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March 31, 2010
March 2010 Quick Links
By Eric Goldman
Internet Exceptionalism
* Stern v. Sony Corp., CV 09-7710 PA (C.D. Cal. Feb. 8 2010) "to the extent Plaintiff is suing Sony as a manufacturer of video games, and the provider of online services, Sony is not a ‘place of public accommodation’ and is therefore not liable for violating Title III of the ADA" Nice complement to the Estavillo case. My prior post on Internet exceptionalism.
Online Competition
* Microsoft’s head algorithms guru says that Google's search engine beat Microsoft because Microsoft ignored the long tail of search queries. If Google and Microsoft made different product design choices and the marketplace liked Google's choices better, doesn’t this make it hard for Microsoft to complain about Google’s "anti-competitive" practices? I wonder if this talk was pre-cleared by Microsoft’s antitrust counsel.
* SJ Mercury News: Google's most recent 10-K lists some new self-identified competitors, including Yelp, Kayak & WebMD. By identifying some vertical players as competitors, such as Kayak and WebMD, does Google lend credence to the arguments by TradeComet and myTriggers that Google does compete with vertical search engines?
* In re eBay Seller Antitrust Litigation, 2010 WL 760433 (N.D. Cal. March 4, 2010). eBay wins summary judgment in an antitrust challenge: "Despite the voluminous briefing permitted in connection with both of the instant motions-which includes hundreds of pages of supporting documents-Plaintiffs have not drawn the Court's attention to any actual proof of antitrust injury caused by eBay's alleged anticompetive acts-on an individual or a classwide level."
Online Pornography
* U.S. v. Beckett, 2010 WL 776049 (11th Cir. March 9, 2010). A man posed as a 17 year old girl on MySpace and AOL, engaged boys in discussions, induced them to send nude photos, and then coerced them to have sex with him to prevent his dissemination of the photos.
* Miller v. Mitchell, No. 09-2144 (3rd Cir. March 17, 2010). This is the case where the government prosecutor threatened to bring felony charges against girls for "sexting." The court upholds a preliminary injunction against requiring the girls to go through an education program in lieu of felony prosecution.
* U.S. v. Durdley, 2010 WL 916107 (N.D. Fla. March 11, 2010). No privacy expectations in a flash drive left in a public computer.
Online Security
* Cormac Herley of Microsoft Research, "So Long, And No Thanks for the Externalities: The Rational Rejection of Security Advice by Users." In my observations, users are actually intensely rational when it comes to privacy and security issues, and privacy and security advocates who don't fully account for this user behavior do so at their peril.
* Reuters takes a deep look at Innovation Marketing, a Russian scareware operation.
User-Generated Content
* Josh King explains why Avvo supports the proposed federal anti-SLAPP law.
* T.V. ex rel. B.V. v. Smith-Green Community School Corp., 2010 WL 935574 (N.D. Ind. March 11, 2010). Denying class formation for a lawsuit in response to a ridiculously harsh school suspension for a MySpace photo of ribald off-campus activity.
* Melton v. Boustred, 2010 WL 881919 (Cal. App. Ct. Mar 12, 2010). Boustred throws a ragin' party and advertises it via a MySpace open invitation. The plaintiffs show up and were beaten and stabbed at the party by unknown assailants. The court concludes that Boustred isn't liable for the physical injuries. Note to self: stay away from parties advertised via MySpace.
* Yelp Litigation Mania!
- Cats & Dogs Animal Hospital v. Yelp first amended complaint
- LaPausky v. Yelp complaint. A write-up.
- Levitt v. Yelp complaint.
- ClickZ: Ex-Yelper Helps Law Firms Go After Yelp
Anonymity
* Park West Galleries, Inc. v. Global Fine Art Registry, LLC, 2010 WL 742580 (E.D. Mich. Feb. 26, 2010). Using an online pseudonym can lengthen the defamation statute of limitations.
* White v. Baker, 2010 WL 1009758 (N.D. Ga. March 3, 2010). Mandatory reporting of Internet usernames by registered sex offenders violates the First Amendment.
Advertising and Marketing
* ClickZ: New Facebook Policies Clamp Down on 'Loose' Ad Copy.
* Coyote Pub., Inc. v. Miller, 2010 WL 816936 (9th Cir. March 11, 2010). Upholding the constitutionality of Nevada's restrictions on advertising prostitution.
Trademark
* WSJ: It's a crowded namespace for bands.
* 1-800Contacts, Inc. v. Memorial Eye, P.A., 2010 WL 988524 (D. Utah March 15, 2010). It was not objectively baseless for 1-800 Contacts to bring a trademark enforcement action over competitive keyword advertising.
* Rhea Drysdale tells how she busted the trademark application for "SEO."
* The Utah governor has signed SB 26, which (among other things) creates a bastardized version of ACPA. My initial comments on the proposed bill.
Copyright
* James Grimmelmann on Reed Elsevier v. Muchnick.
* Ben Sheffner has some updates in the Scribd lawsuits. My initial post on Scott v. Scribd.
* Ars Technica on an experiment to block users who are using ad blocking software from accessing its site.
General
* Hudson v. University of Puerto Rico, 2010 WL 1131462 (D. Minn. March 23, 2010). Passive blog does not confer general jurisdiction.
* Doe 1 v. AOL LLC (N.D. Cal. Feb. 1, 2010). "Plaintiffs' claims for violation of the ECPA (Count I), unjust enrichment (Count VI) and for public disclosure of private facts (Count VII) are subject to the forum selection clause because none are California consumer law claims." Prior blog post.
* Commonwealth v. Interactive Media Ent’mt and Gaming Ass’n, Inc., No. 2009-SC-000043-MR (Ky. Mar. 18, 2010). Challenge to Kentucky's seizure of 141 gambling-related domain names tossed on standing grounds. Prior blog post.
Posted by Eric at 08:42 AM | Content Regulation , Copyright , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark , Virtual Worlds | TrackBack
March 29, 2010
Unregulating Online Harassment Essay
By Eric Goldman
I posted a very short essay to SSRN called Unregulating Online Harassment. This essay recaps and expands some of my remarks from the Denver University “Cyber Civil Rights” Symposium last November. I previously posted a lengthy recap of the conference.
The essay provides a high-level defense of 47 USC 230--in its current form and without any embellishments--as a response to the way the immunity rankles many advocates against online harassment. If you can believe it--and it may be hard to do so given how many times I've blogged about 47 USC 230 cases--this brief-'n'-breezy essay is actually the first time I have written about 47 USC 230 in the (quasi-)academic literature. The publication specs make the essay almost embarrassingly glib as a contribution to the academic discourse; it's only about 1,000 words and has almost no footnotes, so it's neither industrial-grade nor the final word on this topic. However, I find that people are more likely to read short academic works than the big battleship pieces, so perhaps a piece like this has a place in the academic canon despite its format limitations. I promise a different but more industrial-grade academic defense of 230 when I get around to writing up my regulating reputational systems research.
Adam Thierer and Berin Szoka of PFF posted a response to the essay, praising 230 as "the very cornerstone of Internet Freedom, since it makes possible an online 'utopia for utopias.'" My favorite part of their post (other than the link love, of course!) is a BCG-like four-quadrant matrix of pressures to deputize online intermediaries to intervene on third party content.
Posted by Eric at 09:40 AM | Derivative Liability | TrackBack
March 27, 2010
Another Court Finds that TCPA Applies to Text Messages -- Lozano v. Twentieth Century Fox Film Corp.
[Post by Venkat]
Lozano v. Twentieth Century Fox Film Corp., Case No. Civ. 09-cv-6344 (N.D. Ill) [scribd]
A court in Illinois rejected a motion to dismiss filed by defendants in a class action brought on behalf of plaintiffs who received SMS spam marketing an animated film called "Robots". The court's ruling is not surprising, given the other cases which have come to a similar conclusion. (Abbas v. Selling Source, LLC; Satterfield v. Simon & Schuster)
Are Text Messages "Calls" Under the TCPA: The court grants the FCC's interpretation some deference and finds that text messages are "calls" for purposes of the Telephone Consumer Protection Act.
Do SMS Spam Plaintiffs Have to Allege They Were Charged for the Text Messages: The court concludes that "the plain language of the TCPA does not require Plaintiff to allege that he was charged for the relevant call at issue in order to state a claim" under the TCPA. The defendants in Selling Source raised a similar argument which the court in that case rejected.
Does Section 227 of the TCPA Violate the First Amendment: First Amendment challenges in the context of laws regulating unsolicited communications rarely get any traction. Predictably, the court in this case rejects the First Amendment challenge raised by defendants.
___
Taken together, several recent cases have concluded that: (1) text messages are "calls" under the TCPA, (2) a message can violate the TCPA if it is sent with equipment that has the capacity to send or store messages using a "random or sequential number generator," and (3) a plaintiff need not allege that he or she was separately charged for the message in order to bring a claim under the TCPA. This does not leave much room for a company trying to market through text messages. Marketers are forced to rely on a recipient's consent/opt-in, and as the Satterfield case illustrates, this is a risky road to go down.
The cases all acknowledge that the TCPA was not enacted with text messages in mind, since text messaging was not around when the TCPA was enacted. The laws have some catching up to do, and it will be near impossible for the law in this context to keep pace with rapidly changing technologies. Either way, this case serves as a good reminder as to the perils of marketing through text messages.
Posted by Venkat at 01:42 PM | Spam
March 26, 2010
YouTube Uploader Can't Sue Sender of Mistaken Takedown Notice--Cabell v. Zimmerman
By Eric Goldman
Cabell v. Zimmerman, 2010 WL 996007 (S.D.N.Y. Mar 12, 2010)
A few other folks have written about this case already, but it's worth noting a couple of points.
Cabell posted a video, Pretty Faces, to YouTube. Actors' Equity Association sent a takedown notice to YouTube for the video, which YouTube honored. After Cabell complained, AEA realized that it sent the takedown notice in error. Cabell then sued AEA for the bogus takedown notice.
Cabell argued that AEA's takedown notice constituted a copyright infringement because it interfered with Cabell's ability to exercise his 106 rights. For example, the notice caused YouTube to take down the video, which cut off Cabell's "distribution" of the work. I've never seen this argument advanced before, so in that sense it's creative, but unfortunately it's a completely misguided reading of copyright law. A defendant can't infringe copyright without making a copy, distribution, performance or display of the copyrighted work--and sending a bogus takedown does none of those things. So as much as I would be excited by finding a creative new theory to curb bogus takedown notices, this wasn't it.
Cabell's 512(f) claim failed because the AEA made a mistake--at most, negligently--rather than making the error with a legally actionable level of scienter. The state law claims were dismissed without prejudice to refiling in state court.
Two observations:
1) Cabell's situation is an example of collateral damage from our notice-and-takedown scheme. AEA made an error, YouTube jumped at AEA's request (as 512 expects it to do), and Cabell's legitimate content was temporarily stripped from the information ecosystem through no fault of his own. Obviously, every legal rule will create errors of omission and inclusion, so we shouldn't overweight this one--but this case reminds us that bogus takedown notices do have a cost. Perhaps the Lenz v. Universal case will help sharpen up the quantifiable costs to the uploader, but there's little chance that we can fully account for the social losses.
2) This is another example supporting YouTube's argument in the Viacom v. YouTube lawsuit that YouTube can't tell which user-posted videos are licensed or not because--once again--the rightsholder couldn't figure it out either. After confirming the error, the AEA representative wrote to YouTube: "The clips from Pretty face [sic] were submitted to me by someone claiming that it was done with Equity Actors; I took it on blind faith that the person was correct." If the AEA representative, who has unrestricted access to all of the necessary information to figure out what assets it has the right to enforce, can't even try to figure out if it's properly enforcing a copyright, how can YouTube accurately ferret out illegitimate videos with none of that information?
UPDATE: Ben Sheffner thinks Cabell did not assert a the 512(f) cause of action. I also agree that Cabell's lawsuit was an overreaction, but I'm less sympathetic to copyright owner errors than he is--especially in this case, where it appears the takedown notice sender did not do any investigation before sending the notice.
Posted by Eric at 10:43 AM | Copyright , Derivative Liability | TrackBack
March 25, 2010
Craigslist Wins $1.3M Default Judgment Against Autoposting Facilitator -- craigslist v. Naturemarket
[Post by Venkat]
craigslist, Inc. v. Naturemarket, Inc., Case No. C 08-05065 PJH (MEJ) (N.D. Cal. March 5, 2010) [scribd] (report and recommendation adopted on February 5, 2010)
Craigslist obtained a 1.3 million dollar default judgment against defendants Naturemarket, Inc. and Igor Gasov.
Naturemarket (doing business as powerpostings.com [typical bad choice of name]) sold software which allowed its customers to automatically post listings to craigslist. As advertised by defendants, the software made "the difficult craigslist posting process child's play and [helped users] manage and multi-post . . . ads." Defendants also advertised "posting agent" services where defendants would post ads on behalf of customers. Finally, defendants sold software that scraped email addresses from the craigslist site.
