May 29, 2006
O'Reilly and the "Web 2.0" Trademark
By Eric Goldman
O'Reilly Media is a publisher of technical books. They also operate some technical conferences, including the "O'Reilly Web 2.0 Conference." They are in the process of registering a trademark in the phrase "Web 2.0" for
Arranging and conducting live events, namely, trade shows, expositions and business conferences in various fields, namely, computers, communications, and information technology, and
Organizing and conducting educational conferences, tutorials and workshops in the fields of computers, communication and information technology.
An Irish non-profit enterprise called IT@Cork announced the "it@cork Web 2.0 half day Conference." In response, the corporate parent of O'Reilly [update: this isn't correct--see below] sent a standard bigfoot letter claiming ownership of the phrase "Web 2.0." Once the C&D letter hit the web, a firestorm of controversy erupted, compounded by the fact that O'Reilly's principal, Tim, is on vacation, unreachable, and unable to respond to the controversy himself.
In my opinion, the real lesson here is that if your core customer base subscribes to the "information wants to be free" norm--which, I think, fairly describes many of O'Reilly's customers--then enforcing your trademark rights is a risky proposition. For a taste of how badly customers respond to IP enforcements that violate their norms, see here.
In a sense, I think companies catering to the IWTBF crowd have, by definition, fewer enforceable IP assets than other companies, because some legally enforceable assets simply aren't viable in the court of popular opinion. I think this is particularly true when the trademark is weak (as Marty says, "If you coin and promulgate a term, you can sell it as a buzzword or you can sell it as a brand, but under trademark law, it's virtually impossible to do both."), but I think the advice to tread cautiously applies more generally than that. I'm reminded of the collective guffaw when the original Napster sued to enforce its trademark rights in 2000/2001. It's not that Napster didn't have protectable trademark rights (it did), it was just the irony (and maybe the duplicity/"chutzpah").
But even if a company's customer base is filled with IP maximalists, trademark owners need to remember that sending a cease-and-desist letter has some risk associated with it. The decision to send the letter is not rote, and it should not be based on abstract fears about the hypothetical loss of trademark rights for inadequate policing. Ironically, I recently posted a link to Deborah Wilcox's article on when not to send a trademark cease-and-desist letter; her words seem very apropos.
UPDATE: The NYT story. In it, a representative of IT@Cork says that CMP's backdown illustrates the power of blogs to combat bigfoot letters.
UPDATE 2: Tim O'Reilly's response after his return from vacation. This response raises a number of issues. First and foremost, the relationship between O'Reilly and CMP wasn't clear to me at any point in this process. Second, I'm not comfortable with the idea that O'Reilly is trying to point the finger at CMP. At minimum, it appears that an O'Reilly employee knew what CMP was doing, so presumably a different course of action was possible. But I don't think O'Reilly was that far out of sync with CMP because it appears Tim still thinks that the Web 2.0 mark is worth protecting and that the rights cover Ireland. Finally, I'm not sure about his "shame on the blogosphere" angle--some people absolutely went overboard, but O'Reilly/CMP did make mistakes that the blog pounced on, and O'Reilly's efforts to provide interim info did little to clarify the issue or calm the matter.
UPDATE 3: Marty thinks that O'Reilly/CMP may have committed "self-inflicted genericide."
May 28, 2006
Online Message Board Protected by 47 USC 230--DiMeo v. Max
By Eric Goldman
DiMeo v. Max, No. 06-1544 (E.D. Pa. May 26, 2006)
In my world, it's not a party until someone spills something. But in Anthony DiMeo's world, it appears that it's not a party until someone brings a lawsuit.
Tucker Max runs a website that catalogues his misadventures. As he introduces himself, "My name is Tucker Max, and I am an asshole. I get excessively drunk at inappropriate times, disregard social norms, indulge every whim, ignore the consequences of my actions, mock idiots and posers, sleep with more women than is safe or reasonable, and just generally act like a raging dickhead." His Wikipedia entry gives more color.
His website contains an associated message board. Some message board threads discussed a New Year's Eve party organized by DiMeo. Apparently, partygoers were upset that the event ran out of alcohol early, which sparked a near-riot. The antipathy spilled over to Max's message board, where a variety of users made some harsh statements about DiMeo.
In response, DiMeo sued Max for defamation and under 47 USC 223(a)(1)(3), the controversial criminal statue prohibiting anonymous online harassment. But DiMeo didn't allege that Max was the author of the postings in question, so there's no defamation claim to litigate. 47 USC 230 applies, and the judge grants Max's motion to dismiss.
To get there, the court says::
* Max was both a "provider" and "user" of an interactive computer service--provider because he offers access to multiple servers; user because he is connected to the Internet. This is a broad interpretation of 230's coverage, but it's consistent with precedent.
