January 31, 2011
Speakers Announced for "47 U.S.C. § 230: a 15 Year Retrospective" Conference, March 4, SCU
By Eric Goldman
On February 8, 1996--just about 15 years ago--President Clinton signed into law the Telecommunications Act of 1996, a lengthy law with significant implications for the entire telecommunications industry. As Justice Stevens wrote in Reno v. ACLU (1997), "The Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56, was an unusually important legislative enactment."
Tucked into a corner of that beefy bill was the Communications Decency Act, a law that defined its generation of Internet Law regulations and spawned a series of laws and court battles that took over a decade to resolve. Tucked away in a corner of the Communications Decency Act was Section 509, "Online Family Empowerment," a version of the Cox-Wyden bill that ultimately created 47 USC 230.
Of the many legacies of the Telecommunications Act of 1996, 47 USC 230 certainly looms large. It has become the cornerstone of the Web 2.0 economy, spawning the creation of many Internet giants we now use every day and creating countless billions of dollars of wealth. The law has also sparked extensive, and sometimes heated, debates over online free speech, content-based harms, and the legal and ethical responsibilities of online intermediaries.
On March 4, 2011, we will take a thorough look at 47 USC 230, its history, its implications and its future, from a wide range of perspectives. This event has been in development for more than a year, and I'm excited to see it finally come to fruition. Unlike many other cyberlaw conferences, which tend to encounter 47 USC 230 as a sub-component of the event's main topic, this conference puts the statute front-and-center for maximum geekery.
We have finally posted a tentative version of the day's agenda (subject to change, as always). The whole day is filled with highlights and expert speakers, but some of the parts I'm anticipating the most:
* former Rep. Chris Cox, who co-sponsored the Cox-Wyden bill that became 47 USC 230, will talk about the statute's origins and its legacy.
* Ken Zeran, the plaintiff in the seminal/watershed 47 USC 230 case Zeran v. AOL and an early victim of a "cyber-harassment" attack (before we even had the vocabulary to describe such things), will tell the story-behind-the-story of his litigation. I've heard parts of his story first-hand, and it has completely changed the way I think about the case.
* Chief Judge Alex Kozinski, who authored the majority opinion in Fair Housing Council v. Roommates.com, which some would argue is the most significant appellate court incursion into 230's immunity. Judge Kozinski has also recently articulated his views on Internet exceptionalism (he's against it). I'm not exactly sure what Judge Kozinski will say, but no matter what direction he chooses to go, it undoubtedly will be humorous and provocative.
The conference will be March 4, 2011, at Santa Clara University. You can see the complete speaker lineup, and register for the event, at the conference website. Registration costs $150 or less; we have lots of categories of discounted or free registration. If the registration fees pose a financial hardship for you, please contact us. If you can't make it, we plan to record the day's proceedings (assuming the speakers don't opt-out) and post the recordings online.
While making your travel plans, please note that we're informally celebrating Cyberlaw Week in the Bay Area during that time. You may be interested in two other related events:
* on the day before the 230 conference, the Stanford Technology Law Review is holding a conference entitled "Secondary and Intermediary Liability on the Internet" at Stanford. This has a nice list of speakers and topics that complement the 230 event very well.
* on the day after the 230 conference, we are hosting the inaugural Internet Law Works-in-Progress event at SCU, an annual event co-sponsored by SCU and the NY Law School. We anticipate having approximately 30 speakers present their cyberlaw works-in-progress. This is a closed-door event to allow for a high-level academic conversation, and we are restricting participants to folks who can contribute to an academic dialogue. If that describes you, we would like to welcome you as a participant. Although the deadline has passed, we're still willing to consider talk proposals and discussant requests.
So please come to one, two or all three of these events! I hope to see you there.
January 30, 2011
Private Employers and Employee Facebook Gaffes [Revisited]
[Post by Venkat Balasubramani]
I posted about a Wall Street Journal article highlighting supposed legal landmines facing private employers who discipline their employees for Facebook gaffes. ("Do Employers Really Tread a Minefield When Firing Employees for Facebook Gaffes?") I asked people to enlighten me if there were any such landmines, and someone did just that (thanks Andrew Oh-Willeke).
It turns out that several states have laws that restrict an employer's ability to fire an employee for lawful off-duty conduct. (Here's a 2008 survey from the National Conference of State Legislatures: "Employee Off-Duty Conduct." It's amazing how many of the statutes expressly cover tobacco products!) The California Labor Code protects employees from discipline or firing based on their "lawful conduct during nonworking hours away from the employer's premises." (Cal. Lab. Code §§ 96(k) and 98.6..) A Colorado statute also protects employees from adverse employment decisions based on their engagement in "lawful activities off the premises of an employer during nonworking hours." (Colo. Rev. Stat. § 24-34-402.5.) (The Colorado statute was known as the "Smokers’ Rights Statute.") The Colorado statute contains an exception where the employer can prove the restriction which the terminated employee violated:
(a) Relates to a bona fide occupational requirement or is reasonably and rationally related to the employment activities and responsibilities of a particular employee or a particular group of employees, rather than to all employees of the employer; or
(b) Is necessary to avoid a conflict of interest with any responsibilities to the employer or the appearance of such a conflict of interest.
The Colorado statute looks fairly broad. I did not come across any cases involving employees terminated for online activity. One case involved an employee who was terminated for writing a letter to the editor which was critical of his employer. (Marsh v. Delta Air Lines, 952 F. Supp. 1458, 1462-1463 (D. Colo. 1997).) The court denied the employee's claim, find that writing the letter was contrary to the implied duty of loyalty owed to the employer. In rejecting the employee's claim, the court noted:
by providing exceptions to the statute's general rule, the legislature indicated that it did not intend this privacy statute to provide a sword to employees thereby allowing employees to strike indiscriminate public blows against the business reputation of their employer.
Interestingly, both the California and Colorado statutes are tied to activity not on "the premises" of the employer, a concept that has become amorphous, as companies engage in activities online.
There are also state statutes which are intended to protect employees from being fired when they engage in political activity. Finally, an at-will Facebook firing may not constitute termination for cause, which can affect the terminated employee's eligibility for unemployment benefits (and a corresponding increase in the employer's unemployment insurance rate).
"The Blogosphere: Worker Rights and Employer Responsibility" (for an overview) (July 2007)
"Akin Gump Chair Hits Partner’s Personal Blog Post on ‘Ugly’ Indian Prayer" (ABA Journal) (Jan. 19, 2011)
January 29, 2011
Another Copyright Owner Sent a Defective Takedown Notice and Faced 512(f) Liability--Rosen v. HSI
By Eric Goldman
Rosen v. Hosting Services, Inc., 2010 WL 5630637 (C.D. Cal. Aug. 16, 2010).
[This case just showed up for me in Westlaw. It's not a major case but it's worth a brief note even 5 months later]
HSI is a web host. Barry Rosen is a professional photographer. I saw 25 entries in the C.D. Cal. PACER database since 2005 showing a Barry Rosen as plaintiff (many against Internet company defendants), so he may be a frequent user of judicial services.
Rosen sent a takedown notice covering 4 photos of "Daisy Fuentes," identifying the associated URLs. As it turns out, apparently the photos depicted Amy Weber. The host forwarded the takedown notice to its customer, who allegedly didn't remove the files before Rosen's lawsuit.
The court says HSI isn't contributorily liable because Rosen's takedown notice was insufficient to confer the requisite knowledge. The court doesn't reflectively explore the interplay between the common law principles of knowledge and the statutory requirements of 512; it treats a defective statutory notice as also defective for the common law analysis. I think this is a reasonable approach but the court doesn't get into the nuances.
The notice itself was defective because the "notice contains inherently inconsistent information. While it recites relevant URLs, the reference to Daisy Fuentes, who is not depicted at any of those URLs, makes the notice defective." The court amplifies in a footnote: "its incorrect identification of the allegedly infringing material made it impossible for HSI to assuredly find that material and assess Rosen's infringement claim." It's interesting to see the court apply a high level of formalism towards 512(c)(3) notices, just as courts sometimes are highly formalistic about the service provider's 512 requirements.
HSI counterclaimed on 17 USC 512(f), and the court denies Rosen's summary judgment motion, saying "the incorrect descriptions of the materials in question could be found to be a knowing material misrepresentation."
The parties settled the case shortly thereafter, so we'll never know how this story would turn out in court.
Class Action Brought by "Lonely and Vulnerable" Men Against Online Cupid Site Moves Forward -- Badella v. Deniro Mktg.
[Post by Venkat Balasubramani with some comments by Eric]
Badella v. Deniro Marketing LLC, 10-03908 CRB (N.D. Cal.; Jan 24, 2011)
This is a good one.
A group of plaintiffs brought a putative class action against an online dating website that they alleged contained predominately fake profiles. As Judge Breyer describes it in more colorful language:
This is a putative class action purportedly a vast, fraudulent scheme centered around an internet dating website that lures 'often lonely and vulnerable men' into joining . . . with the false promise that they are communicating with real women in their area who are interested in dating and/or intimate relationships.
Plaintiffs brought claims for fraud, RICO and California's anti-spam statute against multiple defendants. They alleged that they were "drawn" to the website fraudulently (e.g., via "spam, internet pop-up ads, or social networking scams"), induced to sign up for free, and then induced to upgrade to paid memberships.
This Service is for Amusement Purposes only.
You understand and accept that our site, while built in the form of a personals service, is an entertainment service. . . You are not guaranteed that you will find a date, a companion, or an activity partner, or that you will meet any of our members in person.
Online CupidTM Communications: You understand, acknowledge and agree that some of the user profiles posted on this site may be fictitious, and are associated with . . . our "Online CupidsTM", ("OC"). Our OC's work for the Site in an effort to stimulate conversation with users, in order to encourage further and broader participation in all of our Site's services, including the posting of additional information a.or pictures to the users' profiles.
Judge Breyer found that the terms did not undercut reliance for three reasons: (1) plaintiffs alleged that nearly all (as opposed to some) of the profiles are fictitious; (2) the fake profiles were not always labeled "OC," as promised; and (3) the plaintiffs alleged a "widespread and pervasive effort on Defendants' part to make the website appear to be a legitimate dating service." The disclaimer did not defeat reliance because defendants allegedly used a "wealth of information" to create a false impression, and the disclaimer was not as prominent as the information which created the false impression. In rejecting the claims, the court suggested what an appropriate disclaimer would look like, and contrasted this with the one from the website terms:
THIS WEBSITE USES FICTITIOUS PROFILES - READ THIS DISCLAIMER [or] THE MAJORITY OF PROFILES YOU SEE WILL NOT CORRESPOND TO ACTUAL WOMEN - READ THIS DISCLAIMER.
Disclaimers have achieved mixed results against claims of misleading website practices. (See, e.g., Vistaprint; Easysaver Rewards; Duffy v. The Ticketreserve, Inc.) I found the court's conclusion plausible, although a part of me said that an average person reading this disclaimer would conclude that they weren't visiting a typical dating website. Maybe the court figured - as many people do - that people rarely read or digest website terms?
Defendants also argued that the fraud claims were not pled with particularity. The court held that with respect to initially being drawn to the site, the plaintiffs failed to allege the particulars of how they were fraudulently drawn to the site. With respect to being persuaded to register and upgrade to paid memberships, the court held that these allegations were pled with particularity, since plaintiffs' allegations referenced specific messages sent by fake profiles which were not so labeled. Interestingly, plaintiffs alleged that in order to make the fake profile messages more compelling, defendants did not rely on "canned or automatic messages . . . [they employed] actual individuals who control hundreds of fictitious profiles." [Reasonable minds can disagree about the quality of the copy, but my feeling was that anyone who has ever moderated blog comments or been exposed to blog spam would be able to spot this as the same type of copy from a mile away.]
RICO: For the RICO claim, plaintiffs argued that defendants engaged in a conspiracy to commit wire fraud and access device fraud. The underlying fraud plaintiffs alleged was that defendants set up numerous entities to fraudulently obtain merchant accounts and then used these merchant accounts to process credit card payment for the websites in question.
The court does not give defendants' argument much credit here and declines to dismiss the RICO claims. I didn't check to see whether RICO claims have been successfully brought in the online context, but this seems like a way to attack a bunch of people in the chain of a transaction and drastically expand the scope of liability. A charge of conspiracy was successfully brought by the government in Kilbride, a criminal CAN-SPAM case. "Defendants Convicted in 1st Criminal CAN-SPAM Trial." There, among other things the government alleged that defendants used fictitious entities to register domain names. The court in Kilbride also relied on the use of privacy protection services to register the domain names. The RICO claims will have to be fleshed out and no one knows how they will fare, but plaintiffs' theory sounds pretty expansive.
Spam claims: Plaintiffs brought claims under California's spam statute. The court concludes that these claims are barred by the one year statute of limitations, thus avoiding the preemption question that has been plaguing California courts for some time, including in Reunion.com, another case where plaintiffs alleged they were induced to sign up (and upgrade) using unsolicited messages and allegedly bogus "friend messages." ("Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com.") Interestingly, an appeals court in California recently held that under the California statute claims for actual damages must be brought within three years of the receipt of the emails, while claims for statutory damages can only be brought one year within the receipt of the emails. The court's opinion here does not contain a discussion of whether plaintiffs sought actual or statutory damages, but if they sought actual damages, the dismissal does not jibe with the recent appeals court ruling in Hypertouch. ("CA Appeals Court: Claims Under State Spam Statute Not Preempted by CAN-SPAM - Hypertouch v. Valueclick.")
It's hard to not be judgmental about this suit. People - specifically "lonely and vulnerable men" - sign up for these random "dating" websites and then complain because a greater than anticipated number of the profiles are fake (??). I can just picture one of the plaintiffs saying: "I'm playing the odds by going on this site. I don't know what the odds are (no one does), but they were different from what you promised!" It's also hard to fault the court for deferring the underlying issue of whether the users were misled to the factfinder, but unless the plaintiffs are chosen carefully, they are not going to have an easy time credibly explaining how they were misled. In the meantime, we can take comfort that the interests of lonely and vulnerable men trolling internet dating sites for dates can be protected.
Comments by Eric: It's interesting how Venkat concludes his post, because in fact I have zero sympathy for the website (treating the allegations as true, as the court was required to do on this motion to dismiss). I'm trying to imagine a world where customers would pay substantial fees to a "dating" site where much/most of the interaction was with automated scripts. (I also couldn't get Austin Power's "fembots" out of my mind reading this case). The silly disclaimers--that the site was for "amusement" and that paying customers should expect automated interactions--clearly weren't likely to be read by anyone who actually paid money to the site. So it seems axiomatic to me that the only people who paid should have been the people who didn't get the message.
Thus, this seems like one of those cases where the fine print ("we're just going to send you canned messages if you pay us a lot of money") is designed to completely contradict the big print ("we're a dating site"). You can't do that.
This case brought to mind the old Anthony v. Yahoo case, where Yahoo allegedly retained profiles of expired/terminated members so that it looked like it had a bigger dating pool. (Yahoo ultimately settled for up to $4M). We talk about how it can be a jungle out there for single people, but oh man, at least their dating services shouldn't be lying to them. Clearly, before you starting "dating" your dating site, you need to diligence it too.
Related (coverage of a recently filed class action against Match.com over an alleged excessive number of inactive or fake profiles):
"Lawsuit Claims More Than Half Of Match.com Profiles Are Inactive Or Fake" (Joe Mullin)
"Love’s Labour’s Lost in Cyberspace" (Danielle Citron/Concurring Opinions)
January 28, 2011
Do Employers Really Tread a Minefield When Firing Employees for Facebook Gaffes?
[Post by Venkat Balasubramani]
I'm not sure why, but this Wall Street Journal article ("Can Employers Fire Over Facebook Gaffes?") screamed out for a comment. Maybe this is just a case of headline puffery, but the idea that there is some sort of legal minefield facing private employers who fire their employees over Facebook gaffes sounds silly. Most states adhere to some version of the "employment at will" rule, which means that you can fire an employee for any reason or no reason at all. Numerous exceptions have chipped away at this rule over the years, but as long as you steer clear of those exceptions, there's nothing out there as far as I know that says you can't fire an employee for a Facebook gaffe.
In any event, there hasn't been much activity in the courts over social media-related firings when it comes to private sector employees. You would think from reading the article that examples of employers stepping on legal landmines would be plentiful, but the examples from the article aren't particularly relevant. Some involve public sector employees (admittedly an area of a fair amount of litigation activity). Another example includes the Cisco in-house lawyer/blogger who butted heads with someone he called a patent troll. A third case involved restaurant employees whose semi-private page their supervisor accessed. (Claims around the allegedly improper access of employee communications by employers has been an area where there actually has been a lot of activity. See, e.g., "Pure Power Boot Camp v. Warrior Fitness Boot Camp" (granting summary judgment in favor of ex-employees based on the improper access of their emails by the employer).)
I think we will be hard pressed to see an example of a private company getting into hot water for disciplining or firing its employee over a Facebook gaffe (unless of course, there are other issues in the background). (Maybe I'm wrong, and there are a slew of cases cycling their way through the courts, but the article certainly does not cite to any.) The article does make a good point that social media allows the private and public to mix in ways that was not possible or likely before, and this could have legal consequences (e.g., an employer finds out about an employee's health condition or membership in a protected class). The article also highlights the ongoing case involving the NLRB, which argued that Facebook posts complaining about employment conditions can be "concerted activity," and the employer's social media policy in that particular case chilled or restricted this activity. (As this post in the Courant notes, settlement discussions are ongoing in that case: "Settlement Talks Underway In Facebook Firing Case." Here's a post from Molly DiBianca that tells everyone to take a deep breath on this issue: "Employers, Don’t Despair. Social-Media Policies Are Not Prohibited by the NLRA.")
Oddly, while lawyers in the Wall Street Journal's story warned about the many perils of Facebook firings, over at King 5, a civil rights lawyer made the point that you can indeed be fired for your Facebook gaffes, and this happens all the time:
Civil rights attorney Kristin Case said Busch's story is actually one that has become very common in her practice. 'In the past two years there's been an enormous boom in the number of people getting terminated for this,' she explained...'If the employer can access something it finds objectionable on an employee's page -- even if the objectionable activity is legal -- it could be grounds for firing. Case says that employees in the private world often misinterpret freedom of speech.'
(King5.com: "What you say on Twitter or Facebook could get you fired.") Maybe I'm missing something, but it seemed like the Wall Street Journal article didn't accurately capture the landscape. There are obviously issues to watch out for, but disciplining an employee for saying or doing something imprudent on Facebook didn't seem like it would be near the top of the list of employer concerns. Employment lawyers - if I'm missing something, please enlighten me! In the meantime, I'm going to chalk this up to media hype, which is typical when it comes to social media and lawyers, but amplified even more when it comes to social media and employment issues. (See, e.g., "Will Dress Codes for Workplace Avatars Soon Be the Norm?" for another recent example.) Interestingly, the public backlash over a Facebook firing may be more significant than any risk of liability. ("Waitress Is Fired for Her Complaint on Facebook: Lesson Learned for Employers?")
