September 30, 2008
Licensing a Work, and When Licensing Doesn't Work--Reuters v. GMU
A timely Exhibit A in the argument that contract law is being used as a back-door wedge in expanding copyright.
By Ethan Ackerman
James Grimmelmann has an excellent summary of the Virginia-filed breach-of-contract case, noting that a George Mason University History professor developed an open-source Firefox extension called Zotero that worked with Thompson/Reuters' EndNote software. Apparently the development involved some reverse-engineering of the EndNote files or software structure. It's this act that leads to the suit, as reverse-engineering is prohibited by the EndNote site license that GMU held.
Mike Madison also notes the case and parses out the timing of the suit, filed in anticipation of a significant interoperability feature coming in an update to the Zotero software. He also sees much potential for mischief in Reuters' demands for an injunction that would apply to other Zotero users who imported data files from EndNote. Professor Madison's spot-on conclusion: "Reuters is transparent in its effort to use a software license to suppress a competitor in a product market."
Professor Michael Froomkin sees some interesting lawyering and one actual non-trivial legal question in the choice of filing a suit against a university over actions by its professors. To what extent can a state university bind its employee professors? Professor Froomkin points out that the professor in question is probably not a party to the site license agreement, and likely agreed to no such terms, so any privity comes from the fact that the professor is an employee of the university. My own brief searching on the web leads me to suspect the same thing. An academic site license end-user likely clicks on, at most, a much-reduced terms-of-service along the lines of this U.Georgia page before installing the software.
Further developing the 'privity-of-contract-through-employment-status' theory, does it matter that the development of this software by the professor was most likely outside the scope of his employment? I ask, only partially tongue-in-cheek, will this complex 'copyright-or-not, enforceable-terms-or-not, enforceable-license-or-not, injunction-or-not' case turn on the professorial field of the Zotero developer? Would it have been different if this were a computer science professor? A grad student?
So if this is a state law contract case, why all the Copyright Act talk anyway? Reverse engineering can be a fair use of a copyrighted work, something even the Federal Circuit will admit. Bringing an infringement suit against a reverse engineering that focused on something (the data file formatting) with such a thin copyright seems like a quick way to an adverse ruling. Professor Grimmelman, noting the utter inadequacy of the possible trademark claim pleading as well, suspects incompetence. Professor Madison, however, suspects an intentional end-run around reverse engineering fair use law by intentionally asserting only state-law contract claims, copying the proceedings in Bowers v. Baystate Technologies. Both see problems with the injunctive relief sought.
My only gloss on this case, otherwise excellently dissected by Profs. Grimmelmann, Froomkin and Madison, is to point out this is a great answer to Prof. Boyden's initial question about contract law being used as an expanding wedge for rights holders. This case is not even the only recent case tackling the issue, and several other recent cases would have had to face it if courts hadn't mooted the issue by finding a sale rather than a work made available subject to license.
So in summary, yes, there's an open, ongoing and unsettled problem with parties attempting to reverse, by contract clause, an issue that is addressed and settled by federal copyright law.
September 29, 2008
Delayed Enforcement Blocks Domain Name Lawsuit--Southern Grouts v. 3M
By Eric Goldman
Southern Grouts & Mortars, Inc. v. 3M Co., 2008 WL 4346798 (S.D. Fla. Sept. 17, 2008)
I'm often baffled by lawsuits over domain names and keywords because they just don't seem to make any economic sense. This lawsuit is especially perplexing given the plaintiff's delays and the seeming impossibility of the plaintiff reaching a profitable outcome, even if it won in court. What was the plaintiff thinking?
3M and SGM compete in the field of "quartz aggregate products for surface finishes." SGM has a federal trademark registration for "Diamond Brite." In 2000, 3M bought an unrelated business whose assets included a trademark in "Diamond Brite" and the domain name "diamondbrite.com." For a while, 3M redirected the domain name to the home page of the other business unit it owned. No later than July 2002, the domain name stopped resolving, but 3M continuously renewed its domain name registration. Ultimately, 3M migrated the new unit to its existing trademarks and let its acquired trademark in "Diamond Brite" lapse.
Meanwhile, in 2005, 3M did a 3 week trial buying "diamond brite" in Google AdWords, but the lawsuit only involves the domain name, not the AdWords purchase.
SGM contacted 3M three times about the diamondbrite.com domain name. No later than July 2002, SGM emailed 3M asking if it could acquire the domain name. In Feb. 2005, SGM sent a cease-and-desist letter, which 3M rejected. Then, in July 2007, SGM wrote to 3M again proposing an amicable solution, and 3M continued to resist. SGM then sued 3M in Sept. 2007.
From my perspective, this is an easy laches case. Taking 5 years to pursue the matter, with nothing resembling an ongoing dialogue, is simply too long. 3M wound down use of the domain name, so its economic expectations aren't disturbed like a typical laches case, but there is still the increased litigation costs due to the 5 year delay. The court rejects that either the AdWords purchase and the domain name renewals resetted the laches analysis.
