U.S. District Judge John Schabaz threw out a lawsuit brought by Associated Bank-Corp against Earthlink for identifying the bank’s site as a “potentially fraudulent” and advising users to “not continue to use this potentially risky site”.

We raised the possibility of sites and businesses being negatively affected by errors in the new anti-phishing toolbar from Microsoft. The biggest question is whether the providers of these new “tools” will be liable for the effects of their errors.

Schabaz acknowledged that Associated Bank-Corp, with 300 locations in the Midwest, was hurt by the mis-reporting. However, Earthlink was immunized from the suite under a section of the 1996 Telecommunications Act that says that an internet service provider cannot be “treated as a publisher or speaker of any information provided by another information content provider”. Earthlink licensed the database for their ScamBlocker toolbar from a company named Cyota.

It appears that Cyota could and likely is liable for any negative impact itself as it created the database which originally identified Associated Bank-Corp’s website as fraudulent.

As we suggested earlier, owners of small and mid-sized sites should be very concerned by this case. This law was put in place to protect ISPs from the content viewed over their networks. However, it has been interpreted much more broadly. Under this ruling, large companies that increasingly provide (after their own internal review) filters, blocking and warning software to their users for free have no responsibility to make sure that these applications are correct.

False positives, like the one seen in this lawsuit, hurt both the businesses and consumers. Phishing is a huge problem, and it is good to see companies working towards combating the issues, but they must do so within reason.