Technology & Marketing Law Blog: Derivative Liability Archives

Technology & Marketing Law Blog

May 17, 2012

Trademark Trolling by SEO Consultant Provides Cautionary Anti-SOPA Tale (and Other Lessons)--Premier Pool Management v. Lusk

By Eric Goldman

Premier Pool Management Corp. v. Lusk, 2012 WL 1593206 (E.D. Cal. May 4, 2012)

Have I mentioned recently how much I hate SOPA? Today's case is a textbook example of why SOPA--and the things it stood for--were so objectionable to so many people. For SOPA proponents, especially those who falsely (or delusionally) argued that SOPA's tools would only be used by good guys to target bad guys, this case should be mandatory reading.

(This is a default judgment, so the judge relayed the unrebutted facts from the plaintiff's complaint, which I am further relaying here).

Premier Pool Management Corp (PPMC) provides lead generation services for the pool construction industry under the Premier name (the court doesn't use either the terms "lead generation" or "franchising," and I wasn't certain which one best described PPMC). Either way, as a trademark licensor, PPMC provides a variety of services to its licensees, including website management, SEO and other marketing services. PPMC tried to register its trademark but was blocked by a registration held by PPCI, a local Florida pool construction company operating under the Premier mark as well. The trademark registration at issue. In 2011, PPMC and PPCI negotiated a deal allowing PPMC to buy out PPCI's registration for $5k. The relatively low price reflected some doubts about whether PPCI ever made interstate use in commerce of the mark. Then, at the last minute, PPCI bailed out because an undisclosed higher bidder emerged.

Separately, PPMC retained SmartPro, run by the Lusk brothers Dean and Jason, as SEO consultants. I infer PPMC regrets this choice. During SmartPro's research on PPMC's SEO status, Dean discovered PPCI's trademark registration--and became the undisclosed higher bidder! They bought the PPCI registration for $140k with a "business plan" (if you can call it that) of asserting the trademark registration to extract cash from PPMC and 30 other pool construction companies nationwide using the Premier brand. Dean and his "partner" Leonard explained to PPMC how things were going to go:

* PPMC could help get its licensees to pay the Lusks and Leonard exhorbitant royalties to continue using the name "premier"; or
* PPMC could pay an "astronomical sum" to buy the trademark; or
* the Lusks and Leonard would go to the search engines and web hosting companies and shut down PPMC and its licensees.

(Cue the Godfather music and Marlon Brando slurring the words "offer he can't refuse." I half-expected to see references to a severed horse's head.)

PPMC declined this generous offer, and Dean made good on the promise/threat, sending a trademark cutoff notice to PPMC's web host Rackspace, which performed on cue and pulled the plug on PPMC's website. PPMC was able to get up-and-running with another web host, but I assume there was some scrambling and angst (not to mention costs/losses) associated with the transition.

PPMC sued the Lusks, who defaulted. Thus, the judge basically rules for PPMC across-the-board. The most interesting conclusion (again, on default) is that sending a cutoff notice to Rackspace constituted tortious interference with contract, a claim that has been rejected before in other circumstances (see, e.g., the Pandora dispute). The court also cancels the PPCI trademark registration (for lack of interstate commerce use), issues an injunction and awards attorneys' fees and costs.

Where to begin with a case like this? So many things went wrong, it's hard to keep them all straight.

Trademark in Laudatory Terms. At the root of it all is the trademarkability of a laudatory term like "premier." I think we'd be better off if we simply treated [laudatory term] [generic noun] as categorically unprotectable. Otherwise, we get junky trademarks like "Premier Pool Management" with dozens or hundreds of independent users throughout the country. Take a look at the Google search results for "premier pool" and see what a disaster that is. At minimum, I think laudatory trademarks should require secondary meaning, and I wonder how PPCI with its regional and declining customer base showed that. If we took secondary meaning seriously, it's probable that no one could trademark "premier pool management" on a nationwide basis.

Note: if you're looking for a paper topic, a thoughtful analysis of the protection for laudatory trademarks might be fruitful.

SEO Consultants Gone Rogue. This case fuels our fears that SEO consultants are just as likely to be foes as friends. SEO consultants often seem quite sketchy; they keep their cards close to the vest so they don't give any information away for free...plus, customers can't always tell which SEO consultants use black-hat practices. Here, PPMC's story goes far beyond just hooking up with a black-hat SEO consultant. The consultant actively went rogue on its customer--once the SEO consultant got a good look at the customer's business, it could quickly spot the customer's vulnerability and attempt to exploit the vulnerability for its own financial gain. This is the kind of nightmare so many customers fear when hiring SEO consultants!

If you're retaining an SEO consultant, this situation is a great reminder that you need to diligence your SEO consultant THOROUGHLY before retaining them--get referrals, check out any customer reviews, check their own SEOing skills (I couldn't conclusively find the SmartPro website in a quick Google search--not exactly a good sign), and do a background check! You'll be handling over the keys to your business and tons of confidential information to your SEO consultant, so double-confirm they deserve that trust.

Trademark Trolling. As described in the opinion, the Lusks were a classic trademark troll--they bought up weak trademark rights from a third party to build a "licensing"/enforcement business around extracting undeserved value from legitimate existing businesses using the term. The Lusks' trolling business is now kaput because the court canceled the trademark, but before the judicial intervention, the Lusks could cause plenty of mischief. Sadly, I doubt other trademark troll entrepreneurs will find anything in this case to deter them; a trademark's murky boundaries leave plenty of room for trollers to make mischief.

In general, buying up IP assets for the sole "benefit" of asserting them against others is a sketchy business. Trademark law is supposed to suppress such activity by requiring trademark sellers to transfer the goodwill with the trademark; but because this has become a lightly enforced formality, trademark trolling is possible. Even if judges don't enforce the goodwill transfer requirement, they should make all inferences against trademark speculators who buy-and-assert someone else's trademark. That's not what trademark law was designed to do, and it's easy to see how such over-assertions can wreak havoc on an industry.

Pam Chestek has more to say on the trademark problems underlying this case.

Web Host Pliability. The Lusks flashed a trademark at Rackspace, and Rackspace crumbled. It's hard to blame Rackspace given the de facto notice-and-takedown scheme that's emerged in secondary online trademark law (see, e.g., the Akanoc case), but Rackspace's pliability shows the agency problems inherent in a hoster-hostee relationship. The Lusks buy up a questionable trademark and make highly questionable assertions, but it's not worth it to Rackspace to defend its customers' interests. If anything, this situation shows how easy it is to use trademarks to disrupt legitimate customer-vendor relationships.

More importantly, the fact that Rackspace abandoned its customer in the face of a weak purchased trademark exposes several holes in the entire SOPA scheme. SOPA was built on the premise that legitimate IP owners would target illegitimate businesses. But here, an IP owner--using dubious rights it acquired for the sole purpose of legal showdowns--targeted a legitimate business and got the same results. SOPA's enhanced powers to IP owners, plus the cutoff-first/ask questions-second incentives for intermediaries built into SOPA, would only exacerbate that effect. As this case illustrates, we have plenty of problems to fix with the existing law; codifying and extending the IP owners' powers via SOPA would make the situation that much worse.

Posted by Eric at 09:00 AM | Derivative Liability , Trademark | TrackBack

May 15, 2012

Granick on CISPA's Deficiencies (With Some of My Own Comments)

By guest-blogger Jennifer Granick (with comments from Eric)

[Eric's introduction: Some guest visitors to the blog need no introduction, and that surely describes Jennifer Granick (her Wikipedia page). She's cast huge shadows over cyberlaw in her various stints, including being a leading criminal defense attorney for technology crimes, an EFF attorney and director of Stanford's Cyberlaw Clinic. I'm so glad Jennifer was willing to share her unique perspective on CISPA. I have some remarks after hers. Jennifer has also posted a supplemental line-by-line commentary of CISPA.]

The Cyber Intelligence Sharing and Protection Act ("CISPA") is the latest example of a depressingly common situation in Washington DC -- well-meaning legislators unfamiliar with technology try to rush through a statute about a high-profile Internet issue (here, cybersecurity). Proponents of the bill say they want to faciliate information sharing between the federal government and the private sector. What they don't seem to understand is that existing laws already permit most kinds of cybersecurity information sharing. In their eagerness, the supporters of CISPA would undermine our existing system of accountability for sharing of private data and, by doing so, cause a number of unintended consequences that would harm both state and federal efforts to protect consumer privacy.

CISPA's Unintended Consequences: I firmly believe sharing cybersecurity information is a public good, which is why I have made a career of representing security professionals and hacker hobbyists who want to investigate and report on vulnerabilities. But CISPA (1) fails to comprehend the ways in which existing laws allow sharing, but with accountability; (2) runs roughshod over federal and state laws protecting privacy; (3) could inadvertently immunize retaliatory hack-back security techniques; and (4) creates an "inner circle" of private entities willing to share and share alike with the government, but leaves disfavored service providers in the cybersecurity dark.

(1) Current Law Does Not Interfere With Sharing for Security Purposes: The vast majority of what security professionals consider cybersecurity information is not personally identifing or protected from sharing by any law. Attack signatures, vulnerabilities, exploits and other classic computer security data are freely shareable. For the subset of data that may identify a particular individual, existing laws allow sharing. The most relevant laws, the Wiretap Act and the Electronic Communications Privacy Act, allow a provider to collect and share data for protection of the providers' rights or property. It is true that such sharing is subject to minor but long-standing privacy-enhancing conditions* which CISPA would simply dispose of.

[*FN: My line by line analysis of CISPA (link) highlights where in the text safeguards and dangers would be codified. I strongly oppose this legislation, but can envision a much better, streamlined, privacy respecting, bill that accomplishes the purported cybersecurity purpose.]

As for information protected by HIPAA, VPPA or FERPA, one would not ordinarily think such data is subject to CISPA disclosure and use, except that CISPA specifically calls out sensitive health, educational, firearms, library and bookstore records as the kind of information that private entities can be expected to disclose. Otherwise private information, including video rental records, book rentals, newspaper subscriptions, online reading or data protected by state consumer protection laws (like utility usage records) may freely be shared under CISPA, despite existing privacy rules and sharing safeguards.

(2) State Governments Should Oppose CISPA: States, especially California and New York, protect consumers and consumer privacy with statutes regulating the collection, use and disclosure of sensitive information. Such California laws include electronic surveillance statutes, Shine the Light notifications, Smart Meter utility data protection, the Financial Information Privacy Act, the Reader Privacy Act, Security of Personal Information Law and more. While a comprehensive review of state consumer protection rules that could be preempted by CISPA is beyond the scope of this blog post, it isn't hard to see how California, New York and other states might have serious, perhaps fatal, reservations about CISPA as it currently stands.

(3) CISPA Could Categorically Immunize Even Reckless, Privacy Invasive or Damaging Cybersecurity "Active Defense" Techniques. The definition of cybersecurity system is broad enough to include common "active defense" techniques like remote exploit of an attacking system in order to collect data about the attack, or denial of service attacks to take the offending system offline. For more discussion of those kinds of defenses, see this article in The Atlantic. The statute then categorically immunizes good faith use of such cybersecurity systems. So entities that recklessly use active defense or "hack back" technologies to exploit, disable or destroy attacking machines, even when those machines are innocent zombies controlled and misused by the actual attacker, have no incentive to behave responsibly.

(4) The Cybersecurity One Percent: CISPA sets up a heirarchy of network and service providers. At the bottom are those owned and operated by individuals, who get nothing out of the statute. Next are those entites the government doesn't feel like sharing with, for whatever reason--including the retaliatory motivation that the company hasn't been forthcoming with its own cybersecurity (and customer) data. At the top are the golden firms that get preferrential treatment in the form of state-of-the-art security information. The big businesses that support CISPA probably think they are going to be in the room and get the shiny apple. But CISPA instantiates inequities that the computer security community has been managing for over twenty years, problems which inevitably arise from secretive and selective distribution of important security information. See e.g. Schneier, "Full Disclosure of Security Vulnerabilities a 'Damned Good Idea" (Jan 2007); Microsoft Security Response Center: Announcing Coordinated Vulnerability Disclosure (July 22, 2010); National Infrastructure Advisory Counsel, Vulnerability Disclosure Framework (January 13, 2004); Andy Greenberg, Meet The Hackers Who Sell Spies The Tools To Crack Your PC (And Get Paid Six-Figure Fees), Forbes, March 21, 2012. CISPA proponents neither understand nor address the complexities of acheiving the worthy goal of cybersecurity information sharing.
________

Comments from Eric

Many commentators have drawn parallels between CISPA and SOPA, even though they putatively address very different issues (cybersecurity and IP infringement, respectively). I'd like to unpack some of the parallels. The most obvious parallel between the two laws: who thinks up crazy shit like this? As a prize for their creative thinking, the architects of CISPA and SOPA should get a one-way ticket away from Washington DC. Two other parallels between CISPA and SOPA:

1) No use case. I never understood SOPA's use case. Only one target was named: The Pirate Bay. However, the way it was drafted, SOPA wouldn't have applied to The Pirate Bay. So if SOPA was intended to shut down The Pirate Bay but the statutory drafting didn't reach that far, then the statute lacked any clear justification--and especially no payoff that would justify its multitudinous adverse collateral consequences.

Similarly, I'm not clear what problem CISPA is designed to solve. Indeed, some have said CISPA is a solution in search of a problem. If we can't define the problem clearly and succinctly, it's a good sign that either there's no justification for the law, or (more likely) someone is gaming the legislative system for their own benefit.

CISPA and SOPA have another parallel on this front: we don't understand the use case because the proponents never thought they had to justify the statute. In SOPA's case, the copyright owners expected members of Congress to pass the law without serious questions, which almost happened. When the copyright owners have so many financially supported friends in the corridors of power, they don't need to provide specific rationales for their requests; it's simply enough that the copyright owners wanted it, and their patrons are expected to deliver the quid-pro-quo on demand.

CISPA may not been such a blatant case of rent-seeking, but it too was designed to proceed without opposition because it was part of an anti-cyberwar effort. For reasons that remain entirely unclear to me, many DC insiders apparently have convinced themselves that we are waging a surreptitious cyberwar that the bad guys are winning. Perhaps there really is a cyberwar raging behind the scenes, but evidence of a cyberwar sure hasn't leaked outside the DC insider community. This makes me wonder if maybe there's a little too much paranoia running around in DC. Or, maybe there's rent-seeking behind the efforts to hype the cyberwar threat?

Worse, to the extent CISPA is an anti-cyberwar effort, it is poorly designed for that effort. At minimum, its definitions are way too broad to address just cyberwar concerns. One of my biggest objections to CISPA is that it defines cybersecurity issues to include ordinary Internet activities such as competitive scraping and sharing of copyrighted materials. The broad sweep of the bill only reinforces the lack of a clear use case about the problem it's trying to solve.

2) Hack of the Internet's infrastructure. SOPA attacked the Internet's basic infrastructure. Putting aside the poorly conceived domain name cutoff provisions that would have undermined the DNS's stability, SOPA was designed to deputize intermediaries to resolve problems they had little financial incentive to handle carefully. The result would be a massive circumscribing of socially legitimate behavior by intermediaries asked to intervene in problems they didn't care about.

In a different way, CISPA also hacks up the Internet's infrastructure. Over the decades, we have developed a delicate system of checks and balances on the government's ability to monitor its citizens' behavior. CISPA would completely gut that system, giving the government virtually any online information it wanted whenever it wanted it without meaningful restrictions on the government's ability to misuse the information. Thus, CISPA engages in the worst kind of Internet exceptionalism by turning the Internet into an all-you-can-eat smorgasbord buffet of information for ever-curious government officials, while presumably a more robust checks-and-balance system would still be in place offline. Making the Internet worse is not what we as Internet users want!

The resulting public outcry against SOPA and CISPA demonstrates that. The public at large does not want technologically clueless members of Congress messing up the Internet's infrastructure for uncertain/unclear payoffs. We give a lot of deference to Congress to screw things up, but when it comes to wrecking the Internet, THAT'S worth fighting against.

Posted by Eric at 02:07 PM | Copyright , Derivative Liability , Privacy/Security | TrackBack

May 14, 2012

The Dangerous Meme That Won't Go Away: Using Copyright Assignments to Suppress Unwanted Content--Scott v. WorldStarHipHop

By Eric Goldman

Scott v. WorldStarHipHop, Inc., 2012 WL 1592229 (S.D.N.Y. May 3, 2012)

Copyright law wasn't designed as a privacy enhancing doctrine, but sometimes plaintiffs try to repurpose copyright law anyway. This case is an interesting illustration of how copyright law might be used to reverse-engineer a right to forget, using legal tactics not dissimilar to those advocated (and later renounced) by Medical Justice. As such, this case provides an early warning sign of an emerging attack on publicly available truthful information using copyright law chicanery.

In November 2010, Scott's girlfriend and ex-girlfriend got into fisticuffs in a classroom. Scott joined in the melee and hit his ex-girlfriend multiple times. A classmate, Seymour, videotaped the altercation. Seymour then sent the video to the WorldStar website, which posted the video as "Disgraceful: College Fight In NYC Breaks Out Between A Guy, His Girl & Another Girl In Class! (Man Strong Arm's The Student. Hitting Her With Body Shots)." Unfortunately, the opinion is cryptic about whether Seymour posted the video directly or submitted the video to WorldStar for their posting--it would make a difference to the copyright analysis. The video appears to be offline now.

Then, things get really interesting. In December 2010, Seymour assigned the video's copyright to Scott. The opinion doesn't say why. It could be that Scott paid Seymour for this assignment as a cheap way to get legal control over the video; or it could be that Scott coerced Seymour into transferring the copyright to settle a lawsuit threat. Once armed with the copyright, Scott sent 512(c)(3) takedown notices to the websites hosting or linking to the video. See, e.g., this one to Twitter. Scott sent a defective takedown notice to WorldStar, which didn't respond in 12 days, at which point Scott sued. WorldStar brought a 12(b)(6) motion to dismiss. The court rejects the dismissal motion for the copyright claim and grants it for the publicity rights claim.

Copyright. WorldStar argued that Seymour granted it a license to the video before Seymour's copyright transfer to Scott, and thus Scott's acquisition of the video was subject to the then-existing license. The court rejects this argument because WorldStar didn't adequately show it had the required written license (required by 17 USC 205(e) necessary to withstand a subsequent acquisition).

This reinforces the importance of the facts around how WorldStar obtained the video. The opinion doesn't indicate if Seymour clicked through a mandatory non-leaky clickthrough agreement. If WorldStar used a mandatory non-leaky clickthrough agreement, then I'd argue (per UETA/E-Sign) that in fact there was a written license agreement in effect before the Seymour-Scott transaction. However, for WorldStar's argument to work, the license would need to be irrevocable. Otherwise, even if the license survived the acquisition, Scott can simply revoke the license post-acquisition. So while I think most UGC websites will have a "written" license sufficient to withstand the 205(e) attack, I think most UGC websites also don't have strong enough EULA provisions about retaining UGC once posted to avoid this attack. Note that users' rights to remove the videos they uploaded might be located in either the EULA or privacy policy, so both documents would need to be reviewed to reach a conclusion.

WorldStar also argued that Scott sent a defective 512(c)(3) takedown notice, and thus it never got the requisite knowledge of infringement. However, WorldStar didn't argue that it requested Scott resubmit a compliant notice as possibly required by 512(c) (given the nature of the alleged notice defects), and thus WorldStar can't get a 12(b)(6) dismissal on this point.

Publicity Rights. Scott's New York state publicity rights claim fails because Scott didn't allege WorldStar used the video for advertising purposes, and WorldStar's other activities were protected under the state law's newsworthiness exception. While dismissal is the right outcome, relying on the newsworthiness exception is a little disquieting. The newsworthiness exception applies often in content lawsuits (see, e.g., Parisi v. Sinclair and the trademark case BidZirk v. Smith) but not always. See Fraley v. Facebook as an example of how the newsworthiness exception has its limits. A much better grounds for dismissal would be the lack of commerciality in the video; Seymour had no obvious commercial interest in the video, and WorldStar had no more commercial interest in the video's "editorial content" than an ad-supported newspaper has a commercial interest in its editorial content.

Implications. This lawsuit provides a protocol for folks trying to suppress truthful negative information--acquire the copyrights to the content containing the unwanted information, and then use the newly created threat of copyright infringement to force that information off the Internet. While this is a disconcerting protocol, it probably won't work in all circumstances. For example, the protocol probably works better for visual/aural content than purely textual content because (a) people need to see/hear some things with their own eyes/ears, and (b) it's much easier for others to extract and repeat textual information without running afoul of copyrights. Nevertheless, the post-publication acquisition protocol works even better than Medical Justice's now-retired pre-publication acquisition approach because it doesn't rely on legally dubious pre-assignments of not-yet-extant works, plus it can be activated only in response to specific problematic content. Thus, we need to vigilantly monitor the ecosystem for potential abuses of this protocol.

UGC sites (and especially review sites) could undercut the protocol by restricting users' ability to take down content in response to legal duress. Ripoff Report famously provides its authors with no power to delete their reviews, an aggressive and sometimes questionable move that does avoid the problems identified here. If a blanket restriction on users' editing/deleting of their own content is too strong, UGC sites could limit this attack by restricting editing/deleting if the author assigns/transfers the copyright in the work, i.e., a kind of springing conditional irrevocability to the user's license to the UGC site if the user transfers the copyright. I doubt many UGC sites will undertake such an effort now, but if we see widespread misuse of the protocol, UGC sites should undertake more drastic measures to preserve their sites' integrity.

For more on the social values that this protocol threatens, see my essay on the Regulation of Reputational Information.

Posted by Eric at 09:15 AM | Content Regulation , Copyright , Derivative Liability , Licensing/Contracts , Publicity/Privacy Rights | TrackBack

May 10, 2012

Topix Protected by 47 USC 230--Price v. Gannett

By Eric Goldman

Price v. Gannett Co., 2012 WL 1570972, (S.D. W. Va. May 1, 2012)

This is a pro se case. The plaintiffs alleged that pseudonymous posters made defamatory and otherwise tortious remarks about the plaintiffs on Topix. The court has zero difficulty tossing the case on a 12(b)(6) motion to dismiss. The court's analysis:

Plaintiffs have alleged all three elements [of a 230 defense] in their complaint as Topix is a website where users post comments. Plaintiffs have admitted in the complaint that the unknown individuals provided the statements, not Topix. It is also clear that Plaintiffs are treating Topix as the publisher.

If the plaintiffs weren't pro se, this would be a logical case for the judge to issue sanctions against the plaintiffs for bringing such an obviously unmeritorious claim.

This is at least the second time Topix has qualified for the 47 USC 230 immunity. See my post on the first case, Hopkins v. Doe, which similarly involved a pro se suing over pseudonymous posts and led to an equally emphatic defense win.

Posted by Eric at 06:48 AM | Derivative Liability | TrackBack

April 30, 2012

Comments on the Megaupload Prosecution (a Long-Delayed Linkwrap)

By Eric Goldman

[I've been working on this linkwrap for 3 months. Linkwraps rarely improve with age. At this point, it's not even clear the US government has a case due to its repeated gaffes. Nevertheless, I've decided to post this linkwrap now because--regardless of its disposition--the Megaupload prosecution is an incredibly important Cyberlaw development that almost certainly will make my top 10 year-end list.]

While there could be a small amount of provable criminal copyright infringement—under our modern overexpansive criminalization of ordinary daily activities—for infringing files the Megaupload principals uploaded themselves, the government ordinarily wouldn't have cranked up its massive machinery for those violations. After all, millions of Americans routinely commit violations like that, and mass panic would be at hand if the government exercises its prosecutorial discretion so loosely.

Instead, the government's prosecution of Megaupload demonstrates the implications of the government acting as a proxy for private commercial interests. The government is using its enforcement powers to accomplish what most copyright owners haven't been willing to do in civil court (i.e., sue Megaupload for infringement); and the government is doing so by using its incredibly powerful discovery and enforcement tools that vastly exceed the tools available in civil enforcement; and the government's bringing the prosecution in part because of the revolving door between government and the content industry (where some of the decision-makers green-lighting the enforcement action probably worked shoulder-to-shoulder with the copyright owners making the request) plus the Obama administration’s desire to curry continued favor and campaign contributions from well-heeled sources.

The resulting prosecution is a depressing display of abuse of government authority. It’s hard to comprehensively catalog all of the lawless aspects of the US government’s prosecution of Megaupload, so I’ll just focus on two:

1) Trying to hold Megaupload criminally liable for its users' actions. Criminal copyright infringement requires willful infringement, a very rigorous scienter level. I discuss the implications of this high scienter requirement in more detail in my decade-old article on warez trading. Megaupload’s business choices may not have been ideal, but Megaupload has a number of strong potential defenses for its users' activities, including 512(c), lack of volitional conduct and more. Whether it actually qualified for these is irrelevant; Megaupload’s subjective belief in these defenses should destroy the willfulness requirement. Thus, the government is simply making up the law to try to hold Megaupload accountable for its users' uploading/downloading.

2) Taking Megaupload offline. Megaupload's website is analogous to a printing press that constantly published new content. Under our Constitution, the government can’t simply shut down a printing press, but that's basically what our government did when it turned Megaupload off and seized all of the assets. Not surprisingly, shutting down a printing press suppresses countless legitimate content publications by legitimate users of Megaupload. Surprisingly (shockingly, even), the government apparently doesn't care about this “collateral,” entirely foreseeable and deeply unconstitutional effect. The government's further insistence that all user data, even legitimate data, should be destroyed is even more shocking. Destroying the evidence not only screws over the legitimate users, but it may make it impossible for Megaupload to mount a proper defense. It's depressing our government isn't above such cheap tricks in its zeal to win.

The government has also been shockingly cavalier about the collateral consequences of its prosecution on the marketplace. Legitimate web hosts, and their investors, are quaking in their boots that they will be next. It doesn’t help that the content industry is circulating a “kill chart” of its next desired targets.

In the end, the Megaupload prosecution demonstrates that SOPA advocates are inevitably going to win. The content owners’ ire toward “foreign rogue websites,” combined with the administration’s willingness to break the law, if necessary, to keep content owners happy, leads to lawless outcomes like the Megaupload prosecution and ICE’s domain name seizures. I'll say more about this in my long-delayed SOPA linkwrap.

Some links about Megaupload or the situation more generally worth checking out:

Source Materials

* Superseding indictment

* News.com: Some of the assets seized

Analysis of the Enforcement

* EFF: Megaupload Goes to Court: A Primer

* Ars Technica: How can the US seize a Hong Kong site like Megaupload

* Techdirt: Megaupload Details Raise Significant Concerns About What DOJ Considers Evidence Of Criminal Behavior

* News.com: How did the FBI get access to internal Megaupload conversations?

* Ars Technica: Megaupload: Erasing our servers as the US wants would deny us a fair trial

Collateral Effects

* Phil Corwin on collateral effects

* News.com: FileSonic changed its sharing practices in light of the prosecution

* TorrentFreak: RapidShare Publishes Anti-Piracy Manifesto for Cyberlockers

* RWW: Feds to Megaupload Users: Tough Luck

Revolving Doors/Patronage

* News.com: Nobody wanted MegaUpload busted more than MPAA

* News.com: U.S. Attorney chasing MegaUpload is former piracy fighter

General

* CMLP site on Megaupload

* Irina D. Manta, The Puzzle of Criminal Sanctions for Intellectual Property Infringement, 24 Harv. J.L. & Tech. 469 (2011)

Posted by Eric at 09:30 AM | Copyright , Derivative Liability | TrackBack

April 29, 2012

512(f) Plaintiff Can't Get Discovery to Back Up His Allegations of Bogus Takedowns--Ouellette v. Viacom

By Eric Goldman

Ouellette v. Viacom Intern., Inc., 2012 WL 1435703 (D. Mont. April 25, 2012)

Ouellette sued Viacom for sending allegedly bogus takedown notices for videos he posted to YouTube. His case has gone nowhere. In 2011, his ADA claims were tossed. Then, earlier this year, the magistrate judge rejected his 17 USC 512(f) claim. In this ruling, the judge adopts the magistrate's report and closes the case.

The disposition of Ouellette's 512(f) claim is hardly surprising. Putting aside his status as a pro se, even well-lawyered 512(f) plaintiffs rarely make any progress in court after the Ninth Circuit Rossi case required subjective bad faith as an element of a 512(f) claim. With this insurmountable mountain in his way, Ouellette never really had a chance.

Like so many plaintiffs, Ouellette argued that he can't fully allege Viacom's bad scienter until he gets discovery to see what they did and said. Not surprisingly, the court doesn't want to hear it:

Contrary to Ouellette’s assertion that interrogatories are the correct means for him to discover Viacom’s intent in issuing its takedown notice to Youtube.com, § 512(f) requires Ouellette to allege facts, at the pleading stage, that demonstrate that Viacom acted without a good-faith belief.

Stated differently, unless the 512(f) plaintiff has smoking-gun evidence of the copyright owner's bad intent before filing the complaint, the plaintiff has virtually no chance of getting a 512(f) claim into discovery.

The court rejects Ouellette's other contentions, including:
* Viacom's takedowns of other users' content is relevant to his situation. The court only considers Viacom's scienter with respect to the takedowns of Ouellette's content.
* Viacom's failure to sue Ouellette after the takedowns tacitly admitted that Ouellette had engaged in fair use. Obviously, Viacom could have many legitimate reasons why it didn't sue Ouellette for his uploads.

Ouellette was a lousy test case for 512(f), but his case reminds us that 512(f) plays effectively no role in 17 USC 512's overall design of checks-and-balances.

Posted by Eric at 11:48 AM | Copyright , Derivative Liability | TrackBack

April 24, 2012

Internet Intermediary Law Slides from Stanford Guest Lecture

By Eric Goldman

I recently guest-lectured at an Internet Law course at Stanford, run by Jennifer Granick and Richard Salgado. My slides.

Jennifer asked me to cover 47 USC 230 and 17 USC 512 in a single session. I know other Internet Law professors combine the topics, but I normally don't in my Internet Law course. When I cover online copyright liability, I discuss Section 512 as a defense to secondary copyright infringement. Later, I talk about publication torts, including defamation, and then talk about Section 230 as an Internet exceptionalist approach to publication torts based on third party content. I do have a wrapup slide at the end of my Section 230 (included in the slides linked up) that contrasts Sections 512 and 230, but I have never taught them together. I thought it worked out nicely, and it gave me a chance to show different ways plaintiffs are attacking UGC websites. Check it out.

Posted by Eric at 03:27 PM | Content Regulation , Copyright , Derivative Liability , Trademark | TrackBack

April 13, 2012

"Social Media and Trademark Law" Talk Notes

By Eric Goldman

Today, I gave a talk at Suffolk University's event "Social Networking Sites: Law, Policy and Practical Strategies" on Social Media and Trademark Law. My talk notes:
_____

1. Overview

A. Trademark doctrine is inherently elastic
* Schizophrenia about consumer protection vs. producer protection
* Hard to legally model consumer mental processes
* Trademark law relies on commercial/non-commercial distinction, and that model breaks down on the Internet

B. TM doctrine becomes more incoherent as it gets further away from product counterfeiting
* Little value to marching through doctrinal analyses in other circumstances

C. Internet technologies permit TM uses completely unrelated to product counterfeiting
* Pressure on TM law
- And SNSs feel pressure to do private ordering, although their efforts are often kludgy and inconsistent
* Pressure for new or expanded para-trademark rights
- ACPA
- False advertising/false designation of origin
- Defamation
- Publicity/privacy rights
- Identity theft/E-personation (“knowingly and without consent credibly impersonates another actual person through or on an Internet Web site or by other electronic means for purposes of harming, intimidating, threatening, or defrauding another person”)
- CFAA, trade secret, etc.

2. Namespace Disputes

A. Usernames are scarce and valuable
* Namespace proliferation with every new social media
* Leads to username squatting

B. Value + emotion = messy divorces
* Co-venturers (Tea Partiers, OMGFacts)
* Employee/contractor (Maremont, PhoneDog)

C. Doctrinal Ambiguities
* Does using a username create trademark rights? i.e., is it a qualifying “use in commerce”?
* Can a username, on its own, infringe trademark rights? Analogies to domain names
* Must the namespace operator adjudicate complaints to manage its liability? Even if not required, will the operator adopt a private ordering system that is dispositive in practice?

D. Username litigation is rarely cost-justified!

3. Content Source Confusion

A. Taxonomy of types of Content Source Confusion
* Competitive Injury. Ex: Ron Paul (YouTube video)
* Griper. Ex: Iacovelli (fake posts in doctor’s name)
* Parody. Ex: LaRussa, Coventry, BPGlobalPR

B. TM law isn’t designed to protect against content source confusion, but sometimes courts do it anyway

C. Enforcement raises Streisand Effect risk and is rarely cost-justified

4. Brands Can't Control Social Media

A. Social media gives brands unprecedented engagement with customers, but things can go wrong

B. Companies can self-injure their brands with ill-timed/ill-advised posts
* Kenneth Cole: “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online at http://bit.ly/KCairo -KC”
* Entemann’s: “Who’s #notguilty about eating all the tasty treats they want?!” on same day as Casey Anthony’s verdict
* Ketchum exec James Andrew tweet “True confession but i'm in one of those towns where I scratch my head and say "I would die if I had to live here!“” while on way to client, FedEx.

C. Users control brands; brands don’t control users
* Nestle: Nestle took down Greenpeace’s critical video from YouTube, users complained on Nestle’s FB page, Nestle chided them for their behavior, users went crazy
* McDonalds: hashtag #McDStories became a “bashtag”
* For more, see my Online Word of Mouth article

Posted by Eric at 01:13 PM | Derivative Liability , Domain Names , Marketing , Trademark | TrackBack

April 06, 2012

AdKnowledge Denied 47 USC 230 Immunity (Again)--Chang v. Wozo

By Eric Goldman

Chang v. Wozo LLC, 2012 WL 1067643 (D. Mass. March 28, 2012)

This case is a cross between Swift v. Zynga and Goddard v. Google. Tatto runs a website, Wozo, that sells art posters. It created a "poster of the month" negative-option club that sent 2 posters/month for $30/month until the customer opts-out. Who has enough wall space for 24 posters a year? Tatto ran ads offering a "free" poster for a 99 cent shipping fee. Unlucky customers allegedly were surreptitiously enrolled in the poster club. To sweeten the deal, Tatto bundled its free poster offer with additional incentives to consumers, including AdKnowledge's virtual currency ("Super Rewards Points") pursuant to a deal with AdKnowledge. Chang, as class representative, alleges he responded to an ad for the bundled free poster and virtual currency and got duped into the poster club.

AdKnowledge tries a number of tactics to exit the lawsuit early, but I'm going to focus only on its 47 USC 230 defense. Citing Swift v. Zynga in a footnote (in which AdKnowledge was denied a 230 dismissal in a similar circumstance), the court's rejection of 47 USC 230 is brief:

Adknowledge and Chang dispute whether the content of the internet advertisements at the heart of this case were developed solely by Wozo and Tatto or whether the content was developed at least in part by Adknowledge....This is a dispute of fact that cannot be resolved at this juncture.

Nowadays, every plaintiff asserts that a 230-immunized entity "developed in part" the offending content. Therefore, it was lazy at best for the court to simply take the statement at face value in rejecting the 230 immunity. As Judge Kozinski said in Roommates.com, the Section 230 immunity needs to be robust to avoid death by a thousand duck bites.

On the other hand, the court may be responding to AdKnowledge's contract with Tatto to advertise a bundled offering, which does raise the question of how the contract allocated responsibilities for the bundle. For example, if AdKnowledge crafted the ad copy and deliberately omitted any reference to the poster club, 47 USC 230 probably doesn't apply to the ad copy. In contrast, if AdKnowledge crafted fully legally-compliant ad copy based on everything AdKnowledge knew but Tatto independently and surreptitiously crammed the poster club onto users, 47 USC 230 might very well protect AdKnowledge for Tatto's rogue behavior. See, e.g., Goddard v. Google and Mazur v. eBay. I can see why a court would want to see more facts beyond the complaint before making assumptions on a 12b6 motion to dismiss. At the same time, I hope the court will be willing to revisit Section 230 if AdKnowledge has the facts to throw Tatto under the bus.

Posted by Eric at 11:54 AM | Derivative Liability , E-Commerce , Marketing | TrackBack

April 05, 2012

Second Circuit Ruling in Viacom v. YouTube Is a Bummer for Google and the UGC Community

By Eric Goldman

Viacom International, Inc., v. YouTube, Inc., 10-3270-cv, 2012 WL 1130851 (2d Cir. April 5, 2012). The companion case is the Football Association Premier League Ltd. v. YouTube, 10-3342-cv

Overview

After five years in the courts, the Viacom v. YouTube litigation has finally produced an appellate opinion. In my opinion, the result is a loss for Google/YouTube and the UGC community generally. While the court largely agrees with many of YouTube's contentions (and the ruling of the lower court), it nevertheless revives the litigation, ensuring that Google will spend millions of dollars more over the coming months/years.

Furthermore, the opinion identifies at least four "holes" in 512(c) coverage that future plaintiffs will surely attempt to exploit. (Smoking-gun internal emails; willful blindness; right and ability to control; and content syndication). This ensures that other UGC websites will spend a lot of money upfront to try to shut down those holes and spend even more money in litigation to demonstrate that it avoided those holes. So, on balance, I'm characterizing this opinion as a loss for the UGC community because this ruling increases the industry's costs even if the substantive contours of 512 don't change.

Given that the Second Circuit expressly disagrees with the Ninth Circuit's UMG v. Shelter Capital ruling on the right and ability to control issue, I expect future 512 cases will be brought in the Second Circuit, not the Ninth Circuit. I'm not sure if this conflict is strong enough to get the case to the Supreme Court if Google chose to try.

Most importantly, this opinion exposes a structural deficiency of the 512(c) safe harbor. The statute's simply too long and detailed, and if a defendant fails to satisfy each and every element, the safe harbor is lost completely. This is reminiscent of military strategy and information security: the defense has to work equally well across its entire border, while the adversary can concentrate its attack and only has to succeed on one point of attack to win. The same is true with a 512(c) defense. So, it doesn't matter that YouTube won most of the points of contention; if any single point of contention fails, YouTube's 512(c) defense fails. As I've insisted before, this provides a good lesson for drafters of safe harbors and immunities--to work effectively, the safe harbors/immunities must be pithy and categorical, or else they create too many potential points of failure.

Even though Viacom won this ruling, I still don't understand how Viacom is making progress towards any strategic objective that matters to it. Viacom long ago conceded that it didn't object to YouTube's practices after 2008 (after it got access to Content ID). Indeed, Viacom gets upset with YouTube when it removes Viacom's posts made for marketing purposes. And Viacom just expanded its licensing arrangements with YouTube. At this point, Viacom is very clear that it doesn't want YouTube to go away, nor does it want any structural changes to YouTube's current practices. So what the hell is this fight about? Viacom might still look at this lawsuit for its cash value, but it's hard to be sympathetic towards that or see that as a big strategic objective. Viacom might be looking at this case to establish favorable precedent, but it picked a well-funded and determined defendant to make the point, and the Second Circuit ruling--though opening the door for copyright plaintiffs seeking to disqualify 512(c) defenses--doesn't contain a big broad pronouncement that would constitute a strategic win for Viacom. The whole lawsuit is a big waste for all concerned, and the fact the parties can't settle this case after 5 years of costly trench warfare continues to baffle me.

[UPDATE: This post is unintentionally a little contrarian; many folks see this ruling as a win for Google and the Internet. One possible explanation for this difference is our starting baseline.

If your starting point is Viacom''s summary judgment brief and some of the extreme and ridiculous arguments it makes, this opinion is a stunning and quite satisfying rebuke of that brief and those arguments. The opinion bristles with hostility towards most of Viacom's central arguments.

However, my baseline is the Shelter Capital case, which addressed many of the same topics and already established, as Ninth Circuit law, most of the conclusions that people are viewing as wins in this opinion. Compared to the Shelter Capital baseline, this opinion creates additional holes in 512's coverage. That's why I view this opinion as a bummer. In the end, this opinion narrows the grounds of 512 fights, and that's a good thing; but because it opens up new grounds for plaintiffs to exploit, this opinion pushes back--by many years--the day when the safe harbor preempts copyright owners from bringing meritless yet ruinous anti-UGC lawsuits. To me, that's a clear loss for the Internet, no matter how many points of contention YouTube actually won today.]

Analysis of the Court's Discussion

512(c)'s Applicability to Direct and Secondary Infringement

One of the most important rulings of the court comes in an off-hand remark with minimal citation support on page 33: "The District Court correctly determined that a finding of safe harbor application necessarily protects a defendant from all affirmative claims for monetary relief." This is one of the most significant questions in 512(c) jurisprudence: does 512(c) cover only direct infringement, or both direct and secondary infringement? Most courts have assumed the latter without ever saying so, but here the court (echoing, but curiously not citing, the Shelter Capital case) explicitly says 512(c) applies to all flavors of infringement. This makes the safe harbor potentially dispositive to the case--if YouTube gets it, Viacom loses any claim to money damages and, at best, can only get a meaningless limited injunction.

Knowledge of Infringing Activity

The opinion defines three types of service provider knowledge about infringement that might disqualify the service provider from 512(c):

1) actual knowledge of specific acts of infringement. The court calls this a subjective knowledge standard.
2) "red flags" knowledge of specific acts of infringement. The court calls this an objective knowledge standard. I've long argued that the "red flags" standard has evaporated in practice because, objectively, it's impossible for anyone other than the content owner to look at a specific item of content and determine if it's legitimately posted or not. In fact, even content owners can't figure this out for themselves; Viacom itself repeatedly mistakenly identified which items of its own content were properly or illicitly posted to YouTube. If the content owner can't make that determination, I'll argue that objectively no one else could do so either.
3) willful blindness towards specific acts of infringement. Because of the nature of willful blindness, by definition it occurs in situations where the service provider otherwise doesn't have subjective or objective knowledge of the infringing activity. Unfortunately, the court doesn't say what service provider activities would demonstrate willful blindness, and many of us are scratching our heads wondering how willful blindness can occur when the service provider lacks actual or red flags knowledge. Combined with the Tiffany v. eBay contributory trademark ruling, it shows the Second Circuit is obsessed with willful blindness (though it didn’t define willful blindness there either—gee, thanks). The Ninth Circuit had a brief and oblique reference to willful blindness in the Shelter Capital opinion, but my guess is that plaintiffs will like the Second Circuit's express discussion about willful blindness even better than they liked the Ninth Circuit's casual reference.

The court identifies three pieces of evidence that YouTube may have had disqualifying knowledge:

* emails from Patrick Walker asking the team to look for and remove Football League clips
* an email from Jawed Karim indicating that there were Viacom clips on the site that may have been "blatantly illegal"
* an email exchange between Chad Hurley and Steve Chen debating whether to remove clips now or later.

The court expressly says that this evidence may not be enough for Viacom to show disqualifying knowledge (see FN9), but it is enough to get to a jury.

More generally, these emails remind us--- that YouTube was an unsophisticated start-up in its early days. They didn't have legal counsel reviewing these emails or answering its questions about clip removals. Most UGC start-ups now know that these conversations shouldn't be taking place over email, there should be a tightly enforced email retention policy, and active legal counsel is essential from day 1. But the modern protocol also mean that launching defensible new UGC start-ups is much more expensive.

This is especially true for UGC start-ups trying to avoid the willful blindness doctrine; I criticized the Tiffany v. eBay opinion for endorsing eBay's very expensive anti-infringement infrastructure and implicitly requiring start-ups to maintain a similarly expensive infrastructure. This opinion may have the same adverse economic consequences for other UGC start-ups trying to minimize allegations of willful blindness in the copyright context.

Because the ruling creates more ways for plaintiffs to get to a jury in 512 cases, this ruling also means 512 litigation--even if the defendant succeeds--is going to be more expensive. The needle-in-haystack hunt for smoking gun emails means both parties will spend a lot on discovery (a point I complained about in the Shelter Capital case too). Furthermore, with respect to willful blindness, unless courts aggressively police plaintiffs' allegations, it seems like plaintiffs can use a willful blindness allegation to defeat a 12(b)(6) dismissal motion; and if they can find any colorable evidence, plaintiffs can use that to defeat summary judgment and force jury trials in many future 512(c) cases.

[UPDATE: the willful blindness discussion in this case, and our confusion about what might possibly constitute it, reminds me a little of Justice Scalia's "tertium quid" reference in Walmart v. Samara. By adding another category of knowledge but not defining it, this opinion adds substantially to the transaction costs for a category that may not exist in the real world. The judges may be happy with themselves that they've done a more thorough taxonomizing job, but everyone else is miserable trying to figure out what belongs in that taxonomical node.]

Right and Ability to Control

The court blazes its own trail on what constitutes a service provider's disqualifying "right and ability to control" infringing activity. It disagrees with YouTube, the lower court and the Ninth Circuit's Shelter Capital case, all of which held that a service provider's right and ability to control only applied when the service provider had specific knowledge of the infringing activity. But the Second Circuit also disagrees with Viacom's proposition that "right and ability to control" imports its meaning from the common law vicarious infringement test. The court rightly recognizes that would render the statute internally contradictory.

So the court agrees with no one. Given that it rejected everyone else's definitions, we might expect the court to carefully lay out what it thinks the phrase means. Sadly, no. The opinion doesn't provide an express definition of what qualifies as the "right and ability to control," instead sending that issue back to the district court to figure out both the standard and whether YouTube met it. The clearest clue the court provides about the standard is it "involve[s] a service provider exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity." I have no idea what that means, other than that it's open season for plaintiff fiestas.