Unfair Competition on the Merits
The court says that the mere possession of the diamondbrite.com domain name without any further use does not constitute a "use in commerce" sufficient to support Lanham Act violations. Along the way, the court distinguishes a veritable who's-who list of junky domain name cases from the turn of the century, including PACCAR, Brookfield, PETA v. Doughney, OBH and Planned Parenthood v. Bucci. The court distinguishes most on the fact that 3M didn't have an active website resolving to the domain name, but it goes further with the OBH and Bucci cases:
OBH and Planned Parenthood are both nearly a decade old. As with any widespread change in technology, there is a learning curve. Even if those cases were correct when decided, I decline to adopt the position today that internet users of any significant number would be frustrated or hindered by merely not arriving at the expected site the first time a web address (domain name) was typed in... With the advent of multiple, and increasingly powerful search engines, it is unlikely that a potential consumer of SGM's products would be turned away by not finding a website at diamondbrite.com. In any event, SGM has presented not a scintilla of evidence to show that consumers have been prevented from accessing SGM's own website, or prevented from obtaining any of SGM's goods or services. (emphasis added)
The bolded language, of course, is true and has been for a number of years, but it's nice to see a court expressly acknowledge that "technological facts" embedded in the precedent are now out-of-date. It's also nice to see the court clearly recognize the substitutability of the domain name system and search engines and to realize that consumers prefer search engines.
The court also rejects the precedent by pointing out that there cannot be likelihood of consumer confusion when the domain name owner doesn't resolve at all. As the court says, "The seven factors use to determine whether a likelihood of confusion exists become irrelevant if there is no “use” to compare the mark to." There is plenty of stupid precedent to the contrary (including those predicated on initial interest confusion, which the court expressly rejects), but this court nails it.
ACPA on the Merits
In my opinion, the ACPA claim is an easy defense win because 3M (and the predecessor company) had legitimate trademark interests in "Diamond Brite" prior to the domain name's registration. The court still courteously goes through the "bad faith" ACPA analysis before concluding that 3M had none. Along the way, the court soundly rejects a pretty silly argument that the domain name registration pointing to an unresolved domain name would divert consumers because frustrated consumers would do a Whois lookup query for the defunct domain, learn that 3M was the registrant and seek out 3M to transact with. Some arguments are better left unmade.
In the end, the court grants summary judgment to 3M and dismisses the lawsuit.
I understand how matters like this can sit on an in-house counsel's desk for years, only resurfacing every couple of years and prompting a "ping" to the other side. But I simply can't understand how, in 2007, after 5 years of irresolute progress, SGM thought the economic upside justified the expense of a lawsuit.
On the benefit side, a domain name like "diamondbrite.com" has some value, especially when it's associated with a product line bearing that name. But how much value? Assuming a lawsuit like this costs at least six figures, I can't imagine that the domain name is worth anywhere close to that. Indeed, any incremental selling power from the domain name could be cost-effectively replicated through a combination of SEO and SEM on the term "diamond brite." Better yet, SGM could have poured the money into product sales and marketing, which I'm confident has a substantially higher ROI than suing or gaming the search engines.
As further evidence of the weak value of the domain name, SGM did not cite any harm from not owning the domain name, and the matter only rose to the top of SGM's in-house personnel's desk 3 times in 5 years. Clearly, this is not a "must have" domain name,
On the expense side, these types of lawsuits are costly. In addition to the normal attorney's fees, SGM obtained at least one expert witness (and, to add insult to injury, the court bounced the expert's report), did some expensive discovery (including obtaining and reviewing 3M's portfolio of 13,000 domain name registrations) and tied up key internal personnel on the lawsuit (including testimony from the "head of information technology and the executive vice-president of SGM"). The cost of a lawsuit isn't measured just by out-of-pocket attorney expenses but by overall opportunity cost, and on that basis, this lawsuit tied up valuable resources.
Finally, the rational decision-maker multiplies the cost-benefit amount by the probability of winning, and it seemed clear to me that this lawsuit had bad odds from the get-go. The ACPA claim was destined to lose because on the high "bad faith" standards (it also makes me wonder why SGM didn't try the UDRP first) and the fact that 3M had clear legitimate rights at the beginning. The potential success of the unfair competition claim is naturally less clear, but even if SGM won this claim, they had almost no chance of recovering meaningful damages or attorney's fees. As a result, I can't see a scenario where this was a breakeven lawsuit from the beginning. Given the low odds of success, this just seems like a clearly futile waste of money from day 1.
[A personal note: I'm out for the rest of the week for the Jewish holiday and a trip to the heartland. I'll probably next see you again next week. L'shanah tovah tikatev v'taihatem!]
September 24, 2008
Co-Website Operator Gets 47 USC 230 Defense--Best Western v. Furber
By Eric Goldman
In my Co-Blogging paper, I wrote about my uncertainty whether co-bloggers would be able to claim 47 USC 230 for the content/actions of their co-bloggers. This case hardly resolves the issue, but the court does grant 230 dismissals to co-website operators for all posts they did not author.
Three defendants claim 230. Furber is one of the website operators. There are three alleged facts at issue:
* Furber "created the website homepage to solicit content from others"
* he publicly posted emails he received from others
* he "created and posted a “Site Master Notice Post” stating that some posts were being moved to an alternative website"
Acknowledging these three facts, the court gives Furber a 230 dismissal for any posts he did not create or develop. He is still potentially on the hook for 12 posts he made himself. It's interesting that the court cites the Roommates.com case to say that Furber isn't liable for soliciting content from others.
