COUNSEL:

Daniel Scott Schecter, David M. Simonds, Latham & Watkins, Los Angeles, CA, Ryan C. Squire, Stephen C. Chuck, Garrett & Tully, Pasadena, CA, for Plaintiff.

Louis J. Levy, Leventhal Senter and Lerman, Tobey B. Marzouk, Marzouk and Parry, Washington, DC, Thomas M. Norminton, Norminton & Wiita, Beverly Hills, CA, Henry D. Fetter, Doniger & Fetter, Los Angeles, CA, Richard J.J. Scarola, Scarola Reavis & Parent, New York City, for Defendants.

FEESS, District Judge.

This case presents a dispute between two downloadable software providers, New.net whose software, NewDotNet, is downloaded onto individual computers often without the knowledge or request of the computer owner, and Lavasoft whose software, Ad-aware, is purposefully downloaded by the computer user to detect and remove programs like the one written by New.net. New.net complains that the injuries caused by Ad-aware's inclusion of NewDotNet in its database are actionable under both state and federal law.

The Court previously denied New.net's motion for a preliminary injunction to halt Lavasoft from including NewDotNet in its database. In ruling on that motion the Court concluded, among other things, that Lavasoft, through its software, was engaging in First Amendment protected speech. Now Lavasoft moves to dismiss the state claims in their entirety under California's anti-SLAPP statute, which provides an expedited procedure for dismissing lawsuits designed to stifle speech on issues of public importance. The Court concludes that the motion is well taken and should be GRANTED. Further, the Court concludes that the remaining federal question claims should be dismissed under Rule 12(c).

A. THE PARTIES AND THEIR SOFTWARE

1. New.net and the NewDotNet Software

New.net describes itself as a "leading domain name registry and provider of domain name extensions." (Compl. at 2). It apparently generates revenue through the sale of domain names in nonstandard format such as .free and .shop as opposed to "true" domain names, e.g., .edu, .gov, .org., and .com. Without special software, the internet user who types a nonstandard domain name into his or her browser will not be able to locate the website. New.net deals with this problem by providing its software, NewDotNet, that recognizes the nonstandard extension and connects the user to the site without requiring the user to know and enter the site's true nonstandard domain name.

Because New.net generates its revenue through the sale of these nonstandard domain names, its ultimate success and, indeed, its very survival, depends on maximizing the value of these names by generating traffic to these sites. That is, it needs to enable increasing numbers of users -- most of whom have never sought to do business with New.net -- to access New.net's customers' websites. In order to accomplish this goal, New.net must distribute and install NewDotNet on as many computers in the hands of the general public as possible. (Sheehy Decl. ¶ 10 (conceding that New.net's "success depends on its ability to distribute as many copies of the New.net Software as possible.")). How that is done is at the heart of the present dispute. New.net attempts to realize its objective by surreptitiously "bundling" NewDotNet with other popular software programs, a process by which an individual who intentionally requests and downloads certain desired software actually gets a bundle of other software that was not sought by the user. [FN 2]

[FN 2] NewDotNet is sometimes introduced to users' computers without any notice or consent because NewDotNet is silently bundled with another program. At other times, its presence is "disclosed" deep within complicated user agreements that do not allow users to opt out of downloading the bundled conglomeration. This Court's prior order contains a more detailed description of New.net's distribution methods. (11/04/03 Order at 8-12).

2. Lavasoft and Its Ad-aware Software

Defendant Lavasoft/Nicolas Stark Computing, AB is a public information service which began as a project to bring public notice to the fact that unwanted software applications were being downloaded onto personal computers without the user's knowledge or consent. To this end, Lavasoft developed a software program, Ad-aware, which is available for free on the internet, with enhanced versions also available for sale. Ad-aware is enormously popular and one of the most downloaded software applications on the internet. (See August 22, 2003 Amabile Decl. ¶ 4 ("Ad-aware is the eighth most downloaded software application with over 270,000 downloads in the week of August 17, 2003 alone, and more than 19 million downloads in total.")). Lavasoft's homepage describes Ad-aware as a program that "detect[s] and remove [s] the worst that the Internet and shareware/ freeware have to offer" and gives the user information regarding programs, that without the user's knowledge or permission, are downloaded onto the user's computer and can effect the computer's operation, and tells the user that Ad-aware can keep the user's computer or network free of compromising and intrusive threats to privacy. (8/25/03 Sheehy Decl. Exh. B).

