September 30, 2010
StubHub Can't Beat Tax Collection Obligation Using 47 USC 230--Chicago v. StubHub
By Eric Goldman
City of Chicago, Ill. v. StubHub!, Inc., 2010 WL 3768072 (7th Cir. Sept. 29, 2010)
In my recent post about Milgram v. Orbitz, I wrote that "online tickets have become a major subfield of cyberlaw" and collected some of our blog posts on the topic. This is yet another case over online ticket sales, this time involving StubHub and reaching the 7th Circuit. I am amazed at how StubHub seems to be a bottomless well of litigation. What a litigation generation machine they've been.
This case involves Chicago's attempt to force StubHub to collect a ticket resale tax on its behalf. StubHub responded that if Chicago wants the tax revenue, it should take the matter up with StubHub's buyers and sellers. Apparently Chicago didn't like that answer, so it amended its laws to make it more explicit that StubHub should qualify as "reseller's agent" who must collect the Chicago tax on ticket resales.
StubHub responded that 47 USC 230 preempted this tax collection obligation. Judge Easterbrook does not respond well to this argument, although it does give him an excuse to reiterate his idiosyncratic view of 230 as articulated in Doe v. GTE and amplified in CLC v. Craigslist:
As earlier decisions in this circuit establish, subsection (c)(1) does not create an “immunity” of any kind....It limits who may be called the publisher of information that appears online. That might matter to liability for defamation, obscenity, or copyright infringement. But Chicago’s amusement tax does not depend on who “publishes” any information or is a “speaker”. Section 230(c) is irrelevant.
From my perspective, StubHub's 230 argument was a stretch, so I'm not surprised it failed. However, Easterbrook's reason for deeming it unsuccessful (230(c)(1) isn't an immunity) is quirky.
The court is kinder to another StubHub defense that Illinois' state tax obligations preempt Chicago's tax obligations. The panel certifies that issue to the Illinois Supreme Court for a ruling.
September 29, 2010
Deleted Facebook and MySpace Posts Are Discoverable--Romano v. Steelcase
By Eric Goldman, with additional comments from Venkat
Romano v. Steelcase Inc., 2010 WL 3703242 (N.Y. Sup. Ct. Sept. 21, 2010).
On my personal blog, I have repeatedly blogged about plaintiffs who tell one story in court only to have that story undone by their postings to social networking sites. See, e.g., Sedie v. US, People v. Franco (despite the tragedy, my personal favorite) and Embry v. State.
This case is in the same vein. Romano claims that she is largely bedridden/housebound, but her public Facebook pictures show her apparently enjoying herself away from home. The defense requests access to her non-public posts on Facebook and MySpace, which the judge grants.
The short opinion focuses on the defense's ability to access the private posts, but the actual order covers both current as well as deleted material. Specifically, the court orders "Defendant STEELCASE's motion for an Order granting said Defendant access to Plaintiff's current and historical Facebook and MySpace pages and accounts, including all deleted pages and related information, is hereby granted in all respects." The court didn't discuss the deleted material separately in its analysis, but this seems like a gotcha. Once a person posts material to Facebook or MySpace, there may not be a meaningful "undo"--even deleting it does not eliminate the material as future discoverable evidence for the duration of Facebook's and MySpace's retention periods.
[UPDATE: I had a few conversations with Facebook and my understanding is that deleted photos indeed would be unavailable for discovery within 90 days in many cases and perhaps substantially less time. Other content items are more complicated, but overall Facebook does not retain complete copies of "everything" indefinitely.]
This case only tells us what we already knew--never post anything online that will be inconsistent with the story you're planning to tell others. The inconsistent material can surface even if the post is made in a non-public venue and even if you delete it later. Unfortunately, this well-known "rule" appears to be about as teachable as the rules regarding making sex tapes.
Other comments on this ruling:
* Kashmir Hill, pointing out the seeming inconsistency of this ruling with the Crispin ruling from earlier this year. I do think it's conspicuous that the court seems to treat all material on Facebook as equally discoverable, even though some material might be governed as private communications under the ECPA and other material clearly wouldn't be. An apropos academic article worth checking out: Lior Strahilevitz, A Social Networks Theory of Privacy (2004).
* Evan Brown
* Mike Masnick
* Bruce Boyden
Venkat's comments: I don't know when people will learn the "never post anything online that will be inconsistent with the story you're planning to tell others" lesson. Perhaps a public awareness campaign is in order? People also tend to be surprised that, absent a specific privilege, personal communications, recollections, notes, and even a party's diary are discoverable in a civil lawsuit. In fact, this evidence often tells the most accurate version of the story from the person's perspective.
The wrinkle is the federal statute prohibiting the disclosure of private electronic communications such as emails, and on this basis, at least one court has ruled that the social networking site should not turn over private Facebook or MySpace messages to a party who issues a subpoena. ("Facebook Messages/Wall Posts, Civil Discovery, and the Stored Communications Act -- Crispin v. Audigier.") But this does not mean that the party seeking the discovery is not entitled to the relevant information. It just means that it should not be turned over by the social networking site absent a waiver or consent, and there is nothing to stop a court from requiring you to consent in order to proceed with your claims. I can't see any universe in which you can bring a lawsuit alleging emotional damages or that an injury affected your lifestyle, and then claim your Facebook or MySpace postings are off limits. (I think it's worth being clear about the different types of postings as well: there are truly private messages (which are similar to emails) and there are postings for your "friends," which are quasi-public anyway. All of this should potentially be discoverable.)
This scenario presents an awkward logistical issue. Steelcase is entitled to postings from the plaintiff's Facebook and MySpace pages, but does this mean that Steelcase can just rummage around in the plaintiff's accounts? This seems invasive. It allows Steelcase to make the decision of what is and is not relevant and, in the process, get access to potentially sensitive and private information that is not relevant to the lawsuit in any way. I suppose the judge could offer to become Facebook friends with the litigants, but this seems clunky at best. ("Judge Offers to Facebook 'Friend' Witnesses in Order to Resolve Discovery Dispute -- Barnes v. CUS Nashville.") Other alternatives are to have a neutral third party view the material and decide what is relevant (this is expensive) or to require Facebook to provide a log of account activity (doesn't necessarily work with pictures).
I'm not a big fan of courts citing to a bunch of company-drafted policies and concluding that Facebook and MySpace posts should be disclosed because no one expects them to be private anyway. Information that is stored in social networks can be used by several different parties, including law enforcement, the social network itself, and an outsider seeking information in the context of a civil lawsuit. To say that there is no expectation of privacy in your postings obscures the fact that these parties can access the information in different ways and subject to different restrictions. Does the court's take on the privacy expectations of Facebook and MySpace users mean that law enforcement can freely access your private Facebook posts? This doesn't seem like a tenable conclusion.
Finally, the fact that the court allowed access to certain deleted posts is interesting. I'm sure parties often receive advice to delete their accounts. Setting aside spoliation of evidence issues, as a practical matter, this may just not be an effective way to delete the material you want deleted.
September 28, 2010
Washington Anti-Online Gambling Law Survives Dormant Commerce Clause Challenge -- Rousso v. State
[Post by Venkat, with brief comments from Eric]
Rousso v. Washington, Case No. 8040-1 (Wash. S.Ct. Sept. 23, 2010)
Professor Goldman blogged recently about a case from the Washington state Supreme Court interpreting the state's online gambling laws: "P2P Gambling Site is Illegal Bookmaker." The same court just issued an opinion rejecting a dormant commerce clause challenge to Washington state's online gambling laws.
Lee Rousso, an online poker aficionado and Washington state resident, brought a declaratory judgment lawsuit seeking a declaration that Washington's online gambling statute violates the dormant commerce clause. The trial court and the court of appeals rejected this challenge, and the Washington Supreme Court affirmed.
No delegation of authority
The court first noted that existing federal laws regulating online gambling did not delegate to the states authority to regulate online gambling. The court rejected the State's argument that the Unlawful Internet Gambling Enforcement Act of 2006 and the Wire Act contained language from which the court could find that Congress delegated the matter to the states.
Court finds that the statute does not discriminate
The court next applied the traditional discrimination test to determine whether the Washington law discriminated in language or effect against out-of-state commerce. The language of the statute was not discriminatory - "it equally prohibits internet gambling regardless of whether the person or entity hosting the game is located in Washington, another state, or another country." The court could not find any discriminatory effect on interstate commerce, since the statute prohibits internet gambling "evenhandedly, regardless of whether the company running the web site is located in or outside the state of Washington." Rousso argued that in reality, since there were no Washington-based internet gambling sites, the effect of the ban was to favor in-state brick and mortar gambling services. Citing CTS Corp v. Dynamics Corp, 481 U.S. 69, 87-88 (1987), the court rejected this argument.
Rousso also argued direct discrimination because banning internet gambling will "have a secondary effect of promoting in-state, Internet gambling substitutes . . . ." The court rejects this argument as well, noting that internet gambling and brick and mortar gambling are "two different activities, presenting risks and concerns of a different nature . . . ." According to the court, purchasing substitute goods and services (whether that is brick and mortar gambling or "buying more snacks for an in-person poker game among friends") is not a direct discriminatory effect.
The burden is not "clearly" excessive in relation to the local benefit
Finding no overt discrimination, the court engaged in commerce clause balancing and asked whether there is a legitimate state purpose for the ban, and whether the burden imposed as a result of the ban is "clearly excessive" in relation to the local benefit. Interestingly, the court credits the State's arguments regarding the State's interest in regulating online gambling on the basis that online gambling (as opposed to in-person gambling) presents unique harms:
Internet gambling introduces new ways to exacerbate [the same threats to health and welfare as off-line gambling] . . . . Gambling addicts and underage gamblers have greater accessibility to on-line gambling--able to gamble from their homes immediately and on demand, at any time, on any day, unhindered by in-person regulatory measures. Concerns over ties to organized crime and money laundering are exacerbated where on-line gambling operations are not physically present in-state to be inspected for regulatory compliance. Washington has a legitimate and substantial state interest in addressing the effects of Internet gambling.
The court found that the burden on interstate commerce is "comparable" to the substantial state interest in protecting health, welfare, safety, and morals.
Regulation vs. an outright ban
Rousso argues that the State had a less restrictive alternative to address these concerns: regulating (rather than banning) internet gambling. The court again recited the "unique dangers and pitfalls" presented by online gambling, and concluded that it wasn't clear regulation could adequately address these issues, and in any event, it wasn't up to the court to second guess the legislature's decision to ban, rather than regulate, online gambling. The court further noted that regulating online gambling would be "an interstate-commerce burdening nightmare." [It wasn't clear to me that an outright ban presents less of a burden than regulation.] Regulation would require Washington to inject itself into the universe of non-Washington (and off-shore) online gambling entities, and "foreign operations would need to be reorganized in conformity to Washington regulations. . . . When a foreign operation failed to conform, all Washington commerce on that web site would be precluded."
I wasn't sold on the Court's conclusion. The Washington Supreme Court previously rejected a dormant commerce clause challenge to Washington state spam laws (See State v. Heckel, 24 P.3d 404, 406 (Wash. 2001)), but as the court of appeals noted, Heckel differs from this case since the law here applies to "passive" websites. Also, Washington's spam statute (like most others) also contains a geographic limitation. In fact, I may be missing something pretty basic, but I don't see an express geographic limitation in the statute. RCW 9.46.240 states:
Whoever knowingly transmits or receives gambling information by telephone, telegraph, radio, semaphore, the internet, a telecommunications transmission system, or similar means, or knowingly installs or maintains equipment for the transmission or receipt of gambling information shall be guilty of a class C felony . . . . However, this section shall not apply to such information transmitted or received . . . relating to activities authorized by this chapter . . . .
Not only does the statute not contain an express geographic limitation, it also exempts the identical conduct when engaged in by brick and mortar retailers. As I read the statute I wonder whether it allows gambling establishments that are authorized in the State of Washington to conduct operations on the internet? I think the State's argument breaks down here, because entities that are authorized (i.e., regulated) can engage in the conduct, but 100% of them will be in the state.
It was also interesting that the court so quickly and easily concluded that a ban did not affect out-of-state and foreign businesses because of their ability to screen customers geographically:
those businesses can easily exclude Washingtonians. If an individual during registration marks his or her location as the state of Washington, the gambling web site can end the registration there.