Loren Unruh's only involvement in the website operations was that he allegedly "solicited content from others through his marketing of the website." This is an easy 230 dismissal.
On the other hand, Nidrah Dial is denied a 230 defense for acting as the typing agent/scrivener for her husband's dictated comments. The court said that a jury could find that the posts were a collaborative effort. I think this is right, but I find this discussion really interesting because this is exactly the kind of hypothetical example that judges have pondered and struggled with in trying to determine 230's limits. Also interesting: the opinion seems to leave open that Nidrah might still get 230 if she can show that she was a passive recorder of a third party's thoughts (her husband's).
The rest of this case is pretty interesting, too. It involves an effort by the Best Western hotel chain to shut down a group of dissident franchisees (technically, in this case, members of a non-profit corporation). The court sees through this campaign and largely shuts it down, cleaning out a lot of Best Western's causes of action and rejecting some of their ludicrous damages claims. Overall, the case is a good example of a plaintiff that initiated a litigation armageddon that has almost no chance of turning out well for anyone but the lawyers.
September 23, 2008
Carterfone and Open Access in the Digital Era Symposium, October 17
By Eric Goldman
On October 17, we are having a neat event at Santa Clara University. A brief word about the genesis. I don't normally travel in telecom circles but I went to a few events in the past year or so, and at these events the FCC's 1968 Carterfone opinion and the "Carterfone principles" were heavily invoked. It was clear that Carterfone was an important opinion and of continuing relevance today, but I was having a problem--it wasn't clear that the speakers were referring to Carterfone consistently. Instead, everyone seemed to have their own idiosyncratic interpretation of the case. So the idea was to get together a group of experts to see if we could try to work through the case's meaning and implications. This also gives us a platform to talk about Net Neutrality, optimal regulatory structures for network design, open access principles and a whole bunch of other interesting academic issues.
We have a terrific and eclectic group of speakers, but I am especially excited that the opinion's author, Nick Johnson, will be joining us for a keynote talk. It will be interesting to see how he and the group survey the opinion 40 years later. A brief marketing description is below the line. As usual, admission is free unless you want CLE (and even then, it's free in some cases). Please feel free to spread the word, and I hope to see you there.
Carterfone and Open Access in the Digital Era
Santa Clara University School of Law
Sponsored by the High Tech Law Institute and the BroadBand Institute of California
October 17, 2008
9 a.m. – 5 p.m.
The FCC’s 1968 Carterfone decision—celebrating its 40th anniversary this year—is frequently cited in policy discussions about Net Neutrality and open access, but there is little consensus about how its provisions should apply to Internet access providers and emerging communications technologies. This Symposium will gather leading telecommunications policy experts to explore the opinion’s implications—past, present and future—on communications policy. Nick Johnson, the former FCC Commissioner who authored the opinion, will provide the keynote address.
Attendance is free and open to the public. Five plus hours of CLE are also available to attorneys at HTLI benefactor firms and in-house counsel for free, to Santa Clara Law alumni for $50, and to everyone else for $100. Santa Clara Law is a State Bar of California approved MCLE provider.
For speaker information and to register online, visit
September 22, 2008
Perfect 10 v. Google on Remand, and 230 as an Affirmative Defense
By Eric Goldman
Perfect 10, Inc. v. Google, Inc., 2008 WL 4217837 (C.D. Cal. July 16, 2008)
You recall this case involving Perfect 10's allegations that Google and Amazon (and, in a subsequent complaint, Microsoft) are infringing its rights by indexing third party posts of Perfect 10's photos. You may also recall the 9th Circuit issued an important but confusing ruling in this case in May 2007, which the 9th circuit corrected in an amended opinion in December 2007. The 9th Circuit rulings sent the case back to the district court for further proceedings, and this opinion (which just came through Westlaw--not sure why it took so long) is part of those proceedings.
Perfect 10 sought to file a second amended complaint making new factual allegations, including extending the lawsuit to include Google's Blogger service and claiming nearly a thousand new infringed copyrights, and pleading new causes of action, including California and common law unfair competition, unjust enrichment, and misappropriation. Google tries to knock out the amendment on a variety of grounds, but all of Google's arguments fail, and the court lets Perfect 10's second amended complaint through.
I was most interested in Google's attempt to knock out the unfair competition, unjust enrichment and misappropriation claims as moot due to 47 USC 230. The court rejects the argument because it says that 230 is an affirmative defense that does not support a 12(b)(6) motion. I remain surprised that this meme has taken root so deeply, because my guess is that well over 50% of the 230 defense wins have been in a 12(b)(6) motion or its state law equivalent, like a demurrer. (The percentage is reduced by cases where the defendant didn't try for 12(b)(6) and instead raised the 230 motion in the first instance in summary judgment). In other words, the vast weight of caselaw supports that 230 can be used for a 12(b)(6) dismissal, so this court's breezy refusal to do so is disappointing.