Ad-aware functions as follows: it performs a scan of the user's computer, detects specific programs on a user's personal computer, alerts the user to their presence with a text box providing a cryptic description of the programs, asks the user if they wish to delete identified programs, and, if prompted, removes unwanted applications from the user's computer. Ad-aware does not tell a user to remove a program. Nor does it delete a program unless the user decides to exercise that option. Rather it empowers the user with the choice of uninstalling the program or keeping it. New.net's complaint concedes this point, stating on more than one occasion that "Ad-aware gives the users the option to remove" a program. (Compl. at ¶¶ 10, 24).

Lavasoft relies on reviews of submissions from the public and other sources of publicly available information in order to make a determination as to whether certain software programs should be included in the Ad-aware database. NewDotNet is one of the programs that Ad-aware identifies and, if directed, assists the user in deleting. NewDotNet is included in the Ad-aware database because of its purported negative impact on internet connectivity and its surreptitious method of distribution -- both of which are topics of discussion in the internet privacy community on sites which refer to NewDotNet as commercial "foistware" and discuss various system problems associated with NewDotNet.

B. THE PENDING MOTION

Although Lavasoft won a decisive victory in defeating Plaintiff's attempt to obtain a preliminary injunction in this case, New.net has continued its pursuit of this lawsuit. Accordingly, Defendants Lavasoft and Nicolas Stark Computing AB (hereinafter "Defendant") now move to strike, pursuant to California's anti-SLAPP statute, Plaintiff's causes of action for (1) unfair competition; (2) trade libel; (3) and tortious interference with prospective economic advantage. Defendant also seeks judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) as to Plaintiff's federal Lanham Act false advertising claim. Finally, because the only remaining claim -- Plaintiff's claim for declaratory relief -- is intertwined with and dependent on the other claims for relief, Defendant seeks dismissal of that claim as well.

The Court's November 4, 2003, ruling on New.net's motion for preliminary injunction distills the essence of the present dispute and describes the foundation of the Court's ruling, which applies on this motion as well. There the Court wrote:

New.net brings this suit ... to protect its ability to surreptitiously download its New.net software by silencing a company whose computer program, at the request of the computer owner, calls attention to NewDotNet's presence on the user's hard drive. Correctly understood, the contest in this case is between computer users, who acquire software precisely to determine what programs they may have unsuspectingly downloaded onto their hard drives, and New.net, which apparently needs the ability to deliver its program to as many unwitting users as possible to further its business plan.

(Order at 2) (emphasis in original). This Court noted, among other things, that New.net present[ed] no persuasive evidence that any of Lavasoft's statements are false, (Order at 3), and that "Lavasoft's speech addresses a matter of legitimate public concern." (Order at 21). Accordingly, as explicated more fully below, the Court GRANTS Defendant's motion in its entirety, and orders the present lawsuit DISMISSED WITH PREJUDICE.

A. LEGAL STANDARD FOR A SPECIAL MOTION TO STRIKE

In 1992, responding to the "disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances," the California Legislature enacted the Anti-Strategic Lawsuit Against Public Participation (anti-SLAPP) statute. Cal. Civ. Proc. Code § 425.16(a). The statute was intended to "encourage continued participation in matters of public significance" and to prevent the chilling of such participation "through abuse of the judicial process. Id. To that end, the statute directs courts to construe the statute broadly." Id.

The statute is designed to allow for early dismissal of non-meritorious cases aimed at chilling First Amendment expression through costly, time-consuming litigation. Under the statute, a civil defendant, at the infant stages of the litigation, may move to strike a plaintiff's SLAPP complaint, which is defined as a non-meritorious action brought against a person arising "from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." Cal. Civ. Proc. Code § 425.16(b)(1).

