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April 30, 2010
Website Gets 230 Immunity Despite Claim of Site Content Accuracy--Milo v. Martin
By Eric Goldman
Milo v. Martin, 2010 WL 1708895 (Tex. App. Ct. April 29, 2010)
This case involves allegedly defamatory "guestbook" messages posted by unknown users to a website entitled "The Watchdog." Framed like that, the precedent says the website should get an easy and uncontroversial 47 USC 230 dismissal (and IMO Rule 11 sanctionable).
The plaintiffs try to get around 230 by citing The Watchdog's first page, which contained the following statements:
The WATCHDOG
The unfiltered truth about Conroe politics and your tax dollars.
The Watchdog is a monthly publication by newsletter and website. It contains facts believed to be totally accurate by sources with character and truthfulness as their primary attributes. Our agenda is the truth and nothing less. Our sources and any information obtained are absolutely confidential and will remain so.
The plaintiffs argue that by asserting the website content's accuracy, The Watchdog "developed" the defamatory content and thus became a content provider of the user-supplied content. The majority doesn't bite, saying:
The Watchdog's failure to verify the accuracy of the information in the posts in issue here does not, in itself, make the Watchdog the "information content provider" of the defamatory statements about which [the plaintiffs] complain.
The court further rejects the plaintiff's arguments on several other grounds:
* this statement was not a guarantee against inaccuracies on the site
* the statement doesn't apply to the guestbook, which readers would have quickly assessed was not an area the site operators were policing for accuracy, especially because users had posted critical views of The Watchdog to the guestbook.
In its concluding remarks about the defamation claim, the court (like so many others) cites Roommates.com for the defense, saying that the plaintiffs did not provide any evidence that The Watchdog itself layered the allegedly unlawful material onto the user-supplied content.
The majority opinion sidesteps whether 230 would preempt an intentional infliction of emotional distress claim (it does if the claim is based on third party content—see, e.g., Barnes and Friendfinder), instead concluding that The Watchdog lacked the requisite scienter/bad faith.
The majority opinion concludes with a gratuitous parting shot at Congress:
We note our concern that section 230 does not provide a right to request a website's owner to remove false and defamatory posts placed on a website by third parties, and does not provide the injured person with a remedy in the event the website's owner then fails to promptly remove defamatory posts from its site, at least in the absence of extreme and outrageous circumstances that are not present here. Instead, Congress chose with only narrow exception to protect internet service providers from their potential liability for publishing false and defamatory content when that content is created by third parties and when the interactive computer service has not acted as an information content provider. Despite our concerns about section 230's breadth, the trial court did not err in applying section 230 to render summary judgment in this case.
Get in line with the other judges that dislike 230. It's a growing queue.
The concurring opinion bristles with even more hostility towards 230. I don't think I can do it justice by trying to summarize the arguments, in part because they are novel bordering on nonsensical. If I understand the concurring judge's arguments correctly (a big if), he collapses 230(c)(1) and 230(c)(2) into a single operative provision and uses the "good faith" language from 230(c)(2)(A) to restrict the availability of the 230(c)(1) immunity. This would be a crazy (mis)reading of 230, and fortunately the majority judges' cooler heads prevailed.
The concurring judge uses his odd logic to conclude that "In my view, if a malicious website operator intentionally and unreasonably refuses to delete an anonymous third-party's obviously defamatory statement, a claim based on an intentional tort may be asserted in the appropriate circumstances against the operator under Texas law." I suspect this is why the majority sidestepped a definitive conclusion that 230 preempts intentional infliction of emotional distress claims and ruled instead on scienter grounds. Even the concurring judge agreed that the defendants here did not engage in the required "extreme and outrageous" conduct by failing to remove the post because (1) the plaintiffs didn't make the removal request until after the litigation started, and (2) at that point, the defendants relied on their counsel's advice not to remove the post (presumably for evidence spoliation purposes).
Even though we get some fresh/novel/crazy readings of 230 here, the opinions suggest that everyone involved in the litigation missed at least two key points:
1) the takedown/stay-up decision is an editorial one, and 230 categorically protects these editorial decisions however they come out. So all of the concurring opinion's machinations about the website’s decision not to remove are completely immaterial in light of 230.
2) the plaintiffs might have had more success with a Mazur-style attack, skipping the defamation claim against the website and instead trying to hold the website liable for its first party marketing representations. Here, the website voluntarily announced that it "contains facts believed to be totally accurate by sources with character and truthfulness as their primary attributes." What, if anything, did the website do to make that statement correct with respect to the guestbook postings? If the answer is nothing, that creates an opportunity to hammer the defendants for possibly bogus marketing representations. The Mazur attack might not have succeeded even in this case; the majority opinion indicates that site visitors would not have assumed the marketing representations extended to the guestbook postings. Nevertheless, it would have been interesting to see the discussion (especially given both the majority and concurring judges' antipathy towards 230) if the plaintiffs had framed this case about the marketing representations specifically and not the defamatory postings.
For more on the interplay between marketing representations and 230, see, e.g.:
* 47 USC 230 and Consumer Protection Talk Notes
* 47 USC 230 Talk at Fordham
* Ninth Circuit Mucks Up 47 USC 230 Jurisprudence....AGAIN!?--Barnes v. Yahoo
Posted by Eric at 11:09 AM | Content Regulation , Derivative Liability | TrackBack
April 29, 2010
Online Defamation Action Can Have Only One Defendant--Novins v. Cannon
By Eric Goldman
Novins v. Cannon, 2010 WL 1688695 (D. N.J. April 27, 2010). The CMLP page on Novins' initial demand letter. The CMLP page on the lawsuit. An aborted lawsuit blog putatively by Novins.
This is a defamation action over a USENET post. Doing research for this blog post required me to go back into USENET, a place I haven't been in years, and I was instantly reminded why I don't go there any more. Putting aside the signal-to-noise ratio, I simply could not intellectually comprehend most of the posts I saw. It's like the posts were written for people who live in a parallel English-speaking universe with a very different grammar and logic than mine. Who is still reading and writing this stuff??? And who in the world takes anything in an unmoderated USENET group seriously???
Charles Novins is an attorney. On Feb. 13, 2008, a person using the name Kevin Cannon posted to several USENET groups (apparently, none topical, e.g., alt.culture.alaska) a not-nice-if-untrue post entitled "Law Offices of Charles Novins hires drug addicts to fill your legal needs." The text is also attached to the end of the original complaint. Novins alleges that the post cost his firm money and spooked clients, prospective employees and colleagues.
Novins sued a whole bunch of people. The complaint is opaque about what role these people played in publishing the defamatory post but, as it turns out, it doesn't matter. The court says that 47 USC 230 does not immunize the post's author (presumptively Cannon), but it applies to everyone else regardless of their role as publishers/republishers/whatever. Effectively, then, the court's logic indicates there can only be one defendant in an online defamation action--the originator of the defamatory content. Everyone else should be protected by 230, period. As the court says:
it does not matter how Defendants republished the alleged defamatory statements—whether by email, website post, or some other method. The point is that all the Defendants in this case—with the exception of Cannon—acted as re-publishers of another person’s information, and as such they are protected by the CDA.
This ruling just reinforces what we already knew, but it is a good reminder that Web 2.0 participants (and even USENET participants) will not be liable for other people's content.
Posted by Eric at 08:16 AM | Content Regulation , Derivative Liability | TrackBack
April 28, 2010
Record Album Only Supports One Statutory Damages Award--Bryant v. Media Right
By Eric Goldman
Bryant v. Media Right Productions, Inc., 09-2600-cv (2d Cir. April 27, 2010). My previous blog post on this case under the name Bryant v. Europadisk.
Wow, talk about snatching defeat from the jaws of victory. The plaintiffs produced 2 copyrighted albums containing 10 songs each, "Songs for Dogs" and "Songs for Cats," and obtained copyright registrations for the albums and at least some of the individual songs. The plaintiffs retained defendant Media Right to generate album sales for a 20% royalty, but the agreement only permitted Media Right to sell the physical copies it obtained from the plaintiffs, not to make new copies. In its effort to stimulate demand, Media Right erroneously licensed defendant Orchard to offer digital downloads. These albums appear to be niche-y offerings, so perhaps it's not surprising that the albums were not huge hits:
From April 1, 2002 to April 8, 2008, Orchard generated $12.14 in revenues from sales of physical copies of the Albums, and $578.91 from downloads of digital copies of the Albums and of individual songs.
Plaintiffs' share of this meager revenue stream was $331, which Media Right did not pay by mistake.
The district court held that both Media Right and Orchard committed copyright infringement, so now we move onto damages. Due to the plaintiffs' copyright registrations and the trivial actual damages, the plaintiffs sought statutory damages and attorneys' fees. However, the district court made three crucial rulings that gutted the plaintiffs' damages:
* each album constituted a single "work" for statutory damages calculations
* Media Right had not infringed willfully, and Orchard had infringed innocently
* in its equitable discretion, the judge did not award any attorneys' fees
So given that 2 albums were infringed, the judge awarded the statutory minimum against Orchard (2 x $200 = $400) and $1,000 per album against Media Right (2 x $1,000 = $2,000), for a total award to the plaintiffs of $2,400.
The Second Circuit upholds all of these decisions on appeal. In particular, this appears to be the first Second Circuit opinion (and the first appellate opinion generally under the 1976 Act?) holding that an infringed record album is a single work for statutory damages purposes, so the copyright owner is not entitled to separate awards for each individual song on the album. As the court says:
Based on a plain reading of the statute, therefore, infringement of an album should result in only one statutory damage award. The fact that each song may have received a separate copyright is irrelevant to this analysis.
In an era where the record album is dying/dead and consumers pay to download individual tracks regularly, this ruling seems a little anachronistic. Nevertheless, the court's statutory reading persuaded me.
Here's the kicker. At the end of the opinion, the court says:
Appellees also were reasonable in trying to resolve the case short of trial: Appellees made an Offer of Judgment in the amount of $3000, which Appellants rejected, in favor of continuing to demand over $1 million in damages, notwithstanding the evidence that Appellees had received less than $600 in revenues from infringing sales.
[Note: presumably the plaintiffs claimed an alleged case value of $6M--20 songs x 2 defendants x $150,000 maximum statutory damages for each willful infringement per song. Perhaps they claimed a case value of $9M, because they unsuccessfully argued that Media Right's CEO should be independently liable for statutory damages awards. Given these lofty calculations, the plaintiffs may have felt were already being generous to the defendants by offering to take only $1M.]
Isn't this so classic? I see this far too often: a copyright owner is so angry about the infringement and so dazzled by the prospects of winning the damages lottery that the copyright owner makes completely unreasonable financial demands to settle. As it turns out, the defendants' settlement offer was spot-on, but there was no possibility of settlement when the plaintiffs misjudged the case's value by over 400X. But in the end, their misjudgment will cost the plaintiffs significantly. Their final award was undoubtedly less than their costs; I'm sure $2,400 doesn't cover their out-of-pocket litigation costs to get a Second Circuit opinion, even if their attorney took the case on contingency...and I shudder to think about how badly the plaintiffs played it if they actually paid their attorneys. Either way, this is a classic Pyrrhic victory almost certainly attributable to greed.
Now, the coup de grace would be if the defendants can win a Rule 68 motion and get their attorneys' fees for the plaintiffs' continued litigation after they got a settlement offer ($3,000) that was better than their actual award ($2,400). As I recently blogged in the Veoh case, it's not clear to me how defendants can get a Rule 68 payoff in copyright cases. I would certainly enjoy the irony if the defendants get their attorneys' fees awarded here.
Posted by Eric at 11:28 AM | Copyright | TrackBack
April 27, 2010
Interesting Database Scraping Case Survives Summary Judgment--Snap-On Business Solutions v. O'Neil
[Post by Venkat, with additional comments from Eric below]
Snap-on Business Solutions Inc. v. O'Neil & Assocs., Inc. (N.D. Ohio April 16, 2010) [scribd]
Snap-on is one of those cases that's great because the court canvasses the various claims that come into play in the increasingly common scenario when someone accesses a computer or network to extract data following termination of (or outside of) a contractual relationship. (The practice of extracting data from a website is commonly known as 'scraping'.) The court punts based on the existence of factual disputes, but the court's order is well worth a read just because it lays out the issues and theories.
The background facts are straightforward. Mitsubishi hired Snap-on to build a database of parts data which Mitsubishi dealers could then access online. Mitsubishi provided the underlying documents and images (parts information) to Snap-on, who converted them and built a "searchable database with linked data and images." At some point, Mitsubishi decided to move the parts database over to O'Neil, instead of Snap-on. When Mitsubishi asked for a copy of the database, Snap-on predictably declined. Snap-on told Mitsubishi that Mitsubishi could have the database, but would have to pay an extra fee. Meanwhile, O'Neil, Mitsubishi's new vendor suggested that it could extract the data from Snap-on's servers using O'Neil "scraper tool." O'Neil ran the scraping program, and used log-ins provided by Mitsubishi in the process of gathering the data. According to testimony from Snap-on, O'Neil's access of Snap-on's website caused Snap-on's website to "crash" in at least one instance.
Snap-on sued O'Neil (and interestingly not Mitsubishi) alleging Computer Fraud and Abuse Act, trespass to chattels, unjust enrichment, breach of contract, copyright infringement, and misappropriation of trade secrets.
Computer Fraud and Abuse Act: The key question on the Computer Fraud and Abuse Act claim was whether O'Neil's access of the website was "without authorization." The court held that the underlying agreement between Mitsubishi and Snap-on did not clearly resolve the question of whether Mitsubishi could authorize O'Neil to access Snap-on's website and servers and, whether even assuming Mitsubishi had this ability, Mitsubishi somehow lost it.
I think the court came to the correct conclusion on whether the access was without authorization. There's a split of authority in the employment context as to whether an employee's access to the employer's servers for the employee's own purposes constitutes "unauthorized access," but this case doesn't implicate that scenario. (Jeff Neuburger covers the 9th Circuit's recent ruling in LVRC Holdings, LLC v. Brekka, which acknowledges this split.) Here, the parties had an agreement, and the only viable argument by O'Neil on the unauthorized access issue was that Mitsubishi had authorized O'Neil to access Snap-on's computers and servers. (Since you had to log-in to access the website, O'Neil could not argue that Snap-on impliedly authorized everyone (including search engines) to access its site.) The terms of the agreement between the parties would resolve this issue and the agreement didn't provide a definitive answer, at least at the summary judgment stage.
Trespass to Chattels: Snap-on also asserted a trespass claim based on damage or temporary deprivation of the ability to use its servers. The court also declined to resolve this issue on summary judgment, finding that Snap-on presented sufficient evidence to find that O'Neil's unauthorized access caused Snap-on's servers to crash and "deprived Snap-on of their use for a substantial time.
O'Neil argued that copyright law preempts Snap-on's trespass claim. The court summarily (and in a conclusory fashion) rejects this argument, finding that Snap-on's argument seeks to protect the integrity of its computer servers, rather than its "possessory interest in the [software] or accompanying database."
Unjust Enrichment: The court finds that Snap-on's unjust enrichment claims were preempted by the Copyright Act since Snap-on failed to provide any evidence as to how the unjust infringement claims were based on rights distinct from Snap-on's rights as a copyright owner.
