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July 31, 2005
Milwaukee Radio Station Settles 47 USC 230 Lawsuit
The Journal-Sentinel reports today that WTMJ-AM settled a libel lawsuit that appeared to be directly covered by 47 USC 230. A talk radio host, Charlie Sykes, received an email from a listener and then reposted the letter on his blog. The letter contained factual errors, and Sykes quickly deleted it. Nevertheless, the radio station was sued.
Based on the newspaper report, this case should have been an easy case to win on a motion to dismiss (like so many other 47 USC 230 cases). Instead, the radio station settled the case for $5,000, basically the nuisance value of a lawsuit like this.
When I was at Epinions, it would have almost always cost $5,000 or more to file the motion to dismiss, so as a rational actor it would be cheaper to pay the $5,000 settlement than to file the motion to dismiss. Nevertheless, we didn't settle these cases during my tenure, in part because we needed plaintiffs to understand that there was zero economic upside to complaining about something covered by 47 USC 230. I guess the radio station didn't feel as strongly about this as we did.
How Many Errors Can We Find in the Article?
Unfortunately, like far too many stories about 47 USC 230, the remainder of the article is garbled/riddled with errors. Consider the following passage:
"The judicial interpretation of the Communication Decency Act continues to evolve. No cases have made it to the U.S. Supreme Court or even to a federal Court of Appeals. State courts of appeal that have ruled on the issue have consistently ruled in the manner Katsaros described - except for one in California.
In that case, the appeals court ruled that someone who knows information is false but posts it anyway can be held legally responsible. The case is now pending before the California Supreme Court."
How many errors can we spot in this passage???
1) There have been at least 7 federal appeals court cases interpreting 47 USC 230, including Batzel, Ben Ezra, Carafano, Doe v. GTE, Green, Noah (the appeals court didn't reference 47 USC 230 but affirmed on the grounds relied upon the district court), and of course, Zeran. The defendant has won every single one (except, arguably Batzel).
2) Though it is correct that the US Supreme Court has not weighed in on 47 USC 230, they have denied cert in at least four cases (Zeran, Ben Ezra, Batzel and Doe v. AOL).
It may also be worth noting that the Florida Supreme Court has weighed in on 47 USC 230 (Doe v. AOL; another victory for defendants). We also had the funky procedural dismissal of Grace v. eBay by the Cal. Supreme Ct.
3) It appears that the reporter was referring to the Barrett v. Rosenthal case when the article referenced the case pending in front of Cal. Supreme Ct. Unquestionably, we're all watching this case closely, but this case is not the only one that has suggested that distributor liability survived 47 USC 230--others include:
* Grace v. eBay (until the CA. Supreme Ct. wiped the lower court opinion away)
* MCW v. badbusinessbureau
* dicta in the Doe v. GTE case.
There were some other lower court losses that were reversed on appeal, and there's dicta in other cases too. Nevertheless, I continue to characterize these cases as the distinct minority given the very substantial precedent on the other side.
4) Incredibly, the story does not address the most applicable case of all--Batzel v. Smith, which is a "blog law" case. In Batzel, a blog operator received a letter on the topic of his blog and then reposted the letter to the blog. In determining the applicability of 47 USC 230, the 9th circuit said the sender's motivation was important. If the sender intended the correspodence to be private, then the republication would not be covered by 47 USC 230 (in effect, the blog operator becomes the information content provider at that point). Otherwise, if the correspondence was intended for forwarding to the blog, then 47 USC 230 applies.
(Note that the OptInRealBig case is along these lines as well).
In the Charlie Sykes situation, we don't know the sender's intent, although the newspaper characterization seems to suggest that it was not intended to be private--in which case the Batzel precedent would suggest that this is covered by 47 USC 230 and a motion to dismiss would have been successful regardless of any other facts.
The story makes another major mistake in a different passage:
"The current state of the law protects them because right now, the less editing you do, the less liable you are.
"If you substantively edit or comment, you are responsible," Rothberg said."
This is wrong wrong wrong. This statement represents old-media law, not cyberlaw. The whole point of 47 USC 230 is that the website's editorial control is irrelevant, so there is no sliding scale of editorial control in cyberlaw like there is in media law. Indeed, I can think of about a half-dozen cases directly contrary to this proposition regarding substantive editing: Blumenthal v. Drudge, Carafano (not directly on point, but hard to read the case any other way), Donato, Ramey, Schneider, Whitney Information Services and Zeran (not directly on point, but pretty clear on this topic). I think a number of other cases would easily stretch to cover the proposition (the Noah case comes to mind).
The only precedent directly contrary to this point is the MCW v. badbusinessbureau case, although one might point to dicta in a case like Roskowski. So under current interpretations of 47 USC 230, the amount of editing done by the ICS does not affect liability.
Meanwhile, I can't think of any 47 USC 230 cases where commenting on third party content affected liability either way. But in general, given the breadth and power of 47 USC 230, commenting on third party content should be 100% irrelevant to liability.
Conclusion
I remain frustrated with highly inaccurate stories like this one that portray 47 USC 230 as unsettled. Tt's not. If an online website republishes third party content (other than copyrighted material), the online publisher isn't liable. End Of Story...defendant's motion to dismiss granted.
Unfortunately, stories like the Journal-Sentinel's continue to encourage plaintiffs to bring lawsuits that are ultimately wasteful and fruitless. I continue to hope that plaintiffs get the message and spend their time on more useful endeavors, but misleading stories prevent plaintiffs from fully comprehending the real state of the law.
Note: you can find citations for the cases referenced in this post here. You might also find helpful my talk organizing the principles of 47 USC 230.
Posted by Eric at 10:47 AM | Derivative Liability
July 28, 2005
Kevin Kelly on the Web's Past, Present and Future
Kevin Kelly writes a fantastic essay at Wired on the Internet circa 1995, 2005, and 2015. It's an excellent read, so I won't spoil all of the fun. However, two passages of particular note.
First, he hits the nail on the head with the following:
"What we all failed to see [in 1995] was how much of this new world would be manufactured by users, not corporate interests."
This is so true. In the mid-1990s, we wondered how we could provide adequate incentives to users to get them to create useful content. We learned the answer--disaggregation would let good content surface, and we just need good filters to ensure the proper sorting of this grassroots-generated content.
His vision for 2015 is a little too cyborg-y for my tastes, but he predicts that the Internet will act as a giant coordinated Machine much like the human brain:
"Today the nascent Machine routes packets around disturbances in its lines; by 2015 it will anticipate disturbances and avoid them. It will have a robust immune system, weeding spam from its trunk lines, eliminating viruses and denial-of-service attacks the moment they are launched, and dissuading malefactors from injuring it again. The patterns of the Machine's internal workings will be so complex they won't be repeatable; you won't always get the same answer to a given question. It will take intuition to maximize what the global network has to offer. The most obvious development birthed by this platform will be the absorption of routine. The Machine will take on anything we do more than twice. It will be the Anticipation Machine."
I particularly like Kevin's description of an "Anticipation Machine"--the system will get smarter, and we've barely seen the possibilities with today's state-of-the-art technology.
I think Kevin's predictions are consistent with two of the bigger policy issues I continue to harp on:
1) We need to ensure that regulatory policy fosters, instead of inhibits, consumer participation in content creation and other online tasks to "run the Machine." This means strong laws, like 47 USC 230, protecting those who try to develop communities.
2) We cannot fully evaluate the consequences of any pathogen jeopardizing the Internet (viruses, spam, spyware, whatever) until the Machine has had a chance to respond fully. In the end, the Internet is far more resilient than we acknowledge, and it will organically self-correct many problems if we keep the regulators from screwing it up.
