As reported in the New York Law Journal, Volume 224, No. 10 (2010), the parties admitted that the ISP agreement had clearly stated that Baidu, Inc. was proceeding at its own risk and would provide its own security. However, the hacker was able to penetrate by emailing Register.com that it had lost its password. It provided a new password, notwithstanding the fact that the hacker was unable to answer the security questions.
The Court held that the gross negligence by Register.com was either intentional wrongdoing or at the very least, “reckless disregard for the rights of others.” On that basis the Court allowed the case to proceed on the claims of gross negligence and breach of contract.
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