Perfect 10 also argued that Google is the content creator of the tortious content. I wonder how Perfect 10 will factually support that assertion, but it also was enough for the court to reject the 12(b)(6):
The question whether any of Google's conduct disqualifies it for immunity under the CDA will undoubtedly be fact-intensive. Neither party has proffered evidence sufficient for the Court to determine at this stage whether Google is entitled to CDA immunity. Although it is highly likely that P10 will encounter difficulty in establishing that Google engaged in the “creation or development in whole or in part” of unlawful content, see Fair Housing Council, 521 F.3d at 1168-69, it would be improper for the Court to resolve this issue on the pleadings and the limited evidentiary record before it.
Also interesting is that the court lets Perfect 10 add 650+ new infringed copyrights that were unregistered at the time of filing the complaint. In my opinion, 17 USC 411(a) is fairly clear (as statutory language goes) that copyright plaintiffs can sue only on registered (or pre-registered) copyrights, which should make this an easy dismissal. However, some courts have found the statutory language ambiguous and thus have allowed plaintiffs to proceed on copyright applications while they are pending with the Copyright Office--and this court does so as well.
September 20, 2008
Bloggers' Defamation Liability Not Dismissed--Saadi v. Maroun
By Eric Goldman
Saadi v. Maroun, 2008 WL 4194824 (M.D. Fla. Sept. 9, 2008). One of the complaints (doesn't everyone know that just blacking out data in a PDF doesn't prevent people from learning the info???). The opposition to the motion to dismiss. There is some evidence that this ruling is part of a broader litigation frenzy--I found 4 separate Justia pages involving these litigants in 4 different jurisdictions other than MDFla (1, 2, 3, 4).
This case reminds us that we as bloggers own our words, and we face the same type of publisher liability as other publishers.
The dispute involves members of the Lebanese-American community. For unspecified reasons (this article provides one possible explanation), the members had a falling out, and some of them allegedly posted negative comments about the plaintiff at biggestloosers.blogspot.com (now gone from the web and archive.org) and other sites. The bloggers tried to defend that the claims were opinion, not fact. The court rejects this argument, saying that "statements that Plaintiff is a mentally unstable stalker, a criminal, and that he has received gifts paid for with money stolen from the Lebanese government, as well as statements that suggest that Plaintiff falsely purports to have a law degree and has committed statutory rape" are all factual claims--especially when the blog screams "OUR STORIES ARE TRUE."
September 17, 2008
Road Show Fall 2008
By Eric Goldman
This post highlights some of my talks and events scheduled for this semester. As always, if I'm going to be in your area, it would be a delight to see you--let me know.
October 3: Works in Progress Intellectual Property (WIPIP) Colloquium, Tulane University School of Law, New Orleans
October 4: Midwestern Law and Economics Association Annual Meeting, Northwestern University School of Law, Chicago
October 13 (noon-1): Cardozo Law School (NYC), IP Speaker Series. I'll be speaking about my Economics of Reputational Information project. I believe this event will be free and open to the public, so if you're in the NYC area, please plan to come!
October 17: All-day symposium at Santa Clara. More details soon.
November 4: Federal Circuit oral arguments at Santa Clara University. More details soon.
November 14-15: Virtual Worlds, Social Networks & User-Generated Content Roundtable, Vanderbilt Law (Nashville)
December 8: 2008 IP and the Internet Conference, California State Bar IP Section, Santa Monica
December 10: 2008 IP and the Internet Conference, California State Bar IP Section, San Francisco
Early January: AALS in San Diego
September 13, 2008
StubHub Wins 230 Dismissal in Anti-Scalping Case
By Eric Goldman
This is yet another lawsuit in the ongoing battle over online ticket sales. In the past year, I've blogged about a lawsuit over initial ticket allocation, a lawsuit over ticket resales, and a statute restricting ticket allocations (and another proposed law). Someone ought to create a blog just about online ticket sale legal regulation. There's a lot of emerging source material.
This lawsuit is very similar to the Hill v. StubHub lawsuit I blogged about in July, Both plaintiffs sued StubHub (and, in this case, eBay) for allowing third parties to resell tickets allegedly in violation of anti-scalping laws (in Hill, it was the Hannah Montana concert tour; this lawsuit, the Boss' tour). In the Hill case, the court rejected StubHub's dismissal request per 47 USC 230. In this case, the court grants the 230 dismissal for StubHub and eBay in a brief non-substantive order--the opposite result. StubHub's eligibility for 230 is currently legally unresolved, but clearly courts will have plenty more cases to develop a consistent rule.
September 10, 2008
DMV.org Hit With SEO-Degrading Injunction--TrafficSchool.com v. eDriver
By Eric Goldman
TrafficSchool.com, Inc. v. eDriver, Inc., 2008 WL 4000805 (C.D. Cal. June 4, 2008). Permanent injunction entered Aug. 28, 2008.
[Note: I missed this case when it first came out. I recently learned about the case from Rebecca, and it's such an interesting case that it's worth blogging about at this comparatively late date. Also, just today the defendants signaled their intent to appeal, so the case is still very much alive and active.]
This case involves websites referring consumers to traffic schools and driver's education courses, a business that appears to be both lucrative and cutthroat. The plaintiffs allege that the operators of DMV.org, a referral site, engage in false advertising. The gist of the plaintiff's argument is that DMV.org falsely implies an affiliation with government DMVs, and therefore consumers believe that linked-to vendors are being recommended by a government agency. Naturally, the implicit government imprimatur on a traffic school or driver's ed course should significantly bolster consumer demand, so the plaintiffs feel disadvantaged in the marketplace. Oddly, both parties agreed that the plaintiffs' websites had better conversion than DMV.org.