A court considering an anti-SLAPP motion must engage in a two-part inquiry. First, in order to prevail on a motion to strike, the moving party must make an initial prima facie showing that the claimant's suit arises from an act in furtherance of its rights of petition or free speech in connection with a public issue. Wilkerson v. Sullivan, 99 Cal.App.4th 443, 446, 121 Cal.Rptr.2d 275 (2002) (citing Dowling v. Zimmerman, 85 Cal.App.4th 1400, 1414, 103 Cal.Rptr.2d 174 (2001)); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1109 (9th Cir.2003). "An act in furtherance" includes, but is not limited to, "any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or any other conduct in furtherance of the exercise of ... the constitutional right of free speech in connection with a public issue or an issue of public concern." Cal. Civ. Proc. Code § 425.16(e)(3).

Second, once the defendant has made a prima facie showing, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the challenged claims. Vess, 317 F.3d at 1109. To do this, the plaintiff must demonstrate that "the complaint is legally sufficient and supported by a prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." Wilcox v. Superior Court, 27 Cal.App.4th 809, 823, 33 Cal.Rptr.2d 446 (1994) (emphasis added) (overruled on other grounds).

This burden is "much like that used in determining a motion for nonsuit, directed verdict, or summary judgment." ComputerXpress, Inc. v. Jackson, 93 Cal.App.4th 993, 999, 113 Cal.Rptr.2d 625 (2001). Thus, a defendant's anti-SLAPP motion should be granted when a plaintiff presents an insufficient legal basis for the claims or "when no evidence of sufficient substantiality exists to support a judgment for the plaintiff." Id. at 828, 33 Cal.Rptr.2d 446. In making this determination, the court is to consider the pleadings, and supporting and opposing affidavits stating the facts upon which liability is premised. Cal. Civ. Proc. Code § 425.16(b)(2).

B. THE SPECIAL MOTION TO STRIKE DOES NOT VIOLATE THE ERIE DOCTRINE

Defendant properly directs its anti-SLAPP motion only to the pendant state law claims set out in the Complaint. Because Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), which was initially formulated in diversity cases, applies as well to pendant state law claims in federal question cases, see Nathan v. Boeing Co., 116 F.3d 422, 423 (9th Cir.1997), the Court must first consider whether to apply this unique state procedure in this action. That determination turns on whether application of the state procedural rule would result in a "direct collision" with a Federal Rule of Civil Procedure. Walker v. Armco Steel Corp., 446 U.S. 740, 749-50, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980). Where no such collision exists, application of the state rule should be applied to accomplish the "twin aims" of the Erie principle -- the discouragement of forum shopping and the equitable administration of the laws. Hanna v. Plumer, 380 U.S. 460, 468, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).

This circuit has addressed the applicability of the anti-SLAPP statute in federal question cases in United States v. Lockheed Missiles & Space Co., Inc., 190 F.3d 963, 970-73 (9th Cir.1999), in which the Court concluded that subsections (b) and (c) of the anti-SLAPP statute may be applied to pendant state law claims without running afoul of Federal Rules 8, 12 and 56. In response to the contention that the anti-SLAPP legislation "directly conflicted" with those rules, the Court concluded:

[T]wo aspects of California's Anti-SLAPP statute are at issue: the special motion to strike, Cal. Civ. P.Code § 425.16(b), and the availability of fees and costs, Cal. Civ. P.Code § 425.16(c). We conclude that these provisions and Rules 8, 12, and 56 'can exist side by side ... each controlling its own intended sphere of coverage without conflict.' Walker v. Armco Steel, 446 U.S. at 752, 100 S.Ct. 1978, 64 L.Ed.2d 659.

Id. at 972. The Court further noted:

Although Rules 12 and 56 allow a litigant to test the opponent's claims before trial, California's "special motion to strike" adds an additional, unique weapon to the pretrial arsenal, a weapon whose sting is enhanced by a[n] entitlement to fees and costs. Plainly, if the anti-SLAPP provisions are held not to apply in federal court, a litigant interested in bringing meritless SLAPP claims would have a significant incentive to shop for a federal forum. Conversely, a litigant otherwise entitled to the protections of the anti-SLAPP statute would find considerable disadvantage in a federal proceeding. This outcome appears to run squarely against the "twin aims" of the Erie doctrine.