The court of appeals also mentions this ease with which an online business can exclude a resident from a particular state, but neither the court of appeals nor the Washington State Supreme Court cite much evidence for this proposition. (Here's a pdf link to the opinion: Rousso v. State, which discusses American Libraries Ass'n. v. Pataki, 969 F.Supp. 160 (S.D.N.Y.1997), and other decisions that came after it.)
The fact that this is a criminal statute dealing with the transmission of information makes this problematic. Would an out of state business violate the statute because a patron happen to use the service without disclosing that the patron was a Washington resident? The statute does not provide a simple answer to this.
I think this case is much tougher than the court gives it credit for being. It's worth noting that Justice Sanders, who authored the opinion, is well known for his libertarian leanings.
I also think the statute raises First Amendment concerns, but a quick online search did not turn up any challenges to the statute on this basis.
"State Efforts to Regulate the Internet" (Cyberlaw Cases) (discussing court of appeals opinion)
"Washington State Supreme Court Upholds Internet Gambling Law" (PokerNewsDaily) (discussing Rousso)
"No On-line Gambling for You, Minnesotans" (Info/Law) (discussing 2009 effort by Minnesota to impose filtering on ISPs)
Eric's comments: I continue to believe that any state regulation of the Internet presumptively violates the dormant commerce clause, especially when the statute does not contain any geographic limitations in its express terms.
It's true that a gambling website can block a state's residents if the site asks the user to report the geography and if the user accurately self-reports. However, a state law requiring websites to ask users to self-report geography governs conduct wholly outside the state because websites located outside the state who serve non-state residents would still have to comply. This extraterritorial reach, in turn, makes the law presumptively violative of the DCC, negating the applicability of the Pike balancing test. So from my perspective the court badly whiffed this ruling.
For my other ruminations on the problems with states regulating the Internet, see Geolocation and A Bordered Cyberspace (Nov. 2007).
UPDATE: John Ottaviani sent the following:
After rereading a number of dormant Commerce Clause Internet cases, I just come down on the side that the Internet is an inherently interstate entity, incapable of regulation by the states, as did the courts in Pataki and Dean (Am. Libraries Ass'n v. Pataki, 969 F. Supp. 160 (S.D.N.Y 1997); Am. Booksellers Found. v. Dean, 342 F.3d 96 (2d. Cir. 2003)). So I never get to the Pike balancing test. Even on the Pike balancing test, the Washington court gives short shrift to its treatment of the burden on interstate commerce, and is overly glib in its assertion that the websites can simply block the Washington users by refusing to register users with a Washington zip code. One of the reasons state lotteries and other "legal" forms of gambling have not proliferated on the Internet in the United States is the fear of criminal prosecution due to the inability to restrict users by geographic location to the degree felt necessary to avoid criminal prosecution. Users can lie about their address, or can be using service providers located in a different state than the user. The problem is exacerbated now with the proliferation of mobile devices, as users are no longer even tied to a particular fixed location. If a Washington resident is gambling on his Blackberry while on vacation in San Francisco, is that considered a violation of the Washington statute? What if the user lies and provides a California address and zip code?
The Rousso decision is consistent with the Washington court's decision in State v. Heckel, 24 P.3d 404 (Wash. 2001), where the Washington court rejected a dormant commerce cause challenge to its anti-spam law (prior to the enactment of the federal CAN-SPAM law). In Heckel, the court also gave a cursory treatment to the burden on interstate commerce, finding the only burden was the burden for spammers to refrain from deception, which the court found did not burden interstate commerce at all.
I'm not sure how the case would come out if the Supreme Court accepts a cert petition. Scalia is on record as not liking the Pike balancing test.
September 26, 2010
New York Court Dismisses Putative Class Action Brought Under California Spam Statute -- Bank v. Hydra Group, LLC
[Post by Venkat]
Bank v.Hydra Group LLC, 10-CV-1770 (JG) (E.D.N.Y. Sept. 24, 2010)
Todd Bank brought a putative spam class action against Hydra Group. The court dismissed the lawsuit for lack of subject matter jurisdiction.
Bank alleged that he received three pieces of spam:
[the] subject lines all contained the phrase “ATTN: Your Auto Insurance Renewal Reminder,” but the bodies contained only advertisements for an auto insurance broker.
Claiming that his was one of a million pieces of spam sent out by defendant Hydra Group, Bank styles his lawsuit as a class action. (But see footnote 1 of the order, where Bank admits this number is based on his "'general knowledge' of the industry.") Hydra Group, which is headquartered in California, brought a motion to dismiss for lack of personal jurisdiction and for failure to state a claim. The court on its own motion raises the issue of subject matter jurisdiction, and dismisses the lawsuit for lack of subject matter jurisdiction.
Bank asserted the Class Action Fairness Act of 2005 (which requires the amount in controversy to exceed five million dollars) as the basis of subject matter jurisdiction. However, the statute he sued under had a cap of $1 million per “incident.” (Cal. Bus. & Prof. Code § 17529.5(b)(1)(B)(ii) (“A person or entity bringing an action . . . may recover . . . [l]iquidated damages of . . . up to one million dollars ($1,000,000) per incident.”).) The statute defines incident as “a single transmission or delivery to a single recipient or to multiple recipients of an unsolicited commercial e-mail advertisement containing substantially similar content.” Bank argued that the cap was a limit on the recovery per plaintiff and not an aggregate cap on a defendant's liability. The court disagreed:
First, if the liability-limiting provision is interpreted as Banks suggests it should be, it would rarely, if ever, limit a plaintiff’s recovery. A plaintiff would have to receive more than 1000 unsolicited messages of substantially similar content from the same defendant in a single transmission to trigger the provision. On the other hand, if the provision is read as a cap on a defendant’s per-incident liability, it would be triggered more frequently -- whenever a defendant sent more than a thousand messages of substantially similar content in a single transmission, whether the messages went to one recipient or many more.
Furthermore, the statute evinces an intent to limit a defendant’s liability even further if the defendant has made efforts to comply with it. In the case of a defendant that has “established and implemented, with due care, practices and procedures reasonably designed to effectively prevent unsolicited commercial e-mail advertisements that are in violation of this section,” the statute limits liquidated damages to $100,000 per incident. Id. § 17529.5(b)(2). This reduced cap would provide far less of a reward, and therefore far less of an incentive, for defendants to avoid sending spam if, instead of limiting a defendant’s total liability for each transmission, it merely limited the amount a defendant had to pay to each plaintiff. For this reason as well, the damages provision is best interpreted as a limit on total liability rather than individual recovery.
At first glance, this may seem like a harsh turn of events for a pro se plaintiff. However, Bank is far from the typical pro se plaintiff who is typically accorded some leeway by courts -- he is a lawyer. In a previous case, Bank (or someone who shares his name, including his middle initial) tried to assert a section 1983 claim in federal court based on a state court judge's denial of his request to wear jeans and a hat in court: "Lawyer Has No First Amendment Right to Wear Hat in Court, Federal Judge Decides."
Throwing out the dispute on subject matter (rather than personal jurisdiction) grounds, kicks the lawsuit out of the federal system. In the process, the court expresses some skepticism at Bank's claims for damages:
I have difficulty conceiving of a statutory provision, concededly intended to limit liability in at least some cases, that nevertheless fails to operate in this case -- thus permitting the recovery of $3 billion in damages for the receipt of misleadingly labeled insurance advertisements. The inartful drafting of the provision is no justification for such a bizarre result.
Added: In 2008, Bank suffered a loss in the Second Circuit, which affirmed the dismissal of his claims under the Telephone Consumer Protection Act: "2nd Circuit Rejects Lawsuit Over Unsolicited Fax Ads." (h/t @LearnedElbow)
Other cases involving subject line claims under California's spam statute:
September 24, 2010
Availability of Client Data on LinkedIn, Facebook, and Google Sinks Trade Secrets Claim -- Sasqua Group v. Courtney
[Post by Venkat with a brief comment from Eric]
Sasqua Group, Inc. v. Courtney, 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010)
Background: Sasqua Group and its principal (Tors) ran a executive search consulting firm for professionals in the financial services industry. They work with "a small group of high-caliber clients, including . . Barclays Capital, The Royal Bank of Scotland, Nomura American Holding, Inc. . . . " In 2000, Sasqua took on Lori Courtney (Tors's niece) as a consultant. Sasqua claimed that Courtney ran the day-to-day affairs of Sasqua and lacked experience when she came to work for Sasqua. Courtney's version differed.
In 2008, Tors and Courtney negotiated but did not enter into a partnership agreement and continued to work together. [If this isn't a red flag for a dispute in the future, I'm not sure what is.] Courtney continued to work with Sasqua under a consulting agreement which was renewed annually. In 2009, despite the lack of a partnership agreement, Tors and Courtney started sharing profits and expenses of Sasqua. In early 2010, Courtney resigned from Sasqua and formed Artemis Consulting. Within the week, three Sasqua recruitment consultants advised Sasqua that they were leaving to work for Courtney at Artemis. Tors contacted Sasqua clients to let them know of Courtney's departure, and one of the clients (Standard Charter) told Tors that it already know what was going on. Predictably unhappy, Tors sued Courtney and Artemis. Sasqua asserted a variety of claims, but sought an injunction to prevent Courtney's communication with Sasqua's "client contacts" (i.e., particular individuals at companies who were in charge of hiring companies such as Sasqua and Artemis).
The Court's Decision: Since Sasqua did not have a non-competition or a non-solicitation agreement with Courtney, it was left to rely on a trade secrets claim based on its client list. This claim did not fare well.
The key issue the court focused on was whether the information sought to be protected as a trade secret was known outside the business or readily ascertainable. Courtney argued that the information Sasqua sought to protect was freely available, or available with little efforts through using sources such as LinkedIn, Facebook, and Google:
virtually all capital markets personnel have their contact information on Bloomberg, LinkedIn, Facebook or other publicly available databases, including the firm's own media advertising.
Sasqua argued that it developed database software which kept track of client contacts and preferences. Unfortunately for Sasqua, Courtney was adept at finding information on the internet, and her in-court demonstration of how to find out information that Sasqua claimed was a trade secret seemed to have impressed the court:
Courtney . . . described a . . . process that she would utilize if she were approached by a foreign exchange trader who was looking for a position at Nomura and if she were starting from scratch. Going to Google first this time, Courtney typed in the phrase "global head of FX in Nomura." Approximately 72,400 hits came up, the first of which was entitled "Nomura Appoints Head of Fixed Income Research." . . . Courtney next went to Bloomberg.com . . . Doing a search on Bloomberg, Courtney was able to find the direct phone number for Gladwin at Nomura's offices in London, the London address itself and Gladwin's direct e-mail address. The Bloomberg site also allows the user to send an instant message to Gladwin . . . .
Courtney also explained how such a search could be conducted on LinkedIn, which she described as being "like Facebook but for business" and as being more searchable than Bloomberg "because people put their whole profile on LinkedIn."
The court also credits her testimony on the availability of contact information and professional details on the internet:
[i]t used to be years ago, that people were very protective about their resumes and personal information because no one ever wanted their employer to get wind that they were looking for another job . . . [now] everyone . . . puts it out there for the world to see because people want to be connected now. People want to know - - people want the recruiters knowing who they are and how to find your information and how to find them if they have a good opportunity.
Sasqua argued that although contact information for certain decision-makers may be readily ascertainable, things like the chain of command, placement preferences, and histories were not. The court held that Sasqua failed to put forth evidence in support of this. Additionally, the court sided with Courtney on the issue of whether Sasqua undertook reasonable measures to protect the secrecy of the alleged trade secrets. Courtney submitted a declaration from Sasqua's computer technician that Sasqua actually misappropriated the client list from its prior employer and that Sasqua was "extremely lax" in its efforts to safeguard the data.