70-80% of DMV.org's traffic comes from search engines due to favorable search engine indexing (in 2006, the site was the #2 organic Google link for "DMV") and aggressive search engine advertising. Consumers who reached DMV.org were shown text and graphics designed to enhance the site's credibility/authority and perhaps exacerbate visitors' perceptions that a government agency operated the site, although there was a small footer disclaimer. After the lawsuit, DMV.org was redesigned to reduce the possibility of consumer confusion about any government affiliation, but the court recounts anecdotes that consumers were confused both before and after the redesign. As a result, the court finds that the plaintiffs established a prima facie case of 43(a) false advertising.
However, the court determines that the plaintiffs have "unclean hands" because they too had registered and used various domain names containing "DMV" and had explored advertising on DMV.org. Due to their unclean hands, the court denies the plaintiffs any damages or attorney's fees.
The court does grant an injunction requiring DMV.org to display a mandatory "acknowledgement page" (we might call it an interstitial or landing page) telling consumers that the site is unrelated to any government agency and requiring them to affirmatively click through. See the page here. My hypothesis is that such an acknowledgement page wrecks DMV.org's search engine indexing by preventing the robots from seeing the page content (unless DMV.org uses grey hat/black hat techniques to present a different page to search engine robots). In partial support of that argument, when I searched today for "DMV" at Google, the site was 4th in the organic results--still excellent for such a popular term, but down from their #2 ranking in 2006. (Their continued good placement may be due to their PR7--which has been juiced by links from state government agencies that mistakenly thought it was an official site). Thus, an injunction requiring a mandatory acknowledgment page effectively will dramatically reduce the traffic--and the value--of an SEO-driven site. The defendants have also made post-injunction filings saying that a lot of visitors are backing away due to the acknowledgement page. Accordingly, the defendants are claiming that the injunction could be fatal to their business.
This suggests a possible lesson to learn from this case. The defendants had a great domain name (DMV.org) that they managed to build nicely, but they may have too aggressive about stoking consumer expectations about their affiliation with the government. The consequence of that aggressiveness is a potentially business-ending injunction, rendering the domain name nearly worthless. If the defendants hadn't played so close to the line, perhaps they would have lost some revenue but might have been able to maintain the domain name's value in the long run.
Today, the defendants filed a variety of motions indicating that they plan to appeal the ruling and asking the court to stay the injunction during the appeal. If the defendants can get the traffic-killing injunction lifted on appeal, I suspect they will consider it a win even if they have to write a check for damages.
Rebecca has more on the case.
September 09, 2008
August 2008 Quick Links, Part 2
By Eric Goldman
* The FCC gets on Comcast’s case for deceptively blocking BitTorrent connections without disclosure. While I don’t know anyone who has defended Comcast’s behavior here, at the same time there is an undercurrent of concern about the FCC’s authority to regulate Internet activities. Could this be the FCC camel's nose in the Internet's tent? We will learn more about the FCC's authority because Comcast has appealed the FCC's decision.
* A topic I haven't seen discussed very much: how the doctrine of trespass to chattels intersects with net neutrality principles. The only article I found in a 60 second search on the topic was a couple of paragraphs in J. Gregory Sidak, A Consumer-Welfare Approach to Network Neutrality Regulation of the Internet, 2 J. Competition L. & Econ. 349 (2006).
* Interactive Retail Management, Inc. v. Microsoft Online, L.P., 2008 WL 3851691 (Fla. App. Ct. Aug. 20, 2008). This is a click fraud case I hadn't heard about previously. Microsoft won at the trial court on jurisdiction grounds. This court revives the lawsuit for more jurisdictional investigation.
* Jeff Neuburger on a Wisconsin case saying that the UCC governs contract formation via email instead of UETA.
* Request for your guidance. Wikipedia has some photos that simultaneously say they are released under both a Creative Commons license and the GFDL. See, e.g., this photo. The license terms are irreconcilably inconsistent. If someone wants to use such a photo, now what?
* Edwards v. Arthur Andersen (CA Sup. Ct. Aug. 6, 2008). The Ninth Circuit was wrong to create a narrow restraint exception to B&P 16600, the California statute voiding non-compete clauses.
* XPEL Technologies Corp. v. American Filter Film Distributors, 2008 WL 3540345 (W.D. Tex. Aug. 11, 2008). Rebecca on an odd case involving (once again) the DMCA anti-circumvention provisions as an anti-competition tool.
* Two interesting studies recently about people’s response to spam. Despite the animosity, a quarter of consumers have responded to cellphone spam and 30% say they have made purchases in response to spam. For more complementary statistics and my attempt to explain this seeming dichotomy, see here.
