November 28, 2008
Roommates.com Loses Summary Judgment on Remand, and Then Partially Settles
By Eric Goldman
Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, CV 03-9386 PA (RZx) (C.D. Cal. Nov. 7, 2008). Nov. 19 stipulation.
The Ninth Circuit en banc ruling in the Roommates.com remains one of the most noteworthy Cyberlaw developments of the year, but it didn’t end the case. In the April ruling, the court held that some aspects of the Roommates.com service did not qualify for immunization under 47 USC 230 and remanded the case back to the district court to determine if, in fact, there had been a violation of the Fair Housing Act (and the state law analogue) and whether the First Amendment applied.
However, the remand order, while facially neutral, did not provide a blank slate for the district court judge. The majority en banc opinion repeatedly described the service as illegal and referenced its illegality as a key part of the 230 analysis. While the Ninth Circuit didn’t conclude that Roommates.com should lose on remand, any district judge trying to avoid reversal on appeal really only had one way to go.
It's not surprising, then, that Roommates.com principally lost its substantive case on remand. In a November 7 ruling, the court held that Roommates.com’s system violated the Fair Housing Act and the state law analogue, and Roommates.com was not eligible for constitutional protection (either the First Amendment or any right to intimate association). Consistent with the idea that the court only had one viable option, the court’s analysis is pithy and unforgiving.
After this ruling, the parties conducted a mediation and reached a settlement agreement that partially resolved the case (unfortunately, the settlement agreement wasn’t posted to PACER). The parties agreed on damages, including punitive damages, but didn’t resolve the plaintiff’s claim to attorneys’ fees. The parties also did not reach agreement on injunctive relief. As a result, the parties will go to trial on injunctive relief in January, and the plaintiff can ask for attorneys’ fees after that.
November 27, 2008
Google Book Search Settlement Comments (A Little Late)
By Eric Goldman
The Google Book Search settlement sparked plenty of discussion, but the coverage was suppressed by the high entry barriers to commenting--specifically, 300 pages of dense slow-reading legalese in the settlement agreement. Some of you may be faster readers than I am, but it would take me at least a full day to read everything. As a result, I still haven't made my way through the thick stack, and I'm not sure if/when I will actually do so.
In light of that, I will make only three high level points about the settlement:
1) Did Google make a good business decision to enter this market? If the settlement gets final approval, Google will get a clear path to republishing book content. However, this was an expensive market to enter. To get this result, Google will pay the $125M settlement fee, plus all of the litigation costs (which were undoubtedly enormous), the costs to construct the technology and scan the books to date, and the future construction and scanning costs. Further, Google's future book-related revenues will be taxed 63% (which may sound like a high percentage, but I'm sure Google has done higher splits in other context).
So how long will it take for Google, earning 37 cents on the dollar, to recoup its investment of well over $125M? More to the point, what is the implicit ROI on this investment, and how does that compare to other investment choices that Google could have made with the money? My guess is that if, at the beginning, Google knew that it would cost so much to enter the business, the rational decision would have been for Google to put the investment dollars in higher yielding investments.
(Note: I know that Google is awash in cash and doesn't need to maximize its return on every investment, so Google can afford to make lower-yield investments to make other socially important points. I'm glad they can, and I'm glad they do. Even so, I'm still struck by the size of their investment to enter this market.)
2) This deal has the potential to reengineer a number of industries. Part of the settlement agreement's length is due to the fact that the agreement creates a new collective rights organization, the Book Rights Registry, and articulates a command-and-control approach to govern how Google will interact with the Book Rights Registry. Personally, I think this overall architecture has a high risk of failure--no matter how long the contract, it's impossible to anticipate everything by contract to ensure successful competition over time. In fact, I suspect that anyone who picks up the contract 20 years from now will think the agreement is filled with anachronisms that reflect current assumptions about the technology and the book industry that won't make sense then.
I am especially interested in the potential effects of this deal on the library market--a huge market that drives a number of publishing industry sectors. Harvard Library's reversal notwithstanding, my initial assumption is that many/most libraries will be very desirous of obtaining a license to the electronic book database for two reasons. First, the database will have a lot of good stuff, and this may be a cost-effective way of expanding their collections. Second, libraries are literally running out of physical space, so an electronic database of books may solve a problematic and expensive facilities problem. But the dollars libraries spend on the database are going to come from somewhere, presumably either from money spent on print publications or from existing electronic licensees. Either way, this will create some winners and losers.
Creating a collective rights organization by contract has other major risk factors, most obviously antitrust concerns. There are a number of reasons to question the competitive effects of this deal, but the agreement waves the red flag in front of antitrust regulators by containing some provisions where Google and the Book Rights Registry are supposed to agree on downstream prices to customers. Sure looked like vertical price restraints to me. It may be no accident that collective rights organizations typically operate under Congressional authorization or an antitrust consent decree.
Because of these problems, it will be interesting to see who objects to the deal. Among the candidates:
- the DOJ, who might be still spoiling for a fight over Google's market power after successfully tanking the Google/Yahoo ad syndication deal.
- entrenched interests in the library supplier market, such as Baker & Taylor or existing electronic database licensees
- individual authors or publishers who feel screwed by the opt-out system
- other major players in the book industry whose market niche could be reengineered. Amazon is an obvious candidate.
3) If the deal goes through, this arrangement could represent a discontinuous step up in the overall knowledge that benefits our society. One of the most problematic aspects of book publication is that the content isn't searchable (one of the reasons I much prefer writing law review articles that get into Westlaw/Lexis than book chapters that become effectively unsearchable). If this database makes book content globally and easily searchable, massive quantities of human knowledge become newly findable and more usable. What a huge win for all of us! It remains to be seen if we'll realize this theoretical promise, but I remain hopeful we will.
The deal needs approval from the judge (it has already received preliminary approval sufficient to solicit opposition), and it will be interesting to see who lines up in opposition. The deal also could be attacked by the antitrust regulators and others. So I may try to defer investing the time to read the agreement in total until we see what happens.
There were a lot of articles on the settlement. Some of the ones that caught my attention:
* Mike Masnick: Will Others Now Line Up To Get Paid From Google?
* Fred von Lohmann: Google Book Search Settlement: A Reader's Guide
* Mike Masnick: Short Term Profits Over Long Term Principles; Google's Caving On Book Scanning Is Bad News
* David Drummond's official Google blog post
My 2005 comments on Google's efforts.
UPDATE: I've since learned that James Grimmelmann did a lot of the hard work that I've been trying to avoid. His analysis and list of recommendations is excellent.
November 26, 2008
Lori Drew Guilty of 3 Misdemeanor Violations of the Computer Fraud & Abuse Act
By Eric Goldman
According to news reports (WSJ Law Blog, LA Times, AP), the jury has declared Lori Drew guilty of "three misdemeanor counts of accessing a computer without authorization." I would like to parse the actual jury verdict form to make sure we understand what the jury actually said. For now, some preliminary observations.