Id. at 973. See also Rutter Group, FEDERAL CIVIL PROCEDURE BEFORE TRIAL, at 1:63.6 (2004) (describing the anti-SLAPP statute as establishing a rule of "substance" and not "procedure"). Thus, under controlling precedent, the Erie doctrine permits the Court to consider Defendant's special motion to strike under California's anti-SLAPP statute since, to do otherwise, would encourage forum shopping by providing plaintiffs with a federal forum where they could bring bogus SLAPP suits.

Plaintiff complains that Defendant's motion suffers from two procedural flaws, one that potentially implicates Erie and one that does not. First, Plaintiff argues that permitting Defendant to move to strike would deny Plaintiff the opportunity to conduct discovery, potentially placing the statute in conflict with Rule 56(f), which precludes motions for summary judgment upon a showing that additional, relevant discovery may create a genuine issue of material fact for trial. Second, Plaintiff argues that the motion should be denied because Defendant failed to comply with the requirement that the special motion should be made within 60-days of the filing of the complaint. [FN 3] The Court will take up the 60-day rule first, and then the discovery argument.

[FN 3] The Court notes that Plaintiff is simultaneously advancing two contradictory positions. On the one hand, Defendant's motion was filed too late and therefore should be denied. On the other hand, Plaintiff also argues that Defendant filed its motion too soon because discovery has not yet been had in this matter. The Court concludes that neither position is meritorious.

1. The Court May Consider anti-SLAPP Motions Made Later Than 60 Days From the Filing of the Complaint

The anti-SLAPP statute provides that a defendant may file an anti-SLAPP motion "within 60 days of the service of the complaint or, in the court's discretion, at any later time upon terms it deems proper." Cal. Civ. Proc. Code § 425.16(f). [FN 4] Plaintiff argues that Defendant filed its motion too late and that because Defendant was required to seek leave of the Court to file its untimely motion prior to filing, the motion must be denied. (Opp. at 5). Moreover, Plaintiff insists that leave should not be granted because there is no excuse for Defendant's delay in filing when it had prepared the motion and attached it to its opposition to the motion for a preliminary injunction. (Id.). Defendant acknowledges that more than sixty days have elapsed since the filing of the complaint in this matter, but in its motion to strike, requests permission to file its untimely anti-SLAPP motion. (Mot. at 1).

[FN 4] As discussed below, the anti-SLAPP statute's expedited procedure does not implicate the Erie Doctrine in this matter. Moreover, by Plaintiff's own assertions, this expedited procedure has been delayed because Defendant's motion was filed more than sixty days after the filing of the complaint, thereby vitiating any Erie concerns implicated by sixty-day rule.

Because this case has not proceeded in any material respect with the exception of litigating Plaintiff's motion for a preliminary injunction, the filing of this anti-SLAPP motion after the sixty-day period does not frustrate the anti-SLAPP statute's purpose of disposing of improper lawsuits in the early stages of the proceedings. Nor is Plaintiff prejudiced because, as Plaintiff admits, it was in possession of the motion when it received Defendant's opposition to the motion for a preliminary injunction. Thus, Plaintiff has been long aware of both Defendant's intent to file the motion and of the motion's content.

Here, the Court concludes that the delay in filing reflects prudence on the part of Defendant because the Court's ruling on Plaintiff's motion for a preliminary injunction would, in most instances, have resulted in the voluntary dismissal of the lawsuit. Indeed, Defendant contends that in light of this Court's prior ruling, it delayed the filing of the anti-SLAPP motion in the hope that Plaintiff might appreciate the lack of merit in its lawsuit. (Reply at 2). It was not until Plaintiff appealed this Court's ruling, indicating Plaintiff's intention to continue its aggressive pursuit of this lawsuit, that the filing of the instant motion became necessary. (Id.). Furthermore, because this Court's ruling with regard to the motion for a preliminary injunction provides much of the basis for Defendant's motion, the delay is excusable. Accordingly, the Court exercises its discretion and permits Defendant to proceed with this motion without first seeking leave to refile it.