* The First Circuit issued an interesting DMCA 1201 case that I haven’t seen discussed. The BNA summary: “District court properly granted summary judgment to plaintiff cable television service provider on claim that defendants violated Digital Millennium Copyright Act by selling low-frequency signal filters, within plaintiff's service area, that were capable of bypassing plaintiff's pay-per-view billing mechanism, since plaintiff's pay-per-view delivery and billing system is technological measure that effectively controls access to copyrighted works, and digital cable filter allows subscribers to "avoid" or "bypass" that technological measure (CoxCom Inc. v. Chaffee, 1st Cir., 8/4/08)”
* Funny YouTube video: "Here Comes Another Bubble," set to the tune of Billy Joel's "We Didn't Start the Fire"
September 08, 2008
August 2008 Quick Links, Part 1
By Eric Goldman
* Mazur v. eBay Inc., 2008 WL 2951351 (N.D. Cal. July 25, 2008). See my previous blog post on the case. Some commentators are excited about this ruling because it rejects eBay's motion to dismiss a RICO claim.
* Missing Link, Inc. v. eBay, Inc., 2008 WL 3496865 (N.D. Cal. Aug. 12, 2008). This is a lawsuit by eBay sellers complaining that eBay didn’t immediately index their listings in its search engine and eBay raised the price on “Good Until Cancelled” listings. This is the second time the court has dismissed some claims, but even so some claims have also survived the motion to dismiss process.
* Vulcan Golf, LLC v. Google Inc., 2008 WL 2959951 (N.D. Ill. July 31, 2008). The court dismisses a few claims made in the plaintiff's third amended complaint. My post on the initial complaint.
* A heavily redacted version of the Google/Yahoo agreement. The SEC examiner who let the agreement go through with this many redactions was asleep at the wheel!
47 USC 230
* Bauer v. Glatzer (N.J Superior Ct. July 21, 2008). Wikimedia easily wins a lawsuit against it alleging that a Wikipedia entry was defamatory.
* Capital Corp. Merchant Banking, Inc. v. Corporate Colocation, Inc., 2008 WL 4058014 (M.D. Fla. Aug 27, 2008). 47 USC 230 defense denied against allegations that "Leonard Norwich posted defamatory statements about [the plaintiff] on three websites and Francesca Norwich allowed Leonard to use “a computer registered in her name” to make the defamatory statements." The denial makes sense for Leonard but seems clearly erroneous with respect to Francesca.
* Vanginderen v. Cornell (S.D. Cal. June 3, 2008). CMLP page. This isn't specifically a 230 case but it's still relevant. Interesting lawsuit against Cornell and related entities for electronically posting a school newspaper story from 1983 that was allegedly defamatory. The court dismisses the lawsuit on an anti-SLAPP motion.
* A Las Vegas nightclub loses its cool and sues a blogger for, among other things, including its logo in the blog post.
* As part of the fallout from the Troll Tracker blog, Dennis Crouch, of PatentlyO fame, has received a subpoena for communications related to his blog. Dennis' comments and LegalWatch. In a related lawsuit, Frenkel (a/k/a Mr. Troll Tracker) was dismissed from a lawsuit again. Ward v. Cisco Systems, Inc., 2008 WL 4079286 (W.D. Ark. Aug 28, 2008)
* Kings English, Inc. v. Shurtleff, 2008 WL 3285898 (D. Utah Aug. 8, 2008). The judge denied the plaintiffs’ motion to reconsider its highly unfavorable prior ruling. My initial post on the lawsuit.
* Reisinger v. Perez (E.D. Wis. complaint filed Aug. 18, 2008), First amendment lawsuit against the City of Sheboygan for intimidating a woman into removing a website link to the city's police department.
* National Federation for the Blind v. Target has settled, with Target paying $6M and redesigning its site.
September 05, 2008
426,487 Reasons Why Metatags Still Matter (In Court)--Venture Tape v. McGills
By Eric Goldman
Venture Tape Corp. v. McGills Glass Warehouse, 2008 WL 3959997 (1st Cir. Aug. 28, 2008). For more on the case, see the initial 2003 ruling denying a motion to dismiss for lack of jurisdiction and a 2006 district court ruling on damages.
Regular blog readers know that metatags don't matter from a technological standpoint and haven't mattered for years. But because they once might have mattered, courts are still treating them as the uber-SEO technique. In this ruling, the First Circuit joins the 11th Circuit as the latest appellate courts this year to experience a judicial freakout about metatags. The price tag to the defendant for using ineffectual metatags: $426,487 in damages, costs and attorney's fees.
The story is all too familiar. McGills sells competitive products to Venture Tape and in 2000 put Venture Tape's trademarks ("Venture Tape" and "Venture Foil") into its metatags and in white-on-white text with the hope of getting some search engine traffic. (As usual, the judge doesn't know or seem to care that there are multiple flavors of metatags, but the opinion treats them as keyword metatags). In 2003, Venture Tape realized this and sued. The district court found for the plaintiff and awarded $230k in damages for the period 2000-2003, $188k in attorney's fees and over $7k in costs. McGills appealed to the First Circuit.
With respect to trademark infringement, the First Circuit's test omits any requirement of trademark use in commerce (a seeming doctrinal problem in its own right), so the only issue was likelihood of consumer confusion. On that front, because the parties are direct competitors and the defense admitted that they referenced the trademarks to generate search engine traffic, the court says "By the conduct of its case below, McGills effectively admitted seven of the eight elements of" the likelihood of consumer confusion test.
