Liberi V Taitz Plaintiffs Request For Judicial Notice Doc 466

Case 8:11-cv-00485-AG-AJW Document 466
Filed 02/20/12 Page 1 of 4 Page ID #:10921
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Philip J. Berg, Esquire Pennsylvania I.D. 9867 LAW OFFICES OF PHILIP J. BERG 555 Andorra Glen Court, Suite 12 Lafayette Hill, PA 19444-2531 Telephone: (610) 825-3134 E-mail: philjberg@gmail.com Attorney for Plaintiffs UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SOUTHERN DIVISION : : : Plaintiffs, : : : : : : : : : : Defendants. : : : : : : :
LISA LIBERI, et al,
CIVIL ACTION NUMBER: 8:11-cv-00485-AG (AJW) PLAINTIFFS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF THEIR OPPOSITION TO DEFENDANT INTELIUS, INC.S MOTION FOR SUMMARY JUDGMENT Date of Hearing: March 12, 2012 Time of Hearing: 10:00 a.m. Location: Courtroom 10D
vs. ORLY TAITZ, et al,
TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD: Please take notice, that pursuant to the Federal Rules of Evidence [Fed. R. Evid.], Rule 201, Plaintiffs, Lisa Liberi, Lisa Ostella, Go Excel Global, Philip J. Berg, Esquire and the Law offices of Philip J. Berg [Plaintiffs] by and through their undersigned counsel, respectfully request this Court to take Judicial Notice of
Liberi, et al, Plaintiffs Request for Judicial Notice
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the following Exhibits in Support of Plaintiffs Opposition to Defendant, Intelius, Inc.s Motion for Summary Judgment. 1. EXHIBIT 1 - Intelius, Inc.s S-1/A Form S-1, Registration Statement Under the Securities Act of 1933, SEC File No. 333148597 filing with the Securities and Exchange Commission on October 19, 2009; 2. EXHIBIT 2 - Intelius, Inc.s February 9, 2010 Press Release introducing Intelius branding of TalentWise; 3. EXHIBIT 3 - Federal Case, Order of Settlement for Fair Credit Report Act Violations, in the U.S.D.C., Northern District of Alabama, Western Division, Moore v. Intelius, Inc., et. al, Case No. 7:08-cv001062-SLP Intelius, Inc. admitted Plaintiff was the prevailing party; and 4. EXHIBIT 4 - Federal Case, Intelius, Inc. Settlement of Fair Credit Report Act Violations, U.S.D.C., Northern District of Oklahoma, Tulsa Division, Williams v. Intelius, Inc., et. el, Case No. 4:09-cv00217-TCK-PJC.
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5. EXHIBIT 5 - FTC v. Accusearch, Inc., 2009 WL 1846344 (10th Cir. June 29, 2009), U.S. Court of Appeals for the Tenth Circuit upheld the District Courts denial of immunity under the
Communications Decency Act and granted Summary Judgment in favor of the FTC. The Court held that CDA immunity was not
available to defendants because the claims at issue did not seek to treat them as the publisher of information, a prerequisite to such immunity. Rather, they arose out of Defendants purchase and resale of confidential information to third parties.1 Fed. R. Evid. 201 authorizes a Court to take Judicial Notice of facts that are not subject to reasonable dispute and are either (1) generally known with the territorial jurisdiction of the Trial Court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b); See also Peel v. Brooks America Mortg. Corp., No. 8:11-cv-0079-JST, 2011 WL 2174373, at *4 (C.D. Cal. June 1, 2011) (Taking Judicial Notice of Complaints and Court Orders [b]ecause all of these documents appear to be public records from either related proceedings or from other cases); Haney v. Pacific Telesis Group, No.CV00758AHMMAnX, 2000 WL 333400194, at
Intelius filed a request for Judicial Notice of Geller, et al. v. Intelius, et al., Los Angeles Superior Court Case No. BC 453778, that conflicts with the Tenth Circuit Ruling of FTC
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*2 (C.D. Cal. Sept. 19, 2000) ([T]he Court may take Judicial Notice of the Complaint from another case because a complaint is a matter of public record.). Judicial Notice is mandatory if it is requested by a party and the Court is supplied with the necessary information. Fed. R. Evid. 201(d). Judicial Notice is appropriate for SEC filings and press releases, as they are capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned, In re Network Assocs. Sec. Litig., 2003 U.S. Dist. LEXIS 14442, *2, n.3 (N.D. Cal. March 25, 2003) (citing Fed. R. Evid. 201(b)). Plaintiffs
EXHIBITS 1 through 5 are matters of public record and therefore are Judicially Noticeable. For the reasons outlined above, Plaintiffs respectfully request that this Court take Judicial Notice of the attached documents. Respectfully submitted,
Dated: February 20, 2012
/s/ Philip J. Berg Philip J. Berg, Esquire Pennsylvania I.D. 9867

LAW OFFICES OF PHILIP J. BERG
555 Andorra Glen Court, Suite 12 Lafayette Hill, PA 19444-2531 Telephone: (610) 825-3134 E-mail: philjberg@gmail.com Attorney for Plaintiffs
v. Accusearch, Inc., 2009 WL 1846344 (10th Cir. June 29, 2009)
SEC Info - Intelius Inc - S-1/A - On 10/19/09
http://www.secinfo.com/dsvr4.s1HS5.htm#xlvx
Case 8:11-cv-00485-AG-AJW Document 466-1 Filed 02/20/12 Page 1 of 37 Page ID #:10925 SEC Info Home Search My Interests Help Sign In Please Sign In
Intelius Inc S-1/A On 10/19/09

Filed On 10/19/09 6:14am ET SEC File 333-148597 Accession Number 950123-9-51082 in
As Of 10/19/09 Intelius Inc Filer Filing S-1/A
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Pre-Effective Amendment to Registration Statement (General Form) Form S-1 Filing Table of Contents
Document/Exhibit 1: S-1/A 2: EX-2.3 3: EX-2.4 4: 5: 6: 7: 8: 9: 10: 11: 12: 13: 14: 15: 16: 17: 18: 19: EX-3.1 EX-3.3 EX-10.4 EX-10.5 EX-10.10C EX-10.10D EX-10.13 EX-10.14 EX-10.15 EX-21.1 EX-23.2 EX-23.3 EX-24.1 EX-99.1 EX-99.2 EX-99.3 Description Pre-Effective Amendment to Registration Statement (General Form) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession Articles of Incorporation/Organization or By-Laws Articles of Incorporation/Organization or By-Laws Material Contract Material Contract Material Contract Material Contract Material Contract Material Contract Material Contract Subsidiaries of the Registrant Consent of Experts or Counsel Consent of Experts or Counsel Power of Attorney Miscellaneous Exhibit Miscellaneous Exhibit Miscellaneous Exhibit Pages HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML HTML Size 1.99M 189K 102K 41K 99K 13K 21K 23K 16K 136K 47K 144K 8K 8K 8K 11K 12K 7K 9K
S-1/A Pre-Effective Amendment to Registration Statement (General Form) Document Table of Contents Page 1 " " " (sequential) (alphabetic) Alternative Formats (Word, et al.) Balance Sheet Business Capitalization Certain Relationships and Related Party Transactions Consolidated Balance Sheets Top
1st Page - Filing Submission Prospectus Summary Risk Factors Special Note Regarding Forward-Looking Statements and Industry Data " Use of Proceeds " Dividend Policy " Capitalization
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Case 8:11-cv-00485-AG-AJW Document 466-1 #:10926 Dilution Selected Consolidated Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Business Management Certain Relationships and Related Party Transactions Principal Stockholders Description of Capital Stock Shares Eligible for Future Sale Material United States Federal Income Tax Consequences to Non-U.S. Stockholders Underwriting Legal Matters Experts Where You Can Find More Information Index to Consolidated Financial Statements Intelius Inc. Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Zaba, Inc. Financial Statements Independent Auditor's Report Balance Sheet Statement of Loss Statement of Stockholders' Deficit Statement of Cash Flows Notes to Financial Statements Intelius Inc. Pro Forma Financial Statements Unaudited Pro Forma Condensed Consolidated Statement of Operations Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations Table of Contents
Filed 02/20/12 Page 2 of 37 Page ID

Consolidated Statements of Cash Flows Consolidated Statements of Operations Consolidated Statements of Stockholders' Equity Description of Capital Stock Dilution Dividend Policy Experts Independent Auditor's Report Index to Consolidated Financial Statements Intelius Inc. Consolidated Financial Statements Intelius Inc. Pro Forma Financial Statements Legal Matters Management Management's Discussion and Analysis of Financial Condition and Results of Operations Material United States Federal Income Tax Consequences to Non-U.S. Stockholders Notes to Consolidated Financial Statements Notes to Financial Statements Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations Principal Stockholders Prospectus Summary Report of Independent Registered Public Accounting Firm Risk Factors Selected Consolidated Financial Data Shares Eligible for Future Sale Special Note Regarding Forward-Looking Statements and Industry Data Statement of Cash Flows Statement of Loss Statement of Stockholders' Deficit Table of Contents Unaudited Pro Forma Condensed Consolidated Statement of Operations Underwriting Use of Proceeds Where You Can Find More Information Zaba, Inc. Financial Statements
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Case 8:11-cv-00485-AG-AJW Document 466-1 Filed 02/20/12 Page 3 of 37 Page ID #:10927
As filed with the Securities and Exchange Commission on October 19, 2009 Registration No. 333-148597
UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 Amendment No. 4 To
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Intelius Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
7374
(Primary Standard Industrial Classification Code Number)
81-0590432
(I.R.S. Employer Identification Number)
500 108th Avenue NE, 25th Floor Bellevue, Washington 98004 (425) 974-6100
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
Naveen K. Jain Chief Executive Officer and President 500 108th Avenue NE, 25th Floor Bellevue, Washington 98004 (425) 974-6100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to: Mike Liles, Jr., Esq. Walter M. Maas III, Esq. Karr Tuttle Campbell PS 1201 Third Avenue, Suite 2900 Seattle, Washington 98101 Telephone: (206) 223-1313 Facsimile: (206) 682-7100 Horace L. Nash, Esq. Laird H. Simons, III, Esq. James D. Evans, Esq. Fenwick & West LLP 801 California Street Mountain View, California 94041 Telephone: (650) 988-8500 Facsimile: (650) 938-5200
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o

Accelerated filer o Non-accelerated filer x
(Do not check if a smaller reporting company)
Smaller reporting company o
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated October 19, 2009
Intelius Inc.
Shares
Common Stock
This is the initial public offering of Intelius Inc. We are offering shares of our common stock. We anticipate that the initial public offering price will be between $ and $ per share. We intend to apply to list our common stock on the New York Stock Exchange under the symbol II.
Investing in our common stock involves risk. See Risk Factors beginning on page 11.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share Total
Public offering price Underwriting discounts and commissions Proceeds, before expenses, to Intelius Inc. We have granted the underwriters the right to purchase up to to cover over-allotments.
$ $ $
$ $ $
additional shares of common stock
Deutsche Bank Securities

