« June 2007 | Main | August 2007 »
July 31, 2007
July 2007 Quick Links, Part I
By Eric Goldman
Search Engines
* According to this study, up to 40% of search queries are "re-finding queries" (i.e., the searcher is trying to re-find previously viewed information). The implication: "Because people repeat queries so frequently, search engines should assist their users by providing a means of keeping a record of individual users' search histories, perhaps via software installed on the user's own machine." As I've said before, search engines necessarily will need client-side software to see more consumer behavior if they want to improve relevancy for consumers. HT Greg Linden.
* People are spoofing the Googlebot.
* Hal Varian, a first-rate scholar at Berkeley's SIMS, is now Google's chief economist. I don't know how many other Internet companies have economists-on-staff, but I could see this as a growth area.
Intellectual Property
* Prediction: at least one person will go to jail for prereleasing the new Harry Potter book. It's just too conspicuous for the feds to ignore. Indeed, at this point, it seems unavoidable that every launch of an eagerly anticipated copyrighted work will also involve criminal prosecutions for unauthorized prereleasing (see, e.g., this post). Meanwhile, BusinessWeek is marveling at how many websites are now cooperating with copyright owners rather than fighting them.
* Capitol Federal Sav. Bank v. Eastern Bank Corp., 2007 WL 1885134 (D. Kan. June 29, 2007). Kansas TM owner lacks jurisdiction in Kansas over New England bank allegedly committing TM infringement, even though the New England bank bought keyword ads on the trademark (but, those ads were geo-targeted to Massachussetts). Along the way, the court (as usual) cites to Zippo but rejects the "website doing business" prong, instead requiring the plaintiff to show that the website was doing business in the forum jurisdiction.
* Masterson Marketing, Inc. v. KSL Recreation Corp., 2007 WL 1975425 (S.D.Cal. April 13, 2007). Oh man, what a crazy lawsuit. Freelancer takes product shot of hotel and licenses photo to hotel. Hotel then provides photo to third party websites (such as Expedia) as a way of promoting the hotel. The freelancer claims the hotel breached the license and proceeds to sue what seems like every website in the travel industry. This case is now going on 5 YEARS...over a product shot. (Disclosure note: I worked a little on the case when I was affiliated with Epinions, which is one of the defendants. Yes, it's that old). This ruling deals with the hotel's attempt to recreate the product shot with a different photographer. The court grants SJ to the defendants on the copyright infringement of a recreated shot (per ETS-Hokin). The court also makes it clear that the plaintiff isn't going to get any of the plaintiff's profits, which I assume means the plaintiff is going to get bubkus damages (plaintiff isn't eligible for statutory damages).
* From the NY Times: Mr. Skin is a website that provides subscribers with access to pictures and videos of naked actresses taken from movies. Mr. Skin doesn't normally get permission from copyright owners, seemingly making it a prime target of a business-ending copyright lawsuit. It tries to justify the wholesale republication of clips and stills under the guise of fair use because it claims to be a movie review site, but I doubt that many judges would find that argument very persuasive. However, movie studios have realized that promotion via Mr. Skin increases demand for the movies ("sex sells"), even if Mr. Skin is already showing the "money shot" on its site. As a result, instead of getting lots of C&D letters, Mr. Skin gets lots of promotional copies from movie studios.
* Microsoft is trying to patent what Ars Technica describes as the "mother of all adware." Microsoft is also trying to patent a system for tracking people to deliver relevant advertising. People may find these patents a little creepy, but I see them as both inevitable and ultimately a good thing.
* Washington Post: a new website is trying to position the purchase and resale of exclusively branded fashion items (e.g., Birkin purses) as an investment. And to stabilize the investment decisions, the website screens out the knock-offs and certifies authenticity.
* Domaining to become a $4B/year industry?
Posted by Eric at 12:40 PM | Copyright , Domain Names , Internet History , Patents , Search Engines , Trademark | TrackBack
July 30, 2007
Fourth Amendment Privacy Case Law Bonanza
By Ethan Ackerman
In June, privacy advocates generally celebrated the Sixth Circuit’s important 4th Amendment ruling in US. v. Warshak. But hot on its heels, the Ninth Circuit sobered the tone rather quickly in US. v. Alba, declining to find 4th Amendment protection for email and IP addresses. Alba dealt with the use of a pen register to collect IP addresses and out- and in-bound email addresses that the suspect visited/emailed. Based on the results of the pen register, the government got a warrant for subsequent surreptitious keylogging and screen captures on the defendant's PC. At the trial court level, the defendant challenged only the pen registers and not the subsequent warrant-based surveillance. Coming so close on the heels of the privacy-expansive holding in Warshak, US v. Alba drew attention (and quite possibly some of the best off-the-cuff 4th Amendment banter/criticism on the Web) for its apparent holding that email addresses and IP addresses have no 4th Amendment protection. The Ninth Circuit generated enough confusion over the facts surrounding this holding to merit a subsequent clarification from the court as to whether this surveillance occurred surreptitiously on the defendant's PC (nope) or at the ISP level (yep).
Following closely on Alba's release, while everyone was still confused about just where the pen register interception happened, Wired News broke the details of US v. Glazebrook, a District court opinion on FBI keylogging that used some sort of software exploit or social engineering to allow remote monitoring of the PC of a high school MySpace user making bomb threats. The Glazebrook surveillance was done pursuant to a traditional court-reviewed warrant, leaving little room for 4th Amendment issues. Nonetheless, the case (and especially the warrant affidavit) is great reading, full of interesting technological questions regarding the FBI's covert remote monitoring capabilities.