2. The Erie Doctrine Does Not Demand the Completion of Discovery Prior to Ruling on Defendant's Motion

(a) CCP 425.16(g) and Rule 56

Subsection 425.16(g) provides that the filing of an anti-SLAPP motion automatically stays all further discovery until the court rules on the motion. The court, however, "on noticed motion and for good cause shown, may order that specified discovery be conducted notwithstanding this subdivision." Cal. Civ. Proc. Code § 425.16(g). Thus, at least on its face, this section would seem to be entirely consistent with Rule 56(f), which provides that:

Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

Both statutes confer discretion on the trial court to permit discovery in the face of a dispositive motion, in the appropriate case and upon a proper showing. Thus, a comparison of the text of the two rules would seem to suggest that the anti-SLAPP statute and Rule 56 do not "directly conflict."

One case from this district has reached a contrary conclusion, based its view of the Supreme Court's interpretation of Rule 56. Rogers v. Home Shopping Network, 57 F.Supp.2d 973, 979-80 (C.D.Cal.1999). Rogers was cited with favor in a subsequent Ninth Circuit decision which noted that the Supreme Court has held that a Rule 56(f) motion must be granted "where the nonmoving party has not had the opportunity to discover information that is essential to its opposition." Metabolife Int'l, Inc., 264 F.3d 832, 846 (9th Cir.2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 5, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)) (emphasis added). A recent Ninth Circuit decision also recognized that, in connection with proceedings under the anti-SLAPP statute, the court may permit specified discovery on noticed motion and for good cause shown. Batzel v. Smith, 333 F.3d 1018, 1024 (9th Cir.2003).

This Court sees very little difference in the principles enunciated in the text of the two rules, or in their interpretation. By the inclusion of the phrase "essential to its opposition," the Liberty Lobby case seems clearly to impose a requirement on the opponent of a summary judgment motion to make a showing of need before the motion will be granted. Indeed it has been so interpreted in this circuit in cases holding that a properly supported Rule 56(f) motion requires more than a perfunctory assertion that the party cannot respond because it needs to conduct discovery.

References in memoranda and declarations to a need for discovery do not qualify as motions under Rule 56(f). Rule 56(f) requires affidavits setting forth the particular facts expected from the movant's discovery. Failure to comply with the requirements of Rule 56(f) is a proper ground for denying discovery and proceeding to summary judgment.

Brae Transportation, Inc. v. Coopers & Lybrand, 790 F.2d 1439, 1443 (9th Cir.1986). The opposing party must explain with particularity why it is unable to oppose the motion, state with specificity what facts it intends to seek through discovery, and show how its discovery efforts are reasonably expected to create a triable issue. See In re Silicon Graphics Litigation, 183 F.3d 970, 989 (9th Cir.1999); Keebler Co. v. Murray Bakery Products, 866 F.2d 1386, 1389 n. 5 (Fed.Cir.1989).

In this Court's view, these cases require a showing of "good cause" -- appropriate to the particular circumstances of a Rule 56 motion -- to obtain more time to conduct discovery. Thus, this Court sees no inherent "direct collision" between the expedited procedure contemplated in the anti-SLAPP statute, and the provisions of Rule 56. Indeed, to find such a collision would undermine the holding in Lockheed Missiles permitting the use of the anti-SLAPP procedure in federal court. Since the very objective of the procedure is to permit early resolution of claims designed to chill the exercise of First Amendment rights, any holding that would, in effect, convert the statute into a variant on Rule 56 would undermine the statute's purposes and would promote the kind of forum shopping decried in Lockheed Missiles. Nevertheless, the Court will review the record to determine whether an actual collision exists in this case.

(b) There Is No Potential For Conflict In This Case

Even if the Court concluded that Section 425.16(g) and Rule 56 were potentially in conflict, the potential for a direct collision has not materialized because Plaintiff has not demonstrated that discovery is essential to its opposition nor has Plaintiff shown good cause as to why discovery should be permitted.

