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March 31, 2008
PLI Presentation on Social Networking Sites and Blogs
By Eric Goldman
Last week I gave a brief overview talk about social networking sites and blogs at a PLI conference. My slides. For each screen shot, you'll have to imagine some of the faux-witty remarks I might have made. To help you along as an example, on the fourth slide I noted that Ian Ballon doesn't look a day over 70. (You can see a different assessment of Ian's age here).
Posted by Eric at 10:09 AM | General | TrackBack
March 30, 2008
Zango's Brief in Zango v. Kaspersky Ninth Circuit Appeal
By Eric Goldman
Zango has filed its initial appellate brief in Zango v. Kaspersky [warning: 2.1MB file], the case addressing the liability of anti-spyware vendors for their classification decisions. Characteristically, Zango goes on the offensive, declaring that Kaspersky's software is the real "badware" here.
Other materials in this case:
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 01:45 PM | Adware/Spyware , Derivative Liability | TrackBack
March 27, 2008
Rescuecom v. Google Pre-Oral Argument Details
By Eric Goldman
We're anxiously awaiting oral arguments in the Rescuecom v. Google case next week. In advance of that, the court cleaned up a couple of matters:
1) The court denied the amicus brief from Yahoo, AOL and eBay. It didn't give a reason for bouncing the brief, although sometimes it's done to avoid a panelist's recusal.
2) Earlier this week, the court posted the following notice:
"Judge Leval wishes to advise the parties as follows:
1. A year ago Judge Leval was invited by the Stanford Law School to be a participant in a two-day conference at the school focusing on Internet issues, which was to be jointly sponsored and organized by the Stanford Law School and Google, Inc. [Eric's note: this is the Legal Futures Conference--see the conference website.] The conference, which was held at the Law school on March 7 and 8, 2008, will pay the travel, lodging and board expenses of the participants. The conferees, numbering approximately 50, included professors of law, business, economics and communications, participants the Internet from the profit and not-for-profit sectors, writers, lawyers, government representatives, judges, and Stanford law students. In preparation for the conference, Judge Leval communicated by email with a Google representative concerning the subject matter and organization of a panel in which he would participate (The subject of the panel was unrelated to trademark law or to any other issue involved in this case.). On one evening, the conferees were hosted for dinner by Google at its campus. During the two days, Judge Leval met and chatted briefly with Google representatives who were involved in organizing the conference.
2. Judge Leval has been friendly for nearly twenty years with William Patry, Esq., since the time Mr. Patry was employed in the United States Copyright Office in the Library of Congress and as Copyright Counsel to the US House of Representatives, Committee on Intellectual Property. For approximately the last two years, Mr. Patry has been part of the legal staff of Google (Mr. Patry was not a participant in the Stanford conference).
Judge Leval is confident that these contacts with Google, Inc. Would in no way influence his consideration of the case. If either party wishes to move for Judge Leval`s recusal from consideration the case (or to request further information or clarification), it should submit a letter-motion (or letter requesting such further information) to the Clerk of the Court by 11:00am on Friday March 28."
Barring such a recusal request, the panel will be Judges Calabresi, Leval and Wesley.
More case resources:
* Commercial Referential Trademark Uses (Rescuecom v. Google Amicus Brief Outtakes)
* Rescuecom reply brief
* Law professors' brief by Stacey Dogan and me
* Electronic Frontier Foundation amicus brief by Jason Schultz, Corynne McSherry and Fred von Lohmann
* Public Citizen amicus brief by Paul Levy
* eBay/Yahoo/AOL amicus brief by Celia Goldwag Barenholtz, Janet Cullum and others of Cooley Godward Kronish [now mooted]
* Google's initial brief
* Rescuecom's initial brief
* District Court's opinion
Posted by Eric at 04:17 PM | Search Engines , Trademark | TrackBack
Google Site-Specific Search-Within-Search Tool--Why is Everyone So Worked Up About This?
By Eric Goldman
On Monday, Bob Tedeschi at the NYT published an article entitled "A New Tool From Google Alarms Sites" about Google's recently launched site-specific search-within-search box. When I first saw the feature, I really didn't think about it very much because I already use Google to search within a site and bypass the site's internal search function. In fact, I routinely use Google to locate items in my own website and blog instead of my own search tool (blog.ericgoldman.org is the #1 site in my Google Web History).
As a result, I didn't think the tool or the article was particularly blog-worthy. However, I've now gotten at least 4 emails from people wanting to chat about this tool. So, by popular demand, some thoughts:
From a trademark law standpoint, I don't think the tool changes the analysis. In theory, Google is gaining more insights into the searcher's intentions; instead of knowing just X (the first search term), it now knows X+Y, which increases the odds that we might intuit the searcher's intent well enough to assess if the searcher is being "diverted" by alternative options. However, (1) even with the additional information, Google still doesn't know searcher intent, so it will still be improper to make any conclusions of "diversion," (2) in practice, this really isn't any different than if the searcher initially puts in X+Y into the search box, so Google already faces this liability, and (3) in all cases, Google may lack the requisite use in commerce to be liable for trademark infringement regardless of how deep it goes into the consumer search process.
Irrespective of the legal analysis, I think it's interesting that some publishers are revolting against Google, which forces Google to think carefully about how it can maintain good publisher relations. Even more interesting is if Google is cutting special deals with some publishers to remove the site-specific search. I don't think that Google can realistically support treating different sites differently, so I assume that Google ultimately will be pressured to give all sites an opt-out option (or take down the tool entirely).
One last thought--I wonder just how many searchers are using this new search option? It wouldn't surprise me if usage is modest, in which case this could all be a tempest in a teapot.
Posted by Eric at 03:42 PM | Search Engines , Trademark | TrackBack
March 26, 2008
Griper Selling Anti-Walmart Items Through CafePress Doesn't Infringe or Dilute--Smith v. Wal-Mart
By Eric Goldman
Smith v. Wal-Mart Stores, Inc., 2008 WL 760196 (N.D. Ga. March 20, 2008)
Charles Smith doesn't like Walmart. Like many gripers, he has taken his cause to the web. Among other things, he set up two CafePress stores to sell t-shirts and other items that bore a variety of anti-Walmart designs and slogans, including the phrases "Walocaust" and "Wal-Qaeda." He registered domain names containing those phrases and pointed them to his CafePress pages. He also did some other limited promotions of the CafePress stores.