The article mentions policies, along with a helpful quote or two from people who draft such policies. I don't know what the best approach is here. Many policies are overwrought. Some are aspirational and simple, almost to the point of being gimmicky. Some useful thinking on this came from a blog post by David Griner: "Why your office shouldn't have a social media policy." Griner's main point is that an employer's social media policy should not aim for specificity as far as social networks, because the space is constantly changing:
[G]iving social media its own HR policy isn't cutting edge. It's short-sighted. Your company's time and energy would be far better spent developing a policy that can be universally applied to all types of digital communication — e-mails, forums posts, blog entries, tweets, status updates, etc. In my opinion, a digital policy for employees should be akin to the U.S. Constitution. It should convey the organization's overarching stance on how workers should comport themselves online. The question isn't whether your policy includes Twitter, Facebook, LinekdIn and YouTube. The question is whether your policy acknowledges that there is no longer a clear divide between the personal and the professional.
Regardless of what a policy should contain, I do think two things are useful: (1) the company should make clear what social media accounts (if any) are official accounts and (2) the company should have a designated person who should be in charge of monitoring the accounts or pages, and who regularly monitors them and deals with issues that arise.
Loosely related: "Packers Fan Fired Over Team Necktie; Will Litigation Ensue?"
Previous post on this topic: "Company Not Responsible for Harassive Comments by Coworker on Personal Facebook Page."
January 27, 2011
Top 5 Cyberlaw Developments of 2010, Plus a 2010 Year-in-Review
By Eric Goldman
Earlier this Fall, I posted my top 8 trends in Internet law, and that's a good place to start if you want to see how I think things are developing. Because of that post, this year I'm shaking up the format of my year-end recap post a little bit. We'll start with the top 5 Cyberlaw events of 2010, but then we'll move to other topics. (This is a variation of my post to InformIT on Tuesday).
Top 5 Legal Developments
#5: Google pulls out of China. China's native search engines rejoice, but is this really a win for China's long term prospects? Meanwhile, I keep hoping Google will do the same in the EU too given how much the EU regulators hate Google.
#4: COICA and the pre-enactment COICA workaround, ICE's lawless seizure of 82 supposedly pirate-oriented domain names. Showing once again that domain name censorship is irresistible to government regulators.
#3: Righthaven goes on a litigation frenzy on behalf of newspapers. Which do you think will happen first--bloggers stop discussing newspaper articles for fear of being sued, or newspapers go out of business? What's amazing is that newspapers don't realize that the first will accelerate the second.
#2: Oracle gets $1.4B+ from SAP for competitive scraping. Oracle hit a grand slam with the damages in this case, ranking highly on several all-time-largest-awards charts.
And the top cyberlaw story of the year goes to...
#1: Wikileaks. Wikileaks finally forces us to confront many of the cyberspace governance issues we were debating in 1996. I'm sad to say that our government, and many private businesses, failed the test.
Other Key Developments
* Tiffany v. eBay. The Second Circuit thumps Tiffany's pathetic arguments and gives eBay a clean bill of trademark health. However, this ruling just preserved the status quo, so for my money, the much more important secondary trademark rulings involved providing other services to alleged counterfeiters. See Gucci v. Frontline, potentially exposing credit cards and other payment service providers to secondary liability for providing payment services to alleged counterfeiters, and Roger Cleveland Golf v. Price, potentially exposing SEOs/web designers to secondary liability as well.
* Sony v. Tenenbaum. I'm still waiting to see if this case is a blip or a watershed. It has the potential to make every copyright statutory damages case into a constitutional due process inquiry.
* Legally, it was a good year for Google. Google got a favorable trademark ruling in the ECJ. Google got a decisive win in its Rosetta Stone AdWords trademark case (and, as mentioned before, the YouTube case as well). Most of the other trademark plaintiffs lost or simply gave up.
* Legally, it was a lousy year for Google. Everyone in the world seems to be considering if they can run Google's algorithms better than it can: EU antitrust regulators, French antitrust regulators, the Texas AG, private plaintiffs, the New York Times and so many more. Google got trapped in a dangerous antitrust litigation in the unfavorable venue of Ohio state court. Google Street View has been a legal train wreck world-wide. The DOJ busted up a possible hiring cartel among Silicon Valley companies, and Google almost immediately handed out 10% pay raises for everyone. Buzz was a lousy product with a horrible launch, and it led to a multi-million dollar litigation kicker.
* Perfect 10 v. Google. Google gets yet another win in this case, this time on 512(d)--one of the few cases interpreting the 512(d) safe harbor for linking to infringing content.
Notice I didn't put *any* of the Ninth Circuit Internet law jurisprudence on the list. There were plenty of interesting rulings this year: Krottner v. Starbucks, MDY v. Blizzard, Vernor v. Autodesk, DSPT v. Nahum, the Freecycle naked licensing case, Advertise.com v. AOL, Toyota v. Tabari, Visa v. JSL, CRS Recovery v. Laxton, Office Depot v. Zuccarini. However, I have lost all faith that 3 judge panel decisions by the Ninth Circuit have any binding precedential on other panels, so every case is effectively a one-off.
Less-Heralded But Nevertheless Interesting Disputes of the Year
Some under-the-radar legal disputes that I thought were more interesting than the overhyped stories:
* Barclays v. theflyonthewall. A brokerage house gets an injunction against the republication of its stock recommendations based on a hot news doctrine. The case is now on appeal to the Second Circuit. The case exposes the precarious business model of brokerage houses: they are content publishers trying to monetize via a commodity service, and brokerage house stock recommendations were exactly the kind of information John Perry Barlow explored in his 1994 Economy of Ideas article. Will the hot news doctrine prop up a doomed business model?
* Anderson v. Bell. Electronic signatures count towards the requirements for an election petition. This could launch a new era of citizen petitioning of the government.
* Snap-on v. O'Neil. A company can't scrape its own data from its outsourced vendor, seemingly authorizing the vendor to play hold-up games for companies that don't handle the contract correctly. The Eventbrite v. Cvent case provided some interesting contrast.
* Goforit v. Digimedia. A court upholds domain name wildcarding and says the TM owner/plainitff pursuing those wildcarded domain names may have engaged in reverse domain name hijacking.
* Lara Jade Coton v. TVX. The blog post title said it all: "Tip for Clean Living: Don't Use a 14 Year Old's Self-Portrait in Advertising for Porn."
Most Overhyped Stories
This year, for the first time, I'm separately breaking out a category for most overhyped stories of the year.
* Craigslist shuts down its adult services category. A toxic mix: Craigslist took a legally defensible but nevertheless obstinate position, and state AGs love to show their constituents how much they hate the Internet. When Craigslist finally gave in and shut down its adult services category (with a whining F-U), people went crazy.
* Borings get $1 for their trespassing claim. Google's Street View contractors made a mistake, drove up a private driveway, and captured what they saw. Google posted the photos until it got a complaint, then the homeowners with the odd surname ("Boring") went on a litigation frenzy. Their payoff for several years of litigation? $1. Not even enough for extra foam on a Starbucks mochachino.
* The Supreme Court's tech docket. Several fizzled out non-decisions from SCOTUS this year: Bilski, Quon, Costco. The Supreme Court is taking a steady diet of tech-related cases, but they are gun-shy about actually resolving them.
* Mark Hurd. Mark Hurd, Hewlett Packard's CEO, had an inappropriate relationship with an HP contractor/former B-list softcore porn actress and maybe fudged his expense reports. When he tried to take a job at HP's frenemy Oracle, HP got litigious, but it turns out their fur can be smoothed for a few million.
* Lost iPhone Prototype. Stop me if you've heard this joke before: an engineer walks in a bar and...loses a super-stealthy prototype of one of the most important new consumer technology launches ever...? I realize it's an uber-cool phone, but still, IT'S A PHONE, PEOPLE!
Our Snarkiest Company-Specific Posts
Occasionally, we get snarky about specific companies' practices. It's not our norm, but these posts sure do boost traffic. Companies in our crosshairs this year:
* The Problems With Google House Ads. Google's response to this post was pathetic and embarrassing.
* Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. I still use Scribd, but I have zero loyalty.
* Hypocrisy Alert?! Expedia, a "FairSearch" Member, Marginalizes American Airlines in Its Search Results. If you're going to wave the "Search Neutrality" flag, please keep it hypocrisy-free.
* Facebook pulls a rare hat trick of snark this year: Q2 2010 Quick Links Part 3 (Special Facebook Edition), Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com, Distrust in the Cloud Part #2: Facebook Blocks J.mp Links and Takes Down Lots of Status Updates in the Process. I'm officially no longer in love with Facebook. I post the exact same content to Twitter and Facebook, so please follow me at Twitter instead.
* My RapLeaf Profile is Amusingly Mistaken. This is What the Fuss is All About?. In response to an article in the Wall Street Journal's "What They Know"/privacy plaintiffs lawyers full-employment series of articles.
Most Popular Blog Posts of the Year
1) Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. Nearly 2X the traffic of #2. Putting profanity in the post title still works as a traffic booster.
2) Deleted Facebook and MySpace Posts Are Discoverable--Romano v. Steelcase (Topsy 100). I still can't figure out why this post was so popular; it just reminded us of something we already knew. See also the related but overreaching Millen v. Hummingbird Speedway.
3 & 5) #3: Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to "Twitter/TwitPic". Venkat also had an end-of-the-year hit with the #5 post, "Court Rejects Agence France-Presse's Attempt to Claim License to Haiti Earthquake Photos Through Twitter/Twitpic Terms of Service -- AFP v. Morel." Both posts were Topsy 100.
4) Viacom v. YouTube Summary Judgment Motions Highlights. Not surprisingly, the gossip about the lawsuit is way more popular than the blog post on the actual ruling.
One other post reached Topsy 100: "Ripoff Report Defeats Extortion Claim, But Plaintiffs Keep Trying--AEI v. Xcentric."
Lists of Yore
Posted by Eric at 06:56 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Licensing/Contracts , Search Engines , Trademark , Trespass to Chattels | TrackBack
January 26, 2011
Nursing School Can't Expel Students for Posting Photo to Facebook--Byrnes v. Johnson County CC
By Eric Goldman
Byrnes v. Johnson County Community College, 2011 WL 166715 (D. Kan. Jan. 19, 2011). The complaint.
You've probably already heard about this case. Four nursing students posted photos of a patient's placenta to Facebook, and the school expelled them in response. The students sued the school for reinstatement, which the court grants in this ruling.
The case turns on two key facts. First, the placenta photographs were not identifiable to the patient, even though the photos had some time-related information that could have narrowed down the possible placenta-birthing patients. This raises re-identification issues we've discussed numerous times on the blog; even if the combined facts of placenta photo + time information don't themselves identify the patient, those two pieces of data plus other datasets could lead to reidentification.
Second, the clinical supervisor knew the students were taking the photos. The students further claim they told the supervisor that they were going to post the placenta photos to Facebook, to which the supervisor allegedly responded "Oh, you girls." The court analyzes these facts by saying:
photos are taken to be viewed. When Delphia granted permission to take the photos, it was unreasonable to assume that they would not be viewed. If the photos were objectionable, to say nothing of objectionable to the point warranting expulsion from the nursing program, then it would not have mattered whether the photos were viewed on Facebook or elsewhere. By giving the students permission to take the photos, which Delphia admitted, it was reasonable to anticipate that the photos would be shown to others.
It's a little hard to parse this statement. The court could be saying that it really believes the supervisor expressly or implicitly approved the Facebook publications by saying "oh, you girls." Or, the court could be saying that even if the supervisor never knew about the students' intent to post on Facebook, the supervisor should have assumed that the photos would be seen by a larger audience at the time the supervisor approved/acquiesced to the taking of the photos. This latter interpretation isn't very comforting. Many photos are never published to the public. For example, the students could have taken the photos for archival purposes or for further self-study. So I'd like to think the court wasn't saying that consent to photo-taking automatically means consent to widespread publication of that photo.
This case reminded me a lot of Yoder v. University of Louisville. That case similarly involved a nursing school's expulsion of a nursing student in response to a social media publication. In the Yoder case, the nursing student's publication was much more troubling in that it said possibly mean things about patients. Nevertheless, both cases involve: (1) nursing students perhaps showing insufficient sensitivity towards patients' interests, and (2) nursing school overreactions to student participation on social media. I wonder if something funky is going on in the nursing school community or if these cases are just coincidences.
January 25, 2011
Ad Networks Ordered to Drop Allegedly Infringing Site--Elsevier v. eNom
By Eric Goldman
On the surface, this seems like a run-of-the-mill copyright enforcement. The plaintiffs Elsevier and John Wiley publish textbooks on pharmaceuticals and related topics. The website at issue, Pharmatext.org, allegedly republishes those copyrighted textbooks for free via an ad-supported website. If these were the only key facts, the publishers should be able to shut down the rogue site easily.
However, I think this is a pretty complicated case that isn't getting the nuanced legal analysis it requires. There are at least three major complexities to the case:
1) Pharmatext.org is now offline, but when I reviewed it in Google's cache, it looked like a linking site. In other words, the site itself wasn't hosting the allegedly infringing downloads but just linking to URLs where they were available. I didn't see anything in the complaint that connected the operators of Pharmatext to the uploads of the copyrighted material on third party servers.
Thus, this case could be about a website's liability for linking to infringing content. We might still conclude that Pharmatext is infringing, but we'd need to reach that through a secondary liability analysis, not a direct liability analysis. Of course none of this is mentioned in the materials I saw. The complaint does not clarify who is the direct infringer because those paragraphs are in the passive voice--is it the uploader, the individuals who download, or Pharmatext for unspecified activities that it did?
2) Pharmatext.com is owned by eNom as a privacy proxy (under its Whois Privacy Protection Service, the captioned defendant). I've previously blogged about domain name privacy proxies before and the legal troubles they are encountering (see my post on Solid Host v. NameCheap). The publishers sue WPPS for vicarious copyright infringement, alleging "it controls the domain name pharmatext.org and receives a direct financial benefit for doing so."
Hold on a sec. This is a really dense statement that requires unpacking. WPPS is the domain name registrant on behalf of an undisclosed principal. It does not "control" the domain name. Even if it did, the normal test for vicarious infringement requires the "right and ability to supervise the infringing activities." How does a privacy proxy do that? It controls the domain name, not the associated servers. See the old 9th Circuit ruling in Lockheed v. NSI. And typically vicarious infringement requires a direct financial benefit from the infringement. Sure, as a service provider, the privacy proxy gets paid by the website operator--but the payment amounts don't vary with the amount of infringement. This is like saying the electric company gets paid by an alleged infringer to supply power to the infringing website. Yes, the electric company gets paid, but no, that's not direct financial benefit from the infringement. (Ironically, in fact increased infringing activity might boost the amount of electrical consumption, so the electric company is more likely to profit from infringement than a privacy proxy.)
Finally, recall that I believe Pharmatext is a linking site that isn't the direct infringer. So WPPS is a distant service provider to a possible secondary infringer. Tertiary liability, anyone?
The court's response? It orders WPPS to disable the domain name, fork over the principal's identity, and freeze any transfer of the domain name.
I am extremely bearish on the future of domain name privacy proxy services. It seems inevitable that IP plaintiffs are going to drive that particular service offering into the ground with their litigation.
3) The publishers also sued two ad networks, Chitika and Clicksor, for contributory copyright infringement. The supporting allegations? The ad networks directly profit from the infringement and provide the funds to enable Pharmatext.com to continue its existence.
Traditionally, contributory copyright infringement requires knowledge of the infringing activity and a substantial contribution to the infringing activity. I didn't see any allegations of knowledge by the ad networks at all--no assertions that the ad networks had figured out that Pharmatext,org was a rogue website, and no assertions that the copyright owners sent a C&D or takedown notice. (I don't think the ad networks qualify for a 512 safe harbor because of the way those safe harbors are worded; but a C&D/takedown notice would still help the publishers in arguing that the ad networks knew it was a rogue website). The ad networks' only "contribution" to the infringement is the payment of money to the site, and this was expressly rejected as sufficient for liability in Perfect 10 v. Visa, which concluded that even if the payment system stopped the flow of money, it would not automatically stop the website and any associated infringement on it.
Further, if Pharmatext was a contributory infringer for linking to infringement, this means the ad networks would be contributing to a contributory infringer--another tertiary liability argument.
The court's response: it ordered the ad networks not to pay any money to Pharmatext and to drop them as customers.
From the PACER report, it appears that the defendants haven't contested the publishers' claims. I hope that will change. This is a case where the publishers have clearly overreached, and if the judge won't call them on it himself, we need the adversarial system to expose the major gaps in the publishers' logic.
Meanwhile, this case illustrates two broad themes. First, it illustrates how plaintiffs are going after an array of supporting service providers to make them responsible for their customers' activities. On the trademark front in the past 12 months, see, e.g., Louis Vuitton v. Akanoc (web hosts), Gucci v. Frontline (payment service providers), Roger Cleveland v. Price (web designers/SEO), Microsoft v. Shah (software vendors that assist website development). Plaintiffs are reading secondary liability doctrines very, very broadly, and courts aren't always slamming down those arguments as emphatically as they should.
Second, several other lawsuits have tried to nail ad networks for providing advertising support to infringing sites. As another example (also in the trademark realm), see the Vulcan Golf v. Google lawsuit. The only successful case that I can recall involves Triton Media, a ruling that was so skewed by its facts that I didn't think it was worth a full blog post. Wendy Davis discusses the comparison more.
If this lawsuit ends with the current injunction, I'll consider this ruling an interesting oddity. Any further developments in this case warrant careful scrutiny.
January 24, 2011
Second Life Gets Out of Dispute Between Virtual Bunnies & Virtual Horses
By Eric Goldman
Amaretto Ranch Breedables v. Ozimals, 3:10-cv-05696-CRB (N.D. Cal.). The Justia page. The case library:
* Linden Lab's opposition to the preliminary injunction
* Ozimals' non-opposition to the preliminary injunction
* Amaretto's preliminary injunction motion
* The preliminary injunction
* The TRO against Linden Labs/Second Life
* The complaint with exhibits.
* Ozimals' C&D to Amaretto and its blogged statement on the case.
This case involves an IP dispute between virtual bunnies and virtual horses in Second Life. My previous blog post. The bunnies assert that the horses copy too much of the bunnies, so the virtual bunnies sent two DMCA takedown notices to Second Life. In a relatively rare move, the horses sued under 512(f) to enjoin further takedown notices, but in a bizarre twist, the court ordered Second Life--not a party to the lawsuit--from taking down the horses. The court's order raised both procedural and substantive issues: procedurally, how the court could enjoin a non-litigant, and substantively, how the court could restrict Second Life's editorial discretion.
