Micro-blogging site, Twitter Inc. (TWTR) was recently asked by Sony Corp. (SNE) to suspend the account of an individual user named Val Broeksmit whose Twitter ID is @BikiniRobotArmy.
The particular user has been accused of using illegally obtained data for tweets. The data that he used for his tweets had been stolen and leaked online as a result of the major cyber attack that Sony was exposed to last month.
Sony has accused Twitter of violating various California state laws and federal laws such as the Computer Fraud and Abuse Act. Per this 1986 law, it is a crime to access a computer without authorization.
Twitter has also been accused of violating the Copyright Act. This law protects certain material from being republished. While copyrighted material used for the benefit of the public would be protected by the fair use clause, it’s unclear whether the same protection would be available to illegally obtained data. But there are likely other defenses available to Twitter under the Communications Decency Act.
However, it might be better for Twitter to comply with Sony’s demand, it if only to avoid getting involved in a costly lawsuit for the sole purpose of proving its innocence (it has no financial incentive to fight Sony in court). On the other hand, Sony may demand a hefty compensation for the use of leaked data.
Of late, Twitter has been plagued by the slowdown in its user growth rate. Attracting more advertising revenues will be difficult if it cannot get its user growth back on track, especially considering the significant competition from Facebook, Yahoo! Inc. (YHOO) and market leader, Google (GOOGL).
We believe that the acquisitions of Cover, Gnip, TapCommerce, Namo Media and CardSpring will expand Twitter’s product portfolio and monetization capability. Furthermore, the company’s foray into e-commerce by testing the ‘Buy Now’ button is a significant positive, in our view.
Currently, Twitter has a Zacks Rank #3 (Hold).
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