September 30, 2011
Pennsylvania Appeals Courts Says no to Circumstantial Authentication of Text Messages -- State v. Koch
[Post by Venkat Balasubramani]
State v. Koch, 2011 PA Super 201 (Sept. 16, 2011)
Courts continue to struggle with the authentication of electronic communications. Although several courts have opined that the rules of authentication are not upended by new technologies and modes of communication, courts tend to be erratic about authentication and admission of this type of evidence.
In this case, the defendant was convicted of possession of marijuana with intent to deliver and possession as an accomplice. She was sentenced to 23 months of probation. The evidence revealed that she resided with her brother (who was allegedly selling cocaine) and her paramour. Police officers obtained a warrant to search her residence and obtained drugs, paraphernalia, baggies and other items. The search also yielded two cell phones, one of which the defendant admitted was hers. One of the detectives searched the defendant's cell phone for drug-related messages, and found thirteen messages that the detective determined were "drug-related." Although the defendant did not admit to authoring the messages, the messages were introduced into evidence. The key issue on appeal was whether the messages were sufficiently authenticated.
The court reiterates its earlier statement that there is nothing "inherently unreliable" about emails or text messages and there is no need to create new rules governing the admissibility of this type of evidence. The court looks to case law from other jurisdictions allowing the admission of text messages and concludes that in those cases, there was more than mere "confirmation that the number or address belonged to a particular person [in question]." As a prerequisite to admission, courts have looked to whether the messages themselves contain "factual information or references unique to the parties involved." The key issue is authorship and while an email address or number can be tied to one person, often more than one person uses an email address (email addresses can also be accessed without permission). The court says that text messages have unique attributes that affect their evidentiary treatment:
Text messages are somewhat different in that they intrinsic to the cell phones in which they are stored. While e-mails and instant messages can be sent and received from any computer or smart phone, text messages are sent from the cellular phone bearing the telephone number identified in the text message and received on a phone associated with the number to which they are transmitted. The identifying information is contained in the text messages on the cellular telephone. However, as with e-mail accounts, cellular telephones are not always exclusively used by the person to whom the phone number is assigned
Here, the detective testified that he could not be sure that the defendant authored the messages in question and the content of the messages themselves (they referred to the defendant in the third person) indicated that it was unlikely that the defendant authored some of the messages. The court says that the messages were not sufficiently authenticated. There was no testimony from the recipients or an admission from the defendant that the defendant authored the messages. Contextual clues as to authorship were absent. The court finds that the messages were not properly admitted.
The court also finds that the messages were inadmissible hearsay. The prosecution tried to argue that the messages were not being offered for the truth of the matter, but the court rejects this argument. The court says that the messages could have been admitted under the party admission exception, but given that there was a dispute as to whether the defendant authored the messages, this was not proper.
Circumstantial authentication decisions tend to be confusing. Some courts have allowed circumstantial authentication while other courts have said no. For example, in Commonwealth v. Purdy, the Massachusetts Supreme Court says yes to circumstantial authentication of emails based on ownership of a computer (and left it up to the defendant to explain any dispute over actual authorship). In contrast, in Griffin v. Maryland the Maryland Supreme Court said no to circumstantial authentication of MySpace evidence, based in part over concerns that social networking profiles can be faked or altered without permission.
I would think that as between an email, a Facebook profile or message, or a text message, a text message is the least likely to be subject to a dispute over authorship. As the recent incident involving cell phone photos of Scarlett Johannson illustrates, cell phones are not immune from hacking. Nevertheless, fake text messages are certainly less common than fake social networking profiles, and once it's established that the putative author was tied to the telephone number in question, it would seem that it should be up to that person to explain away any discrepancy. I would guess that most often, the reason why a text message may be sent by someone other than the owner of the telephone number in question would be because the owner implicitly or explicitly allowed another person to use their cell phone to send a message. This is not the case with Facebook posts, or even emails. In any event, in this case, the court chose to impose a higher standard and require evidence as to actual authorship, even though there was no dispute that the number was tied to the defendant.
(h/t ABA Journal)
September 29, 2011
Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account -- Deck v. Spartz, Inc.
[Post by Venkat Balasubramani]
Deck v. Spartz, Inc., 11-Cv-1123 (E.D. CA.; Sept. 27, 2011)
I posted about the lawsuit involving the @OMGFacts Twitter account some time ago. ("Thoughts on the Lawsuit Over the @OMGFacts Twitter Account.") The account was created by Adorian Deck, who at the time was a minor. Deck signed an agreement with Spartz to commercialize the brand, and the parties ended up in a dispute over the agreement and who could control the "@OMGFacts" brand. As the court notes, Deck had an "OMG-moment," and decided to bail out on the agreement. He sued in California to disaffirm the agreement and Spartz, an Indiana corporation, moved to dismiss or transfer the case to Indiana. The court denies Spartz's motion and allows Deck to proceed.
Personal jurisdiction: Spartz's argument that it is not properly subject to personal jurisdiction in California does not go very far with the court. At the time the parties entered into the agreement, Spartz knew that Deck was a California resident, and the court finds this dispositive. It does not matter that the parties conducted their negotiations over the internet:
It is immaterial that the primary method of communication between the parties was electronic and that Adorian Deck's performance was to occur online. The Internet is not a place, and Adorian Deck was to complete his performance in California, his place of residence. The fact that he was to send the resulting materials to [Spartz] via the Internet does not change the nature of the parties' relationship.
Nothing too earthshattering there. Spartz also pointed to the forum selection clause in the agreement that required disputes to be resolved in Indiana. The court says that if Deck is entitled to disaffirm the agreement (and the court finds that he is), the forum selection clause goes out the window.
Disaffirmance: With respect to the disaffirmance issue, Spartz argued that Deck was trying to have it both ways: on the one hand, Deck was trying to disaffirm the agreement and on the other hand he was suing for breach. The court disagrees and says that dispute is over the remedies Deck is entitled to if he gets to disaffirm the agreement. Spartz also argued that Deck could not disaffirm unless he returned the consideration he received under the agreement, but the court says that there is case law support for the proposition that disaffirmation before the minor reaches the age of majority does not require the return of consideration, and the current version of the statute (Section 6710) "no longer requires restoration of consideration for any disaffirmed contract." Deck filed the lawsuit when he was still a minor and this reflects a clear intent to disaffirm the agreement. The fact that he did not restore any consideration he received is immaterial.
Trademark claims: Deck brought common law trademark claims against Spartz, and Spartz's principal defense was that the contract is still valid and Deck thus cannot claim unauthorized use. The court says that since Deck is entitled to disaffirm the agreement and expressed an intent to do so and because Deck revoked any permission granted to Spartz to use the mark, Deck states a valid claim for infringement.
Ouch. This is a rough result for Spartz. It's going to have to continue to litigate the dispute in California. The court pretty much nukes the agreement, and this does not put Spartz in a great position in the dispute. It looks like control over the @OMGFacts brand will revert to Deck, and the parties will probably resolve this dispute in short order.
September 28, 2011
Colorado Judge Drills Righthaven and Awards Attorneys' Fees--Righthaven v. Wolf
By Eric Goldman
Righthaven LLC v. Wolf, 1:11-cv-00830-JLK (D. Colo. Sept. 27, 2011)
Another judge, this time in Colorado, issued another stinging rebuke to Righthaven. This time it was Judge Kane in Colorado, and his decision will lead to the end of all of Righthaven's pending cases in Colorado over the "TSA Pat Down" photo from the Denver Post. I assume Righthaven will appeal this ruling to the Tenth Circuit, but until then, it seems like its Colorado operations will be on hold.
Like other judges before him, Judge Kane dismisses Righthaven's case for lack of standing due to an inadequate copyright assignment. Unexpectedly, Judge Kane doesn't simply rely on the Ninth Circuit Silvers case or the other Righthaven precedent. Instead, because the case is in the 10th Circuit and not bound by the Silvers case, the court does a scholarly analysis of the standing issue from scratch. The judge walks through the 1909 Act, the 1976 Act, precedent cases and Constitutional considerations to conclude that the Copyright Act precludes the bare assignment of the right to sue for copyright infringement. The court then finds that Righthaven's assignment from the Denver Post only procured that bare right to sue, despite self-serving language in the contract to the contrary. Some of the judge's arguments were a bit odd, but the detail and care of the judge's analysis substantially increases its odds of surviving the appeal.
The judge orders Righthaven to pay Wolf's attorneys' fees. As I've mentioned before, with every fee award against it, Righthaven's profit meter keeps running in reverse. It wouldn't surprise me if judges eventually award more fees against it than Righthaven took in through its settlements in total. However, none of the fee awards will matter if Righthaven is inadequately capitalized and thus continues to plead poverty. As its profit meter keeps running in reverse, Righthaven may have become a judgment-proof litigant itself. I expect that angry defendants with sizable fee awards are going to look for other parties who might pay the fees. MediaNews, you're probably going to hear from some defendants; I hope you built that contingency into your budget. Wouldn't it be ironic if defendants started sniffing around Steve Gibson's home looking for assets to satisfy their fee awards?
As a final insult, Judge Kane makes it clear that Righthaven isn't going to win in his court, even if they can get a reversal of the standing issue on appeal (see, e.g., FN 2 of the opinion). While this opinion wasn't a flamboyant benchslap like Judge Hunt's opinion in the Democratic Underground case, it was a stern rebuke nonetheless. It's interesting how so many judges, effectively independently from each other, have each morally condemned Righthaven's campaign.
A personal note: I know many folks get a thrill from watching Righthaven implode, but I must confess that I feel no schadenfreude. Yes, it's fun (in a bloodsport way) to watch judicial benchslaps. Yes, of course, Righthaven has been a plague on our community, so having them driven out would be welcome relief. Yes, they have contributed to a nice body of defense-favorable precedent. Yet, using the powerful tools of our judicial system, Righthaven has imposed significant financial and emotional costs on hundreds of victims. I feel sad for the victims who have had to fight back for their rights at the peril of losing their homes, and I feel sad that we as a society have accepted a litigation system that allows a scheme like Righthaven to harm for ordinary well-meaning citizens trying to do the right thing. A judicial crushing of Righthaven is inadequate restitution for these victims, so I remain sad about the overall situation.
Just a reminder: one of my side clients did get sued by Righthaven and settled the case. I publicly disliked Righthaven before that happened, and I still dislike them today.
I'll be off the rest of the week for the Jewish New Year. See everyone next week. To my Jewish readers: L'shana tovah!
Prior blog coverage of Righthaven:
* Resetting the Righthaven Fiasco
* Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon
* Recapping Righthaven Developments from the Past Two Weeks
* Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground
* Another Defense-Favorable Righthaven Ruling--Righthaven v. Choudhry
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One
In Facebook's Lawsuit Against Alleged Spammer, Court Denies MaxBounty's Motion to Dismiss
[Post by Venkat Balasubramani]
Facebook v. MaxBounty, 10-Cv-04712 (N.D. Cal. Sept 14, 2011)
Facebook is suing MaxBounty for allegedly running an affiliate network which dupes people into fanning Facebook pages, promoting the page to their friends, and signing up for third party offers, all based on the promise of free items. Facebook brought a variety of claims, including common law fraud, CAN-SPAM, and the Computer Fraud and Abuse Act. The court previously found that Facebook wall posts can be considered "electronic mail messages" and thus are subject to CAN-SPAM. (Here's my post on this ruling: "N.D. Cal.: Facebook Posts are Electronic Mail Messages, Subject to CAN-SPAM.") However, the court said that Facebook had to be more specific regarding some of its allegations. This time around, the court finds that Facebook's allegations are sufficiently specific, and denies MaxBounty's motion to dismiss.
Fraud claims: Facebook alleged that MaxBounty's affiliate manager knew of and encouraged an affiliate that offered a free IKEA gift card. The affiliate manager allegedly provided technical assistance, assured the affiliate that the affiliate's actions were kosher and, when the affiliate expressed hesitation, offered the affiliate $30,000 to continue. Interestingly, the court doesn't quite specify what the fraudulent statements were and who was deceived by them. In some ways, this case is somewhat reminiscent of the Reunion.com case involving an alleged "spam a friend" scheme, while that case addressed the issue of whether claims under California's spam statute were preempted by CAN-SPAM. One other difference is that in this case, Facebook is the one bringing the fraud claims and it's unclear how Facebook has been duped. The court allows the fraud claim to go forward and also allows claims for aiding and abetting the fraud and for conspiracy.
CAN-SPAM claims: MaxBounty argued that Facebook's allegations fail to make out a claim that MaxBounty "procured or induced" the transmission of messages at issue. MaxBounty also argued that Facebook failed to specify how the messages at issue contained materially false header information. The court rejects these arguments, noting that the messages sent as part of the campaign do not identify MaxBounty as "the initiator" despite the fact that MaxBounty "initiated the messages by inducing Facebook users to execute malicious computer code that cause[d] messages to be sent automatically to all of their Facebook 'friends'."
Computer Fraud and Abuse Act claims: The court refuses to dismiss the CFAA claim, finding that access in violation of the stated restrictions (with a predicate act) can violate the Computer Fraud and Abuse Act. MaxBounty argued that because Facebook granted MaxBounty permission to access the site, MaxBounty did not engage in any "unauthorized access," but the court says no (citing to U.S. v. Nosal).
There are some interesting issues raised in the three claims discussed in the court's order, but since this lawsuit involves a large network trying to police against alleged spam, the court doesn't give MaxBounty's arguments a detailed treatment they may have otherwise deserved. As in many other cases where networks try to shut down interlopers, the causes of action end up being stretched pretty thin.
In the prior post, I mentioned that treating Facebook messages as email messages that are subject to CAN-SPAM does not necessarily jibe with the statute or its requirements. The court says that "none of the messages in question [identified] MaxBounty as the initiator." The court is not specific about what types of Facebook messages were involved, but it's possible to see the practical limitations of including this type of a notification on a Facebook message. This is one of the potential problems with calling messages on social networks "electronic mail messages" that are subject to CAN-SPAM.