The only disputed point is evidence of actual confusion, and the defendant points out that there's no evidence that any consumers were lured to its site due to the trademark references. The court says it doesn't care about this evidence one way or another because this is only 1 of 8 factors, so the 7 other factors are damning enough. In other words, this court says it doesn't matter if any consumers actually changed their behavior because the other proxies to measure the efficacy of the defendant's actions (i.e., the other elements of the likelihood of consumer confusion test) should matter more. Hmm.
The court has no problem declaring the defendant's conduct "willful" (the white-on-white text is really tough to defend, even if it's not efficacious), opening the path to an award of damages. The calculation starts with the defendant's entire revenues during the period of time the plaintiff's trademark was on the website (2000-2003), or $1.9M. The defendant is able to show that its gross profits during that time were only $230k, but it further argued that the competitive products were only 1% of its business. The district court wasn't satisfied with the evidence to bolster that argument, so the court awards 100% of the gross profits (instead of 1%). The consequence is that the defendant's entire business ran at zero profit for over three years solely because of its competitive metatagging--even if the metatagging didn't divert a single consumer. To make it worse, the court awards $188k of attorney's fees for the willful infringement plus $7k of costs. And, of course, the defendant paid for its own attorney for 5 years of litigation. All told, ouch.
I won't now belabor the point that both the district court and the appellate court are wrong in their analysis of metatagging. See here for my previous belaboring of that point. Instead, let me reinforce two practice pointers that I've made before:
1) Don't put third party trademarks in keyword metatags. It's just not worth it. The marketing payoff is trivial at best, and too many courts are overreacting to the presence of metatags. Here, it cost the defendant 3+ years of profits for their entire business plus another nearly $200k for some SEO tactics that had little chance of helping anyway. That's a bad business call.
2) If you are defending a lawsuit involving metatags or other technology-mediated uses of trademarks like keyword advertising, you MUST hire an attorney who already understands search engine technologies. As a good acid test, ask your attorney if they know how search engines index keyword metatags. If they don't know that keyword metatags are irrelevant technologically, drop them immediately. The point is that your attorney will need to explain to the judge why keyword metatags don't matter from a technological standpoint (like the attorneys apparently did in this case), and if your attorney doesn't understand the technology, the judge won't either.
September 02, 2008
eBay Cracks Down on Cookie Stuffing--eBay v. Digital Point Solutions
By Eric Goldman
eBay, Inc. v. Digital Point Solutions, No. 5:08-cv-04052-PVT (N.D. Cal. complaint filed Aug. 25, 2008)
It is exceedingly rare for marketers to sue affiliates who are trying to game their affiliate programs. I'm sure there have been other lawsuits, but frankly I'm drawing a blank. (The only relevant precedent that came to mind was Google's tepid enforcement actions in 2004/2005 against click frauders--see Google v. Auction Experts and US v. Bradley). [Update: A reader reminded me of Land's End v. Remy, which is an on-point precedent.] The more typical remedy when commission fraud is taking place is to cancel any unpaid commissions and write off the rest as a cost of doing business (or an uncollectible painful lesson). But if someone gamed the system big--I mean, really big--maybe it would be worth hiring fancy and very high-priced counsel to go see what they might be able to retrieve...
eBay isn't saying how much it got taken for by the defendants in the case. The complaint was conspicuously silent on that juicy detail. However, the amount appears to be enough that eBay hired the premium law firm O'Melveny & Myers for a glorified collections effort. Either that, or eBay has decided to send a remarkably expensive message to other potential fraudsters.
The complaint alleges that the defendants engaged in a cookie stuffing campaign to hijack commissions through Commission Junction. Cookie stuffing occurs when a fraudster places a cookie on a third party computer that will cause the fraudster to get paid a commission that the fraudster didn't earn legitimately by doing the things that the marketer wanted to pay for. In this case, eBay alleges that the defendants used a clever technical exploit to put cookies on users' computers even though the users had not seen the requisite ads. The complaint also alleges that the defendants deployed some tricks to cover their tracks, like deliberately not cookie-ing computers in San Jose and Santa Barbara, the homes of eBay and Commission Junction respectively, to keep employees of those companies from spotting the marauding cookies.
If in fact the defendants engaged in cookie stuffing, I hope eBay nails them. However, I must say that some of eBay's legal arguments made me nervous. eBay's alleged causes of action include:
* CFAA (18 USC 1030). The allegation is that presenting a bogus cookie to eBay's servers was a misuse of the servers. Hmm...
* fraud. Similarly, the allegation is that the defendants caused web users to make a misrepresentation to eBay's servers by presenting a bogus cookie. Hmm again...
* CA Penal Code 502. There are very few cases interpreting 502, which isn't necessarily a bad thing because the statute is so broadly over-inclusive that everyone violates it routinely. Here, it looks like the lawyers weren't quite sure how to fit cookie stuffing into the statute. Take a look at para. 60 and let me know if you agree that this is an odd pleading.
* a civil RICO conspiracy claim. Given that eBay is being sued for RICO claims in the Mazur case (and, I'm sure, others), I would think eBay would want to avoid building new legal precedent that could be applied against them in other cases.
