January 29, 2009
Erika Rottenberg Talk Recap
By Eric Goldman
Yesterday, in celebration of International Data Privacy Day, Santa Clara University hosted Erika Rottenberg, LinkedIn's GC, for a lunchtime talk. Despite putting the event together at the last minute, we had a strong turnout of about 90 folks in the audience. Erika focused her remarks mostly for the students in the audience, encouraging them to think about the future implications of their online activities. Some of the parts of her talk that I found most interesting:
* LinkedIn has 34M users and is adding about 1.5M new users a month
* Approx. 29,000 LinkedIn users have an SCU affiliation (such as current or former students)
* LinkedIn gets about 2 subpoenas a month. [corrected from the talk]
She talked about how employers are researching job candidates online (for yet another story on this topic, see this Sun-Sentinel article). Though hearsay, she’s been told that approximately 10% of final job applicants don't actually get an offer due to inappropriate online activities. She gave some great examples of good and bad uses of online networking sites:
The good. She discussed Henk van Ess, the "Accidental Entrepreneur," who became a successful web retailer after discovering a better iPhone battery from China and then generating customers for it through his LinkedIn activity. She also discussed that company recruiters are trolling through sites like LinkedIn looking for new employees, leading to serendipitous job offers.
The bad. Her flagship case study was Joshua Lipton (see the AP story). Lipton was awaiting sentencing in a drunk driving incident that caused serious injuries to a victim. During this time, he went to a Halloween party in a "jailbird" costume wearing jailhouse attire, and photos from the party were posted to his Facebook page. The prosecutor submitted the photos to the judge, which prompted the judge to give a harsher sentence in response to his apparent lack of remorse.
Erika also discussed James Andrews, a Ketchum advertising executive who flew to Memphis to train FedEx employees about using social media like Twitter. While traveling, he tweeted "True confession but I’m in one of those towns where I scratch my head and say 'I would die if I had to live here!'" Perhaps not surprisingly, a FedEx employee saw Andrews' tweet, was offended by the seeming denigration of Memphis, and shared the tweet with FedEx's big brass. The result was a strong rebuke by FedEx to Andrews and his employer Ketchum, putting a lucrative advertising account in some jeopardy, and some questions about whether Andrew had the personal expertise to teach others about using social media given the apparent faux pas. (There's a lot written on the Andrews situation; here is the blog post that broke the story).
[Edited to make some changes]
January 28, 2009
Web Host Faces Potential Contributory Trademark Liability--Louis Vuitton v. Akanoc
By Eric Goldman
Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., C 07-03952 JW (N.D. Cal. Dec. 23, 2008)
This is one of countless anti-counterfeiting actions by luxury brands against allegedly infringing websites—but the twist is that the brand owner is going after the sites' web host. In Tiffany v. eBay, the big brand got very little traction against eBay based on eBay hosting auctions for allegedly infringing goods. This case doesn't turn out as well for the web host. The court, without citing Tiffany, leaves open the possibility that the web host could be liable for its customers' infringing activities. Why the difference?
Contributory Copyright Infringement
The court starts with contributory copyright infringement. The court doesn't clearly specify the direct copyright infringement taking place. It discusses evidence that the defendant's customers are selling counterfeit goods, but it doesn't connect the dots to show that the counterfeit goods are actually protected by copyright law. (It's not automatic that counterfeit goods infringe copyright).
Also, the DMCA online safe harbors are not mentioned, which makes sense if the copyright-infringing behavior is the actual sale of the counterfeit goods instead of publishing information about those goods. However, as we saw in the Tiffany case, the web host cannot determine if the goods being sold are actually counterfeit. Nevertheless, the court says a jury could find the web host had actual knowledge of the infringement due to a series of defendant emails and demands from the plaintiff. From my review, it appeared that the referenced emails involve the web host relaying the plaintiff’s takedown notices to the hosted customers, so I'm not sure how these emails could evidence knowledge of the counterfeiting.
With respect to material contribution, the court references the confusing language from Perfect 10 v. Amazon and the archaic Napster precedent to say that failure to take simple measures to stop infringement can qualify as a material contribution (a standard referenced in Amazon), and the web host here could easily disable the IP address of the putatively infringing website. As a result, its failure to take such simple steps could constitute material contribution.
All told, the contributory copyright infringement analysis in this case is heavily plaintiff-favorable. It appears that the plaintiff’s prima facie showing is (1) allegedly counterfeit goods being sold outside the host's purview (the direct infringement), (2) demand letters plus emails from the host to customers relaying takedown notices (knowledge), and (3) the host’s ability to turn off accounts or disable IP addresses (material contribution). This is a disconcerting standard, because just about every web host could satisfy this test.
Contributory Trademark Infringement
The court references the contributory trademark infringement standard from the Ninth Circuit's 1999 Lockheed v. Network Solutions case, requiring knowledge of the infringement plus “[d]irect control and monitoring of the instrumentality used by the third party to infringe the plaintiff’s mark.” In practice, it appears the court equates the contributory trademark and contributory copyright analysis. The court does so expressly for the knowledge prong, where the judge simply references its prior copyright discussion.
As for the host’s control, the court analogizes the host to an offline swap meet (just like Tiffany did), shoots down some of the defendant's arguments and then says that, per Fonovisa, the defendant cannot remain willfully blind to infringement on its servers. This sounds a lot more like a contributory copyright infringement analysis than the Lockheed “direct control and monitoring” requirement.
I was disappointed that the court (like so many others) does not address the web host's eligibility for the printer/publisher defense. This might very well be apropos to web hosts.
The court dismisses the vicarious copyright infringement claim because there was no evidence that the web host's profits varied with the infringing activity. The court also dismisses the vicarious trademark infringement because the web host lacked the requisite agency relationship with its customers (why do apparently smart IP lawyers routinely allege vicarious trademark infringement when there is no agency???).
I think the contributory trademark infringement ruling is entirely consistent with the obvious hole left open by the Lockheed case, which excused a domain name registrar for selling allegedly infringing domain names but implied that web hosts might be treated differently. More surprising, perhaps, is that in the decade since the Lockheed case, we've had almost no cases mapping out the boundaries of web host liability for contributory trademark infringement. It's remained one of those known Cyberlaw frontiers. While it's nice to get a case addressing that frontier, I wish it were more favorable to web hosts.
January 26, 2009
Decay Rates of Committed Online Community Members--an Epinions Case Study
By Eric Goldman
Building on several previous blog posts, I am writing up a extended discourse explaining why Wikipedia will fail. A key part of my argument is that committed Wikipedians will turn over faster than they can be replaced. Unfortunately, I'm not aware of a study of Wikipedian turnover rates. However, I had a rough sense of turnover rates in the Epinions community, and I was able to consult some publicly available data to do a quick 'n' dirty empirical study. Here's what I came up with (I did the data review at the end of December 2008):
I looked at Epinions’ top 20 most popular authors in 1999 to see if they were still active on the site, which I defined as writing at least one opinion in the past 12 months (i.e., in 2008). I manually reviewed each of the top 20 reviewers' profile pages. According to my definition, only seven of the top 20 (35%) still actively contribute to Epinions, meaning that 65% of those early power users have turned over in 9 years.
Indeed, six of the 20 (30%) have stopped coming to Epinions at all, and thus their accounts are no longer active. An explanation of inactive Epinions accounts: Epinions generally expires accounts if the person has not visited the site within a certain number of months (I'm not sure what the period is nowadays). Among other consequences of inactivity, Epinions wipes out any earnings that haven't been cashed out before expiration. Most Epinions reviewers don't earn a ton of money, but power reviewers with very popular opinions generally should be earning enough that they would be willing to expend a minimal effort to keep the cash coming. As a result, inactive members have an incentive to keep visiting the site occasionally and cashing out earnings even if they are no longer interested in continuing to write. The fact that 30% of them gave up the cash entirely is interesting to me.
The 1999 class of power Epinions reviewers is special in part because of the unique circumstances of the dot com bubble and the very high payouts that Epinions offered to "prime the pump" of reviews. Thus, many reviewers were drawn to the site by the opportunity to earn lucrative amounts, and it may not be surprising that these users turned over (in some cases, in disgust) when payout rates were significantly reduced during the dot com bust.