Everything has turned out OK for Second Life. The bunnies acquiesced to the horses' requested injunction against sending more DMCA takedown notices to Second Life. The horses didn't directly back off of their interest in handcuffing Second Life, but the court granted an injunction that only applies to Ozimals' sending of takedown notices and makes no reference to restrictions on Second Life.
Although this ends the most interesting angle of the dispute, the bunnies vs. horses dispute remains pretty interesting on its own. Normally, I would expect a dispute like that to get resolved quickly. I'm a little baffled how the revenue streams from these virtual animals can profitably support full-scale litigation warfare. Unfortunately, the parties seem to be going down that path.
January 23, 2011
Ex-Employees Awarded $4,000 for Email Snooping by Employer -- Pure Power Boot Camp v. Warrior Fitness Boot Camp
[Post by Venkat Balasubramani]
Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 08-civ-4810 (S.D.N.Y.; Dec. 22, 2010)
Email snooping and computer fraud statutes (Stored Communications Act; Computer Fraud and Abuse Act) are starting to play a starring role in litigation between departing employees and their former bosses. Plaintiffs asserting claims under these statutes often press tenuous claims, with evidence for damages that are weak at best. There are often unclean hands all around, and the disputes end up just being messy.
One such dispute is Pure Power Boot Camp v. Warrior Fitness Boot Camp. As the court describes it, Lauren Brenner, the owner of Pure Power hired Alex Fell and Ruben Belliard to work as "drill instructors" at her gym (which was "designed to replicate as closely as possible the experience of training at a military boot camp"). Fell was fired and Belliard quit, but before they left, they made plans to open a competing fitness facility in town. Fell and Belliard alleged that after they left, Brenner, or someone on her behalf, accessed and printed emails from Fell's Hotmail, Gmail, and Warrior Fitness Boot Camp accounts. The emails yielded a bounty of information about Fell's and Belliard's efforts while still at Pure Power to open a competing gym. Brenner denied that she ever accessed the emails or directed anyone to, and in any event, alleged that the emails were accessible because Fell left his username and password stored in Pure Power's computers.
The lawsuit had numerous procedural twists and turns. Brenner and her company sued in state court to enforce a non-compete after gathering the email evidence. The state court determined that the non-compete was unenforceable, and allowed Fell and Belliard to open their competing fitness center. (This was probably a good time to consider settling the dispute and not sinking more resources into it.) Fell and Belliard then removed the lawsuit to federal court and asserted claims based on Brenner's improper access of the emails. Fell and Belliard also sought a preclusion order, prohibiting Brenner from using any of the improperly obtained emails in the proceeding. The court agreed with defendants and issued an order requiring Brenner to return all emails or materials obtained "outside normal discovery procedures." The court also precludes Brenner from using any of those emails in the underlying lawsuit. In that order, the court found that the access of the emails violated the Stored Communications Act, but did not violate the ECPA. Defendants brought a motion for summary judgment on their SCA and ECPA claims.
Stored Communications Act Claims: With respect to the Stored Communications Act claim, the court held that the court's earlier preclusion order established the law of the case that the access of the accounts violated the SCA. Both sides tried to argue as to whether the preclusion order conclusively established Brenner's personal liability, but the court left that issue for another day, finding that there was a factual dispute as to whether Brenner herself accessed the emails or directed someone else to do go. However, interestingly, the court held that defendants failed to show any actual damages for the Stored Communications Act violations. Brenner argued (citing to Van Alstyne v. Elect Scritporium) that in the absence of actual damages, defendants could not recover any damages at all, but the court rejects this, finding that regardless of whether defendants put forth any evidence of actual damages, they are entitled to statutory damages. (See Tom O'Toole's blog post on Van Alstyne.)
However, the victory turns out to be a pyhrric one for defendants (on the damages front), as the court holds that defendants are only entitled to damages per instances of access (and not per email) and awards defendants the disappointing amount of $4,000. The court noted mixed authority on the issue of whether damages were appropriately awarded per email accessed or based on each instance of unauthorized access. Ultimately, the court noted that there was no evidence as to how many times the email facilities were accessed during a relatively short time period that was at issue (nine days), and the court aggregated the intrusions with respect to each individual account. The court also defers ruling on defendants' request for fees and punitive damages, finding that those questions were better suited for the jury.
ECPA Claims: The ECPA provides a civil cause of action against those who "intercept" electronic communications. The court rejects defendants' claims under the ECPA on the basis that the messages were accessed after they were delivered to defendants' accounts. The court had rejected defendants claims in its ruling on the preclusion order, and apart from arguing that the time period between delivery and access by plaintiff was "shorter than defendants had initially believed," defendants did not offer any new evidence that the interception occurred before delivery (or contemporaneous with delivery).
I'm not sure what to make of this case, except to say that unless there's a policy in place that clearly authorizes email monitoring, it's a minefield to access someone else's email, whether that's in the employment context or in the family law/divorce context.
Even when there's a policy in place, there's some risk that the policy may not clearly express consent for monitoring, as was almost the case in another email snooping case from Illinois. (See Shefts v. Petrakis, 10-cv-1104 (C.D. Ill.; Dec. 9, 2010).) In Petrakis, there was a policy which said that the company would monitor emails, but there was some dispute as to whether it applied to plaintiff, who was a director and shareholder, rather than an employee. There was also conflicting language in the policy that said that employees would not monitor one another's email absent express board approval. Although the employee who brought the ECPA and SCA claims made a valiant attempt to inject ambiguity into the language of the policy, the court ultimately saw things the employer's way.
You would potentially expect some sympathy from the court since in many of these cases, the monitoring results in the employer getting access to highly relevant evidence that often points to misconduct or a breach of policy (or a contractual duty) on the part of the employee, but this does not seem to be the case. Here I guess the court expressed some sympathy in the form of the small damage award given to the employees, but the employer took an even bigger hit - the court's previous order precluded the employer from using this evidence. When you consider that the information the employer accessed was information that could have been obtained through discovery (from the ex-employees), the decision to access the emails here turned out to be pretty costly.
January 22, 2011
Internet-Proofing your Cease and Desist Letter [Revisited]
[Post by Venkat Balasubramani]
I blogged some time ago about steps you can take to "'Internet-Proof' Your Cease and Desist Letter." Here's what happens when you don't.
The law firm Lazar, Akiva & Yagoubzadeh sent a cease and desist letter to Boing Boing. When you send a letter to someone like Boing Boing, they are going to post it . . . so if you send one, you should make sure it's clean and defensible (and relatively reasonable). Apparently, this particular one was not, and Boing Boing posted the letter. (See "Stupid legal threat of the young century.") Boing Boing also said it was one of the worst letters they had received (and it seems like they receive a lot of cease and desist letters):
Boing Boing has been on the receiving end of one or two stupid legal threats in our day but this one from the firm of Lazar, Akiva & Yagoubzadeh takes the cake, the little cake topper, the frosting and all the candles, as well as the box and the cake-stand and the ornamental forks.
In response, the company on whose behalf the letter was sent walked back the allegations in the letter. It also publicly severed its relationship with the law firm who sent the letter. ("K-12 tutoring company fires law firm over blog spat") (California Watch) (via Volokh)
Internet justice in action! Boing Boing didn't even have to have its lawyers write a response back. They simply posted the letter, and things took care of themselves.
thedirty.com's 47 USC 230 Defense Rejected on Motion to Dismiss--Jones v. Dirty World Entertainment
By Eric Goldman
On occasion I've ended up at thedirty.com. It's not my kind of site, but clearly I'm not the target audience. Given its stock-in-trade in trashing people, I'm a little surprised we don't have more lawsuits relating to it.
The plaintiff in this case is Sarah Jones, a Kentucky school teacher and Cincinnati Bengals cheerleader. Jones was featured in two user-submitted posts on thedirty.com, both of them saying not-nice-if-untrue things about Jones. Based on what I saw in this ruling, thedirty.com's editorial contribution beyond the user-submitted content appears to be minimal and probably legally inconsequential.
This lawsuit has an odd history. The plaintiff initially incorrectly sued thedirt.com (instead of thedirty.com) and got a large ($11M) but uncollectible default judgment. See the Politico coverage. Whoops. I still think the plaintiff is suing the wrong defendant due to 47 USC 230, but at least now the plaintiff is targeting the correct website.
This week's ruling mostly denied thedirty.com's motion to dismiss for lack of jurisdiction. As with most Internet jurisdiction rulings, it's not all that interesting. In addition, the court touches on the 47 USC 230 motion to dismiss. The court's entire discussion on that point:
Dirty World, LLC relies on the Communications Decency Act (CDA) of 1996, 47 U.S.C. § 230(c), for the proposition that postings on its web site are privileged.
As stated above, the court cannot consider a possible defense under this Act on the personal jurisdiction issue. Therefore, this branch of defendant’s motion to dismiss will be treated as a motion for summary judgment. The motion is not supported by any affidavits or other materials suitable for summary judgment motions. Plaintiff has orally moved for a period of discovery to respond to the motion. In the opinion of the court, this motion is well-taken and will be granted.
The immunity afforded by the CDA is not absolute and may be forfeited if the site owner invites the posting of illegal materials or makes actionable postings itself. See Fair Housing Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008)(en banc).
Defendant’s counsel properly admitted at oral argument that discovery was necessary to resolve this motion.
This appears to be a Roommates.com-attributable loss, because the court says that the Rooommates.com standard forces the defendant to participate in discovery. However, this loss could reflect thedirty.com's specific "value" proposition. In contrast, with many other websites, plaintiffs will not be able to make a colorable argument that the site invites illegal user submissions.
January 21, 2011
The Next Digital Decade Book Launch and Event Recap
By Eric Goldman
I’m pleased to call your attention to a new book called “The Next Digital Decade: Essays on the Future of the Internet,” edited by Berin Szoka and Adam Marcus of TechFreedom. This is a truly remarkable book. It contains 31 essays on various Internet law topics from some of the brightest and most provocative thinkers on Internet law topics. Please note that I have some self-interest in praising the book because I contributed 3 of the 31 essays, but I would be fawning over this book even if none of my essays were included. It’s that good.
What makes this book so special is that *every* essay I’ve read is top-notch. In contrast, in many essay collection books, the essays are spotty—some great, some clearly inferior. Berin and Adam did a fantastic job curating the collection. They also did a nice job tying the essays together into coherent chunks.
In future blog posts, I will have more to say about some of the essays, including my chapter on Regulating Reputation as well as James Grimmelmann’s outstanding chapter on search “neutrality.” I have more to say on the search engine bias topic as well in a short essay that I intended to include in the book but didn’t get done in time.
As part of a book launch, earlier this week TechFreedom put together a symposium where book authors and other special friends discussed some of the themes in the book. Although the audience was well-stocked with techno-libertarians, the panels themselves were mostly nicely balanced, which led to a really great conversation. The remainder of this post reflects my notes from the day, which as usual are a blend of verbatim statements and my impressions of the speakers’ remarks.
Panel 1: Internet Optimism, Pessimism and Future of Online Culture
Berin Szoka, TechFreedom (Moderator)
Andrew Keen, author of Cult of the Amateur
Adam Thierer, Mercatus Center
Prof. Ann Bartow, South Carolina School of Law
[Note: Jonathan Zittrain was supposed to participate but he was a last-minute scratch. That left a hole on the panel, as the panelists had prepared to discuss Jonathan’s work. So the panel ended up talking a lot about—and mostly criticizing—Zittrain’s work without Zittrain around to defend himself!]
Thierer: Two schools of Internet pessimism:
(1) people without much hope that Internet will improve society. They feel the good old days were better.
(2) people who are technology enthusiasts but are pessimistic about the future of technology. For example, Zittrain’s view of threats to generativity and Lessig’s view that code as law leads to perfect regulation. They feel we’re at the cusp of a dark age of openness.
Pasquale: Takes a “progressive” approach to Internet studies. Issues on his mind:
(1) Leading Internet powers are like utilities. We should be fearful of monopolies.
(2) Fusion between government and corporate sectors.
(3) Internet is accelerating inequality. Ex: Zittrain’s ubiquitous human computing.
Bartow: More women used to write about cyberlaw in the 1990s than now. Regarding Zittrain’s Future of the Internet, the Internet doesn’t need to be either open or closed; it could be somewhere in-between. She also noted that there’s not much “law” in Zittrain’s “cyberlaw.” He assumes technologists will lead the way. In typical Ann fashion, she provided a bonus tip: avoid doing a search on “lickety split” if you don’t want porn.
Keen: [Eric’s note: I had never seen Keen’s shtick first hand, and it was exactly what I anticipated: provocative statements mixed with out-and-out gratuitous trolling. I personally do not respond well to trolls, so I found his remarks mostly a massive turnoff, despite a few interesting nuggets interspersed here and then.
As part of his trolling, he started off with a series of gratuitous insults targeted at many of the other participants and audience members. In my world, it’s really not nice to deliberately insult a big chunk of your audience before you even get to your substantive points.]
He doesn’t understand what the law has to do with the Internet. Law professors have seized control over the debate. Law professors are paid by law schools to churn out articles that have no market value. In contrast, Keen is a paid author and therefore guided by market forces.
Keen wants to defend a professional creative class. He is interested in failure of new media to provide an economic environment to pay the creative class. (1) Curse of piracy. Some people take pleasure in demise of old media. (2) Internet as content monetization system. Keen is skeptical of Web 2.0.
[Two more observations about Keen’s trolling. First, I don’t necessarily care about preserving a “professional creative class.” I care about creative outputs and less about protecting one traditional way we get them. I wonder if we can get most or all of our socially desired outputs if we abolished the professional creative class completely. Second, I understand some people are elitist, but most of the time, they try to hide their elitism. In contrast, Keen was unapologetically elitist. This deliberately set up an unnecessarily divisive “us-vs.-them” dynamic that people usually try to avoid in polite society. Personally, I think we’ll get a lot farther looking for ways to work together rather than creating a class warfare dynamic. Then again, I’m a mere law professor paid by my law school to churn out worthless junk, so what do I know?]
Thierer: Keen is skeptical about the technological transition. Thierer’s response: “humans adapt.” In a multi-iteration game, players will change from iteration to iteration. Ex: AOL dominated the 1990s and look at them now.
If Keen is right, what do we want to do about it? We need to cope with the changes, not fight it. Pessimists: too quick to jump on current event catastrophes, without giving a chance for coping mechanisms to evolve. When things are darkest, biggest incentives to entrepreneurs. [The conversation took an odd turn when Frank said Thierer had ironically invoked Karl Marx, who had argue that we shouldn’t try to make things better for workers so they will have an increased willingness to revolt. I’m not sure who was more insulting: Keen trashing law professors or Pasquale calling Thierer a Marxist! But unlike Keen’s insults, I know Frank was just having fun with Thierer.]
Pasquale: we need more transparency about business practices to help government enforcers do their jobs better.
Bartow: Industry evolution cuts both ways. She gave two examples: (1) her local paper dropped coverage of the university when the paper went online and got the statistics showing the level of interest in those stories. (2) anti-virus software vendors need the continued release of new viruses to support their business model.
Thierer: compare where we are today to the past. In the past, we had information scarcity. Information overload is a much better problem to have.
Bartow: puzzled by Zittrain’s criticism of Onstar because it tracks folks when that’s the entire point of the service. Tradeoffs between tracking devices and the benefits of geolocation. A concern: technologists may not reflect women’s concerns given their backgrounds.
Szoka: Zittrain thinks everyone should want to tinker with technology, but some folks don’t want to tinker.
DelBianco: consumers are frustrated with the real problems with the Internet (crime, fraud, etc.). Governments are desperate for relevancy, so they may seize that opportunity to insert themselves into the process.
Keen: “I just have to respond to this libertarian stuff”: Zittrain’s book hasn’t been read outside of law schools. In the past, major historical events have required government management of the transition.
Pasquale: Europe is becoming the de facto regulator. If we don’t take the lead, they will fill the vacuum.
Q: Silicon Valley venture capitalists try to hit home runs by funding the new displacement technologies.
Szoka: business cycles are becoming shorter. Winners last for shorter times. Digital markets aren’t like Adam Smith’s perfect competition; but dominant players may be easier to oust today, so we might be willing to accept monopolies in the short term while new disruptive technologies are emerging that will organically trump the monopolist.
Panel 2: Internet Exceptionalism & Intermediary Deputization
Adam Thierer, Mercatus Center (Moderator)
Prof. Eric Goldman, Santa Clara School of Law
Prof. H. Brian Holland, Texas Wesleyan School of Law
Prof. Mark MacCarthy, Georgetown University
Prof. Frank Pasquale, Seton Hall Law School
Me: two noteworthy dynamics (1) different types of Internet exceptionalism are proliferating, and (2) 230 liability umbrella allows for UGC experimentation like we’ve never seen before.
Holland: 230’s exceptionalism isn’t about absence of social norms. 230 enables the creation of social norms independent of legal norms. 230 sets initial condition (by mitigating legal norms, such as tort norms) and allows experimentation with new norms. Ex: Web 2.0 communities have, through contract and code, the ability to enforce their norms (we don’t just need government as only norms enforcer). Because Wikipedia isn’t forced by law to enforce, its users develop their own norms.
MacCarthy: Payment intermediaries have taken steps to police their networks. Ex: gambling, pharmaceuticals, child porn, tobacco, copyright infringement. These efforts were largely independent on legal regime in the 1990s—he thinks the payment systems didn’t qualify for First Amendment, 230, 512. Law enforcement thus reached out to payment intermediaries. He thinks this was a success. But on cost-benefit basis, it may not be worth regulating intermediaries. Plus, intermediaries have gotten the message and are voluntarily assuming responsibility. However, in the Wikileaks case, the intermediaries may have overreached.
Goldfoot: The Internet is a physical medium, and the online activities have offline payoffs. He favor a secondary liability regime similar to the secondary doctrines in copyright and patents.
Pasquale: We may need different rules for different niches in the Internet industry. Maybe it’s better to have only a couple of intermediaries, but we can trust them. If we get de facto monopolists, let’s call them a utility and embrace them accordingly.
Government agencies have difficulty getting the required expertise to understand and regulate industry. He favors bringing in expertise to the agencies. He praised the FTC for doing that with Christopher Soghoian and Ed Felten.
MacCarthy: the Internet is concentrating at every level due to network effects. So Frank’s consolidation is happening naturally. Combine with intermediaries’ willingness to police users, and we get back to media consolidation we saw with broadcasters and newspapers. So what do we do about private censorship? We’re not going to go back to FCC controls of media consolidation.
Goldman: I dispute the empirical assumption in MacCarthy’s claim of consolidation. Regarding Pasquale, I don’t trust either the government or its oversight.
Holland: More worried about Facebook than Google. Need data portability.