Needham & Company, LLC
The date of this prospectus is 2009.
UBS Investment Bank

Pacific Crest Securities
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PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing elsewhere in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 11, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms Intelius, we, us and our in this prospectus to refer to Intelius Inc. and its subsidiaries. Overview Intelius is a leading online information commerce company that provides information services to consumers and enterprises. Our consumer information services include search services and monitoring services that help consumers find information about people, businesses and assets, and manage personal information security risks. Our enterprise information services principally include employment-related screening and management services. We generate revenues primarily from consumers who purchase our services on a pay-per-use or subscription basis, from companies that provide directory services to customers we have referred to them, and from online merchants that provide targeted advertising to our customers. We have developed a proprietary service delivery platform that provides customers with actionable information by applying our sophisticated analytics technology to publicly and commercially available data. Our accurate, timely and useful information services allow customers to make decisions about people, businesses and assets that are important to their private, professional and social lives. We sell information services through our network of owned and operated websites, including our primary website, www.Intelius.com. The Intelius network of websites was one of the top 100 most visited web properties in the United States for September 2009, according to comScore Media Metrix, a leading Internet audience measurement firm. We have established relationships with leading online portals and directories, including Yahoo! and AT&T, that market our services on their websites and direct visitors to our websites. Since our inception in January 2003, we have sold our information services to over nine million customer accounts. Our business has grown rapidly our revenues increased from $18.1 million in 2004, our first full year of operations, to $122.9 million in 2008, and from $63.9 million in the first six months of 2008 to $74.2 million in the first six months of 2009. Industry Overview The Internet has become an increasingly important medium for commerce and entertainment, and an important source of information about people and businesses. Consumers are increasingly using free and paid Internet services to contact acquaintances, gather information about people and businesses, and expand social and professional networks. The Internet also has a wealth of detailed information on commercial products and services, which has been a key contributor to the growth and penetration of the Internet as a retail commerce channel. As electronic commerce has grown and consumer media consumption has migrated online, advertisers have begun shifting a greater proportion of their marketing budgets to the Internet. In todays society, individuals and businesses often must make critical decisions based on limited or fragmentary information. Consumers and organizations are increasingly turning to the Internet for information services to make better-informed decisions about the people, businesses and assets with whom and with which they interact. Information services provide
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consumers and organizations with information to help them identify, monitor, interpret and respond to specific situations and their environment. Sources of Information A wealth of existing sources of information can be used to provide services that help identify and locate individuals and businesses, manage information security and mitigate personal safety risks. These sources fall into the following categories: Public Records. Public records consist of information that is maintained by government agencies and is generally available, such as property title and lien documents, birth and death certificates, business records and court records. Publicly Available Information. Publicly available information consists of online and offline information that is generally available but is not maintained by a government agency, such as names, addresses and telephone numbers of individuals and businesses, professional licensing and trade organization information, press releases and newspaper articles and content from blogs or social networking sites. Commercial Records. Commercial records consist of information that is maintained by enterprises and is available for purchase, such as mailing and telemarketing lists, phone connect and disconnect information, and business profile data. The Intelius Solution Key elements of our solution include: Broad Portfolio of Information Services. We offer over 100 information services that help consumers address potential safety and security concerns, manage and protect their personal information, and locate businesses, family, friends and colleagues. Compelling Value and User Experience. We provide a high-quality user experience by delivering valuable services, an intuitive user interface and dedicated customer service at affordable prices. Useful Information About People, Businesses and Assets. Our consumer information services are based on an extensive collection of information about people, businesses and assets that is dynamically accessed, managed, integrated, cleansed and validated in real time to provide accurate, timely and useful information. Proprietary Technologies and Extensible Platform. Our analytics technologies verify and augment multiple terabytes of data, usually in disparate formats and having varying degrees of accuracy and completeness, from a myriad of sources in order to make inferences and predictions based on this data. Security and System Reliability. By leveraging standards-based technologies, we have implemented industry-leading security measures and innovative security technologies to enhance customer confidence when they are using our services or providing information to us. Large Audience and Attractive Customer Base. In September 2009, the Intelius network of websites drew over 11.7 million unique visitors in the United States according to comScore Media Metrix. We believe that our customers and visitors to our websites appeal to advertisers because they have attractive demographic characteristics and have demonstrated the ability and willingness to purchase goods and services online.
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Our Strategy Our objective is to be the leading provider of information services. Our strategy for achieving this goal includes the following initiatives: Expand Our Customer Base. We intend to grow our customer base and reach a broader consumer audience by developing our existing distribution relationships with leading Internet companies, establishing new distribution relationships, and adding new websites to our website network that attract consumers of information services. Expand Our Portfolio of Service Offerings. We plan to continue to innovate, add new data sources and leverage our advanced technologies to develop new information service offerings for consumers. We also intend to optimize the way we offer these services, including through subscription offerings. Increase Revenue Per Customer. We seek to maximize our revenue per customer by up-selling, cross-selling and advertising. Increase Repeat Purchase Activity. We believe repeat customers are more likely to access our websites directly than are new customers, resulting in more profitable transactions. We intend to increase repeat purchase activity and customer loyalty by extending the breadth and quality of our service offerings and actively promoting our subscription service offerings. Enhance Our Brand. We intend to enhance our brand through advertising and marketing initiatives, including online advertising, print and outdoor advertising, trade shows, viral marketing and word-of-mouth. We also intend to continue to enhance our brand through quality of service initiatives, maintaining industry best practices and improving customer interfaces on our websites. Expand Through Strategic Acquisitions. We intend to pursue acquisitions of relevant domain names, as well as acquisitions of companies with complementary customers, technology and services, in order to augment our customer base, increase traffic to our websites, enhance awareness of our brand, add new services and provide new sources of revenues. Risk Factors We are subject to many risks and uncertainties that could materially harm our business or inhibit our strategic plans. Before investing in our common stock, you should carefully consider the following risks, which are described in greater detail in the section titled Risk Factors starting on page 11, and other information provided throughout this prospectus: Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future, and if we fail to meet or exceed the expectations of investors or any securities analysts, the trading price of our common stock may decline suddenly and substantially. Our limited operating history and occasional changes in our business strategy make it difficult to evaluate our business trends. Our operating results depend significantly on advertising revenues that we generate from a single advertising relationship. Losing this relationship could harm our operating results. Because we are a consumer-oriented company, customer complaints and occasional adverse publicity are an inherent aspect of our business. If we fail to manage customer complaints properly, or incur substantial adverse publicity, our revenues and operating results may be harmed and our stock price may decline.
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Our operating results depend significantly on our ability to acquire and use customers billing information. If the rules are changed to make it more difficult to acquire and use customers billing information provided for one transaction in another transaction for the same consumer, our operating results could be harmed. We are the subject of a Washington State Attorney General investigation regarding third-party subscription services advertised on our websites and our own identity protection subscription services, and we do not know what the outcome of the investigation may be. We are the subject of a Federal Trade Commission investigation regarding our compliance with the Fair Credit Reporting Act, and we do not know what the outcome of the investigation may be. Changes in the laws and regulations governing access to public information and the collection or sale of publicly available information could make it more difficult for us to conduct business. Our corporate image might be impaired as a result of negative publicity about our use of personal information in our service offerings, which could cause a corresponding drop in our stock price. We cannot assure you that any securities analysts will follow our company. Corporate Information We were incorporated in the state of Delaware in January 2003. Our principal executive offices are located at 500 108th Avenue NE, 25th Floor, Bellevue, Washington 98004 and our telephone number is (425) 974-6100. Our primary website address is www.Intelius.com. The information on, or that can be accessed through, our primary website or our other websites is not part of this prospectus. Intelius and the Intelius logo are our registered trademarks. This prospectus also includes trademarks that belong to third parties.
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RISK FACTORS Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the other information in this prospectus, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our common stock. If any of the following risks is realized, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline and you could lose part or all of your investment. We have organized these risks in the following important categories: Risks Related to Our Business, beginning immediately below; Risks Related to Litigation and Government Regulation beginning on page 24; and Risks Related to This Offering and Our Common Stock beginning on page 30. Risks Related to Our Business Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future, and if we fail to meet or exceed the expectations of investors or any securities analysts, the trading price of our common stock may decline suddenly and substantially. Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future as a result of many factors, many of which are outside of our control. For example, our net income of $4.8 million in the second quarter of 2008 decreased to a net loss of $6.3 million in the second quarter of 2009. If our quarterly operating results do not meet or exceed the expectations of investors or any securities analysts, the price of our common stock could decline suddenly and substantially. Factors that may cause our operating results to fluctuate include the following: the addition or termination of business relationships through which we acquire customers and generate revenue, or changes in the pricing or structures of these relationships; variable expenditures for customer acquisition; lower-than-anticipated levels of traffic to our websites, or reduced effectiveness in attracting customers that are likely to purchase our services; changes in federal, state or local laws and regulations affecting our business or the businesses of our advertisers or other vendors; investments in infrastructure and personnel to facilitate future growth; system downtimes or other service interruptions that prevent us from selling our services to our customers; unavailability of, or increased costs to obtain, data or other product components used to provide our information services; data or security breaches affecting consumer willingness to purchase our services; the failure of the entities that pay us fees to market their products or services or to generate current or projected levels of business; the failure of third parties to report accurately or timely the information on which our fees are based; judicial or governmental decisions, regulations, or settlements of disputes, such as our recent litigation settlement, that increase our costs or require us to change our business model; and 11
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advertisements, which could adversely affect the demand for Internet advertising and our revenues. Because we are a consumer-oriented company, customer complaints and occasional adverse publicity are an inherent aspect of our business. If we fail to manage customer complaints properly, or incur substantial adverse publicity, our revenues and operating results may be harmed and our stock price may decline. A substantial majority of our revenues are derived from sales of information services to individual consumers, including approximately 3.8 million transactions in 2008, and from post-transaction advertising to those customers. In order to promote repeat customer activity and the value of our brand generally, it is important that we provide a good customer experience, including how we handle customer complaints. We could be subject to consumer complaints if we fail to maintain our customer service at acceptable levels, if our services do not meet consumer expectations, if we are perceived as not providing fair refunds, if we are subject to a data security breach, or for other reasons. Over the past two years the number of customer complaints has risen more rapidly than the number of transactions, and the steps we have taken to reduce the number of complaints may prove to be ineffective. Sales of our Identity Protect subscription service, and post-transaction advertising of other subscription services, appear to be the focus of many customer complaints, and our efforts to reduce the incidence of complaints may also reduce our revenues from that service and our advertising. Dissatisfied customers may also deny payment for services through their charge cards, increasing our chargeback rates and our costs of doing business. Customer complaints may also lead to adverse publicity in the press or popular blogs and websites, and may lead to regulatory investigations and potential legislative or regulatory reactions that may impact our business, reduce our revenues or increase our operating expenses. For example, adverse publicity about our post-transaction advertising practices led to a reduction in our post-transaction advertising and to changes to our business model, including a greater emphasis on direct sales of our Identity Protect service. In addition, we are subject to ratings by consumer advocacy organizations, such as the Better Business Bureau, which could be adversely affected by negative publicity and customer complaints. Finally, from time to time we incur negative publicity related to our founder and chief executive, Naveen Jain. If we do not manage adverse publicity adequately, our brand and revenues could be harmed and our operating expenses could increase, harming our financial results and stock price. Our corporate image might be impaired as a result of negative publicity about our use of personal information in our service offerings, which could cause a corresponding drop in our stock price. Public sensitivity to the disclosure and use of personal information may create negative reactions by investors and customers to our business practices. Public concerns regarding data collection, privacy and security may cause some potential customers to choose not to purchase our services, which would inhibit or reverse the growth of our business and negatively affect our stock price. Any perception that our services might invade consumer privacy, even if our practices are in compliance with applicable law, may subject us to adverse publicity and could affect our business and the price of our common stock. Publicity by politicians and regulators threatening legislative or administrative action could adversely affect our business or the price of our common stock, whether or not the threats materialize. We are subject to risks related to credit card payments we accept, including credit risk and financial penalties, which could harm our operating results. A substantial majority of our revenues originates from online credit transactions. Under current payment card industry practices, we are liable for fraudulent and disputed payment 13
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card transactions because we do not obtain the cardholders signature at the time of the transaction. If we fail to maintain our chargeback rates at levels that are acceptable to the payment card associations, or otherwise fail to comply with their rules or requirements, we will face the risk that one or more payment card associations may, at any time, assess penalties against us, including higher transaction fees, or terminate our ability to accept payment card payments from customers, which would harm our business and operating results. For example, we are currently on probation with one of our payment card associations as a result of elevated levels of chargebacks, particularly those associated with sales of Identity Protect. We may also be subject to litigation and receive adverse publicity due to these issues, which could have a material adverse effect on our business and financial condition. If the terms of our subscription service offerings are not sufficiently clear, some customers may inadvertently purchase our services and subsequently seek reimbursement and chargeback. In addition, if our security measures are not sufficient, we will be at risk for a higher rate of payment card chargebacks. Because we provide online services to customers but do not process payments for approximately three days after we provide these services, we are at risk for fraudulent activity that we cannot detect in the limited time between the placement of an order and our provision of services. Fraudulent activity continues to increase in sophistication, making it more difficult to discern legitimate activities from those that are fraudulent. Our business depends on our ability to attract visitors to our websites who are likely to purchase our services, and any failure to do so could adversely affect our operating results. Our business model requires us to increase traffic to our websites, and to attract visitors who are most likely to purchase our services. With respect to third-party websites with which we have a cost-per-click pricing relationship, we may focus our efforts on attracting those customers who we believe are more likely to purchase our services in order to maximize revenues relative to our customer acquisition costs. In contrast, where we have a revenue-sharing or fixed-price relationship, we may attempt to attract a high level of traffic to our websites and, as a result, our conversion of visitors into customers may be lower. We may not be effective in controlling or directing the levels of traffic that we desire in order to derive the most value from these different types of relationships. Other factors could affect our ability to convert visitors into customers, including: our failure to meet the needs of our potential customers due to a perceived lack of breadth of service offerings, perceived or actual unreliability of information, or otherwise; the unwillingness of potential customers to pay the prices we charge for our information services, or to pay for information-related services at all; deterioration in the customer experience on our websites or in our level of customer care; system failures that cause our websites or services to be unavailable; or data security breaches that damage our brand. If any of these or other factors causes our rate of conversion of visitors into customers to decrease, our revenue growth could decline and our business could be harmed. We might also be forced to reduce our prices to maintain or increase our conversion rate, which would harm our revenues and operating margin. We attract a significant number of the visitors to our websites through our relationships with search engines and other leading Internet companies, and changes in these relationships could harm our revenues and operating results. We attract a significant number of the visitors to our websites through our relationships with third-party websites, including AT&T and Digimedia, and search engines such as Google and 14
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Yahoo! that feature our services on their websites through links or that advertise our services. Establishing new advertising relationships has been a significant contributor to increases in our revenues and net income in the past, and if we fail to establish new online advertising relationships or expand existing relationships in the future, our operating results could be harmed. Conversely, one or more of these companies might terminate or decide not to renew their relationships with us, or change their business focus in a way that harms our business by providing fewer visitors or introducing competitive services. Moreover, some of our agreements with third-party websites and search engines are terminable by these parties with little or no notice. If we have fewer visitors to our websites, we may generate less revenues from the sales of our services. A website or search engine that displays advertisements for our services or that offers our services through a link to our websites may choose to move these advertisements or links to a less prominent place on its website, in which case the volume of traffic that the website or search engine generates for us will decrease. Similarly, the search engines that direct traffic to our websites both through algorithmic search results produced by the search engine and by purchased listings on the search engines website may modify their search algorithms in ways that make our services appear less prominently or frequently in search results, or may establish or change the eligibility rules for purchasing listings that may require us to change how we offer our services. One or more third-party websites may attempt to charge more for advertisements or links, may charge more for purchased listings or may otherwise attempt to restructure their pricing relationship with us, for example, from revenue-sharing to cost-per-click pricing of advertisements. In addition, the prices for keyword advertising may increase due to market factors such as the increase in popularity of Internet advertising, which could lead to competition for scarce advertising slots. In any of these circumstances, our operating expenses may increase, which would lead to reduced operating margin, or traffic to our websites could decrease and our revenues could decline. We may not succeed in cross-selling or up-selling additional services to our customers. We seek to acquire customers based on their interest in one or more of our services and then offer additional or enhanced services to those customers. If our customers are not interested in our additional or enhanced services, or have an adverse experience with the services in which they were initially interested, the sale of additional or enhanced services to those customers and our ability to increase our revenues could be adversely affected. If we are not successful in developing new information services, our operating results may be harmed. A majority of our revenues in 2008 and the first six months of 2009 were derived from sales of our information services offerings. Our operating results could be substantially harmed if sales of any of these services were to decline or if we are not successful at enhancing these services or developing or acquiring new services to meet customer requirements. Any new service we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve the broad market acceptance necessary to generate significant revenues. If we are unable to develop new services to increase the breadth of our service offerings, our business and operating results may be adversely affected. 15
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If we are unable to increase repeat purchase activity, our revenue growth and operating margin will be harmed. Sales and marketing expenses related to acquiring new customers are our largest operating expense. Repeat purchase activity reduces this operating expense by lowering our average customer acquisition cost. Our ability to generate repeat purchase activity will depend on our ability to generate compelling new service offerings and to provide a positive customer experience and high-quality customer support. If we are unable to maintain loyal customers and generate increased repeat purchase activity from these customers, our revenue growth and operating margin could be harmed. Because our business depends on our reputation for high quality services and data integrity, if the information that we deliver to customers is unreliable or incomplete, or is perceived to be unreliable or incomplete, our business will be harmed. We believe that the primary benefits that cause customers to purchase our information services are the accuracy, relevancy and completeness of our information. Moreover, we compete against offline providers of information services with respect to some of our service offerings, and for us to be successful, customers must perceive our services to be as reliable as services provided by our competitors, which often involve human analysis and review. The information that we provide is based on data that we collect from many online and offline sources, and we rely on the accuracy, relevancy and completeness of this underlying data. Sometimes information provided to our customers contains inaccuracies. Some of our information may be deemed incomplete; for example, information concerning litigation does not contain any federal civil litigation other than bankruptcy. If our service offerings provide inaccurate, irrelevant or incomplete information, or if this information is otherwise not useful for our customers needs, then our reputation will be harmed and sales of our service offerings will decline. We may not be able to grow our business and our operating results may be adversely affected unless we generate greater brand recognition and market awareness of our services and increase quality traffic to our websites in a cost-effective manner. We derive most of the visitors to our websites from third parties that we compensate for this traffic. Sales and marketing expenses accounted for a majority of our operating expenses for 2008 and the first six months of 2009, and customer acquisition costs related to online advertising arrangements was the largest component. If we do not increase the number of direct visitors to our websites and reduce our reliance on third-party traffic, our ability to improve our operating margin and grow our business will be limited. We must generate greater awareness of our brand and the services we offer in order to increase the proportion of direct visitors to our websites. We expect that we will need to engage in online and offline advertising, in addition to our existing customer acquisition advertising relationships, in order to generate greater brand awareness. There is no guarantee that these advertising efforts will be effective in generating increased direct traffic and generating and sustaining greater brand awareness, or that these efforts will be more cost-effective than our online advertising relationships. In addition, we believe that growth of our customer base and future revenue growth depends on making our services appeal to a wider segment of the population. We must expand our range of services to appeal to wider segments of the online user population, and must engage in marketing efforts that will be effective in appealing to wider audiences. 16
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We intend to acquire domain names, services, technologies and businesses to facilitate development of new services and to increase customer traffic, but if we are unable to make acquisitions, or if we do not realize the anticipated benefits of acquisitions, our operating results could be harmed. We have acquired domain names, services, technologies and businesses in the past, and expect to continue to do so in the future. For example, in November 2006, we acquired IntelliSense Corporation, an employment screening business, in December 2008, we acquired Zaba, Inc., a people search website, and in April 2009, we acquired the assets of Spock Networks, Inc., a people search technology company. Any acquisition could require significant capital outlays and could involve many risks, including, the following: integrating the operations, systems, employees, benefit programs, services and technologies of the acquired business into our existing business, workforce and services can be complex, time-consuming and expensive; domain names that we acquire may not generate the levels of traffic to our websites that we anticipate; we may be required to record substantial accounting charges, including amortization or impairment charges, which could affect our operating margin; an acquisition may involve entry into geographic or business markets in which we have little or no prior experience; an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; an acquisition may require action to comply with certain privacy and data security laws and may implicate privacy and data security laws with which we had not previously been required to comply; we may incur debt in order to fund an acquisition, or we may assume debt or other liabilities of the acquired company, as we did with some of our previous acquisitions; and we may have to issue equity securities to complete an acquisition, which would dilute our stockholders ownership position and could adversely affect the price of our common stock. We may not be able to identify or consummate any future acquisitions on favorable terms, if at all. If we do complete an acquisition, the financial markets or investors may view the acquisition negatively. Even if we successfully complete an acquisition, it could adversely affect our business, and the anticipated benefits of any acquisition may not be realized or we may be exposed to unknown liabilities. For example, we recently settled litigation arising out of our 2005 acquisition of Qwil Company, that resulted in a settlement payment of $7.0 million. In addition, we may not be able to secure any necessary additional debt or equity financing to complete an acquisition on favorable terms, if at all. Any of these factors could harm our ability to achieve anticipated levels of profitability from acquired businesses or to realize other anticipated benefits of acquisitions. We depend on our leadership team, particularly our Chief Executive Officer and the Chairman of our board of directors. The loss of any of our senior management could adversely affect our future operating results. Our future success will depend on the ability of our executive management, under the direction of our board of directors, to operate effectively. The loss of any of our senior managementparticularly Naveen Jain, who is one of our founders and our Chief Executive Officer and Presidentcould adversely affect our future operating results. We believe that Mr. Jain has been critical to the development of our corporate culture and strategic focus, and 17