In the modern era where professional networking on the internet is the norm, things like client lists will become increasingly difficult to protect as trade secrets. If the information you are seeking to protect as a trade secret is available on the internet (and the defendant can access it with clean hands), you're going to have an uphill battle. (But see Hirel Connectors, Inc. v. United States, 2004 U.S. Dist. LEXIS 31036 (C.D. Cal. Jan. 23, 2004) ("This Court declines to hold that information that becomes publicly available on the Internet can never be a trade secret under California law.").) Also, as more information that may fall into the trade secrets category is in electronic form, efforts to protect its secrecy will be important. Allowing employees at the company to freely access information that a party later claims is a trade secret will put the party in an awkward position.
Additional coverage: 3 Geeks and a Law Blog ("Thanks to LinkedIn, Your Client Database May Not Be a Trade Secret").
Eric's comment: This case reminds me a lot of the classic trade secret case Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202 (1978). In that case, Van Zeeland took in a young apprentice Sandas, taught him the business (in that case, booking bands at music venues) and then saw Sandas leave only to go into competition with his former mentor. As Sandas walked out the door, he grabbed a list of contacts at the various music venues. Ultimately the court concludes that the information wasn't protectable as a trade secret because it would be simple to recreate that list. This was back in the 1970s, when in fact it was comparatively hard to put together contact lists. In the digital age, where people and businesses publish detailed profiles implicitly describing what they are looking to buy and sell, it will become increasingly harder for many businesses to claim their contacts/customer lists as trade secrets.
September 23, 2010
Georgia Pacific's Effort to Control Towel Dispenser Refills Fails in 8th Circuit--Georgia Pacific v. Myers Supply (Guest Blog Post)
Georgia Pacific Consumer Products LP v. Myers Supply, Inc., 2010 WL 3564834 (8th Cir. Sept. 15, 2010)
By guest blogger Mark Bartholomew
After a decision by the Fourth Circuit seemed to open the door for businesses to use contributory trademark law to block the sale of complementary goods, a recent case in the Eighth Circuit adopts what I think is a more reasonable approach. In both cases, the plaintiff and the technology at issue were the same, but the outcomes are completely different.
Plaintiff Georgia Pacific (GP) employs the following strategy to try and prevent competitors from offering cheaper paper towels for the paper towel dispensers it manufactures. It leases its hands-free enMotion brand paper towel dispensers to distributors who in turn lease the dispensers to businesses like restaurants and gas stations. In its leases, GP conditions any use of the dispensers on exclusive use of GP brand paper towels. GP also places a sticker on the dispensers warning any sublessees that only GP-brand replacement towels may be used.
In the Fourth Circuit dispute, GP claimed contributory trademark infringement against a rival paper towel manufacturer, Von Drehle. The Fourth Circuit reversed a grant of summary judgment in Von Drehle’s favor. To the extent Von Drehle knowingly created its towels for use in the enMotion machines and supplied those towels to distributors knowing how they were to be used, Von Drehle could be liable for contributory trademark infringement. The Fourth Circuit was sympathetic to GP’s claim that its reputation would suffer if it could not control the quality of the toweling used in its dispensers.
GP also tried its luck in the Eighth Circuit, this time suing a distributor of Von Drehle paper towels named Myers Supply. In the district court, Myers won. Although the judge found that Myers knew that its customers were stuffing the Von Drehle towels in enMotion dispensers and continued to supply the towels in the face of this knowledge, he held that GP failed to demonstrate an underlying likelihood of confusion. GP appealed, contending that the district court improperly discounted its survey evidence. The same survey evidence had been offered as evidence of confusion in the Fourth Circuit case.
The Eighth Circuit affirmed the district court. In one sense, the Eighth Circuit’s decision does not represent a complete break from the Fourth Circuit. It was reviewing a district judge’s finding of no likelihood of confusion after a bench trial, a decision entitled to some deference. By contrast, the Fourth Circuit overturned a grant of summary judgment on the issue of contributory infringement and could not be accused of simply interpreting the proffered evidence of confusion in a different way from the trier of fact. But the Eighth Circuit’s decision also offers some hints that, unlike the Fourth Circuit, it might not be willing to allow the controversial and unsettled area of contributory trademark infringement doctrine to ratify GP’s strategy for blocking competitors.
First, the Eighth Circuit spent a lot of time on industry custom. On multiple occasions, the court notes, “it was unobjectionable and common practice to put towels of one brand into a dispenser of a different brand.” GP’s own behavior, apart from its strategy with the enMotion machines, meshed with this industry practice. GP manufactures “universal” paper towel dispensers that can accept towels from other businesses and its products catalog indicates that it provides towels for use in other companies’ universal dispensers. By including these facts, the Eighth Circuit may be suggesting that GP should not be allowed to have it both ways, i.e., freely participating in a robust market for complementary goods while prohibiting any such goods for use in its enMotion machines. The Eighth Circuit even ratified the district court’s decision to credit this evidence of industry custom over survey evidence demonstrating that 23 percent of respondents using enMotion machines thought the brand of the towel inside was the same as the brand of the dispenser. In contrast, the Fourth Circuit largely ignored evidence of industry practice, instead limiting its likelihood of confusion analysis strictly to whether “restroom visitors” could be confused as to the source of the towels found in enMotion dispensers.
Second, GP also claimed tortious interference with contract but the Eighth Circuit dispatched this cause of action quickly. Myers admitted at trial that it knew there was a “99 percent” probability that its customers were buying Von Drehle towels and stuffing them in enMotion dispensers. Nevertheless, the Eighth Circuit decided that just “fill[ing] the orders of its customers” could not make Myers liable for tortious interference. In dissent, Judge Clarence Bean argued that Myers’ conduct could be deemed improper since it knew that its customers were violating their sublease and kept providing the cut-rate towels anyway. (Note how this is largely the same analysis required for a claim of contributory infringement: did the defendant know that its customers were engaging in trademark infringement and did it continue to supply its product after having that knowledge?) Similarly, the Fourth Circuit reversed a grant of summary judgment in favor of von Drehle on the tortious interference issue, disagreeing with the lower court’s view of von Drehle’s behavior as “legitimate competition.” It seems to me that the majority in the Eighth Circuit opinion, given its focus on industry custom, was willing to deem the paper towel stuffing at issue as “legitimate competition.”
Which leads me to a final point. The specific claim here might have been contributory trademark infringement, but the Eighth Circuit’s analysis is really more about unfair competition. Concerned that GP’s lawyers were making an anti-competitive end run around the rest of the industry, the court used industry custom to knock out GP’s infringement and tortious interference claims. I’m not sure that the decision maintains complete fealty to traditional trademark infringement doctrine—it seems to me that survey evidence showing double-digit rates of confusion is probably more probative of confusion than evidence of industry custom. But when confronted with an anti-competitive practice and a body of secondary trademark infringement doctrine providing increasing support for such practices, the court chose to use the discretion built into the likelihood of confusion analysis to find the right result. In this way, I think the decision represents an improvement over the Fourth Circuit’s decision just one month before.
September 22, 2010
Reunion.com Back to District Court -- Hoang et al v. Reunion.com Inc
[Post by Venkat]
Hoang et al v. Reunion.com Inc., Case No. 08-cv-03518-MMC (N.D. Cal.)
Reunion.com is a spam case that's generated some blog fodder, to say the least: "CAN-Spam-a-Friend?--Hoang v. Reunion.com," "Reunion.com Revisited," and "Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM." In the last round, the trial court reconsidered its prior orders and decided that the claims asserted by plaintiffs under California law were not preempted by CAN-SPAM.
Reunion sought to appeal this order. Denials of motions to dismiss are not typically appealable, but here Reunion sought and obtained an order from the district court certifying the court's most recent order (denying Reunion's motion to dismiss) for immediate appeal. Reunion then sought permission in the Ninth Circuit to have the appeal heard. The Ninth Circuit recently issued an order declining to hear the interlocutory appeal. This means that the case is now back in Judge Chesney's court. Judge Chesney also granted Reunion's request to stay discovery pending the appeal to the Ninth Circuit. As a result, the case is now just getting under way, a full two years after it was first filed!
It's also worth mentioning that one of the two lawyers representing plaintiffs withdrew. I wouldn't read anything into this, but I only mention it because I mentioned this firm in a previous post, as having represented defendants in spam lawsuits (who happened to be on the plaintiffs' side in this case). [Correction: one of the lawyers working for one of the firms on the plaintiffs' side is no longer working on the case. I misread this and thought one of the firms withdrew. My mistake, and thanks for the heads up!]
September 21, 2010
Anti-Scraping Lawsuit Largely Gutted--Cvent v. Eventbrite
By Eric Goldman
Cvent, Inc. v. Eventbrite, Inc., 2010 U.S. Dist. LEXIS 96354 (E.D. Va. Sept. 14, 2010).
Given the amount of scraping taking place every day all over the web, scraping lawsuits are surprisingly infrequent. In this ruling, a target website has its anti-scraping lawsuit largely gutted, in part due to poor legal preparation by the target website. Because many target websites will deploy better anti-scraping defenses than this one did, I'm not sure how much this ruling will help other scrapers.
Cvent provides a variety of resources to event planners, including web databases of information about event venues and their communities. Eventbrite operates an "event planning, sales and registration" website, which included profile pages for event venues. To help populate these pages, Cvent alleges that Eventbrite retained a third party contractor, Foley, to scrape Cvent's databases in Fall 2008. Cvent sued 18 months later (why so long?).
This ruling deals with Eventbrite's partial motion to dismiss multiple causes of action, each of which I discuss below. Among other highlights, the opinion has a rare interpretation of UCITA's provisions.
Computer Fraud & Abuse Act
The CFAA protects against the unauthorized usage of third party servers that causes the requisite loss. Scraping can violate the CFAA. See, e.g., EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001).
Eventbrite attacks the CFAA’s "unauthorized use" requirement by arguing that Cvent operated a publicly available website--"public" in the sense that the site was browseable without restriction. Following this line of reasoning, Eventbrite's usage was no less authorized than a web user who browses the site.
Surprisingly, Cvent doesn't appear to have alleged a common law trespass to chattels claim. Post-Hamidi/Mummagraphics, it's doubtful such a claim would be more successful than a CFAA claim. However, given that Cvent alleged so many other causes of action, trespass to chattels would have been a natural one to allege too. I doubt Cvent missed the claim, so I’m wondering why they chose not to pursue it.
Virginia Computer Crimes Act
Cvent also claimed a violation of Virginia's computer crime statute. This is a logical move; Venkat and I both have been tracking cases interpreting the analogous California Penal Code 502. The court, citing 4th Circuit jurisprudence, says the Copyright Act preempts a claim under the state computer crime law when it "does not require proof of elements beyond those necessary to prove copyright infringement." This happened here; "Cvent's claim in this case reduces to nothing more than a copyright infringement allegation, dressed up in VCCA garb," and therefore is preempted by federal copyright law.
Reverse Passing Off Under the Lanham Act/Dastar
Cvent also alleges that Eventbrite presents Cvent's copyrighted material as Eventbrite's own, and this constitutes a Lanham Act reverse passing off. This is exactly the kind of argument I thought Dastar precluded, yet the court does not dismiss the claim, saying that it can proceed as an alternative to the copyright claim. I don't understand Dastar all that well, but Rebecca is a Dastar expert, and she explains why the court whiffed.
Breach of Contract
Eventbrite tries to dismiss the contract breach claim on three grounds:
1) Copyright preemption. Although courts reach inconsistent results over copyright preemption of contract breaches, normally contract breaches should survive preemption, and it does here.
2) Privity. Eventbrite says Foley was an independent contractor and therefore didn't bind Eventbrite. The court says that Cvent alleged an agency relationship, and that was good enough to survive a motion to dismiss.
3) Unsuccessful formation. Given that the court held the terms were ineffective for CFAA purposes, we knew the terms would fail the more stringent requirements of contract formation. The court properly treats Cvent's terms as a "browsewrap" instead of a "clickwrap" and concludes (as it should) that "plaintiff has not pled sufficient facts to plausibly establish that defendants Eventbrite and Foley were on actual or constructive notice of the terms and conditions posted on Cvent's website." Tom O’Toole has more to say on this point. From my perspective, this case reminds us of something we already knew: if you want a valid online contract, use a mandatory non-leaky clickthrough agreement.