Another District court decision, United States v. D'Andrea provides an interesting take on the 4th Amendment protections of web-stored files with password protection. As Orin Kerr's thoughtful parsing points out, the decision makes some fairly big factual judgments without sharing some of the significant background details. In this case, the contraband files were password-protected but stored online, and government investigators viewed them (without a warrant) after an ex-girlfriend of the suspect tipped off the investigators and provided the web site's password. The opinion finds a reasonable expectation of privacy may exist in password-protected files stored online, even though they are physically remote and transmitted to a third party provider.
In this case, the expectation of privacy did not exist, however, as the judge concluded that the suspect gave the ex-girlfriend the necessary information to access the files. As Professor Kerr points out, this last conclusion is thin on the facts. It is not at all clear in the opinion how the ex-girlfriend acquired the passwords; the suspects vigorously denied providing them to her. Would it have made a difference if she hacked, snooped, or guessed the passwords? Although it cited to Warshak, the opinion was similarly thin on just why 4th Amendment protections existed. (Not wrong, to this author's eye, just not detailed.) The opinion also spent little time addressing statutes that might address the privacy expectations, and whether and how they might affect the expectations of the defendant. For example, the Protection of Children from Sexual Predators Act requires ISP reporting of any discovered instances of child pornography, and the Electronic Communications Privacy Act is rife with exceptions allowing for disclosure of electronic communications. While I suspect the correct opinion is that mere statutes don't influence the Constitutional standard of "reasonableness," the court doesn't address the issue in any detail.
Professor Kerr would moot these conundrums with an alternate holding based on the controversial "special needs" exception, reaching the same final result. This particular debate is fairly politicized, and arises in many 4th Amendment cases, and isn't specific to computer cases, though it often pops up there too. I’m not as willing as Professor Kerr to recognize an imaginary dividing line between criminal investigators and other government employees such as child services investigators or network administrators and ascribe no 4th Amendment significance to agents on the "correct" side of that line, but his other questions cut right to the core ambiguities of this opinion. To be fair, even some other Circuit Courts don't seem too concerned making that excuse in other computer investigation cases, either.
Posted by Ethan Ackerman at 10:01 AM | Privacy/Security | TrackBack
July 23, 2007
Ninth Circuit Strikes Down Contract Amendment Without Notice--Douglas v. Talk America
By Eric Goldman
Douglas v. US District Court ex rel Talk America, No. 06-75424 (9th Cir. July 18, 2007)
In this case, the plaintiff initially procured telephony services from AOL, which subsequently sold its telephony business to Talk America. Talk America posted revised terms (including a new arbitration clause) to its website. When Douglas sued Talk America in court, Talk America sought to compel arbitration. The district court agreed, but the Ninth Circuit reversed. It pointed out that Douglas hadn't been back to Talk America's website, and even if he did, there was no reason he would have investigated the user agreement. The court says curtly, "Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."
But, could the parties agree otherwise at the outset? Unfortunately, the opinion is vague about whether AOL's initial contract with Douglas had a provision whereby he agreed that AOL could amend the user agreement simply by posting changes to its website. If AOL didn't, then of course one party to an already-existing valid contract can't simply change terms either by unilaterally notifying the other party or by posting its desired new terms to its website. But I'm assuming the court bounced this amendment despite a contract provisions putatively permitting unilaterally posted website amendments which put the onus on users to check back frequently for updates.
I've never been a fan of these "we can amend simply by posting new terms to the website" provisions for two reasons. First, as the court points out, "Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed." This isn't practical or sensible, so it's not surprising that courts will reject such an obligation. Second, even if the court was willing to accept this method as a valid amendment process, there would be strict limits on the substantive changes that a website can make unilaterally. Indeed, the court independently concludes the arbitration clause is unconscionable. I expect courts will aggressively police these unilateral amendments using unconscionability and other limiting doctrines.
So, what should a website do? There are three main options when a website wants to amend its user agreement terms, none of them ideal:
1) Get all existing users to re-up to the amendment using normal contract formation processes (including offer, acceptance, consideration). This isn't ideal because the website will have to create new consideration, plus no website wants to lose any customers who say no. And in many cases, websites have a large group of dormant users that won't respond to a call to action.
2) Include a provision in the initial contract saying that the website can amend the terms unilaterally after providing notice to users. Ideally this is coupled with a bona fide right to reject the terms, but this would involve giving the users an ability to terminate the contract. Even if not, merely giving notice would appear to satisfy the Ninth Circuit here, at least with respect to unconscionable amended provisions. However, in practice, giving users notice isn't all that easy. A mass-email to the userbase is likely to get flagged as spam by many IAPs, plus many users will be annoyed by the seemingly worthless email (or may discard it instantly as a possible phish). Alternatively, notice can be given when the user comes back to the website and logs in, but obviously only a limited number of legacy users come back to the website to log in. I like eBay's approach, which lets users self-configure the notification about user agreement amendments.
3) Assume that it's impossible to unilaterally amend the contract, regardless of any specified unilateral amendment rights in the initial contract. In this case, if the website wants to change terms, it can only apply those new terms against new users; legacy users will be stuck on the old terms. This method is the only guaranteed method to work from a legal standpoint, but it creates some difficult situations dealing with users on different versions of the contract, and it hinders websites' freedom to evolve their offerings over time.