[UPDATE: Sherwin Siy and I had an exchange on Twitter about this:

@SherwinPK: I don't think that "exerting substantial influence on activities of users" is "open season." A bit vague, yeah, but bounded
@ericgoldman OK, what you think "exerting substantial influence on activities of users" means? That's the goal of every UGC site!
@SherwinPK Not at all. Cybernet, for instance, had the OSP literally giving pointers on layout and content. That's substantial influence.
@SherwinPK Youtube doesn't exercise an editorial function wrt to user videos. That's why there's so much dreck.
My private reply: "That's not how the plaintiffs will put it! They will argue top X lists and exhortations to post constitute "substantial influence""]

Stored at a User's Direction

The court rejects several of Viacom's arguments that YouTube's automated handling of user-supplied videos wasn't stored at the user's direction, including YouTube's transcoding and playback functions and its display of thumbnails in a "related videos" module. However, the court leaves open the possibility that YouTube's "syndication" of user videos didn't qualify for 512(c). Specifically, YouTube licensed 2,000 user videos to Verizon Wireless. It’s unclear if any Viacom videos were included. That fact question goes to trial. If no Viacom videos were included, Viacom won't get any benefit from this exception. However, the ruling leaves open future fights over what constitutes "syndication" as a way of bypassing 512(c). More plaintiff fiestas.

Case Library

Posted by Eric at 01:33 PM | Copyright , Derivative Liability | TrackBack

March 27, 2012

Emailing the URL of an Allegedly Defamatory Post Immunized by 47 USC 230--Shrader v. Biddinger

By Eric Goldman

Shrader v. Biddinger, 2012 WL 976032 (D. Colo. February 17, 2012). That ruling is the magistrate's report. The judge adopted the magistrate report verbatim last week. The initial complaint. This case also produced an interesting 10th Circuit ruling on jurisdiction: Shrader v. Biddinger, 2011 WL 678386 (10th Cir. Feb. 28, 2011).

Shrader entered into an agreement with Stewart to publish Shrader's content. That relationship soured, and Shrader demanded that Stewart stop publishing the content. It's not clear Stewart ever did so.

In connection with their publication dispute, Stewart emailed some critical remarks about Shrader to Biddinger, who posted the email to a Wave59 message board. Wave59 didn't remove the post after learning of Shrader's direction, and indeed Wave59 principal Beann personally emailed the post's URL to various interested folks.

Shrader, suing pro se, initiated the kind of sue-everyone legal proceedings that we sometimes see from pro se litigants. The magistrate's decision (as approved by the judge) ends big chunks of Shrader's lawsuit and, to boot, awards some attorneys' fees under Colorado §13-17-201 (which basically applies to tort claims which the defense wins on a 12(b) motion). If Shrader has any money, he will be writing a good-sized check to some defendants for their troubles.

Wave59 and its principal Beann get a successful 47 USC 230 immunity. This outcome is so obvious, I doubt these defendants would have been sued in the first place if Shrader had used an attorney. The magistrate says:

neither Beann nor Wave59 originated the posting plaintiff finds objectionable. Rather, Biddinger was the “information content provider.” Wave59 was the “interactive computer service.” Consequently, this court finds that the CDA provides these defendants with federal immunity against the plaintiff's state tort claims based upon the posting being placed on and kept on the Wave59 website

(Just to clarify, Biddinger isn't necessarily the ICP of any defamatory content. Instead, he may have had his own 230 immunity for republishing Stewart's email per Batzel and Barrett v. Rosenthal).

The magistrate says Section 230 applies even though Wave59 didn't remove the post after getting notice. Further, citing Blumenthal v. Drudge (a slightly odd cite in this context), the court says "even if Beann 'directed' users of the board to [the post], such conduct does not diminish the protections of the CDA's immunity." This result is entirely consistent with Section 230, but at the moment I'm hard-pressed to think of another Section 230 case with closely analogous facts. Let me know if I've forgotten something.

Posted by Eric at 03:25 PM | Derivative Liability | TrackBack

March 20, 2012

Another 512(f) Claim Fails--Ouellette v. Viacom

By Eric Goldman

Ouellette v. Viacom Intern., Inc., 2012 WL 850921 (D. Mont. March 13, 2012). Prior blog post on the case.

Ouellette brought a 17 USC 512(f) claim against Viacom for sending bogus takedown notices. As we know, it's almost impossible to win 512(f) cases, and as a pro se, Ouellette had no chance.

In setting the standard, the court says the copyright owner must consider the fair use doctrine (citation to the Lenz case):

the fair use doctrine is necessarily part of a copyright owner’s initial review of potentially infringing material, and must be considered in assessing whether a copyright infringement exists

Nevertheless, this gesture towards fair use doesn't really help this or any other 512(f) plaintiff. Per the Rossi case, the 512(f) standard remains that the copyright owner's bad faith is measured subjectively. Ouellette argued that he successfully counter-noticed Viacom's takedowns, that Viacom kept DMCAing his videos, and that Viacom uses scanning software without human oversight. Even if all of that is true, the court says, "Ouellette has not presented any factual information plausibly suggesting Viacom actually knew Ouellette made fair use of its copyrighted material, and that it acted with the requisite subjective bad faith in issuing its takedown notices."

Part of that was due to Ouellette's pleading failure for not explaining why his publications qualified for fair use. (I assume future 512(f) plaintiffs will rectify that). Even so, it's clear the Rossi requirement of subjective bad faith dooms almost all 512(f) complaints unless the plaintiff, when filing the complaint, (a) has smoking-gun evidence of subjective bad faith, (b) can make an overwhelmingly compelling case that the publication was obviously protected by fair use, or (c) the takedown notice had material factual errors (like it took down something the copyright owner didn't even own). Given the virtual impossibility of winning 512(f) claims, this case just gives us more reasons to favor 512(f) reform.

We blog virtually every 512(f) case we see.

Posted by Eric at 11:00 AM | Copyright , Derivative Liability | TrackBack

March 17, 2012

Text Spam Class Action Against Jiffy Lube Moves Forward – In re Jiffy Lube Int’l, Inc., Text Spam Litigation

[Post by Venkat Balasubramani]

In re Jiffy Lube International, Inc., Text Spam Litigation, 11-md-2261-JM-JMA (N.D. Cal.; Mar. 9, 2012)

Plaintiffs filed a class action against Jiffy Lube (a multi-location franchisee Heartland Automotive Services) and TextMarks alleging TCPA violations based on text messages sent by TextMarks on behalf of Jiffy Lube:

JIFFY LUBE CUSTOMERS 1 TIME OFFER:REPLY Y TO JOIN OUR ECLUB FOR 45% OFF A SIGNATURE SERVICE OILCHANGE! STOP TO UNSUB MSG&DATA RATES MAY APPLY T&C:JIFFYTOS.COM.

The court denies Heartland’s motion to dismiss. The big takeaway from the order is that text message-based marketing is something that companies often screw up, and these screw-ups end up being costly. Given the draconian provisions of the TCPA (statutory damages, stringent consent provision, no free pass for the initial message, and liability for any unsolicited message that is sent with certain equipment), rulings like these make me think companies should consider avoiding text message-based marketing altogether.

TCPA Provides for Derivative Liability:

Heartland’s first argument was that it should not be held liable because it did not actually send out the text messages (TextMarks did). The court cites to Satterfield v. Simon & Schuster and notes that the Ninth Circuit had no problem imposing liability on Simon & Schuster despite the fact that Simon & Schuster did not physically send the messages. The court also cites to an unsolicited fax case for the proposition that “congressional tort actions implicitly include the doctrine of vicarious liability.” If advertisers were allowed to escape liability by not actually sending the messages, this would allow advertisers to make an end-run around the TCPA’s prohibitions.

Heartland also argued that plaintiffs failed to sufficiently plead vicarious liability, but the court says that plaintiffs’ allegation that Heartland "engaged TextMarks to send the messages" is sufficient.

Plaintiffs’ Prior Consent:

Heartland produced invoices and sought to rely on the invoices to demonstrate that plaintiffs consented to receive the messages. The court rejects Heartland’s request that the court take judicial notice of the invoices, saying they stand for the opposite of what plaintiffs allege in their complaint. The invoices are not central to plaintiffs’ claims; therefore, they are not properly the subject of judicial notice in the same way that contractual terms—which the plaintiff relies on in the complaint—are. In passing, the court expresses skepticism as to whether the invoices would satisfy the TCPA's strict consent requirements.

Were the Messages Sent Using an Auto-Dialer:

The TCPA only imposes liability for text messages that are sent using equipment that has the capacity to store or produce random numbers. Heartland argued that plaintiffs should only be permitted to allege the use of an auto-dialer on in formation and belief if (1) the content of the message was impersonal, and (2) the text message was sent by a specific SMS-short code. I think what Heartland is trying to argue is that only if the text messages bear indicia of being transmitted en masse should a TCPA plaintiff be entitled to allege the use of an auto-dialer on information and belief. The court rejects this, noting that in Simon & Schuster the Ninth Circuit only required that the equipment at issue have “the capacity” to store or produce numbers using a random or sequential number generator. Under Satterfield, it does not matter whether this capability was actually used to send the messages.

First Amendment Challenge:

Heartland also brings a First Amendment challenge, arguing that the broad definition of auto-dialer would mean that friends who text each other dinner invitations could incur TCPA liability, and this would render the statute overbroad. As expected, this argument doesn’t get much traction with the court. The court says that the statute is intended to protect consumers against the costs and privacy invasions that accompany unsolicited text messages, and regulating texts sent through auto-dialers adequately serves this interest. The court also says that the prospect of friends incurring liability under the TCPA for texting each other dinner invitations is fairly remote. At worst, this type of a text message lies at the fringe of the statute and thus the statute does not suffer from overbreadth issues.

Plaintiffs’ Cannot be Compelled to Arbitrate Their Claims:

Heartland finally argued that one of the plaintiffs who signed an agreement with Jiffy Lube (and other class members who fell into the same category) should be required to arbitrate their dispute. This plaintiff entered into an agreement while obtaining services at Jiffy Lube which contained the following provision:

[the parties] agree that any and all disputes, controversies or claims between Jiffy Lube and [the customer] (including breach of warranty, contract, tort or any other claim) will be resolved by mandatory arbitration according to the terms of this Mandatory Arbitration Agreement (“Agreement”), except that any such dispute can be resolved by a small claims court if and for so long as the dispute is within its jurisdiction. By this Agreement, Jiffy Lube and [customer] also agree to only bring disputes against each other in an individual capacity and not as a class representative or class member and waive the right to a jury trial.

The court says the arbitration language is “incredibly broad,” and application of the clause to disputes unrelated to the contract would raise conscionability issues. The court cites to a Judge Posner opinion and concludes that if enforced as drafted, “absurd results would ensue.” Heartland asked the court to construe it narrowly but the court declines, saying it is not authorized to do so. Even if the clause were construed to be limited to disputes “arising out of or relating” to the contract, the court says that the TCPA claims would not fall within the clause.
__

As mentioned above, text message litigation has been brutal for marketers and advertisers, and this decision is no different. (Liability for spam email in contrast has been much more limited.) To my knowledge, the issue of dervative liability hasn't been squarely argued by a TCPA defendant, but decisions have implicitly recognized that the TCPA provides for derivative liability in rejecting the requests to dismiss filed by advertisers who did not transmit the messages in question. From that standpoint, the ruling is not significant, but it is still worth nothing.

Outsourcing your text message-based marketing was a risky proposition to start with, but as this decision squarely allows for derivative liability (albeit under somewhat vague standards), this makes it an even riskier proposition. Marketers may labor under the perception that the initial text message is a freebie (from a liability standpoint) and including an opt-out from receiving future texts absolves the marketer or advertiser from liability under the TCPA. It's worth repeating that this is not the case.

Previous posts:

"Group Text Services Grapple with TCPA Class Actions"
"Text Spam Lawsuit Against Citibank Moves Forward Despite Vague Allegations of Consent -- Ryabyshchuk v. Citibank"
"Court Rejects Constitutional Challenge to TCPA Based on Vagueness in "Prior Express Consent" Exception -- Kramer v. Autobytel, Inc."
"Another Court Finds that TCPA Applies to Text Messages -- Lozano v. Twentieth Century Fox Film Corp."
"Court Finds that SMS Spam Messages are Subject to the TCPA and Rejects First Amendment Defense -- Abbas v. Selling Source, LLC"
"Ninth Circuit Revives TCPA Claim--Satterfield v. Simon & Schuster"
"Cellphone Spam Violates TCPA--Joffe v. Acacia Mortgage"

Posted by Venkat at 08:46 AM | Derivative Liability , Marketing , Privacy/Security , Spam

March 13, 2012

TheDirty Gets Its First 47 USC 230 Win--S.C. v. Dirty World

By Eric Goldman

S.C. v. Dirty World LLC, No. 11-CV-00392-DW (W.D. Mo. March 12, 2012)

thedirty got a 47 USC 230 immunity--the first time it has qualified for Section 230--in the lawsuit by Stephanie Crabtree (S.C.). This isn't thedirty's first court victory; it won the Dyer and Gauck cases on the substantive claim elements, not on Section 230. In contrast, in January the Jones case denied a Section 230 immunity for thedirty, and this cast doubt on its immunity eligibility. Not only does this ruling vindicate thedirty's eligibility for 47 USC 230, but the opinion even explains why the Jones opinion is wrong.

As usual, this case involves a user's submission of a post and photo to thedirty. Nik Richie, thedirty's principal, approved the post for publication and added his usual derogatory snark about the situation. Richie is legally responsible for his snark, but in this case it's clearly not tortious. Instead, the lawsuit seeks to hold thedirty accountable for the third party material it published. As we know, stated that way, the immunity should apply clean and decisively.

Adopting the Accusearch definition of "development," the court says a website "develops" third party content (and thus loses the immunity) if the website "contributes materially to the alleged illegality of the conduct." The court gives two examples of this disqualifying behavior:

1) requiring or paying for the submission of illegal information
2) editing third party content to change its meaning (i.e., editing out the word "not" from a factual statement)

The element of "requiring" the submission of illegal content is a variation of the Roommates.com standard. The Roommates.com standard has proven unexpectedly defense-favorable, although the Roommates.com denouement showed the illogical of determining content illegality as part of an immunity determination. (I also made this point with the StubHub ruling from last week).

However, the "paying for illegal content" element is a dangerous bastardization of Accusearch. Many websites pay for UGC--for example, Epinions does, and so does YouTube. I don't think the court means to say that paying for UGC automatically forecloses Section 230 immunity for that content (and I think several cases have found Section 230 immunity in those situations), but just like the StubHub ruling, the loose language will inspire yet more plaintiffs. Sigh.

Applying the standard, the court says thedirty didn't "develop" the third party content:

it is undisputed that the Church Girl Post was unilaterally drafted and submitted by a third-party. The Defendants have further established that (a) they did nothing to induce a post specifically directed at the Plaintiff; (b) Richie does not personally know and has never knowingly spoken to the author of the Church Girl Post; (c) Richie had never heard of the Plaintiff prior to commencement of this action; and (d) the Defendants did not add to or otherwise alter the substance of the post. In addition, the Website does not require the posting of actionable material, and it does not pay for such information.

The plaintiff tried a few other arguments to defeat the Section 230 immunity:

* Richie "hand select[ed] those juicy tidbits of trash that are titillating to the public." Citing Zeran, the court says Section 230 protects these editorial choices.
* having "the Dirty Army" and a category called "Would You?" constitutes content development. Just like the StubHub case, the court says that website architecture isn't relevant to Section 230 analysis; the legal analysis should focus on the handling of the specific post in question.
* thedirty "encourages" people to post dirt. Citing Furber and Shiamili, the court says "merely encouraging defamatory posts is not sufficient to defeat CDA immunity." Plus, the site has other categories that aren't focused on dirt.

Finally, the court discusses the Jones precedent. The court tries to distinguish the cases factually, which I didn't find persuasive. The court says that in Jones, Richie's snark related to the user's allegedly defamatory statement, while in this case Richie's snark was just a derogatory reference to her appearance. Also, Richie removed this post in question, which he didn't do in the Jones case. The latter fact contravenes Zeran's teaching that Section 230 applies to a website's decision to "withdraw" content, and of course many cases have emphatically stated that Section 230 applies even if the website receives a takedown notice and ignores it. So I don't know what the judge was thinking here, but there you go.

Fortunately, the judge doesn't just rely on the factual differences; the opinion also denigrates the Jones ruling. It says the Jones opinion "appears to adopt a relatively narrow interpretation of CDA immunity," which conflicts with the "broad" immunity interpretations in the 8th Circuit (see the Johnson case). The court also says the Jones opinion shouldn't have considered the website's name because Section 230 analysis should be based on the handling of the specific UGC item.

The court ends with an odd admonishment:

to avoid any confusion–the Court disagrees with the Defendants’ apparent belief that they are immune for any and all postings on their Website. Instead, the Court simply holds that the Defendants are entitled to immunity under the facts of this case.

Three meta-observations about Section 230 litigation in light of some interesting parallels between this ruling and the StubHub ruling last week:

1) Both courts got to the right result but used unnecessarily sloppy language to get there, which will spur even more unmeritorious lawsuits. I wish judges wouldn't reinterpret the standards so freely. It makes everyone's lives so much more difficult.

2) Both courts expressly rejected plaintiffs' efforts to attack the website's architecture, instead requiring plaintiffs to show how the specific post in question lost its status as third party content.

3) It's disconcerting to see both courts parsing the meaning of the word "development" as the immunity's linchpin. After the Roommates.com train wreck, it's clear that no one knows what the word "development" means. While the SC and StubHub opinions both get to a decent place, the more often that courts play around with the meaning of the term "development," the more likely it is that we'll see goofy defense losses. Defendants, if you're fighting the Roommates.com battle, please try to get courts to focus on this standard from Roommates.com: “The message to website operators is clear: If you don’t encourage illegal content, or design your website to require users to input illegal content, you will be immune.”

Under that standard and any other reasonable interpretation of Section 230, thedirty qualifies for Section 230 immunity for third party content it republishes. Honestly, that's not even a close question. This reinforces the Jones case was wrong, and it should be reversed on appeal. I hope the appellate court fixes the obvious error.

Posted by Eric at 09:03 AM | Derivative Liability | TrackBack

March 12, 2012

Another Newspaper Isn't Liable for User Website Comments Per 47 USC 230--Spreadbury v. Bitterroot Library

By Eric Goldman

Spreadbury v. Bitterroot Public Library, 2012 WL 734163 (D. Montana March 6, 2012). Magistrate's Findings and Recommendations from November 2011 (Spreadbury v. Bitterroot Public Library, 2011 WL 7462038 (D.Mont. November 30, 2011). The Justia page.

It's not easy to predict what will set off a pro se litigant. Just recently I blogged about Kanal Gaston's serial litigation triggered, in part, by a missing sex toy. The facts underlying today's litigation started when Michael Spreadbury asked his local library to add an item to its collection, and the library refused. (It's not entirely clear what the item in question is, but I believe it's a letter written by another local resident to President Obama). The situation spiraled downward such that the library banned Spreadbury from its premises, so naturally the next stop was the courthouse. Spreadbury (as a pro se litigant) has sued what seems like half of Montana and, in less than a year, has helped generate a PACER docket of over 250 entries.

The county newspaper, the Ravalli Republic, has covered Spreadbury's situation extensively (see its archives). Spreadbury sued the newspaper publisher Lee Enterprises for defamation based on one of the stories as well as user comments. In this opinion, the court easily dismisses Lee Enterprise's liability for web users' comments to the article per 47 USC 230:

Through its website, Lee Enterprises provides an “interactive computer service,” 47 U.S.C. § 230(e)(3), that “enables computer access by multiple users to a computer server.” Collins, 703 F .Supp.2d at 878 (holding that a newspaper cannot be held liable for postings by third parties on its website) (quoting DiMeo v. Max, 248 Fed. Appx. 280, 282 (3rd Cir.2007)). The website is a “neutral tool” and offers a “simple generic prompt” for subscribers to comment about articles. Fair Housing Council, 521 F.3d at 1162, 1174. Lee Enterprises does not develop or select the comments, require or encourage readers to make defamatory statements, or edit comments to make them defamatory. See Collins, 703 F.Supp.2d at 878; Miles v. Raycom Media, Inc., Slip Copy, 2010 WL 3419438, *2–3 (Aug. 26, 2010 S.D. Miss.)(holding that a newspaper is not liable for comments posted by third parties on its website). Accordingly, I agree with Judge Lynch that Lee Enterprises is entitled to summary judgment on Spreadbury's claims that are predicated on third-party comments.

As I've indicated before, Section 230 would apply even if the newspaper did more than act a "neutral tool." Indeed, you may recall my comprehensive blog post on newspapers' liability for users' comments, which showed that newspapers consistently get Section 230 immunity for users' defamatory web comments. Also see my post on the Delle case, a more recent entry in the genre.

Posted by Eric at 08:48 AM | Content Regulation , Derivative Liability | TrackBack

March 10, 2012

Justin.tv Mostly Eliminates Zuffa's Trademark and Communications Act Claims Over User-to-User Live Video Streaming

By Eric Goldman

Zuffa LLC v. Justin.tv, Inc., 2012 WL 764424 (D. Nev. March 8, 2012). The complaint.

[Note: I've worked with Justin.tv on related issues, but I'm speaking for myself in this post]

Justin.tv allows user-to-user live video streaming. Zuffa runs the Ultimate Fighting Championship, which broadcasts pay-per-view fights. This lawsuit relates to the UFC 121 Lesnar v. Velasquez pay-per-view fight from October 2010, which Justin.tv users rebroadcast. Zuffa sued Justin.tv for a variety of claims. In this ruling, Justin.tv successfully dismisses most of the trademark claims and all of the Communications Act claims.

Trademark. Justin.tv argued that Zuffa's trademark claims were Dastar-ed. The court partially disagrees because Zuffa wasn't claiming reverse passing off. Nevertheless, Dastar wipes out Zuffa's claims about any trademarks actually embedded in the video stream, such as Zuffa's trademarked Octagon fighting ring, because trademarks would allow Zuffa to control the copyrighted material even after the copyright term expired. Instead, "the Court limits Zuffa’s trademark claims only to the display of Zuffa’s trademarkswhich are not an inherent part of the video broadcast." Whatever that means...! In a footnote, the court also "expresses extreme doubt" about Zuffa's trademark inducement claim.

Communications Act. Zuffa's claims relate to the "stealing cable" provisions. Justin.tv claimed that 47 USC 230 applies, a pretty logical argument given that Zuffa is bringing a non-IP claim against Justin.tv for third party content. However, the court sidesteps the Section 230 issue, saying it's never been applied to the Communications Act (true) and that the court couldn't find any analogous "stealing cable" claim against websites, and it didn't want to touch this "novel" issue.

Instead, the court dismisses the "stealing cable" claim on its elements. The court says:

In essence, Zuffa alleges that Justin.tv’s users copied Zuffa’s UFC event and then rebroadcast the UFC event over the internet. This is not the type of conduct properly addressed by the Communications Act, but by copyright law (and, potentially, trademark law) because Justin.tv had no relationship with the original cable or satellite signal: by the allegations, Justin.tv did not receive or intercept any actual cable or satellite signal or broadcast. The Court finds no evidence in the statutory language, other cases, or legislative history that the Communications Act addresses this type of conduct or was meant to bolster or act as a separate type of copyright claim.

In a footnote, the court notes the troubling implications of Zuffa's argument:

if the Court were to allow claims such as these, it would have to allow similar Communications Act claims against scores of “cloud computing” service providers such as Microsoft, Apple, Google, Amazon.com, Dropbox, Box.net, and others because Jusint.tv’s [sic] particular streaming service would be irrelevant. As an example, say a person took a snippet (or longer) of video of a UFC match being broadcast on their television with their iPhone, Windows Phone, etc. The iPhone then automatically uploads that video to one of dozens of cloud storage systems such as Apple’s iCloud. The Court refuses to find that Apple (or Microsoft, etc.) would be liable under the Communications Act for merely receiving and storing this data under the Communications Act. Yet, Zuffa arguesfor exactly this result when it argues that Justin.tv’s mere receipt of this video stream makes Justin.tv liable. In passing the Communications Act, Congress did not intend such a result, and this Court will not broaden the effect of the statute in this manner.

Amen!

At its core, the lawsuit is about copyright infringement, and Justin.tv didn't attempt to dismiss that claim. So the case hasn't gotten to the real meaty claim yet. It's my (presumably biased) position that Justin.tv should clearly qualify for the 512(c) safe harbor.

Posted by Eric at 10:52 AM | Copyright , Derivative Liability , Trademark | TrackBack

March 06, 2012

StubHub Gets Section 230 Immunity from Anti-Scalping Laws Because Users Set Prices--Hill v. StubHub

By Eric Goldman

Hill v. StubHub, Inc., 2012 WL 696223 (N.C. App. Ct. March 6, 2012). My blog post on the trial court ruling against StubHub in this case. Earlier blog post on the motion to dismiss ruling.

This long-running case (4.5 years so far) is just one of many arising out of the Hannah Montana concert tour of 2007, which unexpectedly turned into a watershed Cyberlaw moment. The tour has spawned substantial legislative and litigation activity, including the notorious RMG v. Ticketmaster case, and several of the cases have reached bad legal results as populist judges have felt sorry for the tweeners and their parents gouged by high ticket prices due to the extraordinary demand.

One of the bad Hannah Montana rulings came in this case. Last year, the trial judge denied StubHub's Section 230 immunity in an rogue opinion. The appellate court correctly reverses that ruling and holds that "Defendant is entitled to immunity from any liability arising from the ticket price established by Mr. Holohan" and orders the trial court to grant summary judgment to StubHub. The result is a great Section 230 win, and the supporting opinion is mostly good too.

The court sets the context for its opinion:

According to our research, there have been approximately 300 reported decisions addressing immunity claims advanced under 47 U.S.C. § 230 in the lower federal and state courts. All but a handful of these decisions find that the website is entitled to immunity from liability.

Unfortunately, the judge didn't appear to see David Ardia's article, which would have sped up the research and empirically challenged their last sentence. Nevertheless, the court's assessment rightly treats plaintiff wins as exceptional and perhaps aberrational, so there better be a good reason why the immunity doesn't apply. Reinforcing this point, the court says later "The reported decisions construing the immunity provisions of 47 U.S.C. § 230 have rejected a number of efforts to expand the range of factual situations in which a website is deprived of the immunity from liability provided by that statutory provision."

This case turned on who the court thought was the ticket "seller." The trial court treated StubHub as the real seller due to the various tools StubHub provides to facilitate matching, in which case users are effectively StubHub's suppliers just like the pretext report generators in the Accusearch case.

The appellate court saw it differently. The opinion treats StubHub as a venue for buyer-seller matching and the users as the real sellers. This styling of StubHub as a venue, not the seller, also disposes of the plaintiffs' related claim that StubHub overcharged the maximum service fee that a "seller" or its agent can charge (a law that North Carolina has since amended to exclude StubHub). Once the court conceptualized StubHub as a venue, the Section 230 immunity follows naturally. No one questions that the StubHub sellers set the final price for the tickets they have, which makes the price, as a data item, third party "content" to StubHub.

After canvassing a number of the plaintiff Section 230 wins, the court synthesizes a new legal standard for what constitutes content development:

to “materially contribute” to the creation of unlawful material, a website must effectively control the content posted by those third parties or take other actions which essentially ensure the creation of unlawful material

The latter standard, "essentially ensure the creation of unlawful material," is a trivial variation of the Roommates.com standard that foreclosed the Section 230 immunity if you "design your website to require users to input illegal content."

However, the former standard, "effectively control the content" of third parties, is a non-sequitur. The apparent support for that standard is the court's discussion of Jones v. thedirty, which the court said predicated liability "upon the website’s decision to affirmatively adopt or ensure the presentation of unlawful material." The court should have said that the Jones case was a mistake; but even if the court doesn't believe Jones is wrong, saying liability can attach when a website "effectively controls" third party content isn't supported by Jones or by the law generally. Websites get Section 230 immunity because they exercise editorial control over third party content, so what "control" is the court contemplating that isn't subsumed in the permissible editorial control? Further, the court's additional standard was unnecessary because the court never applies this looser standard to the facts at issue. In an opinion clearly designed to take the wind out of the plaintiffs' sails, the opinion's sloppy articulation of the legal standard is an stiff ocean breeze. Sigh.

In refuting the trial court's analysis, the court provides a more useful recap:

the prevailing tendency among decisions construing the relevant statutory language is to hold that the immunity provided by 47 U.S.C. § 230 is (1) not defeated by evidence tending to show that the website had notice of the unlawful posting; (2) not affected by the fact that a website attempts to earn a profit; and (3) not subject to any liability on the basis of “reasonable foreseeability” or “willful blindness” analysis. Thus, the fact that Defendant may have been on notice that its website could be used to make unlawful sales and that certain of Defendant’s practices may have provided incentives for the overpricing of certain tickets does not support a decision stripping Defendant of its immunity under 47 U.S.C. § 230.

All true. In particular, I can't recall another opinion expressly discussing a "willful blindness" challenge to Section 230 immunity.

The court also criticizes the trial court's review of the entire website in determining Section 230's applicability, even considering features that were not used by the litigants. The court says it's inappropriate to do this kind of holistic review of features that weren't implicated by the case's facts:

the appellate cases addressing immunity claims arising under 47 U.S.C. § 230 have analyzed the specific content alleged to be unlawful rather than examining the entire website on a more generic basis

Finally, the court goes out of its way to knock the NPS v. StubHub denial of Section 230 immunity:

Aside from the fact that the evidentiary and procedural context present in NPS is substantially different from that before the Court in this case, we simply do not find the reasoning employed by NPS persuasive, believe that it is inconsistent with the decisions concluding that knowledge of unlawful content does not strip a website of the immunity from liability granted under 47 U.S.C. § 230, and decline to follow it in deciding the present case.

Because of its limitations, I'd love to see the NPS precedent relegated to the dustbin. Since that ruling, we've had several good Section 230 rulings in ticket cases, including this one and the Milgram v. Orbitz case. As the favorable precedent continue to mount, I hope lawsuits against ticket resale venues will wane.

Posted by Eric at 11:33 AM | Derivative Liability , E-Commerce | TrackBack

March 01, 2012

Facebook, Google and Lexis-Nexis Get 47 USC 230 Immunity in a Bizarre Case Involving a Missing Sex Toy--Gaston v. Facebook

By Eric Goldman

Magistrate ruling: Gaston v. Facebook, Inc., 2012 WL 629868 (D. Or. February 2, 2012)
Judge's approval of the magistrate's ruling: Gaston v. Facebook, Inc., 2012 WL 610005 (D. Or. February 24, 2012)

Kanal V. Gaston went on a bit of a litigation tear recently, filing no less than four highly similar lawsuits (Gaston v. Harris County complaint in Oregon, Gaston v. Harris County complaint in California, Gaston v. Microsoft complaint, Gaston v. Facebook complaint). All of these lawsuits relate to issues he had with Rivas, the mother of his child, and some recriminations over a missing sex toy. If it's important to you to try to understand how that all fits together, read the court's description of his allegations.

With respect to the technology defendants, the court recites the following allegations:

* Facebook "has allowed and/or gave [Rivas] access to its server or internet web communication system or device or social network to spread false or defamatory statements against [him]."

* Lexis-Nexis provides "computer assisted legal research to the public at large and holds the largest electronic database for legal and public records in the world" and has "conspired with other Defendants to retaliate against [Gaston] and has published or republished false and defamatory statements against him."

* Google "reaches more than one billion online users (people) worldwide" and has "conspired with other Defendants to retaliate against [Gaston], and has published or republished false and defamatory statements against him."

The court easily disposes of the claims against these three defendants on 47 USC 230 grounds:

Gaston seeks to hold Google, Facebook, and Lexis Nexis liable for defaming him and/or conspiring to defame him based solely on content created or supplied by Rivas....The CDA defines "interactive computer service" as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions." 47 USC s 230(f)(2). Google, Facebook and Lexis Nexis clearly fall within that definition. Therefore, Gaston fails to state any viable claim for defamation against those three defendants who should be dismissed with prejudice.

Gaston didn't contest the magistrate report, so the judge adopted the magistrate's opinion verbatim.

The most noteworthy feature about this ruling is that Lexis-Nexis qualified for 230 coverage, which I believe is the first time they've done so. Even though it may be a first, this isn't a surprising result; indeed, to the extent they manage their own electronic network, they may be a better fit for the definition of a provider of an interactive computer service than a typical website.

Posted by Eric at 11:04 AM | Content Regulation , Derivative Liability | TrackBack

February 13, 2012

Employee Wins Harassment Claim Based in Part on Co-Workers' Offsite Blog Posts

By Eric Goldman

Espinoza v. County of Orange, 2012 WL 420149 (Cal. App. Ct. February 9, 2012)

Espinoza was born with an incomplete hand. In 1996, he started working for the county probations department. In 2006, a co-worker started two independent blogs, including one called "Keeping the Peace." Pseudonymous commenters quickly used the blog to launch a cyberattack against Espinoza, with multiple co-workers criticizing and mocking Espinoza's hand, managerial style and other work-related issues. (Espinoza wasn't the only probation employee attacked on the blog). Espinoza also alleged numerous offline incidents of harassment at the workplace, and he repeatedly reported the situation to management. The local managers took some steps to remediate the online harassment, but it appears those steps weren't pursued zealously and weren't effective. Espinoza sued the county for disability harassment (among other things), and a jury awarded him over $800k.

The county appealed on several grounds, including:

* the blog posts were "conduct outside the workplace." In addition to the fact that harassing behavior took place onsite, the court says:

Employees accessed the blog on workplace computers as revealed by defendant's own investigation. The postings referred both directly and indirectly to plaintiff, who was specifically named in at least some of them, and the postings discussed work-related issues. It was reasonable for the jury to infer the derogatory blogs were made by coworkers. Management sent two e-mails to employees directing they discontinue posting the improper comments on the blog. This suggests the administrators believed employees were posting. That none of the individual defendants was found liable for harassment does not overcome the other evidence of employee harassment. And that some of the blog postings were directed against the probation department and its management does not somehow offset the comments made about plaintiff.

This raises the same issue as the cases dealing with schools disciplining students for online behavior. See, e.g., 1, 2, 3, 4, 5, 6. However, I'm not sure I understand the onsite/offsite line being drawn by this court, and it's navigating some tricky issues. Clearly employers can't be automatically liable for online activity between employees, and in particular, government employers can't restrict an employee's speech outside the office. For a discussion about this in the context of private employers, see Venkat's post "Private Employers and Employee Facebook Gaffes [Revisited]."

This case seems a little clearer-cut than that. As the opinion spins it, the employer had a pervasive problem with intra-employee harassments both in and outside the office, and the employer didn't try very hard to fix that pervasive problem. But notice two things: even if the employer had blocked blog log-ins at the office, it couldn't regulate the out-of-office conduct; plus, none of the individual harassers were actually found guilty of harassment, so it's not clear their blogging was "illegal" content. As a result, the employer could not have cracked down on the employees' out-of-office conduct without risking a suit from the targeted employees. I'm not exactly sure what the court wanted the county to do about the offsite blog, and it's too bad the court didn't expressly acknowledge the employer's obvious dilemma.

* blog evidence should have been suppressed. In particular, the county argued that blog posts unrelated to Espinoza should have been excluded because those posts were "vulgar and disgusting." The court disagreed because the corpus of posts was sufficient relevant and not unfairly prejudicial.

* 47 USC 230. The county claimed that 47 USC 230 preempts the workplace disability harassment claim. Although part of the harassment claim was based on blog activity and allowing employees to access the blog from the workplace, the court concludes that "defendant's breach was not based on its employees' use of their work computers but on its own failure to investigate and resolve the problem." The court later reminds us that the "plaintiff does not seek to hold defendant liable for the actual blog postings, either directly or vicariously."

The court discusses the quirky Delfino v. Agilent case, where a prior California appeals court held that 47 USC 230 immunized an employer for providing Internet access to an employee who cyber-threatened third parties. The court distinguishes the case because in Delfino:

the plaintiffs were strangers, never employees of the defendant, and did not sue under FEHA, which imposes additional duties on an employer to protect an employee.. [and] the defendants had not ratified his acts and had no respondeat superior liability

On the plus side, it's good to see that employment lawyers addressing 47 USC 230. On the minus side, 47 USC 230 wasn't designed to address employer-employee lawsuits, so it will often be a stretch in those cases.

UPDATE: Molly DiBianca of the Delaware Employment Blog emailed me to explain that, in some cases, employers can (and perhaps must) discipline or terminate employees for off-duty conduct. This blog post provides some support for that claim.

Posted by Eric at 12:35 PM | Content Regulation , Derivative Liability , Evidence/Discovery | TrackBack

February 06, 2012

Roommates.com Isn't Dealing in Illegal Content, Even Though the Ninth Circuit Denied Section 230 Immunity Because It Was

By Eric Goldman

Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, 2012 WL 310849 (9th Cir. February 2, 2012)

A brief history of this long-running case. Fair housing advocates sued Roommates.com for allowing potential roommates to evaluate each other using allegedly discriminatory criteria in violation of the Fair Housing Act (FHA) and related state claims. In 2004, the district court dismissed Roommates.com based on 47 USC 230. In 2007, the Ninth Circuit reversed the district court in a horribly fractured batch of opinions led by Judge Kozinski. The Ninth Circuit wisely vacated those opinions and heard the case en banc. In 2008, the Ninth Circuit en banc majority, in an opinion written by Judge Kozinski, subsequently reinforced that 47 USC 230 didn't apply to parts of Roommates.com's service. The Ninth Circuit en banc majority opinion became the flagship exception to 47 USC 230, but that exception has proven narrow over the past four years; most cases citing Roommates.com rule for the defense.

After the Ninth Circuit en banc ruling, the case remanded to the district court to evaluate the substantive merits of the FHA and related claims (now that the Section 230 immunity was off-the-table). Although the Ninth Circuit en banc majority opinion didn't conclude that Roommates.com acted illegally, the opinion assumed Roommates.com's illegality so strongly that, not surprisingly, the district court ruled that Roommates.com violated the FHA and related claims.

The FHA ruling went back to the Ninth Circuit. Last week, the Ninth Circuit ruled--in yet another opinion by Judge Kozinski--decisively that Roommates.com hadn't acted illegally, i.e., that it hadn't violated the Fair Housing Act (or California equivalent) because roommates who share a dwelling aren't covered by the statutes. From a cyberlaw standpoint, the ruling is only mildly interesting.

Much more interesting is this ruling's implication for 47 USC 230 and the Ninth Circuit's prior en banc ruling. In his en banc majority opinion, Judge Kozinski offered the following conclusion, which is the most commonly cited holding of this case:

If you don’t encourage illegal content, or design your website to require users to input illegal content, you will be immune.

Well, Judge Kozinski's latest ruling concluded that Roommates.com wasn't dealing in illegal content, so it should be immune, right? But Judge Kozinski earlier concluded that Roommates.com didn't qualify for the immunity because it had been dealing with illegal content. What gives?

It appears that Judge McKeown, in her en banc dissent, predicted this trap:

the question of discrimination has not yet been litigated. In dissenting, I do not condone housing discrimination or endorse unlawful discriminatory roommate selection practices; I simply underscore that the merits of the FHA claim are not before us. However, one would not divine this posture from the majority’s opinion, which is infused with condemnation of Roommate’s users’ practices. To mix and match, as does the majority, the alleged unlawfulness of the information with the question of webhost immunity is to rewrite the statute.

Indeed, one way of interpreting the Ninth Circuit's sequence of rulings is that, per the en banc ruling, a plaintiff can defeat a 47 USC 230 immunity defense simply by alleging the existence of illegal content (as part of showing the website encouraged/required illegal content), and this allegation works even if the content ultimately isn't illegal. But this would be a bad policy result--we need the immunity exactly when the plaintiff's allegation is wrong. We now know Roommates.com deserved to win (either due to the immunity or based on the substantive doctrine), but the immunity would have gotten us to the right result much faster. After all, Roommates got its 47 USC 230 dismissal in the district court EIGHT YEARS AGO. Now, 8 years later, we've reached the same result, but the parties have spent enormous amounts of time and money to restore that status quo. As both Judge Kozinski and Judge McKeown acknowledge, the point of the 47 USC 230 immunity is to help defendants save those costs for the defense. By letting the plaintiff's incorrect allegation trump the immunity, the Roommates.com majority rule has undermined that objective.

[Procedural note #1: it is tempting to criticize Roommates.com's counsel for pushing the 47 USC 230 immunity ahead of other defenses, but that's not fair. Putting aside the fact that Roommates.com did advance multiple defenses initially and not just 230, Section 230 should eliminate the defendant's need to go through a claim's substantive elements (and all of the discovery associated with it). So it's a logical litigation strategy to put the Section 230 immunity first. And in fact, Roommates.com got the Section 230 win at the district court, so until the Ninth Circuit coughed up its hairballs, the defense strategy worked well.]

[Procedural note #2: it's a little harder to be sympathetic to Judge Kozinski. In his defense, as an appellate judge, he deals with the cases as they arrive on his desk. [UPDATE: In the first version of this post, I mistakenly claimed the case was initially dismissed on a motion to dismiss.] However, his en banc opinion was written quite broadly and loosely. If he had any doubts about the legality of Roommates.com's actions--and the new opinion makes it clear he's strongly in support of their actions--he could have acknowledged that possibility more clearly rather than writing such a strongly worded opinion based on the presumptive illegality.]

A different way of reading this result is that the latest Ninth Circuit ruling has undermined the en banc ruling. Roommates.com never had illegal content in the first place, so the en banc opinion was based on a factual predicate that wasn't true. I've asked Roommates.com's counsel about the possibility of asking the Ninth Circuit to vacate the en banc ruling because of this factual predicate problem. I don't know if such subsequent proceedings are possible, but it would be a big win for 47 USC 230 jurisprudence for the Ninth Circuit to wipe away the en banc opinions. Even though the en banc opinions have produced mostly defense-favorable rulings, wiping them out would clean up some unnecessarily loose and confusing language in the majority opinion as well as cast significant doubt on the few plaintiff-favorable cases that have built on Roommates.com (e.g., Accusearch, NPS, Swift v. Zynga, Jones v. thedirty).

____

The case library:

* February 2012 Ninth Circuit ruling
* Roommates.com's reply brief on the second appeal
* Roommates.com's opening brief on the second appeal
* District court ruling on remand. November 2008 stipulation. Blog post on those developments.
* 9th Circuit en banc opinion from April 2008
* Recording of the en banc oral argument
* Amicus brief from a variety of Internet companies such as Google, eBay and Amazon plus non-profit organizations such as the EFF [subsequently rejected by the Ninth Circuit]
* Amicus brief from various news organizations
* Amicus brief from the ACLU. Roommates.com's reply brief to the ACLU brief.
* The Fair Housing Councils' request to brief Batzel. Roommates.com's opposition. The Ninth Circuit denied the Councils' request on Nov. 6.
* The Ninth Circuit order granting the en banc hearing
* Fair Housing Councils' reply to the EFF et al amicus brief
* EFF et al amicus brief supporting a rehearing en banc
* Fair Housing Council's response to Roommates.com's request for an en banc rehearing
* Roommates.com's En Banc Request
* The original 2007 Ninth Circuit opinion
* My blog post on the Ninth Circuit opinion
* Blog post on initial district court dismissal per 47 USC 230

Posted by Eric at 11:37 AM | Derivative Liability | TrackBack

January 29, 2012

Newspaper Isn't Liable for User Website Comment Per 47 USC 230--Delle v. Worcester T&G

By Eric Goldman

Delle v. Worcester Telegram & Gazette Corp., 2011 WL 7090709 (Mass. Super. Ct. Sept. 14, 2011)

I previously mentioned this ruling in a recent Quick Link, but I can write up a full post now that I've seen the actual opinion.

Robert Delle is a lawyer (of course). A reporter surreptitiously called Delle and asked for his views on Obama's citizenship. The reporter then published a story in the T&G calling Delle a "birther" and opining about the relationship between the birther movement and racism. Seven months later, the T&G published a story covering a lawsuit that Delle was litigating. A user commented to that article that "there was no bigger dope than Delle." Delle claims the comment came from a T&G employee/agent, but his only support for this belief is that he'd heard a rumor that sometimes newspapers comment on their own stories.

Bringing a defamation lawsuit over being called a "dope" doesn't seem very savvy to me, and the court easily dismisses the claim due to 47 USC 230. The court correctly concludes "the T & G cannot be held liable for the statements of a third party on the comments section of its website." It doesn't matter if the T&G prescreened the comments, allowed other users to flag the comment as abusive (which Delle did) and decided not to act after users had flagged the comment as abusive. Delle's unsupported allegation that perhaps the T&G wrote the comment wasn't enough to survive the dismissal motion.

The court also tosses the defamation claim against the T&G for its earlier story. Interestingly, the court doesn't directly address the defamatory implications of calling someone a "birther," even though in my world a that's much worse insult than calling someone a dope. Instead, the court says that any implication that birthers are racist, and therefore Delle may be a racist, was clearly based on the reporter's personal beliefs, plus it constituted an interpretation of facts rather than a fact itself.

Prior blog coverage of newspapers' 47 USC 230 wins for user-posted comments.

Posted by Eric at 05:14 PM | Content Regulation , Derivative Liability | TrackBack

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

As usual, I'm running late with my year-end recap. This post begins with my countdown of the top 5 Internet Law developments of 2011, then it lists other interesting developments and cases. It concludes with some of the most linked posts and then my editor's choice of some posts in 2011 that might have been a little overlooked. As usual, thanks for reading the blog in 2011!

