November 18, 2008
October 2008 Quick Links, Part 2
By Eric Goldman
Spam
* Kramer v. Perez. An Iowa court awards $236M in damages in a spam case. Venkat's comments.
* After the government lost its jury trial against Impulse Media, the court denied Impulse Media attorneys fees.
Contracts
* AT&T put its own emailed notice of amended contract terms into its spam folder. Whoops! Due to spam filters and other automated blocks, it is becoming almost impossible for websites to communicate with their users by email.
* An estimate of the massive "tax" imposed on consumers by reading privacy policies. Of course the financial drain is overstated because many people make a rational decision not to read every privacy policy, plus not every person has to read a privacy policy for marketplace responses to be effective.
* The Blizzard v. MDY WOWGlider case has reached a stipulated damages amount of $6M.
* Pulaski & Middleman, LLC v. Google Inc., 5:2008cv03888 (N.D. Cal. complaint filed August 14, 2008). The Justia page. Yet another me-too lawsuit against Google over serving ads to parked domains and error pages.
* An Israeli GPL enforcement action settled.
Trademarks/Domain Names
* Kentucky v. 141 Domain Names. Is a domain name property? Yes. See the Sex.com case. Can a plaintiff seize a domain name pursuant to a favorable judgment? Yes. Is it appropriate for Kentucky to seize domain names for gambling websites available in Kentucky? Of course not, because this would effectuate an extraterritorial reach by curtailing non-Kentucky residents from making possibly legal uses of the domain name. More recently, the seizure was stayed.
* Speaking of inappropriate seizures, the Feds are trying to seize the trademarks of the Mongols motorcycle group. DOJ press release. LA Times article.
* Best Western Intern., Inc. v. Doe, 2008 WL 4630313 (D. Ariz. Oct. 20, 2008). Prior blog post in this case. The judge is losing patience: "These filings are wasteful in the extreme. The Court is not a forum for the parties to expend every possible dollar seeking to litigate every conceivable issue, no matter how insubstantial. The Court will no longer tolerate the excesses of this case."
* The Verizon v. Navigation Catalyst Systems domainer lawsuit settled.
* 50 Cent brings yet another questionable lawsuit. (1, 2).
Advertising
* Goddard v. Google Inc., 2008 WL 4542792 (N.D. Cal. Oct. 10, 2008). The case against Google for deceptive mobile phone ads will stay in federal court.
* Eyeblaster, Inc. v. Federal Insurance Co., 2008 WL 4539497 (D. Minn. Oct. 7, 2008). This is a collateral lawsuit to Sefton v. Eyeblaster alleging that Eyeblaster distributed spyware. Eyeblaster tendered the claim to its insurer. This court holds that the CGL policy doesn't apply because the claim relates to software problems, not physical damage to the users' computers. Further the E&O policy doesn't apply because Sefton alleges that Eyeblaster intentionally installed the spyware, bumping Eyeblaster into one of the policy's exclusions.
* Are consumers becoming more tolerant of pop-up ads? For more on consumer acceptance of new advertising formats, see here.
* A big damages award in NetQuote v. Byrd.
Posted by Eric at 06:42 AM | Adware/Spyware , Domain Names , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Spam , Trademark | TrackBack
October 14, 2008
September 2008 Quick Links, Part 3
By Eric Goldman
eBay
* Universal Grading Service v. eBay, Inc. More fallout from the National Numismatic v. eBay case--another lawsuit alleging antitrust and defamation because eBay designated some coin rating services as preferred and impliedly devalued others.
* Windsor Auctions v. eBay has been refiled in a new jurisdiction.
* Mehmet v. Paypal, Inc., 2008 WL 3495541 (N.D. Cal. Aug. 12, 2008). Upholding the consequential damages waiver in PayPal’s user agreement.
* A company's failure in the marketplace can drive up the value of its collectibles on eBay.
* Stelor Productions, Inc. v. Google, Inc., 2008 WL 4218107 (S.D. Fla. Sept. 15, 2008). In the lawsuit alleging that Google causes reverse confusion of Googles.com [warning: annoying music ahead], the plaintiff doesn't get to depose Sergey or Larry yet. Rose Hagan, Google’s long-time chief trademark counsel, is the lucky substitute.
* Lots of rhetoric in the Google/Yahoo ad syndication deal. Google’s advocacy website. Google Chief Economist Hal Varian explains why the deal won’t raise ad prices in the auction. Randall Stross weighs in.
* Google has changed course and now allows religious groups to advertise on the keyword “abortion.”
* Kubit v. Google Groups, 2:2008cv00738 (M.D. Fla. complaint filed Sept. 29, 2008):
I then would like to sue Google Groups for not removing the posts when I repeatedly asked them to for 2 years. I believe I am entitled to at least a small amount of compensation for the emotional distress and lost business income that has resulted from them allowing these posts to remain on their Google Groups, even though I offered them VERY solid proof that I do not have HIV. If they had stopped the posts when they first occurred, they would not have proliferated to hundreds of websites. I became suicidal for a period of time after the posts started. I incurred a lot of emotional pain and fear because of the posts and had to seek psychiatric and psychological help to get my life back together. I still suffer from fears of dating, living a public business life and trusting others.
Yes, this is a pro se complaint. Yes, it is preempted by 47 USC 230.
Marketing/Advertising
* NebuAd is dead (1, 2). Even so, the lure of intermediaries aggregating deep data about consumers for commercial purposes will never die.
* Is Gator/Claria dead?
* The EU passed a non-binding resolution against sexual stereotypes in advertising.
* Celebrity branded merchandise run amok.
Miscellaneous
* Valleywag: "The 5 most laughable terms of service on the Net." For more laughs, see Mark Lemley’s Terms of Use paper.
* Murakowski v. University of Delaware, 2008 WL 4104087 (D. Del. Sept. 4, 2008). This reminded me a lot of the Jake Baker case from the mid-1990s.
* The Virginia Supreme Court reversed itself on the Jaynes anti-spam prosecution, and Jaynes walks. Does Virginia routinely pass unconstitutional laws?
* Becker v. Toca, 2008 WL 4443050 (E.D. La. Sept. 26, 2008). Ex-wife's alleged delivery of "Infostealer" program to grab passwords from ex-husband could violate the ECPA, SCA and CFAA.
* Interesting article on ESPN’s exclusive distribution and bundling agreements with Internet access providers.
* Silly? Horrifying? A sign of the apocalypse?
Posted by Eric at 06:17 PM | Adware/Spyware , Content Regulation , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Spam | TrackBack
August 27, 2008
7Search Sues McAfee For Red Flagging It
By Eric Goldman
7Search.com v. McAfee, Inc., 1:2008cv04831 (N.D. Ill. complaint filed Aug. 25, 2008). The Justia page.
I don't have a good sense of how many lawsuits have been filed against anti-spyware vendors for classifying third party software as "adware" or "spyware." I've blogged on a few (including Kaspersky, PC Tools and Symantec v. Hotbar), and Ben Edelman maintains a larger catalog of such lawsuits (not sure how up-to-date this is). However, I don't know if these lawsuits are relatively rare (as Ben's chart implies) or if they are multitudinous but most quietly fly under the radar screen.