* The posts were provided by another information content provider. DiMeo never alleged that Max wrote them. Instead, DiMeo tries the tired and futile argument that Max exercised such a high degree of editorial control that he "developed" the postings. The court rightly points out that this is exactly what 47 USC 230 was designed to protect.
In a footnote, the court makes an interesting claim that the defamation claim might independently fail because, in context, the messages could not be considered serious statements (i.e., the postings are from usernames like "Jerkoff" and "Drunken DJ").
The judge also denied a motion to add a claim for intentional infliction of emotional distress, saying that it too would be barred by 47 USC 230.
The 47 USC 223(a)(1)(3) claim fails because there is no private right of action, Max didn't act anonymously, and the statute excludes liability of interactive computer services (which the court had previously found described Max's website).
Altogether, there's not much new legal ground broken here. This was a case that, based on the alleged facts, was doomed at the outset, and the judge rightly cleaned its docket early rather than let this case consume additional time and money. While I wouldn't call Max's website a blog (at least, not in the classic sense), the reasoning applies 100% to comments to blog posts, so this case does reinforce the likelihood that courts will protect blog operators from liability for their users' comments.
For reasons that he explains in his unique way, Tucker Max touts this opinion as "Best. Legal. Decision. Ever."
A side note of interest: the presiding judge was Judge Dalzell, who in 1996 also wrote a colorful opinion in the ACLU v. Reno case striking down some of the criminal portions of the Communications Decency Act.
(Thanks to my former student Matt Goeden for calling my attention to the case).
May 26, 2006
Merck v. Mediplan Redux--Keyword Purchases Really Aren't Trademark Use
By Eric Goldman
Merck & Co. v. Mediplan Health Consulting, Inc., 2006 WL 1418616 (SDNY motion for reconsideration denied May 24, 2006)
In late March, the legality of the search engine keyword advertising industry got very murky due to two inconsistent rulings within the span of 10 days. One case, Edina Realty v. TheMLSOnline.com from Minnesota, held that keyword purchases could constitute a "use in commerce" for trademark infringement purposes, while Merck v. Mediplan from the Southern District of New York held that such purchases were not a trademark use in commerce.
Worse, these opinions didn't cross-reference each other, so the courts did not try to reconcile their positions. Further, the Edina Realty case recently settled, eliminating the possibility that the Edina Realty court (or an appellate court) would clarify the interaction between the two cases.
Fortunately, Merck sought reconsideration of its ruling, and this week the Southern District of New York issued a clarifying ruling that has turned into a big win for keyword advertisers. This is the first ruling explicitly confirming that the landmark 1-800 Contacts v. WhenU case from last summer, which dealt with adware and pop-ups, applies to search engine keywords. As such, I think this is an important ruling that may have greater precedential impact than either of the previous rulings from March.
Merck moved for reconsideration on two grounds: (1) the court should have considered the Edina Realty precedent (which had just come out 10 days earlier), and (2) the court failed to recognize meaningful differences between keyword-triggered pop-up ads and keyword-triggered search results.
The Edina Realty Precedent
The court said that the Edina Realty ruling (which was thinly reasoned on the specific point) did not persuade the judge to change his views. Instead, the judge felt bound by the 1-800 Contacts precedent, which said that not all commercial activities qualify as a "use in commerce." The court says, "in the search engine context, defendants do not ‘place’ the ZOCOR marks on goods, containers, displays, or associated documents, nor do they use the marks to indicate source or sponsorship....This internal use of the keyword ‘Zocor’ is not use of the mark in the trademark sense."
Differences Between Pop-Up Ads/Adware and Search Engines
In an even more significant clarification, the court confirms that the 1-800 Contacts reasoning extends beyond WhenU's comparatively unique directory-matching process to cover search engine keywords. The court correctly understood that in both the adware and search engine context, the machines "use" keywords to trigger ad content, but that matching takes place outside the searcher's view and thus does not indicate source or sponsorship. Thus, where the Second Circuit avoided opining on the standard search engine keyword context (see footnote 11 of the Second Circuit opinion), this court thinks the Second Circuit's rationale cleanly covers the situation.
This is a great win for the defense. Not only did the initial ruling fully validate the defense-side arguments, but this ruling clarifies the ambiguity created by the Edina Realty case and further explicitly confirms that the Second Circuit 1-800 Contacts precedent extends to search engine keywords. And, from my (admittedly biased) perspective, this court got the analysis 100% right.
This will not be the last ruling on this topic, but perhaps the tide is turning against plaintiffs here. If, in fact, the Second Circuit has concluded that search engine keyword usage isn't a trademark use in commerce, then an important and influential appellate court will have blessed the basic practices of search engines and their advertisers, making it more difficult for plaintiffs to find a friendly court. Thus, this ruling increases the likelihood that purchasing (or selling) keyword advertising doesn't violate trademark law.