Another thing to consider is that Facebook is a platform, and will be subject to attacks from third parties that seek to hold Facebook liable for the actions of third parties in its ecosystem. Could Facebook's overly broad legal arguments come back to haunt it? Mike Masnick makes a similar point about Craiglist's enforcement efforts here: "Craigslist Trying To Destroy The Life Of Someone Who Made Posting To Craigslist Easier." Facebook has ample legal hooks to go after rogues on its network, and it may want to think twice about going in with guns blazing and creating bad precedent in the process.
September 26, 2011
Stock Trading Message Board Protected by 47 USC 230--Deer Consumer Products v. Little
By Eric Goldman
Deer Consumer Products v. Little, Index No. 650823/11 (NY Sup. Ct. Aug. 31, 2011)
SeekingAlpha is a message board for stock traders. This is their second appearance on the blog. In Desai v. Clark, a SeekingAlpha author brought a defamation suit against the author of disparaging comments to his post. That lawsuit ended quickly with a motion to dismiss.
This case involves several third party-authored reports on SeekingAlpha discussing the business practices of Deer Consumer Products, a Chinese manufacturer of small home appliances. Deer sued both an author and SeekingAlpha, alleging defamation. Because the claims relate to third party-authored posts, SeekingAlpha is obviously not liable under 47 USC 230.
Deer mounted a lackluster attempt to work around 230's immunity. The court discussed allegations that SeekingAlpha pre-reviews and "handpicks" third party posts for publication, but those facts push towards the immunity, not away from it. The court continues that "plaintiff failed to submit any evidence or allegation indicating that SAL is anything other than a publisher of third party content on its website. Plaintiff's own submissions show that SAL selects, edits, and organizes the articles written by others....There is simply no allegation that SAL created or developed the alleged defamatory statements and ideas contained in the defamatory report." Further, the court says there's no need for discovery to figure out the relationships between SeekingAlpha and its authors, and thus the court dismisses without leave to amend.
September 25, 2011
Failure to Delete Third Party Comments Supports a Malice Finding in Defamation Case--Tanner v. Ebbole
By Eric Goldman
Tanner v. Ebbole, 2011 WL 4425540 (Ala. Civ. App. Ct. Sept. 23, 2011)
Competitive animosity can be found in every industry, but it sometimes amazes me just how sharp it can. Today's case involves competing tattoo shops located across the street from each other in Mobile, Alabama. The newcomer apparently wanted to knock off Ebbole, the incumbent, and therefore allegedly went on a campaign to smear its rival, including orally telling folks that the rival had communicable diseases. Also, Tanner, a business associate of the newcomer (an employee? an independent contractor? the case doesn't resolve this characterization), allegedly made a MySpace posting questioning her skills. Ebbole sued for slander, libel and invasion of privacy. She alleged that the defendants' campaign had hurt her bottom line, causing her income to drop from no less than $28k/year to $20k that year. (The defendants' economics don't look much better--the company claims a net worth of -$28k, its proprietor claims a net worth of $12k, and Tanner claims a net worth of -$3k. Aren't they effectively judgment-proof???) It's clear the tattoo business isn't the most lucrative.
The jury found in favor of the plaintiff, but this is where things get especially weird. The jury awarded zero compensatory damages plus $200k in punitive damages against the company, $100k in punitive damages against the company's owner and $10k in punitive damages against Tanner, the business associate. This is a rare jury finding of defamation. However, the award of punitive damages when there are zero compensatory damages poses some doctrinal problems, so the court ordered the jury to try again. Not surprisingly (especially given the updated detailed jury instructions on how to award nominal compensatory damages), the jury came back with $1 compensatory damages against each of the three defendants plus the same punitive damages awards.
Also odd was the court's discussion of malice. The court ruled the plaintiff was a public figure, so the plaintiff had to show defendants' malice to support the defamation claim. I am especially interested in its application to Tanner's MySpace posting. The court quotes the posting and it looks pretty timid:
You have taken what I love and sh-t all over it ... allegedly.
Current mood: disgusted
I came across this video during my recent health inspection of all [things]. I was certified to do microdermal anchoring in October of 2008.... [Ebbole's method] is disrespectful to what I do and what I love ... allegedly. I ask you, people of the interweb ... what should I do about it?
FYI: [Ebbole's method] is NOT the method I use or would suggest to be used for any implant procedure.
I'm failing to see anything defamatory in this statement at all. Tanner says that Ebbole's method is "disrespectful" and isn't the method Tanner would use or recommend. The former seems like a straight-up opinion, and the latter appears to be a truthful statement of Tanner's beliefs. What am I missing? The appeals court rejected Tanner's arguments claiming protection as opinion because she didn't provide any citations...hmmm. It's unclear who posted the referenced video, but even if Tanner posted it, if the video truthfully depicts Ebbole at work then I'm not sure what's the problem with it either.
In response to Tanner's posting, some users made negative comments. For example, one comment said "I'll be happy to kill [Ebbole]." A terrible comment, but not defamatory. However, other comments are arguably defamatory, such allegations that Ebbole didn't properly do age authentication and had communicable diseases.
However, due to 47 USC 230, none of the user comments should be attributed back to Tanner, and unless Tanner made the video, any defamatory material in the video shouldn't be attributed back either (if all she did was embed a third party video). Sadly, 47 USC 230 isn't mentioned at all in the opinion, and I fear it was never raised in the lawsuit at all.
On the question of Tanner's malice, the court continues:
The trial court was apparently of the view that malice could be inferred from Tanner's failure, after receiving a demand letter from Ebbole's counsel, to retract her statements or to delete the third-party comments that were posted on her Web page. That view has some support.
Ugh. Inferring malice from a site operator's failure to remove third party comments should be preempted by 47 USC 230 because it treats the operator as a publisher/speaker of those comments. It's disappointing the opinion doesn't acknowledge the issue at all.
The court does remand the case back to the trial court to reconsider the defendants' remittitur requests and whether the punitive damage awards are excessive in light of the nominal compensatory damages.
Blog coverage of other tats-related legal issues:
* Copyright and Tattoos: Hangover II Injunction Denied, But the Copyright Owner Got Some Good News Too--Whitmill v. Warner Bros. (Guest Blog Post)
* Tattoo Advertising/Human Billboards
* Copyright in Tattoos
Plus check out my 2005 contracts exam.
September 24, 2011
Gilbert Arenas' Tweets Sinks His Motion to Enjoin "The Basketball Wives" -- Arenas v. Shed Media
[Post by Venkat Balasubramani]
Arenas v. Shed Media, CV 11-05279 (C.D. Cal.; Aug 22, 2011)
Arenas is a basketball player for the Orlando Magic. He goes by various nicknames, including "Agent Zero, Agent Arenas, and Hibachi." Arenas and Laura Govan were once in a relationship and have four children together. Shed Media produces the "Basketball Wives" television series, which centers around a cast of women, "most of whom have or have had a romantic relationship with a professional basketball player." Govan was set to appear in "Basketball Wives: Los Angeles," a spinoff of "Basketball Wives." Arenas moved to enjoin the broadcast and publicity around Basketball Wives: Los Angeles. He principally brought claims under the Lanham Act and under California's publicity statute.
The court notes that it's unclear as to whether the show will use and appropriate Arenas' identity. Arenas conceded that Shed Media "[took] care to avoid explicit reference to [Arenas'] name in the advertisements." Shed Media tried to argue that there's no publicity rights issue because the show would not discuss Arenas by name and any reference would be in reference to Govan's relationship with a certain unnamed basketball player. The court rejects Shed Media's argument, finding that it's inevitable that Arenas would come up in the show, either by name or by implication. The court then moves on to the two available affirmative defenses: (1) transformative use and (2) the "public interest" defense.
The court finds that Shed Media is likely to succeed on its transformative use defense. According to the court, the focus of the show is on "women who have or have had relationships with basketball players" rather than "the players themselves." The show is not using Arena's likeness to sell or endorse unrelated products or services.
The court also found that Shed Media would be likely to prevail on the "public interest" defense. This turned on whether Arenas' life is a matter of "public concern," and Arenas argued that his personal life and relationships were not a matter of public concern. The court disagrees, pointing to Arenas' Twitter feed for the proposition that Arenas has himself publicized many mundane details about his life (e.g., "dont u hate waking up doing the same thing..wash face..brush teeth..pee..take shower (well sum of us)...put on clothes...eat...etc.").
The court characterizes Arenas' trademark claim as "muddled." (The court doesn't discuss the issue of whether Arenas' name, as a personal name, is entitled to trademark protection at all.) There's no possible confusion between the title of the show and any of Arenas' marks. Arenas also argued that Shed Media's use of his name in the show itself constitutes infringement. The court disagrees, saying that Shed Media would readily have a "nominative fair use" defense available (citing to Toyota Motor Sales v. Tabari). It would be virtually impossible for the show to refer to Arenas without actually mentioning his name. Additionally, any discussions Arenas' ex would have in the press would not necessarily suggest endorsement: "common sense suggests that a celebrity may not agree with his ex-girlfriend's opinion of him."
Having found that Arenas is unlikely to prevail on his claims, the court does not need to address the issue of whether he will be irreparable harm, but it touches on this issue anyway. Arenas argued that the show is one that "prides itself on its coarse brand of drama" featuring "cat fights" and "infidelity issues," and the association between the show and Arenas' brand would lessen his reputation. The court disagrees, again turning to Arenas' Twitter feed and his own statements:
Shed Media provides a treasure trove of newspaper articles about and tweets by Arenas that, taken as a whole, convince the Court that Plaintiff's reputation will suffer no serious blow if BWLA airs as scheduled. For example, to paraphrase Shed Media, it is difficult to see how an association with 'cat fights' will tarnish Arenas' reputation when he has been publicly associated with potential gunfights. [Ouch!] Arenas made national headlines at the beginning of 2010 over an incident in the Washington Wizards locker room in which he drew a gun on a teammate during a dispute over a gambling debt, and ultimately pled guilty to carrying a pistol without a license. Arenas has publicized on Twitter his views of women and other groups--opinions that would be characterized by many, if not most, people as crude and offensive.
Moreover, Arenas has already associated himself with the show by tweeting directly or indirectly about Govan's appearance on it. In these tweets, Arenas expresses his opinion that he "doesn't care what Govan does" because "if she gets a job he pays less money to her." According to Arenas, most basketball players do not know that (1) "they" (presumably ex-wives and ex-girlfriends) cannot lie about basketball players on television because the players can sue the show; and (2) the basketball players pay less money if "they" have a job.
Then there's my personal favorite of Arenas' comments:
Arenas opines that he 'care[s] more about [watching people] plank [i.e., lie prone] th[a]n my ex on tv.'
Ultimately, the court blocks Arenas' attempts to shut down the show. To add insult to injury, the court grants Shed Media's anti-SLAPP motion.
The court's ruling paves the way for the show to discuss aspects of Arenas' life as they relate to Govan. The tenor of the ruling is that, in this day and age of hyper-focused attention on the lives of celebrities, some discussion of this nature has to be tolerated and the fact that a reality show may seize on this is not something a celebrity can prevent by asserting his or her personality rights. Arenas' trademark claims seemed fairly weak, and while it's not quite on par with the 1-800 GET THIN v. Hiltzik case which Eric blogged about last month, the court makes clear that the show has some breathing room to refer to Arenas without running the risk of consumer confusion. Finally, we're left with the classic situation of a modern litigant making an argument that's inconsistent with statements he or she said online.
NB: this isn't the only dispute around Basketball Wives, Los Angeles. Chris Bosh sued Allison Mathis, his former paramour and the mother of his children to block her appearance on the same show. The court (same judge) granted Mathis' motion to dismiss for lack of personal jurisdiction. You can access that order here.
THR (Eriq Gardner): Judge Rejects Gilbert Arenas' Attempts to Block VH1's 'Basketball Wives' (Exclusive)
September 23, 2011
iPhone Privacy Class Action Dismissed for Lack of Standing -- In re iPhone App. Litigation
[Post by Venkat Balasubramani]
In re iPhone Application Litigation, 2011 WL 4403963 (N.D. Cal.; Sept. 20, 2011)
iPhone users sued Apple and various advertising networks alleging that defendants violated their privacy rights "by . . . allowing third party applications that run on [iOS devices] to collect and make use of . . . personal information without user consent or knowledge." The court dismisses the claims but grants leave to amend. Judge Koh's order has the feel of a professor grading an exam, and it covers a lot of ground, including many cases we've blogged about. (It's well worth the read.)
Plaintiffs alleged that Apple made public statements about protecting user privacy but the design of its iOS system "permit[ted] apps that subject consumers to privacy exploits and security vulnerabilities." Plaintiffs alleged that Apple devices allow apps to track, access and use the following customer information:
address book, cell phone numbers, file system, geolocation, International Mobile Subscriber Identity (IMSI), keyboard cache, photographs, SIM card serial number, and unique device identifier (UDID).
Plaintiffs claimed that they were not put on notice of this tracking. Plaintiffs also alleged that the "Mobile Industry Defendants" exploited this information and "use[d] the merger of personal information to effectively or actually de-anonymize consumers." Despite being put on notice, Plaintiffs claimed Apple did not take any action to prevent this tracking and use of information.
Standing: Plaintiffs argued that they suffered three types of injury: (1) their personal information was misappropriated; (2) the personal information diminished in value; and (3) they suffered lost "opportunity costs" in having installed the apps and suffered a diminution in value of their devices because the devices are "less secure" and "less valuable." The court says that the complaint has a deeper standing issue. Plaintiffs failed to allege what injury they suffered personally (or as a class). They fail to identify what apps they used, what personal information was accessed, and what harm resulted. The court also says that the allegations are "especially slim with respect to . . . Apple."
[as in Specific media, plaintiffs have] not alleged any 'particularized example' of economic injury or harm to their computers, but instead offer only abstract concepts, such as 'opportunity costs,' 'value-for-value exchanges,' 'consumer choice,' and 'diminished performance.'
Plaintiffs pointed to Doe v. AOL, but the court distinguishes it on the basis that in that case there were "specific allegations" of the danger of public disclosure of "highly sensitive information." Plaintiffs' allegations in this case "come nowhere close" to the allegations in AOL. Plaintiffs also cite to the Facebook privacy case, but the court distinguishes it on the basis that the Facebook privacy case involved Wiretap Act claims which only require a showing that a person's communication was "intercepted, disclosed or used" in violation of the statute. Here, there's no analogous statute.