Posted by Eric at 12:35 PM | Derivative Liability , Internet History
Patent Reform Act of 2005--July 26 Draft
A new draft of the Patent Reform Act of 2005 (HR 2795) has been circulated. Among other noteworthy aspects, this draft drops the limitations on injunctive relief--perhaps expedient to move the bill forward, but a disappointing omission IMO nonetheless. At the same time, if you missed it, eBay is seeking certiorari in the MercExchange lawsuit regarding the grant of injunctions while cases are on appeal. So we may see this injunctive relief issue pursued simultaneously in the courts and in Congress.
While I still think there's merit to Patent Reform Act, its scope is being progressively narrowed through negotiations. In my opinion, this undercut the overall merit of the amendments.
Posted by Eric at 09:16 AM | Patents
July 26, 2005
Challenge to CDA's Obscenity Provision Rejected--Nitke v. Gonzales
Nitke v. Gonzales, No. 01 Civ. 11476 (SDNY July 25, 2005).
This case involves a challenge to the 1996 Communications Decency Act's restriction on disseminating obscenity over the Internet. The basic gist is that there are different standards for evaluating obscenity throughout the US. As a result, a content publisher who has questionable content will not risk publishing the content, even if it is legal in the publisher's local community. Taking this argument to its logical extreme, a publisher will not post content to the Internet if it has any risk of violating the most restrictive jurisdiction's standards of obscenity, which will cause some quantum of non-obscene content to be foreclosed from Internet publication.
These arguments are hardly new. They were rejected in the context of dial-a-porn in the Sable Communications case, where the court effectively said that the phone sex provider should refuse to accept calls from places where the content might be questionable. Of course, in the telephone context, authenticating geography is easier (do it by area code) than it is on the Internet--although the forces of censorship continue to insist that Web publishers can determine the geography of their readers (using IP address analysis or perhaps silly techniques like pop-ups requesting self-authentication) and restrict content dissemination accordingly.
The Nitke plaintiff's basic argument was also largely rejected in the court's highly fragmented decision in Ashcroft v. ACLU, when the court rejected the argument that differing community standards was alone a sufficient justification to reject COPA.
In any case, given the Supreme Court precedent on this topic, it's not surprising the plaintiffs lost their challenge to the law, but what a way to lose! The court acknowledges that the named plaintiffs had proper standing to challenge the law because of their activities might be legitimately chilled. Yet, the court nevertheless rejects the challenge because the plaintiffs were unable to show substantial overbreadth, which the court wanted evidenced by:
* the total amount of speech implicated by the CDA
* the amount of protected speech inhibited by the CDA
* is there a reason that the online differing-standards issue is worse than faced by traditional pornographers?
This is entirely circular. It's the lack of reliable information about what will be considered obscene (and where) that creates the plaintiff's dilemma in the first place. The only way to satisfy the court's request would have been to show the exact same work that was subject to obscenity prosecutions in two different jurisdictions at roughly the same time and that those prosecutions reached different conclusions. Perhaps this data is available, but it wouldn't surprise me if these cases are very few. For more on the evidentiary challenges, see the plaintiff lawyer's blog entry.
In any case, I'm not especially surprised by the result, but I am disappointed the judges took this route to reject the challenge.
UPDATE: The Supreme Court denied certiorari March 20, 2006.
Posted by Eric at 11:01 AM | Content Regulation
Surowiecki on the Decline of Brands
Catching up on back reading, I came across James Surowiecki's Wired article The Decline of Brands from Nov. 2004. If you haven't read it, I recommend the article highly--it's provocative and interesting.
Surowiecki argues that consumers' brand loyalty has declined for several reasons:
* consumers are more informed about their options and more demanding about what they get from manufacturers
* manufacturer quality has gone up across the board, so consumers feel less risk going with an off-brand
As a result, he writes, "If once upon a time customers married brands - people who drove Fords drove Fords their whole lives - today they're more like serial monogamists who move on as soon as something sexier comes along."
I'm not sure I agree with the article's assessment of the effect of additional information. Obviously, sites like Epinions act as a brand leveler by pointing out strong products with unknown brands and weak products put out by the best brands. However, there remains too much information, and I continue to believe that brands will be a way of sorting through information overload. Further, we still need brands to help consumers distinguish their product offerings in the marketplace--consumers still need a nomenclature to accurately distinguish competitive products X and Y.
I'm also interested in the article's implicit discussion about trademark "goodwill," which we often characterize as buyer momentum or the persistence of buyers to keep transacting with the same source. The article challenges that consumers behave in such a fashion any more. If consumers don't actually have "goodwill" towards a brand, in the sense of driving consumer behavior towards brands, then perhaps we run the risk of overweighting goodwill in our legal analysis.
Posted by Eric at 09:16 AM | Trademark
July 25, 2005
Internet Hunting Editorial
On my other blog, I have frequently railed against the regulatory response to Live-shot.com and hunting via the Internet (you can find postings sprinkled throughout this page). I finally organized my thoughts into an editorial that ran today in the San Jose Mercury News. I welcome your comments.
UPDATE: So, isn't this typical? The Mercury News ran an early draft of the editorial even though I sent, and they received, the updated file. Read the editorial they should have published.
Posted by Eric at 06:01 PM | Content Regulation
Bellia on Spyware, and Searcy v. Microsoft
Patricia Bellia of Notre Dame Law School recently posted a paper on spyware and surveillance laws, Spyware and the Limits of Surveillance Law. She challenges those who believe that the Electronic Communications Privacy or the Computer Fraud and Abuse Act adequately address spyware, concluding that “there is good reason to question whether federal electronic surveillance statutes can successfully combat anything but the most extreme forms of spyware.”
If nothing else, this article points out that there is an existing body of law pertaining to “spyware,” and much of it constitutes plaintiffs’ losses in court (although, I should note, there have been a number of settlements where defendants have paid money). As Bellia points out, some of these losses are attributable to judicial formalism.
As an example of these phenomena, consider Searcy v. Microsoft Corp., 2005 WL 1163114 (M.D. Fla. May 4, 2005). This case is putatively a spyware case, although (like many spyware cases) it doesn’t really discuss the allegations in those terms. The case is further muddled by the fact that (a) Searcy was a pro se plaintiff, and (b) worse, he was an incarcerated man with a history of repeat frivolous lawsuits. Usually these attributes produce poor judicial reasoning, as evidenced here.
In this lawsuit, Searcy alleges that Microsoft and AOL created and distributed software devices that surreptitiously captured personal information. He alleged that the capture violated the ECPA. However, he never alleges that the defendants ever did anything with that information. As a result, the court immediately rejects the lawsuit.
So far, so good. Then, the court continues:
"Defendants could not be held liable for the manufacture and distribution of software which may be exploited by third parties and used to illegally obtain a person's electronic information."
[An aside: the court footnotes this sentence to Zeran and AOL v. Green, both cases where the defendants relied on 47 USC 230. However, by its terms, 47 USC 230 doesn't apply to ECPA claims, so the court's reliance on these cases is sloppy at best.]
The court then concludes:
"[The ECPA] simply does not contemplate imposing civil liability on software manufactures [sic] and distributors for the activities of third parties."
This latter sentence is a strong statement, and it seems germane to the continuing confusion over how we sort through the allocation of responsibility between advertisers, manufacturers and distributors/affiliate marketers. The court was clearly saying that merely developing a tool to capture data does not violate the ECPA, even if some unrelated third party exploits that data. However, this language might also suggest a broader principle that there are strong limits to derivative liability under the ECPA irrespective of 47 USC 230.
Unfortunately, this case will never be good precedent because of the plaintiff's unique situation. However, the case both reinforces Bellia’s points and represents yet another example where a court rejects the legal claims of anti-spyware plaintiffs.