Being in Virginia, the court then discussed UCITA's contract formation provisions. I must confess that until the court brought it up, I hadn't even thought about UCITA's applicability. Talk about a forgotten (and failed) "model" law. I did a quick Westlaw search for "UCITA" and found 16 case citations to the law, not all of them interpreting its provisions, and no citations since 2008. Given the paucity of UCITA caselaw, the UCITA discussion alone makes the opinion distinctive.
Here, Cvent's presentation of the terms fails UCITA's requirements that the term be "available in a manner that ought to call it to the attention of a reasonable person," ... or [that] the website "disclose[s] the availability of the standard terms in a prominent place on the site" and "does not take affirmative acts to prevent printing or storage of the standard terms for archival or review purposes."
Normally, unjust enrichment is a junk claim, so I'm always disappointed when courts don't end it early. Further, in this context, it would have been completely appropriate to deem the unjust enrichment claim as preempted by the Copyright Act, because Cvent's basic argument is that Eventbrite’s enjoyment of Cvent’s data is an unjust enrichment. Nevertheless, the court said the claim survives Copyright Act preemption for material not protected by copyright.
Cvent alleged that Eventbrite's work with Foley constituted a conspiracy. The court rejects the argument, treating Foley as Eventbrite's agent which precludes the conspiracy claims.
Eventbrite didn't try to knock out the copyright claim on a motion to dismiss, but it did seek to moot statutory damages and attorneys' fees due to Cvent’s untimely registration. Foley swept through the Cvent site in Fall 2008, and Cvent registered its copyrights in April 2010 right before filing suit, so Eventbrite wins this point. Cvent can still get compensatory damages, but losing its claim for statutory damages and attorneys' fees probably significantly reduces the cash value of this litigation to it.
1) It's hard to scrape legally. Although this ruling is mostly good news for Eventbrite, it shows how hard it is to legally justify scraping. Scraping implicates lots of overlapping legal doctrines, and the scraper has to succeed on all of them.
2) Outsourcing to Consultants. Websites that want to avoid legal liability for scraping might be tempted to outsource the activity to independent contractors. As this case illustrates, the court can collapse the legal distinctions between the hiring party and the independent contractor.
Meanwhile, independent contractors might choose to tread cautiously after this opinion, as they are equally exposed legally. In this respect, I'm reminded of the Snap-on case from earlier this year, where the scraping contractor demanded an indemnity from the hiring party. Good thinking, but the indemnity is worthless if there is a criminal prosecution.
3) Cvent Didn't Prepare the Case Well. The case doesn't mention several anti-scraping techniques that many websites frequently use, including robots.txt/robot exclusion headers, IP address blocks, rate limits (i.e., quantitative caps on the data an IP address can download within a specified time), a more prominent contract, timely copyright registrations and cease & desist letters. Perhaps Cvent did some of these things and the court didn't mention them, or it may be some of the techniques would have been unavailable (such as IP address blocks or a C&D letter) because Cvent waited so long and perhaps didn't discover the scrape when it was occurring. This leads to a corollary point: it's easier to bust a scraper if you catch them in the act, so it can be hard to shut down a one-time scraper.
As part of prepping a future anti-scraping case, I advise clients to set up an API that allows third parties to download appropriate portions of the website's content subject to reasonable license terms. If the license terms include a mandatory linkback, reuse of the data acts as marketing and SEO for the originating website. From a legal standpoint, this way, the website's answer isn't "you can't have the data" but instead "you can't have it that way." This is the basic litigation posture that Facebook is taking with Power.com--Facebook Connect yes, scraping no.
Coverage of Other Scraping Cases
We don't have a scraping category on the blog (maybe we should) or even a trespass to chattels category. But scraping is a perennial favorite topic, so I thought it would be helpful to provide a bibliography of other posts regarding scraping and highly related matters:
* Judge Denies Facebook’s Request for Judgment on the Pleadings and Strikes Power.com Counterclaims -- Facebook v. Power.com (July 2010). See also EFF Weighs in on Facebook v. Power Ventures -- Facebook v. Power Ventures and Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com
* Interesting Database Scraping Case Survives Summary Judgment--Snap-On Business Solutions v. O'Neil (April 2010)
* In Aggregation Case, Israeli Court Says Online Ads Aren’t Copyrightable (Guest Blog Post) (April 2010)
* Craigslist Wins $1.3M Default Judgment Against Autoposting Facilitator -- craigslist v. Naturemarket (March 2010)
* Google AdWords Litigation Keeps Rolling In--Parts Geek v. US Auto Parts (Nov. 2009)
* CAN-Spam-a-Friend?--Hoang v. Reunion.com (Oct. 2008) and Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com (April 2010)
* Taxonomies and Commercial Reputations (Dec. 2007)
* Ticketmaster Wins Big Injunction in Hannah Montana Case, But Did the Public Interest Get Screwed?--Ticketmaster v. RMG (Oct. 2007)
* Oracle v. SAP Lawsuit Comments (April 2007). See also SAP Has Bad News in Oracle Lawsuit, But Tries to Bury It
* Facebook's Lawsuit Against Competitive Email Harvesting Continues--Facebook v. ConnectU (May 2007)
Venkat and I both love scraping cases! Please send us your tips about other scraping rulings as they come down.
September 20, 2010
Fifth Circuit Blesses Vistaprint's Rewards Program Sign-Up Process -- Bott v. Vistaprint USA Inc.
[Post by Venkat]
Bott v. Vistaprint USA Inc., No. 09-20648 (5th Cir.; Aug. 23, 2010).
I recently blogged about an online rewards program class action which survived a motion to dismiss. (In re: Easysaver Rewards Litigation: "Internet Rewards Program Class Action Survives Initial Motion to Dismiss.") Defendants in that case tried unsuccessfully to rely on a trial court's dismissal of a similar class action against Vistaprint. The Fifth Circuit recently affirmed the district court's decision in Vistaprint, endorsing Vistaprint's process for signing up online and its disclosures. The Fifth Circuit issued a per curiam decision, highlighting the reasoning of the district court in Vistaprint.
The Vistaprint and Easysaver cases differ in one important procedural respect: in Vistaprint, there was no dispute about the sign up process and consumer experience. In Easysaver, partially because the sign up process seemed to change over time, the court did not accept as fact the webpages put forth by Easysaver that supposedly represented the consumer experience. [It would be helpful for the court to have actually reproduce the webpages in question in an appendix to the court order.] In both cases, defendants brought an initial motion to dismiss. In Vistaprint, the court granted the motion and dismissed the case. In Easysaver, the court held that motion was properly brought as a summary judgment motion and declined to dismiss the case at the initial stage. (In contrast to Easysaver, in Vistaprint, the plaintiffs did not dispute the authenticity of the webpages submitted by Vistaprint along with its motion to dismiss.)
The Vistaprint district court decision is worth reading because it shows how details in an online transaction matter, and what types of thing courts point to when they decide to not credit the "I didn't read the online disclaimer" argument:
1. the text itself indicated that the rewards program offer was presented after the transaction with Vistaprint;
2. the Vistaprint program had a disclosure which was presented to consumers above the space for entry of the consumers' email address;
3. consumers had to check the box indicating that they had read and agreed to the (rewards program) offer details;
consumers had to enter their email address twice, the second time to confirm that they wished to enroll;
4. the "offer details" specified the terms of the offer and were "in the same size and color as most of the [other] print on the webpage except that the title [was] in bold print . . . ."
The court held that the disclosures were provided in a "clear, prominent, and conspicuous manner," and that:
a consumer cannot decline to read clear and easily understandable terms that are provided on the same webpage in close proximity to the location where the consumer indicates his agreement to those terms and then claim that the webpage, which the consumer has failed to read, is deceptive.
The court also rejected plaintiffs' Electronic Funds Transfer Act claims. With respect to the class of plaintiffs who used credit cards, the court held that the EFTA does not apply to these claims. With respect to the plaintiffs who used debit cards, the court held that there was no EFTA claims because the initial transfers were authorized and defendants did not continue any transfers after plaintiffs provided notice to their financial institutions that the transactions were not initially authorized. In addition to the EFTA claim, the court also dismissed a slew of ancillary claims.
[Oddly, the Vistaprint terms had a forum selection clause which provided for venue in Bermuda (??). The court rejected Vistaprint's attempt to rely on the forum selection clause on the basis that Bermuda's consumer protection rules did not have extraterritorial application.]
I'd slot this case (roughly) in the same category as Scherillo v. Dun & Bradstreet, discussed by Professor Goldman here: "Clickthrough Agreement With Acknowledgement Checkbox Enforced." Both cases contain useful teaching on how careful drafting of online terms can undercut a plaintiff's argument that they didn't read an online contract.
September 16, 2010
Software Vendor Trumps First Sale Doctrine via License--Vernor v. Autodesk
[Post by Venkat, with some comments from Eric below]
Vernor v. Autodesk, Inc., Case No. 09-35969 (9th Cir. Sept. 10, 2010) [pdf].
The Ninth Circuit last week issued an opinion in one of the two cases addressing whether a transaction involving copyrighted material is treated as a sale or license. Here’s a previous blog post on the district court’s opinion: "Vernor v. Autodesk--Does the Right to Possession Distinguish Between Sales and Licenses?". The other case, UMG v. Augusto, involves resales of "promo CDs," and the court has yet to issue an opinion in that case. A third topically related case, MDY v. Blizzard, is also pending at the Ninth Circuit.
Vernor tried to resell (on eBay) copies of Autodesk software that he purchased at a garage sale from Cardwell/Thomas & Associates, an architectural firm. Autodesk issued numerous takedown notices for Vernor's auctions to eBay, which ultimately terminated Vernor’s account. Vernor brought a lawsuit seeking declaratory relief that he was entitled to sell the copies of the software on eBay since the initial transaction between Autodesk and Caldwell/Thomas was a sale and not a license. A ruling in Vernor’s favor would have two consequences. First, he could freely sell the copies of the software he obtained. Since he hadn’t agreed to the contractual restrictions on at least some of the copies, Autodesk’s sole avenue to relief would be a breach of contract action against Caldwell/Thomas. Second, his customers could assert the “essential step” defense against Autodesk’s claim of unauthorized copying when they ran the software they bought from Vernor on eBay.
The district court found determinative the fact that the Autodesk agreement allowed Cardwell/Thomas to retain the copies in perpetuity. Cardwell/Thomas could choose to upgrade, in which event it would have to certify that it destroyed the old versions, but if it chose not to upgrade, it could retain the copies indefinitely. In the district court’s view of Ninth Circuit case law, Cardwell/Thomas's perpetual right of possession if it chose not to upgrade was determinative. (As Professor Goldman notes in comments below, the fact that Cardwell/Thomas chose to upgrade and sell its copies of the older version of the software tilts the equities in Autodesk's favor, away from Vernor.)
The Ninth Circuit reversed, focusing on the restrictions imposed by Autodesk. The court held that (1) the label attached by Autodesk, along with (2) the “significant” transfer and “notable” use restrictions, meant that the transaction was a license and not a sale. Vernor argued successfully at the trial court level that regardless of whatever restrictions the Autodesk license agreement imposed in theory, in practice, Autodesk did not enforce these restrictions. Vernor argued that the mere formality of having in place restrictions which Autodesk never enforced should not determine the classification of the transaction. The Ninth Circuit rejected these arguments. The Ninth Circuit also discussed the “essential step” defense, which would have been available to those who purchased the software from Vernor, had Caldwell/Thomas been a purchaser. Interestingly, as the court notes, the essential step defense is not available to licensees.
This was a closely watched case, and the Ninth Circuit acknowledged participation of amici (including the American Library Association, eBay, and the Software & Information Industry Association) and addressed their arguments.
I don't have much to add on the policy debate surrounding this - somewhat predictably, the reactions of people tended to fall towards extremes. My view is that anything less than a very limited ruling in Vernor's favor would have constituted a significant incursion into the contractual relationship.
One point which people picked up on is that the increase of software or content being made available in intangible form (without physical media, such as a CD) changes things. As more copyrighted material is made available in non-tangible (digital) form, I wonder if resale will become much less prevalent. Most times you have to jump through a few technical hoops (and maybe fight a few DRM battles) to be able to sell or lease your non-tangible (digital) copy of the copyrighted material, and I would guess the average person is much less likely to do this. You have a physical copy of the book and in order to sell or lend it you don't have to do much. With digital media, on the other hand, this does not seem to be the case. Practically speaking, I wonder how much being able to take advantage of the first sale doctrine even matters when it comes to books, music, and software in digital form.