Although Plaintiff has sought to defer this motion pending discovery, it has not stated with any degree of specificity what discovery it needs or how that discovery would bear on this motion. Plaintiff's opposition generally refers to matters such as learning about Lavasoft's business plan, its sales and revenue, its motives and reasons for "targeting" New.net and other entities, the un-installation function of Ad-aware, the basis for labeling NewDotNet as a "data miner" or "misc.," and Lavasoft's customer base. (Opp. at 6). To the extent that the proposed discovery would contain any relevant information, most of it is already known to Plaintiff. (See e.g., 11/06/03 Order at 8-9 n. 7 (noting that although New.net claims to be puzzled as to why Lavasoft might wish to scan for New.net's software, New.net cannot be truly unclear as to Lavasoft's position given the responses to New.net's counsel before the suit was filed)). But most of the information sought -- business plans, sales and revenue -- has little bearing on the issues raised in this motion. Plaintiff's complaint focuses on what Lavasoft did, not so much on why it did it. Moreover, Plaintiff's argument -- that because of the functionality of the parties' programs, the consumer perceptions of Lavasoft's advertising message are subject in large part to expert proof, requiring the Court to defer deciding the motion until expert discovery has been conducted -- is wholly unsupported. In short, Plaintiff has failed to persuade the Court that discovery is essential to its opposition to Defendant's motion.

C. Defendant's Motion Is Not Improper Under Cal. Civ. Proc. Code § 425.17

Plaintiff next argues that under recently enacted section 425.17, this case is excluded from the anti-SLAPP procedure. (Mot. at 6). Section 425.17 was enacted in 2003 and no reported cases exist to assist the Court in its interpretation of the statute. Accordingly, Plaintiff's argument presents an issue of first impression to this Court.

Due to abuses of California's anti-SLAPP law, which has undermined the very constitutional rights section 425.16 was designed to protect, the California legislature enacted section 425.17, rendering section 425.16 inapplicable to certain actions. Cal. Code. Civ. P. § 425.17(a). Section 425.17(c)(1) provides that section 425.16 no longer applies to:

(c) [A]ny cause of action brought against a person primarily engaged in the business of selling or leasing goods or services, including, but not limited to, insurance, securities, or financial instruments, arising from any statement or conduct by that person if both of the following conditions exist:

(1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services, that is made for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services, or the statement or conduct was made in the course of delivering the person's goods or services.

(2) The intended audience is an actual or potential buyer or consumer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer ... notwithstanding that the conduct or statement concerns an important public issue.

Cal. Civ. Proc. Code § 425.17(c)(1)(2) (emphasis added). For the reasons discussed more fully below, Plaintiff's case does not fall within the ambit of section 425.17(c)(1)'s protection. As sections 425.17(c)(1) & (2) are conjunctive and Plaintiff is unable meet the conditions of section 425.17(c)(1), the Court will not address whether or not Plaintiff could satisfy the requirements of section 425.17(c)(2). [FN 5]

[FN 5] The Court declines to engage in unnecessary interpretation or application of section 425.17 because, as already discussed, this section has yet to be interpreted by any California court. Accordingly, informed by principles of federalism, the Court concludes that it should avoid any unnecessary construction of the newly enacted statute.

1. Lavasoft Is Not Primarily Engaged in the Business of Selling Goods

As a threshold matter, to satisfy section 425.17, Plaintiff must show that Defendant is "primarily engaged in the business of selling or leasing goods or services." Id. § 425.17(c). Plaintiff asserts that Defendant is "primarily engaged in the business of selling Ad-aware and other products" based on the fact that Defendant purports to admit that it operates a business and sells software products. (Opp. at 7).

Just because Defendant operates a business and sells software products, does not mean that Defendant is primarily engaged in the business of selling goods. In fact, in addition to providing a public service, it is not seriously disputed that a bulk of Defendant's business involves giving away, not selling, its goods. (See August 22, 2003 Amabile Decl. ¶ 4 ("Ad-aware is the eighth most downloaded software application with over 270,000 downloads in the week of August 17, 2003 alone, and more than 19 million downloads in total.")). [FN 6]

[FN 6] Plaintiff, in oral argument and its motion, insists that Defendant's enormous popularity is due to its aggressive marketing campaign which includes the making of purported libelous advertising type statements about the nature of Plaintiff's software. Plaintiff, however, has adduced no evidence that Defendant's success is due to any such marketing. Furthermore, the Court notes the possibility that companies can experience great success and create substantial interest in their products with little to no marketing by simply filling an empty niche in the marketplace.