Posted by Eric at 11:54 AM | Adware/Spyware , Derivative Liability , Privacy/Security | Comments (1)
July 23, 2005
Spyware, the Pew Report, Anti-Terrorism Efforts and Coping with Spam
I'm a little late blogging about the most recent Pew report on spyware. A couple of weeks ago, Pew Internet & American Life Project released its report "Spyware: The threat of unwanted software programs is changing the way people use the internet." I thought the report was generally interesting, but one fact stood out above the others: "91% of internet users say they have made at least one change in their online behavior to avoid unwanted software programs."
I think it's tempting to lament these behaviorial changes. At minimum, they represent a loss of innocence. Plus, there might be deadweight losses from these changed behaviors--if these changes do not produce any corresponding benefit, they just represent wasted effort.
I've wrestled with these issues as I've witnessed our response to terrorism (particularly after 9/11). As a society, we have increased our spending on security--new assets (super-duper baggage scanners), new labor (screeners), new time-consuming practices (it takes me 5 minutes to get through baggage scanning...and don't even get me started on the time my plane was diverted from National Airport to Dulles because some yutz stood up from his chair in the last 10 minutes of the flight). Collectively, these represent a major social expenditure, and I'm not sure if we get back concomitant social benefits.
However, there's another way to look at this issue, a viewpoint I am slowly embracing. There will always be terrorists, just like there will always be purveyors of viruses, malware and other harmful software. As much as we'd like to retain our innocence, we necessarily must incur some costs to cope with these inevitable threats as part of the consequences of living in a complex society. So given that we have to incur costs to protect ourselves from online threats, my policy objective is to make sure that those costs are appropriately measured at each incremental step.
On that front, I found the 91% statistic from Pew to be good news, not bad. We need online users to exercise some vigilance against online threats, and the Pew report suggests that consumers are going from doing nothing to protect themselves to doing something. This is a major step in the right direction, and I'm reasonably confident that society gets concomitant benefits from these incremental steps.
This statistic also reinforces a pattern that I've seen with various new online technologies that are initially perceived as threats. One of the reasons why I'm not panicked about "spyware" is that we are in the earliest stages of dealing with spyware. There will be a number of organic systems that will automatically correct for the spyware threats--entrepreneurs will spot new market opportunities and develop new coping/protection technologies, evolved business practices will marginalize the most egregious commercial behavior, and consumers will get smarter. The Pew report shows that the latter system is already organically correcting itself. We don't need new laws to do what consumers will naturally start doing themselves. A little patience will show that the spyware threat can and will be contained even if it is never eliminated--just like the threat of terrorism can be controlled but never eliminated.
There are those who will insist on regulation nevertheless. In some cases, it may be in their commercial interest to game the legislative system. In other cases, the early abuses/excesses create such moral outrage towards the entire category that some people will demand legislative vengeance even as the problem is ameliorating in the marketplace.
However, if we can keep our cool and exercise a little patience, everyone else will find that the market self-corrects. I'm 100% convinced that if Pew releases a report on spyware in 2007, its statistics will show that consumer anxiety about and problems with spyware will be significantly lower than they are today--even if we were to roll back all the new anti-spyware laws and didn't pass any new ones. Pew already demonstrated this phenomenon with spam ("email users say they are receiving slightly more spam than before, but they are minding it less"). I'm convinced spyware will be no different.
While many people may point to this Pew report as further evidence of a problem (which would be partially consistent with the report writer's gentle spin on the data), instead I point to it as resounding evidence that we are on the path to a solution. The quicker we implement coping strategies, the quicker we will realize that the spyware problem is eminently controllable.
Posted by Eric at 08:15 AM | Adware/Spyware
July 22, 2005
Answer in AFP v. Google
Agence France Presse v. Google Inc., Civil Action No. 1:05cv00546 (D.D.C. answer filed May 19, 2005). Following up on my earlier coverage of AFP v. Google over Google News, I have found the answer and put it online.
As is typical, the answer is not especially substantive. The answers and affirmative defenses are fairly boilerplate; they are more thoughtful than many answers (which often just deny everything in a blanket manner) but it's still fairly non-substantive.
The interesting part is where Google goes on the offensive (starting on page 17), seeking declaratory judgments that (1) "AFP’s headlines and parts of “story leads”...consist, in whole or in substantial part, of mere facts and ideas that are not subject to copyright protection" (Para. 176), (2) Google's use is lawful (which, in this context, means that Google's use is fair), and (3) "Google’s utilization [of the AFP content] is licensed or authorized by AFP, implicitly if not explicitly, based inter alia upon AFP’s conduct, knowledge, and contracts with third parties" (Para. 192).
This is an interesting move by Google to convert its defenses (non-copyrightable, fair use, license/authorization) into counterclaims. Many defendants would simply pursue these issues as affirmative defenses rather than undertaking the added complexity of seeking a declaratory judgment.
However, Google has shown a propensity for aggressively seeking declaratory judgments--the preemptive strike against American Blinds comes to mind--so I wonder if there's a philosophy in the legal department behind the merits of seeking declaratory judgments or positioning as a plaintiff in its cases. Perhaps this move is as simple as Google deciding that it wants to make the AFP a precedent-setting test case for the viability of Google News.
A BNA report indicates that Google filed a brief in the case June 22. If you've seen it, I'd be grateful for a copy.
Posted by Eric at 03:18 PM | Copyright
eBay, the Search Engine
Is eBay a search engine? Of course it is. eBay is acknowledging as much. As the NY Times reports, "In a conference call, Ms. Whitman also described the importance of improving eBay's search capability, calling the service as much a search site as Google."
This really isn't an earth-shattering revelation. As I recall, something on the order of 95% of eBay users find products through eBay's search as opposed to eBay's weak and hard-to-follow taxonomical structure. From an auctioner's perspective, being included in eBay's search database is a significant part of the value eBay provides. Indeed, eBay is susceptible to some of the same search engine spamming tricks that Google has to wrestle with. See, e.g., Daina J. Schemo, In Online Auctions, Misspelling in Ads Often Spells Cash, N.Y. TIMES, Jan. 28, 2004, at A1.
Of perhaps more relevance to this blog, I think eBay faces the same legal issues as any search engine. In other words, I can't distinguish between the legal issues that should concern eBay and Google. For example, both of them should care about liabiilty for third party content and for doctrines like initial interest confusion that may inhibit using trademarked keywords to trigger advertisements.
I've never been a fan of efforts to make distinctions between "search engines" and "portals" and "e-commece sites" (or, in this case, "auction" sites). In the end, all of these websites are in the same business--helping consumers get what they are looking for--and thus will gravitate towards using the same mechanisms: deep databases of third party content delivered by keyword associations.
Posted by Eric at 12:24 PM | E-Commerce , Search Engines
Ripoffreport.com Wins 47 USC 230 Case
Whitney Information Network, Inc. v. Xcentric Ventures, LLC, 2005 WL 1677256 (M.D. Fla. Jul 14, 2005).
The plaintiff runs real estate training programs. The defendants run ripoffreport.com and ripoffrevenge.com where consumers can submit complaints about businesses. The consumers write the critiques, but the defendants select which ones to publish.
The opinion is a little cryptic what happened, but apparently the defendants posted some critical consumer critiques. I was able to find some examples of the complaints that may have been the basis of the lawsuit. The critques then got good search engine indexing--presumably meaning that when searchers looked for the plaintiffs at the search engines, the critical opinions were prominently displayed in the search results.
Defamation
The plaintiffs sued for defamation. The defendants moved to dismiss the complaint based on 47 USC 230, which the court granted immediately. This is not surprising--the defamation is based on third party content that the defendants chose to publish, so this is an archetypical application of 47 USC 230.