Craigslist sued alleging claims under (1) copyright; (2) DMCA; (3) the Computer Fraud and Abuse Act; (4) trademark; (5) breach of contract/terms of use. Defendants failed to contest the suit. The court granted default judgment against defendants:
Copyright Infringement: Craigslist alleged it registered protectable elements of its site (the "post to classified, account registration and log-in features") and that defendants copied these elements of the craigslist site when developing, testing, and using their auto-posting software. The court accepted these allegations at face value, notwithstanding questions as to what parts of the craigslist site were copyrightable (minus the listings themselves, obviously), how the copying here was different from search engine copying under an implied license, and the fact that it's awkward to conclude that browsing in excess of the terms of use constitutes copyright infringement.
DMCA Violations: The court agreed with craigslist that defendants violated two provisions of the DMCA through making available, among other things, "pre-verified craigslist accounts and CAPTCHA credits." There's precedent that supports the proposition that at least some of these types of acts do not violate the DMCA. (See, for example Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105, 113-14 (D.D.C. 2005) ("using a username/password combination as intended--by entering a valid username and password, albeit without authorization--does not constitute circumvention under the DMCA.").) Real made a similar argument to the one defendants would have made here, but this argument was rejected. Either way, the trouble with the court's conclusion is that it's not clear that a violation should be based on use of an anti-circumvention mechanism in a way that's not authorized. This isn't the type of conduct that the DMCA is necessarily meant to address. Mike Masnick flags this aspect of the ruling here.
Computer Fraud and Abuse Act: The Computer Fraud and Abuse Act claims were premised on access of craigslist computers in violation of the craigslist terms of service. This argument is often used in civil cases, but most recently received attention in the Lori Drew case, a criminal case. The Lori Drew case illustrated many of the problems with imposing Computer Fraud and Abuse Act liability based on violations of a terms of use. Professor Goldman's post when the case first started is a good read.
Trademark Infringement: Craigslist alleged that defendants used the craigslist mark "in the text and . . . the headings of sponsored links on internet search engines to advertise their auto-posting products and services." The court cites to American Blinds for the proposition that this will cause "initial customer confusion". (Here's one of Prof. Goldman's posts on American Blinds.) It's odd to see craigslist arguing initial interest confusion. These are the types of arguments one would expect to see against craigslist (for example by someone suing it for trademark infringement, not made by craigslist.
Breach of Contract/Terms of Service: Craigslist pointed to provisions in its terms of use which prohibited the use of automated means and posting agents to post listings. Craigslist argued that defendants violated these provisions and induced craigslist users (who were customers of defendants) to violate these provisions. The court awards $840,000 in liquidated damages based on the terms of use claims asserted by craigslist. Craigslist argued that defendants posted at least 18,200 ads or alternatively defendants posted 4,200 ads as a posting agent. The court assumes for purposes of calculating damages, that the lower number is correct and awards $840,000 based on this number. For each listing posted in violation of the terms of service, the court awarded $100 in liquidated damages (and an extra $100 for each item posted as a "posting agent"). [Note to self: be careful about posting items in violation of the craigslist terms of service!]
Attorney's fees: Craigslist sought $83,614.45 in fees, for the work performed by 5 lawyers and one paralegal. The court found the hours expended reasonable, but reduced the hourly rate slightly, ultimately awarding $65,038.20 in fees. (As a side note, what's up with the reduction in billing rates by one dollar in the April-June 2009 time period. The hourly rates for one partner went from $525 in 2009 to $550 in January-March 2009, to $549 in April-June 2009. Does the one dollar change in someone's hourly rate really matter?)
____
This case is similar in many ways to Ticketmaster v. RMG, where Ticketmaster sued RMG, a company that automated the ticket buying process on behalf of its customers. Following the issuance of an injunction, Professor Goldman noted that this case was "a troubling Cyberlaw development." The claims asserted by craigslist here suffered from some of the same weaknesses as those in Ticketmaster. On the other hand, this was in the context of a default judgment, where the good faith allegations in the complaint are taken as true, and craigslist knew it had to only make colorable arguments. It wants to keep out certain perceived bad actors. In the default judgment context, I'm not sure how much it can be faulted for not fine-tuning its legal arguments. That said, it's always tough to read through these types of rulings without cringing.
One of the more troubling things about the ruling is how the terms of use supports three separate claims: the copyright claims, the Computer Fraud and Abuse Act claim and, of course, the breach of contract claim. It's unsettling to see the website terms of service (which are typically tough to read and digest, rarely read by end users, and incredibly one sided) be given enough clout to support serious statutory violations. But this is nothing new, and courts always seem to be willing to accept these types of arguments.
Another issue for craigslist to consider is whether any of the arguments could come back to bite craigslist. I haven't thought through whether there was a good section 230 argument to be made here, I'm guessing not. Assuming there was, it doesn't seem like such a good idea for craigslist to knock down that argument. It's the classic section 230 beneficiary. At any rate, at a basic level, craigslist is ultimately suing Naturemarket based on harm caused by end users. This is exactly what state regulators did to craigslist. The initial interest confusion argument is also one that does not seem like it's in craigslist's interest to push.
Finally, I'm always curious as to what these damage awards accomplish. How often does the company chase down the defendant's assets? More likely, this is something that can be waved around to other potential defendants to get them to comply and/or settle.
Related: Mike Masnick discusses some of these issues in a post flagging an early round of lawsuits filed by craigslist against spammers: "Craigslist's Dumb Lawsuit Against Spam Tool Provider"
Posted by Venkat at 09:25 AM | Content Regulation , Copyright , Licensing/Contracts , Spam , Trademark
March 23, 2010
Google Gets Favorable ECJ Opinion, But Will It Prove to Be a Hollow Victory?
By Eric Goldman
The European Court of Justice issued its long-anticipated decision in the three Google AdWords cases (C-236/08, C-237-08 and C-238/08) referred to it by the French Cour de Cassation. The ruling only answers the questions posed to it by the Cour de Cassation, so in that sense it does not provide a blanket resolution of keyword advertising legitimacy in Europe. Nevertheless, all three answers by the ECJ are favorable to Google and other keyword advertising vendors—although, as I explore below, litigatable questions remain.
In broad strokes, the ECJ adopted Google’s position that it merely provides technology services to advertisers who make legally significant judgments using the technology. For example, the ECJ says that advertisers, not Google, make the requisite trademark “use,” and Google can qualify as a web host of its advertisers’ content—and thus is eligible for the associated safe harbor—if it remains sufficiently passive.
While these rulings improve Google’s legal position against trademark owners, the news isn’t uniformly good for the keyword advertising industry. The opinion identifies a number of potential legal pitfalls for keyword advertisers. We may learn more about these pitfalls from the other trademark owner-v.-advertiser cases pending before the ECJ. My understanding is that 5 such cases are pending, with one ruling coming on Thursday. Based on the language in this opinion, I think it’s probable that the subsequent ECJ rulings will show that keyword advertisers face significant legal exposure when buying competitive keyword advertising.
As a result, Google’s legal victory may prove to be a little hollow. Even if Google eventually earns a clean bill of health for itself, it could still see revenue contraction if advertisers are dissuaded by their legal exposure.
The ECJ Rulings
As typical with European legal opinions, this ruling (although briefer than many, including the Advocate General’s advisory opinion in the case) was unnecessarily long and written in inscrutable language. For example, the opinion refers to search engines selling keyword advertising as “referencing service providers” and keywords as “signs.” Huh? Further, like most European opinions, the opinion starts out with a lengthy but largely unenlightening recitation of facts and law. If you are looking to save a little time, skip ahead to paragraph 42.
Or, better yet, just start reading the opinion at the end. There, the court helpfully lays out its conclusions in three standalone paragraphs:
1. Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.
2. An internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign within the meaning of Article 5(1) and (2) of Directive 89/104 or of Article 9(1) of Regulation No 40/94.
3. Article 14 of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) must be interpreted as meaning that the rule laid down therein applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned.
A closer look at each of the three holdings.
Holding #1: Keyword Ad Copy Must Sufficiently Distinguish the Trademark Owner
This holding does not directly address Google’s liability; it only references the advertiser’s liability. The EU generally lacks a well-developed doctrine of secondary trademark liability. Therefore, even if an advertiser’s ad is problematic, that may not be imputable to the keyword vendor. (I discuss advertiser liability below).
In several places, the court’s language reinforces that keyword advertising systems do not create independent liability for their vendors. For example, in paras. 56-57, the court says that a “referencing service provider allows its clients to use signs which are identical with, or similar to, trade marks, without itself using those signs….The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign.”
Further, in paras. 94-95, the fact that other advertisers’ bids may increase the trademark owner’s price to display ads triggered by its own trademark (and Google’s consideration of ad quality) does not “constitute an adverse effect on the advertising function of the trade mark.” The court goes on to say (paras. 97-98):
when internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list. That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’. Having regard to those facts, it must be concluded that use of a sign identical with another person’s trade mark in a referencing service such as that at issue in the cases in the main proceedings is not liable to have an adverse effect on the advertising function of the trade mark.
As every SEO knows, nothing is “guaranteed” when it comes to search engine placement. Trademark owners usually show up well in organic search results for their trademark, but Google may have de-indexed or downgraded the trademark owner’s website. Further, personalized search results and universal search results can cause unexpected orderings. What happens to the court’s reasoning when the trademark owner doesn’t show up prominently in the organic results?
Holding #2: Search Engines Don’t Make a Legally Recognized “Use” of the Trademarks
In the Second Circuit ruling in Rescuecom v. Google, which held that Google made a “use in commerce” by selling trademarked keywords for keyword advertising. After that ruling, it was pretty clear that both buying and selling trademarked keywords constituted a “use in commerce” under US trademark law, shifting the litigation battle to likelihood of consumer confusion and the defenses.
Here, the court reaches the superficially opposite result, saying that advertisers, not Google, make the legally actionable “use in the course of trade.” These divergent results may just reflect differences in the statutory wording. Nevertheless, for enthusiasts of the “use in commerce” doctrine, its spirit apparently lives on in Europe!
Holding #3: Keyword Vending Can Qualify for E-commerce Directive
This was a doctrinally interesting conclusion. The E-commerce Directive was inspired by the Digital Millennium Copyright Act online safe harbors (17 USC 512), so it was oriented towards online copyright issues. For example, it has a safe harbor for caching that really only makes sense in the copyright context.
Here, the ECJ applies the E-commerce Directive to a trademark dispute, effectively treating Google as the web host of the advertiser’s ad content. While this is a promising interpretation, it leaves open some ambiguity about what will constitute disqualifying activity. The opinion makes it fairly clear that Google would have an “active role”—and therefore become disqualified for the safe harbor—if it helps the advertiser prepare the ad copy. However, Google can participate in its advertising campaigns in a variety of ways, such as suggesting bid amounts and keywords to purchase (through its keyword suggestion tool). Will these other participatory activities constitute a disqualifying “active role”?
Liability of Keyword Advertisers
The opinion highlights several potential liability risks for keyword advertisers. First, the opinion says that keyword advertisers can’t avoid liability by indicating that their products are “imitations” or “copies” in the ad copy. (Paragraph 102).
Second, regarding Holding #1, the opinion (paras. 83-85) raises concerns about ads triggered by keywords identical to a trademark where “normally informed and reasonably attentive internet users” cannot easily determine if the advertised goods originate with the trademark owner.
The precise wording of Holding #1 limits its applicability to a keyword that is identical to the trademark and to goods that are identical to the trademark owner’s goods. By inference, the language does not govern keywords that are similar to the trademark (does it exclude typographical error versions?) or goods such as complementary goods or replacement components. In addition, the standard seems to limit trademark coverage by class of goods—something that can be ambiguous when a single keyword is the trademark of multiple trademark owners in different classes. However, given the wording of the answer, I do not assume that these unaddressed circumstances will be found permissible when tested in future cases.
In the situations described in the holding, “the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark.” The court says that national courts have the power to adjudicate whether that source confusion actually occurred (para. 88), but the following ads appear to be presumptively problematic:
* “where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark” (para. 89).
* “where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor” (para. 90).
If this language is intended to cover ad copy that constitutes bait-and-switch or passing off, this language isn’t a big deal. However, this language appears to be broader, and I’m not entirely clear what advertisers can do to avoid these risks. A typical text ad has very limited space for subtle legal explanations, and Google’s trademark policies allow the trademark owner to prohibit the advertiser from referencing the trademark in the ad copy even for clarification purposes. For example, an advertiser purchasing the “smith” trademark as a keyword can be blocked from saying “compare our products to smith’s” in the ad copy. If the ad copy says “switch to us” or “we’re better than other brands,” will those types of implicit comparisons be enough to eliminate the ambiguity feared by the court? At minimum, the court’s language leaves plenty of room for trademark owner-vs.-advertiser lawsuits asserting ambiguous ad copy. Perhaps the pending ECJ AdWords cases will provide some further clarity.