Of course, it remains to be seen if the Second Circuit will agree with the Merck court's reading of the 1-800 Contacts precedent. It wouldn't surprise me if Merck asks them to do so.
Meanwhile, if the Merck court is right about the reach of the 1-800 Contacts precedent, then I think future defendants have a very strong basis to claim that keyword metatag usage isn’t a trademark use in commerce either. If so, then perhaps this case will help put an end to the ridiculous cases treating keyword metatag usage as per se trademark infringement.
UPDATE: Rebecca Tushnet has some thoughtful remarks on the linguistics of the "use in commerce" defintion in the statute.
May 25, 2006
Teenager Busted for Creating Fake "News" Story
By Eric Goldman
It seems like every day there are new stories about teenagers doing stupid things online, but this story still struck me as interesting and unusual.
The incident involves a website, Cheezus.com, that asks the user to submit a name and location. The site then populates this data into a pre-authored "story" about sexual misconduct. You can see a test example here. (I entered the terms "Plato," "Athens" and "Parthenon"; the rest of the page is provided by the website--and apologies to any Plato descendants for besmirching his name). Perhaps this website does more than other sites to increase the apparent authenticity of the resulting page, but it's not hard to find many similar websites that play off the same riff.
According to the Milwaukee Journal-Sentinel, a 14 year old middle-schooler used the site to create a fake story about his teacher as retribution for a low grade. The teenager then printed out the pages and distributed the story to some of his school chums. A few students turned the story over to the school's "cop," and the teenager was busted. As a result, the teenager received a ticket for disorderly conduct plus a school suspension.
So the key question is: when does a gag cross over to impermissible mischief? We engage in a variety of deceptions for humorous purposes (April Fool’s gags are a leading example), but at some point a gag can have a pernicious effect on its target. However, I’m not sure I know the border between funny and illegal, and I doubt a teenager does either.
In this case, the gag had extra potential to cause mischief because student readers may have struggled to assign the appropriate level of cognitive authority to the web page printout. This, of courses, raises a complex issue about the ability of readers (especially students) to figure out what’s legitimate and what’s bogus online (and offline too). If anything, the website may have established too much credibility--it uses a fancy "Times" masthead, has a page layout that resembles a typical online page layout for newspapers (even down to the weather graphic in the upper left), has a byline and photo, and sounds internally credible. Perhaps it looks even more authoritative when printed out.
But it's still just an Internet page, and it's trivially easy to manufacture bogus Internet content. Perhaps students are getting this message, because the article says that students did suspect it was a prank. If so, I’m not sure why any punishment was required.
As for Cheezus, I’m pretty tolerant of websites doing stupid things, but this particular website bothers me from both a legal and ethical standpoint. From an ethical standpoint, the website is designed to capitalize and reinforce reader misperception without giving the reader any clue that this is a gag. I’m not saying this website goes too far, but I would be a lot more comfortable if the website was either less credible-looking or more outlandish. Otherwise, the website is practically leading its users into a problematic spot. Certainly I can see how a teenager author might be easily led astray.
From a legal standpoint, this website might qualify for 47 USC 230 because the defamatory content comes from a third party filling out a web form (see Carafano, Roommate.com, Prickett). But it might not. The website authors wrote salacious content that they knew was false. At some point, the website authors own the words they write.
Finally, the article raises a variety of other interesting dynamics, including the efficacy of Internet filtering at schools and the risks that we as teachers face for giving out low grades.
May 18, 2006
Edina Realty v. TheMLSOnline Settles
By Eric Goldman
The Edina Realty v. TheMLSOnline case, which held (among other things) that purchasing a trademarked keyword was a trademark use in commerce, has reportedly settled, according to the Associated Press. That leaves in place the conflict between that case and the Merck v. Mediplan case, which held that such purchases weren't a trademark use.
May 17, 2006
Cynical Consumers and Brand Antipathy
By Eric Goldman
Interesting article in the NYT about negative consumer attitudes towards brands. The article says that "cynical consumers [desire] not simply to avoid companies and brands they dislike but also to punish them." Thus, consumers may use their dollars to vote against brands by transacting with the brand's competitors. At the same time, cynical consumers "demonstrated very strong brand loyalty to the few companies they could trust."
Trademark law is built around a brand's power to attract, but trademark law doesn't really account for brands' repellent power, and this may be a potentially significant omission. As the article suggests, there may be a double-whammy when a brand loses a consumer's trust--not only does the brand lose the consumer's dollars, but competitors may be a direct beneficiary regardless of the competitor's substantive merits.
May 16, 2006
KinderStart v. Google Motions to Dismiss and Strike
By Eric Goldman
You may recall the pending lawsuit by KinderStart against Google for Google's downgrade of KinderStart's PageRank. My previous analysis here. I posted the initial complaint, although I understand that a first amended complaint was subsequently filed.