It appears Smith hoped that the CafePress sales might defray the litigation costs, and he chose to set the merchandise price at a 30% profit margin rather than at cost (which was an option in CafePress' menu). Even so, market response to these lightly marketed goods wasn't strong, and he sold less than 50 shirts in total (excluding the sales to plaintiff's lawyers). All told, "The revenues from Smith's CafePress Walocaust and Wal-Qaeda account sales have been less than his costs for the domain names and CafePress account fees." Doesn't sound like a good business decision.
Worse, the CafePress stores could have been detrimental from a legal standpoint. These sales confirmed that Smith was making a "use in commerce" of the designs and slogans, eliminating one potential defense argument that other non-commercial gripers try to invoke. As a result, the decision to expand his griping campaign to CafePress was a potentially risky one--not only didn't Smith make any money to help fund his defense, but he may have weakened his defense from a legal perspective. Stated differently, there are rules of engagement for gripers, and some courts will hold that the rules prohibit a CafePress battlefront. It worked out OK for Smith, but other gripers should proceed cautiously.
In any case, with no argument over use in commerce, Smith's defense focuses on likelihood of confusion. Walmart brought out the big guns in the form of frequent trademark expert Prof. Jacob Jacoby, who did two mall intercept surveys (including regular surveys plus a mock website) to establish confusion and dilution. First, what a ridiculous and expensive waste of money for Walmart to retain Jacoby for such a low-stakes dispute--Jacoby is like a nuclear flyswatter in this case. Second, the court rightly sees the problems of trying to fit a griping dispute into a standard trademark survey, and as a result most of Jacoby's survey gets tossed or ignored. Third, the court embraces Smith's activities as a parody, which doesn't automatically resolve the likelihood of confusion analysis in Smith's favor but swings some of the factors over to his side. Summary judgment for Smith on the trademark infringement and related claims.
The court also grants summary judgment against Walmart's dilution claims because "Smith's parodic work is considered noncommercial speech and therefore not subject to Wal-Mart's trademark dilution claims, despite the fact that Smith sold the designs to the public on t-shirts and other novelty merchandise."
Finally, to complete Smith's success, the court rejects the trademark claims over Walmart's smiley face, saying that "Wal-Mart has failed to establish that the smiley face has acquired secondary meaning or that it is otherwise a protectible trademark." Due to this ruling, Walmart ends this lawsuit with fewer trademark rights than when it began (see the analogous consequence in the American Blinds case). Whoops!
This raises the question most on my mind: why did Walmart try to enforce its rights against Smith in the first place? To be fair, Walmart didn't sue Smith; Smith brought a DJ. But Walmart did send C&Ds to Smith and CafePress, and as every trademark owner knows, every C&D has the risk of prompting a DJ that leads to the invalidation of their trademark rights--EXACTLY WHAT HAPPENED HERE! So why did Walmart send the C&D in the first place? After all, Smith was a small potatoes griper, and the enforcement action served to raise his obscure profile. More importantly, I can't imagine any construction of a trademark owner's policing duty that extends to cover a griper like this. If Walmart felt it needed to shut down Smith to satisfy some policing obligation, I respectfully but emphatically disagree with that judgment.
Walmart didn't drag CafePress into this lawsuit (after all, CafePress did initially fold in response to Walmart's C&D). Nevertheless, I'm struck by the fact that this is the second time I'm blogging on CafePress in the last month. See my previous blog post on Curran v. Amazon. It seems to me that future cases will address the liability of websites like CafePress that help users become retailers with minimal upfront investments. It's not 100% clear to me that sites like CafePress can point the finger at their users and walk away from liability.
More on this case:
* Public Citizen's web page with source material from the case
* Public Citizen's press release
* A thorough Law.com article with some good interviews
* Atlanta Journal-Constitution
* Sam Bayard
* Ron Coleman
Posted by Eric at 02:50 PM | Trademark | TrackBack
March 24, 2008
Clickthrough Agreement Binding Against Minors--A.V. v. iParadigms
By Eric Goldman
A.V. v. iParadigms, 2008 U.S. Dist. LEXIS 19715 (E.D. Va., March 11, 2008),
I previously blogged that the judge was going to dismiss this case. The judge finally issued an opinion explaining his reasoning, and it's quite an interesting read.
At issue is iParadigms' Turnitin plagiarism detection service. It works as follows: a professor adopts the Turnitin service for a class. Students then submit class papers directly to the Turnitin database. Turnitin compares the submitted papers against its database, which includes Internet content, previously submitted student papers, and various commercial databases. Turnitin then provides the professor with an "Originality Report" assessing the likelihood that the paper was original to the student and not copied from one of the sources in the database. At the same time, Turnitin adds each student-submitted paper to its proprietary database so those papers create matches if submitted again.
Personally, I've never used the Turnitin service. I'm lucky enough that when I've taught "paper courses," I've been able to work closely enough with each student that a plagiarized paper would be useless. However, not every professor or teacher can interact with students enough to make these individualized assessments, and there are plenty of courses where students basically dump a paper onto professors in a relatively impersonal exchange. In those cases, I could see why Turnitin is an important or even essential tool to combat student efforts to game the grading system.
Even so, I remain troubled by some aspects of the Turnitin service. Most of my concerns relate to the implicit coercion of students to use Turnitin. Some students may not be aware that the professor will require Turnitin use at the beginning of the semester when (in theory) objecting students could freely drop the course, in which case the student is effectively required to use Turnitin to pass the class regardless of student consent. Even more problematically, students might be required to take a Turnitin-mediated course--such as when the course is a mandatory prerequisite and there aren't multiple professors teaching the course, or when students are assigned to a course without any choice (such as in high school). In those cases, students are forced to participate in the Turnitin scheme whether they want to do so or not. This isn't the biggest travesty in the world, but I'm not sure it's fair either.
The plaintiffs in this case--a group of four high schoolers--mount a solid attack on the Turnitin system for copyright infringement based on Turnitin keeping copies of their papers and occasionally republishing the papers to other professors when the papers trigger matches in future Originality Reports. iParadigms defends based on its mandatory clickthrough agreement, which every student must agree to as part of the submission process. The clickthrough was properly formed, so there's no question that it superficially demonstrates mutual assent.