My only question: why did the plaintiffs even try the defamation cause of action? Didn't they know that the cause of action would be immediately mowed down on a motion to dismiss? Why didn't they at least try some creative plead-arounds? Plead-arounds have a low chance of success, but they would have had more likelihood of success than bringing a complaint covered squarely by 47 USC 230.
(I should hasten to add that the plaintiffs may have been emboldened by MCW Inc. v. badbusinessbureau.com, 2004 WL 833595 (N.D. Tex. Apr. 19, 2004). The defendant in that case is the same as the defendant in this case, and the MCW case is one of the very few aberrational cases suggesting that 47 USC 230 can be bypassed if sufficient website involvement is alleged).
Trademark
The plaintiffs also sued for trademark infringement (and some related causes of action). The court also grants the defendants' motion to dismiss, saying that there is no possibility of likelihood of confusion between a gripe site and the real estate training firm's website. I'm not 100% convinced that the court's discussion here is consistent with trademark law, but I am 100% convinced that the court improperly made findings of fact in granting the motion to dismiss. At minimum, the court needed to convert its decision to a summary judgment.
Whatever the way we get there, this ruling makes clear that this judge doesn't want to hear from a grumbly business that a website offering consumer complaints about the business is engaging in trademark infringement. This is the right result as a matter of policy, but I remain frustrated with how many judges are willing to let trademark plaintiffs hamper the free flow of reputational information.
Conclusion
This case is a useful precedent for any websites that allow consumers to rate/grade business partners--including sites like Amazon and eBay that have feedback mechanisms, and (naturally) websites that allow consumers to have their say, like my former employer Epinions.
Hat tip to InternetCases.com for catching this one.
For voyeurs, you might be interested in my personal experience with ripoffreports.com and a pugnacious plaintiff.
Posted by Eric at 11:37 AM | Derivative Liability , Trademark
FTC Cracks Down on Porn Spam
The FTC has brought enforcement actions against seven companies for violating failing to include the "SEXUALLY-EXPLICIT" label on emails where such labels are required under CAN-SPAM and the implementing FTC regulations (as well as other violations of CAN-SPAM). Four of the companies have settled for a total of over $1.1 million. Although these enforcement actions were generally pretty standard for the FTC, two aspects caught my eye:
First, they reiterate that the FTC is throwing resources at enforcing CAN-SPAM. It's particularly interesting to see the FTC showcase non-compliance (and its enforcement of) the adult labeling rules...especially in light of its position on mandatory labeling for emails generally.
Second, the FTC went after the advertisers responsible for the emails sent by their affiliate marketers (which CAN-SPAM specifically authorizes), reflecting that the FTC continues to be serious about working "up the chain" to go after the money sources.
Posted by Eric at 10:37 AM | Derivative Liability , Marketing , Spam
July 20, 2005
Teaching Contract Drafting Presentation
I'm giving a talk tomorrow at Northwestern Law School about my experiences teaching a course called Contract Drafting. A preview of my notes from my talk.
Posted by Eric at 09:31 PM | Licensing/Contracts
July 19, 2005
Misguided CNET Article on Canadian Copyright Law and Caching/Archiving
CNET ran an odd article today entitled "In Canada: Cache a page, go to jail?" The article discusses some proposed changes to Canada's copyright law that allegedly would make search engine archiving an infringement. It quotes a bunch of intelligent commentators lamenting how this would be a bad outcome.
Only problem: I think search engine archiving might already be an infringement under existing US law. Shouldn't we be more worried about laws already on the books than a proposed law?
First, a nomenclature problem. The article casually flips between "caching" and "archiving." I can understand this casualness. Google even clouds the issue by calling its archive a "cache."
However, the article's failure to clearly distinguish archiving from caching is sloppy. Archiving means making and keeping a permanent copy. Caching might mean that, but far more often it means keeping a temporary copy, either stored locally on a desktop machine or stored at some intermediate gateway server, in either case to speed delivery of files to clients served by that gateway.
There is a safe harbor for "caching" in the US, 17 USC 512(b). It only applies to caching at the gateway level, and even then, in limited circumstances that have been rendered mostly historically moot. As far as I know, there has never been a case interpreting 17 USC 512(b) nor has any defendant ever avoided liability using the 17 USC 512(b) safe harbor. Given how practices have changed, there may never be.
Archiving, on the other hand, is a shorthand phrase for saying: "I'm keeping a copy permanently for my business purposes." These business purposes might be noble and socially-beneficial, as with the Wayback Machine, but in the online context, archiving still violates several of the copyright owner's rights under 17 USC 106. There are safe harbors for libraries and "archives" under 17 USC 108. I don't think there's any meaningful likelihood of online entities like the Wayback Machine or search engines qualifying for the 108 safe harbors. There are other possible defenses to archiving, such as 107 fair use, but fair use is extremely hard-to-predict in advance, and never a solid foundation for building a business.
So, the natural response is...how can search engines and the Wayback Machine get away with their conduct if there's no law protecting them from copyright infringement? Obviously, not every act of infringement leads to a lawsuit, but I would be reluctant to make any inferences about the legitimacy of either search engine archiving or the Wayback Machine in light of some of the pending lawsuits (such as the Perfect 10 cases against Google and Amazon, and the recent lawsuit against the Wayback Machine). Time will tell, but a copyright infringement lawsuit against either search engines or the Wayback Machine would be non-frivolous.
Don't get me wrong--I love Google's cache and the Wayback Machine, and I use both frequently. I'd hate to see them go in a hailstorm of copyright infringement lawsuits. But I don't think that American law clearly makes such behaviors permissible--which is why the flap about a proposed change to Canadian law strikes me as so odd. If we're going to wring our hands about that, we should be doing a lot of hand-wringing about US law too.
One other mistake in the article. The article says that Google was warned by Perfect 10. In fact, Google was sued by Perfect 10 last fall. The latest rumors I've heard is that the case is in discovery.
Posted by Eric at 10:02 AM | Copyright , Search Engines
July 18, 2005
Search Engines and Privacy...AGAIN?!
News.com and the Associated Press both ran stories last week about the possible ways that Google aggregates user data in a way that theoretically threatens privacy.
Hmm...this sounds familiar...haven't we heard this story before? Yes, only about a thousand times. Danny Sullivan asks why we obsess about Google and privacy and ignore how other search engines (such as Yahoo) also have rich databases of potentially equal magnitude.
Indeed, I was going through my notes over the weekend and came across this March 2005 AP article fretting about how Amazon might use its customer database. The search engines-and-privacy story seems to endlessly cycle through the press, pretty much every time a search engine adds a new feature that uses personal data. (I won't even revisit the mind-numbing press about Gmail from last year).
I offer three propositions about search engines and privacy:
1) Search engine databases can be accessed by government agencies through legal processes. In rare cases, other private parties could use a legal process to access information in these databases too. Search engines are not alone in this regard; any business that has personal information about its customers is susceptible to these legal processes as well. It's true that search engines have particularly interesting/rich data, but plenty of other vendors have interesting data too.
So search engines aren't the problem; the problem is government snooping. As a result, perhaps new legislation would be appropriate to raise the bar on when the government can tap into search engine databases (a little like the "Bork bill" that raised the bar for accessing video rental histories).
2) Search engine databases are a tempting target for hackers. This is true, but once again, search engines are not unique in this regard. Every business that maintains personal data about its customers is a hacker's target. As a result, we need businesses to take prudent actions to prevent hacking, and we need government enforcement against illegal hacks. Nothing new here on any front.