I think the motion to dismiss' introduction elegantly frames the issue:
The Amended Complaint, in almost 200 paragraphs, raises what amounts to a single question: Who should determine how an Internet search engine identifies those websites that are most likely to be of relevance to its users? Since its inception, Defendant Google, like every other search engine operator, has made that determination for its users, exercising its judgment and expressing its opinion about the relative significance of websites in a manner that has made it the search engine of choice for millions. Plaintiff KinderStart contends that the judiciary should have the final say over that editorial process. It has brought this litigation in the hopes that the Court will second-guess Google’s search rankings and order Google to view KinderStart’s site more favorably. If KinderStart were right, and websites could use the courts to dictate what the results of a search on the Google search engine should be, neither Google nor any other search engine could operate as it would constantly face lawsuits from businesses seeking more favorable positioning. Fortunately, KinderStart’s position finds no support in the law.
KinderStart’s approach has been tried before. Over the years, authors who felt their books belonged on bestseller lists, airlines who thought their flights should be featured more prominently in airline flight listings, bond issuers dissatisfied with their ratings, and even website owners angry about Google’s ranking of their sites, have turned to litigation seeking to override such judgments. Each time, the courts have rejected such claims, recognizing that private businesses have a right to express these opinions freely. KinderStart’s many legal theories do not justify a different result. Because the First Amendment protects Google’s right to share its opinions about the relative significance of websites, KinderStart’s complaint must be dismissed.
The motion to strike (sometimes called an "anti-SLAPP" motion) is a special California proceeding to protect against lawsuits that inhibit protected speech. As the motion to strike explains:
Under Cal. Civ. Proc. Code § 425.16, a defendant may move to strike from a complaint claims for relief arising from defendant’s exercise of its free speech rights in connection with a public issue. In this case, all of KinderStart’s claims, but most obviously its free speech, defamation, and negligent interference claims, arise from Google’s protected speech. These claims seek to hold Google liable for expressing its opinion about the relative importance of Internet websites to the public (i.e., “PageRank”) through the operation of its well known Internet search engine. Put simply, KinderStart does not like the opinion that Google holds and shares with users about the significance (or lack thereof) of KinderStart’s website.
By KinderStart’s own admission, Google’s speech concerns matters of public interest. Accordingly, KinderStart’s claims challenging that speech must be stricken unless KinderStart can demonstrate a probability that it will prevail on them. This KinderStart cannot possibly do.
While it's very typical to file an anti-SLAPP motion in a situation like this, filing the motion is consistent with Google's standard practice of going on the offensive in litigation. If it wins the anti-SLAPP motion, Google may be entitled to attorneys' fees.
UPDATE: I've posted more source materials in the case. See here.
May 11, 2006
Quick Links May 2006
By Eric Goldman
My blogging queue has gotten too thick. Here's some items that caught my attention that I've been meaning to blog and simply haven't gotten to.
* I previously blogged about Chris Wilson, the website operator who allowed users to post pornography and was then prosecuted for distributing pornography under state law. I argued then that such prosecutions were immunized by 230. According to AP, in January, Chris pleaded no contest to 5 counts of possession of obscene material (this news report sounds garbled; the crime of possessing obscene material, without more, should protected by Stanley v. Georgia). For this, in April, he was sentenced to 5 years probation.
* Deborah Wilcox has written an article about situations when trademark owners should NOT send a trademark cease-and-desist letter. Given how many trademark plaintiffs' lawyers mistakenly shoot first and ask questions later, this article raises an important but overlooked perspective.
* The blogosphere is doubling every six months. 4 million bloggers update their blogs at least weekly.
* Cedric reports that, in February, Google finally won an AdWords case in France.
* 310,000 consumers were affected by Lexis-Nexis' data breach. Lexis-Nexis offered them a free year of credit monitoring services. Only 6% took Lexis-Nexis up on the offer, a number that's similar to other such offers (Citibank only had a 4% signup rate). Bob Sullivan tries to figure out why. Among the theories:
- consumers discarded/ignored the notification as junk mail
- consumers were suspicious that the free offer wasn't going to be free in the end
- consumers are apathetic about privacy issues
I have my own speculation about this, but I think the time for relying on intuition is long past. Instead, I think further empirical research is critical before more legislatures robotically rubber-stamp existing legislation designed to remediate data breaches. I remain suspicious that these mandated solutions are doing nothing to help the problem, and may in fact be exacerbating the problems.
* Barton Beebe's slides from his presentation, US Contextual Advertising Law, at the Fordham International IP conference in April.