First, the jury verdict is not the last step in the process. For example, the judge could still dismiss the case notwithstanding the jury verdict. Personally, I think it was a mistake for the judge to let this case go to the jury; overturning a jury ruling is always a dangerous move for a trial judge, and it would be especially awkward here for the judge to kick the case out now given the high emotions and heavy press coverage for this case. There could be a retrial (especially on the fourth charge, which resulted in a hung jury). It is also possible the jury verdict could be reversed on appeal. Finally, if none of those occur, a sentence that didn't include jail time would still be a travesty but would still have let the people have their vengeance while reducing the injustice to Drew. So it's hard to assess the meaning of the jury verdict because it's only 1 chapter in a longer story.
Second, I am even more convinced that it was a travesty of justice for the government to bring this case at all. The facts elicited at trial demonstrated the illogic of the government's argument that Lori Drew made unauthorized uses of MySpace's servers, including the facts that:
* Lori Drew did not create the MySpace account at issue (Grills, the babysitter, did--but she got government immunity for testifying against Drew)
* Lori Drew did not click OK to the MySpace user agreement (Grills did)
* Lori Drew did not send the final fateful message (Grills did)
* some of the messages at issue were not even sent through the MySpace network (they were sent through AOL)
These facts severely undercut the government's theories about the Computer Fraud & Abuse Act. They should also frighten each of us who may have broken an online user agreement, intentionally or not, at some point in our lives, by showing how easy it could be to violate the CFAA. The tenuousness of the law's application to the facts reinforced that the real trial was over Lori Drew's moral culpability for Meier's death...though that wasn't supposed to be on trial.
Third, regardless of how this case turns out, I remain frustrated by how pro-regulatory forces are using Meier's death--a tragic but highly anomalous situation--as grist for their pro-regulatory agendas. In particular, the push to legally prohibit "cyberbullying" baffles me. I don't even understand the term, but I do know that we cannot legislate people being nice to each other, online or off, and we don't even try in most offline circumstances. Further, as the expansive interpretation of the CFAA highlights, restrictions against "cyberbullying" could chill many socially beneficial and protected activities. So, I hope we can resist the pro-regulatory temptations. Ironically, a guilty verdict for Lori Drew might have that salutary effect by showing that existing laws can punish "bad" actors, even if legal justice is being denied to Lori Drew in the process.
Private investigators are stressing about this ruling.
November 25, 2008
Search Engines Aren't Liable for Gambling Ads Per 230--Cisneros v. Yahoo
By Eric Goldman
Cisneros v. Yahoo, CGC-04-433518 (Cal. Superior Ct. "Tentative Trial Decision" Nov. 6, 2008)
I am frequently asked if 47 USC 230 protects websites for claims based on the ads they run. My answer is emphatically "yes" unless the claim relates to IP, federal criminal law or the ECPA. The fact that the third party content is advertising is irrelevant to the immunization, and so is the fact that the website is being paid to display the allegedly tortious material. I have never organized the 230 jurisprudence to identify all of the cases that confirm immunization for third party ads, but two examples come to mind: (1) the eBay cases over listings, such as the Stoner and Gentry cases, and (2) Ramey v. Darkside Productions. Because it reinforces the lack of liability for third party ads, I should add that 230 protects websites for their own ads in some cases--see here.
However, Internet gambling can violate federal criminal law, and sites associated with third party Internet gambling could drop out of 47 USC 230 coverage accordingly. However, this exclusion only applies when it's a federal criminal agency bringing the enforcement action. Furthermore, when it relates to gambling ads, the criminal claim can be trickier, and the First Amendment can provide some protection for the ads. Nevertheless, I understood why the search engines settled up with the DOJ over gambling ads. They may have had powerful defenses, but 230 wasn't one of them, and it may have been cheaper/smarter to settle up than continue to fight.
In contrast, when a state agency or a private plaintiff complains about a website running third party gambling ads online, the law clearly says that the plaintiff should buzz off. A recent ruling in a long-running lawsuit (filed Aug. 2004; see John O's post from 2005) confirms that, proposing to dismiss a private plaintiffs' lawsuit against Google and Yahoo because it's preempted by 47 USC 230 (among other reasons).
The plaintiffs' 17200 unfair competition lawsuit had already taken some hits along the way, including a ruling that damages weren't available. This left only injunctive and declaratory relief on the table, but the injunctive relief claim was effectively mooted by the search engines' settlement with the DOJ (which, interestingly, the court does not directly discuss).
The plaintiffs persisted, alleging that some gambling ads slip past Google's and Yahoo's efforts to suppress the ads. The court expresses some sympathy for the filtering challenge, noting that "much like bacteria that mutate in order to survive antibiotics, would be on-line gambling operators change their tactics to escape detection, necessitating different enforcement techniques by the defendants." (This sounds like a good basis for a 47 USC 230(c)(2) dismissal, also not discussed by the court). The court gives props to the defendants' suppression efforts and refuses to promulgate a technology-based injunction telling the search engines how to run their business, saying "the defendants are doing as good a job as possible at removing on-line gambling links, and that job is far better than anything this court could come up with in an injunction."
The 230 discussion is pretty straightforward. One nice touch: the court explicitly talks about the plaintiffs' allegations that Google and Yahoo were "aiding and abetting" the illicit gambling. Citing the 7th Cir. Doe v. GTE ruling from 2003, the court correctly says that 230 trumps aiding and abetting claims, even if Google and Yahoo made money from the advertising. This is a good reminder that "aiding and abetting" or similar claims (like conspiracy) should not be a viable plead-around to 47 USC 230.
November 21, 2008
Blockshopper Request to Dismiss Jones Day Lawsuit Denied
By Eric Goldman
2008 has been a banner year for ridiculous trademark claims, so picking the most ridiculous is a little tricky...but this lawsuit easily makes my top 3. As you may recall, Blockshopper reports on real estate transactions--in this case, purchases by two Jones Day associates. Blockshopper wrote about the purchases, referenced their employment with Jones Day, and deep-linked to the associates' bios on the firm's website. Jones Day is now suing Blockshopper for trademark infringement, dilution and more.
We all know this is a meritless lawsuit, but it's not easy to pin down a single reason why. So let me try 4 obvious and non-exhaustive reasons:
1) I don't see any way that Jones Day can show the requisite "use in commerce" for trademark infringement or dilution.
2) I don't see any way that Jones Day can show any consumer confusion, either about the source of goods in the marketplace or about some implied sponsorship/endorsement. If Jones Day is trying to argue that consumers think deep-linking to another website means the linked website endorsed or sponsored the linking website, c'mon! Wendy Davis has more to say about this.