In an attempt to show that Defendant primarily engages in the business of selling products, Plaintiff refers to Defendant's website which posts job listings for sales assistants and other sales positions. (Opp. at 8). In an analogous context, however, the Consumer Reports website also lists a number of positions related to sales and/or servicing Consumer Reports customers and the website further lists various products for sale such as its well-known magazine subscription and internet version of that subscription. (Scarola Decl. to Reply Exh. B). Thus, if the Court adopted Plaintiff's construction, Consumer Reports would be "primarily engaged in the business of selling ... goods or services," thus making Consumer Reports ineligible for the protection of the anti-SLAPP statute. The Court cannot and does not adopt such an untenable interpretation of California's newly enacted statute.

2. Lavasoft Is Not Making Statements About Its Own Product nor Is New.Net Lavasoft's Business Competitor

In order to satisfy the required conditions of section 425.17(c), Plaintiff must also show, pursuant to section 425.17(c)(1), that Defendant is making statements about its own product or a competitor's business operations, goods or services. First, according to Plaintiff's complaint the purportedly offending statements are not statements made about Defendant's product, but rather statements about Plaintiff and its products. Thus, under the facts present in this case, section 425.17 requires that the parties be competitors. Section 425.17 was adopted in 2003 and there are no reported cases discussing what "competitor" means. The definition of "competitor" in Webster's Dictionary, however, is a "rival" or "one selling or buying goods or services in the same market as another." Webster's Ninth New Collegiate Dictionary 268 (9th ed.1991); (Scarola Decl. to Reply Exh. C ¶ 4). For the reasons discussed infra in the analysis of Plaintiff's Lanham Act claim, Plaintiff's argument that Defendant is a competitor is without merit.

3. Lavasoft's Purported Statements Were Not Made in the Course of Delivering Goods

Next, Defendant's statements about Plaintiff were not made in the course of delivering goods, but were made after the good, i.e. Ad-aware, was downloaded and operational. The plain facts are that specific references to NewDotNet did not occur until after Ad-aware was downloaded by the computer user and in use. Indeed, Plaintiff concedes that "access to Ad-aware statements is selective because such statements are generally viewable only by those who download or purchase one of the Ad-aware products." (Opp. at 10).

Nevertheless, Plaintiff argues that Defendant's statements that induce a user to download Ad-aware in the first place are actionable because they falsely associate Plaintiff with the "worst of the worst" on the internet. As the Court noted in its denial of Plaintiff's request for preliminary injunction, to the extent that Plaintiff's software has been associated with insidious downloaded programs, New.net itself bears responsibility for that association by allowing its software to be bundled with some of the most invasive spyware and track-ware programs on the internet. But, in reality, nothing on Lavasoft's web page even mentions New.net or its software, let alone associates it with questionable downloaded programs. Rather, Lavasoft's homepage generally explains that its software is designed to give computer user's information regarding programs that, without the user's knowledge or permission, are downloaded onto the user's computer and can effect the computer's operation, and tells the user that Ad-aware can keep the users' computer or network free of compromising and intrusive threats to privacy. (8/25/03 Sheehy Decl. Exh. B). Lavasoft's website does not mention Plaintiff either directly or indirectly.

Finally, even if New.net's software had been mentioned on the site, the undisputed facts establish that it could legitimately be described as a surreptitiously downloaded program. Although Plaintiff has repeatedly asserted that only those who want New.net's software receive it, a few moments of reflection suggests that if this assertion were true, there would be no reason for this lawsuit. If a computer user desired NewDotNet, actively sought it out, knew of the nature of the software, and affirmatively chose to download it on their computers, Ad-aware's notification of its presence would merely advise the user of what he or she already knew. Because Ad-aware does not remove any program without direction from the user, the user who had requested NewDotNet would have no reason to delete it merely because Ad-aware alerted the user to the program's presence. In fact, Defendant poses a threat precisely because NewDotNet is downloaded without the user's knowledge or informed consent, and so advising a computer user of that fact, especially after the download has occurred, falls outside the scope of section 425.17. Accordingly, section 425.17 does not prevent Defendant from filing this anti-SLAPP motion.

