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Subject:    [ISN] Injunction Issued for Hacking Away Competitor's Customer Base
From:       mea culpa <jericho () dimensional ! com>
Date:       1999-02-25 16:24:35
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http://www.lawnewsnetwork.com/stories/feb/e022299ad.html

Injunction Issued for Hacking Away Competitor's Customer Base
Judge: Conduct violates federal Wiretap Act
By Shannon P. Duffy 
The Legal Intelligencer 
Monday, February 22, 1999

Hacking into a competing company's computers to get the names of its
customers from e-mail files violates the Federal Wiretap Act, a Pittsburgh
federal judge has ruled. 

In her four-page order in Labwerks Inc. v. Sladekutter Ltd., U.S. District
Judge Donetta W. Ambrose enjoined an Internet Website development company
from making any future attempts to hack into its competitor's system and
ordered it to return the e-mails it stole. 

Ambrose also ordered Sladekutter to contact the customers whose names it
accessed -- and whose business it tried to steal -- and inform them of the
court injunction. 

The central figure in the case is Daniel Dehner, a former Sladekutter
employee who is now the vice president and chief technical officer at
Labwerks. 

According to court papers, Dehner worked full-time at Sladekutter as a
multi-media developer from November 1997 to September 1988, and then
continued to work there part-time for two months as a consultant. 

During his consulting phase, Dehner worked for both Sladekutter and
Labwerks. At times, he would use Sladekutter's computers to access
Labwerks' system in order to complete projects. 

Judge Ambrose of the Western District found that Dehner informed
Sladekutter of his other work. And when he started full-time work with
Labwerks in November 1998, he never again accessed Sladekutter's
computers. She also found that Dehner never took any of Sladekutter's
materials and had accessed only those files that were pertinent to the
projects he was working on. 

But Ambrose found that Sladekutter mistakenly believed that Dehner was
violating a non-compete clause he had signed in December 1997. The
non-compete agreement was never valid, Ambrose found, since Dehner signed
it without receiving any additional compensation, benefits or title in
exchange. 

On Nov. 13, 1998, Ambrose found that Sladekutter "gained unauthorized
access" to Labwerks computer system by using a combination of Dehner's
name and his social security number. Once he had successfully hacked his
way in, Ambrose said, Sladekutter copied Dehner's e-mails and the names of
Labwerks' customers. 

Labwerks' attorney, Peter A. Santos of Dickie McCamey & Chilcote, said he
proved that Sladekutter was the hacker by presenting a detailed computer
log in court which showed that the unauthorized entry into its system came
from "sladekutter.com," and that the hacker made several unsuccessful
attempts at guessing Dehner's password before breaking in. 

Soon after the hack job, Abrose found that Sladekutter wrote letters to
two of Labwerks clients and demanded that they stop doing business with
Labwerks based on the non-compete clause. Both clients soon informed
Labwerks that they would likely be withdrawing their business. 

In her conclusions of law, Ambrose declared that the non-compete agreement
was invalid since it was presented to Dehner after he had agreed to the
terms of his employment, but added no new consideration. 

Sladekutter's removal of Dehner's e-mails, she said, violated the Federal
Wiretap Act and its contacts with the two customers "constitute an
intentional interference with plaintiff's existing contractual relations." 

Ambrose said Labwerks proved that it would suffer irreparable harm without
a court injunction "since it established through testimony that it will go
out of business if the two clients withdraw their business." 

Santos hailed the decision as a significant victory that had rescued his
client from potential financial disaster. 

"The court has said in no uncertain terms that it will not tolerate one
business breaking into another business's computer system. It's illegal
and it will be stopped," Santos said. 


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