3) I don't think Jones Day can establish the requisite fame to constitute a mark protected under the revised dilution law. They are not a household name, although more ridiculous lawsuits might change that (but paradoxically will not leave them a reputation that can be further denigrated).
4) I don't see how the website reference and deep link could in any way constitute blurring or tarnishment of the mark under the revised dilution law.
With all of these obvious problems, this should be an easy defense win...right? Unfortunately, trademark law is so completely broken that it cannot clean up cases like this on a motion to dismiss when the plaintiff rotely alleges the elements of the claims, no matter if it can't deliver on its allegations later on in the case. Jones Day certainly knows how to make the rote allegations in its complaint, so the judge refuses to dismiss the trademark infringement and dilution claims. (The judge does dismiss the individual entrepreneurs as defendants.) This is consistent with how some judges approach 12b6 motions, but other judges might have pressed Jones Day on the specifics of its allegations and how those allegations support its theories (as Sam Bayard and Corynne discuss), and yet other judges would have at least signaled their skepticism at the ultimate merits of the claims.
Also disconcerting is that the judge rejected the public interest groups' amicus brief. I understand that trial judges typically are less interested in amicus briefs because they often don't help interpret the facts, but in this case the judge needs to understand the possible social import of overexpansive trademark doctrines or even keeping meritless trademark cases past the 12b6 motion to dismiss. (For more about the broader social issues, see here).
Even if justice wasn't served in this ruling and the court isn't listening to some of the experts, let's hope the judge gets to the right place soon. And because the court let the case go on further than it should have, I hope the court awards Blockshopper its attorneys fees--a power the court has in "exceptional" cases, which (in my opinion) this case certainly is.
November 19, 2008
October 2008 Quick Links, Part 3
By Eric Goldman
* Can you believe this? A 15 year old girl took nude photos of herself using her cellphone and sent the photos to her peers. She is now being prosecuted on child pornography charges. The girl's behavior sounds more like a cry for help than a criminal act.
* Judges are pushing back against online child porn downloading cases.
* PROTECT Our Children Act (S.1738). If I were a legislator, I would name all of my bills (regardless of substantive topic) “Protect Our Children Act” to ensure passage. Among other things, the law creates a new crime of “child pornography that is an adapted or modified depiction of an identifiable minor” (assuming this survives First Amendment scrutiny, no more photoshopping Miley Cyrus’ face onto a naked woman’s body). The law also modifies existing law to require that websites and Internet access providers who find child porn on their network to forward it and other information to the CyberTipline operated by the National Center for Missing and Exploited Children.
* Sarah Palin email hack indictment. Orin's comments.
* HR 5938. Congress amended the Computer Fraud & Abuse Act again to increase the penalties and criminalize conspiracies to violate the law.
* S 431, Keeping the Internet Devoid of Sexual Predators Act of 2008 or the `KIDS Act of 2008'. Wired's critique. This law requires sex offenders to register their email addresses with a central database and then permits social networking sites to access the database and block registrations from the sex offenders. The most interesting aspect of the law is that it tries to define a social networking site as: “an Internet website (i) that allows users, through the creation of web pages or profiles or by other means, to provide information about themselves that is available to the public or to other users; and (ii) that offers a mechanism for communication with other users where such users are likely to include a substantial number of minors; and (iii) whose primary purpose is to facilitate online social interactions.” Is there any Web 2.0 site that does not qualify? Any wagers about how long it will take Congress to change this law to require social networking sites to block sex offenders’ email addresses rather than making it optional as this law states?
* State v. Ellison, 2008 WL 4531860 (Ohio App. Ct. Oct. 10, 2008). Two childhood friends have a falling out. One posts an allegation on her MySpace page that the other is a child molester. After the district court convicted her of harassment via a telecommunications device, the appellate court overturned the conviction because she lacked sufficient intent to harass.
* Ryan Haight Online Pharmacy Consumer Protection Act of 2008, HR 6353. “No controlled substance that is a prescription drug as determined under the Federal Food, Drug, and Cosmetic Act may be delivered, distributed, or dispensed by means of the Internet without a valid prescription.”
* Gotbaum ex rel. Gotbaum v. City of Phoenix, 2008 WL 4628675 (D. Ariz. Oct. 17, 2008). Malicious blog posts in local Phoenix blogs about a lawsuit aren't enough pre-trial publicity to warrant a change in venue.
* Bursac v. Suozzi, 2008 WL 4830541 (N.Y. Sup. Ct. Oct. 21, 2008). Online shaming of DWI suspects before conviction violates due process. Are you listening, FTC?
* Canadian court: linking to defamatory material is not defamation.
* In an attempt to forestall further movement on the Global Online Freedom Act, the search engines released a high concept statement on how they won’t help repressive regimes.
November 18, 2008
October 2008 Quick Links, Part 2
By Eric Goldman
* Kramer v. Perez. An Iowa court awards $236M in damages in a spam case. Venkat's comments.
* After the government lost its jury trial against Impulse Media, the court denied Impulse Media attorneys fees.
* AT&T put its own emailed notice of amended contract terms into its spam folder. Whoops! Due to spam filters and other automated blocks, it is becoming almost impossible for websites to communicate with their users by email.
* The Blizzard v. MDY WOWGlider case has reached a stipulated damages amount of $6M.
* Pulaski & Middleman, LLC v. Google Inc., 5:2008cv03888 (N.D. Cal. complaint filed August 14, 2008). The Justia page. Yet another me-too lawsuit against Google over serving ads to parked domains and error pages.
* An Israeli GPL enforcement action settled.
* Kentucky v. 141 Domain Names. Is a domain name property? Yes. See the Sex.com case. Can a plaintiff seize a domain name pursuant to a favorable judgment? Yes. Is it appropriate for Kentucky to seize domain names for gambling websites available in Kentucky? Of course not, because this would effectuate an extraterritorial reach by curtailing non-Kentucky residents from making possibly legal uses of the domain name. More recently, the seizure was stayed.
* Speaking of inappropriate seizures, the Feds are trying to seize the trademarks of the Mongols motorcycle group. DOJ press release. LA Times article.
* Best Western Intern., Inc. v. Doe, 2008 WL 4630313 (D. Ariz. Oct. 20, 2008). Prior blog post in this case. The judge is losing patience: "These filings are wasteful in the extreme. The Court is not a forum for the parties to expend every possible dollar seeking to litigate every conceivable issue, no matter how insubstantial. The Court will no longer tolerate the excesses of this case."
* Goddard v. Google Inc., 2008 WL 4542792 (N.D. Cal. Oct. 10, 2008). The case against Google for deceptive mobile phone ads will stay in federal court.