What’s Next
I find EU governance structures generally baffling, so it’s impossible to anticipate all of the possible implications of this ruling. However, trademark owners steamed about this ruling have a wide range of options, including the following:
* they could seek a new directive, or seek to modify an existing directive, to expand keyword advertising vendor liability.
* to the extent possible (something I can’t easily evaluate), they can seek legislative changes at the national level to get back some of the ground lost in this ruling.
* they can continue to litigate the interstices of this ruling. For example, they can try to disqualify Google from the E-commerce Directive’s safe harbor by arguing that Google plays an active role in its advertisers’ decisions.
* they can seek to expand advertiser liability through any of these methods.
* they can litigate against advertisers one-by-one.
* as always, they can continue to send takedown notices or avail themselves of the search engine trademark policies.
Other good options may exist.
From Google’s perspective, I wonder if this opinion gives it enough comfort to liberalize its European trademark policy to match the rest of the world (i.e., allow trademark owners to block only certain ad copy references and not keyword purchases). For example, to retain its eligibility for the E-commerce Directive, Google still needs to follow a notice-and-takedown regime, although I wasn’t clear if Google’s takedown can just be the ad copy or has to be the keyword as well. Google did liberalized its UK and Ireland trademark policy after the Mr. Spicy ruling, which also concluded that Google did not make a legally actionable “use,” so perhaps Google will feel emboldened by Holding #2.
What Google SHOULD do is take a more proactive stance on the legality of the keyword advertising industry. It should propose legislation that protects both itself and its advertisers. It should also intervene in some of the trademark owner-vs.-advertiser cases that have the potential to establish disadvantageous legal rules for its advertisers. Google has been remarkably passive in terms of legal developments, playing defense only when threatened. I believe this is not a long-term winning strategy. Cf. the Battle of Hastings and how a determined and powerful opponent can eventually breach a shield wall. Google currently has to defend a wide array of battlegrounds, and a loss in any one of those venues could materially diminish its earning potential. To ensure the long-term viability of the keyword advertising industry, Google may need to go on the offense.
I don’t expect that this opinion will affect any US legal developments. For the most part, the opinion interprets governing EU directives and regulations. Because the words in those statutes are not the same as the words we use in the US, the opinion is not readily exportable to US law.
Nevertheless, this opinion could be the vanguard of an emerging legal trend to put the trademark compliance legal burden on keyword advertisers and not keyword vendors. We have not yet reached that conclusion in the United States, but it’s entirely sensible to me that the keyword vendors should not be trademark arbiters, and my hope is that US judges will get there eventually. For more on why I believe we should deregulate keyword ad sales, see this article.
Posted by Eric at 10:25 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack
March 22, 2010
Plaintiff Wins $7,000 Following Bench Trial on Claims Under California Anti-Spam Statute -- Balsam v. Trancos
[Post by Venkat]
Balsam v. Trancos, Inc., Cal Sup. Ct. Case No. (Civ.) 471791; March 10, 2010 [scribd]
Although spam lawsuits have not gone particularly well for individual (non-ISP) plaintiffs, Dan Balsam recently took a case to trial in San Mateo Superior Court and was awarded $7,000 in damages.
Balsam sued under the California Legal Remedies Act (1750) and California's anti-spam statute (section 17529). The court held that Balsam could not maintain an action under section 1750 because he was not a "consumer" and did not sustain any damages, and dismissed the 1750 claim. His claim under section 17529 was tried to the bench and he was awarded $1,000 in statutory damages per email.
Background: Defendant Trancos registered numerous domain names through DomainsByProxy. Through Defendant's "Meridian" division, Defendant entered into a deal with Hi-Speed Media/ValueClick under which Defendant "managed" several email lists and sent out emails. Trancos and Hi-Speed Media shared revenues generated from transmission of the emails. Trancos discontinued this conduct in 2007 and according to the court had "stopped the allegedly wrongful conduct of which [Balsam complained]."
The Emails: The trial was over eight email messages. The emails were sent through various domain names (privately) registered to Trancos: misstepoutcome.com, modalworship.com, moussetogether.com, mucousmarquise.com, minuteprovenance.com, minecyclic.com, mythicaldumbwaiter.com, and nationalukulele.com. (How on earth did Trancos come up with these domain names!) The subject lines of the emails were typical unsolicited email fare, and ranged from inviting people to take surveys and get paid ("Get paid 5 dollars for 1 survey") to dating-related invitations ("It's a Great Time to Say Hello to Someone New!"; "Date Single Christians"). The emails did not purport to be from anyone particular. The "from" email addresses were from accounts such as "franchisegater@modalworship.com," and "dating@mythicaldumbwaiter.com". The emails contained varying opt-out text and (in some cases) links.
The Court's Ruling: The court held that Balsam's claim under section 17529 was not preempted under federal law. Defendant pointed to Virtumundo and argued that CAN-SPAM preempts state email statutes which reach immaterial errors in emails. The court rejected this argument noting that in Virtumundo, the plaintiff did not put forth any evidence that the emails at issue rose to the level of "falsity and deception" excluded from CAN-SPAM's preemption clause, and on the basis that the Washington statute was different from the California statute (nothing in the Washington statute required any misrepresentations to be "material").
The court looked to the "from" addresses in the emails and held that the "'senders' identified in the headers of the . . . emails do not exist or are otherwise misrepresented . . . [i]n those same headers reflecting the 'from' line of the email, the referenced sender email is a non-existence [sic] entity using a nonsensical domain name reflecting no actual company . . . ." The court also relied on the fact that the address at the end of the email messages (a PO Box in Santa Monica) was registered in the name of a non-existent entity.
Although the plaintiff "was not tricked into believing that [the] emails were anything other than commercial advertisements . . . and was not tricked into seeking to purchase any goods or services," the court held that seven of the emails violated 17529.5(a)(2) because the emails had "falsified, misrepresented, or forged header information." The emails came from Trancos, "but none of the emails disclose[d] this in the header."
Observations: The two significant preemption CAN-SPAM cases (Mummagraphics and Virtumundo) both held that state laws which prohibit immaterial misstatements in emails are preempted. There's another district court case which went beyond this and held that a plaintiff had to satisfy the "actual fraud" standard in order to successfully assert a spam claim under state law (Reunion). The cases in this context often look to whether the plaintiff could have easily ascertained where the email came from. In Mummagraphics the court relied on the fact that the plaintiff could have easily determined where the email originated from in finding the error immaterial (and the claim preempted). In Kilbride, a criminal case, the court imposed liability, finding that the sender's use of GoDaddy's privacy protection services was evidence of the sender's intent to mislead the recipient. In this case, there were similar facts. None of the emails at issue in this case stated where they originated from (or on whose behalf they were sent). Defendant used a lot of names of companies that did not exist, and got a PO Box for the company in the name of another non-existent company. That said, the violations didn't fit nicely within the statute.
17529.2: The court quoted section 17529.2, which is a blanket prohibition on the transmission of unsolicited email to or from a California email address. This section of the statute is obviously dead on preemption grounds and can't support liability.
17529.5: The court also looked to section 17529.5 which is similar to the anti-spam statutes of many states, including Washington. This section prohibits the transmission of email that (1) "contains or is accompanied by" a third party's domain name without permission; (2) "contains or is accompanied by falsified, misrepresented, or forged header information;" or (3) has a misleading subject line. The court found that the subject lines were not likely to mislead and in fact Balsam was not misled by the subject lines. The court didn't expressly find that the emails contained or were accompanied by a third party's domain name without permission. There was no violation of this provision since there was no dispute that Trancos owned the domain names at issue.
The court found that Trancos violated the header information prong, because there was no such person or entity referenced in the "from" line. It's tough to see how this is the case, since the header information was not forged. If you own or control a domain name, you are free to create any number of email addresses that can send emails through the domain name, and no one sees anti-spam statutes as requiring the reference in the from line to refer to an actual living person. I have received numerous emails from "customer support" or "orders" at Amazon.com and I'm fairly confident that there's no such person at Amazon.
What this section of the statute actually gets at is the transmission of emails that appear to come from someone when they actually don't, or the obfuscation of header information. There was no evidence of either in this case. The plaintiff in Virtumundo raised somewhat similar arguments, which were rejected by the trial court. On appeal, the court found that the claims were similar to the ones raised by the plaintiff in Mummagraphics (arguably because accurate WHOIS information could have readily identified the sender of the emails) and held that the claims were preempted under Washington's email statute. There's a colorable argument to be made that nothing in Virtumundo precludes a claim under 17529.5(2), but the differences in the statutory language cut against Balsam's claims. The California statute prohibits "falsified, misrepresented, or forged header information," while the Washington statute prohibits emails where the sender "misrepresents or obscures any information in identifying the point of origin or the transmission path." The Washington statute incorporates a "point of origin" concept that makes it easier to argue that a violation occurs if you include an email address in the from line that's related to a non-existent company.
The final point to consider is that Balsam admitted that he didn't suffer any "adverse effects" of the sort that the court held were required to support a claim under CAN-SPAM. Balsam didn't expend any funds on bandwidth, filtering, infrastructure, etc. His sole injury was the fact that he mistakenly opened the message, and presumably, expended sums litigating his claims.
___
As the court notes, the California Supreme Court is currently considering Kleffman v. Vonage, a case that deals with the scope of California's anti-spam statute. Also, the Reunion case, dealing with the scope of CAN-SPAM preemption, is still stuck in the district court (in the Northern District of California). It's likely to be appealed to the Ninth Circuit.
It will be interesting to see how this plays out. In the meantime, kudos are due to Balsam and his counsel, who unlike James Gordon, Asis Internet, and other spam plaintiffs, are at least generating positive cash flow (if Trancos ever pays up).
Added: "Save the Mail Blog" asks whether it was worth it ("Lawyer Awarded $7k in Spam Suit: We do the Math"). SFGate also covers the ruling ("S.F. lawyer awarded $7,000 from e-mail spammer").
Posted by Venkat at 12:08 PM | Marketing , Spam
Search Engine Legal Developments to Watch in 2010
By Eric Goldman
I recently spoke on a panel about search engines and the law at SMX West. I previewed four major trends in search engine law to watch in 2010:
1) Competition issues. Antitrust/competition law has become a big part of the search engine industry. There are two main flash points: Google’s high percentage of the search advertising business and Google’s black box algorithm for organic search results. Both facets are troubling to competitors and regulators, but they are creating extra friction with “vertical search engines” that portray themselves as competition for Google.
Recent antitrust/competition battles:
* Google-DoubleClick acquisition scrutiny
* Google-Yahoo search syndication deal killed by DOJ
* >a href="http://blog.ericgoldman.org/archives/2009/07/microsoftyahoo.htm">Microsoft-Yahoo deal
* DOJ and Microsoft opposition to Google Book Search settlement
* Person, KinderStart and Langdon civil lawsuits against Google
Present battles:
a) EU complaints from a UK price comparison site, Foundem, a French legal search engine called ejustice.fr, and Microsoft's Ciao! from Bing. Wired: “Google says the companies accuse it of wielding its dominance as a search engine to squelch competition by preventing people from finding their vertical search engines.”
b) US actions: TradeComet and myTriggers. Do these lawsuits have Microsoft ties? In a blog post “Competition Authorities and Search,” Microsoft came out of the closet and admitted it was harassing Google on antitrust issues.
The underlying battle: who should decide what content and ads that searchers see? Two main options: search engines or regulators. Seems like an easy call to me. See my Search Engine Bias article. An under-addressed issue: the role of 47 USC 230(c)(2) in search engines' filtering decisions.
2) keyword advertising lawsuits against Google. 8 lawsuits are pending. The Rosetta Stone case scheduled for trial in May. There are no known US legislative initiatives, especially now that the Utah legislature has adjourned for the year. We are all anxiously awaiting the issuance of the ECJ opinion tomorrow at 1:30 am CA time (I'll blog it as fast as I can).
3) Search engines and copyright. Pending US cases include Viacom v. YouTube, Perfect 10 v. Google and the Google Book Search settlement. Plus, Google's tussles with AP, News Corp. and other news organizations.
4) Search engine compliance with foreign laws, including the Google-China flap and the Google Videos conviction in Italy. This has stirred the pot in Congress again. The latest: Sen. Durbin’s is threatening to force Web companies to join the Global Network Initiative and stop dealing with repressive regimes…which is a resurrection of Chris Smith’s Global Online Freedom Act. Hypocrisy alert! In light of point #1, will the US itself be put on the list of repressive regimes? Plus, as we’ve seen, Google’s single-handed efforts to take down the Chinese government haven’t worked so well.