Countdown: My Top 5 List of Developments in 2011

#5: Righthaven Implodes. Since the beginning, I've been skeptical of Righthaven's business model. Seriously, who else thinks it's a good idea to sue small-time mom-and-pop bloggers and non-profits on a one-by-one basis? However, even I had no idea that Righthaven would accelerate their own demise by routinely making basic litigation errors. A sketchy business model + a litigation shop that isn't very good at litigation = one dead start-up. It's always fun (in a bloodsporty way) to watch hubristic bullies get their just desserts, but watching the Randazza firm school the Righthaven litigators in Litigation 101 has been amazing. THAT'S how you litigate.

Righthaven lost often in 2011 (see my August reset). They lost fair use rulings (e.g., CIO, Choudry). They lost on standing grounds (e.g., Democratic Underground, Wolf). They were hit with sanctions. They were hit with hundreds of thousands of dollars of attorney fee shifts (e.g., Leon, Wolf, DiBiase). They even lost their domain name in an auction--a delicious irony given that Righthaven's complaints improperly demanded its defendants' domain names on the theory that it might need the domain name to satisfy a judgment against the defendant, when in fact it was Righthaven's domain name that was used to help satisfy a judgment against it!

Righthaven ended 2011 on death's door, but the trend of newspapers trolling for copyright litigation isn't going away. I'll be watching NewsRight closely in 2012.

#4: Medical Justice Gives Up. Speaking of hubristic bullies... You recall Medical Justice, the organization that helped doctors and other medical service providers take copyright assignments from patients in their as-yet-unwritten reviews so that the doctors could expeditiously remove unwanted reviews by sending 512(c)(3) takedown notices to review sites. It's an interesting legal hack, but it has some bad side-effects, including the fact that patients hated it, the copyright assignments almost certainly were void (for public policy reasons and others), doctors were hurting themselves by discouraging patient reviews (patients prefer to choose doctors when there's a critical mass of patient reviews), and (as our research uncovered) most consumer review sites ignored the doctors' 512(c)(3) takedown notices. Obviously, with those defects, Medical Justice wasn't exactly adding a ton of value to its clients. Medical Justice finally gave up, but too late to prevent a lawsuit against one of its clients and a complaint to the FTC. Chances are Medical Justice will be living with a long-term hangover from this entrepreneurial foray.

Seeing Medical Justice stop peddling anti-patient review tools was slightly satisfying, but that result was always a fait accompli. The reason Medical Justice's change of heart matters is that shady or clueless vendors keep developing new ways to suppress unwanted consumer reviews, and I hope Medical Justice's experiences will discourage other vendors from trying the copyright hack. I talk about these dynamics more in my paper on regulating reputational information.

#3: gTLD Expansion. It remains unclear exactly what ICANN's rollout of unlimited top level domains will do. Due to the expansion of new namespaces, brand owners face a long list of complicated--and potentially expensive--choices to make. Unfortunately, these choices don't really benefit society; instead, the gTLDs tax businesses while the benefits accrue to a small number of service providers (and, of course, ICANN itself). I think many businesses will reserve their name in multiple new gTLDs to prevent squatting--with the net effect that businesses will spend more money just to preserve the status quo. Meanwhile, most consumers are likely to be bewildered by the unlimited number of TLDs, which is just going to increase their tendency to rely on search engines and link directories rather than domain names to navigate to their desired destinations.

#2: Internet Consumer Privacy Lawsuits Tank. 2011 initially looked like the year of the Privacy Plaintiff. A torrent of privacy lawsuits had been filed, plaintiffs had wrested a few important and lucrative settlements, and Internet companies continue to make questionable privacy decisions that create a steady supply of potential new lawsuits.

But the path to riches didn't materialize. Instead, 2011 emerged as the year when privacy class action lawsuits mostly failed miserably. Courts principally rejected the lawsuits on standing grounds for lack of cognizable harm, but plaintiffs failed on other related grounds, such as a lack of damages negating the prima facie case. There were some exceptions where plaintiffs made a little progress (see, e.g., Claridge v. RockYou, Anderson v. Hannaford, Fraley v. Facebook). I'm sure the privacy plaintiffs' bar will be studying those rare successes to formulate a better battle plan--and to better prepare their cases and find strong named plaintiffs, a recurring omission that hasn't gotten a lot better over the year. However, for now, it's clear that the privacy plaintiffs' bar can't just show up in court and hold out their hands for a payday.

#1: Regulators Broke the Internet. We've always known that regulators could combat bad online activity by working "up the chain," i.e., by making upstream service providers liable for the bad acts or obligated to cut off the activity. However, for the most part, we've shared a tacit understanding that systematically going up the chain was a "nuclear" option--it would fix the specific problem but only at significant collateral cost that, on balance, makes the option unattractive.

I think we'll look back at 2011 as the year that tacit understanding broke down. In 2011, regulators around the world showed a seemingly insatiable demand for working up the chain. Although we in the USA like to think we're different from other repressive regimes, the evidence suggests otherwise. Some examples of "up the chain" activity in 2011:

* Arab Spring. Repressive regimes got local Internet access providers to turn off Internet access in the country.
* Operation in Our Sites. The Immigrations and Customs Enforcement (ICE) agency keeps seizing domain names of suspected foreign rogue websites on an ex parte basis, making errors and breaking the law in the process. Mike Masnick blew open the story on Dajaz1.com, which ICE seized on an ex parte basis, conducted secret proceedings for a year, and then gave back the domain name with no explanation.
* Graduated Response. Copyright owners got Internet access providers to voluntarily (?) agree to restrict, and eventually terminate, their users' accounts.
* Secondary liability against intermediaries. Rightowners keep expanding their intermediary targets, including lawsuits against ad networks and SEOs/web designers. To be fair, some of these lawsuits aren't going very far, and expansive secondary liability theories aren't new in 2011.
* Ex Parte Seizures. Rightsowners are asking for the moon against third party service providers in ex parte proceedings, and courts are giving it to them because the third parties aren't there to represent their own interests. We recap this epidemic in this post.
* SOPA and PIPA. These proposed bills were the finest examples of rightsowners pursuing the nuclear option regardless of the collateral damage. The bills' basic architecture was to attack a wide range of intermediaries for third party actions--domain name registrars, search engines, payment service providers, ad networks. By seeking to deputize the intermediaries, the bills sought to instantiate "up the chain" duties across virtually the entire Internet. Putting aside their other policy deficiencies, I think we should resist all laws predicated on that fundamental assumption of intermediary deputization. See my post on the OPEN bill for why I reject the compromise "follow the money" solution. Sadly, I stand virtually alone in my stance.

Other Interesting Developments.

Some other interesting developments this year:

* Patent Reform. The America Invents Act is the most dramatic patent reform bill in years, and it has many provisions that may affect Internet companies, including the joinder standards, the prior user defense, and the novelty/priority standards. The law doesn't fix the overall problems with bad Internet patents or unmeritorious assertions of those patents, but it nevertheless could make some dramatic changes in what Internet companies do.

* Google and Antitrust. Google has become the incumbent in search, and all of its rivals--especially the companies Google is disintermediating--are desperately seeking to knock it off its perch. I believe Google and antitrust was the #1 topic prompting reporter phone calls to me in 2011. We are waiting to see what comes from the FTC investigation into Google's practices, and the list of Google-haters keeps growing daily. At the same time, the anti-Google forces made surprisingly little actual progress in 2011, including suffering a conspicuous (and not even close) loss in the myTriggers case. See my paper on why I am so over the Google antitrust battles.

* DC's Obsession with Busting Silicon Valley Companies. Sometimes, it feels like DC insiders wake up in the morning and wonder, "What Silicon Valley company do I feel like busting today?" Drive down the 101 from San Francisco to San Jose and play the "Spot the FTC/DOJ Bust" bingo game. Some of DC's targets in 2011: Google Buzz, Twitter (finalized in 2011), Facebook, Google pharma ads, Apple and others for no-poaching restrictions, and others. Good times!

* Judges Order Litigants to Hand Over Passwords to Social Networking Sites. This year, several judges ordered litigants to turn over their Facebook passwords to their litigation opponents for discovery purposes. See, e.g., Zimmerman v. Weis (which I added to my Internet Law reader this year). In 10 years, we'll look back at this mini-trend and shake our heads at the judicial cluelessness. Social networking sites contain a mix of public and private information, and letting a litigation opponent root around the account is just as objectionable as making a litigant hand over the keys to his/her house so the opponent can rummage around.

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

* Author's Guild v. Google. The court rejected the Google Book Search settlement agreement for good reasons, but it sent the parties back to square 1. Why the parties haven't been able to broker a legislative compromise is beyond me.

* Barclays v. theflyonthewall. The Second Circuit took a big bite out of the hot news doctrine. Unfortunately, the Second Circuit didn't kill the hot news doctrine outright, but the opinion leaves open very little room for hot news plaintiffs.

* Network Automation v. Advanced System Concepts. The most important keyword advertising ruling to come out in several years. While the ruling itself was a mixed bag for the litigants, the opinion tore down a number of crusty plaintiff-favorable legal doctrines that had cluttered up trademark jurisprudence for years--including virtually mooting the initial interest confusion doctrine and killing the "Internet trinity" bypass to the standard multi-factor likelihood of consumer confusion test. I've noticed that the opinion has already noticeably tilted courts towards more defense-favorable rulings.

* Betty Boop case (Fleischer Studio v. AVELA). For a few months, it looked like the Ninth Circuit had eliminated trademark merchandising rights in characters that were out-of-copyright. Then it changed its mind; but still it liberated Betty Boop to the world.

* PhoneDog v Kravitz. An interesting battle over ownership of a Twitter account.

* Levitt v Yelp/Ascentive v. PissedConsumer. 47 USC 230 still works really, really well as an immunity. In Levitt, Yelp got a 230 dismissal that Yelp had tried to get advertisers to pay to manage consumer reviews. In Ascentive, the court rebuffed a plaintiff's effort to use a trademark infringement claim against a consumer review website to work around 230.

* Habush v Cannon. Buying a person's name as the trigger for keyword advertising doesn't violate their publicity rights.

* UMG v. Shelter Capital. While everyone waits for the Second Circuit's decision in Viacom v. YouTube, the Ninth Circuit stole some of that thunder with a powerful endorsement of the 17 USC 512 safe harbor. Too bad Veoh didn't live long enough to enjoy the win.

* In re Rolando S. Rolando was convicted of felony identity theft for taking a classmate's Facebook page for a joyride. My vote for the most interesting Internet Law case of 2011, and an instant cyberlaw classic. I've already added it to my Internet Law reader, and the students seemed to enjoy discussing the case.

Some of the Most Linked Blog Posts in 2011 (Per Topsy)

* New Advertising & Marketing Law Casebook Available for Review
* Court Orders Plaintiff to Turn Over Facebook and MySpace Passwords in Discovery Dispute -- Zimmerman v. Weis Markets, Inc.
* "App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon (Apple legal issues are always good link bait)
* Twitpic Modifies Terms and Claims Exclusive Rights to Distribute Photos Uploaded to Twitpic
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract -- CX Digital v. Smoking Everywhere (the most popular post of the year by far--a modern Contract Law classic)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

* Cyberbullying and Restorative Justice [a Long-Delayed Post on DC v. RR]
* Racy Teen Photos Posted to Facebook Are Constitutionally Protected Speech--TV v. Smith-Green
* Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion
* Free-to-Consumers Ad-Supported Website Isn't Illegally Priced--Cammarata v. Bright Imperial
* What Would a Government-Operated Search Engine Look Like in the US?

Lists of Yore

Previous top 10 lists from 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 09:45 AM | Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

January 22, 2012

Photobucket Qualifies for the 512(c) Safe Harbor (Again)--Wolk v. Kodak

By Eric Goldman

Wolk v. Kodak Imaging Network, Inc., 2012 WL 11270 (S.D.N.Y. Jan. 3, 2012). Prior blog post on this case.

As I've indicated before, blogging 17 USC 512 cases has gotten tedious because they are just TOO LONG. I can crank through most 47 USC 230 cases in an hour or two because they are usually quite short and efficient. In contrast, because 17 USC 512 gives copyright plaintiffs so many words to contest, 512 opinions tend to be lengthy and quite time-consuming to blog--with this 69 page opinion as a prime example. This has some implications for drafters of laws like SOPA/PIPA, which have similarly long and detailed provisions that just beg plaintiffs to contest every word and will force courts to write quite lengthy opinions that bloggers like me will struggle to crank through. I cheer for immunities and safe harbors, but I have three cheers for SHORT immunities and safe harbors.

This case is even more unfortunate because the pro se plaintiff had an obviously unmeritorious case, yet the two defendants used three law firms to beat this case. And it's not exactly like Kodak is wallowing in cash any more.

Wolk is an artist. Users uploaded images of Wolk's work to Photobucket (a UGC photo-sharing site). Photobucket, in turn, had a revenue-sharing agreement with Kodak Imaging that allowed users to print the images via Kodak (i.e., Kodak did "photofinishing").

Photofinishing Liability

The court says that Kodak Imaging wasn't directly liable for printing the images (Wolk didn't allege secondary infringement). The court observes that "reproduction, display or transmission of the Plaintiff's images by or through the KODAK Gallery website is an automated process with no human intervention by any employee of the Kodak Defendants." Thus, because its entire system was automated, Kodak didn't act volitionally and thus avoids the strict liability standards of direct copyright infringement.

This ruling is unexpected because it's been conventional wisdom for many years that photofinishers were in fact directly liable for their print jobs. Perhaps that's because humans were always involved in the photofinishing process during that time, as opposed to now where the process from photo upload to mailing of items can be completely automated. Whatever the case, this ruling has to be encouraging for other automated photofinishers (whether they print photos or other items), such as CafePress or Zazzle. Then again, perhaps the copyright plaintiffs will pursue them under secondary infringement doctrines, which Wolk didn't do.

Although I like the result, I remain confused about the scope of the "volitional doctrine." As was the case in Cablevision, Kodak's system was completely automated only because Kodak's engineers designed it that way. We would benefit greatly from a richer theoretical grounding for the volitional doctrine and how it interplays with strict liability. Without that grounding, the results seem a little random.

512(c) Safe Harbor

Photobucket qualified for the 512(c) safe harbor. This isn't surprising; the court indicated as much when it denied Wolk's request for a preliminary injunction. Still, the court works through a 512(c) in fine detail:

* Photobucket is a "service provider"
* Photobucket properly adopted and implemented a repeat infringer termination policy.
* Photobucket accommodates standard technical measures. Wolk argued that Photobucket gives users tools that can remove or hide watermarks. The court doesn't opine whether watermarks are a standard technical measure, but instead the court says Photobucket doesn't encourage users to use the tools, so users--not Photobucket--would be the ones interfering with standard technical measures if watermarks qualified as such.
* Photobucket didn't have actual or constructive knowledge of the infringement. Before the lawsuit, Wolk sent 15 infringement notices covering 9 works. When Wolk sent 512(c)(3) notices, Photobucket expeditiously responded. However, 11 of the notices weren't 512(c)(3)-compliant (because they didn't specify URLs) and thus are irrelevant. (Compare the troubling dicta in the uncited UMG v. Shelter Capital). Wolk argued--as so many copyright owners do--that one notice about a work should cover all existing and future uploads without providing URLs of the other items. The court rejects that argument.
* Photobucket doesn't have the right/ability to control infringement because it does not prescreen content, render extensive advice to users regarding content and edit user content. Photobucket also lacked direct financial benefit from the infringement: "The Defendants' profits are derived from the service they provide, not a particular infringement."
* Photobucket properly identified its agent for notice and designated it with the copyright office.

All of this 512(c) analysis was fairly by-the-book. The most interesting part is where the court discussed how "Photobucket Has No Duty To Police Its Website For Infringements." The court says:

Photobucket is a website that consists of over 9 billion images and videos. Under the plaintiff's theory, Photobucket would be required to police its website for infringing copies of her work wherever they may appear once she has provided a DMCA-compliant notice....[due to 512(m),] the DMCA does not require the policing the Plaintiff suggests.

Secondary Infringement

The court says, without any real discussion, that 512(c) moots Photobucket's secondary liability. Accord UMG v. Shelter Capital. The court continues with other reasons those claims fail. In particular, Photobucket lacked the requisite scienter about the infringing items it transmitted to Kodak at users' requests, nor did Photobucket act "in concert" with Kodak. The court rejects the applicability of Grokster, Napster and Aimster because those cases involved peer-to-peer file sharing (more evidence of the exceptionalism towards P2P) and her incomplete takedown notices didn't confer scienter.

Conclusion

The court granted summary judgment against Wolk, ending her case. The precedential value of this case's discussion about 512(c) probably will be overwritten by the Second Circuit's Viacom v. YouTube ruling, and a win against a pro se litigant isn't much in the grand scheme of things. Nevertheless, the ruling reinforces that courts continue to take the 512 safe harbor seriously. In particular, they continue to rebuff copyright owners who don't send 512(c)(3) takedown notices but still want judicial relief.

Meanwhile, the "volitional conduct" defense appears to be live and well, especially in the Second Circuit, although I'm not sure anyone understands the doctrine's parameters.

Posted by Eric at 02:00 PM | Copyright , Derivative Liability | TrackBack

January 15, 2012

Attempted Trademark Workaround to 47 USC 230 Immunity Fails Badly—Ascentive v. PissedConsumer [Catch-Up Post]

By Eric Goldman

[This is one of the top dozen or so most important Internet law opinions of 2011, but unfortunately it came out just as I was going into my exam-grading exile and I had to put blogging it on hold. Even over a month later, it's still worth your careful review.]

Ascentive, LLC v. Opinion Corp., 2011 WL 6181452 (E.D.N.Y. Dec. 13, 2011). A prior blog post on a different Ascentive lawsuit, Ascentive v. Google.

In my Regulation of Reputational Information paper, I explain how vendors are misusing intellectual property to control consumer perceptions of their businesses. One example is Medical Justice, which tried to use copyright law to work around 47 USC 230 and suppress unwanted reviews. Fortunately, Medical Justice has abandoned that effort.

Other vendors try to use trademark law to work around 47 USC 230. By definition, consumers must reference a vendor's brand in order to review it, and trademark's doctrinal plasticity means that such references arguably support a prima facie trademark claim. (I explain that issue more in my Online Word of Mouth paper). As a result, we've seen a number of vendors dabble with trademark claims against consumer reviews. For two examples, see Lifestyle Lift v. RealSelf and Eppley v. Iacovelli. (For more on the noteworthy litigiousness of doctors against consumer reviews, see this post).

In this case, the plaintiffs used trademark law to make a no-holds-barred assault on the 47 USC 230 immunity's applicability to consumer reviews. Their arguments go nowhere. I hope this emphatic ruling will discourage other plaintiffs from trying to use trademark law to work around 230.

Likelihood of Consumer Confusion

The court tried to do a straight-laced multi-factor LOCC analysis, but as I've noted before, the LOCC factors don't make sense when comparing apples and oranges like a vendor and a review site of the vendor. On the bad faith factor, the court says:

While it may be true that PissedConsumer has engaged in sharp-elbowed and perhaps unethical SEO tactics meant to make its webpages appear more relevant to search engines such as Google or Yahoo! than they actually are, that fact has no bearing on the inquiry here—whether PissedConsumer has attempted to sow confusion as to the source, origin, or affiliation of its products and services with those of plaintiffs.

The court instead observes: "Indeed, it is clear that PissedConsumer is not using plaintiffs’ marks as source identifiers at all." Well, that's only partially true--PissedConsumer is using the plaintiffs' marks as referents for the plaintiffs. (See Deregulating Relevancy for more on the implications of that). In a footnote, the court said there wasn't a dispute that PissedConsumer was using the marks in commerce, but the court failed to reconcile these seemingly inconsistent statements.

To bolster their unmeritorious trademark claim, the plaintiffs argued that several specific technological features used by PissedConsumer supported trademark infringement. The court rejects the plaintiffs' arguments on each feature:

* using the plaintiff's trademark as a third level domain name, i.e., ascentive.pissedconsumer.com. The court said that the pissedconsumer.com domain name makes it clear to consumers that the site is critical of, and therefore not affiliated with, the mark owner.

* using the plaintiff's trademark in the consumer reviews. The court says there's no consumer confusion here either:

after a brief inspection of the content of PissedConsumer’s website, the user would realize that they were visiting a third-party gripe site for “pissed” consumers.

* metatags. The court rejects initial interest confusion. First, there can't be competitive diversion because PissedConsumer isn't selling anything to consumers. Second, no one searching for the plaintiffs would be "diverted" to the defendants' website. (A point I make in gory detail in my Deregulating Relevancy article). Third, initial interest confusion imposes minimal (if any) harm on consumers because they can hit the back button. Finally, the court recognizes that technology has evolved since the 1999 Brookfield ruling such that metatags don't matter (citing, among other things, Google's 2009 blog post to that effect—thanks, Matt Cutts, for doing that!)

* black hat SEO. The opinion talks in some detail about linking archive posts from Twitter with the hope that Google will treat the posts as fresh content. The court says:

While it may be—and likely is—the case that PissedConsumer’s SEO practices are intended to make its webpages seem more relevant to search engines than they actually are and these methods may indeed violate the search engines’ terms of services, the remedy for this conduct is not trademark law but instead with the search engines themselves.

Amen to getting trademark law out of the way and letting search engines fix the gaming! This is another point I made ad naseum in my Deregulating Relevancy article.

* serving ads (through Chitika) showing the plaintiffs' trademarks, presumably automatically triggered by keywords on PissedConsumer's pages. The court says that, at most, PissedConsumer as the publisher is contributorily liable to any infringement committed by the ad network (Chitika), but the plaintiffs didn't allege contributory infringement. The court seemed to treat Chitika as the direct infringer instead of the advertisers, but in fact I think Chitika should be evaluated under contributory infringement as well, with the advertiser being the direct infringer (if there is one).

Although the court gets to the right place, its doctrinal jujitsu shows what happens when trademark law is stretched to places it doesn't belong. We've lost too many of the limiting principles in trademark law that should help make a case like this an easy one for judges. Among other things, a more robust use in commerce doctrine would have ended much of this case early, and the very lengthy opinion oddly doesn’t mention the seemingly applicable doctrine of nominative use at all.

47 USC 230

Having dispatched the plaintiffs’ trademark assault, the court mops up all of the remaining state law claims using 47 USC 230. The court says "a website such as PissedConsumer constitutes an ‘interactive computer service,’" which makes PissedConsumer's officers "providers" of an ICS. This is an unusual reading of the statute, but it's all good.

The court rejects the plaintiffs’ Roommates.com attack on 230, saying "determining what makes a party responsible for the ‘development’ of content under § 230(f)(3) is unclear, and the CDA does not define the term." Thus, the court says it's appropriate to examine the totality of the circumstances; plus, "one is responsible for the ‘development’ of information when he engages in an act beyond the normal functions of a publisher (such as deciding to publish, withdraw or modify third-party content) that changes the meaning and purpose of the content." The Roommates.com attack fails here because the plaintiffs provided no evidence that PissedConsumer actively created the content; their unsupported general assertions weren't enough. The court rejected the application of the old (and quite outmoded, IMO) Badbusinessbureau opinion, saying PissedConsumer's "actions are not unlike the targeted solicitation of editorial material engaged in by a narrow genre of publishers." (Huh?) Inviting consumers to post reviews and SEOing the pages didn't change the analysis. Accord Asia Economic Institute v. Ripoff Report.

Separately (and not relying on 230), the court tosses the RICO claim because the plaintiffs didn't show that PissedConsumer engaged in commercial bribery or extortion.

On these bases, the court rejects the plaintiffs' request for a preliminary injunction. However, the case is ongoing, and the plaintiffs still get discovery.

Implications

Although not a party to the suit, the real party-at-interest in this case is Google, because both Ascentive and PissedConsumer depend on Google traffic as virtually their entire marketing plan. In Ascentive's case, it said that 99% of its sales are made online, and a majority of that came from Google searches. Indeed, Ascentive had previously sued Google for trademark infringement before abandoning that claim. Meanwhile, PissedConsumer's business is to get favorably indexed in Google for businesses' names and then sell them services that take the edge off any negative user content that gets indexed. As a result, both litigants are competing against each other for favorable placement in Google search results. In my Online Word of Mouth paper, I discuss how brand owners face unusual and effectively unprecedented competition on their own brands for scarce consumer attention—in this case, the scarce resource of top search engine placement—and how that dynamic leads to weird trademark lawsuits like this one.

The legal ruling may be good for PissedConsumer, but this opinion isn't exactly a clean bill of health for its business model. Indeed, "the Court finds some aspects of PissedConsumer’s business practices troubling and perhaps unethical." I continue to believe that all consumer review businesses that seek to get paid by the vendors they review have a major structural conflict-of-interest—especially when the review site’s sales pitch to the vendor is reputation management. I ultimately think Google will need to restructure its algorithm to reflect the inherent untrustworthiness produced by these conflicts of interest.

Paul Levy's comments on the ruling.

Posted by Eric at 01:08 PM | Content Regulation , Derivative Liability , Search Engines , Trademark | TrackBack

January 10, 2012

TheDirty Denied 47 USC 230 Immunity--Jones v. Dirty World

By Eric Goldman

Jones v. Dirty World Entertainment Recordings, LLC, 2012 WL 70426 (E.D. Ky. Jan. 10, 2012). Prior blog post on this case.

A Kentucky federal judge rejected 47 USC 230 immunity for thedirty.com for third-party content. It's entirely clear that if the jury finds the user posts defamatory or a privacy invasion, this judge will let thedirty be liable for third-party content. That's exactly what 47 USC 230 was designed to prevent, making this a troubling and probably lawless ruling. Critics of 47 USC 230 will likely rejoice about this opinion because it represents the biggest incursion to 47 USC 230's immunity we've seen to date. Yet, for that reason, I wonder if this ruling will survive an appeal, which thedirty has already promised.

You may recall thedirty encourages users to submit third party gossip, typically about women, along with a photo of the gossip subject. Nik, thedirty's operator, evaluates the submissions, picks some of them for publication, and then typically adds his own short snarky comment about the user post. In this case, Nik published two user submissions about Sarah Jones, a Cincinnati Bengals cheerleader and a school teacher. The user posts intimated, among other derogatory remarks, that Jones had sex with the entire Bengals football team, had sexually transmitted diseases because her boyfriend cheated on her, and had sex with her boyfriend in public places, including her school classroom. In response to the second post, Nik's snarky comment was "Why are all high school teachers freaks in the sack? – nik."

[Just to state the obvious, this isn't my kind of website. I think the site is targeted at a different demographic than middle-aged suburban dads of two. And if the statements are untrue, then they don't belong online. But unlike this judge, my views about 47 USC 230 don't turn on whether or not I think the website is laudatory or has good editorial practices.]

The court's discussion is short, yet it's surprisingly scattered. Pages 8-10 run through a gamut of gripes about thedirty's practices and statements, but the judge doesn't articulate the relevance of these facts (other than providing evidence of the judge's animus towards thedirty). Because the judge does a poor job connecting the facts to his adopted legal standard, we aren't sure exactly what thedirty did to foreclose the 230 immunity. However, and slightly helpfully, the court summarizes its conclusion at the end:

This Court holds by reason of the very name of the site, the manner in which it is managed, and the personal comments of defendant Richie, the defendants have specifically encouraged development of what is offensive about the content of the site. One could hardly be more encouraging of the posting of such content than by saying to one’s fans (known not coincidentally as “the Dirty Army”): “I love how the Dirty Army has war mentality.”

This goofy legal standard ("specifically encouraged development of what is offensive about the content of the site") comes from the 10th Circuit FTC v. Accusearch opinion. Although a few other courts have cited Accusearch favorably, I believe this is the first time a court has favorably cited this specific standard for evaluating 230's immunity. (The language was also quoted in the Backpage case, although the defendant won that case). By adopting a legal standard that no other court has found useful, this judge was clearly reaching.

I personally wouldn't shed a tear if thedirty was wiped off the face of the Internet. As I said, it's not my kind of site. But Congress told judges that they aren't allowed to wipe UGC sites off the Internet just because they don't like them. For that reason, this is a terrible ruling that needs to be fixed on appeal. In the interim, I'm sure the plaintiff's bar will swarm all over this opinion, just like they have with other 230 exceptions. Yay, something we can look forward to.

Other blog coverage of thedirty cases:

* TheDirty Defeats Publicity Rights Claims--Gauck v. Karamian
* TheDirty Defeats Privacy Invasion Lawsuit--Dyer v. Dirty World
* thedirty.com's 47 USC 230 Defense Rejected on Motion to Dismiss--Jones v. Dirty World Entertainment

Posted by Eric at 02:55 PM | Content Regulation , Derivative Liability | TrackBack

January 07, 2012

Trademark Owner Can't Hold GoDaddy Liable for Domain Name Forwarding -- Berhad v. GoDaddy

[Post by Venkat Balasubramani]

Berhad v. GoDaddy, C 09-5939 PJH (N.D. Cal.; Jan. 3, 2012)

Plaintiff, Petroliam Nasional Berhad (Petronas), a government owned entity, owns the Petronas Towers in Malaysia. It’s trying to enforce its trademark rights against two domain names (petronastowers.net and petronastower.net). In mid-2010, it quickly obtained relief against both domain names, via in rem actions. These aren’t the disputes before the court. Prior to obtaining in rem relief against the domain names, Petronas urged GoDaddy to disable the website and domain names (the domain names were registered to GoDaddy and GoDaddy provided forwarding services, which pointed the domain names to porn sites). GoDaddy demurred, stating that as the registrar, it could not adjudicate Petronas’s cybersquatting claim and since it did not host the underlying sites, it couldn’t process Petronas’s trademark infringement claim. Petronas is trying to hold GoDaddy liable for not ‘disabling’ the domain name and website at Petronas’s urging. It asserted claims for cybersquatting and contributory cybersquatting against GoDaddy. Its hook for trying to hold GoDaddy liable? GoDaddy “used” the domain names by providing forwarding services for its customers.

Cybersquatting claim: GoDaddy argued that it was covered by the ACPA’s safe harbor. It also argued that two of the three ACPA elements ((1) use; (2) confusingly similar domain name; (3) bad faith intent to profit) were not satisfied. The court does not rule on the safe harbor issue but agrees with GoDaddy that Petronas's claims cannot withstand summary judgment.

The court finds that GoDaddy’s forwarding service does not amount to “use” of the domain names: “GoDaddy simply provided the infrastructure to the registrant to route the [domain names] to the website of his choosing.” It was a free service that GoDaddy provided to its domain name registration customers. Additionally, under the cybersquatting statute, only the registrant or its representative can “use” the domain name and potentially incur liability. Second, there was no evidence that GoDaddy harbored a bad faith intent to profit by providing forwarding services. It also did not charge for the service so it did not profit from the forwarding in any way.

Contributory Cybersquatting: As the court acknowledges, it’s unclear whether courts even recognize claims for contributory cybersquatting. (I blogged about a Western District of Washington case whre Judge Martinez allowed the claim to go forward at the early stages: “Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward”; see also Eric’s post about SolidHost v. NameCheap: “Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?”). The court analyzes the contributory cybersquatting claim under Perfect 10 and Lockheed and says that Petronas has to show that GoDaddy had knowledge and directly contributed to or induced the infringement. When the defendant provides a service the defendant can be held liable where it exercises “direct control and monitoring of the instrumentality” used to infringe. The court says that there is no evidence that GoDaddy exercised any type of control over the registrant’s use of the forwarding services. The court also says that Petronas has not shown that there is any bad faith by the registrant (the person who utilized GoDaddy’s forwarding services). According to the court, the registrant could have used the forwarding to “create mischief” or “annoy the owner of the Petronas mark” – he didn’t necessarily use the forwarding to “profit.” [This was a strange conclusion. I would have thought that the disposition of the in rem actions would conclusively establish bad faith intent to profit by the underlying registrant.]

Cancellation of Petronas’s Mark: GoDaddy asserted counterclaims and sought to cancel Petronas’s mark. Petronas argued that GoDaddy lacked standing to assert the claim for cancellation but the court rejects this: “GoDaddy has standing to seek cancellation because Petronas is using the registration as a sword against GoDaddy.” With respect to the merits of GoDaddy’s claim, the court says that factual issues preclude the grant of summary judgment. [Ouch. Petronas tries to hold GoDaddy liable, but all that's left of the lawsuit at this point is GoDaddy's claim for cancellation of Petronas's mark.]
__

The recently much-maligned GoDaddy may deserve a star for not caving to Petronas’s takedown notice, even at the risk of liability to GoDaddy. The court’s discussion alludes to the fact that registrars play a central role in the functioning of the internet as we know it. This just highlights the effect of GoDaddy’s conduct in other cases (e.g., the ex parte takedown cases Eric and I have blogged about). Of course, there’s also GoDaddy’s SOPA-support debacle, which resulted in a drain of domain names (including this one) away from GoDaddy. It’s unclear exactly what GoDaddy did in response to Petronas’s claims. While it did not cancel the forwarding, it did “assist Petronas in seeking a transfer order, and [locked] each domain.” In any event, GoDaddy deserves kudos for not summarily killing the forwarding that the registrant had in place.

The court’s treatment of Petronas’s direct infringement claim for cybersquatting spans many pages. The court ultimately concludes that GoDaddy provided services to the registrant in the nature of “infrastructure,” but still declines to consider GoDaddy’s claim that it was protected under the safe harbor. This is unfortunate because GoDaddy was forced to expend resources dealing with discovery and summary judgment; this may well influence GoDaddy's future dealings with others who are similarly situated to Petronas. ACPA's relevant registrar immunity provision (for damages) provides:

A domain name registrar, a domain name registry, or other domain name registration authority shall not be liable for damages under this section for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.

GoDaddy’s forwarding services arguably fall under “maintenance” of a domain name, but there’s not much discussion of GoDaddy’s immunity argument at all in the court’s order. The text of the immunity provision also leaves room for a damages claim where the plaintiff shows a “bad faith intent to profit.” This looks like unfortunate drafting that makes it tough for courts to grant immunity without consideration of fact-specific issues that are germane to the overall cybersquatting analysis. It would be nice for the immunity to distinguish between when the registrar is acting as a registrar and when it’s arguably trying to monetize domain names (e.g., through parking). (See: "Film Academy Targets GoDaddy Founder As Legal Fight Heats Up.") Registrar immunity rulings are rare, but if there was ever a candidate for when it is appropriate, this was it. A scenario where registrars routinely comply with rightsholder requests and disable forwarding or DNS resolution would break the internet. The court recognizes as much in its background discussion of the case (“If registrars stopped performing the function of taking name server information and providing it to registries, the Internet would not function.”) Unfortunately, the court does not take the route of providing immunity. [The routing point is relevant to the overall SOPA discussion.]

The court analyzes the contributory claim under Lockheed’s test for contributory trademark infringement. Courts continue to assume the viability of a claim for contributory cybersquatting, but they rarely dig in. Courts also don’t seem to discuss the contours of a cause of action against the backdrop of registrar immunity. A broad cause of action for contributory cybersquatting against registrars is a work-around of the registrar immunity provisions. (As GoDaddy pointed out, it was precluded by the ICANN/UDRP rules from disabling the site pending resolution of Petronas's claims, which were properly directed to a UDRP forum or a court.) I’m surprised the court did not take a much more critical look at Petronas’s claims here. Trying to hold GoDaddy liable for routing and pointing to DNS servers is a short step away from arguing that GoDaddy should be liable for forwarding. What’s next? Will Petronas sue Al Gore for its injuries because he invented the internet?

Petronas obtained the relief it sought: control or cancellation of the infringing domain names. It tried to hold GoDaddy liable because GoDaddy did not in effect disable access to the domain names. The court correctly rejects GoDaddy’s claims, but does not take the shortest possible route in doing so. The court should be cognizant of how its resolution of claims against GoDaddy will affect how GoDaddy reacts in the future to notices from rightsowners. The current trademark liability rules have resulted in a system where trademark owners can send takedown notices, typically to sites themselves. Rightsowners have pushed the envelope and through rulings such as Akanoc, are likely extending this to hosts as well. Petronas's claims tried to take it one step further, and broaden this to the registrar level. The court rejects its attempt, albeit in a long-winded way.

Posted by Venkat at 11:20 AM | Derivative Liability , Domain Names , Trademark

January 06, 2012

Did a Court Eliminate 512(h) Subpoenas?--Maximized Living v. Google

By Eric Goldman with additional comments from David Gingras

Maximized Living, Inc. v. Google, Inc., 2011 WL 6749017 (N.D. Cal. Dec. 22, 2011). The initial 512(h) subpoena. The Justia page.

17 USC 512(h) is a relic of a different era. The basic architecture of 17 USC 512 seeks to put copyright liability on users instead of their service providers. However, for that scheme to work, anonymous/pseudonymous infringers must be identifiable so the copyright owners can sue them instead of the intermediaries. 512(h) seeks to expedite the identification of alleged infringers by allowing copyright owners to get an unmasking subpoena super-easily. All copyright owners need to do is file a subpoena request with a court clerk, and in response the court clerk *must* issue the subpoena--the copyright owners don't need to file a lawsuit, and no judge reviews or approves the subpoena's issuance.

Indeed, neither the clerk nor a judge have any statutorily provided discretion to refuse the subpoena. As a result, 512(h) is now badly out-of-step with the law governing anonymous/pseudonymous online defendants that has developed over the past decade in response to unmasking abuses. In other areas than copyright, plaintiffs usually must make some showing that their substantive claims are meritorious before a judge will issue an unmasking subpoena. (The level of the plaintiff's showing depends on a variety of factors). In contrast, a 512(h) subpoena issues irrespective of the substantive merits of the plaintiff's claims--thus opening up a backdoor channel to unmasking abuses. For example, last year I got anecdotal reports that doctors used 512(h) to unmask patients that anonymously/pseudonymously reviewed doctors in contravention of the Medical Justice-supplied contract. If we were redrafting 17 USC 512 today, we would pay a lot more attention to 512(h) and its privacy implications than we did in 1998. [On that front, I have a latent empirical research project to investigate what happened after 512(h) subpoenas issued, but this case may have mooted it.]

With that background, let me turn to this case. Maximized Living sells copyrighted material to chiropractors. Anonymous blogger Doe allegedly infringed Maximized Living's copyrights via a Blogspot blog post. Maximized Living submitted an apparently overbroad 512(h) subpoena request to Google to identify Doe, and Doe successfully quashed the subpoena for its irregularities. Nevertheless, Doe apparently removed the infringing material from the blog. After that removal, Maximized Living sent Google a putatively corrected 512(h) subpoena request to unmask Doe. In this ruling, the court quashes Maximized Living's 512(h) subpoena for a second time.

The court does something goofy to reach this result. The court holds "that the subpoena power of s 512(h) is limited to currently infringing activity and does not reach former infringing activity that has ceased and thus can no longer be removed or disabled." Thus, because Doe had removed the infringing material after the first 512(h) subpoena was quashed, there was no infringing activity taking place when the second 512(h) subpoena request was made.

The problem with this result is that copyright owners must submit a 512(c)(3) takedown notice to service providers before seeking a 512(h) subpoena. Most service providers will take down the allegedly infringing material in response to the 512(c)(3) notice, so unless the copyright owner moves really fast to make its 512(h) request, the infringing material invariably will be down before the 512(h) subpoena request gets filed with the court--leaving those copyright owner in the same place as this one (i.e., submitting a 512(h) request when there's no current infringement). Below, David Gingras explains why the court may have misread the statute.

As a practical matter, this case's result may not be earth-shattering even if it survives appeal. I believe most service providers honor 512(h) subpoenas without much scrutiny and perhaps without notifying the targeted individual. This case will only help if the targeted individual challenges the subpoena, which will only happen if the service provider notifies the individual before releasing the unmasking information and the individual gets to court quickly enough. Because the service providers are a critical player in this process, how they handle 512(h) subpoenas warrants careful attention. I'd be game to work with you to try to get service providers to tell us more about their 512(h) handling procedure and if they give notice to the users--and wait for any quashing effort to materialize--before forking over unmasking info. [FWIW, Google appears to have done both, so they get a gold star for the day.]

Copyright owners also can avoid this result by filing the 512(h) subpoena request basically at the same time as they send the 512(c)(3) notice. That way, when the 512(h) subpoena is filed, there is still infringing activity occurring, even if it's quickly eliminated by the service provider responding to the 512(c)(3) notice. My guess is that many copyright owners will be reluctant to do this because it will increase the cost and time required to target infringing material when quick-filing of a 512(h) request will help in only a small number of situations. Thus, changing the takedown protocol to add a 512(h) filing probably isn't cost-effective.

Finally, even if 512(h) isn't available, the copyright owner can still seek unmasking through a John Doe lawsuit. This isn't as low-cost as 512(h) and will trigger judicial screening of the subpoena request before issuance, so 512(h) is better for copyright owners if they qualify. Nevertheless, copyright owners can still achieve unmasking, and perhaps this case simply indicates that 512(h) is a much more highly specialized solution than we thought.

Finally, a personnel note: one of the plaintiff's lawyers is Kenton Hutcherson. You may recall that last year I blasted an article by Kenton for advocating that plaintiffs scrub search results by taking advantage of Google's apparently lax policy towards court orders. Here, it looks like the judge didn't respond well to at least two of the plaintiff counsels' choices:

1) the overreach in the initial 512(h) subpoena request
2) the submission of a second 512(h) without the court's permission, as specified when the court quashed the first subpoena

One possibility is that the court reached its odd substantive conclusion in response to the plaintiff lawyers' errors.

________________

Comments by David Gingras

[Eric's introduction: Many of you already know David Gingras due to his positions as General Counsel for Ripoff Report and litigation counsel for thedirty.com. While drafting this post, I sent this opinion to David for his thoughts, and his statutory analysis in response was so useful that I asked his permission to share it]

I think it’s extremely clear the court make the wrong decision here. I think the court should have found that the subpoena was entirely appropriate under § 512(h) even if the allegedly infringing material had been removed and the infringing activity stopped.

The court’s premise seemed to be that you could only use a pre-suit subpoena under § 512(h) to identify current infringers, not a former infringer who had stopped infringing. By itself, this seems like a very dubious distinction. What’s the difference?

As far as I can see, the conclusion was based on the fact that you obviously can only use what is commonly referred to as a “DMCA notice” (i.e., a takedown demand under § 512(c)(3)(A)) to address active infringements. In turn, that sounded correct because § 512(c)(3)(A) requires the party submitting the notice to identify, inter alia: “the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled." By using the present and future tenses here, it’s beyond obvious that this section doesn’t apply to past acts of infringement. In other words, you can only use a § 512(c)(3)(A) notice to address current/ongoing infringements (DUH – if the material was already removed, you wouldn’t need to a send a takedown notice anyway, right?)

Up to this point, the court interprets the DMCA in a common sense way, but then it erred when it assumed (incorrectly), that because § 512(h) subpoenas are necessarily premised on a § 512(c)(3)(A) takedown notice, that requires the court to find that where the infringement has stopped, the right to pursue a § 512(h) subpoena also stops. That’s just totally inconsistent with the plain language of § 512(h)(5) which talks about the duties of a party on the receiving end of a DMCA notice (like Google) once they receive the follow-up subpoena:

(5) Actions of service provider receiving subpoena.--Upon receipt of the issued subpoena, either accompanying or subsequent to the receipt of a notification described in subsection (c)(3)(A), the service provider shall expeditiously disclose to the copyright owner or person authorized by the copyright owner the information required by the subpoena, notwithstanding any other provision of law and regardless of whether the service provider responds to the notification. [italics added]

The way I read that section, it seems pretty simple – you can get and serve a § 512(h) subpoena either contemporaneously with the § 512(c)(3)(A) takedown notice, or the subpoena may be issued subsequent to that notice; i.e., at a later time when the infringement has already stopped. Either way is perfectly fine, which makes sense.

In this instance, the way the court interpreted § 512(h) makes the words “or subsequent to” totally superfluous, so we know the court’s conclusion is incorrect. Furthermore, the last few words of § 512(h)(5) seem to suggest that § 512(h) subpoenas may or may not come after a service provider has already “responded” to the takedown demand; i.e., after the material has already been removed – that’s another strong indicator that the right to pursue a § 512(h) subpoena may start with a § 512(c)(3)(A) takedown notice, but it does not stop simply because the infringing material was removed.

Posted by Eric at 09:18 AM | Copyright , Derivative Liability , Privacy/Security | TrackBack

January 05, 2012

SOPA/PROTECT-IP/OPEN Linkwrap #2

By Eric Goldman

It's been a busy time for news related to SOPA (the Stop Online Piracy Act, not the Stop Online Privacy Act, although that could be an unintended result!), PROTECT-IP/PIPA, and the OPEN Act. In a bit, I'll recap some links. First, though, some general thoughts about the last month.

As I predicted, SOPA has been incredibly divisive. It has largely boiled down to Hollywood in support vs. the rest of the world against, with an emerging "with me or against me" attitude. What a shame. We get much better results when the tech and entertainment community collaborate rather than play zero-sum games.

Naturally, I think Hollywood has made several strategic miscalculations here. First, the outrageousness of its proposals has mobilized the tech community. It's been fascinating watching companies and politicians scramble to disavow themselves from SOPA when targeted by the anti-SOPA advocates. That NEVER happens when it comes to a Congressional proposal to regulate technology. Perhaps this mobilization will be a flash in the pan, or perhaps Hollywood has poked a sleeping tiger once too often.

Second, Hollywood's credibility with its financially-sponsored politicians may be wearing thin. Politicians will happily take its money, but they don't enjoy looking like fools--and many SOPA supporters have, in fact, looked pretty silly while being left twisting in the wind by their Hollywood patrons. Money will buy a lot of politician patience, but the goodwill reservoir is not bottomless.

