Explain the difference between false advertising and puffery. Are consumers smart enough to see through companies’ puffery?

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1. In “techie’’ circles, Kevin D. Mitnick became the underground icon of computer hackers. During a decade’s reign, Mitnick terrorized the federal government, universities, and high-tech companies such as Sun Microsystems, Novell Corporation, MCI Communications, and Digital Equipment Corporation by breaking into their computer systems. Mitnick used his computer skills to penetrate his victims’ computer systems to steal secret information and wreak havoc with their software and data.

Mitnick, a self-taught computer user, has a history of computer-related crime. As a 17-year-old, he was placed on probation for stealing computer manuals from a Pacific Bell Telephone switching center in Los Angeles. Mitnick was next accused of breaking into federal government and military computers. He has also been accused of breaking into the nation’s telephone and cellular telephone networks, stealing thousands of data files and trade secrets from corporate targets, obtaining at least 20,000 credit card numbers of some of the country’s richest persons, and sabotaging government, university, and private computer systems around the nation. Mitnick was arrested and convicted of computer crimes and served time in prison. Upon release from prison, he was put on probation and placed in a medical program to treat his compulsive addiction to computers, which included a court order to not touch a computer or modem. Mitnick dropped out of sight and evaded federal law enforcement officials for several years, as he continued a life of computer crime. Mitnick’s next undoing came when he broke into the computer of Tsutomu Shimomura, a researcher at the San Diego Supercomputer Center.

Shimomura, a cyber sleuth who advises the FBI and major companies on computer and Internet security, made it his crusade to catch the hacker who broke into his computer. Shimomura watched electronically as Mitnick invaded other computers across the country, but he could not physically locate Mitnick because he disguised his whereabouts by breaking into telephone company computers and rerouting all his computer calls. Eventually, Shimomura’s patient watching paid off, as he traced the electronic burglar to Raleigh, North Carolina. Shimomura flew to Raleigh, where he used a cellular- frequency-direction-finding antenna to locate Mitnick’s apartment. The FBI was notified, and an arrest warrant was obtained from a judge at his home. The FBI arrested Mitnick at his apartment. Mitnick was placed in jail without bail, pending the investigation of his case. Mitnick’s computer crimes spree has been estimated to have cost his victims several hundreds of millions of dollars in losses, but Mitnick was not accused of benefiting financially from his deeds. Mitnick entered into a plea agreement with federal prosecutors. The U.S. District Court judge sentenced Kevin Mitnick to 46 months in prison, including time served, and ordered him to pay $4,125 in restitution to the companies he victimized. The judge called this a token amount but did not order a larger restitution because she believed Mitnick would not be able to pay more. After serving his time in prison, Mitnick was released. As part of the sentencing, Mitnick cannot use electronic devices, from PCs to cellular telephones, during an additional probationary period following his release from prison. Mitnick is now acting as a consultant to businesses, advising them how to protect themselves from computer hackers.

1. Was Mitnick guilty of a crime?

2. Did Mitnick act unethically? Do you think hackers cause much economic loss?

3. Should Mitnick have been given a greater sentence in this case? Why or why not? Do you think anything should have been done differently in sentencing?

2. Papa John’s International, Inc., is the third-largest pizza chain in the United States, with more than 2,050 locations. Papa John’s adopted a new slogan—“Better Ingredients. Better Pizza.”—and applied for and received a federal trademark for this slogan. Papa John’s spent over $300 million building customer recognition and goodwill for this slogan. This slogan has appeared on millions of signs, shirts, menus, pizza boxes, napkins, and other items, and it has regularly appeared as the tag line at the end of Papa John’s radio and television advertisements.

Pizza Hut, Inc., is the largest pizza chain in the United States, with more than 7,000 restaurants. Pizza Hut launched a new advertising campaign in which it declared “war” on poor-quality pizza. The advertisements touted the “better taste” of Pizza Hut’s pizza and “dared” anyone to find a better pizza. Pizza Hut also filed a civil action in federal court, charging Papa John’s with false advertising, in violation of Section 43(a) of the federal Lanham Act.

1. Explain the difference between false advertising and puffery. Are consumers smart enough to see through companies’ puffery?

2. Is the Papa John’s advertising slogan “Better Ingredients. Better Pizza.” false advertising? Explain your answer.

3. Did Papa John’s act ethically in making the claims it made?

3. The National Enquirer, Inc., is a Florida corporation with its principal place of business in Florida. It publishes the National Enquirer, a national weekly newspaper with a total circulation of more than five million copies. About six hundred thousand copies, almost twice the level in the next highest state, are sold in California. The Enquirer published an article about Shirley Jones, an entertainer. Jones, a California resident, filed a lawsuit in California state court against the Enquirer and its president, who was a resident of Florida. The California lawsuit sought damages for alleged defamation, invasion of privacy, and intentional infliction of emotional distress.

1. Explain what kind of paper the National Enquirer is.

2. Was it ethical for The National Enquirer, Inc., to try to avoid suit in California?

3. Are the defendants subject to suit in California? Why or why not?

4. Robert Schlagenhauf worked as a bus driver for the Greyhound Corporation. One night, the bus he was driving rear-ended a tractor-trailer. Seven passengers on the bus were injured and sued Schlagenhauf and Greyhound Corporation for damages. The complaint alleged that Greyhound was negligent for allowing Schlagenhauf to drive a bus when it knew that his eyes and vision “were impaired and deficient.” The plaintiffs petitioned the court to order Schlagenhauf to be medically examined concerning these allegations. Schlagenhauf objected to the examination. Who wins?

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