Although I don't have any great practice-oriented recommendations based on this opinion, I do hope this opinion will help contribute to the demise of the "check back frequently for amendments" provisions in online user agreements. I've always considered those among the worst excesses of the dot com era.
HT: BNA
Posted by Eric at 10:57 AM | Licensing/Contracts | TrackBack
July 19, 2007
Advertiser Liability for "Contributory" Trespass to Chattels Redux--Burgess v. American Express
By Eric Goldman
Burgess v. American Express Co., 2007 NCBC 15 (N.C. Superior Ct. May 21, 2007)
David Fish points to an interesting new ruling on the subject of advertiser liability for pop-up advertising (I'm inferring that the pop-ups were delivered via adware, although the opinion doesn't use that term). As part of a procedural request by a defendant/advertiser, the court says:
Burgess’s claim is premised on the appearance of unauthorized “pop-up” messages on his computer displaying the Defendants’ advertisements. Burgess alleges specifically that Target (and other Defendants), through the services of a third-party intermediary, delivered unauthorized “pop-up” advertisements to his computer and thereby caused damage to the same....Construing these allegations in the light most favorable to Burgess, he has at least alleged a claim for trespass to chattels under North Carolina common law. [cite to Sotelo] ...The Court is also satisfied that Burgess has alleged actual harm; although, I note that actual damage is not required to pursue a claim for trespass to chattels in North Carolina, at least where the claim is based on unlawful interference.
While the plaintiff has a lot more work to do before winning this case, this ruling is still interesting because it reinforces the potential that advertisers can be directly/contributorily liable for a trespass to chattels based on how their advertising is delivered. Not only is this a stupid result legally, but I remain shocked that these opinions fail to discuss Intel v. Hamidi or the more recent Mummagraphics case, both of which should make pop-up ad-based claims for trespass to chattels tenuous at best. I hope the defense lawyers can convince the judge to look at broader precedent than just the Sotelo case.
Some previous posts on advertiser liability for adware/trespass to chattels:
* Utah Bans Keyword Advertising (April 2007)
* Advertisers Settle NY Anti-Adware Action (January 2007)
* WSJ Debate on Advertiser Liability for Adware (April 2006)
* The FTC, Adware Advertising and Badges of Shame (December 2005)
* Adware Witchhunt Gone Awry (October 2005)
* Downloading Software onto Home Computer May Be Trespass to Chattels--Sotelo v. DirectRevenue (Sept. 2005)
* Are Adware Advertisers Responsible for Adware? (August 2005) [points to my CNET editorial on this topic]
* AP Story on Advertiser Responsibility for Adware (June 2005)
* Edelman on "Intermediaries' Role in the Spyware Mess" (May 2005)
* LA Times on Adware Advertisers--Including 1800 Contacts? (May 2005)
* Utah Amends Spyware Control Act (March 2005)
Posted by Eric at 02:06 PM | Adware/Spyware , Derivative Liability , Marketing , Trespass to Chattels | TrackBack
July 18, 2007
Roommates.com Amicus Brief
By Eric Goldman
The EFF, Lycos and I have filed an amicus brief in the Fair Housing Council v. Roommate.com case urging the Ninth Circuit to rehear the case en banc. See the EFF's news release about the brief.
Other documents in the case:
* Fair Housing Council's response to Roommates.com's request for an en banc rehearing
* Roommates.com's En Banc Request
* The original Ninth Circuit opinion
* My blog post on the Ninth Circuit opinion
Posted by Eric at 03:40 PM | Derivative Liability | TrackBack
July 17, 2007
Patent Contingency Fee Agreements
By Eric Goldman
Patent litigation is hot, but I rarely see much discussion about the fee agreements used by patent litigants. So I was very interested to hear Stephen Susman (from the well-known Susman Godfrey firm) speak at the May UT Austin Technology Law Conference about fee agreements for patent contingency work--a topic he knows well, as he said he spends 70% of his time on such matters.
Plaintiff-side patent contingency cases pose a number of unique challenges to lawyers. Most obviously, the cases represent a major upfront investment by the law firm. Susman said his baseline is $3M of attorney time to complete a trial, plus $2M of out-of-pocket expenses (mostly) for experts. Further, these investments are subject to significant risk by the rapidly evolving patent jurisprudence; any defense-favorable Supreme Court opinions (such as the AT&T v. Microsoft case) mid-stream can eviscerate a case's economic value.
To reduce these risks, Susman Godfrey does the following:
* the firm invests significant money (he estimated $100,000) diligencing a potential case, including getting validity and infringement opinions. During this diligencing phase, Susman Godfrey enters into a “standstill agreement” to freeze the client from going to a different lawyer. Susman didn’t provide a copy of the standstill agreement, but I would love to see it! An agreement getting clients to temporarily restrict their choice of counsel and forebear their litigation rights should raise particularly interesting and complicated professional responsibility issues. (Sounds like an excellent exam question!)
* the firm only takes on cases that receive a majority vote of all of the firm’s lawyers (with every lawyer, from associate to senior partner, receiving an equal vote). This reminds me a little of the Wisdom of Crowds approach to decision-making.
* the firm joins forces with a patent firm for each case. Susman’s view is that it’s better to have 50% interest in two cases than 100% interest in one.