If there aren't many unpublicized lawsuits, that may reflect that suing an anti-spyware vendor over its classification decisions almost never makes sense. First, many vendors have a private adjudicatory/appellate process that resolves many potential disputes without a lawsuit. Certainly, most vendors don't want to make errors, which undermines their own credibility, and most reputable vendors want to fix their mistakes. Second, lawsuits bring generally unwanted publicity to the plaintiff, calling extra attention to their alleged deficiencies and bringing out all of the gripers. Third, the costs of the lawsuit may be more than the value of any frustrated transactions. Finally, many of the lawsuits have low probabilities of legal success for the reasons I'll discuss in a moment. So there is good reason to believe classification-related lawsuits such as this one are rare. (I'm not saying that grumbles or C&Ds are rare; I'm just referring to formal lawsuits).
In this lawsuit, 7Search says that it was in the toolbar business but stopped offering downloads from its site in 2003. However, McAfee's SiteAdviser gives 7Search the big red X and says "Feedback from credible users suggests that downloads on this site may contain what some people would consider adware, spyware, or other potentially unwanted programs." 7Search claims that this statement is false because it isn't offering any downloads at all. 7Search thus alleges false advertising (Lanham 43(a)), deceptive trade practices, defamation and unfair competition.
The most obvious barrier to 7Search's lawsuit is 47 USC 230. Both (c)(1) and (c)(2) could be implicated. (c)(1) is less likely, but if in fact McAfee is republishing information from third parties (as suggested by the statement's reference to "credible users"), they may be able to claim (c)(1) for the republication. Either way, (c)(2)--the immunization for filtering decisions--is directly on point and potentially immediately fatal to the lawsuit. Zango's lawsuit against Kaspersky was soundly and quickly knocked out on 230(c)(2) grounds (though that is now on appeal to the Ninth Circuit), and a district court in Illinois gave broad deference to the Zango ruling in finding that Comcast could claim 230(c)(2) for email filtering decisions.
At the same time, 7Search alleges that McAfee's classifications were in bad faith. If so, then 230(c)(2) wouldn't apply even under the liberal Kaspersky or Comcast approaches, both of which required subjective good faith. We'll have to see how McAfee responds to determine if 7Search's allegation has any chance of getting traction.
There are two other possible holes in the potential 230 coverage for this lawsuit. First, courts have been inconsistent whether a false advertising 43(a) claim under the Lanham Act fits within the "IP" exclusion to 230. Second, most of 7Search's gripe goes to McAfee's statement that bad downloads are available--words chosen by McAfee to describe its filtering decision. It remains unclear if 230(c)(2) protects an intermediary's characterization of its filtering decision as much as it protects the filtering decision itself--just like 230(c)(1) may protect against liability for third party information but may not protect against marketing representations rendered untrue by third party content or actions.
In any case, I think this lawsuit and others over classification decisions raise interesting and important issues that I plan to explore in my Economics of Reputational Information project. We want skillful intermediaries to digest the overwhelming amount of information available in the marketplace and make reputational judgments that speed up our consumer decision-making. On that basis, we definitely don't want reputational judgments removed from marketplace actors and put into the hands of the judges. However, we also want the reputational intermediaries to make factually accurate judgments because their misjudgments also could distort marketplace decision-making.
Posted by Eric at 03:54 PM | Adware/Spyware , Derivative Liability , Marketing , Trademark | TrackBack
August 20, 2008
Competitive Pop-up Ads Aren't Unfair Competition or Tortious Interference--Overstock v. SmartBargains
By Eric Goldman
Overstock.com, Inc. v. SmartBargains, Inc., 2008 UT 55 (Utah Sup. Ct. Aug. 19, 2008)
In light of the death of adware and the fact that almost all of us have moved on, it is jarring to see adware opinions still emerging. This case, percolating in the courts four years, is quite a throwback.
In 2004, Overstock sued SmartBargains for buying adware-delivered pop-up ads that were triggered by user visits to Overstock.com. There have been a lot of keyword advertising cases since then, but this case is unusual because (for reasons not clear to me) Overstock did not make the more typical trademark infringement claim or even the less common trademark dilution claim.
Instead, Overstock asserted three causes of action: (1) violation of the initial Utah Spyware Control Act passed in 2004, (2) unfair competition, and (3) tortious interference with prospective business relations. The Spyware Control Act claim was mooted when the statute was deemed unconstitutional and further mooted when the legislature amended the law, so Overstock did not pursue that claim further. The district court also ruled against Overstock on the other 2, and Overstock appealed to the Utah Supreme Court. [for reasons that aren't clear to me, this case apparently bypassed the Utah appeals court.]
The Supreme Court had little difficulty disposing of the remaining claims. The pop-up ads didn't constitute unfair competition (in Utah, an anti-passing off claim) in this case because SmartBargains' pop-ups appeared in a separate window and displayed the SmartBargains' logo. The tortious interference claim gets tossed for exactly the right reason--competitive ads are a good thing, not bad. The court says "SmartBargains’ pop-ups indisputably exist to compete with Overstock. Competition is not an improper purpose, even though other byproducts of competition may exist." Case dismissed.
In one sense, this case isn't all that important. With respect to lawsuits over competitive online ads, most of the action relates to trademark infringement and particularly what constitutes a trademark use in commerce. But this case is important because it's fairly typical for plaintiffs in those lawsuits to add a laundry list of additional claims with the hope that something sticks. As this case shows, the laundry list claims are junky and easily disposed of, and a state supreme court ruling to that effect is a nice and useful precedent for defendants.
Even so, I wonder about the political ramifications of this ruling. Overstock's attitude towards keyword advertising has been erratic. On the one hand, it went to the Utah legislature to protest the Utah Trademark Protection Act because it apparently buys keyword ads on third party trademarks. On the other hand, it supported Utah's initial Spyware Control Act, it was the first to try to take advantage of the law, and it was willing to pursue this silly lawsuit for over 4 years. In response to this loss, will Overstock flip--just like its Utah Internet retailing peer 1-800 Contacts flipped--and go seek out a friendly and easily persuaded Utah state legislator to give it a tailor-made anti-keyword advertising statute? Stranger things have happened in Utah...
HT: Evan Brown
Posted by Eric at 07:15 AM | Adware/Spyware , Marketing , Trademark | TrackBack
August 08, 2008
Affiliate Liability Extravaganza
By Eric Goldman
[Note: I recently published a version of this article at InformIT. Here's the pre-edited version I sent them.]
Introduction
This article discusses marketers’ liability for the actions of their marketing affiliates (what I refer to as “affiliate liability”). The affiliate liability issue has become red-hot recently because numerous plaintiffs have taken aggressive legal positions seeking to expand the boundaries of affiliate liability. In three recent rulings, courts have emphatically rejected these expansive liability arguments. Even so, it seems likely that plaintiffs will continue to look for ways to expand affiliate liability, and despite the favorable rulings, defendants often settle a lawsuit alleging affiliate liability rather than establish their rights in court.
Affiliate Marketing—Good and Bad
Marketers create affiliate programs to outsource marketing decisions to domain experts. For example, independent third parties may have better or cheaper access to subcommunities of potentially interested consumers than a marketer’s employees. An affiliate marketing program compensates these local experts for work and expertise involved to take the marketer’s message to those consumer communities. When it works properly, affiliate marketing programs can play an important role in the broad “invisible hand” economic phenomenon of allocating scarce resources to consumers who value them the most.