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has been instrumental in the growth of our business to date. If we lose the services of Mr. Jain, our corporate culture and strategic focus could be negatively impacted, which could adversely impact our ability to achieve future growth. Mr. Jain has been a defendant in several high-profile lawsuits. Mr. Jain has devoted significant attention to these litigations at various times, and certain of these actions have received media attention. There can be no assurance that Mr. Jain will not be a defendant in additional litigation in the future. Any future litigation could distract Mr. Jain from his activities as our Chief Executive Officer and President, and harm his reputation and consequently our business. Negative publicity about litigation involving Mr. Jain may hurt our hiring efforts. The loss of any of our directors, particularly the Chairman of our board, Admiral William Owens, could adversely affect our operating results. For example, Admiral Owens has been instrumental in attracting high quality individuals to serve on our board of directors and has helped us enter into important business relationships. As such, the loss of his services could adversely affect these areas of our business. Our arrangements with our employees, including Mr. Jain and our other executive officers, are at-will, and therefore may be terminated at any time by us or the employee. In addition, a significant portion of the stock options and restricted stock units held by several of our executive officers are vested, which presents the risk that these individuals may lack sufficient economic incentive to continue their employment with us in future periods. If our security measures are breached and unauthorized parties obtain access to customer data, our reputation might be harmed, potential and current customers might cease purchasing our services and we could be subject to regulatory penalties and litigation. If unauthorized parties succeed in penetrating our network security or otherwise misappropriate our customers personal or payment card information, we could be subject to liability and could face reduced customer confidence in our services. If we experience breaches of our network security or sabotage, we might be required to expend significant capital and resources to protect against or alleviate these problems. We may not be able to remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures and our reputation could be harmed and we could lose current and potential customers. Because of our increased profile as a result of our becoming a public company, we may become subject to more frequent attempts to breach our data security. The Federal Trade Commission, or FTC, and state agencies have inquired about or investigated the use and disclosure of consumers personal information by us along with various other Internet companies. The federal government has also enacted laws, such as the Fair Credit Reporting Act, or the FCRA, the Gramm-Leach-Bliley Act and the Drivers Privacy Protection Act, protecting the privacy of consumers nonpublic personal information. Our failure to comply with existing laws, including those of foreign countries, or the adoption of new laws or regulations regarding the use of personal information that require us to change the way we conduct our business, could increase the costs of operating our business. 18
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Our relationships with our vendors, advertisers and distributors may also be affected by the economic recession. Some of our vendors, advertisers and distributors may experience cash flow difficulties and difficulties accessing lines of credit or complying with debt covenants, or even continued viability. For example, in the second quarter of 2009 we reserved approximately $1.3 million related to a deposit with a business vendor that filed for bankruptcy. This reserve materially affected our results for the second quarter of 2009. If any of our other vendors, advertisers or distributors were forced to reduce their operations or to file for bankruptcy protection, it would be more difficult for us to conduct our business as we have in the past and could have a material adverse effect on our business. If the data that we obtain from government and private sources becomes unavailable or more expensive, our costs will increase and our operating margin will decline. Our information services depend on the continual availability of data from many external online and offline sources. For example, we obtain information from public filings, information companies and government authorities, and we rely on a large number of court vendors to complete local courthouse searches. Information provided by commercial sources may become unavailable if one or more providers change business practices, are sold or go out of business or suffer system downtimes, or as a result of other factors. We do not have multi-year agreements with some of our data suppliers. Moreover, changes in federal, state or local laws and regulations, including privacy laws, and unavailability of online public databases and other public records might contribute to the unavailability of source data. The loss or temporary unavailability of one or more sources of data might reduce the completeness and reliability of the information we provide, or reduce the breadth of our service offerings. In addition, source data that is currently obtainable without charge or at a low cost might become more expensive, which could require us to raise our prices or make it too costly for us to gather that information. Any of these factors could materially harm our operating results, financial condition and business operations. We face competition from a wide variety of online and offline companies in the different markets for our service offerings, and we expect to face increased competition, particularly online. If we do not compete successfully, our business, financial condition and operating results will be adversely affected. We operate in rapidly evolving and competitive markets, competing primarily with large, diversified online and offline service providers, as well as small firms and individuals. These competitors include online and offline background check and information verification service providers, large diversified Internet companies, national credit repositories and online address and phone number directories. We anticipate that as the market for our services grows and we develop and expand our service offerings, we will encounter increased competition from new and existing competitors. As we develop new service offerings, we expect that we will be exposed to new competitive threats. Many of these actual or potential competitors may have greater resources, more brand recognition and consumer awareness, greater international scope and larger customer bases than we do. We may be unable to maintain or strengthen our competitive position in our markets, especially against larger competitors. As competition intensifies, we may become more reliant on our advertising relationships, which may reduce our bargaining leverage and make us more susceptible to financial harm if any of these relationships are subsequently terminated. If we do not compete successfully, our business and operating results will be adversely affected. The competitive landscape for online information services is extremely fragmented, with widespread availability of alternative services at different price points. As this market evolves, consumer demand and competitive service offerings may emerge that undermine demand for or impose pricing pressures on our services, which could result in reduced revenues and 20
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retaining enterprise customers, our revenue growth may be impaired, which could harm the price of our common stock. To the extent the availability of free or relatively inexpensive Internet access to information increases, the demand for our services may decrease, which could harm our business. Public sources of free or relatively inexpensive information have become increasingly available, particularly through the Internet, and we expect this trend to continue. Government agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive information may reduce demand for our services. To the extent that customers choose not to obtain services from us and instead rely on information obtained at little or no cost from these public sources, our revenues could decrease, which might have an adverse effect on our business, financial condition and operating results. Risks Related to Litigation and Government Regulation Our operating results depend significantly on our ability to acquire and use customers billing information. If the rules are changed to make it more difficult to acquire and use customers billing information provided for one transaction in another transaction for the same consumer, our operating results could be harmed. In May 2009, the Chairman of the U.S. Senate Committee on Commerce, Science and Transportation sent a letter to two marketing companies that acquire consumer billing information through other companies online retail sites. The letter seeks information about this practice, which it calls controversial and subject to an inordinate number of consumer complaints. We have a relationship with Adaptive Marketing, a subsidiary of one of these companies, pursuant to which we have provided Adaptive Marketing with consumer billing information for consumers who have purchased one or more of our services and had indicated their intent to purchase a service from Adaptive Marketing. We have relationships with other online retail sites pursuant to which they provide consumers billing information to us, after the consumer has purchased a product or service from that online retail site and has also indicated he or she wanted to purchase a service from us. Similarly, we use consumer billing information provided when a consumer purchases one of our services in connection with selling the same consumer another of our services, particularly subscription services that generate a significant portion of our revenues. If the rules and regulations applicable to the practice of transferring consumer billing information between companies or in connection with intra-company add-on purchases are changed to disallow either practice or to make it more difficult to engage in either practice, our revenues would be materially adversely affected. In addition, recent state legislative proposals would require, and some recent class action settlements have required, that consumers re-enter credit card information to confirm online purchases. We believe these requirements reduce customer willingness to enter into such transactions, and, if applicable to us, would likely reduce our revenues. Changes in laws and regulations governing access to public information and the collection or sale of publicly available information could make it more difficult for us to conduct business. Because we use personal information in providing our information services, we are subject to government regulation and vulnerable to adverse publicity. We provide many types of data and services that already are subject to regulation under the FCRA, Gramm-Leach-Bliley Act, Drivers Privacy Protection Act and, to a lesser extent, various other federal, state and local laws 24
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and regulations. Violation of these laws or regulations may result in substantial fines, judgments and other penalties. These laws and regulations are designed to protect the privacy of the public and to prevent the misuse of personal information in the marketplace. However, many consumer organizations, privacy advocates and government regulators believe the existing laws and regulations do not adequately protect privacy. These groups have become increasingly concerned with the use of personal information, particularly social security numbers, department of motor vehicle data and date of birth data. As a result, there is an effort to impose restrictions on the dissemination or commercial use of personal information. Many states have enacted laws to protect personal information or to give consumers more information about how their personal information is used, and restrictions on the dissemination or commercial use of personal information by the public and private sectors may be adopted in the future. For example, the Washington State Legislature recently adopted legislation prohibiting companies from selling cell phone directory services without an express opt-in by cell phone owners, which was a service we had begun to offer and subsequently discontinued as a result of this new requirement. The following legal and regulatory developments could have a material adverse effect on our business, financial position and operating results and could result in substantial regulatory compliance and litigation expenses: amendment, enactment or interpretation of laws and regulations that restrict the access to and use of personal information and reduce the supply of data available to customers; additional restrictions or requirements or increases in data prices implemented by credit bureaus and other providers of data; changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing; failure of our services to comply with current laws and regulations; and failure of our services to adapt to changes in the regulatory environment in an efficient, cost-effective manner. Further, laws and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent and restrictive. These regulations could affect the costs and effectiveness of communicating over the Internet, adversely affect the demand for our services, or the efficiency of our advertising, or otherwise harm our business, operating results and financial condition. We are the subject of a Washington State Attorney General investigation about third-party subscription services advertised on our websites and our own Identity Protect subscription services. This inquiry could result in fines or other remedies that could adversely affect our business. The office of the Washington State Attorney General has started a formal inquiry, including depositions of some of our executives, about some of our business practices, particularly those involving our business relationship with Adaptive Marketing and associated with our sales of subscription services. These programs have been the fastest growing sources of our revenues over the past two years, and if the Washington State Attorney Generals office concludes that the critical components of these services must be changed, or imposes fines or penalties on us, or precipitates negative publicity about these services, our revenues and operating results could be adversely affected. 25
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We are the subject of a Federal Trade Commission investigation about our compliance with the Fair Credit Reporting Act, which could result in fines or other remedies that could adversely affect our business. The FTC has commenced an inquiry into our compliance with the FCRA. At the conclusion of its investigation, the FTC may impose monetary penalties or other restrictions on us, which could have a material adverse effect on our business. While we believe that our enterprise screening services are FCRA-compliant, we do not know whether the FTC will take the view that the FCRA is also applicable to our delivery of consumer information services such as our background check and nanny check services. A determination by the FTC that the FCRA covers delivery of consumer services could have a material adverse effect on our business. In 2005, the FTC levied penalties of $15 million against one of our competitors for violations of the FCRA and the FTC might impose monetary penalties, which also could have a material adverse effect on our business. Class action complaints for alleged unfair and deceptive business practices could harm our reputation and operating results. Complaints from customers about our services, third party services and the marketing of those services may from time to time result in class actions litigation against us. For example, on August 31, 2009, a resident of the state of California filed an action against us and Adaptive Marketing in Federal Court in California. The complaint alleges causes of action for unfair and deceptive business practices, false advertising, breach of financial privacy and conversion. The complaint is a purported class action complaint on behalf of all similarly situated California residents. More specifically, the complaint alleges that we have not adequately disclosed the terms of our Identity Protect service offer and have not obtained proper approval from consumers before debiting consumer bank accounts or charging consumer charge cards. The complaint also alleges that Adaptive Marketing has not adequately disclosed the terms of its post-transaction offers appearing on our websites and that we improperly transferred consumers credit card information to Adaptive Marketing without obtaining proper approval. Any such purported class action lawsuit, and any other private or governmental claims or actions that may be brought against us in the future relating to these programs, could cause us to incur substantial legal fees to defend claims or result in our being obligated to pay substantial damages. These fees and damages could be disproportionate to the revenues we generate through these programs, which would have an adverse effect on our operating results. Even if we are successful in defending against these claims, the time spent doing so may cause management distraction. In addition, customer dissatisfaction, or a significant reduction in, or termination of, membership offers on our website as a result of these claims, could harm our brand, revenues and profitability. We could face liability based on the nature of our services and the information we report, which may not be covered or fully covered by insurance. We face potential liability from individuals, classes of individuals, customers or regulatory bodies for claims based on the nature, content or accuracy of our services and the information used and reported by us. This potential liability includes claims of non-compliance with laws and regulations governing our services and claims of defamation, invasion of privacy, negligence, and copyright, patent or trademark infringement. In some cases, this potential liability may be determined without fault. Insurance may not be adequate to cover us for all risks to which we are exposed or may not be available to cover these claims at all. For example, punitive damages, which generally are not covered by insurance, may be available under the FCRA to consumers for the failure to comply with the FCRA. Any imposition of liability, particularly liability that is not covered by 26
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insurance or is in excess of our insurance coverage, could have a material adverse effect on our business, financial condition and operating results. We may be subject to costly litigation arising out of information presented on our websites or collected in connection with our employment screening services, and the litigation could have a material adverse effect on our business if decided adversely. In the proper circumstances, individuals, businesses and government agencies may rely on our information services in making hiring decisions and conducting background checks of potential business partners. If our services provide inaccurate information, individuals seeking employment may be denied opportunities on the basis of that information. Conversely, if the information provided by our services is erroneous or incomplete, employers may hire someone with a fraudulent resume or business credential, or a criminal record. We may face potential liability in any of these situations, with potential claims such as defamation, breach of contract and negligence. For example, in the past we have faced a claim because we reported that a person had been convicted of criminal activity when the person had merely been charged with the activity. Some laws require us to withhold disclosure of identifying information regarding certain individuals in some circumstances; however, because an individuals identifying information may change without our knowledge, the individual may still be searchable in our database. From time to time, we have been subject to lawsuits by potential employees of our customers, alleging that we provided inaccurate or improper information that negatively impacted the customers hiring decisions. Such claims and similar lawsuits in the future could divert the attention of our management, subject us to equitable remedies relating to the operation of our business and provision of services and result in significant legal expenses, any of which could have a material adverse effect on our business, financial condition and operating results. We could be subject to legal claims, government enforcement actions and damage to our reputation if we or our customers fail to comply with federal, state and foreign laws, regulations or policies governing consumer privacy, which could materially harm our business. Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices. The U.S. Congress has considered, and will continue to consider, legislation regarding privacy and data security measures (for example, the Personal Data Privacy and Security Act of 2009). Any failure by us to comply with applicable federal, state and foreign laws may result in, among other things, administrative enforcement actions and fines, class action lawsuits, cease and desist orders, and civil and criminal liability, and materially harm our business. Third parties may bring class action lawsuits against us relating to online privacy and data collection. We disclose our information collection and dissemination policies, and we may be subject to claims if we act or are perceived to act inconsistently with these published policies. Any claims or inquiries could be costly and divert managements attention, and the outcome of these claims or inquiries could harm our reputation and our business. Our customers could improperly use the information on our websites, and we may be held liable. Our customers are also subject to various federal and state laws concerning the collection and use of information regarding individuals. For example, the FCRA regulates the way information that may be available through our websites may be used in connection with 27
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background checks for employment, insurance, tenancy and real estate. We cannot assure you that our customers are currently in compliance, or will remain in compliance, with these laws and their own privacy policies. We may be held liable if our customers use our services in a manner that is not in compliance with these laws or their own stated privacy policies. We may be required to indemnify our customers or data suppliers, which could have a material adverse effect on our cash flow, operating results and financial condition. Some of our customer and data supplier contracts contain indemnification provisions that require us to indemnify our customers and suppliers against certain claims, including those for improper use of information, non-compliance with applicable laws and regulations and intellectual property infringement. To the extent these claims are successful and are not covered by our insurance coverage, these obligations could have a material adverse effect on our cash flow, operating results and financial condition. The introduction of tax laws targeting companies engaged in electronic commerce could materially adversely affect our business, financial condition and operating results. We file tax returns in those states where existing regulations applicable to traditional businesses require these filings. However, one or more states could seek to impose additional income tax obligations or sales tax collection obligations on out-of-jurisdiction companies, such as ours, that engage in or facilitate electronic commerce. A number of proposals have been made at various government levels that could impose taxes on the sale of services through the Internet or on the income derived from these sales. These proposals, if adopted, could substantially impair the growth of electronic commerce and materially adversely affect our business, financial condition and operating results. The moratorium on certain U.S. federal, state and local taxation of online services and electronic commerce has been extended by the U.S. Congress to November 1, 2014. Any future imposition of these taxes could materially adversely affect our business, financial condition and operating results. Laws governing Internet communications and commerce over the Internet could adversely affect our business. The legal and regulatory environment pertaining to the Internet is uncertain and may change in the future. New laws may be passed, existing laws may be deemed to apply to the Internet or existing legal safe harbors may be narrowed, both by U.S. federal or state governments and by governments of foreign jurisdictions. These changes could affect, among other things, user privacy and security issues, consumer protection, transfer of and charges to credit cards, sales tax and other taxes, and cross-border commerce. The adoption of any new laws or regulations, or the application or interpretation of existing laws or regulations to the Internet, could hinder growth in use of the Internet and online services generally, and decrease acceptance of the Internet and online services as a means of communication, commerce and advertising. In addition, it could increase our costs of doing business, subject our business to increased liability or prevent us from delivering our services over the Internet, thereby harming our business and operating results. 28
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within the online advertising market, performance-based advertising, such as cost-per-click and cost-per-action, is the largest and fastest growing segment, representing 57% of the market in 2008, up from 51% in 2007. The Need for Information Services In todays society, individuals and businesses often must make critical decisions based on limited or fragmentary information. At the same time, the pace of decision-making has accelerated, and risks associated with decisions have increased, as society has become more mobile and contacts traditionally based on personal referrals have been replaced by more impersonal networks. In response to these developments, consumers and organizations are increasingly turning to the Internet for information services to make better-informed decisions about the people, businesses and assets with which they interact. Information services provide consumers and organizations with information to help them identify, monitor, interpret and respond to specific situations and their environment. Consumers may require basic information, such as phone numbers and addresses, or more advanced services, such as background screening, identity theft protection, credit monitoring and employment verification. Sources of Information A wealth of existing information can be used to provide services that help identify and locate individuals and businesses, manage information security and mitigate personal safety risks. This information falls into the following categories: Public Records. Public records consist of information that is maintained by government agencies and is generally available, such as property title and lien documents, birth and death certificates, business records and court records. In addition, government organizations maintain information available only for restricted uses, including driving records and employment authorizations. Publicly Available Information. Publicly available information consists of online and offline information that is generally available but is not maintained by a government agency, such as names, addresses and telephone numbers of individuals and businesses, professional licensing and trade organization information, press releases and newspaper articles. Publicly available information is increasingly available over the Internet due to the proliferation of online search engines, blogs, social networks and directories. Commercial Records. Commercial records consist of information that is maintained by enterprises that is available for purchase, such as mailing and telemarketing lists, phone connect and disconnect information, and business profile data. Additionally, consumer credit profile information is available pursuant to the Fair Credit Reporting Act, or FCRA. Challenges Faced by Existing Information Services Most free and paid information services face significant challenges and frequently fail to provide consumers and enterprises with valuable, accurate and timely information about people, businesses and assets. These challenges include: Limited Breadth of Data Sources and Information. Many available information services, including Internet search engines, public records and directories, provide access to a single data source or subset of available information, and are not comprehensive in nature. Failure to Integrate Data from Multiple Sources. Data currently resides in disparate online and offline sources and in many different formats. In order to analyze the data 70
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and present useful information to a consumer, the data must be aggregated and normalized into a consistent, meaningful format. Failure to Cleanse Out-of-Date or Conflicting Data. Much of the public, publicly available and commercially available information is inaccurate or inconsistent, as many sources fail to regularly update their data and reconcile inaccurate and inconsistent data to create up-to-date records. Lack of Advanced Technologies to Analyze Data. Few services apply the sophisticated analytics technologies required to transform raw data into valuable information from which consumers can make useful inferences. Lack of Relevant Information for Specific Decisions. Many services aggregate large volumes of data but fail to integrate the data and present information in an organized and understandable format that can be used to make decisions. Lack of Automation and Efficiency. Services that require extensive research, data collection, cleansing and analysis are often performed manually by private search firms and individuals. These services are time intensive, difficult to scale to large volumes and difficult to update. Failure to Provide Quality Services at an Affordable Price. Due to the difficulties and inefficiency in aggregating and reconciling information from a myriad of sources, most service providers are unable to offer consumers quality services at attractive prices. The Intelius Solution We have developed a proprietary platform from which we deliver useful and timely information services to consumers over the Internet. Our platform dynamically accesses, collects and integrates data from thousands of online and offline data sources and uses sophisticated analytics technologies to cleanse, verify and augment this data in real time to provide our customers with actionable information. Our information services help our customers make important decisions about people, businesses and assets. These services include search services such as Background Check, People Search, Phone Number Verification and Property and Neighborhood Report, and monitoring services such as Identity Protect and Credit Reports and Scores. We sell our information services on a pay-per-use or subscription basis and enable online advertisers to provide targeted advertising to our customers. Key elements of our solution include: Broad Portfolio of Information Services We offer over 100 information services, including Identity Protect, Background Check, Phone Number Verification, People Search, and Property and Neighborhood Report, which address a variety of consumer and business demands. Our services provide consumers with valuable information that helps them address potential safety and security concerns, manage and protect their personal information and locate businesses or family, friends and colleagues with whom they have lost contact. We also offer enterprise information services to provide businesses with tools and services to identify, screen and administer prospective and current employees that can be used to mitigate risks, reduce costs, increase efficiency and address regulatory requirements. Compelling Value and User Experience We provide a high-quality user experience by delivering valuable services, an intuitive user interface and dedicated customer service at affordable prices. We sell our consumer information services on a pay-per-use or subscription basis at price points designed to appeal to a wide cross-section of consumers and to encourage repeat purchase activity. We provide our customers instant access to our services over the Internet through an easy-to-navigate user 71
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interface. We actively monitor trends in customer usage and market demand in order to continuously innovate and develop services that anticipate and respond to our customers evolving needs. We believe the compelling value and positive user experience we provide enhances customer satisfaction and increases customer loyalty. Useful Information About People, Businesses and Assets Our consumer information services are based on a collection of more than 15 billion public, publicly available and commercial records about people, businesses and assets. The innovative technologies built into our platform enable us to dynamically access, manage, integrate, cleanse and validate massive amounts of data in real time from hundreds of internal and external databases and repositories. This allows us to provide timely, useful and accurate information that helps consumers make better informed decisions. Proprietary Technologies and Extensible Platform We have developed advanced proprietary technologies that access, collect and normalize a broad range of consumer and business-related information. Our analytics technologies verify and augment multiple terabytes of data, usually in disparate formats and with varying degrees of accuracy and completeness, from a myriad of sources in order to make inferences and predictions based on this data. For example, our technologies enable us to construct a single identity profile for a person who has changed his or her last name, address or phone number. Furthermore, our extensible platform gives us the flexibility to develop and quickly bring to market new service offerings based on our existing technologies and information sources. This enables us to develop new sources of revenues without incurring significant incremental development costs. Security and System Reliability By leveraging standards-based technologies, we have implemented industry-leading security measures and innovative security technologies to enhance customer confidence when they are using our services or providing information to us. These security measures also conform to the security requirements of our commercial relationships, such as credit bureaus and credit card processors. To verify the robustness and compliance of our security technologies, we hire external consultants to perform extensive internal and external security audits on a quarterly basis. Furthermore, our infrastructure is designed to handle expanding volumes of customer visits, transactions and service offerings in an efficient and cost-effective manner. Large Audience and Attractive Customer Base In September 2009, the Intelius network of websites that attracts users interested in obtaining consumer information services drew over 11.7 million unique visitors in the United States, according to comScore Media Metrix. We have generated transactions from over nine million consumer accounts since our inception. In addition to the visitors who come to our websites directly, we draw visitors through our relationships with Internet portals and directories, such as Yahoo! and AT&T, that offer our services to their users and direct visitors to our websites. We believe that our customers and visitors to our websites appeal to advertisers because they have attractive demographic characteristics and have demonstrated the ability and willingness to purchase goods and services online. 72