Pasquale: JuicyCampus/cyber-cesspools. He prefers users migrate to Facebook, which has rules, than at cesspools. [Eric’s comment: Really? I have a hard time encouraging anyone to use Facebook. See Q2 2010 Quick Links Part 3 (Special Facebook Edition), Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com, Distrust in the Cloud Part #2: Facebook Blocks J.mp Links and Takes Down Lots of Status Updates in the Process]
Goldman: government embrace of leading industry players may sterilize competition/innovation. With Facebook, if we lock it in as a government-monitored “utility,” will we prevent its displacer from emerging? Also, WRT JuicyCampus and People’s Dirt, the marketplace worked just fine—they both got drummed out.
MacCarthy: there are small numbers of gatekeepers at each level. Media world is always a concentrated market. How do we deal with their consolidated power?
Alex Howard from audience challenging MacCarthy: Top 10 blogs aren’t old line media (ex: Huffington Post, Mashable, Engadget, TechCrunch). Indeed, old line media are syndicating these new media players.
Goldman: even if mass-market topics consolidate on the Internet, the conversations in sub-communities are way more interesting and not consolidated at all.
Holland: small audiences are OK.
Goldfoot: should consider secondary liability on tort-by-tort basis, not blanket basis.
Milton Mueller: 230 establishes rules that enhance freedom. Contrast: utility.
Pasquale: competition/innovation isn’t our own goal. Let’s not forget that the public sector done some good things.
Braden Cox: why not extend 230 to offline world?
Goldman: I will argue for that at our 47 USC 230 conference on March 4.
Goldfoot: secondary liability has its role, such as in products liability, but maybe we could reduce liability for defamation because no one sues on those torts.
DelBianco: COICA goes after ad networks.
Goldman: If you’re going to regulate the payment systems, you have to regulate the ad networks too. Unfortunately, there is ongoing pressure to put a range of service providers to websites on the hook. We’re seeing lots of activity in this area in IP arena, but not in areas covered by 230.
Goldfoot: to be responsible, intermediaries must know what’s going and must be able to stop it.
David Johnson: Internet as global network. What entity is doing the deputization?
Goldfoot: international users delegate the power to the companies they use. Russian citizen accepts US law by using Facebook.
Jonathan Allen: does FCC net neutrality rules affect other Internet players?
Goldman: I’m seeing a quest to impose neutrality at every layer of telecom stack.
Panel 3: Who Will Govern the Net in 2020?
Berin Szoka, TechFreedom (Moderator)
Prof. David Johnson, New York Law School
Prof. Milton Mueller, Syracuse University
Shane Tews, VeriSign
Chris Wolf, Hogan Lovells
This panel did not quite come together as the event organizers probably expected. David Johnson started out by describing himself as an “optimistic exceptionalist communitarian,” and it progressively got more esoteric from there. Part of the problem is that David J. and Milton enthusiastically agreed with each other, and the other two panelists didn’t really challenge them very much. Lovefests are fine but tend to make for less interesting panels.
The topics mostly addressed Internet transnational regulation and Internet community self-regulation. From my perspective, this conversation didn’t really seem that much different from a conversation we might have had a dozen years ago.
Chat with FCC Commissioner Robert McDowell
Moderated by Declan McCullagh.
Declan: why aren’t FCC Net Neutrality rules yet published in Federal Register?
McD: might be buried in bowels of the government
Declan: did FCC step in due to Congressional vacuum?
McD: we didn’t have the authority to step in
Declan: where can government facilitate technological innovation?
McD: tax policy—Ex: extend R&D credit. Get government out of the way.
Declan: Comcast/Level 3 dispute. Should FCC in peering disputes?
McD: FCC may not have jurisdiction, it shouldn’t be involved. Peering relationships have been working out fine. If there’s an antitrust problem, it should be reviewed by antitrust authorities.
McD: Comcast consented to the net neutrality order because they were before regulatory agency.
Declan: will FCC authority wither away as more data moves to packet-switching?
McD: the Internet has shrunk the universal service pool, but we shouldn’t worry about fund shrinkage. As technology and consumer practices evolve, what is FCC’s role? Spectrum scarcity may be technologically mooted someday and undercut the rationale for FCC regulation, but this is long term.
Declan: should we be optimistic about next decade?
McD: Yes. We’re just entering golden age of wireless. But I worry about what government might do. Government is a blunt regulatory instrument.
Declan: predictions on Congress and Net Neutrality?
McD: No. I do what Congress wants. Congress could introduce legislation.
Declan: who will file first lawsuit over Net Neutrality?
McD: someone unhappy with the order! [the next day, Verizon sued in the DC Circuit]. He thinks FCC order will fail in courts.
Politico: which condition in Comcast/NBC merger are you most unhappy about?
McD: net neutrality condition. It makes one marketplace player live by the rule even if the rule is overturned; that’s misguided public policy.
Andrew Keen: there seems to be consensus that some compromise on net neutrality was needed.
McD: what was broken that the government needed to fix? Answer: nothing. The few examples of net neutrality problems all were fixed by existing law. Plus, there could be a chain reaction internationally. Are we inviting the other countries to impose their view of what’s reasonable regulation for the Internet? Plus, marketplace will be unsettled during litigation.
Thierer: FCC isn’t very transparent about releasing information.
McD: direct that comment to the chairman, who controls the process.
Mueller: Canada has done some net neutrality work. Good example?
McD: we know about it. Like us, the EU didn’t regulate net neutrality either. Most common request we get at the FCC: please regulate my rivals.
Q: hasn’t congress told the FCC to think in a stovepipe way?
McD: Yes, but statute should be modernized over time.
January 20, 2011
CA Appeals Court: Claims Under State Spam Statute Not Preempted by CAN-SPAM - Hypertouch v. Valueclick
[Post by Venkat Balasubramani with some comments from Eric]
Hypertouch, Inc. v. Valueclick, Inc., et al., B218603 (Cal. Ct. App.; Jan. 18, 2011)
A California appeals court weighed in on a long-running debate: whether CAN-SPAM preempts California's spam statute. This is a significant decision that covers a lot of ground (I think it mentions just about every major spam case), and it is sure to be appealed.
Background: Two of the seminal anti-anti-spam cases were Mummagraphics and Virtumundo. Mummagraphics said that CAN-SPAM is intended to cover material misstatements in emails and preempted contrary state laws (to the extent they imposed liability for immaterial misstatements). Virtumundo said that only legitimate ISPs that have suffered actual harm can sue under CAN-SPAM. In Virtumundo, the Ninth Circuit also rejected the plaintiff's claims under Washington's email statute. The plaintiff in Virtumundo was pushing the envelope, and it was unclear as to whether the Ninth Circuit's rejection of his state law claims was restricted to the plaintiff's fanciful claims which clearly stretched the scope of Washington's spam statute to the breaking point. Mummagraphics and Virtumundo were from the Fourth and Ninth Circuit respectively, and they left open the question of how other state spam statutes would fare, including California's, which is one of the most expansive (and important). Lower federal courts courts struggled with applying Virtumundo and Mummagraphics to the preemption question in California, and decisions were all over the place. Some courts held that CAN-SPAM's savings clause only saves state statutes that sound in traditional fraud, and since California's spam statute didn't require proof of reliance and damages, it did not fall into this category and was preempted. (Here's my April 2010 post on Hoang v. Reunion.com, a case that struggled with the preemption question: "Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com.")
Factual Background: Hypertouch brought claims against Valueclick, various Valueclick subsidiaries, and PrimaryAds for violating section 17529.5 (California's spam statute). As the court describes it, Hypertouch is a small provider of email service to about 100 customers. Valueclick provides online marketing services to:
third-party advertisers who promote retail products. . . . Valueclick contracts with these third-party advertisers to place promotional offers on websites that are owned and operated by various Valueclick entities. Consumers, in turn, can visit Valueclick's websites and earn rewards in exchange for participating in the advertised promotional offers.
Valueclick contracts affiliates who "drive traffic" through methods chosen by the affiliates in their discretion. Valueclick provides the affiliates the creatives for a promotion, and the affiliates promote as they see fit (in many cases hiring sub-affiliates to effect the promotions). Valueclick alleged that it had no "knowledge of, or control over, the email delivery methods or header information used by [affiliates] or their sub-affiliates." [This is a risky admission!] PrimaryAds looks like it's similar to Valueclick - PrimaryAds operates a website which contains third party offers. PrimaryAds contracts with affiliates who download materials from PrimaryAds' website, engage in promotions (which are tracked by PrimaryAds). PrimaryAds requires its affiliates to sign agreements stating that the affiliates will comply with all laws, including anti-spam laws, in carrying out their promotion activities. PrimaryAds also alleged that it had "no control over the email delivery methods used by affiliates."
Hypertouch argued that Valueclick and PrimaryAds were advertised via emails that violated California spam statute in three ways: (1) the emails contained deceptive header information (because the from and to fields did not accurately reflect the sender or recipient); (2) the subject lines were likely to mislead recipients into thinking they would receive free stuff; and (3) the emails used third party domain names without the third party's permission. The trial court granted defendants' motion for summary judgment. The trial court held that defendants could only be held liable for emails they sent or caused to be sent (which cut out a chunk of the emails in question). The trial court also found that CAN-SPAM preempted state spam statutes which regulated misleading emails, unless the statutes covered "common law fraud or deceit." Since the claims did not cover the elements of common law fraud, they were preempted. Significantly, the court awarded defendants $100,000 in costs.
The appeals court's decision: The court reversed and ruled for Hypertouch, with an order that dramatically expands the reach of potential liability for products or companies that are advertised via email (regardless of whether they send the email). It's a blockbuster ruling for the anti-spam community.
Preemption: CAN-SPAM's preemption provision states that it preempts state statutes that regulate the use of commercial email "except to the extent that any such statute prohibits falsity or deception in any portion of a commercial email." The court acknowledges that CAN-SPAM's preemption was intended to accomplish a uniform standard for email regulation (to avoid requiring compliance with a "patchwork" of laws). The court also cites to a Senate Report that says that states laws prohibiting things like "fraudulent or deceptive headers, subject lines, or content" should not be preempted "because they target behavior that a legitimate business trying to comply with relevant laws would not be engaging in anyway."
The court disagrees with the trial court's conclusion on preemption and provides two main reasons, along with a lengthy discussion (and canvassing of the case law): (1) the language of the preemption clause does not support a finding of preemption; (2) allowing state law claims that reach misleading but not fraudulent emails would not undermine a national standard.
Hypertouch's claims survive summary judgment: Defendants argued that Hypertouch failed to put forth evidence that defendants either sent the emails or "knew" they were being sent by an affiliate in a misleading manner. The court responds that:
the plain text of 17529.5 indicates that its application is not limited to entities that 'send' the offending emails nor does it require plaintiff to establish that defendant had knowledge of such emails. Rather, the statute imposes liability on any 'person or entity' that 'advertises' in an email containing any of the forms of deceptive content described in section 17529.5 [(a)(1)-(3)].
Do the emails Violate the Statute?: Although plaintiffs asserted that the emails at issue violated three different prongs of section 17529.5, the court doesn't discuss the other two prongs, and merely focuses on the subject line prong. Section (a)(3) is the no misleading subject line prong, and the court finds that the following representative subject lines potentially violate the statute:
Get a FREE Golf Retreat to 1 of 10 destinations;
Let us know your opinion and win a free gift card;
Do you think Hillary will win? Participate now for a Visa card
In support of its summary judgment burden, Hypertouch put forth the testimony of its president (?) who says that he clicked on links in these emails and found out that in order to receive anything for free, you had to purchase something. As the court phrases it, the statute requires the subject line to mislead a recipient about a "material fact," and
if a subject line "creates the impression that the content of the email will allow the recipient to obtain a free gift by doing one act (such as opening the email or participating in a simple survey) and the content of the email reveal [sic] that the 'gift' can only be obtained by undertaking more onerous tasks . . . the subject line is misleading about the contents of the email.
1 year statute of limitations on liquidated damages claims: The California statute allows for statutory damages or actual damages. If the statutory damages are considered a penalty, then they are subject to a one year statute of limitations under California law. Hypertouch argued that statutory damages should not be subject to the one year time-bar because they are discretionary, but the court disagrees, holding that although the court has discretion with respect to the amount of damages it awards, it must award some amount of damages. Therefore, the court concludes that Hypertouch may seek actual damages for emails within three years of their receipt, but may only seek statutory damages for emails within one year of their receipt.
This is a big ruling on several levels.
The big practical effect is that it provides an avenue for California spam plaintiffs to seek relief under the California statute. Previous spam cases have backfired on spam plaintiffs due to over-reaching, but I wonder if the preemption argument backfired on defendants due to their over-reaching. Arguing that the preemption clause only saved claims which sounded in actual fraud was a stretch, and both Ethan and I expressed discomfort with rulings that embraced this standard. The court almost has an easy argument to knock down, and it happened to be an aggressive interpretation of the preemption clause that defendants were responsible for pushing.
The even bigger effect of this ruling is the fact that persons or entities who do not themselves send email but who are advertised in non-compliant email can now be held liable, without a showing that they knew or should have known that they were being promoted via non-compliant spam. This is going to throw a big monkey wrench in affiliate programs. Previous cases dealing with affiliate liability in the CAN-SPAM context required plaintiffs to show some sort of knowledge or facts sufficient to impute knowledge. ("Affiliate Spam Liability is Fact Question--US v. Cyberheat"; "Affiliate Liability Extravaganza".) .
In fact, the court expressly embraces a strict liability standard for affiliate liability. This is going to lead to some wacky results - for example, think of the case where a company located outside California is being promoted via email but does not know that its affiliates are emailing to California residents (the affiliates themselves may not know). All of a sudden, they find themselves subject to liability in California for violations of the California spam statute? (Does this present a section 230 issue, since neither of the defendants created the copy which allegedly violated the statute?)
The court's assessment of the substantive violations of the statute is cursory. The court tackles the subject line violations but where's the court's assessment of the violations of subsections (a)(1) (the domain name prong) and (a)(2) (misleading or forged header information prong). Setting aside the fact that the court's interpretation of the subject line prong is charitable (and aimed at protecting people who take on face value a claim via email that the recipient is getting something for free), there's no discussion from the court on how the emails violate the prong which prohibits the use of third party domain names without permission. The court similarly doesn't deal with the misleading header information prong, but Hypertouch's claims sound similar to the claims the Ninth Circuit rejected in virtumundo ("there is . . . nothing inherently deceptive in Virtumundo's use of fanciful domain names").
Interestingly, the California Supreme Court weighed on its spam statute just once. In a ruling last year in (Kleffman v. Vonage) the court held that use of random and multiple domain names even if they were intended to bypass spam filters does not violate California spam statute. ("Use of Multiple (Even Random or Garbled) Domain Names to Bypass Spam Filter Does not Violate Cal. Spam Statute -- Kleffman v. Vonage.")
Additional coverage: "C.A. Revives Action Charging Advertiser Under Anti-Spam Law" (Metropolitan News-Enterprise)
Comments by Eric:
This is an incredibly noteworthy opinion for several reasons.
First, published opinions on Internet law from California appeals courts are becoming rarer than a hen's tooth, so this is likely to be one of the few citable opinions by a California state court on spam issues for the foreseeable future (unless the Supreme Court takes it on appeal). As a practical matter, then, this opinion not only sets California law, but all federal courts interpreting federal law will also have to acknowledge this opinion. I anticipate this will be a heavily cited opinion in the future.
Second, the court's imposition of strict liability for advertisers promoted by spam is breathtaking. The court says "imposing strict liability on the advertisers who benefit from (and are the ultimate cause of) deceptive e-mails, forces those entities to take a more active role in supervising the complex web of affiliates who are promoting their products." Well, that's true in theory, but it's completely divorced from reality. Because of strict liability, even advertisers who undertake substantial efforts to police their affiliate network ARE STILL LIABLE FOR ANY PROBLEMS CREATED BY AFFILIATES. Maybe the court got confused about what it meant to impose STRICT LIABILITY. In reality, many advertisers won't rely on affiliates at all if they are strictly liable for what they do. I bet this court would view that as a perfectly fine outcome, but the it's disingenuous to say that strict liability will ratchet up the policing effort. A negligence standard might have done that; strict liability squashes the endeavor altogether.
For that reason, the strict liability standard for advertisers is the #1 thing (of a pretty long list) that needs to get fixed on appeal.
Venkat raised the issue of 47 USC 230's role here. I haven't had a chance to see if the issue was raised by the litigants, but my initial instinct is that an advertiser's 230 defense for ad copy written by a third party sounds pretty meritorious.
Overall, rulings like this reinforce to me how desperately we need to get states out of the business of trying to regulate the Internet. First, Congress built a structure to hold advertisers should be liable for spam violations in CAN-SPAM (a narrow liability scope, although I question the wisdom of even that). If California can impose a supplemental and much more expansive advertiser liability doctrine, Congress clearly did a crummy job with its preemption clause (so what else is new?). Second, this liability rule, if it sticks, is terrible policy destined to generate lots more of wasteful profit-seeking litigation. Third, it's unclear how California's policy would affect interstate advertising campaigns--a question we shouldn't even have to ask when dealing with Internet activities. We really, desperately, need to rethink our governance scheme that puts states in the business of regulating the Internet. IT DOESN'T WORK, and we lose a lot in the process.
Finally, a gossipy note. This is an unusual spam opinion in that it had big firm lawyers on both sides (Steptoe on the plaintiff side; Gibson Dunn on Valueclick's defense). I wonder if the court's decision to write a lengthy, detailed, footnoted and published opinion is the result of that.
January 19, 2011
Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward -- Microsoft v. Shah
[Post by Venkat Balasubramani]
Microsoft Corp. v. Shah, et al., C10-0653 (W.D. Wash.; Jan. 12, 2011)
WSJ's Law Blog reports that Judge Martinez in the Western District of Washington (Seattle) issued an order allowing Microsoft to proceed on a novel theory of cybersquatting. Judge Martinez rejected defendants' motion to dismiss and held that Microsoft properly alleged claims for contributory cybersquatting and contributory trademark dilution.
The court's discussion of the background facts is brief (I've uploaded Microsoft's amended complaint to Scribd, which you can access here):
Defendants are alleged to have registered domain names containing Microsoft trademarks in order to drive traffic to their website. Consumers seeking a Microsoft website or product are mistakenly drawn to Defendants’ website through Defendants’ alleged use of Microsoft trademarks. Consumers who believe they are downloading a Microsoft product are then allegedly tricked into interacting with Defendants, who in turn solicit users to download emoticons. Defendants allegedly receive payment when a visitor clicks on links or advertisements displayed on their website, or when a visitor downloads or installs a product such as the emoticon toolbar.
Moreover, Defendants are alleged to have induced others to engage in infringement and cybersquatting by providing instruction on how to misleadingly use Microsoft marks to increase website traffic. Further, Defendants also allegedly sold a product that contained software to allow buyers to easily create websites incorporating Microsoft marks. This product allegedly included a video narrated by Defendant Shah.