Third, even if Hollywood can succeed in passing something like SOPA or even PIPA, I believe it would be counterproductive to its long-term interests. As I've mentioned before, we all benefit from having larger common markets (see, e.g., NAFTA or the EEC), and the Internet has emerged as the largest common market of all. A Balkanized Internet will devolve into disparate smaller markets that represent less value for everyone.

A final counterproductive point, although Hollywood may not care. SOPA/PIPA absolutely will drive US dollars--and jobs--overseas. For example, I ditched GoDaddy as my domain name registrar and took my business to a foreign registrar who won't be subject to SOPA/PIPA. If other folks make the same calculations I did, collectively it will be a boon for foreign service providers and a net loss for US service providers. At best, SOPA/PIPA preserve some jobs at the expense of others; my guess is that our economy will suffer a net reduction in jobs. Just what we need during this protracted economic downturn.

The amazing thing is: despite the complete lack of credible empirical evidence supporting SOPA/PIPA, and despite a groundswell of grassroots opposition to it, and despite companies and politicians dropping their support of SOPA/PIPA when the spotlight is cast on them, Hollywood might still be able to succeed in this rent-seeking endeavor. It's evidence of just how well Hollywood has embedded itself into Congress' psyche (and wallets).

Some news items since my last linkwrap:

* OPEN has been introduced in the Senate as S.2029.

* CDT's list of opponents. As you know, I am on it.

* Mike Masnick broke a huge story about Dajaz1.com, showing how our government repeatedly broke the law in falsely pursuing a so-called rogue website. The conduct of the government is chilling--things like this aren't supposed to happen in our democracy!--and if heads don't roll for the coverup, it will be another nail in the coffin of our republic.

* The government also lost the Rojadirecta case. Also, an in-depth look at the Operation in Our Sites bust of Ninja Video, where the government continues to make questionable interpretations of criminal copyright law.

* Constitional Law scholar extraordinare Laurence Tribe and advocate Marvin Ammori both explained how SOPA violates the First Amendment. Marvin followed up with a First Amendment assessment of the manager’s amendment. Corynne McSherry’s thoughts.

* Why aren't members of Congress listening to the opposition? Maybe it has something to do with the revolving door between government and industry. See this article: SOPA revolvers: Sixteen former Judiciary staffers lobby on online copyright issues.

* Wikimedia’s General Counsel Geoff Brigham explains “How SOPA will hurt the free web and Wikipedia”

* One of the many unanswered questions: who is a rogue website and how many are there? CNET News.com suggests that SOPA is all about taking out just one website--The Pirate Bay. Seriously, we're going to break the Internet because of The Pirate Bay? Talk about collateral consequences for something that could be handled with incredibly narrow legislative fixes—or better yet, with precise transborder enforcement cooperation.

* EFF on the good and bad in the OPEN Act.

* Mike Masnick completely destroys Lamar Smith’s so-called statement of facts in support of SOPA. Reading articles like this remind us that support for SOPA/PROTECT-IP is hardly about "the facts."

* More "fact" debunking, this time by Julian Sanchez.

* Speaking of "the facts" or the lack thereof, it appears that the House Judiciary Committee is massively overclaiming who supports SOPA. Misleading the American public apparently is just business as usual in DC.

* Meanwhile, companies are realizing that being listed as a SOPA supporter isn't necessarily good for business. SOPA opponents targeted GoDaddy, who instantly declared their lack of support for SOPA but remains completely untrustworthy and hypocritical.

* Meanwhile, SOPA is turning into an election-year issue, and politicians are beginning to learn the power of Reddit.

* If you want to speak up, check out SOPA Track and find out where your legislators stand. My Congresswoman, Anna Eshoo, has been firm in her opposition to SOPA, but the California senators are both PIPA co-sponsors because they too deeply in bed with Hollywood to listen to other constituents. So fair warning to Sen. Boxer and Feinstein--I plan to vote for your opponents, whoever they are, in the next election cycle.

* Great article about how SOPA will become a Trojan horse for all types of online content censorship, not just the suppression of rogue websites.

* Opposition to SOPA is bipartisan: “I suggest the left and right unite and pledge to defeat in primaries every person named as a sponsor on H.R. 3261, the Stop Online Piracy Act.”

Just a reminder because everyone knows SOPA is so ridiculously extreme: PROTECT-IP is NOT an acceptable "compromise" to SOPA. PROTECT-IP is also extreme. As I indicated previously, if we're going to have any legislative discussions about rogue websites, we should start with the OPEN Act and iterate from there. In light of the action in the courts (see the links below), any legislative solution should be coupled with increased immunities for Internet intermediaries so that they don't just coddle the rightsowners irrespective of the legislation.

FWIW, I have called Rep. Eshoo to thank her for her opposition to SOPA, and I've contacted Sens. Feinstein and Boxer to let them know that I disagree with their positions on PROTECT-IP. Have you contacted your legislators to tell them how you feel? If you don't speak up, they won't know where you stand.

Prior blog coverage of SOPA/PROTECT-IP/OPEN:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 09:15 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

January 02, 2012

Nov.-Dec. 2011 Quick Links, Part 1

By Eric Goldman

47 USC 230

* Wang v. OCZ Technology Group, Inc., 2011 WL 4903190 (N.D. Cal. Oct. 14, 2011). In a false advertising suit, the plaintiff argued that the defendant quoted/linked to third party testimonials on the defendant's website and those contributed to the misrepresentations. The defendant counterargued that the third party content was immunized by 47 USC 230 and therefore shouldn't be attributed to it. The court rejects the defendant's use of 47 USC 230 on a motion to strike material from the complaint, saying that it was too premature. Rebecca's coverage.

* News report that, per 47 USC 230, Worcester Telegram & Gazette wasn't liable for user-posted comments to one of its stories. Naturally, the plaintiff was an attorney. Prior blog coverage of lawsuits against newspapers for user-posted comments.

* Unsurprisingly, the plaintiffs appealed their 230 loss in Levitt v Yelp to the 9th Circuit. Prior blog post.

* Parisi v Sinclair, another 230 case, is being appealed to the DC Circuit. Prior blog post.

* An insurance company sued Google for the high search placement of Scam.com and PissedConsumer reports about it. Hello 47 USC 230!

* Techdirt: Dentist Who 'Invoiced' Patient For Negative Reviews, Getting Slammed On Yelp. Prior blog post.

Content Regulation

* Yoder v. University of Louisville, 2011 WL 5434279 (W.D. Ky. Nov. 8, 2011). Yoder graduated from University of Louisville with her nursing degree, but her lawsuit isn't moot due to her damages claim. Prior blog post.

* Roberts v. McAfee, Inc. (9th Cir. Nov. 7, 2011). Due to the single publication rule, failing to remove a press release on the website does not reset a defamation statute of limitations.

* Mattingly v. Milligan, 2011 WL 5184283 (E.D. Ark. Nov. 1, 2011):

Milligan won a hotly contested race for the position of Saline County Circuit Clerk. Following his election, Milligan sent a letter to four employees informing them that he would not retain them. That evening, Mattingly made two posts on Facebook in quick succession stating that bad things were all around and that her heart went out to those ladies who were told they were no longer needed. The posts could be viewed directly by at least 1,300 people, most of whom were residents of Saline County. As Milligan said in his letter of termination, Mattingly's statements were "in a public domain."...As evinced by their comments in response, some who read the posts understood Mattingly to be speaking about Milligan's decision to terminate some employees in the Circuit Clerk's office. These comments included criticisms of Milligan's termination decisions. According to Milligan, six constituents were motivated by Mattingly's posts to call him at home to complain about the terminations. Television news stations, newspapers, and an internet blogger reported on the Milligan's decision to terminate the employees. Viewing the evidence in Mattingly's favor, her Facebook posts touched on a matter of public concern.

* Obsidian Financial v. Cox, 2011 WL 5999334 (D. Or. Nov. 30, 2011). The court held that an Oregon blogger isn’t a journalist for shield law purposes. I think the case got so much attention in part because the judge said unnecessarily derogatory things about bloggers. However, Kash Hill reports that the defendant doesn't appear to adhere to journalistic standards, either. Eric Robinson explains why the judge got to the right legal result. The EFF also contextualizes the ruling.

* Louisiana Crisis Assistance Center v. Marzano-Lesnevich (E.D. La. Nov. 23, 2011). Interesting anti-SLAPP decision.

* India asks Google and Facebook to prescreen UGC to prevent the publication of disparaging content.

* The Smoking Gun reports on a prosecution for posting revenge porn.

Search Engines

* Not surprisingly, myTriggers appealed its loss in its antitrust claims against Google. (Because the case has nothing to do with its legal merits, I'm sure myTriggers will keep appealing losses until they exhaust all appeals). Prior blog post.

* In an expected move, ShopCity filed an antitrust complaint against Google with the FTC.

* buySafe v. Google complaint: As part of a patent battle, buySafe asserts that Google promises better search placement for participants in its Trusted Stores program.

* More insight into the Google Search Quality Raters. Prior blog post.

* On a related note, Bing is going back to hand-picking some search results. Could you imagine how the Google Haters would respond if Google did the same thing?

* Also related? New Scientist: “Google and Microsoft have won a major victory in the fight against such content farms”

* Google is cracking down on parked domains in its search results. Compare Vulcan Golf v. Google.

* Google Knol is another casualty of Google's project cleanup. Remember some Google Haters thought Google Knol would crush other encyclopedic-style projects due to Google favoritism of its own properties? (See, e.g., this article). What say you now?

* Google, Bing and Yahoo shut down fraudulent mortgage advertisers (WSJ, Search Engine Land).

* Search Engine Land: Google Instant Costs Google $65,000 In France. Given all of its prior losses, I had thought Google already was completely illegal in France.

* MediaPost: “consumers’ failure (or refusal) to differentiate between their search and browser bars shaped search behavior in 2011.” I wrote about this same issue...back in 2005!

* Clive Thompson: Why Kids Can’t Search.

Social Networking Sites

* Zoya Co. v. Julep Nail Parlor Co., 2011 WL 5975054 (N.D. Ohio Nov. 29, 2011). Website wasn't passive for Zippo purposes because, among other things, "It includes links that allow customers to “Connect on Facebook” and “Connect on Twitter” and to subscribe to a monthly newsletter." Compare DFSB Kollective Co. v. Tran.

* U.S. v. Cassidy, 2011 WL 6260872 (D. Md. Dec. 15, 2011). Reversing a harassment conviction based on talking a lot about a person on Twitter and in a blog.

* Dimas-Martinez v. State, 2011 Ark. 515 (Ark. Dec. 8, 2011). “Because of the very nature of Twitter as an on online social media site, Juror 2's tweets about the trial were very much public discussions. Even if such discussions were one-sided, it is in no way appropriate for a juror to state musings, thoughts, or other information about a case in such a public fashion….Thus, this court has recognized the importance that jurors not be allowed to post musings, thoughts, or any other information about trials on any online forums. The possibility for prejudice is simply too high. Such a fact is underscored in this case, as Appellant points out, because one of the juror's Twitter followers was a reporter. Thus, the media had advance notice that the jury had completed its sentencing deliberations before an official announcement was made to the court. This is simply unacceptable, and the circuit court's failure to acknowledge this juror's inability to follow the court's directions was an abuse of discretion.”

* U.S. v. Juror Number One, 2011 WL 6412039 (E.D. Pa. Dec. 21, 2011). A juror was fined $1,000 for criminal contempt for using email to discuss the case with other jurors during the trial after being dismissed from the jury.

* State v. Gordon, 2011 WL 5354265 (Ohio App. Ct. Nov. 7, 2011):

if Gordon's use of the computer for personal purposes during work time constitutes theft in office, it would mean that every public official or government employee who sends a personal email, reads a text message, or checks Facebook during working hours would be guilty of committing a felony. We do not believe that is the intended purpose of R.C. 2921.41. Therefore, we find that there was insufficient evidence that Gordon's use of the Village's computers for personal purposes constituted Theft in Office pursuant to R.C. 2921.41

* Woodward v. State, 2011 WL 6278294 (Ala. Crim. App. Ct. Dec. 16, 2011). Inflammatory online comments about a defendant (who allegedly killed a police officer) don’t necessitate a change in venue: “the unsolicited, unreviewed, largely anonymous online comments did not rise to the level of saturated, prejudicial media coverage. Moreover, we believe that any readers of the comments would value those comments at their true worth and not as “news coverage” at all.”

* Facebook “accidentally” blocked Snopes.com as a spammy link. Prior blog post.

* Kash Hill: How Not To Use Facebook To Get Custody Of Your Kids. Horrifying story!

* Gizmodo: Facebook Is Making Us Miserable [and not for the reason you think!]

* The truth about students using Facebook and their grades.

* A quarter of the blogs listed on the inaugural ABA Journal Blawg 100 from 5 years ago are now gone. This blog didn't make the first list, but next month we'll be celebrating our SEVENTH anniversary!!!

* K-12 schools are adopting social media policies restricting teacher-student interaction on social networking sites.

Posted by Eric at 07:49 PM | Content Regulation , Derivative Liability , Search Engines | TrackBack

UGC Website Hit With Spoliation Sanctions--Io v. GLBT

By Eric Goldman

[This is one of those blog posts that got stuck in queue. It's still pretty interesting, so I'm sharing at this relatively late date. Happy new year!]

Io Group Inc. v. GLBT Ltd., 2011 WL 4974337 (N.D. Cal. Oct. 19, 2011)

This case involves Io, the pornography company that lost Io v. Veoh, the main 17 USC 512 case I teach in my Internet law course. The defendants in this case are British. They run a series of UGC porn websites where users can get some porn for free and then must pay for additional access either with cash or by uploading their own content. The plaintiffs seek to hold the defendants liable for copyright and trademark infringement because users are allegedly committing copyright infringement by uploading the plaintiffs' porn. The defendants are defending on 17 USC 512 and other grounds.

Being in Britain, the defendants are governed by the Data Protection Act. They interpreted that act to require them to flush lots of data very quickly. Perhaps they have been overly zealous about implementing the DPA such that their interpretation isn't so credible. For example, they automatically deleted all incoming and outgoing email after 3-4 days, and they didn't change this for more than a year into the lawsuit. They also completely deleted all files that were subject to a takedown notice, so it wasn't possible for plaintiffs to see which files had been removed. Their answers to the judge's pointed questions apparently weren't very satisfying, and eventually the defendants went AWOL. So it's a little hard to tease out any legitimate DPA-based objections the defendants might have had from their other questionable choices.

FWIW, I'm not a DPA expert, but the DPA requires that the service provider keep data only so long as reasonably necessary. I would think legal obligations/discovery rules satisfy that standard.

The court's opinion gives some insights into the evidence that would be useful for the 512 safe harbor. The defendants completely wiped away any UGC files they disabled. The court says:

With respect to the deleted audiovisual files, Plaintiffs are prejudiced by not being able to examine the files and related metadata for any "red flags" indicating that infringement was likely. Such red flags could render Defendants ineligible for safe harbor protections of the Copyright Act.

This is consistent with language in the Ninth Circuit's subsequent ruling in UMG v. Shelter Capital. The court continues:

The loss of takedown notices and corresponding removal notification emails also prejudices Plaintiffs. First, the trier of fact may consider the extent of copyright infringement on Defendants' websites when analyzing a claim of inducement to infringe....Although the number of takedown notices does not alone determine the amount of actual infringement on the site, a large number of notices could indicate that a large portion of the material on the site is infringing. In addition, in order to be eligible for safe harbor protection, Defendants must show that they have policy in place providing for the termination of repeat infringers. 17 U.S.C. § 512(i)(1)(A). Defendants claim that they have such a policy in place, but without the ability to examine the takedown notices and corresponding emails, Plaintiffs have no way of challenging the implementation and enforcement of the policy because they cannot examine whether Defendants actually terminated individual users who repeatedly posted infringing material.

I'm not clear about the relevance of the percentage of infringing activity, but for more on the evidentiary issues associated with inducement, see the Grokster ruling. Finally, the court says:

the destruction of Defendants' internal emails renders it impossible for Plaintiffs to explore Defendants' motivation and state of mind in operating their websites; this is key to Plaintiffs' claim of secondary infringement based on inducement

For the evidence spoliation, the court hits the defendants with adverse inference sanctions:

Plaintiffs are entitled to adverse inference instructions in the form of rebuttable presumptions. Given the specific evidence destroyed by Defendants, the court orders the following rebuttable factual presumptions: 1) third parties posted material on Defendants' websites that infringed Plaintiffs' copyrights; 2) Plaintiffs submitted takedown notices to Defendants regarding the infringing material; and 3) Defendants did not take steps to remove Plaintiffs' infringing material from their websites.

Unless the defendants magically find some exculpatory evidence, it sounds like those inferences will nail them on the substantive rulings. The court also awarded $15,000 in attorneys' fees.

This case raises a number of interesting issues.

First, exactly what evidence is plaintiffs entitled to when trying to overcome a service provider's 512 defense? As far as I can tell, there are few limits because just about anything might support an inducement finding. The otherwise defense-favorable ruling in UMG v. Shelter Capital provides some other ideas about information that plaintiffs can seek. Summing all this up, as a practical matter, 512's safe harbor is nifty, but it's an increasingly expensive proposition for both parties. Contrast this with 47 USC 230, where many immunized lawsuits are tossed on a motion to dismiss without any discovery at all. Not only does that allow judges to issue clean and quick rulings, but it saves both plaintiffs and defendants a lot of coin. Note to statutory drafters: it's so important to consider the evidentiary implications of your legislative drafting. The way the statute implicitly allocates discovery costs has a huge substantive effect--especially if the goal is to create a safe harbor or immunity. On this point, even if 512 usually gets to the right result, the safe harbor is miscalibrated from an evidentiary standpoint.

Second, service providers hoping for a 512 safe harbor are often uncertain about what data they should or must retain. After Grokster, UGC sites became nervous about potential inducement liability. As a result, I believe it's become common to recommend that UGC sites flush as much material as quickly as possible (and before litigation becomes "reasonably anticipatable") to reduce the risk that the material will be cited as evidence of inducement or otherwise disqualify the 512 safe harbor. However, UGC sites don't want to look like they are trying to evade the truth or, worse, disrespecting the court (as the defendants in this case might be perceived as doing) or engaged in evidence spoliation, so how should UGC sites strike an appropriate balance? I'd welcome your thoughts about that.

Third, irrespective of how we feel about these particular defendants, their underlying point about the intersection between 17 USC 512 and user privacy is worth considering. 17 USC 512(m) is entitled "Protection of Privacy," so the drafters of 512 recognized the push-pull issue here. Assume for a moment that the defendants in this case honestly wanted to provide their users with private browsing/uploading/downloading, something that might be desirable in the context of these defendants' service. It seems logical that the service provider seeking a privacy-enhanced UGC service would flush its logs, email and disabled files promptly and make those representations to its users. Here, it appears the court would undo those promises, forcing the service provider to retain data it didn't want to keep for the benefit of copyright plaintiffs. I understand that may be our current state of play, but I see the potential for mischief too.

Posted by Eric at 08:20 AM | Copyright , Derivative Liability , Evidence/Discovery , Privacy/Security | TrackBack

December 29, 2011

Ripoff Report May Be "Appalling," But It Still Gets 47 USC 230 Immunity--Giordano v. Romeo

By Eric Goldman

Giordano v. Romeo, 2011 WL 6782933 (Fla. App. Ct. Dec. 28, 2011). [Disclosure note: I joined an amicus brief in support of Ripoff Report's position, written by Paul Levy of Public Citizen]

One sign of a good judge--a judge who can set aside his/her personal feelings to uphold the law when it conflicts. We got one of those rulings in this case. The judge condemns Ripoff Report using some of the harshest language I've seen in a judicial opinion in a while:

The business practices of Xcentric, as presented by the evidence before this Court, are appalling. Xcentric appears to pride itself on having created a forum for defamation. No checks are in place to ensure that only reliable information is publicized. Xcentric retains no general counsel to determine whether its users are availing themselves of its services for the purpose of tortious or illegal conduct. Even when, as here, a user regrets what she has posted and takes every effort to retract it, Xcentric refuses to allow it. Moreover, Xcentric insists in its brief that its policy is never to remove a post. It will not entertain any scenario in which, despite the clear damage that a defamatory or illegal post would continue to cause so long as it remains on the website, Xcentric would remove an offending post. [footnote omitted]

I needed asbestos glasses just to read that.

[As a factual note, Ripoff Report has hedged its "we never remove posts" stance, and it does offer its Corporate Advocacy Program which the court acknowledges in a footnote and a separate arbitration system that the court doesn't note.]

Despite the stinging rebuke of Ripoff Report's basic enterprise, the judge concludes: "However much as this Court may disapprove of business practices like those embraced by Xcentric, the law on this issue is clear. Xcentric enjoys complete immunity from any action brought against it as a result of the postings of third party users of its website."

So true.

Some quick background. In the wake of the Seventh Circuit's Blockowicz ruling, which said that Ripoff Report couldn't be forced to remove a third party post under FRCP 65, a Florida state court judge went off the rails in a similar case. That judge held that 47 USC 230 did not prevent the judge from ordering Ripoff Report to remove the user post. This was a rogue ruling by a judge who clearly wasn't interested in what the law actually said. In an interesting turn, that judge wasn't reelected (the voters apparently got it right on that one!) and the case transferred to a new trial judge, who promptly reversed the ruling and upheld Ripoff Report's 230 immunity.

On appeal, the intermediate appellate court upheld the second trial judge's ruling in a short (and, as you can see, sharp) ruling. In 2001, the Florida Supreme Court, in Doe v. AOL, adopted a broad reading of 230 as Florida law, and this court sees that ruling as dispositive: "Consequently, under Florida law, section 230 of the CDA 'creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.'"

I continue to be skeptical of Ripoff Report's business model (I'll explain more in my forthcoming post on Ascentive v. PissedConsumer), and I continue to have reservations that inaccurate information can remain on the Internet even if judges say it's inaccurate. However, I am even more troubled by judges who simply choose to ignore 47 USC 230, so I'm glad to see the appellate court got to the right result.

UPDATE: Paul Levy comments on the ruling.

Posted by Eric at 09:02 AM | Derivative Liability | TrackBack

December 27, 2011

UMG v. Shelter Capital: A Cautionary Tale of Rightsowner Overzealousness

By Eric Goldman

UMG Recordings, Inc. v. Shelter Capital Partners LLC, 2011 WL 6357788 (9th Cir. Dec. 20, 2011). My prior blog posts on district court rulings on Veoh’s 512(c) safe harbor and attorneys’ fees/Rule 68.

Make no mistake, web hosts and their investors got a major 512(c) victory in this ruling. The Ninth Circuit, building on its favorable but convoluted ruling in Perfect 10 v. ccBill, wrote a decisive and clear (well, as clear as the 9th Circuit gets...) opinion interpreting the crucial 512(c) safe harbor. This opinion is so comparatively lucid that I plan to substitute it into my Internet Law reader next Fall as a replacement for the Io v. Veoh and Viacom v. YouTube district court rulings.

But also make no mistake: this case reminds us why we need to strike a fair balance between rightsowners and technology providers, or else our system will break down. This case's real result is that Veoh is legal, but Veoh is dead—killed by rightsowner lawfare that bled it dry. Meanwhile, rightsowners wrongly assessed the legality of Veoh, but the worst consequence they suffered was overpaying their lawyers. Indeed, UMG isn’t liable under 17 USC 512(f) for sending bogus takedown notices because they never sent any notices at all., nor is UMG liable for Veoh's attorneys’ fees. UMG’s decision-makers walk away from this car crash, muttering under their breath that the Ninth Circuit misunderstood their brilliant legal arguments, but they still get to go to their cushy jobs tomorrow. The same can’t be said for Veoh, even though it "won." Veoh’s employees? On the street. Veoh’s investors? SOL. Veoh’s community? Kicked to the curb.

This case outcome—Veoh is legal, but Veoh is dead—highlights one of the many reasons why so many people are so opposed to SOPA/PROTECT-IP. Those proposals don’t make rightsowners fully internalize the cost of their actions, such as the economic losses suffered by erroneously accused targets. Of course rightsowners will overclaim when there's no real downside to doing so; that’s just human nature. (And please, I don’t want to hear any BS that rightsowners will never get it wrong. See, e.g., Viacom v. YouTube). Without proper calibration, rightsowner overclaiming threatens to wreck the entire Internet ecosystem.

A partial fix to SOPA/PROTECT-IP would make rightsowners bear the cost of their overclaiming. Make them put up a $1 billion bond for the privilege of sending cutoff notices; and pay liberally out of that bond if the rightsowners get the law or facts wrong. Write checks to the investors and employees whose economic expectations are disrupted when rightsowners get it wrong. Write checks to the payment service providers and ad networks who turn down money from legally legit businesses based solely on rightsowner accusations. Heck, write checks to the users of those legit services who are treated as inconsequential pawns in this chess match. Sure, a $1B bond obligation with liberal payouts would turn cutoff notices into a sport of kings that only the richest rightsowners could afford, but perhaps that’s the way it should be. A rightsowner's decision to send a cutoff notice should be a Big Deal, the equivalent of going to Defcon 5, and not like sending holiday cards to distant relatives you last saw at Ethan's bar mitzvah.

Unless (until?) Congress wrecks the Internet with SOPA/PROTECT-IP, 17 USC 512(c) still matters a lot to the Internet ecosystem, and this ruling has a lot of good news for web hosts. It’s a long opinion, as 512 opinions usually are. Some highlights:

* Since its passage, 512(c) has had a crucial ambiguity: did it provide a safe harbor for all three flavors of infringement (direct, contributory, vicarious) or just direct infringement? The legislative history was clear that the safe harbor applied to all three flavors, but the literal text of the statute seemed, by its very terms, to exclude contributory and vicarious infringement. Remarkably, most 512(c) cases sidestepped this fundamental interpretive issue. In contrast, this case confronts it head-on and, perhaps for the first time in an appellate ruling, indicates that 512(c) applies to all three flavors of infringement. For example, the court says:

Given Congress’ explicit intention to protect qualifying service providers who would otherwise be subject to vicarious liability, it would be puzzling for Congress to make § 512(c) entirely coextensive with the vicarious liability requirements, which would effectively exclude all vicarious liability claims from the § 512(c) safe harbor….Although in some cases service providers subject to vicarious liability will be excluded from the § 512(c) safe harbor, in others they will not.

To achieve this outcome, the Ninth Circuit says that “right and ability to control”—language that appears in both the standard test for vicarious copyright infringement and as an exclusion to 512(c)’s availability—means different things in those contexts. I presume the same applies to “direct financial interest,” though that didn’t come up here. Notice this is a result only lawyers could love: the exact same words have different meanings depending on whether they are in the plaintiff’s prima facie case or in the defendant’s affirmative defense.

The good news is that the opinion reads “right and ability to control” as dependent on knowing of specific problems that need to be remediated, like the Viacom v. YouTube opinion did:

a service provider must be aware of specific infringing material to have the ability to control that infringing activity within the meaning of § 512(c)(1)(B). Only then would its failure to exercise its ability to control deny it a safe harbor….A service provider’s general right and ability to remove materials from its services is, alone, insufficient. Of course, a service provider cannot willfully bury its head in the sand to avoid obtaining such specific knowledge.

Unfortunately, the last sentence reminds me a little of the gratuitous dicta in Tiffany v. eBay about "willful blindness," which trademark plaintiffs have already started to mine. Trying to scrounge for any angle, I'm sure copyright plaintiffs will start digging around for evidence that service providers buried their head in the sand, making the most tendentious interpretations of fact that aren't damning in the least.

* UMG argued that 512(c) only provided a safe harbor for personal cloud storage. Under this reading, the moment a file stored in the cloud was available to third parties, 512(c) dropped away. The court brushed away UMG’s argument, and I can’t believe UMG thought it was worth pressing. The argument made no sense historically (no one was offering personal cloud storage lockers when the DMCA was passed), it contravened numerous provisions in the statute that clearly suggested otherwise, it would have conflicted with a long list of precedent cases that applied 512(c) to public hosting, and it’s almost impossible to construct a fact pattern where a user uploading to a personal cloud locker commits copyright infringement (or that a copyright owner would learn about this storage sufficient to send a 512(c)(3) notice specifying the file’s location).

As a corollary, 512(c) applies even if the service provider slices-and-dices the user-submitted file, such as transcoding the file and extracting metadata. This is consistent with earlier 512(c) cases, but now it’s Ninth Circuit law.

* The court rejects UMG’s many arguments that Veoh had impermissible scienter. UMG’s hubris was insane. For example, UMG argued that Veoh hosted music videos, and that because it didn’t have licenses to the music, its general knowledge categorically disqualifies Veoh from 512(c). The court shreds UMG’s argument, noting that Veoh did have direct arrangements with music video producers, and UMG’s argument (if you host music, you must know you’re infringing) would negate the entire 512(c) safe harbor. Instead, the court emphasizes the importance of the notice-and-takedown scheme in 512(c) because “Copyright holders know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.” Thus, the court “hold[s] that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one’s services could be used to share infringing material, is insufficient to meet the actual knowledge requirement.” Nor can such knowledge count as a “red flag.”

The court isn’t any more impressed with UMG’s argument that Veoh bought Google Adwords keyed to the names of UMG artists like 50 Cent, Avril Lavigne and Britney Spears. The court responds:

50 Cent, Avril Lavigne and Britney Spears are also affiliated with Sony-BMG, which gave Veoh permission to stream its videos by these artists. Furthermore, even if Veoh had not had such permission, we recognize that companies sometimes purchase search terms they believe will lead potential customers to their websites even if the terms do not describe goods or services the company actually provides. For example, a sunglass company might buy the search terms “sunscreen” or “vacation” because it believed that people interested in such searches would often also be interested in sunglasses. Accordingly, Veoh’s search term purchases do little to demonstrate that it knew it hosted infringing material.

I wouldn't rely on the Ninth Circuit for SEM advice, but did the court really say that a site can buy the keyword “Britney Spears” to reach teeny-boppers, even if the site doesn’t offer any Britney Spears music? Hmm...

The court also rejects UMG’s argument that takedown notices from the RIAA should have prompted Veoh to go find additional videos from the same artists mentioned in the takedown notices. As ccBill said, service providers don’t have that affirmative investigatory duty; it remains solely on copyright owners’ shoulders.

Finally, the court rejects UMG’s efforts to dig up old newspaper quotes from Veoh executives acknowledging that their site contained infringing material. The court appropriately notes that 512(c) assumes UGC sites will contain some infringing items. That’s why copyright owners should send takedown notices, and why they shouldn't bitch if they don’t.

One sour note: The court says that a user-submitted complaint that he’d seen infringing content on the site, and fingering a specific other user, could constitute a "red flag of infringement" even if the user complaint didn’t constitute a 512(c)(3) notice. UMG didn't make any progress here based on the specific facts, but unfortunately the Ninth Circuit opened up the door for copyright owners looking for notifications from non-copyright owners that the copyright owners can turn into red flags. Of course they are going to find such notices; what UGC site hasn’t gotten dragged into intra-user disputes? Unfortunately, 512(c) discovery is already ridiculously expensive, and hunts for needles in the haystack like this only add to everyone’s costs—with almost no payoff because sites should be free to ignore user gripes (non-512(c)(3) notices) in their considered judgments. Until the Ninth Circuit fixes this in a future opinion, this sloppy discussion means UGC sites must address non-512(c)(3) gripes about potential copyright infringement at peril of being accused of having red flags of infringement. This isn’t what Congress intended, so it’s a bummer the otherwise-solid opinion went off the rails here.

* The ruling absolved Veoh’s investors of liability. In a footnote, the court recognizes the importance of keeping investors free of liability, especially when the site actually qualifies for the 512(c) safe harbor:

Congress was no doubt well aware that service providers can make the desired investment only if they receive funding from investors like the Investor Defendants. Although we do not decide the matter today, were we to hold that Veoh was protected, but its investors were not, investors might hesitate to provide the necessary funding to companies like Veoh, and Congress’ purpose in passing the DMCA would be undermined.

The court says that UMG isn’t arguing that funding a venture is enough to create liability; the investors must be involved with the business operations. The court tries not to overrule one of the Napster district court rulings regarding investor liability by saying that, in the Napster case, only one investor (Bertlesmann) was involved with Napster. So long as there are more than 1 investor—and frankly, when won’t that be the case?—each individual investor can’t have sufficient control to trigger liability. In response, UMG tried to argue that Veoh had three outside board members from investors and they collectively controlled the board, but the court said UMG didn’t adequately allege that they were in cahoots with each other.

It would have been so much better if the court had just rejected investor liability outright rather than nose-counting board seats and agreements among board members. Expect copyright owners to impose discovery heck on investors, looking for any evidence that smacks of coordinated efforts among them, and expect rightsowners to make mountains out of molehills like stockholders’ agreements. Nevertheless, the Ninth Circuit opinion has enough language to raise the bar on investor lawsuits that district courts should toss these efforts on summary judgment (the needle-in-haystack discovery hunts are going to make motions to dismiss hard). Let’s hope the district courts set the bar high enough that copyright owners eventually get discouraged in pursuing investors.

* The ruling basically eliminates FRCP 68 for copyright cases (and presumably any other statutes that have express fee-shifting provisions). Rule 68 says that if a defendants offers a jdugment, is refused, but then achieves final results better than the settlement offer, the plaintiff must pay all attorneys’ fees after the offer. The idea is to motivate plaintiffs to accept fair settlement proposals—they have to be so confident they’ll do better the settlement offer because they have to pay off the defendant if they are wrong. Rule 68 provides a useful tool from a game theory standpoint, but the court eviscerates it for copyright cases. The court says that Rule 68 offers can pay off only if the judge chooses to award attorneys’ fees under 17 USC 505. No 505 fee shift, no Rule 68 fee shift. But, why is Rule 68 needed if the judge has to make a 505 fee award anyway? This makes no sense. Rebecca discusses this issue in more detail.

I know a lot of folks are interested in how this case affects Viacom v. YouTube. The news is all good for Google. First, until the Second Circuit issues its opinion, this opinion is the new high water mark for 512(c) cases; and it is the governing law of the Ninth Circuit. Second, I imagine the Second Circuit panel will take a look at this opinion, and they may choose to defer to it. The opinion isn’t airtight analytically, but it’s persuasive enough. Third, in the unlikely situation that Google loses in the Second Circuit, this opinion sets up the possibility of a bona fide circuit split that might open the door for a Supreme Court appeal.

Other coverage of the case:

* Techdirt
* Rebecca (focusing on Rule 68)
* EFF
* Michael Barclay

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

December 23, 2011

Academic Literature Recap, Q4 2011

By Eric Goldman

I'm mired in grading heck, slogging my way through 146 exams. As a result, blogging has taken a back seat. I have several key items to blog, including the UMG v. Shelter Capital and Ascentive v. Opinion Corp. rulings. I'll get to these and other topics soon.

In the interim, just in time for the holidays, let me call your attention to some recent academic articles that caught my eye this quarter. They may be worth checking out during your holidays. Happy reading!
____________

Bevin Ashenmiller and Catherine Shelley Norman, Measuring the Impact of Anti-SLAPP Legislation on Monitoring and Enforcement, The B.E. Journal of Economic Analysis & Policy: Vol. 11: Iss. 1 (Topics), Article 67 (2011). The abstract:

We examine changes in environmental monitoring and enforcement activity in the presence of state legislation prohibiting Strategic Lawsuits Against Public Participation (anti-SLAPP laws). Using data on the Clean Air Act from the Environmental Protection Agency’s ECHO database, we find evidence that state inspections increase by almost 50% after a state passes anti-SLAPP legislation. In addition, we find strong evidence that the ratio of findings of noncompliance to inspections more than doubles in the presence of anti-SLAPP legislation.

____________

danah boyd, Eszter Hargittai, Jason Schultz & John Palfrey, Why parents help their children lie to Facebook about age: Unintended consequences of the ‘Children’s Online Privacy Protection Act’, First Monday, Volume 16, Number 11 - 7 November 2011. The abstract:

Facebook, like many communication services and social media sites, uses its Terms of Service (ToS) to forbid children under the age of 13 from creating an account. Such prohibitions are not uncommon in response to the Children’s Online Privacy Protection Act (COPPA), which seeks to empower parents by requiring commercial Web site operators to obtain parental consent before collecting data from children under 13. Given economic costs, social concerns, and technical issues, most general–purpose sites opt to restrict underage access through their ToS. Yet in spite of such restrictions, research suggests that millions of underage users circumvent this rule and sign up for accounts on Facebook. Given strong evidence of parental concern about children’s online activity, this raises questions of whether or not parents understand ToS restrictions for children, how they view children’s practices of circumventing age restrictions, and how they feel about children’s access being regulated. In this paper, we provide survey data that show that many parents know that their underage children are on Facebook in violation of the site’s restrictions and that they are often complicit in helping their children join the site. Our data suggest that, by creating a context in which companies choose to restrict access to children, COPPA inadvertently undermines parents’ ability to make choices and protect their children’s data. Our data have significant implications for policy–makers, particularly in light of ongoing discussions surrounding COPPA and other age–based privacy laws.

This article stirred up a fair amount of discussion. See, e.g., the CNET coverage.

Some notes about this article:

* no one looks good here: not the kids, parents, Facebook or Congress.
- Parents teach children how to lie to get what they want online
- Gilmore’s law that the Internet interprets censorship as damage and routes around it. COPPA has been a success at getting websites to shun kids 12 and under, but it’s been a complete failure at protecting kids online.
- all of the lying kids are presumptively engaged in criminal activity

* when kids are asked to represent themselves as older than they actually are, do they inadvertently put themselves in more adult situations than they can handle? See my post on mistake of age defenses.

* the policy implications of this report cut in both directions. Pro-regulation: the only way to keep kids off Facebook is to do mandatory age authentication that parents can’t game; or do comprehensive privacy regulation. Anti-regulation: COPPA was a bust, so we should repeal it or structurally modify it.
____________

Felix T. Wu, Collateral Censorship and the Limits of Intermediary Immunity, 87 Notre Dame L. Rev. 101 (2011). We don't have too many law professor papers really grokking 47 USC 230, which makes this paper instantly noteworthy. Felix presented this paper at our 47 USC 230 fiesta earlier this year. His conclusion:

Intermediary immunity can and should play an important role in protecting speech on the Internet. Immunity prevents the application of laws targeted at original speakers to intermediaries that lack the incentives of original speakers to speak. Immunity can thus be used to avoid the collateral censorship of lawful, socially desirable speech that poses a real or perceived risk of liability to intermediaries. At the same time, immunity can and should be limited. When intermediaries are actually original speakers, and have the incentives of original speakers, immunity is no longer appropriate. Similarly, immunity as to causes of action that are specifically targeted at intermediaries inappropriately prejudges the reasonableness of such liability.

Even ardent supporters of intermediary immunity would be well-served to recognize its limits. When immunity becomes unbounded, it begins to seem increasingly unfair, stimulating calls to cut back on the immunity, or even eliminate it entirely. The framework developed here demonstrates how, without any need to amend current law, we can limit the immunity, while still serving its core purposes.

James Grimmelmann's comments about the paper.
____________

Sandra L. Rierson, The Myth and Reality of Dilution, 2012 Duke Law & Tech. Rev. ___ (forthcoming 2012). From the introduction:

This Article advances three claims. First, statutory dilution erroneously assumes that the source-identifying function of a trademark is a rivalrous good and one that is dissipated by use. This assumption lacks empirical support, and is assuredly not categorically true despite the contrary principle that underlies the federal dilution statute. If marks are nonrivalrous, as they often are, no cause of action for dilution should exist.

Second, even were particular marks indeed rivalrous, the social and transaction costs imposed by the federal dilution statute would still outweigh the supposed harm to trademark holders. Dilution claims inflict profound anticompetitive burdens, preclude beneficial comparative advertising, and entrench dominant (often oligopolist) firms at the expense of market entrants. Dilution has serious non-economic costs as well and prohibits protected First Amendment speech without justification. For these reasons and others, the federal dilution statute imposes substantially more harm than it (allegedly) prevents.

Finally, the true foundation for the federal dilution statute lies not in alleged economic harms, but rather results from an entirely misplaced fiction of corporate personality. We do not require trademark holders to prove actual economic injury in the context of a dilution claim because, in truth, there is none. Instead, we have granted the holders of famous trademarks the equivalent of a “moral” right to these marks: an extension of the rights granted to a creator of an expressive work in the copyright context. Trademark owners feel vested in their brands, many of which are deliberately anthropomorphized, and the dilution statute reifies and protects these rights as a matter of federal law.

Stacey Dogan's cogent critique of the article. You may recall that in 2007, SCU convened a major academic conference on trademark dilution.
____________

Lydia Pallas Loren, Deterring Abuse of the Copyright Takedown Regime by Taking Misrepresentation Claims Seriously, 46 Wake Forest L. Rev. ___ (forthcoming 2011). A nice in-depth look into one of my favorite topics, 17 USC 512(f), by one of my favorite authors. The conclusion:

The takedown provisions of the Copyright Act are a powerful tool that copyright owners may use to obtain prompt removal of infringing material from the Internet without judicial assessment of the assertion of infringement. Congress provided a mechanism to deter abuse of this extrajudicial enforcement mechanism in the form of a new cause of action for material misrepresentation. Courts should interpret the requirements for prevailing on a claim of misrepresentation with an eye toward fulfilling Congressional intent. This means using a standard that would hold copyright owners liable not only when they had actual knowledge that the material targeted for takedown was not infringing, but also when the copyright owner should have known if it acted with reasonable care or diligence that the material was lawful. It also means interpreting the injury requirement broadly and awarding attorney’s fees to prevailing plaintiffs. Taking the claims of misrepresentation seriously will shape the behavior of copyright owners who seek removal of material through takedown notices.

Posted by Eric at 07:55 AM | Content Regulation , Copyright , Derivative Liability , Privacy/Security , Trademark | TrackBack

December 20, 2011

Hyundai Gets a Pass from the FTC on Endorsement Issues, in Part Due to Its Social Media Policy

[Post by Venkat Balasubramani with updated comments from Eric]

In re Hyundai Motor America, FTC File No. 112-3110 (Nov. 16, 2011) [.pdf]

We've posted on the FTC endorsement guidelines, which broadly require disclosure of relationships, and incentives provided to those who endorse products or companies. ("FTC Dings PR Firm for Fake Reviews -- In re Reverb Communications"; "FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers"; "FTC Online Endorsement Guidelines Strike Again - FTC Dings Legacy Learning Over Allegedly Misleading Affiliate Reviews.") The FTC recently closed an investigation on Hyundai, whose marketing agency gave bloggers gift certificates as an incentive to "include links to Hyundai videos in their posts and/or to comment on . . . forthcoming Super Bowl ads." You can access a copy of the FTC's closing letter here [.pdf].

The FTC provided two reasons for why it closed the investigation into Hyundai's promotions:

- Hyundai did not know in advance about the incentives, which were offered by an employee of Hyundai's marketing agency.
- offering an incentive to post about or endorse a Hyundai product was contrary to the social media policies of both Hyundai and its marketing agency.

It was challenging to me to make sense of the FTC's decisions under its endorsement guidelines. Thus far, the FTC has taken action against entities who directly violate the rules (Reverb), or those who have an active role in encouraging reviews or endorsements which violate the endorsement guidelines (Legacy Learning). It seems that entities that haplessly dole out gifts with the unarticulated expectation of reciprocation in the form of an endorsement have yet to come under the FTC's knife (see this investigation and Ann Taylor). Meanwhile, the FTC seems to have given celebrities--who reportedly shill for products and companies on a regular basis without accompanying disclosures--a free pass.

The FTC's reliance on the social media policies of Hyundai and its marketing agency is interesting and yet another data point in favor of adopting a social media policy. Query as to whether the FTC's reliance on these policies is inconsistent? The FTC doesn't seem to accept affiliate agreements at face value for the proposition that companies are policing their affiliates. It's odd for the FTC to accept a social media policy for the same purpose.

Update: The FTC's Business Center blog has a nice explanation for the FTC's rationale in this matter. ("Using social media in your marketing? Staff closing letter is worth a read.") The FTC recommends following the M.M.M. approach:

1) Mandate a disclosure policy that complies with the law;
2) Make sure people who work for you or with you know what the rules are; and
3) Monitor what they're doing on your behalf.

Other coverage:

FTC Closes an Investigation Into a Blogging Promotion

"FTC Dings PR Firm for Fake Reviews -- In re Reverb Communications"
"FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers"
"FTC Online Endorsement Guidelines Strike Again - FTC Dings Legacy Learning Over Allegedly Misleading Affiliate Reviews"
____________

Eric's Updated Comments

1) The FTC Endorsement and Testimonial Guidelines are confusing to everyone, even the FTC. Recall the public discord they had over whether Ashton Kutcher broke the rules. I remain skeptical that the FTC understands what it said in its own rules.

2) Regardless of what they said, the FTC's goals are clear: they hate inauthentic content online, and that includes content that might be financially motivated without sufficient disclosure to the reader/viewer. If they could wave their magic wand and eliminate all that content from the Internet deus ex machina, they would.

3) Unfortunately for the FTC, they can't wave their magic wand, so they have to bring enforcement actions. But they have made it 100% clear that they really do not want to go after individual bloggers--even though the bloggers are the ones who the FTC thinks are actually violating the Endorsement and Testimonial Guidelines. It makes sense that the FTC doesn't want to chase individual bloggers, who are multitudinous and often legally unsophisticated, but it means the FTC refuses to go after the most responsible individuals.

4) Because the FTC won't go after the direct violators, they are casting a net for other folks to hold responsible. I've previously raised the concern that such trawling for secondary violators is impermissible under 47 USC 230, a statute the FTC wishes didn't exist. Because they are going after the secondary players with a weak theoretical justification for holding the secondary players responsible while not simultaneously enforcing the rules against the principal players, the FTC is effectively developing its rules on the fly. Not surprisingly, such an ad hoc development of rules can be hard to keep consistent.