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Our Strategy Our objective is to be the leading provider of information services. Our strategy for achieving this goal includes the following initiatives: Expand Our Customer Base. We intend to grow our large, established customer base and reach a broader consumer audience by developing our existing distribution relationships with leading Internet companies, establishing new online distribution relationships, and adding new websites to our website network that attract consumers of information services. Additionally, we believe offline retail and mobile devices represent exciting new distribution channels for us to reach new consumers with our offerings. Expand Our Portfolio of Service Offerings. We closely follow broad consumer usage and Internet industry trends to identify new compelling services for our customers. We plan to continue to innovate, add new data sources and leverage our advanced technologies to develop new information service offerings for consumers. We also intend to optimize the way we offer these services, including through new subscription offerings such as Property and Neighborhood Report and Credit Reports and Scores. By developing new services and enhancing the depth and functionality of existing offerings, we believe we can reach new customers and increase sales to existing customers. Increase Revenue Per Customer. We seek to maximize our revenue per customer by up-selling, cross-selling and advertising. During the transaction process, we might up-sell by offering an enhanced version of the initially requested offering. We cross-sell complementary services, such as Identity Protect, and offer promotional pricing to entice customers to make additional purchases. We integrate advertising during the transaction process as another source of revenue. We continuously evaluate our transaction process for opportunities to increase revenues per customer through the introduction of additional product offerings. Increase Repeat Purchase Activity. Repeat customers generally account for a substantial portion of our revenues. We believe these customers are more likely to access our websites directly than are new customers, resulting in more profitable transactions. We intend to increase repeat purchase activity and customer loyalty by extending the breadth and quality of our service offerings, continuously improving our customer experience and providing excellent customer service. We actively promote our subscription service offerings to facilitate increased customer loyalty and repeat purchase activity. Enhance Our Brand. We plan to invest to enhance our brand. We intend to build a recognized brand through advertising and marketing initiatives, including online advertising, print and outdoor advertising, trade shows, viral marketing and word-of-mouth. We also intend to continue to enhance our brand through quality of service initiatives, maintaining industry best practices, such as expansion of our service center, and improving customer interfaces on our websites. In addition to raising public awareness, we believe that these brand-building initiatives will enhance our sales and profitability over the long term by attracting more direct traffic to our network of websites. Expand Through Strategic Acquisitions. We intend to pursue acquisitions of relevant domain names, as well as acquisitions of companies with complementary customers, technology and services, in order to augment our customer base, increase traffic to our websites, enhance awareness of our brand, add new services and provide new sources of revenues. To date, we have made acquisitions that have allowed us to increase direct traffic to our network of websites, improve our search engine relevance and expand our product offerings. Consumer Services We offer consumers a broad range of search and monitoring services that address their immediate needs for information about people, businesses and assets. Our search services are 73
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designed to help consumers identify and verify unknown or missing contact information for people and businesses, locate and connect with friends, colleagues and businesses, and acquire detailed information on real estate and other assets. Our monitoring services provide a comprehensive examination and ongoing monitoring of critical personal information, which can be used to alert consumers of potential identity theft and financial fraud concerns. We utilize the most up-to-date, complete and accurate information available to us to create our service offerings, which we sell individually and in bundles of complementary services. Most of our services are offered to our customers in an easy-to-use and understandable format through our primary website, www.Intelius.com. Our core service offerings include: Information Services Search Services Background Check provides a detailed examination of an individuals personal history based on name and state of residence. It draws from thousands of continuously updated data sources that include government, criminal, court, property and other public and publicly available records. Background Check delivers a detailed analysis of an individuals address history, aliases, criminal history, liens and judgments, bankruptcy, professional licenses, marriage, divorce, death, property and other asset information. Some components of Background Check are also available as individual offerings. Business Search enables consumers searching for information, products and services to connect with merchants. Leading online directory services provide us with listing information about businesses and service providers related to a consumers search query. Our Business Search helps these online directories generate additional exposure for their merchant customers and helps merchants acquire customers and sell products and services. People Search enables consumers to locate a physical address, email address and phone number information for individuals. This service analyzes billions of public and publicly available records, including addresses and daily phone connect and disconnect information, to deliver information that helps consumers locate family, friends and colleagues. Date Check provides individuals with the information provided by our Background Check service and our Business People Search service along with a social network lookup. Phone Number Verification enables consumers to identify phone numbers they do not recognize. It provides up-to-date information associated with residential, commercial, mobile, Internet, pager and pay phone numbers, listed and unlisted. Phone Number Verification provides our customers with the name, current address (when available), phone company and connection status of the unrecognized phone number. Email Verification enables consumers to identify email addresses they do not recognize. Email Verification provides up-to-date information associated with an email address, including residential, commercial, mobile and Internet phone numbers and postal addresses by utilizing data sources containing both listed and unlisted numbers and addresses. Identity Verification enables individuals or businesses to verify the identities of individuals based on information provided, including social security number, name, address, phone number and other key variables. This service searches for fraud and validates that an individual is using his or her true identity on an application or other form of registration. Business People Search provides consumers with the ability to locate professionals by name, location, company and other search criteria. This service analyzes multiple forms of public and publicly available records, including corporate records, professional licenses, business profiles, addresses, and daily phone connect and disconnect information, to deliver information that helps consumers and professionals locate colleagues and associates. 74
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Property and Neighborhood Report enables consumers to make decisions about property value and verify other details about the surrounding area of a residential or commercial property. This service analyzes many forms of public and publicly available information, including property tax data, census records, sex offender information, and liens and judgments, to provide consumers with relevant information and statistics about individual properties, neighborhood residents and community demographics and characteristics. Monitoring Services Identity Protect, our identity theft protection subscription service, provides individuals with the ability to monitor and protect proactively against cases of identity theft. We offer comprehensive identity reports and real-time identity fraud monitoring that analyzes thousands of public and commercial data sources for potential fraudulent activity and changes in users personal profiles, such as changes of address or new account activations. Our service alerts customers via email to suspicious behavior involving their personal information and includes an insurance and recovery plan that provides $25,000 of coverage in the event that identity theft does occur. Background Monitoring allows consumers and businesses to receive periodic updated background reports on individuals that keep them informed of the dynamic and changing nature of the individuals background. We alert our customers to any new information about the individual, such as a recent criminal charge, civil lawsuit, judgment, lien or bankruptcy. Credit Reports and Scores is a subscription service that helps consumers understand and monitor their credit profile. This service includes a credit report, which provides consumers their credit history as reported by one of the three national credit repositories, Equifax, Experian or TransUnion; a credit score based on the credit history from one of the three national credit repositories; and credit monitoring, which includes the periodic review of credit-related information from each of the three nationwide credit reporting agencies designed to detect and notify the consumer of fraudulent activity, new inquiries, new accounts, late payments and other matters affecting his or her creditworthiness. Advertising We provide advertising in several formats to our customers and to visitors of our websites. We charge our advertisers on a cost-per-action, cost-per-impression and cost-per-click basis. Post-transaction Advertising offers advertisers the ability to reach our customers with targeted service offerings and promotions after a customer has completed a transaction on our website. This advertising is highly valued because it is presented to our customers at a time when they are open to making purchases. Upon acceptance of these offers, we enable our customers to securely transfer their billing information in order to facilitate their purchase. Display Advertising helps businesses build their brands, acquire customers and market products and services to visitors of our websites. We provide display advertising, in the form of banner advertisements or text links, on many of our websites. Enterprise Services We provide employers and real estate managers with detailed personal and background information that is necessary for conducting pre-employment screenings of potential hires and screening of potential tenants. All of our enterprise screening services require consent of the individual being screened and we gather this consent in compliance with the FCRA. Our enterprise information services include: Employment Screening consists of our background screening service, which includes address and criminal history and may be augmented with education and employment 75
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verification, a credit report, drug screening, a department of motor vehicle records check, and other information and services selected by the employer. Tenant Screening consists of our background screening service, and may be augmented with a credit report and rental history. Technology We have developed several proprietary technologies that serve as the foundation of our technology platform and allow us to view, analyze and adjust how we acquire and market to our customers. We also employ industry-leading technologies and in-depth security policies designed to ensure that our operations and information are protected. Our technology infrastructure enables us to scale our business at a low cost while providing a flexible platform for integrated application development. Data Access, Analysis and Integration We draw upon a wide variety of online and offline sources for our data, including government agencies, credit bureaus and third parties that compile public, publicly available and commercial record information. This information is delivered to us via digital media or accessed via electronic gateways. Update frequencies range from daily to annually, depending on the source. We do not rely on a single source to operate any of our services, and we believe we would be able to continue our service offerings should any single source become unavailable. Our technology platform is designed to standardize access to disparate information sources so that we can uniformly search and analyze all sources. Whether information is stored in our internal databases or accessed in real time from external sources, we apply the same normalization techniques. We then apply a real-time integration process that allows us to create an accurate and comprehensive virtual record from the information sources used, while minimizing duplication. Our innovative technology employs sophisticated analytics that allow us to make inferences and predictions from disparate information sources. We apply cost-optimization algorithms to deliver high-quality information at an affordable cost. Operations and Information Security We implement security at multiple levels in our hardware and software and follow rigorous industry standards to protect our internal operations and the personal information we require and provide. We use leading enterprise firewalls and monitoring systems for intrusion detection. We encrypt all sensitive data and store it with the 256-bit Rijndael Advanced Encryption Standard approved by the National Institute of Standards and Technology and control limited logged access by access control lists. We engage in extensive annual internal and external security audits, as well as quarterly external network scans and penetration tests conducted by VeriSign. We also engaged VeriSign to conduct an assessment of our policies and procedures, and VeriSign certified that we were in compliance with the VeriSign Security Certification Program as of September 25, 2009. For the assessment, VeriSign focused on the security components of the following industry standards: Payment Card Industry, or PCI, Data Security Standard v1.2; Gramm-Leach-Bliley Act; ISO 27002/27001:2005 Information Security Standards; Technical Security Standards from the National Institute of Standards (NIST) and the Open Web Application Security Project (OWASP); and State Security Breach Notification Law (using California Civil Code Section 1798.80 1798.84 as the baseline). 76
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the workflow for administrative follow-up. Once all components for a report have been received, a job completion alert informs the requester that its report is ready for delivery. Advertising Platform We have developed a proprietary advertising platform that allows for the dynamic placement of advertising on our websites. Advertising can be grouped together into exclusive families with weights to determine relevance based on numerous attributes related to websites, user location and behavior and profiling. Our monitoring and administration system allows tracking of these offers in real time enabling us to refine and optimize targeting. iSearch/Spock In September 2008, we launched www.isearch.com, a service that includes an information retrieval engine for both structured and unstructured records. The iSearch platform generates a multi-level profile of individuals and businesses. Our April 2009 acquisition of Spock Networks, Inc. introduced a natural language processing feature to our data extraction process, which identifies the merge attributes for each record. Product Development Our product development activities, which are primarily composed of research and development efforts, are focused on the development of new analytics technologies for integrating disparate databases and providing a robust data platform for development of our new products. These efforts are instrumental in allowing us to provide unique and compelling products to our customers. For the years ended December 31, 2006, 2007 and 2008, we spent $1.5 million, $3.3 million and $5.7 million, respectively, on product development. For the first six months of 2008 and 2009, we spent $2.6 million and $4.4 million, respectively, on product development. Sales and Marketing We use the following advertising and marketing programs to attract and retain customers: Online Distribution Relationships. We have established relationships with leading Internet companies, including Yahoo! and AT&Ts AnyWho subsidiary, that market our services on their websites and direct users to our websites. These relationships are structured on a revenue-sharing, cost-per-impression or cost-per-click basis. Search Engine Optimization and Marketing. We optimize our websites to maximize the opportunity for proper indexing, listing and inclusion in the editorial results of algorithmic search engines of companies such as Google, Microsoft and Yahoo!. We run performance-based search advertising programs and monitor, analyze and modify them in real time to improve their effectiveness. Direct Navigation. We own a network of websites with content relevant to our services, from which we direct visitors to our primary website, www.Intelius.com, where they have the opportunity to purchase our services. Offline Marketing. We advertise in offline media such as radio, television, billboards, print media and trade shows to enhance consumer awareness of our brand and services. Customer Loyalty. We promote customer loyalty by providing an intuitive and compelling user interface on our website, and through our in-house, highly-trained customer service department. Additionally, we periodically offer our customers security tips, new product offerings and promotions through opt-in direct email communications. We market to enterprise customers through a dedicated sales force and channel partners. Our sales force is organized geographically in major U.S. regional markets and is responsible 78
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for answering incoming inquiries and contacting prospective enterprise customers. Our enterprise account management organization is responsible for servicing, cross-selling and up-selling existing enterprise customers. We also work with channel partners that wish to market and promote our services to their customers, clients or end users. Our channel partners pay for our services on behalf of the end users, or feature our branded services with their offerings. Competition We operate in rapidly evolving and competitive markets and compete with large, diversified online and offline service providers, as well as small firms and individuals. We believe that most of our competitors compete with us for a particular service offering, but do not compete with us across our entire suite of service offerings. However, we believe that as the market for our services grows and we expand our service offerings, we will encounter increased competition. We face different principal competitors in the information services market, including the following: Online and offline background check and information verification service providers, including private search firms. Many of these providers offer manual background screenings and verification services for consumers and businesses that are typically comprehensive, but are high-cost and labor intensive and require a significant amount of time to complete; Online properties and directory services that provide free and paid address and phone number information, people search services and real estate information and analysis; Large, diversified Internet companies that offer publicly available information that can be crawled and indexed on the Internet. While these companies do not currently offer a wide variety of information services, they may compete directly with our service offerings in the future; Internet websites that compete with us for online advertising revenues. These websites compete with us on the basis of the number of visitors and the quality of visitor traffic; and National credit repositories and other information services providers that offer credit monitoring services that compete with our identity theft protection services. These services typically provide only after the fact notification of a credit-related incident after it has occurred. We believe the principal factors upon which we compete in the market for information services are: completeness, accuracy and reliability of information services offered; speed of delivery of information services; ease of use and access to information services; cost-effectiveness of information services; relationships with highly visited Internet portals and websites; ability to acquire customers cost-effectively; and ability to generate revenues from repeat customers. We believe we compete effectively relative to our competitors in the market for providing information services to consumers and businesses over the Internet. Furthermore, we believe our advanced technologies and proprietary platform provide a significant advantage in delivering accurate and useful services in a timely manner at affordable prices. 79
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Government Regulation We are subject to state, federal and international laws and regulations applicable to online commerce, including privacy, website content, background screening, consumer credit, gaming, protection of minors and general consumer protection laws. Laws and regulations have been adopted, and may be adopted in the future, that govern or regulate Internet-related activities and information, including online content, data privacy, data security, online marketing, unsolicited commercial email, taxation, pricing and quality of products and services. Some of these laws and regulations, particularly those that relate to the Internet, were adopted relatively recently and their scope and application is less certain. Our enterprise business, which accounted for approximately 7.0% of our total revenues during 2008 and 5.9% of our total revenues in the first six months of 2009, distributes information about individuals to persons who make eligibility, service and other decisions based on this information. These enterprise services are subject to regulation under federal, state and local laws in the United States. Examples of these regulations include the FCRA, which regulates the use and disclosure of information used by employers, landlords, insurers and other entities to make various selection decisions, the Gramm-LeachBliley Act, which regulates the protection and use of non-public personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions; the Drivers Privacy Protection Act, which restricts the public disclosure, use and resale of personal information contained in state department of motor vehicle records; and state private investigator licensing laws. Certain state and federal privacy laws restrict the use and disclosure of personal information and provide consumers with various rights, including the right to know the manner in which their own covered information is being used, to challenge the accuracy of this information and to prevent the use and disclosure of that information. In some instances, these laws also impose requirements for safeguarding personal information through the implementation of data security standards and practices. Certain state laws also require notification to those affected by security breaches in certain circumstances. Some laws require us to withhold disclosure of certain elements of certain individuals identifying information in some circumstances; however, information regarding the individual may still appear in our database when changes in the individuals address or other identifying information have occurred, or new information received from our data sources, prevent us from identifying the individual in question. Failure to comply with these regulations may result in the imposition of civil and criminal penalties, including fines. The use by consumers of certain of our consumer services, including Background Information, Phone Number Verification and People Search to make hiring, credit, tenant or similar screening decisions could result in the customers violating FCRA and similar laws adopted by states if the customers fail to adhere to our terms of use for the services in question. Like others in the industry, we require persons desiring to purchase our consumer services to agree, as a condition to purchase, that they will not use the information provided by those services to make screening decisions regulated by those laws. Intellectual Property Our intellectual properties include our trademarks and our proprietary analytics and predictive information algorithms. We use these in connection with our websites user interfaces, virtual record of integrated data, real-time monitoring and administration system, and real-time fraud analysis and detection system. We protect our know-how and trade secrets with various confidentiality agreements and other protocols. No single trade secret is critical to our operations. We own and use many copyright-protected works, including the user interfaces on our websites and various software programs and code that have been written by our employees. We also use open source software that is subject to various open source software licenses. 80
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We own trademarks, service marks and trade names that are important to our business. Our Intelius trademark and logo are our primary brand and mark. Aside from this brand, however, we are not dependent in any material way upon any single trademark, service mark or trade name or group of trademarks, service marks or trade names. We protect, register and defend our trademarks and service marks. While the initial duration for a federal trademark registration is six years, each registration may be renewed an unlimited number of times as long as the company continues to use the applicable mark in commerce. We have applied for the registration of additional trademarks, service marks and trade names used in our business. We have three patent applications in the United States related to data access, analysis and integration of public records and data sorting and content relevance. However, we cannot be certain that these patents will be issued or that any issued patents will cover our requested claims. In addition to our primary website, Intelius.com, we own and operate numerous website domain names, including: addresses.com zabasearch.com peoplelookup.com lookupanyone.com Employees As of September 30, 2009 we had a total of 299 full-time employees, of which 41 were engaged in sales, marketing and business development, 88 were in network operations and product development, 140 were in search services and customer support, and 30 were in finance and administration. None of our employees is represented by a labor union, and we consider current employee relations to be good. Facilities Our headquarters consist of approximately 30,000 square feet in Bellevue, Washington under a lease expiring in 2012. Our executive offices, administrative and marketing functions, and engineering group are located at this facility. We also lease approximately 25,000 square feet in Bothell, Washington for our enterprise division and customer support operations, and have sales offices in other locations. We also have co-location agreements for space to house our data centers and related equipment in Tukwila, Washington and Seattle, Washington. Legal Proceedings On June 22, 2008, we received an inquiry from the Washington State Attorney Generals Office in the form of a Civil Investigative Demand regarding our relationships with Adaptive Marketing and Yellow Book USA. The subject matter of the inquiry included the details of our business relationships with Yellow Book USA and Adaptive Marketing, as well as Adaptive Marketings various offers that were shown on our websites to customers who purchased our products and services, and the circumstances under which credit card and other customer information was transferred by us to Adaptive Marketing. On August 15, 2008, we responded to this inquiry and on December 15, 2008, we provided a supplemental response. On October 23, 2008, we received a second Civil Investigative Demand from the Washington State Attorney Generals Office regarding our IDWatch/Identity Protect service. On January 15, 2009, we provided our response. Some of our officers and employees have been deposed regarding the subject matter of this investigation. On September 21, 2009, we received a third Civil Investigative Demand from the Washington State Attorney Generals Office regarding the forms of offers for our Identity Protect service and Adaptive Marketing services. 81 iaf.net publicrecordfinder.com spock.com datadetective.com theultimates.com reversephonedirectory.com isearch.com
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On November 27, 2006, we received an inquiry from the FTC in the form of a Civil Investigative Demand regarding compliance with the FCRA. Over the next several months, we responded to this inquiry, and to follow-up inquiries, by answering questions and producing numerous documents to the FTC. Our representatives also met with FTC staff in August 2007 to respond to these and additional questions. In November 2008, the FTC orally contacted our outside legal counsel handling the matter to inquire about our opt-out policy and procedures. A detailed response to their inquiry was produced to the FTC in January 2009, and a supplemental response was provided in July 2009. We have received no additional requests for information since this last response. The FCRA is applicable to certain of our enterprise screening services. We do not believe that the FCRA is applicable to our delivery of our consumer information services. However, we cannot be sure whether the FTC will agree with our view that the FCRA is not applicable to our delivery of these services. A determination by the FTC that the FCRA does apply to these services, if sustained, could have a material adverse effect on our business. In addition, a determination by the FTC that our enterprise screening services do not fully comply with the FCRA, if sustained, could have a material adverse effect on our business. The FTC could, for example, impose monetary penalties, increase regulation of our consumer information services in a manner that reduces demand for them, require that we change how we provide our enterprise screening services in a manner that increases our costs or reduces demand for them or require some other action. On August 31, 2009, a resident of the state of California filed an action against us and Adaptive Marketing in the United States District of California, Southern Division, Civil Action No. CV09-6343 RGK (VBKx), titled Denise Baxter v. Intelius, Inc., Intelius Sales Company LLC and Adaptive Marketing LLC. The complaint alleges causes of action for unfair and deceptive business practices in violation of California Business and Professional Code Section 17200 et seq. and false advertising in violation of Section 17500 et seq. of that Code, breach of financial privacy, and conversion. The complaint is a class action complaint and is purportedly on behalf of all California residents situated similarly to the plaintiff. We believe the factual basis for the action to be materially misstated and intend to defend the action vigorously. From time to time we are involved in various other legal proceedings that arise in the ordinary course of our business. We provide for estimated legal fees and settlements relating to pending lawsuits when they are probable and reasonably estimable. While we do not currently believe that the outcome of any other pending or threatened litigation in the ordinary course of business will have a material adverse effect on our financial position or operating results, we cannot assure you that those actions will not materially and adversely affect our business, financial condition, results of operations or cash flows. For additional disclosure on the risks to our business that these legal proceedings create, please refer to Risk Factors beginning on page 11. 82
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SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Amendment No. 4 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bellevue, State of Washington, on this 16th day of October 2009. Intelius Inc.
By: /s/ NAVEEN K. JAIN Naveen K. Jain Chief Executive Officer and President Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 4 to the registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ NAVEEN K. JAIN Naveen K. Jain /s/ PAUL T. COOK Paul T. Cook /s/ JAY T. CALDWELL Jay T. Caldwell WILLIAM A. OWENS * ARTHUR W. HARRIGAN, JR. * WILLIAM R. KERR * CHRIS A. KITZE * PETER W. CURRIE * /s/ RICHARD P. KARLGAARD Richard P. Karlgaard /s/ GEORGETTE MOSBACHER Georgette Mosbacher /s/ WILLIAM B. WHITE William B. White
Chief Executive Officer and President (principal executive officer), Director Chief Financial Officer (principal financial officer) Chief Accounting Officer (principal accounting officer) Chairman of the Board of Directors Director Director Director Director Director
October 16, 2009
October 16, 2009
October 16, 2009
October 16, 2009 October 16, 2009 October 16, 2009 October 16, 2009 October 16, 2009 October 15, 2009
Director
October 16, 2009
Director
October 16, 2009
*By:/s/ NAVEEN K. JAIN