* Eyeblaster, Inc. v. Federal Insurance Co., 2008 WL 4539497 (D. Minn. Oct. 7, 2008). This is a collateral lawsuit to Sefton v. Eyeblaster alleging that Eyeblaster distributed spyware. Eyeblaster tendered the claim to its insurer. This court holds that the CGL policy doesn't apply because the claim relates to software problems, not physical damage to the users' computers. Further the E&O policy doesn't apply because Sefton alleges that Eyeblaster intentionally installed the spyware, bumping Eyeblaster into one of the policy's exclusions.
* Are consumers becoming more tolerant of pop-up ads? For more on consumer acceptance of new advertising formats, see here.
November 17, 2008
Yellow Pages Publisher Hit with $1.5M Fraud Judgment for Publishing False Ad--Knepper v. Brown
By Eric Goldman
Knepper v. Brown, CC 9903-02495 (Or. Sup. Ct. Oct. 9, 2008)
A woman got a botched liposuction job (which plaintiff's expert described as an "uncorrectable disaster") from Dr. Brown, a dermatologist. She sued the dermatologist and Dex, the publisher of his Yellow Pages' ad, for fraud based on Brown's ad. The court describes the ad and the interplay between the doctor and Dex as follows:
In 1996, Brown placed a second advertisement in Dex's Yellow Pages -- this time under the subheading "Surgery, Plastic and Reconstructive." The new advertisement stated that Brown performed liposuction, wrinkle treatments, and sclerotherapy. It also stated that Brown was "Board Certified" -- without specifying any area of certification.
The new advertisements were added at the urging of a Dex sales representative, Mueller. Brown's office manager, Newman, told Mueller that Brown was interested in attracting more liposuction patients. Mueller met with Newman to help her "mock up" a new advertisement. Mueller told Newman that the "plastic and reconstruction surgery" subheading in the Yellow Pages would be the best place to reach that target market. Mueller also told Newman that the advertisement should identify Brown as "board certified," because "patients were expecting a [board certified] plastic surgeon to do these techniques." Newman repeatedly told Mueller that she was concerned that such an advertisement would be misleading, because Brown's board certification was in dermatology, not plastic and reconstructive surgery. Mueller continued to push for a nonspecific "board certified" designation under the "Surgery, Plastic and Reconstructive" subheading, and Brown, who had the final say, acceded to Mueller's advice.
Brown (probably wisely) settled, leaving Dex as the only defendant. After a mistrial, the jury in the second trial awarded the plaintiffs $1.5M for the fraud claim against Dex. The Oregon Supreme Court upheld this judgment.
There are a number of interesting points to observe about this case:
1) I'm sure all of the lawyers reading this post are shaking their heads at the apparently rogue salesperson!
2) I understand why Dex thought it could win on the legal merits, but this looks like the kind of situation where a jury will pay the plaintiff regardless of the legal merits. Given that the doctor had settled, Dex was the only target for the jury to nail. And that's exactly what they did.
3) The dermatologist's use of the undefined phrase "board certified" is a good example of an implied false representation. It also seems like something the medical profession ought to regulate. For example, for most lawyers, there are very specific rules about how lawyers can describe themselves as "specialists."
4) Assume that Google sold the keyword "liposuction" to Brown and Brown's ad included the undefined phrase "board certified." What result? 47 USC 230 almost certainly would protect Google in that case. Of course, the Dex salesperson allegedly did far more in encouraging the falsity than Google would likely do. If an online publisher/ad network's salesperson was similarly aggressive at pushing a false representation, it may be possible that the 47 USC 230 shield would drop. Even so, this is a good example of how 47 USC 230 may privilege online publishers over offline publishers in a way that grants significant competitive advantages to online publishers.
Tom Seery at RealSelf has more to say on the case.
November 14, 2008
Just who is an Internet access service provider under CAN-SPAM?
Worded to prevent lawsuits by individual email recipients, the federal CAN-SPAM Act limits who can bring suit for a CAN-SPAM violation. In addition to state and federal enforcers, the Act allows suits by "Internet access service providers." Just who are they, and can individuals find a way back in to court under this provision?
By Ethan Ackerman
One of the most distinct differences between the federal CAN-SPAM Act and state anti-spam laws is the federal law's restrictions on who may bring suit for a violation. Like many federal laws, it's vital to consider the environment in which it passed in attempting to understand the scope and intent of its provisions.
After several years of experience with state laws allowing individual email recipients to bring suit under state laws, and both actual and exaggerated instances of 'professional plaintiffs' bringing questionable suits against email marketers, many business and marketing lobbyists were eager to limit who could bring suits under a federal spam law. While efforts to expand or limit liability under federal laws are as old as the 1st Congress, 2003 was a notable high-water mark. At the same time as, and in the same Congress as, the CAN-SPAM Act, similar Acts altering liability standards and raising barriers to lawsuits and class actions were being passed under the mantra of "tort reform." Limitations on environmental and manufacturer liability, extending sovereign immunity to vaccine developers, restrictions on class actions, preemption of state enforcement and consumer protection laws, statutorily-mandated settlements of active court litigation - these were some of the hallmarks of the 108th Congress' involvement with the judicial branch.
In this environment, it's not surprising that various provisions in the CAN SPAM Act were negotiated back and forth to expand or contract liability, standing and preemption. This blog has previously covered the preemption back-and-forth, but similar negotiation went into just who could sue, and how, and where, and for how much under the CAN SPAM Act.
The final version of s.877 signed into law in 2003 that became the CAN SPAM Act reflects the compromises on several issues necessary to get sufficiently broad political support. This post will attempt to identify each of those issues in turn.
The final bill allows suits by a broad swath of federal regulatory agencies to enforce the law, including most notably the FTC. The scope of state officials' enforcement of the federal law, and just who else could sue, was somewhat more disputed. Prior year versions of the bill allowed suits in state as well as federal court. The initial Senate version of s.877 also allowed suit in federal or state court, but the final version negotiated with the more lawsuit-averse House of the 108th Congress restricted suits to only US federal District Courts, and now redundantly also granted the relevant federal agencies additional authority to removes suits filed by States to federal courts.
The issue of caps on damages and attorney's fees was also near and dear (or anathema) to many in the 108th Congress, and extensive changes exist between various versions of the bill as conditions were horse-traded and various constituencies weighed in. State enforcement statutory damages swung from $20 to $250 over the course of the different Congresses, with treble damages being available, then dropped and replaced with discretionary 'aggravated' damages possibilities. State enforcers' attorneys fees similarly went from mandatory to discretionary between the introduced Senate version and House-approved version. Statutory damages for internet access providers saw similar swings and horse trading, ultimately with certain egregious violations triggering $100 damages and other damages valued at $25, a far mark from a proposed 'up to $10.' Damages caps were also a feature, but swung from as little as $500,000 to in some cases $3 million.
Similarly, the political demands of the House resulted in additional, heightened pleading standards for civil suits by anyone other than federal enforcement agencies. These heightened standards, absent in the initial Senate version but added in sections 7(f)9 and 7(g)2 of the final version, raised a scienter pleading requirement for state enforcers and constricted the definition of 'procure' for suits brought by Internet access providers.