Affiliate marketing doesn’t always have this salutary effect. Affiliate marketing programs create payoffs to motivate affiliate behavior, and inevitably some affiliates will try to obtain the payoff without doing the desired activity. Thus, even if the marketer would prefer otherwise, some affiliates might do “whatever it takes” to get paid, including using false advertising or illegitimate marketing mechanisms. Further, the fact that the marketer outsources some choices to affiliates (a necessary part of any affiliate program) can lead to “diffuse responsibility” where the marketer and affiliates point fingers at each other if something goes wrong. Sometimes, when there are multiple tiers of affiliates, it can become effectively impossible to assign responsibility for the wrongdoing.
To bypass these legal entanglements, plaintiffs have sought ways to hold marketers vicariously (automatically) liable for their affiliates’ actions. However, these efforts “break” standard tort law by trying to treat independent contractors as if they are principal-agents without the requisite supervision or authority that typically triggers agency liability. As a result, overexpansive theories of affiliate liability cause marketers to internalize too many costs, curtailing potentially socially beneficial marketing activities or leading to overinvestment in socially wasteful liability minimization schemes.
Plaintiffs Gone Wild: Two Recent Efforts to Expand Affiliate Liability
There have been countless affiliate liability enforcement actions, but I’ll focus on two recent initiatives.
New York Sales Tax Law
State and local taxing jurisdictions have long coveted a way to impose sales tax collection responsibilities on non-resident Internet vendors. In general, these efforts have been stymied by the Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which requires a vendor to have a physical presence in the jurisdiction before the taxing entity can impose sales tax collection obligations on it.
New York, however, developed a nifty workaround. In April, it passed a law (Chapter 57, N.Y. Laws of 2008) declaring that a vendor’s marketing affiliates in New York constituted a physical presence in New York by the vendor. If so, New York can impose sales tax collection obligations on remote vendors due to their New York affiliates. As part of its crafty plan, New York tried to induce compliance with a carrot—if remote vendors voluntarily agreed to collect and pay sales tax from New York residents going forward, then New York would grant them amnesty for any back sales tax collection obligations.
Neat trick, but…a small problem: affiliates are independent contractors of the vendor, so this effort to treat them as legally related entities surely doesn’t comply with the Constitution. I suspect a court will confirm this flaw because both Amazon and Overstock.com have sued New York over the law. At the same time, to minimize its risk, Overstock has also tossed all of its New York affiliates overboard. One might question the wisdom of the New York legislators prompting marketers to cut off opportunities for New York online entrepreneurs.
Trademark Owners Claiming Marketers Are Liable for their Affiliates’ Marketing
Another trend: trademark owners are trying to hold a marketer liable for the alleged trademark infringement committed by its affiliates, such as when affiliates purchase the third party trademark as a keyword trigger for search engine ads. Plaintiffs have alleged affiliate liability in at least three lawsuits in the past couple of months:
* DSW v. Zappos.com (S.D. Ohio complaint filed May 12, 2008). For more, see SEOmoz.
* NameSafe v. LifeLock (M.D. Tenn. complaint filed June 26, 2008). For more, see Techdirt and News.com.
* Rosetta Stone v. Rocket Languages (C.D. Cal. complaint dated July 2, 2008). For more, see the WSJ Law Blog.
Courts Weigh In—and Plaintiffs’ Expansive Theories Don’t Fare Well
The efforts to extend liability in the sales tax and trademark contexts are novel, and it’s hard to predict the final outcome because we have limited direct precedent to consult. However, looking at some recent rulings in other contexts, there is good reason to believe that both legal theories go way too far.
CAN-SPAM
Unlike many other areas of the law, CAN-SPAM (15 USC 7705 and 7706) specifically authorizes affiliate liability in the statute. The Federal Trade Commission (FTC) has routinely invoked this provision in its pursuit of marketers promoted by affiliate-initiated spam (for one of the more recent examples, see the FTC’s press release on one of its porn spam busts and settlements). Further, typically when the FTC targets a marketer on an affiliate liability theory, the marketer rolls over and settles rather than fight.
But…a small problem: the FTC’s expansive interpretation of the affiliate liability statute—the basis it has used to procure these settlements from marketers—may not actually reflect the law. In an outcome that didn’t get nearly the press it deserved, in an lawsuit against Impulse Media earlier this year, the FTC took its affiliate liability theories to a jury and lost. This is a huge verdict because (1) the FTC rarely loses in court, and (2) perhaps more importantly, when average citizens evaluate the FTC’s expansive affiliate liability theories, they may balk.
Oddly, the FTC didn’t take no for an answer. It subsequently asked the judge to enjoin Impulse Media even though Impulse Media won the jury verdict. Talk about chutzpah! Not surprisingly, the court declined the request. US v. Impulse Media, 2008 WL 1968307 (W.D. Wash. May 1, 2008).
In another lawsuit, ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008; unsealed April 29, 2008), a civil plaintiff, ASIS (a serial anti-spam litigant), invoked the CAN-SPAM affiliate liability provision in its anti-spam lawsuit against 20 defendants. One defendant never showed; 18 defendants settled up (as mentioned, the typical response); and only one defendant—Azoogle—persisted in court.
Azoogle is a lead generation company for upstream marketers, and it relies on downstream affiliates to help it generate leads for its clients. Some of those downstream affiliates generate leads via spam. In this ruling, the court rejects Azoogle’s liability for spam sent by its marketing affiliates:
Although ASIS has pointed to significant evidence that Azoogle, during the relevant time period, did little to investigate the third party vendors it engaged, there is no evidence in the record from which a jury could conclude that Azoogle, in contracting with Seamless Media, made a deliberate choice not to know that Seamless Media would engage third parties to send out spam on Azoogle's behalf. The evidence cited by ASIS to establish knowledge on Azoogle's part is entirely speculative. Even assuming it is true that the Emails were sent by a single individual and that the lead was typed into a web site that was copied from Azoogle's lowrateadvisors site, this is insufficient to show that Azoogle consciously avoided knowing that the Emails would be sent. Further, while ASIS relies primarily on the allegation that Azoogle failed to adequately investigate its third-party vendors, ASIS has pointed to no evidence that if Azoogle had investigated Seamless Media prior to entering into the Insertion Order, it would have learned facts sufficient to show that Seamless Media was likely to engage in CAN-SPAM violations. There is no evidence in the record that would put Azoogle on notice that Seamless Media, or Seamless Media's vendors, obtained leads from spammers. Indeed, the only evidence on this subject is that Seamless Media had a good reputation at the time, and was obliged by its contract with Azoogle to follow the law.
Adware
Another recent affiliate liability decision is the remarkable ruling in People v. Direct Revenue LLC, 2008 WL 1849855 (N.Y. Sup. Ct. March 12, 2008), another case that did not get the attention it deserved. Disclosure note: I helped file an amicus brief in this case.
In 2006, the NY Attorney General’s office (NYAG) made the apparent decision that adware vendor DirectRevenue needed to be shut down by any means necessary, and it launched a multi-front attack on DirectRevenue. It publicly posted a website with information about DirectRevenue that had no apparent purpose other than to denigrate DirectRevenue’s reputation. It bullied DirectRevenue’s advertisers, ultimately procuring, and then releasing a hyperbolic press release about, an insignificant settlement that spooked potential advertisers away from DirectRevenue. And finally, it sued DirectRevenue directly.
The NYAG’s actions had their desired effect. Perhaps due in part to the NYAG’s campaign to close DirectRevenue down, DirectRevenue did in fact go out of business. Congratulations to the NYAG for achieving its apparent goal.