3) Search engines will necessarily need to obtain and use personal data to reach the next rung of delivering relevant results. Right now, the biggest limitation inhibiting search engines is that they use a "one-size-fits-all" relevancy algorithm, designed to satisfy majority interests rather than personalized to each person's interests. Google has done a remarkable job with relevancy using a one-size-fits-all algorithm, but it (and its competitors) will make quantum improvements in relevancy when they personalize the searches. To personalize the searches and really give searchers what they want, search engines will need to collect and use rich personalized datasets. This is a good thing for searchers.
Thus, from my perspective, social welfare will improve in these situations. I can't wait for Google and other search engines to start reading my mind (as opposed to making guesses about majority interests). Let's hope that the constant whining/scaremongering about search engines and privacy doesn't delay us in getting there.
Prior blog post on this topic.
UPDATE: Google has blacklisted News.com reporters for one year because of the story linked to above.
Posted by Eric at 09:48 AM | Privacy/Security , Search Engines | Comments (3)
Virtual Worlds Paper
I have posted the published version of my virtual worlds paper, Speech Showdowns at the Virtual Corral, to SSRN. The abstract:
"This Essay considers the rights of virtual world providers to terminate their customers or otherwise control their worlds. The Essay argues that virtual worlds are not meaningfully different from other online environments and therefore do not warrant virtual world-specific legal rules. The Essay also explains why society benefits by letting virtual world providers decide how much control they want to exercise over their environments."
The first draft of this paper already sparked some conversation in the virtual world community, a fair amount of it critical. See Terra Nova and Second Life Herald. I'm grateful to the commenters for their feedback; I made a number of changes directly in response to the comments.
Posted by Eric at 09:18 AM | Virtual Worlds
July 15, 2005
Lane's Gift Click Fraud Complaint
Lane's Gifts and Collectibles LLC v. Yahoo! Inc., Case No. CV-2005-52-1 (Ark. Cir. Ct. complaint filed Feb. 17, 2005).
After parsing the Click Defense complaint last week, I was finally able to get my hands on one of the complaints in the Lane's Gift click fraud lawsuit. This particular version is a second amended complaint in state court, but I'm not sure if this is the "latest" complaint as the case has been bouncing between state and federal court. I heard today that the case was sent back to state court in the last week, but I haven't been able to confirm that.
This particular version of the complaint alleges three causes of action:
* breach of contract
* unjust enrichment (and various related theories)
* civil conspiracy
I have no idea what the "civil conspiracy" cause of action means. This is an odd cause of action; maybe there's something very specific in Arkansas law. It reads almost like an antitrust claim: "This is an industry wide conspiracy in which all search engines have worked together to develop and/or create a market which allows for over billing and/or overcharging of businesses and/or entities which purchase online PPC advertising." (Para. 47)
An antitrust angle to the click fraud lawsuits would be an interesting development and would potentially raise the stakes significantly for Google and Yahoo. On that front, I had a telephone conversation today with Click Defense's counsel and he used a lot of rhetoric that implied monopolistic practices. I asked him point blank if Click Defense was planning to amend its complaint to add an antitrust complaint and I got a non-commital response, but it seems like a logical move.
As I mentioned in my analysis of the Click Defense complaint, the unjust enrichment claim will likely stand or fall with the other causes of action.
That leaves the breach of contract action. This particular complaint is thinner in describing the basis of the breach of contract than the Click Defense complaint. As I mentioned there, a plaintiff is not required to show all of its cards in the complaint, although this one might be too thin. I could see a judge requiring clearer allegations of exactly how the defendants breached a contract than the very high level allegation made here: "Defendants either expressly and/or implicitly, contractually agreed to provide Internet PPC advertising and/or services to Plaintiffs and only charge for the actual click thruogh advertising from actual customers. Defendants breached that contract by collecting revenues for services which were not provided." (Para. 44)
As I said, it's very possible that there are newer versions of the complaint than this one. If anyone has a newer version, I'd be grateful for a copy.
I'm now scheduled to speak on click fraud at Search Engine Strategies in San Jose next month. If you're interested in the topic, I hope to see you there. (I believe everyone else on the panel has their knives ready to carve up the search engines like a turkey, so it should be an interesting event!).
Posted by Eric at 02:02 AM | Licensing/Contracts , Search Engines | Comments (2)
July 13, 2005
Settlement in Jewish Rock and Roll Hall of Fame Case
Rock and Roll Hall of Fame and Museum Inc. v. Jewish Rock and Roll Hall of Fame Inc., No. 1:05-cv-0527 (N.D. Ohio complaint filed February 7, 2005 and order of dismissal filed July 5, 2005). Reuters reports that the case has settled, with the defendants changing their website name to "Jewsrock.org" and agreeing not to use the phrase "Jewish Rock and Roll Hall of Fame."
This is a disappointing but perhaps inevitable loss. As one of the defendants said, "These guys are an enormous establishment and institution, and we're just three Jewish guys with a computer." So, maybe the Rock and Roll Hall of Fame does own the Jews after all? The "humorless" plaintiffs even rejected a settlement allowing the defendants to use the name "Jewish Rock & Roll Challah Fame." Oy vey.
Posted by Eric at 11:10 AM | Trademark
July 12, 2005
"Adware's Second Act"
Stefanie Olsen at News.com recaps some of the efforts that adware makers have undertaken to become more legitimate. She points to the example of WhenU, which changed its installation policies and cleaned out some distributors--and watched its installation base drop up to 50%.
This is good news, isn't it? Adware vendors have heard the critics (and others) and are cleaning up their practices accordingly. There was a bubble of bad practices for a couple of years, and we've moved beyond that.
As a result, I hope we will get a truer picture of social demand for adware. I think it's far greater than most people give it credit for. Specifically, I think in 10 years from now, virtually every online ad-delivery mechanism/network will look a lot like adware. And I further think we'll be appalled at how crude the ad-delivery mechanisms of the late 1990s and early 2000s really were.
Posted by Eric at 10:47 AM | Adware/Spyware
July 11, 2005
Trademarking a Blog Name
Marty Schwimmer weighs in on whether blog names are trademarkable and whether registration is a good idea. (His answers: mostly yes and maybe).
From my perspective, trademark law is a cumbersome, expensive and unpredictable solution to managing a pool of blog names. Perhaps someone will find a way to develop a blog registry where name conflicts can be identified (and maybe even resolved) without resorting to the expensive legal system.
Until then, new blog creators are well-advised to search in places like Google and Technorati to avoid obvious conflicts. Sadly, many blog creators (like most other types of clients) won't, so lawsuits on blog names are an inevitable part of our future.
One more thing: if multiple people are operating a blog, then they should have an agreement disposing of the blog assets post-split, just like a band would have an agreement governing who gets the band name if the members split. Another good prophylatic practice that will continue to be ignored until the first lawsuit, when everyone will freak out.
Posted by Eric at 02:01 PM | Trademark | Comments (2)
July 09, 2005
Class Action Settlement in Electronic Databases Case--Should I Participate?
In re. Literary Works in Electronic Databases Copyright Litigation, M.D.L. No. 1379 (SDNY). This case involves the republication of print articles in electronic databases like Westlaw and Nexis without authorization (part of the fallout from Tasini and similar cases). The parties have proposed to settle the lawsuits by paying $10-18 million. This money pays the lawyers and creates a fund to compensate class members.
Unwittingly, I am a member of the class. I have written a number of articles that may be eligible for compensation under the settlement. So the question is...should I claim them?
I have mixed emotions about participating in the settlement. Principally, I don't feel screwed by the publishers about having my articles included in the electronic databases. Invariably, I write to reach an audience and to be validated by the publisher. It is almost never about the money, which is a good thing because I almost never get paid for my articles. So I really can't complain about the bargain--the publishers got free content, I got their audience and validation. To the extent that having my articles included in the electronic databases extended my article's reach, this was an added bonus for me.