However, student consent is illusory in at least two ways. First, as I mentioned, many students don't have a meaningful choice about consenting to the clickthrough agreement because they will fail their courses if they don't submit. The students attack this as duress, and the court correctly notes that Turnitin is not the source of duress; instead, the schools are the source, and the court tells the students to take it up with them. While the court is right that duress doesn't apply directly here, I could have seen other courts using the school-supplied duress as part of an unconscionability attack on the contract.
Second, the plaintiffs were minors, and well-settled law is that incomplete contracts with minors are voidable. The court sidesteps this issue by saying that the students had received the complete benefit of the Turnitin contract relationship when their papers were cleared by the Originality Report, and therefore they could not "return" the benefits conferred on them by Turnitin.
This is a ruling of potentially large significance. I've long believed that courts would struggle with dismissing claims by minors against websites because of the voidability issue, which seemingly left a large class action hole against all websites with minors as users. That hole may still exist--it depends on whether the contract is complete or not, and in many cases both parties will have incomplete obligations in a standard website EULA. Despite this, it's clear that this judge wasn't going to entertain any bypass that threatened the integrity of the Turnitin service, and I wouldn't be surprised if many other courts would reach the same conclusion in other circumstances.
The court dismisses the copyright infringement claim on the alternative ground that Turnitin's copying is fair use:
* storing the copy of the paper for plaigarism purposes is highly transformative
* the court twists the nature of work factor to weigh in favor of Turnitin, saying that Turnitin doesn't use the papers for their creative meaning
* the court also twists the amount/substantiality of the portion taken to weigh in favor of Turnitin. Even though Turnitin takes 100% of the work, it doesn't really publish the entire work (except in the occasional cases where a professor requests a copy after a match in the Originality Report) to others but simply flags the match.
* the court dismisses the effect on the market value of the work. Most student papers have no commercial value. The papers would have commercial value if resold to the term paper websites, but the plaintiffs conceded that they wouldn't authorize this usage because that would be cheating.
While I can't really quibble with the conclusion that Turnitin's use is fair, especially given the laudable objective of plagiarism suppression, other judges would have reached the opposite conclusion because Turnitin forces students to put their papers into a database that iParadigms mines for its profit.
In any case, this fair use ruling may augur well for search engine fair use cases, most obviously Google's book search and Google News--both of which pump third party copyrighted works into a for-profit database but republish only a limited portion.
The opinion also has some interesting discussion about iParadigms' counterclaims against the students. iParadigms initiated a very aggressive counterattack against the students (the words "scorched earth" came to mind). I guess iParadigms wanted to send the message--don't screw with us, because we'll make your life heck. I don't think iParadigms expected to get any meaningful payoff from their counterclaims, but they got nothing. In some sense they are lucky that it wasn't worse; I could see some judges taking such umbrage at iParadigms' tactics that they could have backfired.
iParadigms sought indemnity from the students based on a clause in its usage policy. The problem is that the usage policy wasn't presented as a mandatory clickthrough (whoops!) and the court refuses to extend the Register.com v. Verio bailout here.
One of the students obtained false credentials to log into the system at one point, but the court rejects iParadigms' claim that such a login was a trespass to chattels, Computer Fraud & Abuse Act violation or Virginia Computer Crimes violation because iParadigms couldn't make any showing of damages from this unauthorized login. This is the right result (at least with respect to trespass to chattels) per Intel v. Hamidi, but we've seen plenty of courts ignore the damages requirement from the Hamidi case.
Other comments on this case:
* Tom O'Toole
* Rebecca Tushnet
* Siva Vaidhyanathan
* Georgia Harper
* William Patry
UPDATE: According to the Chronicle of Higher Education, the students plan to appeal. Given the many conflicting norms associated with this case, I would be surprised if the appellate ruling was as decisively favorable for Turnitin as the district court opinion was.
Posted by Eric at 10:41 PM | Copyright , Licensing/Contracts , Privacy/Security | TrackBack
March 23, 2008
Adwords Ad Creates Initial Interest Confusion--Storus v. Aroa
By Eric Goldman
Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008).
(Sorry for my delay blogging this one).
A federal district court has held that displaying a competitor's trademark in Adwords ad copy constitutes impermissible initial interest confusion, leading to a summary judgment win for the trademark owner. This is one of the first competitor-vs.-competitor search advertising cases where the plaintiff has won the trademark claims. This case also has an interesting and rare discussion about the trademark implications of a retailer’s internal search engine.
Claims Against Aroa
Storus distributes money clips under the trademark "smart money clips." Storus was able to get a federal registration for the mark, which is interesting because I’d love to see the showing of secondary meaning. Given the registration, Aroa instead tries to knock out "smart" as a laudatory phrase, but the court isn't convinced. Thus, the court permits Storus to proceed with a pathetic descriptive mark.
Aroa sells competitive money clips. Through Adwords, it purchased the keyword "smart money clip" to display the following ad:
Smart Money Clip
www.steinhausenonline.com Elegant Steinhausen accessories. Perfect to add to any collection.
Per Google's standard formatting, the trademark shows up bold and underlined, which the court says overshadows Aroa’s display of its own trademarks in the ad copy. The court also invokes initial interest confusion (as part of the Ninth Circuit's inconsistently invoked "Internet trilogy" likelihood of consumer confusion analysis) and notes that "defendants offer no evidence to show a lack of actual initial interest confusion." Summary judgment for plaintiff.
Claims Against Skymall
Skymall is an online retailer of Aroa products. Storus alleges that Skymall included the term "smart money clip" on Aroa product pages, which meant that if a person searched for "smart money clip" in Skymall's internal search engine, Aroa's products would appear in the search results. Storus portrayed this as initial interest confusion, but the court wasn't persuaded enough to grant summary judgment. Instead, the court observes that "a page offering an Aroa money clip will appear as a search result solely because the consumer searches using the phrase “money clip,” irrespective of whether the consumer adds the word “smart” to the search term and irrespective of whether the page contains the word “smart.”" Isn't it amazing that a page containing the phrase "smart money clip" would also appear for a search on "money clip"?!