Contributory Cybersquatting: Defendants moved to dismiss on the basis that claims for contributory cybersquatting and dilution are "not recognized." The court looks to two prior cases (Ford Motor v. Greatdomains.com and Solid Host v. Namecheap) and concludes that plaintiffs can assert claims for contributory cybersquatting. In Greatdomains, the district court discussed the "flea market" analysis but also found that since the cybersquatting statute required bad faith, a claim for cybersquatting would require a heightened standard - a cause of action against "cyber-landlords" would only be available in "exceptional circumstances." The court in Greatdomains declined to hold the defendant liable for contributory cybersquatting. Solid Host is a case where domain proxy registration services declined to turn over the identity of alleged thief and Solid Host brought contributory cybersquatting claims against the entity offering the proxy registration services. As an earlier blog post from Professor Goldman notes, the court there cited to the knowledge and control standard from the Ninth Circuit's Lockheed case, under which a plaintiff was required to prove:
that the defendant had knowledge and ‘[d]irect control and monitoring of the instrumentality used by the third party to infringe the plaintiff’s mark'.
In addition to these two cases, the court also cites to a recent case where the Ninth Circuit held - based on its view of an expansive reach of the ACPA - that a defendant who held on to a domain name to gain leverage in a business dispute (where the defendant claimed he was owed money) could be held liable under the ACPA. ("Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum.")
Oddly, the court's discussion of the facts doesn't connect the dots. The court several times cites to the fact that the defendants sought to profit from "teaching others how to trade off the . . . recognition of [Microsoft's] mark in order to drive traffic to a given website," but the complaint doesn't seem to say that defendants sold any domain names to these third parties or helped these third parties acquire any domain names. The facts actually remind me of the SEO/web designer case Professor Goldman blogged about a couple of weeks ago where contributory trademark claims based on counseling and coaching were allowed to proceed against a web designer/SEO firm. (See "SEO/Web Design Consultant Faces Contributory Trademark Liability for "Copycat" E-Commerce Site--Roger Cleveland Golf v. Price".) Unless you have some revenue sharing arrangement going on, or benefit from the exploitation, it doesn't seem like giving someone the tools that would allow them to infringe should on its own subject you to liability.
Contributory Dilution: The court also declined to dismiss the cause of action for contributory dilution based on defendants "encourage[ment] of others to utilize the famous Microsoft mark in such a way that could cause dilution of the . . . mark." Plaintiffs consistently push for contributory dilution claims, and courts are not receptive to them. (See, e.g., the Second Circuit's result in Tiffany v. eBay: "eBay Mostly Beats Tiffany in the Second Circuit, but False Advertising Claims Remanded.") It's less than satisfying here for the court to recognize the cause of action, but treat the discussion of it as an afterthought.
The court gives lip service to the heightened test that is appropriate for a cause of action for contributory cybersquatting, but seems to give Microsoft a pass applying either of the tests to the allegations. It's tough to say whether this cause of action will alter the landscape for either cybersquatting or dilution, or whether this is a scenario where the court let the contributory claims move forward since Microsoft alleged primary claims for cybersquatting that on their face look strong. (Courts seem to have this bad habit.) If it sticks, it seems like a broadening of the scope of ACPA liability, which courts in the Ninth Circuit seem willing to do.
"On Microsoft and ‘Contributory Cybersquatting’" (WSJ Law Blog)
"Microsoft Gets Green Light for Suit Asserting Novel Expansion of Cybersquatter Liability" (Law.com)
"Western District Denies Dismissal of Novel Trademark Theories" (Mike Atkins)
"Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?--Solid Host v. NameCheap"
"Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum"
"SEO/Web Design Consultant Faces Contributory Trademark Liability for "Copycat" E-Commerce Site--Roger Cleveland Golf v. Price"
January 17, 2011
Canadian-Uploaded YouTube Video Doesn't Infringe in US--Shropshire v. Canning
By Eric Goldman
Shropshire v. Canning, 2011 WL 90136 (N.D. Cal. Jan. 11, 2011)
This lawsuit relates to the Christmas novelty song, "Grandma Got Run Over By A Reindeer," a song I listened to far too many times while preparing this blog post. I won't dignify the song with a link. Just know that it was initially released in 1979 (not known as a good year, or era, in music) and co-performed by a guy named Elmo Shropshire. Need I say more?
Canadian resident Canning allegedly posted the YouTube video at issue, which paired reindeer pictures with a cover of the "Grandma" song by a Canadian group "The Irish Rovers." Shropshire retains an equity interest in the song. Canning received a takedown request and ignored it. Shropshire then filed a takedown request with YouTube, which complied but reversed itself when Canning filed a counter-notice claiming fair use. Shropshire then sent multiple emails to YouTube protesting the reinstatement. Finally, he sued Canning and YouTube, but later dropped YouTube voluntarily. Thus, the court deals with two claims against Canning--a claim for synchronizing the song with the reindeer pictures, and a claim for a false DMCA counternotification. Both parties have mostly been proceeding pro se, which explains some of the messiness. The court dismisses both claims but gives Shropshire the chance to amend.
Regarding the synchronization claim, the court says that the synchronization took place entirely in Canada and therefore outside the reach of US copyright law. Shropshire argued that the upload took place in the US, but he didn't assert that in his complaint. The court continues:
There are no allegations that Plaintiff marketed or advertised the video in the U.S., distributed, sold or exported the video to U.S. customers, or received any profit from posting the video on YouTube; in fact, Plaintiff did not sell the video to anyone.
This could be easy to fix, so Canning's victory may be temporary. Shropshire may simply need to amend his complaint to allege that the upload and subsequent downloads are infringing and occurred in the US. The court makes its expectation clear: "Any amended complaint must identify a specific act of infringement that occurred entirely within the United States."
With respect to Shropshire's suit over Canning's counternotification, this is a very rare 17 USC 512(f) lawsuit over a counternotification from the uploading party--as opposed to a 512(f) lawsuit against the copyright owner for sending a bogus takedown notice (which is also pretty rare). The court could not find in the complaint where Shropshire alleged Canning misrepresented in the counter-notice. The court lets Shropshire try again, saying "Plaintiff must identify a specific misrepresentation and explain how that misrepresentation caused him injury."
Further, the court requires Shropshire to bring in at least one other plaintiff. Shropshire had designated a publishing company as "exclusive copyright administrator" for the song, making that party a necessary litigant. Without this party, "Defendant would be subject to substantial risk of incurring double, multiple, or otherwise inconsistent obligations." I wonder how often the joinder issue will arise in future 512(f) litigation over counternotifications. One way of reading this opinion is that all co-owners and exclusive licensees would need to be a part of any 512(f) claim over counternotifications. If that's the case, 512(f) lawsuits over counternotifications are likely to remain rare. [UPDATE: A reader points out that the court's discussion here is ambiguous. Another way to read the opinion is that joinder is required for both claims, not just the 512(f) claim, which would make the court's joinder requirement even more interesting.]
January 14, 2011
My 2005 Prediction of Wikipedia's Failure By 2010 Was Wrong
By Eric Goldman
“Prediction is very difficult, especially about the future.”
-- attributed to Niels Bohr
I’ve written a few notorious posts in my 6 years of blogging, but none more so than my December 2005 prediction that Wikipedia would fail in 5 years. Those 5 years are up, and this post admits that my prediction is wrong. In this post, I’ll also look at how Wikipedia has changed since 2005. Although these changes don’t validate my prediction, Wikipedia circa 2011 differs in important ways from Wikipedia circa 2005.
Why Did Wikipedia Beat the Odds?
My initial prediction focused on the threats posed by spammers and vandals. With Wikipedia’s free editability, spammers and vandals can easily manipulate content to advance their own interests. Standing between them and success are Wikipedia volunteers. With millions of financially motivated spammers and thousands of dedicated volunteers, the volunteers seemed outgunned. How have they been able to vanquish the spammers and vandals to date?
In my opinion, the biggest change was Wikipedia’s (re)adoption of Google’s nofollow tag in 2007. Prior to that, spammers had significant incentives to insert links into Wikipedia pages for the link juice, no matter how many Wikipedia readers clicked on the links. After implementing the nofollow tag, spammers’ payoffs for getting links into Wikipedia decreased substantially. There are still other ways that marketers can manipulate Wikipedia (such as editing their own entries), but these efforts are small potatoes compared to SEO bots.
In addition, the Wikipedia community has done an admirable job developing anti-spam technological tools available to its volunteers. Anti-spam efforts remain principally a manual effort, but improved anti-spam tools has increased the leverage of the remaining volunteers.
Other Ways Wikipedia Has Changed Over 5 Years
While these factors have been pretty effective at keeping the spammers and vandals at bay (so far), other changes to Wikipedia have been less salutary.
* Xenophobia. Over the past 5 years, the Wikipedia community has closed ranks and become somewhat insular. Wikipedia offers technological tools to the public at large to edit the database, but as I explain in my Wikipedia’s Labor Squeeze article, the practical capacity to make edits that stick is limited to a much smaller universe of contributors. Joining that club is relatively easy, in the sense that it merely requires a person to “show up,” contribute and get along with other community members. At the same time, club membership is hard because it must be a concerted effort over time. Drive-by edits by uninvested contributors are unlikely to stick.
Xenophobia poses a serious challenge to the community because it makes it much harder to recruit and absorb new power contributors. Thus, community xenophobia may be one of Wikipedia’s biggest strategic challenges.
As I’ve watched Wikipedia close ranks, I’ve started to wonder if xenophobia is endemic to UGC websites. I’ve seen the phenomenon occur with other UGC sites, so perhaps it’s unavoidable. An interesting question worth a more intensive study.
* Increased Wikipedia staff. This isn’t a negative per se, but it is noteworthy. Wikipedia’s staff has grown substantially over the past few years (I believe it’s approximately doubled in the last two years or so). I don’t believe the new staff members have displaced any key editorial services traditionally performed by the community. However, the headcount growth reflects an implicit decision that Wikipedia cannot expand solely on self-coordinated volunteer efforts. With its growth, Wikipedia’s staff is increasingly looking like the staff of an editorially controlled publication.
As an example, consider the Wikipedia Public Policy Initiative, which I’m participating in. In my Wikipedia’s Labor Squeeze article, I discussed how Wikipedia could source new content, and possibly new contributors, by working with educators who incorporate Wikipedia participation into their courses. (To be clear, many other people made that suggestion too). Without Wikipedia staff coordinating the effort, some educators might independently do this themselves. However, with the Public Policy Initiative, Wikipedia is allocating FTEs to fix the coordination problem. I expect Wikipedia staff intervention will produce more and better contributions, but notice that it becomes much more expensive content to produce given the FTEs’ amortized costs.
* Increased technological barriers to participation. On its home page, Wikipedia still uses the introductory tagline “the free encyclopedia that anyone can edit.” However, the site has struggled with free editability over the years. A variety of (mostly minor) technological restrictions have been implemented over the years to limit contributions from untrusted sources.
From my perspective, the most important technological control is “Flagged Revisions” (rebranded “Pending Changes”), which allows only trusted editors to immediately make public edits. All other contributions sit in a tank until a trusted editor approves them. Flagged Revisions is a substitute to Wikipedia’s traditional full protect/semi protect approach to restricting edits on problematic pages. As a substitute, Flagged Revisions is more flexible than protection because people can still contribute to an affected page (although the contributions aren’t immediately public and may never be approved).
Instead of being used only on problematic pages, Flagged Revisions could restrict editing site-wide. It’s used for that purpose in some Wikipedia versions, but not in the English language version. When Flagged Revisions is used to widely control editing, it undercuts the tagline that Wikipedia is a place anyone can edit. That still may be technically true, but making distinctions between editor trustworthiness means that untrusted contributors may not actually be able to edit.
Thus, if the English language version of Wikipedia had broadly adopted Flagged Revisions before the end of 2010, I was going to declare my prediction as mostly correct. Unfortunately for my prediction, widespread implementation of Flagged Revisions hasn’t happened yet. However, as I initially predicted in my 2005 post:
Wikipedia will have to change its open access nature. Instead, Wikipedia will have to lock down lots of pages from being edited at all. Or Wikipedia will have to install some reputational management system to limit who has the right to post or edit content.
I may not have gotten the timing right, but I wonder if this fate remains inevitable.
* Several measures of editor engagement have peaked. There are several possible explanations for why contributions and contributors are down from historical highs, including:
- the community’s xenophobia, freezing out newcomers
- the “old guard”—the initial cohort of power Wikipedians—may be progressively turning over or burning out
- Wikipedia may have reached a plateau in terms of coverage and quality, so less work still needs to be done
Whatever the reason for these numerical declines, they pose a serious challenge to Wikipedia’s freshness. Wikipedia currently does a very good job keeping highly trafficked articles up-to-date. For example, when a celebrity has a major new development, that celebrity’s page is often updated that same day. However, I routinely find long tail pages that are poorly maintained and conspicuously out-of-date. Stagnancy could seriously undercut Wikipedia’s credibility over time; if the site looks like a ghost town, readers will become less trusting of the site, and that will enhance the attractiveness of competitors.
Over the years, it’s become clear to me that searchers want and need an encyclopedic entry in their top search results. In many circumstances, a relatively objective factual source improves the iterative search process. Wikipedia has unquestionably met that need, which is one reason why it remains so popular.
However, it’s less clear that Wikipedia’s current labor model and site architecture is the only—or even the best—way to deliver encyclopedic search results. Other labor models or site architectures could usurp Wikipedia’s current approach while delivering the same basic value proposition to searchers. It seems likely that any successful encyclopedic site will rely on crowdsourcing to ensure enough support for long-tail topics. However, free editability may be less important to the end result.
Wikipedia remains a community that can be baffling and exasperating at times, but I also routinely find the site’s content useful and interesting. I visit it daily as part of satisfying my intellectual curiosity. Happy 10th anniversary, Wikipedia!
My Prior Posts on Wikipedia
* Catching Up With Wikipedia (Feb. 2010)
* Offering Students a Graded Wiki Option—My Experiences, and Some Lessons (Feb. 2010)
* Why More Wikipedia Editing Restrictions Are Inevitable, and Some Comments on Flagged Revisions for Living People's Biographies (Aug. 2009)
* Wikipedia and Rules Proliferation (Aug. 2009)
* Decay Rates of Committed Online Community Members--an Epinions Case Study (Jan. 2009)
* Wikipedia Revisited: the Wikipedia Community's Xenophobia (Jan. 2008)
* Wikipedia and Search Engine Marketing (SEM) / Search Engine Optimization (SEO) (May 2007)
* Wikipedia Will Fail in Four Years (Dec. 2006)
* Wikipedia Will Fail Within 5 Years (Dec. 2005)
Also see my 2009 law review article, Wikipedia’s Labor Squeeze and its Consequences
January 13, 2011
Keyword Advertiser Headed to Trial--Soaring Helmet v. Nanal
By Eric Goldman
Soaring Helmet Corp. v. Nanal, Inc., 2011 WL 39058 (W.D. Wash. Jan. 3, 2011)
I previously blogged on this case in 2009 when Soaring Helmet sued Google for selling keyword advertising triggered on its trademark. Soaring Helmet quickly dropped Google from the suit but continued against the keyword advertiser.
Soaring Helmet makes...(wait for it)...motorcycle helmets and related motorcycle riding gear. The registered trademarks at issue here involve "VEGA" for motorcycle helmets and protective clothing. The case goes on and on about how Soaring Helmet doesn't deal with Internet-only retailers because its brick-and-mortar retailers hate the price competition (reinforced by Soaring Helmet's resale price maintenance). The implicit anti-consumer/anti-competitive nature of Soaring Helmet's distribution system should have been a huge strike against it, but the opinion seems rather unconcerned with it.
The defendant runs Leatherup.com, an Internet-only retailer of motorcycle gear. The court recaps the allegations about the defendant's activity:
On or about September 1, 2008, Nanal bought the keywords "vega helmets" through Google AdWords. Albert Bootesaz, president of Nanal, testified that the keywords were suggested by Google after he entered "helmets" as a search term. At the time that he bought the keywords "vega helmets" he thought that it referred to a solar system or a star. Nanal ceased using the keywords "vega helmets" in April 2009 after receiving a cease and desist letter from Soaring Helmet's counsel. Nanal also took the additional step of incorporating a negative instruction to Nanal's Google AdWords campaign so that LeatherUp.com's advertisements do not appear when the word "Vega" is searched. Mr. Bootesaz also testified that the word "Vega" has never been used on the LeatherUp.com website and he has never directed that the word be incorporated into the website in any manner.
Contrary to Mr. Bootesaz representation, Ms. Demund provides evidence showing that the LeatherUp.com website advertised the "XElement Vega Leather Jacket," which was neither manufactured nor licensed by Soaring Helmet. As of November 22, 2010, Ms. Demund testified that the XElement Vega Leather Jacket was still being offered for sale on eBay.com and Cobragear.com. [citations omitted]
Because of the latter allegations, the court handles the discussion glibly. For example, on the trademark infringement claim, the court's discussion is unclear whether the defendant referenced "Vega" in the ad copy or only as a keyword trigger. If the defendant only used Vega as an ad trigger, then perhaps the court could have resolved this on summary judgment (in the defendant's favor, natch).
The false advertising discussion is more troubling. The court says "Nanal's president admitted both that he used "vega helmets" as an Adword through Google and that his company was not authorized to, nor did it, sell vega helmets....The falsity of Nanal's advertisement creates a presumption of deception and reliance." Wait a minute, did I miss something there? How is having an ad triggered by the Vega keyword make a false statement? Depending on the ad copy, for example, there could be an express comparative advertisement; but even if the defendant's ad just merely referenced its own goods, there's no reason to assume that the "Vega" keyword is incorporated into the advertiser's statement. At minimum, the court did a lousy job articulating how it derived a false statement here. Compare Jurin v. Google and Heartbrand Beef v. Lobel's discussing the search engines' (lack of) liability for false designation of origin.
As a result, the court sends this case to trial on the trademark infringement, false advertising and other claims.
[Note: I still have to blog the 1-800 Contacts v. Lens.com decision from last month]
January 12, 2011
What State Does the Harm Occur in When Adulterous Lovers Text and Email Each Other Across State Lines? -- Knight v. Woodfield
[Post by Venkat Balasubramani]
Knight v. Woodfield, No. 2009-IA-01371-SCT (Mississippi; Jan 6, 2011)
Personal jurisdiction questions in cyberspace have been pretty well hashed out over the last ten years, and it's tough to tell whether recent cases are breaking any new ground on this issue. My view is that they're not - personal jurisdiction standards are somewhat mushy, and in my experience courts assert jurisdiction largely based on the merits and the equities (although their orders may couch their decisions in terms of various tests). (But see this post on two personal jurisdiction cases currently in front of the Supreme Court: "Supreme Court Grants Cert in Important Personal Jurisdiction Cases." More on these cases - which were the subject of today's oral argument from SCOTUSBlog: "Argument previews: When do state courts have general and specific jurisdiction?")