5) Because the FTC doesn't want to unfairly impose liability on secondary players for actions they can't necessarily control, the FTC has made it quite clear that it expects advertisers playing in the financially-motivated online content space to do the following:

* tell bloggers not to break the law
* tell their agents not to break the law
* double-check after-the-fact to see if anyone has broken the law and undertake efforts to remediate those violations

This may seem a little silly and formalistic as a way of complying with the Endorsement and Testimonial Guidelines, but it appears like it's enough to satisfy the FTC.

6) As Venkat points out, the FTC's position here may be harder to reconcile with the FTC's position about other forms of liability based on affiliate actions, where the FTC may not be OK with simply including "comply with the law" provisions in the contracts and doing after-the-fact spot checking. If the FTC is going to hold advertisers liable for third party actions--a paradigm I think they should categorically abandon, especially in light of 47 USC 230--then it would be great if the FTC would publicly reconcile these different attitudes towards third party liability. Given the FTC's steadfast refusal to provide bright-line rules that might limit its future discretion, I wouldn't hold my breath waiting for such clarification.

Posted by Venkat at 07:44 PM | Derivative Liability , Marketing

Twelve Comments Filed in Response to Copyright Office Proposal to Amend 512 Designation Requirements

By Eric Goldman

With all of the focus on SOPA/PIPA/OPEN, it's easy to lose sight that a Copyright Office proposal seriously jeopardizes the 17 USC 512 online safe harbors for many service providers. Specifically, the Copyright Office proposes to expire existing agent designations and then require periodic maintenance of designations or they too will be expired. In both situations, a service provider without a designated agent instantly loses all 512(c)/512(d) eligibility--even if the failure was an administrative accident or mistake, and even if the service provider properly filed a valid designation initially. Worse yet, the Copyright Office hasn't shown how the existing database causes problems for copyright owners, so the Copyright Office is proposing to jeopardize these essential safe harbors for no apparent gain to anyone else.

In response to the Copyright Office's proposal, twelve comments were submitted, including the comment that I submitted with the EFF and Jason Schultz. Regarding the proposal to expire existing designations and require periodic maintenance of future designations, the comments broke out as follows:

AGAINST: EFF/Schultz/Goldman, Public Knowledge, Microsoft, CCIA, Matthew Neco
FOR: RIAA, Verizon/Internet Commerce Coalition (I treat these as identical because Verizon is a member of ICC, and their points were similar)
AMBIGUOUS: MPAA (seemingly leaning against the proposal but equivocal)

The CCIA’s opposition on this issue was well-stated: "it would be unsound and inconsistent with Section 512 to attempt to revoke the safe harbor and impose liability on services who do not resubmit contact information to the Office which the Office already has…Proposed § 201.38 is itself a formality which -- at least as described in the NOPR -- may also impose harsh penalties for failing to prepare redundant paperwork at the proper time."

Some of the “AGAINST” comments wondered if the Copyright Office has the power to terminate a validly filed designation, because doing so creates a forfeiture and apparently exceeds the authority that Congress provided to the Copyright Office. I do hope the Copyright Office will consider the administrative law issues carefully before doing something that leads to an expensive lawsuit over its authority.

Some other interesting points raised in the filings:

* the RIAA made several aggressive proposals, including (1) a requirement that "the service provider...disclose any shareholders or related groups of shareholders (such as a family) with a majority ownership of the service provider; and any persons or entities with a controlling interest in or decision making power over the service provider," and (2) "the Copyright Office require proof of the business address of the service provider, perhaps by requiring the entity to scan a piece of business correspondence and attach it to the designation as a PDF." I don’t see it as the Copyright Office’s responsibility to validate service providers’ self-reported information, and I thought the requirement to disclose related entities was overreaching and creates traps for the unwary.

* Microsoft proposed "that the Office consider issuing OSPs a unique identification number corresponding to their submission of a designation of agent, and requiring the OSP to post this number where it also posts information about its DMCA agent and its process for submitting notices of claimed infringement. This requirement would enable users of the OSP directory to easily link a particular website with the DMCA agent designation (and related records) maintained by the Copyright Office." While this proposal would solve one set of problems, I don’t think the Copyright Office has the authority to require the publication of this unique ID as a condition of the online safe harbor.

* Google believes only written takedown notices should satisfy the 512 requirements:

We urge the Office, however, to also note that takedown notices sent to designated agents must be in the form of a written communication. We are concerned that the clarifications and the availability of a phone number do not lead to a requirement that service providers designate a specific person to be contacted for voice communication or that leaving of takedown notices be authorized via phone calls or voice mail. Accepting takedown requests via phone or voicemail would present a multitude of problems: for example, lack of documentation to send on to the alleged infringer, lack of signature, problems with verifying identity, detecting abuse, lack of accurate metrics, scalability, and potential differences of opinion about what was identified.

While I completely agree about the problems of non-written takedown notifications, I’m pretty sure 512 doesn’t give the Copyright Office the power to effectuate this request.

* The Verizon/ICC filings encouraged the Copyright Office to warn rightsowners not to misuse takedown notices. For example, the ICC filing says "we urge the Copyright Office to post a prominent notice at the entry point to the database warning entities submitting DMCA notices that knowing material misrepresentations in 512(c) notices may trigger monetary liability."

* The ICC filing also gave a specific example of the privacy issues raised by the designated agent database:

One woman who works as a designated agent for one of our member companies has received harassing “stalking-type” messages from people who are not copyright owners, but found her name through an agent designation. For precisely this sort of reason, it is important to allow email addresses of designated agents to reflect their function, rather than their name, and to allow designated agents to list P.O. Boxes as their address, wherever their address is a home address.

I frequently use the designated agent database to find contact information for a company when other resources fail me.

* The MiMTiD filing was a piece of work. It appears to misunderstand the existing 512 safe harbors, and most of it is just a rant against Google.

If you want to comment on the Copyright Office proposals, do so quickly. Reply comments are due December 27.

Posted by Eric at 08:00 AM | Copyright , Derivative Liability | TrackBack

December 10, 2011

The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP

By Eric Goldman

Sen. Wyden and Rep. Issa have released a draft of OPEN: Online Protection & ENforcement of Digital Trade Act, intended as an alternative to SOPA/PROTECT-IP. See my prior posts opposing SOPA and linkwrapping the discussion. Unlike SOPA's disgustingly blatant rent-seeking, which was such an over-the-top abuse of the legislative process that it did not (and could not) support a principled or even intelligent conversations about it, OPEN provides a useful starting point for a sensible conversation that could actually lead to acceptable compromises. For that reason alone, I think Congress should immediately stop all work on SOPA/PROTECT-IP and redirect that energy towards vetting this proposal. Having said that, for reasons I'll explain in a moment, I continue to believe the assumptions underlying SOPA/PROTECT-IP and OPEN are misguided, meaning that forging a compromise from OPEN’s more sensible proposal may be tricky.

Before I get further into substance, two process notes:

First, SOPA was the product of rent-seekers who were talking only amongst themselves and legislators tethered to their campaign contributions. The drafting process was disturbingly closed-door and exclusionary, exactly the kind we wish didn't take place in our representative democracy. In contrast, the OPEN sponsors want to have a dialogue about their ideas. In support of that, they have posted the draft to a website that allows comments and discussion. This is the way our democracy SHOULD work. Why is such an open process the exception instead of the rule?

Second, OPEN is a comparatively svelte 18 pages focused mostly on one core concept, compared to SOPA's 78 page monstrosity that advanced about a dozen different substantive proposals. I can't tell you the number of times I've seen very smart people stymied to keep all of SOPA's moving parts separate, and the failure to do so meant that they were conflating different parts of the statute in ways that prevented productive discussion. (Just two examples: the Colbert Report, where Zittrain mostly focused on SOPA's felony streaming provision while his counterpart was mostly talking about the cutoff provisions; and Business Insider's infographic where the felony streaming sanction was presented as a remedy to the cutoff provisions). By reducing the number of topics at issue, OPEN substantially reduces the chance that policy discussants will simply talk past each other.

An Overview

The law contemplates that rightsowners can file a petition against rogue websites at the ITC, an independent federal agency best known for its adjudication of certain patent disputes. In response to the rightsowners’ petition, the ITC will conduct an administrative adjudication. If the ITC determines that the website is a rogue website, then (1) the website is required to cease its conduct (not sure how enforceable that is), (2) the site also will be subject to any other unspecified consequences following from its determination as a rogue actor, and (3) most importantly, the rightsowner can take the ITC determination to payment service providers (PSPs) and ad networks and have them cut off the flow of money to the rogue website. The PSPs and ad networks would be protected by several immunities for trying to comply with the orders or their other efforts to protect the public.

This makes OPEN similar to SOPA in that it seeks to cut off funds flowing to rogue actors. However, among other key differences, PSPs and ad networks have no legal obligations until the ITC makes a ruling. In contrast, SOPA imposed cutoff obligations on PSPs and ad networks based merely on rightsowners’ unsubstantiated assertions.

What's Good

Substantively, some of the things I liked about OPEN:

* it situates the discussion about "rogue websites" in foreign trade policy. This fixes SOPA's overinclusive application to both domestic and foreign actors. However, if we really think rogue websites are a transborder enforcement problem, there are many other trade policy solutions that might be better options to consider—the most obvious being transborder enforcement coordination like the FTC does with its foreign counterparts.

* OPEN doesn’t touch the domain name system or search engines. SOPA had the potential to destroy the DNS and to jeopardize search engine functioning. OPEN sidesteps both pitfalls.

* OPEN builds in some due process before any formal legal obligations attach. As we've recently seen, due process is actually quite important, and we suffer from its absence. I say “some” due process because I’m not sure how much due process will attach in practice. For example, I have some concerns about the notice provision--not every targeted website will receive notice of the ITC investigation. However, I did like that any website the ITC labels as rogue can correct any identified problems, reapproach the ITC and ask it to remove the “rogue” determination.

* the definition of rogue website is tightened up substantially. It requires three elements:
a) a "non-domestic domain name," which requires that the registry, registrar and registrant all have to be located outside the US (I'm not sure what "located" means in this context). Venkat asked me what happens to a .com registered with a foreign registrar; I believe OPEN does not apply to this domain name.
b) conducting business in the US; and
c) "has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site to willfully engage in infringing activity."

The last element, in particular, is quite restrictive by requiring willful infringement. The meaning of the word "willful" is notoriously murky (see, e.g., the multitudinous Supreme Court cases over the word), so the statute would be improved by using a more detailed synonym. No matter what, though, willful is a high scienter level that should easily exclude most legitimate players. The statute further expressly excludes any sites that:

- follow good notice-and-takedown procedures
- qualify for 17 USC 512 (the DMCA online safe harbors) [this means that the statute sits next to 512 instead of rendering 512 moot like SOPA threatened to do], or
- distribute "copies that were made without infringing a copyright or trademark." I’m not 100% sure what this means. It apparently excludes websites reselling goods covered by the First Sale doctrine. I presume that the exclusion includes sites that sell legitimate knock-off goods, such as replicas of goods that aren’t protected by copyrights or trademarks.

* if a PSP or ad network fails to comply with an ITC order, the only consequence is that the DOJ can seek injunctive relief. Rightsowners do not have a private cause of action in those cases. As discussed below, this doesn't eliminate all PSP/ad network exposure to rightsowners, but rightsowners can't introduce evidence of ITC orders in any civil suits they bring against PSPs or ad networks.

* on the trademark side, it expressly limits its applicability to counterfeiting (although there is a erroneous cross-reference in the draft). Presumably, dilution or garden-variety trademark infringement disputes don't qualify under the statute.

What's Not Good

Substantively, some of the things I don't like about OPEN:

* OPEN still contemplates reestablishing a Fortress USA. Fortress USA marginally makes sense regarding the shipment of physical goods across geographic borders. It makes zero sense for digital bits zinging around the borderless network.

* in particular, because OPEN would burden only US-governed PSPs and ad networks, it may drive websites—including legitimate websites who want to reduce their risk of being mistargeted—to shift their business to foreign-based PSPs and ad networks. If lots of businesses make a switch based on these concerns, OPEN could counterproductively result in net financial losses for the US economy.

* similarly, foreign websites can opt-out entirely of the ITC process by consenting to US judicial jurisdiction. I like the idea of an opt-out, but imagine if other countries offered the same quid-pro-quo of allowing US websites to opt-out of some nasty foreign process so long as the websites consent to jurisdiction in their countries. I think we’d be outraged and insulted; which is how I would expect foreign countries to view this quid-pro-quo. Cf. Venkat's recent post on Facebook v. Faceporn. Then again, other countries might think it’s a pretty good idea, leading to a proliferation of transborder quid-pro-quo jurisdictional offers.

* designating the ITC to conduct the investigations is a little odd. First, the ITC is an administrative agency, not a federal court. I don't fully understand all of the implications of administrative vs. judicial review, but I believe there are substantial procedural differences that could lead to important substantive differences. Second, the ITC has been gamed in the patent world (see, e.g., my colleague Colleen Chien's research on the ITC explaining how the ITC hears many US company vs. US company disputes), so I fear similar gaming will emerge. For example, a rightsowner chasing a rogue website could simultaneously pursue a domestic court action, a foreign court action and an ITC proceeding. How would these types of parallel proceedings play out in practice? We’re still trying to resolve the parallel proceeding problems in patents.

* like SOPA, the bill covers copyright infringement, trademark infringement *and* 1201 circumvention. I don't understand why the circumvention issue is getting equal billing or how often transborder circumventions are a real problem. Seeing how 1201 circumvention lawsuits have devolved into anti-competitive enforcements, picking up the circumvention piece could increase the risk of competitive misuse of the statute.

* like SOPA, the definitions are vague. Consider, for example, the definition of Internet advertising service:

The term Internet advertising service means a service that serves an online advertisement in viewable form for any period of time on an Internet site.

Hmm...what does that mean? Notice that the definition doesn't directly distinguish between third-party ad networks and sites that sell their own ads. I think in practice sites that sell their own ads drop out of the statute, so one possible implication is that more sites will ramp up their own ad sales. (This is doubtful, but just throwing the possibility out there). I think the focus on "viewable" is interesting; are audio-only ads excluded? And what does it mean to "serve" content? This contemplates a specific technological interaction that I don't fully understand today and will almost certainly evolve over time.

Why I’m Not Enthusiastic About OPEN

Even though OPEN is worth discussing intelligently, unlike SOPA, I believe it's based on two underlying assumptions that aren’t fixable.

First, like SOPA, OPEN assumes there is a problem with foreign rogue websites that needs to be solved. I'm not saying there isn't, but the policy discussions have been startlingly devoid of reliable and credible facts demonstrating the nature and scope of the problem.

Instead, the evidence in support of a rogue website "problem" typically consists of two main threads: (a) people are dying from counterfeit drugs, and (b) bad guys are "stealing" our stuff. With respect to the former, I've never seen anything more than ad hoc assertion; but if there’s a real problem, counterfeit drugs can be fixed with a highly targeted solution. With respect to the latter, it's hard to give those arguments much credit. After all, all of rightsowners’ arguments are inherently self-interested: it's in their financial interest to say that they would like to make more money than they are making. It's also in their interest to bemoan broad sectoral changes in the economy as evidence that someone is capturing money they think they are entitled to (and to use rent-seeking to thwart those broad sectoral changes). More importantly, there is lots of evidence that a lot of rightsowners are making a lot of money today, both via the Internet and more generally. So it's hard to break out the quantity of actual economic losses that rightsowners are truly suffering when those claims are intermingled with rightsowners’ general rent-seeking efforts.

Therefore, until the rightsowners offer us more than the trumped-up BS already-discredited statistics, I'm still not clear on the problem, how bad it is, how any legislative solution would remediate that problem, and if the collateral consequences of the effort to remediate the problem are greater or less than the problem itself. OPEN does nothing to fill the void of supporting foundational evidence of the problem, so it's hard for me to be enthusiastic about its solution.

Second, and more importantly, attacking the money supply to supposed bad actors remains too blunt an instrument. I may be truly on my own on this point, as many people I respect--including, notably, Rep. Lofgren--are prepared to embrace the policy solution of cutting off money flows. However, by embracing an attack on the movement of money, OPEN replicates one of SOPA's sins. If a player is engaged in legitimate and illegitimate activity and its money supply is cut off, both activities go down the tubes. In contrast, one of the positive aspects of 17 USC 512(c) and (d) is that they require the copyright owner to identify infringing items and target only those items. Giving rightsowners a remedy that would affect an entire site for only some items on the site goes too far.

The OPEN bill tries hard to minimize overbreadth by narrowly defining the targeted websites. Perhaps this definition is narrow enough that there won't be much collateral damage. However, in practice, regulating money flows nevertheless could have pernicious effects in the field. A PSP or ad network drawn into an ITC proceeding frequently will “voluntarily” choose to toss the targeted website before the ITC proceeding reaches its conclusion—even if the ITC proceeding would have rejected the challenge. Furthermore, rightsowners still will send cutoff notices to PSPs/ad networks without filing any ITC petition, and the PSPs/ad networks will often honor them as a way of preempting an ITC proceeding.

What this teaches me (in combination with the Elsevier v. Chitika case) is that PSPs and ad networks need robust statutory immunities which are not based on a notice-and-takedown scheme. On the trademark side, the need for an immunity became clear after the sloppy language in Gucci v. Frontline. On the copyright side, 512 doesn’t cover PSPs and ad networks, probably because in a million years the safe harbor drafters never thought PSPs and ad networks would be liable for third party infringing activity in the first place. Now that we've seen copyright law and trademark law creep much further than we could have imagined in 1998, we should plug this liability hole completely. If OPEN proceeds, it should have a broad-based immunity for PSPs and ad networks with the idea that rightsowners are getting a specific remedy against them in the new law.

While OPEN can’t really be fixed to resolve my two structural concerns, my hope is that the discussion about OPEN will force rightsowners to provide *credible* evidence of harms that they or consumers are suffering (no more self-serving hype, please), and that such evidence will force us to think carefully about how "rifle shot" solutions (as opposed to shotgun solutions) can ameliorate those harms. If we have a discourse that even slightly resembles this ideal, then OPEN will be successful no matter what final outcome we reach.

Posted by Eric at 09:55 AM | Copyright , Derivative Liability , Search Engines , Trademark | TrackBack

December 07, 2011

I Don't Heart SOPA or PROTECT-IP: A Linkwrap

By Eric Goldman

Venkat and I have been covering SOPA and related topics. In case you missed our posts:

* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

Next week, SOPA is supposed to go to committee markup. In anticipation of that, some of the SOPA-related links from the past few weeks that have caught my attention:

* Bose v. Ejaz (D. Mass Nov. 7, 2011). Paypal cut off funds transfers to an International eBay merchant at the request of Bose, a rightsholder. The court rejects the merchant's tortious interference claim.

* Techdirt: The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas

* Politico: Shootout at the digital corral. The entertainment industry spent $91M this year on lobbying. Tech industry spent $15M. Guess who wins that battle?

* Op-eds against SOPA from NYT, LA Times and the Economist.

* EFF: What's On the Blacklist? Three Sites That SOPA Could Put at Risk

* Public Knowledge explains why PROTECT-IP isn’t an acceptable compromise to SOPA. Both "solutions" are off-the-charts extreme.

* Wired: Analysis: Internet Blacklist Bill Is Roadmap to ‘the End’ of the Internet.

* WaPo: SOPA opposition goes viral. Partially related: interesting stats about SOPA's lack of popularity.

* DHS/ICE seize another 150 domain names. Who needs SOPA? Reuters’ coverage.

* Hollywood Esq.: How Controversial Antipiracy Laws Could Be Enacted Even Without Congress.

* Nazerali v. Mitchell, 2011 BCSC 1581 (B.C. Sup. Ct. Oct. 19, 2011): A Canadian court ordered Google and other support providers to cut off the domain name of an allegedly defamatory website.

* EFF: Free Speech is Only as Strong as the Weakest Link. Check out their new resource, www.globalchokepoints.org.

* The RIAA wrote a letter to the editor headlined “RIAA largely succeeds in goal of bringing piracy under control.” Yet, they insist that SOPA is needed?

* Amusingly misguided: The $500,000,000 Cost of Google’s Five Million DMCA Notices. Partially related: Techdirt: As We Complain About SOPA & PIPA, Don't Forget The DMCA Already Has Significant Problems

Posted by Eric at 08:48 AM | Copyright , Derivative Liability , Trademark | TrackBack

December 05, 2011

Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

By Eric Goldman with comments from Venkat

Elsevier, Ltd. v. Chitika, Inc., 2011 WL 6008975 (D. Mass. Dec. 2, 2011). Chitika's brief supporting its motion for judgment on the pleadings. Elsevier's opposition. Chitika's proposed reply brief.

As Venkat recently indicated, while Congress generates massive amounts of hot air discussing SOPA, there's a common law battle quietly brewing with rightsowners seeking to obtain in court the same basic remedies that SOPA would provide statutorily. This judge nixes this rightsowner's request, but this is hardly a win for SOPA opponents or ad networks.

Elsevier publishes textbooks. This lawsuit involves pharmatext.org, a (now-defunct) site that provided links to allegedly infringing copies of Elsevier's books. We'd now characterize pharmatext.org as a possibly rogue website. I previously blogged about this case in January, when the judge issued a dense and troubling ruling that ordered ad networks Chitika and Clicksor to freeze the site's money and stop serving ads to the site. It also ordered the domain name privacy proxy to freeze the domain name and identify the owner. Basically, Elsevier got much of the relief that SOPA now seeks to enact as law.

But hold on a second. The court's January order was based on ex parte proceedings. Chitika subsequently showed up to contest the case, and surprise! The court reaches a different result after adversarial proceedings. Let's hear it for due process!!! YEAH!

[Note: you may recall Chitika separately had an unfortunate legal scrape with the FTC.]

Chitika first argued that Elsevier never proved any direct copyright infringement in the United States because Pharmatext.org's operator, Saggi, was based in India, and the site had no US presence. Elsevier argued that it had test downloads done by US investigators, so there was infringing activity in the US. The court nearly blows a gasket before punting this sticky jurisdictional issue:

While it appears that Chitika may eventually be entitled to judgment on this ground (that is, plaintiffs’ failure to allege any act of direct infringement occurring entirely within the United States), factual issues involving the structure of the Internet and the locus of the infringing activity remain (Where did the copying take place? Where are the third-party websites and servers, from which unauthorized copies of plaintiffs’ books were downloaded?). These issues preclude the granting of the motion on this ground.

For more on the jurisdictional question, see, e.g., the Shropshire case. This locus-of-infringement question is quite interesting, especially as applied to "foreign" rogue websites, but SOPA largely sidesteps all of the doctrinal complexity (and creates its own mess).

Without resolving whose the underlying direct infringer, the court instead considers Chitika's contributory copyright liability. The court concludes that Chitika doesn't have the requisite knowledge of infringement:

Plaintiffs do not allege facts showing that Chitika was familiar with the content of the Pharmatext website, or knew (or had reason to know) that such content was infringing. Thus, plaintiffs fail to support with plausible facts their conclusory allegations that Chitika “must have had knowledge” of the alleged infringement of plaintiffs’ books...and that Chitika “plac[ed] ads on the Pharmatext site because [it] believe[d] that Pharmatext users – in other words, people seeking to obtain pirated copies of copyrighted books – are a target audience for particular advertisers.”

Notice this leaves open what would have happened if Elsevier had sent a takedown/cutoff notice to Chitika. Presumably, such a notice would have conferred the requisite knowledge to Chitika.

Heavily relying on Perfect 10 v. Visa (even though it wasn't binding precedent in Massachusetts), the court also rejects Chitika's material contribution to the infringement. The court says:

while Chitika’s advertising payments might make it easier for Saggi’s infringement to be profitable, Chitika did not create, operate, advertise, or promote the infringing websites, and its advertisements were not the “site” of the infringement.

However, the court hedges at the end, saying it wasn't deciding the issue definitively because Chitika's lack of knowledge resolves this case.

In a footnote, the court explains why Judge Kozinski's dissent in Perfect 10 v. Visa is unhelpful to the plaintiffs:

in contrast to Visa, Chitika did not provide an “essential” service to Saggi that enabled infringement on a “massive scale.” Plaintiffs make no factual allegations that Chitika knew about any infringing activity, nor is there any evidence that Chitika was “intimately and causally involved in a vast number of infringing transactions.”

This is a little garbled (because it references the defendant's knowledge in the consideration of material contribution), but it seems like the court suggests that ad networks may be in a different position than payment service providers because ad networks don't have the same multi-iteration "transactions" with the rogue website.

Notice that this court totally sidestepped (or missed?) the tertiary liability aspect of this case--that Chitika was a support provider to a site that only provided links to allegedly infringing files. To me, it would be entirely appropriate for the court to say that any tertiary player categorically lacks the ability to materially contribute to infringing activity. Otherwise, once we start doing a dragnet for service providers to service providers to infringers, the universe of potential defendants grows to a ridiculous size.

In the end, the court grants Chitika's Rule 12(c) motion for judgment on the pleadings. Broadly construed, this ruling is a win for ad networks, indicating that they are not automatically liable for contributory copyright infringement simply because allegedly rogue websites participate in their networks. But I'd hardly call this a resounding win. Elsevier didn't send Chitika a cutoff notice, giving the court an easy escape valve on scienter, and the court waffled on the material contribution prong. I would expect this opinion to look very different if Elsevier sent a cutoff notice and Chitika didn't promptly drop Pharmatext. In so, rightsowners like Elsevier probably can get 90%+ of the benefit of SOPA Section 103 simply by sending cutoff notices to ad networks.

Notice also that in the face of a cutoff notice, Chitika would not stand up to defend the alleged rogue website publisher in its network. Chitika alleged that Saggi accrued about $500 in royalty payments over 29 months of service. Assuming Chitika does 50/50 splits with its publishers, Chitika will not expend an ounce of effort to preserve its $17/month revenue stream from Saggi. Thus, Elsevier's cutoff notice would be dispositive--even if Chitika could win a ruling like this (which would be more uncertain after Chitika gets a cutoff notice), it's not worth the fight. So after Elsevier's cutoff notice to Chitika, Chitika instantly tosses Pharmatext overboard like a piece of garbage, due process be damned. SOPA isn't required to get that result.
__

Comments from Venkat:

As Eric points out, Elsevier is trying to hold Chitika liable under a theory of tertiary liability. It's far from clear that Pharmatext is liable to Elsevier for merely linking to infringing downloads. Columbia Records v. Fung is currently pending in the Ninth Circuit, and it should shed some light on how extreme the facts need to be in order to hold a website liable for merely linking to allegedly infringing downloads. (Here's Eric's post on the district court opinion in that case: "Torrent Sites Induce Infringement and Lose DMCA Safe Harbor--Columbia v. Fung." I expect the Ninth Circuit's ruling on the appeal fairly soon.)

The question of infringement that occurs purely off-shore is interesting. As Eric mentions, the court questions whether a site that is totally off-shore can be held liable if there's no predicate act that occurs in the United States. I wonder if this is a legitimate argument for rightsowners as to something in the rules that should be 'fixed'? If Elsevier has no recourse in US courts against Pharmatext, should this automatically undermine any possibility of going after service providers of rogue sites?

Finally, as to the issue of whether Chitika has the requisite knowledge of the underlying infringements for Elsevier to be able to hold it liable, query as to whether any search terms that were used to target could be used to show the requisite knowledge on Chitika's part. The use of search terms as a proxy for intent has come up in the copyright context (e.g., it was used against Limewire as indicative of its intent to lure Napster users) but it would seem less probative in this context.

Posted by Eric at 09:20 AM | Copyright , Derivative Liability | TrackBack

November 30, 2011

Fraud Allegations Don't Trump 47 USC 230--Hopkins v. Doe

By Eric Goldman

Hopkins v. Doe #1, 2011 WL 5921446 (N.D. Ga. Nov. 28, 2011). The initial complaint. Hopkins' lawsuit-related website.

This lawsuit relates to allegedly defamatory statements that Does made about Hopkins on Topix. As a pro se, Hopkins sued both the Does and Topix. Topix naturally invoked 47 USC 230, and the court easily concludes that it qualifies for the immunity. The court says:

At bottom, Plaintiff seeks to hold Topix liable for simply publishing the defamatory conduct and the consequences which flow from that decision....All of Plaintiff’s state-law claims are preempted by the CDA’s immunity, and Plaintiff has therefore failed to state a claim.

It appears the plaintiff tried to work around 47 USC 230 by arguing that Topix had made on-site promises to address problematic content and Topix didn't uphold those promises. The court rejects the workaround: "It does not matter that Plaintiff has attempted to skirt this preemption by alleging that Topix fraudulently violated its own policies by not policing its content in a timely fashion." This is unquestionably correct (see, e.g., the uncited Milo v. Martin), but it reinforces that breach of contract workarounds to 47 USC 230 don't necessarily work. For more on the 230/contact interplay, see my recent article on online account terminations.

Hopkins appears to have taken this defeat in stride and is now refocusing his attention on the correct targets. He posted a statement on his website about this ruling:

The Federal Court basically ruled that Topix is completely protected under the Communication Decency Act of 1996 (CDA) which basically allows Internet Providers to act Indecently. So they dismissed Topix, and then remanded the case back to Superior Court in regards to all the John Does, which I will now focus on.

So I tried. I did the best I could. Many people reviewed my work and said that it had as good a chance as anything they could imagine. But inthe end the lesson learned seems to be that until Congress changes hte CDA, then people like Chris Tolles, running companies like Topix, have a free reign to allow Indeecent Communications to flourish and destroy lives. Chalk one up for evil. But we fought. Sometimes that is enough. Now we need to see where this goes.

As for me - I am now hunting certain John Does.

Posted by Eric at 05:05 PM | Derivative Liability | TrackBack

November 28, 2011

Dangerous Copyright Office Proposal to Undercut the DMCA Online Safe Harbors

By Eric Goldman

In light of SOPA and its capacity to destroy the current online safe harbor scheme, it seems almost quaint to keep worrying about 17 USC 512. However, unless SOPA/PROTECT-IP passes, 512 remains an essential part of the UGC economy, and it's worth fighting to preserve the safe harbor's integrity and all of the social benefits that have flowed from it.

Recently, the Copyright Office floated a proposal that would result in websites completely losing the 512 safe harbors due to administrative technicalities. Specifically, the Copyright Office proposes to force all websites that currently have properly designated an agent for notice to re-register or they will automatically forfeit the safe harbor; then, the Copyright Office proposes to require all websites to take affirmative action to confirm their designation every two years or they will automatically forfeit the safe harbor.

Unquestionably, the proposal's net effect will be that well-meaning legitimate websites will lose their safe harbor protection due to unintentional or garden-variety clerical/administrative errors. Further, there is almost no countervailing benefit to copyright owners or the Copyright Office from the additional administrative requirements.[**] Indeed, the Copyright Office proposal inevitably will increase the litigation costs for both copyright owners and UGC websites as it gives them yet another thing to litigate over--as if 512 opinions weren't long enough already.

[**: Perhaps I've overstated things. In fact, the proposal may offer indirect benefits to both copyright owners and the Copyright Office. First, copyright owners might be happy that more UGC websites become easy targets for their lawsuits. Second, I wonder if the Copyright Office plans to use filing fees to extract more profits from UGC websites, something they didn't expressly say but I have my suspicions].

Working with Corynne McSherry of the EFF and Jason Schultz from UC Berkeley, today we filed comments to the Copyright Office proposal encouraging them to scrap this part of the proposal. Our comments are just 3 pages long, so take a look. The initial comment due date is today; reply comments are due Dec. 27.

Posted by Eric at 09:20 AM | Copyright , Derivative Liability | TrackBack

November 23, 2011

eBay Gets 47 USC 230 Dismissal of Products Liability Claim--Inman v. Technicolor

By Eric Goldman

Inman v. Technicolor USA, Inc., 2011 WL 5829024 (W.D. Pa. Nov. 18, 2011)

Today, I'm thankful for 47 USC 230. Whenever I think about it, I am still incredulous the law is on the books. Nowadays, Congress' agenda is bulging with proposals from rent-seeking monopolists seeking to break the Internet with the hope of goosing their short-run profits. But 15 years ago, Congress shockingly found a way to foster a new multi-billion dollar UGC industry by restricting lawyers rather than empowering them. And the benefits of the UGC industry make my life better every single day. So thank you to Congress and the foresighted members who recognized that they could do some good with a strong immunity. For more on the history of 47 USC 230 and how it helps today, see the materials we produced from our 15 year anniversary party for 47 USC 230 back in March.

What better way to give thanks for 47 USC 230 than to discuss a case where the 230 immunity got it right. Today's case involves vacuum tubes that contain mercury, some of which third party merchants resold on eBay. Inman, the plainitff, allegedly bought these vacuum tubes and contracted mercury poisoning. He sued nearly two dozen defendants, including eBay, under product liability theories.

eBay defended on several grounds, but I'll focus on 47 USC 230. This is a really easy 230 case; the immunity says eBay can't be liable for what its merchants sell, and the court has little difficulty getting to that point. The court concludes:

the CDA protects eBay from liability for Tube Zone's tortious activity in this case. Inman does not appear to dispute that eBay is an interactive computer service, as defined by 47 U.S.C. § 230(f)(2), or that Tube Zone is not affiliated with eBay beyond its use of eBay's website. It is true that Inman was injured by tortious conduct. However, whether information disseminated through a website results in a tortious act has no effect on immunity under the CDA. Like the malicious program in Green and the gun sale in Gibson, the alleged sale of vacuum tubes in this case was facilitated by communication for which eBay may not be held liable under the CDA. Therefore, to the extent Inman seeks to hold eBay liable for Tube Zone's tortious conduct, eBay is immune.

A number of prior cases have dealt, expressly or implicitly, with an attempted products liability workaround to 230's immunity. For example, Gibson v. Craigslist dealt with a criminal who bought a gun via Craigslist; and Doe v. MySpace dealt with a "premises liability" type claim. Neither claim made any headway against the 230 immunity. This case also cites some older precedent on the same track, including Green v. AOL, Stoner v. eBay and Gentry v. eBay. However, I think this is the cleanest opinion rejecting a products liability attack on 230's immunity.

The only sour note is that the court dismisses eBay without prejudice, so the plaintiff will get another opportunity to fail before 230 slams the door shut permanently.

This case is a prime example of why 47 USC 230 works so well. If eBay was liable under a product liability theory for every product sold in its marketplace, the potential liability would be enormous--eBay can't inspect the goods its merchants sell, eBay merchants sells millions of unique goods, and who knows which goods will harm victims in what way. eBay could act as the ultimate insurer of all of these harms, but only at extreme cost; and requiring that level of insurance would erect enormous barriers to entry and suppress any possibility of innovation. Meanwhile, there are plenty of other defendants for a claim like this, starting with the manufacturers who put mercury into their vacuum tubes. So making eBay an additional defendant does little to help plaintiffs but would subtract a lot from our economy. Avoiding outcomes like that satisfies me even more than a (faux) turkey dinner. Happy Thanksgiving!

Posted by Eric at 09:48 AM | Derivative Liability | TrackBack

November 15, 2011

Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

By Eric Goldman

[Note: I've been working on this post for about 2 weeks, so my apologies if my comments are duplicative of the intervening discussion about the bill]

The DMCA online safe harbors have worked pretty well over the past 13 years. I don't know that anyone loves the compromise, but everyone seems to have done OK. We've seen an explosion of UGC websites fueled by the safe harbor, and content owners as an industry have done pretty well for themselves financially and have developed a working relationship with most major UGC sites.

The Stop Online Piracy Act, with its ridiculously named subpart the "E-PARASITE Act," doesn't expressly modify 17 USC 512. Nevertheless, it is a full-fledged assault on the safe harbor's scheme. It employs the same basic notice-and-takedown structure of 512, but it applies the cutoff obligations to payment processors and ad networks (thus effectively reversing Perfect 10 v. ccBill and Perfect 10 v. Visa), expands--for the first time--the takedown obligations to trademarks (thus embracing and expanding Gucci v. Frontline), expands the takedown obligations to cover anti-circumvention in addition to the 17 USC 106 rights, expands the reasons why a rightsowner can complain, and does not give the governed intermediaries any business incentive to stand up for user content. On the latter point, because SOPA is designed to cut off the cash, each and every UGC item potentially jeopardizes its entire economic enterprise of a website hosting it. In other words, if the website goes offline because of cash flow problems caused by the cutoff attributable to a single UGC content item, all of the UGC on that website goes dark because of a single content item. Talk about collateral damage.

Thus, among other adverse consequences, if SOPA passed, it effectively repeals 17 USC 512 by shifting most of the action to the notice-and-takedown process in SOPA. In doing so, SOPA radically changes the balance between content owners and UGC websites. Despite the FUD from the content industry and other bill supporters about the supposedly serious problems caused by "rogue" websites and the supposedly fine-grained targeting of this bill, make no mistake--this law mortally threatens the entire UGC community.

There are a lot of other serious problems with the law and I'll discuss a few in a moment, but let me step back for a moment. Some legislative proposals, even if everyone knows they won't pass, are nevertheless useful for sparking healthy conversation among disparate communities. SOPA is not such a law. It doesn't seek to engender productive conversations. Instead, it goes out of its way to pit Silicon Valley v. Hollywood. This fosters unhealthy and antagonistic conversations, and the ongoing battle between the two diverts valuable resources that could be used to enrich both communities. See, e.g., the $100M+ that Google has spent fighting Viacom in the YouTube lawsuit--a huge amount of money that could have been instead invested in new services that benefit consumers, help rightsowners make more money and generally improve society.

Further, this law represents the worst kind of rent-seeking we see from incumbent industries. One approach to drafting legislation is to put so many objectionable concepts into a single bill that the opponents feel like they won if they clean up 50% of the problems, but that still leaves the other 50% of nasties to get through the system. I find it dispiriting that we must spend a lot of resources just to preserve the status quo from this type of industry overreaching. I support democracy for the reasons articulated by Winston Churchill, but I wished I lived in a democracy where attempts at legislative manipulation like SOPA were obviously DOA and led to its proponents suffering appropriately adverse consequences for their overreach.

In addition to the trumping of the 512 notice-and-takedown provisions, other major structural deficiencies of the law include:

* attempting to reinstantiate geographic borders on the Internet. Perhaps rebordering the Internet is inevitable, but it's bad policy for the United States to be cutting off transborder data flows, even for the putatively noble purpose of suppressing copyright infringement. Basically, the law provides a roadmap to foreign governments on how to reinstantiate geographic borders over their Internet connections, and they won't limit their censorship to copyright infringement. Instead, they'll go for the whole enchilada to restrict every type of foreign content the governments object to. (It seems virtually inevitable that we'll do the same in the US too, but that's a separate post). It will be hard for us to criticize those foreign governments' efforts because we taught them how to do it. The retort that we only deemed border reinstantiation worthy for copyright infringement and no other content type will ring hollow. When the Internet balkanizes into the US Internet, which looks nothing like the Egypt Internet, we'll have no one to blame but ourselves. I encourage the act's proponents to think very carefully whether such a Balkanized Internet will make them less money in the long run.

* The imposition of cutoff obligations on a wide variety of intermediaries, including Internet access providers and search engines in addition to the payment processors and ad networks I discussed above.

* Terms that don't lend themselves to precise statutory definitions, including "Internet advertising service," "Internet search engine," and "Internet site." All of these definitions are broad, ambiguous and based on assumptions about current technology. They don't make sense today and will look even sillier 10 years from now.

* the complete absence of empirical evidence supporting the need for any changes, or that the proposed changes fix any important problem. The collateral consequences would be unacceptable even if this evidence existed; without it, it's hard to interpret this law as a good faith effort to improve society.

While most of the discussion has been justifiably focused on the cutoff provisions, I also want to call your attention to Section 205 of SOPA. The way I read it, it proposes to build a huge bureaucracy of foreign diplomats whose sole job is to advance the interests of US IP owners in foreign countries. We already have problems with USTRs being IP maximalists, but this section would dramatically expand the number of IP maximalists in the US diplomatic corps. I'm not sure I have a good handle on all of the implications, but it seems like (1) we'll have more opportunities for the revolving door from IP owners to government and back, (2) this will further inculcate the agenda of legacy/incumbent IP industries into our government policy, and (3) we will have more boots on the ground to push the US IP maximalist agenda on other countries as part of our doctrinal imperialism.

There has been a lot of commentary about the bills. Some links worth exploring:

EFF Coverage

SOPA: Hollywood Finally Gets A Chance to Break the Internet (an excellent single-stop resource to begin your research)

Proposed Copyright Bill Threatens Whistleblowing and Human Rights

Techdirt

[I know you're already reading Techdirt, but no one is doing a better job of chronicling the day-to-day SOPA developments than Mike Masnick.]

E-PARASITE Bill: 'The End Of The Internet As We Know It'

MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized [a must-read article of how content owners who should know better nevertheless mistakenly accuse legitimate businesses of infringing activity and, using the power of law enforcement, shut down legitimate businesses and cost Americans jobs]

Go Daddy Supports E-PARASITE Legislation Even Though Its Own Site Is Dedicated To Theft Of Property Under Terms Of The Bill

Viacom Exec: 'Everyone Knows A Rogue Site When They See One'… Except He Doesn't

Others

Larry Downes, News.com, SOPA: Hollywood's latest effort to turn back time

Future of Music Coalition, Coming Clean on SOPA

Rebecca MacKinnon, New York Times, Stop the Great Firewall of America

Public Knowledge, SOPA and Section 1201: A Frightening Combination

James Temple, San Francisco Chronicle, Stop Online Piracy Act would stop online innovation

What You Can Do

If your member of Congress is supporting the law, remember that fact come election time. Before then, some things you can do today:

Contact your legislator

Sign the petition at Whitehouse.gov

Sign the petition at Avaaz

If you qualify, sign the Educators' Letter to Congress

Posted by Eric at 08:16 PM | Copyright , Derivative Liability , Trademark | TrackBack

November 07, 2011

Good News/Bad News About the Number of Blogs Eligible for the 17 USC 512 Safe Harbor

By Eric Goldman

My 2006 article about blog law included the following passage (footnotes omitted):

few blogs satisfy the numerous technical prerequisites for § 512 eligibility, such as registering their websites with the U.S. Copyright Office. To assess this, on April 18, 2006, I searched the Copyright Office’s database of § 512 registrations and found only ten registrations containing the word “blog.”

In preparing comments on the Copyright Office's proposed amendments to the 512 designation of agent requirements, I decided to redo this pseudo-empirical study. On November 3, I went to the Copyright Office's database of registrations and searched for the character string "blog" in the name of the registered names/websites. I came up with over 200 hits. At the bottom of the post, I lay out the numerical details.

[Procedural note: I know this methodology is a hack. First, the Copyright Office has a lag of weeks/months between filing and publication. Second, many blogs don't have the word "blog" in their title for registration purposes but may be covered nonetheless. Third, a single entity might be counted multiple times in my count; for example, Weblogs, Inc. counted as at least 3 hits. Fourth, I'm not even sure what constitutes a "blog" any more. I'm sure there are many other objections. The count isn't super-precise. It's more of a directional indicator.]

Thus, the good news is that my 2011 census produced more than 20x the number of hits I got five years ago. Clearly the word has spread in the blogging community of the value of filing for 512 protection. But, the bad news is that even if 200+ blogs are covered by the agent designation--and therefore have satisfied one of the formalities prerequisites for a 512(c) safe harbor--it's a tiny fraction of the blogs that might ultimately want the 512 safe harbor because, for example, they allow user comments. Indeed, Righthaven repeatedly sued defendants over user-uploaded articles/comments to blogs and websites that hadn't made the requisite filing and therefore couldn't claim the safe harbor at all. So while it's heartening to see the growth in blogs eligible for 512 coverage, the overall number of covered blogs remains disconcertingly low.

FWIW, as a personal note, this blog isn't covered by a 512 designation of agent. I'm obviously aware of the statute, but comments have been off since 2006. The only posts that might be covered by my 512 filing are those of my co-bloggers, such as Venkat, and I've decided to take the risk that they will post infringing material and that a 512 designation would have been available in the co-blogger situation.
_____

The number of times the character string "blog" appeared per letter in the Copyright Office database: A - 2 // B - 50 // C - 12 // D - 6 // E - 1 // F - 7 // G - 6 // H - 16 // I - 6 // J - 1 // K - 6 // L - 6 // M - 13 // N - 9 // O - 1 // P - 10 // Q - 0 // R - 4 // S - 13 // T - 9 // U - 3 // V - 1 // W - 23 // X - 0 // Y - 1 // Z - 3 // Other - 0. Total = 209.

Posted by Eric at 08:54 AM | Copyright , Derivative Liability | TrackBack

November 06, 2011

October 2011 Quick Links

By Eric Goldman

Copyright

* MUST READ from Techdirt: MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized. On the topic of errors in determining copyright infringement, the incident a powerful reminder both that even those "in the know" overclaim copyright infringement, and that the targets of such overclaiming can suffer catastrophic losses. That makes the incident an important reminder of the value of procedural safeguards in the copyright setting.

* An amended Capitol v MP3Tunes opinion explains why 17 USC 512 applies to state copyright claims (see pages 14-17). Prior blog coverage.

* Megaupload settles with Perfect 10, and the judge vacated her opinion. Prior blog coverage.

* Permanent injunction issued against Zediva. Prior blog coverage.