Implications
On the surface, this case looks problematic for the search advertising industry. Any time a search advertising practice is deemed infringing, it should promptly eliminate all similar ads from other advertisers, taking a chunk of revenues out of search engine pockets. Further, when advertisers are liable for trademark infringement, it increases the risk that search engines will be contributorily liable for those infringing ads.
Yet, Aroa’s practices here (displaying a competitor’s trademark in the ad copy) are already restricted by all of the search engine trademark policies. Therefore, this ruling shouldn’t reduce much ad revenue for search engines.
But that raises the obvious question: why didn't Storus just invoke these search engine policies to shut down Aroa? As Dennis Toeppen might have said, perhaps Storus' lawyer wanted a new boat, because this trademark lawsuit made absolutely no financial sense for Storus. The court determines that over 11 months Aroa got 1,374 clicks on its ads (from 36,164 ad impressions, yielding a 3.7% clickthrough rate--not bad). If we value each click at $1/click (a generous amount given that Aroa sells its money clip for $30), Storus could have acquired the "diverted" clicks for $1,374--an amount that is surely no more than 5% (and perhaps even less than 1%) of what Storus spent in this lawsuit. Smart business decision there, guys.
Doctrinally, this case is a textbook example of how the initial interest confusion doctrine is completely bogus. As I’ve said before, a defendant cannot mount an adequate defense against the initial interest confusion doctrine because the doctrine lacks any rigorous definition or normative support in the first place. The defense challenge is especially problematic where, as here, a court improperly puts the burden on the defendant to disprove that consumers experienced initial interest confusion. Exactly what proof would satisfy the court here? I can’t answer this and I bet the court couldn’t either, and I can go further and assert that evidence to disprove initial interest confusion simply does not exist at all.
This court also unfortunately buys into the tired and outdated syllogism that every click on Aroa’s ad was a “diverted” consumer. As I’ve explained here, this massively overstates the quantum of “diversion” (whatever that means) because we don’t know what consumers expected to find when they entered the search term “smart money clip.” The low general risk of diversion is even lower here because consumers saw Aroa’s trademarks in the ad copy, further reducing the risk that anyone was confused by the time they decided to click on the ad.
Other comments on this case:
* Thomas O'Toole
* Tech LawForum
* IP Law Observer
* Las Vegas Trademark Attorney
Posted by Eric at 10:05 PM | E-Commerce , Search Engines , Trademark | TrackBack
March 14, 2008
Craigslist Gets Seventh Circuit 230 Win in Fair Housing Act Case--Chicago Lawyers' Committee v. Craigslist
By Eric Goldman
Chicago Lawyers' Committee for Civil Rights Under Law v. Craigslist, Inc., 2008 WL 681168 (7th Cir. March 14, 2008)
Yesterday, I declared this week "47 USC 230 Week" at the Technology & Marketing Law Blog. The Seventh Circuit helps us end 47 USC 230 Week with a bang with its Craigslist ruling, an important opinion that reinvigorates 47 USC 230 doctrine in the Seventh Circuit. Sadly, like the district court opinion, this opinion is filled with gratuitous and unfortunate dicta that dilutes the analysis. Nevertheless, on the plus side, the Seventh Circuit (like the district court) emphatically reaches the right result and grants Craigslist a solid win under 47 USC 230.
Easterbrook's opinion takes a loving and lengthy gaze at his previous Doe v. GTE opinion (including using about 20% of this opinion to quote from the prior opinion), but I don't think there's much value to parsing his confusing statutory analysis to figure out how the two opinions sit together. Instead, the key part of the opinion is that Easterbrook fully realizes the costs and benefits of making an intermediary filter user content. Craiglists provides an excellent test case for that because they are so leanly staffed, and the Fair Housing Act is a good test statute because of the squishy nature of making discrimination assessments. More fundamentally, Easterbrook also understands that any filtering system is imperfect: "Automated filters and human reviewers may be equally poor at sifting good from bad postings unless the discrimination is blatant; both false positives and false negatives are inevitable."
As a result, Easterbrook recognizes that turning Craiglist into a content cop may not be the best solution. I think his conclusion says it best:
Using the remarkably candid postings on craigslist, the Lawyers’ Committee can identify many targets to investigate. It can dispatch testers and collect damages from any landlord or owner who engages in discrimination....It can assemble a list of names to send to the Attorney General for prosecution. But given §230(c)(1) it cannot sue the messenger just because the message reveals a third party’s plan to engage in unlawful discrimination."
It will be interesting to see how this opinion affects the Ninth Circuit's en banc consideration of the Roommates.com case. After all, the legal issues are identical, and Easterbrook's Doe v. GTE ruling was a key precedent for the plaintiffs. Now, with Easterbrook having said (decisively) that 230 preempts claims for the Fair Housing Act, it seems like the Doe precedent is effectively worthless to the Roommates.com plaintiffs. As a result, the only solid way for the plaintiffs to distinguish the uniformly defense-favorable precedent is by hammering on the fact that Roommates.com provided structured categories for user content--a fact that might be enough to craft an exception to 230, though I think it shouldn't.
UPDATE: Randy Picker: "Chicago Lawyers’ Committee v Craigslist: Yet Another Reason Newspapers are Dying"
Posted by Eric at 12:17 PM | Derivative Liability | TrackBack
March 13, 2008
eBay Denied 230 Defense for Its Marketing Representations--Mazur v. eBay
By Eric Goldman
Mazur v. eBay Inc., 2008 WL 618988 (N.D. Cal. March 4, 2008)
I declared Monday "47 USC 230 Day" here at the Technology & Marketing Law Blog, but with this new case, I'm declaring it 47 USC 230 Week. This case explores one of the frontiers of 47 USC 230 jurisprudence--when can 230 preempt a claim that a website made false marketing representations? This issue has been lurking in numerous recent 47 USC 230, but it arises squarely here. Unfortunately, the legal analysis isn't clean or easy.
eBay offers its users the ability to engage in "live bidding" (i.e., bidding via the Internet on auctions taking place in physical space) through third party vendors. eBay's marketing materials described these vendors as "safe" and "carefully-screened, reputable international auction houses" and that the bidding was against "floor bidders" (i.e., people bidding on the physical floor of the auction). The plaintiff claims that instead shill bidders at the auctions caused her to overpay. eBay defends against the claims based on 230 because any falsity introduced into its statements was attributable to the actions of third party vendors.