The court also says that the alleged injuries are not "fairly traceable" to defendants. There is no allegation that Apple misappropriated the data, and plaintiffs did not distinguish between the "mobile industry defendants," which made it tough to figure out who plaintiffs were trying to hold liable for what misappropriation. The court dismisses on the basis of standing with a cautionary note to plaintiffs:
any amended complaint must provide specific allegations with respect to the causal connection between the exact harm alleged (whatever it is) and each Defendants' conduct or role in that harm.
Although the court dismisses on standing grounds, it goes on to address alternate arguments raised by defendants and other issues in the case.
End user agreements: Apple argued that various end user agreements barred claims for the alleged injuries. Plaintiffs argued that the agreements were contracts of adhesion. The court says that plaintiffs will have trouble with both prongs of the adhesion argument. Plaintiffs have alternatives available, and the contract in question is for a recreational activity. The court does not outright reject plaintiffs' adhesion argument, but it sends plaintiffs a signal that they should articulate in their amended complaint why Apple should be held responsible despite any terms in the agreements.
Particularity and the absence of app developers: The court says that, as to the mobile industry defendants, the complaint fails to allege what role each of the defendants played in the alleged harm. This needs to be fixed in any amended complaint. Apple also raised the argument that the app developers were necessary parties but the court rejects this argument. At this stage, the court declines to dismiss the lawsuit for failure to join the developers.
Negligence: The court identifies two problems with the negligence claims. Apple does not necessarily have a legal duty to protect end user information from third party app developers and damages are speculative.
Breach of the duty of good faith: The court tells plaintiffs to identify which of the end user agreements and privacy agreements plaintiffs are using to support their duty of good faith claim.
Consumer Legal Remedies Act: The court questions whether the statute is applicable at all to software--it covers the sale of goods and services (citing to Ferrington v. McAfee).
Consumer Fraud and Abuse Act: The court says that plaintiffs' Computer Fraud and Abuse Act claims are deficient for three reasons. First, there is no allegation that Apple acted "knowingly." Plaintiffs only allege that Apple failed to take "meaningful steps" to police third party developers. Second, since the software was downloaded voluntarily, this tends to undermine a claim that the access was "without authorization" or "exceeded authorized access." Finally, there's the damages issue. The court says that only economic damages are available and damages for "death, personal injury, mental distress, and the like" are not available. There are no allegations of economic harm. Although damages can be aggregated where the violation can be described as "one act," plaintiffs failed to point to any "single act" of harm by defendants.
Trespass to chattels: Under Intel v. Hamidi, a trespass to chattels claim based on access to a computer server requires impairment or loss of use. The court says plaintiffs have not adequately pled this element.
Unfair competition: In order to bring an unfair competition claim, a plaintiff needs to have suffered damage or lost money or other property. The court says it is skeptical of the "personal information as currency" argument (citing to the recent Facebook privacy ruling). The court also says that it's unclear as to whether plaintiffs paid money for the apps in question.
Unjust enrichment: There is no separate cause of action for unjust enrichment under California law. The court says that restitution may be available as an equitable remedy in lieu of contract damages. If plaintiffs amend their complaint, they are directed to clarify that they are looking for as far as restitution.
Judge Koh goes through and basically shreds the complaint. A consistent theme is plaintiffs' lack of specificity. This is not surprising, because the trigger for the complaint is a news story or a scholarly study, rather than a specific event that a plaintiff had awareness of when it happened. The court's order makes clear that, even if plaintiffs get past the allegation of harm issue, there are numerous other hurdles that stand in the way of holding defendants liable. In particular, she says that Apple as the third party is somewhat removed from the information collection, and plaintiffs are not going to have an easy time holding Apple liable. Apple may also have a robust defense in its end user agreement(s). Other than knocking down plaintiffs' unconscionability argument, the court did not get into specifics of what those agreements contain that may limit Apple's liability, but the agreements are sure to contain a few. All of this has to be good news for Apple. [I'm somewhat surprised the issue of arbitration has not come up. Also, Apple may be able to assert a Section 230 defense, either based on section (c)(1) for its putative liability based on the developers' actions, or under (c)(2) for the negligence claim that it failed to police its app store properly.]
Lower courts have overwhelmingly rejected the latest wave of privacy class actions, and evinced deep skepticism towards the theory that the collection of personal information alone by a private entity constitutes harm. Courts also do not seem excited about the theory that tracking somehow harms end users because it diminishes the value of their personal information. Nor do they seem excited about the "information as currency" argument. I think it's fair to say that, while the case law leans towards the defendants, there's not necessarily a ton of Ninth Circuit precedent that directly speaks to the issues raised by tracking cases. It's possible that some set of plaintiffs may have better luck in the Ninth Circuit.
September 22, 2011
Court Revisits and Dismisses Fair Credit Reporting Act Lawsuit Against Spokeo -- Robins v. Spokeo, Inc.
[Post by Venkat Balasubramani]
Robins v. Spokeo, Inc., 10-CV-05306 (C.D. Cal.; Sept. 19, 2011)
Spokeo collects information about individuals and allegedly markets this information to employers and HR professionals. Robins sued Spokeo in a putative class action, alleging violations of the Fair Credit Reporting Act. The court initially dismissed the lawsuit for lack of standing, due to Robins's failure to allege actual harm. ("Court Dismisses Class Action Against Spokeo for Lack of Standing.") Robins filed an amended complaint and the court found that Robins adequately alleged injury and standing. ("Court Allows Fair Credit Reporting Act Claims Against Spokeo to Move Forward.")
The court revisits the ruling and finds that plaintiffs failed to adequately allege harm:
the Court reinstates the January 27, 2011 Order, which found that Plaintiff fails to establish standing. Among other things, the alleged harm to Plaintiff's employment prospects is speculative, attenuated and implausible. Mere violation of the Fair Credit Reporting Act does not confer Article III standing, moreover, where no injury in fact is properly pled. Otherwise, federal courts will be inundated by web surfers' endless complaints. Plaintiff also fails to allege facts sufficient to trace his alleged harm to Spokeo's alleged violations. In short, Plaintiff fails to establish his standing before this Court. This action is therefore DISMISSED.
Is it sufficient for a plaintiff to plead a violation of a statute or does the plaintiff have to allege harm for Article III purposes separately? Does a statutory violation automatically confer Article III standing? I'm guessing Robins will appeal this ruling and we will get to see what the Ninth Circuit says about the standing issue. [For what it's worth, I predict a reversal.]
Copyright Preempts State Tort Claims Over Loss of Control Over Website -- 78th Infantry Div. v. Oprendek
[Post by Venkat Balasubramani]
78th Infantry Division, WWII Living History Ass'n v. Oprendek, 11-165 (D.N.J.; Aug 4, 2011)
This is another web vendor dispute. Professor Goldman posted about one earlier this week. As in that case, here the parties did not heed his admonition (which cannot be repeated often enough):
Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.
The 78th Infantry Division, World War II Living History Association is a non-profit organization that provides World War II reenactments and educates the public about World War II. According to the facts as the court describes them, the Association registered the 78thinfantry.com domain name in 2003, and in 2006 Oprendek joined the Association "and volunteered to be the webmaster." He recommended that the Association transfer the domain name to him, "claiming that 'the website needed more space,' and that the website would be easier to maintain under his control." We all know what happens next.
In 2009, Oprendek resigned, and instead of transferring the domain name back to the Association, he allegedly cancelled it and registered the domain name in his own name. He also allegedly used "content from the Association's website" to create a competing organization which he formed with some former members of the Association. Oprendek then registered the website's contents with the copyright office.
The Association sued in state court, alleging conversion, trespass to chattels, breach of the duty of loyalty, tortious interference, and unjust enrichment. Oprendek removed the lawsuit to federal court, citing preemption. The Association moved to remand, and in a sweeping ruling, the court says that the lawsuit stays in federal court due to copyright preemption.
The court says that "the core" of the Association's conversion claim "is the unauthorized taking of a website domain and its contents." Conversion under state law is the exercise of control over property "without authorization," and the court says that this element is "conceptually indistinguishable from an unauthorized taking in the copyright context." The court finds that a trespass to chattels cause of action is similar to a conversion claim, and both of these claims are preempted.
For whatever reason, the court does not separate out the Association's claim for dispossession of the domain name and the contents of the website. Wrongfully taking control of someone's domain name can state a claim for conversion. Recently, the Ohio Court of Appeals found in Eysoldt v. Proscan that GoDaddy could be held liable for preventing a customer from accessing their domain name and transferring it. This is not the same as preventing someone from accessing or updating the contents of their website, and this difference should be enough to avoid preemption. Preventing someone from accessing the back-end of their website so they cannot update the site's contents is a somewhat closer question, but even this arguably does not fall squarely within the rights granted by the Copyright Act. The question in my mind is whether this overlaps with the right to modify and create derivative works as provided in the Copyright Act. There's also the issue that the ownership of the underlying contents is at issue, and this is sometimes resolved with reference to state law.
The Ground Zero Museum web-vendor dispute Eric posted about addressed almost exactly the same preemption issue, and the court in that case also conflates access to the server, access to the website, and control over the domain name. The court comes to the opposite conclusion in that case, finding the trespass claim not preempted:
Plaintiffs do not contend that Wilson reproduced the content of the website, prepared a derivative work, distributed copies of the website, or displayed it in an alternate public forum. Instead, one component of Plaintiffs' claim is that Wilson deprived them of access to or possession of their own website or specific webpages for a period of time. This does not overlap with the exclusive rights granted to copyright holders.
The discussions from both of these cases were somewhat confused (and confusing). As Eric mentioned, in looking at the issue, it's worth separating and analyzing separately: (1) the domain name, (2) the content of the website, (3) access to the content of the website (which in many cases probably can't form the basis for a claim that does not survive preemption), and (4) access to the physical server itself.
This is a messy dispute all the way around, and Eric's admonition with reference to the Ground Zero web dispute is probably the big takeaway: do not transfer your domain name to your web vendor without documentation in place. I also thought the court's conclusion on the preemption issue was worth flagging and worth contrasting with the GZM case.
September 21, 2011
Bad SEO Advice May Support Negligence Claim--D'Agostino v. Appliances Buy Phone
By Eric Goldman
This is a confusing dispute, so I'm just going to focus on a few aspects. Based on the court's description, it appears that D'Agostino helped Appliances Buy Phones (a baffling TM, but we'll call them ABP) build an e-commerce site in 2003. In 2009, the parties allegedly agreed to have D'Agostino build a second website ("Appliance4Sale") that was more SEO-optimized, and D'Agostino would get a cut of the revenue from the second site. Allegedly, D'Agostino indexed the second site in Google Products and started generating some sales; but subsequently ABP put the kibosh on sales through the second site, and then Google hit the sites with a duplicate content penalty that dried up traffic to the second site, so ABP shut it down to revitalize the indexing of the first site. ABP allegedly didn't pay D'Agostino for his development work on the second site, even though he claimed to spend 1,000-2,000 hours working on the site. On a pro se basis, D'Agostino sued ABP and its principals as well as Google.
The most interesting ruling relates to the counterclaim by ABP's principal, Sigman. Sigman brought counterclaims against D'Agostino for a violation of New Jersey Consumer Fraud Act, negligence and contract breach. The court refuses motions to dismiss the three counterclaims.
On the NJCFA claim, Sigman claimed "Plaintiff knowingly created the Second Website that threatened the existence of the First Website and profitability of ABP." On the negligence claim, Sigman argued that D'Agostino claimed to be an SEO expert but negligently triggered a duplicate content penalty. Finally, Sigman claimed that D'Agostino breached their contract by "jeopardizing defendant’s website, violating Google policies, and causing the interruption of defendant’s enterprise."
Now, if someone selling SEO services wasn't aware of Google's duplicate content rules, that would be a big problem. At the same time, those rules can be pretty arcane, so I could see how even well-meaning SEOs could run into unexpected duplicate content problems, especially if a site were engaged in aggressive grey-hat activities (which may or may not describe the sites involved in this litigation).
This particular judge appears to be a very cautious judge; so cautious that he might refuse a motion to dismiss even when it's warranted just to give a pro se plaintiff more time and space to develop the case. Thus, it's possible/probable that Sigman's counterclaim won't do as well at later stages in the case. Even so, this ruling has to be disconcerting to the SEO community. Combined with the Roger Cleveland case, where the vendor providing (among other things) SEO services got tagged with a big contributory trademark infringement damages award, it seems like the risks of being in the SEO consulting business keep going up.
I'm not 100% clear on D'Agostino's claims still standing against Google, but Google invoked its forum selection clause in one of its agreements to try to get out of New Jersey. (It's not clear which agreement applied, although the court references Google's Merchant Center Terms). We've had a long string of cases upholding Google's forum selection clauses, but here the court waffles on its application to D'Agostino. The court says that even if D'Agostino registered the second website with Google, he may have done so as ABP's agent, in which case he's not a party to the contract. This sounds wrong on two fronts. First, the second website appears to have been a joint endeavor of D'Agostino and ABP, so he may very well have been a party; and even if he was acting as an agent, then he should be bound equally with the principal. The court rejects Google's motion without prejudice, which means Google may still be able to transfer the case if it can show facts binding D'Agostino to the contract, but for now Google's still stuck in New Jersey.
Just yesterday, regarding the Ground Zero Museum Workshop v. Wilson case, I wrote:
Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.
This is another example where the contracts weren't air-tight enough to cut short a murky litigation. In fact, the basic architecture of this business deal--giving the SEO financial interest in the second website but still running the first website--seemed fraught with conflicts from inception. The structure apparently put the two different websites in competition with each other (because there were different economic payoffs associated with each site), so perhaps a falling-out was inevitable.
September 20, 2011
1st Circuit Reinstates $675,000 File-Sharing Award Against Tenenbaum -- Sony BMG v. Tenenbaum
[Post by Venkat Balasubramani]
Sony BMG Music Entertainment v. Tenenbaum, 2011 WL 4133920 (1st Cir. Sept. 16, 2011) [pdf]
Sony's lawsuit against Joel Tenenbaum was one of two file-sharing lawsuits brought by record labels against end users that proceeded to trial. (The RIAA's lawsuit against Jammie Thomas resulted in three trials, a $1.5mm verdict which was reduced to $54,000 and is currently on appeal.)