But…a small problem: the NYAG’s assessment of DirectRevenue’s legitimacy may have, in fact, been itself lawless, because the court emphatically rejected all of NYAG’s legal theories. This might be amusingly ironic if the NYAG’s anti-DirectRevenue campaign wasn’t such a chilling and crushing misuse of governmental powers.
The opinion is worth reading in its entirety, especially where the court affirms the EULA formation and limits extraterritorial liability. However, apropos to this post, the court rejected DirectRevenue’s liability for allegedly illegitimate software installations made by its affiliates, saying “petitioner has not shown that respondent should be held liable for the actions of those third parties under a theory of agency or ratification, or otherwise.” The court explains:
Dismissal is required with respect to the 22 [installations by] third parties, who petitioner concedes were independent contractors rather than agents of Direct Revenue. A principal is generally not liable for the acts of an independent contractor because of the lack of control over how the contractor's work is performed (Chainani v. Bd. of Educ., 87 N.Y.2d 370, 380-81 [1995]). Neither may the principal be charged with the conduct of even more remote subcontractors (People v. Synergy6, Inc., Index No 404027/03 [Sup Ct N.Y. Co 2006][unpublished disposition][Attorney General's action for deceptive practices and false advertising under GBL dismissed as against email marketing company where fraudulent emails were sent by company retained by agent]). Although exceptions exist, such as where the contractor was negligently retained or supervised (Saini v. Tonju Assocs., 299 A.D.2d 244, 245 [1st Dept 2002]) or where the principal has ratified the wrongful acts (Kormanyos v. Champlain Valley Fed. Sav. and Loan Assoc. of Plattsburgh, 182 A.D.2d 1036, 1038 [3d Dept 1992]), the record here does not support any grounds for departure from the usual rule.
As noted, under the SDA, Direct Revenue contractually required its distributors to obtain consent of consumers consistent with the terms of the EULA. The SDA also forbade the distributors from holding themselves out as respondent's agents. Respondent was not authorized or obligated to control their work, particularly since many of them additionally acted as distributors for various other advertisers. Although in Sotelo v. Direct Revenue, 384 Supp2d 1219 (ND Ill 2005) the court upheld a cause of action against respondent for negligent supervision of distributors, the issue arose on a motion to dismiss and the court thus restricted its inquiry to the four corners of the complaint. Notably, the court stated that it was precluded at that procedural juncture from considering respondent's evidence that the distributors were independent contractors, evidence which, as here, included the SDA.
…
The theory that respondents ratified the alleged third party misconduct also fails. The allegations that respondent had general and/or constructive knowledge of some distributors' wrongful practices are insufficient to impose liability (see, Synergy6, supra; Del Signore v. Pyramid Sec. Servs., Inc., 147 A.D.2d 759, 760-61 [3d Dept 1989][mere knowledge of litigation and complaints against security company for undue force by guards insufficient to impose liability upon hiring firm]; see also Hamilton v. Beretta USA Corp., 96 N.Y.2d 222, 237 [2001]). Moreover, it is conceded that in those few instances in which respondent obtained actual knowledge of a distributor's misconduct, it took significant steps to modify its procedures. A finding of ratification cannot be found upon such facts, notwithstanding that respondent may have benefited financially from its relationship with the distributors before remedial measures were implemented (see Synergy6, supra).
It is my understanding that the NYAG has filed a notice of appeal in this case to preserve its options, but it is still deciding if it will pursue the appeal.
Unfortunately, I’m not aware of the Synergy6 opinion being available electronically, which is a shame because it’s an interesting and relatively early rejection of the NYAG’s expansive affiliate liability doctrines. Due to that ruling (which involved email marketing instead of adware), the NYAG already had good reason to suspect that its predicate theories were dubious, which makes its decision to pursue those theories against DirectRevenue even more lamentable.
Conclusion
This post highlights two seemingly inconsistent trends. Trend #1 is that plaintiffs (private actors or government agencies) are taking very expansive positions on affiliate liability. Trend #2 is that when tested, expansive affiliate liability theories are failing in the courts. These two trends seem to be in conflict with each other. My hope is that trend #2 becomes so strong that it overrides trend #1, i.e., plaintiffs and government actors get the message that they have gone too far.
Unfortunately, in the interim, many defendants will capitulate and settle an expansive affiliate liability claim—even if it’s lawless—because it’s the cheapest path to resolution or because the precedent isn’t strong enough to ensure victory. Perhaps some defendants will realize that the trend is in their favor and will fight back accordingly. More judicial clarity about the line between permissible and impermissible behavior would benefit everyone.
It is also possible that the legal ambiguities of affiliate liability will be resolved by statute. However, despite the defendants’ string of court victories, I see the chances of legislative intervention to curtail expansive affiliate liability doctrines as nil. If anything, it’s more likely that future legislation will codify liability expansion.
For a rare in-depth analysis of affiliate liability, see Jean Noonan and Michael Goodman, Third-party liability for federal law violations in direct-to-consumer marketing: telemarketing, fax, and e-mail 63 Bus. Law. 585-596 (2008) [ABA subscription required to download].
Posted by Eric at 08:04 AM | Adware/Spyware , Derivative Liability , Marketing , Spam , Trademark | TrackBack
July 01, 2008
June 2008 Quick Links
By Eric Goldman
Trademarks/Domain Names
* Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, 2008 WL 22043807 (10th Cir. May 29, 2008). CMLP writeup. Nice 10th Circuit win for a gripe site against trademark infringement and cybersquatting. This case, plus the SKI VAIL case, indicate that the 10th circuit is making progress undoing the harm it created in the Australian Gold v. Hatfield case.
* Georgia has a new anti-phishing law (16-9-109.1) that acts as a para-trademark law. See my comments on the analogous California anti-phishing law.
* After initiating a trademark lawsuit against a consumer review site and soundly losing in court, Lifestyle Lift paid $17,500 to settle its own lawsuit and avoid claims for legal fees under Rule 11 and the Lanham Act.
* Marty reports on a German case saying that white-text-on-a-white-background is a trademark use.
* Update on the battle over the trademark registration for "SEO."
* Will TLD proliferation lead to a new open era in domain name administration, or will the resulting anarchy just reinforce that top search engine placement is the really important online real estate? It seems like the currently limited number of TLDs has some benefits from a bounded rationality standpoint, and those benefits will be lost in a cacophony of unknown TLDs.
Patents
* My colleague Colleen Chien has posted "Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission" (forthcoming William & Mary Law Review). She empirically demonstrates that the ITC mostly involves disputes between two domestic litigants, making it a redundant battleground with federal district court but nevertheless an attractive venue for plaintiffs due to a number of procedural advantages. She makes a number of recommendations to eliminate the litigation gamesmanship offered by having parallel venues. Check it out.
Search Engines
* Udi Manber, chief algorithm keeper for Google, reiterates why it's silly for lawyers and judges to put too much legal emphasis on the relative placement of search engine results, saying "it's definitely the case that if you do the same search on a different cluster, you may get slightly different results at a given time. It's also the case that if you do the same search on different days you may get different results, because some of the results are things we indexed five minutes ago."
(Over)Regulation
* In response to an enforcement effort by the NY AG's office, several Internet access providers have blocked access to newsgroups that are putatively sources of child pornography. See the NYT story and the NY AG press release. In practice, this means wholesale takedowns of newsgroups that may have nothing to do with child porn. For example, Verizon is killing all USENET hierarchies except comp.*, misc.*, news.*, rec.*, sci.*, soc.*, and talk.*. Wired suggests this is the death of online intermediary freedom as conceptualized in 47 USC 230. Of course, 230 never protected intermediaries from criminal exposure for child porn, and this isn't the first time that an access provider has knuckled under to the NY AG's office. See the BuffNet enforcement action from 2001.