On the other hand, publishers routinely handle copyright agreements sloppily. In my career, I've signed only about a half-dozen author agreements in my dealings with over 50 different publishers. This is true even today.
Further, some publishers (not necessarily the defendants) handle other aspects of the copyright relationship sloppily. I won't bore you with all of my stories about publisher sloppiness, so let me just offer three:
* one publisher ran an article I had merely submitted for consideration without letting me know (I found out when I got the hard copy with my article in it...surprise!). After the article appeared in print without my consent, that same publisher then sent me an author agreement and asked me to sign it. Nice.
* publishers have authorized third party print publishers to republish my articles without my consent or any agreement authorizing the republication
* publishers routinely attach controversial headlines to my article without my consent. Sometimes they edit the article without my consent.
I'll stop there. I could go on. Given the general sloppiness in the industry, perhaps it's appropriate that I contribute to publishers feeling a little pain for their sloppiness.
Plus, I have these nagging feeling that I am being a sucker by not getting some cash that I am legally entitled to. We're not talking about a lot of money. I have never registered my copyrights in my articles and I got paid for very few, so I think I'm generally eligible for $5/article. I haven't taken the time to figure out how many articles I have that are covered. My guess is that when it's over, I could probably get enough to treat my family to dinner at Beans & Barley. Still, it's low-hanging fruit (it would take me some time to fill out the forms, but not a lot), and my wife deserves a nice dinner (and much, much more).
So, what should I do? What are other people doing? I'd welcome your comments and suggestions.
UPDATE: A private reply reminded me of a third choice--I could opt out of the class altogether and pursue remedies directly against the publishers. Of course, because I have not registered any copyrights, my remedies in those cases will be pretty limited, and the transaction costs would increase astronomically. So I think my choices are within the class--do I tender my claims or not?
Posted by Eric at 07:02 AM | Copyright , Licensing/Contracts
Gosbee v. Martinson--Trial Court Motion to Dismiss Reversed on Appeal
Gosbee v. Martinson, 2005 ND APP 10 (N.D. Ct. App. July 6, 2005). This is the latest ruling in a RICO action based on the "Spy Wiper" software program. The plaintiff alleges that the defendants hijacked his computer to create demand for the software. David Bank wrote a story on Gosbee's plight back in April 2004.
The appeals court summarizes the lower court's determination as follows:
"Martinson moved for dismissal of the complaint under N.D.R.Civ.P. 12(b)(6) for failure to state a claim, or alternatively for summary judgment. Martinson alleged that any "highjacking" of Gosbee's computers was caused by one of Martinson's marketing affiliates, and he was not responsible for the actions of the affiliate. The trial court granted Martinson's motion for dismissal, [FN1] and judgment was entered dismissing the action and awarding costs and disbursements to Martinson."
Gosbee objected to the award of costs/disbursements and asked for reconsideration of the dismissal and an opportunity to amend the complaint. The trial court rejected both, and Gosbee appealed. In this ruling, the appeals court reversed the trial court, saying that the trial court has to give Gosbee a hearing.
The plaintiff is going to get another day in court, but it's never a good sign for the plaintiff when a trial court grants a motion to dismiss the complaint, does not give an opportunity to amend, and refuses to reconsider. Some of this may be due to "inartfully drafted" pleadings, and some news reports indicated that the plaintiff wasn't responding promptly to the trial court. While the appeals court practically instructs the trial court to give the plaintiff an opportunity to amend, it's going to be tough for the plaintiff to win back this judge.
Spyware Warrior has a small repository of papers related to this action.
Related action: in April, the FTC extended an enforcement action to include the defendants in this case. This, along with Spitzer's enforcement action against Intermix, raises the recurring and critical question of when a vendor is liable for its affiliate's actions. Note how the trial court in this case resolved that question. I'm not yet clear, however, if the FTC's theory is advertiser liability under CAN-SPAM; there is statutory authority for that.
Posted by Eric at 05:23 AM | Adware/Spyware , Derivative Liability
July 08, 2005
Study on User Consent and Spyware
Stopping Spyware at the Gate: A User Study of Privacy, Notice and Spyware by Nathaniel Good et al. I've already lauded this study after I heard Deirdre Mulligan present the findings at the Boalt Spyware conference in April. If we agree with its findings, then this paper destroys many of the foundational assumptions of regulators and anti-spyware advocates about consumer behavior and psychology, thus highlighting how many current regulatory/consumer protection efforts are misdirected.
The key findings (from the abstract):
"Our study indicates that while notice is important, notice alone may not be enough to affect users’ decisions to install an application. We found that users have limited understanding of EULA content and little desire to read lengthy notices. Users found short, concise notices more useful, and noticed them more often, yet they did not have a significant effect on installation for our population. When users were informed of the actual contents of the EULAs to which they agreed, we found that users often regret their installation decisions.
We discovered that regardless of the bundled content, users will often install an application if they believe the utility is high enough. However, we discovered that privacy and security become important factors when choosing between two applications with similar functionality. Given two similar programs (e.g., KaZaA and Edonkey), consumers will choose the one they believe to be less invasive and more stable. We also found that providing vague information in EULAs and short notices can create an unwarranted impression of increased security. In these cases, it may be helpful to have a standardized format for assessing the possible options and trade-offs between applications."
Highly recommended reading.
UPDATE: Eric L. Howes does a careful analysis of the study and, not surprisingly, identifies some possible limitations of the study. No study is perfect, and that includes a limited-scale ethnographic study. Instead, I look at this study as a challenge to the anti-spyware community to question some deeply-held views about what users are doing in the field and what will help those users make good (better?) choices.
Posted by Eric at 05:12 PM | Adware/Spyware , Licensing/Contracts
Top Internet IP Cases of 2005 (So Far)
For the past two years, John Ottaviani and I have compiled a list of the top Internet IP cases of the year. (Despite the attribution, John O. did all the heavy drafting work). See our lists for 2003 and 2004.
I've been giving some thought to the list for this year. My contenders for the top Internet IP cases of the first half of 2005, in rough order of importance:
1. Grokster. This one's easy! Grokster and StreamCast may have induced infringement.
2. 1800 Contacts v. WhenU. Adware vendor does not "use" trademarks.
3. Bosley Medical Institute v. Kremer. Protecting noncommercial gripe sites.
4. In re Napster Litigation. "Distribute" does not mean "make available."
5. Faegre & Benson v. Purdy. Important line-drawing discussion about metatags and pagejacking in the context of a gripe site.
6. Marvel v. NCSoft. Dismissing several types of claims against MMORPG because users had created characters that looked like plaintiff's characters.
7. SMC Promotions v. SMC Promotions. Web host can't pretend to be consumer's agent for purposes of displaying photos that the host copied itself.
8. BMG Music v. Gonzalez. First reported case holding file-sharers liable for copyright infringement.
Some of the other interesting cases so far include WebLoyalty v. Consumer Innovations (website sales text may be copyrightable because it is more effective at conversion-to-sale), Google v. American Blinds (Google not able to dismiss trademark claim based on keyword-triggered ads), Apple Computer v. Doe (did bloggers misappropriate trade secrets?), and Independent Living Aids v. Maxi-Aids (a convoluted opinion about the use of descriptive trademarks on websites).
Of course, any list like this is idiosyncratic and debatable. That's part of what makes them so much fun! Let me know what Internet IP cases you would have put on the list.
Posted by Eric at 03:26 PM | Copyright , Trademark
Laugh! Or You Can Be 26 Cents Richer
TBS is so convinced that people will laugh at the new Pauly Shore TV show "Minding the Store" that it says: "If his new show doesn't make you laugh, he'll send you a dollar!*"
Just to make sure we're clear, TBS believes that "grins, smirks, smiles and giggles all count as actual laughs."