D. THE REQUIREMENTS OF CALIFORNIA'S ANTI-SLAPP STATUTE ARE SATISFIED

1. Defendant Has Satisfied Its Threshold Burden [FN 7]

[FN 7] After the hearing on this matter, Plaintiff submitted two newly decided cases -- Scott v. Metabolife International, Inc., 115 Cal.App.4th 404, 9 Cal.Rptr.3d 242 (2004) and Rezec v. Sony Pictures Entertainment, Inc., 116 Cal.App.4th 135, 10 Cal.Rptr.3d 333 (2004) -- for the proposition that advertising is not protected speech and therefore fails to satisfy the first prong of California's anti-SLAPP statute. Both cases are factually distinguishable from that at bar because, as discussed more fully below, Defendant's speech is not advertising and addresses a matter of concern. Thus, these authorities are inapposite and do nothing to alter the Court's analysis.

(a) Defendant's Speech Addresses a Matter of Public Interest

First and foremost, this Court has already ruled that this case involves important First Amendment issues and that Defendant engages in legitimate protected speech in connection with the public issue of surreptitiously downloaded computer programs. (Order at 3 (stating that Defendant's speech "addresses a matter of public interest")); (Order at 16 (stating that "Ad-aware constitutes speech on an issue of public importance")); (Order at 21 (stating that "Lavasoft's speech addresses a matter of legitimate public concern")); (Order at 21-22 (stating "Lavasoft's speech touches on issue of public concern regarding various aspects of the internet")); (Order at 24 (finding that because the disputed content of the software addresses a subject of public importance and debate, it is entitled to full First Amendment protection)).

Lavasoft had its genesis in a project to notify the public that unwanted software applications were being downloaded to personal computers without the user's knowledge or consent. (Akerlund Decl. Exh. B to Mot. ¶ 6). Relying primarily on submissions from the public, Lavasoft receives information through the internet and other sources to program Ad-aware. (Id.). Lavasoft reviews publicly available information and makes a determination as to whether that information supports inclusion of a particular program in its database. (Id.) Ad-aware is, in this way, a service akin to Consumer Reports and other consumer information databases, but in a new form. (Id.).

Lavasoft contends that, because unscrupulous businesses have devised sophisticated means for using the internet to download their software to personal computers without informed consent, the subject of internet and computer privacy and the integrity and safety of one's personal computer has become a matter of serious concern in recent years made all the more important by the increasing reliance of computers by a large segment of the population in their daily lives. (Mot. at 6). Thus, the program itself is analogous to a newspaper, magazine, or other material that addresses a matter of public importance. Defendant's position is supported by the evidence, much of which was submitted by Plaintiff in support of its effort to obtain a preliminary injunction.

Plaintiff offered in support of the motion for a preliminary injunction the Simonds Declaration, which presents as exhibits, correspondence between the parties leading up to this lawsuit. Included in that correspondence are attachments from internet sites on which problems associated with NewDotNet are discussed. (See 11/4/03 Order at 12 for Examples). If ever any question existed as to the extent to which Defendant's speech deals with an issue of public importance, these attachments confirm that there is indeed a community concerned with internet privacy, that the subject is a matter of public discussion, and that Plaintiff's surreptitious downloads are a topic of discussion and concern in that context. Adding further credence to this view, the record includes evidence of complaints regarding "connectivity" associated with NewDotNet that were raised by users and various software reviewers such as Microsoft. These materials were also offered in support of the motion for a preliminary injunction to illustrate that Plaintiff has been dealt severe blows to its reputation. (Id. at 12). All of the statements contained in these materials were made by entities or individuals other than Defendant. Thus, much of the offensive speech with which Plaintiff takes issue is not Defendant's speech, but speech engaged in by numerous others in the internet community including individual computer users. Because Plaintiff cannot silence these critics, it has attempted instead to gag Defendant. The effort, however, instead demonstrates the public importance of the issues that are the focus of Defendant's software. Because the issue of public awareness of, and protection from, the unknown are at the heart of the public information service Defendant provides and because that service is of public significance, speech in this area should not be chilled by litigation brought by Plaintiff who seeks to stifle speech to enhance its profits.