* Ohm, Paul. The myth of the superuser: fear, risk, and harm online. 41 UC Davis L. Rev. 1327-1402 (2008). A neat article on how regulators manufacture a fake bogeyman, the unbeatable "superuser," as a justification for expansive regulatory power.
* No evidence that data breach disclosure laws actually help reduce identity theft. Surprised?
* The FTC wants civil enforcement authority for spyware actions. Haven't they heard that the adware battle is already over...and they won?
Contracts
* Mark Radcliffe expresses concern about the ALI's proposed software licensing project on open source licenses.
* Sarah Bird on a messy contract lawsuit involving an SEO contractor.
Anonymity
* Tendler v. www.jewishsurvivors.blogspot.com, 2008 WL 2352497 (Cal. App. Ct. June 10, 2008). A subpoena request to identify a blogger doesn't support an anti-SLAPP cause of action.
* In the AutoAdmit lawsuit, Doe 21's motions to squash the subpoena and proceed anonymously were both denied. David Hoffman provides an update on the case.
Event Tickets
* Chicago has moved against eBay for reselling tickets in violation of its amusement tax law.
* The Ticketmaster v. RMG case ended with a default judgment granting a permanent injunction and $18.2M in damages.
General
* Vanity Fair: How the Web Was Won.
* Paul Levy blogs about a plaintiff's effort to bypass 230 by suing the authors of complaints about the vendor and then joining the consumer complaint site as a necessary party as a cost-increasing tactic.
* BusinessWeek on emerging technological tools to protect workers' attention against unwanted/untimely interruptions.
* Text message-savvy kids educate the North Carolina DMV about the meaning of the term "WTF," which was used on a license plate example on the DMV's website.
* I have one free pass to OMMA Behavioral in San Francisco July 21. First person to send me an email asking for the pass gets it.
Posted by Eric at 12:32 PM | Adware/Spyware , Content Regulation , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Search Engines , Trademark | TrackBack
May 20, 2008
Zango Files Reply Brief in Zango v. Kaspersky
By Eric Goldman
Zango has filed its reply brief in Zango v. Kaspersky [warning: 3+ MB file]. Some points that caught my attention:
* the brief starts out by quoting one of Kozinski's unfortunate rhetorical detours in Roommates.com that 230 wasn't intended to create a lawless no-man's land on the Internet. I'm sure some Zango haters would note the irony of Zango thinking this language benefits them. From my perspective, this is just another example of plaintiffs cutting and pasting pieces of the Roommates.com opinion to try to bolster their case.
* the brief doesn't acknowledge the existence of the significantly adverse e360insight case. Zango wasn't required to cite it, but the CDT brief did mention it, and I expect this precedent to figure prominently in the ruling.
* I thought this was an interesting statement (on page 19 of the PDF): "Notwithstanding the overheated protestations of Kaspersky and the holier-than-thou ideologues that it relies upon, millions of people find Zango not only acceptable, but desirable."
The case library:
* Amicus brief by CDT in favor of Kaspersky
* Kaspersky's answering brief [warning: 5MB file].
* National Business Coalition on E-Commerce and Privacy amicus brief in favor of Zango
* Zango's appeal brief [warning: 2.1MB file]
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 06:46 AM | Adware/Spyware , Derivative Liability | TrackBack
May 06, 2008
CDT Files Amicus Brief in Zango v. Kaspersky
By Eric Goldman
The Center for Democracy and Technology has authored a brief, for itself, anti-spyware vendors and other advocacy groups, in favor of Kaspersky in the Zango v. Kaspersky case. I thought this brief was a useful contribution to the discourse. The brief focuses heavily on the issue of empowering users' control over their desktops, which is the critical issue but a complicated one when users give instructions that may conflict with each other. The brief addresses this issue squarely:
Two scenarios illustrate the interplay of “consent” in the anti-spyware context. First, assume that a user did consent to the installation of Zango software, but later concluded that the software and resulting advertisements were harassing and objectionable. Kaspersky Lab (and most anti-spyware services and tools) offers the ability to disable Zango software, and for a user to choose to install Kaspersky software to block Zango’s advertisements is fully consistent with the user’s true choice (notwithstanding the assumed initial consent to install the Zango software).
Second, if the Kaspersky Lab software is installed on a computer before someone attempts to download and install the Zango software (and Kaspersky software blocks the Zango installation), that is quite possibly also fully consistent with the wishes of the user. By installing anti-spyware software, the user is asking to be protected from spyware even if the user does not immediately recognize certain downloaded software as spyware. Moreover, it may well be that the owner of the computer (such as a parent or an employer) decided to install anti-spyware software such as Kaspersky Lab’s, and then some other users (such as a child or employee) attempts to install Zango software (and that installation is blocked). In that scenario, the anti-spyware software is in fact doing precisely the job that it was asked to do.
I think both of these examples tell a story of how a user's putatively inconsistent instructions could be reconciled. But these examples are also pretty stylized, so minor changes in the facts would expose situations where the reconciliation might be tougher.
The case library:
* Kaspersky's answering brief [warning: 5MB file].
* National Business Coalition on E-Commerce and Privacy amicus brief in favor of Zango
* Zango's appeal brief [warning: 2.1MB file]
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 05:35 PM | Adware/Spyware , Derivative Liability | TrackBack
May 01, 2008
Adware is Dead. Long Live Adware!
By Eric Goldman
In late January, I attended the Anti-Spyware Coalition's Public Workshop entitled Spyware: What's Worked, What's Left, and What's Coming. I was on a panel entitled "Is Adware Dead?" with Alissa Cooper from CDT and Colin O'Malley from TRUSTe. This is a timely topic because I've been pondering this question myself for a while now. This blog post recaps some of my thoughts.
Adware Is Dead
At the workshop, everyone agreed that adware is dead, although we may have been using different definitions of adware. (Commissioner Leibowitz declared adware "mostly dead," invoking the phrase from the Princess Bride). I was a little surprised to see such broad consensus on this topic. Let's explore what happened.
Looking back, it's clear that the 2003-06 period was a wild time for the adware industry. Several new entrants sought to build "legitimate" businesses on client-side software that displayed advertising, and others were seeking technical exploits for more nefarious purposes.
Collectively, these efforts sparked the Great Adware Wars of the 2000s. This was a time of mania, with everyone scrambling for the largest network of installs. In turn, vendors attempted lots of aggressive practices, such as bundled installs with obscure notice/consent, difficult uninstalls, loosely controlled/uncontrolled third party distribution chains, and overgrazing of user attention once a desktop install was achieved.
I'm declaring that the Great Adware Wars of the 2000s are over, and the anti-adware forces won. The signs of a decline in the adware industry are everywhere. Most obviously, most of the entrants are out of the business. Of the players trying to run legit adware companies, arguably only Zango persists in its client-side software business model circa 2004.
Why Did Adware Die?