Breach of Contract: Snap-on also asserted a claim for a breach of its end user license agreement. The court declined to dismiss this claim based on the existence of factual dispute as to whether the parties entered the EULA and whether O'Neil breached it. Surprisingly, Snap-on's website required a log-in but only contained a statement that "[the] use of and access to the information on [Snap-on's] site is subject to the terms and conditions set out in [Snap-on's] legal statement." Snap-on did not users to check the box, acknowledging that they read and agreed to the end user terms.
Copyright Infringement: Snap-on knew it had an uphill battle on the copyright claim for a few reasons. First, much of the material (such as the images) is owned by Mitsubishi to begin with. Second, it's tough for anyone to argue that pricing and parts information is copyrightable. With this in mind, Snap-on argued that the "database structure" is entitled to copyright protection and Snap-on owned the copyrights in the structure.
The court went through the Feist analysis. In Feist, the court held that a "factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but the copyright is limited to the particular selection or arrangement. In no event may copyright extend to the facts themselves." Lower courts have applied Feist and found that databases containing facts may be copyrightable. O'Neil argued that the "arrangement" or the database structure was obvious and was thus not entitled to copyright protection. The court again agrees with Snap-on that factual disputes preclude summary judgment on copyrightability and ownership.
The court's conclusion on the copyright issue seemed the most problematic. Even if Snap-on owned some part of the underlying arrangement or database structure, did O'Neil "copy" the structure, or otherwise exercise any rights exclusive to the copyright owner? This is a tough sell. Also, on the ownership issue, I would think Mitsubishi would have a colorable argument that even if it didn't own the copyright, it should be treated as a joint owner along with Snap-on?
Trade Secrets: Finally, the court also declines to grant summary judgment on Snap-on's trade secrets claims. I'm not sure what trade secrets Snap-on is using to support its claim, and I'm skeptical that any trade secrets exist here that O'Neil misappropriated. However, given that the court declined to grant summary judgment on the other claims, it wasn't the end of the world for the court to let this claim go to the jury as well.
__
Apart from canvassing the various legal theories that come into play in this type of a factual scenario, the case also offers a few practice pointers.
First, if someone is hosting or storing data for you, it makes sense to have a provision in the agreement that allows you to get access to the data at the termination of the relationship, regardless of any contractual dispute that may arise between the parties. The party with physical access to the data will have leverage as a practical matter, and this is the type of thing contractual language should address. As a last resort, the party who may be in a position to extract the data should have an unbridled ongoing right to extract the data during the course of the relationship. The agreement should also have a notice and breach provision that would prevent the summary denial or revocation of authorization.
Second, I'm surprised there wasn't a clear ownership clause in the agreement that said Mitsubishi owns the underlying data, the database structure, and any copyrightable elements in the database. A determination by the court that Snap-on owns some copyrights in the database structure could cause problems down the road for Mitsubishi. There are many reasons why it made sense for Mitsubishi to own the data, and Snap-on doesn't have much of a business justification for owning the data because it can't use it at the termination of the relationship. As a last resort, Mitsubishi should have had a broad license to the data.
Third, the agreement should contain terms allowing Mitsubishi to authorize third parties the right to access Snap-on's servers and any copyrighted material, at least for back-up and archiving purposes.
Fourth, if you are a website that is looking to prevent scraping, ownership of the underlying data and restrictions on access (such as a log-in) help significantly. Professor Goldman's comments below highlight that scraping is problematic from a legal standpoint. However, two things that bolstered Snap-on’s claims are its ownership of the data and the fact that O’Neil accessed the site through a log-in which it wasn’t clearly authorized to use. This, coupled with the fact that Snap-on was in physical possession of the data at the termination of the relationship, pretty much put it in the driver’s seat.
Finally, Snap-on's contract formation process could have been cleaner. Where you have a situation involving access of a website for a business purpose (where the person is accessing data that they need) there's much less risk of people declining to access your website based on additional hurdles in the form of click throughs or check the box. In the consumer setting, websites often weigh certainty of contract formation against customer conversion, but this isn't really present in Snap-on's case. I guess what I'm saying in a long-winded way was that Snap-on should have implemented a mandatory, non-leaky, clickthrough, as discussed in Professor Goldman's post covering Scherillo v. Dun & Bradstreet.
____________________________
Eric's comments:
This is such a rich and interesting case that both Venkat and I wanted to cover it. I am frequently asked if scraping is legal, and the short answer is that (a) possibly not, but (b) people regularly do it anyway. This case illustrates the difficulty of doing scraping legally, and I highly recommend reading this case to anyone who thinks scraping solves a business problem they are having. If anything, this case was unusually defense-favorable because the replacement vendor (O'Neil) was scraping the customer’s (Mitsubishi’s) data at the customer’s request. Yet, because that data resided on Snap-on's servers, O'Neil is still staring down the barrel of copyright, contract, CFAA and common law trespass to chattels claims. If I were on the defense team, I'd be whipping out my checkbook and angling for a settlement, because I expect this case will not play well in front of a jury.
This case is slightly similar to a case from earlier this year that I never got a chance to blog, Edgenet v. Home Depot. In both Edgenet and this case, a big company retained an outsourced vendor to maintain and enhance an obviously unwieldy product catalog, and legal tussles ensued when the customer and vendor divorced. According to this opinion, Mitsubishi thought it had procured the IP rights to Snap-on's enhanced database, but Snap-on thought otherwise and demanded extra money to get something Mitsubishi thought it had already bought. As Venkat indicates, this reinforces the practice pointer that customers always need to have a clear exit strategy nailed down upfront whenever they enter into an outsourcing relationship.
The case is a little less clear about Mitsubishi's ability to get interim deliveries of the database pre-termination. (The case suggests that Snap-on tried to charge for this as well). As Venkat also indicates, this violates another rule of outsourcing--without a copy of its database, Mitsubishi was never in control of its fate and continuously vulnerable to Snap-on deciding to play a hold-up game.
When Mitsubishi finally decided to go with Plan B and retain O'Neil as Snap-on's replacement vendor, a series of poor judgments followed. Mitsubishi decided it was too expensive to have O'Neil replicate the work Snap-on had done, and Mitsubishi apparently decided it was too expensive to pay Snap-on for the one-time delivery from its database. But what did Mitsubishi expect--that Snap-on expected to be paid for delivering the data but would acquiesce to free scraping? Snap-on seems to have made it clear that its business model included payment for getting Mitsubishi data out of Snap-on's database, so Mitsubishi had to know that any alternative courses of action were dicey.
Then O'Neil, presumably trying to be helpful, offered the scraping option. Any lawyer in the process should have kiboshed the idea on the spot. Instead, Mitsubishi gave O'Neil some login credentials in apparent violation of the Snap-on agreement. This reminded me of the Oracle v. SAP lawsuit, which is not going to end well for SAP.
The scraping process did not go well, either. It appears the scraping tool was misconfigured because it allegedly caused enormous traffic spikes that ultimately crashed the site at least once (and maybe twice). Even if the court follows the more restrictive Hamidi approach to common law trespass to chattels requiring damage to computer system resources, this qualifies. Snap-on blocked the scraper's IP address, so O'Neil offered to continue using a different IP address (a big no-no in my guide to "legitimate" scraping) but only if Mitsubishi signed an indemnity agreement...which Mitsubishi signed. What??? Are you kidding me??? It's hard to wave a bigger red flag of problems ahead than to have a vendor say that it will only continue if it gets an indemnity agreement. Fortunately for O'Neil, the indemnity agreement may mean that O'Neil won't be writing checks when the jury says nyet; unfortunately for O'Neil, the indemnity agreement won't help if the feds decide to bring a criminal CFAA prosecution. Snap-on blocked the second IP address, O'Neil stopped scraping, and Snap-on decided to sue.
Where were the lawyers in this process? I'm shocked that Mitsubishi's lawyer didn't shoot down the initial scraping proposal. Scraping was a classic engineer's solution to a legal problem. But even if the lawyer never got a chance to speak up then, surely lawyers got involved when O'Neil tendered the indemnity agreement to Mitsubishi. That they didn't put their foot down then blows my mind. Given Snap-on's delays, it appears that Snap-on might not have even sued if O'Neil hadn't reinitiated scraping via a second IP address, so the indemnity agreement should have given Mitsubishi and O'Neil enough time and warning to realize that the engineering solution had failed and it was time to seek a legal solution.
As Venkat recaps, the legal rulings are fairly straightforward given our standard understandings of scraping law. However, they illustrate that despite its ubiquity, scraping may not be legally defensible when challenged in court--even, in this case, when Mitsubishi was trying to retrieve "its own" data.
Finally, this case is a microcosm of the broader IP battles over product catalog and taxonomical data. See my notes from my 2007 talk about IP rights in taxonomies. I don't have a solution to these IP battles, but I continue to wonder about the social benefits we could obtain if a global product catalog existed that everyone could freely use.
Posted by Venkat at 09:50 AM | Copyright , E-Commerce , Licensing/Contracts , Trade Secrets , Trespass to Chattels
April 26, 2010
Amazon Wins Keyword Advertising Suit--Video Professor v. Amazon
By Eric Goldman
Video Professor, Inc. v . Amazon.com, Inc., 1:09-cv-00636-REB-KLM (D. Colo. April 21, 2010)
Video Professor has been involved in a few interesting legal scrapes. For example, you may recall that in 2007 they launched a major crackdown against the publishers of negative product reviews. See this recap.
In this lawsuit, Video Professor sued Amazon for bidding on the keyword "video professor" and then displaying competitive options on the linked landing page. This type of fact pattern--online retailers advertising on third party trademarks to promote competitive alternatives--has created significant confusion for trademark law. See the irresolute rulings in BabyAge v. Leachco (involving the alleged misuse of product reviews to redirect a retailer's consumers to a house product) and Hearts on Fire v. Blue Nile (a retailer buying keywords for a manufacturer's product it didn't sell).
In Amazon's case, this should be a laughably easy case. So long as Amazon has any legitimate Video Professor products in inventory--even if it or third party vendors are reselling used Video Professor goods via the First Sale doctrine--it should have the right to accurately advertise that fact. See Tiffany v. eBay. The fact that consumers might redirect to other offerings once they get into the retailer's premise is completely irrelevant. As I explain in gory detail in my Brand Spillovers paper, using third party trademarks to generate consumer interest and redirect them to other products is an essential part of offline retailing and virtually unchallenged by anyone. Yet, when the same behavior happens online, people freak out. My paper concludes that these freakouts are due to cyberspace exceptionalism, not any rational or doctrine-based concerns.
Amazon doesn't win this case on First Sale grounds (although it should have). Instead, Video Professor was an Amazon vendor for a while, and Amazon makes vendors enter into a "Vendor Manual" that contains a perpetual trademark license. Therefore, Amazon successfully defended its keyword purchases as being authorized by this perpetual trademark license. Summary judgment for Amazon. This is a neat legal trick by Amazon and almost assuredly a boilerplate "gotcha" for most Amazon vendors, who probably didn't fully understand the implications of the boilerplate language. Then again, I just argued that Amazon should have this right as a matter of default trademark law, so I don't think vendors agreeing to Amazon's Vendor Manual are giving up any legal rights they actually had.
This case illustrates the increasing importance of contracts in governing keyword advertising purchases, a point I mention in my latest keyword advertising legal recap slides. Here, Amazon was able to slip in a perpetual right to buy its vendors' trademarks as keywords into its vendor contract. In theory, if Video Professor objected, it should have rejected the Vendor Manual clause AND promulgated its own more restrictive contractual restrictions on Amazon's keyword purchases.
For those of you who rely on buying third party trademarks as keywords, this case might spur you to redouble efforts to get contractual permission (one way or another) from the third parties. That contractual consent may be highly effective at fending off future cyberspace exceptionalist freakouts by trademark owners.
Posted by Eric at 11:52 AM | Licensing/Contracts , Marketing , Trademark | TrackBack
April 23, 2010
Beverly Stayart Strikes Again! This Time, Stayart Sues Google
By Eric Goldman
Stayart v. Google, Inc., 2:10-cv-00336-LA (E.D. Wis. complaint filed April 20, 2010)
I've previously blogged about Beverly Stayart (a/k/a Bev Stayart) and her mockable lawsuit against Yahoo. She has repeatedly declared that she is the only Beverly Stayart / Bev Stayart in the world and that her name--due to the cachet she has built up from being a quality human being--is being used to peddle sex-related pharmaceuticals. She lost her first foray against Yahoo on 47 USC 230 grounds but nevertheless is trying again.
Now, she has launched another effort to defend her name—this time she is suing Google for similar concerns. (Like we couldn't see that coming!). She objects to the fact that Google Suggest prompts searchers on "bev stayart" to search for "bev stayart levitra." (para. 13). Anticipating a 47 USC 230 defense, she argues (para. 15) that Google Suggest represents first party editorial content that drops out of 230 coverage. The complaint also seems to raise the question of whether selling a personal name as a keyword trigger constitutes a publicity rights violation; but the complaint does not appear to evidence any understanding of broad matching, i.e., that a search for "bev stayart levitra" will deliver Levitra-related broad-matched ads for reasons having nothing to do with Bev Stayart. (See this recurring defect in paras. 90-109).
(Note: this prompted me to check out a search for "eric goldman levitra." My first result, from www.hosmersoda.com, looks pretty sploggy to me, but there's no way I'm going to click on these links!!!)
Some unsolicited advice for Bev Stayart: stop suing search engines, and stop running vanity searches on the search engines. Life is too short to fret about sploggers!
Two final notes: Bev's attorney is, once again, Gregory A. Stayart, her employer and presumably a family relation. Also, searches for "Bev Stayart" and "Beverly Stayart" are worth a look—I can’t recall other search results quite like that.
Posted by Eric at 09:29 AM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Spam | TrackBack
April 22, 2010
FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers
By Eric Goldman
Although the FTC's revised Endorsements and Testimonials Guidelines were inscrutable overall, a few things were, in fact, clear from the FTC's announcements:
1) The FTC believes shill blogging is out of control
2) They blame advertisers for showering bloggers with gifts
3) They intend to invest some resources in investigating advertisers doing the showering
4) Advertisers who want to avoid the FTC have to (A) require bloggers to make adequate disclosures, and (B) do ex post policing of bloggers.
Our first tangible evidence supporting these lessons comes from a letter issued by Mary Engle at the FTC to AnnTaylor a couple of days ago. The FTC opened an investigation into AnnTaylor based on a January 26 party thrown by its LOFT division to preview LOFT's Summer 2010 collection, which apparently included gifts for bloggers in attendance. This is consistent with the FTC's repeated assurances (most recently reiterated in this insightful interview with Engle's boss David Vladeck) that the FTC will be pursuing advertisers and not individual bloggers. The FTC dropped the investigation citing the following factors:
* there was only 1 party
* only a few bloggers posted, and some of those disclosed the gifts. In a footnote, the FTC notes that LOFT had a sign at the event reminding bloggers to disclose the gifts if they posted.