For comparison, I also looked at the top 20 most popular authors in 2003, many of whom either joined after the dot com bust or had acquiesced to Epinions' reduced payouts by this time. This has been a much more stable group: 15 (75%) are still active contributors, and none of the 20 have inactive accounts.
Putting the two stats together (and acknowledging the many weaknesses of this limited empirical review), I see a community decay rate among Epinions' most committed members of:
* 25% after 5 years
* 65% after 9 years
I'm not sure if this decay rate will look anything like WIkipedia's. Among other major differences, the glue that binds these reviewers to Epinions is different than the binding force for Wikipedia, because Epinions reviewers get both paid for their contributions (even if it's not a huge amount) and get much more reputational recognition than Wikipedians. (I'll explain more about cash and credit in the paper). Also, by definition all Wikipedians joined during or after the dot com bust, so they may have different and more manageable expectations than the early Epinionators.
If you are aware of any other studies of community membership decay rates, specific to Wikipedia or more general, I would be very grateful for the referral. Please email me. Also, if you would be interested in exploring this topic with me in a more scientifically rigorous way, let me know--I might be interested in doing a real study of this phenomenon at some point.
UPDATE: In a short amount of time, I've already gotten some email from people who want me to build out the entire argument about Wikipedia--basically, to see the full paper. I'm gratified by this because most of the time people recoil in horror at the thought of reading my academic papers. (Yes, this includes my mom, who is otherwise the most sympathetic audience a son could ask for). In any case, I'll be presenting the paper at Uniiv. of Colorado Boulder in early February and then I hope to post it online in a month or two after that. Thanks for your patience.
UPDATE 2: Jason Lee Miller's comments.
January 23, 2009
The [Non]enforceability of Privacy Promises--Pinero v. Jackson Hewitt
A recent court case reiterates that privacy policies aren't the be-all, end-all panacea for protecting online privacy.
By Ethan Ackerman
One of the main arguments against a federal online privacy law has been that website privacy policies were a self-regulatory solution that was more than sufficient, permitted more flexibility, and bound parties as surely as any federal law. Real-life court cases continue to suggest the contrary.
From mid-90s FTC staff decisions to "encourage self-regulation" to the 1998 formalization of a Clinton administration e-commerce policy framework to the extension of this policy through both terms of the G.W. Bush Administration, "self-regulation" of online privacy has been the policy of the executive branch of the federal government. Similarly, "self-regulation" has been the primary card played (the 10 of spades?) against Congressional attempts to pass federal online privacy regulation, successful in stalling any legislation on the issue since at least the 106th Congress. Online industry lobby groups still emphasize that "self-regulation" is the only needed enforcement, and online privacy advocates cite self-regulation's failures for the 'decade of disappointment' in internet privacy.
Meanwhile, outside of the policy debates, online activity has exploded, along with the collection and use of personal information online. Putting aside the real challenge of discovering unacceptable uses, sometimes that collection and use (or misuse) is egregious enough that someone sues over it. As the recent case of Pinero v. Jackson Hewitt Tax Service shows yet again, actual monetary damages matter more than egregiousness.
Mindful of the increasing body of cases that have refused to find damages in the mere breach of protective statutes, violations of privacy policies or unlawful disclosures of personal records, Ms. Pinero's attorneys alleged specific factual emotional, physical, and economic damages in their suit. Those damages weren't good enough under the applicable state law, according to U.S. District Judge Sarah Vance. Specifically, the judge found that the plaintiff suffered no direct pecuniary damage from the breach - a heightened risk of future loss or steps taken to mitigate that loss weren't enough under Louisiana law for a negligence or breach of contract claim.
Above and beyond my brief summary, the opinion is worth a read in greater detail. The judge's detailed discussion of the pleadings reveals much work on this case. The pleading drafters clearly went to great effort to avoid precisely this outcome, claiming damages of several types with a great deal of specificity and carefully formulating claims under a variety of different statutes and causes of action, including a Consumer Protection Act and database breach statute claim. Judge Vance addresses each claim and the surrounding caselaw in good detail as well, providing scant room for a reversal on appeal by leaving every issue addressed.
The takeaway? As Eric has worried in the past, there may be no effective customer legal recourse against companies that breach their privacy policies.
[Eric's comment: we've seen a long list of situations where plaintiffs suffered some privacy invasion but were unable to obtain any legal recourse. Ethan links to the JetBlue case (which remains remarkable to me to this day), and we've blogged on others as well (see, e.g., the Acxiom and Key cases). In general, I think these opinions have often reached a sensible and pragmatic result that a privacy invasion may lead to no tangible losses, so damage awards may overcompensate the victim or overdeter the defendant. However, providing no damages awards--especially when a company breaches its self-selected promises--may under-deter and reward companies for overpromising and underdelivering. This case seems especially odd because the complaint contained allegations of specific tangible harm. Maybe we don't believe the allegations, but normally they ought to be heard.
At the same time, I fear the policy-makers may overreact to this situation by creating statutory damages. Those solve one problem (the courts' balking at plaintiffs that have no obvious damage) but create another, (IMO) much bigger problem of motivating plaintiffs and their lawyers engage in litigation frenzies with low-merit lawsuits. We've seen a lot of wasted motion in the spam context from people chasing statutory damages, and I shudder to think about the tax on our economy if we ever created a statutory damage for generalized privacy violations.]
January 22, 2009
Data Privacy Day at SCU Jan. 28: Erika Rottenberg, LinkedIn GC
By Eric Goldman
Please join us for this event being held in conjunction with the Data Privacy Day. Free admission and no RSVP required. Erika is a long-time colleague (dating back to our Cooley Godward days) and I'm very interested to hear how she sees the world from LinkedIn's perspective.
"Protecting Personal Identities Online"
Vice President, General Counsel and Secretary of LinkedIn
12:00 p.m. – 1:00 p.m.
Williman Room, Benson Center
Santa Clara University
Light lunch will be served
Part of the IT, Ethics & Law Colloquium Series cosponsored by the High Tech Law Institute; the Center for Science, Technology, & Society; and the Markkula Center for Applied Ethics.
On-line networking sites, such as LinkedIn, Facebook and MySpace, allow friends, acquaintances and/or professionals to connect and communicate with each other and have become an essential part of many people's daily lives. While most of these communications and interactions enrich our lives and enhance our business productivity, sometimes they can become problematic, especially when inappropriate or harmful information is published online. Erika Rottenberg, General Counsel of LinkedIn, a professional networking site with over 34 million members, representing 170 industries in 200 countries, will talk about opportunities and pitfalls posed by on-line networking sites and how we can be smart users of the sites. This will be a moderated discussion followed by an audience question and answer period.
About the speaker: Erika Rottenberg is Vice President, General Counsel and Secretary of LinkedIn, responsible for LinkedIn’s worldwide legal matters, including privacy. Prior to LinkedIn, Erika served as General Counsel for two public technology companies, providing valuable experience in dealing with the regulatory policies and challenges specific to technology centric public companies. Most recently, Erika was Senior Vice President, General Counsel and Secretary, for Nasdaq-listed SumTotal Systems. Prior to SumTotal, Erika was Vice President, Strategic Development and General Counsel of Creative Labs, the company that brought multimedia to the PC with the Sound Blaster sound card. Erika received her law degree from Berkeley's Boalt School of Law and started her legal career at the Silicon Valley technology based law firm of Cooley Godward.
Brand Spillovers Article Now Available
By Eric Goldman
I have finally posted my article, Brand Spillovers, to SSRN. It will be published in the Harvard Journal of Law & Technology later this year. I have blogged about this project several times over the past 4 years, but for most of you, this is your first public opportunity to read the article in full. Please take a look!
This article has been in the works nearly 5 years, so a few words about this project. It started with my Deregulating Relevancy article. While writing that in 2004, I had a few paragraphs regarding the analogies between retailer shelf adjacency and keyword triggering--a popular meme then, and one that still gets used a lot. I ultimately removed most of that discussion from the draft and set it aside to explore in a separate paper. I initially conceptualized the paper about the role of physical and temporal adjacencies in trademark law, and I presented on that topic at Law & Society Association in May 2005. (See my slides from 2005).
After several drafts, many presentations and lots of very helpful comments, the paper has evolved substantially. The paper now explores the analogy between shelf adjacencies and keyword triggering in careful detail, explaining why the analogy is legally and factually complicated but also useful. My hope is that the paper will become the key reference any time anyone in the future wants to make that analogy.
Also, the paper is one of the few articles that analyzes the unique role of retailers in trademark infringement lawsuits. My research suggests that retailers are universally ignored by trademark lawyers, judges and regulators, even though retailers do a lot of things with third party trademarks that look actionable. I've thought a lot about this over the past 5 years, and I keep coming back to the unavoidable conclusion that trademark plaintiffs seem to be erring by not suing more retailers even in manufacturer-vs-manufacturer lawsuits. The paper tries to explain why retailers get a free pass nonetheless, but if you have alternative explanations after reading my attempts, I would be extremely grateful.
Finally, this paper is noteworthy because it is the last stop in a multi-year project on how trademark law can damage the Internet. Other papers in the series include Deregulating Relevancy, Online Word of Mouth (which also was a branch-off of the Deregulating Relevancy article) and, to a lesser extent, a Coasean Analysis of Marketing. I'm still interested in Internet trademark law, but next few projects are going to focus on other topics. The next article in queue is a short essay detailing why Wikipedia will fail. After that, I will be focusing on my Economics of Reputational Information project, which I expect to be working on over the next couple of years, and a big stealth project.
In any case, the Brand Spillovers paper remains a draft, and I have limited opportunities to make changes. Accordingly, I gratefully welcome any comments you have.
This Article considers the spillover effects of trademarks—in particular, “brand spillovers,” which occur when consumer interest in a trademark increases the profits of third parties who do not own the trademark. Using techniques such as loss leaders and shelf space adjacency, retailers routinely create brand spillovers for their profit, and trademark law generally has not restricted these activities. Online intermediaries, such as search engines, also create and profit from brand spillovers by selling manufacturers’ trademarks for advertising purposes (“keyword triggering”). However, in contrast to retailer practices, keyword triggering has sparked a heated and irresolute battle over its legitimacy under trademark law. By drawing lessons from retailers’ experiences with brand spillovers and through an analysis of the ways intermediaries can add value to consumers, this Article offers a new way to resolve the keyword triggering debate. The Article proposes that all intermediaries—including both retailers and online intermediaries—should be permitted to use brand spillovers as part of their effort to reduce consumer search costs, even if the intermediaries profit from the brand spillovers along the way.
January 21, 2009
American Airlines v. Yahoo Venue Transfer Denied
By Eric Goldman
American Airlines, Inc. v. Yahoo!, Inc., 4:08-CV-626-A (N.D. Tex. Jan. 16, 2009)
The procedural battles over American Airlines' lawsuit against Yahoo for selling trademarked keywords continue. You may recall that American Airlines sued Yahoo in its home court in Fort Worth, Texas. This venue has several advantages, including a hometown judge, higher costs for Yahoo to litigate 1500 miles from its HQ, and a location in the Fifth Circuit, which doesn't have much jurisprudence on keyword advertising cases but is unlikely to adopt the current defense-favorable approaches of the Second Circuit.
In response, Yahoo initiated a declaratory judgment against American Airlines in its home court of Northern District of California. [note: Yahoo is based in the Silicon Valley but the former Overture operations are principally in Los Angeles, so Yahoo appears to consider both NDCal and CDCal as acceptable.] I was pretty surprised by this venue choice, largely because the Ninth Circuit has the adverse Playboy v. Netscape keyword advertising precedent and the Second Circuit seemed so much more defense-favorable. However, my suspicion is that Yahoo hopes to take advantage of the Ninth Circuit's favorable nominative use defense.
In its DJ complaint, Yahoo also intimated that American Airlines had contractually agreed to the NDCal venue in AA"s advertising contract with Yahoo. This is an interesting argument because a contractual venue stipulation would almost assuredly trump all other venue considerations, but American Airlines' beefs with Yahoo relate to AA's advertising via the Yahoo network only tangentially at best.
Yahoo floated this contract-based venue argument in front of the Fort Worth judge, and that didn't go so well. In a short but pointed ruling, the judge dismisses the argument emphatically, calling it "completely nonsensical." OUCH. Oddly, the judge declined to explain his reasoning, but the limited explanation he offers makes me wonder if he misread the actual contract language. (Compare the quoted language with the footnote language--both have the word "exclusive" in them).
In any case, the Fort Worth judge has thrown down the gauntlet to the NDCal judge, saying, in effect, "this case isn't leaving my courtroom." This sets up a showdown with the NDCal judge, who will either dismiss the DJ action or pick up the gauntlet and keep the case. What happens at that point is unclear to me; maybe a civil proceduralist can help me understand what happens if neither judge backs down.
January 20, 2009
Kentucky Reverses Seizure of 141 Gambling-Related Domain Names
By Eric Goldman
Interactive Media Entertainment and Gaming Association v. Wingate ex rel Kentucky, 08-CI-01409 (Ky. Ct. App. Jan. 20, 2009)
We see state enforcement agencies freak out about the Internet all the time, so I have a hard time determining which freakouts are more noteworthy than others. However, it definitely caught my attention when Kentucky tried to seize 141 domain names associated with worldwide gambling operations. Their objective was to shut down illegal gambling in Kentucky, but the domain name seizure would have the effect of shutting down those websites worldwide--even if the gambling site was legal with respect to some of its non-Kentucky users. This kind of extraterritorial impact should be categorically outside the province of individual states.
So it's a relief to see that the Kentucky court system has corrected its errors and rejected the seizure of the domain names. The judges don't agree on the matter, and we get 3 opinions out of a 3 judge panel. However, two of the judges emphatically agreed that domain names do not qualify as "gambling devices" under the statutory definition, making their seizure under the statute unlawful. Relying on this definition in the statute sidesteps the many important public policy issues underlying the case, but it's a good (and IMO correct) result nonetheless.
Outdated Whois Information Might Lead to False Light Tort--Meyerkord v. Zipatoni
By Eric Goldman
Meyerkord v. The Zipatoni Co., 2008 WL 5455718 (Mo. App. Ct. Dec. 23, 2008)
It's a late entry, but this opinion may be a dark horse candidate for the most bizarre case of 2008.
Meyerkord was a Zipatoni employee and listed as the registrant on domain names at Zipatoni's Register.com account. Meyerkord left in 2003. In 2006, Zipatoni ran an astroturfing viral campaign for Sony to promote the Play Station Portable at the domain alliwantforxmasisapsp.com. A BusinessWeek story on the campaign and the Urban Dictionary entry.
Unfortunately for Sony--and Meyerkord--the campaign did not go well. Bloggers and others got suspicious of the overly colloquial site, unmasked the astroturfing and decided to "out" the people involved. They pulled up the Whois records, saw the outdated information that Meyerkord was the registrant, and mistakenly assumed he was involved in the campaign.
The case doesn't get into the specific treatment of Meyerkord, but it seems logical to assume that he was subject to a blogger firing squad circa 2006, i.e., shoot first and ask questions later (I'd like to think the blogosphere would be a little more circumspect circa 2009, but maybe not). For example, the Consumerist has its own category tag for alliwantforxmasisapsp, and it awarded Sony the "Lucky Golden Shit" award for best "flog" of 2006. In this post, the Consumerist "outs' Meyerkord and calls him a "douchebag" (which, for reasons my aging brain can't comprehend, has become the modern derogatory term of choice) until they modified the post, striking out his name and recanting "he is an innocent bystander in this sordid affair." Oops...a little late for that, don't you think, Consumerist?
In response to this rough justice from the blogosphere, Meyerkord sued Zipatoni for the privacy tort of false light. The lower court dismissed the complaint for failure to state a claim. In this ruling, the appellate court reverses the lower court and remands the case to allow Meyerkord to file an amended complaint if he can allege that Zipatoni acted with actual malice.
While I can see why the court was sympathetic to Meyerkord for being falsely associated with an astroturfing campaign, in my opinion, Zipatoni's real negligence was its failure to keep its domain name records updated FOR THREE YEARS! I feel silly mentioning the obvious and well-known practice pointer that you should keep your Whois records up-to-date; and especially remove any former employees from Whois records. Not only does outdated Whois information pose a major security risk, but it could allow former employees to assert ownership over the domain. Now, keeping them on the record may be tortious to the former employee as well. In any case, for having a former employee listed on its domain names for three years, Zipatoni deserves whatever punishment they get.
One more oddity: alliwantforxmasisapsp.com now is a promotional site for Haagen Dazs ice cream. Huh? I presume Haagen Dazs bought the residual traffic from all of the links bashing the domain, but (1) the association between PSP and Haagen Dazs doesn't make any sense, and (2) I would have thought a big brand like Haagen Dazs wouldn't want the implicit taint of benefiting from an astroturfed website.
January 19, 2009
Rip-off Report Rolls to Another Win--GW Equity v. Xcentric Ventures
By Eric Goldman
GW Equity LLC v. Xcentric Ventures LLC, 2009 WL 62173 (N.D.Tex. Jan. 9, 2009)
I previously blogged about this case in October when the magistrate judge issued his report and recommendations finding that Rip-off Report was immune from the plaintiff's claims per 47 USC 230. I thought that ruling was noteworthy because it addressed--and rejected--three principal arguments that plaintiffs use against the Rip-off Report:
1) Rip-off Report offers users pulldown menus to tag their reports
2) Rip-off Report writes titles and other parts of user reports
3) Rip-off Report profits from its Corporate Advocacy Program
As I mentioned in my last post, the plaintiff objected to the magistrate recommendations, so the district court judge reviewed the objections. In this careful and thoughtful ruling, Judge O'Connor overrules the objections and upholds the magistrate recommendations in total--affirming summary judgment dismissal in favor of Rip-off Report.
Although the judge doesn't add much new analysis to the magistrate report, there are still some good nuggets:
* the MCW precedent (a rare adverse ruling for the Rip-off Report) is distinguishable because it only dealt with a motion to dismiss, not summary judgment.
* the Roommates.com en banc ruling does not apply because that decision turned on the fact that merely asking the discriminatory question was illegal under the Fair Housing Act, whereas here the pulldown tagging options are not per se illegal.
* the opinion discusses Rip-off Report's "content monitors," who in some cases admitted that they have added the words "rip-off," "fraud" and geographic information to user-submitted postings. However, the testimony indicated that it had been "years" since the word "rip-off" was added by Rip-off Report, and any added geographic information would be inconsequential to the legal analysis.
* in a different lawsuit involving GW Equity, Dickson Woodard testified in a deposition that Magedson, not Woodard, wrote some postings putatively from Woodard. The court does not permit the deposition to be introduced in this case because Rip-off Report did not have a chance to participate in that deposition.
* In this lawsuit, the plaintiffs introduced an affidavit from Josh Bammel that he uploaded negative reports about GW Equity to Rip-off Report and the published reports contain words he didn't write. At his deposition, he acknowledged that he had been drinking before making the postings, and in his words, "[a]fter four or five Crown and Cokes, man, you aren’t going to remember what you wrote." It reminds me a little of the Lucy v. Zehmer case, where the putative seller of real property--documented in a bar on a bar receipt--said that he was "high as a Georgia pine." With an admission like this, the affidavit was properly excluded.
January 16, 2009
AOL Loses Venue Selection Dispute in Ninth Circuit Due to an Unfortunate "Of"--Doe 1 v. AOL
By Eric Goldman
Doe 1 v. AOL LLC, 2009 WL 103657 (9th Cir. Jan. 16, 2009)
This is one of several lawsuits against AOL over AOL's 2006 posting of a database of improperly anonymized search queries. This particular lawsuit was brought by AOL members in California and alleges a variety of federal and state law claims against AOL.
AOL defended based on its venue selection clause in its member agreement, arguing that the contract required the lawsuit to be brought in Virginia. AOL has had a lot of success with its venue selection clause over the years, but it has had some prominent failures as well. One of those is America Online v. Superior Court (ex rel Mendoza) from 2001, in which a California appellate court struck down AOL's venue selection clause on public policy grounds because Virginia law did not provide adequate relief to California consumers--because, among other things, Virginia state courts do not permit class action lawsuits.
The Mendoza case was part of a broader judicial trend against online user agreements over the past decade. We've seen them fail for unconscionability, public policy and other reasons, making the successful drafting of such clauses tricky. Collectively, I think these cases have established pretty clearly that a venue selection clause designed to suppress class action lawsuits has a high risk of failure and, in California, is presumptively unenforceable.
What isn't clear to me is what, if anything, AOL did to modify its member agreement's venue selection clause in response to its Mendoza defeat. As a result, I can't tell if this court is interpreting the same contract language as was presented to the Mendoza court. But in all other respects this case is extremely similar to Mendoza: the plaintiff initiated a class action lawsuit in California, AOL defended on its venue selection clause to force the case back to Virginia, and the court is confronted with the public policy implications. Thus, if AOL did change its contract post-Mendoza, it didn't get the desired results, because it suffers another defeat here.
It appears that if the case could be heard in Virginia federal court, the class could form and the clause would not necessarily fail; but if the clause only permits Virginia state court, this is Mendoza redux and AOL loses. As a result, the court tries to figure out which venue the member agreement language specifies. AOL's agreement designates the exclusive venue as "the courts of Virginia." The court parses the grammar of the word "of" and looks at other precedent analyzing "the courts of [state]" and concludes that this language selects only Virginia state court. Because a California appellate court (the Mendoza court) had already said that Virginia state court isn't an acceptable choice for a putative class action of California consumers, the Ninth Circuit has no choice but to toss the venue selection clause.
This raises an obvious drafting point: courts are reading venue clauses specifying the venue as "state of X" to mean only state courts in the designated state, so don't use that grammar unless that's what you intend. I'm sure that most drafters using "state of X" language instead mean the parties can litigate in either federal or state court in that venue, but that's not the way courts are reading it. Accordingly, I think it would be prudent to avoid the "courts of X" grammar altogether, which isn't hard to do. Personally, I normally say "courts in X" (as opposed to "courts of X"). I would have to research the precedent interpreting that grammar (this case has made me a little nervous), but the "in" grammar should pretty clearly avoid the analysis in this Ninth Circuit opinion. Another alternative would be to expressly reference both federal and state courts as options; I've seen this language frequently, although I've previously thought that was unnecessarily wordy. Maybe it isn't.
January 15, 2009
Cautionary Tale of Website Co-Ownership--Mikhlyn v. Bove
By Eric Goldman
In my Co-Blogging Law article, I discussed the potentially ugly legal consequences of "blog divorces" when co-bloggers fall out of love with each other and start fighting. I wrote:
Whether a limited liability entity or a private agreement is the better choice depends on the bloggers’ specific circumstances and goals. However, either choice is preferable to co-bloggers doing nothing proactive to override the default rules.
When I wrote the article in 2005, I didn't have any dramatic examples of how bloggers got screwed by the default rules, nor I was able to say with confidence exactly how a judge would resolve a blog divorce. I still don't know the latter, but if I were writing the article today, I would discuss Mikhlyn v. Bove as the cautionary tale. The case involves an e-commerce website divorce that involves cousins, embroidery, alleged drug use, a scramble for website passwords, and the current denouement, a hailstorm of litigation (with both groups suing each other for about a dozen causes of action each) that will surely cost each side more than the business was ever worth. If you are a co-blogger or a co-operator of a website and you don't have a documented exit strategy, take note!
(Please note that the parties contest just about every fact, so my recitation of what happened is based on the court's opinion as best as I could read it, and I've omitted a lot. You have to read the whole opinion if you want the complete story).
This case reinforces the maxim that you should never do business with family members. The case involves Israeli neighbors Ana and Polina (Group 1), who in 2002 established an e-commerce business selling embroidery designs through eBay and their website. The business ultimately expanded to include embroidery supplies in addition to designs. Over time, Ana's cousin-in-law Inga and cousin Vadim, both from Brooklyn, got involved in the business (Group 2). Group 1 says they hired Group 2 as employees; Group 2 says that Groups 1 and 2 were all partners in the venture. Uh oh.
It sounds like business did well financially for a while. Then the relationships turned south in 2007 and into 2008. Ana relocated from Israel and moved in with Inga and Vadim, but they allege Ana started abusing drugs and scaring the kids, which may have prompted them to kick Ana out of the house. Starting in Spring 2008, the parties brought in the lawyers, thus commencing the formal legal fight over the venture's assets. And it turns out there were a fair number of assets to fight over, including several websites under the "ABC" brand (including domain names and the website design/text--Ana obtained a (contested, of course) copyright registration for the latter), an eBay storefront, a registered trademark in "ThreaDelight" (held in the name of all four parties), embroidery designs by Ana (but no copyright registrations in them), and various trademark rights in the name "Anna Bove" (note 2 "N"s instead of 1).
Ana brought an unsuccessful UDRP to get the ABC-based domain names. However, because co-defendant Polina was the listed owner for some of the domain names, Ana was able to assume technical control over those domain names. Doing so apparently split the technological empire, such that Group 2 is running certain websites and Ana or Group 1 is running other websites. This is an unstable allocation of the business, so in August, Group 2 sued Group 1, which prompted counterclaims from Group 1.
What a mess. WHAT A MESS!
Just how messy is it? Check out how the court resolves the partnership v. employees dispute at the core of the lawsuit. The court says that Groups 1 and 2 were neither partners nor employer-employee. OK...so what were they? I don't know, and the court doesn't seem to know either, but it hypothesizes--without concluding--that the parties may co-own certain copyrights and trademarks of the venture. As I explain in my Co-Blogging article, IP co-ownership can come with numerous unexpected pitfalls, so I suspect no one is happy with the co-ownership resolution. Ugh.
Ana also tried to stop Group 2 from using her name (the modified "Anna Bove" mark) as part of their business. The court rejects the effort, saying that both groups have been using the Anna Bove mark in parallel with each other for a number of years, and thus Ana's claim is barred by acquiescence or laches. Accordingly, it looks like Ana has effectively lost control over her own name because Group 2 can continue to operate an "Anna Bove" business that she can't stop or restrict. Double ugh.
As should be obvious, the current resolution is complex, ugly and unsatisfying to everyone. The good news is that the parties are going to mediation. Maybe they can do some horse-trading and find a mutually improved outcome than the one the court's opinion leaves them in. If mediation doesn't work out, I could see the groups being locked in a death struggle where no one other than the lawyers emerges with anything of value.
I'm sure the parties wish they could go back in time and make a nice, clean agreement documenting their relationship that would avoid all of this heartache. If you are a co-blogger or co-operator of a website without such an arrangement, what are waiting for?
January 13, 2009
47 USC 230 Talk for Businesspeople
By Eric Goldman
As I mentioned in my previous post, I will be speaking tonight in Sacramento about 47 USC 230. The audience will have a heavy component of businesspeople mixed among the lawyers. Although I've spoken frequently about 230, I couldn't recall the last time that I had an extended presentation in front of non-lawyers about 230. So I put together a new slide deck entitled "Introduction to 47 USC 230."
Eric Goldman Road Show Spring 2009
By Eric Goldman
As usual at this point in the semester, I'm still scheduling events for the semester, but this post enumerates some of the events I have calendared so far. Some of these are High Tech Law Institute events, so we'll be disseminating more information about those as it comes available. As usual, if I'm going to be in your area or if we are going to be at the same conference, please let me know! If I'm speaking, my topic is in parenthesis after the event.
Jan. 13 (TONIGHT!), Sacramento: Navigating the Hazards of Cyberspace, Sacramento County Bar Association Intellectual Property Law Section (47 USC 230). This is a free event, so if you're in the area, please come!
Jan. 28, SCU: HTLI special noontime speaker on privacy issues. More info to come.
Jan. 30, San Jose: The journal's patent law symposium. I may be around at the conference some, but I'm double-booked with...
Jan. 30-31, SCU: The HTLI is hosting the ABA Business Law Section Cyberspace Committee's Winter Working Meeting. Come interact with cyberlawyers from around the country (and the globe) as they work on their various work projects. The Winter Working Meeting is all about work, not about presentations, so it's a unique and interesting way to get to know your colleagues. Hope you can make it!
Feb. 7-9, Boulder: The Digital Broadband Migration: Imagining The Internet’s Future, University of Colorado Boulder/Silicon Flatirons (Why Wikipedia Will Fail)
Feb. 11, Santa Clara: SMX West (Legally Speaking: Recent Legal News About Search)
Early March at SCU: the HTLI will be scheduling Bay Area Blawgers 4.0. If you are a Bay Area-based legal blogger and have never received an email about the event before, please contact me so I can add you to our list. More info to come.
March 11, Santa Clara: IEEE Communications Society, Santa Clara Valley Chapter (Internet Law Frontiers)
March 13, SCU: HTLI is hosting Prof. Barton Beebe of Cardozo Law (visiting at Stanford Law this semester) for a lunchtime talk to the faculty. Please contact me if you are interested in attending.
March 26, SCU: HTLI is co-sponsoring a careers in trademark panel on campus with INTA. It will be primarily student-focused, but everyone will be welcome. I won't be there because I'll be traveling to...
March 27, New York: Intermediaries in the Information Society, Fordham Center on Law and Information Policy (Content and CDA Immunity)
April 2, San Francisco: PLI Information Technology Law Institute 2009: Web 2.0 and the Future of Mobile Computing (Social Networks & Blogs)
April 30, SCU: The HTLI is co-sponsoring with the Berkeley Center for Law & Technology a full-day academic symposium on the 1909 Copyright Act. We haven't finished our marketing materials, but I guarantee the speaker list will be fabulous. Please reserve the date on your calendar now!
I'm still working on my summer event list, but one I'll mention now:
June 4-5, Berkeley: Berkeley-GW Privacy Law Scholars Conference, UC Berkeley Law School (Economics of Reputational Information)
January 12, 2009
Shifting Strategies in Patent Law Conference Announcement
By Eric Goldman
[Eric's note: this is a popular annual event--last year's symposium drew over 200 attendees. This year should also be popular due to the timely topics and impressive speaker's list. Should be a great event. Hope you can make it.]
January 30, 2009, 9:00 am - 5:00 pm
The Tech Museum of Innovation (San Jose, CA)
Come hear Judge Randall R. Rader, of the United States Court of Appeals for the Federal Circuit, keynote this symposium, and many other distinguished speakers.
In need of Ethics and/or General MCLE Credit? Take advantage of the "Early Registration Special" now! Learn more and register for this event.
January 09, 2009
Following in the expected path of her earlier ruling, District Judge Maxine Chesney again dismissed an anti-spam lawsuit against Reunion.com. This time, the Judge also threw in a tenuous constitutional holding for good measure. Count this ruling as yet another one muddying the distinction between fraud lawsuits and anti-spam lawsuits and undermining the reasonably clear preemption provisions of the CAN-SPAM Act.
By Ethan Ackerman
On Dec. 23, 2008, federal District Judge Maxine Chesney issued what the defense attorneys in Hoang v. Reunion.com will likely view as a welcome, if foreseeable, Christmas present - another conditional dismissal of the plaintiffs' class action lawsuit. I've previously blogged about the first dismissal here, with an important follow-up regarding the amended complaint here. Reading those posts first to get some important context will help in following this post.
Falsity is still not the same thing as fraud, especially when Congress distinguishes between them, unless a federal judge says it is.
Judge Chesney's first dismissal ruling focused on the absence of fraud allegations in the plaintiff's complaints, ultimately holding that in order to escape preemption by the federal CAN-SPAM Act, plaintiff's' state law claims had to include, above and beyond the falsity violations of the California anti-spam laws, some or possibly all the additional elements of a fraud claim. I criticized that holding in the prior post because that's not only not what the CAN-SPAM Act requires, but it was actually adding four additional elements to the Act that Congress considered but didn't include. Falsity is one of five elements of fraud under California law. California is hardly alone in having consumer protection laws that require a lesser standard than fraud. Adding four additional elements by judicial decision would be like a judge requiring a prosecutor to prove each of the elements of premeditated murder when she's only charging involuntary manslaughter - and in this case it would be like judicially requiring them even after the legislature considered and rejected the additional elements.
Sticks and stone may break my bones, but misleading emails alone don't really hurt anyone.
My prior disagreement with the first dismissal was its inconsistency with the falsity standard of the CAN-SPAM Act, and its reliance on the similarly mistaken 4th Circuit Mummagraphics opinion. This dismissal repeats that problem and then raises the stakes by suggesting that it would be unconstitutional for the court to even hear the case if the complaint wasn't amended to allege at least several of the additional elements - reliance and damages.
Specifically, Judge Chesney states
[In] the absence of an allegation that each such plaintiff incurred some type of injury or damage as a result of his having taken action in reliance on defendant's assertedly false use of a third-party domain name in the email, [the] action is subject to dismissal.
Failure to do so, Judge Chesney holds, would not only result in preemption under CAN-SPAM, but also run afoul of the case-or-controversy requirement of the US Constitution's Article III.
Actual Injury Standing, or Wait, spam's not illegal until someone actually wires the $10,000 to Nigeria?
Prior court disagreements over whether falsity must also be material or intentional look pretty minor compared to this Constitutional "no harm, no foul" holding, so what's going on here?
By way of background, Article III of the US Constitution requires a "case or controversy" before a federal court may rule in a case, and this provision has been interpreted by the Supreme Court to mean that a plaintiff must suffer an "injury in fact" to have standing in a federal court. This is the principle underlying Judge Chesney's holding, but it’s quite a stretch to apply the principle to dismiss a case brought by admittedly aggrieved plaintiffs directly covered by a state's consumer protection statutes.
The requirement that an individually identifiable "injury in fact" be shown by someone before they can bring a lawsuit prevents judges from having to make hypothetical rulings or issue advisory opinions without the benefits of specific facts. This lack of standing is the reason any given citizen can't sue the government for spending tax dollars in a way they don't like, or a mob boss can't preemptively sue for an unlawful wiretap before it's actually installed, or more specific to this case, why someone who hasn't actually received a misleading email from Reunion.com couldn't sue it for violation of CAN-SPAM or California law even if Reunion.com's practices clearly violated the laws.
There are even particular types of cases where "injury in fact" standing is commonly a close question; (until recently) qui tam lawsuits were often challenged on "injury in fact" grounds. Similarly, environmental organizations bringing suits against government actions (and inactions) often succeed or fail based on standing, and are the source of much of the standing caselaw. Although not relevant to this case's constitutional holding, there is also a good deal of action on issues of injury standing at the statutory level. More than one CAN-SPAM lawsuit has been dismissed on the grounds that a plaintiff lacked standing under the "adversely affected" requirement of the statute. [Author's note: While it is debatable whether this element of the statute acts as a pleading requirement or functions as a prerequisite for statutory standing, courts have used it that way. I suspect Judge Chesney may ultimately rule similarly, thus avoiding an unnecessary constitutional ruling. That would definitely be the better of these two disagreeable choices.]
Similarly, some state consumer protection laws have been amended by legislatures to remove or add a specific injury pleading requirement, alternately making some consumer protection act violations "strict liability" laws or making suits for violation more complex to prove by adding another statutory element. Two notable examples of such trends are the addition, by Proposition 64, of such a requirement to the California laws, and the removal of such a requirement in the District of Columbia's Consumer Protection Act.
Based on this quick treatment, Judge Chesney's holding seems plausible. This "injury in fact" doctrine really does exist and some cases do turn on it. But, while the Constitutional requirement that there be an "injury in fact" keeps hypothetical cases out of federal court, it is a fairly low threshold for those cases actually brought under a federal or state law directed against a certain type of behavior Congress or a state legislature has already found to be damaging. But this dismissal ruling departs from other court rulings on standing by blowing past legislative determinations of just what is "damage."
So your real beef is not the result, but that the Judge had to ignore the damage determinations of the legislatures to come to such a holding?
In a word, yes. The California anti-spam act included specific findings of costs and damage to the end-user, findings that even the federal CAN-SPAM Act echoed. This frustration is perhaps amplified by the practice of Judge Chesney in other contexts to accept and defer to Congressional policy decisions, an important and correct skill needed when interpreting nuanced statutory provisions. In other contexts, Judge Chesney has cited with clear approval the notion that a court "was not at liberty to second guess congressional determinations and policy judgments."
Perhaps this holding is explicable because the statute's lower pleading standard is unique to spam laws?
In a word, no. There is no shortage of laws requiring some lesser standard of falsity than fraud at the federal and state level. Similarly, many laws provide for liability based on a statutory presumption of reliance. In some other cases, mere or factual error is sufficient to trigger liability regardless of materiality or reliance. These laws are so common and numerous that the term "strict liability laws" is a frequently used term describing just one subset. Let's explore in more detail just how large a majority of federal and state suits are brought under these laws...
Most analogous to anti-spam lawsuits are other consumer protection laws against unfair or deceptive practices where committing a prohibited practice triggers a right to sue, regardless of any monetary damages. For example, the federal Fair Debt Collection Practices Act prohibits a range of collection practices and gives debtors subjected to the illegal practices a right to sue for statutory damages, regardless of whether the unfair dunning results in a collection or not. Wisely, courts, including Circuit Courts of Appeal, have held that the illegal threats to collect constitute an "injury in fact" regardless of whether or not the debtor heeds them and pays up. Similarly, “It is well settled, however, that proof of actual deception or damages is unnecessary to a recovery of statutory damages” under the Truth in Lending Act, according to the Second Circuit in Gambardella v. G. Fox & Co.
There are also a whole host of civil laws ordering business structures and transactions where committing a prohibited practice triggers a right to sue and provides for statutory damages regardless of any monetary damages. Trademark law contemplates lawsuits over trademark use violations that in some cases don't even require an actual showing of confusion, merely the (by definition speculative) "likelihood of confusion." Touching close to the current case (and presumably different only in having more complete damages pleading) Judge Chesney apparently had no problems with the Article III standing of some recent trademark plaintiffs, allowing summary judgment under the statute in favor of an initial-interest-confusion plaintiff based only on the likelihood of initial interest confusion.
But perhaps the most dramatic examples of laws permitting civil suits to recover money even absent any measurable or conceivable or alleged harm are the IP laws, copyright and patent. The patent holder's right is fundamentally the right to exclude others from practicing her patent, and a non-practicing patent holder who has never made, sold, licensed or marketed a single product, and thus lost not a single penny in sales or licensing fees to the infringer, or indeed suffered under any cognizable theory of harm, may still bring suit to recover the wrongful profits of the infringer. Similarly, a copyright holder with an unpublished manuscript or suffering from an infringement occurring in an entirely different media is still entitled to sue for statutory damages, even in the absence of any actual damages. Indeed, many of these laws even provide statutory damages as a measurement of harm precisely because the actual harms are variable, need to be deterred, or are hard to assess.
Some parting words from the controlling courts
Suits of this type, where a legislature has already found an injury in a certain prohibited practice or behavior and passed a statute granting particular individuals a right to sue in response to that practice, are precisely the suits the Supreme Court was contemplating in Lujan v. Defenders of Wildlife when it said the "injury required by Art. III may exist solely by virtue of ‘statutes creating legal rights, the invasion of which creates standing."
The Ninth Circuit also has a particularly lenient view of what constitutes damage for Article III purposes. So if Judge Chesney had accepted the damages findings of the California legislature, she would likely have to find those enumerated damages were of the types (time, money) that the Ninth Circuit has previously identified in various cases as being Constitutionally sufficient.
As Venkat's timely post on this case notes in conclusion, several related cases raising some of these issues are in the process of being decided by the California Supreme Court or Ninth Circuit Court of Appeals. Those decisions have the possibility of perpetuating or correcting several of the trial court errors I've discussed in prior posts. Also, in this particular case, Judge Chesney did graciously grant another opportunity to amend, meaning there may be yet another opinion in this case. Finally, and most simply, an amendment to the complaint could just recite the harms identified in the California statute and allege that plaintiffs have suffered them.
January 08, 2009
December 2008 Quick Links, Part 2
By Eric Goldman
Social Networking Sites/Cyber-Bullying/Sexual Predation
* More on the Lori Drew conviction:
- Wired has a tough behind-the-scenes look at the Lori Drew jury deliberations.
- The jury instructions
- In case you missed it, my special three part series on implications of the Lori Drew conviction: Part 1, Part 2, and Part 3.
* Yet more fallout from the Lori Drew prosecution and conviction. Wired has a story on the cyberbullying litigation frenzy. The Washington Post has a recap on the proliferation of state anti-cyberbullying laws.
* U.S. v. Morris, 2008 WL 5101636 (7th Cir Dec. 5, 2008). Judge Posner talks about the difference between entrapment (not OK) and vigilantism (OK) in the context of a mom who created a fake MySpace persona to chat with an alleged sexual predator who had contacted her underage daughter.
* Barry Schwartz: is Google getting desperate for ad revenue?
* The Register: "Google this week admitted that its staff will pick and choose what appears in its search results." However, I don't think the article supports this aggressive statement. Instead, it appears the article is getting excited about the fact that Google manually tweaks the algorithms when they produce goofy results--something we've known for years.
* Updates on Axact v. Student Network Resources, the case involving alleged copyright infringement of term papers. Axact allegedly has been trying to get its domain name registrars to release its domain names for transfer, and SNR is trying to cut them off. Apparently Google also balked at the instructions to kick the subject domain names out of its index, but SNR and Google resolved their differences enough to reach a stipulation. Finally, I've received numerous threats and requests from Axact to modify my original post, which has prompted me to make some minor changes.
* IMS Health v. Ayotte. New Hampshire passed a law restricting the use of a doctor's past prescribing practices (i.e., behavioral information) for personalized/targeted sales calls. This opinion upholds the NH law against a First Amendment and dormant Commerce Clause challenge.
* Australian advertisers are cookie-ing users at high CPM sites so that they can show the users targeted ads when those users appear at lower CPM sites.
* Sony busted for COPPA violations.
* New advertising medium: school exams.
* Good article on the Sprint v. Cogent peering fight.
* And a good article showing limits to the Long Tail theory.
* U.S. v. Grober, 2008 WL 5395768 (D. N.J. Dec. 22, 2008). Grober pleaded guilty to uploading and downloading child porn over the Internet. The judge rejects the 19 1/2 year minimum sentence specified by the Sentencing Guidelines and instead sentences Grober to the 5 year statutory minimum. This opinion poignantly explains why this judge, like several others, rejects the Sentencing Guidelines in Internet child porn cases because the dictated sentences are too severe.
* BusinessWeek is still amazed that people actually--get this--provide their time and efforts over the Internet without getting paid!
* Lior Strahilevitz, Reputation Nation: Law in an Era of Ubiquitous Personal Information, 102 Nw. U. L. Rev. 1667 (2008). Lior explores the cross-elasticities of demand for types of reputational information and shows that if some information isn't available (due to, say, privacy laws), decision-makers will consult less credible or pernicious sources. For example, if a landlord can't get good credit information about a prospective tenant, the landlord may resort to discriminatory considerations (like race) to decide whether or not to rent to the tenant. Good article.
* I have previously written about New York v. Synergy6, Inc., 404027/03 (N.Y. Sup. Ct. Jan. 6, 2006), where the court soundly rejected the New York Attorney General's office regarding a marketer's liability for allegedly illegal emails sent by downstream affiilates (i.e., not in direct privity). I have not been able to find a copy of the opinion electronically, but over the holidays I found my hard copy and scanned it to a PDF. Check it out, especially in combination with the 2008 New York v. DirectRevenue opinion, which soundly rejected the NYAG's affiliate liability arguments in the adware context.
January 07, 2009
December 2008 Quick Links, Part 1
By Eric Goldman
* Stockwire Research Group, Inc. v. Lebed, 577 F .Supp. 2d 1262 (S.D. Fla. Sept. 18, 2008). $2.5M default judgment for violation of anti-circumvention provisions.
* The RIAA announced that it is shifting away from suing its customers to putting more pressure on Internet access providers to do their dirty work. Fred at EFF and Mike Masnick weigh in. But Mike wonders if the RIAA is really changing its practices?
* Nerds on Call (Indiana) v. Nerds on Call (California), 1:07-cv-00535-DFH-TAB (S.D. Ind. Dec. 22, 2008):
The court realizes that a simple internet search for "nerds on call" could return the Nerds/California site. If a person has lived in Indiana and used Nerds/Indiana's services before, the person might be confused momentarily. Given trademark law's explicit approval of concurrent uses of marks in different geographic areas or product markets, see 15 U.S.C.A. §1052(d), this momentary confusion on the internet is not a sign of intentional targeting. The internet is available worldwide. Use of a locally established trademark on a website may cause momentary confusion among consumers. The solution to that problem is not to require that all trademarks be given worldwide effect even if their non-web use is limited to a narrow geographic area. Instead, users of the web simply need to understand that a worldwide web search may turn up results from distant businesses.
* Saint Louis University v. Meyer, 2008 WL 5412263 (E.D. Mo. Dec. 24, 2008). SLU allegedly threatened to close the student newspaper, so the paper's faculty advisor registered a new non-profit organization with the secretary of state under the name "The University News, a Student Voice Serving Saint Louis University Since 1921" in case the students wanted to go independent. The university and the students worked out a deal, and the faculty advisor promptly dissolved the organization without ever having done anything with it. Still, the university sued the advisor for trademark infringement, dilution and other claims. In this ruling, the court rejects most of the claims because the advisor never made a "trademark use in commerce." Why was the university suing its own tenured faculty member for forming and then promptly dissolving a non-profit organization without ever using it? Makes no sense to me.
* 1-800 Contracts, Inc. v. Lens.com, Inc., 2008 WL 5191705 (D. Utah Dec. 10, 2008). In a trademark lawsuit over keyword purchases, Lens.com is hit with sanctions for discovery abuses.
* WSJ on the growth in numerical SLDs.
* GateHouse v. New York Time. The CMLP page. Another silly anti-deep linking and headlines-as-copyright infringement lawsuit, this time between two media companies. Some of the claims are clearly off-base, like the trademark claims. Note to dilution plaintiffs: it is almost impossible by definition to be both a hyper-local business and a famous trademark. Also oxymoronic is the allegation that the sites are competitors when a competitor is prominently promoting the website and apparently passing PageRank. If you are my competitor and would like to pass me some PageRank, I would be happy to chat. The most novel part is the plaintiff's attempt to use the Creative Commons license as an affirmative contract to claim breach of contract. I can't recall a similar allegation in the past where the Creative Commons license was used as a sword instead of a shield. Finally, the complaint doesn't mention anywhere that the plaintiff's website apparently offers RSS feeds, which raises a bunch of problems for its arguments.
* McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008). This is a dispute between rival members of the teacher's union. Among other activities, the defendant sent an email linking to a website that had allegedly defamatory statements about the plaintiff, but the website's statements were authored by third parties. In this ruling, the court grants the defendant's anti-SLAPP motion, saying that the defendant wasn't liable for the emailed links per 47 USC 230. This is another nice anti-SLAPP win for Internet content, following on December's Higher Balance case.
Some Personal Notes
* I'll be at AALS and plan to attend the blogger's get-together Thursday night. If you're going to be around, hope to see you there!
* If you're in the Sacramento area on January 13, come to this free event!
* Most of you know that I maintain my personal blog for posts that don’t really belong on this blog. But you may not know that I’ve also been Twittering with some regularity. Check it out!
* Good news: this blog is a finalist for Best Law Blog from Weblog Awards.
January 06, 2009
Oracle v. SAP Updates--Third Amended Complaint, Motion to Dismiss Ruling, SAP's Latest Answer
By Eric Goldman
There have been some recent developments in the high-stakes and complicated Oracle v. SAP lawsuit.
In October, Oracle filed its third amended complaint whereby it expanded its efforts to show that SAP America and SAP Germany were both responsible for the actions of SAP America’s TomorrowNow subsidiary, which SAP has already admitted engaged in impermissible practices. The third amended complaint is supported by lots of facts that only millions of dollars of discovery can buy. The complaint a long read and still has too much PR hyperbole about how Oracle is so much better than SAP, but I thought the complaint did a good job arguing that the parent companies were more involved with the rogue subsidiary than mere stockholdership. At the same time, Oracle does look like it will have a damper on some of its copyright claims—it acknowledged that it lacks copyright registrations for many of the copied files, and it made some copyright filings as part of the lawsuit that probably will be too late to create eligibility for statutory damages. This probably means that Oracle won’t get to inflate the final damages calculation as much as it would like.
On Dec. 15, the judge ruled on SAP’s partial motion to dismiss. The ruling cleans up the case a bit but doesn’t really affect the substance of the case. Personally, I was a little confused about the ruling on copyright preemption of the breach of contract claim. The court denied the motion to dismiss the contract claim “except as to the extent that the state law claims are based on the alleged copyright infringement – in which case the parties agree they are preempted by the Copyright Act. SAP does not dispute plaintiffs’ assertion that the TAC alleges other actions (fraud, unauthorized use, and harm to private contractual rights and expectations) that form the basis of the state law claims, and which are not preempted by the Copyright Act.” Did the court say that a breach of contract can’t be based on acts that would constitute a copyright infringement? We know that would be wrong.
On Dec. 30, SAP filed its answer to the third amended complaint. Just like it did with its first answer, which it released so that the news would effectively break on the obscure newsday of the July 4 holiday, SAP once again tried to bury its news by releasing it so that the news would break on a holiday (this time, New Years). Oh please! You’re not fooling anyone with your bogus PR shenanigans, SAP.
Not surprisingly, SAP is blaming its TomorrowNow subsidiary for all misconduct--which is convenient, because SAP has already shuttered TomorrowNow, so it has nothing more to lose if it can contain the lawsuit to the subsidiary.
I must say that the overall picture doesn't look good for SAP. I am skeptical that they will emerge unscathed from this lawsuit. However, I’m still not clear what Oracle wants from SAP. It’s in the driver’s seat, so it should be able to dictate terms. What would it take for Oracle to move on? It may be that keeping the case open is hurting SAP in the marketplace, such as by spooking SAP's potential customers, so Oracle may be happy to let the case linger. Otherwise, it seems like Oracle should have enough information to state a price, and I’d like to think SAP would be prepared to write a reasonable check.
January 05, 2009
Veoh Gets Another Nice 512(c) Win--UMG v. Veoh
By Eric Goldman
UMG Recordings, Inc. v. Veoh Networks, Inc., 2008 WL 5423841 (C.D. Cal. Dec. 29, 2008)
Last year, in Io v. Veoh, online video sharing site Veoh got a significant win under the DMCA online safe harbors (17 USC 512(c)). That opinion makes my list as one of the top 10 cyberlaw cases of 2008, and I'm considering teaching it in Cyberlaw next year.
Last week, Veoh--a site where users upload and share video--got another nice 512(c) win. UMG claimed that the following activities by Veoh did not constitute "storage at the direction of a user":
"(1) automatically creating “Flash-formatted” copies of video files uploaded by users; [the Io court had already ruled that this didn't block a 512(c) defense]
(2) automatically creating copies of uploaded video files that are comprised of smaller “chunks” of the original file;
(3) allowing users to access uploaded videos via a technology called “streaming”;
(4) allowing users to access uploaded videos by downloading whole video files"
UMG's statutory reading is novel, but this is partially due to the fact that it's a really goofy way of reading the statute. Accordingly, the court rejects UMG's argument that any of these technological manipulations of user-uploaded videos disqualify Veoh from coverage under 512(c). This does not mean Veoh will qualify for 512(c)--the court wasn't opine on that issue--but the court's opinion is a strong signal that Veoh will qualify.
I don't expect the ruling to have much bearing on the Viacom v. YouTube case. I don't recall Viacom making the goofy statutory argument that UMG made here, so this ruling should be tangential to the arguments in that case. On the other hand, the ruling adds another defense-favorable interpretation of 512(c) as applied to online video sites and gives another data point that the courts just aren't buying the copyright owners' arguments. Maybe that will help nudge Viacom and YouTube to settle.
January 02, 2009
OnlineNIC Loses One Lawsuit and Gets Sued in Another
By Eric Goldman
Two anti-domainer developments involving OnlineNIC occurred over the holidays.
Yahoo! Inc. v. OnlineNIC, Inc., 5:08-cv-05698-PVT (N.D. Cal. complaint filed Dec. 19, 2008)
Yahoo has sued domain name registrar OnlineNIC and some Does for cybersquatting, trademark infringement, trademark dilution and related causes of action. This lawsuit caught my eye because OnlineNIC is a registrar, and normally lawsuits against registrars are barred by 15 USC 1114(2)(d)(iii). However, that immunization does not apply if the registrar has a "bad faith intent to profit from such registration or maintenance of the domain name." Here, Yahoo alleges that OnlineNIC registered the domain names for itself (i.e., it was both the registrar and the registrant--see Para. 47) and used a variety of covers and fronts to mask that it was the true registrant. I also think many of Yahoo's allegations of "abusive" domain name tasting and domain name kiting support a bad faith argument if Yahoo chooses to go that route.
Verizon California, Inc. v. OnlineNIC Inc., 5:08-cv-02832-JF (N.D. Cal. Dec. 19, 2008)
The same day Yahoo sued OnlineNIC, Verizon won a "record" $33+M default judgment against OnlineNIC. The Verizon press release. It was a slow news week before Christmas, so Verizon got a lot of press coverage (see, e.g., WSJ, NYT, News.com) for its victory.
Although it's hard to divine much insight into future jurisprudential developments from a default judgment order, Judge Fogel's brief opinion does conclude that OnlineNIC violated the Anti-Cybersquatting Consumer Protection Act:
Defendant’s actions with respect to Verizon’s trademarks undoubtedly violated the ACPA. Defendant has registered hundreds of domain names that are designed to attract web users seeking to access Verizon’s legitimate websites. Moreover, Defendant has refused to alter its behavior, and its bad faith is further evidenced by its machinations to avoid detection through the use of fictitious business entities, shell corporations, and kiting of its domain names.
This builds on Verizon's early win against Navigation Catalyst that certain domaining practices can constitute impermissible cybersquatting.
Three Brief Observations
FIrst, Verizon's sizable award against OnlineNIC is a pretty empty public gesture. Good luck collecting that, Verizon. (InternetNews has more on the likelihood of collection). It's a little like Facebook's recent $873M default judgment against spammers using its private messaging system. As we used to say in the old days, these multi-million judgments plus a nickel will buy you a cup of coffee. (I recognize Starbucks is more like $5/cup, but you get the point). Yahoo shouldn't bank on any big paydays either, even if it wins.
Second, earlier this year, I suggested the Verizon v. Navigation Catalyst case could be a turning point in the legal battles over domaining, and the latest ruling might reinforce that. Even though Verizon's latest win has no real financial implication, it does help accrete the anti-domaining legal precedent. I expect to see nothing but bad legal news for abusive domaining in 2009.
Third, I can't avoid observing how interesting it is to see Yahoo and Verizon bringing plaintiff-side lawsuits over domaining. After all, Verizon sells ads on mis-typed domain names when its consumers use its browser (i.e., on its mobile devices), and Yahoo is still fighting a lawsuit over having placed ads on domaining sites.