It's hard to tell exactly what ended the Great Adware Wars. Some possible contributing factors:
* enforcement actions by the FTC, state AGs and private litigants (including class action lawsuits)
* new laws, including the laws passed by Utah and Alaska
* technological responses, including enhanced filtering/labeling by anti-spyware vendors
* changes in the economics. In particular, paying third party distributors for installs spurred a lot of unprofitable behavior, so installation economics improved. At the same time, due to the enforcement actions and negative publicity, advertisers have become increasingly gun-shy about advertising via adware. There is some anecdotal evidence that advertisers are now including anti-adware policies in their agency agreements. It's not clear that such policies are actually being enforced, but collectively they send a signal that suppresses the demand for advertising inventory in adware.
* changes in user behavior, due to user education and press attention to adware. Adware has become a dirty/tainted word, and that taint suppresses demand up and down the chain.
Ultimately, I think the single biggest contributing factor to the demise of adware is that it often provides a lousy consumer experience. Even when adware doesn't carpetbomb users with ads, it is still largely based on interruption marketing (a term from Seth Godin's excellent book Permission Marketing
In the end, I believe lousy consumer experiences always fail in the marketplace. The adware being deployed during the Great Adware Wars didn't prove otherwise.
What Consequences from the Death of Adware?
The Great Adware Wars are over. Now what?
Regulatory Proliferation
Even though the war is over, regulators haven’t gotten the message. In fact, I predict that we will see continued efforts to regulate 2005-era adware. Why? If the threat has been neutralized, shouldn't regulators focus their attention elsewhere?
This is a classic public choice problem. Everyone hates pop-up ads and scary adware, so regulators can pander to their constituencies' fears. At the same time, no one is opposing these efforts--the adware companies have largely vanished (not that they were ever a potent lobbying force in the first place), and no one else will stand up in their stead. As a result, regulators seeking some publicity bounce for being “tough on Internet threats” can easily enact ineffectual laws to combat past problems. (As an example of this, see the continued unopposed efforts of the Humane Society to ban Internet hunting).
Long Live Adware!
Adware circa 2003-06 may be dead, but adware in the broad sense--client-side software that displays advertising--will never die. Instead, as I argue here, adware is an inevitable part of our future for several reasons.
First, client-side software can interact with the user whenever they are using their computer. As a result, the vendor doesn’t have to worry about Internet connectivity. Plus, each vendor wants to be able to reach the consumer 100% of the time, not just when the user is visiting its servers.
Second, client-side software has access to the very best data about a user. Server-side applications generally only see the data made available when users are communicating with it. This partially explains the Facebook Beacon offering; it's an attempt by Facebook to aggregate data about user behavior that's captured by third party servers (i.e., data that Facebook ordinarily wouldn't see). But even compared with Beacon, client-side software will see more--and better--data.
At the conference, it was pointed out that behavioral targeting doesn't necessarily improve with deeper datasets. While this is true, it also remains true that a website never knows if the user has transacted with its competitor (i.e., when I searched for flights at both American and United's websites, the losing company has no idea if I transacted with its competitor or not). Client-side applications can see all of this valuable information.
As a result, vendors will always want to get onto users' hard drives and watch the users' communication flows from there. Thus, the race for client-side installations will remain an omnipresent fixture of our technological environment.
At the same time, the residual legislative and regulatory efforts--made in a vacuum without a direct threat and without any counterbalancing lobbying--has a serious risk of inhibiting the development of beneficial client-side applications. Simply put, in the legislative grandstanding to put the "nail in the coffin" of adware, regulators might in fact distort the innovation cycles of software developers who can improve users' lives. It's this risk of collateral fallout that drives my objection to most types of anti-adware regulation, and when I see stupid and regressive state laws (like the Utah Spyware Control Act, or Alaska's anti-adware law, or the screwed up Utah Trademark Protection Act), the potential harm on innovation is palpable.
So here's my proposal. Let's take a moment to pause and celebrate the end of the Great Adware Wars of the 2000s, and congratulate the many people who worked very hard to contribute to its demise. Then, let's all collectively vow to move on and focus our energies on looking forward to the next round of bona fide and serious threats, instead of looking backwards at perceived threats already vanquished.
Posted by Eric at 08:10 AM | Adware/Spyware | TrackBack
April 29, 2008
Kaspersky Files Answering Brief in Zango v. Kaspersky
By Eric Goldman
Continuing my coverage of the Zango v. Kaspersky litigation over 230(c)(2), Kaspersky has filed its answering brief (warning: 5MB file). If you want to save time, the actual argument starts on page 32 of the PDF.
The case library:
* National Business Coalition on E-Commerce and Privacy amicus brief in favor of Zango
* Zango's appeal brief [warning: 2.1MB file]
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 05:53 PM | Adware/Spyware , Derivative Liability | TrackBack
April 09, 2008
Pro-Zango Amicus Brief in Zango v. Kaspersky
By Eric Goldman
The National Business Coalition on E-Commerce and Privacy has filed an amicus brief supporting Zango in Zango v. Kaspersky, the lawsuit over an anti-spyware vendor's classification of third party software as "spyware." I'm not familiar with this coalition and I couldn't find a website for it. If you have any information about them, please let me know. The brief itself conducts a very run-of-the-mill statutory and legislative history analysis, so it doesn't give much color about the coalition or why it cares about this case.
UPDATE: "Among its members are Experian, Fidelity Investments, the Investment Company Institute, Charles Schwab & Co., Inc., Deere & Company, Inc., JP Morgan Chase, General Motors Corp., Vanguard Group, UPS, CheckFree, Eastman Kodak, Bank of America, and The Assurant." This makes me even more curious why these companies would be interested in the issue.
UPDATE: Wendy Davis at MediaPost reports: "The coalition's members operate Web sites that place cookies on users' computers when they visit the site. The group is concerned that the trial judge's decision would immunize spyware removal companies that market software that deletes their members' cookies." Hmm...are they planning to sue CookiePal or any web browser software vendor that sets a default to reject all cookies?
The case library:
* Zango's appeal brief [warning: 2.1MB file]
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 10:17 AM | Adware/Spyware , Derivative Liability | TrackBack
March 30, 2008
Zango's Brief in Zango v. Kaspersky Ninth Circuit Appeal
By Eric Goldman
Zango has filed its initial appellate brief in Zango v. Kaspersky [warning: 2.1MB file], the case addressing the liability of anti-spyware vendors for their classification decisions. Characteristically, Zango goes on the offensive, declaring that Kaspersky's software is the real "badware" here.
Other materials in this case:
* The district court's dismissal and my commentary
* TRO Denial and my commentary
* Kaspersky's Response to TRO Motion
* Zango's TRO motion
Posted by Eric at 01:45 PM | Adware/Spyware , Derivative Liability | TrackBack
December 28, 2007
December 2007 Quick Links
By Eric Goldman
Marketing
* I've blogged about Various, which operates AdultFriendFinder.com, before. They made the news recently in two ways. First, they sold to Penthouse for half-a-billion dollars. Second, they settled with the FTC for "pelting" users with unwanted sexually graphic pop-up ads. Do you think these developments are linked in any way... ? Could it be that Various was willing to settle up with the FTC on any terms so that they could get a half-billion dollar check? In this respect, I'm reminded of the MySpace/Intermix $7.5M settlement with the NY Attorney General's office in a dubious enforcement action that was immediately followed by MySpace's sale to News Corp. for $580M. Hey government enforcement agencies--if you can spot hot dot-coms that are negotiating mergers and bring an enforcement action, you can name your price!
* Abrams v. Facebook, the lawsuit over Facebook sending text messages to old phone numbers, has settled. See Michael Erdman and the AP.