Posted by Eric at 10:15 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Search Engines , Trademark | TrackBack
March 20, 2010
Another Bad Ruling in Louis Vuitton v. Akanoc
By Eric Goldman
Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 5:07-cv-03952-JW (N.D. Cal. March 19, 2010)
I have not seen a definitive statement of facts in this case, so synthesizing various cryptic statements by the court, here's my understanding of the situation. Akanoc is a US-based web host primarily servicing Chinese customers. Some of those Chinese customers advertise and sell counterfeit goods, including counterfeits of Louis Vuitton, to a US and global consumer base. Louis Vuitton sent copyright and trademark takedown notices to Akanoc, some of which Akanoc ignored. Louis Vuitton sued Akanoc for direct and secondary copyright and trademark infringement. In Dec. 2008, the judge denied Akanoc's dismissal motion, sending the case to a jury trial. In Aug. 2009, the jury tagged the defendants with a $32M+ judgment.
In the latest ruling, Louis Vuitton requests a permanent injunction and Akanoc tries to salvage what it can from the jury loss through various JMOLs. The result is an omnibus ruling that has zero good news for web host defendants. Some "high"lights:
* posting photos of counterfeit goods constitutes direct copyright infringement
* web users who browsed those photos of counterfeit goods did not make a fair use by browsing (FN 9)
* it's not a defense to contributory copyright infringement that the direct infringers were overseas and thus not subject to the court's personal jurisdiction (FN 10) (this seems right to me)
* web hosts made a material contribution to copyright infringement when they (1) "provided servers with data storage, routers, and data bandwidth to the websites," (2) "continued to host those websites despite receiving notice from Plaintiff of particular websites that engaged in such conduct, and (3) "rarely used several of the tools at his disposal to punish or deter the operation of the counterfeiting websites on Defendants’ servers."
* the defendants didn't designate a 512 agent for notice until 4 months after the case was filed, so they could not claim 512 protection before that time (why did they wait so long?)
* the 512 safe harbors also didn't apply because "evidence that Defendants had reasonably implemented a policy to terminate repeat infringers was limited, at best. For example, Defendant Chen, the designated agent for Defendants, testified that he did not understand the DMCA’s requirements as to maintaining or implementing the required policy....Other evidence indicated that Defendants had not terminated certain repeat offenders."
* the web host had the requisite control over the direct trademark infringers to support contributory trademark infringement when "Defendants had numerous tools at their disposal for monitoring their servers and terminating abusive users. For example, Defendants had the ability to suspend a particular user, disable IP addresses used by a particular website or, if necessary, unplug a server that contained the data for a particular website."
* it's become vogue to challenge copyright statutory damages on constitutional grounds, but this court rejects a due process challenge against both copyright and trademark statutory damages. A Gore challenge to the ratio of actual to "punitive" damages was inapplicable to statutory damages. (FN 25)
* the defendant's sole officer was personally liable for the infringements because he "had nearly complete control over Defendants’ operations. He was the general manager and sole owner of the corporate Defendants....He also held the principal decision-making authority as to responding to infringement notices, and he instructed his part-time employee regarding how to respond to such notices....Moreover, he was the designated agent under the DMCA for receiving infringement notices and decided whether or not to terminate offending customers." Does this ruling imply that the person designated as the 512 agent for notice has an increased risk of personal liability...?
Stepping back from the details, I can see why the defendants lost. There appears to be a fair amount of evidence that the web host provided services to counterfeiters and didn't deploy state-of-the-art risk management techniques, such as a proper 512 designation of an agent for notice. More importantly, the web host appeared not to respond to takedown requests in an industry-standard fashion. Finally, the defendants made some bizarre legal arguments that superficially appeared doomed, such as the repeated assertions of extraterritoriality issues when a US-based web host was being sued in a US court for violations of US law. For these reasons, I sincerely hope the defendants don't appeal this case to the Ninth Circuit. That could end up doing a lot of long-term harm to Cyberlaw doctrines.
Despite this, I remain troubled by the implications of this case for all web hosts. For example, this case's legal standard for contributory trademark infringement leaves all web hosts at some risk. At minimum, it seems to confirm a common law notice-and-takedown regime for online trademark complaints. (This is reinforced by the injunction, which codifies a notice-and-takedown system for injunction violations). After this case, I think all web hosts will need to be quick on the trigger when they get trademark takedown notices.
I was also deeply troubled by the court's extension of personal liability to the 512 designated agent for notice. What sucker will agree to be a 512 agent in the future?
Posted by Eric at 01:25 PM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack
March 18, 2010
Viacom v. YouTube Summary Judgment Motions Highlights
By Eric Goldman
Who doesn’t enjoy a good old-fashioned mud-slingin' showdown? That’s exactly what we’ve got on our hands in the dueling summary judgment motions from Viacom and YouTube in the long-running copyright infringement case (see my initial post from March 2007). While we might have some voyeuristic fun watching the sparks, the latest salvos prove that the parties are both losers for not finding a way to settle this case. Only the lawyers win when two heavyweight contenders get locked into a cosmic death struggle. Everyone else would be better off if Viacom and YouTube instead had poured their millions of dollars of legal fees towards developing innovative and profitable ways to serve consumers’ interests. It’s ridiculous that they can’t find a way to do this.
Combined together, the filings tell a “Tale of Two YouTubes.” Viacom focuses on YouTube of Yore, circa 2005-06, while YouTube’s brief largely focuses on YouTube of Now. In that sense, the briefs largely talked past each other.
By focusing on the past, however, it shows that time is slowly working against Viacom in two ways. First, the legal precedent since Viacom’s filing has been largely YouTube-favorable. The three Veoh opinions (Io v. Veoh, UMG v. Veoh 1, and UMG v. Veoh 2) have filled in some key legal gaps that existed at the time of Viacom’s filing. While the Veoh cases aren’t binding on the judge, this judge now can follow in someone else’s footsteps rather than trail-blaze. Viacom does cite the Columbia v. Fung case, which helps its cause some, but I think YouTube gets the better of that exchange.
Perhaps more importantly, the intervening time has been good to YouTube as a business and as a brand. In this sense, compare Grokster to YouTube. At the time of the Grokster cases, it was still very much an open question whether Grokster would ever evolve into a tool where legitimate activity dominated. While we might still have had that same question about YouTube in 2006, by 2010 YouTube has answered that question resoundingly. YouTube’s business practices have matured, everyone has had positive legitimate experiences with YouTube (even behind-the-curve judges), and it’s clear that major legitimate players have adopted YouTube as a platform for their legitimate activities. For example, YouTube’s brief makes the point that all of the 2008 presidential candidates published YouTube videos as part of their campaign. I’m guessing no 2004 presidential candidates used Grokster for campaign purposes.
So as time goes on, YouTube solidifies a brand as a legitimate part of our information infrastructure. As we learn that the YouTube story has a happy ending, I suspect judges become less interested in punishing YouTube for past practices. For this reason (and others), I thought a lot of Viacom’s inducement arguments ran hollow because they ran counter to my brand impressions of YouTube. I would also note that Viacom appears to be giving up its litigation over activity after May 2008, so even Viacom seems to be happy with YouTube in its current form.
This raises an interesting legal point that I can’t resolve. Let’s assume for sake of argument that Viacom is right that YouTube induced infringement in 2005-06. Let’s also assume that no one is arguing that YouTube currently induces infringement (after all, Viacom isn’t contesting post-May 2008 activity). How do we determine when YouTube flipped the switch from inducing to not? And does flipping the switch cure any of the past infringement, or does it only cut off future claims? Because we have so few cases of inducement, we really don’t know how the doctrine works with a site that morphs over time.
I thought both YouTube and Viacom scored points against each other in the briefs. I’ll summarize some of those points below, but first I want to highlight a few standout points for both parties:
In YouTube’s case, I could not get over that Viacom has TWICE withdrawn clips from its complaint. I thought the first time Viacom did that was embarrassing and damaging to Viacom’s case, but then Viacom admitted that it didn’t catch all of its errors on the first withdrawal and therefore had to make a second withdrawal of clips. WTF? How hard it is for Viacom to accurately determine which clips it has not permitted to show on YouTube? Whether it intended to or not, Viacom has answered that question to its detriment: hard enough that an entire brigade of extremely expensive lawyers obligated to do factual investigations by Rule 11 can’t get the facts right the first OR SECOND time. For me, this undercuts Viacom’s credibility to its core. Rather than YouTube simply making intuition-based arguments to the judge that it’s really hard to figure out legitimate vs. illegitimate clips, Viacom’s failings have proven to the judge that it’s too hard—too hard for lawyers charging upwards of $1k an hour despite having unrestricted access to accurate information in their clients’ possession, and clearly too hard for YouTube’s slightly-above-minimum-wage customer support representatives with no such information advantages.
YouTube also scored points for its descriptions of Viacom’s stealth marketing practices. Although these facts only help YouTube’s legal posture a little, the lawsuit’s discovery process has unveiled some non-public information about Viacom’s practices that should be interesting to the FTC and state attorney generals. Viacom’s alleged stealth marketing practices are aggressive—close to the permissible line, if not over it. As a result, they might be exactly the kind of consumer misdirection and inauthentic online content that the FTC has been railing against, and we know the FTC is looking for test cases in this area. So, a lawsuit that began as Viacom v. YouTube might morph into FTC v. Viacom. This is one of the known risks of picking a fight—once started, you can’t control where it goes.
From Viacom’s brief, two references really stood out. First, Viacom found an email where Google employees characterized YouTube (pre-acquisition) as a “video Grokster.” Viacom argues that YouTube was like Grokster factually and therefore should be treated like Grokster legally. The Google email admits (in the lay sense, not the legal sense) this factual equivalence. Google can legally discredit the email's importance, but it can’t easily avoid talking out of both sides of its mouth.
Second, I was struck by the fact that Chad Hurley lost his entire email repository. I’ve had that happen to me too, so that fact standing alone isn’t damning. However, the brief goes on to say that when he was grilled about his co-founder’s email stash, Hurley developed “serial amnesia.” The combination did make me wonder about this situation.
As I read the brief, I made some brief notes about points of particular interest. Those notes:
YouTube’s Summary Judgment Motion
I thought both briefs were well-written and generally effective. However, the YouTube brief successfully struck a conversational tone—a nice balance between formality and accessibility.
[note: my references are to the PDF’s page numbering, not the brief’s page number at the page bottom]
PDF Page 21: Viacom sent a bulk takedown request covering about 100,000 clips on February 2, 2007, but this purge didn’t reduce YouTube traffic or increase Viacom’s traffic.
PDF Page 24: plaintiffs are suing over at least one clip of 1 second. 1 second???
PDF page 34: YouTube has terminated 400,000+ user accounts for infringement out of its 250M accounts. Although that’s a low percentage, that’s a surprisingly high absolute number.
PDF page 40 (FN 9): some litigated clips never got a takedown notice at all.
PDF page 45: YouTube says it did lacked “red flags” knowledge of infringing activity because, in some cases, the copyrights were obscure.
PDF page 47: No red flags because copyright owners routinely voluntarily upload lots of copyrighted material to YouTube, and copyright owners try to cover their tracks. Copyright owners do this because YouTube marketing works. Copyright owners’ embrace of “viral marketing”/“stealth marketing” eliminates any potential red flags.
PDF page 49-50: Details of Viacom’s stealth marketing efforts:
* It uses an “army” of third party marketing agents (at least 18 firms)
* Account names don’t indicate a Viacom relationship
* Email addresses aren’t linked to Viacom
* Clips are deliberately uploaded from networks not tied to Viacom, such as Kinko’s
* Clips are deliberately altered videos to make them look stolen. I thought this was the most damning fact. It’s disingenuous to rail against piracy and yet try to take advantage of the marketing benefits of seemingly unauthorized copying.
PDF page 50: Viacom has released clips with the intent that users spread them virally.
PDF page 53: Viacom has a deliberate and complex strategy for leaving up clips. This part of the brief was confusing so I didn’t fully follow the timeline. Here’s what I understood about Viacom’s “leave-up” policy. Through Oct. 2006: leave up clips less than 5 minutes. Oct 2006: Viacom tells BayTSP to leave up all clips shorter than 2.5 minutes [or is it 3 minutes?]. Then, Viacom expanded the leave-up policy to include every clip shorter than a full episode; and in some cases, even full episodes were expressly left up.
PDF page 54-55: Viacom found 316 clips of South Park and took down only 1.
PDF page 56: “If Viacom deliberately refrained from sending takedown notices for certain videos, how could it be that YouTube was obligated to remove those same videos on sight—without any request from Viacom?”
PDF page 59-60: No red flags because some copyright owners granted licenses that permitted YouTube uploading. Also, some clips may be subject to joint ownership, and YouTube can’t tell if one of the joint owners had consented.
PDF page 61: no red flags because of fair use/de minimis use. I was surprised that the Lenz case wasn’t explored.
PDF page 73: Viacom had complex whitelists of YouTube accounts that wouldn’t be challenged.
PDF page 75: Viacom sued over clips it had authorized for posting.
PDF page 99: less than 1% of YouTube clips have been subject to a takedown notice. Again, I am surprised that this was appropriately rounded to 1%; I would have expected an even smaller fraction.
PDF page 105: Viacom spent over $1M advertising on YouTube from 2006-08. All of which (and more) YouTube has reinvested in its litigation against Viacom.