Vernor involved software, and the first sale doctrine is a limitation on the copyright owner's exclusive right of distribution. The line between display and distribution is blurred on the internet, and if the purchaser who acquires a copy of a digital book cannot be prevented from freely displaying it, the purchaser can essentially distribute the book. For example, if I buy a copy of a digital book and make it available on a website where people can freely browse and read the book, most would agree that copyright rules should allow the copyright owner to prevent this. Also, a transfer of a digital copy that is in intangible form involves reproduction of the copyrighted material, unless the device itself is transferred. A 2001 report issued by the Copyright Office which looked at, among other things, first sale in the digital context ("Digital Millennium Copyright Act, Executive Summary") makes this point:
While disposition of a work downloaded to a floppy disk would only implicate the distribution right, the transmission of a work from one person to another over the Internet results in a reproduction on the recipient's computer, even if the sender subsequently deletes the original copy of the work. This activity therefore entails an exercise of an exclusive right that is not covered by section 109.
The report also highlights an important difference between first sale in the context of tangible and non-tangible media:
Physical copies degrade with time and use; digital information does not. Works in digital format can be reproduced flawlessly, and disseminated to nearly any point on the globe instantly and at negligible cost.
It's interesting that one criticism of the Ninth Circuit's decision is that it paves the way for other industries to start imposing restrictions on the resales of copyrighted material. See, for example, this interview with Greg Beck, counsel for Vernor: "How Booksellers Could Be Affected by Vernor Copyright Ruling." According to this argument, if software publishers are allowed to control the terms of redistribution via a license agreement, is the scary scenario of booksellers licensing copies of books next? But isn't this already the case? Companies such as Amazon certainly act as if they license the content to you. (Amazon generated some bad press when it zapped Kindle content, as mentioned in this article in The Consumerist: "Amazon Clarifies When It Will Remove Kindle Books".) This is also the position Amazon takes in its Kindle content terms, although interestingly, the Kindle terms allow for the perpetual right of possession (which in Judge Jones's view could have meant that Kindle content is owned, rather than licensed):
Use of Digital Content. Upon your payment of the applicable fees set by Amazon, Amazon grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content and to view, use, and display such Digital Content an unlimited number of times, solely on the Device or as authorized by Amazon as part of the Service and solely for your personal, non-commercial use. Digital Content will be deemed licensed to you by Amazon under this Agreement unless otherwise expressly provided by Amazon. Restrictions. Unless specifically indicated otherwise, you may not sell, rent, lease, distribute, broadcast, sublicense or otherwise assign any rights to the Digital Content or any portion of it to any third party, and you may not remove any proprietary notices or labels on the Digital Content. In addition, you may not, and you will not encourage, assist or authorize any other person to, bypass, modify, defeat or circumvent security features that protect the Digital Content.
Greg Beck indicated that Vernor will seek to have the case re-heard. We'll see what happens there. In the meantime, we'll see if the court's decision in Augusto adds anything to the mix.
Public Citizen (who litigated the case on behalf of Vernor): "Ninth Circuit says consumers may not own their software"
Law prof. Randy Picker: "Vernor v. Autodesk: Copyright, Software Upgrades and Secondary Markets"
Timely and relevant event at Santa Clara Law on this topic (Nov. 5, 2010): "Exhaustion and First Sale in IP"
Eric's comments: This case makes my head hurt. It involves a complicated set of legal and business issues that don't lend themselves to quick sound bites or easy answers.
We don't get a definitive answer here. Given the pending Augusto and MDY opinions, we don't really know the full state of 9th Circuit law yet. In this regard, I'm reminded of the troika of Perfect 10 cases from 2007; there was no way to understand the state of Ninth Circuit secondary copyright infringement law until we got all three opinions. (Unfortunately, I would add, I don't understand the Ninth Circuit jurisprudence even after we got over 100 pages of "explanations" in the three opinions). With two other related cases in process, it's too early to conclude where the Ninth Circuit will end up.
As it turns out, there was also a fourth relevant case, the F.B.T. Productions v. Aftermath Records case from Sept. 3. In that case, the court said:
where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license
Compare this to the standard in the Vernor case:
First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions.
Interesting parallels--basically the tests are the same except in the Vernor case, the licensor restricted software transfer, while in the FBT case, the licensor required periodic payments. Even more interestingly, Vernor doesn't cite to FBT, and the cases did not have any panel members in common. So apparently independently, two panels of Ninth Circuit judges (a total of 6 judges) both used broad definitions of licenses and narrow definitions of sales. This seems to bode poorly for other First Sale cases.
In considering the equities of the Vernor case, one fact stood out to me above the others: the architecture firm sold the supplanted software version after buying an upgrade at a discounted price. If Autodesk loses this case, then presumably it won't offer discounted upgrades in the future because each upgrade buyer can unleash the prior version into the secondary market. I would feel totally differently if the architecture firm had simply decided to stop using the software and wanted to liquidate the asset. Instead, the architecture firm got a windfall that Autodesk had clearly tried to prevent, which makes it harder to be sympathetic to Vernor as the downstream buyer. Unfortunately, the panel drafted a rule to preclude the architecture firm's windfall but failed to distinguish the more legitimate asset liquidation situation. In contrast, the equities in the Augusto case point much more favorably towards a First Sale defense, so perhaps that case will effectively limit this ruling to the resale-after-upgrade situation.
As Venkat kindly noted, the High Tech Law Institute is holding a conference on the First Sale doctrine on November 5. Our timing couldn't be better, as we have a lot to talk about. I hope you'll join us there.
September 14, 2010
Company Not Responsible for Harassive Comments by Coworker on Personal Facebook Page -- Amira Jabbar v. Travel Services
[Post by Venkat]
Amira Jabbar v. Travel Services (D.P.R.; Sept. 10, 2010) (Order on reconsideration)
Plaintiff brought a hostile work environment claim against her employer. Plaintiff alleged, among other things, that the employer failed to properly investigate derogatory comments made on Facebook. Specifically, following a company event, another employee (or someone related to the other employee) uploaded photos of the event to a personal Facebook account. Plaintiff commented on the Facebook photo and said: "remind me that taking pictures in this shade is really a dis-service to my wonderful chocolate skin." In response, another employee (who also happened to be a defendant) responded by stating: "That is why you always have to smile!!!" Plaintiff pointed to this comment along with other evidence in support of her hostile workplace claim.
The court rejects plaintiff's claims on summary judgment. With respect to the Facebook comment, the court finds that there was no evidence that the account to which the photo was uploaded was a company account. The court also did not credit plaintiff's testimony that the company had a policy in place that encouraged employees to upload photos of company events to their Facebook pages. In any event, the court rules that the company took appropriate corrective action:
As to the Facebook incident, [the company] asked its IT contractor to block access to [Facebook] for all office computers.
It's tough to read too much into this opinion, and it doesn't in practical terms answer the burning question of what sorts of things (if anything) related to Facebook and other networks belong in a company's social media policy. But the court seemed to rely on the fact that the Facebook account was the personal account of an employee (or a friend) and not an official company account. If the comment was made on the company's official Facebook page, would it have mattered? Would it have made a difference if the commenter was in a supervisory position vis a vis plaintiff? I'll leave it to the employment law experts to answer these questions, but I'm guessing at a minimum, the company has an obligation to take prompt corrective action and have in place a policy in the first place that employees shouldn't make problematic comments on company pages or accounts.
One takeaway from these cases is that if you have official company accounts, it makes sense to designate the person(s) who can "officially" post to these accounts and designate what accounts are official accounts. It probably would not hurt to have someone keep tabs on the account to monitor inappropriate comments and to give any authorized posters a crash course in what types of statements courts consider to be problematic or could get the company in hot water.
[The corrective action undertaken by the company is overly drastic, although it was endorsed by the court. No more access to Facebook from company computers! What are the employees supposed to do all day?]
September 13, 2010
Yelp Wins 47 USC 230 Dismissal of Dentist's Lawsuit--Reit v. Yelp
By Eric Goldman
Reit v. Yelp!, Inc., 2010 WL 3490167 (N.Y. Sup. Ct. Sept. 2, 2010)
Dr. Glenn Reit is a Manhattan dentist. His Yelp page and website. As of May 2009, the Yelp page had 11 reviews: 10 favorable reviews and 1 negative review from "Michael S." Dr. Reit believes the Michael S. posting was defamatory because it included "statements that his office is 'small,' 'old' and 'smelly,' and 'the equipment is old and dirty.'"
[An aside: these statements do not sound anywhere close to defamatory, and Dr. Reit looks a little thin-skinned for complaining about these statements. He might be interested in the literature showing how some negative reviews can bolster the credibility of positive reviews. See, e.g., this CNN article.]
Dr. Reit alleges that Michael S.'s post caused Dr. Reit to lose 5-11 calls per day. When Dr. Reit complained to Yelp about the review, he claims that Yelp removed all of the positive reviews and kept only Michael S.'s post. Eventually, that post got removed too. Dr. Reit's Yelp's page now has only 2 posts, both made in the past 4 months. Dr. Reit argues that Yelp removed the positive posts as part of Yelp's alleged scheme to get business owners to pay for advertising.
Dr. Reit tried a frontal legal assault against 47 USC 230 by alleging Yelp committed defamation by continuing to publish Michael S's review. For this claim, Yelp should get the 230 immunity for Michael S's review, and it's not even close.
[Another aside: Reit's lawyer is the well-known computer law pioneer Richard Raysman (check out this bizarre Wikipedia entry). I'm a little surprised Raysman frontally assaulted 230; surely he knew the defamation claim against Yelp would fail.]
To get around the obvious 230 immunity, Reit argued that Yelp's decision to remove the positive posts wasn't editorial, it was a "business decision," and this somehow makes Yelp liable for the negative review that remained. Similar arguments about profit-maximizing editorial judgments have been tried without success in several Ripoff Report cases, and the argument fails here as well. Instead, the court (citing the pretty analogous Shiamili case) effectively says that third party content remains third party content even if Yelp publishes reviews as part of a pay-for-play scheme:
The allegedly defamatory content was supplied by a third party information content provider and consisted of a message board posting. That Yelp allegedly uses "bad" posts in its marketing strategy does not change the nature of the posted data. Moreover, Yelp's selection of the posts it maintains on Yelp.com can be considered the selection of material for publication, an action "quintessentially related to a publisher's role"
This case doesn't cite the Ripoff Report cases, but it is consistent with them. As a result, this ruling is an unexpected boost for Ripoff Report's legal defenses.
After efficiently disposing of Yelp's defamation liability, the court addresses Dr. Reit's claim that Yelp committed deceptive business acts under NY state law. Dr. Reit argues that Yelp overclaims that its review sorting is entirely algorithmic and not manipulated by humans. The language cited by Dr. Reit comes out of Yelp's Business Owner Guide. The court says that the NY statutes only cover consumer-oriented conduct, and the Business Owner Guide was aimed at advertising businesses and not consumers.
Because this latter point turns on the NY statutes' specific language, I'm not sure how much this ruling helps Yelp in the other pending lawsuits against Yelp for its alleged pay-for-play business operations (see 1, 2, 3). The most interesting question is why the court sidestepped 230's application to the deceptive conduct statutes. The court simply and opaquely says that 230 "does not contemplate protecting Yelp's usage of [defamatory third party reviews] as leverage in its business model." Although I remain skeptical about 230's immunity for self-promotional advertising advanced by websites, I see that as a more contestable issue than the court treated it here. See, e.g., the Mazur case.
While Yelp avoided liability in this lawsuit, it should scrub its site to ensure it does not claim that Yelp's reviews are bias-free or the sole product of automated algorithms. For example, the complaint alleges that Yelp's guide says "We remove the guesswork by screening out reviews that are written by less established users. The process is entirely automated to avoid human bias." Obviously, the second half of the statement contains a fatal logic flaw; any algorithm intrinsically reflects human biases in its configurations. See my Search Engine Bias paper for more.