In a nutshell, in this case, the jury returned a verdict of $675,000. The trial judge found the award excessive under Due Process standards and reduced it to $67,500. The First Circuit finds that the trial judge erred in not reducing the award based on common law remittitur and giving Sony the choice between accepting the reduced verdict or opting for a new trial. The original verdict is reinstated and the case is sent back to Judge Gertner to rule on plaintiff's motion for remittitur.
The court's opinion summarizes the facts viewed in the light most favorable to the jury's finding, and contains plenty of facts that cast Tenenbaum in a not-so-favorable light. According to the court, he had plenty of notice of facts that precluded any sort of argument that he was innocent as to the consequences of his actions:
He used Napster . . . [After Napster was shut down,] he instead began using other peer-to-peer networks for the same illegal purposes. . . . Tenenbaum shifted to these other networks after Napster's termination despite his knowledge that Napster was forced to close on account of a lawsuit brought against it for copyright infringement. . . . . Tenenbaum knew that his conduct, both his downloading and distribution, was illegal and received warnings the industry had started legal proceedings against individuals. He received several warnings regarding the potential liability his actions carried with them.
He received warnings from Goucher College, which he attended, from his internet service provider, from his parents, and from the record companies themselves. It looks like he pretty much ignored these warnings. He was far from a model defendant, and the court's recitation of the facts makes it seem like he was an odd choice to push legal arguments that had yet to gain mainstream acceptance. (Tenenbaum was represented by a law professor who engaged in some questionable tactics, to say the least.)
Tenenbaum raised a variety of pre-trial issues, including some that veered into tax-protestor territory. He claims, for example, that Congress did not intend for the Copyright Act to impose liability against "consumer copiers," or intend that the Copyright Act be used for infringement suits of this nature. That's right up there with arguing that the IRS is should be abolished and is not properly empowered to levy taxes. The trial court rejects these arguments, and they fare no better with the First Circuit:
We reject Tenenbaum's invitation to usurp Congress's legislative authority and to disregard binding Supreme Court precedent.
The case went to trial, and the jury returned a verdict of $625,000 ($22,500 per infringement x 30 works). The Copyright Act provides for statutory damages to be determined by the court (rather than the jury), but the Supreme Court held in Feltner v. Columbia Pictures Television Inc. that the Seventh Amendment's right to a jury trial entitles a copyright defendant to have the amount of statutory damages determined by a jury and not a judge. Following Feltner, courts leave the damages determination entirely to the jury. After trial, Tenenbaum filed a motion for a new trial or for a reduction of the award based on the fact that it was excessive and "shocking to the conscience." He filed a separate motion arguing that the award violated Due Process standards. Sony opposed Tenenbaum's motions, and the United States also intervened, since Tenenbaum challenged the statutory damages award as being overly excessive. Judge Gertner tackled the Due Process question and held that an award of $625,000 violates Due Process.
The First Circuit says that the trial court should have avoided the constitutional issue and should have ruled first on the motion for remittitur. As the First Circuit points out, the constitutional issues are "difficult." Supreme Court precedent holds that states have wide latitude to impose statutory damages for violations of state statutes. On the other hand, under more recent case law, where a jury awards punitive damages, the jury award must comport with Due Process standards. It's not entirely clear where statutory damages fit in--are they punitive in nature? There's also the issue that Copyright Act damages are set by Congress, rather than awarded pursuant to state law, and a court's scrutiny of a statutory damages range set by Congress raises separation of powers issues.
At the end of the day, the First Circuit says that Judge Gertner should have avoided these thorny issues and should have instead considered the remittitur motion. There's a final question as to whether the trial court should give Sony the choice between accepting the award or a new trial or whether it may merely adjust the award. The court says that the usual rule is that the court may not reduce the jury's award without giving the plaintiff a choice, but there is case law from intermediate appeals courts which suggests that the court may reduce an award which is "punitive" in nature without giving the plaintiff a choice for a new trial. The court cites to Feltner and says that regardless of the precise nature of statutory damages under the Copyright Act, since the Supreme Court held in Feltner that the issue of statutory damages must be tried to a jury, the court may not reduce the award without also giving the plaintiff the option of a new trial.
I'm not sure exactly where this leaves us. The $625,000 award in favor of Sony is reinstated. Judge Gertner's analysis of the Due Process limits on statutory damages and the feelings of Congress about peer-to-peer file sharing, while interesting, is swept aside (for now). The million dollar question, and one I wish the court had answered, is whether Sony can immediately appeal the choice to accept a reduced award or whether it has to proceed with the new trial. Will Sony be trapped in an "endless loop" of going through trials resulting in a damage awards that the court reduces on the basis that the awards are "excessive"? (See Ben Sheffner's post about the Thomas-Rasset case: "Labels reject remittitur, opt for third trial on damages in Jammie Thomas-Rasset case.") The other question that the First Circuit's opinion raised but didn't address is: if statutory damages are to be determined by the jury, why does the trial court get to take this decision away from the jury and reduced it via a remittitur? What is the effect of Feltner on the common law practice of reducing damage awards? Where an award is within the statutory range, it seems odd for the court to have authority to reduce it via a remittitur--isn't this the point of Feltner?.
My instinct is that the labels will end up winning this particular battle over damages, although I don't know the various details of how statutory damages, Due Process, and remittitur fit together. Most notably, Tenenbaum does not look like anything close to a model defendant. While the economic arguments around what relationship the damage award bears to the actual harm suffered by the labels may be debatable, and the current scheme for awarding statutory damages may not be ideal, it will be tough for any court to ignore Tenenbaum's own culpability. And it looks from the First Circuit's opinion, there is a lot of it.
Added: Judge Gertner who heard the case has since retired from the bench and is now teaching at Harvard Law (alongside Charlie Nesson, whom she threatened with sanctions in this case, which should make for some lively faculty meetings). It looks like it will be up to Judge Gertner's replacement to determine whether the award should be reduced.
Web Vendor Dispute Gets Ugly--Ground Zero Museum v. Wilson
By Eric Goldman
Ground Zero Museum Workshop v. Wilson, 2011 WL 3758582 (D. Md. Aug. 24, 2011)
Disputes like these make me wonder if we can't find some way to get along. Suson runs a non-profit museum focused on the September 11 tragedy. Wilson runs an Internet shopping cart service. Wilson offered to help Suson with the museum website by adding shopping functionality. Wilson also helped Suson get free web hosting from a third party vendor, A-1 Hosting. Then, over what seemed to be a minor thing, the relationship soured in 2009. Wilson turned off the shopping cart functionality and reverted the website back to a prior version; Suson claims Wilson also took down the museum website. Wilson subsequently complained that the museum website continued to use his IP, and he sent an ineffectual takedown notice to A-1 Hosting. Wilson also allegedly badmouthed the museum to A-1 Hosting, allegedly causing them to stop providing free hosting. Wilson also set up a quasi-gripe site, cam-scam.com (now down), and allegedly a fake MySpace page, that said or implied unflattering things about Suson.
From a relatively simple commercial dispute involving a non-profit enterprise comes a cascade of litigation, including complaints and countersuits. I could seriously write my entire Internet Law exam from this situation. It touches on almost every topic I cover in class. This isn't the worst breakup I've seen, but it appears that the parties are using litigation as a sledgehammer, especially given the low dollars and stakes at issue.
1201 Circumvention. Suson claims Wilson committed a 1201 circumvention by administratively logging into the museum website and making changes in excess of his authorization. The court rejects this claim, saying "using a password or security code to access a copyrighted work, even without authorization, does not constitute 'circumvention' under the DMCA" and citing to several other cases (including the IMS and Egilman cases). The court also says that even though Wilson resigned his technical role, his continued login to the website was authorized until Suson changed the password. Finally, disabling the shopping cart wasn't a circumvention because the functionality lived on Wilson's site, not Suson's.
Computer Fraud & Abuse Act. The CFAA claim fails on summary judgment because "Plaintiffs have produced no evidence to back up their assertion that Wilson damaged the website or that his actions caused at least $5,000 in economic damages in one year." The only allegation of harm is that Wilson "stripped the metatags" (whatever that means) when he reverted the website back to the prior version, and the court can't make heads or tails of that. Suson also hired an SEO to redo the metatags for $8k, but the court can't consider this evidence either because it wasn't properly authenticated and the payments took place over more than one year (and thus perhaps didn't trigger the $5k/year CFAA threshold).
Trespass to Chattels. This was a very confused discussion. The court says the "chattel identified in Plaintiffs' trespass claim is the GZM website, or alternatively specific webpages within the site. Plaintiffs contend that Wilson deprived GZM of possession of its website and damaged the chattel by inserting a redirect command." This seems to conflate access to a virtual asset (the web page) and use of a tangible asset, the computer server. The court focuses on the virtual asset, but that should be impossible to "trespass," or any trespass claim should be preempted by copyright law. Reinforcing the court doesn't understand what it's talking about by lumping together three very disparate items, the court continues:
Although websites are not tangible property in the traditional sense, courts in Maryland, New York, and elsewhere have been willing to recognize claims for conversion or trespass to chattels involving certain digital things, such as websites and domain names and computer networks.
The court then cites cases finding conversion of domain names and a "website," plus the Cyber Promotions case where the court was clearly talking about trespass of the physical server. On this basis, the court says that copyright law doesn't preempt the trespass to chattels claim. Too bad the court couldn't make a more fine-grained distinction between tangible and intangible assets, because the trespass of an intangible asset claim should be preempted by copyright law.
The court then further finds a prima facie trespass to chattel because Wilson dispossessed Suson of the "current" website when he reverted to the older website version. However, whether Wilson acted with the requisite scienter has to go to the jury. Wilson's response that he co-owed the copyright in pieces of the website isn't availing; even if true, he can't dispossess his co-owners of their rights.
Note the unexpected result here: the CFAA claim failed and the common law trespass to chattels claim survived. How often do you see that? But this result occurs only because the court mixes its metaphors and treats the website owner's lack of virtual access to administrate the website as a physical dispossession.
Defamation. Because of the nature of the virtual interactions, the court struggles with deciding which law applies to the defamation claim. The court says:
Applying lex locus delicti is inconclusive because the websites Wilson created were accessible on the Internet from any location and the record on summary judgment does not identify the location of A1-Hosting or the unidentified third parties when they received the emails with alleged defamatory statements, so the exact place of publication for these statements is unknown.
The court finally decides that New York law applies because "Suson lives in New York, the museum is located there, and the bulk of Plaintiffs' business activities take place there. In addition, the alleged defamatory statements relate to Plaintiffs' business operations in New York. Accordingly, the brunt of the damage to Plaintiffs' reputation or business interests will be experienced in New York, and New York has the most significant relationship to the alleged defamation."
The court rejects defamation against all of the allegedly defamatory statements. If you're an Internet defamation junkie, it's worth reading the opinion.
Tortious Interference. This claim, based on Wilson's communications to A-1 Hosting, fails because Wilson didn't do anything improper.
512(f) Bogus Takedown Claim. Wilson didn't violate 512(f) because his takedown notice to A-1 Hosting was ineffectual. The court doesn't cite the Amaretto v. Ozimals opinion which reached an identical conclusion.
Copyright Co-Owner Counterclaim. The court lets Wilson plead that he made such contributions to the museum website that he became a co-owner, and therefore he is entitled to an accounting of profits. This is why you never let anyone modify your website code without a written agreement spelling out their rights.
Related Disputes. This is just the latest blog post on website co-ventures gone horribly awry. Other posts in the series:
* Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum
* Web Developer Didn't "Convert" Website--Conwell v. Gray Loon
* Taking Intangible Electronic Files is Criminal Fraud--NM v. Kirby
* Cautionary Tale of Website Co-Ownership--Mikhlyn v. Bove
* Another Cautionary Tale of Joint Website Ownership--TEG v. Phelps
Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.
September 14, 2011
Request for Help: Doctor v. Patient Lawsuits Over Online Reviews
By Eric Goldman
I'm doing some research, and I'm hoping you can help. I'm trying to comprehensively catalog doctor vs. patient lawsuits over online reviews of the doctor. I'm equally interested in suits by other health care professionals; I've noticed dentists are surprisingly litigious. I've included lawsuits against intermediate publishers where the underlying litigation involves a patient review. I've also included suits where the review author was a family member of the patient, but I'm excluding other posts by non-patients.
Here's the list I've developed so far:
* Nevyas v. Morgan, 309 F. Supp. 2d 673 (E.D. Pa. 2004)
* Bosley Medical Institute, Inc. v. Kremer, 403 F.3d 672 (9th Cir. 2005)
* Barrett v. Rosenthal, 146 P.3d 510 (Cal. Sup. Ct. 2006)
* Gilbert v. Sykes, 53 Cal. Rptr. 3d 752 (Cal. App. Ct. 2007)
* Alvi Armani Medical, Inc. v. Hennessey, 629 F. Supp. 2d 1302 (S.D. Fla. 2008)
* Biegel v. Norberg, San Francisco Superior Ct. case # CGC-08-472522 (filed Feb. 25, 2008)
* Kim v. IAC/InterActive Corp., 2008 WL 3906427 (Cal. App. Ct. 2008)
* Reit v. Yelp, Inc., 29 Misc.3d 713 (N.Y. Sup. Ct. 2010)
* Wong v. Jing, 189 Cal. App. 4th 1354 (Cal. App. Ct. 2010)
* Rahbar v. Batoon, San Francisco Superior Ct., case # CGC-09-492145 (filed Sept. 2, 2009) and case # CGC-10-502884 (filed August 20, 2010)
* McKee v. Laurion Case # 69-DU-CV-10-1706 (Minn. Dist. Ct. Apr. 28, 2011)
* Lynch v. Christie, Slip Copy, 2011 WL 3920154 (D. Me. Sept. 7, 2011)
* Pensler v. Hostetler, 10 CH 35876 (filed 8/19/10); Pensler v. Cuevas, 10 CH 35238 (filed 8/16/10); and Pensler v. Bender, 09 CH 18628 (filed 6/10/09) (all in Cook County Court)
* Henry v. Does 1-100, CIV095020; plus the apparently related Henry v. Carson, CIV1002670, and Henry v. Tamara M., CIV1003042 (all in Marin Superior Court)
Three other cases that are close but factually distinguishable:
* Townson v. Liming, 2010 WL 2767984 (Tex. App. Ct. 2010)
* Lifestyle Lift Holding Co. Inc. v. Prendiville, 768 F. Supp. 2d 929 (E.D. Mich. 2011)
* Darm v. Craig, Case 1107-08823, Oregon Circuit Court
Please email me if you have any suggestions of other cases I should check out.