* Supplemental briefing requested in Viacom v. YouTube:

The parties are hereby ordered to submit letter briefs, not exceeding ten pages doublespaced, on the following questions: (1) whether and how the red-flag knowledge provision would apply under the Defendants’ “specific” knowledge construction of § 512(c)(1)(A); and (2) whether YouTube’s “syndication” of videos to third parties falls outside the scope of safe harbor protection for activities that occur “by reason of . . . storage at the direction of a user” under § 512(c)(1).

Mark Lemley on Viacom v. YouTube.

* Mick Haig Productions, e.K. v. Does, 2011 WL 5104095 (N.D. Tex. Sept. 9, 2011). In a mass copyright lawsuit, the plaintiff's lawyer issues subpoenas without authorization to identify the defendants and gets sanctioned $10k for it.

* Righthaven LLC v. Newman, 2011 WL 4762322 (D. Nev. 2011):

the restated SAAs are not a simple attempt to clarify or supplement the facts pleaded in the complaint with additional facts that were present at the time of filing. Rather, the restated SAAs present a new set of facts with respect to the alleged copyright ownership, which is impermissible because Righthaven may not amend the defects in the jurisdictional facts themselves. See Newman–Green, 490 U.S. at 830. Next, the restated SAAs' terms substantially contradict the original SAA. Again, defects of allegations may be amended, but not defects in the facts themselves.

* Righthaven LLC v. Inform Technologies, Inc., 2011 WL 4904431(D. Nev. Oct 14, 2011). Upholding personal jurisdiction in Nevada but issuing an order to show cause why the suit shouldn't be dismissed for lack of standing.

* Righthaven v. Newsblaze (D. Nev. Nov. 4, 2011). Another Nevada judge, this time Judge Jones, dismisses a Righthaven case for lack of standing.

* Sam Francis Foundation v eBay complaint: Class action suit against eBay under CA's "resale royalty" statute.

* Google got a good copyright win in a German case over its image search service.

* Wired: U.S. Copyright Czar Cozied Up to Content Industry, E-Mails Show

Search Engines

* Google implements SSL on its search results pages and knocks out search terms from the referrer URL. This may sound like a privacy win, but it also means that Google will increase the gap between its database and the databases of indexed websites. So this is a backdoor way for Google to hoard data for itself...and perhaps increase incentives for advertisers to pay. More on this point from Danny Sullivan: "if Google thinks this needs to be done for privacy reasons, then it needs to block referrers for everyone and not still allow them to work for advertisers. That move is one of the most disturbing, hypocritical things I’ve ever seen Google do."

* Google Buzz is dead, but Google has a 20 year hangover with the FTC, which approved the settlement. Prior blog post. Francoise Gilbert offers some lessons.

* Search Engine Land: Organic Click-Thru Rates Tumbling; Only 52% Click On Page One, Study Suggests

* News.com: Google's whimsical Easter eggs.

Content Regulation

* Darm v. Craig, the Oregon Twitter libel lawsuit, settled.

* Language Line Services, Inc. v. Language Services Associates, LLC, 2011 WL 5024281(N.D. Cal. Oct 13, 2011). Complicated dispute between two competitors. Many claims based on one competitor's blog post were stricken under CA's anti-SLAPP law. Rebecca’s coverage.

* Crookes v Newton, 2011 SCC 47 (Can Sup Ct): Linking to defamatory content on 3rd party site isn't "publication" of linked content.

* Hollywood Reporter: Misappropriation of personality claim in Hurt Locker case gets anti-SLAPPed.

Miscellaneous

* Ninth Circuit will rehear the Nosal case en banc. Prior blog post. Tom O’Toole’s reset.

* Zing Brothers LLC v. Bevstar LLC (D. Utah Oct. 14, 2011: “This specific inclusion of Utah in the drop down list of states, and the website statements that orders are solicited anywhere "inside the USA" is sufficient to establish that this site is "something more" than a non-targeted transaction site.”

* Ferris & Salter P.C. v. Thomson Reuters Corp. (E.D. Mich. Oct. 19, 2011): “There is no basis under Michigan law or, for that matter, in the vast majority of those states whose courts have considered the issue, to deem computer consultants and service providers professionals…. Thus, the Court concludes that—under Minnesota or Michigan law—no professional negligence action will lie against computer engineers and technicians.”

* From the Chronicle of Higher Ed: What Wikipedia Deletes, and Why.

* A new article tries to answer the question, "Why did Wikipedia succeed while other encyclopedias failed?" My Wikipedia article touched on this issue.

* Actors' unions ask IMDb not to publish the age of actors. NY Times coverage.

* Tom O’Toole: ICANN's .xxx sunrise period was a success--for ICANN.

* A behind-the-scenes look at the creation of the Paris Hilton brand:

* I was on TWiL 134 with Denise Howell, Evan Brown and Ernie Svenson. Listen in.

Posted by Eric at 03:35 PM | Content Regulation , Copyright , Derivative Liability , Search Engines | TrackBack

November 03, 2011

Ninth Circuit Affirms Google's Section 230 Win Over a Negative Business Review--Black v. Google

By Eric Goldman

Black v. Google, Inc., 2011 WL 5188426 (9th Cir. Nov. 1, 2011). The complaint. The district court ruling.

The Blacks sued Google over a negative third party review of their business published in an unspecified Google property. This lawsuit was obviously preempted by 47 USC 230 from the get-go, so I easily fit my prediction of the case's outcome into a tweet. In August 2010, the district court dismissed the lawsuit on Section 230 grounds in an efficient opinion.

The Ninth Circuit didn't find this case any more challenging than the district court did. In a brief unpublished memo opinion, the court upheld the district court's ruling. The main substantive sentence of the Ninth Circuit's opinion:

The district court properly dismissed plaintiffs’ action as precluded by section 230(c)(1) of the Communications Decency Act (“CDA”) because plaintiffs seek to impose liability on Google for content created by a third party. See Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157, 1162 (9th Cir. 2008) (en banc) (“Section 230 of the CDA immunizes providers of interactive computer services against liability arising from content created by third parties . . . .”); Carafano v. Metrosplash.com, Inc., 339 F.3d 1119, 1122 (9th Cir. 2003) (“Through [section 230 of the CDA], Congress granted most Internet services immunity from liability for publishing false or defamatory material so long as the information was provided by another party.”).

Posted by Eric at 08:52 AM | Derivative Liability | TrackBack

November 02, 2011

Yahoo Partially Defeats Lawsuit Over Wrongful Account Termination--Buza v. Yahoo

By Eric Goldman

Buza v. Yahoo, Inc., 2011 WL 5041174 (N.D. Cal. Oct. 24, 2011). The complaint.

Buza claims Yahoo terminated two GeoCities accounts related to his advocacy efforts. Buza is proceeding pro se, which is typical for user lawsuits over wrongful account termination. He sued Yahoo in state court. Yahoo tried to remove to federal court. In this ruling, Judge Seeborg dismisses the federal claims and sends the others back to state court. I'm sure Yahoo wished Judge Seeborg had cleaned out the case entirely, but I bet Yahoo will get there soon enough.

Buza claimed that Yahoo violated his First Amendment rights. As I explain in my article on wrongful account termination, plaintiffs often invoke the Constitution to get around any statutory immunities, but Constitutional claims routinely go nowhere. It's 100% clear that privately owned online service providers like Yahoo aren't state actors and therefore aren't restricted by the Constitution. The court says:

Buza's response that Yahoo!'s services should be seen as a "public forum" in which the guarantees of the First Amendment apply is not tenable under federal law. As a private actor, Yahoo! has every right to control the content of material on its servers, and appearing on websites that it hosts.

Similar recent cases in this vein include Young v. Facebook, Estavillo v. Sony and Jayne v. Google Founders.

Buza also brought an ECPA/SCA (18 USC 2701) claim for unlawful access to stored communications. The court dismisses because the restrictions don't apply to the service provider's access of those communications.

Having disposed of the federal claims, Judge Seeborg sends the case back to state court to deal with the remaining claims, which include a violation of California's state constitution, "intellectual property," trespass to chattels and breach of contract. The judge expresses some skepticism about some of these claims, but having decided he could quickly clean his docket of the case, he doesn't go any further than necessary to send the case back to state court.

My understanding is that Yahoo didn't raise a 47 USC 230(c)(2) defense, the federal immunity for service providers' filtering decisions. I explore this point in detail in ">my recent 230(c)(2) article. 230(c)(2) can't trump federal constitutional claims, but it should (?) trump state constitutional claims. 230(c)(2) doesn't apply to IP claims per a statutory exclusion, but the Ninth Circuit in Perfect 10 v. ccBill said that 230 trumps state IP claims (the judge says no federal IPs are at issue). The immunity likely trumps the trespass to chattels claim, although I don't recall seeing that issue tested before. And I explain in my article, 230(c)(2) could very well trump the contract breach claim. (This judge could have also disposed of the contract claim based on express terms giving Yahoo the power to pull the plug on websites, but the state court judge will have do that).

Because the immunity is a federal statute, it would have been appropriate for the federal court to interpret its application to the state claims before remanding. This discussion suggests that had the immunity been raised, Judge Seeborg might have completely ended the case on 230(c)(2) grounds without sending anything back to state court.

Posted by Eric at 09:33 AM | Derivative Liability , Licensing/Contracts , Privacy/Security , Trespass to Chattels | TrackBack

October 26, 2011

Yelp Gets Complete Win in Advertiser "Extortion" Case--Levitt v. Yelp

By Eric Goldman

Levitt v. Yelp Inc., 2011 U.S. Dist. LEXIS 124082 (N.D Cal. Oct. 26, 2011)

A group of advertisers sued Yelp for allegedly extorting them to buy ads from Yelp with the implied/express threat that Yelp would degrade their ranking in Yelp's database if they didn't. In a previous ruling, Judge Patel dismissed the second amended complaint, but her opinion exhibited her characteristic quirkiness.

The case got reassigned to Judge Chen, who was presented with a motion to dismiss a third amended complaint. Deviating in part from Judge Patel's analysis, he reaches the same conclusionthat the complaint should be dismissed--but this time he does so with prejudice, sending the case to the Ninth Circuit (likely) or its grave.

The plaintiffs asserted that Yelp itself wrote negative reviews about the advertisers. In support of this assertion, the plaintiffs claimed that Yelp employees write some reviews, Yelp pays authors for reviews and some reviews don't match the advertisers' customer records. The court says those allegations aren't enough to survive a 12(b)(6) motion to dismiss because they do "not raise more than a mere possibility that Yelp has authored or manipulated content related to Plaintiffs in furtherance of an attempt to 'extort' advertising revenues." The plaintiffs' arguments were too inferential, and other stories plausibly fit the alleged facts.

The plaintiffs' claims that Yelp reorders reviews is preempted by 47 USC 230(c)(1):

Plaintiffs’ allegations of extortion based on Yelp’s alleged manipulation of their review pages – by removing certain reviews and publishing others or changing their order of appearance – falls within the conduct immunized by § 230(c)(1).

Once again, a defense win cites to Roommates.com.

To get around 230, the plaintiffs argued that Yelp assembled a star rating, and the star rating was its own expression, not its users. The court notes this argument was rejected a decade ago in Gentry v. eBay. To get around Gentry, the plaintiffs argued that Yelp improperly monkeyed with reviews to shape the star rating with bad intent (to "extort"/pull cash out of advertisers' pockets).

Judge Chen responds that "§ 230(c)(1) contains no explicit exception for impermissible editorial motive." He contrasts 230(c)(2)'s "good faith" requirement, saying that the absence of a parallel "good faith" requirement in 230(c)(2) means editorial intent is irrelevant to 230(c)(1). [For more on the "good faith" requirement in Section 230(c)(2), see my article on account termination and 230(c)(2).] On this point, he diverged from Judge Patel's analysis, but unlike her, he actually cites a Ripoff Report victory in support of his conclusion. (Still no cite to the Reit v. Yelp ruling).

Making the point that 230(c)(1) does not permit an inquiry into the defendant's motivation, Judge Chen continues:

traditional editorial functions often include subjective judgments informed by political and financial considerations....Determining what motives are permissible and what are not could prove problematic. Indeed, from a policy perspective, permitting litigation and scrutiny motive could result in the “death by ten thousand duck-bites” against which the Ninth Circuit cautioned in interpreting § 230(c)(1)....As illustrated by the case at bar, finding a bad faith exception to immunity under § 230(c)(1) could force Yelp to defend its editorial decisions in the future on a case by case basis and reveal how it decides what to publish and what not to publish. Such exposure could lead Yelp to resist filtering out false/unreliable reviews (as someone could claim an improper motive for its decision), or to immediately remove all negative reviews about which businesses complained (as failure to do so could expose Yelp to a business’s claim that Yelp was strong-arming the business for advertising money).

Yes! That's exactly right, and kudos for the judge for seeing the connection. The beauty of 230(c)(1) is its simplicity. It ends lawsuits cold on a 12(b)(6), and doesn't open the door for a myriad of messy, expensive and time-consuming factual considerations. Having that airtight immunity means websites can make tough editorial decisions without worrying what kind of story those decisions will ultimately tell in court. Contrast the litigation inquiries in 512(c) and contributory/vicarious copyright infringement, where every service provider choice is grist for the plaintiffs, and that pressure leads service providers to follow the rule "if in doubt, take it down."

The judge adds that a lawsuit based on Yelp's marketing representations might not be covered by 230(c)(1). I discuss this issue more in my 230(c)(2) paper. I disagree with the judge's statement. As I explain in my paper, 230(c)(1) can preempt marketing-based claims; plus see cases like Milo v. Martin. Fortunately, it's inconsequential to this lawsuit as the plaintiffs dropped their false advertising claims. Unfortunately, I expect plaintiffs to seize this language (along with similar statements in other rulings) and do lots of research to find shreds of marketing and support material published by a service provider that could be used to support a false advertising claim that's fundamentally based on user-generated content. (But cf. the Woods v. Google ruling, where Judge Fogel put his foot down on that nonsense).

This ruling makes clear that Yelp can manage its database of user reviews however it wants. This is as it should be. However, it doesn't mean that we as consumers will find Yelp trustworthy. Section 230(c)(1) simply means that Yelp has to earn and keep our trust as readers/consumers, which remains an important and ongoing challenge.

UPDATE: Rebecca's comments.

Posted by Eric at 02:08 PM | Derivative Liability , Marketing | TrackBack

October 12, 2011

Google Defeats Class Certification in Keyword Ad Lawsuit--FPX v. Google

By Eric Goldman

FPX, LLC v. Google, Inc., 2011 WL 4783376 (E.D. Tex. Sept. 29, 2011)

Google obtained a major victory in one of the most serious pending lawsuits against it challenging its AdWords keyword advertising program. Putative class action lawsuits were filed in the Eastern District of Texas--which many folks view as a plaintiff-friendly jurisdiction for patent cases--by some lawyers/litigants with ties to the patent NPE community. (The FPX case was consolidated for discovery purposes with parallel and virtually identical cases by John Beck Amazing Profits, LLC and the Rodney Hamilton Trust; I believe this ruling effectively applies to all three). On the surface, this looked like a major showdown over Google's practices in a potentially hostile venue with a venal adversary.

However, so far the case is working out fine for Google. Judge Ward (adopting Magistrate Judge Everingham's report verbatim) refused to certify the class, meaning that each advertiser will have to proceed against Google individually--or give up. Without the potential payoffs from a class adjudication, it's possible/probable that the plaintiffs' lawyers will lose interest in the case; NPE litigation may be more lucrative than continuing to pursue Google on an advertiser-by-advertiser basis. Even if the plaintiffs decide to push ahead with individual cases, Google's consequences of an adverse ruling go down substantially.

The ruling isn't all that surprising or groundbreaking. As I wrote in my initial blog post on the case in 2009, "the judge is very unlikely to certify the class." The opinion walks through various reasons why trademark lawsuits don't lend themselves to class adjudication, including:

* initial interest confusion must be examined with respect to each trademark. The court notes the different, and trademark-specific, analyses in GEICO v. Google and the Network Automation case. "Thus, Plaintiffs' common contention (i.e., that Google's policy of selling trademarks as keywords leads to initial interest confusion) is not capable of classwide resolution and, as such, does not meet Rule 23(a)(2)'s commonality requirement."

* each trademark's strength has to be individually evaluated. See the Vulcan Golf v. Google ruling.

* any affirmative defenses have to be evaluated on a trademark-by-trademark basis (another cite to Vulcan Golf).

* the request for equitable disgorgement was problematic under the applicable FRCP.

[If you're looking for a good paper topic, here's one: when (if ever) are trademark lawsuits appropriate for class adjudication, and how and why does this differ from other false advertising lawsuits?]

A procedural note: since this ruling, the case was reassigned from Judge Ward to Judge Folsom. This appears to be triggered by Judge Ward's October 1 retirement. It's not clear to me if this reassignment helps or hurts one litigant compared to the other.

As a practical matter, the defeat of class certification here leaves the Rosetta Stone v. Google case as the most serious trademark challenge to AdWords still remaining. Should Google get a good ruling in that appeal, it is probable that Google will successfully run the table on the remaining lawsuits and obtain a de facto clean bill of health for its AdWords program.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on October 12, 2011):

* ~~Ezzo v. Google~~
* ~~Rescuecom v. Google~~
* FPX v. Google and the related cases John Beck Amazing Profits v. Google and Rodney A. Hamilton Living Trust v. Google, plus ~~the now-dead Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* ~~Rosetta Stone v. Google~~ [on appeal]
* ~~Flowbee v. Google~~
* ~~Parts Geek v. US Auto Parts~~
* ~~Dazzlesmile v. Epic~~
* Pathak v. ICG
* Groupion v. Groupon

Posted by Eric at 12:54 PM | Derivative Liability , Search Engines , Trademark | TrackBack

October 03, 2011

New Essay on 47 USC 230(c)(2)

By Eric Goldman

I have posted a new essay, Online User Account Termination and 47 U.S.C. §230(c)(2), to SSRN. I wrote this essay as a contribution to a virtual world symposium at UC Irvine, and it will be published in the UC Irvine Law Review.

The essay generally argues that 47 USC 230(c)(2) permits online providers, including virtual world operators, to terminate user accounts without liability. Academic commentators frequently ignore or fail to consider Section 230(c)(2)'s immunity when discussing user account terminations, so the essay tries to elevate Section 230(c)(2)'s profile in the discussions, especially for the virtual world community. To me, Section 230(c)(2)'s applicability to account terminations is clear, but the story is complicated and perhaps not free from controversy. In addition to explaining the nuts-and-bolts, I offer a brief theoretical defense of the immunity.

I believe this essay is the first law review article exclusively on 47 USC 230(c)(2), the overlooked and undertheorized sibling of Section 230(c)(1). (FWIW, I have another, much larger article in process on Section 230(c)(1) that I hope to complete next semester.) If I've missed a 230(c)(2)-specific article, please please please let me know. For that reason alone, I'm quite excited about this essay.

I'm also excited about this essay because it culminates a topic I've been contemplating since I began blogging--the implications of virtual world proprietors' rights to terminate for convenience. See, e.g., this post--one of my first on the blog--from 6 1/2 years ago. After all these years, I'm glad to finally organize my thoughts more completely.

The essay is in draft form, so I would gratefully welcome your comments.
________

The abstract:

An online provider’s termination of a user’s online account can be a major-and potentially even life-changing-event for the user. Account termination exiles the user from a virtual place the user wanted to be; termination disrupts any social network relationship ties in that venue, and prevents the user from sending or receiving messages there; and the user loses any virtual assets in the account, which could be anything from archived emails to accumulated game assets. The effects of account termination are especially acute in virtual worlds, where dedicated users may be spending a majority of their waking hours or have aggregated substantial in-game wealth. However, the problem arises in all online environments (including email, social networking and web hosting) where account termination disrupts investments made by users.

Because of the potentially significant consequences from online user account termination, user-rights advocates, especially in the virtual world context, have sought legal restrictions on online providers’ discretion to terminate users. However, these efforts are largely misdirected because of 47 U.S.C. §230(c)(2) (“Section 230(c)(2)”), a federal statutory immunity. This essay, written in conjunction with an April 2011 symposium at UC Irvine entitled "Governing the Magic Circle: Regulation of Virtual Worlds," explains Section 230(c)(2)’s role in immunizing online providers’ decisions to terminate user accounts. It also explains why this immunity is sound policy.

Posted by Eric at 09:10 AM | Derivative Liability , Internet History , Licensing/Contracts , Virtual Worlds | TrackBack

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.

Other New York state court rulings that have interpreted 47 USC 230 broadly include Shiamili v. Real Estate Group, Reit v. Yelp and Finkel v. Facebook.

Posted by Eric at 08:32 AM | Content Regulation , Derivative Liability | TrackBack

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

Category: blogging

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.

Posted by Eric at 10:16 AM | Content Regulation , Derivative Liability | TrackBack

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.

Posted by Eric at 08:38 AM | Content Regulation , Derivative Liability | TrackBack

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.

Posted by Eric at 09:05 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

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.

Posted by Eric at 02:05 PM | Derivative Liability , Marketing , Search Engines | TrackBack

August 24, 2011

Mixed DMCA Online Safe Harbor Ruling in Cloud-Based Music Locker Case--Capitol v. MP3Tunes

By Eric Goldman

Capitol Records, Inc. v. MP3Tunes, LLC, 2011 WL 3667335 (SDNY Aug. 22, 2011).

Background. This case involves MP3Tunes.com and Sideload.com. MP3Tunes is a music storage locker. Small lockers are free, but more storage is available at a price. The system doesn't store redundant copies; if the system recognizes an identical bit stream coming from a second user, it just records the hashtag. Sideload is a music search engine that lets users find free music on the Internet. (It was also a browser plug-in). If users find a music file they like, they can "sideload" the music file into their MP3Tunes' locker as a personal archive copy. MP3Tunes' database tracks the sources of these personally archived files.

Due to other issues being addressed in prior proceedings, this ruling primarily focuses on the applicability of the 17 USC 512 safe harbor. This court expressly interprets 512(d), the safe harbor for linking to infringing content--one of the rare opinions to do so. Like most 512 rulings, this ruling is lengthy and detailed, reflecting the fact that the plaintiff contested a long list of safe harbor elements. As I recently mentioned, god bless the pithy 47 USC 230 immunity and the short opinions it produces.

Result. The net effect is that most of MP3Tunes' operations got a 512 safe harbor defense, but it is contributorily liable for any infringing sideloaded files it didn't remove following a takedown notice, and MP3Tunes' CEO (the persistent Michael Robertson) may be personally liable for any infringing files he personally loaded into his locker. These rulings leave the defendants on the hook for potentially millions in damages. Other questions, such as liability for employees' uploads, were rolled over to trial. Because of this mixed ruling, both sides issued public statements touting their wins. As I'll explain momentarily, both sides also earn some brickbats from me.

Some of the post-ruling punditry has suggested this ruling provides a roadmap for other cloud-based music lockers, including the offerings from Apple, Amazon and Google. While that's partially true, the guidance is limited at best due to the fact-specific nature of the ruling. Perhaps the best news for the other services is that lockers may not have to store redundant copies of user-uploaded files to qualify for a Cablevision defense (see the EFF post for more on this). However, as the Zediva ruling recently showed, it remains uncertain how broadly other courts will read the Cablevision case. Otherwise, I think this case mostly tells us things we already knew but that copyright owners refuse to believe.

Out of this dense and slightly inscrutable ruling, some of the points that I found most interesting:

Bogus Takedown Notices (Yet Again...) EMI sent MP3Tunes overbroad takedown notices. The court says EMI affiliates "provided a list of EMI artists and demanded that MP3Tunes 'remove all of EMI's copyrighted works, even those not specifically identified.'" This was in 2007, NINE YEARS after the DMCA came into effect. Seriously, guys? 512(c)(3) isn't that complicated, and major copyright owners that send notices vastly in excess of 512(c)(3) look like greedy or clueless SOBs.

With the hope that we can avoid future SOBness, here's an offer I extend to any and all major copyright owners. I will happily give you a FREE tutorial on how to draft proper 512(c)(3) takedown notices so that you don't look as asinine as EMI looked here. I'm not worried about these trainings being too much of a drain on my time--they should only take about FIVE MINUTES and involve a variation of RTFM.

Needless to say, the court wasn't impressed by EMI's overreaching takedown notuices. It reminds EMI that a proper 512(c)(3) takedown notice requires the copyright owner to provide sufficient information to locate the infringing files (cite to Wolk v. Photobucket).

MP3Tunes' Takedown Policy. MP3Tunes took the puzzling position that, in response to the overreaching 512(c)(3) notices, it only had to remove specified links from Sideload and not any files downloaded from those URLs into personal lockers--even though MP3Tunes kept the source URLs in its database and could therefore trace those files. Now, if the users had downloaded the files to their hard drives, that wouldn't be MP3Tunes' issue--though, to be clear, the users probably don't have a fair use defense if the files are actually infringing (see, e.g,. the BMG v. Gonzalez case). However, as a cloud service provider, MP3Tunes needs to respond to 512(c)(3) notices when they meet the statutory requirements, even if the locker is supposed to be the user's "private" space. MP3Tunes loses the 512 safe harbor for these files because EMI's 512(c)(3) notices provided adequate information for MP3Tunes to locate the files, and the court says MP3Tunes is contributorily liable for these infringements. MP3Tunes argued a Sony defense that its lockers had substantial non-infringing uses, but the court says Sony applies only to products, not services.

It's unclear how this discussion applies to other cloud-based music lockers. The court distinguishes Viacom v. YouTube because Viacom could easily search YouTube for infringements--which isn't possible with private cloud-based lockers (just as it isn't possible with user hard drives). The court also asserts that any other lockers letting users "sideload" from the Internet must trace URL source and disable all files from that URL in response to a 512(c)(3) notice. But what if the music locker allows users to upload files from their hard drives and don't allow those to be searched? The opinion seems to deliberately avoid addressing that situation. [A related unresolved Q: how copyright owners can find private YouTube videos. I've posted a few myself for use in my Advertising Law course.]

The court dismisses MP3Tunes' seemingly overstated concerns about its liability to users for disabling files in their "private" lockers. MP3Tunes' user agreement expressly allowed this, as I would expect every other cloud service providers' user agreements to do.

Even so, it's 100% clear that cloud storage is different from hard drive storage, and some users are going to get quite a surprise when they learn that third parties can zap files from their cloud storage. (Recall the hubbub over Amazon's zapping of books from Kindle). If Congress weren't so dysfunctional, this would be a good place for a statutory fix. It would make a nice complement to the Digital Due Process initiative to fix the ECPA's application to the cloud.

It's worth noting that users weren't represented in this litigation and had no ability to show that their uses were fair, notwithstanding BMG v. Gonzalez and similar cases. If cloud-based music lockers simply pull the trigger on 512(c)(3) notices on an "ex parte" basis (i.e., without any input from the affected users), their fair use rights become effectively irrelevant unless the sites honor users' putback notices. I think it's critical for cloud-based music lockers enabling "private" lockers to address how they will deal with 512(c)(3) notices and if they will honor 512(g) putback notices. I'd welcome your thoughts on ways that we collectively can monitor cloud service providers' policies and practices on this topic.

Repeat Infringer Policy. MP3Tunes had an adequate repeat infringer policy because, among other things, its users weren't "blatant infringers" (they were just downloading files for personal use and may not have known better) and "MP3Tunes does not purposely blind itself to its users' identities and activities."

Red Flags of Infringement. I continue to assert that "red flags of infringement" is no longer possible given copyright owners' widespread practices of freely seeding their content on the Internet as marketing. EMI did that too. Indeed, the court says "EMI executives concede that internet users, including MP3tunes' users and executives, have no way of knowing for sure whether free songs on the internet are unauthorized." The court further dismisses EMI's mockable argument that the terms "free," "mp3" and "file-sharing" automatically confer red flags knowledge. EMI's takedown notices that didn't comply with 512(c)(3) didn't contribute to any red flags knowledge either.

Vicarious Infringement Standards. The court rejects that the sideloading feature contributed to "financial benefit" because, even if it was a "draw," it had non-infringing uses, and MP3Tunes didn't charge for its usage. MP3Tunes lacked the requisite "control" because it was a cloud storage solution.

Public Performance. EMI argued that MP3Tunes publicly performed the files in users' lockers. MP3Tunes responded with a Cablevision defense. The court explains that MP3Tunes doesn't deliver files from a "master copy" (even though redundant copies aren't made) but instead "uses a standard data compression algorithm that eliminates redundant digital data" and therefore preserves exact digital copies. Thus, MP3Tunes wasn't publicly performing. I didn't understand the technological distinction the court was making, but I didn't find it persuasive at all. The court also distinguished Cablevision because it couldn't qualify for 512, while MP3Tunes does.

DMCA's Applicability to pre-72 Sound Recordings. FN1 says that 512 applies to pre-1972 sound recordings:

The Court agrees with Defendants that the plain meaning of the statutory language makes the DMCA safe harbors applicable to both state and federal copyright claims. Thus, the DMCA applies to sound recordings fixed prior to February 15, 1972.

I believe this is the first ruling reaching this conclusion (am I forgetting one?). The court didn't offer any citations or analysis in support of this conclusion, and I anticipate this issue will continue to be litigated fiercely.

Reminder: in case you missed it, I recently caught up on 4 months worth of online copyright rulings, including several addressing the same or similar issues as this case.

Other comments on this ruling: Techdirt, EFF, CNET News.com

Posted by Eric at 02:26 PM | Copyright , Derivative Liability , Licensing/Contracts , Privacy/Security | TrackBack

Court Affirms Robust ISP Protection For Blocking Bulk Emails -- Holomaxx v. Microsoft/Yahoo

[Post by Venkat Balasubramani]

Holomaxx v. Microsoft, 2011 WL 3740813 (N.D. Cal. Aug, 23, 2011) [pdf]
Holomaxx v. Yahoo, 2011 WL 3740827 (N.D. Cal. Aug, 23, 2011) [pdf]

Eric and I both previously posted on the Holomaxx cases, where Holomaxx sued Yahoo and Microsoft for blocking or filtering bulk emails transmitted by Holomaxx. The court granted motions to dismiss filed against Holomaxx with leave to amend. ("Bulk Emailers (Mostly) Lose Three 47 USC 230(c)(2) Rulings--Holomaxx v. Microsoft/Yahoo & Smith v. TRUSTe.") Holomaxx filed an amended complaint, but it produced no better results. The second time around, the court permanently shuts the door on Holomaxx's claims, finding again that Section 230(c)(2)(A) insulates the ISP's filtering decisions and dismissing without leave to amend.

The result was not terribly surprising, given that the court was initially skeptical of Holomaxx's vague allegations that the ISPs harbored some sort of bad faith when they blocked Holomaxx's bulk emails. As Laura Wise notes in her recap of the oral argument, Judge Fogel asked Holomaxx for its "absolute best argument" that Microsoft and Yahoo harbored some sort of bad faith intent, and he was not swayed by what Holomaxx had to offer. Judge Fogel concludes that the Messaging Anti-Abuse Working Group guidelines which Microsoft and Yahoo allegedly deviated from are not an "industry standard," so Microsoft or Yahoo could be faulted for not following them. He also concludes that the fact that the filtering efforts stopped and re-started is not in any way indicative of bad faith. While he acknowledged some tension between Section 230's robust grant of immunity and Judge Fisher's concern (in Zango v. Kaspersky) that a service provider may abuse filtering immunity by blocking content for "anticompetitive purposes or merely at its malicious whim," the court says that allowing Holomaxx to proceed with only its vague allegation of bad faith would undermine Section 230:

To permit Holomaxx to proceed solely on the basis of a conclusory allegation that [the ISP] acted in bad faith would essentially rewrite the CDA.

The court also dismisses Holomaxx's claims under the Wiretap Act and the Stored Communications Act based in part on Holomaxx's failure to articulate how exactly Microsoft and Yahoo violated these statutes in the course of their filtering efforts. (These statutes are excluded from Section 230 so the court deals with them separately.)

As with blocking or filtering decisions targeted at malware or spyware, complaining that the ISP was improperly filtering bulk email (spam) is likely to fall on unsympathetic ears. It would take a lot for a court to allow a bulk emailer to conduct discovery on the filtering processes and metrics employed by an ISP. (Hence the rulings on a 12b motion, rather than on summary judgment.) Here the court reiterates the "good faith" standard for 230(c)(2) is measured subjectively, not objectively. That puts a heavy burden on plaintiffs to show subjective bad faith. Eric's reaction to the Zango case--where the Ninth Circuit held that anti-spyware company Kaspersky's decision to classify Zango as adware was protected--largely alludes to this result:

this opinion is terrific news for vendors of anti-spam/anti-spyware/anti-virus services. Although we have long suspected that they would be protected under 230(c)(2), this opinion codifies their immunization as Ninth Circuit law. As a result, these vendors should continue to have a high degree of freedom to make judgments about how to best serve their customers. On the flip side, this opinion confirms that anyone blacklisted by these software vendors can’t use judicial proceedings to change the classification. Fortunately, most reputable vendors offer an extra-judicial mechanism to correct their misclassification errors.

The only difference is that Microsoft and Yahoo are ISPs, and they could use unfettered filtering discretion to block competitive content, links, or maybe even throttle users (or skew search results). Holomaxx's complaint did not credibly raise any such concerns, so the judge dismisses them.

Previous posts and other coverage:

* Bulk Emailers (Mostly) Lose Three 47 USC 230(c)(2) Rulings--Holomaxx v. Microsoft/Yahoo & Smith v. TRUSTe
* Amendment was futile (Laura Wise)

Posted by Venkat at 11:13 AM | Content Regulation , Derivative Liability , Spam

August 22, 2011

Deep Packet Inspection Lawsuits: NebuAd Partner ISP Wins Summary Judgment -- Kirch v. Embarq

[Post by Venkat Balasubramani with comments from Eric]

Kirch v. Embarq, 10-2047-JAR (D. Kan. Aug. 19, 2011)

The fallout from Nebuad's ill-fated deep packet inspection continues to percolate through the courts. Plaintiffs sued NebuAd and ISPs in the same forum in Northern California, but the ISPs were dismissed on jurisdictional grounds, requiring plaintiffs to pursue them through local lawsuits. NebuAd reportedly shut down, but lawyers recently announced a settlement over claims against NebuAd. (See: "NebuAd Settles Lawsuit Over Behavioral Targeting Tests.") Interestingly, the $2.4M from the proposed settlement will go to public interest organizations and the lawyers--there's no class payout, and just small payments to the named plaintiffs. This is fairly typical in privacy lawsuits, but settlements like these have elicited a few challenges, most prominently in Facebook's Beacon settlement (which is currently on appeal to the Ninth Circuit).

This particular case is one of the end users' cases against ISPs. They brought claims for violation of the Computer Fraud and Abuse Act, Electronic Communications Privacy Act, invasion of privacy and trespass to chattels. They voluntarily dismissed the invasion of privacy, trespass and CFAA claims. This left the ECPA claim. (The court says the claims were dismissed pursuant to "stipulation," but does not get into detail as to whether there was any settlement associated with this dismissal.)

No derivative liability: The court found for summary judgment purposes that Embarq did not have access to the contents of user communications. Embarq admittedly facilitated NebuAd's tracking and targeting, but this is not enough for plaintiffs to hold Embarq liable:

As plaintiffs' expert testified, Embarq's role was to install the NebuAd device so as to furnish the UTA connection to NebuAd. In other words, the NebuAd device . . . goes into place, then all of the raw data that flows through Embarq is directed to that device, where NebuAd does the analysis and, apparently, separates out the Port 80 traffic. Moreover, plaintiffs cite no authority that Embarq's access to the raw data that flowed through its network constitutes a violation of the ECPA, which requires an entity to actually acquire the contents of those communications. There is nothing in the record that Embarq itself acquired the contents of any communications as they flowed through its network; instead, plaintiffs' theory rests on the notion that the NebuAd System extracted the contents of the communications. Plaintiffs' assertion that Embarq 'endeavored to intercept' communications falls short of creating civil liability under the ECPA, which creates liability for actual interception.

Plaintiffs pointed to the contractual relationship between Embarq and NebuAd as a basis for holding Embarq indirectly liable. The court says clearly that the "civil liability provision of the ECPA . . . does not provide for secondary liability."

User consent: The court also grants Embarq summary judgment on the basis that to the extent there was improper interception, the users consented to it. Embarq's "activation agreement" pointed to its privacy policy and said Embarq could revise it. Prior to deployment of NebuAd, Embarq posted a new paragraph in its privacy policy entitled "preference advertising." This paragraph informed subscribers that:

Embarq may use information such as the websites you visit or online searches that you conduct to deliver or facilitate the delivery of targeted advertisements. The delivery of these advertisements will be based on anonymous surfing behavior and will not include users' names, email addresses, telephone numbers, or any other Personally Identifiable Information.
You may choose to opt out of this preference advertising service. By opting out, you will continue to receive advertisements as normal; but these advertisements will be less relevant and less useful to you. If you would like to opt out, click here. (embarq.com/options)

Subscribers were given an opportunity to opt-out by clicking on a link. Plaintiffs made three arguments as to why this consent should not be viewed as being effective, but the court summarily rejects them all, relying in part on Mortensen v. Bresnan: (1) the scope of the disclosure was inadequate and did not identify NebuAd; (2) the notice was not conspicuous enough; and (3) the opt-out mechanism was insufficient.
__

The NebuAd deep packet inspection idea was ill-fated, but it's interesting to see the litigation play out as it has. NebuAd's insurers settled for a relatively small amount. The claims against the individual ISPs are struggling, and when you throw requests to compel arbitration based on the Supreme Court's decision in Concepcion into the mix, it's going to end up being a long road for plaintiffs.

I'm not sure I can think of a principled reason for this, but I've always viewed deep packet inspection as something that crossed the line. But under existing privacy laws, it's not easy to hold ISPs who partnered with NebuAd liable. Privacy plaintiffs continue to push the envelope but they are repeatedly rebuffed by the courts. As Eric notes, the statutes under which plaintiffs assert causes of action in privacy class actions are convoluted, confusing, and in need of a much-anticipated revamp.

As with the flash cookie cases, I'm curious about the FTC's role in the regulatory quagmire. I would think they could have a significant effect in the area if they came in and took type of action they took against the likes of Google and Twitter against the players in this space. Maybe I'm missing something or there are institutional factors at play (or activities going on behind the scenes), but it certainly seems like the FTC has extracted a large quantity of blood in some situations but is ineffectual or slow to act in others.

Previous posts on NebuAd:

Deep Packet Inspection (NebuAd) Litigation: Court Dismisses ECPA Claim but CFAA Claim Continues
NebuAd Deep Packet Inspection Lawsuits Sputter -- Deering v. CenturyTel & Green v. Cable One

Additional coverage:

Wendy Davis: "Embarq Wins Privacy Suit Stemming From NebuAd Tests"
__

Eric's comments

1) For sake of completeness, I note that a 47 USC 230 defense wouldn't have helped Embarq against the derivative ECPA claim because 230's immunity expressly excludes ECPA claims. See 47 USC 230(e)(4). Thus, this case failed on the prima facie elements. The court says confidently (cites omitted):

The civil liability provision of the ECPA, however, does not provide for secondary liability, as liability attaches only to the party that actually intercepted a communication. As numerous courts have consistently held, a defendant does not “intercept” a communication merely by allowing or enabling, or even directing, another party to intercept communications.

2) The court's conclusion about consent is interesting:

plaintiffs were required to agree to the terms of the Activation Agreement in order to use Embarq’s Internet service; that Agreement incorporated the terms of the Privacy Policy, which informed subscribers that their de-identified data could be shared with third parties; that Agreement informed subscribers that the terms could be changed at any time through posting a new policy at Embarq’s website; and Embarq modified those terms in advance of the NebuAd test to add a paragraph regarding preference advertising, with an opt-out mechanism.

This summary, very much in line with the Mortensen case, shows an extreme judicial deference to Embarq's contract--both in terms of letting broad opaque language serve as user "consent" and letting Embarq unilaterally amend the contract to add new and different terms. We've seen other courts push back on both practices, so I wouldn't recommend Embarq's approach as an industry best practice. It seems especially odd that courts have been so deferential on consent issues given the inherent disagreeability of NebuAd's DPI practices.

3) Along with last week's Bose v. Interclick ruling, chalk this up as another plaintiff loss in a privacy case that most people probably thought was a slam dunk. So many of the pending privacy lawsuits are filed solely because defendants will pay to avoid the adjudication costs of defending their practices under poorly drafted statutes, not because there's any fundamental merit to the cases. We desperately need a complete rewrite of the CFAA and ECPA simply to put them in English so that everyone has a better sense of which cases are meritorious from the outset.

4) An interesting factoid: NebuAd paid less than $30k to Embarq for the trial period. Note to future IAPs who want to experiment with potentially privacy-invasive technologies: it isn't a good financial deal for you! Or, at minimum, get the vendor's insurer to stand behind the vendor's indemnity clause so that you won't spend many multiples of the associated revenue defending yourself when the vendor goes belly-up.

Posted by Venkat at 04:27 PM | Derivative Liability , Licensing/Contracts , Privacy/Security

August 17, 2011

Backpage Gets 47 USC 230 Defense for Prostitution Ads--M.A. v. Village Voice

By Eric Goldman

M.A. v. Village Voice Media Holdings LLC, 2011 WL 3607660 (E.D. Mo. Aug. 15, 2011)

M.A. was the victim of a convicted sexual trafficker, Latasha Jewell McFarland. M.A. alleges that McFarland created child pornography of M.A., posted the photos on Backpage as part of advertising M.A. for prostitution, and then acted as a pimp for M.A. M.A. sued Backpage for its role in the tragedy.

The court starts with an interesting discussion about Article III standing. M.A. took the position that she's suing Backpage for running its website, not for the content of McFarland's post. This distinction doesn't make any sense, and the court uses Article III standing to collapse it. M.A.'s real complaint is about McFarland's crimes against her, and the only way M.A. has standing against Backpage for those crimes is based on McFarland's posts to Backpage. Framed this way, Backpage is primed for a 47 USC 230 defense.

M.A. took a comprehensive approach to trying to dislodge the immunity:

* Backpage allows keyword searches. Citing several cases, including Jurin and Rosetta Stone, the court says this is irrelevant.

* Backpage created an adult category. The court cites Dart v. Craigslist in concluding this is irrelevant.

* Backpage takes steps to increase its revenues. Backpage allegedly "tout[ed] its website as a 'highly tuned marketing site' and instruct[ed] posters of ads on how to best increase the impact of those ads." The court responds: "to find Backpage to be not immune from suit based on M.A.'s allegations about how it structured its website in order to increase its profits would be to create a for-profit exception to § 230's broad grant of immunity. This the Court may not do."

* Backpage allegedly knew prostitution was advertised on the site. The court cites several cases for the proposition that knowledge is irrelevant to 230's immunity.

* Backpage "developed" the ads. This was just a rehash of the notice + profit argument. The court says "neither notice or profit make Backpage liable for the content and consequences of the ads posted by McFarland." The court expressly rejects the direct Roommates.com attack on the immunity, distinguishing Roommates and a few other cases by saying " In the instant case, there is no allegation that Backpage was responsible for the development of any portion of the content of McFarland's posted ads or specifically encouraged the development of the offensive nature of that content." The court also notes: "however horrific the consequences to M.A. of McFarland's posted ads were, the ads were created by McFarland."

* Giving Backpage a 230 immunity is "indefensible." This is basically a policy argument, and the court tells M.A. to take it up with Congress.

* Backpage "aided and abetted" a criminal violation. Backpage lacked the specific intent to satisfy the prima facie case. It appears the court also says that 230 preempts aiding-and-abetting liability.

* 230 doesn't apply to criminal prosecutions. This is a civil case premised on a criminal statute, and the court cites Doe v. Bates for the proposition that 230 preempts the civil claims. M.A. argued that Bates was "flawed," but the court responds "[Bates] is supported, however, by other cases applying the broad reach of § 230's immunity to websites that, whatever they did to increase their profitability and visibility, did not create the content of the offensive posted information." The court continues: "this does not lead M.A. without a remedy under § 2255. She may still pursue a civil remedy against McFarland." (And, in fact, McFarland has been required to make restitution and pay other amounts as part of her criminal sentence).

* The "Optional Protocol to the Convention on the Rights of the Child on the Sale of Children, Child Prostitution, and Child Pornography" trumps 230. This treaty wasn't self-executing. Plus, when the Senate ratified it, it declared existing law--which included 230 already on the books--satisfied the treaty.

The court neatly sums things up:

Plaintiff artfully and eloquently attempts to phrase her allegations to avoid the reach of § 230. Those allegations, however, do not distinguish the complained-of actions of Backpage from any other website that posted content that led to an innocent person's injury. Congress has declared such websites to be immune from suits arising from such injuries.

You have to give M.A. credit for effort. The lawsuits tried virtually every trick in the book to overcome the 230 immunity. But you also have to give the judge credit, both for keeping a cool head and for the skillful references to a couple dozen 230 precedent cases.

Combined with Dart v. Craigslist, it seems entirely clear to me that plaintiffs are wasting their time suing classified ad websites for prostitution ads. M.A.'s situation is tragic, but the blame against Backpage is misdirected.

Posted by Eric at 01:44 PM | Derivative Liability | TrackBack

August 12, 2011

Catching Up on 4 Months of Online Copyright Cases--Myxer, Hotfile, Megaupload, Flava Works, Zediva, Blue Nile, Perfect 10, Rojadirecta

By Eric Goldman

Online copyright cases have been coming at such a furious pace that I haven't had a chance to keep up. This blog post wraps up the last 4 months of decisions.

