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March 31, 2009
Virginia v. Jaynes - This Time Really is The End
by Ethan Ackerman
The US Supreme Court has declined to grant a petition for certiorari filed by Virginia's Attorney General in Virginia v. Jaynes. That denial means the Virginia state Supreme Court's holding is the final say in the Jaynes case, and the Virigina spam statute is definitively unconstitutional.
While some coverage is suggesting that the Supreme Court had an opinion on this case or otherwise endorsed the ruling below, other articles are correctly framing the cert. denial - the Supreme Court didn't agree or disagree with the Virginia Supreme Court, it merely declined to take the case. As a result, the state opinion stands.
This also means I no longer have to end each of the blog posts I've written on the Jaynes case with a 'but this ruling could still be appealed further.'
An interesting final anecdote, perhaps? The outcome in the spam litigation turns out to be mostly academic for Mr. Jaynes. According to the Washington Post, he is currently in prison on unrelated securities fraud charges.
Posted by Ethan Ackerman at 02:44 PM | Spam | TrackBack
March 30, 2009
CLRB Hanson v. Google Preliminarily Settles for $20M
By Eric Goldman
CLRB Hanson Industries v. Google, 5:05-cv-03649-JW (settlement papers filed March 26, 2009). The new case filings:
* The settlement motion
* The settlement agreement
* The proposed court order granting the settlement
My previous blog coverage of the case:
* my initial post from August 2005
* the August 2007 determination that advertisers were bound by the AdWords contract
* the May 2008 initial refusal to grant summary judgment to Google
* the December 2008 second refusal to grant summary judgment to Google
The long-running CLRB Hanson v. Google case (also referred to as the Howard Stern case because he is a named plaintiff), over Google's alleged mishandling of budget caps set by its advertisers, has reached a proposed settlement. The settlement needs court approval, but I would be surprised if that didn't occur in due course. Individual advertisers could choose to opt out of the settlement and pursue individual claims, but I expect few will find it economically rational to do so. In the extreme case, the deal could unravel if more than 5% of advertisers opt out of the class, but I would be shocked if this happened. As a result, I expect this development to substantially resolve the case.
The stated settlement price tag is $20M of cash. Plaintiffs' counsel are likely to get $5.25M, the named plaintiffs are likely to get $20k each, and the $14.7M balance will go into a bank account. Google will provide AdWord credits for affected advertisers who are still advertising and have a balance due to Google, and Google will get cash back from the pot for any actual credits given to advertisers. It is unclear how much of the $14.7M Google will recoup this way. Or, advertisers can opt to receive cash instead for their putative harms. If less than $200k is left over after all this, the money will go to charity. If more than $200k is left over, the parties will go back to the judge to propose how to reallocate the remaining money to the class.
in my previous post on the case from December 2008, I wrote:
I suspect the case is still around because the parties can't work out a deal on the attorney's fees--which, if this situation is anything like the click fraud cases, almost certainly will dwarf any actual monetary relief received by the putatively injured advertisers. If the parties can work out the plaintiff attorneys' cut of the spoils, I'm confident this lawsuit will settle before trial
Seeing the size of this settlement, I'm not sure I called it right. Given the fairly narrow advertiser harms left open by the judge's prior rulings, I expected the advertiser relief to be nominal (certainly less than $15M). Furthermore, unlike prior advertiser v. search engine lawsuits where advertiser credits were use-it-or-lose-it, Google could be out much of the $20M no matter what. In the end, Google probably will pay a lot more cash than I expected it would have to.
While Google can easily afford the dough, the settlement is a big enough sum to potentially attract further class action lawyers seeking their piece of the Google fortune. Contrast this with Google's stance on patent lawsuits, where it has taken a hard line on settlements with the hope that its refusal to buy out lawsuits will discourage future weak patent claims from being asserted against it. However, the plaintiffs in this case had to work pretty hard--Google fought them for nearly 4 years--so it's possible that the actual economic return for the plaintiffs' lawyers for their four years of labor wasn't especially lucrative.
I have lost track of the many lawsuits against Google, but I believe this settlement ends the 2005-era advertiser v. Google class actions. There may still be some individual click fraud claims, and there are other advertising-related lawsuits still pending (such as the Vulcan Golf and related/copycat lawsuits). Let's hope this means that Google has improved its ability to keep advertisers happy.
Posted by Eric at 06:46 AM | Licensing/Contracts , Marketing , Search Engines | TrackBack
March 25, 2009
Web Host Convicted of State Child Porn Crimes Despite 230--People v. Gourlay
By Eric Goldman
People v. Gourlay, 2009 WL 529216 (Mich. App. Ct. March 3, 2009)
Hot on the heels of the Cook County Sheriff's publicity stunt filing against Craigslist, we get an interesting but complicated ruling exploring the application of 47 USC 230 to state criminal laws. The ruling tries to distinguish between ordinary web hosts and the defendant's behavior, and in doing so finds an adequate basis to punish the defendant for his role in producing and disseminating child pornography.
This prosecution is part of the fallout from "Justinscam," a tragic and well-documented story first told in exhaustive detail in this 2005 New York Times article (and its correction; see the NY Magazine for more about the NYT reporter's unorthodox and controversial role in the story). According to the opinion, at age 13, Justin Berry got a webcam and eventually started broadcasting pornographic images of himself over the Internet. The defendant, Kenneth Gourlay, operated Chain Communications, the host of the Justinscam website. Gourlay then engaged in a dialogue with Berry that ultimately led to the creation of two additional websites, JFWY and mexicofriends. With respect to the crimes on appeal, I quote the relevant portion of the opinion:
"The prosecution of defendant was based on the theory that defendant, knowing that the purpose of the JFWY and mexicofriends websites was to allow Internet viewers to watch Berry engage in pornographic acts, was an active participant in the creation of the two websites. The...prosecution presented evidence (1) that defendant knew Berry hosted his own pornographic website, that Berry wished to take this website, the justinscam website, to the “next level,” and that the purpose of both the JFWY and mexicofriends websites was for others to see pornographic images of Berry, (2) that defendant hosted the two websites with Chain Communications and registered the domain names, (3) that defendant programmed the websites with the JAVA applet to create a near live streaming video image, (4) that defendant created the members-only sections for the websites, and (5) that defendant provided Berry with an advanced web camera when he visited Berry in Mexico. In addition, in online conversations, defendant told Berry that Berry should “milk the cam for all its worth,” that Berry “got the money shots right before” Berry turned the web cam off, and that some high resolution images of the “money shots” would be nice in the website's members-only section."
The Wikipedia entry on Justin Berry also discusses Gourlay's repeated molestation of Berry. Based on this fact alone, Gourlay is destined for significant jailtime, and Gourlay's involvement in Berry's website is almost besides the point. Accordingly, personally I think the court's discussion about the web hosting relationship is hugely colored by the criminal molestation, which makes it hard to disaggregate the court's feelings if this was truly only a customer/vendor relationship.
Nevertheless, focusing only on the facts discussed by the court, Gourlay was more involved with Berry's websites than a typical hosting vendor would be. Gourlay was allegedly providing custom software programming, hardware and recommendations about content decisions to Berry. In a footnote, the court says:
We note that, although defendant claims on appeal that he was merely providing standard web hosting duties to Berry for the JFWY and mexicofriends websites, there was no evidence presented at trial that many of the services defendant provided to Berry for the two websites, such as use of the applet, the creation of members-only pages, the technical assistance given to members of the two websites, and the registration of domain names, were provided for any of Berry's other websites or to other clients of Chain Communications.
A jury ultimately convicted Gourlay of:
* two counts of child sexually abusive activity, MCL 750.145c(2)
* two counts of using a computer to communicate with another to commit child sexually abusive activity, MCL 750.145d(2)(f)
* two counts of distributing or promoting child sexually abusive material, MCL 750.145c(3)
* two counts of using a computer to communicate with another to commit distribution of child sexually abusive material, MCL 750.145d(2)(d)
* third-degree criminal sexual conduct (CSC), MCL 750.520d(1)(a), and
* soliciting a child for immoral purposes, MCL 750 .145a.
Although in this ruling the appellate court reversed the sentencing decision of the trial judge, Gourlay will be going to jail for a substantial period of time.
On appeal, Gourlay claims that the pornography-related offenses were preempted by 47 USC 230. The court says that some of the elements of a 230 defense are met; "There is no dispute that Berry was an information content provider for the JFWY and mexicofriends websites and that defendant, acting as Chain Communications, was an interactive computer service provider."
The state argued that 230 didn't apply because 230 covers only civil claims, not criminal claims. It's true that 230(e)(1) excludes federal crimes from the immunity, but the plain language of the statute is clear that state criminal prosecutions are preempted. The court easily concludes that "Congress intended that no liability may be imposed under a state criminal law that is inconsistent with § 230."
Nevertheless, the court concludes that the jury didn't need to be instructed about 47 USC 230 (which, it sounds like, defense counsel at trial may not have been aware of). The crime of child sexually abusive activity requires the state "to prove that the defendant 'persuade[d], induce[d], entice[d], coerce [d], cause[d], or knowingly allow[ed] a child to engage in a child sexually abusive activity for the purpose of producing any child sexually abusive material.'" The court says that a typical web host does not fulfill the scienter requirements:
An interactive computer service provider, by providing bandwidth, by publishing content that was generated by an information content provider's use of the service's general features and mechanisms, or by knowing of the nature of the published content, has not taken an intentional action directed toward a child to engage the child in child sexually abusive activity.
Therefore, the conviction could be consistent with 230. I didn't exactly follow the court's logic here, and I would be very interested to see how a jury would react in this case if told the foregoing quote. Inferentially, the court is saying that 230 does not apply because Gourlay as a vendor did more than provide bandwidth, publish content and know the contents being published.
With respect to the distribution count, the court lays out the prosecution's burden: "(1) the defendant distributed or promoted child sexually abusive material, (2) the defendant knew the material was child sexually abusive material at the time of distribution or promotion, and (3) the defendant distributed or promoted the material with criminal intent." The court says that some prosecutions under this statute would be preempted by 230 if the prosecution's theory was that "an interactive computer service provider distributes child sexually abusive material with the intent that it be seen by others when, after receiving notice of the material, keeps the material available to be viewed or discovered by others." In other words, failure to respond to a C&D/takedown notice would not convert the provider into a criminal distributor under 230.
Instead, based on the facts I quoted above, the court says that the prosecution's theory is that "defendant, knowing that the purpose of the JFWY and mexicofriends websites was to allow Internet viewers to watch Berry engage in pornographic acts, was an active participant in the creation of the two websites." Given that Gourlay defended on lack of knowledge grounds, not lack of involvement, the court said the conviction was consistent with 230.
This is a complicated case overlaying a tragic situation, but let me offer three implications:
* this case is a good reminder of the toxicity of child porn. As I teach in Cyberlaw class, if you run into child porn, you want to put it as far away from you as possible. Gourlay did not do that. Gourlay’s behavior would be more understandable if Gourlay didn't know there was child porn taking place and thought Berry was over 18 (he claimed both). I suspect the jury found those assertions hard to believe. If Gourlay had any doubts about his beliefs, he should have done more--a lot more--to investigate them.
* Although I think it's a close call, I think that on these facts and based on the precise wording of these statutes, I think the appellate court got it right that 230 doesn't protect Gourlay for the creation and dissemination of child porn. I would be very troubled by that conclusion if Gourlay was purely a technology provider, but the court was clear to distinguish 230's application to the provision of technology. What put Gourlay over the edge for me is the alleged facts that Gourlay appeared to become a co-venturer with Berry and took on a quasi-producer role, and apparently encouraged Berry to increase the pornographic content of the sites--all in the face of Berry being a young teen.
* While I think the court got it right, I'm also disappointed that the jury didn't learn about 47 USC 230. I'm not sure it would have produced a different result, but I imagine a jury would find the fact that Congress provided strong immunities for some of Gourlay's behavior potentially important. All of this reinforces the importance of finding lawyers who know the technology and the applicable law. I suspect many criminal defense lawyers have never heard of 47 USC 230, so it's not surprising if the trial lawyer didn't raise it, but a lawyer who knew that law might have been able to tilt the odds a little more in Gourlay's favor.
Tom O'Toole is similarly unsure what to make of the case.
Posted by Eric at 07:26 AM | Content Regulation , Derivative Liability | TrackBack
March 24, 2009
"Locate Plastic Surgeon" Trademark Registrant Brings Dubious Enforcement Action--Ezzo v. Google
By Eric Goldman
Ezzo v. Google, 2:09-CV-00159 (M.D. Fla. complaint filed March 17, 2009). The Justia page.
I'm suffering ennui about blogging pro se lawsuits against companies like Google. Most of them are completely unmeritorious and poorly expressed, so they don't warrant the time and legal risk associated with writing them up. Nevertheless, I decided this lawsuit is blog-worthy because it, combined with the Medical Justice no-talk waivers that I hope to blog about soon, appears to be part of a troubling trend of using IP to make it harder for consumers to find appropriate medical services.
Jamil Ezzo has a registered trademark on the Supplemental Register for the phrase "Locate Plastic Surgeon," which he apparently uses in connection with his website locateplasticsurgeon.com. Armed with this registration, in this lawsuit he sues Google and AOL (apparently for selling the trademark as an ad keyword) and a bunch of other folks in the plastic surgery business who apparently advertised on the keyword. (The complaint is so indecipherable that I'm not really sure what he's beefing about; this is my best guess).
Among other dubious aspects, he comes up with a claim for $90M in damages. He says that over 5 years, the competitive keyword advertising cost him 5,000 customers who would have paid $100/mo each. That's pretty powerful keyword advertising and a gravity-defying 100% margin business. Add in treble damages, and that produces $90M in damages. Nevertheless, the good faith in his computations is palpable because he kept the damages claim under 9 figures.
In any case, putting aside the indecipherability of the complaint, this lawsuit will be quickly crunched because (among other defects) I am extremely confident that "Locate Plastic Surgeons" is not a protectable trademark. Registration on the Supplemental Registry only confirms that the phrase could become a protectable trademark some day, but it's not necessarily protectable today. To make progress, he'll need to show secondary meaning in the phrase, and given the highly descriptive phrase plus the apparently low profile of the site, I think the chances of showing secondary meaning are near zero. Given this, I think this lawsuit is a good candidate for the court to award attorneys fees to the defendants (awardable in exceptional cases, which I think this is).
Even if this lawsuit is a little off-kilter, it still depresses me that anyone could think they can own a protectable trademark in the phrase "Locate Plastic Surgeon" for the process of locating plastic surgeons. It's dramatic evidence of the abysmal and overexpansive state of trademark doctrine today.
More on this lawsuit from Tom Seery of RealSelf.com.
Posted by Eric at 11:01 AM | Derivative Liability , Search Engines , Trademark | TrackBack
March 23, 2009
Soccer Coach Shut Out in Message Board Lawsuit--Joyner v. Lazzareschi
By Eric Goldman
Joyner v. Lazzareschi, 2009 WL 695539 (Cal. App. Ct. March 18, 2009)
Joyner is a Southern California soccer coach who merged two girls soccer teams into one, a decision that sparked a near-riot in the local girls soccer community. In particular, the discussion got hot-and-heavy on socalsoccertalk.com (a site currently offline), operated by defendant Lazzareschi. Socalsoccertalk.com had 600+ members and got 200-500 messages per day--including allegedly a total of over 2,000 messages about the team merger. A number of allegedly defamatory messages about Joyner were posted by unregistered "guests," although Joyner claimed that Lazzareschi posted some of those messages. Joyner sued Lazzareschi and a variety of Doe defendants for defamation and related torts.
The trial court initially granted Lazzareschi's anti-SLAPP motion, but in a prior ruling the appellate court reversed because the lawsuit lacked the requisite public interest. The trial court subsequently granted summary judgment for Lazzareschi, and this ruling deals with Joyner's appeal.
Like the recent Raggi v. Las Vegas Metropolitan Police case I blogged about last week, this is an easy case for 47 USC 230. We all know that message board operators aren't liable for third party posts to the boards. To get around the 230 brick wall, Joyner invokes Moreno's concurrence in Barrett v. Rosenthal, arguing that Lazzareschi was in a conspiracy with the posters and 230 doesn't preempt conspiracy liability. However, Joyner didn't allege conspiracy in the complaint or introduce any evidence supporting a conspiracy, so these arguments fell flat.
Joyner also tries to exploit the ambiguous language in Roommates.com. (FWIW, this is a great example of a "duck biting lawsuit" predicted by Kozinski). The court rejects the analogy to Roommates.com, saying that "no evidence suggested defendant engaged in any filtering remotely related to defaming plaintiff" because Lazzareschi never edited the allegedly defamatory messages, even though he created the forum titles that elicited the allegedly defamatory messages.
To my knowledge, defendants are now 4-0 in opinions that substantively discuss the Roommates.com en banc opinion (the others are Goddard, Furber & GW Equity). As a result, I continue to believe that Roommates.com is not the 230 jurisprudential train wreck we feared. Nevertheless, the court's inquiry for evidence of website operator filtering shows exactly why the Roommates.com opinion was so lousy. A website operator's deletion of user-submitted messages clearly would not disqualify the operator for 230(c)(1) liability, and in any case an operator's filtering decisions should be independently protected under 230(c)(2). So the court's doctrinal standard here is odd and confusing, and we can blame the extensive sloppy language in Roommates.com for that.
Posted by Eric at 09:38 AM | Derivative Liability | TrackBack
March 20, 2009
Union Isn't Liable for Members' Postings to Union Message Board--Raggi v. Las Vegas Police
By Eric Goldman
Raggi v. Las Vegas Metropolitan Police Dept., 2009 WL 653000 (D. Nev. March 10, 2009)
Unexpectedly, we're celebrating union week at the Technology & Marketing Law Blog. Earlier this week, I blogged that union organizers aren't liable for trademark infringement from their online activism. Today, I'm blogging that 47 USC 230 protects unions from liability for online postings by their members.
The plaintiff sued a variety of defendants for allegedly defaming and discriminating against the plaintiff. This particular ruling involves an SJ motion from the Las Vegas Police Protective Association (“LVPPA”), a union of Las Vegas law enforcement personnel. Two LVPPA union members allegedly posted impermissible messages to a message board operated by LVPPA, and the LVPPA did not remove the targeted messages after the plaintiff's demand. Even with the refusal to take down the messages, this set of facts supports an easy 47 USC 230 case for the message board operator (see, e.g., Eckerd, DiMeo v. Max, Universal Communication Systems v. Lycos, Higher Balance), and frankly I think most plaintiffs are finally getting that message.
The complicating factor here is some caselaw suggesting that there may be a principal-agent relationship between unions and their members when members are conducting union business. Elsewhere, I've raised the issue of whether principal-agency relationships allow plaintiffs to bypass 47 USC 230; I think that's still an open issue. See more discussion of this issue in my Higher Balance blog post. The court can avoid this doctrinally thorny issue because the posting members weren't conducting union business while posting. The plaintiff argued that, by failing to remove the postings, the union ratified the members' posts, but the court rejected that bypass as well. As a result, the court reaches the sensible result that 47 USC 230 protects unions for their members' online postings.
Posted by Eric at 12:28 PM | Derivative Liability | TrackBack
March 19, 2009
IEEE ComSoc SCV Talk: "Engineers' Role in Internet Law Development"
By Eric Goldman
Last week, I gave a talk at a meeting of the IEEE Communications Society, Santa Clara Valley chapter. I don't often get the chance to speak to a group of engineers, so I decided to go in a little different direction than my normal talks. I gave a procedure-oriented talk about how lawyers and engineers can work together to improve legal compliance. Along the way, I pointed to the Roommates.com and Cablevision cases as two case studies of how product design choices can influence the legal analysis (one good, one bad). My talk slides.
Posted by Eric at 10:25 AM | Copyright , Derivative Liability , Internet History | TrackBack
March 18, 2009
Call for Papers: AALS 2010 Annual Meeting, Law & Computers Section: "Law & Wikis"
By Eric Goldman
[feel free to redistribute this post widely]
Call for Papers on the Topic of “Law and Wikis”
2010 AALS Annual Meeting, New Orleans, Jan. 6-10, 2010
The AALS Section on Law and Computers invites you to submit a request to present on the topic of “Law and Wikis” at the Section’s session at the 2010 AALS Annual Meeting in New Orleans, Louisiana. The Annual Meeting will be held January 6-10, 2010; the session’s exact day and time is TBD. Selected speakers must submit a paper to AALS prior to the Annual Meeting for posting to the AALS website; those papers may be accepted for publication in other venues so long as the paper is not published before the Annual Meeting. The Section hopes to place the group of selected speakers’ papers in a to-be-designated law journal.
About the Topic: Wiki technologies offer novel and interesting ways for people to work online collaboratively. The best-known wiki application is Wikipedia, a highly successful website that has generated millions of encyclopedic articles from volunteer contributors. This panel will explore the interaction between law and wiki technologies, including Wikipedia. We are interested in presentations that address any aspect of wikis or Wikipedia. Example topics might include:
* Ownership of content created using wikis
* Who (if anyone) is responsible for ensuring the accuracy of wiki-generated content?
* Wikipedia governance structures
* Should the legal regulation of wikis differ from other Internet communications technologies?
* Wikis and deliberative democracy
* The use of wikis in legal pedagogy
How to Apply: Please email your presentation proposal to the section chair, Professor Eric Goldman, Santa Clara University School of Law, no later than April 6, 2009, noon Pacific time. Email address: egoldman@gmail.com. Your proposal should include your name, professional title, professional affiliation(s), contact information, presentation title, short abstract (less than 500 words please), estimated length of your paper, and (if applicable) any information about the paper’s publication status. Abstracts will be reviewed by a working group of the AALS Law & Computers Section, and selected speakers will be contacted no later than April 25, 2009. Selected speakers must bear their own travel and conference registration expenses.
Posted by Eric at 03:55 PM | General | TrackBack
Perez Hilton Wins IP Lawsuit--Silver v. Lavandeira
By Eric Goldman
Silver v. Lavandeira, 2009 WL 513031 (S.D.N.Y. Feb. 26, 2009). The CMLP page.
I've lost track of Perez Hilton's multitudinous lawsuits, but in this case he gets a nice win. Silver is a rival blogger at "Perezrevenge.com." I'm not exactly sure how this site improves upon other celebrity gossip sites, but it claims to be different. Silver brought a pro se lawsuit against Perez for copyright infringement and related claims. (Perez fired back with Lavandeira v. Infuse, LLC, a cybersquatting and trademark lawsuit). In the most recent ruling, the district court accepts the magistrate report rejecting all of Silver's claims.
It's a little unclear why Silver thinks Perez committed copyright infringement, but it appears that Silver is claiming that Perez picked up facts from her blog and wrote those facts up for his blog. Applying very basic copyright law, the court says that republishing facts isn't copyright infringement. Further, even if Silver had a compilation copyright in the facts presented on her blog, Perez didn't infringe because his blog had a different arrangement, plus "his distinctive sarcastic and ironic tone constitutes a significantly different expression of the underlying facts."
The court also rejects Silver's hot news misappropriation claim. Because Silver was republishing facts that had been widely published before her posts, the court questions whether she had invested substantial costs in gathering the facts; and indeed questions whether she can have any proprietary interest in such extensively disseminated facts.
BTW, for those of you keeping score, this is the third time in the past month that I have blogged on hot news claims. See the AP and Scranton Times case. There must be something in the water.
Finally, the court rejects two DMCA claims. Silver claimed a 1201 violation, but not did allege a circumvention of a technological protection measure. Silver also claimed a 1202 violation because her name was in her posts but not referenced in Perez's posts, but (citing/misciting the goofy IQ case from 2006) the court dismisses the claim because she inserted her name into her posts manually and not on an automated basis. I think there are plenty of good reasons to dismiss the 1202 claim (such as the lack of copying), but the manual insertion of copyright management information is not one of them.
Although this case hardly breaks any important new ground, it does represent a nice validation that standard blogging practices of building upon someone else's newsy blog post does not give rise to legal claims.
Posted by Eric at 09:50 AM | Copyright | TrackBack
March 17, 2009
Newspaper Obituaries Aren't Hot News--Scranton Times v. Wilkes-Barre Publishing
By Eric Goldman
The Scranton Times, LP v. Wilkes-Barre Publishing Co., 3:08-cv-02135-ARC (M.D. Pa. March 6, 2009)
Oh man, how bad is it in the newspaper business? Rather than investing in building new and sustainable business models and relationships with their subscribers, newspapers are like dinosaurs trying to eat each other while the temperature rises. However, instead of eating each other, the dinosaurs are suing each other, squandering their valuable capital on low-merit newspaper v. newspaper lawsuits, such as the GateHouse v. NYT lawsuit over the republication of headlines.
Today's lawsuit is even more scoffable. The Scranton Times is suing the Wilkes-Barre newspaper for republishing obituary notices in its Scranton edition that were initially published in the Scranton Times. But the Scranton Times has a problem--funeral homes typically write and submit the obituary notices, so the Scranton Times has no copyright interest in the notices. Undeterred, the Scranton Times sued the Wilkes-Barre paper for a bunch of junky unfair competition-style claims in Pennsylvania state court.
This ruling deals with the Wilkes-Barre defendant trying to remove the case to federal court by showing that there is a federal question of whether the junky claims are preempted by federal copyright law.
The most interesting discussion relates to the hot news misappropriation doctrine. I just discussed the doctrine last month in the AP v. All Headlines News case, where the SDNY said that the AP's hot news claim against an online aggregator/syndicator survived a motion to dismiss. I've seen some breathy law firm announcements that this ruling revitalized the hot news doctrine, but not so fast, guys. Here, the court says that the obituary notices fail to qualify as hot news, and therefore the misappropriation claim is preempted by copyright law.
In particular, the court says that obituary notices can qualify as time-sensitive information, such as timing of memorial services. Further, even though the newspaper doesn't write the obituary notices, the court says that the newspaper bore all of the costs of collecting and distributing the notices, and the rival paper free-rode on those investments. However, the court said that the Scranton Times had failed to show that the free-riding would threaten the Scranton Times' publication of obituary notices. Thus, the hot news claim failed.
The court looks at the copyright preemption of other junky unfair competition claims, holding that the unfair competition claim was really a reverse passing off claim, which was preempted, as was the tortious interference and unjust enrichment claims. Oddly, the court said that the conversion claim wasn't preempted by copyright law, even though the only "converted" assets would be copyrighted intangible material (the obituary notices).
So a few of the junky claims survive the copyright preemption analysis, but there isn't much hope for this lawsuit. Then again, unless the Scranton Times realizes that fighting a rear-guard action against its competition does nothing to improve its future business prospects in a market disintegrating around it, there isn't much hope for the paper either.
HT: Tom O'Toole
Posted by Eric at 10:18 AM | Copyright | TrackBack
March 16, 2009
Union Organizers' Activist/Gripe Sites Don't Support Trademark Claims--Cintas v. Unite Here
By Eric Goldman
Cintas Corp. v. Unite Here, 2009 WL 604099 (S.D.N.Y. March 9, 2009). The Unite Here press release.
Cintas, a Fortune 500 company, manufactures uniforms. The defendants are unions and affiliated folks interested in unionizing Cintas' workforce. This article indicates that the litigants don't like each other.
To advance their objectives, the defendants set up several websites that critique/criticize Cintas, such as cintasexposed.org (targeting Cintas' customers), uniformjustice.org (targeting Cintas' employees) and notonmytrack.info (targeting NASCAR fans). The cintasexposed.org website contained a disclaimer and also linked (directly and indirectly) to some sites with commercial aspects.
Among other things, Cintas sued the defendants for trademark infringement, dilution and cybersquatting. the court grants the motion to dismiss all three claims.
For the trademark infringement claim, the court starts with a standard likelihood of confusion multi-factor analysis, but the factors just don't work in a nominative/referential use situation like this. Unfortunately, the court doesn't mention the nominative use doctrine, which would have facilitated an analytically clean dismissal. Nevertheless, the court gets on the referential track, saying "Defendants are not using the “CINTAS” mark as a “source identifier”, but rather solely to criticize Cintas's corporate practices," which negates any consumer confusion. The court dismisses the initial interest confusion argument because there was no evidence of intentional deception.
The trademark dilution claim fails for a lack of requisite use in commerce (this theory could have helped dismiss the trademark infringement claim too, but the court didn't connect the dots). The court rejects the plaintiff's efforts to do link-counting to linked websites where referred users might be able to transact, saying "The twice-removed links to a union “store” is at least one bridge too far and insufficient to establish the use of the CINTAS mark for profit." (I severely criticize link-counting exercises from prior Internet trademark cases in this article). The cybersquatting claim similarly fails for lack of profit motive.
Posted by Eric at 09:38 AM | Domain Names , Trademark | TrackBack
March 13, 2009
Utah HB 450 Dies in Utah Senate Without a Vote
By Eric Goldman
After barely passing the Utah House, Utah HB 450--Utah's third ill-fated attempt to regulate keyword advertising--died quietly last night when the Utah Senate failed to act on it before the Utah Legislature adjourned for the year. My understanding is that 1-800 Contacts, the bill's principal advocate, stopped pushing the bill in the Senate earlier this week when it became clear that it couldn't muster the votes.
On its face, this bill's failure appears to be good news. While the bill was less ill-conceived than Utah's past two anti-keyword advertising laws, it was still an ill-conceived anti-competitive law designed principally to advance the protectionist interests of a local Utah company. Laws like this should be rejected.
Nevertheless, I feel that there is no real good news here. If the law had died because the Utah Legislature had recognized the folly of thinking that it was uniquely well-positioned to improve keyword advertising, or had abandoned the quest because of its abysmal track record in regulating the Internet, we'd have good reason to celebrate. Unfortunately, I haven't seen any evidence of such an epiphany.
Instead, I *guarantee* that the Utah legislature will revisit the topic of regulating keyword advertising for a fourth time. (I'm reminded of the fable of Ulysses and the Sirens; trying to "fix" keyword advertising appears to be simply irresistible to the Utah Legislature). One reason is that there remains a lot of hostility towards keyword advertising in the Utah Legislature. For example, Rep. S. Clark was quoted last week as opposing HB 450 (indeed, he voted no) because:
"We should be going after the Googles that are creating this problem. They're the villains." .... "If we're going to use the strength and resources of the state to go after businesses, then we ought to go after the business that is causing the harm. … We ought to go after the Googles with the state's resources and reputation."
Nice. In addition to this ill-informed antipathy, companies like 1-800 Contacts and Overstock.com--both Utah-based web retailers with, at best, highly descriptive trademarks--are always interested in ways to reduce their competition. So, Utah's legislative hubris plus local company rent-seeking creates a toxic brew that ensures repeat surfacing of bad policy proposals. Let's reconvene here in February 2010 and see what the Utah bunch is cooking up for the 2010 legislative session. [UPDATE: Kate Kaye has a little more to say about the future.]
Meanwhile, even though 1-800 Contacts didn't get its statutory shortcut to control keyword ads on its trademarks, I expect 1-800 Contacts will keep bringing traditional trademark lawsuits against competitive retailers who buy competitive keyword advertising. 1-800 Contacts has already been busy on this front; I don't have a complete census of these lawsuits, but I pulled the following case list from PACER ()which is usually incomplete for a variety of reasons):
* 1-800 Contacts v. Lensworld.com, 2:2008cv00015 (filed 01/08/2008, closed 09/09/2008)
* 1-800 Contacts v. Drugstore.com, 2:2008cv00157 (filed 02/26/2008, closed 08/12/2008)
* 1-800 Contacts v. Lens.com Inc., 2:2007cv00591 (filed 08/13/2007)
* 1-800 Contacts v. Premier Holdings, 2:2007cv00946 (filed 12/06/2007, closed 05/16/2008)
* 1-800 Contacts v. Memorial Eye, 2:2008cv00983 (filed12/23/2008)
* 1-800 Contacts v. Lensfast, 2:2008cv00984 (filed 12/23/2008)
* 1-800 Contacts Inc v. Manila Industries Inc, 8:2007cv00102 (filed 01/26/2007, closed 04/07/2008) (note: the complaint wasn't on PACER, so I couldn't confirm that this was a keyword suit)
Given this level of activity, I doubt we've seen the last of these lawsuits (unless 1-800 Contacts has exhausted the universe of defendants).
One last point: I remain flabbergasted by the standards of acceptable conduct in the Utah Legislature. For example, as I mentioned before, I got a reliable tip (but I haven't been able to confirm otherwise) that one house representative mistakenly voted yes on HB 450. Whoops! Subsequently, the Salt Lake Tribune reminded us that Rep. Jennifer "Jen" Seelig--who voted yes on HB 450, in case that wasn't obvious--is a lobbyist-employee of 1-800 Contacts, the principal advocate for the bill. (This page describes her title as "Associate Director of Governmental Relations" for 1-800 Contacts). What??? Rep. Seelig explained that she doesn't lobby for 1-800 Contacts in the Utah Legislature, but I would think any representative with such obvious conflicts would necessarily abstain from voting on bills advocated by her employer. (Or perhaps there should be rules against legislators also being employed as lobbyists, but I digress...). Apparently not in the Utah Legislature. Utah residents, I just don't get it--why are you not demanding better practices from your elected representatives???
Posted by Eric at 10:27 AM | Marketing , Search Engines , Trademark | TrackBack
March 12, 2009
Fifth Circuit Denies Yahoo's Jurisdictional Appeal in American Airlines Case
By Eric Goldman
In re: Yahoo! Inc; Overture Services, Inc., No. 09-10098 (5th Cir. March 11, 2009)
In January, the Texas district court denied Yahoo's request to transfer the American Airlines keyword advertising lawsuit out of Texas and into Yahoo's home court in California. Yahoo appealed that ruling to the Fifth Circuit, and yesterday the Fifth Circuit denied the request.
Yahoo's principal argument was that the parties' lawsuit was governed by its Sponsored Search Agreement, which had a mandatory venue clause requiring litigation in Yahoo's home court. The district court judge did not respond well to that argument, calling it "completely nonsensical." The appeals court wasn't as harsh but still concludes that Yahoo didn't make the extraordinary showing required to obtain the relief Yahoo sought--even though American Airlines is seeking disgorgement of its payments under the Sponsored Search Agreement as one of the requested remedies.
This case remains at an early procedural stage, but already I'm struck by how aggressively Yahoo is fighting to get the case out of Texas. There may be good reasons for this--naturally, a litigant prefers to be in its home court and not in its opponent's home court, plus there may be substantive doctrinal benefits in the Ninth Circuit instead of the Fifth Circuit. However, Yahoo is spending a fair amount of money over this procedural point, signaling that it isn't looking for a quick or cheap settlement.
The only remaining jurisdictional question is what, if anything, Judge Fogel in Northern District of California will do with Yahoo's declaratory judgment suit. The most logical thing would be for Judge Fogel to stand down in the face of the continued litigation in Texas, but I don't know if that's the only possible result.
Posted by Eric at 04:01 PM | Search Engines , Trademark | TrackBack
Rip-off Report Lawsuit Updates: Certain Approval Programs and Ecommerce Innovations
By Eric Goldman
Certain Approval Program v. Xcentric
Certain Approval Programs, L.L.C. v. XCentric Ventures L.L.C., 2009 WL 596582 (D. Ariz. March 9, 2009). I previously blogged about this case in November. This ruling is in response to the plaintiff's request to file an amended complaint, which Rip-off Report resisted on several grounds. Of particular interest is the plaintiff's desire to add a claim for “misappropriation of name or likeness." Rip-off Report responded that such a claim is futile due to 47 USC 230. The court rejected the futility argument at this early procedural stage, saying
Plaintiffs have alleged enough facts regarding Defendants' “creation or development of information provided through the Internet or any other interactive computer service” to make it plausible that Defendants are an “information content provider” for some content and therefore the CDA does not completely immunize Defendants.
This is not the first time that plaintiffs' allegations against Rip-off Report have survived the equivalent of a motion to dismiss, but getting further into the litigation process has proven difficult for plaintiffs.
The court didn't reach the issue, but it's also germane to the futility argument whether a "misappropriation" claim is even preempted by 230 at all or if qualifies as an "intellectual property" claim that is excluded from the immunization. Compare ccBill and Friendfinder.
Ecommerce Innovations v Doe
Ecommerce Innovations, L.L.C. v. Does 1-10, No. MC-08-93 (D. Ariz. Feb. 10, 2009). Thanks to Jeff Neuburger for calling attention to this case. In this case, a defamation plaintiff is seeking identifying information for an anonymous Rip-off Report contributor. The Rip-off Report initially fought the request, but the district court ordered Rip-off Report to comply because the plaintiff had established a prima facie case. The Rip-off Report responded that it plans to appeal the judge's order to the Ninth Circuit, and the district court has stayed the order pending the appeal (although I can't find any evidence that the appeal has been filed yet). As Jeff points out, an appeal by Rip-off Report may prompt the Ninth Circuit to articulate its standards for when plaintiffs can unmask anonymous defendants; it also could become a backdoor way to gauge the Ninth Circuit's attitude towards Rip-off Report in light of some ambiguous language in the initial Ninth Circuit Roommates.com opinion.
Posted by Eric at 11:54 AM | Content Regulation , Derivative Liability , Privacy/Security , Publicity/Privacy Rights | TrackBack
March 11, 2009
The Third Wave of Internet Exceptionalism
By Eric Goldman
[I initially wrote this as an editorial for our University magazine and republished that version through InformIT as well. Here's the original unedited version I submitted.]
From the beginning, the Internet has been viewed as something special and “unique.” For example, in 1996, a judge called the Internet “a unique and wholly new medium of worldwide human communication.”
The Internet’s perceived novelty has prompted regulators to engage in “Internet exceptionalism,” crafting Internet-specific laws that diverge from regulatory precedents in other media. Internet exceptionalism has come in three distinct waves:
The First Wave: Internet Utopianism
In the mid-1990s, some people fantasized about an Internet “utopia” that would overcome the problems inherent in other media. Some regulators, fearing disruption of this possible utopia, sought to treat the Internet more favorably than other media.
47 USC 230 (a law still on the books) is a flagship example of mid-1990s efforts to preserve Internet utopianism. The statute categorically immunizes online providers from liability for publishing most types of third party content. It was enacted (in part) “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.” The statute is clearly exceptionalist because it treats online providers more favorably than offline publishers—even when they publish identical content.
The Second Wave: Internet Paranoia
Later in the 1990s, the regulatory pendulum swung in the other direction. Regulators still embraced Internet exceptionalism, but instead of favoring the Internet, regulators treated the Internet more harshly than analogous offline activity.
For example, in 2005, a Texas website called Live-shot.com announced that it would offer “Internet hunting.” The website allowed paying customers to control, via the Internet, a gun on its game farm. An employee manually monitored the gun and could override the customer’s instructions. The website wanted to give people who could not otherwise hunt, such as paraplegics, the opportunity to enjoy the hunting experience.
The regulatory reaction to Internet hunting was swift and severe. Over 3 dozen states banned Internet hunting. California also banned Internet fishing for good measure. However, regulators never explained how Internet hunting is more objectionable than physical space hunting.
For example, California Sen. Debra Bowen criticized Internet hunting because it “isn't hunting; it's an inhumane, over the top, pay-per-view video game using live animals for target practice….Shooting live animals over the Internet takes absolutely zero hunting skills, and it ought to be offensive to every legitimate hunter.”
Sen. Bowen’s remarks reflect numerous unexpressed assumptions about the nature of “hunting” and what constitutes fair play. In the end, however, hunting may just be “hunting,” in which case the response to Internet hunting may just be a typical example of adverse Internet exceptionalism. [For more, check out my 2005 editorial on Internet hunting.]
The Third Wave: Exceptionalism Proliferation
The past few years have brought a new regulatory trend. Regulators are still engaged in Internet exceptionalism, but each new advance in Internet technology has prompted exceptionalist regulations towards that technology.
For example, the emergence of blogs and virtual worlds has helped initiate a push towards blog-specific and virtual world-specific regulation. In effect, Internet exceptionalism has splintered into pockets of smaller exceptionalist efforts.
Regulatory responses to social networking sites like Facebook and MySpace are a prime example of Internet exceptionalism splintering. Rather than regulating these sites like other websites, regulators have sought social networking site-specific laws, such as requirements to verify users’ age, combat sexual predators and suppress content that promotes violence. The result is that the regulation of social networking sites differs not only from offline enterprises but from other websites as well.
Implications
Internet exceptionalism is not inherently bad. In some cases, the Internet truly is unique, special or different and should be regulated accordingly. Unfortunately, more typically, exceptionalism cannot be analytically justified and instead reflects regulatory panic.
In these cases, regulatory exceptionalism can be harmful, especially to Internet entrepreneurs and their investors. It can distort the marketplace between web enterprises and their offline competition—occasionally advantaging the website (such as 47 USC 230), but typically hindering the web business’ ability to compete. In extreme cases, such as Internet hunting, unjustified regulatory intervention may put companies out of business.
Accordingly, before enacting exceptionalist Internet regulation, regulators should articulate how the Internet is unique, special or different and explain why these differences support exceptionalism. Unfortunately, emotional overreactions to perceived Internet threats or harms typically trump such a rational regulatory process. Knowing this tendency, perhaps we can better resist that temptation.
Posted by Eric at 12:20 PM | Content Regulation , Derivative Liability , Internet History | TrackBack
March 09, 2009
Conference on the 100th Anniversary of the 1909 Copyright Act, April 30, SCU
By Eric Goldman
Please come to a Conference on the 100th Anniversary of the 1909 Copyright Act, April 30, at Santa Clara University. The event is co-sponsored by the High Tech Law Institute, Santa Clara University School of Law and Berkeley Center for Law & Technology, University of California Berkeley School of Law.
My hope is that the speakers will look back at the last 100 years of the 1909 Copyright Act to see what worked and what didn't. Ideally, this might help us think more intelligently about developing copyright policy and drafting copyright provisions in the future.
I'm especially excited about this event because we are bringing together 2 dozen top copyright experts to spend a day geeking out on copyright law. If you're not a diehard copyright enthusiast, this may not be the event for you. But if discussing copyright policy and doctrine with other smart copyright experts sounds like your idea of a good time, we think we've scheduled a day of pure bliss.
The event is free to attend but registration is required. There is a small fee if you want 7 hours of CLE credit. You can register for the event here. Hope you can join us.
The scheduled list of speakers:
Keynote speakers:
David Nimmer, Of Counsel, Irell & Manella
William Patry, Senior Counsel, Google
Marybeth Peters, Register of Copyrights, U.S. Copyright Office
Participants:
Howard Abrams, University of Detroit Mercy School of Law
Jon A. Baumgarten, Proskauer Rose LLP
Oren Bracha, University of Texas School of Law
Michael Carroll, Villanova University School of Law
Julie Cohen, Georgetown University Law Center
Laura Gasaway, University of North Carolina School of Law
Daniel Gervais, Vanderbilt University Law School
Justin Hughes, Yeshiva University Cardozo School of Law
Peter Jaszi, American University Washington College of Law
Roberta Rosenthal Kwall, DePaul University College of Law
Marshall Leaffer, Indiana University School of Law
Jessica Litman, University of Michigan Law School
Joseph Liu, Boston College Law School
Lydia Pallas Loren, Lewis & Clark Law School
Tyler Ochoa, Santa Clara University School of Law
Ruth Okediji, University of Minnesota Law School
Tony Reese, University of Texas School of Law
Pamela Samuelson, Univ. of California at Berkeley School of Law
Christopher Sprigman, University of Virginia School of Law
John Tehranian, Chapman University School of Law
Elizabeth Townsend Gard, Tulane University School of Law
Alfred Yen, Boston College Law School
Posted by Eric at 10:09 PM | Copyright | TrackBack
March 06, 2009
Utah House Barely Passes HB 450 (Maybe)--UPDATED
By Eric Goldman
The Utah legislature is continuing its embarrassing third attempt to regulate keyword advertising. Today, after making a ticky-tack amendment, the Utah House passed HB 450 and sent the bill to the Senate. However, the House was sharply divided, voting 38-36-1 to pass it. The law barely made it through due to the fierce last-minute lobbying efforts of 1-800 Contacts; Kate Kaye catches us up on some of 1-800 Contacts' maneuverings.
It's not clear if the Senate will approve the law; or if it will even act on the law before the legislature recesses on March 12. It's also possible that the governor would veto the law. However, for now, it is clear that the Utah legislature is still working hard to retain its status as the reigning jesters of Internet regulators.
UPDATE (12:30 Pacific): Perhaps I should have known better than to rely on the Utah legislative website. I got the following email from a tipster:
"So the bill passed by one vote but one rep realized she voted the wrong way....So she's putting a hold on it and they're going to try to reconsider the action, basically revote the thing, today or Monday."
WHAT??? I realize that mistakes can happen, but I would think that legislators would work really, really hard to vote the right way on bills. After all, isn't that the single most important thing we pay legislators to do? In light of this apparently crucial flub, it seems like the last line of my initial post was even more apropos than I realized.
UPDATE 2: Kate Kaye provides an update.
UPDATE 3 (6 pm Pacific): My latest understanding is that the misvoting representative lifted her hold, and the bill will move to the Senate.
Posted by Eric at 11:26 AM | Marketing , Search Engines , Trademark | TrackBack
March 05, 2009
Cook County Sheriff Sues Craigslist for Erotic Services Category
By Eric Goldman
Dart v. Craigslist, Inc., 09-CV-1385 (N.D. Ill. complaint filed March 5, 2009)
Dart, the Cook County, Illinois sheriff, has sued Craigslist in federal court for creating a "public nuisance" because its "Erotic Services" category facilitates prostitution. Unfortunately for Dart, this lawsuit is almost certainly preempted by 47 USC 230:
* 47 USC 230 covers the publication of third party ads. See Cisneros v. Yahoo.
* 47 USC 230 preempts a civil claim that is derived from a criminal statute. See, e.g., Voicenet v. Corbett; Doe v. Bates. The federal crimes exception only applies to the enforcement of federal criminal statutes. Therefore, a civil claim based on state or local criminal laws is unambiguously preempted.
* Although hardly a model of clarity, last year the Seventh Circuit clearly held that Craigslist was covered by 47 USC 230 in a claim that Craigslist violated the Fair Housing Act.
* In distinguishing the Seventh Circuit Craigslist case, the Ninth Circuit's Roommates.com case pointed out that Craiglist's listings were open narratives and therefore fully covered by 47 USC 230. The complaint's allegations that Craigslist was involved in creating the bad content because of its category title, search functions and other attributes aren't likely to get around either the Seventh Circuit or Ninth Circuit precedent.
* Indeed, the Seventh Circuit concluded its opinion by pointing out that the Craigslist ads made it easier to find lawbreakers:
Using the remarkably candid postings on craigslist, the Lawyers’ Committee can identify many targets to investigate. It can dispatch testers and collect damages from any landlord or owner who engages in discrimination....It can assemble a list of names to send to the Attorney General for prosecution. But given §230(c)(1) it cannot sue the messenger just because the message reveals a third party’s plan to engage in unlawful discrimination."
All of which is true here as well, and all of which is a good reason why the Seventh Circuit isn't likely to reach a different result here.
At a few points, the complaint implies that Craiglist harmed the sheriff's office because the office spent $105,000 busting 156 individuals for prostitution through Craigslist. WHAT?! Enforcing laws is what the sheriff's office is given taxpayer money to do! And, at less than $700/arrest, I wonder if this is CHEAPER than trying to bust prostitution criminals through other techniques. In other words, it's possible that Craigslist makes it cheaper for the sheriff's office to do its job, so to claim any harm by spending taxpayer money to do its job is ludicrous.
While this lawsuit is little more than a sad publicity stunt by the sheriff's office, I remain uncertain whether or not it's a good thing for Craigslist to have an "erotic services" category. I understand the argument that it centralizes these ads in one place rather than having these ads spammed through other Craiglist categories, but I'm confused what, if any, "erotic services" advertised in this category are ever legal. If everything directed to this category is always illegal, it seems like Craigslist could, and perhaps should, voluntarily choose to eliminate the category altogether. That may require Craigslist to invest some more resources policing its other categories to prevent their spamming/hijacking by the dispersed ads, but that may be the unavoidable cost of a free classified ads service.
UPDATE: A reader points out the Craigslist FAQs:
Q: Why does craigslist have an "erotic services" category?
A: It was established at the request of craigslist users, who were tired of seeing ads for escort services, sensual massage, adult web cams, phone sex, erotic dancing, adult websites, nude housecleaning, etc mixed into the regular personals and services categories.
So it seems that there could be some non-illegal activities mixed into this category. Not having checked out the category myself (and not really wanting to do so from my work computer...), I wonder what percentage of posts actually offer these alternative services? i.e., do users actually regularly post nude housecleaning ads?
UPDATE 2: Craigslist says that its existing deal with the state AGs has reduced erotic services ads 90-95% in 12 months.
Posted by Eric at 01:45 PM | Content Regulation , Derivative Liability | TrackBack
March 04, 2009
Utah Trying to Regulate Keyword Advertising....Again!? Utah HB 450
By Eric Goldman
When I first heard that the Utah legislature is considering yet another law to regulate keyword advertising, I thought: Are you kidding me? After all, Utah has pursued these regulations twice with disastrous results. The first time, in 2004, Utah's attempt to regulate adware-mediated keyword advertising was declared unconstitutional, and Utah amended the law in 2005 to make it irrelevant. In 2007, Utah tried again, passing a law that restricted keyword advertising across-the-board. That law was a spectacular failure, garnering derision both within Utah--especially from angry Utah citizens shocked that their elected representatives passed a law that the state AG thought was unconstitutional and that was going to cost valuable taxpayer money to defend in court--and globally as everyone wondered if the Utah legislature was really that crazy. In 2008, the legislature tucked its tail between its legs and repealed the 2007 law.
With this track record, the Utah legislature wants to try regulating keyword advertising again...? Are you kidding me?
Then again, perhaps this latest foray really isn't all that surprising. My sources tell me that 1-800 Contacts is the prime mover behind this statute, and 1-800 Contacts has testified in support of the law. 1-800 Contacts has an hard-to-explain love/hate relationship with keyword advertising. 1-800 Contacts has been a repeat litigant against keyword advertising, including being the losing plaintiff in the landmark 1-800 Contacts v. WhenU case, and 1-800 Contacts has continued to bring other lawsuits against competitive retailers (such as the LensWorld case I blogged about a year ago). At the same time, 1-800 Contacts has been a buyer of trademarked keyword ads, and it was one of the companies that protested the 2007 law because it was concerned the law would limit its own advertising practices (although, at the last minute, 1-800 Contacts flip-flopped and tried to sneak in new restrictions on keyword advertising into the putative repeal of the 2007 law). Clearly, 1-800 Contacts has a complex attitude towards keyword advertising, although it might just be pure duplicity. Either way, with 1-800 Contacts’ flip in 2008 and its continued litigation against keyword advertising, it’s not unexpected that they might try to bend the ear of the apparently pliable Utah legislature.
The Proposed Law
The 2004-05 laws banned trademark-triggered pop-up ads triggered by adware. The 2007 law allowed trademark owners to register their marks with a newly created Utah administrative registry (which never got created) and prohibited keyword buyers and sellers from using registered marks as triggers for keyword advertising. HB 450, the proposed 2009 law, takes a very different approach than the 2007 law:
Fewer Defendants. The law only applies to keyword buyers (advertisers). Unlike the last two laws, keyword sellers such as search engines are immune from liability under this law. However, the law is expansive in other ways: the law expressly holds an advertiser liable for affiliates' keyword purchases (a currently open point in trademark law), and the law expressly references telephone directory assistance advertiser as being within its scope.
Opt Out. The law only applies after the trademark owner sends a takedown notice/cease & desist demand to the advertiser. Further, if the advertiser stops within 10 days of the takedown notice, it is not liable for any remedies under this law. (They might still be liable under other legal doctrines).
Limited Remedies. My reading of the law is that the only remedies against an advertiser are an injunction and attorneys fees--no damages. I'm not 100% sure about this because some states have laws that create damage claims outside the scope of any specific statute (I'm thinking of California B&P 17200). I don't know if Utah has a catchall provision like that.
Geographic Restrictions. One of the most deficient aspects of Utah's 2007 law was that it required advertisers throughout the country to check the new registry before buying keyword advertising on a third party trademark, even if the advertiser, the keyword seller and the trademark owner all had zero connection with Utah. This law tries much more clearly to restrict its reach to Utah. First, the law only applies to ads "in Utah," whatever that means. Second, the law only restricts keyword buys made from sellers that allow "an advertiser to limit the display of advertisements by geographic location." I'm not exactly sure what this means--after all, a site like eBay segregates its listing database by country; does that mean eBay gives advertisers geographic choices?--but it's clear that an advertiser purchasing ads from a seller that doesn't offer any geolocation choices isn't covered by the law. Third, the law doesn't apply if segregating Utah ad viewers from non-Utah ad viewers isn't "technologically feasible" or would impose "an undue financial burden." I'm not saying that this law will survive a dormant commerce clause challenge--personally, I think all state regulation of the Internet is inherently suspect--but the law certainly tried to limit its reach to Utah.
Narrow Scope. The law applies when "the delivery or display of an advertisement in Utah...is the product of a bad-faith attempt to profit from the registrant's mark by diverting a consumer from the registrant, the registrant's authorized licensees, or another source authorized by the registrant." The statute provides for a multi-factor evaluation of what constitutes a "bad faith diversion" by keyword advertising, with the first factor being that the ad "is likely to create an initial, misleading impression that the person is a legitimate source of the goods or services" (which itself is subject to another multi-factor evaluation). Personally, I don't think there is such a thing as bad faith diversion or initial misleading impressions with respect to truthful ad copy, so this ought to be a null set. Even so, the law lists a number of categorical exclusions from its coverage, including:
* advertiser belief that the ad is fair use. Note: the bill uses the term "fair use" several times, even though this term is not well-defined in trademark law. So it isn't clear to me if "fair use" meant descriptive fair use, nominative use, both, neither, or yet something else.
* the sale is permissible under the First Sale doctrine. This should exclude keyword buys by other parties in a trademark owner's distribution channel. However, as I recently blogged, courts are struggling with the First Sale doctrine's application to e-commerce.
* "(a) fair use of a mark in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark; (b) noncommercial use of a mark; and (c) all forms of news reporting and news commentary." This is an interesting set of exclusions; it looks like the drafter tried to (incompletely) mimic the federal dilution exclusions. However, the implicit redundancy with the other fair use aspect mentioned above also raises a question why (a) only applies to famous marks. That's either a drafting error or a significant limitation on that prong.
So What Does This Law Do?
From my reading, it appears that this law does not apply to gripe ads or trademark conflicts within a distribution channel. Therefore, I think the law really only applies to advertising on competitors' trademarks, and even then, only some of the ads.
Given the application to competitive keyword advertising and the focus on an injunction as a remedy, this law covers only limited circumstances that are not already addressed by the search engines' trademark policies, which provide an extrajudicial "injunction." Indeed, this law is nearly co-extensive with Yahoo's and Microsoft's trademark policies. On the other hand, the law would govern situations that Google isn't remediating with its trademark policy because it could force advertisers off keywords that Google would happily sell. Furthermore, the ambiguous application of the law to keyword buys from places other than search engines, such as telephone directory assistance services, may implicate some keyword sellers who don't currently have trademark policies.
Conclusion
If I'm right that this law simply codifies current search engine trademarks policies and extends them some, then this law isn't as problematic as Utah's last two efforts. But it also makes me wonder--what's the point? Doesn't Utah have more important problems to solve???
Even if the law is less troublesome than the last two, let's be clear: this is not a good proposal. As with Utah's past two efforts, this law has nothing to do with improving consumer welfare. Instead, it would allow companies to suppress competition by helping companies keep their competitors from gaining exposure among the company's potential customers; meaning that companies won't have to work as hard competing on price and quality. I understand why companies such as 1-800 Contacts, who has a pattern of trying to use legal tricks to suppress competitors, would find it attractive to ply their local legislators for some corporate welfare. But why any legislator would waste their time with such an unabashed anti-competitive, anti-consumer request is simply beyond me. As I have explained elsewhere, policy-makers should be helping consumers get relevant content, not enacting laws to take it away from them.
The bill is making its way through the Utah House, and my observation of Utah legislative proceedings is that bills can be amended substantially from beginning to end. So this bill could get better, or it could get much worse. Fortunately, a coalition of Internet companies is lobbying against the bill, and the bill barely survived its first committee hearing on an 8-6 vote. Thus, it's not guaranteed that this law will make it through. My hope is that the Utah legislators will recognize the law’s depravity and their own poor track record in the area and squelch this latest effort.
Posted by Eric at 09:55 PM | Adware/Spyware , Derivative Liability , Domain Names , Marketing , Search Engines , Trademark | TrackBack
March 03, 2009
Facebook Sued Over Private Facebook Group--Finkel v. Facebook
By Eric Goldman
Finkel v. Facebook, Inc., 102578-09 (N.Y. Supreme Ct. complaint filed Feb. 24, 2009).
A New York teenager has sued Facebook and four Facebook users (plus their parents) for allegedly defamatory content posted in a private Facebook group called "90 Cents Short of a Dollar."
This case fits neatly with other legal battles over "cyber-bullying" (whatever that means), such as the AutoAdmit lawsuits, the Sandler case and the Lori Drew case. (For another recent and troubling example of cyber-bullying that I read just this morning, see Wolfe v. Fayetteville, Arkansas School Dist., 2009 WL 485400 (W.D. Ark. Feb. 26, 2009)).
In this case, the plaintiff's school peers said some not-nice things about her in a private Facebook page. The Newsday article has some more color about the sour relationships between Finkel and the defendants. The plaintiff claims that the posts meant that "the plaintiff was a woman of dubious morals, dubious sexual character, having engaged in bestiality, an 'I V drug user' as well as having contracted the H.I.V. virus and AIDS."
With respect to the claim against Facebook, this lawsuit is unquestionably DOA. Frankly, I'm not sure why the plaintiff bothered to sue Facebook. Facebook is completely immunized per 47 USC 230, and this should be an easy dismissal. The complaint didn't even try to do anything fancy to get around 230; in fact, the complaint alleges that Facebook "published" the content, the absolutely wrong allegation to make if you're trying to bypass 230. I think it significantly detracts from the sympathy we might otherwise feel for plaintiff for her to have futilely dragged Facebook into the lawsuit. And, it ensures there will be at least one aggressive defendant in the lawsuit.
With respect to the school peers' liability, this case raises some interesting and complex questions. First, and most obviously, how did the plaintiff get a copy of the private group's postings? This reminds me a little of the Washingtonienne case, although access to Cutler's blog wasn't technologically restricted like it was in Facebook.
Side note: the republication of the private group's posts in this complaint reminds us once again that we always have to be prepared for our digital words to show up on the front page of a national newspaper. In particular, including the transcript to the complaint without a protective order was an aggressive move; I suspect other people reading the transcript for the first time will not be happy.
Second, there were only 6 group members listed on the exhibit, which means the total universe of listeners for any defamatory statement was 5 other folks (the person posting the statement doesn't count). This may severely circumscribe any damages. Third, given that this group of 6 presumably represented a social clique with its own norms and mores, it's entirely possible that the small universe of readers completely understood that superficially factual statements weren't really factual and were never intended to be. In this respect, I'm reminded a little of the DiMeo v. Max case, where the judge adjusted the evaluative standards to reflect the fact that message boards fostered a laxer conversation, and readers understood that. A quick perusal of the posts suggests that all of them clearly were utter nonsense and, I suspect, fully understood by all readers to be inane and meaningless chatter. Finally, the posts apparently never referred to the plaintiff by name, although this may be irrelevant if everyone knew who was being discussed.
The lawsuit also goes after the students' parents. Among other things, to try to establish liability, the complaint alleges that the parents negligently supervised their children. I'd gladly write a $100 check today if the plaintiff or her lawyers could articulate a foolproof way that parents can use to prevent high schoolers from doing stupid things on Facebook (without denying them access to Facebook altogether).
From my perspective, going to court over this matter was not a good decision. Nevertheless, I remain troubled by the examples of mean behavior among students that I'm seeing in the alerts I'm getting. For example, the Wolfe and Sandler cases I mention above are absolutely horrifying. Even though I graduated high school nearly 25 years ago, reading about meanness among high schoolers still gives me the shakes, reminding me how bad high school can be! And it weighs heavily on my mind as a parent. However, I can't imagine any legal solution that will make people be less mean to each other.
Posted by Eric at 02:34 PM | Content Regulation , Derivative Liability | TrackBack
Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber
By Eric Goldman
Mary Kay, Inc. v. Weber, 2009 WL 426470 (N.D. Tex. Feb. 20, 2009). The Justia page. There are a number of Mary Kay meta-sites tracking this and other Mary Kay lawsuits. For more filings and commentary on this case, see pinklighthouse.com.
Amy Weber is a former Mary Kay Cosmetics independent salesperson (in Mary Kay-speak, "Independent Beauty Consultant," or "IBC"). To retain her IBC status, she was required to buy $200/mo of cosmetics. It sounds like Weber wasn't able to move this much product through traditional Mary Kay sales techniques, so she ultimately lost her IBC status. Meanwhile, apparently stuck with an inventory of unsold goods, Weber started reselling the cosmetics on eBay. Over time, she started buying cheap Mary Kay products on eBay from other folks and flipping them on eBay for more. Eventually she started an e-commerce website, initially called "marykay1stop" but later renamed "touchofpink.com." It sounds like the venture became quite successful.
Not surprisingly, Mary Kay wasn't pleased with the channel conflict that the defendants were causing. A Mary Kay representative first contacted the defendants in 2005, ordering them to change their e-commerce site's name (so that it didn't reference Mary Kay) and remove any copyrighted product shots. The parties dispute this conversation; the defendants say that the representative promised that they would be legally OK if they took these steps, while Mary Kay says that its demands didn't promise safety. Not satisfied with the defendants' responses, Mary Kay sued in 2008 for trademark infringement and a variety of other claims.
Regular blog readers will recognize this fact pattern. We've seen a number of similar lawsuits where a manufacturer/brand owner with restricted distribution channels sues because those channels break down and legitimate original goods hit the Internet. See, e.g., Standard Process. v. Total Health Discount (E.D. Wis. 2008); Australian Gold v. Hatfield (10th Cir 2006); S&L Vitamins v. Australian Gold (EDNY 2007); Standard Process v. Banks (E.D. Wis. 2008); Designer Skin v. S&L Vitamins (D. Ariz. 2008); and Tiffany v. eBay (SDNY 2008). The legal principles developed in these cases are decidedly mixed.
In this case, it sounds like one possible problem is that Mary Kay forced its retailers (i.e., the IBCs) to buy more product (through the minimum monthly orders) than the retailers could sell--which would be a type of channel stuffing that leads to big inventories of unsold goods being held by retailers. If so, then Mary Kay got blitzed by all of this unsold inventory when an Internet sales channel opened up. If anything, the minimum monthly order probably exacerbates the problem because those orders are probably at the reduced distributor prices, which would allow IBCs to flip a portion of the inventory at cost to Weber (keeping the rest for personal consumption at the discounted distributor price or resale through traditional means), enabling Weber to undercut standard retail prices.
Trademark Infringement
From a legal standpoint, the trademark infringement claim looks easy to dispose of. Due to the First Sale doctrine, IBCs and any downstream resellers should be free to resell legitimate goods at whatever price they want; and they should be free to let consumers know of the availability of those goods. However, the First Sale doctrine applies only when the resold goods are not "materially different." Mary Kay argued that the goods were materially different because "(1) they are expired, (2) they do not carry the same product guarantee, and (3) they are old, used, discontinued, or otherwise defective." Some of these arguments are questionable (why are discontinued but unmodified goods "materially different"?), but everyone agreed that Weber was reselling expired goods, and with perishable goods this could matter. Not being a cosmetics consumer, I'm not sure how perishable cosmetics are; I suspect some aren't, even if they are stamped with an expiration date. In any case, the court denies summary judgment, making this a fact question for the jury.
The defendants also claimed nominative use, which allows the defendants to use "Mary Kay" to refer to the vendor/licensor Mary Kay. The nominative use defense is only available if the defendants did not take more of the trademark than necessary and did not imply any sponsorship or affiliation.
In addition to the defendants' website references, the defendants spent $20,000/mo on Google keyword advertising to purchase 79 keywords, of which 75 included the phrase Mary Kay or the name of a Mary Kay product. Further, some of the text ads included Mary Kay in the ad copy. Citing the Total Health case, Mary Kay argued that purchasing keyword ads categorically precluded a nominative use defense because the defendants took more of the trademark than necessary. The court rejects this argument, reading the Total Health case more narrowly. The court goes further to say that it would disagree with a broader reading of the Total Health case because Mary Kay's proposed reading would mean that "second hand sellers could not advertise on search engines such as Google without facing liability for trademark infringement."
Instead, the court cites Tiffany and Designer Skin for the proposition that keyword advertising on third party trademarks does not automatically create an implied sponsorship or affiliation. As the court says:
the law will destroy the valuable resource that search engines have become if it prevents those search engines from doing what they are designed to do: present users with the information they seek as well as related information the user may also find helpful or interesting [cite to Designer Skin]
Yes! However, the court says that a fact issue remains whether the ad copy created an implied sponsorship/affiliation. The ad in question read:
"Mary Kay Sale 50% Off: Free Shipping on Orders over $100 Get up to 50% Off-Fast Shipping www.touchofpinkcosmetics.com."
The court says the language "Mary Kay Sale 50% Off" could be read to imply that the ad was from Mary Kay itself.
As for the Mary Kay references on the touchofpink.com website, the court says that the likelihood of confusion factors point heavily in favor of a plaintiff win, so on that basis summary judgment for the defense is inappropriate. The court's whole discussion of likelihood of confusion is entirely odd; the court seems to miss the point that the likelihood of confusion factors necessarily will point towards infringement when dealing with an unauthorized reseller of legitimate goods.
Other Discussion
* The court dismisses the tortious interference claims because the defendants didn't actively recruit other IBCs to resell goods to them, even if the defendants knew that the IBC contract had a restriction on Internet resales, and because the defendants sale of the "trappings" of being an IBC didn't substitute for becoming an IBC.
* The court also dismisses the unjust enrichment claim because unjust enrichment isn't a standalone cause of action. Why why why do so many plaintiffs waste their time alleging unjust enrichment as a standalone cause of action???
* The court partially tosses Mary Kay's consumer survey putatively showing the consumers assumed an affiliation between Mary Kay and the touchofpink website: "confusion that stems solely from the fact that the Webers are reselling Mary Kay products is not legally relevant and might confuse the jury. As a result, the court cannot allow the jury to hear the bald statement that forty five percent of consumers were confused about touchofpinkcosmetics.com's affiliation with Mary Kay." However, respondents' narratives about why they assumed affiliation are admissible.
Conclusion
Mixed rulings like this often produce a settlement. Frankly, I could see both sides wanting to keep this case out of a jury's hands. In court, defense counsel will hammer on the fact that Mary Kay is trying to suppress legitimate resales because they don't like the competition; plaintiff's counsel will probably argue that the defendants deliberately went too far in pretending to be Mary Kay instead of being clearer that they were an unauthorized reseller. I don't know which argument will appeal more to a Texas jury, and this unpredictability increases the attractiveness of a settlement.
Doctrinally, I suspect the defendants hoped for a better ruling. Their First Sale defense was so palpable that it's frustrating the defendants couldn't get the court to embrace it fully. Then again, unauthorized resales of legitimate goods that have leaked out of a controlled channel have really confounded the courts, so perhaps a mixed ruling is to be expected--especially in light of some questionable (in hindsight) decisions by the defendants, such as their original choice for their website name, the ambiguous references to Mary Kay in their ad copy, and the heavy reliance on reselling expired cosmetics.
While the defendants' failure to get a solid win was a loss of sorts, this case does offer some good news for future defendants--especially the court's clear conclusion that simply buying trademarked keyword ads, without more, does not create an implied sponsorship or affiliation with the trademark owner. It would have been nice for the court to rely on some social science to support this proposition, but let's celebrate the court's wisdom however it got there. This, combined with the recent case saying that keyword advertising isn't a false designation of origin, suggest that we are slowly overcoming past rulings that have treated keyword advertising as having some mystical power to hypnotize and divert consumers.
Finally, while completely irrelevant to the case, I'd be remiss if I didn't link to a Mary Kay pink Cadillac--perhaps the most enduring attribute of the Mary Kay brand for a non-consumer like me. Wow.
Posted by Eric at 12:54 PM | E-Commerce , Search Engines , Trademark | TrackBack