* LOFT had a written policy (adopted after the event) that it wouldn't give gifts to bloggers without requiring the bloggers to disclose. The FTC continues ominously:
The FTC staff expects that LOFT will both honor that written policy and take reasonable steps to monitor bloggers' compliance with the obligation to disclose gifts they receive from LOFT.
LOFT should have the feeling that it is being watched.
As I've previously blogged, I think the FTC is totally off-base with their scrutiny of blogs and not other media. Therefore, investigations like these are over-inclusive or under-inclusive--either the FTC should be going after print and broadcast reporters for undisclosed free gifts, or the FTC is wasting its time with chickenscratch events like the LOFT party that didn't inspire a lot of blogger enthusiasm. But the letter makes me wonder how many FTC blog-related investigations are pending. I would be shocked if this were the only one.
In my previous blog post, I made the following recommendations that still seem right even after the new information in Engle's letter:
* Advertisers need to (1) require disclosure from any bloggers they support, and (2) monitor all sponsored posts for accuracy and disclosure. I think it’s bad form to offer consideration and then hope/encourage the blogger not to disclose. But efficacy of sponsored posts may be lower with visible disclosure than without (consumers overdiscount content labeled as “ads”). For some types of consumer goods, good products go viral, in which case marketing dollars are better spent on making product improvements than creating shill reviews.
* Under no circumstances is it appropriate for marketers to create fake reviews (positive for you or negative about a competitor). See the Lifestyle Lift settlement with the NYAG. Fake reviews/astroturfing seems like the most logical area for increased FTC enforcement. And if you don’t think the long arm of the law will reach you, don’t forget that competitors love to publicly “out” each other.
* Bloggers need to disclose any conflicts in the post itself; general disclosures elsewhere on the site may not suffice. However, it’s unclear how to make the appropriate disclosures in Twitter or a Facebook status report. Some folks think CMP.ly may be an answer. I believe the FTC would take the position that if you can’t fit the necessary disclosures in Twitter, then don’t post to Twitter.
* Bloggers should think twice about joining pay-to-play services. There is a high legal ambiguity about the practice’s legitimacy.
More thoughts on the LOFT investigation from AdLaw by Request.
Posted by Eric at 11:14 AM | Marketing | TrackBack
April 20, 2010
Upcoming Talks Spring 2010
By Eric Goldman
I've added some new talks to my schedule recently, so here's an updated list of my talks for the next couple of months:
May 6, 8-10 am: Obstacles and Opportunities: eCommerce on Both Sides of the Atlantic, a breakfast briefing co-sponsored by Bingham and the High Tech Law Institute. We'll be talking about the Google ECJ opinion, Tiffany v. eBay and other cutting-edge online trademark and copyright topics. In addition to me, the panel includes two Bingham partners and a very special guest: Terri Chen, Google's new chief trademark counsel, in one of her first public speaking venues since she has taken on her new role. Free CLE! Register here.
May 11, 12-1: I'll be speaking at the San Jose State library school about regulating reputation systems. See their event announcement. Seating at this event is very limited, so let me know if you would like to attend in person. A recording will be posted to the web about a week after this event.
May 28: EACLE Conference, Rotterdam. Assuming trans-atlantic flights have resumed by then, I will be speaking about my reputation research in the Netherlands. This may be a closed door event.
June 1, noon: I will give another version of my reputation talk at the University of Amsterdam. This should be an open door event, so contact me if you are interested in attending.
June 8, 8-10 am: Hot Topics in Blog, Social Network and Internet Law, a breakfast briefing co-sponsored by Greenberg Traurig and the High Tech Law Institute. Ian Ballon, one of the world's foremost Cyberlaw experts, and I will be speaking on the latest and most interesting Internet law developments. Free CLE! Register here.
June 25: I'll be speaking about online advertising at the Stanford E-commerce event.
Also, please save the date for our big Fall academic symposium on the First Sale and Exhaustion Doctrines in IP, November 5, at SCU. The event web page with a link to registration. This event will be especially timely given that the Supreme Court should be hearing oral arguments in Costco v. Omega around that time.
Posted by Eric at 04:56 PM | General | TrackBack
Spammer Convicted on Wire Fraud Charges -- United States v. Diamreyan
[Post by Venkat]
United States v. Diamreyan, 09-cr-0260 (JCH) (D. Conn.) (April 16, 2010)
Earlier this year Okpako Mike Diamreyan was found guilty of wire fraud. The district court recently denied his motion for judgment of acquittal.
Diamreyan "was charged with devising a scheme to defraud known as an 'advance fee.'" As the court describes it, this is a "scam . . . where a person asks an individual to pay an advance fee in order to obtain a larger sum of money, which the individual [victim] never receives."
The government presented evidence that defendant used a Yahoo email account (miklymyx@yahoo.com) for over ten years, and presented evidence of emails sent to victims, telephone calls made, and wire transfers which were initiated by the victims.
The stories about Diamreyan's purported identity, the amount of money available, the reason it was tied up, the money needed to free it, and the name of the contact person changed from email to email, but the overall scam was the same. Frequently, Diamreyan would include his phone number (one of those listed on his visa application) in the email and ask people to contact someone by a different name at that number. For example, in one email, Diamreyan told the email recipient that he was in Sierra Leone, and his family's $23.4 million was on consignment at the airport. He then asked the recipient to contact the airport director, Rev. Dr. Richard Camaro, to release the money from this consignment.
Defendant's arguments in favor of a judgment of acquittal did not end up carrying the day.
Two things about the case struck me. First, people who respond to these emails (from miklymyx@yahoo.com, no less) and transfer money to complete strangers in the hopes of receiving more money do in fact exist. Second, the amounts transferred were nominal. In this case, the amounts were between $50 and $250. (I'm curious as to what the government will end up arguing as a loss amount for sentencing purposes. I'm sure it will present some sort of projection of how much money defendant must have gained.) [Update: one of the filings contained a spreadsheet [link] which listed amounts transferred to defendant and to third parties. The amounts were more than "nominal".]
Here's the press release from the US Attorney's Office: "Federal Jury Finds Nigerian Citizen Guilty of Charges Related to Internet 'Advance Fee' Fraud Scheme." According to the press release he faces up to 20 years and a fine of up to $250,000. [I don't have a good frame of reference, but this seems absurdly high.] Also, not to make light of the plight of the victims, but you would think the government has bigger fish to fry?
Related: Two interesting radio programs on those who take matters in their own hands when dealing with internet scammers: (1) Xeni Jardin on NPR's Day to Day: "Scam-Baiters' Turn Tables on Would-Be Cons"; and (2) This American Life -- Act two of Episode 363 ("Enforcers"): "Hanging in Chad." Both programs reference "419 Eater", a website that documents "scambaiting" (scamming the scammers).
Posted by Venkat at 10:34 AM | Spam
April 19, 2010
Online Publishers, Advertising and Privacy Considerations
By Eric Goldman
I recently spoke at OMMA Global on a panel entitled "Can Publishers Take Ownership of Privacy?" This panel focused on the role of online publishers in the marketing-and-privacy discussions. Most of the privacy angst has focused on other intermediaries in the advertising ecosystem, such as ad networks. However, online publishers play a crucial but under-discussed role in privacy considerations as well.
I made the following three points in my brief introductory remarks:
1) Our privacy regulatory architecture of "notice and choice" requires that publishers actually give their consumers notice and choice, but I'm routinely flummoxed by publishers who balk at doing both. Publishers often rely on dense obfuscating language to mask their true behavior--eviscerating the notice part of "notice and choice"--and will broadly interpret user consent or opt-in beyond the consumer's clear consent. If publishers want to enjoy the benefits of a "notice and choice" regulatory regime, then they have to deliver accordingly. No excuses, no corner-cutting, no BS.
2) I am also amazed at how often publishers let third party vendors place web beacons on their pages or otherwise let third parties have access to their server logs. Routinely consumers are "informed" in obscure or vague privacy policy references that third party vendors might have access to logs (i.e., "we might use third party vendors, so trust us"). At best, the privacy policy links the consumer to the vendor's own privacy policy, at which point the publisher pats itself on the back and feels like it has checked off the "notice and choice" box. But this isn't notice or choice; 99% of consumers won't even look at the privacy policy, and exactly what choice do they have...to follow the daisy-chain of privacy policies to try to assemble the overall picture of what is happening to the consumer and his/her data?
More importantly, I think publishers underestimate the competitive risks of letting other vendors put web beacons on their pages. Every vendor who's listening in via the web beacon knows pretty much everything about the publisher's online business. The publisher can try to handcuff the vendor's enjoyment of that data in the contract; but as we know, too many contracts are not worth the piece of paper they're written on.
As a result, I think publishers need to think long and hard about letting vendors put beacons on their pages or otherwise granting vendor access to the publisher's server logs. Publishers need to evaluate it from a competitive standpoint, and publishers need to act as a proxy for their consumers' interests given that consumers don't have any meaningful notice or choice in the situation. After all, if something blows up, it's the publisher's trust relationship with its consumers that will suffer.
3) Personally, I don't have any problem with providing publishers with more information about me--even PII--so long as they actually provide enhanced value to me. However, in far too many situations, I don't see any extra value from the publisher despite the information I provide. I keep getting the same crappy ads I'd get if they knew nothing about me. So, publishers: if you want better info about me, deliver better value to me. On the flip side, when publishers keep doing a crummy job after asking me to personalize my experience, I will absolutely hold it against them.
Posted by Eric at 09:44 AM | Marketing , Privacy/Security | TrackBack
April 16, 2010
Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com
[Post by Venkat]
Hoang v. Reunion.com, No. C-08-3518 MMC (March 31, 2010)
Reunion.com is a long-running case that's been blogged extensively by Ethan and others. A group of plaintiffs who received emails through Reunion's alleged "invite your friends whether you like it or not" program sued under California spam laws. They alleged three claims: (1) a subject line claim that the emails misleadingly said "[Your friend] is looking for you"; (2) a from line claim that the from lines of the emails contained an email address (e.g., edmorphic@yahoo.com) through a domain that the sender did not have permission to use; and (3) a from line claim that the emails misrepresented that they were from specific individuals (i.e., friends), rather than from Reunion.
The Court Dismisses the Amended Complaint: The court (in December 2008) dismissed the amended complaint on the basis that CAN-SPAM preempts all but "torts" involving misrepresentations. Plaintiffs failed to allege that they relied on any of the misleading statements in the emails to their detriment so they failed to state a claim under state law. The court cites to CAN-SPAM's legislative history, noting that CAN-SPAM's preemption clause was designed to ensure a "national standard," and thus only laws that touch "fraud or deception" would be left surviving under the preemption clause. As an alternative argument, the court found that plaintiffs lacked standing to sue in federal court.
[The complaint asserted state law causes only but is in federal court under the Class Action Fairness Act of 2005.]
The Court Reconsiders Its December 2008 Order: The latest order (issued on March 31, 2010) focuses on Gordon v. Virtumundo, a 9th Circuit case many thought would sharply curtail spam litigation. (Prof. Goldman's post: "An End to Spam Litigation Factories?--Gordon v. Virtumundo".) The court "reads [Virtumundo] as implicitly finding [that the Washington email] statute was intended to confer standing based solely" on receipt of emails. [The discussion about Virtumundo and standing is somewhat confusing to me.] Ultimately, the court concludes that in light of Virtumundo, in order to have standing under state law, a spam plaintiff need not allege reliance and actual damage.
The court tackles preemption next. The court relies on the presumption against preemption (citing Virtumundo) and relies on CAN-SPAM's legislative history to find that the plaintiffs' claims against Reunion are not preempted. The court's order almost reads like an opposition brief to its earlier order. The court concludes that "plaintiffs' failure to allege they relied to their detriment on the alleged false statements in defendant's emails does not constitute a ground for dismissal of their claims."
Finally, the court addresses defendant's materiality argument. The court compares the misstatements in Virtumundo to the misstatements here. In Virtumundo, the plaintiff complained that he received emails from addresses such as "Criminal Justice@vm-mail.com," while in this case, plaintiffs allege they received emails which appeared to be sent from people they knew. Given these differences, at least at the pleading stage, the court could not conclude that the misstatements were not material.
__
What to Make of the Latest Reunion.com Order?
1. Ethan's posts are good reading for background: "CAN-Spam-a-Friend?--Hoang v. Reunion.com" and "Reunion.com Revisited". Judge Chesney's most recent order vindicates his view.
2. It's tough to figure out the current state of CAN-SPAM preemption. One way of looking at it is that Mummagraphics and Virtumundo involved claims based on state email statutes for emails that were not misleading. Reunion.com emails, on the other hand, are arguably misleading. (Are reasonable people really misled by "your friend is looking for you" emails?) The big question is: where is the line? Of course, email marketers would benefit from having a bright line which they can adhere to without fear of getting sued in any one of the fifty states.
3. There's a discrepancy between how California plaintiffs are faring versus how plaintiffs in other states such as Washington are faring. John Levine notes at Circle ID that another Washington spam case - this one brought by Bennett Haselton and Peacefire - was recently dismissed: "Another Spam Case Lost in Washington, or Gordon Strikes Again." The plaintiff in Virtumundo (James Gordon) has also had a slew of Washington spam cases recently dismissed. Although the most recent court order in the Peacefire case focused on the CAN-SPAM claims and not on state law claims (the court in footnote 1 notes that "it [appeared] plaintiffs . . . abandoned" their state law claim), the fact that similar lawsuits are moving ahead in California but failing in Washington is problematic. [Correction: it looks like Peacefire is pursuing a claim under the Washington spam statute as well as a claim under Washington's consumer protection statute. The court indicates that he abandoned the CPA claim but not the claim under the Washington spam statute.] This is one of the things preemption is designed to avoid.
4. There are two ways at looking at possible "from line" claims: (1) they could cover spoofing (where an email is sent to look like it's coming from an email address when it's not) or (2) they could more broadly cover "unauthorized" use of a domain name to transmit an email. There's a third view that's pressed by plaintiffs such as Gordon, which is that the address in the from line has to refer to an actual person, but this argument has never gotten much mileage. With respect to the second view, accepting the proposition that you can state a claim where an email is transmitted through a Yahoo email address in violation of Yahoo's terms of use (which would make it technically "unauthorized") has never sat well with me. It would be great if courts construe the from line prong of state email statutes to only cover spoofing.
5. On the bright side, we should hopefully get some clarity soon. Kleffman v. Vonage, another California spam case which raises similar issues (which the 9th Circuit certified to the California Supreme Court), is scheduled for argument in front of the California Supreme Court on May 6. Also, Reunion.com moved for a stay and permission to file an interlocutory appeal. It's a long shot, but who knows, maybe this case will end up sooner rather than later in front of the 9th Circuit? I was unpersuaded that the standards for reconsideration were satisfied here. The court pretty much did a 360 on its earlier ruling, and the court should recognize this when it considers defendant's request for leave to file an interlocutory appeal.
6. Finally, it's worth noting that counsel for the plaintiffs here are on the defense side in Asis Internet v. Subscriberbase, a case which raises similar preemption issues which I blogged about last week ("N.D. Cal Rejects Preemption and Standing Defenses Against Claims Under CA Spam Statute"). The defendant in Reunion devoted some energy to raising this issue to the court and trying to argue a conflict, but Judge Chesney wasn't swayed by this. (see page 3, footnote 3)
Related: See additional coverage from Wendy Davis here: "Judge Brings Reunion.com And Spam Suit Together Again".