Given the significant dollar values of a patent judgment, there is a higher-than-average risk of litigation between lawyer and client when it comes time for fee payoffs. Plus, it can be difficult to value patent settlements, which might include cross-licenses, running royalties, equity investments or obligations to purchase future widgets. Thus, when negotiating a patent contingency fee agreement, Susman strongly encourages clients to get their own independent counsel to review the agreement as a way of increasing the agreement’s likely enforceability.
Susman Godfrey’s fee agreement includes a provision allowing the firm to unilaterally terminate a representation if the firm decides the case is a loser. The goal of this provision is to address the moral hazard risk in contingency fee cases where clients feel no economic disincentives to pursue a case to trial even if there’s a low chance of victory, but the firm wants to cut its losses. Susman acknowledged that this clause would be difficult to enforce in court, but he said that the firm included the provision after their ethics professor/expert concluded that the provision wasn’t likely to jeopardize the enforcement of the other provisions even if the judge tossed that provision out.
Susman said that his firm never initiates any settlement/licensing talks with defendants before the firm files a case in a favorable forum. This prevents the defendant from initiating a declaratory judgment action in an unfavorable (to the plaintiff) forum, but it also struck me as crummy that no deal is discussed before the case consumes court resources. This may be another good reason to include venue limitations in any patent reform bill.
Susman said that the firm’s malpractice carrier would prefer that the fee agreement’s dispute resolution provision specify a non-jury trial to preserve the ability to appeal, but the firm has chosen to specify mandatory arbitration to help preserve client confidentiality, a particularly important issue when patents (and trade secrets) may be on the line.
Susman didn’t discuss typical contingency fee percentages, but he did say that typically the percentage increases at various milestones. For example, the percentage bumps up 60 days prior to trial because of the major ramp-up in work starting then. He also said that if the firm advances expenses for the client, the percentage is typically 5% higher to compensate for the extra risk (the expenses may be recouped before the remainder is split). The downside is that if the client doesn’t have any skin in the game, they may be unreasonable about settlements. That’s why he said patent trolls make good clients; they are sophisticated players that evaluate settlement offers rationally (he described them as “professional gamblers, not casual gamblers”).
I haven't seen the Susman Godfrey fee agreement form online in total, but you can see the first couple pages here.
Posted by Eric at 09:49 AM | Licensing/Contracts , Patents | TrackBack
July 12, 2007
Third Circuit Bounces Lawsuit Over Google Groups--Parker v. Google
By Eric Goldman
Parker v. Google, Inc., No. 06-3074 (3d Cir. July 10, 2007)
Parker v. Google was one of the troika of district court opinions involving Google and copyright from Q1 2006 (along with the Perfect 10 and Field cases). Parker appealed his loss to the Third Circuit. Unfortunately, the Third Circuit didn't spend a lot of time writing up a thorough opinion (probably because of the pro se plaintiff), so the opinion is unhelpfully conclusory and designated "not precedential." Despite these defects, the opinion illustrates that at least some appellate courts will give wide deference to search engines.
Parker is a copyright owner. He claims that third parties infringed his copyright by posting his work to USENET, which Google then made accessible via its Google Groups service. He further claims that some people bashed him online and Google committed defamation by indexing and linking to these allegedly defamatory sites. The court efficiently rejects Parker's claims:
* Google isn't liable for direct copyright infringement via its Google Groups service because it makes USENET content available without any volitional conduct.
* Google isn't liable for contributory copyright infringement because Parker didn't allege the requisite knowledge of third party activity. The court doesn't reference 512 in this discussion, but it does note that Parker sent some C&D letters that didn't reference his specific copyrighted work.
* Google isn't liable for vicarious copyright because Parker didn't allege that Google gets a direct financial benefit from the infringing USENET posts.
* Google isn't liable for defamation (and related claims) because of 47 USC 230.
* The court also rejected a trademark claim based on indexing a third party site that Parker claimed searchers would think came from him.
Posted by Eric at 09:43 AM | Copyright , Derivative Liability , Search Engines , Trademark | TrackBack
July 11, 2007
Old-School Defamation Lawsuit Filed Against Google--Phillips v. Google
By Eric Goldman
Phillips v. Google Inc., 3:2007-cv-01236 (N.D. Tex. complaint filed June 4, 2007; removed from state court July 11, 2007)
By now, it seems that most defamation plaintiffs know about 47 USC 230 when suing online intermediaries based on third party content. That doesn't mean plaintiffs like it, but at least they usually try some creative argument to get around the statute. So it's a little jarring nowadays to see a complaint by someone who either doesn't know 47 USC 230 or doesn't make any effort at all to get around it.
This lawsuit is such a case. The plaintiff is a Dallas businessman who claims that some news reports defamed him. His solution? Sue Google for indexing and linking to the third party articles. But the plaintiff goes out of his way to run directly into the 47 USC 230 brick wall, repeatedly saying that Google publishes the tortious content--just about the worse thing you can say if you're trying to get around 47 USC 230!
For reasons unclear to me, Google removed the lawsuit from Texas state court to federal court rather than just filing a motion to dismiss in state court. (Maybe Google was concerned about the fairness of a Texas state court?). Even so, I assume a 12b6 motion to dismiss is coming instantly, and I don't see how the judge can avoid granting it. Maybe sanctions will help the plaintiff understand the consequences of dragging immunized parties into court.
