Landmark case shows SMEs can take legal action against online defamation

A landmark legal case has confirmed that companies may have grounds to pursue and prosecute people who make anonymous defamatory comments online, but only extremely serious allegations should be considered, a legal expert has said.

The comments come after a Victorian man has agreed to pay $30,000 in damages for making defamatory comments against a firm and its managing director on an internet forum.

Graeme Gladman has agreed to pay the costs, and stop making defamatory comments, after he attacked security company Datamotion Asia Pacific and its chairman and managing director Ronald Moir on the HotCopper stock market forum.

Because Gladman wrote under the name “Witch”, the company’s counsel asked HotCopper to reveal the identity – but was met with a refusal. This resulted in court action, but the name revealed to be registered to the account was actually false.

Gladman was eventually found, with Datamotion and Moir alleging that because of his comments, both parties had been “brought into hatred, contempt and ridicule and thereby suffered damage”.

Mark Jones, senior consultant at Rostron Carlyle, says the case shows smaller businesses do have grounds to pursue defamatory comments on blogs and forums in certain circumstances.

“This is a fairly interesting case. Of course the company involved doesn’t have a right of action as a company unless it is fewer than 10 persons or has a motive other than profit, say a charity of some sort. DataMotion Asia Pacific must have somehow fitted under one of those.”

Jones says small companies wanting to take legal action against comments made online need to be sure the outcome will be worth the business’s time.

“You’ve got to be able to show a direct financial loss, and that the comments led to that loss. It’s often difficult to find the author of these comments, and some of these forums could be small which limit the amount of damages.”

“Also the comments would have to be a pretty serious allegation in order to bring a defamation case against an individual.”

James Griffin, chief executive of online reputation management company SR7, says the case demonstrates how businesses can begin to take control of their reputations online.

“I suppose this is what we’ve been saying since we started, and really we’ve seen a surge in companies really understanding and taking responsibility for their reputations online.”

“I think the example on HotCopper is a good one of a business operating in a serious environment and taking a hit from social media.”

Griffin says previously only bigger businesses might be concerned with how to deal with hits at their reputation online. But as social media becomes more popular, Griffin suggests smaller businesses will have to do more to protect themselves, and that could include taking legal action.

“Whereas in the past it’s been considered that social media sits within marketing, we’re starting to see it’s becoming a mainstream tool of communication. Conventional protections such as defamation have struggled to keep with blogs and social media, but this case shows how action can be taken.”