Judge Patel found that 230 helped eBay in a number of respects:
* "to the extent plaintiff seeks to hold eBay liable for information provided by [a third party vendor], eBay is immune from liability".
* "plaintiff’s assertion that eBay knew of the seller’s illegal conduct and failed to prevent it is nevertheless under the ambit of section 230"
* "eBay’s assertion that the auction houses were screened is not actionable" because the screening is an editorial function [note: I'm not sure screening vendors for quality is really an editorial function in the traditional sense. Perhaps this particular issue would have been more appropriately handled under 230(c)(2)?]
At the same time, the court says that three other statements at issue--that live bidding is "safe," is conducted against "floor bidders" and involves "international" auction houses--are not preempted by 230. In doing so, the court distinguishes several cases, including:
* the Gentry case (involving eBay's liability for fake sports memorabilia) because eBay's communications there were distilled from user-supplied feedback
* the SexSearch case (where the site claimed its users were 18+ but a minor lied about her age) because the marketing claims "were merely a regurgitation of its users’ representations" whereas here, apparently eBay made no regurgitations
* the infoUSA case (where infoUSA said that it verified data in its database) and the Barnes case (where Yahoo failed to take down bogus user profiles) because each involved the accuracy of data, while this case involves the promise of safety. [Note: I think the court makes a rather fine distinction here. Clearly the word "safe" means something special to this judge: "eBay’s statement regarding safety affects and creates an expectation regarding the procedures and manner in which the auction is conducted and consequently goes beyond traditional editorial discretion."]
The court doesn't discuss the Accusearch case, which seemed like the most analogous case to me. That case involved a vendor's resale of illicit phone records that were procured by third parties via pretexting, and the court held that 230 didn't protect the vendor even though the underlying asset being sold was information from a third party. The Accusearch opinion doesn't directly hold the vendor responsible for marketing these illicit records as legitimate, but that would be a fair way to read the opinion. The court also could have cited (but didn't) the CafePress opinion, which also involved a 230 denial for a website selling tortious third party goods.
So, what does all of this mean? The bad news is that this case seems to open up a major bypass to 230 for plaintiffs. They don't need to sue a website for a third party-caused tort by asserting the prima facie tort against the website; instead, following the "logic" in this opinion, all a plaintiff needs to do is find that the website made a marketing representation somewhere that says or implies the tort wouldn't occur, and the claim for bad marketing should be outside 230's coverage. [Note: I understand that's not exactly what Patel said because she did reject the claims for eBay's marketing representation about screening. But the claim over "safety" fits this pattern neatly.]
On the other hand, I'm not sure this case reached the wrong result. Assume for a moment that per 230, eBay isn't liable for the marketing claim that its vendors are "safe." This seemingly would mean that eBay could freely make such claims, true or not, reap the economic benefits from consumer choices driven by those claims, and yet completely avoid liability. I don't think 230 should provide a free pass for commercial misrepresentation. eBay picks the words to describe its business; it should own those words.
In any case, as this case illustrates, I think it's fair to say that 230's preemption of marketing representations remains a major open area in 230 jurisprudence. If you're looking for a term paper project, this looks like a good one to me.
Even if 230 doesn't apply, eBay has other defenses against liability for the alleged marketing misrepresentations. The court rejects eBay's defense based on the release in the eBay user agreement, but it does dismiss the fraud claim (with leave to amend) because it lacked the requisite specificity.
The opinion also discusses one of the auction vendor's user agreements, which specified a highly expedited extrajudicial adjudication as the sole dispute resolution option. The court tosses the contractual adjudication procedure as unconscionable due to the contract's formatting and substantive unfairness. Along the way, the court casts some doubt on extrajudicial adjudication clauses that have "no witness" provisions. If you're interested in forming enforceable online user agreements, you should check out this opinion.
Posted by Eric at 09:40 AM | Derivative Liability , E-Commerce , Licensing/Contracts , Marketing | TrackBack
March 12, 2008
The Law & Business of Online Advertising Conference Announcement
By Eric Goldman
I'm pleased to announce that the High Tech Law Institute at Santa Clara Law School has teamed up with the Berkeley Center for Law and Technology to organize a one-day symposium on the Law and Business of Online Advertising, April 18, 2008 in Berkeley. We have a first-rate group of speakers and a nice diversity of important topics. Best of all, registration is free and CLE is available at a nominal cost. Here's the official notice:
With the explosive growth of online advertising, businesses and their counsel must be aware of new technologies, their legal implications, and evolving legal risks in the field. The Law and Business of Online Advertising brings together academics, practitioners, business leaders, and technology experts to discuss legal, policy, and technical developments in online marketing. This intensive event begins with two tutorials led by Professor Hal Varian (Chief Economist, Google) and Microsoft's Kim Howell on the economics and technology of online advertising, followed by panels exploring online advertising issues faced by consumers, publishers, and advertisers. In-house and outside legal counsel who represent or will represent businesses with online advertising should attend, as should those developing or implementing online advertising technologies. Registration is free. To register and view the schedule and speaker bios, please visit the Conference website.
I hope to see you there!
Posted by Eric at 05:28 PM | Marketing | TrackBack
March 11, 2008
Iowa Offers Tax Breaks to "Web Search Portal Businesses"
By Eric Goldman
Iowa, showing its technological savvy, has passed a law providing some tax abatements for "web search portal businesses" that invest $200M in the state in 6 years. See HF 2233, enacted Feb. 28, 2008. Most industry participants would not use the term "web search portal business," but the statute provides a useful definition as an "entity whose business among other businesses is to provide a search portal to organize information; to access, search, and navigate the internet, including research and development to support capabilities to organize information; or to provide internet access, navigation, or search functionalities." Well, that helps narrow down the universe of qualifying companies.
Given the size of investment required, I'll give you three guesses who the Iowa legislature might have been thinking of. Give up? Check out this handy list of lobbyists for the bill and see if you spot any familiar names.
As the fiscal note indicates, they anticipate a whopping TWO buildings to be built pursuant to this abatement. Not that this is special interest legislation or anything... On that note, one of the Iowa senators blogs on the law. Why is he winking at me?