Posted by Eric at 05:24 PM | Derivative Liability , Search Engines | TrackBack
Fair Housing Council Responds to Roommates.com's En Banc Hearing Request
By Eric Goldman
The Fair Housing Council of San Fernando Valley has submitted its response to Roommates.com's request for an en banc rehearing by the Ninth Circuit. Other documents in the case:
* Roommates.com's En Banc Request
* The original Ninth Circuit opinion
* My blog post on the Ninth Circuit opinion
Posted by Eric at 03:02 PM | Derivative Liability | TrackBack
July 10, 2007
Seventh Circuit Opinion Cites Infringing YouTube Video--Stoller v. Brett
By Eric Goldman
Central Manufacturing, Inc. v. Brett, 2007 WL 1965673 (7th Cir. July 9, 2007)
Leo Stoller, the notorious trademark gadfly, lost another case, this time at the Seventh Circuit. Among other denigrations, the Seventh Circuit said that "were there a Hall of Fame for hyperactive trademark litigators, Stoller would be in it."
Judge Evans weaves lots of baseball lore into the opinion because the defendants include baseball great George Brett. In fact, the mere presence of George Brett appears to make Judge Evans swoon, because he spends almost half the opinion gratuitously reliving the story of George Brett's famous "pine tar" incident. As part of this, the opinion says:
The whole colorful episode is preserved, in all its glory, on YouTube, at http://www.youtube.com/watch?v=4Cu1WXylkto (last visited June 6, 2007)
Well, not exactly. The video WAS there earlier today, but the page now has the dreaded red legend "This video is no longer available due to a copyright claim by MLB Advanced Media." In fact, anyone who watched the video had no doubt that it was 7 1/2 minutes of MLB's copyrighted work...but the Seventh Circuit opinion nevertheless encouraged readers to view it. Whoops! Let's hope for the Seventh Circuit's sake that such encouragement isn't contributory copyright infringement...
Too bad the MLB couldn't find it in its heart to leave the video alone to preserve the cite from a Seventh Circuit opinion (the MLB official site linked above does have the radio broadcast, but not the video). Then again, realistically, the MLB isn't known for being magnanimous about IP law. Meanwhile, I suspect the Seventh Circuit will have an internal dialogue about the perils of promoting infringing YouTube videos in their opinions.
FWIW, the rest of the opinion is also entertaining. John Welch of TTABlog is on the case.
Posted by Eric at 09:19 PM | Copyright | TrackBack
July 09, 2007
Credit Card Providers Aren't Liable for Third Party Infringement--Perfect 10 v. Visa
By Eric Goldman
Perfect 10, Inc. v. Visa International Service Association, No. 05-15170 (9th Cir. July 3, 2007)
The Ninth Circuit has completed a hat trick of appeals involving Perfect 10's litigation frenzy over online infringement of Perfect 10's copyrighted photos. The resulting troika of opinions has important implications for cyberlaw and IP law, but the aggregate effect is hardly clear. The Ninth Circuit is visibly struggling to define and justify the boundaries of liability online, making it very hard to sort through the tangled mess of opinions.
Despite the problems with the specific details, the Ninth Circuit generally reached the right results in all three opinions. Financial service providers (FSPs) got a complete victory (12b6 dismissal), other support service providers (like ccBill) got significant protection, and Amazon/Google avoided direct copyright infringement but could be contributorily liable if they have sufficient involvement in the infringement (this liability is a little dicey, but we'll see on remand). The opinions generally make a lot of sense if we focus only on the results.
In contrast, wading through the details shows just how problematic Ninth Circuit cyberlaw jurisprudence has become. The Ninth Circuit has chunked a few major Internet cases--Napster and Brookfield are two conspicuous examples--which has produced a long list of tortured subsequent precedent. The Ninth Circuit should bite the bullet and wipe those cases (and their progeny) off the books. Otherwise, the Ninth Circuit will torture itself each time it tries to reconcile new opinions with those erroneous opinions.
FSP Control Over Infringement
Online secondary liability cases generally struggle to define how much control over third party behavior is required to find secondary infringement. Here, the majority (Smith and Reinhardt) and dissent (Kozinski) philosophically disagree over FSPs' ability to control infringing websites. FSPs have various rules prohibiting payment for illegal activities, and they do a lot of work to police their network. They could be made legally responsible for online gatekeeping (just like Congress did with respect to online gambling).
At the same time, the majority in this case sees FSPs as attenuated from the ultimate infringing acts. Like power companies, FSPs are behind-the-scenes vendors that don't touch the flow of infringing bits. To the majority, that's dispositive in this case. In contrast, Kozinski thinks FSPs may be no different than bagmen for an illegal deal, and they should take responsibility accordingly.
Like so many courts before it, this court cannot reconcile its competing characterizations--nor does it even hint at a doctrinal framework for developing a shared agreement on the matter. As a result, I think the law is still being decided case-to-case, substantially undercutting the precedential utility of this case.
The Legal Discussion
A few interesting aspects in the legal analysis:
* The court helpfully acknowledges the proliferation of contributory infringement tests and tries to harmonize them, saying prior articulations are "noncontradictory variations on the same basic test, i.e., that one contributorily infringes when he (1) has knowledge of another’s infringement and (2) either (a) materially contributes to or (b) induces that infringement." I think this properly states the legal standard, including making it clear that inducement is a subset of contributory liability, not a separate test. Courts would be well-served to start with this language rather than the many other variants.