Also, Tagged.com, a company that allegedly scrapes the contact lists of people who join to invite other potential members to join, recently settled up with the San Francisco DA's office by paying $650,000. This comes on the heels of other similar settlements between Tagged.com and regulators.
Posted by Venkat at 09:30 AM | Spam
April 14, 2010
FTC Endorsement and Testimonials Guidelines Notes from SMX West
By Eric Goldman
Last month, I spoke at SMX West about the FTC Endorsement and Testimonial Guidelines. My talk notes:
Beatles fans routinely parsed the meaning of John Lennon’s lyrics, which irritated him. When Lennon released “I am the Walrus,” which was a compilation of three different song ideas each with nonsense lyrics, he reportedly said “Let the fuckers work that one out.” Every time I read the indecipherable FTC endorsement and testimonial guidelines, I imagine this is what the FTC staffers said to each other when the guidelines were issued. Every word in their guidelines is in English, but the collection of words is less than the sum of its parts.
Structural Problems
Let me identify five structural problems with the guidelines:
1) The FTC guidelines seek to effectuate a clearer division between advertising and editorial content, but this division has never made sense, and certainly makes no sense in the online context. For example, on the Internet, every “editorial” web page has significant SEO value as marketing. Indeed, the standard advice to marketers seeking to improve their search engine indexing is to create better content.
The subtext: the FTC has a misguided belief that the FTC can improve content authenticity in our ecosystem through the FTC’s regulatory oversight. That’s a losing battle.
2) The guidelines do not attempt to distinguish between the very different situations of paid celebrity endorsements in infomercials and online consumer reviews where the reviewer gets a free book. As a result, the guidelines actually undercut Point #1 by miscategorizing some editorial content (online consumer reviews) as advertising.
3) The guidelines make unsupported (unsupportable?) assumptions about consumer expectations. For example, the guidelines assume that consumers understand that offline product reviewers get free stuff but don’t understand that bloggers get free stuff:
In general, under usual circumstances, the Commission does not consider reviews published in traditional media (i.e., where a newspaper, magazine, or television or radio station with independent editorial responsibility assigns an employee to review various products or services as part of his or her official duties, and then publishes those reviews) to be sponsored advertising messages. Accordingly, such reviews are not “endorsements” within the meaning of the Guides. Under these circumstances, the Commission believes, knowing whether the media entity that published the review paid for the item in question would not affect the weight consumers give to the reviewer’s statements. Of course, this view could be different if the reviewer were receiving a benefit directly from the manufacturer (or its agent). In contrast, if a blogger’s statement on his personal blog or elsewhere (e.g., the site of an online retailer of electronic products) qualifies as an “endorsement” – i.e., as a sponsored message – due to the blogger’s relationship with the advertiser or the value of the merchandise he has received and has been asked to review by that advertiser, knowing these facts might affect the weight consumers give to his review.
Citations, please. Based on this undefended assumption, the guidelines conclude that “bloggers may be subject to different disclosure requirements than reviewers in traditional media.”
There are two subtexts here. First, the FTC is engaging in unabashed cyberspace exceptionalism, but it has not given any basis for the exceptionalism. When a regulator indulges in cyberspace exceptionalism without explaining why, chances are the offline/online distinctions are unsupportable.
Second, the FTC has repeatedly indicated that it is concerned about Internet lawlessness. This is another sign that the FTC believes it needs to clean up the Internet.
4) The FTC does not clarify what constitutes a disclosable conflict of interest. For example, if the post qualifies as an endorsement, “disclosure of the connection between the speaker and the advertiser will likely be warranted regardless of the monetary value of the free product provided by the advertiser.” The guidelines define an “endorsement” as “any advertising message…that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” This is a circular definition! Conflicts of interest become disclosable only when the content qualifies as an “advertising message,” but editorial content can become an advertising message based on the author's conflicts of interest. Stuff like this makes my brain hurt.
5) The FTC misapprehended 47 USC 230 and took an unsupportably expansive view of advertiser liability. I explain this concern in more detail in this blog post.
UPDATE: Some of these critiques are explored in Recent Regulation: INTERNET LAW -- ADVERTISING AND CONSUMER PROTECTION -- FTC EXTENDS ENDORSEMENT AND TESTIMONIAL GUIDES TO COVER BLOGGERS. -- 74 FED. REG. 53,124 (OCT. 15, 2009) (TO BECODIFIED AT 16 C.F.R. PT. 255), 123 Harvard Law Review 1540 (April 2010).
Practice Pointers
* Advertisers need to (1) require disclosure from any bloggers they support, and (2) monitor all sponsored posts for accuracy and disclosure. I think it’s bad form to offer consideration and then hope/encourage the blogger not to disclose. But efficacy of sponsored posts may be lower with visible disclosure than without (consumers overdiscount content labeled as “ads”). For some types of consumer goods, good products go viral, in which case marketing dollars are better spent on making product improvements than creating shill reviews.
* Under no circumstances is it appropriate for marketers to create fake reviews (positive for you or negative about a competitor). See the Lifestyle Lift settlement with the NYAG. Fake reviews/astroturfing seems like the most logical area for increased FTC enforcement. And if you don’t think the long arm of the law will reach you, don’t forget that competitors love to publicly “out” each other.
* Bloggers need to disclose any conflicts in the post itself; general disclosures elsewhere on the site may not suffice. However, it’s unclear how to make the appropriate disclosures in Twitter or a Facebook status report. Some folks think CMP.ly may be an answer. I believe the FTC would take the position that if you can’t fit the necessary disclosures in Twitter, then don’t post to Twitter.
* Bloggers should think twice about joining pay-to-play services. There is a high legal ambiguity about the practice’s legitimacy.
Posted by Eric at 07:56 AM | Marketing | TrackBack
Yahoo! Chat Logs Admitted Over Defendant's Objections Based on Eavesdropping Statute -- People v. Nakai
[Post by Venkat]
State v. Singh Nakai, 2010 Cal. App. LEXIS 446 (Cal. App.) (Div. 2) (April 2, 2010)
Division two of the California Court of Appeals recently rejected a defendant's argument that California's eavesdropping statute precluded the admission of Yahoo! chat logs. (Warning: the case contains strong language.)
The case arose out of chats between defendant Singh Nakai and "Coleen," who was actually 35 years old but posing (and posting) as a 12 or 13 year old in internet chat rooms.* Defendant was convicted of "attempting to send harmful matter to a minor with the intent to seduce the minor," and acquitted of trying to commit a lewd act with a minor. Defendant argued (among other things) that the Yahoo! chat logs were improperly admitted over his objection.
Section 632 of the California Criminal Code prohibits the recordation of a "confidential communication . . . without the consent of all parties" to that communication, and provides that any information obtained in violation of section 632 is not admissible in any proceeding. Section 632 defines a "confidential communication" as "any communication carried on in circumstances as may be reasonably indicate that any party to the communication desires it to be confined to the parties thereto . . . . but excludes a communication made in . . . . any other circumstance where the parties to the communication may reasonably expect that the communication may be overheard or recorded." [emphasis added]
The prosecutor argued that "it was not objectively reasonable to believe that the Yahoo! chat dialogues were not being recorded, due to the dialogues being sent and received in a recorded format, i.e., writing." The prosecutor also argued that Yahoo!'s chat privacy policy undermined any reasonable expectation of confidentiality because the policy provided that Yahoo! would share information as necessary to "prevent . . . illegal activities."
The policy stated that Yahoo! could disclose information:
if [Yahoo!] believe[s] it is necessary to share information in order to investigate, prevent, or take action regarding illegal activities, suspected fraud situations involving potential threats to the physical safety of any person, violations of Yahoo!'s terms of use or otherwise required by law.
The policy also stated that participants in Yahoo! chat communications should not necessarily expected the chats to remain confidential.
The appeals court held that the chats could not reasonably be seen as "confidential": (1) the privacy policy indicated that chat logs may be shared; (2) the policy warned users that chat logs can be archived and printed by the receiving party; (3) the defendant was communicating with someone he didn't know (and could not reasonably trust); and (4) the defendant himself expressed concern as to whether the receiving party's parent would discover the communications (which reflected awareness that the communications could be viewed or printed).
__
Rather than delving into the Yahoo! chat privacy policy and how this affected the expectation of confidentiality, I'm surprised the court didn't just say that chats don't fall under the statute because chat logs are "recorded" as a matter of course by the sender and recipient, and leave it at that. No one ever asks consent to record and retain chat logs. For some reason, people always seem to equate them with telephone calls as far as whether chats leave behind a recording and whether permission is required. With respect to how this ruling may apply to other scenarios, surreptitiously obtained chat communications are often used in civil cases, such as divorce proceedings. While other laws may come into play, it looks like the California eavesdropping statute will not.
Either way, the case is a good reminder that chat logs (like texts and emails) may be admissible.
[* As I read the case I wondered about the propriety of these types of stings, and whether the legality of internet stings, including those conducted by private citizens or "investigators" was well settled. Given that the defendant didn't even raise the issue in this case, it didn't appear to be a viable argument (in California at least). As a civil practitioner, this issue is pretty far outside my realm of experience. But Cyb3rcrim3 has a post that talks about how attacks on private internet stings have played out.]
Posted by Venkat at 07:00 AM | Evidence/Discovery , Privacy/Security
April 13, 2010
Google Sued for Publishing Home Address--Harris v. Google
By Eric Goldman
Harris v. Google, Inc., 1:10-cv-21119-AJ (complaint removed to S.D. Fla. April 8, 2010). The original complaint filed in state court. Google's removal to federal court.
Jonathon Harris sells rare coins. His business office is in Stuart, Florida, and he lives in Jupiter, Florida. As gold prices soared, Harris claimed a heightened fear of being robbed; and to the extent his home address was publicly known, he feared that criminals would seek him out there.
Searches for Harris' business in Google Phonebook pointed potential customers to his home address in Jupiter, not his business address in Stuart. Google Phonebook provides a takedown procedure that promises a "permanent" fix within 48 hours. Harris claims that he made a takedown submission and Google initially honored it; but subsequently his home address showed up again, and Google then ignored multiple takedown requests. He sued in state court for public disclosure of private facts and intentional infliction of emotional distress. Google has removed the complaint to federal court.
On its face, I am skeptical that publication of Harris' home address was sufficiently "outrageous" to satisfy the prima facie elements of either of his claim. But even if it does, Google ought to be protected by 47 USC 230. It appears that Google Phonebook is provided by a third party provider, so it should qualify as third party content to Google, and the types of claims Harris makes are squarely covered by 230. Compare, e.g., the Doe v. MySpace cases, where the victims actually experienced physical harm; here, Harris just raises the possibility of prospective harm.
While this looks like an easy 230 case, I wonder if this case implicates some of the interstices of the Barnes v. Yahoo ruling. At its core, Harris isn't complaining just about the publication of his home address; he is also complaining that Google Phonebook's promised a fix and didn't deliver. Per Barnes, any negligence-style claim for failure to remove should be preempted; but did the website disclosures provide Harris with sufficient grounds for a promissory estoppel claim? (Note he didn't make a promissory estoppel claim per se, but it is perhaps implicit in the claims he did make). Ultimately, even if he tries to push the promissory estoppel angle, Harris may have difficulty establishing sufficient reliance on the Google Phonebook disclosures.
I am a little confused why Harris' court filings didn't redact his home address. As is so common for plaintiffs bringing privacy invasion lawsuits, Harris' lawsuit may have been counterproductive at trying to keep the world from knowing his home address. In this respect, I'm reminded a little of the Boring v. Google lawsuit; like the Borings, perhaps Harris is unusually sensitive about his home privacy, and a public lawsuit is an ineffectual method of preserving that. Then again, I bet Harris' lawsuit would not have even materialized if he hadn't felt that Google was such a black box when he repeatedly complained.
Posted by Eric at 09:01 AM | Derivative Liability , Publicity/Privacy Rights | TrackBack
April 12, 2010
Google Successfully Transfers Another AdWords Case to California--Parts Geek v. US Auto Parts
By Eric Goldman
Parts Geek, LLC v. U.S. Auto Parts Network, Inc., 2010 WL 1381005 (D.N.J. April 1, 2010)
Google has successfully transferred another trademark lawsuit over AdWords to its home court in California based on the mandatory venue clause in its AdWords contract. This is the latest success Google has had invoking its venue clause; similar recent victories include the TradeComet and Flowbee rulings. Indeed, the only case I can recall where Google has unsuccessfully invoked its AdWords venue selection clause is the Rosetta Stone case (see this transcript from Sept. 2009). (There may be other failed efforts, but I can't recall them). As a result, the Rosetta Stone case remains on the rocket docket with a trial scheduled for next month, but it appears some of Google's other litigation parties will be moving to California.
The most interesting thing about this particular ruling is that the court doesn't cite to either the TradeComet or Flowbee rulings in deciding for Google. Instead, the court anchors its decision in its putatively sui generis analysis of 3rd circuit caselaw.
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 09:50 AM | Derivative Liability , Search Engines , Trademark | TrackBack
Ninth Circuit Applies California law to Domain Name Ownership Dispute and Remands for Determination of Whether "Innocent Purchaser" Defense Applies -- CRS Recovery, Inc. v. Laxton
[Post by Venkat]
CRS Recovery, Inc. v. Laxton, 9th Cir. (April 6, 2010).
Background: Mayberry registered rl.com through Network Solutions in 1995. At the time, mat.net was also registered to him. Mayberry provided dale@mat.net as the email address for the registrant and administrative contacts. The mat.net domain name ultimately expired and was later registered by Li Qiang. Qiang - who the court notes is probably judgment proof - receives an email (at dale@mat.net) from Network Solutions relating to rl.com. Qiang then transfers rl.com to himself and then sells rl.com to Barnali Kalita, an Indian citizen, who later sells rl.com to Laxton, the defendant below.
[Keeping your registration information current is common sense, but if there's ever a case that illustrates the importance of it, this is definitely one of them!] [Eric's addition: the Meyerkord v. Zipatoni case really highlighted this point IMO]
Once Mayberry realizes that he has lost control of rl.com he tracks down the current registrant, which happens to be Laxton, and requests that Laxton transfer the name back to Mayberry. Laxton - having just spent significant resources prevailing in a WIPO domain name proceeding brought by Ralph Lauren - understandably declines. Mayberry sues, and the trial court grants Mayberry summary judgment and orders the domain name transferred back to Mayberry. The trial court concludes, over Laxton's objection, that California law applies. On appeal, the Ninth Circuit affirms that California law applies, but remands for a determination of whether theft or fraud resulted in the original loss of the domain name. If Laxton obtained the property from someone who obtained title by fraud, the "innocent purchaser" defense comes into play, and Laxton cannot be held liable for conversion.
The Ninth Circuit Beats Up on Umbro: The key threshold question addressed by the court was whether California law or Virginia law applied. Mayberry, a citizen of Virginia, argued that California law, and not Virginia law should apply. Although Laxton was a citizen of California, he argued that Virginia law should apply because the domain name was "located" in Virginia. (Here's a post discussing Office Depot v. Zuccarini, a recent Ninth Circuit case which looked at where creditors can levy against domain names.) Laxton also argued that Virginia law should apply, because Virginia law provided for a different outcome:
Laxton argues that a garnishment case from the Supreme Court of Virginia, Network Solutions, Inc. v. Umbro . . . holds that domain names are contract rights under Virginia law.