But back to the big difference
As initially indicated, the biggest difference between most state and the federal anti-spam law is the absence of a private right of action for spam recipients in the federal law. In the 108th Congress, a general private right of action was a non-starter. Even the initial Senate version of the bill restricted suits to enforcement officials and Internet access providers. Contrary to the desires of state enforcers from state with such provisions, and apparently an uncomfortable concession from the minority Democrat sponsors, the absence of a private right of action was a stated minimum.
The final wording of Section 7 of the CAN SPAM Act specifies who can bring suit, listing first federal enforcement, then state enforcement, and finally granting Internet access providers the right to bring some civil suits. So who is an 'Internet access provider'?
The short answer - the definition written in the 'definitions' section of CAN SPAM - is that the "term `Internet access service' has the meaning given that term in section 231(e)(4) of the Communications Act of 1934 (47 U.S.C. 231(e)(4))." This somewhat unenlightening reference leads to the actual statutory definition of:
The term “Internet access service” means a service that enables users to access content, information, electronic mail, or other services offered over the Internet, and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include telecommunications services.
This broad definition originally was passed into law as part of the earlier Child Online Protection Act (not to be confused with the Childrens' Online Privacy Protection Act). Importantly, CAN SPAM also used other definitions from other prior laws defining similar terms. One example, one short line above the CAN SPAM 'internet access provider' definition, is the definition of 'Internet.' CAN SPAM defines 'Internet' by reference to the earlier passed Internet Tax Freedom Act, 47 USC 151 note. Importantly, CAN SPAM did not adopt the much narrower, more ISP-centric definition of 'internet access provider' in that Act. The Internet Tax Freedom Act defines an internet access provider as "a person engaged in the business of providing a computer and communications facility through which a customer may obtain access to the Internet..."
This definitional difference is important because CAN SPAM was written with service providers above and beyond just then-traditional modem-pooling, DNS-providing traditional ISPs in mind. Spam impacts next-generation services like online website hosts, online email providers, online proxies and filtering services, and CAN SPAM was drafted to take into account not just the dial-up AOLs of the world, but also the Rackspaces, the Hotmails, and the TUCOWs.
So courts have uniformly picked up this clear distinction, right?
If they had, what would there be to write about? While CAN SPAM was commonly understood to prevent end-user lawsuits, that portion of the law is implicit, not explicit. CAN SPAM was, however, explicitly written broadly to cover all, even the as-of-yet-uninvented, online service providers that spam negatively impacted. Unfortunately, subsequent court cases addressing the issue of whether it is an 'internet access provider' bringing suit have sometimes attempted to reinsert traditional ISP-style definitions into the Act.
A recent case getting the issue correct is Haselton v. Quicken Loans Inc.. Though anti-filtering activist Bennett Haselton, administrator of peacefire.org, sued Quicken in his individual capacity, separately incorporated Peacefire also was a named plaintiff. Defendant Quicken made much of the fact that Haselton was the sole employee of the organization and alleged Haselton was simply an individual end-user filing suit. Haselton countered, and the court agreed, that Peacefire's filter-circumventing service, even if operated only by Haselton, was clearly an 'internet access service provider' within the meaning of the Act.
Unfortunately, other courts, and commenters, have often channeled their skepticism over the litigation intentions of a plaintiff into interpreting this broad definition narrowly.
For example, the Gordon v. Virtumundo court's palpable disagreement with serial plaintiff Gordon's litigation intentions and strategy led it to reach to hold, contrary to the plain wording of the definition, that Gordon's multi-user internet email service was not a " a service that enables users to access ...electronic mail... offered over the Internet." UPDATE
While they may be legitimate concerns over the capacity and legitimacy of serial plaintiffs' anti-spam suits, courts can address them without resorting to unnecessarily adjusting definitions in the statute. In Hypertouch v. Kennedy-Western University, for example, the court correctly recognized that an email service provider, even though small and providing accounts without charge, was nonetheless a 'internet access service provider.' As Eric blogged earlier, this court addressed its, and defendant's, concern that the plaintiffs allegations were inadequate and more properly addressed towards the actual marketing company in its ruling that plaintiff was an internet access service provider, but its claims were inadequate to survive a motion for summary judgment.
12/08 Update An observant Tri-cities reader gently corrects me, noting that Judge Coughenour ultimately did, contrary to what I suggested, conclude the plaintiff qualified as an Internet access service provider in Gordon v. Virtumundo. After reviewing all the criticisms and interpretation of legisaltive history and analogous cases that suggested Gorden was not intended to qualify, Judge Coughenour did ultimately conclude Gorden qualified "under the statute's capacious definition." So, my speedy reading aside, Gordon v. Virtumundo stands as an appropriate example of a court properly addressing questions about the propriety of a suit without narrowing the definition of an Internet access service provider after all.
November 13, 2008
October 2008 Quick Links, Part 1 (Copyright Edition)
By Eric Goldman
* Happy (?) 10th birthday, DMCA. The EFF birthday cards (1, 2).
* Speaking of the DMCA, Sen. McCain got a first-hand experience with it when his lawyer complained to YouTube that YouTube was taking down campaign videos in response to 512(c)(3) notices too quickly. Really…what a shock. We’ve documented problems with 512(c)(3) notices and 512(f) lawsuits repeatedly on this blog (see, e.g., 1, 2, 3, 4, 5, 6, 7), and yet it only becomes a problem when the legislators personally experience the consequences of the laws they passed. Ironically, Sen. McCain’s response wasn’t to seek legislative solutions that ameliorate the incentives that service providers have to take down content on notice. Instead, Sen. McCain looked for favoritism treatment just for politicians, perhaps hoping that his candidacy for the position as leader of the free world might intimidate YouTube into doing his biding. No such luck (1,2). Maybe YouTube decided McCain was too far behind in the polls. Now that Sen. McCain has a little more time on his hands, maybe he will draw upon his first-hand experience with the tyranny of 512(c)(3) notices to seek out legislative solutions. Paul Levy made some good suggestions.
* Redbox v. USHE. Redbox is an in-store kiosk for renting DVDs. According to Redbox, Universal Studios ordered Redbox to give it a cut of its action or Universal would cut off its wholesale supply of DVDs. See EFF story. Universal Studios may simply be trying to clear the DVD kiosk market of competitors so that it can enter the market itself.
* Mygazines was a website that enabled users to post magazine articles to share them with their peers. It was sued for copyright infringement, settled the lawsuit (1, 2), And then promptly went out of business.
* A recap of the latest in Oracle v. SAP. Separately, the judge has asked Oracle to name its price.
* H.R. 6531: Vessel Hull Design Protection Amendments of 2008. After a few years of trying, Congress amended the vessel hull protections to include copying of boat decks.