September 13, 2011
Ninth Circuit Upholds Web Host's Liability for Counterfeiting Retailers--Louis Vuitton v. Akanoc
By Eric Goldman
Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., No. 10-15909 (9th Cir. Sept. 12, 2011). Prior blog posts:
* Another Bad Ruling in Louis Vuitton v. Akanoc
* Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host
* Web Host Faces Potential Contributory Trademark Liability
This cases involves a US web host, Akanoc, that hosted Chinese retailers selling counterfeit Louis Vuitton goods. The web host apparently ignored numerous takedown notices from Louis Vuitton. Louis Vuitton sued for contributory copyright and trademark infringement, and the result has been a string of troubling rulings. For a sample of those, consider the trial court's rulings that individuals directly infringe copyrights when browsing a photo of a counterfeit good, and a 512 agent for service of notice could be personally liable for any infringements. Ugh. The coup de grace was a massive $32+M jury verdict against the defendants for willful infringement.
On appeal to the Ninth Circuit, the court issued a characteristic "omnibus" opinion that resolves lots of contentions in relatively short order. Opinions like this rarely become major precedents, which is fine by me given the results. Overall, the court rejects all of the defendants' arguments except one, but that one saves the defense over $10M.
Some of the more interesting points:
* MSG leased equipment to Akanoc. The jury held MSG liable, but the trial court reversed that. On appeal, the Ninth Circuit agreed that MSG wasn't liable for the retailer counterfeiting because "Louis Vuitton presented no evidence that MSG had reasonable means to withdraw services to the direct infringers."
* the defendants argued that its customers' websites were the "means" of trademark infringement, not the hosting services to them. The court rejected the argument as irrelevant:
websites are not ethereal; while they exist, virtually, in cyberspace, they would not exist at all without physical roots in servers and internet services....Appellants had control over the services and servers provided to the websites. Stated another way, Appellants had direct control over the “master switch” that kept the websites online and available.
This seems to resolve one of the open issues from the Ninth Circuit's 1999 Lockheed v. NSI case, which is the circuit's benchmark opinion on contributory trademark infringement online. That case said NSI as a domain name registrar wasn't responsible for an infringing domain name, but it implied that vendors closer to the infringement--such as web hosts--could be. This ruling confirms our assumption that web hosts have more affirmative obligations to intervene against trademark infringement than domain name registrars do.
* "providing direct infringers with server space" qualifies as a material contribution for contributory copyright infringement.
* the court touched on the required scienter for both contributory trademark and copyright infringement, but this discussion goes nowhere given that the jury found willful infringement.
Even though the defendants did not prevail on its doctrinal arguments, the appeal was partially successful because the court reduced the damages award over $10M (the jury had awarded $32+M against three defendants; the judge post-ruling had dismissed MSG, which cut the award to about $21M; this panel reduces it further to $10.8M). The trial court judge's jury instructions allowed the jury to cumulate awards against each defendant for the same infringements, rather than forcing them to make a single award joint-and-several. The appeals court fixed that perplexing error.
Even so, the lesson remains that any web host that fails to promptly honor takedown notices--copyright or trademark--does so at extreme peril. We don't have an express notice-and-takedown scheme for trademarks, but we've gotten there on a de facto basis.
September 12, 2011
Patent Conference Announcement, SCU, Oct. 14 (July-Aug. 2011 Quick Links, Part 3)
By Eric Goldman
Over the past few months, we've seen some dramatic--and expensive--evidence that the patent system is out-of-control. Feeling outgunned in the smartphone space by big players with larger patent portfolios, Google has been on the prowl for bulk patent portfolios to supplement its own. First, Google bid for the Nortel patent portfolio but got aced out after a consortium of competitors bid a breathtaking $4.5B for the portfolio. Then, Google bought a patent portfolio for IBM.
But I think the message really hit home when Google sought to buy Motorola Mobility for $12.5B, in which the prize asset is a portfolio of 17k patents. See the merger agreement.
Investors in Motorola Mobility might be cheered, but there's no good news in this acquisition. The Nortel auction showed that a company can be worth more dead than alive because its death unlocks its patent portfolio without putting at risk a company's ongoing revenue stream. Once the patent portfolio is on the open market, potential buyers include NPEs looking to unleash a wealth-draining litigation frenzy (where the NPEs get rich by pulling cash out of companies actually engaged in productive activities) or operating companies buy the portfolios as a way of deterring competitors from initiating a patent armaggedon. In the latter case, the acquirer pays a steep premium to improve its freedom to operate--it has higher costs to do the same level of innovation, and we as end consumers ultimately pay for this. As a a result, the winners from this developing market for bulk patent portfolios are the high-volume patent prosecutors, the deceased company's creditors (and perhaps stockholders), the plaintiff-side patent litigators, the NPE investors, and any brokers in the system. Everyone else--including consumers--is a big loser from these transactions, which demonstrates that the patent system isn't motivating the kind of social welfare improvements it putatively was designed to facilitate.
Meanwhile, a growing number of persuasive voices are expressing skepticism about the state of the patent industry. Laura Sydell of NPR kicked off the trend with "When Patents Attack," a great investigative story on Intellectual Ventures and its potentially detrimental effect on our economy. This was followed up with a number of stories in leading publications like the Wall Street Journal, the New York Times and the Economist, all questioning the patent industry. Some of the articles that caught my attention:
* NYT: A Bull Market in Tech Patents
* Forbes: my colleague Colleen Chien wrote how to "Turn the Tables on Patent Trolls."
* NY Observer: Anatomy of a Patent Troll
* PC World: It's Clear Why Software Patents Need to Disappear
* Reuters: Apple uses courts to buy time to secure iPad's market share
Unfortunately, the patent reform legislation does not help with this situation. The tweaks aren't terrible, but they leave most NPE-related issues untouched.
Until Congress or the courts fix the problems doctrinally, what are operating companies supposed to do to prevent being undeservedly subverted by third party patents? Get into a bidding war with Google or other incumbents to buy up the remaining bulk patent portfolios? Tell their patent prosecutors to get busy with large numbers of new applications? Cross their fingers and hope they don't get noticed by plaintiffs?
In a stroke of propitious timing, for the past several months the High Tech Law Institute, working with the Berkeley Center for Law & Technology, has been cooking up a major conference entitled "Defense 2.0: New Strategies for Reducing Patent Risk." The event will be on October 14 at SCU, and we have a terrific lineup of experts. The conference will explore cutting-edge and cost-effective strategies for companies to improve their freedom to operate--without fear of innovation-destroying patent litigation. Although there will be an opportunity to hear from the other side, this conference is all about patent defense, a topic of vital importance to the Silicon Valley. The registration fees are a bargain (and free for many categories of attendees). I hope you will consider joining us.
September 08, 2011
Lawyer Hit With $4.2 Million Judgment in Junk Fax Class Action -- Holtzman v. Turza
[Post by Venkat Balasubramani]
Holtzman v. Turza, 08 C 2014 (N.D. Ill. Aug. 29, 2011)
Apparently reports of the fax machine's death are greatly exaggerated. People still use fax machines.
Holtzman sued Turza for receiving unsolicited faxes. The court certified the lawsuit as a class action, and granted Holtzman's motion for summary judgment as to two issues: (1) the faxes in question were "advertisements" under the TCPA, and (2) the defendant would be liable for all faxes received on a "target list."
After conducting some discovery, Holtzman files a motion for summary judgment, largely directed at damages. Holtzman takes the deposition of Michael Richard, the CFO of VillageEDocs, which is a parent company to MessageVision, the service used by Turza to send out the faxes. Richard testifies as to the approximate number of faxes he sent out on behalf of Turza, what portion of faxes sent to the "target list" were reliably transmitted, and how much he billed Turza. It turns out MessageVision sent out 8,430 faxes. At $500 in statutory damages per fax, this amounts to a damage award of $4,215,000.
Turza raised a few arguments in opposition to Holtzman's motion, but the court isn't very impressed by any of them. Turza argued that because Richard is a CFO and not a technical expert, his testimony as to fax transmission rates was not reliable. The court finds this objection curious, since Turza himself relied on the "until-now unquestioned integrity of MessageVision's system to compute the number of successful fax receipts that resulted in the charges paid by [Turza]." Turza relied on new testimony from his expert but the court finds this evidence untimely and insufficient to create a factual dispute as to Richard's testimony. Turza also argued that there was no evidence that the class members did not consent to the faxes, but this was contradicted by Turza's own testimony that he did not procure consent from any of the recipients. Turza also raises the issue of whether class members owned the fax machines to which the faxes were sent. The court says that this does not preclude summary judgment, although it's something that may bear on the individual damage award to class members.
Finally, Turza also sought to decertify the class and argued that the imposition of a $4 million award violates Due Process. As to the certification issue, Turza argues that there are other methods to adjudicate the dispute, namely that the individual class members could pursue their own claims in small claims. The court says that even if a chunk of class members have sizeable claims (e.g., those amounting to $10,000 or more) this would not mean that a class action "would be less fair or efficient than individual litigation." Since statutory damages are at issue, TCPA claims are "arguably best suited" to class resolution.
With respect to Turza's due process argument, the court notes that the class award is not excessive because of the risk of Turza having to declare bankruptcy. Turza had insurance policies in place, and these policies should cover the awards at issue. The bulk of the bill will be borne by the insurance company and not by Turza at all!
This would be a pretty unremarkable case, except for the fact that the faxes were actually newsletters that were written on behalf of a lawyer. Here is Eric's previous post on the case: "Ghostwritten Attorney Newsletter is an "Ad" for TCPA Junk Fax Law Purposes." Professional courtesy aside, it's pretty scary that sending out a bunch of faxes which contained editorial but ghostwritten content can put you at risk of an award for four million dollars. Fortunately for Turza, his insurance company may end up footing the bill.
A big takeaway from this case is that it's risky behavior to send out marketing communications to lists that you have bought. I guess it also illustrates one of the many perils of using ghostwritten content.
Blogger Can Display County Seal in Blog Posts--Rothamel v. Fluvanna County
By Eric Goldman
Rothamel v. Fluvanna County, Va., 2011 WL 3878313 (W.D. Va. Sept. 2, 2011)
I don't use images on this blog, but many bloggers include images to help illustrate their posts. It's not uncommon, then, for bloggers to include government seals or other insignia in posts discussing the government. I've never seen an empirical study of readers' perceptions when presented with such displays, but I find it hard to believe that readers are confused in the slightest.
In Fluvanna County, Virginia (part of the Charlottesville metro area), Bryan Rothamel (a blogger at http://flucoblog.com) included the county seal when blogging about county stories. The county Board of Supervisors deserve mad props for apparently having solved all of the major problems facing them, because Rothamel's seal usage quickly emerged on their priority list ahead of other, obviously more trivial, issues. In response, the county passed an ordinance with the following restriction:
Sec. 2–7–2. Seal Deemed Property of the County; Unauthorized Use Prohibited.
The seal of Fluvanna County shall be deemed the property of the County; and no person shall exhibit, display, or in any manner utilize the seal or any facsimile or representation of the seal of Fluvanna County for non-governmental purposes unless such use is specifically authorized by law. (Ord. 9–15–10; Ord. 2–16–11)
Violations were punishable by up to 30 days in jail, a $100 fine or both.
Rothamel brought a First Amendment challenge to the statute, which the court grants. The court notes that the statute restricts speech and can't survive even intermediate scrutiny because it's not narrowly tailored. The court notes: "This sweeping prohibition encompasses a substantial number of uses of the seal that would not suggest government endorsement, such as the display on a website of an exact copy of an official County news release that contains the image of the seal next to the text, or the publication in a newspaper of a photograph of a County official delivering a speech from a podium upon which the County seal is attached and visible."
The court compares this regulation with the regulations governing federal seals and related logos, noting that they restrict uses that might communicate sponsorship or endorsement. This statute wasn't so targeted, and I don't think anyone truly believes that readers will think a blog post was sponsored or endorsed by the county because the post displays the seal. The state of Virginia intervened in this lawsuit because its seal restriction is similar to the county's; it appears Virginia's seal restrictions would not survive a challenge either. Similarly, this case brought to mind the FBI's ridiculous position that Wikipedia couldn't display the FBI seal. The Wikipedia entry recaps the situation, including then-Wikimedia GC Mike Godwin's withering response. This case suggests that the FBI's position indeed wasn't defensible.
The court also rejects the county's self-serving designation of the seal as "county property." I'm not sure exactly what that's supposed to mean. Perhaps such designations matter when dealing with tangible assets. When applied to intangible assets, it is just another way of restricting speech.
The net effect is that, under the First Amendment, bloggers should be free to display government seals or insignia in their blog posts about the government agency. With my newly confirmed freedom, I'm now displaying the seal of Fluvanna County, Va., which, as county seals go, is actually quite pretty (those are persimmons at the top):
God bless America!
September 07, 2011
Reflections on the DOJ-Google Half-Billion Deal over Illegal Pharma Ads (July-August 2011 Quick Links, Part 2)
By Eric Goldman
I haven't previously written on the DOJ's bust of Google over illegal pharmaceutical ads, partially because I couldn't reconcile my views about this enforcement action. From my vantage point, this action equally fits into two dichotomous stories, and these stories may not be mutually exclusive.
Story #1: Google's massive revenues and profits are significantly inflated by illegitimate ads. Here, we learn that Google was raking in millions of dollars from ads for illegal pharmaceuticals. We also know Google has struggled with gambling ads (1, 2), ads for bogus ringtones, ads that trademark owners consider infringing, and other problematic ads.
The sources of Google's revenues may be like the log that no one wants to turn over to see what's under it. I bet that if we could get a detailed line-item breakdown of where Google's revenues come from, more than a few folks would be queasy about some key revenue categories.