The Ninth Circuit rejects Laxton's argument, abrogating (or at least drastically minimizing the applicability of Umbro), noting that "Umbro tells us only about how Virginia law treats domain names in garnishment actions . . . Umbro does not compel the conclusion that Virginia considers domain names to be contracts rights for purposes of conversion suits . . . ." This is nice to see, since (as discussed in a previous post talking about whether creditors can levy against domain names) Umbro is often mistakenly cited for the proposition that domain names are not property.
Innocent Purchaser Defense: The court next discusses whether Laxton can be held liable under California law. The common law rule provides that Laxton assumes the risk of whether the domain name had good title; however, this is subject to an "innocent purchaser defense." The innocent purchaser defense allows an innocent purchaser who lacked notice of any underlying improprieties to escape liability for conversion where the vendor procured the goods in question through fraud. The key question is whether the underlying transfer to Qiang was procured through fraud or whether it was just mere theft. The court concludes that it's unclear from the record as to whether Qiang procured initial transfer of rl.com through fraud or theft.
Did Laxton Abandon the Domain Name: The Ninth Circuit also breathes life into an argument which the district court treated as a throwaway argument. The court notes that it's not so clear that "Mayberry's failure to change the contact information . . . [does not constitute] an affirmative abandonment of his rights to the domain." A dissenting Judge Noonan takes issue with the majority's abandonment argument, likening it to a position where a plaintiff who throws away a bank statement containing bank account information is deemed to have abandoned the underlying bank account.
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This is an interesting case which illustrates the downside of Kremen v. Cohen, the Ninth Circuit case which found that domain names are property which may support a conversion action. The factual scenario and the court's ruling here, leaves domain name purchasers in a tricky situation. They will have a tough time determining whether they have clean title. It didn't seem like Laxton, the purchaser here, did anything wrong. He even testified that he checked the WIPO domain name ruling records prior to the purchase to see if the domain name he purchased was subject to a dispute. It wasn't. Nevertheless, he's being put in a situation where he may be liable for conversion and have to return the domain name. It's easy to say that purchasers have to conduct due diligence and obtain adequate representations from sellers, but this factual scenario illustrates why, in practice, that's not always feasible. A blemish to the title that goes back several transactions can be particularly difficult to ferret out. Obviously, given the existence of multiple judgment proof-looking defendants, someone is going to be out some money.
The prospect of multiple state laws coming into play to determine the ownership of domain names with disputed title is also worrisome.
[Eric's addition: Venkat's post reinforces the weakness of the WHOIS database as a record of chain of title. I'm not aware of a way to see archival versions of a WHOIS record; the database only shows the most current record. Compare other government-operated databases for recording property title, where it's possible to see the chain. I wonder if WHOIS should make it possible to see a chain of records as well? UPDATE: this tool offers historical WHOIS information for a fee. That's useful, but I think the info should be treated equivalent to a public record and searchable for free.]
Posted by Venkat at 09:30 AM | Domain Names
April 11, 2010
Veoh Denied Attorneys' Fees in UMG v. Veoh. Does FRCP 68 Apply to Copyright Cases?
By Eric Goldman
UMG Recordings, Inc. v. Veoh Networks Inc., 2010 WL 1407316 (C.D. Cal. April 6, 2010)
Copyright law contains a statutory fee-shifting/"loser pays" provision (17 USC 505) that, in specified circumstances, gives the judge discretion to award attorneys' fees to a copyright lawsuit winner. Veoh decisively won a 512(c) defense against UMG's copyright infringement claim, so Veoh applied for its attorneys' fees under 505. The court, exercising its discretion, declined to award them. The court concluded that UMG "played hardball" but its lawsuit was not "improper, in bad faith, or contrary to the purposes of the Copyright Act" and "UMG's position was not legally untenable."
I think the judge's decision is a fair application of the statute, but consider its consequences. UMG helped drain Veoh's coffers through the litigation, yet the court does not impose any disincentives for plaintiffs to bring such a lawsuit. As a result, UMG walks away from the lawsuit while Veoh goes belly-up.
The next part of the ruling confused me, and maybe my litigator friends can help me understand it. As a fallback position, Veoh asked for its attorneys' fees under FRCP Rule 68. Rule 68 tries to encourage litigants to settle their disputes by providing a penalty for refusing a reasonable settlement offer. If Party A proposes settlement terms and Party B declines (because it expects to do better in court), but the ultimate judgment is less favorable to Party B than the proposed settlement, Party B has to pay Party A's costs that accrue post-settlement offer. Rule 68 makes a lot of sense from a game theory standpoint, but I've been told by litigators that it doesn't mean much in practice, and this case might illustrate why.
The court doesn't provide the terms of Veoh's Rule 68 settlement offer, but because Veoh won the case, any settlement offer Veoh made by definition was better for UMG than the actual results UMG got. Therefore, on its face, Rule 68 seems to say that, at minimum, UMG should pay Veoh's costs post-settlement offer.
However, the court looks at the interaction of copyright law's 505 fee-shifting provision and Rule 68 and, in effect, concludes that 505 moots Rule 68. The court says it couldn't find any on-point precedent (I haven't double-checked, but this was the first time I recall seeing any discussion of this interaction), so it cites an analogous case for the proposition that Rule 68 was not designed to expand the bases of fee awards. Thus, because the court had already concluded that Veoh wasn't entitled to a fee award under the Copyright Act, that eliminated any Rule 68 cost award.
This result makes no sense to me. The ruling makes Rule 68 effectively irrelevant to copyright actions. Based on the court's reasoning, there's virtually no circumstance where a copyright defendant eligible for fees would want Rule 68 to apply. 505 allows a court to award ALL of the defendant's costs, while Rule 68 limits the awardable costs to those incurred post-settlement offer. Rule 68's calculation is mandatory, not discretionary, so in theory it could set a minimum award for the judge--once the judge decides fees are awardable at all. However, I rarely if ever see a judge who grants a fee award under 505 force the defendant to take a big enough haircut on awardable fees where the Rule 68 calculation would be more favorable. Therefore, if anyone wants Rule 68 to apply, it seems more likely that a losing copyright plaintiff might try to invoke Rule 68 to cap its fee exposure.
The analysis is about the same from the perspective of plaintiffs eligible for fees, except that copyright plaintiffs can only become eligible for a 505 award if they have registered their copyright within the statutory time period. But if they are 505 eligible, I would expect most judges to award all of their attorneys' fees, not just those post-Rule 68 settlement offer.
While it's certainly fair game for Congress to decide that Rule 68 is irrelevant to copyright actions, I find it hard to believe that's what was intended. Rule 68 serves a valuable social policy of encouraging early settlements, and we should value that result in copyright litigation just as much as any other area of litigation. So it seems like someone--either the judge or Congress--screwed up; either way, it should be fixed so that Rule 68 becomes a fallback to statutory fee-shifting provisions rather than being mooted by them.
Although the court doesn't address it, it seems like its logic should apply equally to the fee-shifting provisions in the patent and trademark statutes. Therefore, if this ruling holds, it appears that Rule 68 is effectively irrelevant to all federal IP litigation. Students looking for paper topics, especially on ADR in IP, the intersection between Rule 68 and the IP statutory fee-shifting provisions seems like a fertile ground for exploration.
UPDATE: The analysis is embedded in a self-promotional post, but Ray Dowd of the Copyright Litigation Blog provides support and a case cite for why he thinks the court made a mistake on the Rule 68 analysis.
UPDATE 2: David Gingras sent the following references:
Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997) says that under Rule 68, a party who makes an offer of judgment in a copyright case and obtains a result better than the offer is entitled to a mandatory award of costs AND fees (because costs are defined by 17 USC § 505 as including fees, and Rule 68 makes an award of costs mandatory). This view seems totally practical and totally consistent with the purposes of Rule 68.
Champion Produce, Inc. v. Ruby Robinson Co., 342 F.3d 1016 (9th Cir. 2003) says the EXACT opposite. The court tried to outsmart everyone else by saying that although the result in Jordan makes sense and seems logical, fees can only be awarded as costs under 17 USC § 505 to the "prevailing party", and they felt that a defendant who made a $20k or whatever offer of judgment under Rule 68 but then lost at trial in which the plaintiff received a judgment of only $19,999 could not be considered as the "prevailing party" and thus could not recover fees as part of the mandatory costs award under Rule 68. Of course, this completely ignores the purposes of Rule 68 and it rewards plaintiffs who reject settlement offers and seek to roll the dice at trial.
It appears this particular issue is baffling to judges and to many smart litigators. Excellent paper topic.
UPDATE 3: Ron Coleman says: "Defendants don’t get their fees."
Posted by Eric at 10:32 AM | Copyright , Derivative Liability | TrackBack
April 10, 2010
Ochoa on the Legacy of the Statute of Anne
By Guest Blogger Tyler Ochoa
Today marks the 300th Anniversary of the effective date of the Statute of Anne, the first modern copyright law. Although copyright law has changed a great deal in the past 300 years, the legacy of the Statute of Anne is still with us today. Indeed, many features of U.S. copyright law today can be traced to antecedents that can be found in the Statute of Anne.
Before the Statute of Anne, publishing in England was tightly regulated by the monarchy. No one could lawfully publish a book unless it was first approved by government censors and registered with the Stationers Company, a guild of London printers and booksellers that recognized a private — and perpetual — quasi-copyright among themselves. In 1695, however, as Enlightenment ideas of freedom of speech were beginning to take hold, the last in a series of Licensing Acts expired. For the first time, members of the Stationers Company faced the prospect of lawful competition, especially from Scottish publishers selling cheap reprints of classic books.
Although the Stationers were chiefly concerned with restoring and perpetuating their monopoly, they framed their petition to Parliament in terms of justice for authors. The Stationers argued that authors deserved to be compensated for their work, and that unless publishers were shielded from competition, they could not afford to pay authors for their manuscripts. The eventual result of their petition was the Statute of Anne; and their author-centered argument is evident in the title of the statute, “An act for the encouragement of learning,” and in its stated purpose, which was “for the encouragement of learned men to compose and write useful books.”
The first U.S. copyright act in 1790 was modeled after the Statute of Anne. Its title was “An act for the encouragement of learning,” and it granted to “the author and authors of any map, chart, book or books . . . the sole right of and liberty of printing, reprinting, publishing and vending” the same. The 1790 Act also followed the Statute of Anne in granting copyright for a term of 14 years, which could be renewed once for another 14 years if the author was alive at the end of the first term. By imposing limits on the duration of copyright, the Statute of Anne created the public domain — a body of works no longer covered by copyright that could be freely republished or adapted by anyone.
Over time, copyright law has expanded from maps, charts, and books to include music, paintings, sculpture, photographs, choreography, motion pictures, sound recordings, architecture, and computer programs. But the basic structure of copyright law remains the same: the law grants to authors and artists a bundle of exclusive rights — reproduction, adaptation, public distribution, public performance and public display — in order to encourage the creation of new works, and to encourage the distribution of those works by publisher and distributors.
Two other features of the Statute of Anne that have survived to the present day are registration and deposit. The Statute of Anne continued to require that each new book be registered before publication with the Stationers Company, and a copy of each book had to be deposited with nine different libraries, including the libraries of the Universities of Oxford and Cambridge. Today, although registration and deposit are no longer conditions of copyright protection, the law still encourages registration, and two copies of each published work must be deposited with the U.S. Copyright Office upon registration, one of which is placed in the collection of the Library of Congress.
Two things that have changed are the duration and two-term structure of copyright. In the interests of international harmonization, the U.S. in 1976 adopted a single term of life of the author plus 50 years — a term which has since been extended to life-plus-70 years. (Works created before 1978 have had their terms extended to 95 years from first publication.) This is arguably inconsistent with the U.S. Constitution, which specifies that copyrights may only be granted “for limited Times.” In 2003, however, the U.S. Supreme Court ruled that, despite this language, the duration of copyright is entirely within the discretion of Congress.
As we celebrate the 300th Anniversary of the Statute of Anne, copyright law faces new challenges, including those posed by the Internet, which provides an opportunity for both copyright owners and potential infringers to distribute works cheaply and efficiently. As we face these challenges, it is worth looking back to see how existing copyright law has evolved from its beginnings in the Statute of Anne. The model that Parliament provided in 1710 has served us well for three centuries; and although further revisions may be needed to accommodate new technologies, that model continues to prove useful in today’s world.
Posted by Eric at 01:53 PM | Copyright | TrackBack
April 08, 2010
Unmasked Judge/Commenter Sues Newspaper for $50mm -- Saffold v. Plain Dealer
[Post by Venkat]
Saffold v. Plain Dealer Publishing Co., Cuyahoga County Court of Common Pleas (filed April 7, 2010) [scribd]
A judge/commenter who was unmasked by the Cleveland Plain Dealer is reportedly suing the newspaper for 50 million dollars. (h/t ABA Journal) There are plenty of bad facts to go around, but I see an uphill battle for the plaintiff.
Background: Cuyahoga County Common Pleas Judge Shirley Strickland Saffold (or someone with access to her email, commenting as "lawmiss") allegedly left some eighty plus comments on the website of the Cleveland Plain Dealer (at cleveland.com). Some of the comments included:
All of these criminals committing crimes against women must stop. None of them should get out of prison, EVER.
Rufus Sims (lawyer of Sowell and of a bus driver convicted of vehicular homicide) did a disservice to his client. If only he could shut his Amos and Andy style mouth ... This was not a tough case, folks. She should've hired a lawyer with the experience to truly handle her needs. Amos and Andy, shuffling around, did not do it.
I'm confused. There's three stories. The first accuses Saffold of being a bully and demeaning the presence of this reporter for no reason. The second indicates that she refused to allow the Plain Dealer reporters to view the proceedings today, and the last indicates that the defense attorneys and the prosecutors agreed that the court needed to find out who the leak was, but they disagreed about the leaking spoiling the pool. What did Saffold do that was wrong??
The Plain Dealer decided to "unilaterally . . . unmask" Judge Saffold and wrote an article about the unmasking. The Plain Dealer and Judge Saffold were not on the best of terms prior to this incident. While Judge Saffold allegedly commented on pending capital murder cases, her comment dealing with the mental health of a relative of Jim Ewinger, a Plain Dealer reporter, supposedly led to the unmasking. (Wendy Davis covered this in an article here: "Cleveland Paper Unmasks Judge As Commenter".)
The Complaint: The Complaint asserts various claims based on the privacy policy (including a promissory estoppel claim), a claim for fraud, a claim for invasion of privacy/false light, and a claim for defamation.