OK, fine. But hold on--what's that asterisk?
Ah yes, the T&Cs that explain why you might not get your $1. First, only the first 250,000 people get a buck. Personally, I find it hard to believe that 250,000 Americans will sit through any show that features Pauly Shore. However, I think it's easy to overestimate the tastes of the viewing public, plus TV executives get paid to dream big--big enough that TBS wants to cap its liability at $250,000. And, in any case, it does seem possible that a few people will write in simply to get some free cash without watching the show at all.
Second, to get the cash, you need to send a 3x5 card and a self-addressed stamped envelope. The card must contain, in handwriting, the viewer's name, address, date of birth (why date of birth??? I didn't see an age requirement for eligibility) and reason why the viewer didn't like the show. We all know what most cards are going to say: something to the effect of "It sucked."
So, to get your buck, you need to pay $0.74 in postage plus the cost of the 3x5 card and envelope. (I can't even contemplate that anyone would steal office supplies or postage to get the buck). Net compensation for your time: 26 cents or less.
Meanwhile, TBS takes the right to use your name, city/state and reason you didn't like the show for its promotional purposes. In fact, I could see TBS basing a show on the response it receives, showing all of the different and creative ways Americans can say "It sucked."
So there you have it. A bunch of non-viewing gamesters are going to net 26 cents each, and TBS is going to get a big pile of cards with the handwritten words "It sucked" on it.
But will the offer increase viewership? Well, if you think it's a good deal to suffer through a bad TV show for 26 cents, then you're probably in TBS's target audience for this show anyway!
(Hat tip to Reality Blurred)
Posted by Eric at 12:14 PM | Marketing
July 04, 2005
Click Fraud Lawsuit--Click Defense v. Google
Click Defense Inc. v. Google, Inc., No. 5:05-cv-02579-RMW (N.D. Cal. complaint filed June 24, 2005). This is the second major lawsuit again Google for click fraud, following on the Lane’s Gift case filed a few months ago. I have yet to see the Lane’s Gift complaint, but fortunately, we can evaluate this complaint.
What is Click Fraud? (and some possible solutions)
Defining click fraud has always been tough. The Click Defense complaint defines click fraud as “when someone clicks on a search advertisement with an ill intent and with no intention of doing business with the advertiser….purposeful clicks on advertisements for some kind of improper purpose.” (Para. 21). The complaint gives the two typical examples—competitors clicking to burn up an ad spend (Para. 21(a)), and webmasters clicking to boost AdSense earnings (Para. 21(b)).
While I can’t quibble with this definition, it creates problems from a litigation standpoint. How, exactly, is Google supposed to divine clicker intent/purpose? Google knows a little about each click—the ad clicked on, which site delivered the ad, the IP address of the clicker, time of the click—but with respect to any individual click, this information is insufficient to determine intent.
Thus, the plaintiffs expect Google to infer intent through clicker repetition. This isn’t wholly unprecedented; Google uses repetition (among other considerations) to screen out robotic behavior. However, clicker repetition isn’t a good proxy for intent, as evidenced by the statistics on interrupted searches and returns to abandoned shopping carts.
Thus, a “click-series” analysis cannot accurately reveal clicker intent. It will never catch the bad-intent clicker who engages in low volume clicking, and any threshold has to be set high enough not to catch the shopper who uses interrupted search strategies. As a result, Google simply cannot eliminate click fraud when fraud is based on the clicker’s intent. Accordingly, the plaintiffs’ definition creates a legal conundrum—assuming that Google has no practical way to detect every instance of click fraud, when does the volume of click fraud (as defined by the complaint) reach the point that it warrants legal consequences? Without rigorous boundaries around this magic moment, many judges will be reluctant to fashion legal relief.
Having said this, Google could do more with the data it has. First, Google could not charge for any highly-repetitive clicking (robotic or otherwise). Maybe Google is already doing this, but I can’t recall a public statement by Google to this effect. I understand that Google may not want to publicize specific thresholds to maintain security, but at the moment my inference is that it counts highly repetitive clicking in some cases. Google can do better than that.
Second, Google could give advertisers a credit across-the-board based on Google’s system-wide estimates of click fraud. For example, if Google thinks that click fraud cannot be determined on a click-by-click basis, but click fraud comprises 10% of clicks across the network, Google could reduce every advertiser’s monthly bill [billed clicks x advertiser’s average bidded CPC for the month] by 10%.
I don’t think this would immediately lop off 10% of Google’s revenues; I would expect many advertisers would keep spending the same by increasing CPCs, bidding on new keywords, etc. Nevertheless, I would not expect Google to acknowledge the click fraud problem so openly unless the problem was truly out of control or advertisers banded together to force Google to act.
On that front, I remain surprised that advertisers have not attempted to coordinate their actions to date. In my world, the people with the money dictate terms to those who want that money, and a group of large Google advertisers should be able to produce results.
In any case, these musings about possible solutions do not directly affect the lawsuit. However, they highlight the definitional problems and the uncomfortable line-drawing exercises that a judge will have to consider. On this basis alone, a judge may think that this problem is better resolved by negotiation between the parties than through judicial intervention.
The Causes of Action
The complaint alleges four causes of action:
· breach of contract
· negligence
· unjust enrichment
· violation of California’s Business & Professions Code Sec. 17200
I think the last two causes of action are “fluffy.” They are alleged in virtually every case involving some type of allegedly unfair business practices but they rarely affect the outcome. Usually, fluffy claims stand or fall with other, more substantive claims. If the plaintiffs lose the breach of contract and negligence claims, I think the other two claims will fail as well.
The Negligence Claim
Negligence is a tort claim. Every tort requires, as a precondition, that the defendant (Google) owes a legal “duty” to the plaintiffs. Although there are exceptions, parties in a contract generally don’t have tort duties to each other solely due to the contract.
The complaint does not explain why Google owes a duty to its AdWord customers. A cryptic complaint is not unusual; complaints do not need to spell out the underlying legal theories.
The complaint alludes to some duties (Paras. 31-33) that Google should track click fraud, warn advertisers about click fraud, and notify advertisers after click fraud occurs. However, these duties do not currently exist (i.e., there’s no precedent imposing these duties on Google), so a court would have to create them from scratch.
Making new law in this context may give many judges pause because there's a contract between the parties, so the parties had a chance to spell out their duties to each other (rather than relying on default/unstated duties). As a result, it’s possible that a judge will say that Google only has contractual obligations to the plaintiffs and no tort duties, in which case the negligence claim will fail.
The Breach of Contract Claim
From my perspective, the contract breach claim is the substantive heart of the complaint. Historically, my position has been that there is no “fraud” in click fraud cases because the plaintiffs get what they pay for. Advertisers buy clicks, Google delivers clicks—in my book, end of the story. If advertisers want to change the definition of clicks, they can negotiate with Google for a different definition.
The plaintiffs address this by alleging that Google won’t negotiate its contract (Para. 39). This is probably true in Click Defense’s case but not true across all advertisers. I am sure Google will negotiate special deals for top advertisers, so the “take it or leave it” offering simply reflects that Click Defense is a Long Tail advertiser. Plus, a party’s unwillingness to negotiate is rarely important in business-to-business contract cases.
Based on the contract the parties entered into, the complaint claims that Google charges for clicks that weren’t appropriately chargeable under the contract’s terms. The contract says that advertisers pay based on “actual clicks.” The complaint alleges (Paras. 36 and 42) that “actual clicks” do not include fraudulent clicks.
This raises a pure contract interpretation question: what do the words “actual click” mean? Although the word “click” has a pretty well-accepted meaning, I think the phrase “actual clicks” is susceptible of multiple meanings. If I were drafting this provision, I would define “clicks” to reflect how my client’s system technically records them. I would also say that “clicks” exclude any clicks that my client, in its sole discretion, considers to be fraudulent based on the client’s fraud detection systems.