One minor procedural note: the court initially granted Dr. Reit a *TRO*. Fortunately, this opinion reflects a change of heart. I can't really imagine what the court was thinking granting a TRO. There are significant free speech and public policy considerations here, so I can't imagine how a meaningful TRO would be either constitutional or a good idea.
One final thought. One of my stock jokes to reporters is that I would never publish a negative consumer review of my dentist because of his/her retribution power, i.e., to dispense immense pain on my next visit. Either Michael S. is an untraceable pseudonym, or he never plans to go back to Dr. Reit, or he is a much bolder man than I am!
September 11, 2010
Google Gets Good Results in Three AdWords Trademark Cases (Jurin, Flowbee, Dazzlesmile)
By Eric Goldman
Jurin v. Google, 2010 WL 3521955 (E.D. Cal. Sept. 8, 2010)
Jurin is one of the multitudinous trademark owners objecting to Google's AdWords program. Echoing a prior ruling, the court has rejected Jurin's claims for false designation of origin and false advertising on a 12(b)(6) motion to dismiss. The court also rejected Jurin's claim of contract breach (based on Google allegedly failing to follow its trademark takedown policy) because Google never made the promises that Jurin asserts. The court gives Jurin another chance to file a second amended complaint, so I'm counting this as a pending lawsuit. However, Jurin has no chance of winning, and I wonder if he will get hit with an attorneys fee award again if he continues his futile quest.
Separately, last month, Google resolved the Dazzlesmile and Flowbee trademark cases over AdWords. See the Dazzlesmile stipulation of dismissal and Flowbee stipulation of dismissal. I couldn't easily find any public announcements about either case, but both appear to be settlements.
With these two dismissals, Google has whittled its portfolio of pending AdWords trademark lawsuits down to three from a high of twelve. (I'm not counting the Rosetta Stone case, which is on appeal after Google's remarkable win).
The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 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 [on appeal]
Flowbee v. Google
Parts Geek v. US Auto Parts
Dazzlesmile v. Epic
September 10, 2010
Veteran Spam Plaintiff Abandons Spam Lawsuit -- Asis Internet v. Subscriberbase
[Post by Venkat]
Asis Internet Servs. v. Subscriberbase, 2010 U.S. Dist. LEXIS 93518 (N.D. Cal. Sept. 8, 2010).
Asis is a veteran spam plaintiff, whose lawsuits have generated a fair amount of blog fodder. (See, for example, posts here, here, and here, discussing Asis lawsuits.) In May of this year, it suffered a bit of a setback when a federal court awarded approximately $800,000 in attorneys' fees against it: "CAN-SPAM Plaintiff Slammed With $800K Attorney Fee Award."
It had at least one spam lawsuit ongoing at the time, and it recently moved to dismiss its lawsuit against Subscriberbase with prejudice. The court granted the motion, but retained jurisdiction over the lawsuit, in case Subscriberbase (the defendant in this lawsuit) wanted to argue that Asis's litigation was "abusive." We'll see what happens in this case, but this certainly seems like the end of the road for Asis's litigation efforts. It acknowledged the $800,000 attorneys' fees award against it and argued that it "can no longer afford to prosecute the [lawsuit against Subscriberbase]," because the attorneys' fees award previously assessed against Asis "threatens to place Asis in either bankruptcy or corporate dissolution."
Another plaintiff (represented by the same lawyers) did not move to dismiss and presumably will continue to prosecute the case.
September 09, 2010
Google Settles Buzz User Privacy Litigation
[Post by Venkat]
In re Google Buzz User Privacy Litigation, Case No. 5:10-CV-00672-JW (N.D. Cal.) (Sept. 03, 2010).
Google recently settled the lawsuits relating to its privacy practices for Buzz. (h/t Wendy Davis) The terms of the settlement, which are subject to the court's approval:
(1) Google sets aside $8.5 million;
(2) the lawyers can claim up to 30% of this amount ($2.5 million), without objection from Google;
(3) class representatives get up to $2,500 each;
(4) Google makes (or has already made) changes "to the Google Buzz user interface that clarify Google Buzz's operation and users' options regarding Google Buzz;" and
(5) Google agrees to disseminate "wider public education about the privacy aspects of Google Buzz."
There's nothing wrong with a class action defendant paying out money to a public interest organization instead of paying damages to class members, but in privacy cases, I wonder if it reinforces the idea often advanced by defendants in these cases that there's no harm. With cases like this one and Facebook's Beacon settling with no damages paid to class members, you have to wonder. Also, with plaintiffs' lawyers becoming more organized, and companies continuing to stumble when it comes to rolling out new services which affect the privacy of consumers, the whole privacy lawsuit-settlement cycle has a toll-like feel to it.
Another interesting aspect of the settlement is that although Google agreed to make changes as part of the settlement, the settlement agreement does not specify any changes. Google admitted some errors in its roll out of Buzz, and I'm curious to see what changes Google made in response to the lawsuit as opposed to in response to public outcry. The settlement agreement notes that Google produced documents relating to operation of Google Buzz, changes, and consumer feedback regarding Buzz. I assume these documents will be made public and that may answer this question. (Also, Google agrees as part of its educational efforts to incorporate comments and suggestions from class counsel. I assume interested parties can submit their comments as well and Google will consider them. It may be unwieldy, but a public process around this would be nice.)
None of this necessarily undermines the claims brought by the class or the settlement, but the terms of the settlement and their similarity to the Beacon settlement are worth noting.
Separately, EPIC filed a complaint with the FTC around Google's Buzz practices. Here's the EPIC page for Google Buzz: "In re Google Buzz."
September 08, 2010
Portalization of Google, Redux
By Eric Goldman
A small point excerpted from my forthcoming essay on search engine bias, but one worth sharing.
Google maintains a page entitled "Our Philosophy: Ten Things We Know to Be True."
On June 3, 2004 (per archive.org), the page said "Google may be the only company in the world whose stated goal is to have users leave its website as quickly as possible." (emphasis added)
On September 6, 2010, that same line now reads "We may be the only people in the world who can say our goal is to have people leave our homepage as quickly as possible." (emphasis added)
Why the difference? In 2004, Google's goal was to send people somewhere else on the web--in other words, to get them off the Google website as quickly as possible. In 2010, Google's goals are more nuanced, but due to the significant increase in Google's own services, Google now often wants to send people to other places on Google.com. As Google becomes more portalized, it effectively increases its competition against the rest of the web. The small noun shift in Google's "Ten Things We Know" is a microcosm of that shift.
For more on this topic, see:
* my short 2005 post, The Portalization of Google
* The Problems with Google House Ads
* NYT Editorial: the Google Algorithm. The editorial's normative arguments are terrible, but its factual predicates are relevant here.
* Texas AG Investigating Google Search, and I Have Questions. The Biggest: Are You Kidding Me???
* Search Engine Bias and the Demise of Search Engine Utopianism
Unless something huge breaks, I'll see you next week. L'shanah tovah!
UPDATE: Google is characterizing this language change as "a small editing change made (about a year ago, actually) unconsciously by a proofreader" and that they will be reverting the edit. OK, sure, whatever. You can fix the language, but the portalization process is irreversible.
September 07, 2010
Online Ticket Resellers Get Significant 47 USC 230 Win--Milgram v. Orbitz
By Eric Goldman
Milgram v. Orbitz Worldwide, LLC, ESX-C-142-09 (N.J. Super. Ct. Aug. 26, 2010)
It's been a relatively quiet year for 47 USC 230, in a good way. We've had a few minor aberrational rulings (Subway v. Quiznos, Cornelius v. DeLuca, Scott P v. Craigslist) but, for the most part, the immunity has been working exactly as we'd expect.
Given the quiet year, this could be the most interesting 47 USC 230 decision of 2010 so far. Orbitz and TicketNetwork (part of CheapTickets) get a decisive 230 win against the New Jersey attorney general for reselling third party tickets. In addition to reaching the right result, the opinion is thoughtfully drafted and well-structured. It would make a great teaching case. It's worth reading.
This lawsuit relates to a private label site operated by CheapTickets (TicketNetwork) and branded by Orbitz. (Is it this site?). Orbitz specified the branding and design elements of the private label site. Orbitz also had the power to request content be removed from the site; to insert text and links for specific ticketed events; and to set prices of the offered tickets.
TicketNetwork hosted and operated the private label site as well as its own site. It sent confirming emails to buyers, processed the credit cards, and handled customer support inquiries. Perhaps most importantly, TicketNetwork handled the relations with third party ticket brokers who submitted offers to the site. It pre-approved brokers and attempted to factually verify the event information in submitted offers. TicketNetwork also provided consumers with various performance guarantees, including that the tickets would be valid and would arrive on time.
The specific offers giving rise to this lawsuit relate to Bruce Springsteen's Fall 2009 concert tour, which made a multi-date stop at the now-demolished Giants' stadium in East Rutherford, NJ. I imagine this event had significant local interest; the Boss is a native son of NJ, and his music has (for decades) addressed issues that relate to NJ. The NJ AG alleged that the sites offered 900 concert tickets 6 days before the official on-sale date; some of those tickets were not actually in the seller's possession/control before being offered for sale; and a few of the tickets listed seat numbers that didn't actually exist. The investigator purchased two tickets and confirmed that the seller pre-sold them before he/she had the tickets in hand; although band insiders and other dignitaries may have legitimately gotten ticket commitments before the on-sale date.
The state AG sued TicketNetwork and Orbitz for violations of NJ's Consumer Fraud Act and Advertising Regulations. Orbitz and TicketNetwork defended on 47 USC 230 and other grounds.
The court does a textbook 3 pronged 230 analysis:
1) Orbitz and TicketNetwork were providers of interactive computer services.
2) The claim treats them as publishers/speakers. The NJ AG argued 230 does not apply because of the defendants' "commercial" conduct--including charging service/administrative fees to ticket sellers. The court does not cite many of the cases upholding a publisher's 230 eligibility for advertising (I last aggregated 230-and-advertising cases in this post), but citing the Jurin ruling, the court nevertheless makes it clear that web publishers aren't liable for third party advertisements. The court says:
The fact that the defendants charge "service" or "administrative" fees is irrelevant to the CDA analysis. Plaintiffs seek to enjoin defendants from "advertising and selling concert tickets to consumers without actually having those tickets in their possession or control." This conduct, however, conduct [sic] fits squarely within the CDA's purview.
3) Orbitz and TicketNetwork don't qualify as "information content providers." Citing Donato v. Moldow (an NJ case from 2005 binding on the court here) and the Carafano case, the court rejects the NJ AG's efforts to treat Orbitz and TicketNetwork as ICPs because they helped create/develop the content at issue. The court correctly says the potentially liability-creating content at issue (the offer of misleading/inaccurate tickets) came from third parties, and Orbitz/TicketNetwork did not make "a material, substantive contribution to the ticket listings" sufficient to change its third party character.
The court distinguishes Roommates.com by reading its holding narrowly. The court says "the linchpin of the Ninth Circuit's decision was the fact that Roommates.com was actively participating in creating the objectionable content, i.e., by providing the illegal questions and by requiring users to answer them." In contrast, here the defendants "do not supply the content to which plaintiffs object -- the inaccurate or misleading ticket listings....Defendants do not ask ticket sellers to provide any information for any unlawful purpose, nor have they designed its [sic] Internet marketplace to violate any federal or state laws." Yet another case where the court ultimately cites Roommates.com in siding with the defense.
The court also distinguishes a pretty similar case, NPS v. StubHub. The StubHub case arose in a very different context--the New England Patriots were trying to get control over secondary ticket resales--but both lawsuits involve a website allegedly violating the law by reselling tickets. This court first questions the StubHub court's factual predicates and then rejects the case as "in contradiction with the spirit of Donato, and [thus it] cannot be relied upon by the court."
The court's conclusion is worth highlighting:
Defendants' services help to create and maintain a vibrant, competitive, market for consumers looking to purchase travel and entertainment related products and services online. As a result, defendants' services are consistent with the Congress's intent to encourage commerce over the Internet and ensure interactive computer services are not held responsible for how third parties use their services. Accordingly, defendants' motions for summary judgment are granted as plaintiffs' state law claims are barred by the CDA as a matter of law.