Viacom Summary Judgment Motion
PDF page 9 (FN 1): This was a confusing footnote, but a crucial one. It appears that Viacom is only interested in infringement pre-May 2008 (before YouTube deployed digital fingerprinting for Viacom). The way I read it, Viacom isn’t going to pursue any claims for activity post-May 2008. Thus, Viacom apparently is acquiescing to—or even happy with—YouTube’s current practices. Consistent with the Tale of Two YouTubes, Viacom reinforces that it’s really only interested in the past, not the present.
Viacom complains that it took too long for YouTube to deploy the digital fingerprinting for it. It says that YouTube withheld the tool as part of a quid-pro-quo to require content owners to sign a license and revenue share deal.
PDF page 14: YouTube founder Karim uploaded infringing content himself.
PDF page 14-15: YouTube was a junkie for traffic to infringing content—it wanted and needed the traffic. They felt they would lose 80% of their traffic if they did a crackdown of obviously infringing clips.
PDF page 17: YouTube tried and then removed the ability for every user to flag clips for copyright infringement. I personally think Viacom overemphasized this point. Service providers are trapped in a dilemma. If they do more screening than 512 requires, copyright owners say that evidences their right and ability to control (indeed, Viacom itself makes that argument in its brief). But if they don’t do more, copyright owners complain that they could have done more. Good grief. With respect to user flagging of copyright infringement, users are a terrible source of credible information about what constitutes copyright infringement (at least, when it’s not their works involved), so the user flagging tool inevitably would generate too many false positives. Requiring 512(c)(3) notices is a logical way to avoid the deluge of false positives.
PDF page 17: Dunton surveyed top clips on YouTube and thought 70%+ were copyrighted. Later, Dunton said 75-80% of clip views were from copyrighted content.
PDF page 19: Karim says in a board meeting that the site would benefit from preemptive takedowns of blatantly illegal content, but no changes were made.
PDF Page 22: pre-acquisition, a Google employee referred to YouTube as a “video Grokster” and a “rogue enabler of content theft.”
PDF Page 22: Google’s investment banker Credit Suisse reported to Google that 60%+ of YouTube’s views were of “premium” content, of which only 10% was authorized.
PDF Page 29-30: Hurley lost all of his emails, and Schmidt deletes all emails after he reads them (guess he doesn’t use Gmail’s “archive” feature). Hurley developed “serial amnesia” when confronted with Karim’s emails.
Posted by Eric at 04:08 PM | Copyright , Derivative Liability , Internet History | TrackBack
Beacon Class Action Settlement Approved -- Lane v. Facebook
[Post by Venkat]
Lane v. Facebook (Case No. 09-3845 RS; March 17, 2010) [scribd link]
Judge Seeborg yesterday issued an order approving the class settlement in Lane v. Facebook, the class action lawsuit arising out of Facebook's Beacon program.
Background: Shortly after the uproar around Facebook's launch of its Beacon program, a group of plaintiffs filed a class action lawsuit in the Northern District of California. Prior to this lawsuit, another group of plaintiffs sued Blockbuster in Texas, based on Blockbuster's participation in the Beacon program. Both plaintiffs asserted, among other claims, violations of the Video Privacy Protection Act, a statute which protects against disclosure of video rental records.
In Texas, Blockbuster argued that the claims should be subject to arbitration based on a terms of service. The court rejected Blockbuster's arguments on the basis that the terms of use were illusory because they contained language saying that they could freely be amended at any time. (Here are posts by Professor Goldman and Tom O'Toole on this potentially far-reaching ruling.) Blockbuster appealed this ruling.
Meanwhile, the California plaintiffs (represented by Scott Kamber) announced a settlement of their claims. The proposed settlement did not provide for monetary damages to the plaintiffs; Facebook agreed to set aside a chunk of money to fund a "privacy foundation," which would be staffed by nominees of counsel for the parties. (Here's a summary of the proposed settlement terms at CircleID.)
Once the Texas plaintiffs found out about the settlement, they moved to intervene in the California lawsuit. They argued that the two class actions should have been consolidated and that the California plaintiffs could not release claims on behalf of the class against Blockbuster, since those claims were first asserted by the Texas plaintiffs in the Blockbuster class action. Judge Seeborg denied the motion to intervene, a ruling which the Blockbuster plaintiffs appealed.
The parties engaged in a round of wrangling in the Northern District of California, and behind the scenes. Ultimately, Blockbuster settled with the Blockbuster (Harris) plaintiffs by agreeing to pay $50,000. More importantly, counsel for the two classes probably came to some sort of agreement regarding fee sharing. Counsel for the Blockbuster plaintiffs then withdrew their objections to the proposed settlement pending in front of Judge Seeborg. This left a few objections raised by individuals and public interest organizations. Judge Seeborg rejected these objections and approved the settlement.
The Court's Disposal of The Objections:
Form of Notice: One interesting objection was raised by Shan Huangfu. He argued that notice of the settlement was sent via email, was caught in his spam filter and therefore inadequate. (Here's an article by Wendy Davis flagging this objection.) I didn't pick up on this at first, but interestingly, the parties wanted to use email notice in lieu of notice through Facebook accounts, and Judge Seeborg did not agree with this. Ultimately, it looks like Facebook sent notice via email and through the potential class member's Facebook account, but did not send any paper notice. I wonder if people who cancelled their Facebook account in reaction to Beacon were more likely to fall through the cracks?
Whether The Privacy Foundation Will be Beholden to Facebook: One of the biggest objections to the proposed settlement was that the foundation created as a result of the settlement would be beholden to Facebook and wouldn't provide any public benefit. Judge Seeborg found that there had been "no persuasive showing that the Foundation will be a mere publicity tool for Facebook, or in any meaningful sense under Facebook's direct control." The foundation will initially staffed by Chris Hoofnagle, Larry Magid, and Tim Sparapani (Facebook's Director of Public Policy and a formerly Senior Legislative Counsel to the ACLU in Northern California). (Interestingly, Sparapani shares a fair amount of personal information on his publicly accessible Facebook profile.)
The Fact That No Monetary Relief Was Awarded to Class Members: Another significant objection was that the class members will not receive any compensation under the settlement (except for the named plaintiff who would receive $10,000, two named representatives would receive $5,000 each, and the remaining named representatives would receive $1,000 each). Judge Seeborg dismissed this objection on the basis that the damages available (principally, the statutory damages under the Video Privacy Protection Act) would be "speculative at best." Because of the speculative nature of the statutory damages, and the risks inherent in litigation, the settlement as structured could be viewed as reasonable.
Observations:
1. The appeal in Harris v. Blockbuster (the Texas action) has been dismissed by the parties. However, they haven't moved to vacate the trial court's ruling so it looks like it will stay on the books. (EPIC filed an amicus brief in favor of the Harris plaintiffs: [pdf]. EPIC's page on Harris v. Blockbuster is worth checking out.)
2. There were approximately 3.6 million potential class members. 100 opted out, and 4 objected. These numbers understandably swayed Judge Seeborg. I'm surprised no one mounted a vigorous "opt out of the Beacon settlement" social media campaign. This would have probably been the most effective method to derail the settlement.
3. This plaintiffs in the California action were left in the awkward position of arguing that the lawsuit that they brought would not support the award of significant damages. In fact, Scott Kamber's declaration [scribd link] argues that it would be tough to hold Facebook liable under the Video Privacy Protection Act, among other reasons because Facebook does not fall under the statute's definition of a "video tape service provider".
4. The Harris plaintiffs were in this position as well. Additionally, the Harris plaintiffs settled separately with Blockbuster, and Blockbuster agreed to pay "Plaintiffs $22,500 and also . . . pay Plaintiffs' counsel $27,500 [in fees]." (Access the Blockbuster settlement agreement on Scribd here.) From the settlement agreement, it appears that the named plaintiffs will receive settlement payments but the remaining members of the class receive nothing. In fact, the court hearing the Blockbuster lawsuit did not approve the settlement. I suppose you could say that the Blockbuster plaintiffs were receiving these amounts for their efforts expended in representing the class, but there was no class award and no class to represent. Shouldn't the remaining Harris plaintiffs receive some compensation? Another factor here is Blockbuster's precarious financial condition.
5. Judge Seeborg deferred ruling on counsel's request for fees, asking for some additional evidence on time spent by counsel. The request for fees states that the Lane class counsel incurred $1.1mm in fees and the Harris class counsel incurred $820,000. After adjustments, between the two, they seek approximately $2.8mm in fees.
6. It's interesting that a piece of legislation passed in the wake of then-Judge Bork's Supreme Court confirmation hearing ended up being influential in this context. I doubt when the legislation was passed, Congress envisioned that the statute would be central to a significant dispute around online advertising and would result in a settlement of this scale. There's no counterpart to the Video Privacy Protection Act for magazines, books or newspapers. Just videos.
7. The Video Privacy Protection Act reared its head in another privacy dispute recently. Netflix just settled with the FTC and agreed to discontinue the sequel to its recommendation engine contest. (Forbes/The Firewall) Professor Ohm flagged the issue in September 2009 post and urged Netflix to reconsider its decision to launch the second contest. While the settlement between the FTC and Netflix wasn't expressly based on the Video Privacy Protection Act, Scott Kamber also sued Netflix under this statute. Netflix announced on its blog that this lawsuit has been settled, but the terms have not been made public.
8. I guess someone can appeal. Public Citizen objected, maybe they will?
__
(h/t Wired's Threat Level)
Wendy Davis at MediaPost has been following this lawsuit closely. Here is a link to her article on Judge Seeborg's decision.
Posted by Venkat at 10:42 AM | Privacy/Security
March 17, 2010
Regulating Reputational Systems Slides
By Eric Goldman
Last week, I presented my Regulating Reputational Systems talk to non-lawyers at the Jewish High Tech Community. My talk slides. I've been working on this topic now for about 18 months, and I'm finally getting closer to nailing down the arguments and writing up the papers. As you can see from the slides, I believe I have come up with an under-explored policy justification for 47 USC 230. As always, comments appreciated.
I will be giving slight variations of this talk four more times this semester:
* at the UC Berkeley School of Information on April 14, 4 pm.
* at the San Jose State School of Library and Information Science on May 11, noon. I believe this will be webcast, and I will post the details to my Twitter account.
* at Erasmus University in Rotterdam, Netherlands, on May 28.
* at the University of Amsterdam on June 1, noon.
If you would like to attend any of these event, please email me and I will provide details as they become set. If you are in the Netherlands and would like to visit professionally or socially on my trip, please email me.
Some previous versions of my reputation talk slides:
* DePaul Reputation Talk Slides (October 2009)
* George Mason Talk and Paper on Economics of Reputational Information (May 2009)
* Economics of Reputational Information Talks (Oct. 2008)
* Economics of Reputational Information Talk (Aug. 2008)
Posted by Eric at 09:07 AM | Derivative Liability , E-Commerce | TrackBack
March 16, 2010
Stratton Faxon v. Google Dismissed
By Eric Goldman
Stratton Faxon v. Google, Inc., NNH-CV-09-5031219S (Conn. Superior Ct. dismissed March 8, 2010)
Stratton Faxon v. Google was always an oddball case in the constellation of trademark owner challenges to Google AdWords. First, the plaintiff--a law firm that woke up one day in 2009 and discovered competitive keyword advertising--didn't allege trademark infringement but instead took an unusual and questionable legal path. Second, the case was filed in state court, not federal court, which made the case much more difficult to track than cases in federal court.
These oddities are now irrelevant. The court issued a "motion for judgment" on March 8 granting a motion brought by Google to dismiss the case. I haven't seen any of the underlying motions, but the net effect is that the case is closed.
However, the case may not be over. In my prior email exchanges with Stratton Faxon, they indicated that they may refile in federal court. So we'll see if this case resurrects itself.
Combined with Rescuecom giving up, Google has now whittled its pending AdWords challenges down to 8 pending cases. Furthermore, the Utah legislature has adjourned for the year without banning Google's cash cow again. In the world of Google's legal affairs, these two developments qualify as good news! Next stop: the ECJ's opinion addressing Google's trademark liability in the EU, expected one week from today.
The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 2010):
* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
Posted by Eric at 05:33 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack
March 15, 2010
Data Anonymization and Re-identification Lecture Featuring Paul Ohm, SCU, April 7
By Eric Goldman
University of Colorado law professor Paul Ohm has written one of the most provocative privacy-related papers of the past few years, Broken Promises of Privacy: Responding to the Surprising Failure of Anonymization. Using examples such as the AOL "Data Valdez" release of search logs and the NetFlix personalization contest, he shows that seemingly innocuous datasets can still become personally identifiable when combined with other data sources. This puts significant pressure on our regulatory distinctions between "personally identifiable information" and non-personally identifiable information, as the combination of datasets can convert non-PII into PII. The implications potentially shake the privacy literature to its core.