Over the years, Google has taken some baby steps to screen out bogus advertisers from its network, but I wonder if Google's "Must. Be. Scalable!" mantra--and the concomitant profits that come from willful blindness--has inhibited Google from undertaking some needed, but necessarily manual, steps to police its ad network more aggressively.
Story #2: The incumbent DC regulators view Google's emerging power as unwanted competition to their regulatory power, and like typical incumbents, the DC regulators are closing ranks on the start-up--meaning they have become hellbent on busting Google, legitimately or not. To me, the Google Buzz settlement is a clear example of how DC regulators are unnecessarily flexing their muscles against Google.
Some details made me wonder if the DOJ misused its power in this enforcement action:
* the Rhode Island's US Attorney's post-announcement attack on Larry Page, declaring that he knew of the illegal ad sales. Given the DOJ's subsequent rhetoric, it makes me wonder if the DOJ threatened Page with criminal prosecution. If nothing else, the personal prosecution threat would have a powerful in terroram effect to goad Google to take a deal, warranted or not.
To be clear, the non-prosecution agreement doesn't explicitly protect Larry Page, but I think a personal prosecution is super-unlikely at this point. The agreement might insulate his acts on the company's behalf, and I can't imagine the DOJ will want to spend further prosecution resources after getting such a big score already. So the net effect is that this deal should end the matter.
* the deal was structured as a civil forfeiture. Note the DOJ (or any other federal agency) would have encountered significant problems bringing a civil action against Google over the third party ads. 47 USC 230 would have preempted the action, and with a half-billion dollars at issue, Google surely would have litigated any statutory ambiguities rather than roll over. Therefore, as Peter Henning explains, the government avoided pursuing a doctrinally questionable criminal prosecution and simultaneously bypassed a likely 47 USC 230 immunity of any civil action. Pretty tricky navigation by the DOJ.
* finally, Google disgorged both its revenues AND ITS ADVERTISERS' REVENUES from the illegal ads. I can't think of any comparably sweeping remedy in any other advertising lawsuit (am I forgetting something?). I simply can't believe the DOJ could have gotten a judge to order a similarly expansive disgorgement. Thus, it appears the DOJ asked for way more cash than the law actually allows--and yet a pliable target forked it over.
If Story #2 is true, the deal could be an unholy pact: Google bought the freedom of its CEO for a check that is a pinprick compared to its cash on hand; and the DOJ got a huge taste of Silicon Valley's wealth and publicly blare that justice was served--even if the DOJ vastly exceeded current law to get there.
One more reason that story #2 could be plausible. The DOJ portrays this as a case about illegal pharmaceuticals, but it imprecisely lumps together a variety of factually different situations into that category, including:
* pharmaceuticals that are never legal in the United States
* fraudulent pharmaceuticals, i.e., sugar pills sold as brand X
* counterfeit pharmaceuticals, i.e., bioequivalent pharmaceuticals sold as brand X but made by someone else
* prescription pharmaceuticals that aren't fraudulent or counterfeit but are being sold without a prescription
* prescription pharmaceuticals that aren't fraudulent or counterfeit that being sold with a prescription, just not one recognized by US law
Note that the consumer harm in the last 3 circumstances is unclear. It's possible that some consumers win in each of those cases by getting the desired pharmaceutical at a cheaper cost than US drugs. Such consumer wins don't make the pharmaceutical sales legal; but it raises the question of whether the US government was pursuing the best interests of its citizens
One final point: the DOJ press release describes the illegal pharmaceutical advertisers as "rogue" websites. That's an interesting characterization. It seems to tie into the DHS ICE's domain name seizures and the proposed PROTECT IP Act. At minimum, the DOJ enforcement action reinforces how desperately DC regulators want Internet companies to do more of their policing work. Also, perhaps the deal's template shows how the DOJ thinks it can achieve PROTECT IP irrespective of whether Congress enacts the law.
More links to check out:
* the non-prosecution agreement
* the DOJ's announcement
* the general NY Times article announcing the deal
* Also in the NY Times, Peter Henning parses some of the deal's legal oddities
* Techdirt's skeptical coverage
* Plaintiffs' lawyers will be partying with the non-prosecution agreement. The first wave: stockholders' lawsuits.
September 06, 2011
Court Invalidates Agreement Governing Toyota's Online Prank Contest -- Duick v. Toyota
[Post by Venkat Balasubramani]
Duick v. Toyota, B224839 (Ca Ct. App.; Aug. 31, 2011)
Toyota and Saatchi & Saatchi ran a marketing campaign where a visitor to the Toyota Matrix website could designate a separate person who would receive prank emails and messages. Here is how the court describes the campaign and Duick's (the plaintiff) experience:
During the campaign, any visitor to the Toyota Matrix website ("player 1") could designate another person ("player 2") for participation in the Your Other You "interactive experience." Player 2 would then receive an email purportedly from player 1, inviting player 2 to click a hyperlink that was in some manner "identified with Toyota." The link would direct player 2 to a web page entitled "Personality Evaluation."
[Duick played the role of player 2, and] later began to receive emails from an individual identifying himself as "Sebastian Bowler." The text of the first email reads, "Amber mate! Coming 2 Los Angeles Gonna lay low at your place for a bit. Till it all blows over. Bringing Trigger." Duick received another email from Bowler the following day, accurately stating her previous home address, describing it as a "Nice place to hide out," and advising her that "Trigger don't throw up much anymore, but put some newspaper down in case." . . . . Additional emails from Bowler to Duick over the next few days purported to describe his cross-country journey by car to visit her, including photos and videos of his travels and references to his efforts to evade law enforcement . . . . The final email included a link to a video revealing that Bowler was a fictional character and that the entire sequence of emails was an elaborate prank, all part of an advertising campaign for the Toyota Matrix.
The whole thing sounds clever in a Blair Witch Project sort of way, but I'm guessing neither Toyota or Saatchi & Saatchi spent much energy having their legal departments review the contest. Even a fairly risk-tolerant legal department would have flagged this as a marketing campaign that has the potential to go south, regardless of the technical legality of it.
Anyway, Duick asserted claims for emotional distress, negligence, and false advertising. She sought the respectable sum of $10,000,000 in damages. [I can just picture Duick's lawyer mimicking Dr. Evil from Austin Powers when he or she is talking with Duick about what damages figure to include in the complaint.] Defendants moved to compel arbitration. The court rejects their request. Not only does the court reject defendants' request to compel arbitration, the court nukes the entire set of contest terms.
The court says that Duick was duped as to the nature of the agreement:
A person in the role of player 2, such as Duick, could not access the terms and conditions without first clicking "Begin" on a webpage entitled "Personality Evaluation," created by defendants. The terms and conditions themselves were entitled 'Personality Evaluation Terms and Conditions.' Defendants thereby led Duick to believe that she was going to participate in a personality evaluation and nothing more. In particular, a reasonable reader in Duick's position would not have known that she was signing up to be the target of a prank.
Here is what the online terms said:
You have been invited by someone who has indicated that he/she knows you to participate in Your Other You. Your Other You is a website provided by [Toyota] that offers you . . . an interactive experience. . . . If you review and agree to the Terms and Conditions detailed below . . . you may participate in a 5 day digital experience through Your Other You. . . . You may receive email messages, phone calls and/or text messages during the 5-day experience. . . .You understand that by agreeing to these Terms, you are agreeing to receive emails, phone calls and text messages from Toyota during the 5-day experience of Your Other You.
The online terms contained language that alerted Duick to future email messages "from Toyota," but she would reasonably expect these to be mundane messages about a purported 'Personality Evaluation'--i.e., the fact that she agreed to receive emails, phone calls and texts does not amount to consent for receiving "frightening or disturbing messages" from some unidentified third party. The court notes that there was probably a way for the terms to be drafted to avoid the issue, but then again that would probably defeat the contest's purpose.
Michael Anderson's post provides some detail about the campaign and asks some good questions ("Prank Marketing and the Toyota Matrix: How Far Is Too Far?"):
When you employ a viral mechanism to promote the game, how overtly should it indicate the game’s fictionality? How much information do you disclose about the nature of the campaign? Finally, how do you allow for players to opt-out if they no longer wish to continue the experience?
Duick still faces the Herculean challenge of proving up her damages, but she has to feel good about avoiding arbitration.
Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion
[Post by Venkat Balasubramani with additional comments by guest blogger Laura Heymann and Eric]
[Eric's note: this may be our first post with *three* different bloggers covering the same case! Venkat starts us off:]
In re Robert Edward Forchion, Jr., 2011 WL 3834929 (Ca. Ct. App. Aug 31, 2011)
Robert Edward Forchion, Jr. filed a petition to have his name changed legally to "NJWeedman.com." The trial court denied the request, and the appeals court affirms.
Background: As the court describes him, Forchion:
is a resident of New Jersey. Since 2009, he has managed a Rastafarian temple in Los Angeles and has operated a medical marijuana dispensary that he claims is lawful under the Compassion Use Act of 1996. . . . He has devoted his adult life to promoting the legalization of marijuana and, in 2000, was convicted in New Jersey of marijuana offenses. Forchion is currently facing trial in New Jersey on marijuana charges arising out of an arrest on April 1, 2010. He is free on bail.
Forchion has a national reputation as a marijuana advocate and is popularly known as NJweedman. He operates a Web site, "NJweedman.com," which discusses his efforts to legalize the drug. In 2001, Forchion unsuccesfully petitioned the New Jersey state courts to change his name to "NJWeedman.com."
Forchion's life: The court spends approximately 20 pages recounting the details of Forchion's life, including his protests, and brushes with the law. (These facts were apparently taken from Forchion's website.) For example, the court notes that he "smoked his first marijuana cigarette and 'was immediately impressed by its medical healing powers, in regard to his asthma' . . . . [b]y age 18 he was a regular user . . . and dismissed the Surgeon General's claims of its harms as 'propaganda and Christian superstitions.'" He enlisted in the United States Marine Corps where he continued to use marijuana, despite the government's prohibition. He became a coast-to-coast trucker in 1994. In 1995 he "became a practicing Rastafarian."
In 2008, he apparently fled to California, "seeking asylum, leaving the garden state for the pot friendly environs of Los Angeles." In 2009 he opened a "Rastafarian Temple" on Hollywood Boulevard. The temple was named "Liberty Temple II, after a series of protests he held at the Liberty Bell in Philadelphia." He then became a "Hollywood persona," and opened a "party promotions company called "NJweedmanPromotions." In 2010, he penned his biography, which was titled "Public Enemy #420." None of this is particularly relevant to Forchion's name change petition, but the court walks through the facts in some detail and they were strangely interesting. (All of this just gets to page 6 of the court's recitation of facts.)
Name changes generally: The court notes that people who wish to change their names have two different options. They can take the route of a "common law change of name," and simply start referring to themselves as something else (as long as their purpose is not to "defraud or intentionally confuse"). They can also formally change their names pursuant to statute. The statutory route offers certain advantages, namely the change of name is "definitely and specifically established and easily proved." In contrast:
[a] common law name change . . . carries with it no mandate to those with whom one comes in contact to accept at face value the nexus between the new name and the individual who assumes it.
In any event, the court concludes that while there must be a "substantial" reason for denial of a request to change one's name, the trial court is vested with discretion in ruling on a name change petition and the reasons offered in case law for refusing a name change request are not exhaustive.
Can Forchion change his name to a domain name?: The court turns to the key issue of whether Forchion can change his name to a domain name. This turns on whether Forchion is guaranteed to be able to use the NJWeedman.com domain name indefinitely. The court notes that although domain name registrants "appear to possess all [of] the component rights" of property owners, on closer examination, "it becomes apparent that a domain name is not property." The court concludes that a domain name is merely the product of an agreement for services between the registrant and the registrar. The agreement--pursuant to which a registrant secures a domain name--is not guaranteed to continue indefinitely. The registrar places numerous limitations on the registrant's use of a domain name and if the registrant breaches the domain name registration agreement in any number of ways (e.g., fails to pay fees, allows the domain name registration to lapse, uses the domain name in violation of the law), the registrar can cease providing the registration services. The court sees this as problematic because if Forchion's name change is approved, his name would "permanently" become "NJWeedman.com," but if he loses the domain name a subsequent user could end up with the rights to NJWeedman.com. In the court's eyes, the "dual use might create confusion, depending in part on what the new registrant did with NJweedman.com."
The court also notes that even if Forchion continued to pay the registration fees in perpetuity, his use of the domain name may run into problems due to a conflict with third party trademark rights. If a third party is able to assert trademark rights and successfully force Forchion to change his website or discontinue his use of the NJweedman domain name, the court says that his continued use of NJweedman.com as a personal name would be problematic. The court says it's not aware of any procedure pursuant to which a third party could force NJweedman.com (f/k/a Forchion) to change his personal name. The court says that these types of trademark considerations are not ones that the trial court should be forced to consider, when ruling on a name change. [Strangely enough, the court relies on those considerations in making its decision.] At the end of the day, the court says that domain names and personal names should remain in separate realms and the streams should not be crossed:
In sum, personal names and domain names should not overlap; they belong in distinct realms. Domain names were created for use on the Internet and should be limited to assisting a user in finding a desired Web site. By the same token, we should not treat a person as part of a domain.
As an added bonus, the court also points out that Forchion's website encourages others to break the law and is on thin legal ice. The website provides instructions on how to grow marijuana. It urges individuals to call New Jersey law enforcement and "provide false reports about the use of marijuana, hoping to send the police on wild goose chases and squander valuable resources." The court also closes the 37 page (!) order with a nod to comity principles. The court notes that while courts are "divided over res judicata applies to name changes . . . the principles that underlie the application of that doctrine are present here."
The court's opinion borders on entertaining and covers a lot of different ground. In particular, the discussion of the two types of name changes was interesting. At 37 pages, it felt a bit excessive, but I can't say I was disappointed after reading it.
I was surprised to see the court treat the domain name registration rights as a contract right, rather than a property right, given that numerous cases have discussed the issue since Kremen v. Cohen and have concluded that (at least for conversion and creditor remedies purposes) domain names are considered property and not a contract right. (See, for example: Eysoldt v. ProScan and CRS Recovery, Inc. v. Laxton.) As Eric points out, the fact that the domain name registration agreement could lapse or be terminated wasn’t a particularly persuasive basis to deny Forchion’s name change request.