Privacy Policy: The privacy policy claim is tough. For starters, the privacy policy is not clear that it guarantees anonymity. Second, claims for damages based on a breach of privacy policy are not very easy to make. Many recent cases rejected privacy policy-based claims for lack of actual damages (and some jurisdictions have a rule that precludes recovery for emotional damages unless a physical injury is involved). (See, for example, Pinero v. Jackson Hewitt; Bell v. Acxiom; Pisciotta v. Old National Bancorp [pdf].) There's even a case which expressly rejects a claim based on the disclosure of an email address in violation of a privacy policy. (Cherney v Emigrant Bank) Of course, all of these cases are based on the view that disclosure in itself does not cause damage, and Judge Saffold's case presents different facts. She will probably get past the damages hurdle, but she will have to deal with any provisions in the terms of service that the paper could use to undercut her claims or at least limit damages (disclaimers of warranty, limitations of liability, etc.). Her bigger challenge is to prove that the privacy policy actually guaranteed anonymity, and as Wendy's article points out, the policy envisions that the newspaper would use personal information in a variety of scenarios, including for the newspaper's own benefit.
Invasion of Privacy: The invasion of privacy claim is similarly tough because it will probably turn on whether plaintiff reasonably expected that her comments would remain anonymous. Anyone using the internet will tell you that there's no guarantee of anonymity, and in addition to the ambiguity of any guarantee in the policy, the paper will likely argue that the policy made clear that there are a variety of circumstances in which any user's personal information would be disclosed. Disclosure in response to a subpoena is obviously the classic example. Use of personal information for business purposes is another example.
First Amendment/Media Privilege Defense: At the end of the day, plaintiff will have a challenge proving that she reasonably expected some guarantee of anonymity, and even if the court finds that there was a guarantee, the newspaper could also try to invoke some sort of First Amendment/media privilege defense. It's certainly newsworthy for a judge to have commented on pending cases. While this wasn't what prompted the newspaper's unmasking of the plaintiff, this could bolster the newsworthiness argument. The fact that the judge used the same online profile to supposedly comment on a case she was presiding over (!) is extremely problematic and will cut against the expectation of anonymity. A litigant in that case certainly has a shot at discovering the identity of the commenter in order to support a recusal motion, and once the litigant figures out the judge's identity, the cat is out of the bag. The lawyers litigating the serial murder case Judge Saffold was presiding over (and allegedly commented on) are actually making this argument. ("After Web Post About Serial Murder Case, Judge Should Step Down, Lawyer Says"; "‘Lawmiss’ Comment on Accused Serial Killer Is Linked to Judge Overseeing His Case") This makes the Judge's expectation of anonymity argument that much harder. Had the newspaper found this information out from another source, the First Amendment argument would probably be a fairly strong one. However, given that the Plain Dealer doesn't seem to have the cleanest hands, I'm not sure how much mileage this will get here.
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There are two strong facts on the other side, in the plaintiff's favor. First, the paper seems to have been engaged in a feud with her, and the reporter may have had his own personal score to settle. This will not look good for the paper. Second, media entities can't pick and choose. It certainly is arbitrary for a paper to say "we have a privacy policy and will protect your anonymity . . . except when your identity as a commenter is newsworthy, in which case we'll exploit that to our benefit." Newspapers are in a tricky position as far as commenter anonymity, and no one will reasonably think that media can have it both ways, which is what they'll have to end up arguing. Finally, while the newspaper could have disclosed the Judge's identity in response to a subpoena, that doesn't mean the paper should voluntarily disclose it in order to publish something it thinks is newsworthy (or to settle a score).
The key question here, is how, why, and when the newspaper decided to check out the real identity of "lawmiss."
When all is said and done, plaintiff will finally have to actually prove damages, and suffer the additional embarrassment of a very public dispute around her comments on a newspaper website. Discovery sure is not going to be pretty. (Interestingly, the complaint cites to many public statements made by the Plain Dealer. The Plain Dealer should have adhered to the "less is more rule," when making statements about potential disputes.) Regardless of how the dispute plays out, I guess it illustrates that when interacting online, people need to keep common sense at the forefront. To the extent the she commented on a serial murder case she was presiding over, what was she thinking? On the other hand, what was the newspaper thinking when it decided to "check out the identity of a commenter?"
The case raises the issue of the ethical quandary inherent when a newspaper is the custodian of anonymity. To the extent the newspaper has access to the identity of commenters, there will always be the temptation to check out who particular commenters are. The newspaper in many situations ends up making the call on when to release the identity of the commenter, when to publicize it, and when to fight for anonymity. There will always be conflicting considerations and ethical issues present here.
A final note. Whether someone had the expectation of privacy when dealing with a website or social network is becoming an increasingly litigated issue. I question how useful it is to use the actual language of a privacy policy to determine the expectation of privacy. These are clunky documents that no one ever reads, much less understands. I cringe every time a court wades through a privacy policy, picking and choosing among language it thinks supports or detracts from an expectation of privacy. I blogged about a recent case where a court held that a newspaper website commenter did not waive the expectation of privacy based on language of a policy: Sedersten v. Taylor. Tom O'Toole makes a similar point in a post about another recent case, McVicker v. King: "Newspaper Website's Privacy Policy Creates Expectation of Privacy for Commenters?"
Update: I've added a few additional links below, and clarified that the comments were left with someone who shares the same email address as Judge Saffold. (Judge Saffold's daughter is taking credit for the comments, or at least some of them.) The Plain Dealer reported that someone with the same email address as Judge Saffold left the comments, and verified some of the information behind its reporting through a public records request. It reported that its public records request revealed that someone used Judge Saffold's work computer to access the paper's website at the same exact time as when someone left some of the comments.
Additional Coverage:
Courthouse News has a post which provides some good factual background: "Judge Demands $50 Million From Plain Dealer"
ABC News has a post which also contains some interesting background facts: "Judge Saffold Files $50M Suit Against Cleveland Newspaper Over Online Comments" (It looks like the Judge's daughter who is or was a law student says she was the one who made some of the comments! An Ohio law professor is also quoted as saying it would have been a "major ethics violation" for the judge to have commented on pending cases.)
Cleveland Plain Dealer: "Cuyahoga County Judge Shirley Strickland Saffold files $50 million lawsuit against The Plain Dealer and others"
Gawker: "Can Anonymous Commenters Be Outed if They Do Something Newsworthy?"
The Newsroom Law Blog had a good post about the ethics of the unmasking: "Cleveland Newspaper Unmasks Anonymous Commenter" The post makes a good point about what this may mean for future anonymity arguments asserted by the Plain Dealer on behalf of anonymous commenters. [The Plain Dealer's John Kroll comments on the post . . . fodder for discovery?]
Posted by Venkat at 08:36 AM | Privacy/Security , Publicity/Privacy Rights
"Mistake of Age" Defense When a Sexual Abuse Victim Inflated Her Age on MySpace
By Eric Goldman
I continue to see a troubling number of cases in Westlaw that involve an overaged male and underaged female having illegal sex, in some case facilitated by a social networking site (especially MySpace). In the past few weeks, I saw four cases where the victim's self-reported age on her MySpace profile was raised as part of a defendant's unsuccessful "mistake of age" defense to statutory rape charges.
In State v. Breathette, 2010 WL 702446 (N.C. App. Ct. March 2, 2010), the court rejected a "mistake of age" defense to a variant of statutory rape charges even when the victim had misreported her age to MySpace.
State v. J.S., 2010 WL 765367 (Wash. App. Ct. March 8, 2010), is another mistake of age case. In this case, a 16 year old boy had sex with a 13 year old girl he met on MySpace. She had reported her age as 17 on MySpace and 15 in person, and she said she was in middle school The boy believed she was actually 14. The crime applies to sex when the parties' age are more than 3 years different, and it is a defense if the defendant proves that “the defendant reasonably believed the alleged victim to be [of legal age] based upon declarations as to age by the alleged victim.” The court rejected the defense because "presented with the victim's conflicting and inconsistent declarations as to her age, the trial court is not compelled to find that the defendant reasonably believed that one of the conflicting statements must be true."
Both cases brought to mind US v. Haile, where an undercover cop had (mis)reported three different ages. I found that case more troubling because the cop, not a victim, communicated inconsistent information when he could have easily provided consistent information. Further, because no sex actually occurred, the defendant never got a chance to confirm the putative victim's age face-to-face before revealing his true intent.
Recently there were also two cases where the victim misreported her age in MySpace but the defendant never saw that misrepresentation. In these cases, the court refused to admit the MySpace evidence. See State v. Bol, 2010 WL 934113 (Minn. App. Ct. March 16, 2010) and People v. Avelar, 2010 WL 1079416 (Cal. App. Ct. March 25, 2010)
Students, if you are looking for a paper topic for the summer, I think it might be worth exploring the legal implications of sexual abuse victims' misreporting their age. In particular, I would love to explore the hypotheses that (a) MySpace's efforts to screen out 13 and 14 year olds implicitly encourages teens to inflate their self-reported ages, and (b) this age inflation exacerbates the number of underage sex crimes (I have a few theories why this might be the case). If these hypotheses were true, the state AGs' deals with MySpace and Facebook to block young teens actually could be spectacularly counterproductive and bad social policy.
Posted by Eric at 08:15 AM | Content Regulation | TrackBack
April 07, 2010
In Aggregation Case, Israeli Court Says Online Ads Aren’t Copyrightable (Guest Blog Post)
By Guest Blogger Yoram Lichtenstein, Adv.
[Eric's note: Yoram previously shared some perspectives on a case involving live streaming of sports events. He now writes about another one of his cases, this time involving online aggregation websites. He represented the defendant Hug in this matter.]
We're all aware of the information flooding the Internet, especially ads--job ads, real estate transactions, second hand items, and more. Which online resource should we use? Do we really need to scout 7 different sites in order to find a suitable couch for the living-room?
Aggregation/index sites are popping up everywhere, trying to solve this problem while aggregating ads (and other materials) from various sites. Yet those aggregation sites encounter potential legal hurdles, such as trespass to chattels (as we saw in eBay Inc. v. Bidder's Edge, Inc.) or copyright infringement.
In Israel, there is a lot of legal and commercial interest in sites which collect ads from other sites and aggregate them into a single site. A few court cases have been heard or filed recently, yet none reached a definite decision until recently.
For example, "Alljobs.co.il" is one of the pioneer aggregation sites in Israel. Its slogan is something along the lines of "Job ads from all the sites and newspapers in Israel". A few years ago, Maariv (a printed newspaper) and NRG (its online site) sued Alljobs, claiming copyright infringement in the ads that Alljobs had aggregated from them. The court stated that it is questionable whether such ads enjoy copyright protection at all; and even if they do, the ad copyrights are owned by the actual advertisers, not the site/newspaper. As the claim was not brought by the advertisers themselves, the (preliminary) injunction was denied.
Tel Aviv District Court (Israel's intermediate appellate court) recently issued a decision (Hebrew word version) which could have a big impact on the permissibility of advertisement aggregation under Israeli copyright law.
Sometime during 2005, a new site, Hoogel, launched a directory of leisure activities and courses. Hoogel wasn't alone. Shortly thereafter, a competitor named Hug also entered the market ("Hug" means "Course" in Hebrew) to provide a directory for the same materials. Nine advertisers, encouraged by Hoogel, sued Hug for copyright infringement.
Hug responded that it collected information from various sources – including Hoogel, but also including brochures, newspapers (local and national), etc. Hug also responded that the material it collected was not copyrightable because it was data and facts relating to the courses themselves.
The collected materials included the activity name, name of the vendor offering the course, activity schedule, expertise level required (i.e., beginners, intermediate, advanced), location, etc. Sometimes Hug added a photo; occasionally these photos were collected from third party sources.
While some of this data is clearly uncopyrightable, advertisers might be able to assert copyright protection for the course descriptions and photos. The court decided that the course listings lacked originality (or creativity); usually they include only "dry" data. The court emphasized that although previous decisions did not demand very much creativity, ads still need at least some creative value to become copyrightable. Thus, “the advertiser holds no rights in the content of the advertisement, in a manner that enables to prevent other billboards and index sites to publish the ad without her authorization" (my translation).
The court used, as an example to explain why the course descriptions were not copyrightable, a course description for sculpting sugar-figures for cakes. The text was (my translation, again): "Figure sculpturing workshop, consisting of two 5 hours encounters, each. The workshop emphasizes female and male proportions. First meeting shall include preparing the cake-base, and a winter male figure with proper clothes and accessories. On the second encounter we will prepare the female summer spouse, accessorized as well. At the conclusion of this fun activity each shall have the original couple s/he created."
The court regarded such wording as purely factual, supplying relevant course details. The court did not separately discuss the copyrightability of any associated photos; it seemingly regarded the photographs in the same manner.
The decision teaches us that text and other materials that are functionally descriptive and factual may not be regarded as "works" protected by Israeli copyright law.
The court also considered the protection of compilation works. Citing the US Supreme Court opinion Feist v. Rural Telephone Service, the court decided that it is reluctant to allow such protection.
Because ads are not protected "works", this decision may provide certain aggregators with more freedom of action. I do not know if this is a coincidence or not, but following the decision, Tel Aviv has been stormed by billboards advertisements for "the new kid on the block," ZVZ.co.il, a new aggressive aggregator in Israel which touts its aggregation properties.
However, this decision does not allow the aggregators "carte blanche". Every activity must be planned carefully, both commercially and legally. For example, this decision still did not solve issues like trespass to chattels (a doctrine not fully accepted in Israel).
Posted by Eric at 09:19 AM | Copyright | TrackBack
April 06, 2010
Fourth Circuit: Email, ECF, and Domain Name Woes do not Excuse Failure to Respond to Summary Judgment Motion -- Robinson v. Wix Filtration
[Post by Venkat]
Robinson v. Wix Filtration Corp. LLC, 4th Cir. (Mar. 26, 2010) [scribd]
The Fourth Circuit recently held that the district court properly granted summary judgment in favor of a defendant, and rejected plaintiff's argument that counsel's failure to respond to a defense motion for summary judgment was excusable due to email, malware, and domain name issues.
As described by the court, plaintiff's counsel "was afflicted by a malware virus and . . . his counsel's firm's domain name had temporarily expired when the motion for summary judgment was filed." Counsel re-registered the domain name but the "e-mail accounts associated with the domain name were 'blacklisted' causing further e-mail problems."
The court found that plaintiff's failure to receive notice of the motion "resulted from counsel's conscious choice not to take any action with respect to his computer troubles." In the words of the court: "counsel made the affirmative decision to remain in the dark." Finding that a client must bear the consequences of his or her attorney's conduct, the court found that it was not an abuse of discretion for the trial court to refuse to set aside the judgment. The court found that plaintiff was not entitled to relief under either Rule 59(e) or 60(b).
One judge concurred, finding that the dismissal was a result of "counsel's unwise and misplaced strategic choice to litigate, ostrich-like, with his head in the sand." The concurring judge noted critically (in a footnote) that periodically checking the CM/ECF docketing system "simply was not a part of [counsel's] practice."