Naveen K. Jain as Attorney-in-Fact
II-8
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EXHIBIT 2
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Case 8:11-cv-00485-AG-AJW Document 466-2 Filed http://www.talentwise.com/news/talentwise-press-release.html 02/20/12 Page 2 of 5 Page ID #:10963
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News and Events - TalentWise
http://www.talentwise.com/news/talentwise-press-release.html
Case 8:11-cv-00485-AG-AJW Document 466-2 Filed 02/20/12 Page 3 of 5 Page ID http://www.talentwise.com/news/talentwise-press-release.html #:10964
News & Events Details
Intelius Screening Solu ons Introduces TalentWise Brand

Enhanced Solu on and New Web Site Help HR Professionals Increase Produc vity and Deliver a Higher Quality Workforce February 9, 2010 Bothell, Wash. Intelius Screening Solu ons, the #1 ranked employment screening solu on provider, today announces the TalentWise brand and website, TalentWise.com. TalentWise encompasses Intelius Screening Solu ons' exis ng comprehensive, on-demand employment screening and onboarding products, along with new features and func onality. Designed for human resources, stang and recrui ng professionals, TalentWise helps drive greater produc vity and a higher quality workforce. The TalentWise solu on oers businesses of all sizes a comprehensive set of employment screening and onboarding products including: background checks; occupa onal health tes ng such as drug, alcohol and physical tness tes ng; skills tes ng and behavioral assessments; educa on and employment verica ons; onboarding - including automa on of the Form I-9 and E-Verify process; driving records and credit checks. The launch of the TalentWise solu on brings enhanced capabili es in the areas of interna onal screening as well as industry-specic oerings for Healthcare, Stang, Hospitality, Educa on and DOT-regulated industries. The TalentWise solu on also includes FastTrack employment background check products for small businesses seeking to get started quickly with a standardized online solu on. TalentWise FastTrack products combine high quality informa on needed to minimize business risk with the convenience of a credit card checkout process. "We are very excited to introduce TalentWise, our next-genera on employment screening and onboarding solu on," said Todd Owens, General Manager of Intelius Screening Solu ons. "Since incep on, we have been laser-focused on simplifying the lives of HR, stang and recrui ng professionals. With TalentWise, our customers will con nue to receive the same award-winning level of service they are accustomed to, but can now u lize our expanded set of products under the TalentWise brand to achieve greater eciency, compliance and condence."
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News & Events Details

Intelius Screening Solutions Introduces TalentWise Brand
Enhanced Solution and New Web Site Help HR Professionals Increase Productivity and Deliver a Higher Quality Workforce February 9, 2010 Bothell, Wash. Intelius Screening Solutions, the #1 ranked employment screening solution provider, today announces the TalentWise brand and website, TalentWise.com. TalentWise encompasses Intelius Screening Solutions' existing comprehensive, on-demand employment screening and onboarding products, along with new features and functionality. Designed for human resources, staffing and recruiting professionals, TalentWise helps drive greater productivity and a higher quality workforce. The TalentWise solution offers businesses of all sizes a comprehensive set of employment screening and onboarding products including: background checks; occupational health testing such as drug, alcohol and physical fitness testing; skills testing and behavioral assessments; education and employment verifications; onboarding - including automation of the Form I-9 and E-Verify process; driving records and credit checks. The launch of the TalentWise solution brings enhanced capabilities in the areas of international screening as well as industry-specific offerings for Healthcare, Staffing, Hospitality, Education and DOT-regulated industries. The TalentWise solution also includes FastTrack employment background check products for small businesses seeking to get started quickly with a standardized online solution. TalentWise FastTrack products combine high quality information needed to minimize business risk with the convenience of a credit card checkout process. "We are very excited to introduce TalentWise, our next-generation employment screening and onboarding solution," said Todd Owens, General Manager of Intelius Screening Solutions. "Since inception, we have been laser-focused on simplifying the lives of HR, staffing and recruiting professionals. With TalentWise, our customers will continue to receive the same award-winning level of service they are accustomed to, but can now utilize our expanded set of products under the TalentWise brand to achieve greater efficiency, compliance and confidence." Along with the introduction of its TalentWise solution, Intelius Screening Solutions also announces the launch of its new website, www.talentwise.com, the place for HR, staffing and recruiting professionals to learn more about the TalentWise solution, its world-class customer support, its partners and customers. Companies looking to get started quickly can purchase TalentWise FastTrack products on this new web site using a credit card. Interested companies can apply online to join the TalentWise Affiliate Program, where they can earn commission for referring business. "With TalentWise.com, our prospective and current customers have a content-rich web site that matches our industry-leading products and service," added Owens. "Businesses of all sizes and
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industries can leverage this resource to learn about our solution, buy our products, or become an affiliate." In addition to the TalentWise solution, Intelius Screening Solutions plans to introduce other branded solutions specifically geared toward unique markets for FCRA-regulated products including, but not limited to, tenant screening and screening for home employment. For more information about TalentWise or Intelius Screening Solutions, visit www.talentwise.com.
About Intelius Screening Solutions

Intelius Screening Solutions LLC, a wholly owned subsidiary of Intelius Inc., is an industry leading consumer reporting agency focused on providing businesses, landlords, and households with the information they need to make sound and legally compliant decisions. Through its TalentWise employment screening and onboarding solution, the company has earned recognition as the #1 ranked employment screening provider to over 3,000 businesses throughout North America. TalentWise helps make HR, staffing and recruiting professionals' lives easier by driving greater quality from their recruitment-to-hire process through affordable, comprehensive and flexible technology that increases productivity and improves compliance. In 2009, Intelius Screening Solutions was rated the #1 employment screening solutions provider by HRO Today magazine, the same organization that rated Intelius Screening Solutions #1 in Customer Satisfaction in both 2008 and 2009. Intelius Screening Solutions has also been named to Workforce Management Magazine's "Hot List of Employment-Related Screening Providers" for the fourth consecutive year (2007 - 2010). Intelius Screening Solutions, and its General Manager, have been recognized throughout the industry for their outstanding products, customer service and industry leadership. For more information about Intelius Screening Solutions and its TalentWise solution, visit www.talentwise.com.
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EXHIBIT 3
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CM/ECF - U.S. District Court Northern District of Alabama
https://ecf.alnd.uscourts.gov/cgi-bin/DktRpt.pl?596837163258524-L_452_0-1
Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 2 of 11 Page ID #:10968 CLOSED, MEDIATION
U.S. District Court Northern District of Alabama (Western) CIVIL DOCKET FOR CASE #: 7:08-cv-01062-SLB
Moore v. Intelius, Inc et al Assigned to: Chief Judge Sharon Lovelace Blackburn Cause: 15:1681 Fair Credit Reporting Act Date Filed: 06/16/2008 Date Terminated: 07/08/2009 Jury Demand: Plaintiff Nature of Suit: 890 Other Statutory Actions Jurisdiction: Federal Question
Plaintiff Shannon Moore represented by Walter A Blakeney BROCK & STOUT LLC PO Drawer 311167 Enterprise, AL 36331 334-671-2044 Fax: 334-671-2689 Email: walter@circlecitylaw.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
V. Defendant Intelius, Inc represented by Laura C Nettles LLOYD, GRAY, WHITEHEAD & MONROE, PC 2501 20th Place South, Suite 300 Birmingham, AL 35223 205-967-8822 Fax: 205-967-2830 Email: lnettles@lgwmlaw.com TERMINATED: 09/18/2008 LEAD ATTORNEY ATTORNEY TO BE NOTICED Michael D Freeman BALCH & BINGHAM LLP 1901 Sixth Avenue North (35203) PO Box 306 Birmingham, AL 35201-0306 251-8100 Fax: 226-8799 Email: mfreeman@balch.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 3 of 11 Page ID #:10969 Amelia Killebrew Steindorff BALCH & BINGHAM LLP PO Box 306 Birmingham, AL 35201-0306 205-251-8100 Fax: 205-488-5613 Email: asteindorff@balch.com ATTORNEY TO BE NOTICED Defendant Intellisense, LLC represented by Laura C Nettles (See above for address) TERMINATED: 09/18/2008 LEAD ATTORNEY ATTORNEY TO BE NOTICED Michael D Freeman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amelia Killebrew Steindorff (See above for address) ATTORNEY TO BE NOTICED Date Filed 06/16/2008 06/16/2008 06/18/2008 06/18/2008 06/23/2008 06/24/2008 07/10/2008 07/11/2008 07/18/2008 # Docket Text
1 COMPLAINT against Intelius, Inc, Intellisense, LLC (Filing fee $ 350. rec # 200 247590), filed by Shannon Moore.(KAM, ) (Entered: 06/18/2008) 2 Request for service by certified mail filed by Shannon Moore. (KAM, ) (Entered: 06/18/2008) 3 Summons Issued as to Intellisense, LLC mailed certified mail. (KAM, ) (Entered: 06/18/2008) 4 Summons Issued as to Intelius, Inc mailed certified mail (KAM, ) (Entered: 06/18/2008) 5 SUMMONS Returned Executed by Shannon Moore. Intellisense, LLC served on 6/20/2008, answer due 7/10/2008. (KAM, ) (Entered: 06/25/2008) 6 SUMMONS Returned Executed by Shannon Moore. Intelius, Inc served on 6/21/2008, answer due 7/11/2008. (KAM, ) (Entered: 06/26/2008) 7 MOTION for Extension of Time to File Answer to Complaint by Intelius, Inc, Intellisense, LLC. (Nettles, Laura) (Entered: 07/10/2008) ORDER granting 7 Motion for Extension of Time to Answer. Signed by Chief Judge Sharon Lovelace Blackburn on 07/11/2008. (SDB, ) (Entered: 07/11/2008) 8 ANSWER to Complaint by Intelius, Inc, Intellisense, LLC.(Steindorff, Amelia) (Entered: 07/18/2008)
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 4 of 11 Page ID #:10970 07/22/2008 9 MOTION to Withdraw by Intelius, Inc, Intellisense, LLC. (Nettles, Laura) (Entered: 07/22/2008) 07/23/2008 07/28/2008 07/30/2008 ORDER granting 9 Motion to Withdraw. Signed by Chief Judge Sharon Lovelace Blackburn on 07/23/2007. (SDB, ) (Entered: 07/23/2008) 10 Corporate Disclosure Statement by Intelius, Inc, Intellisense, LLC. (Steindorff, Amelia) (Entered: 07/28/2008) 11 ORDER Scheduling Conference set for 9/17/2008 02:00 PM before Chief Judge Sharon Lovelace Blackburn.. Signed by Chief Judge Sharon Lovelace Blackburn on 7/30/2008. (Attachments: # 1 16b instructions)(KAM, ) (Entered: 07/30/2008) 12 Corporate Disclosure Statement by Shannon Moore. (Blakeney, Walter) (Entered: 08/04/2008) 13 REPORT of Rule 26(f) Planning Meeting. (Blakeney, Walter) (Entered: 09/08/2008) 14 REPORT of Rule 26(f) Planning Meeting. (Blakeney, Walter) (Entered: 09/08/2008) 15 ORDER scheduling that certain time limits apply as set out in this order; Discovery due by 4/10/2009. Dispositive Motions due by 5/1/2009. Pretrial needed; mediation 1/19/2009; Jury Trial set for 7/27/2009 09:00 AM before Chief Judge Sharon Lovelace Blackburn.. Signed by Chief Judge Sharon Lovelace Blackburn on 9/19/2008. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(KAM, ) (Entered: 09/19/2008) 16 ORDER regarding attorney and non-attorney time records. Signed by Chief Judge Sharon Lovelace Blackburn on 9/19/2008. (KAM, ) (Entered: 09/19/2008) 17 MOTION for Protective Order by Intelius, Inc, Intellisense, LLC. (Steindorff, Amelia) (Entered: 12/01/2008) 18 ORDER re 17 MOTION for Protective Order, any opposition to dfts' motion is due by 12/16/2008. Signed by Chief Judge Sharon Lovelace Blackburn on 12/2/2008. (KSS, ) (Entered: 12/02/2008) 19 RESPONSE to Motion re 17 MOTION for Protective Order filed by Shannon Moore. (Blakeney, Walter) (Entered: 12/16/2008) 20 REPLY to re 17 Plaintiff's Response to Defendant's Motion for Protective Order filed by Intelius, Inc, Intellisense, LLC. (Steindorff, Amelia) (Entered: 12/19/2008) 21 ORDER REFERRING CASE to Mediation.. Signed by Chief Judge Sharon Lovelace Blackburn on 1/20/2009. (KAM, ) (Entered: 01/20/2009) 22 Joint MOTION for Reconsideration / Joint Request for Reconsideration of Mediation by Shannon Moore. (Blakeney, Walter) (Entered: 01/29/2009) 23 ORDER granting 22 Motion for Reconsideration; the order referring this matter to mediation is V ACATED. Signed by Chief Judge Sharon Lovelace Blackburn on 1/29/2009. (KAM, ) (Entered: 01/29/2009) 24 MOTION to Enforce Settlement Agreement by Intelius, Inc, Intellisense, LLC. (Steindorff, Amelia) (Entered: 02/20/2009) 25 ORDER Setting Hearing on Motion 24 MOTION to Enforce Settlement Agreement : Motion Hearing set for 4/13/2009 11:00 AM before Chief Judge Sharon Lovelace
08/04/2008 09/08/2008 09/08/2008 09/19/2008
09/19/2008 12/01/2008 12/02/2008
12/16/2008 12/19/2008 01/20/2009 01/29/2009 01/29/2009
02/20/2009 02/24/2009
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 5 of 11 Page ID #:10971 Blackburn.. Signed by Chief Judge Sharon Lovelace Blackburn on 2/24/2009. (KAM, ) (Entered: 02/24/2009) 02/27/2009 26 ORDER Setting Hearing on Motion 24 MOTION to Enforce Settlement Agreement : Motion Hearing set for 4/28/2009 01:00 PM before Chief Judge Sharon Lovelace Blackburn.. Signed by Chief Judge Sharon Lovelace Blackburn on 2/26/2009. (KAM, ) (Entered: 02/27/2009) 27 SETTLEMENT AGREEMENT Defendants' Affirmation of Settlement by Intelius, Inc, Intellisense, LLC. (Steindorff, Amelia) (Entered: 04/29/2009) 28 ORDER that the court has been advised that the parties have reached a settlement agreement; in addition, dft's have stipulated that the pla is the prevailing party entitling him to receive atty fees; Plaintiff shall file his motion for atty fees by 6/11/09; any response in opposition is due by 6/25/09;pla's reply is due by 7/9/09; The court will hold a hearing on the fee petition on 7/16/09 at 10:00am. Signed by Chief Judge Sharon Lovelace Blackburn on 5/28/2009. (KAM, ) (Entered: 05/28/2009) 29 MOTION for Attorney Fees by Shannon Moore. (Blakeney, Walter) (Entered: 06/11/2009) 30 AFFIDAVIT re 29 MOTION for Attorney Fees / Affidavit of Walter A. Blakeney in Support of Motion for Attorney Fees by Shannon Moore. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Appendix Certification)(Blakeney, Walter) (Entered: 06/11/2009) 31 NOTICE by Intelius, Inc, Intellisense, LLC Notice of Payment (Steindorff, Amelia) (Entered: 06/16/2009) 32 STIPULATION of Dismissal by Shannon Moore. (Blakeney, Walter) (Entered: 07/07/2009) 33 ORDER that this action is DISMISSED WITH PREJUDICE, with each party to bear their own costs. Signed by Chief Judge Sharon Lovelace Blackburn on 7/8/09. (ASL ) (Entered: 07/08/2009)
04/29/2009 05/28/2009
06/11/2009 06/11/2009
06/16/2009 07/07/2009 07/08/2009
PACER Service Center