I hadn't given any thought to the interplay between trademarks and personal name changes, but a quick Google search led me to a Yahoo! answers question titled "Can i legally change my name to Krispy Kreme," which in turn led to a New York Times article about a 1995 lawsuit between Coca Cola and Fredrick Koch, who wanted to change his name to "Coke-is-It." (See "Coke Settles With 'Coke-is-it.'") It looks like Coca Cola settled with Mr. Coke-is-it based in part on his agreement to not use his name commercially. To the extent the court should have even raised the issue on its own, the trademark versus personal name conflict was unrealistic in this case, given the name chosen by Forchion. I guess a lawn maintenance company in New Jersey could have a similar name and grumble, but really?
I wasn't particularly persuaded by the court's reasoning that a person should not share a personal name with a website because of the possibility of confusion between the two. Is there a realistic possibility that someone would look at Forchion post-name change and equate him with a website found on the internet? Even to the extent there is confusion, would this really result from the addition of .com to NJweedman? Courts and the PTO have long recognized the lack of trademark significance of a .com, and the court's conclusion seems to presume that Forchion's use of a dot com for his personal name would somehow be the basis for confusion.
I didn't have any immediate plans to change my name to balasubramani.com, but at least in California it looks like this wouldn't fly.
Laura Heymann's Comments
[Eric's introduction: I'm pleased to include the following thoughts from Laura Heymann, the Class of 2014 Professor of Law at William & Mary Law School. Laura has been doing some excellent and thought-provoking work on the regulation of naming, and this case squarely implicates the issues she has been thinking about deeply.]
In In re Robert Edward Forchion, the California Court of Appeal affirmed a lower court decision denying Forchion the right to change his name to NJweedman.com, which also happens to be the URL for his website. Forchion is not the first individual to attempt to change his name to a URL. In 2003, animal rights activist Karin Robertson legally changed her name to GoVeg.com, the website of her employer, the People for the Ethical Treatment of Animals, in order to spark discussions about vegetarianism and animal rights; she reverted to her birth name three years later.
Forchion has apparently long advocated in favor of the legalization of marijuana, and both his advocacy and his personal experience with the drug have been the cause of a number of run-ins with the law, all of which is detailed at his website. (As Venkat notes, the California appellate court, taking “judicial notice of the content of [Forchion’s] Web site and any other Web site to which it provides a link,” quoted extensively from the website in rendering its decision.) While he was incarcerated in New Jersey, his home state, Forchion unsuccessfully petitioned the New Jersey state courts to change his name to NJWeedman.com. Forchion subsequently moved to California, where he continued his advocacy (and also operated an allegedly lawful medical marijuana dispensary). In California, Forchion tried again, petitioning a lower court to change his name to NJweedman.com, and was similarly rebuffed both there and on appeal.
As Forchion’s choice of moniker demonstrates, and as I have discussed in a recent article (Naming, Identity, and Trademark Law), personal names have at least three functions. A name is denotative, in that it refers to or identifies a person, allowing us to talk about an individual when he or she isn’t present. A name is also connotative, in that it often suggests or brings to mind a set of characteristics or attributes relating to the person to whom the name is connected. Parents typically have connotation in mind when they decide what to name their children, particularly when choosing a name that signifies a connection to a religious or ethnic heritage. And a name also has an associative function in that it signals a connection to a group or family. Indeed, the decision of Eric and his wife, Lisa, to take on a new shared surname upon their marriage is an example of, as he once wrote, establishing a “new common identity which is uniquely [theirs] as a couple.”
Our personal names also function, in a sense, like trademarks. When we write or speak or otherwise share our creativity with the world, our name is what tells people who is responsible for those thoughts and what allows us to build our reputations. And, like trademarks, we may well want to choose a name for our efforts that is itself creative – that expresses something about ourselves that our given names do not. Indeed, each time we participate in an online environment – a social network, a virtual world, a blog, or even sending e-mail – we choose a name through which we will present ourselves to the world.
Many naming choices are made informally – we ask friends and relatives to call us by a nickname or choose a pseudonym when we decide to comment on a blog post. But in an increasingly administrative world, some choose to make names “official” by petitioning the courts for a change in name. Despite the claim by many jurisdictions that this process is ministerial – simply to create an official record of the exercise of the right we have under the common law to change our name – courts will, from time to time, deny such requests on the grounds that the requested name was chosen for fraudulent or deceptive reasons, is offensive or obscene, or is otherwise objectionable. California’s name change statute has been interpreted as granting the courts discretion in deciding whether to grant a name change petition but also as providing that petitions should not be denied without some “substantial reason.” Indeed, the California courts’ own website suggests that the “main reasons” for denying a name change petition in the state are a finding that the petitioner is changing his name to commit fraud, hide from authorities, or for some other illegal reason.
So why was Forchion’s petition to change his name to NJweedman.com denied? The California appellate court offered four reasons, all of which seem somewhat curious. First, the court held that allowing Forchion to change his name to NJweedman.com ran the risk of confusing others. For example, the court noted, if Forchion ever lost the domain name for his website and someone else were to pick it up, there would now be two entities out there sharing the name NJweedman.com: Forchion and the now unrelated website. This, the court held, was untenable because “if both parties used that name to conduct business, confusion might result.” Second, even if Forchion did maintain the website, the court held, “the name might be so similar to another Web site name or trademark that the multiple usage would create confusion.” Third, the court held that the name change would encourage those who encountered Forchion to view his website, which, the court concluded, encouraged illegal activity. And, finally, the court held that given Forchion’s failed attempt to request a similar name change in New Jersey, his home state, principles of comity militated in favor of denying relief in California.
The idea that changing one’s name to that of an existing URL would create a level of confusion warranting the denial of the name change – either as between that URL or another URL or trademark – seems implausible. Naming is always contextual, and it is the rare name that isn’t also being used by someone else. We all like to think of our names as unique, but a quick Google search will often reveal at least one other person who shares our first name/last name combination. [Eric's note: recall our mockery of Bev Stayart on this point]. It’s also not uncommon for a personal name to be identical to a common word in the English (or another) language, such as the first names Hope, Faith, Hunter, and Clay. None of this presents a considerable difficulty either for the named or for those who refer to them; context will typically tell us whether the sentence “Faith is important to me” is being uttered by a congregant or by Faith’s partner. Although it has communicative components to it, a URL is ultimately an address. “Montana,” for example, has ranked among the top 1,000 girls’ names in the United States in recent years [you can do a search for Montana in NameVoyager], but no one would suggest that the existence of hundreds of little Montanas running around is going to cause travelers to have problems finding the state on a map. Nor is the potential similarity to an existing trademark problematic. A quick Internet search reveals more than fifty individuals with the given name John Deere, but it is unlikely that anyone negotiating with any of these men has been confused into thinking that they are dealing with the farm equipment manufacturer.
Comity also seems to be a curious basis for denying a name change petition. Given the mobility of individuals today and evolving family situations, it’s possible that an individual might change one’s surname upon marriage, change it back to one’s birth name upon divorce, change it again upon remarriage, and change it again for professional reasons. It would be odd to suggest that the ruling of any one state on one of these petitions would affect in any way the ability of another state to make a subsequent ruling. There may be statutory limitations on a court’s ability to render such a judgment, in that a particular state statute might require that the petitioner be a resident of the state in order to file a petition (as the appellate court suggested here). But comity doesn’t seem to be the reason to bar such requests, particularly if part of the basis for deferring to a sister state is, as the court stated here, that “the first two letters of the requested name — NJ — are not only the home state’s abbreviation but are intended to refer to that state.”
And so we come to what seems to be the primary motivation for the denial: the content of Forchion’s website. The court did not conclude that the name “NJweedman.com” was itself offensive; indeed, it noted that several New Jersey residents bear the surname Weedman. And while courts have rejected petitions to change one’s name to words that are, on their face, offensive or obscene, on the ground that the court should not be seen as stamping its imprimatur on the name choice, the name “NJweedman.com” does not seem to rise to that level. Nor should the fact that the name request is unusual be dispositive. Courts have approved name changes to single words, such as “Variable,” and to names that include punctuation marks, such as exclamation points. Not all courts have followed this path; a Pennsylvania court in 2000 affirmed a lower court’s rejection of a woman’s request to change her surname to the letter R on the ground that such a surname was “bizarre” and would therefore arouse suspicion. But even the New Jersey appellate court hearing Forchion’s previous petition noted, in its 2004 ruling, that “the name is not so bizarre as to call for denial of the request on that basis.”
But denying a name change petition on the ground that it may lead others to read about the petitioner’s views on controversial matters – even if those views can be characterized as supporting illegal activity – seems to create difficult boundary problems. A name change inspired by a reclaiming of one’s heritage, for example, may connect that individual to new or additional communities, but it would be problematic to suggest that a court’s view of that community should be the basis for rejecting the change. The fact that Forchion’s requested name change is also the URL of the site may well inspire a few who encounter Forchion to visit the site. But given Forchion’s own self-promotion efforts – and the media stories that have resulted, many of which use Forchion’s adopted name in any event – any such effect seems to be a thin justification for deeming the name change improper. Indeed, the fact that the court stated that the URL “should not also serve as Forchion’s personal name as long as he uses the Web site to encourage others to violate the law,” thus suggesting that the name would be appropriate were the content of the website to change, raises interesting First Amendment implications.
Here, the words of an Ohio appellate court seem relevant, when, in 2005, it granted a petitioner’s request to change his name to “Sacco Vandal,” after the anarchist Nicola Sacco and the Germanic tribe. “It’s a free country,” the court wrote. “The applicant is a grownup. He can change his name to anything he wants so long as the new name is not clearly improper or unreasonable . . . . If the applicant is using the name change to make a statement to society – and most applicants do – it is a subtle one.” The statement that Forchion is making by calling himself NJweedman.com may be considerably less subtle, but that does not mean it is without expressive content.
I agree with Laura's comments that the court's rationales for rejecting the name change are indefensible. It seems that the court implicitly--and improperly--shifted the burden onto Forchion to have a good reason for the name change, instead of retaining the burden to provide a good reason why the name change was problematic.
I was especially unpersuaded about the possibility that the NJWeedman.com domain name would end up in someone else's hands. If this is the court's concern, Forchion could have prepaid the domain name registration for the maximum length permissible, which I believe is at least a decade. That wouldn't have changed the fact that Forchion could still lose the domain name due to a breach of the registration agreement, but I believe those interventions are exceedingly rare. So the "permanence" of a domain name registration could be largely addressed through cash, and the court cut an analytical corner by treating a domain name registration as impermanent.
I'm also scratching my head because Forchion can still effectuate a common law name change, which will give him 90% of the website publicity traffic he seeks. So it's not clear how the court actually advances its policy concerns by denying the official name change.
More generally, despite Laura's scholarly work, state policies governing name spaces remain undertheorized and under-scrutinized. For example, as I blogged on my personal blog, California went decades with a facially illegal distinction in its marriage license, letting the woman take the man's name but not letting the man take the woman's name. California finally fixed this problem with a statute in 2007. For more discussion on government policies towards personal names, see these articles on marriage names and baby names). Another government-operated namespace that doesn't get much attention are vanity automobile license plates; we've seen a variety of questionable government policies emerge there without much pushback.
FWIW, because I changed my name to Eric Goldman from Eric Schlachter, the name Eric Schlachter is freely available for other takers (although, I should point out, there are a few other Eric Schlachters currently using the name). As I mentioned in this blog post, anyone else is free to adopt "Eric Goldman" too, but I plan to defend my favorable search engine placement vigorously!
September 05, 2011
Overreactive Guidance for Social Networking Du Jour -- NLRB Edition
[Post by Venkat Balasubramani]
NLRB Memo - Memorandum OM 11-74 (Aug. 18, 2011) ("Report of the Acting General Counsel Concerning Social Media Cases")
There has been a steady drumbeat from employment lawyers warning about the increasingly watchful eye of the National Labor Relations Board over so-called "social media terminations"--where a company fires an employee for making a statement about the company on Facebook or Twitter. The NLRB recently issued a report regarding the cases it was involved in. I took a look at the report and was surprised at the types of things the NLRB says that private employers cannot fire employees for. (The report is a quasi-advocacy document.
Courts have some room to reject the NLRB's position, but it will obviously be accorded some deference as the agency in charge. Correction: it does not reflect the views of the NLRB, but those of its General Counsel, who is responsible for prosecuting cases before the NLRB.)
Protected activity: Here are a few statements that the NLRB said was "protected activity" and therefore could not justify a firing:
- salespeople who complained about the quality of snacks furnished by a car dealership-employer at a client event;
- employees who complained about the employer's tax withholding practices (and the fact that they owed money);
- social services non-profit's employee who posted that her coworkers did not do enough to help clients;
- hospital employee who complained about a co-worker's absences;
- employee who posted a negative remark about a supervisor in response to the supervisor's request for an incident report.
Unprotected activity: Here are a few that the NLRB said were not protected activity:
- posting that a Wal-Mart assistant manager was being a "super mega puta";
- Tweets by a journalist that criticized other media outlets and some with sexual content (after being warned);
- bartender who posted about an employer's tipping policy (in response to a non-employee question);
- employee who posted on her Senator's wall about government contracts her employer had secured;
- employee who posted about mentally disabled clients.
Overly broad social media policies: The NLRB also offered guidance on when employer social media policies were overly broad:
- prohibition on communications that constitute "embarrassment, harassment or defamation" of the employers and staff members and a similar prohibition "against statements that lack truthfulness or that might damage the reputation or goodwill of the [employer], its staff, or employees";
- prohibition on employee use of microblogging tools on their own time "to talk about company business on their personal accounts; from posting anything that they would not want their manager or supervisor to see or that would put their job in jeopardy . . . [and] from posting any pictures or comments involving the company or its employees that could be construed as inappropriate";
- prohibition on employees posting pictures of themselves "which depict the company in any way, including a company inform, corporate logo . . . .";
- prohibition on "disparaging" remarks when discussing the employer or supervisors, coworkers and/or competitors.
The NLRB's 24 page document purports to provide guidance and promises to be "of assistance to practitioners and human resource professionals," but it left me scratching my head. The report should come with a strong disclaimer that anyone who reads it may find themselves more confused about social media terminations.