Paul will be presenting his research on April 7, 6-8 pm, at SCU. I've heard Paul present this paper a few times and it's always a treat. To spice things up, we'll have two commenters on his work: Cynthia Dwork, a computer scientist at Microsoft, and Chad Raphael, an SCU communication professors. The event is free, and it includes an hour of free CLE if you want it. You can register through this URL. Hope to see you there.
Posted by Eric at 09:36 AM | Privacy/Security | TrackBack
March 10, 2010
Utah Passes Nation's First (?) Bioprospecting Regulation
By Eric Goldman
The Utah legislature has passed SB 51, the "Utah Bioprospecting Act," which requires a government-issued license (which presumably will include a royalty cut for the state) before engaging in bioprospecting on government lands not owned by the federal government. The law is awaiting the governor's signature. If enacted, I believe this will be the nation's first state law regulating bioprospecting.
What is Bioprospecting?
Bioprospecting is the process of looking for naturally occurring animals or plants that have commercial utility. The issue is quite hot in many developing countries, which are rich in biodiversity but may be underdeveloped in research and commercialization capabilities. As a result, foreign researchers come to the country to investigate the biodiversity, identify a commercially useful native species, and then commercialize that species elsewhere without any clear compensation to the source country. We might debate the fairness of this situation, but I know that some folks have strong feelings that bioprospecting is illegitimate.
One of the main challenges with regulating bioprospecting is simply defining it. Take a look at this law's messy definition:
(1) (a) "Bioprospecting" means the removal from a natural environment for research or commercial use of: (i) a naturally occurring microorganism, plant, or fungus; or (ii) information concerning a naturally occurring microorganism's, plant's, or fungus' physical or genetic properties.
(b) "Bioprospecting" does not include: (a) horticultural cultivation, except for horticultural genetic engineering conducted in a manner otherwise constituting bioprospecting; (b) an agricultural enterprise; (c) a forest and range management practice; (d) invasive weed management; (e) Christmas tree and related sales; or (f) incidental removal of a microorganism, plant, or fungus while engaged in bona fide research or commercial enterprises.
What??? What does that mean? I think any law that has to say that it's simultaneously trying not to govern weed removal or Christmas tree farming is overly broad by definition. But look at the drafters' failed efforts to draw non-overlapping Venn diagrams. In (b)(a), how can the exclusion cover activity "conducted in a manner otherwise constituting bioprospecting"? Isn't that circular? And doesn't the (b)(f) exception swallow up the whole?
More generally, look at (1)(a)(ii). The law doesn't just regulate the removal of physical specimens, but it regulates any commercial use of information about a specimen. Huh? Does that mean that I can't publish a picture of Utah plants on state lands without the government issued-license? I wonder to what extent the contemplated licensing requirement to disseminate information about plants runs into Constitutional and federal preemption issues.
Why Did Utah Enact a Bioprospecting Law?
In the mid-2000s, Hawaii considered enacting a law about bioprospecting. I can understand this, as Hawaii is a globally leading biodiversity hotspot. Plus, there remains continuing local unrest about Hawaii's status as a state and the fate of native Hawaiians.
But Utah? I don't think of Utah either as a biodiversity leader or a self-perceived victim of colonialism or imperialism. Instead, for me, Utah's main leadership role is as the nation's leader in state legislative incompetence. While this particular law is not per se stupid (in contrast with many of Utah's efforts to regulate the Internet), this law makes some of the systematic errors I've seen from Utah laws.
First, as indicated above, the law is poorly drafted and ambiguous. I have no idea what it covers. I have the same reaction to most of Utah's efforts to regulate the Internet.
Second, I don't understand why this law rose to the top of the legislative priority queue. Part of that is because I have no idea who is bioprospecting in Utah. Are there flinty old bearded codgers, riding burros overburdened with pick axes, steel canteens and blankets, muttering to themselves that "there's biogold in them thar hills"? If not, then who's doing it, and how will this regulation affect them? Note that the Utah legislature only meets a couple of months out of the year, so they have limited space to produce laws. Given all of the other obvious legislative needs, why spend time on this law?
Third, like many other Utah laws, the law reflects an unstated assumption that if outsiders are coming into Utah to make money, the Utah government coffers deserve a little taste of the action. This brought to mind Utah's deplorable "don't spam the kids" registry, which really was just a backdoor way for Utah to try to tax out-of-state email senders. That efforts was a financial failure; I expect this law to be a financially poor decision as well.
On that point, I was shocked to see the fiscal note that this law had no appropriations and "this bill likely will not result in direct, measurable costs and/or benefits for individuals, businesses, or local governments." Really? First, if there's no law enforcement, I imagine most folks will ignore the law. Second, the state will undoubtedly incur some costs to promulgate the statute's contemplated regulations and to negotiate individual licenses with registering bioprospectors. Third, the imposition of the licensing scheme constitutes a transaction cost that discourages some of the regulated activity from occurring in the first place. Some might conclude that outcome is ultimately a good thing, but it almost assuredly has economic consequences. I cannot figure out how this bill got such a clean financial report. Given the Utah legislature's sensitivity to costs, I bet a more thoughtful fiscal report would have slowed (and probably scuttled) the bill's passage.
Posted by Eric at 10:50 AM | General , Patents | TrackBack
March 09, 2010
TradeComet v. Google Dismissed Based on Venue Selection Clause
By Eric Goldman
TradeComet.com LLC v. Google, Inc., 2010 U.S. Dist. LEXIS 20154 (SDNY March 5, 2010)
The judge has (finally) dismissed TradeComet's antitrust lawsuit against Google based on the venue selection clause in Google's AdWords contract.
The result isn't very surprising. It is consistent with recent similar rulings, such as the uncited Miller v. Facebook and Flowbee v. Google rulings. The latter ruling recently dismissed an advertiser lawsuit against Google (in that case, trademark instead of antitrust) based on the AdWords venue selection clause. The court said that TradeComet's antitrust concerns are sufficiently related to the AdWords relationship to be included within its mandatory venue selection clause.
The most interesting point is that the court upheld Google's agreement despite the fact it contains a "we can change this agreement whenever we want" provision. I've argued before that those provisions are toxic, but B2B contracts can get a little more slack than B2C contracts.
Having won yet another ruling that its AdWords venue selection clause requires lawsuits to be brought in Google's home court, it reiterates again that Google almost certainly breached its own contract by bringing a collections lawsuit against myTriggers in myTriggers' home court. Google will most likely pay for that mistake by losing its ability to pull the case back into California, even though the case has morphed into a major antitrust showdown.
Posted by Eric at 02:39 PM | Search Engines | TrackBack
March 08, 2010
Crowdsourced Ads May Not Be Protected by 47 USC 230--Subway v. Quiznos
By Eric Goldman
Doctor's Associates, Inc. v. QIP Holders LLC, 2010 WL 669870 (D. Conn. Feb. 19, 2010). My prior post on this case.
As a long-time vegetarian (over a quarter-century), I find America's obsession with "more meat" competitions simultaneously amusing and repulsive. On my personal blog, I have routinely chronicled the "burger wars" between heartland restaurants trying to outdo each other by offering bigger and bigger burgers. As far as I know, the current high-water mark is the Beer Barrel Main Event Charity Burger, a 123 pound burger that includes 80 pounds of meat. See the photo. If you're one of those people who thinks a burger can never have too much meat, good luck working on that bad boy.
Today's post involves subway sandwiches instead of burgers, but it turns out that subway sandwich restaurants’ competition over claims of having more meat is no less stiff. Quiznos kicked off the war in 2006 by launching a "double meat" line of sandwiches. Quiznos ran two TV ads comparing the meat in its sandwiches to Subway's and set up a website soliciting individuals to make and submit their own comparative digital video ads. Subway was not amused and ultimately filed a seventh amended complaint (!) over Quiznos' ad campaigns. (What a patient judge).
The parties hotly contested every aspect of the litigation, and Rebecca does a thorough recap of the lengthy ruling. I'm going to focus on the court’s discussion of the crowdsourced video ads published on Quiznos' ad campaign website, which Quiznos defended on 47 USC 230 grounds.
Citing the MCW v. Badbusinessbureau case from 2004, the court says "the critical inquiry with respect to CDA immunity in this case is whether the Defendants merely published information provided by third parties or instead were actively responsible for the creation and development of disparaging representations about Subway contained in the contestant videos."
The MCW decision was questionable even at its time, but it's bizarre to see the court reach into history for this obscure, archaic, unpublished and geographically distant (it was a TX precedent being cited in a CT court) district court precedent. To do this, the court bypasses dozens of more recent—and more thoughtful—cases, including the multiple Ripoff Report cases that have expressly and implicitly rejected the MCW case. A more natural citation would have been the Roommates.com case, which also referenced legal distinctions between active/passive websites similar to the legal standard quoted above. However, if the court had followed Roommates.com, it almost certainly would have ruled for the defense, as Quiznos didn't require illegality or even channel users towards illegality. (Rebecca makes the same point). Therefore, I'm baffled how the court got to this legal standard citing this legal precedent.
Using this odd legal standard, the court says it's up to the jury to decide if Quiznos just exercised traditional editorial control or impermissibly "actively participated in creating or developing the third-party content submitted to the Contest website."
Unquestionably, sending this case to a jury is a 230 loss, but how bad is unclear. We'll never find out what the jury would do with the case because the parties promptly settled the case after this ruling. However, a plaintiff's ability to hold a case open through trial, rather than having it disposed of earlier in the proceedings, would itself represent a significant win for plaintiffs--it would mean plaintiffs can get discovery to fish for embarrassing facts, force the defense to incur lots of litigation costs, and get a chance to tell their sob story before a jury. (FWIW, I am not aware of any 230 case that has ever reached a jury—am I forgetting something?) Nevertheless, I think very few courts will follow this precedent given the plethora of more persuasive precedents and the fact that Quiznos' crowdsourced ads were just one part of Quiznos' larger allegedly false ad campaign. Therefore, I don't expect this 230 loss to spread to many other cases.
I also don't think this case shines much light on the legitimacy of crowdsourcing ads. There's no reason to believe that crowdsourced ads are per se problematic. At the same time, if the advertiser uses the ads offline, clearly the advertiser "adopts" the ad and takes full responsibility for its contents. If the advertiser only publishes the ad online, 230 might be available but the advertiser still might tread cautiously due to the FTC Endorsement and Testimonial Guidelines, which basically ignores 230 and holds advertisers liable for certain types of third party advertisements anyway. I think 230 may nullify this part of the FTC guidelines, but most advertisers would rather not tangle with the FTC to establish the deficiencies in the FTC's thinking. As a result, I expect most advertisers will vet most crowdsourced ads, even if they only publish them only, as if the advertiser is legally responsible for the ads and not protected by 230.
BTW, the Subway v. Quiznos lawsuit isn't the only litigation over subway restaurants' claims of double meat. In an apparently unrelated lawsuit, last month a class action suit was filed over Blimpie's "Super Stacked" sandwich for overclaiming that it had double meat.
I confess some schadenfreude when I see lawsuits against meat pushers for overhyping meat quantities. I would not shed a tear if the meat pushers lock up each other in litigation death struggles and sue each other to oblivion. Of course, consumers can facilitate that outcome by refusing to patronize vendors who "compete" with each other by encouraging us to overconsume the Earth's resources.
Posted by Eric at 07:16 AM | Derivative Liability , Marketing | TrackBack
March 05, 2010
Rescuecom Abandons Its Litigation Against Google
By Eric Goldman
Today, Rescuecom issued a press release declaring victory in its litigation against Google. But it's an odd definition of "victory" given that Rescuecom has apparently voluntarily abandoned its 6 year litigation effort without any new concessions from Google. The dismissal notice.
This development reminds me a lot of the American Blinds v. Google denouement, where American Blinds also simply gave up and dropped its multi-year lawsuit without any concessions from Google. Note to future plaintiffs: if you're going to threaten Google's $20B/year cash cow, chances are pretty good that they have the resources to outlast you.
Why did Rescuecom give up? According to Rescuecom's press release, "Google has recently confirmed to Rescuecom that it has removed Rescuecom’s trademark from its Keyword Suggestion Tool." That, plus the fact that Google blocks trademark references in ad copy, means that Rescuecom feels it has "obtained two of the three things we initially sought in our complaint against Google." And if two out of three is good enough for Meat Loaf, apparently it's good enough for Rescuecom. At minimum, having low standards makes it a lot easier to declare victory when you give up.
However, this explanation is pretty hollow. Although the press release treats Google's removal of Rescuecom from the keyword suggestion tool as a new development, it appears that Google made this change IN 2005. Wendy Davis reports:
[Rescuecom CEO] Milman says he only learned last week that Google had stopped suggesting Rescuecom as a keyword. "Who knows what would have happened if they had told us back in 2005 that they had taken our name out of their keyword tool?" he said.
Hmm...I think I know the answer to that question! Then again, if getting out of the keyword suggestion tool really was one of Rescuecom's Big Three objectives all along, maybe they might have asked Google about it in 2005...or 2006...or 2007...or, well, you get the point. Spin it however they want, it's hard for Rescuecom to look good while dropping a lawsuit based on a 5 year old fact.