* S. 3325, the "Prioritizing Resources and Organization for Intellectual Property Act of 2008." Congress keeps ratcheting up the penalties for civil and criminal infringement, a process I describe more here. The statute also creates an “Intellectual Property Enforcement Coordinator.” It will be very interesting to see who Obama appoints for this position. The position cries out for an IP maximalist, but wouldn’t it be wild if Obama appointed one of his law prof supporters instead?
* Lenz v. Universal Music Corp., 2008 WL 4790669 (N.D. Cal. Oct. 28, 2008). Judge Fogel denied a motion to certify an interlocutory appeal in the Lenz case.
* Due to a copyright dispute with the artist, California will be getting a new "whale tail" design for its custom license plates. Did California really put the whale tail design on 175,000 license plates on a handshake?
November 11, 2008
Lambotte's Click Fraud Lawsuit Against IAC Survives Motion to Dismiss
By Eric Goldman
Lambotte v. IAC/InterActiveCorp, 2008 WL 4829882 (C.D. Cal. Nov. 4, 2008). Initial blog post on the filing of the first complaint.
Lambotte filed this putative class action lawsuit against IAC in May based on alleged click fraud. In July, the court granted summary judgment to dismiss portions of the lawsuit. Lambotte and two new named plaintiffs then filed an amended complaint in September. IAC moved to dismiss. This ruling largely rejects that motion.
The plaintiffs argued that the contract says that IAC would charge for clicks by "users," and reasonable advertisers would assume that "users" are "potential clients" for the advertiser, not bogus clickers. The judge is rightly skeptical of this argument, saying that the plaintiffs' definitions "may not be the most reasonable interpretations." At the same time, California law has a liberal parol evidence rule, so the judge gives the plaintiffs a chance to introduce evidence to support their aggressive definitions. I would be surprised if this claim ultimately prevails, but the plaintiffs can try.
The plaintiffs also argue that the implied covenant of good faith and fair dealing effectively requires IAC to prevent click fraud, and thus IAC breached that obligation. The court, citing In re Yahoo, says that this allegation survives a motion to dismiss.
As with In re Yahoo, this ruling is a win for the plaintiffs because they get to keep litigating the case. However, there remains some basic problems with the plaintiffs' allegations that should ultimately doom the lawsuit. If in fact the plaintiffs do lose the lawsuit, it's unfortunate that everyone had to incur the extra adjudication costs. More likely, if the lawsuit can survive another few rounds, IAC probably cuts a check to end the threat regardless of substantive legal merit.
November 10, 2008
Rip-off Report Wins Dismissal--GW Equity v. Xcentric
By Eric Goldman
I'm thinking about renaming this blog the "Rip-off Report Blog." After all, I blog about them frequently, and there seems to be a never-ending supply of new legal developments. Plus, I know readers are interested in them based on my in-box; emails related to Rip-off Report may be the single largest topic of private blog-related emails I get.
I am being partially facetious, but it is telling (and consistent with my past experience) that my Friday post on the Rip-off Report generated a few emails about yet more Rip-off Report litigation. I promise not to turn this into the Rip-off Report Blog, but the recent court dismissal of a case warranted an update.
GW Equity, LLC v. Xcentric Ventures, LLC, 3:07-cv-00976-O (N.D. Tex. Oct. 8, 2008)
This is a fairly "representative" lawsuit against Rip-off Report. The plaintiff trots out the standard arguments that have bubbling in numerous other cases, including:
1) The Rip-off Report created some of the content at issue because it offers pull-down tagging choices to consumers. The court cites to Roommates.com and others to conclude that the users are responsible for those choices, not the website.
The court does struggle a little with the 2004 MCW v. Rip-off Report precedent, also from the N.D. Tex., which is one of the few remaining "pure" 230 wins for a plaintiff. The court distinguishes MCW based on the prior defendant's failure to introduce rebuttable evidence that it didn't create the content at issue, as well as the defendant specifically telling the user to prepare content according to its specifications, which meant that "defendants in MCW had gone substantially beyond the traditional publisher’s editorial role and had participated in the process of developing information." I think the more recent caselaw is now pretty clear that soliciting user content doesn't convert third party content into first party content, so we'd all be better served if MCW were expressly overturned as precedent (which this court couldn't do). For now, fortunately the archaic MCW precedent is being drowned out by the chorus of subsequent more defense-favorable precedent.
2) Rip-off Report employees write some of the titles/headings and other content in a user report. Parsing the evidence, the court concludes that none of the evidence is competent enough to create a material factual dispute sufficient to survive summary judgment. This is a pretty significant win for Rip-off Report because these factual allegations are being repeated in a lot of cases (like the Barnes case below), so now the Rip-off Report can cite this ruling in those other cases.
3) The Rip-off Report's Corporate Advocacy Program is a racket that strips the company of 230 protection. The court quickly dismisses this argument, saying "it is not a bar to immunity for an Internet provider to refuse to remove defamatory material created by a third party, or to otherwise use it to their advantage, even though the Internet provider’s conduct may be considered reprehensible and offensive."
This opinion was just a magistrate's recommendation, and unsurprisingly GW Equity has filed objections to the recommendation. I suspect this case has plenty more gyrations.
Barnes v. Xcentric Ventures, LLC, GC041766 (Cal. Superior Ct. complaint filed Nov. 3, 2008)
This is a "garden-variety" complaint against Rip-off Report that doesn't break any new ground. Its most striking feature is its juxtaposition to the GW Equity case, because that ruling rejects most of the significant factual allegations in the complaint. If this court follows the GW Equity precedent, I smell summary judgment for the defense.
One more thing about the Barnes complaint. The plaintiff is affiliated with the Law Crossing website, which itself has attracted some criticism throughout the blogosphere. Indeed, Cathy Gellis reports that Law Crossing may have launched an attack campaign using Amazon's mTurk to flood a negative blog post with positive comments.
November 07, 2008
Rip-off Report Back in Court
By Eric Goldman
It's been a few months since I've blogged on new Rip-off Report litigation. For many companies, a blog hiatus might signal good news, but in Rip-off Report's situation, it merely reflects that I've been falling behind in tracking all of the new lawsuits. I don't blog all of their cases, but two relatively new lawsuits caught my attention:
Certain Approval Programs v. Xcentric Ventures, 2:08-cv-01608-MHB (D. Ariz. complaint filed Aug. 29, 2008).
Among the plaintiff's allegations are that automatically putting the words "Rip-off Report" into a user report page's title tag is defamatory and not covered by 230. The complaint has some useful screen shots depicting how Rip-off Report works.
Xcentric Ventures, L.L.C. v. Opinion Corp. dba Pissed Consumer, 2:08-cv-01841-JAT (D. Ariz. complaint filed Oct. 7, 2008).