* Newsday circulation fraud case (involving inflated circulation numbers) nets $83M restitution, $15M criminal settlement, and nine criminal convictions.
* Texas AG Abbott is prosecuting two companies under COPPA. As far as I know, this is the first state-level enforcement action under COPPA.
* Florida AG Michael Palecki looks to be targeting online advertisers for ads placed by their affiliates.
* The Do-Not-Call registry has become an even less dynamic reflection of preferences.
Copyright
* The Second Circuit kicked out the settlement struck in Tasini's aftermath because it covered unregistered copyrights. Rebecca makes some good points.
* Perez Hilton drops YouTube because they took down one of his videos in response to a takedown notice. On the one hand, this shows that there can be marketplace mechanisms that give feedback to intermediaries based on the restrictiveness of their takedown policies. On the other hand, YouTube was a free service; what did you expect?
* Michael Savage, a radio personality, is suing a website for posting audio clips of his rants as part of the website's criticism of him. See the NYT and CMLP.
* A special master has been appointed in the Grokster case to determine the possible filtering options available to Streamcast. I'm actually amazed that this case is still going!
Reviews and Ratings
* WSJ: Restaurants are giving away free meals to online reviewers to try to get improved consumer ratings.
* BrokerCheck, a regulator-sponsored website for consumer gripes about securities brokers, deletes negative gripes if the complaint settles.
* Retail store signage ("shelf talkers") routinely overstate the Wine Spectator ratings assigned to wine on the shelves.
Best of Mike Masnick
Mike Masnick of Techdirt is a terrific blogger who is smart, prodigious and opinionated. This month he had some noteworthy posts (even by his standards), including:
* Some wise words about Fark's trademark application for NSFW.
* “Noncompete Agreements Are The DRM Of Human Capital.”
* "Anything Goes Wrong Online? Yell 'Net Neutrality' As Loud As Possible!"
Search Engines
* Google appears to have categorically wiped out PageRank for bloggers participating in PayPerPost.
* Danny's sensible remarks on the role of humans in Google's algorithmic search results.
* Search engines pay $31.5M to settle up for running gambling ads. A significant share of this settlement amount is actually public service ads, not cash. Note that enforcement of federal criminal gambling laws is one of the few exceptions to 47 USC 230; if this had been an enforcement of state anti-gambling criminal laws or a civil action, it should have been preempted.
General
* "Like the proverbial tree falling in a forest, the unauthorized use of a trademark that is never perceived by anyone cannot be said to create a likelihood of consumer confusion." Custom Manufacturing and Engineering Inc. v. Midway Services Inc. (11th Cir. Nov. 21, 2007). This statement was made in the context of a counterfeit component part, but it sounds like a good reason to reject liability for including trademarks in keyword metatags.
* Todd Hollis is suing DontDateHimGirl.com a second time. Last time the court sidestepped 230. This time, I hope the court will use 230 to terminate the lawsuit permanently.
* Mark Radcliffe's "2007 Top Ten Free and Open Source Software Legal Issues"
* A nice recap on "location-based mobile services," the delivery of services predicated on GPS devices in cellphones. UPDATE: It looks like mobile marketing/privacy is the topic du jour (or, at least, a topic worthy of end-of-the-year recaps). AP weighs in on the same topic.
* Kaspersky flags Windows Explorer as a virus and then reverses itself, calling this a false positive. Then again, many people consider Microsoft software "malicious code," so maybe the positive wasn't so false after all.
Posted by Eric at 09:39 AM | Adware/Spyware , Copyright , Derivative Liability , Marketing , Search Engines , Trademark | TrackBack
December 13, 2007
Oct.-Nov. 2007 Quick Links, Part 1
By Eric Goldman
I was so jammed at the beginning of November that I didn't have time to post my quick links from October. Never fear; that omission is being corrected with a double shot of quick links covering October and November:
Wikipedia
* Slashdot: Has Wikipedia peaked? If true, I'm not surprised.
* The new status symbol of the digital age? A personal Wikipedia page. FWIW, my personal Wikipedia page was crunched and rolled into a general criticism of Wikipedia page. I found this ironic given that the Wikipedians had already caucused about the merits of my page and decided not to kill it; and then a single Wikipedian swept through and ignored that decision. Sounds like the process worked really well there, guys.
* The newest fork from Wikipedia: Veropedia.
Google
* Webmasters give preference to the Googlebot over other search engine robots in robots.txt files.
* Searchers prefer Google results in a blind taste test. But...searchers also prefer search results when they are branded Google!
* For years, people have speculated that Google advertisers get extra bounce in organic search results. Search Engine Guide lays out the case.
* Carl Person isn't giving up in his (unquestionably futile) fight against Google. The latest: he's appealed his case to the Ninth Circuit. HT Links & Law.
Adware/Spyware
* FTC Commissioner Leibowitz thinks bigger civil fines would help shut down more spyware operators. Then again, it seems like the market is doing that job for them; another adware vendor, DirectRevenue, has gone under.
* Zango has appealed Zango v. Kaspersky to the Ninth Circuit. I wasn't a fan of this lawsuit from the outset, so pursuing the case sounds like a mistake to me.
Virtual Worlds
* Herman Miller (maker of the famous Aeron chairs--I had one at Epinions) is combating the makers of fake virtual Aeron chairs in Second Life.
* Bragg v. Linden Lab has settled. The case involved a claim that Linden Lab improperly impounded some virtual assets.
* Wired: "Cheaters in multiplayer online games beware: Game developers are turning to advanced financial fraud-detection software to keep you from crooking your way to online riches."
47 USC 230
* Roskowski v. Corvallis Police Officers' Ass'n, 2007 WL 2963633 (9th Cir. Oct. 10, 2007). A summary opinion upholding a dismissal based on 47 USC 230. See my blog post on the district court ruling. Michael Erhman's comments.
* The US Supreme Court denied certiorari in Perfect 10 v. ccBill.
* The AutoAdmit plaintiffs filed an amended complaint that dropped Ciolli as a defendant and reworked the substantive allegations. Coverage: Above the Law, Concurring Opinions (1, 2), WSJ Law Blog.
* A former student informed me that a judge on the show Boston Legal (the Nov. 13 episode, "Attack of the Xenophobes," episode 74) applied 47 USC 230--correctly!--to dismiss a lawsuit against YouTube for a defamatory video. See the episode recap.
Online Contracts
* Adsit Co. v. Gustin (Ind. Ct. App. Oct. 16, 2007). Daughter-in-law gives credit card number to mom-in-law to complete online transaction. Court holds that mom-in-law acted as daughter-in-law’s agent and thus bound the daughter-in-law to the vendor’s clickthrough agreement. Accord: the Hofer and Abramson cases.
* Whitnum v. Yahoo, Inc., 2007 WL 2609825 (NY Supreme Court, Sept. 5, 2007). Woman sought damages because Yahoo shut down her website the same day she got a good publicity hit. Yahoo pointed to the liability limits in its user agreement, and the court found that those limits supported a motion to dismiss. Given the ubiquity of similar provisions in web hosting contracts, this case nicely illustrates that web hosting customers really don’t have any recourse if their vendor just shuts them down. This is also why I find 17 USC 512(g) (the DMCA limit on liability if a web host honors a counter-notification) so baffling—web hosts don’t need any help from the statutory safe harbor when they have already eliminated the risk through their contracts.