Transaction Receipt
02/16/2012 01:58:52 PACER Login: bl3091 Description: Billable Pages: 3 Client Code: Cost: 0.24 Docket Report Search Criteria: 7:08-cv-01062-SLB
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 6 1 of 2 Page ID FILED Case 7:08-cv-01062-SLB Document 28 Filed 05/28/09 Page of 11 2009 May-28 AM 11:13 #:10972
U.S. DISTRICT COURT N.D. OF ALABAMA
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ALABAMA WESTERN DIVISION
SHANNON MOORE, Plaintiff, vs. INTELIUS, INC.; INTELLISENSE, LLC, Defendants.
} } } } } } } } } } ORDER
CASE NO. CV 08-B-1062-W
This case is before the court on defendants Affirmation of Settlement. (Doc. 27.) 1 Plaintiff initiated this suit under the Fair Credit Reporting Act, 15 U.S.C. 1681 et seq. (Doc. 1.) The court has been advised that the parties in this case have reached a settlement agreement. In addition to agreeing upon a fixed settlement agreement with plaintiff, defendants have stipulated that plaintiff is the prevailing party in this case, (doc. 27), entitling him to receive attorneys fees under 15 U.S.C. 1681n & 1681o. Accordingly, plaintiff shall submit his petition for attorneys fees on or before June 11, 2009. Plaintiff is advised to follow the courts Order Regarding Attorney and Non-Attorney Time Records. (Doc. 16.) Any response in opposition to plaintiffs fee petition is due on or before June 25, 2009. Plaintiffs reply, if any, is due on or before
Reference to a document number, [Doc. ___], refers to the number assigned to each document as it is filed in the courts record.
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 7 2 of 2 Page ID Case 7:08-cv-01062-SLB Document 28 Filed 05/28/09 Page of 11 #:10973
July 9, 2009. The court will hold a hearing on the fee petition at 10:00 a.m. on July 16, 2009.
DONE, this the 28th day of May, 2009.
SHARON LOVELACE BLACKBURN CHIEF UNITED STATES DISTRICT JUDGE
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 8 1 of 2 Page ID FILED Case 7:08-cv-01062-SLB Document 27 Filed 04/29/09 Page of 11 2009 Apr-29 PM 01:34 #:10974
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Case 8:11-cv-00485-AG-AJW Document 466-3 Filed 02/20/12 Page 9 2 of 2 Page ID Case 7:08-cv-01062-SLB Document 27 Filed 04/29/09 Page of 11 #:10975
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Case 8:11-cv-00485-AG-AJW Document 466-331 Filed 02/20/12 Page 101 of 2 Page ID FILED Case 7:08-cv-01062-SLB Document Filed 06/16/09 Page of 11 2009 Jun-16 AM 10:21 #:10976
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Case 8:11-cv-00485-AG-AJW Document 466-331 Filed 02/20/12 Page 112 of 2 Page ID Case 7:08-cv-01062-SLB Document Filed 06/16/09 Page of 11 #:10977
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EXHIBIT 4
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CM/ECF LIVE - U.S. District Court:oknd
https://ecf.oknd.uscourts.gov/cgi-bin/DktRpt.pl?175924085114671-L_45...
Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 2 of 8 Page ID #:10979 CLOSED, DISCREF
U.S. District Court U.S. District Court for the Northern District of Oklahoma (Tulsa) CIVIL DOCKET FOR CASE #: 4:09-cv-00217-TCK-PJC
Williams v. Intellisense, LLC et al Assigned to: Judge Terence Kern Referred to: Magistrate Judge Paul J Cleary Cause: 15:1681 Fair Credit Reporting Act Plaintiff Anthony N Williams represented by Fred Everett Stoops , Sr Stoops & LaCourse, PLLC 8801 S YALE AVE STE 420 TULSA, OK 74137 918-744-7100 Fax: 918-477-2299 Email: fstoops@sbcglobal.net LEAD ATTORNEY ATTORNEY TO BE NOTICED Patrick Hale McCord Stoops & LaCourse, PLLC 8801 S YALE AVE STE 420 TULSA, OK 74137 918-744-7100 Fax: 918-477-2299 Email: pmccord@stoopslacourse.com LEAD ATTORNEY ATTORNEY TO BE NOTICED V. Defendant Intellisense, LLC represented by Larry Doyle Henry Rhodes Hieronymus Jones Tucker & Gable P O BOX 21100 TULSA, OK 74121-1100 918-582-1173 Fax: 918-592-3390 Email: lhenry@rhodesokla.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Michelle B Skeens Holden & Carr (Tulsa) Date Filed: 04/13/2009 Date Terminated: 02/09/2010 Jury Demand: None Nature of Suit: 440 Civil Rights: Other Jurisdiction: Diversity
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Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 3 of 8 Page ID #:10980 15 E 5TH ST STE 3900 TULSA, OK 74103 918-295-8888 Fax: 918-295-8889 Email: hm@holdenoklahoma.com TERMINATED: 06/01/2009 LEAD ATTORNEY Defendant Intelius, Inc. represented by Larry Doyle Henry (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Michelle B Skeens (See above for address) TERMINATED: 06/01/2009 LEAD ATTORNEY Date Filed 04/13/2009 04/13/2009 04/13/2009 04/13/2009 05/01/2009 05/14/2009 05/14/2009 # Docket Text
1 CIVIL COVER SHEET by Anthony N Williams (s-srb, Dpty Clk) (Entered: 04/14/2009) 2 COMPLAINT against all defendants by Anthony N Williams (s-srb, Dpty Clk) (Entered: 04/14/2009) 3 SUMMONS Issued by Court Clerk as to Intellisense, LLC, Intelius, Inc. (s-srb, Dpty Clk) (Entered: 04/14/2009) 4 FILING FEES Paid in Full by Anthony N Williams (s-srb, Dpty Clk) (Entered: 04/14/2009) 5 SUMMONS Returned Executed re: Intelius, Inc. (Re: 2 Complaint ) by Anthony N Williams (Stoops, Fred) (Entered: 05/01/2009) 6 ATTORNEY APPEARANCE by Larry Doyle Henry on behalf of Intellisense, LLC, Intelius, Inc. (Henry, Larry) (Entered: 05/14/2009) 7 Unopposed MOTION for Extension of Time to Answer by Intellisense, LLC, Intelius, Inc. (Henry, Larry) Modified on 5/15/2009 to correct title of event (lml, Dpty Clk). (Entered: 05/14/2009) 8 MINUTE ORDER by Court Clerk, directing Intellisense, LLC to file a Corporate Disclosure Statement pursuant to FRCvP 7.1 within five (5) days of this order, if they have not already done so. The parties shall use the form entitled Corporate Disclosure Statement available on the Courts website (please do not refile if already filed on non-court form unless directed to do so). If you have already filed your Corporate Disclosure Statement in this case, you are reminded to file a Supplemental Corporate Disclosure Statement within a reasonable time of any change in the information that the statement requires. (sjm, Dpty Clk) (Entered: 05/15/2009)
05/15/2009
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Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 4 of 8 Page ID #:10981 05/15/2009 9 MINUTE ORDER by Court Clerk, directing Intelius, Inc. to file a Corporate Disclosure Statement pursuant to FRCvP 7.1 within five (5) days of this order, if they have not already done so. The parties shall use the form entitled Corporate Disclosure Statement available on the Courts website (please do not refile if already filed on non-court form unless directed to do so). If you have already filed your Corporate Disclosure Statement in this case, you are reminded to file a Supplemental Corporate Disclosure Statement within a reasonable time of any change in the information that the statement requires. (sjm, Dpty Clk) (Entered: 05/15/2009) 05/15/2009 NOTICE of Docket Entry Modification; Error: This was filed using the incorrect event (Motion to Accelerate/Extend/Reset Hearings/Deadlines); Correction: Edited docket text to reflect correct event (Re: 7 MOTION for Extension of Time to Answer ) (lml, Dpty Clk) (Entered: 05/15/2009) 10 MINUTE ORDER by Judge Terence Kern Defendants are granted an extension of time to answer or otherwise respond to the Complaint by June 8, 2009 ; granting 7 Motion for Extension of Time to Answer (Re: 2 Complaint ) (vah, Chambers) (Entered: 05/18/2009) 11 CORPORATE DISCLOSURE STATEMENT by Intellisense, LLC, Intelius, Inc. (Henry, Larry) (Entered: 05/19/2009) 12 CORPORATE DISCLOSURE STATEMENT (identifying: Corporate Parent Intelius, Inc. for Intelius, Inc., Intellisense, LLC) by Intellisense, LLC, Intelius, Inc. (Henry, Larry) (Entered: 05/19/2009) 13 SPECIAL APPEARANCE by Michelle B Skeens on behalf of Intellisense, LLC, Intelius, Inc. (Skeens, Michelle) (Entered: 05/26/2009) 14 MOTION for Extension of Time to Answer (submitted as part of Doc # 13 ) (Re: 2 Complaint ) by Intellisense, LLC, Intelius, Inc. (tjc, Dpty Clk) (Entered: 05/27/2009) NOTICE of Docket Entry Modification; Error: This is a multi-event document, which is not allowed in CM/ECF; Correction: Filed the second event as Document # 14 (Re: 13 Appearance - Special ) (tjc, Dpty Clk) (Entered: 05/27/2009) 15 MINUTE ORDER by Judge Terence Kern Defendants have until June 15, 2009 to answer or otherwise respond to Complaint ; granting 14 Motion for Extension of Time to Answer (Re: 2 Complaint ) (vah, Chambers) (Entered: 05/27/2009) 16 ORDER by Judge Terence Kern, directing parties to file joint status report( Status Report due by 7/1/2009) (cds, Dpty Clk) (Entered: 06/01/2009) 17 MOTION to Withdraw Attorney(s) Michelle B. Skeens by Intellisense, LLC, Intelius, Inc. (Skeens, Michelle) (Entered: 06/01/2009) 18 MINUTE ORDER by Judge Terence Kern ; terminating attorney Michelle B Skeens ; granting 17 Motion to Withdraw Attorney(s) (vah, Chambers) (Entered: 06/01/2009) 19 ANSWER (Re: 2 Complaint ) by Intellisense, LLC, Intelius, Inc. (Henry, Larry) (Entered: 06/15/2009) 20 JOINT STATUS REPORT by Anthony N Williams, Intelius, Inc., Intellisense, LLC (Stoops, Fred) Modified on 7/2/2009 to add defendants as filers (sac, Dpty Clk). (Entered: 07/01/2009)
05/18/2009
05/19/2009 05/19/2009
05/26/2009 05/26/2009 05/27/2009
05/27/2009
06/01/2009 06/01/2009 06/01/2009 06/15/2009 07/01/2009
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Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 5 of 8 Page ID #:10982 07/02/2009 NOTICE of Docket Entry Modification; Error: not all filers were selected; Correction: added defendants as filers (Re: 20 Joint Status Report per Local Rule 16.1 ) (sac, Dpty Clk) (Entered: 07/02/2009) 07/08/2009 21 SCHEDULING ORDER by Judge Terence Kern, setting/resetting scheduling order date(s): ( Discovery due by 11/30/2009, Dispositive Motions due by 12/14/2009, Proposed Pretrial Order due by 3/31/2010, Pretrial Conference set for 4/6/2010 at 02:30 PM before Judge Terence Kern, Jury Trial set for 4/19/2010 at 09:30 AM before Judge Terence Kern) (cds, Dpty Clk) (Entered: 07/08/2009) 22 MOTION to Accelerate/Extend/Reset Hearing(s)/Deadline(s) by Anthony N Williams (McCord, Patrick) (Entered: 10/28/2009) 23 SETTLEMENT CONFERENCE ORDER by Magistrate Judge Paul J Cleary, setting/resetting deadline(s)/hearing(s): before ASJ Martin A. Frey ( Settlement Conference set for 12/8/2009 at 01:30 PM before Adjunct Judge) (kjp, Dpty Clk) (Entered: 10/29/2009) 24 MINUTE ORDER by Judge Terence Kern (Separate Scheduling Order to be Entered) ; granting 22 Motion to Accelerate/Extend/Reset Hearing(s)/Deadline(s) (cds, Dpty Clk) (Entered: 11/05/2009) 25 SCHEDULING ORDER by Judge Terence Kern, setting/resetting scheduling order date(s): ( Discovery due by 1/29/2010, Dispositive Motions due by 2/12/2010, Proposed Pretrial Order due by 5/31/2010, Pretrial Conference set for 6/9/2010 at 01:30 PM before Judge Terence Kern, Jury Trial set for 6/21/2010 at 09:30 AM before Judge Terence Kern) (cds, Dpty Clk) (Entered: 11/05/2009) 26 Joint MOTION to Accelerate/Extend/Reset Settlement Deadline(s)/Conference by Intellisense, LLC, Intelius, Inc., Anthony N Williams (Henry, Larry) Modified on 12/2/2009 to add plaintiff as filer (sac, Dpty Clk). (Entered: 12/01/2009) ***Motion(s) Referred to Maigstrate Cleary (Re: 26 Joint MOTION to Accelerate/Extend/Reset Settlement Deadline(s)/Conference ) (sac, Dpty Clk) (Entered: 12/02/2009) NOTICE of Docket Entry Modification; Error: not all filers were selected; Correction: added plaintiff as a filer (Re: 26 Joint MOTION to Accelerate/Extend/Reset Settlement Deadline(s)/Conference ) (sac, Dpty Clk) (Entered: 12/02/2009) 27 ORDER by Magistrate Judge Paul J Cleary Rescheduling Settlement Conference ; setting/resetting deadline(s)/hearing(s): before ASJ Martin A. Frey ( Settlement Conference set for 2/25/2010 at 01:30 PM before Adjunct Judge); granting 26 Motion to Accelerate/Extend/Reset Settlement Deadline(s)/Conference (kjp, Dpty Clk) (Entered: 12/04/2009) 28 ORDER by Magistrate Judge Paul J Cleary striking Settlement Conference set for 2/25/2010; litigation has settled, setting/resetting deadline(s)/hearing(s): ( Dismissal Papers due by 2/11/2010) (kjp, Dpty Clk) (Entered: 02/01/2010) 29 STIPULATION of Dismissal, closing case, by Anthony N Williams, Intellisense, LLC, Intelius, Inc. (McCord, Patrick) (Entered: 02/09/2010) ***Civil Case Terminated (see document number 29 ) (lml, Dpty Clk) (Entered: 02/10/2010)
10/28/2009 10/29/2009
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Case 4:09-cv-00217-TCK-PJC Document 28 Filed in USDC ND/OK on 02/01/10 Page 1 of 1 Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 7 of 8 Page ID #:10984
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA ANTHONY N. WILLIAMS, Plaintiff, vs. INTELLISENSE, LLC., et al., Defendant(s). ) ) ) ) ) ) ) ) )
Case Number:09-CV-217-TCK-PJC
SETTLEMENT CONFERENCE Per the advise of Adjunct Settlement Judge Martin A. Frey, Defendants Counsel has advised that the Parties have reached a settlement herein. Based on this representation, the February 25, 2010 Settlement Conference is hereby stricken. Within ten (10) days of the date hereof, the Plaintiff and Defendant shall file the appropriate dismissal documents with the Court. SO ORDERED this the 1st day of February, 2010.
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Case 4:09-cv-00217-TCK-PJC Document 28 Filed in USDC ND/OK on 02/01/10 Page 1 of 1 Case 8:11-cv-00485-AG-AJW Document 466-4 Filed 02/20/12 Page 8 of 8 Page ID #:10985
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA ANTHONY N. WILLIAMS, Plaintiff, vs. INTELLISENSE, LLC., et al., Defendant(s). ) ) ) ) ) ) ) ) )
Case Number:09-CV-217-TCK-PJC
SETTLEMENT CONFERENCE Per the advise of Adjunct Settlement Judge Martin A. Frey, Defendants Counsel has advised that the Parties have reached a settlement herein. Based on this representation, the February 25, 2010 Settlement Conference is hereby stricken. Within ten (10) days of the date hereof, the Plaintiff and Defendant shall file the appropriate dismissal documents with the Court. SO ORDERED this the 1st day of February, 2010.
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FILED Case 8:11-cv-00485-AG-AJW Document 466-5 Filed 02/20/12 Page 2 of Court of Appeals United States 40 Page ID Appellate Case: 08-8003 Document: 01018090564 Date Filed: 06/29/2009 Page: 1 #:10987 Tenth Circuit
June 29, 2009

PUBLISH
Elisabeth A. Shumaker Clerk of Court
UNITED STATES COURT OF APPEALS TENTH CIRCUIT
FEDERAL TRADE COMMISSION, Plaintiff - Appellee, v. ACCUSEARCH INC., d/b/a Abika.com; JAY PATEL, Defendants - Appellants, _____________________ JENNIFER STODDART, Privacy Commissioner of Canada, Amicus Curiae. No. 08-8003
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF WYOMING (D.C. NO. 2:06-CV-00105-WFD)
Deborah L. Roden (Gay Woodhouse with her on the briefs) of Gay Woodhouse Law Office, P.C., Cheyenne, Wyoming, for Defendants - Appellants. Lawrence DeMille-Wagman, Attorney, Federal Trade Commission, Washington, D.C., (William Blumenthal, General Counsel, John F. Daly, Deputy General Counsel for Litigation, Federal Trade Commission, Washington, D.C.; and Tracy S. Thorleifson, Kial S. Young, Federal Trade Commission, Seattle, Washington, with her on the brief), for Plaintiff - Appellee. Edward R. McNicholas, Sidley Austin LLP, Washington, DC, filed an amicus curiae brief for Jennifer Stoddart, Privacy Commissioner of Canada, in support of Plaintiff - Appellee.
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Case 8:11-cv-00485-AG-AJW Document 466-5 Filed 02/20/12 Page 3 of 40 Page ID Appellate Case: 08-8003 Document: 01018090564 Date Filed: 06/29/2009 Page: 2 #:10988
Before HARTZ, TYMKOVICH, and HOLMES, Circuit Judges.
HARTZ, Circuit Judge.
Abika.com is a website that has sold various personal data, including telephone records. The Federal Trade Commission (FTC) brought suit against the operator of the website, Accusearch Inc., and its president and owner, Jay Patel (collectively, Accusearch), to curtail Accusearchs sale of confidential information and to require it to disgorge its profits from the sale of information in telephone records. The FTC alleged that Accusearchs trade in telephone records (which are protected from disclosure under 702 of the Telecommunications Act of 1996, 47 U.S.C. 222 (2006)) constituted an unfair practice in violation of 5(a) of the Federal Trade Commission Act (FTCA), 15 U.S.C. 45(a) (2006). The district court granted the FTC summary judgment, see FTC v. Accusearch, Inc., No. 06-CV-105-D, 2007 WL 4356786, at *10 (D. Wyo. Sept. 28, 2007), and after further briefing entered an injunction restricting Accusearchs future trade in telephone records and other personal information. On appeal Accusearch contends that (1) the FTCs unfair-practice claim should have been dismissed because Accusearch broke no law and because the FTC had no authority to enforce the Telecommunications Act; (2) it was immunized from suit by the protections provided websites in the Communications
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Decency Act (CDA), 47 U.S.C. 230 (2006); and (3) the injunction is unnecessary to prevent it from resuming trade in telephone records and is unconstitutionally overbroad. Exercising jurisdiction under 28 U.S.C. 1291, we reject each of Accusearchs contentions and affirm. First, conduct may constitute an unfair practice under 5(a) of the FTCA even if it is not otherwise unlawful, and the FTC may pursue an unfair practice even if the practice is facilitated by violations of a law not administered by the FTC, such as the Telecommunications Act. Second, Accusearchs claimed defense under the CDA fails because it acted as an information content provider (and thus is not entitled to immunity) with respect to the information that subjected it to liability under the FTCA. See 47 U.S.C. 230(f)(3). Finally, the injunction was proper despite Accusearchs prior halt to its unfair practices and the possibility that the resumption of those practices would be criminally prosecuted; and Accusearch waived in district court its claim on appeal that the injunction is overbroad. I. BACKGROUND A. Abika.com
Although the parties characterize the Abika.com website differently, they do not dispute the essential aspects of its operation. Any person interested in Abika.coms services could access the website through a search engine or by typing its address into an Internet browser. A visitor to the website would first see its homepage, which displayed various categories of information that could be
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searched. The record contains one printout of the website from December 20, 2006, and one from November 27, 2007. The printouts show that some searches advertised on the homepage targeted information generally contained in government records, such as court dockets, sex offender records, and Tax . . . Liens. Aplts. App., Vol. 4 at 1313; id. Vol. 5 at 1429. Other search categories related to intimate personal information, such as Romantic Preferences, Personality traits, and Rumors. Id. Vol. 4 at 1313; id. Vol. 5 at 1429. Accusearch stresses on appeal that the search services offered on Abika.com were primarily services provided by third-party researchers, who were required by Accusearch to provide assurances that they would perform their work in accordance with applicable law. The researchers had no direct contact with Abika.coms customers. As Accusearch explains, all information passed between [customer] and researcher went through Abika.com, as an intermediary. Aplts. Reply Br. at 3. In placing a search order, a customer paid Accusearch an administrative search fee, Aplts. App., Vol. 4 at 1246, and selected the type of search desired, not a specific researcher or a search identified with a specific researcher. Accusearch would forward the search request to a researcher who could fulfill it. After completing a search, the researcher would send the results to Accusearch and bill Accusearch directly. Accusearch would then email the results to the customer and post them on the customers Abika.com account. A customer
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could know that a third-party researcher was involved in a transaction only by reading boilerplate contained on the website and in Accusearchs email correspondence. And even then, the customer was not provided contact information for any researcher. B. Provision of Telephone Records
From February 2003 to January 2006 the Abika.com website advertised access to personal telephone records. The website stated that its customers could acquire details of incoming or outgoing calls from any phone number, prepaid calling card or Internet Phone, and that Phone searchers are available for every country of the world. Id. Vol. 4 at 124647 (internal quotation marks omitted). Abika.coms customers could purchase both cellphone and landline records. The website specified that cellphone records would detail the numbers dialed from a particular cellphone and generally include the date, time and duration of the calls made. Id. Vol. 2 at 475. Landline records would include the same information, save for the specific time at which calls were made. Acquisition of this information would almost inevitably require someone to violate the Telecommunications Act or to circumvent it by fraud or theft. The Act forbids telecommunications carriers from disclosing telephone records absent customer consent or the applicability of one of several exceptions. See 47 U.S.C. 222(c)(d). The Act provides as follows:
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Except as required by law or with the approval of the customer, a telecommunications carrier that receives or obtains customer proprietary network information by virtue of its provision of a telecommunications service shall only use, disclose, or permit access to individually identifiable customer proprietary network information in its provision of (A) the telecommunications service from which such information is derived, or (B) services necessary to, or used in, the provision of such telecommunications service, including the publishing of directories. Id. 222(c)(1). (We note the additional exceptions below. 1) There is no dispute that the telephone records available on Abika.com constituted individually identifiable customer proprietary network information within the meaning of 222, 2 or, more generally, that the Telecommunications Act barred disclosure of those records by telecommunications carriers. Although Accusearch (remarkably, in our view) maintained that it relied in good faith on its researchers commitment to obey the law in acquiring information, it represented that it ceased offering
The Act does not forbid telecommunications carriers from disclosing telephone records to (1) initiate, render, bill, and collect for telecommunications services; (2) protect telecommunications carriers and customers from the fraudulent, abusive, or unlawful use of, or subscription to, telecommunications services; (3) provide certain telemarketing, referral, or administrative services to the customer; and (4) provide call location information to (a) public-safety personnel responding to a users call, (b) legal guardians and family members in emergency situations involving risk of death or serious physical harm, and (c) providers of information or database management services used to assist in the provision of emergency services. 47 U.S.C. 222(d). Customer proprietary network information is defined to include information contained in bills and information that relates to the quantity, technical configuration, type, destination, location, and amount of use of a telecommunications service subscribed to by any customer. 47 U.S.C. 222(h)(1).
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telephone records in January 2006 after learning that a subsidiary of one of its researchers possibly obtained telephone data fraudulently. C. Procedural History
The FTC filed suit against Accusearch on May 1, 2006, roughly four months after Accusearch ceased to offer telephone records. The complaint alleged that telephone records are protected against disclosure by the Telecommunications Act and that trade in such records constitutes an unfair practice in violation of 5(a) of the FTCA, 15 U.S.C. 45(a). Accusearch responded with a motion to dismiss, contending that the complaint failed to state a claim because the Telecommunications Act applies only to telephone carriers and because selling confidential telephone records was not otherwise unlawful. The district court denied the motion and Accusearch filed an answer. After conducting discovery the parties each moved for summary judgment. The FTC argued that Accusearchs practices were unfair under the FTCA as a matter of law. Accusearch countered that it was immunized by the CDA, which, broadly speaking, protects Internet services from liability as publishers with respect to content provided by others. See 47 U.S.C. 230(c). Accusearch contended that it was entitled to this immunity because the FTCs claim treated it as the publisher of telephone records that were provided by others (that is, telephone companies and independent researchers) and traded over Abika.com. The district court granted the FTCs motion and rejected Accusearchs assertion of
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immunity. The court ruled that the FTC had established each element of its unfairpractice claim. And it concluded that Accusearch was not entitled to statutory immunity because it had participated in the creation or development of the information delivered to customers, Accusearch, 2007 WL 4356786, at *6 (brackets and internal quotation marks omitted), and because the FTCs claim did not treat Accusearch as a mere publisher of those records, id. at *5 (internal quotation marks omitted). It found that Accusearchs claim of blissful ignorance [of its researchers misconduct] is simply not plausible in light of the facts of this case, id. at *7, explaining that [e]ven if [Accusearch was] unaware at the outset how these records were obtained, emails documenting the ordering process between Accusearch and its vendors clearly indicated that underhanded means were used to obtain the records, id. After further briefing the district court entered an injunction restricting Accusearchs future trade in telephone records and other personal information. Accusearch was also ordered, among other things, to disgorge $199,692.71 in profits from the sale of telephone-record information. D. Claims on Appeal
Accusearch contends that the district court should have granted judgment in its favor because (1) it broke no law, (2) the FTC acted outside its authority by attempting to enforce the Telecommunications Act, and (3) it was entitled to immunity under the CDA. Accusearch also challenges the propriety and scope of the injunction. Prohibitory injunctive relief was unnecessary, argues Accusearch,
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because it voluntarily ceased dealing in telephone records before the FTC filed its complaint, and because resumption of those activities would subject it to newly enacted criminal sanctions regardless of the injunction. Accusearch further asserts that the injunction improperly restricts its ability to deal in consumer data other than telephone records. This overbreadth, we are told, violates Accusearchs dueprocess, free-speech, and equal-protection rights. II. DISCUSSION A. Unfair-Practice Claim
The FTCA prohibits unfair or deceptive acts or practices in or affecting commerce, 15 U.S.C. 45(a)(1), and vests the FTC with authority to prevent such practices by issuing cease-and-desist orders, id. 45(b), by prescribing rules, id. 57a(a)(1)(B), and by seeking injunctive relief in federal district court, id. 53(b). To be unfair, a practice must be one that [1] causes or is likely to cause substantial injury to consumers [2] which is not reasonably avoidable by consumers themselves and [3] not outweighed by countervailing benefits to consumers or to competition. Id. 45(n). The FTC argued below that Accusearchs practice of offering consumer telephone records over the Internet satisfied all three requirements. First, the FTC contended that substantial injury was caused by the subversion of the Telecommunications Act; it argued that consumers whose telephone records were obtained through Abika.com suffered emotional harm (sometimes from being
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stalked or otherwise harassed) and often incurred substantial costs in changing telephone providers to prevent future privacy breaches. Second, the FTC contended that because Accusearchs researchers could override password encryption, consumers could not protect themselves by reasonable means but only by extreme measures such as ceasing telephonic communication altogether. Third, the FTC contended that the unconsented-to disclosure of telephone records provided no countervailing benefits to consumers. On appeal Accusearch does not challenge this analysis of the unfair-practice elements. Its arguments relate only to the FTCs reliance on the Telecommunications Act. One argument is that the FTC could not rely on the Act because it applied solely to telecommunications carriers, not to Accusearch or its researchers; during the period at issue, 3 contends Accusearch, there was no law preventing a third-party from collecting telephone records. Aplts. Am. Br. at 61. We reject the argument. Its premise appears to be that a practice cannot be an unfair one unless it violates some law independent of the FTCA. But the FTCA imposes no such constraint. See 15 U.S.C. 45(n) (setting out elements of an unfair practice). On the contrary, the FTCA enables the FTC to take action against unfair practices that have not yet been contemplated by more specific laws. See Spiegel, Inc. v. FTC, 540 F.2d 287, 29194 (7th Cir. 1976) (catalog retailers After Accusearch ceased offering telephone records, Congress enacted the Telephone Records and Privacy Protection Act of 2006, which criminalizes the sale and receipt of confidential telephone records. See 18 U.S.C. 1039.
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practice of suing customers in distant forum was unfair even if practice was perfectly proper under state law); 1 Stephanie W. Kanwit et al., Federal Trade Commission 4.5 (2008) (The FTC is unfettered and free to proceed against practices not previously considered unlawful.). To be sure, violations of law may be relevant to the unfairness analysis. See 15 U.S.C. 45(n) (In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.); Stephen Calkins, FTC Unfairness: An Essay, 46 Wayne L. Rev. 1935, 1970 (2000) (discussing FTC enforcement actions in which claim that practice was unfair was predicated on violation of a law other than the FTCA). Here, for example, the FTC alleged that the substantial-injury element of an unfair practice, see 15 U.S.C. 45(n), was met partly by the subversion of consumer privacy protections afforded by the Telecommunications Act. But the existence of that injury turns on whether the Telecommunications Act was violated (by somebody), not on whether Accusearch could itself be held liable under the Telecommunications Act. Accusearch also raises the related argument that the FTC had no authority to bring its claim because only the Federal Communications Commission may enforce the Telecommunications Act. This argument fundamentally misapprehends the nature of this lawsuit. The FTC brought suit under the Federal
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Trade Commission Act, seeking to enjoin an unfair practice affecting commerce. See id. 45(a) (declaring unfair practices unlawful); id. at 53(b) (giving the FTC authority to seek enjoinment of unfair practices in federal district court). As set out above, the Telecommunications Act was relevant to that claim. But the complaint does not allege that Accusearch violated that Act. In any event, the FTC may proceed against unfair practices even if those practices violate some other statute that the FTC lacks authority to administer. See Am. Fin. Servs. Assn v. FTC, 767 F.2d 957, 983 (D.C. Cir. 1985) (certain creditor remedies, which violated laws in a number of states, also unfair under 5(a)). Indeed, condemnation of a practice in criminal or civil statutes may well mark that practice as unfair. See FTC v. R.F. Keppel & Bro., 291 U.S. 304, 313 (1934); Am. Fin. Servs. Assn, 767 F.2d at 983. By the same token, a practice, such as Accusearchs, which either encourages such condemned conduct or encourages the use of fraud or theft to circumvent the statute, may likewise be considered unfair. B. Immunity Under the Communications Decency Act
Accusearchs primary argument on appeal is that even if the FTC stated a claim, it is immune from liability under 230(c)(1) of the CDA. See 47 U.S.C. 230(c)(1). The CDA is intended to facilitate the use and development of the Internet by providing certain services an immunity from civil liability arising from content provided by others. See Zeran v. Am. Online, Inc., 129 F.3d 327, 33031
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(4th Cir. 1997). The prototypical service qualifying for this statutory immunity is an online messaging board (or bulletin board) on which Internet subscribers post comments and respond to comments posted by others. See id. at 32829, 332 (discussing operation of messaging board and holding that it was clearly protected by 230s immunity). Indeed, Congress enacted the CDA in response to a state-court decision, Stratton Oakmont, Inc. v. Prodigy Servs. Co., 1995 WL 323710, *5 (N.Y. Sup. Ct. May 24, 1995), which held that the provider of an online messaging board could be liable for defamatory statements posted by thirdparty users of the board. See Fair Hous. Council v. Roommates.com, LLC, 521 F.3d 1157, 1163 (9th Cir. 2008) (en banc) (noting Congresss concern about Stratton Oakmont). The Stratton Oakmont court ruled that the administrator of the board became a publisher when it deleted some distasteful third-party postings, and thus was subject to publishers liability for the defamatory postings it failed to remove. 1995 WL 323710, at *45. The decision was criticized for discouraging the voluntary filtration of Internet content, because a forum providers efforts to sanitize content would trigger liability that could be avoided by doing nothing. See Roommates.com, 521 F.3d at 1163. The CDA, however, does more than just overrule Stratton Oakmont. To understand the full reach of the statute, we will need to examine some of the technical terms used in the CDA. But to put those terms in context we first quote the operative provisions of the law. Section 230(c)(1) provides as follows:
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No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. Section 230(c)(2), which protects services that filter content, states: No provider or user of an interactive computer service shall be held liable on account of (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or (B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1). [paragraph (1) should probably be subparagraph (A), see U.S.C.A. 230(c), n.1]. Finally, 230(e)(3) provides that No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section. Accusearch claims immunity under 230(c)(1). The language of that provision, quoted above, sets three limits on the immunity provided. First, immunity is available only to a provider or user of an interactive computer service. Id. 230(c)(1). The term interactive computer service means any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.
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Id. 230(f)(2). Second, the liability must be based on the defendants having acted as a publisher or speaker. Id. at 230(c)(1). Third, immunity can be claimed only with respect to information provided by another information content provider. Id. Accusearch contends that it satisfies these requirements. If it fails to satisfy any one of the three, it is not entitled to immunity. 1. Interactive Computer Service
With respect to the first requirement for CDA immunity, the district court ruled that Accusearch provided an interactive computer service. See Accusearch, 2007 WL 4356786, at *4. The FTC argues on appeal that Accusearch did not provide such a service because its website did not allow for any interaction between third parties. Aplee. Br. at 20. The FTC asserts that the CDAs legislative history and Congresss use of the word interactive evince an intent to protect only the providers of online bulletin boards. It distinguishes such boards from a website like Accusearchs, which merely permits a user to conduct the same sort of business that it would in a retail store (or private investigators office). (We note, however, that the FTCs argument would also deny immunity to nonretail websites, such as one that posted medical-journal articles online (perhaps after removing graphic pictures), unless the website also permitted direct interaction among its visitors.)
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Accusearch essentially concedes the factual premise of the FTCs argument namely, the absence of direct interaction among users of the Abika.com website. Although Accusearch occasionally tries to portray its website as an interactive forum on which independent researchers connected with persons seeking information, it ultimately acknowledges that all information passed between the [customer] and researcher went through Abika.com, as an intermediary. Aplts. Reply Br. at 3. But despite the FTCs accurate characterization of Abika.com, its interactivity argument does not fully respect the CDAs text. Section 230(f)(2) does not say that an interactive computer service must facilitate interaction among third parties; rather, it says that an interactive computer service is one that provides or enables computer access by multiple users to a computer server. 47 U.S.C. 230(f)(2) (emphasis added). See Universal Commcns Sys., Inc. v. Lycos, Inc., 478 F.3d 413, 419 (1st Cir. 2007) (web site operators . . . are providers of interactive computer services because [a] web site . . . enables computer access by multiple users to a computer server, namely, the server that hosts the web site. (internal quotation marks omitted)); Batzel v. Smith, 333 F.3d 1018, 1030 (9th Cir. 2003) (suggesting, but not deciding, that a website necessarily provides an interactive computer service). Accordingly, we are reluctant to embrace the FTCs contention that one who operates a website does not thereby provide an interactive computer service unless it allows interaction
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among the users. Because we can resolve the matter of CDA immunity in this case without deciding whether the FTCs contention is correct, we leave it to another day. 2. Treatment as a Publisher or Speaker
Turning to the second requirement for CDA immunity, we refrain from adopting the concurrences view that the CDA does not protect Accusearch because Accusearchs liability under the FTCA is not based on its being a publisher or speaker. According to the concurrence, the FTC sought and ultimately held Accusearch liable for its conduct rather than for the content of the information it was offering on the Abika.com website. Op., (Tymkovich, J., concurring) at 2. It appears to us, however, that Accusearch would not have violated the FTCA had it not published the confidential telephone information that it had improperly acquired. And that publication was on its website. It would seem to be irrelevant that Accusearch could have operated the same business model without use of the Internet. The concurrence thoughtfully raises an interesting point, but, as with the first requirement for CDA immunity, we choose not to resolve the immunity issue on this ground. 3. Information Content Provider
The predicate for CDA immunity on which we resolve the matter is the third requirement. A provider of an interactive computer service, such as Accusearch, may claim CDA immunity only with respect to information provided by another
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information content provider. 47 U.S.C. 230(c)(1). Thus, an interactive computer service that is also an information content provider of certain content is not immune from liability arising from publication of that content. See Roommates.com, 521 F.3d at 1162; Ben Ezra, Weinstein, & Co., Inc. v. Am. Online Inc., 206 F.3d 980, 985 n.4 (10th Cir. 2000). The CDA defines the term information content provider as any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service. 47 U.S.C. 230(f)(3). This is a broad definition, covering even those who are responsible for the development of content only in part. Universal Commcn Sys., 478 F.3d at 419. Accordingly, there may be several information content providers with respect to a single item of information (each being responsible, at least in part, for its creation or development). See 47 U.S.C. 230(f)(3). Accusearch contends that under the plain language of the CDA it was not an information content provider, because it was not responsible for creation or development of information. We disagree. To begin with, we consider whether confidential telephone records are developed, within the meaning of the CDA, when, as here, they are sold to the public over the Internet. The CDA does not define the term development. Accusearch would construe the word narrowly. It relies on two dictionary definitions, correctly
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noting that develop can mean to [m]ake something new and [c]ome into existence. Aplts. Am. Br. at 39 (internal quotation marks omitted). Because the information provided to its customers came originally from the telecommunications carriers, it argues, it made nothing new nor brought anything into existence. But the CDA uses the phrase creation or development of information, 47 U.S.C. 230(f)(3), and if the meaning of the word develop were limited to the two senses relied upon by Accusearch, the word development would add nothing not already conveyed by the word creation. Under a long-standing canon of statutory interpretation, one should avoid construing a statute so as to render statutory language superfluous. McCloy v. U.S. Dept. of Agric., 351 F.3d 447, 451 (10th Cir. 2003); see Roommates.com, 521 F.3d at 1168. We therefore examine whether we can reasonably construe development more broadly. We can. When faced with an undefined statutory term, an investigation of its core meaning can be illuminating. United States v. Montgomery, 468 F.3d 715, 720 (10th Cir. 2006); see also Muscarello v. United States, 524 U.S. 125, 12829 (1998) (investigating etymological origins of carries to uncover its primary meaning). The word develop derives from the Old French desveloper, which means, in essence, to unwrap. Websters Third New International Dictionary 618 (2002) (explaining that desveloper is composed of the word veloper, meaning to wrap up, and the negative prefix des). The dictionary definitions for develop correspondingly revolve around the act of drawing
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something out, making it visible, active, or usable. Id. Thus, a photograph is developed by chemical processes exposing a latent image. See id. Land is developed by harnessing its untapped potential for building or for extracting resources. See id. Likewise, when confidential telephone information was exposed to public view through Abika.com, that information was developed. See id. (one definition of develop is to make actually available or usable (something previously only potentially available or usable)). This conclusion, however, does not end the inquiry. The question remains whether Accusearch was responsible, in whole or in part, for the . . . development of the offending content. Roommates.com, 521 F.3d at 1162 (quoting 230(f)(3)). That is, was it responsible for the development of the specific content that was the source of the alleged liability? The answer is yes. Just as the CDA does not define development, it does not define responsible. We need not provide a complete definition of the term that will apply in all contexts; but we can say enough to resolve this case and to assuage concern that the broad meaning for development that we have adopted will undermine the purpose of immunity under the CDA. The meaning of responsible becomes an issue under the CDA when a court is considering whether CDA immunity from liability is unavailable because one is responsible, in whole or in part, for the creation or development of information that is the source of the liability. In this contextresponsibility for harmthe
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word responsible ordinarily has a normative connotation. See The Oxford English Dictionary 742 (2d ed. 1998) (stating one definition of responsible as Morally accountable for ones actions.). As one authority puts it: [W]hen we say, Every man is responsible for his own actions, we do not think definitely of any authority, law, or tribunal before which he must answer, but rather of the general law of right, the moral constitution of the universe. . . . James C. Fernald, Funk & Wagnalls Standard Handbook of Synonyms, Antonyms, and Prepositions 366 (1947). Synonyms for responsibility in this context are blame, fault, guilt, and culpability. See Oxford American Writers Thesaurus 747 (2d ed. 2008). Accordingly, to be responsible for the development of offensive content, one must be more than a neutral conduit for that content. That is, one is not responsible for the development of offensive content if ones conduct was neutral with respect to the offensiveness of the content (as would be the case with the typical Internet bulletin board). We would not ordinarily say that one who builds a highway is responsible for the use of that highway by a fleeing bank robber, even though the culprits escape was facilitated by the availability of the highway. This construction of the term responsible comports with the clear purpose of the CDAto encourage Internet services that increase the flow of information by protecting them from liability when independent persons negligently or intentionally use those services to supply harmful content. See 47 U.S.C. 230(a),
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(b). We therefore conclude that a service provider is responsible for the development of offensive content only if it in some way specifically encourages development of what is offensive about the content. In the case before us, the offending content was the disclosed confidential information itself. We need not construe the word responsible to extend beyond its core meaning in this context to conclude that Accusearch was responsible for the development of that contentfor the conversion of the legally protected records from confidential material to publicly exposed information. Accusearch solicited requests for such confidential information and then paid researchers to obtain it. It knowingly sought to transform virtually unknown information into a publicly available commodity. And as the district court found and the record shows, Accusearch knew that its researchers were obtaining the information through fraud or other illegality. Accusearch argues that our decision in Ben Ezra, 206 F.3d 980, establishes its entitlement to CDA immunity. In that case the plaintiff corporation sued America Online for allegedly posting on three occasions incorrect information concerning the corporations stock price and share volume. Id. at 983. America Online purchased price and volume information on numerous stocks from a thirdparty vendor who had compiled it from major national and international stock exchanges and stock markets. Id. We held that America Online was protected from liability by the CDA. Id. at 986. Most relevant to this case, we said that
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Plaintiff has not demonstrated [that America Online] worked so closely with [the third-party vendor] regarding the allegedly inaccurate stock information that [it] became an information content provider. Id. at 985. Accusearch argues that because America Online was not considered an information content provider despite soliciting the relevant information for online publication, Accusearchs own solicitation of information could not make it an information content provider either. But Accusearch takes too broad a view of what was the relevant information in Ben Ezra. Although America Online solicited stock quotations, the plaintiffs claim was based on inaccuracies in the solicited quotations. See id. at 983. The offending content was thus erroneous stock quotations and, unsurprisingly, America Online did not solicit the errors; indeed, it sent the vendor emails requesting that it correct the allegedly inaccurate information. Id. at 985. If the information solicited by America Online had been inherently unlawfulfor example, if it were protected by contract or was child pornographyour reasoning would necessarily have been different. In Ben Ezra, however, America Online had done nothing to encourage what made the content offensiveits alleged inaccuracy. America Onlines conduct was neutral with respect to possible errors in the stock quotations. It was therefore not responsible for the offensive content. Our holding that Accusearch was an information content provider is supported by authority from outside this circuit. Most recently, the Ninth Circuit, sitting en banc, held that the provider of an online roommate-matching service was
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responsible for the development of discriminatory preferences contained in its users personal-profile pages. Roommates.com, 521 F.3d at 116768. Subscribers of the website were required to specify from a set of preselected answer choices their sex, sexual orientation and whether [they] would bring children to a household. Id. at 1161; see id. at 1165 & n.17. Subscribers also had to select their preferences in roommates with respect to the same three criteria. Id. at 1161. For example, subscribers seeking housing had to state whether they [were] willing to live with Straight or gay males, only with Straight males, only with Gay males or with No males. Id. at 1165. These preferences were then posted on a subscribers profile page, where they could be reviewed by other subscribers looking for a roommate match. Id. To be sure, the matching service did not place discriminatory preferences in the minds of its users. It did not, in other words, create those preferences. But the court found that by requiring its users to disclose their illicit preferences, the service provider became much more than a passive transmitter of information provided by others; it bec[ame] the developer, at least in part, of that information. Id. at 1166. It summarized: [A] website helps to develop unlawful content, and thus falls within the exception to section 230, if it contributes materially to the alleged illegality of the conduct. Id. at 1168. That language applies to Accusearchs role in this case. By paying its researchers to acquire telephone records, knowing that the confidentiality of the records was protected by law, it contributed mightily to the unlawful conduct of its
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researchers. Indeed, Accusearchs responsibility is more pronounced than that of Roommates.com. Roommates.com may have encouraged users to post offending content; but the offensive postings were Accusearchs raison detre and it affirmatively solicited them. An earlier Ninth Circuit case, Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9th Cir. 2003), provides a useful comparison. In that case an unknown person created a bawdy dating profile for actress Christianne Carafano on the defendants online-dating website. See id. at 1121. To create the profile, the anonymous poster had to draft an essay and select answers to more than fifty questions from menus providing between four and nineteen options. Id. Some options were sexually suggestive and some were innocuous. Id. The Ninth Circuit held that the dating service was not an information content provider of the libelous profile. Id. at 1124. As the en banc court would later explain in Roommates.com, [t]he salient fact in Carafano was that the websites classifications of user characteristics did absolutely nothing to enhance the defamatory sting of the message, to encourage defamation or to make defamation easier. Roommates.com, 521 F.3d at 1172. Although an unknown person created Ms. Carafanos profile in part from preselected answer choices, the menus provided by the website did not encourage a defamatory response. See id. at 1171. Unlike Roommates.com, which prompted the disclosure of discriminatory preferences, the dating website provided only neutral tools which were
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employed to create the offending content. Id. at 1172; see Universal Commcn Sys., 478 F.3d at 420 (messaging board immune with respect to posts it did not prompt); cf. Chi. Lawyers Comm., 519 F.3d at 671 (Craigslist did not cause discriminatory housing advertisements within the meaning of the Fair Housing Act, 42 U.S.C. 3604(c), by hosting online marketplace where they were posted). Accusearch attempts to portray itself as the provider of neutral tools, stressing that it merely provided a forum in which people advertise and request telephone records. Aplts. Am. Br. at 3738. But that phrasing mischaracterizes the record. As explained above, Accusearch solicited requests for confidential information protected by law, paid researchers to find it, knew that the researchers were likely to use improper methods, and charged customers who wished the information to be disclosed. Accusearchs actions were not neutral with respect to generating offensive content; on the contrary, its actions were intended to generate such content. Accusearch is not entitled to immunity under the CDA. C. The Injunction
The FTCA provides that in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction. 15 U.S.C. 53(b). Although Accusearch ceased dealing in telephone records before the FTC filed its complaint, the district court determined that prospective injunctive relief was appropriate to prevent Accusearch from engaging in similar unfair practices with respect to telephone records or the other information it provided.
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Accusearch, 2007 WL 4356786, at *9. Accordingly, the injunction prohibits Accusearch from doing, among other things, the following: (1) Trading in customer phone records unless doing so would be clearly permitted by any law, regulation, or lawful court order, Aplts. App., Vol. 5 at 1607; and Trading in other consumer personal information without the express written permission of [the consumer], unless [the] consumer personal information was lawfully obtained from publically available information, id. at 1608.
(2)
The injunction defines consumer personal information as any individually identifiable information concerning a consumer. Id. at 1606. Accusearch attacks these prohibitions on two grounds, arguing that they are (1) unnecessary and (2) unconstitutionally overbroad. Accusearch does not challenge other aspects of the relief ordered, including the provision requiring it to disgorge $199,692.71 in profits garnered from the sale of telephone records. We address Accusearchs contentions in turn. 1. Propriety of Injunctive Relief
A courts power to grant injunctive relief survives the discontinuance of the illegal conduct. United States v. W. T. Grant Co., 345 U.S. 629, 633 (1953). When, as in this case, a defendant has ceased offending conduct, the party seeking injunctive relief must demonstrate to the court that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive. Id. In assessing the likelihood of recurrence, a
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court may consider all the circumstances, including the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of the past violations. Id. We review the decision to grant a permanent injunction for abuse of discretion. John Allan Co. v. Craig Allen Co. L.L.C., 540 F.3d 1133, 1142 (10th Cir. 2008). The district courts discretion in this context is necessarily broad and a strong showing of abuse must be made to reverse it. W. T. Grant Co., 345 U.S. at 633. Accusearch has not persuaded us that the district court abused its discretion. True, Accusearch ceased offering telephone records before litigation commenced. But, as the district court noted, because Accusearch remained in the information brokerage business it had the capacity to engag[e] in similar unfair acts or practices in the future. Accusearch, 2007 WL 4356786, at *9; see also W.T. Grant Co., 345 U.S. at 633 (effectiveness of the discontinuance is a factor in assessing likelihood of recurrence). In Accusearchs view it has proved the absence of any need for prospective relief by expressing a willingness to disgorge nearly $200,000 in ill-gotten profits. But a district court is best situated to judge the sincerity of a litigants contrition, see W.T. Grant Co., 345 U.S. at 634, and Accusearch has given us no ground to second-guess the district courts judgment. See United States v. Or. State Med. Soc., 343 U.S. 326, 333 (1952) (courts must beware of efforts to defeat injunctive relief by protestations of repentance and reform).
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Accusearch also argues that the injunction was improper because 18 U.S.C. 1039, enacted by Congress after this suit was filed, criminalizes the sale and receipt of confidential telephone records absent customer consent. Id. 1039(a)(c) (Supp. 2008). Stressing that the government could prosecute under 1039 if it resumed its trade in telephone records, Accusearch asserts that prospective injunctive relief would be redundant, and, as such, improper, because a proper injunction must enhance the already existing power of the Government to act. Aplts. Am. Br. at 49 (quoting New York Times Co. v. United States, 403 U.S. 713, 744 (1971) (Marshall, J., concurring)). To be sure, injunctions against criminalized conduct have historically been disfavored. See Natl Assn of Letter Carriers v. Indep. Postal Sys. of Am., Inc., 470 F.2d 265, 271 (10th Cir. 1972). But in keeping with the characteristic flexibility of equitable remedies, they have never been absolutely prohibited. See id. An injunction can have several advantages over the threat posed by a criminal statute. To begin with, it can encompass conduct not barred by the statute. Here, the injunction covers all individually identifiable consumer information, Aplts. App., Vol. 5 at 1606, whereas the criminal statute covers only telephone records, see 18 U.S.C. 1039(a)(c), (h)(1). Also, because an injunction can be drawn more precisely than a criminal statute, it can have a greater deterrent effect by removing any doubt in the mind of the enjoined party that particular conduct is forbidden. Furthermore, proving a violation of an injunction is generally less
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burdensome than proving a criminal violation. For example, to violate 1039 one must act knowingly and intentionally. Id. 1039(a)(c). The injunction, on the other hand, imposes no scienter requirement and the law does not necessarily imply one. See FTC v. Freecom Commcns, Inc., 401 F.3d 1192, 1204 n.7 (10th Cir. 2005) (FTC need not prove scienter . . . to establish a 5 violation.); 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure 2960, at 382 (2d ed. 1995) ([A] violation of [a] decree need not be willful for a party to be held in civil contempt.). And a violation need not be proved to a jury beyond a reasonable doubt. See Charles Alan Wright, supra 2960, at 37980 (there is no constitutional right to a jury in civil-contempt proceedings and the contempt must be shown only by clear and convincing evidence, not beyond a reasonable doubt). The district court did not impose an inconsequential injunction. Thus, Accusearchs argument fails on its own terms. In any event, Congress . . . has power to provide for civil injunctive relief against activities which adversely affect interstate commerce, and that power extends to activities which are made criminal by state or federal law. United States v. Cappetto, 502 F.2d 1351, 1356 (7th Cir. 1974) (upholding injunction against gambling activities issued under the Organized Crime Control Act of 1970, which also made those activities a crime); accord Natl Assn of Letter Carriers, 470 F.2d at 271 (injunction against criminalized conduct proper in part because it was authorized by statutes purely civil in nature). In enacting the FTCA,
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Congress gave the FTC express authority to seek permanent injunctive relief in federal court to prevent violations of 5(a). See 15 U.S.C. 53(b); FTC v. Kuykendall, 371 F.3d 745, 749, 764 (10th Cir. 2004) (en banc). In sum, the enactment of 1039 does not undermine the propriety of the injunction against Accusearch. 2. Breadth of the Injunction
Although the district court determined only that Accusearchs trade in telephone records was unfair within the meaning of the FTCA, it issued an injunction restricting Accusearchs trade in any individually identifiable information concerning a consumer. Aplts. App., Vol. 5 at 1606. Accusearch argues that the injunction should have been limited to its trade in telephone records, the specific practice found to be unlawful. See FTC v. Colgate-Palmolive Co., 380 U.S. 374, 39495 (1965) (FTC may fence in offenders by enjoining more than the specific misconduct previously engaged in, but the injunction must bear a reasonable relation to the unlawful practices found to exist.). According to Accusearch, this overbreadth violates its due-process, free-speech, and equalprotection rights. (Because Accusearchs discussion of equal protection does not reference any particular feature of the injunction, we presume that the claim is tied to the only feature that Accusearch challenges on appealnamely, its coverage of information other than telephone records.)
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Accusearch, however, not only failed to preserve this claim of error below, it invited the alleged error. After the district court granted the FTC summary judgment, the parties submitted briefs on the propriety and scope of injunctive relief. Accusearch argued that an injunction was unnecessary and that, if the court disagreed, injunctive relief should be limited in certain respects. In connection with this alternate argument, Accusearch submitted a proposed injunctive order that had been negotiated with the FTC. Aplts. App., Vol. 5 at 1409. The proposed injunction set forth agreed-upon language and denoted several areas in which the parties could not reach consensus. Among the agreed-upon provisions were Section II, entitled Prohibited Business Activities, which bars dealings in consumer personal information, and the definition of that term as any individually identifiable information concerning a consumer. FTC v. Accusearch, Inc., No. 06-CV-105-D (Defs. Br. on Injunctive Relief, Ex. A at 25, Nov. 19, 2007). Curiously, Accusearch submitted the proposed injunction as an attachment to a district-court brief in which it argued that the injunctive relief sought by the FTC would be overbroad because it was not limited to telephone records but covered all consumer information. Aplts. App., Vol. 5 at 1411. That is, Accusearch appeared to object to provisions to which it had stipulated, perhaps indicating a clerical error or a drafting oversight. The FTCs responding brief took note of this inconsistency and reminded Accusearch that it had specifically
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agreed to those provisions extending the injunctions coverage beyond telephone records. In reply, Accusearch made no effort to clarify its position or retract any stipulation in the proposed order. With no reason to doubt the stipulated language, the district court understandably adopted it verbatim. The invited-error doctrine precludes a party from arguing that the district court erred in adopting a proposition that the party had urged the district court to adopt. United States v. Deberry, 430 F.3d 1294, 1302 (10th Cir. 2005). Thus, a party whose proposed order is entered as a judgment may not challenge errors within it on appeal. See Morrison Knudsen Corp. v. Ground Improvement Techniques, Inc., 532 F.3d 1063, 1072 (10th Cir. 2008). The doctrine applies in this case to bar Accusearch from challenging language that it proposed jointly with the FTC. See Lyles v. Am. Hoist & Derrick Co., 614 F.2d 691, 694 (10th Cir. 1980) (rulings of a trial court in accordance with stipulations that are clear and unambiguous will not be considered erroneous on appeal). Accordingly, Accusearchs due-process, free-speech, and equal-protection arguments, which are premised on the breadth of the injunction, are waived and fail. III. CONCLUSION We AFFIRM the judgment of the district court.
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08-8003, F.T.C. v. Accusearch Inc. DBA Abika.com & Jay Patel Tymkovich, J., concurring. I write separately to emphasize what I see as an unnecessary extension of the CDAs terms responsible and development, thereby widening the scope of what constitutes an information content provider with respect to particular information under the Act. See 47 U.S.C. 230(c)(1), (f)(3). The majority holds that by soliciting third-parties to obtain and then exposing the confidential telephone records to public view, Accusearch is responsibleat least in partfor developing that information. Under this definition, the line between passive posting of tortious or unlawful commentary, news articles, or other previously unpublished information and content development depends on an amorphous analysis of the motivations of the content provider in soliciting or acquiring that information. In the majoritys view, a content provider seeking out the information in good faith may be able to obtain CDA immunity for any subsequent liability, as it would not have been responsible, in whole or in part, for the . . . development of [that] information. 230(f)(3). If the providers motivations are not in good faith, however, the majoritys approach transforms the provider into a developer of that information. The provider would then be deemed the information content provider for that information and lose its entitlement to CDA immunity. Instead of embarking on this path, I would avoid the need to interpret the CDA in the first instance.
101
I agree with the majority that Accusearch violated the FTCA, though I reach this conclusion because I believe the FTC sought and ultimately held Accusearch liable for its conduct rather than for the content of the information it was offering on the Abika.com website. Section 230 only immunizes publishers or speakers for the content of the information from other providers that they make public. 230(c)(1) (No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.). The CDA says nothing about immunizing publishers or speakers for their own conduct in acquiring the information. Indeed, other courts have explicitly recognized this distinction. E.g., 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F. Supp. 2d 273, 295 (D.N.J. 2006) ([I]mmunity under the Act applies to any cause of action that would make service providers liable for information originating with a third-party user of the service. Immunity does not seem to fit here because the alleged fraud is the use of the trademark name in the bidding process, and not solely the information from third parties that appears on the search results page. It is not the purpose of the Act to shield entities from claims of fraud and abuse arising from their own pay-for-priority advertising business, rather than from the actions of third parties.); Mazur v. eBay Inc., No. C 0703967 MHP, 2008 WL 618988, at *9, 12 (N.D. Cal. Mar. 4, 2008) (The CDA does not immunize [a content provider] for its own fraudulent misconduct. . . . [Here,] eBays statement regarding safety affects and creates an expectation -2-
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regarding the procedures and manner in which the auction is conducted and consequently goes beyond traditional editorial discretion.). A recent Ninth Circuit case succinctly summed up the scope of Section 230 immunity with respect to various torts, stating: [W]hat matters is whether the cause of action inherently requires the court to treat the defendant as the publisher or speaker of content provided by another. To put it another way, courts must ask whether the duty that the plaintiff alleges the defendant violated derives from the defendants status or conduct as a publisher or speaker. If it does, section 230(c)(1) precludes liability. Barnes v. Yahoo!, Inc., 565 F.3d 560, 566 (9th Cir. 2009). To make clear how the FTC sought to hold Accusearch liable, a quick review of Accusearchs conduct is helpful. Through its Abika.com website, Accusearch offered paying consumers the opportunity to obtain private confidential telephone records of almost any individual with a cellular or landline telephone. To fulfill a consumers request for such information, Accusearch would solicit and ultimately enlist various third-party researchers to dig up these confidential records. These third-party researchers would use various fraudulent or unlawful means to obtain these records from telecommunications carriers in violation of the Telecommunications Act, 222. The researchers would then sell the records to Accusearch. In its complaint, the FTC expressly addressed the conduct for which it sought to hold Accusearch liable. In particular, using Section 5(a) of the FTC Act,
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15 U.S.C. 45(a), the FTC contended Accusearch surreptitiously obtain[ed] and s[old] confidential customer phone records without the customers knowledge or authorization. Aplt. App., Vol. I at 19 1. In reference to Accusearchs business model, the FTC noted that [f]or a fee, Defendants have offered to obtain Details of incoming or outgoing calls from any phone number, prepaid calling card or Internet Phone. Phone searches are available for every country of the world. Id. at 21 9. Further, and most importantly, the FTC alleged (and ultimately proved): The account holders have not authorized the Defendants to obtain access to or sell their confidential customer phone records. Instead, to obtain such information, Defendants have used, or caused others to use, false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as a customer of a telecommunications carrier, to induce officers, employees, or agents of telecommunications carriers to disclose confidential customer phone records. Defendants have sold the confidential customer phone records that they have obtained to their clients. Id. at 2122 10 (emphasis added). 4 As its cause of action against Accusearch, the FTC claimed Accusearch violated the FTCA by directly or through their employees or agents, . . . obtain[ing] and s[elling] to third parties confidential
To satisfy the injury prong for FTCA liability, the FTC claimed the invasion of privacy and security resulting from obtaining and selling confidential customer phone records without the consumers authorization causes substantial harm to consumers and the public, including, but not limited to, endangering the health and safety of consumers. Id. at 22 11. -4-
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customer proprietary network information without the knowledge or consent of the customer. Id. at 22 12. As is clear from the complaint, the FTCs allegations of FTCA violations stemmed not from the content of the information Accusearch was disclosing (or developing), but from Accusearchs own conduct in (1) offering the information for sale, (2) soliciting and encouraging third-parties to violate the law in obtaining the information, and (3) ultimately paying these third parties and selling the information to consumers. Accusearchs duty to refrain from engaging in these unfair business practices does not derive from its status or conduct as an Internet website that publishes content. 5 Rather, the duty the FTC alleged Accusearch violated derives from the expectations that a business would not engage in unlawful or unfair business practices in general (whether the business is a conventional bricks-and-mortar operation or exists entirely on the World Wide Web). See Barnes, 565 F.3d at 566. While Internet publication of the confidential phone data, by itself, may very well be protected by the CDA, the CDA does not immunize, expressly or implicitly, the manner in which Accusearch conducted its
If Accusearch had run a traditional business out of a physical location and offered similar services, it would seem the FTC would have the same unfair business practices complaint. Nothing would immunize Accusearchs conduct had it chosen to deliver the confidential telephone records to requesters through hard copy print-outs either in person or through the mail. Accusearchs duty to refrain from engaging in the solicitation and distribution of unlawfully-obtained confidential telephone records should not depend on the medium within which it chooses to operate. -5-
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business. In sum, the CDA does not extend to immunize a partys conduct outside the realm of the Internet just because it relates to the publishing of information on the Internet. Rather than follow the majoritys disposition of this issueextending the definitions of responsible and develop to include solicitation of information based on consumer selections off of Accusearchs websiteI would limit the analysis to whether the CDA even applies in the first place. I would conclude that it does not, and that Accusearch therefore was liable for its unfair business practices in violation of the FTCA.
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Philip J. Berg, Esquire (PA I.D. 9867) E-mail: philjberg@gmail.com LAW OFFICES OF PHILIP J. BERG 555 Andorra Glen Court, Suite 12 Lafayette Hill, PA 19444-2531 Telephone: (610) 825-3134 Fax: (610) 834-7659 Attorney in pro se and for Plaintiffs UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, SOUTHERN DIVISION LISA LIBERI, et al, vs. ORLY TAITZ, et al, : : : Plaintiffs, : : : : : : Defendants. : :
CIVIL ACTION NUMBER: 8:11-cv-00485-AG (AJW) PLAINTIFFS CERTIFICATE OF SERVICE
I, Philip J. Berg, Esquire, hereby certify a true and correct copy of Plaintiffs
Concise Statement of Genuine Disputes of Intelius Proposed Uncontroverted Material Facts were served electronically through the ECF filing system this 20th day of
February 2012, upon the following:
John A Vogt, Jr., Esquire Edward San Chang, Esquire Jones Day 3161 Michelson Drive Suite 800 Irvine, CA 92612 Email: javogt@jonesday.com Email: echang@jonesday.com Attorney for Defendant Intelius, Inc.
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Marc Steven Colen, Esquire Law Offices of Marc Steven Colen 5737 Kanan Road, Suite 347 Agoura Hills, CA 91301 Email: mcolen@colenlaw.com Attorney for Defendants: Neil Sankey; Todd Sankey; Sankey Investigations, Inc. and The Sankey Firm, Inc. James F McCabe, Esquire Morrison & Foerster 425 Market Street San Francisco, CA 94105-2482 Email: jmccabe@mofo.com Attorney for Defendants: Reed Elsevier, Inc., LexisNexis Group, Inc., LexisNexis, Inc., LexisNexis Risk and Information Analytics Group, Inc., LexisNexis Risk Solutions, Inc., Seisint, Inc. d/b/a Accurint, Choicepoint, Inc.
/s/ Philip J. Berg Philip J. Berg, Esquire

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LISA LIBERI, et al,

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/s/ Philip J. Berg Philip J. Berg, Esquire Pennsylvania I.D. 9867

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SEC Info - Intelius Inc - S-1/A - On 10/19/09

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SEC Info - Intelius Inc - S-1/A - On 10/19/09