Nevertheless, I'm interested in knowing more about this removal. Does Google have a way for trademark owners to "opt out" of having their trademarks in its keyword suggestion tool? I would expect that option to become very popular if it were well-known. If anyone has information about how trademark owners can make an election with Google, please share it.
Given the completely disingenuous nature of declaring victory based on getting out of the keyword suggestion tool, there may be a better--and more self-interested reason--for Rescuecom to give up. Rescuecom is defending a trademark lawsuit brought by Best Buy over Rescuecom's competitive AdWords purchases of the "geek squad" trademark. Rescuecom was caught in the duplicitous position of making plaintiff-side arguments against Google while making highly contradictory defense-side arguments against Best Buy. As a result, every positive step in its Google case had the potential to degrade its position in the Best Buy case. By abandoning the Google fight, Rescuecom avoids this difficult dilemma.
As an odd byproduct of this development, Google and Rescuecom are now aligned in advancing the arguments that competitive keyword advertising in AdWords is legitimate. Isn't there a passage in the Bible about the lion and the lamb lying down together?
The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):
* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
Posted by Eric at 10:45 AM | Derivative Liability , Search Engines , Trademark | TrackBack
Eighth Circuit: No Derivative Liability Under Iowa Spam Statute -- Kramer v. Bartok
[Post by Venkat]
Kramer v. Bartok, Case No. 08-3841 (8th Cir. Feb. 19, 2010) (scribd link).
The Eighth Circuit recently reversed an award of $236 million in damages against a spam defendant based on a theory of secondary liability. The court found that the clear language of the Iowa statute only allowed for the imposition of liability against the sender.
Background: Kramer sued defendants Bartok, Perez, and Brown after allegedly receiving millions of spam emails advertising mortgage refinancing services. Kramer asserted claims, including claims under the Iowa's spam statute (then Iowa Chapter Code 714E, which while the suit was pending was replaced with Iowa Chapter Code 716A (which looks fairly different, and does not contain the term "initiate")), the Computer Fraud and Abuse Act, and trespass. According the Eighth Circuit, Kramer (who ran an ISP) actually only received twenty three offending emails, as the remaining millions of emails were blocked by Kramer's spam filter. Defendants produced no evidence at trial, and the lower court found that one of the defendants "dissembled" and sold the computers used by the enterprise. Kramer did not produce evidence that defendant Bartok actually sent the messages in question. The only evidence of Bartok's involvement was that she was "half owner of a business whose sole source of income was predicated on spamming," she signed an agreement for the procurement of mortgage leads, and she assisted Perez in destroying some of the relevant records in question.
The lower court found that Kramer produced no evidence of "actual damages," and rejected all of the claims except for the claims under Iowa's spam statute. With respect to this claim the court awarded $236 million in statutory damages ($10 per spam email).
The Eighth Circuit's ruling: The Eighth Circuit looked to the plain language of the statute and found that the statute only imposed liability on those who "use an interactive computer service to initiate the sending of bulk electronic mail." In other words, the statute was clear that it only imposed liability on someone who actually hit the send button.
Kramer argued that he had produced sufficient evidence of a civil conspiracy between Bartok and the other defendants to sustain a finding of derivative liability, but the court rejected this theory. In the court's view, if the statute didn't authorize the imposition of liability on those who conspired with the person(s) who initiated transmission of the messages (through the use of an interactive computer service), the court was not free to imply a cause of action based on this theory. While Kramer argued a common law conspiracy claim, the court found that Kramer's failure to produce evidence of actual damages precluded the imposition of derivative liability on Bartok. To allow Kramer to assert liability against Bartok based on a conspiracy theory absent evidence of actual damages would be an end-run around the statute's limited focus on those who actually sent the offending messages.
My thoughts: Derivative liability regarding spam and other types of advertising is a favorite topic of Professor Goldman's. I agree that absent clear standards, liability can move up the chain to advertisers and service providers, and this can cause obvious problems.
Here, the court interpreted a statute which by its terms only imposed liability on the person who initiated the transmission of the messages, so the court's conclusion isn't particularly surprising. The fact that the plaintiff in this case only produced 23 emails and was awarded a whopping $236 million in damages (despite having failed to put forth evidence of actual damages) was probably not lost on the court either.
How does this relate to CAN-SPAM: In the context of CAN-SPAM, the standards are slightly different. CAN-SPAM imposes liability on those who "initiate" or "procure" the initiation of noncompliant messages. "Initiate" is defined as "to originate or transmit [messages] or to procure the origination or transmission of [messages] . . . ." "Procure" is defined as "intentionally, to pay or provide other consideration to, or induce, another person to initiate [messages] on one's behalf." Where a civil claim is brought by an ISP, the term procure contains an actual knowledge or a conscious avoidance limitation. (section 7706(g)(2)) CAN-SPAM thus allows for the imposition of derivative liability, but makes it more difficult when the ISP is the one enforcing.
How have CAN-SPAM plaintiffs fared when they sought to impose this type of liability? Not very well. I haven’t done an exhaustive tally, but on the civil side there have been several defense wins (Hypertouch v. Kennedy Western, Asis Internet v. Optin Global, Fenn v. Redmond Venture). On the affiliate liability issue, these cases are typically resolved in favor of defendants on the basis that defendants were not (and had no reason to be) aware of the underlying violations. With respect to enforcement efforts by the FTC, the FTC lost a jury trial (Impulse Media), settled one case after the court found that affiliate liability is a question of fact (Cyberheat), and obtained a conviction (US v. Kilbride). (Oddly, after losing the jury trial in the Impulse Media case, the FTC sought to obtain injunctive relief against Impulse Media. The court denied this request.) Overall, the case law is largely defense favorable. Although CAN-SPAM allows for derivative liability, courts and juries have not been quick to impose it.
Related posts: "Affiliate Liability Talk Notes From SMX West"
Posted by Venkat at 09:15 AM | Derivative Liability , Marketing , Spam
March 04, 2010
Google Dismisses Some Claims in Jurin v. Google and Gets Some Attorneys' Fees
By Eric Goldman
Jurin v. Google, Inc., 2010 U.S. Dist. LEXIS 18208 (E.D. Cal. March 1, 2010)
Jurin v. Google is one of the 10 outstanding trademark-based claims against Google's AdWords programs--in this case, over advertiser purchases of Jurin's trademark "styrotrim." This particular lawsuit took a sizable hit, as Google successfully got a quick dismissal of several claims. As an added perk, the judge awarded Google $6k in legal fees for harassing litigation behavior.
The court dismisses Jurin's Lanham Act false designation of origin claim because Google never represents that it produces Styrotrim. The court says "Even if one accept as true the allegation that a 'Sponsored link' might confuse a consumer, it is hardly likely that with several different sponsored links appearing on a page that a consumer might believe each one is the true 'producer' or 'origin' of the Styrotrim product." This conclusion is consistent with the uncited Heartbrand Beef v. Lobel's case.
The court dismisses the Lanham Act false advertising claim because Google isn't a competitor of Styrotrim.
The court then dismisses a host of claims (Negligent Interference with Contractual Relations and Prospective Economic Advantage, Intentional Interference with Contractual Relations and Prospective Economic Advantage and Unjust Enrichment) on 47 USC 230 grounds. Jurin argued that Google creates content through its keyword selection tool. The court rejects this, saying that Google is just a provider of advertising space and the keyword selection tool "merely helps third parties to refine their content"--an editorial process protected by 230. The court also says that Google just provides "neutral tools" and "Defendant’s Adwords program simply allows competitors to post their digital fliers where they might be most readily received in the cyber-marketplace."
This is an interesting ruling on at least two fronts. First, I can't recall another conclusion that Google's keyword selection tool is covered by 230 (there may be others, I just can't think of them). Google's keyword selection tool has been problematic because some judges interpret it as Google steering advertisers towards third party trademarks for its own profit (see, e.g., the problems it caused in the Rescuecom case). Here, Google gets a nice judicial affirmation of the tool.
Second, the court echoes Google's mantra that it doesn't sell "keywords" but it just sells "advertising space." I have been to countless dog-and-ponies where Google lawyers have made this pitch to the audience, and it's consistently fallen flat IMO. It may be technically true that Google sells ad space and not keywords, but the reality is that Google takes money for keywords, and I think most judges would embrace substance over form. But in this case, the judge parrots Google's arguments nicely. Again my memory could be failing, but I think this is the first time a court has referenced Google as a space seller rather than a keyword seller.
[Note: I'm still working on another recent 230 ruling in the Subway v. Quiznos lawsuit--more on that soon.]
Finally, the court awards Google $6k in costs incurred the first time Jurin sued Google, which Jurin voluntarily dismissed when he lost his attorney. The court says that the claims are basically the same, so refiling harassed Google. I predict Google's likelihood of getting the $6k is about as high as the sun rising in the West tomorrow.
Despite Google's success, Jurin's trademark claims--the main issue in the lawsuit--are still on the table (Google didn't try to knock those out on the 12(b)(6)). However, the writing is on the wall for this lawsuit, and some of the language from this opinion bodes very well for Google when the court turns its attention to the trademark claims.
The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):
* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
Posted by Eric at 08:13 AM | Derivative Liability , Search Engines , Trademark | TrackBack
March 03, 2010
Why I Support HR 4364, the Proposed Federal Anti-SLAPP Bill
By Eric Goldman
In mid-December, in a move that got a little lost in the holiday shuffle, Rep. Steve Cohen (D-TN) introduced HR 4364, the “Citizen Participation Act of 2009,” proposing a federal anti-SLAPP law. This blog post explains why I enthusiastically support this bill as way to help preserve the Internet's vibrancy as an information resource.
What is a "SLAPP"?
SLAPP stands for "Strategic Lawsuit Against Public Participation." The term was coined about three decades ago by two Denver University professors, George Pring and Penelope Canan. Pring and Canan recognized that lawsuits were discouraging people from participating in vital government processes. Thus, they advocated for a statute that would curb these anti-democratic lawsuits.
How Do Anti-SLAPP Laws Work?
In the past quarter-century, more than half of the states have implemented anti-SLAPP protection. These laws vary in several key respects, but they generally have two features. First, they provide an expedited procedure for defendants to end SLAPPs early. Effectively, defendants can turn the tables on the plaintiffs, file an anti-SLAPP motion to strike the litigation, and thereby ask the court to end the lawsuit much more quickly than under traditional rules. Second, anti-SLAPP laws allow successful defendants to be awarded their legal defense costs.
Thus, anti-SLAPP laws have a number of benefits: they get meritless cases off court dockets early, they force plaintiffs to think carefully about their lawsuits’ merits, and they make defendants financially whole for improper lawsuits. The laws protect online and offline speech equally.
The Benefits of a Federal Anti-SLAPP Law
While a majority of states already have anti-SLAPP laws, a federal anti-SLAPP law would provide a baseline level of protection in those states plus provide new protection in the 20+ states that do not have an anti-SLAPP law. For more on this, see this blog post.
Why I Support the Proposed Legislation
Originally, SLAPPs were conceived as lawsuits suppressing citizens' rights to monitor government functions. Over time, we've realized that this construction is too narrow. Although we still need to protect government watchdogs, we also need to guard against plaintiffs who use litigation to remove socially valuable content from our information ecosystem.
Personally, I am especially interested in the flow of information about goods and services in our marketplace, such as consumer product reviews. All too often, vendors use actual or threatened litigation to take down content that criticizes their offerings. The proposed federal anti-SLAPP law applies to those lawsuits. Thus, if enacted, the federal anti-SLAPP law will help consumers share their true feeling about marketplace offerings with less fear of meritless lawsuits from vendors who would rather fight in court than compete.
BoingBoing’s recent resolution of a lawsuit brought by MagicJack nicely illustrates the virtues of anti-SLAPP laws. BoingBoing blogged some criticisms of MagicJack’s offerings, and MagicJack unwisely responded to that post with a lawsuit. Fortunately for BoingBoing, MagicJack sued it in California, which has a robust anti-SLAPP law. As a result, BoingBoing was able to end the lawsuit early (BoingBoing won its anti-SLAPP motion less than 3 months from complaint filing) and get the court to order MagicJack to pay its attorneys’ fees of over $50k. This story would have ended less happily for BoingBoing if the exact same lawsuit had been brought in a state without an anti-SLAPP law (or with narrower anti-SLAPP protection). In those states, even if BoingBoing had defeated the lawsuit, it would have taken much longer, and BoingBoing would have borne its $50k+ litigation costs. The federal anti-SLAPP law will ensure that content publishers throughout the country will enjoy the same protection that BoingBoing got.