Posted by Eric at 08:13 PM | E-Commerce , Search Engines | TrackBack
March 10, 2008
47 USC 230 Day at the Technology & Marketing Law Blog
By Eric Goldman
Today is 47 USC 230 Day at the Technology & Marketing Law Blog as we catch up on a hat trick of recent 47 USC 230 opinions.
1) Gregerson v. Vilana Financial, Inc., 2008 WL 451060 (D. Minn. Feb. 15, 2008)
The defendants repeatedly infringed plaintiff's photos. After the defendants did not pay up in response to a demand letter, the plaintiff posted some griping material to his website and included a section inviting comments about the defendants. Third parties subsequently posted potentially defamatory comments. In a rather perfunctory and typical analysis, the court says that per 47 USC 230 the plaintiff isn't liable for these third party comments, even if the plaintiff received notice about them.
Beyond the 230 discussion, the case touched on some other interesting issues:
A) The defendant's principal claimed that he had a conversation with a guy in a public sauna who recreated the photos and then granted legitimate licenses to the defendants. Unfortunately, alibis based on business deals arranged with strangers in public saunas are always a tough sale for judges.
B) The plaintiff's demand letter quoted his standard license fee for the photos but, as a penalty, demanded 3X that amount and said the settlement price would increase 10X if the plaintiff wasn't paid in 2 weeks. This type of escalating demands is fairly typical with freelancers, who often overestimate the value of their work both in the market and to particular defendants. The court scoffs at the 10X demand, rejecting its legitimacy as a measure of copyright damages, and instead awards the plaintiff its license fee without any gross-ups. I hope this opinion encourages freelancer photographers to make settlement demands based on a realistic assessment of damages, not based on fantastic artificially inflated license fees.
C) The plaintiff gets damages under 17 USC 1202 because the defendants cropped some copyright management information from the photos. This is one of very few plaintiff wins under 1202.
2) Global Royalties, Ltd. v. Xcentric Ventures, LLC, 2008 WL 565102 (D. Ariz. Feb. 28, 2008)
I previously blogged on this case here. As I noted then, Ripoff Report got a defamation claim dismissed (with leave to amend) per 47 USC 230 even though the original poster had repudiated the post and requested its removal. The plaintiff filed an amended complaint, but the court rejects it again, concluding that the poster's request to remove his posting doesn't change the 230 analysis: "liability based on an author’s notice, workable or not, is without statutory support and is contrary to well-settled precedent that the CDA is a complete bar to suit against a website operator for its “exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone or alter content” [cite to Zeran]."
The court also rejects the plaintiff's arguments that (1) the Ripoff Report should drop out of 230 coverage because it allegedly runs an extortion racket, (2) Ripoff Report's supplying of category tags matters, and (3) the Roommates.com case has any bearing on this case (the Ninth Circuit opinion was vacated with the en banc hearing, so there's nothing precedential at the moment). The court also refused to stay the case pending the en banc opinion.
3) John Doe Anti-Terrorism Officer v. City of New York, No. 06-cv-13738 (S.D.N.Y. Feb. 6, 2008) [hat tip Jeff Neuburger]
The plaintiff is an Arab-American police officer in the NYPD. He is suing the NYPD and Tefft for racial discrimination principally based on invective-filled emails sent by Tefft, who was a third party contractor (an antiterrorism consultant) to the NYPD. Tefft defends on 47 USC 230 because he claims he simply forwarded third party content (such as articles) in his emails. However, Tefft also added his own commentary to that third party content, such as introductory statements to the articles, and the court rightly says that 230 doesn't provide any protection for the material added by Tefft.
The court goes on to say that Tefft can't qualify as a "user" of an ICS, a determination that the court apparently didn't research very well because the caselaw has repeatedly reached the opposite conclusion.
Posted by Eric at 09:49 AM | Copyright , Derivative Liability | TrackBack
March 07, 2008
Utah Amends Trademark Protection Act (But Only After Some Drama)
By Eric Goldman
One of the arguments in favor of federalism is that it enables states to act as "laboratories of experimentation," a phrase attributed to Louis Brandeis. The idea is that if enough states try different things legislatively, then some good ideas will percolate up the system and other states can emulate the best ideas. But the "Law of Large Numbers" argument cuts the other way too. If we have enough different legislatures trying out different things, inevitably some legislatures are going to cook up some really crazy shit. And when it comes to state legislatures trying to impose their experiments on a global Internet, even a single mad scientist can wreak a lot of havoc.
Unfortunately, the Utah legislature is the Dr. Frankenstein of Internet regulation. With their track record, I consider the Utah legislature the flagship example of why Internet federalism doesn't work.
And among the bad experiments by the Utah legislature is the Utah Trademark Protection Act, one of the worst pieces of Internet legislation of all time. Fortunately, the Utah legislators responsible for the act ultimately realized the errors of their ways and decided to repeal the substantive provisions.
But isn't it so true-to-form that the Utah legislature nearly botched the repeal of their botched law? At the 11th hour, after the Utah Senate had passed the repealing amendments and after 2 readings in the Utah House, a Utah representative introduced a different amendment that attempted to salvage some of the act's substantive restrictions. You can see the proposed amendments here. Kate Kaye reports that this amendment was introduced at the behest of our old friend 1-800 Contacts, who initially had been part of the coalition to repeal the Utah Trademark Protection Act but apparently had a last-minute change of mind.
I don't fully understand the substantive consequences of the proposed amendments. According to Kate, 1-800 Contacts apparently wants Google to call its keyword ads "paid advertising" instead of "sponsored links," but I'm not sure why that would be particularly valuable to 1-800 Contacts, and in any case this clearly isn't something that can or should be legislated at the state level. Ironically, due to sloppy drafting, the proposed amendments squarely seemed to govern Catalina Marketing's widely used system of in-store delivery of coupons triggered by competitive purchases, so these amendments would likely have stirred up a hornet's nest of protests from local grocery stores. That's what happens when legislatures act too fast on topics they don't understand, and here raising new substantive amendments on the House floor without any time for critical review and discussion ensured that confusion would reign. As a result, it was guaranteed that if 1-800 Contacts' amendments passed, (a) Google and other Internet companies were going to make yet another trip to the Utah legislature to school them, and (b) if that reeducation didn't lead to the repeal that was promised, a lawsuit would be forthcoming.