Judge King filed a spirited dissent, among other things, arguing that the Fourth Circuit's decision creates a "duty to monitor," and that the party should not in this case made to bear the consequences of counsel's actions. Interestingly, Judge King also argues that the exception to the rule (taken for granted as a matter of practice in many ECF jurisdictions) that ECF filing constitutes service should come into play. The dissenting opinion argues that once defense counsel became aware that plaintiff's counsel had email issues, defense counsel should have sent a paper copy of the motion in order to complete service. (The rules provide that ECF filing "is not effective if the serving party learns that [the Notice of Electronic Filing ] . . . did not reach the intended recipient," but by the time the defendant had notice of the other side's email problems, it was pretty much too late. And plaintiff's counsel should have probably checked the docket anyway, to see if a dispositive motion was filed when the deadline came and went.) Judge King also notes that imposing a "duty to monitor" will result in additional costs (in the form of PACER fees) which will fall on the shoulders of clients.
___
It's tough to not be sympathetic to plaintiff and to counsel for plaintiff. Everyone will have an email gaffe at some point in their career. (I'm not sure the failure to check the docket is as excusable.) That said, courts are not very tolerant of arguments that counsel did not respond to a motion or a deadline due to a failure to receive electronic notice. The "spam filter ate my CM/ECF notice" is often offered as an argument in these situations, but this argument typically does not get a lot of mileage. (See Shuey v. Schwab discussed in this post (court remands for consideration of the merits) and the other cases mentioned there.)
(h/t ABA Journal: "Lawyer’s Computer Virus Doesn’t Excuse Missed Dismissal Motion, 4th Circuit Says")
Posted by Venkat at 12:20 PM | Adware/Spyware , Spam
Facebook Preliminarily Wins Copyright Lawsuit over Third Party App--Miller v. Facebook
By Eric Goldman
Miller v. Facebook, Inc., 2010 WL 1292708 (N.D. Cal. March 31, 2010)
Miller developed a videogame called Boomshine. He is upset that Yeo made an allegedly infringing knockoff variation of the game, called ChainRxn, and distributed the knockoff as a Facebook app. Miller sued both Yeo and Facebook for copyright infringement. In January, I blogged on Facebook's success invoking the venue clause in its user agreement to move the case to its home court.
The court dismissed Miller's first amended complaint because the copyright infringement allegations were too vague. Miller alleged "that defendant Facebook 'published ChainRxn in their [sic] Application Directory' and that defendant Facebook 'took the affirmative step to approve ChainRxn for publication on its Application Directory'," but according to the court, these allegations do not make it clear "whether defendant Facebook published a copy of the game on its application directory, published a link to the game, included a place for Facebook users to blog about the game, or published a combination of these and/or other things."
The court also rejects Miller's allegations of Facebook's secondary infringement for Yeo's activity. The contributory claim fails because Miller did not adequately allege material contribution given that the judge can't figure out what Facebook did wrong. The vicarious infringement claim fails because Miller did not adequately allege a right and ability to supervise the infringement given the ambiguity over what took place on Facebook's premises.
The judge does give Miller another chance: "Within FOURTEEN CALENDAR DAYS, plaintiff may file a motion on a normal 35-day track seeking to cure the foregoing deficiencies and appending to the motion a proposed amended complaint. The motion should explain why each new claim overcomes the deficiencies. Leave to amend is otherwise denied." I'm sure Miller will avail himself of this opportunity, but I don't see a rosy long-term prognosis to his litigation efforts.
Posted by Eric at 08:55 AM | Copyright , Derivative Liability | TrackBack
April 05, 2010
230 Protects Newspaper from Liability for Reader Comments--Collins v. Purdue
By Eric Goldman
Collins v. Purdue University, 2010 WL 1250916 (N.D. Ind. March 24, 2010)
The plaintiff, Timothy J. Collins, III, is a Purdue student. The defendant in this ruling is Federated Publications, which publishes a Lafayette, Indiana daily newspaper, the Journal & Courier.
On Jan. 13, 2007, Collins was assaulted on campus and sought hospital treatment. Separately, another Purdue student, Wade Steffey, was reported missing and last seen on Jan. 12. (Months later, Steffey was discovered dead on campus--as far as I can tell, his death still has not been satisfactorily explained). UPDATE: This report explains Steffey's tragic accidental death.
In mid-January, the police started investigating Collins in connection with Steffey's disappearance. On Feb. 5, the police charged Collins with "False Informing" for alleged misinformation Collins had provided to the police. On Feb. 10, the Journal & Courier reported on Collins' Feb. 5 charges in an article, "Student Who Reported Mugging Charged," published both online and off. The article led some readers to infer that Collins was involved in Steffey's disappearance, a topic explored in the online article's "vitriolic and hateful" user comments. The court recaps that "The posting of these readers' comments fueled the suspicious, charged atmosphere on campus at that time and inflamed the frenzied efforts to unravel the Steffey mystery."
This opinion doesn't explicitly say why Collins is on a litigation tear, but I infer that Collins believes he was improperly linked to the Steffey disappearance and was subjected to some harsh treatment by those who made that link. In this ruling, Federated Publications seeks to exit his lawsuit (although many other defendants are left).
Federated defends Collins' libel and false light claims on 47 USC 230, saying part of his claims are based on third party comments. Collins responded that the newspaper website doesn't qualify as a provider/user of an interactive computer service, an argument that goes nowhere. Instead, the court treats this as easy case (which it is):
Federated can be held liable for defamatory statements in its own material published on the website-such as the article if the article was defamatory-but cannot be held liable for the publication of remarks or postings by third parties. Like the defendant in Dimeo, Federated did not create or develop the posted comments and cannot be held responsible for them. Also like Dimeo, none of the facts before the court show any encouragement by Federated for readers to comment on the website articles in a defamatory way. Moreover, Collins has made no assertions in either his First Amended Complaint or his response briefs suggesting that Federated engaged in any of the revisions or redrafting discussed in Nemet or applied any editorial function whatsoever over the comments posted by the readers on its website. Collins himself titles these counts in his First Amended Complaint as “reader comments,” making them unattributable to Federated. Because Federated is immune from liability for the third-party content posted on its website by the CDA, Collins' claims charging Federated with liability for the third-party postings on its website fail.
To get around this, Collins tried an "inducement" style attack on 230, but the court rejected that as well:
Federated did nothing to induce any readers to post a commentary on the article nor to express a preference for a particular viewpoint in the posts. Nowhere in Collins' Amended Complaint is the assertion that Federated chose the particularly hateful and denigrating posts over a batch of kinder, gentler comments. Nor does Collins suggest that any of Federated's staff writers or editors were responsible for the particular posts or their content. To the contrary, Collins has identified these posts on the website as “reader comments” or “reader posts”, and taking Collins at his word, Federated cannot be liable for the statements made by these third-parties.
Note that 230 should have applied even if Federated had done some of these things--especially making editorial judgments about user comments--but the court didn't need to be more precise because Collins' argument failed on the facts he was working with. So in the end, this is an easy 230 case holding that the newspaper isn't liable for the online user comments.
The newspaper wins on other grounds too. The emotional distress claims were dismissed because the newspaper article was not outrageous or published with the requisite scienter; the libel and false light claims were dismissed because of the veracity of the story's exact words; and the statute of limitations also applied.
Posted by Eric at 03:16 PM | Content Regulation , Derivative Liability | TrackBack
N.D. Cal Rejects Preemption and Standing Defenses Against Claims Under CA Spam Statute -- Asis Internet Servs. v. Subscriberbase Inc.
[Post by Venkat]
Asis Internet Services v. Subscriberbase Inc., (N.D. Cal.) Case No. 09-3505 SC; April 1, 2010 [scribd]
Judge Conti (in the Northern District of California) issued a potentially significant decision last week that keeps the door open for plaintiffs alleging claims under California's spam statute. This is good news for anti-spam plaintiffs, and comes on the heels of last month's state court trial win for another spam plaintiff which resulted in an award of $7000. (Balsam v. Trancos)
Background: The Ninth Circuit in Gordon v. Virtumundo held that veteran spam plaintiff James Gordon could not sue under CAN-SPAM because he was not a bona-fide ISP (or provider of an "internet access service") and because he did not suffer any "adverse effects" from the spam he received. He was harmed as any email recipient would be and thus was not among the class of plaintiffs entitled to sue under CAN-SPAM. The court also held that CAN-SPAM preempted Gordon's claims under Washington's spam statute. Here is Prof. Goldman's post discussing that ruling. The post asked whether Virtumundo would spell an end to "spam litigation factories". Following Virtumundo, courts knocked out Gordon's many pending cases. Plaintiffs who appear similarly situated to Gordon have persevered in California, trying to assert claims under California's spam statute.
One issue that was left unresolved was whether CAN-SPAM preempted California's anti-spam statute (and how much of it was preempted). A few courts have dealt with this issue. One court held that a plaintiff must satisfy the "actual fraud" standard in order to assert a claim under a state spam statute. (Hoang v. Reunion.com, discussed by Ethan here and here.) Other courts (Asis Internet v. Vistaprint and Asis Internet v. Consumerbargaingiveaways, discussed by Ethan here) have taken a less restrictive view, rejecting Reunion.com's premise that only claims satisfying the traditional "actual fraud" standard survive CAN-SPAM's broad preemption clause.
This case takes a fresh look at the issue and rejects the Reunion.com view. Regardless of the outcome of this dispute, portions of California's spam statute, such as the provisions imposing a blanket ban and those requiring labeling are preempted. The issue is whether there's room to allege that emails are misleading based on information in the subject lines, from lines, or headers, and make a claim under California's spam statute.
The Court's Ruling:
1. Were the Subject Lines Were Likely to Deceive Recipients: Defendants argued that the subject lines were not likely to deceive recipients. Section 17529.5(a)(3) prohibits subject lines that are likely to mislead "about a material fact regarding the contents or subject matters of the message." The court predictably refuses to conclude as a matter of law that the email subject lines are not deceptive. I don't know if anyone reasonably believes that email subject lines which offer free products (for example: "Review & Keep Designer Handbags worth $1500 Dollars-guys invited too") actually offer free products. But given the statutory language, it would have been tough for the court to conclude as a matter of law that the subject lines were not "likely to mislead." Once you use the word "free," if something is not actually free, you will have an uphill battle getting a court to conclude that the marketing copy is not misleading as a matter of law.
[Tip to marketers: avoid using "free" unless something truly is free, particularly when this claim is made in an email or online!]
2. Did Defendants Have Knowledge That the Subject Lines Were Likely to Deceive: Defendants also argued that the complaint did not sufficiently allege that defendants knew the subject lines were likely to deceive, in light of the fact that defendants did not transmit the messages. Plaintiffs earlier lost a case on this precise issue, where a district court held that the defendants could not be held liable for spam received by plaintiffs because the defendants in that case neither sent nor "knowingly procured" the messages. (Here's Professor Goldman's post discussing that ruling, along with other affiliate liability issues. As mentioned below, this ruling was affirmed by the Ninth Circuit.) In light of the fact that plaintiffs previously lost on this issue, it's irritating for plaintiffs to get another chance here. Defendants will likely have to fight this one out on summary judgment, rather than at the motion to dismiss stage. It would have been nice for the court to require some specific allegations regarding defendants' supposed knowledge.
3. Do Plaintiffs have Standing Under California Law: Defendants' first standing argument was that Proposition 64, which amended California's false advertising and unfair competition laws to provide that only plaintiffs who "suffered injury in fact and has lost money or property" could bring claims, applied to section 17529.5 and barred the claims asserted by plaintiffs. The court rejected this argument, noting that section 17529.5 included "independent, non-exclusive standing and remedy provisions" which authorize ISPs (defined as "electronic mail service providers") to bring suit. The court acknowledged the effect of Prop 64 was unclear, and reasoned that Prop 64 was designed to curb the practice of members of the general public bringing lawsuits to enforce advertising and unfair competition rules, rather than change the standing requirements of statutes which only applied to a narrower (more specific) class of plaintiffs. According to the court, since California's spam statute only authorized a narrow class of plaintiffs to bring claims to begin with, the statute was left unaffected by Prop 64.
4. Are Plaintiffs' Claims Preempted by CAN-SPAM: Defendants relied on Gordon v. Virtumundo and argued that plaintiffs' claims were preempted by CAN-SPAM. The court acknowledged that other courts in California had reached differing results on the preemption issue. Hoang v, Reunion.com held that CAN-SPAM's preemption clause only leaves room for state law causes of action based on "common law fraud," which requires allegations of reliance and actual harm. On the other hand, two judges in the Northern District of California (Asis Internet v. Vistaprint and Asis Internet v. Consumerbargaingiveaways) came to a different conclusion, finding that section 17529.5 was not preempted, even though this statute does not require a showing of reliance or damages. (Odd sidenote: the Reunion plaintiffs are represented by the same lawyers who are representing defendants in this case.)
Judge Conti found that Virtumundo "did not clearly resolve this split." In his view, the Ninth Circuit in Virtumundo found the plaintiff's claims under Washington's spam statute preempted because those claims reached "non-deceptive statements." The court focused on the fact that in Virtumundo, plaintiffs were complaining about immaterial errors in emails (the fact that an advertiser's name did not "expressly appear in the 'from lines,'" and Virtumundo's use of "fanciful domain names"). Judge Conti viewed Virtumundo (and Mummagraphics) as standing for the proposition that only state law claims that reach immaterial errors and omissions were preempted. The court's discussion on preemption is in depth, and worth reading. Ultimately, the court concludes that requiring the elements of reliance and damages would have one practical consequence:
[i]t would limit the scope of entities that are entitled to bring suit under section 17529.5. It would restrict enforcement suits to the (presumably more rare) case where a plaintiff actually been duped by a misleading subject line. The bulk of deceptive email would go unpunished, until such an email happened to mislead someone with the resources and wherewithal to pursue a private claim.
The court found that Congress could not have intended this result under CAN-SPAM.
5. Whether the Enforcement Mechanism of Section 17529.5 Conflicts With CAN-SPAM: The final issue (which it sounds like defendants didn't press, but which to me was the most interesting) was whether the enforcement mechanism of the California spam statute conflicts with CAN-SPAM. CAN-SPAM only allows for enforcement by two classes of entities: (1) certain government actors and agencies and (2) bona-fide ISPs who have been been "adversely affected". The California spam statute on the other hand allows the Attorney General, ISPs, and recipients of emails to bring suit. As the court notes, allowing a broader class of plaintiffs to sue under state law may "disturb . . . the fine balance struck by Congress . . . ." However, the court concludes that it would not upset the balance intended by Congress because CAN-SPAM's preemption savings clause only speaks to the subject of state law (rather than the class of plaintiffs authorized to sue). The court also noted that there was no evidence of Congressional intent to "occupy the field."
____
My Reaction: The court is right that Virtumundo and Mummagraphics found the state law claims in those cases to be preempted by CAN-SPAM because those claims relied on immaterial errors. However, California plaintiffs typically raise similar claims, and courts have not been the most vigilant about scrutinizing them. Plaintiffs seem to construe California's spam statute pretty broadly. For example, in Trancos, the recent decision following trial, and Kleffman v. Vonage, a case pending in front of the California Supreme Court, some of the arguments raised by plaintiffs were similar to the arguments raised by Gordon in Virtumundo. The preemption structure only works if courts dealing with the state law claims use the same standard for what is false or deceptive.