I get that employees have a right to organize, and employers are prohibited from interfering with the activities of employees which fall into this category, but the report reflects a hyper-nuanced view of what constitutes a complaint about the conditions of someone's employment and what constitutes concerted activity. In the case involving the salesman that was fired for complaining about the quality of snacks the dealership furnished for a customer event, the NLRB reasoned that since the salespeople work on a commission basis and since customers may be influenced to buy cars depending on the quality of snacks that are provided, complaining about the quality of snacks can actually be considered a complaint about a condition of employment. Say what??
In the case where employees complained about their employer's tax withholding practices (a legitimate gripe, obviously), the NLRB says that the employees engaged in a conversation that "embodied 'truly group complaints' but also contemplated future group activity":
a former employee posted on her Facebook page a statement, including a short-hand expletive, that expressed dissatisfaction with the fact that she now owed money. She also asserted that the Employer's owners could not even do paperwork correctly. One employee . . . responded to this posting by clicking "Like."
Wow! Someone clicked on a "like" button on a stray Facebook comment. Such an amazing, hearfelt show of solidarity! Interestingly, enough, the bulk of the activity that the NLRB is concerned about seems to take place on Facebook, which we all know is a veritable bastion of serious discussions about life issues. Kashmir Hill makes a similar point about the extreme nuance underlying the NLRB's positions in her post ("When You Can and Can't Fire Employees for Social Media Misbehavior"):
If you decided above to fire the BMW worker [the car dealership case], wrong answer. In that case, the employee was "vocalizing the sentiments of his coworkers" and expressing concerns that had already been raised by sales people at a staff meeting. That’s concerted activity. If you decided to fire the Wal-Mart employee [the "super mega puta" case], right answer. Even though other co-workers chimed in with words of emotional support, the employee was expressing his or her own gripe. It was not concerted.
The NLRB comments on the permissible bounds of social media policies was equally confusing. The NLRB takes issue with allegedly vague language in policies which prohibit "inappropriate," "disparaging," "embarrassing" comments about a company or its brand, because of the chilling effect it would have on employee communications. One would think that these are all legitimate concerns companies may have about employee communications that would affect how the companies are perceived in the public. But the NLRB's view seems to be that prohibiting your employees from airing your dirty laundry in public may run afoul of labor laws. The NLRB goes so far as to say that an employee policy that prohibits the use of "the company name, address, or other information on their personal profiles" is "unlawful." On the other hand, the NLRB alludes to the fact that a simple limitation in a policy that advises employees that a policy should not be construed to "apply to Section 7 activity" would be sufficient to save a policy. This would not seem to result in much clarity for either the employer or the employee.
There could be a couple of possible employer reactions to the NLRB's stance.
Employers may react strongly and start limiting social media access from the workplace or from workplace equipment or networks for personal use. We all know that the bulk of social networking activity occurs from the workplace, and employers may well conclude that if they are going to be held to strict standards in their employment decisions, they may as well make it hard for employees to participate at all. (I don't know the answer to whether the NLRB would crack down on a blanket prohibition on the basis it somehow restricts concerted activity. This would be ironic.) Concerned employers may also decrease their social media participation. In some of the cases, the discussions between employees also involved customers or clients. It puts the employer in a pretty awkward position to have to tolerate employee comments about workplace issues if they are taking place in front of customers or clients. The issue of customer or client perception did not seem like it was of any significant concern to the NLRB.
In reading through the memo, I had the nagging thought that someone at the NLRB is taking Facebook way too seriously. As with most social media regulatory efforts by the government my reaction is: "don't they have something better to do with their time?"
This concludes this week's edition of overreactive guidance to social networking. Next up, we'll discuss the Financial Industry Regulatory Authority Regulatory Notice 11-39, which gives the NLRB memo a run for its money.
[I hope everyone is having a safe and relaxing Labor Day.]
September 04, 2011
Resetting the Righthaven Fiasco (July-August 2011 Quick Links, Part 1)
By Eric Goldman
The Righthaven empire is in tatters. It hasn't expanded its inventory of cases for months (no new cases in July or August); its existing inventory of cases is shrinking for lack of standing and, increasingly, for lack of service; given that, the existing defendants aren't likely to settle, so Righthaven's revenues are stagnant; instead, its profit meter is running in reverse with mounting sanctions and attorney's fee awards; and as far as I can tell, Righthaven apparently has no full-time employees. Unless something changes big-time--such as a major victory in one of its Ninth Circuit appeals or a bankruptcy-inducing adverse fee award--it appears Righthaven will "quietly" fade into the sunset.
Some of the other interesting developments over the past two months:
* Righthaven was also sanctioned $5,000 for failing to properly disclose its interested parties.
* Righthaven lost a series of standing decisions, including in front of Judge Mahan in the Pahrump Life case and in front of Judge Dawson in Righthaven LLC v. Mostofi, 2011 WL 2746315 (D.Nev. Jul 13, 2011) (although, in a typical fit of petulant spite, Righthaven resued Mostofi) and the Hyatt case.
* In Democratic Underground v. Righthaven, Judge Hunt continues to raise the UPL issue: "the Court questions whether Righthaven can even have a legitimate interest under any agreement (no matter the rights purportedly transferred) because Stephens Media and Righthaven’s arrangement seems very much like a contingency fee arrangement with an entity unauthorized to practice law." FN1: "The Court notes that it considered certifying the question of whether Righthaven is engaged in the unauthorized practice of law to the Nevada Supreme Court. Ultimately, the Court chose not to solely because that issue is not dispositive of this application because Stephens Media will adequately represent Righthaven’s theoretical interests and the application is untimely. However, the Court may yet certify the question in a separate case."
* Righthaven v. Choudry, 2011 WL 2976800 (D. Nev. July 21, 2011): The court denied the defendant's motion to reconsider. The court said: “The court understands defendant's position that in-line linking and volitional conduct are two separate defenses. However, this court cannot conclude, as a matter of law, that the presence of an RSS feed unequivocally absolves a defendant of any and all liability for potential copyright infringement. This court lacks the expertise required to determine when or how an individual may modify or otherwise alter the behavior of an RSS feed, if at all. As such, the court cannot make a legal determination on the consequences of any such modifications.”
* the Righthaven/MediaNews agreement is online.
* Righthaven finally put up a web page, although it's hardly confidence-inspiring.
Prior blog coverage:
* Righthaven Defendant Awarded $3,800 in Attorneys' Fees--Righthaven v. Leon
* Recapping Righthaven Developments from the Past Two Weeks
* Righthaven Benchslapped in Ruling Saying It Lacks Standing--Righthaven v. Democratic Underground
* Another Defense-Favorable Righthaven Ruling--Righthaven v. Choudhry
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One
September 02, 2011
Seventh Circuit Awards e360 a Whopping $3 in Damages Against Spamhaus -- e360 v. Spamhaus
[Post by Venkat Balasubramani]
e360 Insight, Inc. v. The Spamhaus Project, 10-3538 & 10-3539 (7th Cir. Sept. 2, 2011)
The lawsuit between e360 and Spamhaus was a long-running, tortured affair, and it looks like it finally came to a close. With e360 being awarded a whopping $3 in damages against Spamhaus. (Here's a link to Ars Technica's recap of the oral argument, where Judge Posner blasted e360's counsel: "This is just totally irresponsible litigation . . . .You can't just come into a court with a fly-by-night, nothing company and say 'I've lost $130 million.'")
Background: e360 sued Spamhaus, a UK entity, for damages allegedly resulting from being identified as a "known spammer." It sued Spamhaus for tortious interference and defamation. Spamhaus removed to federal court and asserted lack of personal jurisdiction. It then withdrew its answer and decided that it did not wish to defend against e360's claims. e360 sought and obtained a default judgment, and the district court granted e360's request for damages and awarded e360 $11,715,000 in damages. Spamhaus moved to set aside the judgment, and when this request was refused, appealed to the Seventh Circuit. The Seventh Circuit affirmed the default judgment but remanded for a proper determination of damages.
Back at the district court, e360 was left with the task of proving up its damages, but it suffered a slew of discovery foibles. e360's principal failed to appear for his deposition as scheduled and failed to respond to Spamhaus's interrogatory requests. Spamhaus moved to dismiss on the basis of e360's discovery failures, and the trial court gave e360 another opportunity to address the discovery issues. e360 supplemented its previous responses but added a slew of new witnesses. It also increased its damages estimate from $11.7 million to a "whopping $135 million." It also sought to reopen discovery. The trial court said no dice and struck the new witnesses listed by e360 and struck e360's requested damage award to the extent it exceeded the initial $11.7 million request. After a bench trial on damages, the trial court awarded e360 "a mere $27,002, a far cry from the millions of dollars that e360 sought." Both parties appealed.
Discussion: The Seventh Circuit affirmed the district court's sanction (of striking the new request for damages and the newly listed witnesses), finding that the district court exercised its discretion "with considerable restraint." It also affirmed the district court's exclusion of a spreadsheet prepared by e360's principal which listed e360's damages at $135,173,577. (The week before trial e360 revised this number to $122,271,346.) The Seventh Circuit also affirmed the district court's exclusion of the bulk of the testimony on e360's behalf:
The district court gave Linhardt's testimony no weight because he was not credible.
Finally, the court gets to the actual damage award of $27,000. The district court cited to Linhardt's testimony regarding contracts with three customers who collectively paid e360 $27,000 per month for services performed. As a result of Spamhaus's actions, the district court found that e360 lost these contracts. Spamhaus argued on appeal that it was not appropriate for the district court to award the entire contract amounts as this amount represented revenue rather than profit. The Seventh Circuit agreed, saying that although Linhardt may have adduced credible testimony as to these three contracts, e360's failure to put forth any evidence on what portion constituted profits versus overhead was fatal to the damage award.
Ultimately the court ends up awarding nominal damages as to the three claims raised by e360, for a whopping award of three dollars:
By failing to comply with its basic discovery obligations, a party can snatch defeat from the jaws of certain victory. After our earlier remand, all e360 needed to do was provide a reasonable estimate of the harm it suffered from Spamhaus's conduct. Rather than do so, however, e360 engaged in a pattern of delay that ultimately cost it the testimony of all but one witness with any personal knowledge of its damages. That lone witness lost all credibility when he painted a wildly unrealistic picture of e360's losses. Having squandered its opportunity to present its case, e360 must content itself with nominal damages on each of its claims, and nothing more.
Spamhaus ended up traveling the long road and ultimately defeating e360, but it's nice to see it prevail. As the Holomaxx v. Yahoo and Microsoft cases indicate, lawsuits brought by emailers against ISPs or filtering services face a long and uphill road, which should lead to a dead end. ("Bulk Emailers (Mostly) Lose Three 47 USC 230(c)(2) Rulings--Holomaxx v. Microsoft/Yahoo & Smith v. TRUSTe;" "Court Affirms Robust ISP Protection For Blocking Bulk Emails -- Holomaxx v. Microsoft/Yahoo.")
[h/t Mickey Chandler]
September 01, 2011
Google Gets a Good Win in the MyTriggers Lawsuit
By Eric Goldman
BFS Finance v. My Triggers Co., 09CV-14836 (Franklin County Court of Common Pleas, Aug. 31, 2011)
This lawsuit started all so innocently. It was just a routine collections matter against MyTriggers, an AdWords advertiser, for a few hundred thousand dollars. Unexpectedly, Google found itself pinned down in a dangerous venue (Ohio state court) against lawyers with impressive resumes and apparently bottomless legal budgets raising issues that are central to Google's business. My original blog post on MyTriggers' counterclaims.
For the moment, Google is having the last laugh. Although it cost them lots of money in discovery and managerial focus, yesterday Google got a thoroughly satisfying win on its motion to dismiss MyTriggers' counterclaims. I'm confident the plaintiff won't let this ruling stand as the final word, but it's clear MyTriggers has gotten zero traction in court. Combined with the ignominious dismissal of TradeComet's similar lawsuit against Google on jurisdictional grounds (being handled by some of the same plaintiff's lawyers), I'm even more confident now that both the TradeComet and MyTriggers lawsuits lack any merit. Unfortunately, these lawsuits' likely demise probably will only encourage the anti-Google forces to redirect their energy and resources into the multitudinous other efforts to bust Google.
Some specifics about this ruling:
* the state antitrust claim (the Valentine Act) fails because MyTriggers only alleged that Google harmed MyTriggers as a competitor, not that it harmed competition. In particular, MyTriggers alleged that Google favored some vertical search engines over others, so this allegation undercut MyTriggers' claim. MyTriggers' allegation of a boycott were too general, and its allegation of unilateral conduct weren't supported by any allegation of antitrust injury.
* MyTriggers' contract breach claim fails because MyTriggers never properly identified the allegedly breached contract or Google's breach.
* MyTriggers' promissory estoppel claim fails because MyTriggers couldn't allege a sufficiently unambiguous promise or any detrimental reliance on those promises.
* MyTriggers' rescission claim (based on fraud) failed for many of the same reasons: no identification of the contract and weak promises by Google.
Stepping back from the details, this is quite a stinging--and thorough--rejection of MyTriggers' pleadings, even though they were aided by many months of discovery. These are not the kinds of dismissal grounds one normally expects to see from a complaint drafted by lawyers with national reputations.
The only sour note is the judge's rejection of Google's 47 USC 230(c)(2) defense to the antitrust claims. Google's basic position is that it rejected MyTriggers' ads because it objected to them, and therefore it gets the statutory immunity for blocking "otherwise objectionable" content. The court rejects the contention, applying the ejusdem generis doctrine to interpret "otherwise objectionable" more narrowly. Citing the National Numismatics case, the court rejected the Langdon v. Google ruling and said that objectionable content must relate to porn, violence, obscenity or harassment. It distinguished other Google citations (such as the e360 case) as involving spam, which the court characterized as a subset of harassment, or 230(c)(1).
I don't agree with this reading of 47 USC 230(c)(2), and there are many cases applying the "otherwise objectionable" language more broadly than this court did. See my overall recap of 47 USC 230(c)(2). On the other hand, I think it's a tough sell for courts to apply 230(c)(2) to antitrust claims (see, e.g., the concurrence in Zango v. Kaspersky), and this ruling shows the natural reluctance of judges to go that direction.