Arista Records v. Myxer, Inc., 2:08-cv-03935-GAF-JC (C.D. Cal. April 1, 2011)

Myxer allows users to upload sound files and create downloadable ringtones up to 40 seconds long. The plaintiffs claimed 90+% of the ringtones were at least 34 seconds; but Myxer claims its average length is 25 seconds and that this is shorter than Audible Magic can reliably filter. Myxer claims to be a tool for independent artists to easily get their music into the mobile environment, but of course users can upload third party copyrighted material. UMG objects to the ringtones at Myxer because the downloadable ringtones disrupt its paid-download ringtones business. For reasons that aren't explained, UMG apparently never sent a proper 512 takedown notice, and Myxer treated the complaint as a takedown notice.

In a perplexing but unexplained statement, the court says "The undisputed facts in the present record establish that Myxer has directly infringed at least one of Plaintiff's exclusive rights, pursuant to § 106." The court further says there is no "volitional" defense in the 9th Circuit. This shifts the battle over the 512 safe harbors.

Agreeing with the UMG and YouTube cases, the court says user downloading qualifies for 512 coverage. The adequacy of Myxer's repeat infringer policy and the expeditiousness of its removal was deferred to trial. Citing Io, the fact that terminated users could re-register didn't disqualify Myxer from the 512 defense. The court rejected UMG's arguments that Myxer had generalized knowledge of infringement and says "to the extent that Plaintiff suggests that Myxer should have taken additional steps to filter infringing material on the Myxer Website, ‘the DMCA does not place the burden of ferreting out infringement on the service provider.’" With respect to direct financial benefit, the court says the test is "whether the infringing activity constitutes a ‘draw’ for users, not just an added benefit."

Myxer also loses a fair use defense. It's pretty clear that Myxer kept the maximum ringtone length fairly short as part of a fair use strategy, but the court circularly says Myxer took the best part, i.e., the chorus.

The most remarkable thing about this opinion is its length--75 pages. Easily, 17 USC 512 opinions are, on average, double or even triple the length of 47 USC 230 opinions. That's because 17 USC 512 has so many more words--and elements--than the pithy 47 USC 230, and plaintiffs contest virtually every word in a 512 defense. This makes for long and sometimes ponderous opinions. As a reader of judicial opinions, let's hear it for short immunities!

Disney Enterprises, Inc. v. Hotfile Corp., 11-20427-CIV-JORDAN (S.D. Fla. July 8, 2011)

Hotfile is a cyberlocker. Part of its business model is to give faster download speeds to paying members. Hotfile pays uploaders who post popular large files, which could naturally encourage people to upload infringing files.

Unlike the Myxer case, and following in the footsteps of the old Netcom case, the court rejects Hotfile's direct liability: "the law is clear that Hotfile and Mr. Titov are not liable for direct copyright infringement because they own and manage internet facilities that allow others to upload and download copyrighted material.... nothing in the complaint alleges that Hotfile or Mr. Titov took direct, volitional steps to violate the plaintiffs’ infringement" [sic—the last word should have been "copyright"]. As a result, the court grants the defendants' motion to dismiss the direct infringement claim.

The court distinguishes some 1990s cases (Webbworld and Russ Hardenburgh, among others) suggesting otherwise, saying that, in those cases, the defendants uploaded files themselves or used software to search for files. The court also expressly disagrees with Capitol v. MP3Tunes and Arista v. USENET.com. This is a pretty unpersuasive distinction based on the facts of the precedent cases, and I think it highlights the weakness of the "volitional" defense. The fact is that all but the most passive of hosts or conduits take some affirmative steps towards customizing the downloader's experience, and trying to parse which of those steps constitute "volitional" conduct and which don't is leading to the inevitable doctrinal incoherence.

Having said that, I thought we decided that web hosts aren't directly liable for user-caused infringement 15 years ago. I can't believe we're still wasting our time on this issue in 2011.

Not surprisingly, the secondary infringement claims survived the motion to dismiss.

Perfect 10, Inc. v. Megaupload Ltd., 2011 WL 3203117 (S.D. Cal. July 27, 2011)

Megaupload is another cyberlocker with a terrible brand name. Its business model appears similar to Hotfile's. Like Hotfile, it also sought a motion to dismiss the direct infringement claim. Unlike Hotfile, the court sees enough volitional conduct to survive the claim. It would have been great if the opinion did a compare/contrast with the Hotfile opinion, but sadly Hotfile wasn't mentioned at all--but, naturally, the MP3Tunes and Usenet.com cases (the ones the Hotfile court trashed) were. Sigh.

As usual, Perfect 10 apparently failed to send a proper 512(c)(3) takedown notice. They sent 22 notices in all, but allegedly 21 related to stuff that wasn't theirs. (Huh?) The court can't do much with this on a motion to dismiss and tells Megaupload to put it in its answer. The court does dismiss the vicarious infringement claim, saying that Perfect 10 didn't properly allege the requisite supervision over infringing activity beyond alleging supervision of the system.

Perfect 10's trademark infringement claims get Dastar-ed, but the dilution claims survive. Perfect 10's allegation is tarnishment because its high-quality photos are intermingled with junk photos. Seriously?

Flava Works, Inc. v. Gunter, 2011 WL 3205399 (N.D. Ill. July 27, 2011)

This case involves myVidster, another lousy trademark. After the cataclysmic flameouts of Napster, Grokster, Aimster, Friendster and so many others, who thinks the "-ster" suffix is still cool??? myVidster is small operation, mostly focused on porn, that allows users to "bookmark" a video. From the description, it sounds like myVidster is like a delicious-style link aggregator that embeds the linked videos, but the court confusingly goes out of its way to say myVidster isn't a linking site:

MyVidster does not simply link to video files displayed on another site; it embeds the files on its own site at the direction of users. In other words, when a visitor to myVidster clicks on a video that is posted there, the video plays directly on myVidster, and the visitor remains on the myVidster site; he or she is not taken to the site that hosts the video file.

Right, that sounds like a linking site to me. It's not clear to me how defense counsel failed to get the judge to grasp this essential fact.

The court describes that myVidster adds some metadata. The court shares this panicky observation: "In cases where a myVidster user bookmarks another user’s bookmark, the ‘source code’ will be a myVidster URL even though the original file of the video may be hosted elsewhere." Quelle horreur! Exactly where would the court like that link to go? The court might not have realized that linking user #1 might have added its own metadata or other users may have posted comments that linking user #2 would want to incorporate.

Flava produces gay ethnic porn. It discovered that myVidster users were embedding lots of its content. It sent multiple DMCA takedown notices. Flava claimed that myVidster's response to its takedown notices was erratic--sometimes it would take everything down, sometimes it would remove the link but leave up a thumbnail, and sometimes it would ignore the notice. myVidster responded that it did a better job than that and produced a chart showing its responsiveness. The court discounts the chart because it was not prepared on a timely basis and wasn't sufficiently credible in its preparation, but in a footnote, the court makes it clear it just didn't believe myVidster's principal:

In any event, although it does appear that it was sometimes like pulling teeth to obtain full compliance from Gunter, as discussed infra, the crux of the problem here is not so much the removal of the infringing videos; it is Gunter’s attitude toward copyright protection and his related refusal to adopt measures to prevent or reduce copyright infringement on myVidster as well as to adopt and implement an appropriate policy regarding repeat infringers.

This quote shows that it’s not a good idea to displease judges hearing online copyright cases. As we learned in Io v. Veoh, websites that go beyond the DMCA and proactively fight copyright infringement get a lot of extra credit from judges. For more on this in the trademark context, see Stacey Dogan’s new article, “We Know It When We See It.”

In myVidster's case, its principal took the highly unusual position that anything publicly posted to the Internet was fair game for linking--irrespective of its underlying copyright status. For example, the principal said: "my policy on repeat infringers are those who are using myVidster as a ways and means to distribute content that is not publicly available." He repeatedly told copyright complainants to take it up with the video host, because removing the links from his site wouldn't remove the file itself from the Internet. This is true, but it's not really sensitive to the emerging legal obligations of intermediaries.

Based on the view that anything publicly posted was freely linkable, user-posted links implicated myVidster's repeat infringer policy only if they went to password-protected sites or private URLs. I find it hard to believe that a lawyer recommended this standard. Because of this policy’s incredibly narrow scope, myVidster only had a single user who got a repeat infringer warning. The court didn't have kind words for this policy: "Gunter’s ‘repeat infringer’ policy is in fact no policy at all, at least with respect to copyright infringement....His definition of ‘repeat infringer’ does not encompass copyright law."

The court has little trouble establishing prima facie contributory copyright infringement. Users posted links to infringing videos. myVidster's principal knew of these links from the DMCA takedown notices. He didn't remove the links (or only partially remove them) upon notice. The court says his view about the free linkability of publicly posted but infringing videos "is the epitome of ‘willful blindness.’" The court also cites his failure to implement filters to prevent repeat infringement or to take recourse against the infringing users.

The general operation of a linking site counted as a material contribution. It also cited the fact that the site offered paid hosting as a way to avoid the possible breakage of links (the court said that "encouraged" infringement), and the site's principal also encouraged infringement through his own personal "favorites" list, which included “Star Trek,” “Crank 2,” and “Hancock”--and at a hearing, he stubbornly said that only the copyright owner could tell if the movie posting was infringing. The court also cited the website’s failure to discourage users from infringing copyrights—this was a doctrinal shortcut by the court.

Needless to say, myVidster doesn't get a 512 defense. The court says brusquely: "It is difficult for us to understand how defendants can argue with a straight face that they have adopted and reasonably implemented a ‘repeat infringer’ policy."

It's frustrating to see a ruling like this. myVidster had a legitimate chance of legal success if it got competent legal counsel from day 1 (or, if they did, if they listened to their lawyers) and baked in even the minimum industry-standard anti-infringement efforts. But the misguided view that anything online was linkable couldn’t be defended in court, and the extremeness of that view (combined with the principal's mule-like refusal to give any ground) gave the court too much liberty to say doctrinally unhelpful things as part of a judicial bodyslam.

Although it's largely mooted by the summary judgment opinion, the court's opinion on the motion to dismiss is also interesting. The court dismissed the direct infringement claim (correctly IMO), and on the vicarious infringement claim, echoed the (uncited) Perfect 10 opinion by saying that "To sufficiently allege the element of “right and ability to supervise,” plaintiff will have to allege more than the mere ownership and operation of myVidster." Similarly, the court follows in the (uncited) Myxer court's footsteps by saying the plaintiff "does not allege that the presence of the infringing material on the site enhances the site’s attractiveness or draws customers." As a result, the court tossed the vicarious infringement claim too. The inducement claim also dropped out because of "formulaic" pleading. Finally, the court tossed the trademark claims because they didn't show how myVidster made a use in commerce. Yet, all of these defense-favorable rulings that narrowed the case didn't save myVidster from a disastrous contributory copyright infringement ruling. But, for other defendants, it shows how victory was attainable for myVidster had it followed a better recipe for clean living.

Warner Bros. Entertainment Inc. v. WTV Systems, Inc., 2:11-cv-02817-JFW -E (C.D. Cal. Aug. 1, 2011)

Unlike most of the other cases here, this is not principally a secondary infringement case. However, it bears some commonalities with the other cases.

Zediva was trying to find a way to take advantage of the Cablevision case to offer a video "rental" service online. Zediva would acquire DVDs and essentially check them out to paying customers such that only 1 customer could enjoy the DVD at any one time. Frankly, if the Cablevision case is good law, Zediva has a point. However, I've been troubled by the Cablevision precedent, and this opinion shows that Cablevision isn't a very robust precedent as the court basically says "nyet" to a similar application in a new context.

Zediva's main failing is that it doesn't maintain separate copies of the downloadable file for each viewer as Cablevision did. Of course, that probably wouldn't be profitable for Zediva, because it presumably needs to amortize the DVD's purchase price over multiple viewers. (Unlike Cablevision, which had already paid for the license fee to obtain the digital bits through its cable retransmission license). Then again, it would be really lame if the legal rule is that we have to build wasteful redundant systems to avoid copyright infringement. That was the implicit rule from Cablevision, and this court doesn't let Zediva cut that corner.

The court says Zediva is publicly performing the videos. Its main citation is to the On Command case from 2 decades ago and the Redd Horne case from over a quarter-century ago. How's this for some circular logic: "Defendants’ transmissions are ‘to the public’ because the relationship between Defendants, as the transmitter of the performance, and the audience, which in this case consists of their customers, is a commercial, ‘public’ relationship regardless of where the viewing takes place." Huh? The court distinguishes Cablevision because each viewer had his/her own dedicated copy of the video, unlike the shared copy of the DVD in this case.

Citing the Myxer case (discussed above), the court says that the Ninth Circuit hasn't adopted a volitional defense.

This opinion is pretty bad, but IMO the worst part is the court's discussion of irreparable injury. Check out this parade of horribles:

* Zediva might "jeopardize the continued existence of Plaintiffs’ licensees’ businesses" (really?!) because consumers find Zediva’s service more attractive than the crappy options officially sanctioned by the movie studios.

* "Defendants’ service threatens the development of a successful and lawful video on demand market and, in particular, the growing internet-based video on demand market. The presence of Defendants’ service in this market threatens to confuse consumers about video on demand products, and to create incorrect but lasting impressions with consumers about what constitutes lawful video on demand exploitation of Plaintiffs’ Copyrighted Works, including confusion or doubt regarding whether payment is required for access to the Copyrighted Works."

* "Defendants’ service also threatens the development of a successful and lawful video on demand market by offering a sub-optimal customer experience and, thus, tarnishing customers’ perception of video on demand as an attractive option for viewing Plaintiffs’ Copyrighted Works." In particular, the court cites Zediva's inability to let multiple customers share the same DVD simultaneously against it, saying that telling customers that a video is "out of stock" will turn off video-on-demand customers permanently.

After reading this, I get the sense that the movie studios think the video-on-demand industry is more fragile than a 1980s Jaguar.

The court spent a lot of time discussing the movie studios' windowing. This reminded me of recent language from the Second Circuit Barclays' case:

The adoption of new technology that injures or destroys present business models is commonplace. Whether fair or not, that cannot, without more, be prevented by application of the misappropriation tort.

Perhaps copyright law can prevent it.

Blue Nile Inc. v. Ideal Diamond Solutions Inc., 2011 WL 3360664 (W.D. Wash. Aug. 3, 2011)

This is a piercing-the-corporate-veil case. Chasin is the principal of IDS, an outsourced online jewelry website operator for offline jewelry retailers. Blue Nile (remember them?) claims IDS republished its copyrighted product shots. Chasin defended that he personally didn't do it, so he should not be personally liable. The court grants summary judgment to Blue Nile.

On direct infringement, the court says (footnotes omitted):

There is no question that IDS was the “brainchild” of Larry Chasin, that IDS “was a small company”, and that Chasin “controlled the corporate affairs”. In addition to creating and controlling IDS, Chasin licensed the development of the infringing websites, and had the power to direct the removal of infringing content.

Any lack of knowledge goes to damages as an innocent infringer, not to the merits. Of course, if the photos had a copyright notice, the innocent infringement defense may be unavailable, so I'm not sure the court did Chasin any favors there.

On vicarious infringement, the court says (cites omitted):

Chasin admits that he had the ability to remove the infringing content and that he controlled the corporate affairs of IDS; thus he had the right and ability to supervise the infringing activity. He also admits that he personally invested “over $440,000 cash” into IDS and that he received salary and benefits from IDS, thereby giving him a direct financial interest in IDS.

Without more insight into the source of the allegedly infringing photos, it's hard to know just how bad this ruling is. I believe that officer/investor liability for a company's copyright infringement remains undertheorized, and I'd love to see more attention paid both to the doctrinal fine points and to the policy implications of treating someone like Chasin as a direct and vicarious copyright infringer. If you’re looking for a paper topic, this might be worth considering.

I also continue to howl that product shot-related lawsuits are a ridiculous tax on the entire retailing industry, and an area that desperately needs reform. One idea I've been kicking around is a commons-style repository of product shots. If you're interested in kicking this idea around, contact me.

Perfect 10 v. Google, No. 10-56316 (9th Cir. Aug. 3, 2011)

Perfect 10 is in the Ninth Circuit again. This Ninth Circuit panel (the opinion was written by Judge Ikuta) made it very clear that it did not want to discuss the main event--i.e., the merits of Perfect 10's lawsuit against Google. I think that's because the panel knows that the case's substantive issues are coming back to it soon enough (it's interlocutory now), and this panel didn't want to skew the substantive analysis when the time comes.

Instead, this opinion is about the standards for a preliminary injunction in copyright cases. The district court denied preliminary injunctive relief to Perfect 10, while at the same time ruling mostly in Google's favor. In this opinion, the Ninth Circuit weaves eBay v. MercExchange into the standards for preliminary injunctions in copyright cases. The court holds:

We therefore conclude that the propriety of injunctive relief in cases arising under the Copyright Act must be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a “thumb on the scale” in favor of issuing such relief.

As a practical matter, this opinion ought to make it harder for copyright plaintiffs to get preliminary injunctions, And unlike many recent Ninth Circuit opinions, I believe there's a realistic chance that other Ninth Circuit panels will honor this holding. The opinion is well-reasoned and a logical extension of the Supreme Court's eBay decision.

The court goes on to say that it wasn't an abuse of discretion to deny a preliminary injunction to Perfect 10, even if it meant they would go out of business. (We can only hope). Basically, the court called BS on Perfect 10's claim that Google is wrecking its business, noting (among other things) that Perfect 10 "failed to submit a statement from even a single former subscriber who ceased paying for Perfect 10’s service because of the content freely available via Google." It is really hard to be too sympathetic towards a copyright owner who seems far more passionate about litigating than in giving consumers reasons to patronize it.

Puerto 80 Projects SLU v. USA, 1:11-cv-04139-PAC (SDNY Aug. 4, 2011)

Rojadirecta is a Spanish operation that runs linking sites. Naturally, some links are to infringing material. Rather than send takedown notices or sue Rojadirecta for infringement, the US government (DHS ICE) just took the domain names on the theory that they were being used to commit criminal copyright infringement. There are numerous problems with ICE’s seizure, including jurisdiction (Rojadirecta is legal in its home country), doctrine (the US government will have a tough time showing criminal copyright infringement), procedure (all of this was done without an adversarial process) and the Constitution (the domain name was the functional equivalent of a printing press for Rojadirecta). The DHS ICE's efforts to shut down a purportedly "rogue" site has, in fact, caused our own government to go rogue itself.

In this lawsuit, Rojadirecta tries to get its domain name back. The applicable statute was designed to govern physical chattel, not virtual printing presses. In a remarkably tone-deaf opinion, the court has none of it. The statute at issue effectively puts the burden on Rojadirecta--an odd place for the burden to rest, given that the US government still hasn't proven anything--and the court doesn't see enough reason to disturb the status quo.

Consider the tone-deafness of the court's response, keeping in mind that the underlying allegation is criminal copyright infringement, where the government's burden should be higher than in a civil case. Rojadirecta argues that it's losing users who can't find it due to the seized domains. The court responds that Rojadirecta has other domains, and "Rojadirecta has a large internet presence and can simply distribute information about the seizure and its new domain names to its customers." Well, yes, it can bang the drum through other media, but by definition there's no way to ensure the publicity reaches folks who only knew of Rojadirecta at the seized domains. Contrast Judge Kozinski's discussion in the Toyota v. Tabari case, a trademark lawsuit over a domain name:

the Tabaris needed to communicate that they specialize in Lexus vehicles, and using the Lexus mark in their domain names accomplished this goal. While using Lexus in their domain names wasn’t the only way to communicate the nature of their business, the same could be said of virtually any choice the Tabaris made about how to convey their message.

In general, it's repugnant under the First Amendment for the court to second-guess a publisher's choices of how to communicate with its audience. Here, the court does just that, and ignores any lost audience because ICE has blocked the publisher's preferred communication method. Corynne at the EFF has more to say about this point.

The court makes the same error when it expressly discusses the First Amendment. The court says "the fact that visitors must now go to other websites to partake in the same discussions is clearly not the kind of substantial hardship that Congress intended to ameliorate in enacting § 983." That is true, but only because 983 contemplated the government would seize physical chattels that putatively facilitate crimes, not virtual printing presses. So when the government misuses its power to reach speech-facilitating chattels, the court should modulate accordingly.

The judge doesn't permanently shut the door on the First Amendment issues or other relevant defenses, but he's apparently not yet appreciated the magnitude of the government's errors either.

Posted by Eric at 09:29 AM | Copyright , Derivative Liability | TrackBack

August 05, 2011

TheDirty Defeats Publicity Rights Claims--Gauck v. Karamian

By Eric Goldman

Gauck v. Karamian, 2011 WL 3273123 (W.D.Tenn. July 29, 2011)

TheDirty.com has an increasingly active litigation docket. This case comes from Lauren Lee Gauck Giovanetti, a TV news reporter for Fox 13 in Memphis, Tennessee. She sued over two user-submitted posts to TheDirty that claimed she "used illicit drugs, was sexually promiscuous, exchanged sexual favors in return for drugs and money, and assaulted an unknown person." The posts contained photos of her and several nude photos that also claimed to be of her, but she denied that claim. As usual, Nik Richie added his terse and snarky comments to the user posts. He also watermarked the photos and covered up portions of the nude photos.

Gauck sought an injunction based on her publicity rights. The court sidesteps the obvious 47 USC 230 defense, assuming without deciding that the publicity rights claim would fit into 230's IP exception.

Instead, the court rejects the injunction request on the merits of the publicity rights claim. This is based on the specific wording of Tennessee's publicity rights statute, which applies only to advertisements or solicitations. TheDirty made a commercially motivated editorial usage of Gauck's name and image. This type of usage gives courts fits, especially when the editorial publication isn't a traditional journalistic enterprise like a print newspaper. (See more about that problem in trademark law). Even so, there was no way to interpret TheDirty's "editorial content" as an advertisement or solicitation. The court says:

Plaintiff has offered no evidence that Defendants marketed their site by emphasizing Plaintiff’s appearance on the site, used portions of the posts in teasers on other sites to draw more visitors, prominently displayed the posts regarding Plaintiff on the site, advertised Plaintiff’s appearance in connection with the sale of any of Defendants’ products, or charged higher premiums to advertisers for advertising space on the pages pertaining to Plaintiff.

The court rejects Gauck's generalized assertion that TheDirty's editorial content generates more ad money because it deals with celebrity gossip:

Plaintiff has suggested, at most, a currently unsubstantiated connection between the general use of celebrity personas on the site and an increase in traffic and/or advertising revenue.

I think that line of inquiry was irrelevant if we maintain the artificial distinction between editorial content and advertising. If the statute applies only to advertising, then it shouldn't matter if editorial content becomes more interesting because it addresses third party personalities. But the distinction truly is artificial--editorial content is its own form of marketing, i.e., more interesting editorial content naturally draws in more readers. The court didn't make a misstep here, but it could have been sharper or more succinct.

More coverage of TheDirty litigation:

* TheDirty Defeats Privacy Invasion Lawsuit--Dyer v. Dirty World
* thedirty.com's 47 USC 230 Defense Rejected on Motion to Dismiss--Jones v. Dirty World Entertainment

Posted by Eric at 11:32 AM | Derivative Liability , Publicity/Privacy Rights | TrackBack

August 04, 2011

Idea Submission Case Revived Against MySpace--Riggs v. MySpace

By Eric Goldman

Riggs v. MySpace, Inc., 2011 WL 3020543 (9th Cir. July 25, 2011)

Riggs created a popular MySpace page, only to have MySpace delete it twice. Not pleased by that turn of events, for years Riggs has been doggedly pursuing a lawsuit against MySpace pro se. Two years ago, the district court unceremoniously bounced her lawsuit relying, in part, on a novel reading of 47 USC 230(c)(1). The Ninth Circuit upheld the 230 ruling on appeal:

The district court properly dismissed Riggs’s negligence and gross negligence claims, arising from MySpace’s decisions to delete Riggs’s user profiles on its social networking website yet not delete other profiles Riggs alleged were created by celebrity imposters, because these claims were precluded by section 230(c)(1) of the Communications Decency Act. See Fair Hous. Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157, 1170-71 (9th Cir. 2008) (en banc) (“[A]ny activity that can be boiled down to deciding whether to exclude material that third parties seek to post online is perforce immune under section 230.”).

Another Roommates.com citation for the defense. But, as I explain in my prior blog post, I think this should have been a 230(c)(2) dismissal, not a 230(c)(1) dismissal.

The court also rejected her claim for “promissory fraud breach of contract claim” (whatever that means) for lack of cognizable damages.

However, in an unexpected turn, the court revived her idea submission claim (an implied-in-fact contract breach) "because Riggs alleged in her First Amended Complaint at paragraph 120 that she told the News Corporation’s executive’s assistant that she wanted to “sell” her ideas before she disclosed them." That's a pretty weak allegation made to a person who may lack proper authority to promise anything, so the court seemed mighty generous to Riggs in reviving the case. Nevertheless, this is consistent with California's amorphous idea submission doctrines. They can be a nice end-run to survive motions to dismiss because, by definition, the parties are likely to dispute the facts in an implied-in-fact contract. Sadly, the Ninth Circuit recently expanded the idea submission doctrines in the Larry Montz case (mentioned here), so expect more weak idea submission claims to get further in litigation than they should.

Although the idea submission claim wasn't really a workaround to 47 USC 230, I think this case bears some parallels to Barnes v. Yahoo. In both cases, 47 USC 230 emphatically closed some doors to plaintiffs, but squishy state law doctrines opened other doors for the plaintiffs. It's a good reminder why 47 USC 230 works so well. Because it has so few exceptions, it ends cases cold. Fluffy doctrines like promissory estoppel and implied-in-fact contracts make it hard for judges to cleanly end cases early.

Eriq Gardner's story on the case.

Posted by Eric at 05:18 PM | Derivative Liability , Licensing/Contracts , Trade Secrets | TrackBack

July 18, 2011

The “Graduated Response” Deal: What if Users Had Been At the Table? (Co-Authored Post)

[Cross-posted to EFF's Deeplinks as well as here]

By Corynne McSherry and Eric Goldman

As was widely reported last week, several major internet access providers (including, very likely, yours) struck a deal last week with big content providers to help them police online infringement, educate allegedly infringing subscribers and, if subscribers resist such education, take various steps including restricting their internet access. We’ve now had a chance to peruse the lengthy “Memorandum of Understanding" (MOU) behind this deal. Turns out, as is often observed, the devil is in the details – and they are devilish indeed.

Let’s start with the people taking credit: major content owners, service providers, and some government officials, principally New York Attorney General Andrew Cuomo. But guess who wasn’t invited to the party? The millions of subscribers who will be governed by the deal—the same subscribers who elect the politicians, buy the content owners’ goods and pay subscription fees to the internet access providers (which are likely to go up as administration costs are passed on – the UK’s graduated response system was estimated to cost about $40 per subscriber). Given that subscribers weren’t consulted, it’s probably not surprising that this deal is not in their interests.

Here’s some of the biggest problems with what resulted--and some ideas on what subscribers should demand of the system they’ll be paying for:

Who’s in Charge? The MOU calls for the creation of a new organization, called the Center for Copyright Information (CCI), to administrate the six-strikes system. CCI will be governed by a six-person executive committee comprised of representatives from content owners and internet access providers. Throwing a bone to subscribers, a three-person advisory board will include members “from relevant subject matter and consumer interest communities,” who will be given the chance to speak up whenever the executive committee asks. This possible advisory presence for subscribers is completely inadequate. Given they are the whole point of the MOU, subscribers deserve seats at the table as voting members of the executive committee.

“Mitigation” Measures and Independent Review: Internet access providers can punish accused subscribers by interfering with the subscribers’ connectivity, including by slowing transmission speeds, temporarily restricting web access for “some reasonable period of time,” and conditioning web access on completing a “meaningful copyright education program.” These mitigation measures can be imposed solely on the basis of the content owners’ assertions, without a judge ever determining that the subscriber did anything wrong.

Internet access has become an essential service in the digital age. Thus, just as we restrict the power of utilities to turn off services to their customers, we should not allow content owners to cause internet access providers to degrade or suspend their services without adequate due process.

The MOU does create a process designed to protect subscribers from unfounded accusations and punishment, but it’s hardly due process. Consider some of the procedural protections that subscribers might have sought if they had been at the bargaining table:

* The burden should be on the content owners to establish infringement, not on the subscribers to disprove infringement. The Internet access providers will treat the content owners’ notices of infringement as presumptively accurate--obligating subscribers to defend against the accusations, and in several places requiring subscribers to produce evidence “credibly demonstrating” their innocence. This burden-shift violates our traditional procedural due process norms and is based on the presumed reliability of infringement-detection systems that subscribers haven't vetted and to which they cannot object. (The content owners’ systems will be reviewed by “impartial technical experts,” but the experts’ work will be confidential). Without subscribers being able to satisfy themselves that the notification systems are so reliable that they warrant a burden-shift, content owners should have to prove the merits of their complaints before internet access providers take any punitive action against subscribers.

* Subscribers should be able to assert the full range of defenses to copyright infringement. A subscriber who protests an infringement notice may assert only six pre-defined defenses, even though there are many other possible defenses available in a copyright litigation. And even the six enumerated defenses are incomplete. For example, the “public domain” defense applies only if the work was created before 1923--even though works created after 1923 can enter the public domain in a variety of ways.

* Content owners should be accountable if they submit incorrect infringement notices. A subscriber who successfully challenges an infringement notice gets a refund of the $35 review fee, but the MOU doesn’t spell out any adverse consequences for the content owner that make the mistake – or even making repeated mistakes. Content owners should be on the hook if they overclaim copyright infringement.

* Subscribers should have adequate time to prepare a defense. The MOU gives subscribers only 10 business days to challenge a notice or their challenge rights are waived (a subscriber might get an extra 10 business days "for substantial good cause"). This period isn’t enough time for most subscribers to research and write a proper defense. Subscribers should get adequate time to defend themselves.

* There should be adequate assurances that the reviewers are neutral. The MOU requires that reviewers must be lawyers and specifies that the CCI will train the reviews in “prevailing legal principles” of copyright law – an odd standard given the complexity of, and jurisdictional differences in, copyright law. We’re especially interested in the identity of these lawyers, and why they are willing to review cases for less than $35 each (assuming the CCI keeps some of the $35 review fee for itself). Perhaps there will be a ready supply of lawyer-reviewers who are truly independent. Given the low financial incentives, another possibility is that the reviewers will be lawyers tied—financially or ideologically—to the content owner community. To ensure that the reviewers remain truly neutral, reviewer resumes should be made public, and checks-and-balances should be built into the reviewer selection process to ensure that the deck isn’t stacked against subscribers from day 1.

Education or Propaganda? The MOU repeatedly emphasizes subscriber education as one of its main goals. Unfortunately, this education won’t offer a very balanced view of copyright, at least if the current version of the CCI website is any indication. That website currently is full of scare-mongering rhetoric decrying the ill effects of so-called “content theft” and stressing the security risks of P2P. As the site is further developed, the executive committee should reject the rhetoric and look instead to the numerous online resources that provide a balanced and nuanced view of copyright law, helping to inform subscribers about their rights as well as their responsibilities when it comes to creative works.

Transparency: The MOU contemplates ongoing evaluation of the system through a variety of reports. That seems like a good idea, but neither subscribers nor the general public get to see or comment on those reports. Similarly, the statement of “prevailing legal principles” used to instruct reviewers also should be made public so that subscribers know how reviewers are interpreting U.S. copyright law. Simply put, if subscribers are supposed to treat the system as credible, they need enough information to determine that the system actually is credible.

Conclusion: This MOU has been in development for years, and we imagine the parties will be reluctant to revisit it. But it has yet to be implemented, which means there’s still time for the parties (and their friends in government) and to address the deficiencies of their proposal from perspective of the subscribers who’ll be paying for it. This deal is never going to be good for subscribers (nor for the artists who won’t see one more red cent as a result of it) -- but it sure could be better.

Posted by Eric at 01:13 PM | Copyright , Derivative Liability | TrackBack

July 15, 2011

17 USC 512(f) Preempts State Law Claims Over Bogus Copyright Takedown Notices--Amaretto v. Ozimals

By Eric Goldman

Amaretto Ranch Breedables, LLC v. Ozimals, Inc., 2011 WL 2690437 (N.D. Cal. July 8, 2011).

I generally like furry critters, but I'm beginning to hate the virtual horses and virtual bunnies for their deleterious effect on Internet law. A prior ruling in this case held that Amaretto (the horses) couldn't claim 17 USC 512(f) when Ozimals (the bunnies) sent takedown notices to Second Life that Second Life didn't act upon. Now, in this ruling, the court says that 17 USC 512(f) preempts all state law claims based on the takedown notices, agreeing with language in the Diebold and Lenz 512(f) cases.

I must confess that copyright preemption baffles me generally. Consistent with that, I couldn't tell if this ruling is relying on statutory preemption (17 USC 301), conflict preemption or field preemption. It might just be my shaky reading skills, but the opinion seemed to imply it was all three simultaneously.

There is a key difference between this case and the Diebold/Lenz cases, however. In those cases, the court said 512(f) was a viable claim. Here, the court has already said 512(f) isn't viable for Amaretto. So Amaretto rightly pointed out that this ruling would leave Amaretto remediless. The court expressly acknowledges this result, saying: yup, that's exactly what federal preemption means.

Amaretto also cited to the recent Rock River ruling, which indicated that 512(f) didn't preempt a tortious interference case. The court distinguishes the Rock River case by saying that case did not involve a 512(c)(3) takedown notice, so the notice never fell within 512(f)'s ambit in the first place and thus 512(f)'s preemption wasn't triggered. The court unfortunately doesn't reference or distinguish Smith v. Summit Entertainment, which survived various state law claims in addition to a 512(f) claim. I don't remember a preemption challenge in that case, but that's perhaps because the case was really about trademarks, not copyrights.

All this leaves me more confused than before. If you're looking for a good but challenging paper topic, the preemptive effect of 17 USC 512(f) looks worth exploring. It also reinforces that 512(f) is a limited solution that may be miscalibrated for its supposed purposes of helping to suppress bogus copyright takedown notices.

Prior blog posts on this case:

* Copyright Takedown Notice Isn't Actionable Unless There's an Actual Takedown--Amaretto v. Ozimals (April 2011)
* Second Life Gets Out of Dispute Between Virtual Bunnies & Virtual Horses (Jan. 2011)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals (Jan. 2011)

Posted by Eric at 07:22 AM | Content Regulation , Copyright , Derivative Liability | TrackBack

July 11, 2011

Comments on NY Highest Court Ruling on 47 USC 230--Shiamili v. Real Estate Group [Catch up post]

By Eric Goldman

Shiamili v. The Real Estate Group of New York, Inc., 2011 WL 2313818 (N.Y. App Ct. June 14, 2011). My blog post on the intermediate appellate ruling.

[I was traveling in mid-June and a few interesting rulings fell through the cracks. This is a catch-up post.]

Shiamili founded Ardor, which competes with the Real Estate Group in the apartment rental brokerage business. A pseudonymous user posted a comment to REG's blog allegedly defaming Shiamili. The blog administrator elevated the comment into a full blog post by republishing it with some introductory remarks. This sparked further allegedly defamatory comments to the post. The blog administrator allegedly also responded to one of those comments to try to elicit further details about Shiamili's deficiencies.

Based on this recitation, this looks like an easy 47 USC 230 dismissal. The plaintiffs made it seem even easier by alleging the defendants' tortious conduct was to "administer and choose content for" the blog. Administering and choosing UGC is exactly what 47 USC 230 protects, so this was a relatively uninspired effort to bypass the immunity.

The court summarizes the state of play in 47 USC 230 jurisprudence and distills a conclusion:

Today, we follow what may fairly be called the national consensus...and read section 230 as generally immunizing internet service providers from liability for third-party content wherever such liability depends on characterizing the provider as a 'publisher or speaker' of objectionable material

I'm not sure how this broad philosophy statement advances the ball beyond the statute's plain text, and the last 3 words are odd. The immunity applies irrespective of whether or not "objectionable" material is involved. The court does explain that the immunity applies equally to both neutral and selective publishers. The court punts on the Roommates.com's discussion about "development," saying that the plaintiff loses even under the more plaintiff-friendly reading. (Count this opinion as yet another citation of Roommates.com for the defense). The court says:

1) "Creating an open forum for third-parties to post content -- including negative commentary -- is at the core of what section 230 protects"
2) "there is no allegation that the defamatory comments were posted in response to any specific invitation for users to bash Shiamili or Ardor"
3) elevating the comment to its own blog post didn't make the blogger a content provider of the comment's content. The court doesn't cite the email forwarding cases, but this ruling is completely consistent with them (see, e.g., Phan v. Pham).

The court distinguishes Roommates.com and Accusearch because the site did not require users to do anything illegal.

Finally, the court says the blogger is the content provider (and thus not insulated by 47 USC 230) for his introductory remarks, the blog post title and an accompanying drawing, but those three elements weren't defamatory as a matter of law.

There was a surprisingly strong dissent (and a 4-3 split among the judges), concluding that "an interpretation that immunizes a business's complicity in defaming a direct competitor takes us so far afield from the purpose of the CDA as to make it unrecognizable." This is at least the second time a state's highest court has split 4-3 on a 230 case--the old Doe v. AOL case in Florida is the other that comes to mind. Perhaps this difficulty agreeing on 47 USC 230's application makes sense for state courts that don't see 47 USC 230 cases regularly and might be surprised by the counter-intuitive breadth of Congress' immunity.

Posted by Eric at 08:55 AM | Derivative Liability | TrackBack

July 05, 2011

"Can IP Be Protected in the Internet Age?" Panel Recap from Russian Economic Development Conference

By Eric Goldman

In June, I attended the St. Petersburg International Economic Forum ("SPIEF"), organized by the Russian government's Ministry of Economic Development. This was a major event drawing thousands of participants to St. Petersburg, including the heads of state from Russia, China and several other major countries. The conference was designed to advance Russia's economic development, which seems to focus on natural resource extraction from Siberia. However, the conference included a few Internet-related panels, and conceptually they fit nicely with the theme of how Russia can develop its economy.

I participated on a panel entitled "Can IP Be Protected in the Internet Age?" Right away, I trust many of you find the titling odd. This is the kind of panel we had in the United States in 1996 and 1997. I can't imagine that anyone in the United States would organize a panel seriously asking that question in 2011. But the question seemed oddly appropriate given Russia's awkward status as a developed nation that bears some commonalities with the economies of the developing world.

Putting the titling aside, this was easily one of the most bizarre panels I've ever been on. The panel consisted of SIXTEEN presenters for a 75 MINUTE panel (one didn't show, so 15 actually spoke). Yes, you read that right. Doing the math, each speaker was allocated a little over 4 minutes (not surprisingly, some ran over). I should add that the Russian government paid thousands of dollars to cover my travel expenses so I could participate in this panel, making this a jaw-droppingly high per-hour rate for my time!

They sat the 16 panelists around a round table. You can see the room set-up in this photo. As you can see, it was a tight fit around the table. You can also see the monitors overhead and the videocameras pointed at the table; so audience members who couldn't see the speaker (for example, because they sat behind the speaker) could watch on the overhead monitor. At the peak, there may have been about 60 people in the audience (although I'm not sure how many of those were staff members). In the back left is the translator booth--about half the speakers spoke in English; the other half in Russian. One final thing to note is that everyone you see in the photo was an SPIEF staffer, meaning that the ratio between staffers and panelists approached 1:1. You've heard the stereotypes about Russian efficiency; this panel seemed to exemplify it.

Because there were too many panelists for the time allotted, not surprisingly the panel devolved into a series of short position statements not dissimilar to the "interaction" at an OECD workshop or other international forum. Some of the later speakers commented on the remarks of earlier speakers, but there was no audience Q&A or panelist back-and-forth. The panel moderator was Igor Drozdov, Director for Law and Legal Matters, Skolkovo Foundation, and he had the unenviable task of herding too many cats in too little time.

I'm not exactly sure why the panel was organized as it was, but it turns out, this event became another iteration in the dialogue between the Russian and United States governments over Russian copyright law. Because Russia's economy is still developing, Russia isn't faithfully toeing the US line on draconian copyright laws. Techdirt does a nice job summarizing some of the recent considerations for Russian copyright reform--something about baking Creative Commons into the copyright statute, which doesn't really make sense but reflects the theory that not every copyright owner needs nuclear-grade copyright rights. It's the kind of discussion we could never have in Congress because US copyright law is exclusively on a one-way ratchet to become more draconian. The US government isn't responding to Russia's flirtation with weaker copyright laws with smiles, and some of that tete-a-tete spilled over to this panel.

I'm going to relay my notes from the panel, but my usual caveats apply--these are my impressions of the discussion, not faithful transcriptions, so you should double-check before quoting or relying on my summary. In this case, capturing the discussion was even more difficult because I was working on very little sleep and relying on the English translations for the Russian speakers, and the translators cut out during a few speakers. If you want to watch the panel yourself and draw your own conclusion, go here. You can also read the organizers' official summary, which doesn't really capture the dynamics. You can also see the organizers' pull quotes.

Miriam Sapiro, US Deputy Trade Representative, started the discussion. Her bio and a Q&A where she lists her work on ACTA as her favorite moment--uh oh. Her remarks were what you would expect from a US trade rep. She rattled off the typical content owner talking points: IP theft is no less illegal than the theft of tangible property; IP protection is essential in the Internet era; legislation should provide for secondary infringement when service providers have the object of promoting infringement.

She tossed out a few Russia-specific quips, including:

* a concern about mandatory licensing of content to a monopolist--presumably a warning that Russia should not officially embrace Spotify as a private compulsory license;
* an expectation of vigorous government enforcement against Internet infringement, including cyber-lockers and BiTorrent.
* advocacy that Russia should join the WTO--and ACTA.

Svetlana Mironyuk, Editor-in-Chief, RIA Novosti. She expressed frustration with the work required to police their rights against UGC, which she says requires a team of 20 lawyers. They brought only 1 case, which they won, but she said the victory doesn't solve the whack-a-mole problem, and enforcement actions aren't good public relations.

Tom Rubin, Chief Counsel for Intellectual Property Strategy, Microsoft Corporation. Tom offered up the DMCA online safe harbor as a good example of how rightsowners' and technologists' interests can be balanced. It has promoted vibrant online innovation, helped proliferate legitimate commercial platforms, and led to voluntary cooperation between content owners and technology platforms that supplement the legal rules. He said there is a problem with rogue websites that have no legitimate purpose--these should be easy for content owners to remove. Creative Commons and other permissive licensing schemes are a complement to copyright law, not a substitute.

Oliver Metzger, Senior Copyright Product Counsel, Google Inc. IP enforcement works well when there is a shared responsibility between IP owners and websites. IP owners are in the best position to know when there is an infringement. We should not require websites to monitor UGC. Monitoring is hard for big companies and a crushing obligation for small ones. He pointed to Content ID as an example of a voluntary IP enforcement mechanism that YouTube has adopted.

Eric Goldman, Associate Professor, Santa Clara University School of Law. My remarks: Copyright protection is a good thing. Unfortunately, this leads to the mistaken assumption that more copyright protection is better.

In the Silicon Valley, much of the innovation takes place in the "unregulated spaces," i.e., the cracks in the regulatory structure. (I know many people have advanced this argument, but I acknowledge Mark Lemley's recent evangelism of this point). Regulation often creates barriers to entry, in many cases at the request of incumbent players.

In contrast, expressly creating unregulated spaces, through safe harbors and immunities, can spur entrepreneurship around those safe spaces. For example, the 17 USC 512 notice-and-takedown scheme. Service providers still feel the takedown process is onerous, but at least they know the rules of engagement and can find profitable ways to implement it, which has led to UGC success stories like YouTube.

From the perspective of content creators, there's an emerging recognition that copyright isn't their only solution. Information asymmetries are unstable on the Internet (an application of the idiom that "information wants to be free"), which reflects the nature of information as non-rivalrous. Many content creators are embracing the instability of information asymmetries by treating non-rivarlous content as marketing for rivalrous goods and services. As just one example, bands voluntarily post recordings of their live performances as marketing for future live performances.

Ivan Zasursky, Head of New Media and Communications Theory, Faculty of Journalism, Lomonosov Moscow State University. I didn't get any notes from him.

Andrei Loginov, Plenipotentiary Representative of the Russian Government in the State Duma. I'm not sure what his title means, but he spoke from a librarian's perspective. He noted that content creators' interests aren't always commercial, and increased commercialization of Internet content can increase piracy.

Yuri Lubimov, Deputy Minister of Justice of the Russian Federation. The traditional copyright owner's rhetoric is that we should do more to bust pirates. He thinks we should consider different perspectives. Paper-based rules are increasingly outdated. There is a decrease in the circulation of traditional media, and TV content is eroding in quality. We may not want to enforce existing rules; instead, we should anticipate when copyright rules will fall apart by finding new ways to monetize content in new technological environments. We can't protect content using the same means as we used to protect paper-based content. If we don't develop new methods to monetize content, then the old system will fail and a new system won't come online.

Kevin Lawric, President, Sony Europe and Africa. He acknowledged that rightowners had made bad decisions for years. [We all know this is true, but it's still refreshing to hear from a music exec.] He pointed to Spotify as a success story that was aided by government nudging. He gave the example of Sweden and Pirate Bay. The government pressured the illegitimate sites, and the legitimate services (Spotify) got licenses.

Ekaterina Chukovskaya, Secretary, Deputy Minister of Culture of the Russian Federation. Her talk seemed especially interesting but it was hard to tell with the translation. She started out by noting that IP owners have different perspectives. They understand the best monetization model for them, and we should give authors the right to do what they want, including sometimes not taking the full package of copyrights. [I believe this is part of the idea of baking Creative Commons into the statute.]

She also appeared to be interested in revitalizing formalities. She indicated there was thought about a digital registration process that libraries could implement. The author could register his/her interest; but if not, the author lets it go.