The practical consequence of the court's ruling is to open a gaping exception to the enforcement structure that Congress may have intended. Congress intended only two classes of actors to enforce CAN-SPAM: (1) the authorities and government agencies and (2) bona-fide ISPs who were adversely effected. CAN-SPAM does not allow for enforcement by mere recipients of email, and doesn't allow for enforcement where the recipient does not suffer any injury, and the court's ruling opens the doors to this enforcement. This is particularly troubling, given that many plaintiffs do not take steps to avoid email and may even invite the harm in question. To the extent they are trolling for spam emails in order to bring lawsuits, they are really no different from a member of the general public.
Another issue to consider is the scope of affiliate liability. It wouldn't make sense for state laws to hold a broader category of actors liable (under a lower standard) than CAN-SPAM, but this could be a practical result of allowing these types of claims to proceed under California's spam statute.
Finally, I'm not sure there's anything wrong with allowing ISPs and those with sufficient resources to sue, when they actually have been harmed. I doubt we've derived much benefit from the proliferation of the anti-spam litigation "cottage industry."
What Does the Ruling Mean For Spam Litigation: The ruling gives spam plaintiffs in California some breathing room. With respect to subject line violations at least, plaintiffs can continue to bring claims under California's spam statute, and unfortunately, can continue to try to sue affiliates as well. They can bring claims in state court (as in Trancos) or in federal court, to the extent they are able to independently satisfy jurisdictional requirements. There is a case pending in front of the California Supreme Court (Kleffman v. Vonage - oral argument is set for May) which should clarify the scope of California's anti-spam statute and whether it's preempted, and Reunion.com is likely to be appealed as well, once it makes its way out of the trial court. But until then, plaintiffs will probably cite to this case for the proposition that subject line claims and other claims based on allegedly misleading aspects of emails that don't necessarily violate CAN-SPAM are not knocked out by CAN-SPAM's preemption clause.
Other Asis Cases: Asis has filed many many different spam lawsuits. 13 alone according to a Justia search. There's been ongoing activity on several of those cases recently:
Asis Internet . Azoogle.com, Case Nos. 08-15979 and 08-17779 (9th Cir.) (Dec. 2, 2009): 9th Cir. affirms dismissal of claims brought against various entities for lack of standing and because Asis failed to prove affiliate liability.
Asis Internet v. Member Source Media, Case No. C-08-1321 EMC (Jan. 28, 2010): CAN-SPAM claims dismissed.
Asis Internet v. Active Response Group, Case No. C07-06211 TEH (Feb. 9, 2010): dismissed for lack of standing under CAN-SPAM; state law claims dismissed without prejudice.
Posted by Venkat at 08:00 AM | Spam
April 01, 2010
Facebook Privacy Class Action Filed by Lanier Firm Voluntarily Dismissed -- Melkonian v. Facebook
[Post by Venkat]
Melkonian v. Facebook, Orange County Superior Court Case No. 30-2009-00293755-CU-BT-CJC [complaint]
In August of last year, prominent plaintiffs' lawyer Mark Lanier filed a privacy lawsuit against Facebook on behalf of a group of plaintiffs. [WSJ Law blog] [Techdirt] The complaint seemed sort of all over the place, with no core allegations of misconduct by Facebook. The fact that it was filed by the Lanier Firm (which, incidentally, has a Facebook page, as does Mark Lanier) made it noteworthy.
Curiously, the lawsuit was voluntarily dismissed with prejudice. [dismissal] It's somewhat old news (the dismissal was entered in early February), but given that there's been no public mention of it, I thought it was worth noting. If there's a backstory, I'm definitely curious about it.
Note: Although Facebook dodged a bullet by settling the Beacon class action against it, and getting rid of this case, this is far from the end of Facebook's privacy woes. There are another couple of class actions against Facebook arising out of Facebook's recent revisions of its privacy settings. (Wendy Davis reports on those suits, which were recently consolidated here.) And Facebook implemented yet another set of privacy changes, which brought about a fresh round of criticism. ("Facebook Keeps Chipping Away at User Privacy"; "Facebook Mulls Privacy Changes, Causes More Outrage".)
Posted by Venkat at 07:10 PM | Privacy/Security
eBay Mostly Beats Tiffany in the Second Circuit, but False Advertising Claims Remanded
By Eric Goldman
Tiffany (NJ) Inc. v. eBay Inc., 2010 WL 1236315 (2d Cir. April 1, 2010)
In a subtle opinion with potentially significant implications, eBay has preserved most of its big 2008 district court victory in the long-running Tiffany v. eBay case. However, as seems to be the norm with federal appellate opinions, the opinion intentionally sidesteps some key open doctrinal questions squarely raised by the case--such as if the Second Circuit recognizes the nominative use defense, or the Second Circuit's standards for contributory trademark infringement. As a result, we don't get the clean and decisive doctrinal standards that help make a case truly precedent-setting; if anything, some aspects of the case are pretty eBay-specific. And while the opinion is generally a win for defendants, there are at least two tangents (the willful blindness standards and the false advertising discussion) that future plaintiffs will unquestionably explore.
What is clear from the opinion is that Tiffany has lost the battle to force eBay to change its system to do more for Tiffany. (Unless Tiffany successfully appeals to the US Supreme Court, which it has said it is considering). What isn't clear to me is how much money is still on the table for the false advertising claim. If Tiffany can make this a backdoor way to get its alleged damages from counterfeits on the eBay site, then there's still potentially a lot of money left to fight over. But otherwise, it would make way more sense for the parties to settle up rather than pursue the remaining false advertising issue.
Overview of the Rulings
* eBay isn't directly liable for trademark infringement based on its advertising activities due to the nominative use doctrine (even though the panel did not adopt the doctrine)
* eBay isn't secondarily liable for counterfeit sales because generalized knowledge is not enough and eBay followed a notice-and-takedown procedure
* eBay isn't liable for direct trademark dilution based on the unadopted nominative use doctrine
* the appellate court rejected the lower court's reliance on a nominative use defense to the false advertising claim.
The ultimate disposition: “The case is therefore remanded…for further proceedings for the limited purpose of the district court's re-examination of the false advertising claim in accordance with this opinion.”
Direct Trademark Infringement
The Second Circuit has never expressly adopted the nominative use defense, one of the many reasons why I favor doctrinal gatekeepers like "use in commerce" rather than relying on the inconsistently interpreted defenses. This panel doesn't adopt a nominative use defense for the Second Circuit either, but it does say "a defendant may lawfully use a plaintiff's trademark where doing so is necessary to describe the plaintiff's product and does not imply a false affiliation or endorsement by the plaintiff of the defendant." This is pretty similar to the Ninth Circuit’s standard, though it omits the factor that the defendant took only as much of the trademark as was needed (in practice, that might be subsumed in the "necessary" requirement).
eBay qualified for the nominative use defense for both its website references to Tiffany and its use of Tiffany in sponsored links because "eBay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website. And none of eBay's uses of the mark suggested that Tiffany affiliated itself with eBay or endorsed the sale of its products through eBay's website."
Other than the district court opinion in this case, I can't think of another case that has found a nominative use defense in a keyword advertising case. This ruling suggests that anyone who might qualify for a nominative use--certainly retailers and affiliates, but potentially even competitors--might have some additional traction to their defense. Potentially, this case will take some wind out of the sails of Rosetta Stone, which has partially complained about advertisements by folks in its channel. All of those people should be protected by the nominative use doctrine, and the Second Circuit may have just filleted those folks out of Rosetta Stone's case.
Note that at least one of eBay's ads was triggered by "tiffany" and included "tiffany" in the ad copy, so it appears that the nominative use defense extends to the trigger. The ruling does not address what happens if the trademark acts as a trigger but does not show in the ad copy. Before the 2nd Circuit's April 2009 Rescuecom v. Google ruling, the trial judge held that triggering by itself didn't qualify as a use in commerce. The appellate court doesn't cite Rescuecom or address use in commerce at all; but I believe this is the first Second Circuit keyword advertising case since Rescuecom, and it turns out fine for the defense.
The court rejected Tiffany's argument that eBay's general knowledge of counterfeiting activity was relevant to the direct infringement inquiry. The court also sensitive to Tiffany’s apparent motive of trying to suppress competition from legitimate resales.
Contributory Trademark Infringement
The flagship case articulating an online standard for contributory trademark infringement is the 1999 Ninth Circuit Lockheed v. NSI case. This court was squarely presented with the issue of the Second Circuit's standard, and the court punted. Instead, the court said that both eBay and Tiffany had agreed to use the Inwood standard (referencing a 1982 Supreme Court opinion, the leading offline case for contributory trademark infringement). The court recaps the standard: “there are two ways in which a defendant may become contributorially liable for the infringing conduct of another: first, if the service provider ‘intentionally induces another to infringe a trademark,’ and second, if the service provider ‘continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.’” Inducement was not an issue here.
eBay followed a notice-and-takedown scheme, so actual knowledge was not at issue either. eBay's generalized knowledge of counterfeiting activities on the site was insufficient; the court required "[s]ome contemporary knowledge of which particular listings are infringing or will infringe in the future." Tiffany's demand letters weren't specific enough, and its specific requests were honored. Therefore, eBay lacked the requisite scienter.
Unfortunately, the court did not stop there. Instead, the court brought up the possibility of "willful blindness." The court articulated a new and troublesome legal standard: “When [a service provider] has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.”
What does this mean??? What lays the foundation for a service provider to have "reason to suspect" that users are infringing? Does a C&D letter do that? The answer seems to be no; Tiffany sent those. Does proactive filtering confer that foundation? Perhaps, because eBay did undertake some extra filtering efforts for Tiffany. In FN 14 the court says “contributory liability may arise where a defendant is (as was eBay here) made aware that there was infringement on its site but (unlike eBay here) ignored that fact.”
It’s great for eBay that it didn’t ignore the fact, but what exactly did eBay do right (other than win at trial court)? I'm not sure, and that's telling for the weaknesses in the court's language and logic. As a result, I expect plaintiffs to get frisky with this "willful blindness" toy and start asserting that defendants had "reason to suspect" user infringement and "ignored that fact."
Sadly for Tiffany, it won't get the benefit of this loose language. The court concludes its discussion on willful blindness by saying “eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website….Without more, however, this knowledge is insufficient to trigger liability under Inwood. The district court found, after careful consideration, that eBay was not willfully blind to the counterfeit sales….That finding is not clearly erroneous. eBay did not ignore the information it was given about counterfeit sales on its website.”
Dilution
The court seems to say that there cannot be blurring or tarnishment when the defendant makes a nominative use. The court says simply “There is no second mark or product at issue here to blur with or to tarnish ‘Tiffany.’” This is interesting because the post-TDRA statute expressly provides a defense for nominative use, but the court doesn't rely on it. Instead, it seems to treat nominative use as a definitional requirement--if the defendant is making a nominative use, tarnishment and blurring should be categorically impossible and defendants should win on a 12(b)(6) motion to dismiss. But if that's the case, why have the statutory defense? (Don't get me started on the "commercial use" infinite loop in the dilution statute).
To the extent counterfeiting causes dilution, eBay didn't sell the goods itself, so it did not commit that dilution. The court mucks its words about contributory dilution; what it should have said is that there is no such thing.
False Advertising
The court describes eBay's advertising at issue:
eBay advertised the sale of Tiffany goods on its website in various ways. Among other things, eBay provided hyperlinks to "Tiffany," "Tiffany & Co. under $150," "Tiffany & Co.," "Tiffany Rings," and "Tiffany & Co. under $50."...eBay also purchased advertising space on search engines, in some instances providing a link to eBay's site and exhorting the reader to "Find tiffany items at low prices."
The court says that these statements are not literally false because genuine Tiffany merchandise was available on eBay, "[b]ut we are unable to affirm on the record before us the district court's further conclusion that eBay's advertisements were not ‘likely to mislead or confuse consumers.’” The court effectively rejected the district court's use of nominative use as a categorical defense to false advertising claims. I wasn’t too surprised to see this; in my post about the district court ruling, "I fear the court may have cut some corners here."
What about 47 USC 230? eBay has used the immunity to defend its ad copy from non-IP claims to the extent the ads are rendered untrue by third parties (see the uncited Mazur case). The court does not directly address 230, but it would not be a fan of such a defense: “eBay did affirmatively advertise the goods sold through its site as Tiffany merchandise. The law requires us to hold eBay accountable for the words that it chose insofar as they misled or confused consumers.”
Then, the court takes another weird detour. eBay appears to be free to advertise that it vends legitimate Tiffany goods, but it can't mislead consumers into thinking that all Tiffany goods on eBay are legitimate. How is eBay supposed to strike that balance? The court says: “An online advertiser such as eBay need not cease its advertisements for a kind of goods only because it knows that not all of those goods are authentic. A disclaimer might suffice. But the law prohibits an advertisement that implies that all of the goods offered on a defendant's website are genuine when in fact, as here, a sizeable proportion of them are not.”
Wait a minute. What kind of disclaimer is the court thinking of here? Maybe "Please come to eBay for Tiffany goods. Disclaimer: we have lots of fakes on our site." Putting aside the implications for eBay’s scienter, how is eBay supposed to fit such a disclaimer into the tight space constraints of an AdWords ad? This reminds me a little of the FDA's threats that it expected pharma companies to make side effects disclosures in AdWords copy...NOT POSSIBLE.
And what constitutes a "sizeable proportion"? The parties did not agree on the exact amount of counterfeiting taking place, and Tiffany's expert report was partially discredited by the trial judge. Does this mean we're back to taking snapshots of infringing activity and arbitrarily picking a percentage as too high? I thought we got past that with the Grokster Supreme Court opinion.
Rebecca has useful things to say about the false advertising discussion.
Implications of this Ruling
Between this ruling and the Akanoc ruling (and perhaps the Google ECJ opinion, if you look internationally), I think it's pretty clear now that trademarks are subject to a notice-and-takedown rule. We don't have a DMTA to complement the DMCA's notice-and-takedown procedure, and perhaps we would benefit from some statutory clarity about the precise mechanics/specifications of the notice and takedown. But even without a DMTA, I think we've arrived at the same basic place. From my perspective, this is not inherently good or bad. I guess I've always thought we'd get here eventually.
I continue to believe that courts reward service providers who do more than statutorily required for IP owners. For example, in FN 16, the court favorably notes that “eBay's efforts to combat counterfeiting far exceeded the efforts made by the defendants in” the flea market cases. I continue to encounter pockets of folks who believe that undertaking any voluntary efforts above the minimum makes the site a guarantor against bad activity. I think that's very outdated thinking. When I asked above what eBay did right to avoid being willfully blind, the answer is that they were proactive about working with IP owners. This case shows that those good faith efforts can be rewarded in court. UPDATE: Greg Lastowka explores this point more.
Having said that, I remain concerned that efforts to cater to IP owners' concerns can create a competitive barrier to entry. Not every site is sufficiently capitalized to undertake the same efforts as eBay. I hope courts will be circumspect about letting the law effectively reduce service provider competition from new entrants.
It remains to be seen what result this ruling will have on the keyword advertising cases. Through its broad reading of nominative use, it's possible the Second Circuit implicitly undercut some of the lawsuits against Google.
Finally, junky false advertising claims are so ubiquitous that we often don't give them much respect. However, here's a good example where the false advertising claim was more potent than the trademark claim. I believe false advertising will remain a hot area of legal practice.
Posted by Eric at 02:02 PM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack