I. HYPOTHETICAL

1. Setting Up Shop on the Internet.
Firestorm Video Products, Inc. ("Firestorm") is a computer peripheral manufacturing firm that has recently decided to market its products via a web site. The site will include an on-line catalogue as well as an on-line 24-hour technical service department. To accomplish this goal, Firestorm hires a consultant to assist its marketing department in establishing the web site.

2. Trouble with Domain Name Secured.
Firestorm secures from InterNIC, the domain name "www.firestorm.com" for its personal use. Flashfire Electronics, Inc. ("Flashfire"), an east coast competitor, has a federal trademark for the name "flashfire" in the video card manufacturing business group.

Flashfire has written Firestorm a terse letter stating that it considers Firestorm's domain name to be an infringement of Flashfire's trademark.

3. Trouble with Patents & Copyrights.
Moreover, Flashfire stated it also believes Firestorm's newest product, the "HeatSeeker" video card, contains components that constitute an infringement of several Flashfire patents, and that its software drivers violate copyrights held by Flashfire.

The Firestorm on-line catalogue utilizes "cookie" technology, where small utility files (i.e., "cookies") are secretly downloaded onto the visitor's hard drive and used to find out the person's name, location, and to record the visitor's destinations on the Internet. Firestorm uses that information to try to sell the user future games and provide notices of software updates.

4. Trouble for Links.
The on-line catalogue also contains a series of links to retail store sites that sell and service Firestorm's product line. One such web site, "www.ubuyit.com," (the web site of Storeco) has an endorsement of the Firestorm "HeatSeeker" by Joe Q. Famous. Although Mr. Famous' photo appears next to the text of the endorsement, Mr. Famous did not endorse the "HeatSeeker," nor did he authorize the use of his likeness by Storeco.

5. Trouble with Disgruntled Employee/Hackers.
Unfortunately for Firestorm, Robin Hacker, a technical service engineer, became disgruntled when the web site was established because Firestorm management switched his schedule from the day shift to the late shift in order to provide 24-hour technical support on its web site.

Since Firestorm's employees now have unfettered access to the internet and the company's intranet, Mr. Hacker utilized his downtime to hack into Firestorm's network server. Upon gaining access, Mr. Hacker manipulated the payroll program and increased three other employees' pay by 50%. The payroll checks went out the next day without the error being noticed. None of these other employees have reported the increase.

6. Trouble with Employee's Spamming & Revealing Confidential Information.
Mr. Hacker also sent a vast quantity of "spam" to Firestorm and some of its competitors, resulting in brief server shut-downs for the targeted companies. Among the e-mails sent to the competitors were confidential documents of Firestorm and its joint venturers.

7. Big Time Trouble with Virus.
Lastly, Mr. Hacker then tinkered with the web site and the Firestorm corporate database and inserted a computer virus, causing data conflicts, and ultimately, both to crash. The web site and database went down for two weeks, causing Firestorm an estimated $2 million in lost revenue, profits and damage. The corporate database is still being rebuilt at a cost of $200,000. Many of Firestorm's own employees are working on this project, resulting in their inability to perform their regular work functions.

8. Finally Disgrunteld - Hacker Employee Gets Fired!!
Ultimately, these problems were traced back to Mr. Hacker, and he was fired one week later after an exhaustive investigation (during which Mr. Hacker was the prime suspect).

9. Gets Worse...Sexually Explicit Messages are Sent.
During the course of the investigation, Mr. Hacker continued to have unrestricted access to the company's computers, and he sent out sexually offensive e-mail to two female employees and one customer.

10. ..And Worse...Shooting Spree.
The day after his termination, Mr. Hacker, an admitted gun enthusiast, entered the workplace and shot his supervisor and a sales representative from the copy machine company with which Firestorm has a contract. The sales representative died from her injuries, while the supervisor is in physical rehabilitation therapy and intensive psychological therapy.

II. QUESTIONS SPARKED BY THE HYPOTHETICAL                                                            Return to Top

1. QUESTION: What coverages and policies might be available for the threatened trademark and copyright infringement litigation? Is there coverage for the threatened patent infringement litigation?

2. QUESTION: John Doe, a member of Citizens Against Internet Privacy Violations, brings suit against Firestorm for trespass, invasion of privacy and property damage for Firestorm's use of cookies. Any coverage?

3.  QUESTION: Joe Q. Famous files suit against Storeco and Firestorm for invasion of privacy, defamation and commercial misappropriation of his likeness under Cal. Civ. Code section 3344. What coverages and policies might apply?

4. QUESTION: Any first party or third party coverage for the actions of Mr. Hacker?

5. QUESTION: What risk management tools would you institute, or have you already instituted, in order to attempt to avoid the aforementioned concerns and/or lawsuits?

YADDA, YADDA, YADDA

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