Google’s contract doesn’t provide any clarification of “clicks” or “actual clicks.” Without such a definition, the plaintiffs can try to define it favorably to them. Because Google already reduces its raw number of clicks to reflect robot activity, the judge could decide that “actual clicks” includes other reductions as well. Personally, I think it’s a stretch to convert “actual” to mean “non-fraudulent” (especially using an intent-driven definition) but that’s for the court to decide.
In addition to the breach of contract based on “actual clicks,” the complaint alleges that Google breached an implied covenant of good faith and fair dealing. Although all contracts contain this implied covenant, judges often interpret this covenant narrowly. However, some judges would consider self-dealing (as alleged in Para. 34) to violate such an implied covenant. As with the interpretation of the words “actual click,” it is difficult to predict in advance what a judge will do with this allegation.
Summary
To recap: I think that the plaintiff will get zero traction with its unjust enrichment and 17200 claims, and I think the negligence claim will probably fail because Google does not owe a tort duty to the plaintiffs. I personally think the contract claim should fail as well, but much depends on the way the judge interprets the words “actual click” and the scope of the implied covenant, so neither of these interpretations are easily predictable in advance.
What’s Not Alleged
Despite the fact that the plaintiffs tried to bolster their legal attack through 2 fluffy claims (unjust enrichment and 17200) and one weak claim (negligence), I found it noteworthy what the plaintiff might have claimed but didn’t.
Notably, the plaintiffs did not allege that Google committed fraud in inducing advertisers into its contract, nor did the plaintiffs allege that Google made a misrepresentation in its marketing or breach any warranty that might have arisen in the marketing or sales process. Any fraud/misrepresentation/warranty would have come from statements outside of the contract, such as Google’s marketing materials, press releases, publicity statements or securities filings. The complaint does reference some of these extra-contract statements (e.g., Paras. 27-29) but does not use these statements to support additional causes of actions. (Note that the contract disclaims many of these extra-contract statements in Sec. 4, but plaintiffs can overcome these disclaimers in some situations).
Although the complaint references statements in Google’s securities filings, the complaint also does not allege that Google committed any securities law violations. While this complaint would not be an appropriate place to do so (the identity of plaintiffs would not overlap between the two actions), most plaintiffs’ attorneys would happily sink their teeth into a rich defendant for every possible claim it can. Perhaps a securities fraud lawsuit is coming from these attorneys, but I doubt it.
I don’t want to overinterpret the absence of these causes of action, but typically plaintiffs’ attorneys allege everything they can. So my inference is that either the plaintiffs didn’t research these topics (which would reflect either sloppiness or a hope for a get-rich-quick settlement), or they did research the topics and found nothing legally useful. Either way, the fact that the plaintiffs base their principal claim (the contract breach) on a contract that is highly Google-favorable does hint at the legal weakness of the plaintiffs’ action.
Conclusion
I vacillate between two competing perceptions about click fraud lawsuits. Sometimes I think that Google deserves some legal heat for its blasé attitude towards click fraud. Other times, I think click fraud plaintiffs are merely media grandstanders and quasi-extortionists. Unquestionably Google can do more to address click fraud, but advertisers—especially Click Defense (given its specialty in click fraud topics)—know about click fraud and yet voluntarily decide to enter into a contract with Google and voluntarily choose the keywords and pick the CPCs they think are profitable knowing that click fraud exists.
I think Click Defense’s complaint is legally weak but not frivolous. Perhaps with sufficient legal sophistry, Click Defense can find a way to convince a judge to give it legal redress. Nevertheless, I remain convinced that click fraud should and will be solved through business dealings rather than in a court of law.
UPDATE: I've noticed that Click Defense continues to advertise on Google, occupying a top spot for the keyword "click fraud." It's really, really hard for plaintiffs to convince a judge of the merits of their case when the plaintiffs keep placing new orders with the defendants under the same terms. I think Click Defense's advertising tips the balance in this case towards publicity stunt instead of serious lawsuit.
UPDATE 2: I got my hands on the Lane's Gift complaint and have blogged on that too. The updated blog post also references some of my insights from a conversation with Click Defense's attorneys.
Posted by Eric at 11:00 AM | Licensing/Contracts , Search Engines | Comments (3)
July 02, 2005
Operation Site Down--The Latest Warez Group Bust (vintage 2005)
The FBI conducted another major International bust of warez groups involving 90 searches and four arrests. The DOJ press release. AG Gonzales' statement. The AP story. This is only the latest of a string of major busts of warez trading groups, including the 2001 bust of the Fastlane group, the 2001 bust of Pirates With Attitude, the late 2001 Operations Buccaneer/Bandwidth/Digital Piratez, the 2003 Operation Safe Haven, the 2003 Operation Cybernet and the 2004 Operation Fastlink.
As I've written previously, the war against warez is ultimately futile. With sufficient enforcement, eventually we can put all of the warez traders behind bars, literally removing them from society to prevent their actions. Otherwise, the threats of criminal enforcement have had no measurable deterrence. Despite the apparent futility of criminal sanctions in preventing warez trading, I've predicted that the DOJ will continue to hunt down and bust warez traders to show Congress that it is taking advantage of the shiny new criminal copyright infringement laws that Congress keeps handing it.
The 2001 DOJ press releases bear a striking resemblence to the latest DOJ press releases. As a result, I predict that in 2008, the DOJ will bust a warez trader group and include in its press release the following statements:
* warez traders are responsible for worldwide copyright infringement [the Site Down press release: "the Department is striking at the top of the copyright piracy supply chain - a distribution chain that provides the vast majority of the illegal digital content now available online"]
* the DOJ will take down anyone who engages in theft that hurts the American economy [the Site Down press release: "The theft of this property strikes at the heart of America’s economy"]
* no warez trader is safe from the long arm of the DOJ {the Site Down press release: "law enforcement can and will find - and we will prosecute - those who try to use the Internet to create piracy networks beyond the reach of law enforcement"]
Some things never change.
Posted by Eric at 04:40 PM | Copyright
What Color is Your Protest?
An Arab anti-settlement political party used an orange color to protest Israeli settlements. Then, some Jewish nationalist political groups have adopted the same orange shade to show support for the Israeli settlements. Fortunately, rather than taking more extreme measures, the Arab party has taken the matter to court, suing the nationalist groups for co-opting the color because the color now sends a "colonial, racist message."
In trademark law, we'd call this reverse trademark confusion. But can the revolution trademark a protest color?
Posted by Eric at 04:02 PM | Trademark
What Happens in Nastygrams...
Steve Middlebrook passed along this story about the slogan “What happens in Vegas, stays in Vegas.” Dorothy Tovar liked the phrase so much, she put it on T-shirts and registered a trademark in it. Then, she got the nasty letter from a representative of Las Vegas Convention and Visitors Authority, which had used the phrase “what happens here, stays here.”
If the convention authority has a trademark in that phrase, perhaps the phrase “What happens in Vegas, stays in Vegas” on T-shirts gets too close to the line. But the article gives other examples of recipients of nasty letters: "What Happens in Cancun," "What Happens in New Orleans" and a brewery for using the phrase "What's Brewed Here Stays Here." I think it would be a stretch of trademark law to think that the Las Vegas convention authority owns every variation of “what happens X stays X,” especially given the authority's obvious geographic link to Las Vegas. It’s beyond a stretch to think they own variations of “what X here stays here.”
Another article on the topic.
UPDATE: The LA Times runs a good story about the "What happens here stays here"/"What happens in Vegas stays in Vegas" trademark dispute.