Reading the list of causes of action, I was surprised that there wasn't a more squarely applicable cause of action that governed cookie stuffing (however, I will confess, none came to mind as I drafted this post). Maybe this is due to the fact that eBay rather than Commission Junction is the plaintiff. If there isn't a better cause of action, then perhaps there is a hole in the law. However, I'm keeping my fingers crossed that a judge won't bastardize existing legal doctrines to plug it.
September 01, 2008
Io v. Veoh Comments--a Terrific 512(c) Defense-Side Win
By Eric Goldman
IO Group v. Veoh Networks, Inc., 5:2006cv03926 (N.D. Cal. Aug. 27, 2008)
We spend so much time thinking about and debating 17 USC 512(c) that it's easy to lose sight of how few cases really interpret the statute. As a result, a clean and thorough opinion like this one makes a significant contribution to the precedent and teaches us a lot.
There are two architectural features of this ruling that make it particularly defense-favorable. First, the question of whether 512 trumps secondary liability or secondary liability trumps 512 is one of the most important frontiers in online copyright law because the statute is inherently ambiguous on this key point, and the cases have been erratic on this topic. Here, the court doesn't dwell on the issue and instead assumes (without any real discussion) that 512 trumps secondary liability. As a result, the court dismisses the case without ever reaching the plaintiff's prima facie case; meaning that even if the plaintiff could establish a prima facie secondary infringement, Veoh still wins. If the court in Viacom v. YouTube reaches the same conclusion, then YouTube will win.
Second, Veoh took a number of steps to suppress user-caused copyright infringement, including some steps that were not required to satisfy 512(c). The court recognizes that it's impossible to eliminate user-committed copyright infringement but instead rewards Veoh for trying so hard. As the court says, "far from encouraging copyright infringement, Veoh has a strong DMCA policy, takes active steps to limit incidents of infringement on its website and works diligently to keep unauthorized works off its website." In this respect, the opinion reminded me of the Tiffany v. eBay ruling, where that court also lauded eBay for going beyond what the law required and excusing the infringement that slipped through the cracks. I think these two opinions put a huge exclamation mark to reject the notion that courts will only tolerate passive conduits (who do nothing to police their network) or perfect editorial control, with no middle ground for courts to excuse omissions by good faith actors. As with my first point, if the Viacom court adopts this philosophy, then YouTube will win.
A few other noteworthy aspects of this ruling:
* a website's failure to prevent terminated users from re-registering under alternative credentials does not preclude 512(c)
* 512(c) is not lost even if employees spot-check user submissions after publication and make minor edits to the metadata
* 512(c) still applies even if the website automatically extracts some metadata (in this case, some still previews of the video) and uses that metadata for promotional purposes. 512(c) even applied to the screenshots.
* The court rejects Io's argument that Veoh should change its business operations to do a better job of infringement suppression. The court recaps Io's argument as:
plaintiff contends that, if Veoh cannot prevent infringement on its site given the current volume of its business, then Veoh should be required to either hire more employees or to decrease its operations and limit its business to a manageable number of users (whatever that number might be). Its not-so-subtle suggestion is that, if Veoh cannot prevent infringement from ever occurring, then it should not be allowed to exist.
This change-your-business argument is popular among copyright plaintiffs, but the court emphatically rejects it:
Declining to change business operations is not the same as declining to exercise a right and ability to control infringing activity...Moreover, as discussed above, the DMCA does not require service providers to deal with infringers in a particular way...Further, plaintiff’s suggestion that Veoh must be required to reduce or limit its business operations is contrary to one of the stated goals of the DMCA. The DMCA was intended to facilitate the growth of electronic commerce, not squelch it.
While this ruling is very good news for the defense, there are plenty of reasons why it may not portend a similar result in the Viacom v. YouTube lawsuit, including:
* different courts (9th Cir. v. 2d Cir.). In particular, the Veoh court makes numerous references to Ninth Circuit precedent, and the Viacom court could simply say that Second Circuit law is different
* Io did not send any 512(c)(3) notices before suing. Viacom did. This is significant because the Io judge had little reason to be sympathetic to Io if they didn't take advantage of the non-litigation recourse mechanism specified in the statute. Then again, the Viacom court could simply expect Viacom to continue using the 512(c)(3) mechanism as well rather than looking for a court-imposed workaround.
* The Io court notes that the user-uploaded videos did not have a copyright notice in them. I'm sure Viacom can find examples where its copyright notice was included in the uploaded videos.
* Io is a pornographer. Their copyrights are as good as anyone else's, but courts might feel less sympathy towards pornographers.
* Veoh had gotten out of the porn business, and this mooted the injunction. However, Viacom could get an injunction against YouTube with significant bite. Most people misassume that 512(c) eliminates all liability for user-caused copyright infringement, but it only eliminates damages and limits the scope of injunctive relief in 512(j)--but a court can still issue an injunction. 512(j) is, as far as I know, not been litigated, and frankly I don't understand all of its provisions. But the bottom line is that an injunction is possible in the Viacom lawsuit even if 512(c) applies, and the Io ruling doesn't shed any light on that possibility.
Despite all this, YouTube has to be heartened by this ruling.
One final point: this is such a nice clean discussion about 512(c) that it may be a useful pedagogical tool. As a result, I am considering adding it to my Cyberspace Law reader in the future.