Technology & Marketing Law Blog: November 2010 Archives

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November 30, 2010

Another Ruling Challenging "Check the Website for Amendments" Contract Provisions--Roling v. E*Trade

By Eric Goldman

Roling v. E*Trade Securities LLC, 2010 WL 4916401 (N.D. Cal. Nov. 22, 2010).

The plaintiffs are suing over E*Trade's allegedly unilateral imposition of an account maintenance fee for folks who didn't make at least one quarterly trade. The plaintiffs further allege that E*Trade would liquidate account assets to cover the fee if the account didn't have enough cash. For a very long time I was a E*Trade customer, but I got tired of their frequently imposed and often surprising fees, so I finally moved elsewhere and improved my overall happiness. In light of their abysmal treatment of a longtime customer with not-inconsequential assets (at least, before the markets melted down), I have no love lost for E*Trade's business practices.

This is a Judge Patel opinion. Other well-known opinions by her include the Napster district court rulings and the NFB v. Target ruling about the ADA's applicability to websites. Judge Patel is known for quirky opinions, and this one doesn't disappoint. She discusses E*Trade's contract amendment process while discussing the unjust enrichment claim. Wait, what? Presumably if the contract fails completely, the plaintiffs may have a claim for quasi-contract restitution, but the court's opinion doesn't connect those dots clearly.

However she gets there, she addresses the crucial topic of unilateral contract amendments. She describes E*Trade's agreement as follows:

The brokerage agreement states that “E*TRADE Securities may modify the fee structure at any time by posting a modified structure on its Web site.” Brokerage Agreement § 4(b). The agreement also requires plaintiffs to check E*Trade’s website for modifications to the agreement:

I understand that this Agreement may be amended from time to time by E*TRADE Securities, with revised terms posted on the E*TRADE Financial Web site. I agree to check for updates to this Agreement. I understand that by continuing to maintain my Securities Brokerage Account without objecting to revised terms of this Agreement, I am accepting the terms of the Revised Agreement and I will be legally bound by its terms and conditions.

Judge Patel continues: "plaintiffs allege that E*Trade’s unilateral ability to change contract terms, without notice, and the requirement that they periodically check the terms of the contract is problematic. Although magic words are not used, the allegations are sufficient to allege a claim for unenforceability."

Oddly, Judge Patel does not cite Douglas v. Talk America, the directly applicable Ninth Circuit case on point that seems to support her position. This may reflect her attempts to apply New York law rather than CA law, but even so, it would have been an appropriate citation. She also does not cite the highly relevant Texas district court opinion in Harris v. Blockbuster, which also would have supported her conclusion.

She does attempt to distinguish several cases cited by E*Trade to support the unilateral amendment clause, mostly on the grounds that the other provisions required the web vendors to notify their users before the amendment applied while this case relates to allegedly unannounced fee changes. This, for example, described her treatment of TradeComet v. Google. As I mentioned in my post on that case, I think the TradeComet ruling makes more sense as a B2B ruling, so the discussion doesn't fit B2C contracts very well. Judge Patel also tries to distinguish MySpace v. theglobe, although I thought her treatment of that case was weak; she should have just gone ahead and say the case reached the wrong result (which I think it did).

As a net effect, the court puts E*Trade behind the eight ball because it used a contract provision that allowed it to make unilateral changes simply by posting them to its website. In my Harris v. Blockbuster blog post from a year and a half ago, I wrote:

STOP PUTTING CLAUSES INTO YOUR CONTRACTS THAT SAY YOU CAN AMEND THE CONTRACT AT ANY TIME IN YOUR SOLE DISCRETION BY POSTING THE REVISED TERMS TO THE WEBSITE

This language has a significant risk of killing the entire contract, which would strip away a lot of very important provisions that should be/need to be in the contract. So far Blockbuster has only lost its mandatory arbitration clause, but it's possible other important risk management clauses (warranty disclaimer, liability limits, dollar caps, etc.) will similarly fall. If those clauses fail, let the plaintiff feasting begin!

I'm pretty sure some readers of this blog have resisted my exhortations because, as I discussed in the Harris post, the options for web vendors to manage their business over time without such a flexible clause aren't great. But, you are not doing your clients any favors by taking this approach. Instead, you are leaving your clients vulnerable to crafty plaintiffs' lawyers who may shred your contract formation process, leaving your client very, very exposed. It's high time to evaluate alternative amendment process options.

Although it might be tempting to read the opinion this way, I don't think it stands for the proposition that websites can't unilaterally change the fees they charge to customers. Websites presumably need to give customers adequate advance notice of such fee increases (and, presumably, the chance to bail out) before charging the new fee, but that seems like a logical customer relations approach even if not required by law. Note, however, in this case, E*Trade's ability to change its fees was coupled with a clause saying it could amend its agreement unilaterally by posting the changes to the website. In my opinion, it's that additional provision that creates the problem for E*Trade. We'd have to see what a court did with a website's unilateral fee increase not coupled with the broader contract amendment clause. That isn't the case before this judge.

Posted by Eric at 07:24 AM | Licensing/Contracts | TrackBack

November 28, 2010

Web Host Denied 230 Defense When It Allegedly "Actively Contributes" to Website--Kruska v. Perverted Justice

By Eric Goldman

Kruska v. Perverted Justice Foundation Incorporated.org, 2010 WL 4791666 (D. Ariz. Nov. 18, 2010). The CMLP page.

I previously posted on this lawsuit in 2008, when the court dismissed GoDaddy as a defendant. This ruling deals with a motion to dismiss by Christopher Brocious, whose relationship to this lawsuit isn't well explained in this opinion. The court treats him as a web host but denies his motion to dismiss based on 47 USC 230. The primary substantive discussion:

in her Amended Complaint, Plaintiff alleges that Defendant not only acted as “moderator,” “legal owner, copyright holder, webmaster/IT person and contributor” to two websites containing content that gave rise to Plaintiff’s lawsuit, he also allegedly “actively contributes to [the websites’] content.” (Doc. 140 at 5-7.) Plaintiff also contends that Defendant and others worked in collusion to post and repost materials about Plaintiff. (Doc. 140 at 30). Based upon Plaintiff’s allegations, Defendant arguably was an “information content provider” who is “responsible, in whole or in part, for the creation or development of information” allegedly posted about Plaintiff. § 230(f)(2)-(f)(3). Thus, the Court will not dismiss Plaintiff’s claims under § 230 at this stage of the litigation.

This ruling reminds me a little of the recent Swift v. Zynga, where the court also accepted fairly sweeping allegations from the plaintiff to defeat a 230-based 12(b)(6) motion.

Like that ruling, this appears to be a bad ruling. Based on a thick stack of precedent, it's 100% clear that Brocious' status as content moderator, copyright owner and webmaster should not make him liable for third party content. Further, I think it's pretty clear that "collusion" with third parties does not reduce the 230 eligibility. Typically, "collusion" is just a code word for exercising editorial discretion, which is squarely protected by 230. This post recaps some of the caselaw on that point.

However, "active contribution" to a third party defamatory post could defeat a 230 motion, but only if the defendant actually "contributed" defamatory material him/herself. It's irrelevant for plaintiffs to show that defendants made some contribution to their own websites; they still get full 230 protection for any third party content even if they do so. Further, under Twombly/Iqbal, simply alleging an "active contribution" to third party content should not be sufficient to defeat a 12(b)(6); the plaintiff should have to marshal more facts connecting how the defendant's contributed content caused the defamation. The court's unwillingness to insist that the plaintiff allege those connections in the complaint appears to be a pretty obvious error.

Like the judge in Swift v. Zynga, it appears this judge was reluctant to use 12(b)(6) to end the case on 230 grounds at the earliest stage, preferring to give the plaintiff a chance to connect the dots. In this case, it's ironic because this judge gave GoDaddy such an easy 230 defense 2.5 years ago, saying at the time that "this immunity has proved nearly limitless." And in this case, already going nearly 3 years, I'd expect the plaintiff to be able to make more precise factual allegations than conclusory assertions of "active contribution."

In any case, it would be a disaster if judges get timid about using 230 to kick out meritorious defenses on 12(b)(6) grounds. Defendants incur lots of expenses after a 12(b)(6), both on discovery and additional motion practice, and it would facilitate the immunity's intent for judges to demand more specificity from plaintiffs before plaintiffs are allowed to impose those costs on defendants.

Posted by Eric at 08:19 AM | Derivative Liability | TrackBack

November 27, 2010

Junk Fax Claim Fails Due to "Established Business Relationship" Exception -- Cardinal Partners v. Fernandez Discipline

[Post by Venkat]

Cardinal Partners, Ltd. v. Fernandez Discipline, LLC, Case No. L-10-1180 (Ohio Ct. App.; Nov. 19, 2010)

Background: Toledo chiropractor Dr. William J. Houttekier II shared a fax number with Cardinal Partners (they both apparently had the same fax number). Houttekier received a fax (advertising an upcoming two day marketing seminar) sent by Fernandez Discipline, a marketing consulting firm. [It's interesting to see marketing consultants advertise their services via communications that turn out to be unwelcome. I would think this does not engender much trust in the consulting services, but that's neither here nor there.] Houttekier threatened suit but offered to settle for $3,000. The parties did not settle, and ultimately Cardinal Partners (not Houttekier) filed a class action lawsuit alleging junk fax violations.

The procedural details are murky, but it appears the trial court dismissed (or denied certification of) the class action, and Cardinal Partners appealed. While the appeal was pending, the parties both moved for summary judgment. Cardinal Partners voluntarily dismissed its appeal, and the case moved forward on an individual basis in the trial court. The trial court granted summary judgment in favor of Fernandez Discipline, on the basis that Fernandez Discipline had an established business relationship with Houttekier, who "co-used the telephone number at which [the fax to Cardinal Partners] was received."

Discussion:

Was the "established business relationship exception" defense available?: The first question was whether the "established business relationship" was available as a defense to the fax at issue. The court looks at the TCPA (enacted in 1991), as amended by the Junk Fax Prevention Act (enacted in 2005), and concludes that although it was unclear as to whether the TCPA (as implemented by the FCC regulations) provided for an "established business relationship" exception to faxes, the enactment of the Junk Fax Prevention Act cleared this up, and since the fax at issue was sent after enactment of the Junk Fax Prevention Act, the exception was available.

Did Fernandez Discipline put forth sufficient evidence to demonstrate that it was entitled to the "established business relationship" exception?: In support of its motion for summary judgment, Fernandez Disciple submitted pages from an online directory which showed that Houttekier and Cardinal Partners shared the same telephone number. This evidence was uncontested. Although there were hearsay problems with the remainder of the evidence submitted by Fernandez Discipline, the court concluded that there was enough competent evidence to show that Fernandez Discipline had an "established business relationship" with Houttekier (who had attended several Fernandez Discipline seminars). Based on this, the court affirms the trial court's dismissal of the claims.
__

The case raises two questions, which the court does not really dig into. First, who has the cause of action when people share a telephone number? Presumably, the person or entity who the number was assigned to (in this case Cardinal Partners) does. Second, if two people share a number, does consent from (or a business relationship with) one undermine a cause of action for the other?

Posted by Venkat at 09:52 AM | Marketing , Spam

November 23, 2010

Apple Gets Partial Win in Case Alleging Copyright Infringement by iPhone App -- Stewart v. Apple Inc.

[Post by Venkat]

Stewart v. Apple Inc., 10-Cv-01012-RSL (W.D. Wash.; Nov. 08, 2010) (Order on Motion to Dismiss) (Complaint) (Answer)

Martyn Stewart recorded a bunch of nature sounds, including bird sounds, which a third party developer allegedly incorporated into the "iBird" app. Stewart sued the developer and, predictably, sued Apple as well.

Apple (and the developer) moved to dismiss for failure to state a claim. Apple tried to poke holes in Stewart's copyright registrations, arguing that Stewart did not adequately allege ownership, and only had rights in the compilations of the sounds, which did not give him copyrights in the individual recordings. The court rejects these arguments, holding that Stewart's allegations were sufficient to state a claim at the pleading stage. If defendants want to conduct discovery around ownership and the underlying copyrighted material, they are free to do so, after which they can bring a motion for summary judgment.

The court did, however, grant defendants' request to strike Stewart's claim for statutory damages and attorneys' fees. Since Stewart filed his copyright registrations after defendants' alleged infringements commenced, there was no dispute about this, and Stewart conceded this issue.

What's interesting is that Apple did not raise an argument that it was entitled to DMCA 512 protection either in its motion to dismiss or its answer (which it recently filed). The pleadings do not contain any allegations that Stewart sent Apple takedown notices or that Apple did not comply with any requests that he sent. It seems like Apple could certainly make the case that it is entitled to DMCA protection. Mike Masnick asks the same question in his initial post about the case: "Apple Sued For Copyright Infringement Because Third Party App Has Someone Else's Bird Sounds."

This isn't the first time a platform such as Apple or Facebook will be sued for an allegedly infringing third party app (see the Miller case linked below for discussion about a case where the plaintiff brought copyright infringement claims against Facebook based on an allegedly infringing app), and the platform's review process for the app certainly should not cause it to lose DMCA protection. (See CoStar Group, Inc. v. LoopNet, Inc., 164 F. Supp. 2d 688 (D. Md. 2001) (screening of uploaded photos for subject matter and obvious infringements did not undermine DMCA protection).) I'm curious why Apple did not even make the argument here?

Posted by Venkat at 05:22 PM | Copyright

Wildcarding Subdomains Is OK; Reverse Domain Name Hijacking Isn't--Goforit v. Digimedia

By Eric Goldman

Goforit Entertainment LLC v. Digimedia.com LP, 2010 WL 4602549 (N.D. Tex. Oct. 25, 2010). See the related personal jurisdiction ruling from 2007 featuring a completely different but still ridiculously large and expensive cast of lawyers.

This is a super-interesting dispute involving two not-so-interesting litigants. The plaintiff Goforit runs a type of meta-search engine at goforit.com. After spending 5 minutes at the site, I couldn't identify a single reason why anyone would want to use it. Also inexplicably, Goforit appears to be quite pleased with its trademark rights in "Goforit," a term that seems more like an exhortation than a trademark.

The defendants own or operate many domain names, including "org.com," "com.org," "gov.org," and "org.net." All of these domain names have wildcarded subdomains, meaning that XYZ.com.org will lead to a working web page, no matter what "XYZ" is. (See my descriptive and normative discussion about wildcarding in my Deregulating Relevancy article). The resulting com.org web page presents a mostly useless directory of CPC links. I noticed that the pages now include a disclaimer at the top saying "xyz.com.org was not found on our servers. www.com.org is shown below" and a link at the bottom saying "Information on how you reached this site" which says:

Occasionally we receive inquiries from users who do not understand why they have accessed our site. Please be advised that you are not reaching our site as a result of spyware. We are not exactly sure why you have been directed here, however, we believe it is a result of the autosearch feature of Internet Explorer. If a site entered into the address bar cannot be accessed, Explorer apparently appends ".org" to the name and then tries to access that site. In the case of a search ending in .com, Explorer thus accesses our domain, "com.org."

Taking this statement at face value (which I recognize is questionable), this technical implementation seems like a goof by Microsoft and anyone else who automatically appends a TLD to an address bar entry. The court’s opinion doesn't mention either the disclaimer or the footer link, so they may post-date the lawsuit commencement. FWIW, the latest page in Archive.org from Aug. 2008 lacks the top disclaimer, although it does have the footer link.

Because the defendants are wildcarding their subdomains and various browsers or toolbars may be automatically adding ".com" or ".org" extensions, the net result is that users could enter "goforit" or "goforit.com" into their address bar and end up at the defendants' wildcarded com.org page, where they were presented CPC links. On the one hand, this wildcarding could have contributed to a type of consumer confusion--consumers putatively looking for goforit's navigational directory got the defendants’ navigational directory instead of, say, getting a 404. On the other hand, who cares? It's hard to believe many people were actually looking for goforit.com and yet had their browser redirect them to goforit.com.org, and those few brand-loyal users should have had no problem instantly spotting that they were in the wrong place.

So to boil the dispute down, a low-value no-name search engine is suing a low-value no-name domainer for a few allegedly misdirected users who quickly self-corrected. It's a little hard to work up a lot of sympathy in either direction. In this respect, the lawsuit vaguely reminded me of the unsympathetic marketers battling over dmv.org.

Two more oddities. First, making all favorable inferences for the plaintiff, how many users could possibly have been "diverted" from plaintiff to defendant? Second, after Goforit complained, the defendants "blocked" goforit as a wildcard, causing users who would have gotten to the defendants' site to get a 404 instead. So, adding it all up, exactly how much money could Goforit be legitimately seeking? I'm sure the defendants love the traffic they get from their scheme, but I can't imagine that the slice of their revenue attributable to "goforit" is greater than de minimis. And for this peppercorn, the plaintiff has been suing the defendants since 2006 through multiple courts--with no less than *TEN* lawyers from *THREE* different law firms listed as its counsel on this opinion. (FWIW, I count 4 lawyers from four different law firms working on the defense side, although there were multiple defendants who might have wanted their own lawyers). The entire litigation efforts seems like a nuclear flyswatter.

Fortunately, the parties' exorbitant expenditures do produce one good outcome: this opinion is one of the most conscientious and thoughtful ones I've seen this year. Huzzah for Chief District Judge Sidney A. Fitzwater!

Unfortunately for Goforit, the judge rules decisively in favor of the defendants. The court rejects Goforit’s claims over the wildcarding and sends defendants' counterclaims to the jury. I’m going to get into the minutiae of the opinion, so unless you are a hardcore domain name/trademark nerd, you should probably stop reading here.

ACPA Claim

The court rejects the cybersquatting claim because Goforit was complaining about third-level subdomains. The court says flatly: "as a matter of law, third level domain names are not covered by the ACPA." The court concludes:

Because third level domains--whether specifically designated or using Wildcard DNS--are not "registered with or assigned by any domain name registrar," a straightforward reading of the text shows that GEL cannot recover under the ACPA for defendants' use of Wildcard DNS in a third level domain.

Trademark Infringement

Goforit's trademark claim fails for lack of use in commerce. Goforit tried two arguments to establish use in commerce: "(1) defendants "used" the mark by registering a TLD website such as "com.org" and enabling Wildcard DNS, intending that third parties would enter addresses containing others' trademarks, such as "goforit.com.org"; and (2) defendants "displayed" the GOFORIT mark in the sale and advertising of their services by programming the address bar to display "goforit.com.org" after the Wildcard DNS directed the user to the "com.org" website."

On the first point, the court says that setting up a wildcarding scheme does not evidence the defendants' intent to use Goforit's trademarks. Citing the 2005 1-800 Contacts v. WhenU case, the court says:

Even if defendants could have foreseen that some third-party web users might type in a trademarked name to trigger the Wildcard DNS, the fact that the TLD websites' Wildcard function processes a trademarked input does not constitute a "use" in "sale or advertising" of services....the Wildcard function in the instant case does not handle the third-party user's trademark input as a trademark, but merely as a web address that internally redirects to the domain name's homepage....Defendants have never tried to leverage others' trademarks into profit by selling specific trademarked keywords to advertisers.

I note that the com.org website now shows the disclaimer--referencing the subdomain and possible trademark--on each page. I wonder if this would change the court's analysis.

On the second point, the court says:

A reasonable jury could only find that, in any instance when "goforit.com.org" appears in the address bar, this is because the user has somehow entered "goforit.com.org" into the address bar at some point, whether intentionally or by inadvertent misuse of shortcut keys, to trigger Wildcard DNS in the first place. It would be different if defendants had configured their website to display "GoForIt.com" on the user's address bar after redirecting users to the "com.org" site and displayed other indications of affiliation with GEL and its GOFORIT mark. But a reasonable jury could not find that there is anything deceptive in itself about calling a website what it actually is: when a user enters "goforit.com.org" into the address bar, the user may be redirected to "com.org," but that does not change the fact that the content the user is seeing is the actual content assigned to the "goforit.com.org" address.

False Designation of Origin

The court also rejects Goforit's claim that the defendants made a false designation of origin by retaining the goforit subdomain throughout a user's visit. The court says that Goforit did not produce any convincing evidence either of consumer confusion or any harm to it.

The court first does a traditional multi-factor trademark confusion test; a few comments about that:

Mark Strength: "Without any evidence of the GOFORIT mark's consumer recognition power, there is no proof that would enable a reasonable jury to find that any of the redirected users was even aware of GEL's GOFORIT mark."

Mark Similarity: the court says the relevant marks are "Goforit" compared with “com.org." The court effectively ignores the subdomain as irrelevant. Even if the Goforit trademark is compared with goforit.com.org, the court says a "reasonable jury could not find that a user would construe an address bar display, especially one that merely retains what was just inputted by the user, as a "mark" when nothing else in the page content indicates GOFORIT sponsorship or affiliation."

Product Similarity: "A reasonable jury could only find, however, that the similarity of product design is attributable to the fact that defendants' TLD Domain Name websites and GEL's GoForIt.com website are both web directories; the functional design choices are common to many web directory websites rather than distinctive to GEL, and GEL has not produced any evidence that defendants have copied any product feature that uniquely identifies GEL's services."

Actual Confusion: "According to Grant's testimony, users on message boards expressed confusion as to how they arrived at websites such as "com.org," but there is no summary judgment evidence that users mistook "com.org" to be affiliated with or approved by the websites they intended to reach. On the contrary, the fact that some users, after experiencing Wildcard DNS, suspected that they had been infected with spyware suggests that it was immediately apparent to users that defendants' websites, which lacked trademark and trade dress similarity with their target sites, were of a different origin." Perhaps this is one of the rare situations where being confused with spyware is a positive!

The court then turns to false advertising proper, saying "a reasonable jury could not find that the display of "goforit.com.org" is a literally false statement." The court considers implied falsity and rejects the elements of that:

GEL has failed to present any evidence that the redirected consumers would have found the display of "goforit" in the web address material in deciding whether to click on the advertisements on "com.org." Nor has GEL adduced evidence that would enable a reasonable jury to find that any of the affected users was even aware of "GoForIt.com" as a competing entity....because a reasonable jury could only find that "go for it" is a common expression in conversational English, and because myriad other websites unaffiliated with GEL incorporate "goforit" into their web addresses, a reasonable jury could not find that any of the users from the log files who typed "goforit" intended to go to GEL's website.

Reverse Domain Name Hijacking

After completely rejecting Goforit's claims, the court turns its attention to the defendants' counterclaims. Defendants sued for reverse domain name hijacking under 15 USC 1114(2)(D)(iv). As part of its scorched earth tactics, Goforit asked the defendants' registrar (Tucows) to impose a registration lock on all of defendants' domain names--including com.org and nearly 300 others.

Tucows did, in fact, impose the registration lock, which allegedly caused all kinds of problems for the defendants. I'm trying to figure out how Goforit convinced Tucows to lock all of the defendants' domain names. On the surface, Tucows isn't looking so great here either. [see update below]

The court says that even if Goforit had a plausible argument against com.org based on goforit.com.org (something the court left open), Goforit had no plausible argument that the other domain names violated its trademark rights. As a result, the court denied Goforit's summary judgment motion, putting the reverse domain name hijacking claim to a jury trial.

I did a little research on the ACPA reverse domain name hijacking provision. I found only 6 other cases in Westlaw citing to the damages provision in subsection (iv) (as opposed to the declaratory relief in subsection (v), which has been successfully invoked only a few times). As far as I can tell, no other (iv) case has resulted in a positive outcome for the domain name registrant. Therefore, I believe the defendants' success so far on the (iv) reverse domain name hijacking claim is the first of its kind.

Tortious Interference With Contract

The court also rejected Goforit's summary judgment on the defendants' claim for tortious interference with the defendants' contract with Tucows. There were some old cases that implied that the ACPA reverse domain name cybersquatting provisions preempted state law equivalents, so this ruling also appears to be novel.

UPDATE: I had an extended email discussion with Tucows about its role in this situation. My contact sent me the following statement:

"Tucows responded in this case as per our policy. When we receive notice of filed litigation, NOT simply a C&D or draft litigation, we lock the affected name(s). We also notify the registrant. Please remember that locking the name does not in any way disable the name, but simply ensures that the name stays in place while the rights are being sorted out. In these circumstances we are also happy to accommodate changes that a registrant may need to a setting such as DNS. Also, in the rare circumstance where this policy creates difficulties for a registrant, Tucows actively works with the registrant to find a solution that balances the registrant's rights with the need to see that an effective legal system sits behind all property rights, including domain names.

While we don't comment on specific matters, Digimedia is, and continues to be, a long time Tucows customer."

Posted by Eric at 10:04 AM | Adware/Spyware , Domain Names , Marketing , Trademark | TrackBack

November 22, 2010

Forwarding Defamatory Email Immunized by 47 USC 230--Mitan v. A. Neumann

By Eric Goldman

Mitan v. A. Neumann & Associates, 2010 WL 4782771 (D. N.J. Nov. 17, 2010)

This is another email forwarding case. Others in this line include Phan v. Pham (2010), John Doe Anti-Terrorism Officer v. City of New York (2008), Barrett v. Rosenthal (2006) and Batzel v. Smith (2003).

In this case, a third party sent Neumann an email warning about Mitan and his family. Neumann then "forwarded the Mitan Alert and accompanying message in an email to attorneys and individuals he had worked with in a recent business transaction, adding the following text to the email chain: 'He is our guy, a known convicted federal felon. Tried several deals before with other companies, supposedly tried the out-of-the-country store before . . .'"

The application of 230 to the forwarded contents is straightforward: 230 "provide[s] immunity from common law defamation claims for persons who republish the work of other persons through internet-based methodologies, such as websites, blogs, and email." Mitan tries to undercut 230 by saying that the forwarded email's substance originated from a print newsletter, but the defendants in this case received and sent the contents by email, making 230's application unambiguous.

The court says that the introductory text added by Neumann does not refer to the plaintiff, so this completes the liability analysis. Case dismissed.

Posted by Eric at 07:21 AM | Content Regulation , Derivative Liability | TrackBack

November 20, 2010

Disclosure of the Substance of Privileged Communications via Email, Blog, and Chat Results in Waiver -- Lenz v. Universal

[Post by Venkat]

Lenz. v. Universal Music Corp., Case No. C 07-03783 JF (PVT) (N.D. Cal.; Oct. 22, 2010) [pdf]

The "'Let's Go Crazy' Dancing Baby" takedown case yielded an interesting discovery ruling. Universal (the defendant) argued that: "[plaintiff] made repeated disclosures to third parties regarding her confidential communications with legal counsel and . . . referenced multiple subjects related to [the] litigation and [her] allegations before the court." Universal alleged that these disclosures "occurred in emails, electronic chats with online friends, and on [plaintiff's] personal blog located at www.piggyhawk.wordpress.com." A magistrate judge held that the plaintiff's disclosures resulted in a waiver of the attorney/client privilege with respect to this subject matter, and that Universal was entitled to conduct discovery regarding plaintiff's communications with her attorneys around these subjects.

Motivations for pursuing the lawsuit: Lenz asserted that she was pursuing the case to vindicate her First Amendment rights. Universal argued that plaintiff had an ulterior motive, and waived the privilege with respect to her motivations by (among other things) sending an email to a friend that included the following:

They [the EFF] are very, very interested in the case. I imagine so. I’ve never heard of anything like it. She [an EFF lawyer] said that Universal Music Group is creating a trend of just going all over the web claiming copyright infringement left and right & that they’re breaking laws & such to do it. So EFF is pretty well salivating over getting their teeth into UMG yet again.

Judge Trumbull held that because this email and others related to the "actual substance of her conversations with her attorneys," plaintiff waived the privilege with respect to her motivations for pursuing the lawsuit.

Communications regarding legal strategies: Universal also argued that plaintiff waived the privilege with respect to her strategies behind re-pleading the complaint, by discussing her litigation strategy in a Gmail Chat with a friend. In one chat with a friend, plaintiff stated:

we're going back to the same judge with more facts, more case law and strengthening the federal aspect. We're dropping the state charge, which was that they violated the contract w/YouTube . . . this way their threat of [h]itting me with a SLAPP suit ('pay our lawyers') is dust . . . b/c the SLAPP statute is a state thing, not a federal. If I make no state claim, they can’t respond with the SLAPP allegation . . . thing is, they’re fighting YouTube over the federal thing right now too . . . so in my case it’s like "pick a federal law you’re accusing me of breaking" it's lose-lose for them on [DMCA] front but they can’t admit publicly that they’re filing DMCA notices b/c that would obliterate the YouTube fight they’re having . . . I told [EFF counsel] that since pursuing the federal portion of the case achieves the ends I have in mind, that’s fine to drop the state portion (that they filed a false DMCA notice, tha[t] they're accusing me of copyright infringement and that a ruling in our case could clarify a cloudy decision known as "Rossi").

The court also found a waiver due to plaintiff's disclosure of her legal strategies. However, the court found that the only relevant subject matter was plaintiff's communications with counsel regarding "clarification of the Rossi decision."

Communications regarding factual allegations: As with the other two subjects, plaintiff also disclosed information regarding her discussions with lawyers around the factual allegations. For example, one (Gmail chat) exchange with a reporter included the following:

[Reporter from "Zerogossip.com"]: You contacted the Electronic Frontier Foundation. What are you hoping for?

[Plaintiff]: When I contacted EFF, I did so at the suggestion of a friend of mine who’s a lawyer in Canada. I wanted to know my rights, how to protect myself in case UPMG sued me and in what way (if any) I had infringed copyright. In discussing the situation with one of the EFF lawyers, we came to the conclusion that I did not infringe the copyright and eventually we decided to file this lawsuit.

Plaintiff also responded on her blog to a reader comment about a fair use defense:

You're right Richard. Mine’s not a 'fair use' case at all. Nor is it a parody. It's something different. I've never heard of anything like it, which is why I contacted EFF.

The court held that plaintiff's discussions of the factual allegations also resulted in a waiver.

Ouch. As Tom O'Toole notes, EFF is appealing this discovery order. This ruling is probably not fatal to the case, but certainly ends up being a distraction, and could yield Universal information that it could use to distract from the core issues in the case (which centers around the propriety of the takedown issued by Universal).

Much of the concern around communications in the modern era focuses on the lawyer's own communication, and the risk that this communication somehow compromises the case. It's interesting that here, the litigant's own communication is the basis for the waiver argument. It's also worth noting that pre-email/chat, Universal's lawyers would have had a much tougher time getting at this information and making this argument. They would have probably questioned plaintiff in a deposition on whether she communicated about the case with anyone and she would have either said no, or would have said that although she discussed the case in general terms, she did not discuss the facts in detail or talk about her communications with her lawyers.

This ruling is a reminder not only that counsel should be careful with their disclosures regarding pending litigation, but the parties should as well (and that the parties could probably could use reminders of this). [For what it's worth, I didn't find the magistrate judge's conclusions on the waiver issue 100% persuasive, but we'll see what the appeal yields.]

Update: the district court judge upholds the ruling: "District Court Upholds Order for Discovery Into Lenz Communications."

Previous posts on Lenz:

"Fair Use - It's the Law (for what it's worth)--Lenz v. Universal"

"Rare Ruling on Damages for Sending Bogus Copyright Takedown Notice--Lenz v. Universal"

Other coverage:

"Magistrate: Lenz Waived Attorney-Client Privilege Through Chats, Blogging" (Tom O'Toole)

Posted by Venkat at 09:19 AM | Evidence/Discovery

November 18, 2010

"Trends in Internet Law" Talk Slides

By Eric Goldman

A couple weeks ago, I spoke at the California State Bar IP Section's IP Institute on the nominal topic of Hot Topics in Internet and Technology Law. I don't normally do "hot topics" CLE presentations, and as a result, I decided to experiment with the format. Ultimately, I decided I wanted to talk about some broad trends I'm seeing in Internet Law. Like a typical hot topics presentation, I spent plenty of time talking about recent cases and statutes, but I tried to bucket them into broader themes. My talk slides.

I did learn that it's a lot easier to discuss 8 cases than it is to discuss 8 trends. It turned out that I basically prepared 8 mini-talks instead of just one lecture, so my reimagination of the topic meant I did a lot more work than I expected. I don't anticipate doing another "hot topics" presentation any time soon!

The eight trends I discussed (I ran out of time to discuss the last trend, unfortunately):

* keyword advertising (one of the main topics I blog about). As you can see, I asked the provocative Q: "Are Keyword Ad Battles Winding Down?" Putting aside the ridiculous number of parties who jumped on Rosetta Stone's bandwagon, my broad assessment is that we're close to the finish line, and that TM owners will soon acquiesce to search engine keyword advertising and move onto to freakouts about newer technologies.

* 47 USC 230 (another main topic of the blog). This gave me another chance to plug our upcoming 15 year retrospective of 47 USC 230 on March 4.

* State AGS (enemy #1 of Internet companies)

* Internet plaintiffs' bar (enemy #2 of Internet companies). See the latest are-you-kidding-me? lawsuit: Dunbar v. Google, a class action alleging that Google violates the ECPA by triggering ads off Gmail emails--an issue that was THOROUGHLY angst-ed in 2004.

* Online authenticity. I predict we will see a variety of additional legal moves designed to prop up online authenticity using regulatory tools.

* Scraping

* First Sale and Exhaustion. I'll write a separate blog post recapping our excellent event last week.

* Are Newspapers the Next Big IP Litigants?

Posted by Eric at 09:12 AM | General | TrackBack

November 17, 2010

Request for Discovery of Facebook Profile and Photos Rejected as a Fishing Expedition -- McCann v. Harleysville Insurance

[Post by Venkat]

McCann v. Harleysville Insurance Co. (2010 NY Slip. Op. 08181) (Nov. 12, 2010)

We've blogged about several decisions involving disputes around the discovery of social network profiles. An appeals court in New York recently rejected a party's request for the contents of plaintiff's Facebook profile because the party seeking the discovery "failed to establish a factual predicate with respect to the relevancy of the evidence." The plaintiff was involved in an auto accident, and settled with the other driver, and then went after the driver's insurance company. The insurance company sought disclosure of photographs from plaintiff's Facebook profile, and sought "an authorization for plaintiff's Facebook account."

The court found that the defendant failed to put forth a sufficient factual predicate that anything relevant was contained in the profile, and thus the request smacked of a "fishing expedition." However, the court also found that the plaintiff's request for a protective order should not have been granted - i.e., defendant could come back, establish the "factual predicate," and obtain the necessary information.

As with the other cases involving the discovery of social networking profile information, this case illustrates the logistical challenges posed in these situations. The party seeking discovery should not be able to rummage around in the other side's Facebook account. On the other hand, if there is relevant evidence, the party seeking discovery should not be deprived of access to it just because it's contained in a social networking profile. (There's also the issue of whether private messages are protected from disclosure by virtue of federal statutes.)

Other coverage:

Eric Turkewitz: "Demand for Facebook Records Rejected by NY Appellate Court"

Evan Brown: "Facebook account protected from disclosure in discovery, for now"

Posted by Venkat at 02:10 PM | Evidence/Discovery

Anti-Bot Restrictions Aren't Copyright Misuse--Oracle v. Rimini Street

By Eric Goldman

Oracle USA, Inc. v. Rimini Street, Inc., 2:10-CV-00106-LRH-PAL (D. Nev.). Decision on Rimini Street's motion to dismiss, Aug. 13, 2010. Decision on Oracle's motion to dismiss Rimini Street's counterclaims, Oct. 29, 2010.

As the world watches the Oracle v. SAP spectacle, a very similar Oracle enforcement action is playing out more quietly. The commonalities are not an accident; one of the principals from TomorrowNow, Seth Ravin, subsequently started up defendant Rimini Street and allegedly has engaged in the same shenanigans that got TomorrowNow and its parent SAP into so much trouble. As the court recaps things, "Plaintiffs allege that Rimini Street illegally downloaded Oracle's software and support materials by logging on to Oracle's password protected websites using a customer's individual login credentials, and downloading materials in excess of that customer's authorized license agreement....Further, Rimini Street allegedly copied this software, in order to offer low-cost support to other Oracle customers and induce them to cancel their support contracts with Oracle in favor of Rimini Street."

In August, the court ruled on the defense's motion to dismiss most of the claims, which goes almost nowhere. The court ends the negligent interference with prospective economic advantage but all of Oracle's other challenged claims survive, including the CFAA, Cal. Penal Code 502, Nevada computer crimes, and trespass to chattels claims (the latter because Oracle "alleged facts indicating that Defendants' conduct, including use of search crawlers, impaired the ability of Oracle America's network systems and information databases to function properly"). The court rejected Rimini Street's "we're just a proxy of our customers" defense in upholding the contract breach inducement claim based on getting customer passwords and rooting around Oracle's customer support database.

In October, the court knocked out most of Rimini Street's counterclaims against Oracle. The most interesting discussion relates to Rimini Street's allegations that Oracle engaged in copyright misuse based on two facts: (1) Oracle's license agreement restricts customers from automated downloads of customer support materials, and (2) Oracle's public website of customer support materials is so poorly designed that customers need the paid maintenance program to find the materials they actually need. The court rejects these arguments. It says:

The alleged limits on massive automated downloads of Oracle Software and Support materials falls squarely within the scope of Oracle's right to control reproduction and distribution of copyrighted works....Further, the alleged limitation of crawlers and other automated search tools, which are the core of Rimini Street's business activities, is only a limitation on third-party business models and is not a restriction on Oracle customers. The licensing agreement does not preclude a customer from using either a competing company or no company at all to access its support materials. As such, it does not constitute copyright misuse.

This seems like an odd distinction to make, but it's a sign the judge isn't really interested in Rimini Street's arguments.

I'm not exactly sure I understand Rimini Street's litigation game plan. If Oracle can prove its facts, Rimini Street appears to be in serious legal trouble, and these two rulings are hardly encouraging to Rimini Street. I'm also curious if the DOJ will consider criminal prosecutions here, a possibility that remains open in the SAP/TomorrowNow situation.

Posted by Eric at 09:01 AM | Copyright , Licensing/Contracts , Trespass to Chattels | TrackBack

November 16, 2010

Furniture Retailer Enjoined from Sending eBay VeRO Notices--Design Furnishings v. Zen Path

By Eric Goldman

Design Furnishings, Inc. v. Zen Path LLC, 2010 WL 4321568 (E.D. Cal. Oct. 21, 2010). The initial complaint filed by Design Furnishings.

I'm a little late to this party (see, e.g., Evan Brown's coverage), but it's a case worth mentioning even now.

Both litigants are retailers of wicker patio furniture made by a third party Chinese manufacturer. Design Furnishings does most of its business via eBay. (Is this its About Me page?) Zen Path has applied for copyright registrations in the furniture as “sculpture/3-D artwork, Ornamental Design.” After it filed its applications for copyright registration, Zen Path then started submitting lots of VeRO notices of claimed infringement (NOCIs) to eBay to take down Design Furnishings' listings. Not only did eBay comply, but the repeated takedowns drove down eBay's statistical measure of Design Furnishings' reputation, putting Design Furnishings in jeopardy of having its entire account suspended and effectively shutting down its business. To fight back, Design Furnishings sued Zen Path and got a TRO against further VeRO notices from a state court. Zen Path removed the case to federal court, and this ruling addresses whether the federal judge will extend the TRO.

Zen Path is clearly taking an aggressive copyright position. First, the ruling doesn't clarify how Zen Path, as a retailer of furniture made by a third party, has ownership interests in the third party's works sufficient to register its rights. Second, furniture normally does not qualify for copyright protection due to the "useful articles" doctrine. Based on the little information we get in this opinion, Zen Path looks like it's on thin ice.

Nevertheless, Design Furnishings' legal position is not rock solid either. It has a potential cause of action against Zen Path for violation of 17 USC 512(f), but this raises a number of Qs, including (1) is an eBay VeRO notice a 512(c)(3) takedown notice for purposes of 512(f), and (2) if so, does 512(f) support equitable remedies? On the first Q, see Dudnikov v. MGA Entertainment (VeRO notice is govered by 512(f)) and the partially related 10th Circuit ruling in Dudnikov v. Chalk & Vermillion Fine Arts, Inc. On the second Q, 512(f) only references damages as a remedy, but see the uncited but highly relevant Biosafe-One, Inc. v. Hawks case from 2007, where the court granted an injunction against sending 512(c)(3) notices during the lawsuit pendency.

The court extends the TRO against Zen Path submitting additional VeRO NOCIs. This is good news for Design Furnishings, but the good news in this situation is limited overall. In effect, Design Furnishings had to seek protection from the courts because (a) Zen Path has taken a very aggressive copyright position, (b) eBay refused to mediate Zen Path's NOCIs, and (c) eBay's refusal to mediate meant that Design Furnishings could be kicked off the eBay network, even for listings that had nothing to do with this dispute. I don't expect eBay to adjudicate Zen Path's copyright claim, but Zen Path has taken eBay's VeRO program to its logical extreme where it can threaten a target's entire revenue stream through heavy submission of NOCIs. The court did acknowledge the problem created by eBay's moral hazard, saying:

the public interest is in fact benefitted by granting a TRO, because absent eBay’s policies, designed to avoid eBay’s liability for intellectual property infringement, it would be the claimed copyright holder who would bear the burden of proving the copyright infringement....That burden is essentially shifted under eBay’s policy. To withhold a TRO would allow anyone to effectively shut down a competitor’s business on eBay simply by filing the notice that the seller’s product allegedly infringes on the complaining party’s copyright.

If in fact Zen Path has overread copyright law, 512(f) is supposed to make Zen Path share the financial pain it caused. See, e.g., the Lenz v. Universal litigation. However, under the 9th Circuit's Rossi opinion, it's unlikely Design Furnishings will get damages from Zen Path because Zen Path will argue that it had a good faith belief in its copyright posture. If so, it's unfortunate that Design Furnishings had to go through this hassle and incur substantial expense simply to restore the status quo.

UPDATE: In December, in a much clearer opinion, the court grants Design Furnishing's request for a preliminary injunction. It appears Zen Path is the furniture designer, but it may not have any protectable rights in the design. The designer may be infected by the natural rights bug when she said “You are further intending to make copies of furniture that I personally designed inch by inch without my permission. My personally designed furniture belongs to us and we will pursue our rights to the fullest extent of the law.”

Posted by Eric at 09:22 AM | Copyright | TrackBack

November 15, 2010

Melaleuca Files Second Lawsuit Following Dismissal of its CAN-SPAM Claims

[Post by Venkat]

Melaleuca v. Hansen, Case 1:10-cv-00553 EJL (D.Idaho) (Nov. 10, 2010)

I recently blogged about the dismissal of a CAN-SPAM case by a federal district court in Idaho. The district judge adopted the magistrate judge's recommendation, and dismissed the CAN-SPAM claims for lack of standing, a belated assignment of claims, and a finding of no "adverse effect." The dismissal was without prejudice and the plaintiff appealed the order dismissing the case. ("Another Federal Court Dismisses CAN-SPAM Claims Due to Lack of Standing - Melaleuca, Inc. v. Hansen.") I expressed surprise that Melaleuca decided to appeal the order dismissing its case.

Not only is Melaleuca appealing the case, it filed a second complaint which appears to be based on the same underlying conduct. You have to just shake your head when companies do stuff like this. One the one hand, it's trying to remedy the deficiency that got it kicked out in the first place, but on the other hand, you have to wonder if the company is throwing resources at a dispute where the recovery may well eclipse any potential recovery.

In any event, Melaleuca is definitely in a disadvantageous position, procedurally speaking. The Ninth Circuit may decide that the dismissal should have been with prejudice, or that Melaleuca is estopped from arguing certain facts. The district court may stay the case, pending resolution of the Ninth Circuit appeal. The district court may impose a bond requirement. Melaleuca may be bringing claims that are now barred by the statute of limitations. Finally, in the unlikely event that the merits of the case ever see the light of day, IP Applications' claims may not turn out to be viable either. Of course, all of this presupposes that CAN-SPAM claims are assignable, which is an open question.

Aggressive litigation tactics are one thing, but this has potential to backfire.

Previous posts:

"Idaho District Court Dismisses CAN-SPAM Claims Due to Non-ISP Status -- Melaleuca, Inc. v. Hansen"
"Another Federal Court Dismisses CAN-SPAM Claims Due to Lack of Standing - Melaleuca, Inc. v. Hansen"

Posted by Venkat at 09:15 PM | Spam

Holomaxx Sues Yahoo, Microsoft, and Others for Non-Delivery of Bulk Emails

[Post by Venkat]

Holomaxx Technologies v. Yahoo!, Inc. and IronPort Systems, LLC, Case No. CV10-4926 (N.D. Cal.) [Scribd]

Holomaxx Technologies v. Microsoft Corp. and Return Path, Inc., Case No. CV10-4924 (N.D. Cal.) [Justia Page]

In what may fit under the dictionary definition of chutzpah, Holomaxx, a (CAN-SPAM-compliant) bulk emailer, sued Yahoo, Cisco (IronPort), Microsoft, and Return Path (in two different lawsuits) for failing to deliver emails sent by Holomaxx. Microsoft and Yahoo are sued for refusing to transmit the emails, and IronPort and Return Path are sued for improperly flagging Holomaxx as a spammer. Holomaxx also alleges that the defendants improperly intercepted and disclosed the emails in the course of their filtering activities.

Holomaxx alleges that it has been sending emails (in bulk) for about ten years, and it sends approximately ten million emails a day on behalf of its clients. It "requires that its clients acquire their list subscribers in accordance with the CAN-SPAM Act . . . which provides federal standards for commercial email." The complaints state that the emails sent out by Holomaxx are all compliant with CAN-SPAM and don't have the characteristics of spam: (1) the emails contain accurate transmission and header information, (2) the emails are sent through a relatively small block of IP addresses, (3) the emails contain opt-out links and allow for unsubscribing through one click, and (4) the emails contain accurate subject lines and include the physical postal address for Holomaxx or its clients.

Holomaxx alleges that the ISPs (Yahoo and Microsoft) are interested in "lowering costs at the expense of commercial . . . speech and internet communications." Holomaxx alleges that the ISPs rely on faulty spam filters which flag emails as spam "without reference to whether the email in question actually violates the CAN-SPAM Act." Holomaxx further alleges that Ironport and Return Path improperly intercepted emails transmitted through the ISPs and also improperly assigned Holomaxx low "sender reputation scores" - i.e., labeled Holomaxx as a likely spammer. Finally, the complaint alleges that the ISPs have improperly forwarded emails sent through the ISPs to IronPort and Return Path.

As a result of defendants' conduct, Holomaxx claims that its reputation has suffered, its business relationships have been disrupted, and it has lost revenues. Holomaxx asserts claims under the Wiretap Act, the Stored Communications Act, the Computer Fraud and Abuse Act, the California Wiretapping statute, and California's unfair competition law. It also asserts claims for defamation, and interference with contractual relationships. Holomaxx seeks a broad array of relief against defendants, including injunctive relief, and interestingly, disclosure of "the grounds for blocking Holomaxx's emails."

It's always tough to evaluate claims based on the complaint, but at least a chunk of Holomaxx's claims will likely face an uphill battle.

The Filtering Decision: As some who have been watching this case note, being compliant with CAN-SPAM does not mean that you have some right to force an ISP to transmit your emails. The CAN-SPAM Act states:

Nothing in this chapter shall be construed to have any effect on the lawfulness or unlawfulness, under any other provision of law, of the adoption, implementation, or enforcement by a provider of Internet access service of a policy of declining to transmit, route, relay, handle, or store certain types of electronic mail messages.

Additionally, section Section 230(c)(2) immunizes intermediaries for their good faith decisions to filter unwanted content:

No provider ... of an interactive computer service shall be held liable on account of -- (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be . . . objectionable, whether or not such material is constitutionally protected . . . [emphasis added]

In e360Insight v. Comcast, where e360 sued Comcast for filtering emails, the court held that section 230(c)(2) insulated Comcast, as long as Comcast's decisions were undertaken in good faith:

a mistaken choice to block, if made in good faith, cannot be the basis for liability under federal or state law. To force a provider like Comcast to litigate the question of whether what it blocked was or was not spam would render § 230(c)(2) nearly meaningless.

The Assignment of Low "Sender Reputation Scores": The claim that the assignment of low "sender reputation" scores to Holomaxx defamed Holomaxx is similarly tough. This activity may also fall under section 230(c)(2), and one case (Pallorium v. Jared) held that publishing a database of IP addresses that others may use for purposes of creating a blocklist falls under Section 230(c)(2). (Here's Professor Goldman's post on Pallorium: "Anti-Spammer Wins 230 Defense--Pallorium v. Jared.") Even in the absence of Section 230, attacking an entity who assigns a "reputation score," could present a First Amendment problem. A suit against lawyer-rating service Avvo was dismissed on the basis that "Avvo's ratings, even if generated through automated algorithms, are opinions, not facts, and thus fully qualify for First Amendment protection." ("Avvo Wins Big in Ratings Lawsuit--Browne v. Avvo.") The sender reputation scores assigned by Return Path and IronPort could very well fall into same category as Avvo's ratings.

Improperly Intercepting, Forwarding, and Disclosing Contents of Emails: The set of claims around alleged forwarding, interception, and disclosure of the emails by the ISPs are somewhat tougher to evaluate. The federal statutes governing the interception and disclosure of emails contain exceptions for these activities when they are "a necessary incident to the rendition of [the ISP's] service or to the protection of the rights or property of the provider of that service" I didn't come across any cases that discuss whether spam-filtering falls under this exception. A policy paper from the Center for Democracy & Technology [pdf] seems to indicate that "the latter prong [referencing the rights or property of the ISP] covers anti-spam and anti-virus monitoring and filtering and various anti-fraud activities . . . " Instinctively, I would think that some basic filtering would not run afoul of these federal statutes. Still, a quick search did not reveal much case law on this point. The Computer Fraud and Abuse Act claims look like losers. Accessing emails sent by Holomaxx does not equate with accessing Holomaxx's "protected computers" (unless I'm missing something).

At any rate, Holomaxx's core claims face an uphill battle. Courts don't like to interfere with filtering decisions, and here Section 230(c)(2) should apply to the basic filtering decisions of the ISPs. As to whether a part of the complaint survives, we'll see.

Other coverage:

John Levine: "How Now to Get Your Email Delivered"
The Magill Report: "Email Marketer Sues Microsoft, Yahoo, Return Path, Cisco Ironport"
Al Iverson: "Holomaxx suing Microsoft, others" & "Holomaxx Link Roundup"
TechEye: "Holomaxx sues Microsoft over mass emailing ban"

Topically related posts:

"Internet Access Provider & Blocklist Publishers Denied 230(c)(2) Immunity for Anti-Spam Efforts"
"Anti-Spyware Company Protected by 47 USC 230(c)(2)--Zango v. Kaspersky"
"7Search Sues McAfee For Red Flagging It"

Posted by Venkat at 09:58 AM | Spam

November 12, 2010

Amazon Isn't Liable for Rogue Affiliate's Keyword Ad Buys--Sellify v. Amazon

By Eric Goldman

Sellify Inc. v. Amazon.com, Inc., 2010 WL 4455830 (S.D.N.Y. Nov. 4, 2010). The initial complaint.

Christopher Maki runs Sellify, which in turn runs a website/eBay store called OneQuality.com. An Amazon affiliate, "Cutting Edge Designs," purchased the keywords "onequality" and close variants in Google AdWords and displayed ads saying “Don't Buy from Scammers” or “Beware the SCAM Artists” and linking to Amazon (presumably using CED's Amazon affiliate ID in the link). Sellify contacted Amazon regarding these ads but reached the wrong internal department, which was unsurprisingly unhelpful. Sellify then sent Amazon a demand letter, which prompted Amazon to tell CED to cut it out. Apparently CED didn't, so Sellify sent Amazon a second demand letter, and Amazon then terminated CED's affiliate status and withheld accrued commissions. The ads stopped shortly thereafter.

Logically, the matter should have ended there. Instead, Sellify sued Amazon under the Lanham Act and ancillary claims, seeking $2.4M in damages.

Legal Analysis

The court quickly rejects Amazon's direct liability for a Lanham Act violation because Amazon didn't buy the ads in question.

The court then discusses Amazon's vicarious liability for any Lanham Act violations. The court's discussion is a little confusing because it never establishes that CED violated the Lanham Act, nor does it resolve the test for vicarious liability. Instead, it says that some courts establish vicarious Lanham Act liability based on either actual authority over the agent or apparent authority:

Actual Authority: CED did not have actual agency authority from Amazon. Amazon's affiliate agreement (the "Operating Agreement") expressly disclaims such authority. "Further, Amazon did not control the form or substance of Cutting Edge's ads, and it is undisputed that Amazon had no authority to remove the Cutting Edge ads from the Internet. "

Apparent Authority: The court rejects apparent authority because Amazon never communicated anything validating CED's ability to act as its agent. Amazon only communicated that affiliates like CED could link to its site.

The court also rejects Amazon's contributory Lanham Act liability, citing the Tiffany v. eBay case. The court says "In this case, there is no evidence that Amazon had particularized knowledge of, or direct control over, Cutting Edge's disparaging ads." The court disregards Sellify's initial misdirected contact with Amazon. Then, "upon receipt of Sellify's May 2009 demand letter, Amazon promptly initiated enforcement action against Cutting Edge, and eventually terminated its contractual relationship with the company in large part because it continued to infringe on plaintiff's mark." Once again, although trademark law doesn't have a statutory notice-and-takedown procedure akin to 17 USC 512, adhering to a trademark notice-and-takedown procedure is clearly a best practice.

The court rejects all of Sellify's state law claims, saying they require "proof that either Amazon itself placed the Cutting Edge ads or that Cutting Edge acted as Amazon's agent in placing the ads," and the court already said that Sellify couldn't show that. This is a good move, but it would have been even better if the court discussed how 47 USC 230 immunized Amazon for its affiliates' acts.

Implications

Affiliate Tax. I wonder how this ruling might bear on the Amazon affiliate tax battles? In NY, Amazon and Overstock are battling over whether their affiliates are "sales representatives" that allow the state to impose sales tax collection obligations on them. Here, we get a federal judge in NY saying that affiliates aren't "agents" for purposes of a variety of legal doctrines. The efforts to use affiliates as a basis to impose sales tax collection obligations has always a crock; this opinion indirectly reinforces that.

TM Liability for Affiliate's Ads. Other lawsuits have tried to impose trademark liability on an affiliate program operator for the ads placed by affiliates. See my recap here. I can't recall any of the other cases reaching a final conclusion. I don't think this case is the final word on the subject, but it may reinforce that those cases are meritless.

Keyword Ad Lawsuits Are Economically Irrational. As I've repeatedly indicated, keyword advertising lawsuits usually make no economic sense. See, e.g.:
- King v. ZymoGenetics. The defendant advertiser got 84 clicks.
- Storus v. Aroa. The defendant advertiser got 1,374 clicks over 11 months.
- 800-JR Cigar v. GoTo.com. The search engine defendant generated $345 in revenue from the litigated terms.

In this case, CED's ads generated about 1,000 ad impressions and 61 clicks. No matter how you slice it, bringing a lawsuit against Amazon over the diversionary effect of 1,000 ad impressions and 61 clicks is a terrible economic decision. The court especially guffawed at the $2.4M damage request--even more farcical given that OneQuality.com was generating a total of about $50k of annual profits. No matter what, Sellify should have dropped the issue once it succeeded with the takedown. Running to court was an unnecessary waste for everyone.

Rebecca's post on this ruling.

Posted by Eric at 11:30 AM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack

November 11, 2010

Ad Networks Can't Get 47 USC 230 Defense on Motion to Dismiss--Swift v. Zynga

By Eric Goldman

Swift v. Zynga Game Network, Inc., 2010 U.S. Dist. LEXIS 117355 (N.D. Cal. Nov. 3, 2010). Wendy Davis' story on the complaint filing.

I have repeatedly observed that the Ninth Circuit's Roommates.com en banc decision has not been the jurisprudential disaster we feared. Indeed, the strong majority of cases citing it have done so in favor of the defense. The rare exceptions include the Accusearch case (which involved really bad facts) and the NPS v. StubHub case (a state court motion to dismiss).

We can add this ruling to the list of Roommates.com pro-plaintiff citations, and in my opinion it's the worst of the bunch because it looks past the narrow holding of Roommates.com and instead taps into the messy discussion that preceded it. My hope is that this decision is an aberration and therefore will not be influential on other courts. Unfortunately, there remains the constant risk (as yet unrealized) that the Roommates.com virus will spread in problematic ways, and this case might be the leading edge of it.

I find this case so troubling because it's factually very similar to another post-Roommates.com case from the same district (ND Cal), Goddard v. Google, which in a thoughtful opinion cited Roommates.com in favor of the defense. Both this case and the Goddard case involved advertisements that offered some "bait" to consumers that caused responding consumers to be (allegedly) unwittingly enrolled in subscription services that had recurring charges. In the Goddard case, the bait was ringtones. In this case, the bait was "special offers" for goods/services that, when obtained, would also give the consumer some virtual currency for Zynga games.

Both Google and Zynga acted as ad networks in distributing the third party advertiser's ads. In this case, Adknowledge apparently provided support services to Zynga's ad network, although the complaint (and the opinion) aren't crystal clear about those services. In general, there's no question that 230 protects ad networks from liability for third party advertisements, even if the ads are "illegal." The Goddard case reached this conclusion regarding Google's ad network, and it should have worked for Zynga and Adknowledge too.

It doesn't. The court starts out by discussing the applicability of Roommates.com. Unfortunately, this is the first time a judge has really tripped over by the murky discussion in the majority opinion about what it means to be a content "developer." The court says:

Applying Rommates.Com [sic] here, the Court cannot determine at this juncture, based on the pleadings, whether Zynga is entitled to immunity under the CDA. Rather, the FAC alleges facts, which, if proven, could support the conclusion that Zynga is responsible, in whole or in part, for creating or developing the special offers at issue. Fundamentally, Plaintiff alleges that the special offers are desirable to users because they provide free virtual currency to be used in Zynga games. FAC ¶¶ 6, 8. In turn, Zynga is alleged to encourage acquisition of the virtual currency by designing their games to become more enjoyable as users obtain more virtual currency. Id. ¶¶ 3, 5. As noted by Plaintiff in her opposition, the lure of virtual currency is the most important "content" within the special offer because, without it, it is unlikely any user would ever participate in the offers. Additionally, Plaintiff alleges that Zynga is responsible for the design, layout, and format of the special offers, and the special offers appear directly within Zynga's games. Id. ¶¶ 12, 13, 33, 36, 37. Moreover, Plaintiff has alleged Zynga's "material contribution" to the alleged unlawful activity by asserting that Zynga designed its games to intentionally create the demand for the virtual currency offered in those games, and then used this demand to lure consumers into the allegedly fraudulent transactions. Id. ¶¶ 4-6, 8-9.

The court distinguishes the Goddard case because:

Plaintiff has not alleged that Zynga is a "neutral" website that merely allows third parties to post advertisements. Instead, Plaintiff asserts that Zynga is a direct participant in the fraudulent transactions that are the subject of this case, as outlined above. Therefore, at this stage, Zynga's motion to dismiss based on CDA immunity is denied.

From my perspective, the court does not carefully distinguish between an ad network's economic interest (which, it's clear from the many apropos cases, is immaterial to the 47 USC 230 analysis) and an ad network's substantive contribution to the offending content. (Even helping create the ad copy isn't enough of a contribution to trump 230; see, e.g., Ramey v. Darkside Productions). Of course it's in Zynga's economic interest to give consumers reasons to want its virtual currency, and of course Zynga wants to give consumers a variety of ways to obtain that currency; that's no different from the fact that it was in Google's economic interest to get more advertisers and encourage them to spend more money on advertising. In both cases, however, the ad network could not govern the allegedly fraudulent conduct of rogue advertisers. Accordingly, it's improper under 230 to extend the ad network's financial interest in advertising to create liability for the advertiser's rogue activity. I believe that's what the court did here.

The court's treatment of Adknowledge's 230 defense is even less satisfying:

it is unclear from Plaintiff's allegations whether Adknowledge is an "interactive computer service provider," as that term is defined by the CDA. It is also unclear whether Adknowledge falls under the "information content provider" exception to CDA immunity. Indeed, whether Adknowledge qualifies for immunity under the CDA is a fact-based inquiry. As alleged, Adknowledge is described simply as an "aggregator" that solicits advertisements from third parties and then facilitates transactions between those parties and Zynga. FAC ¶¶ 6-8. Given the limited nature of a Rule 12(b)(6) challenge, the Court cannot determine, at this stage, whether Adknowledge is entitled to CDA immunity. It would be improper to resolve this issue on the pleadings and the limited record presented. Adknowledge's motion to dismiss based on CDA immunity is denied.

Consistent with this, the court then notes that 230 is an affirmative defense improper for 12b6 adjudication, citing the 2008 district court opinion in Perfect 10 v. Google. Unfortunately, the court ignores that the Ninth Circuit *subsequently* tried to say the same thing in the Barnes case and then withdrew that part of the opinion, nor does the court engage the dozens of other cases saying that 230 is appropriate for a 12b6 motion to dismiss.

The discussion about Adknowledge is unsatisfying on several other fronts. Is the court really going to say that Adknowledge isn't a provider of interactive computer services? Good luck finding precedent to support that conclusion. More generally, one of the key advantages of a 230 immunity is that it's NOT a "fact-based inquiry"; instead, it has been used repeatedly to prevent discovery fishing expeditions. Perhaps structurally this court is waylaid by its (mistaken IMO) belief that defendants have the burden to prove 230 rather than plaintiffs having the burden to show why 230 doesn't apply. The court's placement of the burden on the defense is not unprecedented, but it's pretty rare.

Even though the complaint survived the motion to dismiss, the plaintiff will still have to establish its facts. If it can't, the defendants might be able to plead 230 at the summary judgment or trial stages.

One possible implication of this case is that an ad-supported website seeking 230 immunity for the ads should not integrate its own business offerings (such as the site's own virtual currency) into its advertisers' ad campaigns. Personally I don't think this should make a difference at all to the legal analysis, but a simple change like that might have tipped this opinion in the other direction.

Another possible implication is that ad networks might voluntarily choose to do even more to identify and terminate rogue advertisers. The ad networks have an implicit moral hazard here, as they get paid by rogue advertisers, but the long-term consumer trust degradation from rogue advertisers and the possible legal exposure make those economic gains short-term at best.

Posted by Eric at 01:01 PM | Derivative Liability , Marketing | TrackBack

November 10, 2010

Job Opening: Assistant Director, High Tech Law Institute

By Eric Goldman

I'm sad to announce that Cindy Tippett, our current Assistant Director of the High Tech Law Institute, will be leaving the position due to a family relocation. Cindy has been an integral part of the HTLI's operations over the past 2.5 years, and we have made substantial progress towards our goals during that time period. I am grateful for her many contributions, and I will miss working with her.

Her departure opens up a really terrific law school administrative job for the right person. See the job description and application. The HTLI has a lot of unfinished business and untapped upside, and the Assistant Director plays a crucial role in serving our communities. If you know a candidate who might be a good fit, I'd be grateful if you would make the referral. If you think *you* might be the right person, please submit an electronic application. Feel free to email me with any questions about the position.

Posted by Eric at 03:00 PM | General | TrackBack

Dentist Review on Yelp Gets Partial Anti-SLAPP Protection--Wong v. Jing

By Eric Goldman

Wong v. Jing, 2010 WL 4457330 (Cal. App. Ct. Nov. 9, 2010). The SF Chronicle article on the complaint filing. The dentist's "open letter" about the lawsuit filing.

Tai Jing posted a negative review of Dr. Yvonne Wong, his son's dentist, to Yelp. The Yelp page with a severely truncated review from "TJ." Dr. Wong sued Jing, his wife Ma and Yelp, alleging defamation, intentional infliction of emotional distress and negligent infliction of emotional distress. Dr. Wong subsequently voluntarily dismissed Yelp from the lawsuit--a natural move given Yelp's immunity under 47 USC 230--although Yelp is apparently back in the lawsuit seeking attorneys' fees under California's anti-SLAPP law. The trial court denied the anti-SLAPP motion, which is on appeal to this court.

The appellate court affirms the denial of the anti-SLAPP motion for the defamation claim against Jing, but reverses it against Ma (who did not appear to write the review) and for the emotional distress claims. Unless there is a further appeal of this ruling, I believe that means that Jing, Ma and Yelp should get their attorneys' fees for defending the emotional distress claims while the defamation claim against Jing will proceed to the next step in trial court. The ruling doesn't mean Dr. Wong will win the defamation claim, although the court's discussion was somewhat encouraging about Dr. Wong's position.

The court says the consumer review of the dentist qualifies for anti-SLAPP protection as an issue of public interest. However, the court rejects the anti-SLAPP motion because Dr. Wong made enough of a showing that Jing's statements may be defamatory.

In discussing the public interest issue, the court implies that the review met the public interest standard only because it discussed the safety implications of using silver amalgam (which contains mercury) as a tooth filling, not just the commercial practices of a dentist. The court says "consumer information that goes beyond a particular interaction between the parties and implicates matters of public concern that can affect many people" can qualify as an issue of public interest; presumably without that extra kicker, it would not (the court later reinforces that "the posting went beyond parochial issues concerning a private dispute about particular dental appointments").

Personally, I think the court took the public interest standard in the wrong direction. The consumer review of a dentist should qualify as an issue of public interest even if the review discusses only the dentist's services, as a poorly performing dentist poses a public safety issue. Nevertheless, other courts might make the same move this court did and find that the consumer review not only addressed the vendor's service but some public policy issue raised by that service. If so, I think courts may reach the same result as if they simply categorically treated consumer reviews of vendors as issues of public interest.

Another interesting move: in dismissing the emotional distress claims predicated on an allegedly false consumer review, the court notes the overall redundancy of the emotional distress and defamation claims. Effectively, the court says, the remedies for Dr. Wong's emotional distress claim completely overlap with the defamation remedies, while the elements of the emotional distress claims require Dr. Wong to prove all of the defamation elements plus more stuff. Thus, as a matter of judicial economy, it makes sense to squelch the emotional distress claims because they added nothing to the lawsuit. I wish more judges would aggressively police duplicative claims brought by defamation plaintiffs; which in many cases add substantially to the litigation costs and thwart a much-needed summary adjudication.

Some implications of this case:

* This case reminds us that posting consumer reviews on Yelp can lead to defamation liability if the reviews contain false statements of fact. As I've said before, I bet my house every time I publish content online.

* In partial refutation of the FUD campaign by Medical Justice, the dentist so far apparently isn't having any problems defending herself against an allegedly defamatory review.

* It's a clear mistake to sue Yelp for reviews posted by its users. See also Reit v. Yelp (also involving a review of a dentist). Here, Dr. Wong may have to write a check to Yelp for that error.

Having said that, the court did not complete the thought about Yelp's anti-SLAPP posture. Even if Dr. Wong adequately stated a case for defamation, Yelp still should have won an anti-SLAPP motion on the defamation claim based on 47 USC 230. The court never connects these dots, so it's unclear if Yelp can get its fees spent on the defamation defense. It should be able to do so.

* Anti-SLAPP protection was an issue in this case only because California has one of the most expansive anti-SLAPP statutes. For more, see this post. This is another reason why we should enact a federal anti-SLAPP law and extend broad anti-SLAPP coverage nationwide.

Posted by Eric at 10:11 AM | Content Regulation , Derivative Liability | TrackBack

November 09, 2010

Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to "Twitter/TwitPic"

[Post by Venkat]

Twitter recently issued new guidelines regarding use of the "Twitter" and "Tweet" marks, and use of the underlying tweets by users and third parties as well: "Guidelines for Use of the Twitter Trademark." The guidelines prompted some criticism that Twitter was over-reaching and that it was putting the squeeze on the vibrant ecosystem which helped it grow in the first place. (See "Twitter Investor Defends New ‘Tweet’ Usage Rules," for a discussion of some reactions and responses from an investor in Twitter.) Before talking about the trademark-related issues, I thought it was worth discussing a copyright/licensing issue that was lurking around.

Copyright Issues:

Twitter's guidelines contain its views on whether and when you can reproduce someone else's Tweets. This was largely thought to be an issue that would not come up in practice, but a case currently pending in the Southern District of New York (Agence France-Presse v. Morel) actually turns on the issue of whether sharing content through the Twitter ecosystem results in some sort of broad license to third parties.

Agence France-Presse was accused by a photographer of downloading photos (of the Haiti earthquake aftermath) from a TwitPic account and then licensing those photos to third parties. I thought the case would quickly settle, but it's still ongoing. Surprisingly (almost shockingly), AFP is continuing to take the position that uploading photos to "Twitter/TwitPic" results in some sort of implied license for the world to use whatever content is uploaded. As AFP argued in its briefs in support of its motion to dismiss:

When [plaintiff] signed up for his Twitter/TwitPic account and posted his photographs on Twitter/TwitPic, he expressly agreed to the Terms of Service established by Twitter and TwitPic, and he therefore granted Twitter, TwitPic and third parties, including AFP, a "worldwide, non-exclusive, royalty-free license … to use, copy, reproduce, process, adapt, modify, publish, transmit, display and distribute" his photographs, and he is "responsible for [his] use of the Services … and for any consequences thereof, including the use of [his] Content by other users...."

I think AFP is unlikely to prevail on its motion for a variety of reasons, but Twitter's guidelines make clear that AFP's interpretation of the Twitter terms of service is off-base, to say the least. Twitter's terms contain language making clear that "you own your Tweets." Moreover, as the guidelines note, users should not:

[p]rint Tweets without permission from the author; [or]

[u]se screenshots of other people's profiles or Tweets without their permission.

Twitter did not even bother addressing the underlying content (other than Tweets) uploaded into its ecosystem, most likely because the argument is pretty far-fetched that sharing content through Twitter somehow results in a license for someone to download the content and then use it elsewhere - i.e., no one would reasonably think that content shared within the Twitter ecosystem is fair game, particularly for use outside the Twitter ecosystem. [Also, see my clarification below. The content is not uploaded to Twitter's servers, so Twitter understandably doesn't have to say anything about this content.]

There's one set of issues that Twitter could probably clarify here. Twitter makes available functionality that allows websites to "embed" Tweets. Admittedly, Twitter users who have their timelines set to "public" are looking for broad distribution of their Tweets. I would think that Twitter would be fine with users or third parties (1) either reproducing the text of Tweets within the Twitter ecosystem, or elsewhere in a fair use context, or (2) using the "Blackbird Pie" feature that Twitter made available. (Obviously, users should be free to also use Twitter's "Retweet Button," although there is nothing in the guidelines about this.) At the end of the day, there is a braod spectrum between (1) using someone's Tweets in the ecosystem, or outside of it in an isolated instance to make a point, and (2) downloading content and using it elsewhere, or using a collection of Tweets without permission. I would think there is no dispute that the latter is not encompassed by Twitter's terms of service, but there's a fair amount of grey area in between.

Finally, Twitter's gift to the Library of Congress which plans on archiving all public Tweets has generated some discussion in the past as well. Twitter has a broad license to utilize the Tweets sent by users, but from what I understand, Twitter is allowing users to opt-out of this archiving by deleting their Tweets (and implementing a lag between when a tweet is sent and when it is ready for archiving). Fred Stutzman has a post that raises the issue of whether this should have been opt-in: "Twitter and the Library of Congress." Some of this seems like splitting hairs to me, since all your public tweets are contained in that big old archive in the sky - i.e., Google. Twitter also makes clear that if you set your profile to public, your Tweets are going to end up out there, for the whole world to see. Still, this poses an interesting question and one that Twitter may want to consider clarifying its stance on.

Branding & Trademark Usage Issues: The branding-related changes or restrictions were largely predictable:

you can't use the Twitter marks in a way that imply sponsorship;

you must use current versions of the logos;

you can't use Twitter in the name of your application.

One that was interesting is that Twitter seemed to give somewhat on use of the word "Tweet," by allowing use of this term in the names of applications. However, you can only include "Tweet" in the name of your application to the extent that the application "is designed to be used exclusively with the Twitter platform." As Oliver Chiang's article (linked above) notes, this still affects applications such as TweetDeck, which has "Facebook" integration. (TweetDeck's bird icon probably doesn't comply with Twitter's usage rules either.) Twitter has long had an ambivalent stance on the use of "Tweet" by developers, as noted by Robin Wauters in this February 2010 TechCrunch article: "Twitter Fences With Its “Tweet” Trademark Again."

At the end of the day, this seems like an example of the tension inherent in fostering a vibrant developer community, and the concern's of a platform company's trademark lawyers. Some of Twitter's guidance also seemed directed at average users, perhaps in an attempt to prevent potential genericide of the Tweet mark. (See "Will Twitter trademark 'tweet' before it’s genericized?") Does this represent a shift in what was perceived as Twitter's laissez faire attitude toward Twitter-based marks? (See these April 2009 posts from Tom O'Toole ("Why Not Follow Twitter's Example on Trademark Enforcement?") and Mike Masnick ("Lesson For Companies Being Over-Aggressive In Trademark Protection: Look At Twitter") on Twitter's laissez faire approach.)

Finally, thanks to Professor Goldman, Twitter's General Counsel (Alexander Macgillivray) gave a talk at Santa Clara about Twitter and the variety of legal issues that it has to deal with. You can check out his very interesting and informative talk here: "Twitter: An Insider's View."

AFP v. Morel Briefs:

* AFP v. Morel (Motion to Dismiss)
* AFP v. Morel (Reply in Support of Motion to Dismiss)

Other Coverage:

"Twitter Investor Defends New ‘Tweet’ Usage Rules" (Oliver Chiang/Forbes)
"Hey, Twitter, Enough Of This Crap About 'Here's How You Can Use The Word Tweet'" (Henry Blodget/Business Insider)
"Twitter Updates Logos, Rules: Info On Logo Use, Screenshots, And Capital “T” Tweets" (MG Siegler/TechCrunch)

For a humorous take on all this, check out this post: "How The Twitter “Man” Is Trying To Keep the Viral Buzz-Marketer Down" (A Bajillion Hits)

Added: Thanks to Bakari Brock for flagging something: content is not "uploaded to Twitter." The underlying content (videos, pictures, etc.) is uploaded to third party services or servers. (This is part of the beauty of Twitter's architecture, and one that offers it legal benefits as well. At the end of the day, it's a service that allows for the exchange of short text-based messages, and links.) I've tweaked the post and title to reflect this.

Posted by Venkat at 10:43 PM | Copyright , Trademark

November 08, 2010

Online Forum Operator Gets Easy 47 USC 230 Win--Two Plus Two v. Jacknames

By Eric Goldman

Two Plus Two Publishing LLC v. Jacknames.com, 2010 WL 4281791 (D. Nev. Sept. 30, 2010). The complaint. Steve Green's writeup of the initial complaint filing.

This one just showed up in my Westlaw queue. It looks like a cyberlaw brawl is going down in the poker community. Get a sense of the discussion here. That thread suggests this may be one of those lawsuits that makes no sense whatsoever.

Two Plus Two publishes poker-related content and runs (among other things) a poker-themed discussion forum. Jacknames and its principal Boyd appear to provide a variety of Internet services (hosting, registrar, domain name auction) to online poker-oriented businesses. Two Plus Two accused Jacknames of cybersquatting on the name twoplustwo.me. Jacknames countersued Two Plus Two for defamation and related torts based on user postings to the Two Plus Two online forum. This counterclaim was completely unmeritorious, and the court requires only 2 sentences to apply 230:

In this case, Boyd has alleged that the content was provided by unnamed parties on the Forums. Therefore, Plaintiff is immune from liability for Boyd's causes of action for defamation and intentional infliction of emotional distress.

Two other small points of note:

* Boyd claims to have registered the domain name in question in 2004, but the plaintiff didn't initiate the lawsuit until 2009. Boyd claimed laches, but the court credits the plaintiff's assertion that it didn't actually learn about the domain name until 2009, after which it sued within 5 months. I'd have to do some research on the appropriate starting point for an ACPA statute of limitations, but if the ACPA problem was registration of the domain name, it seems odd to see a lawsuit brought 5 years after registration.

* In the same paragraph where it acknowledges the 230 immunity, the court says:

Plaintiff incorrectly argues that the Digital Millenium Copyright Act (“DMCA”) provides a safe harbor provision for internet content providers and Plaintiff is essentially immune from suit on these causes of action. The DMCA only covers alleged acts of copyright infringement, not the defamatory statements at issue here.

Normally in a low-stakes dispute like this, I would brush off the doctrinal mistake as the product of typical lay person legal misunderstandings. However, the Westlaw report lists the national powerhouse law firm of Greenberg Traurig as plaintiff's counsel. Did they really make such an obvious mistake? Or were they trying to make some exceptionally clever argument? Hmm...

[Note: I will blog another 230 case, Swift v. Zynga, soon.]

Posted by Eric at 05:28 PM | Derivative Liability , Domain Names | TrackBack

November 07, 2010

Another Federal Court Dismisses CAN-SPAM Claims Due to Lack of Standing - Melaleuca, Inc. v. Hansen

[Post by Venkat]

Melaleuca, Inc. v. Hansen, No. CV 07-212-E-EJL-MHW (D. Idaho; Sept. 30, 2010)

I blogged in June about a CAN-SPAM case in the District of Idaho involving CAN-SPAM and state law claims asserted by Melaleuca, a "multi-level marketing company," against Daryl Hansen. Melaleuca is the registrant of "iglide.net" domain name. Melaleuca provided its "marketing executives" internet access and email services "through a third-party Internet service provider." Hansen allegedly sent emails to individuals at their "iglide.net" email addresses, and Melaleuca asserted CAN-SPAM and state law claims based on Hansen's conduct. The magistrate judge (citing Gordon v. Virtumundo) found that Melaleuca was not a bona fide ISP, and as a result, recommended dismissal of the CAN-SPAM claims, and recommended that the court decline to take jurisdiction over the state law claims.

Melaleuca objected to the magistrate judge's recommendation. The district judge overrules Melaleuca's objections, and finds that Melaleuca is not entitled to bring claims under CAN-SPAM because it is not a bona fide ISP. As the court finds:

Melaleuca provides email and internet access through a third party internet service provider, IP Applications. Melaleuca does not own or operate IP Applications. Melaleuca does not have access or control over the hardware that enables internet access to iglide.net customers. Melaleuca does not control the spam filters applied to emails by IP Applications.

As such, the court finds that Melaleuca does not fall within the limited class of plaintiffs who can bring claims under CAN-SPAM. Melaleuca argued that it had obtained an assignment of claims from IP Applications, but the court notes that this occurred "after [Melaleuca filed] its complaint and before [Melaleuca filed] its response." Since standing is determined at the time of filing, Melaleuca's attempt to create standing through the assignment fails. The court also finds that Melaleuca was not "adversely affected" by the emails at issue. While the court agrees with Melaleuca that "spam 'in general' increases the cost [Melaleuca] has to pay to its ISP," the court finds that "Melaleuca has not established any direct adverse affect or additional costs" due to the emails at issue. The court also rejects Melaleuca's speculation that it somehow lost "goodwill" based on the six complaints it received due to the emails at issue.

Surprisingly, the court dismisses the CAN-SPAM claims without prejudice. I may be missing something, but as the court notes, although Hansen filed a motion to dismiss, the magistrate judge converted the motion into a motion for summary judgment and properly considered the motion under summary judgment standards. The court's determination on the no "adverse effect" issue should be conclusive, and Melaleuca should not get another shot at asserting these claims (and neither should IP Applications, since it assigned the claims to Melaleuca).

Even more surprisingly, Melaleuca is appealing this decision. I can't see the Ninth Circuit viewing this appeal with much favor. Additionally, as I mentioned in my previous post on this case, Melaleuca may have to deal with an adverse fee award, since Hansen (as the prevailing party) may be entitled to fees under CAN-SPAM.

Added: John Levine comments on this ruling at CircleID ("Yet Another Unfortunate CAN SPAM Case"). John notes an interesting quote from the court's order:

[T]he harm must be both real and of the type experienced by ISPs. While the harm need not be significant in the sense that it is grave or serious, the harm must be of significant to a bona fide IAS provider, something beyond the mere annoyance of spam and greater than the negligible burdens typically borne by an IAS provider in the ordinary course of business.

While John concludes that the judge here correctly followed the law, he finds that Ninth Circuit precedent is really the problem: "[the] unfortunate fact is that if you want to have any hope of winning a CAN SPAM case, don't file it on the west coast." I'm not so sure about this. This case is one of many (many) examples of CAN-SPAM plaintiffs going to court with flimsy damage arguments. While the line quoted by John hints at an evidentiary problem that a real CAN-SPAM plaintiff could face, the evidence in this case was clear that Melaleuca did not offer any internet access services. It contracted with a third party to do so, and then tried to assert the third party's claims relying on a belated assignment of claims. Courts have sniffed out these attempts to "create damages" time and time again. Also, it's worth noting that the seminal appeals court precedent that was unfavorable to CAN-SPAM plaintiffs came from the Fourth Circuit (in Mummagraphics), and not the Ninth Circuit. (See "Fourth Circuit Rejects Anti-Spam Lawsuit--Omega World Travel v. Mummagraphics.")

Previous post: "Idaho District Court Dismisses CAN-SPAM Claims Due to Non-ISP Status -- Melaleuca, Inc. v. Hansen."

Posted by Venkat at 09:01 PM | Spam

November 06, 2010

Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum

[Post by Venkat]

DSPT International v. Nahum, Case No. 08-5506 (9th Cir.; Oct. 27, 2010)

This case involves the familiar story of a company leaving the domain name registration in the hands of someone who performed web design services (in this case, the registration was left in the name of the web designer's brother) and the registrant later refusing to turn over the domain name due to a dispute over unfulfilled obligations to the registrant.

DSPT is men's clothing importer which was founded by founded by Paolo Dorigo. Dorigo "brought his friend Lucky Nahum into the business." To serve a "younger market with somewhat 'trendier, tighter fitting fashion,' the company created the EQ brand name in 1999." Lucky's brother handled the web design, and the domain name for DSPT's website (eq-italy.com) was registered in Lucky's name. Over time, the website grew in importance to DSPT's business. In 2005, Lucky and Dorigo did not see eye to eye on the terms of their relationship and parted ways. Lucky declined to renew his agreement with DSPT and went to work for a competitor. Shortly thereafter, DSPT's website disappeared, and when customers who went to access the website saw the following message:

All fashion related questions to be referred to Lucky Nahum at: lnahum@yahoo.com.

DSPT sued Lucky alleging a variety of claims, including for cybersquatting. Lucky turned around and counter-claimed for the $14,936.86 in commissions that he claimed he was owed. The jury found for DSPT and awarded it $152,000.00. It also rejected Lucky's claim for unpaid commissions.

On appeal, the key question was whether Lucky's actions fit the statutory definition of cybersquatting - i.e., whether the domain name was registered or used with a "bad faith intent to profit from the plaintiff's mark." Lucky argued that there was no "bad faith intent to profit" from DSPT's trademark because he only used the domain name to try to get money which he was rightfully owed, and even if he intended to profit from something, it was not from DSPT's goodwill in the mark. The Ninth Circuit disagreed, construing the statute broadly, to find that holding the domain name hostage "to get leverage in a business dispute can establish a violation." The court notes that while the initial registration of the domain name was obviously not in bad faith, Lucky's subsequent "use" of the domain name in bad faith was enough to constitute a violation. Interestingly, the court acknowledged that Lucky never actually offered to "sell" the domain name back to DSPT:

Though there was no direct evidence of an explicit offer to sell the domain to DSPT for a specified amount, the jury could infer the intent to give back the site to DSPT only if DSPT paid Nahum the disputed commissions. The 'intent to profit' . . . means simply the intent to get money or other valuable consideration. "Profit" does not require that Nahum receive more than he is owed on the disputed claim. Rather, profit includes an attempt to procure an advantageous gain or return.

Lucky also argued that DSPT's trademark was not distinctive, the domain name was not confusingly similar to DSPT's mark, and that there was insufficient evidence to support the jury's $152,000 verdict. The court doesn't give much credence to any of these arguments.
__

The court's conclusion on the core ACPA issue relies on a liberal reading of the statute. One element of the statute is that the defendant must act with "bad faith intent to profit from [the] mark" [emphasis added], and it's not hard to find cases construing the statute narrowly. (On the other hand, some Ninth Circuit cases have taken a broad view of the ACPA. See, e.g., Bosley Medical Institute v. Kremer (CMLP page).) Here, there was no explicit offer to sell the domain name back to the plaintiff, and it's far from clear that Lucky "used" the domain name in any way. The court was likely influenced by the equities of the situation and the fact that the jury sided with DSPT. Lucky was allegedly owed approximately $14,000 and after going to work for a competitor, he effectively shuts down DSPT's website, which is one of DSPT's main channels of business. Although the precise amount of DSPT's losses are the subject of dispute, they far eclipsed the $14,000 which Lucky sought to recover.

Another issue which the court did not focus on was whether DSPT's mark was famous or distinctive at the time of registration of the domain name (as required under the ACPA). Richard Santalesa takes a look at this issue here: "Surprising Cybersquatting Domain Name Dispute in the Ninth Circuit."

The obvious (but always worth repeating) takeaway is that registration of a company's domain name should always be in the company's name. Another would be that holding a domain name hostage to gain leverage in a business dispute is a risky course of action.

Additional coverage:

Richard Santalesa: "Surprising Cybersquatting Domain Name Dispute in the Ninth Circuit."

Michael Atkins: "Bad Faith Intent to Profit After Innocent Registration Constitutes Cybersquatting." Mike also covers another factually similar decision (web designer / client dispute) from the Ninth Circuit that arrived at the opposite result. This time the dispute was between the law firm and its web designer, and the law firm lost after a jury trial because it failed to show secondary meaning for the marks in question: "Ninth Circuit Affirms Dismissal of Seattle Law Firm's Cybersquatting Case."

UPDATE from Eric: A few analogous cases:

* Web Developer Didn't "Convert" Website--Conwell v. Gray Loon
* Outdated Whois Information Might Lead to False Light Tort--Meyerkord v. Zipatoni
* Taking Intangible Electronic Files is Criminal Fraud--NM v. Kirby
* Cautionary Tale of Website Co-Ownership--Mikhlyn v. Bove
* Another Cautionary Tale of Joint Website Ownership--TEG v. Phelps

Posted by Venkat at 11:56 AM | Domain Names , Trademark

Victim's Misstated Age on MySpace Could Contribute to Mistake of Age Defense--State v. Berry

By Eric Goldman

State v. Berry, 2010 WL 4226707 (Or. App. Ct. Oct. 27, 2010)

This is yet another case involving sex with an underage girl where the defendant believed she was older than she actually was. See my previous comprehensive post on mistake-of-age defenses and MySpace.

The victim in this case was actually 13 years old. The appellate court's opinion omits some key facts, like the defendant's age and how the defendant and victim found each other. All we know is that a jury convicted the defendant of sex offenses predicated on having sex with a victim under 14.

The trial judge refused to let the jury know of the lesser-included offense of having sex with a victim under 18 (less serious than having sex with a minor under 14), even though the defendant argued that he believed the victim was older than 13. In support of those beliefs, the defendant pointed to two pieces of admissible evidence:

1) the victim's MySpace age claimed she was 15
2) the victim claimed she was 17 in an email to the defendant

The prosecution subsequently admitted that it was an error not to let the jury know of the lesser-included offense. Nevertheless, the prosecution tried to uphold the conviction because the error wouldn't have affected the jury's decision. With both the prosecutor and defendant agreeing that an error occurred, not surprisingly the appellate court rejects the prosecution's attempts to sustain the verdict and instead remands the case for a new jury trial.

I don't have a good handle on all of these mistake-of-age cases involving MySpace, but this is the first case I can remember where a defendant's mistake-of-age defense predicated on a MySpace-reported age made a difference to a legal result. It's unclear if the defendant will actually get the benefit of the defense on retrial (i.e., the jury may not find his evidence persuasive), but I believe he's gotten farther with the social networking site-based mistake-of-age defense than any other case I've seen.

Posted by Eric at 09:43 AM | Content Regulation | TrackBack

November 05, 2010

October 2010 Quick Links

By Eric Goldman

Copyright

* Greg Sandoval discusses copyright trolls with Cindy Cohn. You may recall I had an "interview" with Cindy as a guest lecture in my Internet Law course. And a belated congratulations to Cindy for her recognition by the CA State Bar IP Section. BTW, have you considered supporting the EFF financially? I do, because I sleep better at night knowing Cindy and her colleagues are on the beat looking out for our interests.

* Triton Media settles with movie studios for providing too much support to pirate movie websites.

* Did you know that California has a law (Educ. Code 66450-66452) prohibiting the commercialization of class notes from academic courses? It raises interesting First Amendment, copyright preemption and 47 USC 230 issues.

Trademarks

* The initial interest confusion doctrine appears to be infecting EU trademark law.

* Reuters reports on buying counterfeit goods from China over the Internet.

* News.com: Trademark issues on Etsy.

* DSPT v. Nahum (9th Cir. Oct 27 2010). "Even if a domain name was put up innocently and used properly for years, a person is liable under 15 U.S.C. § 1125(d) if he subsequently uses the domain name with a bad faith intent to profit from the protected mark by holding the domain name for ransom. The evidence sufficiently supported the jury’s verdict that Nahum did so, causing $152,000 in damages to DSPT."

* Hearts on Fire v. Blue Nile settled in January. Prior blog post.

* WaPo on universities cracking down on high school teams copying the university's logos.

* An interview with Google's chief trademark counsel Terri Chen.

Content Regulation

* Lichter v. Martin, 2010 WL 3913601 (Cal. App. Ct. Oct. 7, 2010). Blog post protected by anti-SLAPP laws.

* Eoin O'Dell discusses secondary online defamation liability in Ireland. The post illustrates why we should be grateful for 47 USC 230.

* Kash Hill reports on a professor who got busted for possessing child porn, some of which allegedly was collected for an academic research project.

* The Register published an important and thought-provoking article on restitution in child porn cases.

* Doe v. Shurtleff (10th Cir.). Utah law requiring sex offenders to turn over their usernames to the government survives First Amendment challenge.

Consumer Protection

* NYT: "Under the deal with the French Competition Authority, Google agreed to adopt conditions, including a three-month notification period, when it rejected some ads from appearing next to its search results in France. The specific conditions apply only in France, and concern only ads for tools aimed at helping drivers avoid speeding tickets." Search Engine Land has more.

* Target avoids class certification in lawsuit over its website's allegedly inaccurate but obscurely presented references to "Made in the US." Rebecca's coverage.

* PA Bar Opinion: "It is the opinion of the Pennsylvania Bar Association Unauthorized Practice of Law Committee that the offering or providing [in Pennsylvania] of legal document preparation services as described herein (beyond the supply of preprinted forms selected by the consumer not the legal document preparation service), either online or at a site in Pennsylvania is the unauthorized practice of law and thus prohibited, unless such services are provided by a person who is duly licensed to practice law in Pennsylvania retained directly for the subject of the legal services."

* Rebecca on the Ewert v. eBay class certification.

* The Supreme Court denied cert in Tricome v. eBay, Inc., 2010 WL 3525737 (U.S. Nov. 1, 2010)

Miscellaneous

* Streaming video version of Alex Macgillivray's lecture at SCU from a month ago.

* Mike Godwin has left his role as Wikimedia's GC.

* Virtual world enthusiast Greg Lastowka has posted his new book Virtual Justice under a CC license.

* Pelican Trading Inc. v. Proskauer Rose LLP, 2010 WL 3905750 (D. Nev. Sept. 28, 2010). A law firm's blog post about a Nevada law did not help confer jurisdiction in Nevada.

* School district settles spy webcam case. Surprise! Lawyer gets 70% of the money.

Posted by Eric at 06:51 AM | Copyright , Domain Names , E-Commerce , Trademark , Virtual Worlds | TrackBack

November 04, 2010

Spam Filter Excuse for Missing a Deadline Flies in the Northern District of Illinois -- Pace et al. vs. AIG

[Post by Venkat]

Pace et al. vs. AIG, 8 C 945 (N.D. Ill.; Nov. 1, 2010)

As the court notes in this case, 'I missed a deadline because I did not receive electronic notice of a filing' is becoming the "modern [lawyer's] version of the classic 'my dog ate my homework' line."

The court granted AIG's motion for summary judgment on March 30, 2010. The notice of appeal would have been due on April 29, 2010. After the due date, on May 27, 2010, Appellants moved for an extension of the deadline to file a notice of appeal. Initially, they argued that they never received a copy of the court's March 30, 2010 order, but they wisely changed course and blamed it on their overzealous spam filter.

Ultimately, the court grants the motion and extends the deadline, even though six lawyers were listed as counsel on the case, and a local rule requires local counsel to be responsible for receiving notices and notifying "the designating attorney of their receipt and contents." In the process of granting the extension, the court beats up on counsel for appellants, noting that "[t]here can be no doubt that Appellants are guilty of neglect in this case . . . " The court runs through the numerous other cases where courts have rejected the spam filter excuse, but finds that in many of those cases, the failure to act on an e-filed document was part of an overall pattern of lack of diligence or lack of credibility on the part of the lawyer who offered this excuse:

in the cases where courts have held attorneys accountable for failing to monitor the docket, the attorneys' neglect far surpasses the neglect conceded in this case. Unlike here, the cases cited by AIG involve situations where an attorney's malfunctioning e-mail is just one example of the attorney's overall lack of diligence. See Fox v. American Airlines, Inc., 389 F.3d 1291, 1295, 363 U.S. App. D.C. 459 (D.C. Cir. 2004) (affirming denial of plaintiffs' Rule 59(e) motion to vacate dismissal of amended complaint where counsel claimed that he never received electronic notice of defendant's second motion to dismiss even though his later filing repeatedly referred to a pending motion to dismiss and his failure to receive a timely answer to the amended complaint should have aroused his suspicion and prompted him to check the docket); Tobin v. Granite Gaming Group II, LLC, No. 2:07-CV-577-BES-PAL, 2008 U.S. Dist. LEXIS 20906, 2008 WL 723337 (D. Nev. Mar. 17, 2008) (discounting counsel's spam filter excuse where she repeatedly failed to comply with court orders, discovery obligations, and federal and local rules and routinely failed to appear in court); In re Philbert, 340 Br. 886, 891 (Bkrtcy. N.D. Ind. 2006) (rejecting spam filter excuse where counsel failed to show up for hearing on his motion to stay because "counsel knew he was initiating proceedings that had to be dealt with expeditiously," selected the deadlines for objections to his motion, and should have expected imminent activity in the case). Additionally, in some of the cases cited by AIG, courts rejected excuses like Appellants out of disbelief. See Moore v. U.S., No. S 04-0423 FCD JFM, 2005 WL 1984745, at *3 (E.D. Cal. Aug. 17, 2005), rev'd, 262 Fed.Appx. 828 (7th Cir. 2008) (rejecting counsel's spam filter excuse where "serious questions cast doubt on his explanation" and the court of appeals later found that counsel's overall non-responsiveness amounted to gross negligence); Tobin, 2008 U.S. Dist. LEXIS 20906, 2008 WL 723337, at *10 ("Even if the Court were to accept this explanation regarding the spam filter, which it does not, Plaintiff's counsel was clearly on notice that motions were pending before this Court . . ."). Unlike these cases, the Court has no reason to doubt the veracity of counsel's explanation here, which is supported by an affidavit and evidence from his firm's information technology manager.

Posted by Venkat at 12:43 PM | Spam

Facebook Not Liable for Account Termination--Young v. Facebook

By Eric Goldman

Young v. Facebook, 2010 WL 4269304 (N.D. Cal. Oct. 25, 2010). The initial complaint.

Kashmir Hill covered the initial complaint filing in this case, and you should start with her post. The short story is that Facebook kicked Karen Young off its site, she sued Facebook and the court dismissed her suit. The court provides a few interesting conclusions along the way:

* Facebook isn't a state actor despite "contracts between Facebook and the General Services Administration allowing Facebook pages for federal agencies."

* Facebook isn't liable for failing to adhere to Young's desired "safety" levels because its contract disclaims such a duty.

* "Young also claims that Facebook has 'failed in its responsibility to condemn all acts or statements that inspire, imply, incite, or directly threaten violence against anyone.' Id. Young provides no basis from which to infer such a broad duty. Such an obligation would be inconsistent with the policy choices undertaken by Congress in the Communications Decency Act, which sharply limits the responsibility of interactive computer service providers for the content provided by third parties."

* Young's fraud allegations lacked the requisite specificity.

I think the most interesting discussion relates to Young's breach of contract claim. The court dismisses it as well, but it leaves open the possibility that capricious terminations by Facebook might violate an implied covenant of good faith and fair dealing:

As with all contracts, Facebook has an implied duty not to frustrate the other party's right to receive the benefits of the agreement actually made. The agreement in this case is to provide users access to Facebook's services subject to certain terms and conditions. While users do not pay for the services directly, Facebook benefits from user activity through the sale of advertising. Facebook expressly reserves the right to terminate the accounts of users who "violate the letter or the spirit of this Statement, or otherwise create risk or possible legal exposure" for Facebook, Compl. Ex. A-2, but it does not expressly reserve the right to terminate an account for any reason, and indicates in its Statement of Principles that users "should not have their presence on the Facebook Service removed for reasons other than those described in Facebook's Statement of Rights and Responsibilities." Compl. Ex. B-1. It is at least conceivable that arbitrary or bad faith termination of user accounts, or even termination of user accounts with no explanation at all, could implicate the implied covenant of good faith and fair dealing. [emphasis added]

However, Young's current complaint does not allege that the termination of her account was undertaken in bad faith or violated Facebook's contractual obligations. Instead, she alleges that she was deprived of human interaction the process surrounding the termination of her account. The termination provision of the Statement of Rights and Responsibilities provides that when a user account is terminated, Facebook "will notify you by email or at the next time you attempt to access your account." Id. Given the express language, Facebook could not have an implied obligation to provide a different termination process."

Personally, I think 47 USC 230(c)(2) typically trumps a website's implied covenant of good faith and fair dealing regarding account termination, even if the user alleges that the termination was capricious. I will be speaking on that topic in the context of virtual worlds at UC Irvine in April 2011; and I will be writing up a paper in support of this argument in the Spring. Stay tuned.

For more on this ruling, see Evan Brown's coverage.

Some related posts:

* Life May Be "Rad," But This Trademark Lawsuit Isn't--Williams v. CafePress.com
* Terminated eBay Vendor Gets Day in Court Against eBay--Crawford v. Consumer Depot
* Web Host Can Terminate Customer for Abusive Call to Customer Support--Mehmet v. Add2Net
* Online Game Network Isn't Company Town--Estavillo v. Sony
* Anti-Spyware Company Protected by 47 USC 230(c)(2)--Zango v. Kaspersky
* AOIR Regulating Virtual Worlds Panel, and My Notes on Investment Expectations in Virtual Worlds
* KinderStart v. Google Dismissed--With Sanctions Against KinderStart's Counsel
* Search Engines Defeat "Must-Carry" Lawsuit--Langdon v. Google
* Termination of Accounts in Virtual Worlds
* My virtual worlds article: Speech Showdowns at the Virtual Corral

Posted by Eric at 07:10 AM | Derivative Liability , Licensing/Contracts , Virtual Worlds | TrackBack

November 03, 2010

Plaintiff-Side Briefs in Rosetta Stone v. Google Appeal

By Eric Goldman

Rosetta Stone and five amici groups have filed their briefs in the Fourth Circuit appeal in Rosetta Stone v. Google. The filings:

Rosetta Stone's opening appellate brief.

It appears Rosetta Stone has new appellate counsel: Terrence Ross and the Gibson Dunn team are out; a team from Skadden Arps is in. The brief makes several predictable arguments responding to some quirks in the district court opinion.

Inexplicably, the brief was filed in heavily redacted form. Paul Levy is going to fix that.

INTA's amicus brief.

Normally, I'm irked when INTA takes hardcore pro-TM owner positions in amicus briefs. INTA should represent the entire trademark community, which has widely varying views about the proprietary of trademarked keyword advertising. This brief focuses on two doctrinal points: the court misinterpreted the "functionality" defense and botched the dilution analysis. As a descriptive matter, I agree that the lower court's discussion on both points was goofy, so there is a kernel of merit in INTA trying to help the courts keep trademark doctrine straight. Even so, the INTA brief takes a characteristically and excessive maximalist position, especially on dilution.

Carfax et al amicus brief.

This amici agglomeration consists of Carfax, Ford Motor, Harmon International, the Media Institute, Viacom and Blues Destiny. Viacom and Blues Destiny are both Google-haters. Viacom of course is still pursuing YouTube for copyright infringement despite its huge loss in district court; and Blues Destiny sued Google for copyright infringement before giving up. I'm finding it hard to believe that Carfax or Ford Motor care about copyright issues like Viacom and Blues Destiny do, so the agglomeration is weird.

The brief focuses on the standard for contributory trademark infringement. I assume the copyright plaintiffs care because a more liberal trademark standard might migrate back to secondary copyright principles.

Association for Competitive Technology et al amicus brief.

This amici agglomeration consists of Association for Competitive Technology (which describes itself as a "trade association for computer software, hardware, consulting companies working to keep e-commerce unregulated"--ironic!), Burlington Coat Factory, Business Software Association, Chanel, Coach, GEICO, Harrah's Entertainment, SAS Jean Cassegrain, Longchamp, the NFL, Oakley, the PGA, Rolls-Royce, Sunkist, Sunrider, Swarovski, Tiffany, TiVo, Tumi and United Continental. This is another weird agglomeration--a mix of content owners (NFL, PGA), high end brands (Tiffany, Chanel, Rolls Royce), technology organizations (ACT, BSA, TiVo) and random others.

GEICO is another disgruntled former plaintiff against Google. Both the ACT and BSA have ties to Microsoft, who hates Google and is contesting Google's business through multiple fronts (1, 2). Could Microsoft be foolish enough to use this lawsuit as an opportunity to tweak its arch-enemy Google, even though an adverse ruling in this case would almost unquestionably be against Bing's best interests?

It's also a little jarring to see ACT on this brief given that it lists eBay as a sponsor. So, when ACT joined the brief, it effectively put eBay shoulder-to-shoulder with Tiffany--even though Tiffany bitterly (and unsuccessfully) fought eBay over trademark infringement for years, and a favorable ruling for Rosetta Stone in the Fourth Circuit could undercut the power of eBay's win in the Second Circuit. How did this happen?

Substantively, this brief raises the same two issues as the INTA brief (functionality and dilution). Given the similarity, I wonder if this agglomeration considered trying to join the INTA brief. Maybe INTA preferred to work alone. Otherwise, it's a little odd to see the overlap/duplication between the two briefs.

ConvaTec et al amicus brief.

This amici agglomeration includes ConvaTec, Guru Denim, Monster Cable, Petmed and 1-800 Contacts. It's not surprising to see 1-800 Contacts at this party given that they frequently sue competitors over keyword advertising. (I don't have a blog category for 1-800 Contacts, but I probably should. For now, see this search list). Monster Cable is well known for their litigiousness over trademark issues involving competitors and non-competitors who use the term "monster," although I'm not aware of them bringing keyword ad lawsuits.

This brief is the most peripatetic of the amicus briefs; it addresses confusion, functionality, contributory infringement and keyword triggering vs. trademarks in ad copy.

Volunteers of America amicus brief.

This was the oddest of the five amicus briefs. I don't know much about Volunteers of America, and it's not obvious why they would care about trademark issues enough to weigh in here--especially given their crummy trademark and their status as a non-profit organization.

The brief itself argues for a maximalist application of the initial interest confusion doctrine. This is an odd argument because the Fourth Circuit's Lamparello opinion thumped the initial interest confusion doctrine pretty hard, so this brief has to swim upstream. I'm not sure how much credit any of the amicus briefs will get from the court, but this amicus brief will undoubtedly get the least attention of the five.

One overall assessment: it's interesting to see how many Google haters piled onto this opportunity to tweak Google. You don't become an 800 pound gorilla without stepping on a few toes, and those toes are stepping back!

Case library:

* UK Intellectual Property Law Society amicus brief in support of neither party
* Rosetta Stone's opening appellate brief.
* INTA's amicus brief in favor of Rosetta Stone.
* Carfax et al amicus brief in favor of Rosetta Stone.
* Association for Competitive Technology et al amicus brief in favor of Rosetta Stone.
* ConvaTec et al amicus brief in favor of Rosetta Stone.
* Volunteers of America amicus brief in favor of Rosetta Stone.
* District court's main opinion granting SJ. My blog post.
* District court's opinion granting a motion to dismiss on the unjust enrichment claim.
* Rosetta Stone's initial complaint. My blog post.

Posted by Eric at 11:40 AM | Derivative Liability , Marketing , Trademark | TrackBack

November 02, 2010

It May be Best to Shut Down Your Facebook Account While You are on Probation -- State v. Altajir

[Post by Venkat]

State v. Altajir, AC 31375 (Conn. Ct. App. Sept. 14, 2010)

Defendant (Altajir) was involved in an accident in 2004, and pleaded no contest to one count of operating a motor vehicle while under the influence and one count of misconduct with a motor vehicle. As part of her plea agreement, she was sentence to jail for one year, and probation for five years. The court imposed a variety of conditions on her as part of her probation. Among other things, she was required to: (1) use an ignition interlock device, (2) attend school or obtain employment full-time, (3) perform community service, (4) not operate a vehicle without a valid license, (5) abstain from violating laws, and (6) refrain from leaving the state without permission.

After serving her prison term and while on probation, she was involved in another (minor) accident. The police investigation of this accident revealed that she was operating the motor vehicle which she was driving without an ignition interlock device and without a driver's license. She was hauled into court for a probation revocation hearing and at the hearing, she admitted to violating these two conditions of her probation (operating a vehicle without a license and without an ignition interlock device). The court continued the matter for disposition. At the disposition hearing, the State sought to have the defendant's probation revoked and have the defendant serve out the remaining four years of incarceration. The State put forth evidence that the defendant violated her probation as she admitted to in the revocation hearing but also in a variety of other ways. Among other things, the State sought to admit several photographs that were posted on defendant's Facebook page which "indicated that she had left the state without permission." The court admitted some of the photographs over the defendant's objections that they were cumulative and inflammatory - in admitting some of the photos, the court states:

I'm looking at these pictures, and all I can think of is, where is the remorse.

The court imposed a term of three years incarceration.

On appeal, defendant raised a variety of procedural arguments (that she did not receive fair notice that the "uncharged violations" of probation would be a factor in the sentencing hearing and that the state should have been required to prove these violations by a preponderance of the evidence). She also raised the issue that admitting the Facebook photos violated her due process rights because the photos were not reliable since they were undated (i.e., there was no evidence that the photos were taken while she was on probation).

The court finds that defendant failed to preserve the latter argument, and it's therefore only reviewable if it's an error of constitutional magnitude. The court finds that it is not an error of constitutional magnitude.

___

Not being a lawyer who practices in this realm, I don't have a sense of whether the court's ruling on the Facebook photos is correct as a matter of criminal procedure. Courts seem to often admit profile photos without much of a look into their authenticity. (See, for example, the case discussed in this post: "MySpace Evidence: Maryland Appeals Court Allows Circumstantial Authentication.") The timing of the photographs would have been important, but the appeals court's discussion doesn't have enough specifics to get a sense of whether the trial court even looked into the issues of authenticity or reliability with respect to the photographs. Either way, one thing that struck me is that this isn't the first time the defendant's Facebook photos were used against her. As the court notes, defendant's "Facebook profile and accompanying photographs were taken into account when determining the defendant's sentencing and probation agreement for [the initial violations]." Ouch.

I always wonder in these cases how the state obtains access to the photos in question. If defendant's Facebook profile was set to public and her entire profile (including photos) were freely searchable, then she has no one to blame but herself. Interestingly, I came across a post that mentions a growing trend that as a condition of probation, probationers are required to be Facebook friends with their probation officers (mentioned in this article). When you consider all of this, maybe it's best to shut down your Facebook or MySpace profile while you are on probation, at least if you are not going to able to comply with your probation conditions?

As a side-note, the bulk of the social networking profile criminal cases used to be MySpace cases. Facebook cases are more and more becoming a part of the mix now.

Added: "Facebook [status update] leads authorities to Calif. parole jumper"

Related:

"Facebook Is Not The Place To Brag About Your Alleged Act Of Vandalism" (Smoking Gun) (Nov. 2, 2010)

"Facebook Friending leads to Jail" (Discovery News) (Aug. 27, 2010)

"Courtroom Technology Tips From a Tech-Savvy Judge" (ride the lightning) (Oct. 27, 2010):

I mentioned to the judge that a Wyoming judge had told us during a CLE that, as a condition of probation, anyone with a Facebook page must agree to "friend" his or her probation officer with no restrictions as to what the officer can see. To my surprise, that is apparently beginning to happen in Fairfax County has well . . . .

Posted by Venkat at 04:43 PM | Evidence/Discovery

November 01, 2010

Auction Platform Protected by 47 USC 230 for a Rogue Auction--Simmons v. Danhauer

By Eric Goldman

Simmons v. Danhauer & Associates, LLC, 2010 WL 4238856 (D. S.C. Oct. 21, 2010)

Proxibid provides an online auction platform similar to eBay, except that Proxibid vets auctioneers before they can conduct an auction. Danhauer used Proxibid's platform to conduct an auction. Simmons cast the high bid in a Danhauer auction that had two alleged irregularities. First, with the help of a Proxibid CSR, Danhauer unilaterally extended the auction's closing time. Second, Danhauer allegedly cast shill bids in the auction under a different account. The plaintiffs were understandably miffed, and they sued both Danhauer and Proxibid. Simmons apparently settled with Danhauer, leaving open for this ruling the claims against Proxibid. The court dismisses those claims on summary judgment.

The court buzzes through Simmons' claims based on the prima facie elements. It dismisses the negligence claim because the core harm here is an alleged breach of contract (Danhauer's failure to consummate the transaction with the high bidder), and the contract breach can't support a tort claim. Without a tort claim, the unfair practices claim also fails. The conversion claim fails because Simmons had not yet obtained a possessory interest in the goods. The fiduciary breach claim fails because Proxibid only provided customer support to Danhauer. The contract interference claim fails because, at most, Proxibid simply followed Danhauer's instructions.

In addition to the claims' failures on their faces, the court concludes that Proxibid qualifies for 47 USC 230 immunity. The court's entire discussion of the issue:

Plaintiffs have essentially asserted that Proxibid is liable to them in tort for tortious interference with a contract, aiding and abetting a breach of a fiduciary duty, negligence, unfair trade practices, and conversion because Proxibid allegedly helped Danhauer deprive Plaintiffs of the items for which they were the highest bidder in the auction at 4:00 a.m. Plaintiffs' sole bases for maintaining these claims against Proxibid arise from Proxibid's facilitation of Danhauer's reopening of the auction and Proxibid's alleged failure to thwart Danhauer's efforts to bid in its own auction in violation of the website rules. Plaintiffs do not dispute the fact that Proxibid is a website service provider, much like Ebay. Plaintiffs also do not dispute that Danhauer was responsible for conducting all aspects of the auction. There is no evidence that Proxibid posted any information or conducted any actions other than those provided by or at the direction of Danhauer. In this case, Proxibid is nothing more than an interactive computer service provider and cannot be held liable for the information and actions originating from Danhauer. Accordingly, Proxibid is also entitled to the immunity provided under the CDA, and Plaintiffs may not pursue the tort claims in their Complaint against Proxibid.

The case doesn't break much new ground. It's just another easy defense win in an obvious 230 case.

Posted by Eric at 06:50 AM | Derivative Liability , E-Commerce | TrackBack

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November 30, 2010

Another Ruling Challenging "Check the Website for Amendments" Contract Provisions--Roling v. E*Trade

November 28, 2010

Web Host Denied 230 Defense When It Allegedly "Actively Contributes" to Website--Kruska v. Perverted Justice

November 27, 2010

Junk Fax Claim Fails Due to "Established Business Relationship" Exception -- Cardinal Partners v. Fernandez Discipline

November 23, 2010

Apple Gets Partial Win in Case Alleging Copyright Infringement by iPhone App -- Stewart v. Apple Inc.

Wildcarding Subdomains Is OK; Reverse Domain Name Hijacking Isn't--Goforit v. Digimedia

November 22, 2010

Forwarding Defamatory Email Immunized by 47 USC 230--Mitan v. A. Neumann

November 20, 2010

Disclosure of the Substance of Privileged Communications via Email, Blog, and Chat Results in Waiver -- Lenz v. Universal

November 18, 2010

"Trends in Internet Law" Talk Slides

November 17, 2010

Request for Discovery of Facebook Profile and Photos Rejected as a Fishing Expedition -- McCann v. Harleysville Insurance

Anti-Bot Restrictions Aren't Copyright Misuse--Oracle v. Rimini Street

November 16, 2010

Furniture Retailer Enjoined from Sending eBay VeRO Notices--Design Furnishings v. Zen Path

November 15, 2010

Melaleuca Files Second Lawsuit Following Dismissal of its CAN-SPAM Claims

Holomaxx Sues Yahoo, Microsoft, and Others for Non-Delivery of Bulk Emails

November 12, 2010

Amazon Isn't Liable for Rogue Affiliate's Keyword Ad Buys--Sellify v. Amazon

November 11, 2010

Ad Networks Can't Get 47 USC 230 Defense on Motion to Dismiss--Swift v. Zynga

November 10, 2010

Job Opening: Assistant Director, High Tech Law Institute

Dentist Review on Yelp Gets Partial Anti-SLAPP Protection--Wong v. Jing

November 09, 2010

Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to "Twitter/TwitPic"

November 08, 2010

Online Forum Operator Gets Easy 47 USC 230 Win--Two Plus Two v. Jacknames

November 07, 2010

Another Federal Court Dismisses CAN-SPAM Claims Due to Lack of Standing - Melaleuca, Inc. v. Hansen

November 06, 2010

Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum

Victim's Misstated Age on MySpace Could Contribute to Mistake of Age Defense--State v. Berry

November 05, 2010

October 2010 Quick Links

November 04, 2010

Spam Filter Excuse for Missing a Deadline Flies in the Northern District of Illinois -- Pace et al. vs. AIG

Facebook Not Liable for Account Termination--Young v. Facebook

November 03, 2010

Plaintiff-Side Briefs in Rosetta Stone v. Google Appeal

November 02, 2010

It May be Best to Shut Down Your Facebook Account While You are on Probation -- State v. Altajir

November 01, 2010

Auction Platform Protected by 47 USC 230 for a Rogue Auction--Simmons v. Danhauer