Rip-off Report is on the plaintiff's side (again), this time suing a putative competitor and its web host for copyright and trademark infringement. Among the interesting tidbits:
(1) Rip-off Report successfully sent three DMCA 512(c)(3) takedown notices to the web host but is suing the web host anyway for failing to terminate the hosting relationship.
(2) if Rip-off Report has ownership or an exclusive license to the user-supplied reports sufficient to have standing to sue, would this alter its ability to disclaim responsibility for the content of the reports? I think the answer should be "no"--see Schneider v. Amazon and Blumenthal v. Drudge--but exclusive control over user content for copyright enforcement purposes but without concomitant responsibility for other purposes will strike most people as counter-intuitive.
(3) the putative competitor allegedly infringed the Rip-off Report's trademarks by creating and using the URL "http://rip-off-report.pissedconsumer.com" and putting "Rip-off Report" in the site metatags. Hmm...does Rip-off Report really want to establish the precedent that these activities infringe???
November 06, 2008
First Amendment Protects Spoof Strip Club in Video Game from Trademark Claim--ESS Entertainment v. Rock Star Videos
By Eric Goldman
E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., No. 06-56237 (9th Cir. Nov. 5, 2008)
This case reinforces how trademark law has gone so far astray that easy cases have become hard ones. This lawsuit was brought by the Play Pen, a strip club in downtown Los Angeles. The Grand Theft Auto: San Andreas video game depicts stylized but grittily realistic scenes inspired by a few major metropolitan areas, including Los Angeles. At issue is a virtual strip club in the East LA-inspired area titled "Pig Pen" that resembles the actual Play Pen's trade dress and logo. The Play Pen argues that consumers will assume that it endorsed or is otherwise associated with the video game and therefore the depiction constitutes trademark infringement and unfair competition.
On the one hand, I can almost see Play Pen's point. Due to overexpansive merchandising rights, consumers nowadays have no idea when an acknowledgement or homage in an entertainment product is a paid placement or otherwise a licensed use by the IP owner. But on the other hand, come on! First, if users can actually recognize the homage to Play Pen, inclusion in the video game only seems likely to stimulate consumer interest in the brand. Second, even if users make the recognition, the risk that consumers will be confused about the source of goods in the marketplace is ZERO. What a complete waste of time and money to push such a meritless "problem" to the Ninth Circuit.
So from my perspective, it's absolutely clear that the plaintiff should lose. However, as we've seen with other commercial referential trademark uses, trademark law doesn't have a single apropos doctrinal tool to kill this lawsuit. (See Bill McGeveran's paper for a preliminary cut at this problem).
I personally think that the plaintiff's case fails because the defendant didn't make a use in commerce of the trademark, just like the depiction of a fictional character going into a Wells Fargo bank as a movie's plot point does not qualify as a trademark use in commerce. If courts can ever embrace my commercial referential trademark use argument, it will make it much easier to dismiss these referential cases and substantially clean up the doctrinal contortions courts are using in desperation.
The defense here argued nominative fair use, which both the district and appellate court rejected because the fictionalized variation of Play Pen did not actually refer to Play Pen. I can't really dispute that, but it only further reinforces that the nominative use defense is fairly narrow and not robust enough to solve many problems.
Another "defense" would be the lack of consumer confusion about product source. (I put that in quotes because it's actually the burden of the plaintiff to establish as part of the plaintiff's prima facie case). This seems like an easy out for the court, and the Ninth Circuit waxes philosophic on the topic by making its own implicit findings of fact without any support, but nevertheless both the district court and appellate court decided to rely instead on a First Amendment defense. This is noteworthy for at least three reasons. First, there is no automatic First Amendment defense to trademark law, so it's hardly a well-accepted option for courts. Second, courts usually prefer to avoid constitutional issues if they can, and here the courts bypassed the consumer confusion doctrine to reach for constitutional grounds. Odd. Third, the Rogers v. Grimaldi/Mattel v. MCA rulings--the precedents cited by the court--both involved the defendant referencing the plaintiff's trademarks in media titles, a very specialized fact pattern for trademark law, and here the court treats the First Amendment defense as a broad salve for a parody/spoof. This is a pretty big jump for the Ninth Circuit, and one I suspect other panels will follow reluctantly at best.
UPDATE: See the comparison photos yourself here.
UPDATE 2: Rebecca does a better job explaining the doctrinal messiness than I did.
November 05, 2008
SEC's Proposed Guidance on Hyperlinking Contravenes 47 USC 230
By Eric Goldman
In August, I blogged about the SEC's most recent guidance regarding companies' liability for linking to third party content. Today, I submitted comments to the SEC pointing out that their general position regarding linking contravenes 47 USC 230 with respect to civil lliability. (I believe the SEC guidance also pertains to SEC criminal enforcement actions, and those would not be preempted by 230). Unfortunately, I ran out of time to attack the overall illogic of trying to treat outlinks as the basis of liability in any circumstance. That will have to wait for another day. You can read my comments in PDF (that's the best because of the formatting and footnotes). Or, you can read the comments below.
November 5, 2008
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Re: File No. S7-23-08, Commission Guidance on the Use of Company Web Sites
I am an Associate Professor at Santa Clara University School of Law and Director of the school’s High Tech Law Institute.[FN1] My research focuses on Internet law, especially Internet marketing law and search engine law. I have taught an Internet law course every year since 1995-96, and I practiced as an Internet lawyer in the Silicon Valley for 8 years before becoming a full-time professor.
My comments pertain to Section II(B)(2) of Release No. 34-58288. I write to point out that 47 U.S.C. §230 preempts the SEC’s imposition of civil liability for hyperlinked material.
In 1996, Congress enacted 47 U.S.C. §230 to immunize websites and other online entities from liability for third party content. §230(c)(1) says:
No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.
As the statute’s plain language indicates, the SEC cannot treat a company as the publisher or speaker of third party online content under any circumstance. As applied to the SEC’s proposed guidance, §230 means that the SEC cannot hold companies responsible for any content they hyperlink to.[FN2] Although I am not aware of a §230 case that specifically addressed hyperlinked content,[FN3] the case law has been virtually unanimous that websites are not responsible for third party content even when they exercise significant editorial control over the content. For example:
• In D’Alonzo v. Truscello, 2006 Phila. Ct. Com. Pl. LEXIS 244 (Phila. Ct. C.P. 2006), a blogger copied the entire contents of a newspaper article and republished those contents, apparently without authorization, on his blog. The newspaper article was allegedly defamatory (and the newspaper retracted it), but §230 immunized the blogger from any defamation liability even though the blogger affirmatively republished the article.
• In Barrett v. Rosenthal, 40 Cal. 4th 33 (2006), an email list operator made the editorial decision to forward a third party’s allegedly defamatory email to the entire email list. The California Supreme Court held that the email list operator was not liable for defamation for forwarding the email.