A subtle but unmistakable rebuke to the state consumer watchdogs that they barked up the wrong tree.
There are a number of interesting implications of this ruling:
* Rare defeat for a consumer protection agency. Many consumer protection agencies (both state and federal) are in partial denial that 47 USC 230 might apply to their enforcement actions. This ruling reminds them that 230 is a powerful restriction on their enforcement territory.
Further, consumer protection agencies usually win if they get into court. Judges are very sympathetic to consumer protection issues when the government raises them. Here, the clear-thinking judge recognized that NJ's enforcement action was not necessarily in the consumers' best interests.
* NPS v. Stubhub rejected. We've had a very small number of post-Roommates.com plaintiff wins where Roommates.com was cited favorably for the plaintiff. The NPS v. StubHub case is one of them. Here, the court rejects that precedent, potentially limiting the case's incursion into 230's immunity.
* 230 protects e-commerce sites. Curiously, the court doesn't mention FTC v. Accusearch, one of the other plaintiff wins post-Roommates.com, which had some factual resemblances. In the Accusearch case, the defendant resold pretexted phone records. Unlike Orbitz/TicketNetwork, Accusearch actually fulfilled the purchase. However, I've seen some discussion that the Accusearch case signals that e-commerce sites will get limited protection under 230. Here, TicketNetwork processed the payments and provided sales guarantees, yet the listings were still third party content. This case reinforces that e-commerce marketplaces still get 230 for third party commercial activity, even if the marketplace provides services to the vendors.
* Legal battles over online tickets aren't going away. Online tickets have become a major subfield of cyberlaw. Consider some of the following posts we've made over the past 3 years:
- Online Sports Ticketing Exchange Wins Dismissal Under Website User Agreement -- Duffy v. The Ticketreserve, Inc. (July 2010)
- NPS LLC v. StubHub, Inc. (April 2009)
- StubHub Wins 230 Dismissal in Anti-Scalping Case (Sept. 2008) [note: this one also involved Springsteen's tour]
- StubHub Denied 230 in Hannah Montana Ticket Scalping Case--Hill v. StubHub (July 2008)
- Ticketmaster Wins Big Injunction in Hannah Montana Case, But Did the Public Interest Get Screwed?--Ticketmaster v. RMG (Oct. 2007)
We've also mentioned the various state legislation governing online ticket sales (mostly along the lines of squelching line-jumpers).
Perhaps 2010 being a down year for concerts will help take some of the legal edge off the battle for tickets. Otherwise, I expect more litigation over the online resale of hot tickets until we see one of two structural changes in the ticket sales market: (1) ticket buyers can't transfer their tickets easily because they are just a database code attached to the initial buyer, or (2) tickets are sold via auction. Personally, I hope we see more of #2 rather than the continued litigation madness.
It's still 6 months away, but we've opened registration for our 47 USC 230 blowout party on March 4. I anticipate a possible sell-out situation, so get your tickets while there are still plenty. We aren't auctioning the tickets off, and I'm not sure if our anti-gaming devices will be strong enough to suppress robo-buyers if they sweep through.
September 06, 2010
July-August 2010 Quick Links, Part 2
By Eric Goldman
* Reality Blurred successfully counternoticed to overcome CBS's DMCA takedown notice for the Survivor contract/rule book.
* Doctor's Associates, Inc. v. Subway.SY LLC, 2010 WL 3187899 (D. Minn. July 30, 2010). Subway sandwiches wins an enforcement action against a possible Syrian knockoff advertising subway.sy and promoting itself on Facebook.
* Tur gives up his lawsuit against YouTube. My previous blog post. In a partially related development, more copyright owners are choosing to leave infringing videos up and have YouTube monetize the videos for them.
* Blizzard Wins $88 Million in Private Server Lawsuit.
* Christen v. Iparadigms, LLC, 2010 WL 3063137 (E.D. Va. Aug. 4, 2010). An effort to sue Turnitin for non-copyright claims fails due to copyright preemption. See my post on the copyright challenge against Turnitin.
* CMLP issued a report on news aggregators.
* F.B.T. Productions v. Aftermath Records (9th Cir. Sept. 3, 2010). An interesting opinion with possible implications for the First Sale doctrine as well as the sale/license distinction. The court says: "where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license" and not a sale.
* Mark Zuckerberg gets the paparazzi treatment courtesy of Gawker.
* In re Facebook Consumer Privacy Litigation, No. 5:10-cv-00429-JF (N. D. Cal. notice of dismissal July 22, 2010). BNA reports: "Plaintiffs in a putative class action against Facebook Inc. July 22 voluntarily dismissed a lawsuit claiming changes the social networking website made to its privacy policies last year misled users about how their personal data would be used and protected."
* In re Facebook PPC Advertising, 5:09-cv-03043-JF (N.D. Cal. Aug. 25, 2010). The anti-click fraud disclaimer in Facebook’s advertising contract “disclaimer does not cover Defendant’s own actions, irrespective of their purpose; nor does it cover the actions of third parties if the action is not for fraudulent or improper purposes.” The court further says that what constitutes an “improper purpose” is ambiguous. Previous blog post.
* After a public spat between Google and Yelp, Yelp's reviews are no longer included in Google's Places pages.
* In Re Google Buzz User Privacy Litigation, 10-cv-00672 (N.D. Cal.). Google settles the Buzz privacy lawsuits for $8.5M.
* 37 states are chasing Google over the Street View fiasco. The Google Street View lawsuits have been consolidated in the Northern District of California before Judge Ware. Meanwhile, a UK review suggests that Google didn't collect any useful data via Street View.
* In re Anonymous Online Speakers (9th Cir. July 12, 2010). Potentially important ruling on the legal standards for unmasking anonymous online commenters.
* Rep. Rush introduced a new federal privacy bill (HR 5777).
* A troublesome data sale of personal information by XY.com is avoided.
* Republishing social security numbers is protected by the First Amendment.
* The California legislature passed an anti-“e-personation” bill. EFF coverage.
July-August 2010 Quick Links, Part 1
By Eric Goldman
* Wolk v. Olson (E.D. Pa. Aug. 2, 2010). Defamation claim against "Overlawyered" blog dismissed on statute of limitations grounds. The court treats the blog as equivalent to a mass-media publication.
* Kelledy v. Cockerham, 2010 WL 3211906 (Ariz. App. Ct. Aug. 12, 2010). A family law court's order not to record and post an ex-spouse's messages to YouTube was a prior restraint on speech.
* Nexus v. Swift, 2010 WL 2813505 (Minn. App. Ct. July 20, 2010): "the anti-SLAPP statute's public-participation requirement does not exclude speech communicated through the medium of the Internet."
* U.S. v. Blagojevich, 2010 WL 2934476 (N.D. Ill. July 26, 2010). In rejecting the early publication of jurors' names in this high-profile trial, the judge takes an implicit swipe at bloggers: "There is little emphasis today in media or entertainment on the notion of withholding judgment until all the facts are in. ‘I think, therefore I am,’ a precept of Western philosophy, seems to have been supplanted by ‘I feel, therefore I opine.’" I opine that I feel the judge's stereotype is ridiculous.
* Craigslist's lawsuit against South Carolina has been dismissed as premature. In a related development, over the Labor Day weekend, Craigslist shut down its adult services category.
* Latest efforts to make sexting a crime.
* [N G] V. U.S., 2010 WL 3296853 (Fed. Ct. Claims Aug. 20, 2010). Another failed mistake of age defense based on a MySpace misreported age, this time in the context of a military discharge.
* Another unhappy lawyer has sued Avvo.
* Washington Post: Cyber-bullies are most commonly middle school girls?
Marketing and Advertising
* FDA thinks Novartis allowing users to use Facebook's "share" feature violates FDA advertising restrictions.
* IMS v. Mills (1st Cir.). Upholding a Maine restriction on data mining on information about prescribers' behaviors.
* Ars Technica recaps recent payola busts and explains how they undercut the record labels' arguments that radio stations should pay them.
* Eyeblaster, Inc. v. Federal Ins. Co., 2010 WL 2869547 (8th Cir. July 23, 2010). Insurer had duty to defend ad network from claims that the network installed harmful code on users' computers.
* BlueStar Management v. The Annex Club, LLC, 2010 WL 2802213 (N.D. Ill. July 12, 2010). "Defendants urge the court to consider the fact that the source code for the advertisement reveals that the picture was posted on the internet by a company with the email address worthathousandwords.com, not defendants, and that BlueStar has not alleged a relationship between these separate entities. Nonsense. Even if the court were to consider the source code of the advertisement, which was supplied by defendants and not mentioned in the complaint, it does not take a great inferential leap to conclude that BlueStar has alleged that defendants supplied the content of the advertisement to worthathousandwords.com, whom they hired to post the advertisement."
* Gary Null & Associates, Inc. v. Phillips, 2010 WL 2787644 (N.Y. Sup. Ct. June 28, 2010). In a defamation action interpreting the NY long arm statute, the fact that the defendant's website participated in AdSense did not provide jurisdiction in NY.
* Vision Media TV Group, LLC v. Forte, 2010 WL 2836791 (S.D. Fla. July 19, 2010). Another 800Notes case. This time, the operator of 800Notes.com was not responsible for jurisdiction in plaintiff's home court. Paul Levy comments.
* Super-interesting website that lets students “bet” on their course grades.
* Some legacy audio/video recently showed up online:
- my reputation talk at San Jose State in May, in both audio and video.
- video of my 2003 Defcon talk on criminal copyright infringement and warez trading. I think I'm a better speaker now than I was then!
- my 2008 talk at Georgia State University on UGC legal issues. The material should be pretty basic for most of you.
September 04, 2010
Texas AG Investigating Google Search, and I Have Questions. The Biggest: Are You Kidding Me???
By Eric Goldman
Late on Friday afternoon before a three-day holiday weekend, Search Engine Land breaks the news that Greg Abbott, the Texas attorney general, is investigating Google's search practices. Due to this timing, the news reports have been chaotic and incomplete, leaving open a number of questions, such as:
What is the Problem? Because the Texas AG’s office has not released any information about the investigation, we don’t know if the problem is with Google’s organic search algorithms, its AdWords rankings, or both. From Google’s blog post, all we know is that the Texas AG asked for more information about Google’s dealings with Foundem, myTriggers and TradeComet.
All three entities are vertical search engines that claim they were marginalized due to their status as Google competitors, even though no one I consider credible has agreed with their self-assessment of being bona fide Google competitors. As Danny Sullivan says (correctly IMO), those claims are “generally absurd.”
Is Microsoft Behind This Investigation? Microsoft has all but admitted that it is harassing Google on the antitrust front. Microsoft also has some indirect ties to Foundem, myTriggers and TradeComet. See this article for more on the Microsoft/Google chess match.
Danny Sullivan poses the question innocently: “Why an attorney general based out of Texas is investigating allegations made by non-Texas companies is unclear.” One possible hypothesis is that Microsoft and its team has been fomenting interest among state AGs as part of Microsoft’s campaign, and it finally found a taker. Of course, given how much state AGs love to bash dot coms (see, e.g., the state AGs' group enforcements against Craigslist, Facebook and MySpace), an anti-Google initiative would be an intrinsically interesting possibility to dangle in front of a state AG…especially during an election year, when an attack on the mighty Google guarantees headlines. (Abbott is up for reelection in November).
Is There a Role for State AG Enforcement Against Google's Search Practices? I'm always amazed by people who forget that Google’s organic search and ad ordering are editorial processes fully protected by the First Amendment. Part of this myopia is Google's own fault. It has so successfully sold itself as a technology platform that we forget about the editorial processes embedded in its core business. As a result of those judgments, any legal challenges to Google's search practices runs squarely into serious First Amendment considerations.
I'm also intrigued by the potential role of 47 USC 230(c)(2), a federal law which basically insulates websites' filtering decisions from any state law causes of action (except state wiretapping laws and possibly state IP claims). The interplay between 230(c)(2) and antitrust claims is hardly clear, but it’s possible that the Texas AG's efforts are completely preempted by the federal statute.
Remedies? Let's assume Texas can actually establish a case against Google's algorithms. Then what? Will Greg Abbott start telling Google how it should run its search engine? It's hard to imagine that the cure will be better than the disease.