* The majority distinguishes the precedent by saying FSPs aren’t liable for contributory infringement because they "do not help locate and are not used to distribute the infringing images." Kozinski's dissent hammers the majority for its view, pointing out that payment systems are much more of a "sine qua non" for infringing websites than search engines. (He doesn't use the Latin phrase, instead saying that "If cards don’t process payment, pirates don’t deliver booty"...which reminds me of another court's judicial notice that booty is slang for buttocks). The majority's response--websites could find alternative payment mechanisms--is true in theory but laughable based on current practices.
* The state claims, per ccBill, should be wiped out due to 47 USC 230, but 230 isn't mentioned at all. Instead, the court rejects liability based on California common law precedent insulating FSPs from aider/abettor liability.
Where Are We? And Where Are We Going?
I wish I knew. We're stuck in a legal limbo; as Kozinski concludes his testy dissent, "the opinion will prove to be no end of trouble." I couldn’t agree more. The Ninth Circuit should take a very hard look at its entire body of cyberlaw if it wants to provide the type of useful guidance we expect from appellate courts.
On the other hand, I go back to the fact that the Ninth Circuit reached mostly sensible results in all three Perfect 10 cases, suggesting that maybe intuition is more useful at predicting the law than the court’s specific words. Relying on common sense isn't very comforting, and the Ninth Circuit can and should do better, but perhaps common sense still plays a role in Ninth Circuit cyberlaw jurisprudence.
Posted by Eric at 05:09 PM | Copyright , Derivative Liability , Trademark | TrackBack
July 05, 2007
Google Subpoenaed for Keyword Purchase Data--Rhino Sports v. Sport Court
By Eric Goldman
Rhino Sports, Inc. v. Sport Court, 02-1815 PHX-JAT and 06-0366 PHX-JAT (N.D. Cal. subpoena duces tecum issued June 14, 2007)
We're all aware that Google has plenty of good personal information that can be discoverable. But until I saw this subpoena, I don't think I fully appreciated how Google could facilitate competitive disclosures.
This is the latest development in the long-running case of Rhino Sports v. Sport Court, a rather garden variety trademark infringement lawsuit. When I previously blogged about the case in May, the plaintiff Sport Court (now Conner Sport Court International) claimed that Rhino Sports had breached an injunction by buying the keyword phrase "sport court," when it fact Rhino Sports apparently had just broad-matched the word "court." The parties aren't done squabbling yet, because now Sport Court has issued a subpoena to Google requesting records of:
* all purchases of "sport court" as a keyword
* the associated "cost per click calculations"
* estimated ad positions for the keyword
* search volume trends for the keyword
Hello! Maybe I'm missing something big, and maybe I'm not aware of how common these types of subpoenas to search engines are, but this data sounds like it would have significant competitive value. At minimum, I suspect every trademark owner and SEO would LOVE to have this data.
This data may be yours for the price of a complaint and a subpoena--Google appears to be complying with the subpoena without a fight. On June 28, Google sent the following email to affected keyword buyers:
_____
Hello,
Google has received a civil subpoena for information related to your account in a case entitled Rhino Sports, Inc. and John E. Shaffer v. Sport Court, Inc., United States District Court, Northern District of California
To comply with the law, unless you inform us that you will file a motion to quash the subpoena or other formal objection by July 19, 2007, Google will assume you do not have an objection to production of the requested information and may provide responsive documents on that date.
For more information about the subpoena, you may wish to contact the party seeking this information at:
Mr. Jed H. Hansen
Thorpe North & Western
8180 South 700 East, Suite 350
Sandy, UT 84074
Phone: 801-566-6633
Fax: 801-566-0750
Unfortunately, Google is not in a position to provide you with legal advice.
If you have other questions regarding the subpoena, we encourage you to contact your attorney.
Thank you,
Google Legal Investigations Support
____
Naturally, recipients of these emails are perplexed and nervous (see, e.g., here and here). Are they Sport Court's next defendants? Will the disclosed information put them in a competitive adverse position? Note that Google didn't actually provide them with the subpoena, so the email recipients had no idea what Google was planning to disclose or for what purpose.
As I said, these subpoenas of keyword purchase data might be routine. But my instincts tell me they aren't common yet, but they will be in the near future.
Posted by Eric at 11:17 AM | Search Engines , Trademark | TrackBack
July 03, 2007
SAP Has Bad News in Oracle Lawsuit, But Tries to Bury It
By Eric Goldman
Oracle Corp. v. SAP AG, Case No. 07-CV-1658 MJJ (N.D. Cal. answer filed July 2, 2007)
You're an international corporate giant with some bad news in a high-profile case that you want to bury. What do you do? One possibility: hold a press teleconference for 11 pm Pacific on July 2--just late enough to miss the newspaper deadlines for July 3, so the news will effectively break on the July 4th holiday. Genius!
But SAP does have lots of bad news in its Oracle lawsuit, and it substantially undercuts SAP's initial claim that it was going to defend this lawsuit aggressively. After all, it's hard to be aggressive when your hand has been caught in the cookie jar, and SAP admits that its wholly-owned subsidiary TomorrowNow (TN) engaged in some unambiguously rogue downloading.
Worse, with respect to the downloads that SAP claims weren't rogue, SAP's main defense is doomed to fail as well. SAP argues that TN's customers authorized it to download the materials on their behalf--what I call a "proxy defense," i.e., we were just a proxy for our customers' legitimate behavior. Unfortunately, there is typically no proxy defense for most types of claims--certainly not for claims like trespass to chattels or the Computer Fraud and Abuse Act, and usually not for copyright infringement either. In other words, Oracle can control the manner and means by which people access its servers, so even if it permits its customers to access the site, that permission isn't automatically extensible to third parties acting on the customers' behalf. Indeed, Oracle expressly precluded such behavior in some cases.