Remarkably, despite the fact that Utah already had so badly muffed the initial Trademark Protection Act, and despite the process violation of introducing a major substantive amendment with no time to critically vet it, the Utah House handily passed 1-800 Contacts' proposed legislation. Since the Utah Senate had already passed the substantive repeal of the Trademark Protection Act, the bills went to a committee for reconciliation. I haven't yet gotten any insight into these backroom negotiations, but the House backed down and passed the repeal in the form passed by the Senate. Whew, that was close!
So the law now goes to the governor for signature. Given Utah's track record, it wouldn't surprise me in the least if there is some more nonsense before his ink hits the paper.
Meanwhile, this 11th hour drama only reinforces how important it is that we as a community monitor developments in every legislative forum. As 1-800 Contacts' end run shows, we can never be too vigilant. And as I mentioned in my last post and in light of 1-800 Contacts' ominous statements (and as Tom O'Toole reports, also noting that keyword plaintiffs American Blinds and American Airlines also were urging on the Utah legislature too), I guarantee you that the legislative battles over keyword advertising aren't going away. If nothing else, with term limits, new mad scientists are joining the legislative ranks constantly.
UPDATE: Google's Public Policy Blog lauds the amendment.
Posted by Eric at 01:03 PM | Trademark | TrackBack
March 04, 2008
Utah Quietly Killing the Trademark Protection Act [UPDATED]
By Eric Goldman
[See update below]
We're coming up on the one year anniversary of the Utah Trademark Protection Act, Utah's effort to kill/tax keyword advertising. It looks like the law may not survive until its first birthday, as the Utah legislature is in the process of amending the act. On Feb. 6, the Utah Senate passed SB 151 and sent it to the Utah House, where it is now pending. A quick perusal of SB 151 indicates that the amendments strike every instance of the term "electronic registration mark" (Utah's phrase for the new sui generis property right it created in the Trademark Protection Act). As I blogged before, the amendments instead focus on allowing trademark owners to electronically register their trademarks in a Utah database (more on this in a moment).
Thus, it looks like the Utah legislature will eliminate all of the new substantive provisions added in the Utah Trademark Protection Act--in other words, a complete 180. On the one hand, I applaud the Utah legislature for reaching the only logical conclusion available to it--that the Utah Trademark Protection Act was stupid and untenable, so wiping the slate clean was both the best social policy and the lowest cost option. On the other hand, I remain shocked that Utah residents tolerate legislators who screw up this big and waste valuable resources enacting ill-advised laws only to waste more resources reversing themselves. If a California legislator screwed up like this, he or she would be recalled faster than you can say "Rose Bird" or "Gray Davis." And I apologize if it's rude to say this, but I get asked this question a lot--when the legislature whiffs as bad as this, yes, we do think the Utah legislature is a (bad) joke.
As for the new electronic registry, I'm a little confused about what Utah is considering. If the database is simply an e-government initiative to cut down on paper filings and push registrants to make electronic filings, that sounds like a positive development but I'm not sure why it would require legislative authorization. But there is an intimation that this will generate new incremental revenues from trademark owners who seemingly will value listing in Utah's electronic database. The fiscal report indicates that the law should generate $50,000 of revenues, enough to compensate for $50,000 of database development costs. Perhaps Utah is planning to get into the worthless-registry business, an industry well-known to all trademark owners. After a trademark registers, the owner gets a blizzard of official-looking letters from companies offering to list the trademark in a proprietary but worthless registry. What better way to scare some cash out of unsophisticated trademark owners than an official solicitation on Utah state letterhead?
Even when the Utah Trademark Protection Act has been fully gutted and eliminated as a threat to the keyword advertising industry, I guarantee that the war is hardly over. Future state legislators are going to find regulating online advertising irresistible, and each of these legislative initiatives poses grave risks to our information economy. As a community, we need to undertake the Sisyphean effort of continuously monitoring our legislators and educating them about the harm they can do with misguided regulatory intervention.
UPDATE: Hold the phone! Perhaps this is not surprising, but the Utah legislature is doing more screwy stuff. When the dust clears, I'll post a new blog post trying to make sense of the madness.
UPDATE 2: It appears that Utah passed the law in the form I blogged about. See here and here. This presumably sends the bill to the governor for signature. I'll blog more about the last 24 hours shortly.
Posted by Eric at 11:14 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack
March 03, 2008
Lifestyle Lift Tries to Use TM Law to Shut Down User Discussions; Website Countersues for Shilling--Lifestyle Lift v. RealSelf
By Eric Goldman
Lifestyle Lift Holding, Inc. v. RealSelf Inc., 2:08-cv-10089-PJD-RSW (complaint filed Jan. 7, 2008 and answer/counterclaims filed March 3, 2008)
[disclosure note: I have done some legal work for RealSelf, including some limited counseling on this lawsuit]
No matter how many times I see it--and in the Internet era, I see it all too frequently--I always shake my head in disappointment and frustration when a company uses trademark law to lash out against unflattering consumer reviews. To these companies, trademark law is a cure-all tonic for their marketplace travails, and trademark doctrine is so plastic and amorphous that defendants have some difficulty mounting a proper defense. As a result, all too frequently, the threat of a trademark lawsuit causes the intermediary to capitulate and excise valuable content from the Internet. Fortunately, a defendant has decided to fight back and resist the pressure to succumb to unmeritorious trademark claims. See the press release.
I don't know much about Lifestyle Lift and its relative pros and cons as a cosmetic surgery. Fortunately, there are thousands of Lifestyle Lift customers who do, and a large number of them have shared their opinions publicly on RealSelf, a website that allows consumers to discuss anti-aging products and services. I think it's fair to say that many of the consumer-submitted reviews of Lifestyle Lift are unfavorable--exactly the kind of word of mouth that prospective consumers should consider before undergoing a Lifestyle Lift surgery.
But this kind of negative buzz can be fatal to providers of health/beauty products and services, especially given the faddishness of that market. As a result, Lifestyle Lift has resorted to legal mechanisms to prop up its business. (Indeed, Lifestyle Lift is no stranger to court; see this PACER report on their litigation history in federal court).