For other examples of successful anti-SLAPP motions that I’ve covered on this blog, see:
* Griping Blogger Gets Fair Use and Anti-SLAPP Win--Sedgwick v. Delsman
* Gardner v. Martino (9th Cir. April 24, 2009)
* McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008)
* Stress-Relieving Company Gets Anti-SLAPPed Per 230
* Vanginderen v. Cornell (S.D. Cal. June 3, 2008)
* Optima Funding, Inc. v. Strang, 2007 WL 1430699 (Cal. Ct. App. May 16, 2007)
* Blogger Protected by Anti-SLAPP Statute--GTX v. Left
* KinderStart v. Google Dismissed--With Sanctions Against KinderStart's Counsel (the anti-SLAPP motion was denied, but it should have been granted)
* Google Wins Lawsuit Over Search Results--Maughan v. Google
Why Federal Anti-SLAPP Legislation Isn't Enough
Although I strongly support the federal anti-SLAPP legislation, it’s just a start. Only a small fraction of disputes over consumer product reviews lead to court (which then triggers anti-SLAPP coverage), so anti-SLAPP protection--though valuable in litigated cases--won't help in the vast majority of disputes. Thus, I would like to see legislation that creates a cause of action when content publishers a receive bogus cease-and-desist/nastygram takedown demand. Those illegitimate demands intimidate many recipients who fear a lawsuit, even if they would win an anti-SLAPP motion. Accordingly, using meritless threats, vendors can excise critical content from the Internet. 17 USC 512(f) provides a limited counterbalance against bogus copyright takedown notices; it could provide a useful starting point for conceptualizing a broader anti-bogus-takedown law.
How You Can Help
While there’s no effort yet to extend 17 USC 512(f) protection beyond copyright law, we do have a federal anti-SLAPP bill pending in Congress that needs your support. Learn more about this important effort from The Public Participation Project. With so many issues percolating in Congress, it would be easy for the federal anti-SLAPP bill to get overlooked. As a result, the bill will require significant grassroots support to climb up the legislative priority list. If you are interested in being actively involved in the effort, contact me or go here.
Posted by Eric at 09:43 AM | Content Regulation , Copyright , Derivative Liability | TrackBack
March 02, 2010
February 2010 Quick Links
By Eric Goldman
Copyright
* Mavericks Recording Co. v. Harper (5th Cir. Feb. 25, 2010). 17 USC 402(d) precludes an innocent infringement defense in P2P downloading case when the record companies place proper copyright notices on their works. This is consistent with language from BMG v. Gonzalez in the Seventh Circuit.
* Perfect 10 and Amazon settle on confidential terms; Perfect 10 v. Google will keep going. Previous blog coverage of this case (1, 2, 3, 4, 5).
* Veoh won in court (1, 2, 3) but still got knocked out of the marketplace.
* Project DoD, Inc. v. Federici, 2010 WL 559115 (D. Me. Feb. 11, 2010). In a 512(f) lawsuit I blogged about in December, the judge upheld the magistrate report dismissing for lack of personal jurisdiction because the plaintiff had moved and no longer had ties to Maine.
* MCS Music America, Inc. v. YAHOO Inc., 2010 WL 500430 (M.D. Tenn. Feb. 5, 2010). MCS sued Yahoo over infringement of its songs, and the court says that it can only get statutory damages for each song infringed. This means that if Yahoo performed 8 different covers of the song, MCS is only entitled to statutory damages for one infringed work.
Trademark
* Monex Deposit Co. v. Gilliam, 2010 WL 325570 (C.D. Cal. Jan, 25, 2010). The courts says a gripe site called "MonexFraud.com" may cause initial interest confusion of the Monex trademark. Are you kidding me?
* Typographically erroneous phone numbers always struck me as a much greater problem than "typosquatters."
Contracts
* Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC (3rd Cir. Jan. 25, 2010). 3rd Circuit upholds consequential damages waiver in B2B Internet connectivity contract. Prior blog discussion.
Blogging/Social Networking Sites
* Cats & Dogs Animal Hospital v. Yelp (C.D. Cal. complaint filed Feb. 24, 2010). The plaintiffs allege that Yelp violates California B&P 17200 by using a pay-for-play scheme.
* Rick Frenkel speaks about his Troll Tracker blogging days.
* In re Perry, 2010 WL 374770 (Bankr. S.D. Tex. Feb. 3, 2010). Emailing links to a third party's defamatory blog constituted "publication" of the blog for defamation purposes. The court doesn't discuss 47 USC 230 at all!
* Cunningham v. West Virginia, 2010 WL 415257 (S.D. W.Va. Jan. 26, 2010). MySpace does not impermissibly discriminate against sex offenders.
* Evans v. Bayer, 2010 WL 521119(S.D. Fla. Feb 12, 2010). A student's off-campus creation of a Facebook Group called "Ms. Sarah Phelps is the worst teacher I've ever met" may not be an appropriate grounds for school discipline.
* Snowball fight leads to a rampage at Macy's? Blame Facebook!
* Marshall v. City of Savannah, 2010 WL 537852 (11th Cir. Feb. 17, 2010). A probationary firefighter posted an official fire department photo on her MySpace page. After a reprimand, the employment relationship deteriorated and she was fired. The 11th Circuit affirms the dismissal of her discrimination and retaliation claims.
* BoingBoing gets an anti-SLAPP win--including its attorneys' fees--in a defamation lawsuit over one of its blog posts. The anti-SLAPP ruling.
* Berkery v. Estate of Stuart, 2010 WL 610631 (N.J. Super. A.D. Feb. 23, 2010). "The investigative function an author performs is not substantively different from an investigative journalist. The dispositive element is not the form of the investigative process. In an era marked by a diminution of the classic newsmedia and the print investigative journalist and the proliferation of investigative reporting in media such as cable television, documentary journalism-both televisions and movies-internet reporting and blogging, the need for protection remains the same. Whether Hornblum was writing a book, news article, a screenplay or a blog, the substance of his body of work remains the same."
Search Engines
* After some innuendo about Microsoft’s role in harassing Google on antitrust/competition issues, Microsoft effectively admits as much. Also see this Wall Street Journal article on the Microsoft-Google tussles.
* Search Engine Land: Google AdSense Using Search History In Contextual Matching
* Munger v. State, 2010 WL 537641(N.C. App. Feb. 16, 2010). Rejecting a taxpayer challenge against a NC law designed to provide financial incentives for Google to build a facility there.
* Lengthy Wired article on Google's algorithm.
* Nature: Chinese researchers don’t want to lose access to Google. My blog post on this topic.
* Business Insider: In Case You Had Any Doubts About Where Google's Revenue Comes From
Advertising
* Thomas O'Toole: Does "No Contract" Really Mean No Contract?
* MediaPost: Start-Up Links 65 Million IP Addresses To Users, Readies Targeting Platform. This is not going to end well.
* More troubling words for online advertisers from FTC BCP Director David Vladeck.
* Zelotes v. Rousseau (Conn. Grievance Committee). Attorneys participating in an Internet lead generation system that allocated leads geographically didn't violate the attorney Rules of Professional Conduct.
Online Crimes
* F.T.C. v. Pricewert LLC, 2010 WL 329913 (N.D. Cal. Jan. 20, 2010). FTC gets a default injunction against an Internet access provider that allegedly provided connectivity for activities such as child pornography, botnets, spyware, and viruses.
* US v. Little. The Eleventh Circuit disagrees with the Ninth Circuit regarding the appropriate geographic scope to measure the obscenity of Internet material.
* 3 Google executives were convicted in Italy of criminal privacy violations for a user-uploaded video to Google Video. NYT article. Google's response. A refresher on the Felix Somm conviction from 1998.
* Online ticket sellers are getting the smackdown. Criminal prosecutions of online ticket brokers who allegedly played dirty in jumping the queue. The FTC cracks down on Ticketmaster and warns other online ticket sellers.
Posted by Eric at 05:04 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack
March 01, 2010
Ninth Circuit: Creditor Can Execute Against Domain Name Where Registry is Located -- Office Depot v. Zuccarini
[Post by Venkat]
The Ninth Circuit affirmed the district court's ruling in Office Depot v. Zuccarini [Scribd link], agreeing that a creditor may levy against a domain name in the jurisdiction where the domain name registry is located. The decision is significant for two reasons. First, it affirms (or reaffirms) that domain names are property subject to the claims of creditors. Second, it allows creditors to proceed against domain names where the registry is located, thus allowing creditors to proceed against domain names in one proceeding and more importantly levy against domain names located abroad (where the registry is located in the United States). Overall, this makes getting at a domain name much easier for creditors.
Background: Office Depot originally obtained a judgment against frequent cybersquatting defendant John Zuccarini. Office Depot then assigned the judgment to DS Holdings. Office Depot obtained the judgment in 2000 and it's surprising that 10 years later the judgment is finally being enforced against something. Although Zuccarini is proceeding pro se, it seems like he was or became well versed in putting up roadblocks and delaying resolution of the litigation.
DS went after 190 .com domain names that were registered in Zuccarini's name. DS originally tried unsuccessfully to have the domain names transferred directly to it. (This was the technique successfully used by the plaintiff in Bosh v. Zavala.) Later, DS sought to have a receiver appointed over the domain names. The district court granted DS's request to have the receiver appointed, and Zuccarini appealed. Zuccarini's appeal focused on whether it was proper to appoint the receiver in the Northern District of California, since the domain names were not necessarily "located" there.
The court's ruling: The court runs through basic principles of in rem jurisdiction and what rules apply. The court then looks to federal rules to determine where the receiver should be appointed in this case. Finding no applicable federal rule, the court looks to California law. California law provides that a writ of execution may be issued "in the county where the levy is to be made." With this in the background, the two questions presented by the court are: (1) "are domain names property that is subject to execution?" and (2) "if so, where are the domain names located for purposes of execution?"
With respect to the first question, the court cites to Kremen v. Cohen, and easily concludes that (under California law) "domain names are intangible property subject to a writ of execution." Kremen undermined Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (Va. 2000), a Virginia case widely cited for the proposition that creditors cannot get at domain names because domain names are contract rights rather then property. To the extent Kremen did not refute Umbro, this decision definitely provides the necessary ammunition to creditors. (Again, collection is state-specific, and apart from the analysis of the nature of domain names, the outcome in these cases turns on the statute in question, which vary from state to state. That said, I think given the robust marketplace in domain names, Umbro's conception of the domain name as a personal services agreement seems outdated, and most courts will easily recognize this.)
With respect to the second question, the court acknowledges that "attaching a situs to intangible property is ... a legal fiction," and the determination must be made in a "context-specific" manner. Fairness was relevant to the court's determination of the appropriate situs, and the court was understandably not receptive to Zuccarini's policy arguments that allowing a court to issue an order directed to the registry would mean that every .com and .net domain name could be levied through courts in the Northern District of California. The court also looked to the ACPA, which provides for in rem jurisdiction over certain cases where the "registrar, registry, or other domain name authority" is located. Although this was not an ACPA case, the court found the structure set up by the statute persuasive and that the writ was appropriately issued from Northern District of California since VeriSign (the registry for .com domains) is located there.
My reaction: The decision clears up two things. Although post Kremen v. Cohen there shouldn't have been much dispute that domain names are property which are subject to the claims of creditors, the case clears up any lingering doubt that may have existed. (Kremen and this case applied California law, but the result shouldn't vary much across other states.) Second, the decision makes clear that a court which has jurisdiction over the registry can issue an order allowing the creditor to get at the domain names. The case also implicitly affirms that getting a receiver appointed to sell the domain names is the appropriate route for the creditor. Getting the name transferred to the creditor is not a remedy allowed under California law (Palacio Del Mar Homeowners Ass'n, Inc. v. McMahon). Additionally, a transfer of domain names from a cybersquatter to a judgment creditor raises some issues around potential infringement of third party rights through sales or other exploitation of the domain names. (See this post on Bosh v. Zavala for some discussion of those issues.) The method ultimately used by DS in this case (a receiver) avoids all of these issues, or at least shifts them over to the receiver rather than the creditor.
One of the more significant aspects of the case is that the ruling makes clear that regardless of whether a domain name is registered through a foreign registrar, a court having jurisdiction over the registry can issue an order directing transfer of the domain names to a receiver. With respect to .com and .net domain names, this means that creditors can try to get at these domain names through proceeding in the Northern District of California (as the court notes, VeriSign is the registry for .com and .net domain names and is headquartered in Mountain View). While the ACPA allows plaintiffs to file in rem suits where the registry is located, it's nice (for creditors) to have a similar ruling in the post-judgment context, and one from the Ninth Circuit as well.
Will this cause a rush of similar claims to be filed in the Northern District of California? It's tough to say, but even post Kremen, it does not seem like there's been a ton of post-judgment collections activity with respect to domain names. From a practitioner's standpoint, it's certainly nice to have this rule on the books.
An odd footnote: Zuccarini is a colorful character whose internet exploits have gotten him in trouble with the law. He was arrested in 2003. (Here's a post at CircleID rounding up reactions to his arrest.) According to his Wikipedia entry which contains a link to a Bureau of Prisons search, he was released in 2005.
Previous post: "Domain names as property subject to creditor claims -- Bosh v. Zavala"
Additional coverage: Mike Atkins covers the ruling in a post here.
Posted by Venkat at 06:58 AM | Domain Names , Internet History , Trademark