Posted by Eric at 02:05 PM | Adware/Spyware , Derivative Liability , Licensing/Contracts , Search Engines , Virtual Worlds | TrackBack
November 21, 2007
Search Redirection Tool Could Be Trespass to Chattels--Burgess v. EForce
By Eric Goldman
Burgess v. EForce Media, Inc., 2007 WL 3355369 (W.D.N.C. Nov. 9, 2007)
Every now and then a consumer goes on a me-vs.-the-world bender and decides to unilaterally save society by suing everyone in sight. Burgess' anger over unwanted advertising may have sparked such a campaign. His previous appearance on the blog involved his pro se lawsuit against American Express and many other major brand names for unwanted pop-up ads. In that ruling, the court intimated that advertisers could be liable for contributory trespass to chattels.
In this companion action, Burgess sued a number of defendants for spam. The court rejects his CAN-SPAM claim for lack of standing (he doesn't qualify for the limited private causes of action).
Burgess also sued for the installation of search redirection client software, claiming it was a privacy invasion, trespass to chattels, and "illegal conduct." The defendants first tries to dismiss the claims as preempted by CAN-SPAM, but CAN-SPAM's preemption clause does not apply to generally applicable laws like privacy invasions and trespass to chattels. Nevertheless, the magistrate report (approved by the judge) dismisses the privacy invasion claim for failure to state a claim, saying:
While the undersigned shares in plaintiff's frustration with the internet and the unconscionable applications that interfere with one's use and enjoyment of technology--and at times display offensive websites--frustration of purpose is not an invasion of privacy. Further, the undersigned cannot find any North Carolina case recognizing a cause of action for invasion of privacy based on computer viruses that redirect internet searches or inquiries, or any cases that would suggest that similar such conduct in other fields would support such a claim.
The "illegal conduct" claim was also dismissed.
On the other hand, building on Burgess prior ruling in state court, this court refuses to dismiss the trespass to chattels claim. Citing to Sotelo and others, the court says that Burgess' "pro se pleadings are not a model of clarity but nevertheless suffice to state a claim for trespass to chattels. He sufficiently alleges actual possession of his computer and 'unauthorized, unlawful interference' with his use of this personal property." So the Sotelo precedent marches on, even though this court (as with the prior Burgess court) doesn't acknowledge Hamidi, Mummagraphics or the other cases that would put these expansive trespass to chattels rulings in serious doubt.
As a result, Burgess' case lives to see another day. I'm sure we haven't heard the last from him!
Posted by Eric at 02:32 PM | Adware/Spyware , Publicity/Privacy Rights , Search Engines , Spam | TrackBack
August 29, 2007
Anti-Spyware Vendor Protected by 47 USC 230(c)(2)--Zango v. Kaspersky
By Eric Goldman
Zango Inc. v. Kaspersky Lab, Inc., No. C07-0807-JCC (W.D. Wash. Aug. 28, 2007)
There has been a fair amount of hand-wringing/teeth-gnashing over the legal liability of anti-spyware vendors when they label a software program as spyware or some other synonym. On the one hand, vendors might present those labels in a way that causes consumers to overreact to the actual threat, or vendors may make factual errors, and either case can have significant adverse effects on the affected software manufacturer. On the other hand, if vendors are liable whenever software manufacturers don't like their labels, the vendors will make labeling decisions based on risk management, not editorial criteria, and that may degrade the tool's utility to consumers.
That's what makes this ruling so important. The court says, clearly and unambiguously, that anti-spyware vendors' labeling judgments are completely protected by 47 USC 230(c)(2), a statute designed to protect online filtering judgments. In support of this conclusion, the court says that:
1) Kaspersky qualifies as an interactive computer service provider (specifically, as an access software provider)
2) The labeled software does not have to be actually "objectionable;" the vendor qualifies for protection so long as it subjectively considers the software objectionable.
3) There is no "good faith" standard in the statute for the vendor's decision to consider software objectionable.
230(c)(2) has been interpreted fairly infrequently, but a few decisions have applied it to anti-spam vendors and search engine filtering. As best I can remember, this is the first time the statute has been applied to protect anti-spyware vendors. (Am I forgetting any?). As a result of this decision, we should see a decrease in software manufacturers' efforts to strongarm vendors into recharacterizing their software. There will still be private negotiations/discussions between vendors and software manufacturers (which is often a healthy process), but any software manufacturer's threat to escalate the matter to litigation should be fairly empty.
This should close the book on Zango's ill-fated legal initiative from May to change anti-spyware vendors' characterizations of its software. Some previous coverage of those cases: Zango loses TRO against PC Tools; Zango loses TRO against Kaspersky. Yesterday, Zango announced that it voluntarily dismissed the lawsuit against PC Tools; and this ruling appears to put an emphatic end to Zango's lawsuit against Kaspersky.
Posted by Eric at 02:08 PM | Adware/Spyware , Derivative Liability | TrackBack
August 13, 2007
2007 Cyberspace Law Syllabus
By Eric Goldman
I've posted my 2007 Cyberlaw syllabus. Unlike the past few years, which were a little slow cyberlaw-wise, the past 12 months saw a lot of important developments. Let me recap some of changes I made to my reader reflecting these developments:
Additions
Copyright: I added the Cablevision case (after editing out some of the mind-numbing description of cable technology), which provides an interesting exposition on how the source of bits matters in copyright law (we'll reinforce that message with the Amazon.com "server test"). I companioned the Cablevision with the Field case to show a very different philosophy about "volitional" server activity, so I'll ask the students to see if they can reconcile the two cases.
I struggled with how to handle the Ninth Circuit's troika of Perfect 10 opinions. The opinions are long, complicated and irresolute, but it's hard to discuss one without discussing the other two. I decided to include all three but I don't feel great about that decision, given that it takes 115 pages (about 1/6 of my total reader) to work through the three cases, and I'm not sure students will come away any smarter about Ninth Circuit online copyright law after reading all three.
Trademark. I substituted the FragranceNet case for the 1-800 Contacts v. WhenU case. The 1-800 Contacts case remains a very important keyword law precedent, but as a teaching case it was just so-so. The adware subject matter increased the complexity, and it punted on the most interesting question of search engine liability. However, most of the other recent keyword law cases have been even less teachable. Fortunately, the FragranceNet case does a pretty job of recapping the 1-800 Contacts case as well as other recent decisions, and it frames the policy issues nicely. I've paired it with the Playboy v. Netscape case, which will make a good compare/contrast. However, if the Second Circuit gets off its duff, I'd be thrilled to substitute in the court's opinion in the Rescuecom appeal. (I'd be even more thrilled if the court reaches the "right" result!).
I also updated my materials to reflect the Trademark Dilution Revision Act.
230. I continue to stick by the seminal Zeran case, which remains both powerful precedent and a colorful teaching case. However, this year I added the Ninth Circuit hairball Roommates.com opinion. I really didn't want to--it's such a messy opinion--but I think for now the case represents a vitally important incursion into 230 law that any good Cyberlawyer needs to know about it (even if they don't know what to do about it). If we're lucky, perhaps the Ninth Circuit will rehear the case en banc and issue a new and more lucid opinion before I have to teach the existing opinion.
In addition, I created a new module on "blogs and social networking sites" and added the Doe v. MySpace case, a great opinion for exploring the differences between online and offline "premises."
Spam. I teach spam at the semester's end, when time is running out, so we'll see what I'm actually able to cover this year. I've added two recent cases: the