For More Information. I’ve been interested in legal regulation of Google's algorithmic bias for some time. If you haven't read it, I encourage you to check out my 2005 article, Search Engine Bias and the Demise of Search Engine Utopianism, where I argued that market forces are very effective at disciplining search engine algorithmic abuses. A lot has changed in the past 5 years (including the unfortunate terminology shift to "search neutrality" instead of search engine bias"), and I am just putting the finishing touches on a short update to the essay addressing those changes.
UPDATE: Paul Levy doesn't agree with my legal analysis.
September 03, 2010
P2P Gambling Site is Illegal Bookmaker--Betcha v. Washington
By Eric Goldman
Internet Community & Entertainment Corp. v. Washington State Gambling Commission, 82845-8 (Wash. Sup. Ct. Sept. 2, 2010)
Betcha is one of those too-clever-by-half dot com ideas that practically beg VCs to roll the dice. Rather than allow illegal gambling on its site, Betcha styles itself as a P2P betting platform. Effectively, it is a messaging service for people making bets with each other, where Betcha charges the parties to talk with each other. Betcha also escrows the wager, but it allows the losing bettor to renege. Exercising that right, however, has bad reputational consequences that I suspect are tantamount to on-site seppuku.
From a realpolitik perspective, we all know what's going on here (i.e., illegal gambling). Betcha crapped out at the district court, but the appellate court reversed in a split opinion. Unfortunately, Lady Luck has stopped smiling on Betcha as the Washington Supreme Court reversed 9-0. I guess if you're going to lose, you might as well lose big. This makes me wonder: did any Betcha users make bets on the outcome of this case? Maybe someone other than the lawyers got lucky from Betcha's legal misfortune.
The court's opinion makes it clear that expansive anti-gambling laws leave almost no room for entrepreneurial yet legal Internet gambling enterprises. Here, Betcha is tripped up by the definition of "bookmaking," defined as "accepting bets, upon the outcome of future contingent events, as a business or in which the bettor is charged a fee or ‘vigorish’ for the opportunity to place a bet." This strikes at Betcha's model of charging the parties to communicate with each other regarding betting. The court is not swayed by Betcha's formalist argument that because the loser could renege on the bet, the wager did not meet the statutory definitions for gambling. The court says the bookmaking definition applies whether the bets are made for money or not.
The statute also restricts sending or receiving "gambling information." The court said that because Betcha was running a professional gambling site (under the statutory definitions), it also tripped over this definition. This confused me because this provision should be preempted by 47 U.S.C. 230, at least as applied to Betcha. The court says the "information on wagers and odds it received from its users must be presumed, under the plain terms of the statutes, as intended for use in professional gambling," but that goes straight into a 230 immunity. However, 230 wasn't discussed at all. Because this was only one of several legal problems for Betcha, a 230 immunity on this point would not have changed the outcome.
The court also said that Betcha illegally possessed "gambling records." It wasn't clear if this referred solely to user information or to Betcha's own business records, so I couldn't tell if 230 (also not discussed) would have been relevant.
With the court's expansive definitions of bookmaker, gambling information and gambling records, my not-so-creative mind could not easily think of any easy ways to circumvent the statute and legally run a P2P site enabling betting or gambling. However, I would love to see a more cogent discussion about the 230 overlay before reaching a definitive conclusion.
September 02, 2010
Runescape Publisher Denied Preliminary Injunction Against Maker of Auto-Player Software -- Jagex Ltd. v. Impulse Software
[Post by Venkat]
Jagex Ltd. v. Impulse Software, et al., Case No. 10-10216-NMG (D. Mass.) (Aug. 16, 2010)
Jagex operates "Runescape," a popular and free online role-playing game. The game has over 130 million accounts, and users spend a significant amount of time "rising through the levels of the game":
as of October, 2009, the three highest-ranking players had each spent an average of approximately 20,000 hours [!] involved in a game, e.g., 50 hours per week for almost eight years.
Impulse (along with the individual defendants) operate websites offering "cheat" tools - i.e., software that allows users to advance their characters without actually playing the game. Defendants' software downloads a copy of Runescape and "uses a process called 'reflection' to examine the game's internal operation which is normally hidden from users." The software then "plays the game for its owner while she is away from her computer."
Jagex brought claims under the Computer Fraud and Abuse Act, as well as claims for copyright infringement, DMCA violations, and trademark infringement. Defendants moved to dismiss and transfer venue.
Copyright claim: While Jagex obtained copyright registrations in certain "two-dimensional icons" that appear in the game, Jagex did not produce any registrations for either its website or software. Accordingly, Jagex didn't adequately allege that defendants copied anything that was covered by Jagex's registrations. The court finds Jagex's copyright claims are unlikely to succeed.
DMCA claim: Jagex argued that the "reflection" process effected by defendants' software circumvented technological measures put in place by Jagex to protect its copyrighted works. This claim failed both because Jagex did not identify copyrighted material (see above) or any "technological measures."
Trademark claim: The court found that Jagex's trademark claims were moot because defendants "removed all potentially confusing references to Runescape from [defendants'] websites." Defendants replaced "Runescape" with "RS." Jagex argued that it owned a community (EU) trademark for "RS," and therefore defendants continued to infringe. This argument did not sway the court either. The court found that the term "RS" was not being used in a manner that would cause consumer confusion: "it is implausible that the creator of a computer game would create a website that encourages players to cheat at it, the likelihood of consumer confusion is slim".
Computer Fraud and Abuse Act claim: Defendants first argued that Jagex's Computer Fraud and Abuse Act claims fell short because the Runescape servers were not "protected computers," since the game was freely available to end users who did not have to download the game client without agreeing to the terms and conditions. The court disagreed with defendants, noting that in order to progress beyond the introductory levels, players had to upgrade and agree to the terms and conditions. Even assuming the Runescape servers were "protected computers," the court declined to find contributory liability for a violation of the Computer Fraud and Abuse Act. Additionally, the court held that Jagex did not allege that defendants (as opposed to end users) agreed to the terms and accessed any protected computers. [Contributory liability under the Computer Fraud and Abuse Act is a relatively unexplored legal area. At least one court has found (contrary to the result in this case) that a plaintiff may assert a claim for vicarious liability under the Computer Fraud and Abuse Act: Charles Schwab & Co. v. Carter, 2005 U.S. Dist. LEXIS 21348 (N.D. Ill. Sept. 27, 2005). The issue has largely arisen in the employer/employee context, which differs slightly from the scenario here.]
We'll see what happens as the case progresses, but this seems like it could have been an interesting case, had Jagex taken some lessons in enforcement from Blizzard.
September 01, 2010
Griping Patient Goes Too Far Posting Fake Content in Doctor's Name--Eppley v. Iacovelli
By Eric Goldman
Dr. Barry Eppley v. Lucille Iacovelli, 2010 WL 3282574 (S.D. Ind. Aug. 17, 2010). The CMLP entry. The Internet is filled with commentary about this long-running saga if you want more information.
Dr. Eppley is a plastic surgeon. In 2001, he performed a facelift for Iacovelli. After a few months, Iacovelli complained of an obstructed airway. Dr. Eppley believes there is no way the facelift caused the obstructed airway. Iacovelli apparently saw it differently, and she took to the Internet to blame and criticize Dr. Eppley--allegedly including (directly or through cohorts) making fake postings in Dr. Eppley's name and publishing critical content at domain names that include Dr. Eppley's name. Dr. Eppley claims that this criticism has cost him a lot of money; at least 1 or 2 patients a month cancel appointments with him (presumably because the search results scare them off), and an unknown number never contact him in the first place. He has also fought back with a reputation management campaign costing $2-3k/month. Dr. Eppley has a registered trademark in his name.
[note: the court says Iacovelli did not properly contest Dr. Eppley's summary judgment motion, so the court appeared to accept Dr. Eppley's statement of facts. It’s unclear if Iacovelli’s no-show related to her failing health; but in a sad development, she passed away on August 2, before this ruling was issued.]
The court’s description makes Iacovelli sound like a fairly typical griper. For example, the court says:
Ms. Iacovelli has utilized Dr. Eppley's name in tabs, links, websites and throughout her campaign of internet disparagement, with the conscious design of driving internet traffic away from Dr. Eppley's authorized websites and toward her own.
Right, that’s what gripers do. However, there is one key exception: the fake postings in the doctor’s name. The court drops the boom on Iacovelli for this. The court grants Dr. Eppley summary judgment for defamation and false light (although I think the false light actually should have been normal defamation) and says Dr. Eppley is entitled to damages and attorneys' fees, both to be quantified in a later proceeding. Given Iacovelli’s death, I’m not sure any of that will matter.
The allegations in the case also suggest that the false postings might have constituted criminal epersonation in California if Gov. Schwarzenegger signs the pending bill into law. The court even says Iacovelli engaged in "virtual identity theft" of Eppley's trademark. Rhetorically, this is a little over-the-top; I half-expected the court also to say that Iacovelli shanghai'ed his identity.
However, in the zeal to take down Iacovelli, the court goes too far in concluding that Iacovelli committed a false designation of origin. There are several problems with this discussion.
First, Iacovelli allegedly misdesignated the origin of content, rather than the origin of marketplace offerings. As the court says:
The creation of internet sites with names such as "barryeppleyplasticsurgeon.com" and "barry-eppley.owndoc.com," the undertaking to create a series of "Eppley sites," and the appropriation of Dr. Eppley's name and likeness in social network and other websites demonstrate a deliberate effort to attract internet users to the websites controlled by Ms. Iacovelli and her associates and to create the false impression that they are websites and pages created or authorized by Dr. Eppley.
My position is that the Lanham Act applies to misrepresentations about marketplace offerings, not misrepresentations about the *source of information* about marketplace offerings. See my deconstruction of the SMJ Group v. 417 Lafayette Restaurant case. So in my opinion, structurally, the Lanham Act doesn’t apply to misdesignated content about Dr. Eppley’s services.
Second, even if the Lanham Act applies to falsely sourced content, Iacovelli’s griping seemingly lacks the requisite commerciality to satisfy the Lanham Act. Unfortunately, the court strains itself to find commerciality:
The record indicates an effort to elevate Ms. Iacovelli to celebrity status by publicizing her as the "star" of an HBO documentary and to promote the market for the book about her that Mr. Bergeron is writing. Ms. Iacovelli, furthermore, has asserted that her internet publications are regarded by her as her primary occupation, and that she operates them on a "sole-proprietor" basis. It is apparent that Ms. Iacovelli has sought to enhance her fame and notoriety by associating her story and her defamatory message with Dr. Eppley's name. A desire to achieve derivative celebrity status by diverting the internet traffic arising from Dr. Eppley's trademarked name constitutes a calculated effort to take advantage of his name recognition in order to boost the status and attention paid to her "sole-proprietor" sites. In addition, some of the websites and postings have included advertising content, apparently generating advertising revenue or other valuable consideration.
I disagree with the last point that ad-supported content should qualify as commercial activity under the Lanham Act. See my Online Word of Mouth article. But I'm more interested in the first argument--that a desire for fame, even if it doesn't actually translate into revenues, is a commercial activity. It reminds me a little of the Napster Ninth Circuit opinion, where the court found that Napster had a direct financial interest in the infringing P2P files being shared because the files were a "draw" to the system, even though Napster had not actually earned a dime of revenue. If no revenue = direct financial benefit, then I guess a desire for fame = commercial activity. Maybe the judge was overly influenced by Goldhaber's Attention article from the 1990s.
In the same paragraph, the court concedes "Ms. Iacovelli has also been motivated in part by non-commercial goals, but this does not affect her trademark transgressions." Um, say what? Could you go over that again?
The court’s finding of false designation of origin is misguided and unsupportable. However, it’s also clear that false content isn’t cool. Consider this ruling as another data point in the developing legal precedent about inauthentic online content. See also the FTC’s settlement with Reverb, Lifestyle Lift’s settlement with the New York Attorney General’s office, the RealSelf v. Lifestyle Lift lawsuit and settlement, Meyerkord v. Zipatoni and Buckles v. Brides Club. It’s already pretty clear that adjudicators won’t tolerate inauthentic online content.