As a direct-on-point example, see the lawsuit by Facebook against ConnectU for grabbing data from Facebook's servers. ConnectU said that Facebook's users gave their credentials to ConnectU and asked them to get the data on their behalf. This permission did not change ConnectU's relationship to Facebook, which had expressly said that third parties couldn't use its servers to engage in the behavior ConnectU was doing. Thus, the court held that ConnectU trespassed Facebook's chattels. I could cite dozens of other examples where the proxy defense fails. It isn't likely to succeed here either.
Even worse still, SAP announced that the DOJ is probing the matter. As I said earlier, this could be a serious criminal matter. There remains a serious risk that people will be prosecuted here.
From my perspective, given SAP's admissions, the only open Qs are:
1) How big of a check will SAP/TN write to Oracle?
2) After checks are written and injunctions are issued, will TN survive this lawsuit? Or, will SAP "burn" its limited liability subsidiary to insulate the larger enterprise?
3) Will this lawsuit degrade SAP's ability to position itself as an ethical competitor?
4) Will anyone be going to jail?
Some other observations:
* I find it remarkable that some analysts have downplayed--and continue to downplay--the import of this lawsuit. Oracle's allegations go far beyond day-to-day ethical competition.
* On that front, SAP's materials implicitly suggest that SAP knew of TN's behavior but tried to insulate itself from information gathered by TN. At best, this suggests SAP engaged in willful blindness. As a result, even if no SAP employee took the rogue actions, SAP may not be able to avoid responsibility.
* In an effort to provide faux transparency, SAP launched a lawsuit portal. It's nice to have this resource, but a real portal would provide a complete repository of the relevant documents, including Oracle's complaint. And if SAP wants to foster real transparency, it should provide explain in full detail exactly what behavior it admits was rogue.
UPDATE: TN appears to be losing business from the lawsuit. And SAP's CEO seems to think this whole problem could have been handled with a phone call from Oracle to him instead of a lawsuit.
Posted by Eric at 08:22 AM | Copyright , Licensing/Contracts , Trespass to Chattels | TrackBack
July 02, 2007
June 2007 Quick Links
By Eric Goldman
* Spam cases are coming at a regular clip, and it's tricky divining the latest state of the law. Two recent cases that caught my attention:
- US v. Impulse Media Group, 2007 WL 1725560 (W.D. Wash. June 8, 2007). This case involved a porn site that used affiliate marketers who didn't comply with the porn spam labeling requirements. The government argued that the advertiser should be strictly liable for this breach, but the court fairly emphatically rejected that (same as Cyberheat). But the news isn't all good for the defense, as the court also rejected its SJ motion, showing that the question of scienter about affiliate behavior remains a tough one for courts. Venkat's writeup.
- Kleffman v. Vonage Holdings Corp., No. 07-2406 (C.D. Cal. May 22, 2007). A nice complement to the Facebook v. ConnectU case, each holding that aspects of California's anti-spam laws are preempted by CAN-SPAM. In this case, the targeted behavior was the fact that the emailer may have used multiple email addresses to bypass electronic spam filters, but there wasn't anything false/deceptive about each email itself. See the BNA write-up and Venkat's writeup. I've lost track of the preemption cases, but it seems like state anti-spam laws are really getting munched after the Mummagraphics case.
* NYT on the pros/cons of captchas.
* Goodmail has expanded its pay-to-email system to Comcast, Cox, Roadrunner and Verizon.
Intellectual Property
* In Explorologist v. Sapient, involving the posting of a video deconstructing Uri Geller's act, the defendant is arguing (per CCBill) that 47 USC 230 preempts British copyright law.
* A rushed high school yearbook editor downloads lots of Facebook photos and adds them to the yearbook to fill space. Not a good idea!
* Techdirt: Who owns the right to license the design of military weapons to toy manufacturers?
* Marty on intellectual property protection for sexual activity.
Contracts
* A California man claims he bought a Gateway computer that never displayed text properly. Is he bound to the clickthrough agreement displayed on bootup? If this is the only way Gateway presented its contract, the answer should be no.
* At a conference at Southwestern Law School, I heard Prof. Lon Sobel talk about "idea submission" law. He illustrated the phenomenon that "where there's a hit, there's a writ": he suggested that hit TV shows produce an average of 6 "you stole my idea” demand letters. The great 1980s movie Coming to America produced 12 such letters, which resulted in 7 actual lawsuits. Interestingly, Prof. Sobel made the case (implicitly, not explicitly) that there is no separate law of "idea submissions," but rather any such doctrines are subsumed within standard contract law.
eBay
* eBay has changed its stance towards fighting counterfeiters, and it now does more policing itself.
* eBay shill bidder pays $400k to settle with NY AG.
Social Networking/Blogs
* The NCAA kicked a reporter out of the stadium for live-blogging the event. Tip to NCAA: It’s neither possible nor wise to control the flow of real-time information. Get over it. HT: Techdirt.
* Just came across this article: Stacey Schesser, MySpace on the record: The admissibility of social website content under the Federal Rules of Evidence, First Monday, volume 11, number 12 (December 2006).
* Wired: 7 MySpace sex offenders busted.