May 09, 2006
Ebates Sued for Trespass to Chattels--Sotelo v. Ebates
By Eric Goldman
Sotelo v. Ebates Shopping.com, No. 06C-2531 (N.D. Ill. complaint filed May 5, 2006)
The Collins Law Firm has filed a third class action lawsuit over adware, this time targeting Ebate's Moe Money Maker client software. The complaint alleges that Moe Money Maker interferes with other client-side software and that Ebates misrepresents the nature of Moe Money Maker in its marketing. Similar to the other complaints from the Collins Law Firm, this complaint alleges the following causes of action:
1) Computer Fraud & Abuse Act
2) Electronic Communications Privacy Act
3) Trespass to Chattels under common law
4) Illinois Consumer Fraud Act
6) Computer Tampering
7) Invasion of Privacy under common law
8) Cal. B&P 17200 and Civ. Code 1021.5
The Chicago Tribune article on this lawsuit and Collins generally.
A status report on the other adware-related civil litigation that I know about:
* Sotelo v. DirectRevenue. Settled in March (Suzi's report on the settlement). It appears that settlement freed up Sotelo's time to become lead plaintiff again. I've recommended to David Fish that Sotelo should buy some really good anti-spyware software.
* Simios v. 180solutions. Case is in discovery.
* Michaeli v. eXact Advertising. Motion to dismiss filed Dec. 12, 2005 and still pending.
* Consumer Advocates Rights Enforcement Society v. 180solutions (a/k/a Battalgia v. DirectRevenue), No. 2:05-cv-02547-LKK-PAN (E.D. Cal). According to PACER, the last reported action was a motion to dismiss filed April 24 (principally on procedural grounds).
* Kerrins v. Intermix Media. The case appears to be proceeding. A trial date has been set for January 2007, but the parties could settle before that.
If you are aware of others that I missed, I'd love to hear about it.
May 08, 2006
Yahoo "Syndication Fraud" Lawsuits--Crafts by Veronica v. Yahoo and Draucker Development v. Yahoo
By Eric Goldman
Two companion lawsuits against Yahoo for what the plaintiffs characterize as "syndication fraud." These complaints allege that Yahoo made false promises about where it would put advertisers' pay-per-click (PPC) ads. Specifically, Yahoo ran the plaintiffs' ads via adware and on typosquatting pages when advertisers believed that their ads would not appear in such formats (and presumably paid a premium to avoid such placement).
However, despite the serious-sounding use of the term "fraud," this is actually a fairly garden-variety breach of contract action, and a weak one at that.
The Complaint and Its Deficiencies
The complaint levels three principal charges against Yahoo: Yahoo promised that (1) advertisements would be “highly targeted,” (2) Yahoo would run ads on “popular” and “high-quality” sites, and (3) the ads would appear along with “relevant articles [and] product reviews.” Yahoo purported violated these promises by placing advertisers’ ads in adware and on typosquatted pages.
Let’s look more closely at these allegations.
The complaint repeatedly says that Yahoo promised that the ads would be highly targeted. But there’s a big problem: Yahoo didn’t say this, according to the plaintiffs’ own evidence. The complaint points to the following language from one of Yahoo's marketing pages:
You already know how Yahoo!'s flagship product Sponsored Search delivers highly targeted customer leads to your business by allowing you to control placement within sponsored search results across the Web.
Notice the bolded language—Yahoo says it delivers highly targeted customer leads, not highly targeted ads. If Yahoo promised highly targeted ads, arguably it was promsing a certain type of placement--but it didn't promise this. Thus, the difference between targeted ads and targeted leads could be fatal to the complaint—the plaintiffs never allege that they got poorly targeted customer leads, so the plaintiffs’ allegations don’t make a prima facie case of a breach.
This raises an interesting question—plaintiffs clearly know what Yahoo said, so why do the plaintiffs repeatedly mischaracterize Yahoo’s statement throughout the complaint? At best, this is sloppy work by the plaintiffs. At worst, the plaintiffs are blatantly and intentionally misleading the court. Either way, there’s a certain irony when plaintiffs in a misrepresentation case misrepresent the facts to the court, isn’t there? (Maybe Yahoo should bring an action against the plaintiffs for “complaint fraud”?).
My hypothesis is that the plaintiffs don’t want to litigate over lead quality because doing so would destroy the class. To determine lead quality, the court would have to look at each individual plaintiff’s situation to see what leads they got and how they converted, and thus there may not be enough commonality of interests to support a class action. To avoid this pitfall, perhaps the plaintiffs decided that the only way to keep a class action would be to misrepresent what Yahoo said. Other explanations could account for the misrepresentation, but I’m skeptical that it was mere sloppiness.
Let’s put aside the plaintiffs’ misdirection and assume that somewhere Yahoo has actually promised that the ads would be highly targeted. The words “highly targeted” are capable of multiple meanings. For example, the ads were targeted by keyword rather than by category or demographics, so arguably the ads were highly targeted regardless of where they were displayed.
However, the plaintiffs offer no basis to suggest why their interpretation is better than any other interpretation—they don’t cite to any evidence of the term’s meanings (such as private definitions created by the parties, or course of conduct, or industry convention). Instead, the plaintiffs only cite their subjective definition of the term. I’m not sure if this is enough to survive a motion to dismiss.
Popular and High-Quality Websites
Yahoo's marketing page also says:
The Content Match distribution network consists of popular, high-quality sites such as Yahoo! and MSN.com, providing you with better leads that are more likely to convert to sales.
Below this statement, the page gives some more examples that the complaint cites, including sites like Microsoft, CNN and the Wall Street Journal. I’ll stipulate that these sites should fulfill anyone’s definition of popular and high-quality. However, intermixed with these examples, Yahoo gave more examples of what it meant by “popular” and “high-quality,” including sites that I’ve never heard of, such as Away Network and Go2Net. By selectively cutting and pasting only the most prominent sites, the complaint tries to overstate Yahoo’s promise. Instead, plaintiffs who read this page should have gotten the impression that Yahoo’s network included a range of sites, some well-branded and others relatively obscure.
Articles and Product Reviews
Yahoo also says that:
Content Match™ complements your Sponsored Search campaign by displaying your existing listings along with relevant articles, product reviews and more, thereby providing an additional source of targeted leads.
Yahoo uses this same language in other places, such as the very lengthy Yahoo! Search Marketing Advertiser Workbook (see the glossary on page 97—referenced as page 98 in the complaint and labeled as page 109 in the file).
Notice what Yahoo actually said: “and more.” The complaint repeatedly omits those two words because it prefers to focus on the other words. But what do the words “and more” mean? They seem to contemplate that Yahoo would put ads in other contexts, and this negates the claim of a breach.
What Did the Contract Say?
The complaint works hard to pull in language from various marketing collateral, but interestingly it does not mention (not even once!) the centerpiece document in any breach of contract action: the contract that Yahoo and the advertisers actually entered into. I've not seen Yahoo's contract, but I'm assuming it has standard provisions such as a disclaimer of warranty and an entire agreement clause that may squash these extra-contract statements. Also, I wouldn't be a bit surprised if it specifically disclaims promises about where the ads would go or the likelihood of conversion. Either way, plaintiffs will have an uphill battle getting traction from language outside of the contract when the language in the actual contract may shut down these arguments pretty squarely.
Did the Plaintiffs Monitor Their Campaigns?
Let’s assume that plaintiffs read Yahoo’s marketing collateral and didn’t read their contract. Did the plaintiffs monitor their campaigns? There was lots of opportunity for plaintiffs to realize what Yahoo was doing if they monitored their campaign, and their resulting choices would be very telling. When plaintiffs learned of the purported deception, did the plaintiffs terminate the campaign or complain to Yahoo? Or did they keep on buying new ads despite their new-found knowledge? Recall the irony when a click fraud plaintiff (Click Defense) claimed that Google engaged in click fraud while it kept on advertising via Google.
Two Other Observations
(1) The plaintiffs had a massive mound of material to mine for misstatements by Yahoo—Yahoo’s website, securities filings, press releases, press quotes, etc. While not required, typically plaintiffs put the most egregious, most shocking misstatements by the defendant right into the complaint. Yet, given the universe of Yahoo’s public statements, I think it’s telling that the plaintiffs could marshal up language that, I think, is pretty feeble overall. To make the prima facie case, the plaintiffs pulled a few minor statements from some secondary marketing collateral and then heavily manipulate those statements (such as leaving out the “and more,” omitting some of the obscure syndication partners that Yahoo expressly enumerated, repeatedly mischaracterizing the “highly targeted” reference) to try to establish some basis for arguing breach. If this is the worst language that Yahoo communicated, I think they did pretty well (a lot better than I could do when I was an in-house counsel at Epinions!).
(2) Under standard contract law, “puffery” isn’t actionable. For example, if a car salesperson says “this is a wonderful car” in the sales process, the buyer can’t sue later if the buyer thinks the car wasn’t wonderful. The language cited by the plaintiff looks a lot like puffery, especially statements like “popular” or “high quality.”
Let’s be clear what this complaint isn’t about—it’s not about protecting consumers. Consumers may hate adware or typosquatting but this lawsuit doesn’t protect consumers from either. Instead, this is a dispute between Yahoo and advertisers over how much advertisers should pay for the advertising they got. And on that front, there’s little evidence that advertisers didn’t get exactly what they bargained for. They wanted advertising; they got advertising. There’s not even an assertion that the advertising performed poorly. I’m struggling to see a real problem here.
As a result, I think these lawsuits are nothing more than a shakedown for cash. Even unmeritorious class action lawsuits are expensive to defend, so the plaintiffs’ lawyers can exploit those defense costs for their personal largesse. They can make this argument to defendants: settle with me for a fraction of your total expected defense costs, and we’re both better off (defendants save some defense costs, plaintiffs’ lawyers grab some personal loot).
In particular, I’ve been trying to figure out why the plaintiffs (and a largely overlapping group of plaintiffs’ lawyers) filed two separate but virtually identical lawsuits. However, it does make sense as part of a shakedown. By opening up two battlefronts, the plaintiffs increase Yahoo’s defense costs, which should increase the incentive to settle (and the dollar value of a settlement).
It may be cheaper for Yahoo to settle than fight, but I hope Yahoo doesn’t reward the extortionists. Extortion shouldn’t pay, and I hope the plaintiffs find this out the hard way.
UPDATE: Evan Schaeffer offers a different possible explanation for why the plaintiffs filed overlapping lawsuits:
it's possible the plaintiffs' lawyers filed similar lawsuits in different forums because they plan to ask the MDL panel to consolidate the cases. By being in control of the majority of the transferred cases, it increases the likelihood that the lawyers will be able to control the litigation once the cases are consolidated
May 06, 2006
Piracy Loss Estimates as a Managed Number
By Eric Goldman
I've long had doubts about the estimates of copyright owners' losses due to piracy. Typically these studies use suspect methodologies, are based on privately-reported data that cannot be independently verified, and overcount losses by ignoring the demand curve (i.e., people who obtain copies for free may not be willing to pay the retail prices). But more than anything, these estimates are a product of self-interest--the industry can use the estimates as part of its PR and lobbying campaigns to garner support for the industry's agenda. Therefore, the industry has incentives to make the numbers say what they want it to say.
The latest proof of this comes from the newest MPAA survey of movie piracy that produced a loss estimate that was surprisingly high. The WSJ reports:
For months, MPAA members debated whether and how to release the information. Some studios argued that making the figures public would help the industry win tougher laws and enforcement. Other studios said the figures were so bad that releasing them would hurt their stock prices and make a laughingstock of their enforcement efforts.
This situation reminds me a lot of how public companies "manage" their earnings. Most public companies provide an estimate of quarterly profits to the market. Then, the companies typically try to manage their earnings to come in close to the estimated number. If sales are going great, the company will try to roll sales over into the next quarter to keep from overshooting the estimate too much. If sales are going poorly, the company will try to accelerate sales through price breaks or other incentives that may not be good for long-term profits but help deliver on the short term promise.
The WSJ article seems to suggest the same game is being played by the copyright industries with their piracy numbers. They need to come in high enough to support the PR/lobbying efforts; but they can't come in too high or they will spook the market. Now that we understand how the game is played, I hope we'll evaluate industry claims about piracy losses more critically.
(Hat tip: EFF Deep Links)
May 05, 2006
Google Sued for Child Porn--Toback v. Google
By Eric Goldman
Toback v. Google, Inc., No. 06-007246 (NY Sup. Ct. complaint filed May 4, 2006)
Yet another legislator has seized the public microphone to grandstand about Internet threats. This time the lucky legislator is Jeffrey Toback, a member of the Nassau County Legislature, and the threat is that Google puts ads over third party child porn. Instead of passing an unconstitutional or ill-informed law (the typical legislative solution), this time the legislator has taken his battle to the courts, suing Google in a NY state court.
I haven't seen the complaint, so it's impossible to determine the cause of action (or Mr. Toback's standing to bring the enforcement action) from the AP report. But it doesn't matter--I'm 95% confident that any cause of action brought by Mr. Toback will be preempted by 47 USC 230--motion to dismiss, case over. For a great example of this, recall Doe v. Bates, where the court specifically rejected a civil lawsuit based on federal child porn laws when the content had been posted by third parties.
So this case seems DOA. My recommendations to Mr. Toback:
1) Enjoy your 15 minutes of AP stardom
2) Then, withdraw your complaint to avoid wasteful and futile litigation
3) Then, stick to doing what you do best, like passing unconstitutional and ill-informed laws rather than bringing ill-informed lawsuits
UPDATE: The plaintiffs' press release.
UPDATE 2: I have now gotten a copy of the complaint. I can confirm that this lawsuit is just a publicity stunt, and a pathetic one at that. Among other evidence of cluelessness, the complaint uses a wacky definition of "child pornography" (defined as "repulsive material that is illegal to distribute to children") that no knowledgeable lawyer would use. Further, by coopting such a baggage-laden term, the complaint (and associated press material) misdirects just about everyone who doesn't read the complaint closely.
Further, consistent with its status as a press release rather than a serious legal document, the complaint takes numerous gratuitous shots at Google, including swipes for doing business in China and using user data to target ads.
As for the legal merits, the complaint makes an argument that Google is a mall owner and its advertisers are its tenants, and therefore Google has the same legal duties to police tenants as landlords do. I'm not making this up. It appears that the drafters don't understand the difference between merchants and the media that distribute advertising for them. And they certainly don't know 47 USC 230!
The complaint has 2 substantive causes of action: negligence and intentional infliction of emotional distress. I can't figure out how the plaintiff has standing, and some of the things that the plaintiff complains about (such as the Protection of Children from Sexual Predators Act of 1998) do not, as far as I know, have any private cause of action. Otherwise, the entire complaint is predicated on liability for third party content, and thus is clearly covered by 47 USC 230.
Between the lack of standing, the lack of private causes of action, the 230 immunization, and the overall junkiness of this complaint, I think this lawsuit has zero chance of surviving a motion to dismiss. NONE. I hope the judge awards Google sanctions for wasting its time (and ours as well). I also hope Toback's constituents remember this abuse of the legal process come re-election time. His constituents deserve better.
UPDATE 3: Alex E. awards "Dorkus Maximus" Toback his "Dork of the Month" award.
May 02, 2006
North Carolina Blogging Conference Recap
By Eric Goldman
Sorry to post yet another conference recap on blog law, but it's been a busy conference season, and everyone wants to talk about blogs! I previously blogged on my presentation at the University of North Carolina's conference on employee blogging. At the end of the day, the conference organizers asked me to recap my observations about the day. Here's how I summarized the conference.
I divided my observations into three categories: what we know, what we don't know, and some predictions for the future.
What We Know
1. There's no such thing as a "private blog." It's an oxymoron. Think of all the people who have learned this lesson the hard way: Jessica Cutler, who used her supposedly limited-distribution blog to share some very intimate details; Jay Kuo, an attorney who blogged on a live case in a password-protected blog and got rebuked by the judge for it; and the many, many students who are making regrettable postings to their MySpace, Facebook or LiveJournal pages (even though places like Facebook limit access). Blog posts restricted to an Intranet may, in theory, remain limited in their distribution, but even then, bits have a funny way of migrating to the most unwanted places.
Because blog posts are effectively public, blog posts are effectively permanent. They live on forever as part of the author's permanent record. Thus, the maxim: "blog in haste, regret at leisure." The ease of blogging seduces people to blog first and ask questions later, but the permanence of blogging makes such tactics unwise.
2. Speech is Good, Speech is Bad. At the conference, Ed Cone said that blogs are "dangerous but useful." This is exactly right. Blogs are generating good speech and bad speech. It would be a mistake to oversimplify the output in either direction--both good and bad speech are an integral part of the blogging phenomenon.
3. Blogs Put Pressure on Companies That Rely on Secrecy/Data Scarcity. The proliferation and democratization of information makes it very hard to sustain businesses that rely on data scarcity or secrecy. Ed Cone gave the analogy of a basketball game. There's a certain secrecy inherent in playing the basketball game inside a closed pavilion. With bloggers recording every move during the game in real-time, the value proposition derived from the game's secrecy degrades. As a result, the game operators aren't selling access to information, and they make a huge misstep trying to do so by futilely restricting the flow of information. Instead, they need to sell other stuff that can't be easily replicated in an information-rich environment. Thus, the businesses that thrive in the blogging era will build businesses that make more money from the widespread dissemination of data.
Along this lines, companies with branded products need to realize that they are in the business of building fan bases. Blogs can help build fan bases by disseminating information to the company's most dedicated customers, thereby rewarding and further encouraging their loyalty. Thus, companies may find value in building their own blogs, and they should tolerate company-related blogs built by the company's fans.
4. Employers Need to Educate, and then Trust, Their Employees. It is unrealistic to expect employees to know what's appropriate/inappropriate regarding blogging without any training. Instead, companies should educate and train their employees about blogging. And, where an employer has decided to restrict employees' blogging activities, the employer should explain the rationale for the restriction so that employees know both the "what" and the "why" and can better apply the rules themselves. At the same time, with adequate training, employers should then trust their employees to make good choices rather than assuming the worst about employees.
What We Don't Know
1. While we know that blogging will produce a mixture of good speech and bad speech, we don't know how to develop restrictions that curtail unwanted speech without also affecting desired speech.
2. It's easy to say that businesses should build businesses that generate value from speech proliferation due to blogging, but it's not clear how businesses will do that. (If I knew how to do this, maybe I could afford a house in Palo Alto!)
Predictions for the Future
1. 10 years from now, it will seem bizarre that we had a standalone conference on blog law. Blogs are just a subset of Internet-mediated communication--nothing more (and nothing less). As Ed Cone said, "blogs are not exotica." After the novelty of blogs wears off, we'll realize that they are just another communication medium, and we'll stop trying to treat them as unique.
2. Corporation-sponsored blogging will increase as a way to grow and cater to brands' fan bases.
3. People will make poor choices about blogging--they will use blogs to do stupid things, make stupid posts, and generally engage in bad behavior. This is basic human nature.
4. Despite the glut of poor choices, I think there will be less blog-related litigation than we might expect. Typically, there just won't be enough money involved to fight about.