In doing so, Lifestyle Lift has limited tools to go after RealSelf for consumer-submitted reviews. After all, 47 USC 230 clearly eliminates almost all of RealSelf's possible liability for those reviews. However, 47 USC 230 leaves open federal trademark claims--hence, Lifestyle Lift has embraced trademark law as its recourse to wipe the negative reviews off RealSelf and keep them from influencing prospective consumers.
(Lifestyle Lift could always go after individual consumers submitting negative reviews...if they have a meritorious claim. Given Lifestyle Lift's litigiousness, it wouldn't surprise me if they bring some of these lawsuits regardless of merit).
In its answer, RealSelf goes on the offensive and alleges that Lifestyle Lift directly or indirectly posted shill reviews to the Lifestyle Lift discussion, thereby breaching RealSelf's user agreement. Off the top of my head, I can't think of another lawsuit where the message board operator sued a company for shill postings, so I think this case may be breaking important new legal ground. If in fact Lifestyle Lift was trying to manipulate the perceptions of prospective consumers through shill reviews, I hope they are brought to justice for their efforts to pollute the information environment.
More generally, regardless of who wins these specific lawsuits, Lifestyle Lift will never succeed at stifling negative discussion about its offerings. This may just be another painful lesson in the power of online word of mouth.
Posted by Eric at 01:45 PM | Derivative Liability , Trademark | TrackBack
March 02, 2008
Feb. 2008 Quick Links
By Eric Goldman
Advertising
* BusinessWeek: Monetizing social networking sites isn't as easy as everyone had hoped, clickthrough rates are through the floor (0.04%!), and ad proliferation on the sites is driving users away.
* Wilbur, Kenneth C. and Zhu, Yi, "Click Fraud" (January 2, 2008). This paper appears to argue that search engines can increase their profits by failing to disclose the true rate of click fraud on their network.
* In re Miva, Inc. Securities Litigation, 2008 WL 450037 (M.D. Fla. Feb. 15, 2008). This lawsuit alleges that Miva and some associated individuals understated or misreported Miva’s reliance on click fraud, spyware and third party distributors in its public statements and thus inflated the company's stock price. Last year, the court dismissed many of the allegations but let a couple survive. In this ruling, the court dismisses a few more defendants from some statements and lets the rest of the case proceed.
* Going-out-of-business sales are often just another scam. (HT ContractsProf). Note this is completely consistent with economists’ theoretical predictions of final-period behavior of trademark owners.
* Google's stock has lost $70B in market cap in 7 weeks. Oh darn. Clickz offers some theories about why Google's clicks are declining. Could lower rates of click fraud be part of it?
* Hal Varian, Google's Chief Economist, argues that Google's marketplace success is solely due to its "secret sauce" (i.e., the advantage of learning by doing) rather than any defects in the marketplace.
Spam
* Jaynes v. Virginia (Va. Sup. Ct. Feb. 29, 2008). By a 4-3 vote, the Virginia Supreme Court upheld Jeremy Jaynes' 9 year sentence for violating Virginia’s spam law.
* Silverstein v. Experienced Internet.com, 2008 U.S. App. LEXIS 3364 (9th Cir. 2008). Ninth Circuit dismissed a CAN-SPAM lawsuit for lack of jurisdiction when the defendants attest that they didn't send the message and aren't local.
Domain Names
* NSI has been sued for its practice of grabbing pre-registration domain names based on WHOIS searches. The complaint. Good luck defending those practices, NSI!
* Two more breathy articles about the economics of domaining from the New York Times and Network World.
47 USC 230
* Johnson v. Barras, 2007 CA 001600 B (DC Superior Ct Feb. 1, 2008). Court dismisses a lawsuit against a website for republishing a defamatory story per 47 USC 230.
* Yet another doomed lawsuit against MySpace for facilitating communications between an adult male and an underage female that led to sex. Sam Bayard's comments.
Pornography
* NY Lawyer (login required): "Defense Bar Sees Growing Practice in Internet Sex Crimes"
* A federal obscenity prosecution for publishing graphic short stories (without pictures) on the Internet? As Tim Wu says, "astonishing."
* The Utah legislature is considering entering the marketplace again, this time through a certification mark program for Internet access providers who are willing to combat porn. See HB407. Of course, the Utah legislature has had terrific success in the past creating successful new business opportunities that the marketplace has overlooked.
User-Generated Content
* Nick Carr: "What we've seen happen with self-regulating communities, both real and virtual, is that they go through a brief initial period during which their performance improves - a kind of honeymoon period, when people are on their best behavior and rascals are quickly exposed and put to rout - but then, at some point, their performance turns downward. They begin, naturally, to decay." Like, I think, Wikipedia.
* Slate on the top-heavy nature of contributions to Wikipedia and Digg.
* Christian Science Monitor: Teachers Strike Back at Students' Online Pranks.
* Sam Bayard on a motion to quash in the AutoAdmit case.
Reputation
* eBay no longer lets sellers leave negative/neutral feedback for buyers. This putatively stops sellers from retaliating against buyers who leave legitimate complaints, but it also skews the database towards only positive reviews, which ultimately undercuts its credibility.
* In India, where courtships remain very brief by US standards and grooms can be paid dowries by the bride's families, there is an emerging trend for brides to hire "wedding detectives" to ferret out the scoop on grooms and whether their representations are correct.
* Funny article on being a secret shopper for Consumer Reports.
* Dan Solove's book, The Future of Reputation, is now available online for free. Ethan's review of the book.
Patents
* Six years later, eBay finally buys it now: eBay v. MercExchange settles with eBay buying out some of MercExchange's patents and licensing others.
* Mike Masnick: "Psst! Patent Examiners Do Not Scale"
Copyright
* Mike Masnick: “Why We Should All Want Politicians Who Plagiarize.”
* Do Not Resuscitate...My Copyrights (funny).
Miscellaneous
* Citizen Media Law Project has a useful discussion on getting insurance for cyberlaw risks.
* People v. Fernino, 2008 WL 382348 (N.Y. City Crim. Ct. Feb. 13, 2008) (woman violated a no-contact order when sending a MySpace message to the person).
* Mike Masnick: "We Need A Broadband Competition Act, Not A Net Neutrality Act"
* A retrospective on some of the leading dot-coms from the 1990s.
Posted by Eric at 05:32 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | TrackBack