Marketing/Advertising
* AMCO Ins. Co. v. Lauren-Spencer, Inc., 2007 WL 1795970 (S.D. Ohio June 20, 2007). Insured offers jewelry from a website. Third party claims that the insured's jewelry constituted copyright infringement. Insured tenders the lawsuit to her insurance company under the advertising injury policy. Insurance company seeks a DJ of no coverage. The court says that the website constitutes advertising for the products, and so the policy applies to photos of the allegedly infringing jewelry items, even if the photos themselves were created by the insured. Observation #1: The advertising injury policy is very helpful to web businesses. Observation #2: Due to cases like this, I suspect insurance companies are reducing their willingness to offer advertising injury coverage to web businesses.
* Taylor v. XRG, Inc., 2007 WL 1816142 (Ohio App. Ct. June 21, 2007). The defendant was a vendor retained by bulk fax senders that handled consumer responses, including opt-outs from future faxes. Court held that the vendor wasn't liable for any TCPA/state anti-junk fax laws allegedly broken by the fax sender.
* Newish ad format: ads running 2 seconds in duration.
Search
* It's taken me a while to digest some of Google's new efforts. First, Google released two tools (a new toolbar button and a new personalized tab) to anticipate searchers' needs based on their past searches. Second, Google expanded its search history to incorporate all aspects of a user's searching through its services (what it calls "web history"). Meanwhile, Google has reduced its storage of personalized search data from 18-24 months to 18 months before that data gets anonymized. FWIW, I've been using Google personalized search since November 2005 (presumably, some of my data will be flushed any time now). Google has now captured almost 12,000 searches (with a high so far of 255 searches in a single day). Despite this, Google still doesn’t do a good job making predictions for me.
* Another great study from Jim Jansen (see the last one I blogged about). This one presented identical search results branded from different search engines and found that consumer ratings of relevancy varied based on the brand (Yahoo and Google came out on top). The logical inference--branding does matter to perceptions of relevancy. HT: SEL.
* Matt Cutts on the various ways humans affect Google search.
Domain Names
* Denmark's .dk TLD registry has enacted rules targeted at wiping out domainers. See here (Sec. 8.3.6).
* What's hotter than iPhones? iPhone-related domain names.
Adware/Spyware
* Declan on the latest legislative rally against spyware, the Senate's Counter SPY Act.
* The FTC issued final approval for the DirectRevenue settlement of $1.5M. Commissioner Leibowitz dissented, saying the cash payment was too light.
Online Reputations
* Avvo has filed a motion to dismiss the lawsuit over its ratings of attorneys. The motion is very heavy on the 1st amendment and very light on 230. HT: WSJ Law Blog.
* The Washington Post gushes about Reputation Defender and its competitors, without really acknowledging the value of reputational accountability or the potential for takedown/pushdown abuse.
* Entrepreneurs figured out a way to game FICO scores. Fair Isaac will try to close the loophole.
* Ed Magedson of Rip-Off Report was the victim of a vicious harassment campaign demanding that he remove complaints from the site.
* Lengthy NYT article on Wikpedia. Not much new there, but it does hint at the young age of Wikipedians, and it talks about how "pride of ownership" motivates Wikipedians.
Other
* June 26 was the 10 year anniversary of the classic Reno v. ACLU Supreme Court opinion.
* The NYT has launched a new technology blog called BITS.
Posted by Eric at 02:37 PM | Adware/Spyware , Content Regulation , Copyright , Derivative Liability , Domain Names , Internet History , Licensing/Contracts , Marketing , Search Engines , Spam , Trademark | TrackBack
July 01, 2007
American Blinds Sanctioned
By Eric Goldman
Google Inc. v. American Blind & Wallpaper Factory, Inc., 2007 WL 1848665 (N.D. Cal. June 27, 2007)
The Google v. American Blinds trial is scheduled to start November 9, 2007. Last week, Google won a discovery dispute that might help it at trial. Google contended that (1) before May 2006, American Blind didn't adequately preserve, collect, and produce relevant evidence; and (2) in May 2006, American Blind CEO Steve Katzman intentionally destroyed evidence. The magistrate doesn't buy all of these contentions, but it is persuaded that some monkey business took place before May 2006. Accordingly, the magistrate issues the following sanctions (subject to the judge's approval):
1) If the judge allows Google to assert an unclean hands defense (because, like most keyword plaintiffs, American Blinds allegedly was bidding on competitor trademarks when it brought the lawsuit), "it will be deemed judicially established that American Blinds bids on its competitors' trademarks with the deliberate purpose and intent of attempting to entice persons who are specifically looking for the websites of those competitors to visit the website of American Blinds." This isn't likely to help Google much because the judge has all but rejected the unclean hands defense.
2) Of substantially more value, "it is hereby deemed judicially established that the first Sleekcraft factor-strength of mark-weighs in favor of Google." While this factor may have pointed in favor of Google in all cases, this will be a valuable asset for Google at trial by inhibiting (or completely blocking) sympathy-inducing assertions that the brands at issue are really popular or that American Blinds spends lots of money building the brands. Plus, to the extent a jury simply does factor-counting, the score is already 1-0 for Google with 7 factors left (or, American Blinds has to win 5 of the 7 remaining factors). To be clear, I'm not saying a jury would do simple factor-counting, but every factor in Google's favor helps it establish a defense.
3) $15k payable to Google.
Previous coverage:
* judge holds selling keywords is trademark use in commerce (March 2005)
* judge denies reconsideration and SJ (May 2007)
Posted by Eric at 01:01 PM | Search Engines , Trademark | TrackBack