The case involved a $ 200 million libel suit brought by Stratton, which alleged that Prodigy was the publisher of potentially damaging remarks about Stratton made by a subscriber on Prodigy's Money Talk bulletin board.

The recent settlement in the lawsuit filed by investment banking firm Stratton Oakmont against online company Prodigy Services Co. should be viewed as one step forward, and one step backward, by entertainment companies who increasingly are becoming content providers. That’s the opinion of attorneys familiar with defamation issues.

The case involved a $200 million libel suit brought by Stratton, which alleged that Prodigy was the publisher of potentially damaging remarks about Stratton made by a subscriber on Prodigy’s Money Talk bulletin board.

New York judge Stuart Ain agreed, in a preliminary ruling this year in Stratton’s favor.

According to Brian Ek, Prodigy’s VP of public affairs, Ain based his decision in part on a 1990 editorial written by Prodigy’s then-director of public relations, who stated that the company reviewed every note before it appeared on a public bulletin board.

Prodigy changed that practice by 1992, however, and since then has only filtered out obscenities. The company collected documentation – which Ain had requested following his initial judgment – indicating that the practice had changed, which it presented to Stratton and to Ain to reopen the case.

Ek says Prodigy and Stratton both want the case dismissed, and are waiting for Ain to make a decision as to whether he’ll reverse his ruling or wipe it off the books altogether.

No payout

In last month’s announcement of an agreement, Prodigy said it had apologized for “offensive statements concerning Stratton” posted by “an unauthorized and unidentified individual” that may have damaged Stratton’s reputation. Prodigy paid no monetary damages. The case’s near resolution leaves many questions unanswered, and serves as a reminder of the legal uncertainties of cyberspace, says Bill Coats, an attorney at Palo Alto law firm Brown & Bain.

“This case has gotten a lot of attention because the law in this area is so unclear, yet so important at the same time,” said Coats, who has represented clients such as LucasArts and Accolade software.

“There’s a whole area of law that’s developed regarding liability that delineates separate rules for TV, movies, newspapers and other media. These rules have developed over hundreds of years, but there’s nothing comparable yet for protecting the Internet,” Coats said. “Whatever decisions get made over the next few years will decide how the Internet will get regulated in the future.

“The Prodigy (example) is not a good one from the perspective of people who provide online services because it still leaves them in an ambivalent position,” Coats continues.

The reason for the ambivalence is that companies may find themselves at a disadvantage if they attempt to regulate content that appears on their bulletin boards or online forums. Prodigy, for instance, because it had exerted a certain amount of control over its content, made itself vulnerable to charges that it was indeed a publisher.

“The more you try to maintain control, the more you open yourself up to liability,” says Heather Rafter, director of legal affairs at Digidesign, an audio software company that is a subsidiary of Avid Technology.

“If you start exercising control, then you let something slip by, you find yourself with a greater degree of liability,” she adds.

Library analogy

Rafter uses an analogy to define her notion of how an online service should be viewed: “Computer bulletin boards are like libraries. They’re just repositories for information. You wouldn’t hold a library liable because a book might say something untrue.”

For companies that operate bulletin boards, the issue of monitoring content isn’t an easy one. Not only does monitoring potentially set up a company for future legal action, but it could also alienate Net surfers, many of whom believe their cyber postings shouldn’t be subject to the same sort of censorship found, say, in broadcast.

Congress is getting into the act, as well. The U.S. House and Senate are working on bills that focus on cyberspace regulation. Prodigy’s Ek says he expects Congress to vote on the issue before Thanksgiving.

But even with laws passed in Washington, Coats believes it will be several years before defamation issues in cyberspace are resolved. “All of this is a puzzle. There are a lot of different statutes floating around, and we can expect to see a lot more of these cases,” he predicts.

Prodigy Suit A Tough Read

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The recent settlement in the lawsuit filed by investment banking firm Stratton Oakmont against online company Prodigy Services Co. should be viewed as one step forward, and one step backward, by entertainment companies who increasingly are becoming content providers. That's the opinion of attorneys familiar with defamation issues.
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