Anyway, the Mississippi Supreme Court heard a case involving a lawsuit for alienation of affections brought by Eric Woodfield against William Knight. Woodfield and his then-wife (Kristina Dokka) resided in Mississippi from July 2006 to April 2007. Dokka commuted from Mississippi to her job in Louisiana, where she met, fell in love with, and later married her co-worker (and the defendant in this lawsuit) William Knight.
As the court describes it, Woodfield noticed a change in his marriage in January 2007. He noticed an increase in Dokka's private use of her cell phone and computer (and a corresponding decrease in intimacy). This prompted Woodfield to access Dokka's cell phone [computer crime alert!], and he discovered that in addition to sending him partially nude photos:
in February 2007, [Dokka] and Knight . . . exchanged 131 text messages . . . . [i]n March 2007, Dokka [and Knight] exchanged 807 text messages. . . . Knight and Dokka also exchanged numerous emails during this time. One email sent by Knight to Dokka stated, 'I refuse to feel guilty about falling for you . . . [y]ou enter marriage by choice and you can leave it by choice anytime you choose.'
Upon discovering these communications, Woodfield emailed Knight and requested that Knight stop communicating with Dokka. Knight continued, despite Woodfield's request.
Woodfield brought claims against Knight in Mississippi for alienation of affection. Knight moved to dismiss on the basis of personal jurisdiction. In response to Knight's motion to dismiss, Woodfield claimed that "the communications between Knight and Dokka, while [Dokka] was physically present in Mississippi, had resulted in [Woodfield's] loss of consortium, the damage of which had occurred entirely in Mississippi." The trial court sided with Woodfield and denied Knight's motion to dismiss. The Mississippi Supreme Court affirmed.
On appeal, the Mississippi Supreme Court ran through the (long arm statute/minimum contacts) personal jurisdiction analysis. The court found that Woodfield's allegations that Knight texted, called, and emailed Dokka "while she was in Mississippi were the direct and proximate cause" of the injury, and these allegations were sufficient to bring the claim under the long-arm statute. With respect to minimum contacts, the court found that the emails, phone calls, and texts were sufficient minimum contacts to support the assertion of personal jurisdiction by Mississippi:
Knight knew that Dokka resided with Woodfield . . . in Mississippi . . . and exchanged more than 900 text messages in the course of two months . . . Knight and Dokka also exchanged numerous emails, chronicling their developing relationship.
The court also found that maintenance of the suit in Mississippi did not offend "traditional notions of fair play and substantial justice."
Two justices dissented on the basis that:
all of the in-person contacts between Dokka and Knight took place in Louisiana [and not Mississippi]. All telephone conversations and text messages between them were conveyed by or to Dokka's Louisiana cell-phone number.
The dissenting justices were not swayed by the email contacts either:
[t]he fact that Dokka may have accessed emails in Mississippi is of no moment, as emails can be accessed anywhere.
The dissenting justices also added that it appeared from the emails that Dokka "independently" chose to leave the marriage [i.e., we're not that excited about the merits of the case].
Given the volume of contacts, and the fact that Knight knew Dokka resided in Mississippi, the court reaches the right result under current personal jurisdiction doctrine (in particular Calder v. Jones, which looks to where the "effects" of the actions are felt - incidentally, the Calder v. Jones doctrine is under attack (see "Kill Calder v. Jones!")). On the other hand, the dissenting justices raise a good point, although they ignore the off-line conduct and the fact that Knight had to have known that Dokka and her then-husband resided in Mississippi: the sender of an electronic communication often does not know where the recipient will access it, and this is something that is often raised in objection to varying state regulation of interstate electronic communications (e.g., state statutes that regulate online content). This raises another question. Louisiana does not appear to recognize alienation of affection as a tort, and the jurisdiction question could end up being dispositive. From the defendant's perspective, this looks like a troublesome outreach of Mississippi laws to govern his conduct as a Louisiana resident. However, the fact that he must have known that Dokka and her then-husband resided in Mississippi and the harm would be felt there makes this a tough argument for the defendant to make here.
Loosely related: Minnesota v. Pierce - a case where a prosecution for violation of a protective order which prohibited email contact was set aside because the prosecutor failed to put forth evidence that the email was sent or opened in the county where defendant was prosecuted:
[w]hen the state prosecutes a person who has allegedly violated an order for protection under the Domestic Abuse Act by sending a prohibited message by electronic mail, venue is proper in the county from which the sender mailed the message or the county in which the recipient opened it.
Check out this post at Benchmarks on that case: "Prosecutor flubs e-mail harassment case."
Search Engines Sued for Accepting Keyword Advertising on "Cheese of the Month Club" Trademark--Pathak v. ICG
By Eric Goldman
Pathak v. ICG America, Inc., 5:11-cv-00055-VAP -OP (C.D. Cal. complaint filed Jan. 6, 2011)
Pathak's lawsuit is the latest iteration in the litigation deathmatch royale taking place among retailers with "[Food] of the month club" trademarks. See this AP story about related litigation brought by Harry & David against Pathak over "Fruit of the Month Club," plus Harry & David has sued both Hickory Farms and ICG (one of the defendants in this case). See a recent ruling in favor of Harry & David in the ICG case. Finally, Pathak previously sued the PTO over its granting a trademark in "fruit of the month" (and Pathak sued Google as part of that lawsuit over keyword ad revenues). I suspect I'm missing some other battlefronts in the deathmatch.
What a load of nonsense. The world would be a better place if we just declared the phrase "[food] of the month club" generic so that no one could claim a trademark in it. Even if the phrase once was descriptive and thus capable of secondary meaning, it has become genericized through overuse. In contrast, so long as we recognize trademark rights in watered-down descriptive terms like "[Food] of the month clubs," we get bogus disputes between companies with crummy trademarks, all of them tearing each other down rather than actually doing a better job for their customers. What a shame.
OK, back to the latest case. Pathak runs a "Cheese of the Month Club" and has a registered trademark in the term. Apparently he learned some tricks from his defense of the Harry & David lawsuit, because now he's going on the offensive using recycled arguments that apparently were used against him. (Indeed, he apparently cloned-and-revised an anti-cybersquatting claim from his precedent source even though the complaint never discusses domain names). He asserts that some advertisers bought his trademark as keywords and used the term in ad copy. He then pulls the search engines into the lawsuit as well, arguing that they ignored his C&D against selling the trademark as an ad trigger and that makes them culpable. As a pro se going up against some mighty companies, I'd say Pathak's likelihood of success against the search engines is very, very low.
The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 2010):
Ezzo v. Google
Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
and the companion Google v. John Beck Amazing Profits
Stratton Faxon v. Google
Soaring Helmet v. Bill Me
Ascentive v. Google
Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
Rosetta Stone v. Google [on appeal]
Flowbee v. Google
Parts Geek v. US Auto Parts
Dazzlesmile v. Epic
* Pathak v. ICG
January 11, 2011
Court Approves TD Ameritrade Data Breach Settlement -- In re TD Ameritrade
[Post by Venkat Balasubramani]
In re TD Ameritrade Accountholder Litigation, 07-2852 (N.D. Cal.; Dec. 20, 2010) (Order granting preliminary approval of settlement)
A class action lawsuit arising out of a TD Ameritrade data breach looks like it's winding its way to resolution. Judge Walker granted preliminary approval to the class settlement, which:
(1) requires payment of between $2.5 to 6.5 million to the class - each claimant is "entitled to seek cash benefits ranging from $50 to $2,500, depending 'on the nature of the account affected by the identify theft and the type of expense and unreimbursed loss incurred . . . .'";
(2) sets a maximum of $500,000 for attorney's fees; and
(3) requires TD Ameritrade to engage a third party auditor to assess its data security practices.
[Clarification/correction: Matthew Elvey emails to note that class members are not automatically entitled to compensation. Only class members who have been victims of “identity theft” are entitled to compensation, based on a range of factors. Interestingly, I may be missing something, but don’t see a definition for “identity theft” in the settlement agreement. A common sense interpretation would mean people whose data has actually been misused. Another possible framework would have been to allow compensation for people whose data was compromised, regardless of whether the data was misused. I’ve emailed class counsel for some clarification on this and I’ll post an update when I hear back.] The precise amount of each payout will be determined by the claims administrator based on guidelines contained in Section 3 of the settlement agreement. If the amounts claimed by the class are less than $2.5 million, the difference will be paid to certain identified public interest organizations. (Access a copy of the settlement agreement here.)
The lawsuit has a tortured procedural history - the wranglings and objections are reminiscent of the Beacon class action, and involve some of the same players and issues (e.g., Kamber Edelson as class counsel, no cash compensation to class members). Judge Walker previously rejected the class settlement (in October 2009) in an order that recounts some of these wranglings. (Access a copy of Judge Walker's previous order rejecting the proposed class settlement here.)
As Judge Walker's previous order notes, the previous settlement terms proposed by TD Ameritrade principally required TD Ameritrade to: (1) post a warning regarding "stock spam" on its website; (2) retain an independent expert to audit its security practices; (3) retain a consultant to see if any of the lost data had been misused in an "organized" manner and inform any affected class members of this misuse; (4) give out a free one-year subscription to class members to an anti-virus, anti-spam security product; and (5) donate $50,000 to "specified cyber-security projects." The original proposed settlement also proposed a payment of fees to class counsel in the amount of $1,870,000. One of the class representatives (Matthew Elvey) expressed reservations that the proposed settlement "inadequately compensated plaintiffs for their injuries . . . and mischaracterized the nature of the risks associated with the breach." In addition, the Texas Attorney General also voiced its objections, arguing among other things that the proposed settlement "offered no meaningful relief to the class members," and the award of proposed fees to class counsel was "excessive." The parties incorporated some changes to the class settlement in response to the Texas AG's objections, but even as revised, Judge Walker rejected the proposed settlement, noting that the influence of the Texas AG largely "resulted in changes to the nature and scope of the notice, rather than altering the purported benefits to the class." Judge Walker also appointed Gretchen Nelson as substitute class counsel, replacing Kamber Edelson (whom he had provisionally appointed when he initially approved the original settlement). Elvey's relationship with Kamber Edelson looks like it ended less than amicably, as you can see from one of his blog posts here. In any event, it looks like new class counsel was appointed and re-negotiated the terms of a settlement which ended up looking acceptable from Judge Walker's standpoint. (Looks like Elvey still objects to the terms of the proposed settlement.) [Clarification/correction: Jay Edelson emails to note that Kamber Edelson is now two different firms (Edelson McGuire and KamberLaw) and that Scott Kamber was not “kicked off the case.” With respect to this point, I think it’s worth reproducing the court’s language in full:
The May 1, 2009 order of preliminary approval granted “provisional certification of the settlement class” and confirmed Kamber Edelson LLC, Parisi & Havens LLP, Scott A Kamber and Ethan Mark Preston (“Kamber et al”) as lead counsel. Doc #93 at 10. As the certification was provisional and preliminary to final approval, denial of final approval abrogates provisional class certification and the interim appointment of Kamber et al as class counsel. Hence, no class has been certified and no appointment of class counsel has been made under FRCP 23(g). On August 28, 2009, class member Holober suggested Gretchen M Nelson of the Kreindler and Kreindler firm to the court as substitute class counsel. . . . The court has considered Nelson’s experience in handling class actions and other complex litigation, her work in investigating potential claims in the action, her knowledge of the applicable law and the resources she will commit to representing the class. FRCP 23(g)(1)(C). Having considered these factors, it appears that Nelson is fully capable of fairly and adequately representing the interests of a class of TD Ameritrade accountholders.
Kamber remains a part of the case and his name is on the settlement agreement as well. That said, readers can come to their own conclusions as to what the court intended.]
We've blogged a bunch about data breach cases, mostly involving the rejection of data breach claims due to the absence of a showing of damages. There's a larger debate as to whether plaintiffs are harmed and what courts should require of such plaintiffs. I have a post on this that's been in the hopper for a couple of months now, and I'll get around to posting on it soon. But in the meantime, it's interesting to note that repeatedly, plaintiffs bring data breach class actions and their lawyers are quick to suggest a recovery which doesn't involve payment of any significant compensation to the class (but which of course include hefty attorney's fees awards). The Facebook Beacon ("Beacon Class Action Settlement Approved -- Lane v. Facebook") and Google Buzz ("Google Settles Buzz User Privacy Litigation") settlements both fit into this category. It's nice to see courts taking a closer look at these settlements. I wonder whether Judge Walker's insistance on some concrete benefit to the class members and discussion of the reduced fees will set a precedent for future lawsuits like this one. Is increased scrutiny likely for these types of settlements? The Facebook Beacon settlement is on appeal to the Ninth Circuit and raises some issues that are similar to the ones raised in this case. It will be interesting to see what happens with it.
"Trials and Tribulations" (Matthew Elvey's website where he chronicles the path of this litigation, including his falling out with Kamber Edelson)
"Ameritrade Hack Settlement: $2 Per Victim, $1.8 Million for Lawyers" (one of several articles at Threat Level)
"TD Ameritrade Account Holder Litigation, Case No. C 07 2852 VRW" (Class Action Website)
"Interview: Scott Kamber On His ‘Spate’ Of Lawsuits Over Internet Privacy" (paidContent/Joe Mullin)
Earlier data breach posts:
"Starbucks Data Breach Plaintiffs Rebuffed by Ninth Circuit -- Krottner v. Starbucks"
"Two More Courts Close the Doors on Data Breach Plaintiffs"
"9th Circuit Affirms Rejection of Data Breach Claims Against Gap -- Ruiz v. Gap"
"The [Non]enforceability of Privacy Promises--Pinero v. Jackson Hewitt"
"Acxiom Not Liable for Security Breach"
January 10, 2011
Iconic TV Commercials
By Eric Goldman
I'm teaching Advertising & Marketing Law this semester, and I thought it might be helpful to start the semester by showing some TV ads. Remember that many of my students were born after the golden age of TV ads (i.e., a 23 year old 2L was born in, gulp, 1988), so they may have never seen some of the iconic ads of the 1970s and 80s.
Making a relatively short list of iconic ads, however, isn't easy. First, there are big generational gaps in what people consider iconic. My list tends to emphasize ads mid-1970s to 1990, but that reflects my Gen X bias. Second, there are so many good and funny ads, but I was looking for ads that somehow transcended into pop culture.
My Choice for Iconic Ads
With that in mind, I came up with this short list of individual ads that I'll show in class to illustrate iconic ads:
* Life Cereal, Mikey. Iconic dialogue. What ever happened to Mikey? Wikipedia has some clues.
* Oscar Mayer, Boy Fishing on a Pier. My iconic TV ad has a first name, it's "C-U-T-E," my iconic TV ad has a second name, it's "K-I-D."
* Wendy's, Where's the Beef? So iconic, Mondale invoked the phrase in the Democratic primaries against his rival, Gary Hart.
* Coca-Cola, Mean Joe Greene. After Mean Joe polishes off an entire bottle of Coke in one long drink without belching, he gives a kid his used sweaty uniform. Gee, thanks. Wikipedia has interesting factoids on how "Mean Joe" got his nickname as well as the burps that ended up on the cutting room floor.
* Coca-Cola, Beautiful Young Adults Singing on a Hilltop. My personal choice for the most iconic TV ad of all time. This ad is permanently seared into my brain.
Other iconic ads that just missed my cut:
* "This is your brain on drugs." One of the most effective 10 second commercials ever.
* FedEx, Fast Talker. This ad was so effective at defining FedEx's brand.
* Maxwell, The Usual? It's hard to watch this commercial now and not think of Apocalypse Now.
* Hebrew National, Higher Authority. Does the FTC have to answer to a higher authority?
* Grey Poupon, Pardon Me? Could it be any more blatant than when the two Rolls-Royces pull up next to each other?
* Budweiser, Wassup? This one still works really well, even today.
The recent Old Spice campaign is a modern classic. I was riveted to the computer during the few days The Old Spice Man dynamically interacted with the world via YouTube and Twitter. Don't forget the funny Sesame Street parody.
Although it's not iconic, I'll show an Epinions TV ad as a first-hand example of a legal task I encountered as in-house counsel in my first week on the job. As in, "so glad you've joined the company, we're doing a multi-million dollar ad campaign that raises novel legal issues...can you bless these ASAP please?" I think I'll do the minute-long "Alta" commercial, although the "IMac" commercial is pretty good too.
Examples of the many iconic ad campaigns:
* The Nestea Plunge.
* California Milk has two that make my list: Got Milk? and Happy Cows Come from California
* Budweiser Clydesdales
* Life Alert, "I've fallen and I can't get up!" In the same genre: the Clapper ("Clap On! Clap Off! The Clapper!!")
* Joe Isuzu. I wonder if you could make these obviously lying commercials today. Modern plaintiffs tend to be very literal.
* Energizer Bunny. I always liked that little furry dude! He keeps going and going...
* Bartles & Jaymes. A true measurement of the ad campaign's effectiveness: wine coolers were considered a drink of choice in the 1980s. It makes my stomach churn just thinking about it.
* California Raisins, Heard It Through the Grapevine
* Nike, Bo Knows
* Miller Lite, Tastes Great/Less Filling
* Mr. Whipple/Don't Squeeze the Charmin
* The Maytag Repairman
* Madge, the Palmolive lady
* Reese's Peanut Butter Cups: "You got your chocolate in my peanut butter....You got your peanut butter in my chocolate." "Two great tastes that taste great together...Reese's Peanut Butter Cups." This semester I used the example of Reese's Peanut Butter Cups when discussing non-obviousness in my IP course, i.e., after eating a cup, it's obvious that peanuts and chocolate are a great combination, but the combination may not be obvious beforehand. I learned many of my International students had never heard of Reese's Peanut Butter Cups, so I brought in a few bags for the class. I bet my International students will remember Reese's Peanut Butter Cups much longer than they will remember any doctrinal material I covered in class.
I'd be remiss if I didn't mention the Slinky commercials (e.g., this one).
Other Ads That Were Fun to Revisit
* Pepsi, Britney Spears. After everything that's transpired in the last decade, it's hard to imagine Britney Spears was once a hugely popular but barely-legal sexpot who could sell a lot of soda. Plus, Bob Dole shows his funny side, and Pepsi takes a gratuitous dig at Coke.
* Budweiser Frogs. The commercial consists of only three words, presented very effectively: Bud. Weis. Er.
* McDonald's, Nothing But Net. Basketball superstars Jordan v. Bird in a fantasy game of horse, with the prize being fast food that no serious athlete should ever eat.
* Pets.com. Two of my favorites: Deliveries and Dog Park ("I love stuffed things!"). Too bad the company was doomed from the start. My wife and I both loved the sock puppet dog--we even purchased a stuffed version.
* American Tourister, Ape in the Zoo. They don't make 'em like this any more--either commercials or luggage (or zoos, for that matter).
* Keep America Beautiful, Crying Native American. I don't think you can make an ad like this any more.
Not on my iconic list: Apple's "1984" Mac Super Bowl commercial. I admit the commercial is legendary for its production expense, its director (Ridley Scott), its airing only once and its featured product (which really did revolutionize computing--a rare time when the product delivered on its advertising hype). However, the commercial makes zero sense, and I don't think it has aged well.
A student sent me this really nice campaign (that I'd not seen before) by Jamba Juice for its "Cheeseburger Chill Smoothie" spoof. See the YouTube ad and then the website. It turns out that my IP final exam from last semester unintentionally bore a resemblance to this ad.
Another student sent me this Dylan-themed ad for Google Instant that I hadn't seen before. Good ad. Imagine the rights clearances involved with that ad!
January 09, 2011
Goldman Spring 2011 Speaking/Travel Schedule
By Eric Goldman
This lists some of my upcoming public/semi-public talks and other events this semester. As always, if we're going to be at the same conference or if I'm traveling to your area and you would like to try to meet up in person, please email me.
Next Digital Decade, TechFreedom, Washington DC, January 19, 2011 (Internet Exceptionalism & Intermediary Deputization)
UH Law Center Moot Court National Championship (MCNC) Symposium, Houston, January 27, 2011 (Remarks on copyright inducement and ACPA, plus I believe I'll participate on the other panels too)
Social Media 2011: Addressing Corporate Risks, PLI, San Francisco, February 9, 2011 (Defamation, False Information and the CDA Safe Harbor)
Stanford Technology Law Review symposium, Stanford, March 3, 2011 (moderating a panel on secondary TM liability)
47 U.S.C. §230: A 15 Year Retrospective, Santa Clara University School of Law, March 4, 2011 (In Defense of 47 USC 230)
Internet Law Work-in-Progress, Santa Clara University School of Law, March 5, 2011
2011 Intellectual Property Institute, USC Gould School of Law, Beverly Hills, March 22, 2011 (Hot Topics in Trademark and New Media)
Law and Regulation of Virtual Worlds, UC Irvine Center for Computer Games and Virtual Worlds, April 8, 2011 (47 USC 230(c)(2))
Trademark Scholars Roundtable, Bloomington, Indiana, April 22-23
INTA Annual Meeting, San Francisco, May 2011 (I'm on two panels: (1) A Century of Trademark Law: Where Do We Go from Here? and (2) Functionality Doctrine)
ALI Annual Meeting, San Francisco, May 2011
Law & Society Association Annual Meeting, San Francisco, May-June 2011 (In Defense of 47 USC 230)
Privacy Law Scholars Conference, Berkeley, June 2-3 (I asked to present my paper In Defense of 47 USC 230 here as well).
January 07, 2011
TweetPhoto (now Plixi) To Start Charging For Twitter Celeb's Pics
[Post by Venkat Balasubramani]
I posted last week about the AFP/Morel Haiti photo debacle where the court rejected AFP's arguments that it had a license to photos posted to Twitpic by virtue of the Twitter & Twitpic terms of service. Two quick follow up points to that post.
First, Joe Mullin covered the story at paidContent ("Court To AFP: Pics Aren’t Free Just Because They’re On Twitter"), and AFP's lawyers made some striking comments:
Yikes! If this is a "common practice," it looks like there could be other lawsuits out there. What's striking about this comment isn't that AFP's legal position is off-base (it is). What's most striking is that AFP is the same organization that sued Google for linking to AFP's stories. (See "AFP Gets Confused As To How The Internet Works.") Something tells me that a ruling in AFP's favor in this case could undercut their future position as a plaintiff.
Second, the New Statesman reports that TweetPhoto (now Plixi) has agreed to license celebrity photos which are posted on Plixi ("News agency seeks to cash in on celeb Twitter pics"). (h/t TweetSmarter) As the story notes, Plixi signed a deal with WENN, which will now start charging publishers for use of celebrity images. Plixi is in a different position than AFP. Plixi (like Twitter) could claim a broad license to exploit content uploaded to the service; unlike Plixi, AFP is a third party that's coming along and saying it can exploit the content. However, interestingly, Plixi's user agreement does not seem to convey such broad rights to Plixi (See section 15 of Plixi's Terms of Service). The terms only allow Plixi to use the photos for the purpose of promoting Plixi:
Plixi does not claim ownership of Content you submit or make available for inclusion on the Service. However, with respect to Content you submit or make available for inclusion on publicly accessible areas of the Service, you grant Plixi the following worldwide, royalty-free and non-exclusive license(s), as applicable:
With respect to Content you submit or make available for inclusion on publicly accessible areas of Plixi, the license to use, distribute, reproduce, modify, adapt, publicly perform and publicly display such Content on the Service solely for the purposes of providing and promoting Plixi to which such Content was submitted or made available. This license exists only for as long as you elect to continue to include such Content on the Service and will terminate at the time you remove or Plixi removes such Content from the Service.
Maybe Plixi has separate deals with celebrities regarding the rights in celebrity photos?
Added: Additional coverage and link to the original story from Press Gazette: "News agency seeks to cash in on celeb Twitter pics"
January 06, 2011
Contrary LinkedIn Evidence Crushes Witness' Testimony -- Blayde v. Harrah's Entertainment
[Post by Venkat Balasubramani]
Blayde v. Harrah's Entertainment, 08-cv-02798 (W.D. Tenn.; Dec. 17, 2010)
By my guesstimate, LinkedIn ranks last among the major social networks for being invoked as a source of evidence in court cases. MySpace is the runaway favorite, and MySpace evidence often seems to become an issue in criminal and family law cases. Facebook-sourced evidence is starting to crop up more often, also in criminal and family law cases. Twitter is probably a distant third, typically making appearances in trademark cases and the occasional defamation case. Of the four, LinkedIn is definitely last (not that this is a bad thing).
Blayde brought age discrimination claims against Harrah's. Among its many defenses, Harrah's argued that it wasn't actually the Blayde's "employer" for purposes of the ADEA. Blayde testified that although he initially started working at another casino named "Grand," Grand had been acquired by Harrah's, which made Harrah's his employer. Harrah's argued that one of its subsidiaries acquired Grand and this subsidiary (and not Harrah's) should be treated as the employer. Blayde produced evidence that Harrah's treated him as its employee by giving him its employee handbook and signing his paychecks. This looked like it was sufficient to convince the judge, but if this wasn't enough, Harrah's own witness--who according to Harrah worked along with (and supervised) Blayde at Grand (and not at Harrah's)--listed "Harrah's" as his employer on his LinkedIn profile.
Not only did this LinkedIn evidence undermine Harrah's argument that it wasn't Blayde's "employer," it also undermined the credibility of Harrah's key witness:
the evidence supporting Defendants’ explanation for Plaintiff’s termination consists primarily of Hirsch’s testimony, and Hirsch was not a credible witness. Notably, Hirsch testified that he did not work for Defendants even though he listed [Harrah's] as his employer on his LinkedIn page. When confronted with this inconsistency, Hirsch could not offer an explanation except to state that it was not his LinkedIn page. This assertion was incredible given that Hirsch had already verified all of the information contained on the LinkedIn page as being accurate. This and other inconsistencies and illogical conclusions discredit Hirsch’s testimony that Plaintiff’s Action Plan was intended to improve Plaintiff’s performance.
January 05, 2011
Lawyer-Spam Plaintiff Loses in the Sixth Circuit Over Allegedly Misleading DISH Network Emails -- Ferron v. Echostar
[Post by Venkat Balasubramani]
Ferron v. Echostar Satellite LLC, 09-4407 (6th Cir.; Dec. 28, 2010)
Ferron brought claims against Dish Network and its retail and marketing partners alleging that he had been deceived by the terms of email offers sent by defendants. According to defendants, Ferron's strategy was to actually sign up to receive emails which he claimed were deceptive. However, prior to receiving any emails, he allegedly called to verify the terms of Dish Network's service:
according to defendants, Ferron purposefully provided his email address to the approximately twelve satelitte dish websites from which he later received advertisements. Before he provided his email address to the websites, Ferron contacted Dish network call centers to obtain information about the terms and conditions of various Dish Network products and services. Accordingly, Ferron was aware of the terms allegedly excluded from the deceptive emails before he received them.
The trial court granted summary judgment, and the Sixth Circuit affirms in an unpublished opinion.
Ohio Consumer Protection Statute: Ferron claimed that he did not need to have been deceived personally to bring a claim under the OCSPA - it was sufficient that the emails contained objectively misleading information. The court disagrees. Citing overwhelming precedent in defendants' favor, the court concludes that a plaintiff must have been actually deceived in order to bring a claim under the OCSPA (i.e., individual plaintiffs cannot take the private attorney general route). Although Ferron argued that a ruling to this effect would foreclose legitimate claims, this argument didn't get much traction with the court:
Simply put, the only persons foreclosed by today's ruling are individuals who solicit emails from an advertiser after having researched and discovered the additional terms the advertisement allegedly excludes.
The Publisher Exception to the OCSPA: The Sixth Circuit also affirmed the trial court's ruling that one of the defendants (Hydra) who was a mere intermediary was entitled to the "publisher exception" to the OCSPA. As an initial matter, the court concludes that Hydra "was not involved in the creation of the . . . advertisements," and thus was precisely the type of entity who could take advantage of the publisher exception. Ferron argued that Hydra was not the type of publisher the legislature intended to fit within the exception, because Hydra received a referral fee each time a customer signed up (instead of a flat fee per ad, or a monthly fee). The court rejects this argument, reasoning that regardless of the fee structure, the publisher always has an interest in ensuring that customers respond to advertisements. Ferron also argued Hydra should not be entitled to take advantage of the publisher exception with respect to any ads transmitted by Hydra after the filing of the lawsuit. The court rejects this argument as well, since the mere filing of Ferron's complaint is not indicative of a violation of the statute (just that Ferron alleged that defendants violated the statute).
Request for Sanctions: Ferron requested sanctions on the basis that defendants did not maintain the ads in their native form (i.e., he could not click through and access the underlying links and graphics). The Sixth Circuit affirms the district court's rejection of Ferron's request for sanctions, noting that Ferron himself had the emails in question and should have saved them.
The court's description of the facts makes me think a section 230 defense may have been available to Hydra, not that it ended up needing it anyway.
The bigger takeaway? When it comes to spam litigation at least, courts seem more than able to ferret out what they see as unworthy claims. This is one of a long line of losses by plaintiffs who seem to have made it a part of their business to seek out and sue people to send them unsolicited email (see Gordon v Virtumundo, Mummagraphics, etc.).
A couple of days after the Sixth Circuit issued its opinion in this case, it issued its ruling in Charvat v. Echostar, a case where Ferron was counsel for the plaintiff. This case involved alleged do-not-call violations against Echostar and third parties brought by Philip Charvat, whom the court describes as not being "shy in taking on the role of private attorney general under the Telephone Consumer Protection Act" and listed him as a plaintiff in 13 TCPA lawsuits. The Sixth Circuit delves into the thorny jurisdictional issues, but ultimately ends up punting to the FCC on the interesting issue of whether Echostar could be liable for TCPA-violating calls made by third party independent contractors/affiliates. The FCC's amicus brief in this case suggests that it has an expansive (and perhaps troubling) view of such imputed liability.
Coverage of an earlier Ferron lawsuit: "Q1 2009 CAN-SPAM Quick Recaps"
UMG Can't Enforce "Not for Sale" Restrictions on Promo CDs -- UMG v. Augusto
[Post by Venkat Balasubramani with additional comments from Eric]
UMG Recordings, Inc. v. Augusto, No. 08-55998 (9th Cir.; Jan 4, 2011)
The Ninth Circuit issued the third of its three opinions dealing with the first sale doctrine. (Vernor v. Autodesk was the first, followed by MDY v. Blizzard.) The three cases have arisen in varying contexts, but all engaged the same underlying question of whether a transaction involving copyrighted material should be treated as a sale or a license. Autodesk involved a high(er) end transaction between commercial players, Blizzard involved a consumer transaction where money changed hands, and in this case, UMG sent out promo CDs for free.
As the court describes it, UMG sends out CDs to select individuals (e.g., critics or radio programmers). There is no agreement in place, and the recipients do not request to receive the CDs. The CDs contain a statement indicating that the CDs should not be sold or transferred. Augusto acquired several promo CDs from the original recipients and resold them on eBay. UMG tried to prevent the sales of the CDs through eBay, and ultimately filed a copyright infringement lawsuit against Augusto.
With respect to the key question of whether the initial transfer by UMG was a license or resulted in the transfer of title, the court looks to the circumstances surrounding the distribution of the CDs and concludes that the transactions cannot be characterized as licenses (to the extent they can be characterized as transactions at all!):
Our conclusion . . . is based largely on the nature of UMG's distribution. First, the promotional CDs are dispatched to the recipients without any prior arrangement. . . The CDs are not numbered and no attempt is made to keep track of where particular copies are or what use is made of them.
The court also notes that purported licensing arrangement is contrary to the terms of the "unordered merchandise" statute (39 USC 3009), which allows people to freely dispose of unsolicited/unordered merchandise. Finally, the court looks to the language of the "promotional use only" text and notes that the language does not even "purport to create a license." The court also trots out the Restatement of Contracts for the proposition that in the context of contract law, "acceptance by silence" is not the norm.
It's tough (for me at least) to glean a uniform rule from Autodesk, Blizzard, and Augusto. Blizzard and Autodesk involved software, and it's unclear as to whether the Ninth Circuit thinks that transactions involving software warrant different treatment than say, those involving music. The key distinction the court focuses on in this case is that the UMG transaction wasn't a transaction in the conventional sense of the term.
One question is - how will this affect the ability of sellers of books and other media to characterize sales as licenses, which allows them to, among other things, disappear this content and restrict its transfer? (See, e.g., "Amazon Clarifies When It Will Remove Kindle Books," in the aftermath of Amazon's deletion of copies of 1984 which had been downloaded.) Would it have mattered in this case if UMG provided a code where recipients can download promotional tracks (of course, after having agreed to online terms)? Here's the current version of Amazon's Kindle license agreement (the provisions relating to content):
Upon your payment of the applicable fees set by Amazon, Amazon grants you the non-exclusive right to keep a permanent copy of the applicable Digital Content and to view, use, and display such Digital Content an unlimited number of times, solely on the Device or as authorized by Amazon as part of the Service and solely for your personal, non-commercial use. Digital Content will be deemed licensed to you by Amazon under this Agreement unless otherwise expressly provided by Amazon.
Restrictions. Unless specifically indicated otherwise, you may not sell, rent, lease, distribute, broadcast, sublicense or otherwise assign any rights to the Digital Content or any portion of it to any third party, and you may not remove any proprietary notices or labels on the Digital Content. In addition, you may not, and you will not encourage, assist or authorize any other person to, bypass, modify, defeat or circumvent security features that protect the Digital Content.
I'm inclined to think the court's opinions in these three cases leave enough room for the Amazons of the world to argue that they license content to users (and I think many of these battles will be fought along DRM lines anyway), but it wasn't immediately obvious from reading the three Ninth Circuit opinions.
Ars Technica: "Appeals court upholds first sale doctrine for promo CDs"
This opinion has at least three pieces of good news and one piece of not-so-good news.
Let's start with the not-so-good news. Collectively, the troika of 2010 9th Circuit First Sales cases (Vernor, MDY and Augusto) have not given us a clean snapshot of First Sale law in the Ninth Circuit. For the most part, I continue to believe that the Ninth Circuit gives low deference to its own circuit rulings, so each panel effectively makes up the law as they go along. This might actually be good news in the sense that bad rulings have potentially short shelf lives, but overall it's not-so-good news because there really is no way to predict the outcomes in future cases. That's an unfortunate reality because there probably would be even more entrepreneurial activity around secondary resales of IP-protected physical goods if the rules were clearer.
Despite my bearish outlook for legal certainty, one legal point has emerged with some clarity:
three considerations that we may use to determine whether a software user is a licensee, rather than an owner of a copy. First, we consider whether the copyright owner specifies that a user is granted a license. Second, we consider whether the copyright owner significantly restricts the user’s ability to transfer the software. Finally, we consider whether the copyright owner imposes notable use restrictions
OK, let's turn to the good news in this case.
Good news #1: Although the court doesn't say it outright, the court makes numerous references implying that the First Sale rules for software differ from other copyrighted materials. On this point, I think the case is more definitive than Venkat thinks. As a result, one way to read the case is that Vernor and MDY restricted the consumers' First Sale rights only because they involved software.
Good news #2: The court rejects UMG's attempts to impose a label license. One label license was farcically brief ("Promotional Use Only—Not for Sale"). However, the court also rejected a more carefully crafted label license:
This CD is the property of the record company and is licensed to the intended recipient for personal use only. Acceptance of this CD shall constitute an agreement to comply with the terms of the license. Resale or transfer of possession is not allowed and may be punishable under federal and state laws.
I'm not 100% confident that the next 9th Circuit panel will toss aside such a well-crafted label license so quickly. Nevertheless, here, the label license failed, and this gives us some reason to believe that other label licenses should similarly fail.
Good news #3: Combining the first two points of good news, the Augusto case indicates that except for software vendors, copyright owners may not be able to restrict buyers' First Sale rights on initial sales of physical books, CDs, DVDs or other copyright-containing physical media. Thus, some of the doomsday scenarios initially floated in response to the Vernor opinion--e.g., every physical book, CD and DVD will be slapped with a label licensing waiving First Sale rights--seem unlikely now.
Although I think that's the right rule both normatively and descriptively, this opinion did involve the Unordered Merchandise rule (3009). The court's opinion doesn't rely solely on 3009, but that provides future panels with a way to distinguish this opinion if they want.
Even so, there are other situations beyond promotional CDs where this case almost certainly provides a useful answer. For example, many casebook publishers send unsolicited review copies to law professors. Starting in the past year or two, publishers have put anti-First Sale label licenses onto the books (in some cases engraved onto the cover; in other cases, as a sticker slapped on the cover). As an example, West's label license reads "Professor Review Copy//Not for Resale." I'm pretty sure this opinion means that those label licenses stuck onto unordered review copies are ineffectual, making the review copies freely resellable. (I note that law professors have had extensive discussions about the non-legal considerations of reselling review copies).
Despite the good news for chattel sales, as Venkat notes, to the extent copyrighted content is distributed electronically, vendors will successfully eliminate or control any "First Sale" rights for the digital bits.
January 04, 2011
Ripoff Report Ordered to Stop Publishing User-Submitted Report--Giordano v. Romeo
By Eric Goldman
Today's case is a baffling and clearly erroneous ruling. What's even more bizarre is that the judge initially got the right result and *then* screwed up. Bummer.
The case involves an allegedly defamatory Ripoff Report posting by a user, Romeo. The plaintiff sued the user and Ripoff Report (Xcentric). The judge initially dismissed Ripoff Report based on 47 USC 230. So far, so good.
Then, the user agreed to a stipulated injunction that she would ask Ripoff Report to remove the post. Ripoff Report--following its standard no-removal policy--said no. The plaintiff then went back to court, got permission to add Ripoff Report back into the case as a defendant, and then sought a TRO against the Ripoff Report for failing to remove the post.
The judge signed the plaintiff's requested TRO form, which said “Xcentric [sic] refusal to comply with this Court’s Order and the demand of the publisher to remove the statements makes XCentric the publisher of the statements and therefore liable for damages.” The judge crossed out the phrase "and therefore liable for damages" and hand-wrote the following: “This is different from determining that they are the publisher solely because of the posting.” The TRO form also says "The court specifically finds that the CDA does not categorically bar this Court from issuing an injunction against Xcentric" and later "even if Xcentric were not treated as the publisher (and indeed, Plaintiffs do not seek to impose civil liability upon Xcentric), the CDA does not bar this court from entering injunction [sic] relief."
Whoa. The court can repeat as many times as it wants that Section 230 doesn't preempt injunctive relief, but it's greatly mistaken. Courts have repeatedly rejected injunctive relief in 230 cases in the past. See, e.g., Noah v. AOL Time Warner, Inc., 261 F. Supp. 2d 532 (E.D. Va. 2003):
plaintiff argues, unpersuasively, that § 230 does not apply to claims for injunctive relief, relying on Mainstream Loudoun v. Board of Trustees of the Loudoun Cty. Library, 2 F.Supp.2d 783, 790 (E.D.Va.1998)....Subsequent courts have not followed Loudoun in limiting § 230 immunity to claims for liability only, but have found § 230 applicable to claims seeking injunctive relief as well. See Ben Ezra, 206 F.3d at 983-986 (applying § 230 to claims for injunctive relief); Smith v. Intercosmos Media Group, Inc., 2002 WL 31844907 (E.D.La. Dec.17, 2002) (holding that § 230 provides immunity from claims for injunctive relief); Kathleen R., 104 Cal. Rptr.2d at 781 (same). Indeed, given that the purpose of § 230 is to shield service providers from legal responsibility for the statements of third parties, § 230 should not be read to permit claims that request only injunctive relief. After all, in some circumstances injunctive relief will be at least as burdensome to the service provider as damages, and is typically more intrusive.
Further, the court goes out of its way to call Ripoff Report a "publisher" of Romeo's content, which explicitly invokes the statutory language in 230(c)(1) that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." So by calling Ripoff Report a publisher, the court demonstrated that its ruling was unlawful. Worse, the idea that Ripoff Report isn't initially a publisher but can become one by failing to remove the post has been thoroughly rejected in a long string of cases dating back to the uncited AOL v. Zeran case. The Florida Supreme Court has even adopted Zeran in Doe v. AOL from a decade ago, so there really isn't any question that this judge went rogue.
This ruling is similar to the recent Blockowicz decision, but that case had a different procedural setting. There, Ripoff Report wasn't a defendant and had never been; the only issue was a statutory construction of language in FRCP 65(d). Here, for perplexing reasons, the court allowed the plaintiff to name the Ripoff Report as a defendant as a second time after having dismissed the Ripoff Report initially.
We've now seen several cases in the past few months involving injunctions against websites over user-generated content. Two of them, the Blockowicz and Bobolas cases, said an injunction against a user's post does not reach the hosting website per FRCP 65(d). In Amaretto v. Ozimals, the court issued an injunction against a non-party website without explaining how or why it could reach that site. Then, in this case, the court lets the plaintiff add the website as a defendant solely for injunctive relief purposes. The legal results in these cases are pretty jumbled right now, and I hope we get some definitive clarity soon. Perhaps we'll get it in this case, as the Ripoff Report plans to appeal.
Paul Levy has an excellent and lengthy writeup about this case, the Blockowicz case and their implications.
January 03, 2011
Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals
By Eric Goldman
Here's a line you don't see every day in judicial opinions: "The gist of the copyright dispute between the parties is whether Plaintiff's virtual horses infringe on copyrights associated with Defendant's virtual bunnies." This reminded me a little of that great line from Ghostbusters: "dogs and cats living together... mass hysteria!"
The underlying dispute involves rival sellers of virtual animals that require the users to keep purchasing food to keep the animals alive. The C&D letter to Amaretto goes into some detail about what it thinks Amaretto copied. I didn't follow it all, but some of the assertions are clearly dubious (in a Baker v. Selden kind of way) and none of them seemed like a surefire winner to me. The court interpreted Ozimals' position as asserting copyright over software functionality (clearly one of Ozimals' core concerns), and the court rightly dismisses the copyright merit of that position.
This ruling addresses Amaretto's request for a TRO based on 17 USC 512(f), which the court grants. This is now the third time I've seen 512(f) used as the basis of injunctive relief--the other two being Biosafe-One v. Hawks from 2007 and the recent Design Furnishings v. Zen Path LLC (which just had a new, much clearer ruling granting a preliminary injunction). In a clearly rushed opinion, the court didn't cite either case. It's interesting to see 512(f) emerge as an important tool in fighting back against cloud service providers who are too jumpy about copyright takedown notices. [UPDATE: I had forgotten about Novotny v. Chapman, a case that raised 512(f) and injunctive relief but ultimately sidestepped it.]
What's even more unusual about this case is that the court's TRO applies to Second Life (Linden Research), not Ozimals. The specific order: "Linden Research, and all persons in active concert or participation with Linden Research, are temporarily restrained from taking down from Second Life Plaintiff's Horse Product Line."
However, Linden/Second Life wasn't a party to the lawsuit, so the court is effectively stretching FRCP 65(d) to apply to Second Life as a non-party. This takes us squarely into the territory implicated by the recent Seventh Circuit Blockowicz ruling (and a funky ruling, Giordano, I will blog soon), which said that a hosting website wasn't automatically in active concert with a user who submitted enjoined content. Perhaps copyright liability is or should be different than defamation, especially given the different structures of 47 USC 230 and 17 USC 512. Otherwise, it seems like the court's TRO may be improperly trying to bind a non-party. At minimum, the court should have explained why it was discussing a TRO against Second Life.
The order binding Second Life also raises some troubling First Amendment issues. Second Life has the First Amendment rights to decide what to publish and what not to publish. If Second Life decides, for whatever reason, that it wishes to kibosh Amaretto's content, it seems improper for a court to force it to do otherwise. This point is completely unaddressed in the court's opinion because Second Life wasn't a litigant and couldn't advocate for its own interests. I could see why Second Life would basically agree to something analogous to an interpleader (effectively turning over the user-vs.-user copyright dispute to the judge and agreeing to abide by the judge's instructions). However, in a quick perusal of PACER, I didn't see anything that looked like Second Life consented to be bound by the proceedings. Were Second Life to fight this order on First Amendment grounds, I think it would have some mojo in that challenge.
In the other two cases I mentioned, the injunctive relief restrained the copyright owner from sending more takedown notices. In light of both the FRCP 65 problem and the First Amendment, it's not clear from this brief opinion why that approach wouldn't have sufficed. That way, Ozimals' 512(c)(3) takedown notices would stop, but Second Life could still retain its constitutionally protected editorial discretion.
January 02, 2011
Nov.-Dec. 2010 Quick Links, Part 5
By Eric Goldman
* Amazon.com, LLC v New York State Dept. of Taxation & Fin., 2010 NY Slip Op 07823 (N.Y. App. Div. Nov. 4, 2010). A NY appellate court rejected Overstock's/Amazon's facial challenges to "affiliates tax" but revived the as-applied challenge. The court distinguishes between "solicitation" of business for Amazon (collection obligation imposed) and passive advertising for Amazon (no collection obligation), but doesn't clearly explain why Amazon affiliates are engaged in solicitation and not passive advertising. Among other things, the court says [I reordered quotes]:
An advertisement in a newspaper is clearly not solicitation, as it is geared to the public at large. Likewise, the maintenance of a Web site which the visitor must reach on his or her own initiative is not, under the statute, or the advisory opinions, a solicitation. On the other hand, the targeting of a potential customer by the transmission of an e-mail is no different from a direct telephone call or a mailing to a customer. Both constitute active initiatives by a party seeking to generate business by pursuing a sale...When a representative can only receive compensation for an actual sale, it is much more likely that the representative will actually solicit, rather than passively maintain a Web site.....Nevertheless, we remand for further discovery so that plaintiffs can make their record that all their in-state representatives do is advertise on New York-based Web sites.
Although I think the court's analysis is wrong, it is not fatal to affiliate programs. For example, it seems like Amazon could fix its program by (1) prohibiting email marketing by affiliates, or (2) moving to a CPC model for affiliates.
"If such retailers have total annual gross sales in Colorado of $100,000 or more, such retailers must: Provide notice with each purchase (the “transactional notice”). The transactional notice must:
• State that the retailer does not collect Colorado sales or use tax.
• State that the purchase is not exempt from Colorado sales or use tax merely because it is made over the Internet
or by other remote means.
• State that State of Colorado requires Colorado purchasers to file a sales or use tax return at the end of the year
for all taxable Colorado purchases that were not taxed, and pay tax on those purchases
• The notice must be easily seen and located near the total price.”
* Ars Technica on the Comcast/Level 3 spat. Is it a Net Neutrality red flag or a garden-variety peering disputes?
* Putting an end to one of the most over-hyped stories of the year, Craigslist shut down its adult services category globally.
In an unrelated development, Craigslist got a $6M+ judgment against ezadsuite.com, which "developed, advertised, and sold software programs to automate posting ads on Craigslist’s website and utilized other automated devices and related services meant to circumvent Craigslist’s security measures." This is one of those doctrinally troubling rulings that I choose to ignore because it's a default judgment. See the magistrate report and the judge's adoption.
* Specht v. Google, 2010 WL 5288154 (N.D. Ill. Dec. 17, 2010). Google wins a trademark battle over the term "Android." Some interesting parts:
- "on its own, the use of a domain name or e-mail address to identify an Internet host computer does not constitute a bona fide use in commerce. The use of a website address containing a trademark is not the same as use of the mark."
- "The androiddata.com website served as a remnant of a closed business. A "ghost site" such as this is not a bona fide use in commerce that can prevent the abandonment of a mark. The cost is small to maintain a domain name registration and host a several-page promotional website without e-commerce functionality, such as that which Plaintiffs contend existed at androiddata.com....Allowing a mark owner to preserve trademark rights by posting the mark on a functional yet almost purposeless website, at such a nominal expense, is the type of token and residual use of a mark that the Lanham Act does not consider a bona fide use in commerce."
* Oklahoma HB 2800: Executors can take over web accounts of the deceased.
* California State Bar Standing Committee on Professional Responsibility and Conduct Opinion No. 2010-179:
Whether an attorney violates his or her duties of confidentiality and competence when using technology to transmit or store confidential client information will depend on the particular technology being used and the circumstances surrounding such use. Before using a particular technology in the course of representing a client, an attorney must take appropriate steps to evaluate: 1) the level of security attendant to the use of that technology, including whether reasonable precautions may be taken when using the technology to increase the level of security; 2) the legal ramifications to a third party who intercepts, accesses or exceeds authorized use of the electronic information; 3) the degree of sensitivity of the information; 4) the possible impact on the client of an inadvertent disclosure of privileged or confidential information or work product; 5) the urgency of the situation; and 6) the client’s instructions and circumstances, such as access by others to the client’s devices and communications.
* Another ill-conceived California law: large companies have to disclose on their websites their efforts to reduce slavery and human trafficking in their supply chains. Are you kidding me???
* Inside Higher Ed: "professors ‘caught on tape’ is a growing genre, and some think it could have a chilling effect on academe."
* HuffPost: You're Out: 20 Things That Became Obsolete This Decade.
* Tell your favorite male bloggers (besides Venkat and me, of course) how you really feel about their strengths.
January 01, 2011
Nov.-Dec. 2010 Quick Links, Part 4
By Eric Goldman
Blogs and Boards
* Reuters on the wild-and-wooly world of investor message boards.
* KingCast.net v. Friends of Kelly Ayotte, 2010 WL 4683829 (D.N.H. Nov. 2, 2010). Blogger's unsuccessful lawsuit to gain mandatory access to a candidate's campaign events as a journalist.
* Mealer v. GMAC Mortg. LLC, 2010 WL 4586183 (D. Ariz. Nov. 2, 2010). A lawsuit against General Motors for an employee's allegedly disparaging blog post is dismissed because the new GM isn't liable for the old GM's activities.
* ABA Journal: some attorneys are using independent contractors to “ghost write” blog posts for them. This seems like a practice filled with legal landmines.
* Florencia Marotta-Wurgler, Does Disclosure Matter? The abstract:
Disclosure has long been the preferred regulatory approach to curtail one-sided standard form contract terms....The appeal of disclosure is that it is relatively low cost, improves consumer decision-making and preserves consumer choice. For disclosure to be effective, however, it must increase readership and understanding of contracts to a meaningful rate, and, conditional on readership, contract content must be relevant to purchase decisions. This paper tests both these necessary conditions. We follow the clickstream of 47,399 households to 81 Internet software retailers to measure contract readership as a function of disclosure. We find that making contracts more prominently available does not increase readership in any significant way. In addition, the purchasing behavior of those few consumers who read contracts is unaffected by the one-sidedness of their terms. The results suggest that mandating disclosure online should not on its own be expected to have large effects on contract content.
* S. 3386, Restore Online Shoppers' Confidence Act, signed into law Dec. 29, 2010. The bill prevents online merchants from passing shoppers' credit card numbers to other merchants without requisite consent. It also restricts negative option sales without adequate disclosure, consent and ability to terminate.
* Penachio v. Benedict, 2010 WL 4505996 (S.D.N.Y. Nov. 9, 2010). "Defendants are not subject to personal jurisdiction in this Court. The preparation and dissemination of the defamatory material occurred outside of New York. Although the [YouTube] videos bear a relationship to the proceedings in New York and Defendants' alleged commercial interest in New York, Defendants' interaction with New York during the publication of the videos is too marginal to rise to the level of purposeful availment."
* Miller v. Kelly, 2010 WL 4684029 (D. Colo. Nov. 12, 2010). "Defendant's LiveJournal blog appears to the Court to have been merely a passive website that allowed internet users to access and view information posted by Defendant. Accordingly, the Court finds that Defendant's authorship of a LiveJournal blog is an insufficient basis for the exercise of general personal jurisdiction over her....the Defendant's authorship of an entry on the blog was not an act purposefully directed at Colorado. Although the blog entry was allegedly accessed by Plaintiff in Colorado, no allegation or evidence has been presented to indicate that Defendant expressly aimed the entry at Colorado."
* State v. Pierce, 2010 WL 4941473 (Minn. App. Ct. Dec. 7, 2010). A man was ordered not to contact his ex-girlfriend. He violated the order by sending her a MySpace message, but prosecutors could not establish that he sent or she received the message in their county, so the conviction was reversed.
Court Rejects Constitutional Challenge to TCPA Based on Vagueness in "Prior Express Consent" Exception -- Kramer v. Autobytel, Inc.
[Post by Venkat Balasubramani]
Kramer v. Autobytel, Inc., et al., 10-cv-02722 CW (N.D. Cal.; Dec. 29, 2010)
We've blogged a bunch about cases involving defendants accused of sending text messages - none of them have resolved favorably in favor of the defendants:
"Another Court Finds that TCPA Applies to Text Messages -- Lozano v. Twentieth Century Fox Film Corp."
"Court Finds that SMS Spam Messages are Subject to the TCPA and Rejects First Amendment Defense -- Abbas v. Selling Source, LLC"
This case is no exception. Plaintiff brought a putative class action on behalf of recipients of "thousands of" unwanted text messages, some of which were allegedly received after plaintiff opted out. Plaintiff settled against the named defendant (Autobytel), and the court dismissed the individual claims against Autobytel. The putative class claims against Autobytel were dismissed without prejudice, and proceeded against the remaining defendants. Defendants advanced two arguments in their motion to dismiss: (1) the Telephone Consumer Protection Act was vague in its requirement that the messages be sent without the recipients' "prior express consent"; and (2) the allegations in the complaint failed to state a claim.
The plaintiff's complaint alleged the classic transmission of messages through a list procured by or on behalf of the sender (a list which was allegedly passed on multiple times down the chain). Plaintiff alleged:
an effort to promote its automotive products to consumers, Autobytel, the proprietor of one of the nation's largest automotive referral services, through marketing partners such as LeadClick, engaged B2Mobile to conduct an especially pernicious form of marketing: the transmission of unauthorized advertisements in the form of 'text message' calls to the cellular phones of consumers throughout the nation. . . . In order to make their en masse transmission of text message advertisements economical, Defendants used lists of thousands of cellular telephone numbers of consumers acquired from third-parties. . . . Defendant B2Mobile contracted with third parties to acquire lists of phone numbers for the sole purpose of sending spam text messages on behalf of advertisers for its own monetary gain.Defendant Autobytel contracted with LeadClick, who there after contracted with B2Mobile, for the purpose of advertising Autobytel's products and services through spam text messages.
As Professor Goldman mentions in his post about Satterfield, this is exactly the sort of thing that is likely to land those who transmit mass text messages in trouble (i.e., relying on consent allegedly procured by third parties).
First Amendment Challenge: Citing the standard articulated by the Ninth Circuit in Satterfield which requires a "common sense interpretation" of "express consent," and FCC pronouncements that the TCPA applies to SMS spam, the court rejects defendants' constitutional challenge to the statute. I'm always pretty skeptical of First Amendment challenges to statutes regulating the unsolicited transmission of one-to-one communications. It wasn't a shocker that the court rejected defendants' constitutional arguments in this case.
Sufficiency of the Complaint: Defendants' challenge to the sufficiency of the complaint fared no better. Plaintiff alleged that the messages were transmitted "using equipment that . . . had the capacity to store or produce telephone numbers to be called, using a random or sequential number generator" (this was the standard articulated by the Ninth Circuit in Satterfield). Some of the defendants also contested the sufficiency of plaintiff's allegations regarding defendants' role in the transmission of the messages, but the court held that plaintiff's allegations were sufficient:
[plaintiff] stated plainly that he never consented to the receipt of such messages, and described his attempt to opt out of receiving messages from SMS code 77893, which was allegedly registered toB2Mobile. Kramer described the relationship between B2Mobile, Autobytel, and LeadClick, and the roles involved in text message advertising.
There's not a whole lot more to say about this case. It's a good reminder that relying on third party consent when you transmit unsolicited messages is risky behavior.