• In Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998), AOL was not liable for republishing a contractor’s allegedly defamatory content even though AOL had the express contractual right to exercise editorial control over the content.
Although these cases all involved defamation claims, the statute is not limited to those. Instead, §230 preempts all civil causes of action based on third party online content[FN4] —even causes of action enforced by the SEC—unless otherwise specified in §230(e).[FN5]
Further, the immunization applies even when a website explicitly or implicitly “adopts” the third party content. For example, in Global Royalties, Ltd. v. Xcentric Ventures, LLC, 2007 WL 2949002 (D. Ariz. 2007), a website was not liable for continuing to publish third party content that the author had asked the website to withdraw, even if the website had “adopted” the content as its own.;[FN6] Accordingly, the SEC’s standards for “adoption” of third party content may need some revamping for the online context.
Finally, §230 may protect websites’ self-authored characterizations when third parties cause those statements to become untrue. For example, in Doe v. SexSearch.com, 502 F. Supp. 2d 719 (N.D. Ohio 2007), §230 immunized a website’s marketing representation that all of its users were over 18 when a user rendered that statement false by lying about her age.[FN7]
Therefore, the SEC’s proposed guidance may contravene §230 to the extent that it tries to establish civil liability based on a company linking to third party content or for the company’s characterizations of that content. I encourage the SEC to consider revising Section II(B)(2) to reflect §230 and, as appropriate, acknowledge that companies do not face civil liability for hyperlinking to third party content.
I appreciate the opportunity to submit these comments, and I would be happy to elaborate on them further if that would be helpful. Thank you for your consideration.
Associate Professor, Santa Clara University School of Law
Director, High Tech Law Institute
500 El Camino Real
Santa Clara, CA 95053
1. I am speaking only for myself. I provide my affiliation for identification purposes only.
2. See, e.g., Christopher J. Volkmer, HyperLinks to and from Commercial Websites, 7 COMP. L. REV. & TECH. J. 65, 67-68 (2002).
3. The most analogous precedent that came to mind is Smith v. Intercosmos Media Group, Inc., 2002 U.S. Dist. LEXIS 24251 (E.D. La. 2002), which held that a domain name registrar was not liable for an allegedly defamatory website hosted at a domain name registered by its customer. Also analogous is Doe v. MySpace Inc., 528 F.3d 413 (5th Cir. 2008), which held that MySpace was not liable for tortious conduct (sexual abuse) that took place beyond its “premises,” even though the parties had met each other and communicated via the website.
4. See, e.g., Ben Ezra Weinstein & Co. v. Am. Online Inc., 206 F.3d 980 (10th Cir. 2000) (AOL was not liable for publishing inaccurate stock information provided by third parties).
5. §230(e) excludes federal criminal law from the §230(c) immunizations, so §230 does not preempt the SEC’s criminal laws. However, civil claims based on those laws are preempted. See Doe v. Bates, 2006 WL 3813758 (E.D. Tex. 2006); cf. Voicenet Commc’ns, Inc. v. Corbett, 2006 WL 2506318 (E.D. Pa. 2006).
6. However, I should note that the recent Roommates.com en banc opinion, which addressed facts the SEC is unlikely to encounter, has some ambiguous but arguably contrary discussion regarding adoption of third party content. See Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008). Similarly, I am not addressing the application of 47 U.S.C. §230 to the SEC’s “entanglement” discussion.
7. See also Prickett v. infoUSA, Inc., 561 F. Supp. 2d 646 (E.D. Tex. 2006) (§230 immunized information syndicator for its representation that it had verified the syndicated information); Mazur v. eBay Inc., 2008 WL 618988 (N.D. Cal. 2008) (§230 immunized eBay for its representation that its live auction service vendors were screened). But see Anthony v. Yahoo! Inc., 421 F. Supp. 2d 1257 (N.D. Cal. 2006) (§230 does not immunize the dissemination of expired dating profiles with the implicit representation that they were still active); Mazur v. eBay Inc., 2008 WL 618988 (N.D. Cal. 2008) (§230 does not immunize marketing representations that live bidding is “safe,” is conducted against “floor bidders” and involves “international” auction houses).
November 02, 2008
Student Term Paper Website Brings a Lawsuit; Instead Gets Nailed With $700k Award Against It--Axact v. Student Network Resources
By Eric Goldman
Axact (Pvt.) Ltd. v. Student Network Resources, 2008 WL 4754907 (D. N.J. Oct. 22, 2008). The Justia page. Axact's initial complaint. A letter from defense counsel to the judge recapping some of the sad story.
I'm always fascinated when plaintiffs initiate a lawsuit but end up owing the defendants money. I understand that litigation inherently involves uncertainty about the outcomes. However, when the plaintiff ends up owing money, the plaintiffs appear to have made a major miscalculation. Certainly they should have just stayed home rather than mixing it up in court.
Today's case involves the apparently brutal and cutthroat (perhaps literally?) business of student term paper websites. You may recall that Google blacklisted all term paper websites from its AdWords program. I've also blogged on Blue Macellari's complaint against some term paper sites she thought had ripped her off (the case settled). The Turnitin lawsuit is also relevant.
The litigants in today's case are competitors in the student term paper business. Axact, a Pakistan-based IT services company, initiated the lawsuit by alleging that SNR was trying to steer business away from Axact through defamatory statements at the home page and user forums of a website operated by SNR. The complaint cites some pretty strong allegations by the defendants beyond just selling bogus term papers, including purported accusations that the plaintiffs are a "crime syndicate," run a "prostitution ring" and threatened reporters with murder. [Note: I have received legal demands from Axact regarding this paragraph. To make sure there's no confusion, the last sentence refers to the allegations, all of which Axact has denied.]
The defendants fought back with counterclaims alleging that Axact was ripping off SNR by buying term papers and then republishing them through the Axact website. The defendants then sent a Rule 11 letter asserting that the complaint's allegations lacked merit. After the letter, plaintiff's counsel withdrew, saying "Dreier discovered information which, if known at the time the complaint was filed, would have caused Dreier to refuse to file the complaint in this matter on behalf of Axact." This left Axact without counsel, and apparently it had difficulty finding new counsel because it asked the court if it could proceed pro se. The court predictably denied the lawsuit because companies can't appear pro se in court. As a result, the litigation went to default judgment on defendants' counterclaims.
In the Oct. 22 opinion, the court awards damages of $300k and attorneys' fees of $36k for the copyright infringements, plus regular damages of $2.5k and punitive damages of $350k under the NJ unfair competition act. All told, an award of nearly $700k to the defendants in a lawsuit that the plaintiffs should not have brought.
Axact may have defaulted, in part, because it is pursuing a parallel lawsuit in Pakistan. Assuming it can win in its home court, it's still not clear how Axact can collect on a Pakistani judgment against the defendants. At the same time, it will be interesting to see if the defendants can get paid themselves.