[At this point we had gone about 70 minutes of the 75 minute panel and we still had 5 speakers left. For reasons that weren't entirely clear, Miriam Sapiro said she had to leave. There was no graceful way for her to leave. She could have just left, but there were Russian government officials around the table and they might have perceived her departure as US government disinterest in the discussion. At the same time, announcing her departure consumed more time from speakers who hadn't been given their chance. She decided to do the latter and shared a few parting words:]

Miriam Sapiro (again). There is consensus around the table that (1) protection of IP is a universal right, (2) rightsowners, and not the government, should make the decision what to do with their rights. [In fact, I don't think there was any consensus around the table. The Russian government representatives were saying some pretty funky things that we'd never hear a US government official say in his/her official capacity.]

Benoit Ginisty, Director General, International Federation of Film Producers' Associations. "Free" isn't a sustainable business model, and it disturbs concepts of right and wrong. Their content is a value driver for ISPs.

Alexander Maslov, State Secretary, Deputy Minister of Telecommunications and Mass Communications of the Russian Federation. They surveyed Russian users. 80% will support pirated content despite its dangers, but 83% don't object to advertising, and many will pay if they can get timely access to content (no windowing). So there's no reason to be pessimistic if lawmakers adapt their laws and IP owners adapt their business models.

Tim Renner, Managing Director, Motor Entertainment GmbH. Intellectual property rights on the Internet are illusory. All control is lost. We need to ramp up legal options like Spotify. There will always be geographic locations where pirates can find a safe haven, so it's not possible to stop them.

Peter Jenner, Producer, Music Manager, ex-Manager of Pink Floyd and The Clash, Visiting Professor in Music and Entertainment Industry Economics. We need to find business models that are consistent with consumer behavior. We need to work with consumers, not against them. Consumers have different levels of enthusiasm for content, so content owners need to be more subtle with their pricing. We can compete with "free" by making content "feel like free," such as a flat tax paid through IAPs. He asked where the money to Spotify is going? It's not going to the artists. If consumers don't feel like the money is going to the right people, they are less willing to pay. [I'd like to see some social science backing that assertion up.] He also advocated for developing content registries as a formality.

Artemy Troitsky, Russian rock journalist and music critic. Talented artists and scientists will never stop, but we need to remove intermediate publishers from the system and we need to overcome greed. [The translation was garbled so I didn't catch what he was saying at the end, but something in his conclusion made the crowd go wild--his impassioned remarks produced a rousing ovation from an otherwise completely passive audience. Maybe the audience was just happy to reach the end of a frenetic and completely non-interactive panel before dark.]

After the conference, I did some tourism around St. Petersburg. I will post a comprehensive recap of that to my personal blog. In the interim, you can see my photo gallery.

Posted by Eric at 01:05 PM | Copyright , Derivative Liability | TrackBack

June 28, 2011

"Hot Topics in UGC Liability" Talk Slides

By Eric Goldman

Earlier this month, Internet law superstar Ian Ballon and I spoke for about 90 minutes on hot topics in Internet law. Watch the video by downloading or streaming (item #47) it.

I spoke about recent legal developments related to user-generated content. My talk slides.

In particular, the fourth slide is completely new. It's my initial attempt to catalog some of the abusive takedown practices I'm seeing. If you have thoughts about abuses I should add to the list, please let me know. I think it's important to start cataloging these practices for two reasons. First, should anyone propose mucking with the 230/512 allocation of responsibilities, it may be helpful to plop on the table some proposed defense-oriented statutory fixes to these bad practices rather than just respond to the maximalists' wish list. Second, with so much focus on whether or not there are abusive lawsuits (see, e.g., the farcical DOC report on trademark bullying), it seems useful to catalog some of the bad dispositions we're seeing without the dispute getting into court so that policy-makers can understand the true scope of the issues.

I'm also aggregating lawsuits where affected content publishers have sued the senders of abusive takedown practices. I feel like there's been an uptick of this litigation in the past year or so. If you've seen any lawsuits on that front I haven't covered, please let me know.

Posted by Eric at 05:42 PM | Content Regulation , Derivative Liability | TrackBack

June 27, 2011

Another Ripoff Report Win--A-1 Technology v. Magedson

By Eric Goldman

[Note: I have a thick blogging queue of cases to tackle, so if I haven't gotten to your recent favorites yet, a post may still be coming.]

A-1 Technology, Inc. v. Magedson, 150033/10 (N.Y. Sup. Ct. June 22, 2011)

After a while, the Ripoff Report cases all start blurring together. The plaintiffs try the same tired arguments, the courts reject them as they should, and we all experience a little deja vu. This case involves 2 postings to Ripoff Report (from 2006 and 2009) that were allegedly defamatory of a New York company. The Ripoff Report defended on several grounds, including lack of personal jurisdiction, the statute of limitations (1 year for defamation cases in NY) and 47 USC 230.

The 230 discussion is appropriately efficient. The court cites the recent Shiamili ruling (in my queue to blog) for the proposition that 47 USC 230 bars defamation actions "even when the website provider exercises traditional editorial control, including the reposting of the comments of third-parties and providing headings, subheadings and illustrations." The court also rejects the 47 USC 230 immunity would change if Ripoff Report allegedly charged for removing posts.

The court also dismisses the case for lack of personal jurisdiction, following the general rule that simply publishing defamatory material online doesn't automatically confer jurisdiction in the plaintiff's home court. Finally, the court also dismisses any claim for the 2006 post based on the statute of limitations plus the single publication rule as articulated in Firth v. State, an early New York case interpreting the single-publication rule online.

Posted by Eric at 04:59 PM | Content Regulation , Derivative Liability | TrackBack

June 07, 2011

Site Moderators Weren't Agents of the Site--Cornelius v. BodyBuilding.com

By Eric Goldman

Cornelius v. BodyBuilding.com, LLC, 2011 WL 2160358 (D. Idaho June 1, 2011)

This case involves a nutritional supplement called Syntrax, which is available for sale on an e-commerce site BodyBuilding.com. The site supports users comments and message boards and deploys user-moderators to oversee the conversations. Moderators "may, among other things, edit and delete posts, move threads, and ban forum users for violations of the forum’s terms and conditions." Moderators self-nominate but are elected by the community. Moderators don't get paid, but they get a discount for onsite purchases and a free trip to Boise.

This ruling involves three posts made by user "deserusan" and one by "INGENIUM" that made critical remarks about Syntrax. A Syntrax competitor, Gaspari, later hired deserusan as a part-time CSR, and deserusan disclosed that employment status in his onsite signature block. However, perhaps unexpectedly, when deserusan updated his signature block, the update automatically propagated to all of deserusan's old posts, thus making it appear that deserusan was bashing Syntrax as an official employee of a competitor. Meanwhile, INGENIUM subsequently became an onsite moderator, so his legacy posts (including the one at issue) got the elevated visibility given to posts by moderators, even though it was written when INGENIUM wasn't a moderator.

Syntrax initially sued more than 15 defendants over these posts. The case has generated a number of interesting and confused rulings along the way, and we've blogged it three times before:

* "Website Privacy Policy Supports Pseudonymous Poster's Expectation of Privacy -- Cornelius v. Deluca"
* "Troubling Ruling About 47 USC 230 and Moderators--Cornelius v. DeLuca" (which included the classic analysis of whether calling someone a "Cornholio" is defamatory)
* "Online Retailer Isn't Liable for User Comments--Cornelius v. DeLuca"

Gaspari and BodyBuilding.com are the only defendants remaining, and in this ruling, the court grants both summary judgment.

Regarding Gaspari's liability, deserusan had made the offending posts before becoming an employee, but the court had previously ruled that it could be liable if "Plaintiffs could prove that Gaspari intentionally and unreasonably failed to remove the allegedly defamatory posts after notice and opportunity to do so." The court concludes that Gaspari lacked adequate knowledge. It didn't know about the posts when hiring deserusan, it didn't know he changed his signature block or that doing so would affect old posts, and it didn't control the posts. Also, similar to Ripoff Report, BodyBuilding.com restricted its authors' ability to delete their old posts.

[In our exchange about this post in draft mode, Venkat wondered about the legal test the court used here. This is the standard legal test for, say, a business that leaves a defamatory comment posted on the bathroom wall. I don't know if the test makes sense in the context of an employer reviewing a new employee's old online activities, but the court gets to the right place either way.]

Regarding BodyBuilding.com's liability for the remaining claim of Lanham Act unfair competition, the plaintiff contends that "Bodybuilding.com endorsed or “adopted” INGENIUM’s statement – and therefore became responsible for it – when it failed to remove the post after INGENIUM became a moderator." This should have been an easy 47 USC 230 dismissal--even if the post was by a moderator, the website is never liable for it--but the court had previously ruled otherwise. This led to an inquiry whether the moderator was the website's agent.

The court concludes that moderators weren't acting within any agency scope when posting online, and nothing created apparent authority for those posts. Separately, the court says there may not be any damages because it's unclear if anyone saw the post during INGENIUM's time as a moderator.

With all of the facts on the table, it's easy to see why this case took so many rulings to resolve. Users changed their status to employees/moderators, which in turn changed how their posts were presented. It takes a little while to unpeel these layers. On the other hand, this shows why 47 USC 230 is so helpful. If the court had taken the position all along that a moderator's post was third party content, the case would have been tossed a long time ago, and the parties would have saved a lot of time and money.

The court reached a good place in declining to hold that agency law made the site responsible for its moderator's post. However, even if 47 USC 230 didn't apply, the entire inquiry was flawed because independent user-moderators should almost never be considered agents of the site, and therefore courts should screen out agency arguments much earlier in the process. We don't get too many agency arguments as bypasses to 47 USC 230, but this case leaves plaintiffs with some reason to explore those doctrinal interstices.

Rebecca is also covering this suit.

Posted by Eric at 09:28 AM | Derivative Liability , E-Commerce , Marketing | TrackBack

June 04, 2011

TheDirty Defeats Privacy Invasion Lawsuit--Dyer v. Dirty World

By Eric Goldman

Dyer v. Dirty World LLC, 2011 WL 2173900 (D. Ariz. June 2, 2011). The summary judgment motion, Dyer's opposition and thedirty's reply.

An ex-boyfriend submitted to thedirty.com 2 photos of Dyer in a bikini and a comment that Dyer gave him and a buddy an STD. Nik of thedirty posted, in response to his standard "Would You?" question, "No it looks like she just had a baby, and if a girl is willing to take 2 guys on then I suggest you use a rubber." Dyer sued thedirty for public disclosure of private facts and false light. For reasons that aren't explained, Dyer didn't sue for copyright infringement for the republished photos (although I vaguely remember these may be self-portraits) or defamation (even though the complaint repeatedly alleges that the statements are false); nor does it seem that she sued the ex-boyfriend either.

Another oddity: the final posting on thedirty had three disparate information pieces--the photos, the submitted comments, and Nik's comments--but the court appears only to evaluate Nik's comments, which are characteristically acerbic but comparatively innocuous. Nik only advanced two statements: an opinion about Dyer's looks and a recommendation for safe sex practices when engaging multiple sex partners. As a result, the court says that Nik didn't make any statements of fact. The court concludes "the Court finds that the general tenor of Defendant’s website makes clear that the two statements at issue represent Mr. Ritchie’s personal viewpoint, rather than an assertion of fact."

However, the court doesn't explain why it effectively ignores thedirty's republication of the photos and the submitted comments. In FN2, the court says it's not relying on 47 USC 230, but if that were really true, it seems that the court should have considered all three information pieces, not just Nik's own words. So it appears that this is a 47 USC 230 case where the court denies it's relying on 47 USC 230.

Prior coverage of a different thedirty case: "thedirty.com's 47 USC 230 Defense Rejected on Motion to Dismiss--Jones v. Dirty World Entertainment"

Posted by Eric at 09:43 AM | Derivative Liability , Publicity/Privacy Rights | TrackBack

June 02, 2011

Ripoff Report Gets Another Big 47 USC 230 Win--Asia Economic Institute v. Xcentric

By Eric Goldman

Asia Economic Institute v. Xcentric Ventures LLC, 2:10-cv-01360-SVW -PJW (C.D. Cal. May 4, 2011)

The AEI Ruling

Keeping alive its truly remarkable winning streak, Ripoff Report got yet another decisive 47 USC 230 victory. This challenge came from Asia Economic Institute (AEI), suing over 6 posts to Ripoff Report from former AEI employees complaining about the work environment. The case raised some eyebrows last summer when the judge gave AEI a chance to plead a RICO claim. That ruling got some plaintiffs excited that a conspiracy theory might finally expose Ripoff Report to liability. No matter, as it turns out, because AEI still lost on summary judgment.

General Applicability of Section 230

The court accepted that the 6 posts in question all originated with the users. Ripoff Report gives some "generic and stylistic" writing guidance to users, such as an ALL CAPS instruction not to use ALL CAPS. (Ironic, I know). With respect to these formatting instructions, the court says:

these statements can not amount to encouragement, solicitation, or instruction to say anything in particular that might warrant labeling Defendants as “information content providers.”

Ripoff Report also does some things to enhance the SEO of user posts, and the court treats these visibility-enhancing efforts as irrelevant to a Section 230 analysis:

Plaintiffs fail to cite any authority that increasing the prominence of a page in internet searches amounts to “creation or development of information” that would render Defendants “information content providers” under the CDA. The very purpose of consumer reports such as the Ripoff Report website is to provide accessibility to the public on a grand scale. Increasing the visibility of a statement is not tantamount to altering its message....At best, increasing the visibility of a website in internet searches amounts to “enhancement by implication,” which is insufficient to remove Defendants from the ambit of the CDA.

This is yet another court opinion citing Roommates.com for the defense.

I think the court's key line comes immediately after this:

Absent a changing of the disputed reports’ substantive content that is visible to consumers, liability cannot be found.

This sentence is so simple and elegant, yet the concept frustrates plaintiffs to no end. Simply put, if content originates with a third party and the defendant doesn't substantively change its meaning, Section 230 applies--FULL STOP. All of the plaintiffs' kvetching about endorsing or ratifying third party content is getting plaintiffs nowhere. Once the court accepted that the reports came from third parties and that ROR employees didn't substantively modify the contents, there was nothing left to discuss. Section 230 applies. Case over.

The plaintiffs also tried the now-tired argument that Ripoff Report creates report titles by combining user content and Ripoff Report content. The court doesn't want to hear about this "circumvention" of the immunity either:

Users thus know precisely how the titles of their submissions will appear before posting. Defendants need not present users with a completely blank slate from which to create their reports in order to be protected by the CDA

Having determined that Ripoff Report qualifies for Section 230, the immunity wipes out a long list of claims:

(3) unfair business practices under Cal. Bus. & Prof. Code § 17200 et seq.;(4) defamation; (5) defamation per se; (6) false light; (7) intentional interference with prospective economic relations; (8) negligent interference with prospective economic relations; (9) negligent interference with economic relations; and (10) injunction.

The immunity for the 17200 UCL claim is particularly interesting. This is similar to the Levitt v. Yelp ruling, where the plaintiffs weren't able to bypass Section 230 by arguing that Yelp's UGC management practices mooted 230. This court also rejects the 17200 claim on standing grounds and the fraud/deceit claims for a variety of reasons.

Request for More Discovery

The court also denies the plaintiffs' request for further discovery. Among other things, the plaintiffs wanted to look for evidence that the HTML code/metatags aren't generated automatically. The court says that information wouldn't matter because it would just show that Ripoff Report wanted better search engine indexing, plus "Plaintiffs conceded that the HTML code and meta tags of the reports devoted to them were created automatically."

Anti-SLAPP Motion

The court denied Ripoff Report's anti-SLAPP motion to strike. This is the second time the court did so; the first time was a broader anti-SLAPP motion denied in April 2010. This was a narrower anti-SLAPP attempt, but it still failed.

Response to the Ruling

Lisa Borodkin, AEI's counsel, was kind enough to send me a statement, including this assessment:

Ripoff Report also changed several of its practices during the pendency of this litigation. Ripoff Report began informing telephone callers that their calls would be recorded and corrected the description of the Corporate Advocacy Program. Ripoff Report launched an arbitration program which is upfront about disclosing that Ripoff Report will redact names from Ripoff Reports for parties that prevail in arbitration.

The VIP Arbitration Program

This ruling shows that plaintiffs are running out of creative ways to sue Ripoff Report. They have tried just about every legal trick imaginable, and nothing has worked. Eventually, unhappy vendors will abandon frontal litigation assaults on Ripoff Report and aggressively pursue alternative ways to get the outcomes they desire.

One logical alternative is Ripoff Report's relatively new arbitration process, called the “VIP Arbitration Program.” The process lets unhappy vendors proceed to an arbitration service designated by Ripoff Report. If the complainant wins the arbitration, Ripoff Report will redact the complainant's name from the report. This may not be a perfect solution to a problematic report, but it's more useful than a 47 USC 230-preempted lawsuit against Ripoff Report.

Default Judgments and Google Search Results

Meanwhile, a few months ago, a Texas lawyer, Kenton Hutcherson, wrote at Search Engine Land about another way to redress a problematic report. With the seductive title of "How To Remove Ripoff Reports From Google – Not Just Bury Them," the article tells readers exactly what they desperately want to know--how to flush a bad report out of Google's index.

The answer isn't rocket science, and it takes advantage of Google's apparent pliability when presented with a court order. The article advocates that aggrieved parties sue the person who posted the report. Although the article doesn't say this explicitly, the article implies that defendants may quickly agree a default or stipulated judgment. The plaintiff can then present the court order to Google and anticipate that Google will honor it.

I found this article problematic for several reasons:

1) The author initially failed to mention that he had previously sued Ripoff Report--and lost. Do you think this past litigation experience is relevant to assessing the author's perspectives? I do. One way of reading the article is that the author initially planned to drum up some business suing ROR, failed to show the legal merits of that option, and is now cultivating a replacement business line.

You'll see that the article now contains the following disclosure:

Editors Postscript: For the purposes of full disclosure, Kenton J. Hutcherson has served as lead counsel in three lawsuits against Xcentric Ventures, LLC, the company that manages Ripoff Report.

That postscript was added in response to my inquiries to Search Engine Land over the past month.

2) The author mentions Ripoff Report's arbitration program but doesn't indicate that it may be less expensive than the path he recommends--and more effective too (success in arbitration would redact the problematic content everywhere, not just from Google). Omitting that crucial piece of pricing information (while downplaying the cost of litigation) provides further support for a hypothesis that the article is selling a new business line.

3) The article advocates taking advantage of Google's apparently lax responses to court orders. Perhaps that's a legitimate use of the court system, although it's hard for me to be enthusiastic about such efforts. Meanwhile, this article is a good cautionary tale to Google--and all other service providers--that default and stipulated judgments are a potential source of abusive takedowns requests, especially when they don't result from a proper substantive adjudication by the court. (As we know, for this reason, Ripoff Report sometimes stands up to default judgments; see the Blockowicz case).

I am a longtime regular reader of Search Engine Land, so I raised my concerns about this article directly to Danny Sullivan of Search Engine Land. On the point of Search Engine Land authors making adequate disclosures, Danny responded:

Going forward, we're drafting up a disclosure statement that will be added to our contributor guidelines, and our contributors will get a reminder of this in the next monthly newsletter that goes out to them. We'll be asking that they use common sense in disclosing any relevant relationships or background within their articles, as it makes sense within a story (say if they write about a client, they should disclose that) or provide general disclosure as part of their bio (if they are part of a company that might have bearing on what they've written, for example).

As you can see, this translated into the editor's postscript now in the article. At the same time, Danny pointed out:

The disclosure wouldn't have made you think he was somehow less biased against Ripoff Report (it was pretty obvious he wasn't a fan). The disclosure wouldn't have altered the advice he wrote, in terms of making what he was recommending more or less attractive -- nor would it have impacted the alternatives he wrote.

Perhaps this is true, but I find that litigation counsel tend to become deeply entrenched in the viewpoints they advocated, and so I find that knowing that background often helps me contextualize subsequent remarks from them.

Posted by Eric at 09:33 AM | Content Regulation , Derivative Liability | TrackBack

June 01, 2011

Updates on DoctoredReviews.com and Medical Justice

By Eric Goldman

You may recall our April launch of DoctoredReviews.com, a website explaining why Medical Justice's form agreement, the "Mutual Agreement to Maintain Privacy," was a bad deal for doctors, patients and review websites. See a list of the media coverage on the site's launch.

Since then, there have been three developments of interest.

First, Timothy B. Lee at Ars Technica covered his experiences with a dentist who asked him to sign the Mutual Agreement to Maintain Privacy and what happened when he balked at signing (predictably, there was no negotiation, and he was booted from the office). The entire article is a great read, but this line especially caught my eye: "we began to wonder if Medical Justice was taking advantage of medical professionals' lack of sophistication about the law." Watching the doctor community's response to our site launch, I had been wondering the same thing. Doctors and other healthcare professionals are very scared of the combination of privacy laws and unfettered consumer reviews; and Medical Justice has a several year headstart in (mis?)educating them about the law. It's clear that our advocacy site alone isn't enough to do the necessary counter-education.

Timothy also hammers on how Medical Justice has been backpedaling about the efficacy of the Mutual Agreement to Maintain Privacy. Medical Justice publicly claims that the agreement is principally useful for dealing with reviews from the doctors' competitors or ex-employees or other fraudsters. This is a baffling argument because (as Timothy points out) those folks undoubtedly haven't signed the Mutual Agreement to Maintain Privacy, so doctors can neither assert a breach of the agreement nor the assigned copyrights in those reviews. (And asserting copyright to the review websites could lead to 512(f) claims). There is a massive logic disconnect between the purported goals of the Mutual Agreement to Maintain Privacy and the legal effect of the contracts. For an outfit that was clever enough to develop a way to hack 47 USC 230 through a copyright workaround, the response that the agreement should be used only against people who haven't signed it is so oddly sophomoric that it makes me wonder about the sincerity of the proffered explanation.

Timothy followed up his initial story with a postscript. In it, the dentist who claimed he'd never enforced the Mutual Agreement to Maintain Privacy backpedaled and admitted that he had, in fact, help drive a negative review off the Internet. On the plus side, the dentist publicly acknowledged that the Mutual Agreement to Maintain Privacy wasn't a good deal for him, and he said he wouldn't renew with Medical Justice. Hey doctors and other healthcare professionals, I hope you took note.

Second, John Swapceinski of RateMDs made a post entitled "Medical Justice planting glowing reviews on RateMDs.com." Apparently, John saw some early activity from a new Medical Justice offering called the "Review Builder Program" that Medical Justice claims will help patients leave reviews from doctors' offices. Timothy at Ars Technica has plenty of sharp words about the program and the possibility of Medical Justice duplicity.

Third, we are working on Phase 2 of the DoctoredReviews project, during which we identified another doctrinal oddity: doctors, based on their purported copyright ownership, can obtain and send 512(h) expedited subpoena requests in an effort to unmask the review author--in a process that is outside of public view and without any substantive judicial oversight. Obviously, review websites can (and should) push back on these subpoenas, but I have some reason to believe that the Mutual Agreement to Maintain Privacy's purported copyright assignment is producing unmaskings that would not occur if supervised in a court of law. I'm adding this attack on privacy to the taxonomy of abusive takedown practices I'm developing.

Posted by Eric at 02:18 PM | Content Regulation , Copyright , Derivative Liability , Licensing/Contracts , Privacy/Security | TrackBack

May 31, 2011

April-May 2011 Quick Links, Part 2 (Copyright Edition)

By Eric Goldman

* COICA is dead, but S. 968, the PROTECT IP Act, has arisen from its ashes. Criticisms from technologists and the EFF.

* The Department of Homeland Security's domain name seizures are probably the single worst US government abuse of the Internet ever. Further confirmation of that: Techdirt: “Why We Haven't Seen Any Lawsuits Filed Against The Government Over Domain Seizures: Justice Department Stalling."

* CA SB 550: Latest ridiculous proposal from the RIAA, especially in light of the DHS f-ups: “The bill would authorize law enforcement officers to perform inspections, as specified, at commercial optical disc manufacturing facilities during regular business hours without a warrant for the purpose of verifying compliance with these provisions and would authorize law enforcement officers, in performing these investigations, to seize any optical disc or production part manufactured in violation of these provisions.” Wired's coverage: “RIAA Legislation: No Warrant Required to Search, Seize Optical-Disc Plants.”

* S. 978: proposal to amend criminal copyright infringement laws to create a felony for streaming. In my work on criminal copyright infringement, I explained that criminal copyright infringement was an inexorable path to become meaner.

* There were a lot of interesting developments in the LimeWire case leading up to the damages trial.

- statutory damages are computed on a per-song basis so long as the songs were commercially available individually. Contrast the Bryant case.

- the labels had already collected damages from the direct infringers in 104 recordings. Nevertheless, the court says the labels can collect statutory damages from LimeWire for these recordings as well, but the judge can adjust the award to reflect this. [Arista Records LLC v. Lime Group LLC, No. 06-5936 (S.D.N.Y. April 6, 2011)].

- LimeWire could not introduce evidence that it had a good faith belief that they were not operating an unlawful business [Arista Records LLC v. Lime Group LLC, No. 06-5936 (S.D.N.Y. April 20, 2011)].

- The parties ultimately settled for $105M.

- In a partially related development, CNET was sued for facilitating copyright infringement by distributing LimeWire. Tertiary infringement anyone?

* Another copyright owner gets a Pyhrric victory on damages. In Gaylord v. US, the Postal Service reused a photo for one of its stamps and the court found copyright infringement. The photographer asked for $3M; instead, the court awarded damages of only $5,000.

* ACEMLA v. ASCAP (1st Cir. April 21, 2011). Copyright fee shift (17 USC 505) available for the defendant even if the plaintiff didn't make a timely registration of the copyright.

* There were many lowlights in the Righthaven train wreck over the past two months. Two of the lowest:

- Righthaven's Strategic Alliance Agreement with Stephens Media was released (starting on page 6). Joe Mullin's recap. In response to the agreement, the court in Righthaven v. Pahrump Life ordered Righthaven to show cause why case should not be dismissed for a sham copyright assignment, and Judge Kane has stayed all of the Denver Post-related Righthaven litigation in Colorado pending an analysis of Righthaven’s standing under its agreement with MediaNews.

- Righthaven dropped the Brian Hill lawsuit after the judge had some impliedly critical remarks about the case. The dismissal. In the dismissal, Righthaven griped that "Righthaven was unaware of the Defendant’s alleged medical condition prior to filing suit." Well, that's why respectable copyright owners send takedown notices before running to court without all of the facts. It's hard to be sympathetic to Righthaven when it fails to do even basic pre-suit research and then bitches about being surprised. Pathetic. Righthaven continues: "Defendant’s incessant use of the Internet as a means to post inflammatory statements about Righthaven and about these legal proceedings say more about his cognitive ability than one would otherwise surmise from the press statements made by his counsel." Classy... The court didn't appreciate Righthaven's saber-rattling and struck that part of the pleading. As Joe Mullin indicates, Righthaven's antics have annoyed the judge, and Righthaven may want to rethink its entire Colorado litigation strategy. Righthaven struck back with an incredible F-U to the judge. Meanwhile, was Righthaven pressuring Hill to agree to a false press release as part of the proposed settlement?

* AdAge: When It Comes to Ad Avoidance, the DVR Is Not the Problem

* Google lost its Belgian appeal in the Copiepresse case.

* Eros v. Linden settled.

* Angst over Lady Gaga's requirement that photographers assign over the copyrights to the photos they take at her concerts.

* Perfect 10 v Giganews complaint.

* Flowserve Corp. v. Hallmark Pump Co., 2011 WL 1527951 (S.D. Tex.). A company copied-and-pasted its competitor’s product shots as depictions of its own products, which you can’t do. Rebecca is on the case.

* Venkat and I participated (with Evan Brown and Jonathan Bailey) on TWiL 111, mostly discussing copyrights. Listen in.

Posted by Eric at 08:48 AM | Copyright , Derivative Liability | TrackBack

May 30, 2011

April-May 2011 Quick Links, Part 1 (Trademarks and Advertising Edition)

By Eric Goldman

Trademark

* Facebook has quite an active trademark docket.

- Facebook, Inc. v. Teachbook.com, LLC, 2011 WL 1672464 (N.D.Cal. May 3, 2011). Facebook’s trademark suit against Teachbook was dismissed for lack of personal jurisdiction. Facebook promptly refiled in Illinois.

- Facebook sues Various over a "Face Book of Sex" site.

- Facebook v. Bearbook. Facebook forced a name change at a site for "bears."

* What are people bringing trademark lawsuits over? Sears is suing over DieHard sex spray, whiskey manufacturers are suing over “Give ‘Em the Bird,” and the Huey P. Newton Foundation is suing CafePress over "All Power to the People" (one of the rare times when "Power to the People" and trademark enforcement will be in the same sentence). And don't forget the laughable claim that the NYSE has trademark protection in its trading floor.

* Newport News Holding Co v. Virtual City Vision (4th Cir. April 18, 2011). Newportnews.com is the subject of an ACPA loss 10 years after it survived a UDRP. What went wrong? "[I]n making changes to its website in 2007, VCV shifted its focus away from the legitimate service of providing information related to the city of Newport News and became instead a website devoted primarily to women’s fashion....VCV cannot escape the consequences of its deliberate metamorphosis....newportnews.com went from being a website about a city that happened to have some apparel advertisements to a website about women’s apparel that happened to include minimal references to the city of Newport News." Result of the ACPA loss: $80k in damages, $10k in sanctions and attorneys' fees.

* It was a bad two months for plaintiffs suing keyword advertising defendants:

- Starsurgical, Inc. v. Aperta, LLC, 2011 WL 2037554 (E.D. Wis. May 24, 2011): “Star also claims that defendants infringe its mark by using it as a “keyword” on internet search engine advertising such that whenever a customer performs a search for the phrase “Wittmann Patch” defendants' website appears as a sponsored search result. Star, however, makes no effort to explain how this activity confuses consumers. Cent. States, SE & SW Areas Pension Fund v. Midwest Motor Express, 181 F.3d 799, 808 (7th Cir.1999) (arguments not developed in any meaningful way are waived); see also Network Automation, Inc. v. Advanced Sys. Concepts, No. 10–55840, 2011 U.S.App. LEXIS 4488, at *37–39 (9th Cir. Mar. 8, 2011) (using a trademark in keyword advertising does not violate Lanham Act absent showing of likelihood of confusion).”

- World Entertainment, Inc. v. Brown, 2011 WL 2036686 (E.D. Pa. May 20, 2011): “Plaintiffs showed Brown's use of their protected trademarks in advertising and diverting internet traffic to Grand Entertainment's website through search engine phrase matching using Google Adwords and meta tags, but they did not offer any evidence suggesting the percentage of their business downturn caused by such infringement.” Accord InternetShopsInc.com v. Six C Consulting, Inc.

- The Scooter Store v. SpinLife.com, 2011 WL 1460438 (S.D. Ohio amended opinion April 18, 2011). The Scooter Store sued SpinLife for buying its trademarks in Google AdWords. This ruling preserves SpinLife’s antitrust counterclaims.

- Traveler's Joy, Inc. v. Haycco LLC, 2011 WL 1587132 (S.D. Ind. April 26, 2011): "In an attempt to stave off dismissal, Joy points to numerous screenshots of Google's search results and pages generally discussing how Google's “AdWords” keyword-based advertising program operates. Based on this “evidence,” Joy jumps to the conclusion that Haycco's advertisements are specifically targeted to users in Indianapolis. However, this evidence is in no way sufficient to establish that Haycco engaged in any such intentional targeting of Indiana. Instead, the credible evidence establishes that Haycco only engages in general web advertising."

* Architectural Mailboxes, LLC v. Epoch Design, LLC, 2011 WL 1630809 (S.D. Cal. April 28, 2011). In a case involving critical comparative advertising, the court grants the advertiser’s nominative use defense on a motion to dismiss. Rebecca’s coverage.

* Koch v. Does. A hoax press release survives a trademark challenge. Coverage from EFF and Bill McGeveran.

* Eva Bridal Ltd. v. Halanick Enterprises Inc. (7th Cir. May 10, 2011). A botched franchising attempt leads to a finding that the purported franchisor abandoned the mark.

* be2 LLC v. Ivanov, 2011 WL 1565490 (7th Cir. April 27, 2011). An alleged knockoff website didn't have jurisdiction when it had only 20 registered users in the plaintiff's home court.

Advertising

* The plaintiffs voluntarily dropped the Taco Bell beef lawsuit. But Taco Bell may not be done with the plaintiffs.

* NYT: A study suggests that 3 credit card merchant account providers support the vast majority of spammers. The paper. Unfortunately, this will almost certainly encourage politicians to deputize credit card providers as the Internet police.

* In a crackdown on fake "news" sites promoting acai berries, the FTC takes another broad view about affiliate liability (1, 2).

* Similarly, “The FTC has consistently maintained that sellers are responsible for their marketers’ telephone calls to solicit purchases of the seller’s goods or services.”

* NYT: angst about advergames oriented towards kids. Evidence that kids don't understand ad labeling.

* The vegan-oriented magazine VegNews used stock photos of items containing meat to accompany the vegan recipes it publishes (and didn't disclose this fact). The vegan community erupted in anger. VegNews initially stood its ground but finally relented and apologized.

* NYT on functional foods.

* Patton Boggs: "FTC Enforcement Against Individuals: Legal Standards Impacting Individual Liability for Alleged Violations Enforced by the FTC’s Bureau of Consumer Protection."

Posted by Eric at 08:24 AM | Derivative Liability , Marketing , Trademark | TrackBack

May 27, 2011

Review Website Should Get 47 USC 230 Dismissal But Judge Keeps Case Open in "Abundance of Caution"--Frontier Van Lines v. MoverReviews.com

By Eric Goldman

Frontier Van Line Moving & Storage, Inc. v. Valley Solutions, Inc., 2011 WL 2110825 (W.D. Pa. May 24, 2011)

MoverReviews.com is a review website for moving companies. Frontier Van Lines alleges that a MoverReviews user, Schmidt, made 2 defamatory posts and that MoverReviews "published, authored, created, or acted in concert with Schmidt in authoring, creating, and posting and in failing to remove the alleged defamatory statements."

Pled this way, it should be an easy 47 USC 230 dismissal. Calling MoverReviews the "publisher" seals the deal; and the rest of the verbs are the kind of bald-faced factually unsupported assertions that a plaintiff proffers to get around the obvious 47 USC 230 problem. To bolster this plead-around, Frontier Van Lines makes the typical move of invoking the Roommates.com decision.

The court does a few savvy things in response. First, the court recognizes that MoverReviews is more like the "free text" area in Roommates.com, which the Roommates.com case said qualified for 47 USC 230, because Frontier Van Lines didn't allege that MoverReviews "shaped" the allegedly defamatory reviews. Second, because of Frontier Van Lines' unsupported conclusory allegations, the court says that "Frontier has failed to 'nudge' its claims 'across the line from conceivable to plausible.'" (citing Iqbal).

Yet, like some other courts faced with an obvious 47 USC 230 immunity recently (see, e.g., Smith v. TRUSTe, Kruska v. Perverted Justice Foundation and Robins v. Spokeo), the court just couldn't bring itself to grant a 12(b)(6) motion to dismiss. Instead, the court says:

out of an abundance of caution, the Court will provide Frontier an opportunity to develop the record with respect to this issue; and therefore, will deny the motion to dismiss without prejudice for Valley Solutions to file a prompt motion for summary judgment after the exchange of the Rule 26(a)(1) disclosures, and limited discovery

If the court thinks Frontier Van Lines could replead a plausible claim, it should have dismissed the complaint with a leave to amend. That's what I think Iqbal requires. Instead, the court put the financial burden on the defendant to engage in discovery and file a summary judgment motion. Even if the discovery is "limited," MoverReviews shouldn't have to bear that costs if Frontier Van Line can't make the threshold showing. If the court was going to impose these costs on the defendant, I think it should have said that Frontier Van Lines has a choice: it can tuck its tail between its legs and go away now at no cost, or it can pay for the costs that MoverReviews incurs to fulfill these obligations if MoverReviews wins its summary judgment motion (which seems highly likely).

Notice that this case probably comes out very differently in California under its generous anti-SLAPP protections. So long as the reviews addressed, even tangentially, a matter of public interest, then a CA court almost certainly would have granted MoverReviews' anti-SLAPP motion and made Frontier Van Lines pay MoverReviews' attorneys' fees. So even though this case is mostly a strong defense-side win, it's also a great case study of why we need federal anti-SLAPP legislation.

Posted by Eric at 10:00 AM | Content Regulation , Derivative Liability | TrackBack

May 22, 2011

Dentist Pays Sizable Penalty for Not Knowing 47 USC 230--Wong v. Jing

By Eric Goldman

Wong v. Jing, 1-08-CV-12997I (Cal. Superior Ct. May 13, 2011). Wendy Davis' story on this ruling, plus coverage in DrBicuspid.com.

At DoctoredReviews.com, we discussed that doctors upset with patients' reviews can always bring a lawsuit. However, as we note, doctor-vs.-patients lawsuits should be an extraordinary step for extraordinary circumstances. Otherwise, suing patients can become a big--and costly--mistake.

This lawsuit involves a Yelp review of a dentist. In my previous blog post on this case, I explained how the court issued a split ruling in the case. Several of the dentist's claims were tossed on anti-SLAPP grounds, while the defamation claim against the author survived the anti-SLAPP motion and remains a possible risk to the patient. Because the court granted the anti-SLAPP motion, the defendants were entitled to their attorneys' fees and costs for the anti-SLAPPed claim. In this ruling, the court awards those fees and costs to the tune of $80,000.

The dentist foolishly sued Yelp in the lawsuit but voluntarily dismissed Yelp after the plaintiff's lawyer decided that 47 USC 230 immunized Yelp. The prior ruling was vague about whether Yelp's attorneys' fees were awardable, but this ruling awards those fees as part of the $80k. The court doesn't break out the portion of the attorneys' fees attributable to Yelp as opposed to the other defendants. I contacted the defense attorney, Mark Goldowitz of the California Anti-SLAPP Project, and it appears that at least $8k of the fees could be attributable to Yelp's portion of the defense. Accordingly, the dentist (or almost certainly her attorney) will be writing a decent-sized check to the defense for the attorney's 47 USC 230 error. Another cautionary tale for plaintiff's counsel.

Posted by Eric at 09:39 AM | Content Regulation , Derivative Liability | TrackBack

May 20, 2011

Court Allows Fair Credit Reporting Act Claims Against Spokeo to Move Forward -- Robins v. Spokeo

[Post by Venkat Balasubramani with comments from Eric]

Robins v. Spokeo, No. CV10 05306 ODW (AGRx) (C.D. Cal.; May 11, 2011)

I previously blogged about Spokeo, which is being sued for disseminating reports which allegedly contain inaccurate information about plaintiff. The court initially dismissed the lawsuit without prejudice due to plaintiff's failure to allege actual harm.

Plaintiff refiled its lawsuit and alleges harm sufficient to satisfy the court:

the court finds that plaintiff has alleged sufficient facts to confer Article III standing. Specifically, Plaintiff has alleged an injury in fact - the "marketing of inaccurate consumer reporting information about plaintiff" - that is fairly traceable to defendant's conduct - alleged FCRA violations - and that is likely to be redressed by a favorable decision from this court.

This just sounds like a formulaic recitation of harm, but it's good enough for the court. To allege standing under certain statutes you, just have to allege a violation of the statute. In other cases, you have to allege actual harm.

Apart from lack of standing, Spokeo argued that it is not a "consumer reporting agency" under the Fair Credit Reporting Act. Spokeo pointed its disclaimers which stated that the reports furnished by Spokeo "cannot be used for FCRA purposes." The court is not swayed by this argument and points to plaintiff's allegations that Spokeo marketed its reports to "HR professionals and potential employers." Plaintiff presented the court with some typical gotcha website copy that easily made the case at the pleading stage that regardless of what the disclaimers said, Spokeo intended the reports to be used for employment and credit verification purposes.

Spokeo also argued that it was entitled to protection under Section 230. The court punts on the Section 230 issue. The court's discussion of this issue is somewhat disappointing in that it gives the parties very little to work with as far as how the court will ultimately deal with the issue. The details around how the collection and dissemination of information occur could end up being important to the Section 230 analysis. (Prof. Goldman's post on Accusearch discusses this: "Roommates.com Infects the Tenth Circuit--FTC v. Accusearch.") Spokeo should be able to take in information from various agencies, aggregate it, and redistribute it without losing Section 230 protection. (See, e.g., AOL v. Drudge.) To the extent Spokeo is just taking in reports that third parties already create, it should be difficult for plaintiff to argue that Spokeo falls under the Ninth Circuit's Roommates decision and somehow plays a role in the creation of the content. It's also worth separating the "score" assigned by Spokeo, with respect to which Spokeo will likely be able to argue some First Amendment protection (see Brown v. Avvo), from the information that is taken in from third parties and disseminated. Maybe the pleadings and the briefing didn't highlight what exactly whether plaintiff was complaining about the information that came from third parties or the "score" assigned by Spokeo, but these seem like issues the court could have delved into in order to provide some clarity to the parties.

The court also dismisses plaintiff's claims under California's unfair competition statute on the basis that the plaintiff did not allege that he "lost money or property" as a result of the unfair competition. Here the court finds that the plaintiff's conclusory allegations of lost income from continued unemployment are insufficient.

Previous post: "Court Dismisses Class Action Against Spokeo for Lack of Standing"
____________

Eric's comments

The court's 47 USC 230 discussion is terse. The entire substantive discussion:

Defendant asserts that it is immune under the CDA because it is an “interactive computer service” that “passively displays content that is created entirely by third parties.” Plaintiff, however, alleges that CDA immunity does not apply to Defendant because unlike information content providers that simply reorganize information obtained from other content providers, “Defendant develops original content based on information obtained from a variety of sources and posts it online[.]” Accordingly, application of the immunity is not clear at this time and the Court declines to dismiss the Complaint on this basis.

This could be another example of a judge being too cautious to use 230 on a motion to dismiss. The court appears to have allowed the bald assertion that Spokeo "develops" content to survive the dismissal motion. As Venkat says, what the judge should have done is require the plaintiff to be more specific about exactly what Spokeo did to develop the content.

We've seen a couple other recent examples where courts have let bald assertions like this survive a 230 dismissal, only to come to its senses at the summary judgment stage and decide 230 applied after all. (See the Kruska and Smith cases). My guess is that something similar will happen here too, with the twist that anything Spokeo actually develops will be its protected opinion (much like the Avvo case, as Venkat notes). A late 230 defense is better than no 230 defense, but it still incurs a lot of needless costs and wasted motion. It's unfortunate this judge wasn't more aggressive at policing the obvious 230 issue at the pleading stage.

Posted by Venkat at 08:08 AM | Derivative Liability , Publicity/Privacy Rights

Another Ruling that the Americans with Disabilities Act Doesn't Apply to Websites--Ouellette v. Viacom

By Eric Goldman

Ouellette v. Viacom: The magistrate report: 2011 WL 1882780 (D. Mont. March 31, 2011). The judge's approval of the magistrate's report: 2011 WL 1883190 (D. Mont. May 17, 2011). The original complaint (he filed an amended complaint that served as the basis of these rulings).

[Note: this lawsuit is gossip-worthy because the plaintiff named YouTube and Viacom as co-defendants, leading to the possibility that they might work together on a joint defense despite their bitter feud in Viacom v. YouTube.]

Just yesterday, I blogged about Young v. Facebook, in which Judge Fogel held that Facebook wasn't covered by the Americans with Disabilities Act because it wasn't a physical place. In this unrelated ruling (there were no cross-citations between the opinion), YouTube and MySpace get a virtually identical ruling. Perhaps we will see enough precedent develop that websites aren't covered by the ADA to suppress further plaintiffs forays. Today's rulings also have some interesting discussion about the application of 17 USC 512's safe harbors to a user whose content is removed.

Plaintiff filed this lawsuit pro se and in pro per. Trying to summarize, it appears his main allegations are that YouTube and MySpace wrongfully removed his videos in response to allegedly bogus takedown notices from Viacom and other content owners. Because of his pro per status, the court does an initial screen to determine if the claims are frivolous. In February, the court determined that Claim I, the "DMCA" claim, wasn't frivolous--presumably, a 512(f) claim against the content owners for a bogus copyright takedown notice.

The two rulings prompting this post--the magistrate report and judge's approval--dismiss the other claims as frivolous, including the rejection of:

* a claim that the defendants violated his fair use rights. The court says that fair use is a defense, not a cause of action.
* a 512(f) claim against the defendants other than the content owners. Even though 512(f) could apply generally, the plaintiff never alleged any actual misrepresentations made by the specified defendants.
* claims that YouTube's contract had an improper venue clause (even if true, Google let the case proceed in Missoula, so the clause wasn't used) and that the contract let third parties harass him, to which the magistrate says "Under the facts alleged by Ouellette, however, Google and YouTube cannot be liable for the conduct of any third party."

After breezing through those claims, the magistrate takes a little more time with the ADA claim. The plaintiff is dyslexic. The magistrate summarizes his contention: "he alleges those Defendants discriminated against him based on his reading disability, and deprived him of access to their internet services and their “online theater”—a “place of public accommodation” governed by the ADA." Citing the AccessNow v. Southwest Airlines case, the magistrate says "an internet website, by itself, is not an actual place, or a physical, concrete structure that would qualify as a place of public accommodation under the ADA." Similar to the discussion in yesterday's Young v. Facebook ruling, the magistrate responded:

His allegations fail to identify any actual, physical place where Defendants' services are made available, and fail to assert any connection between the internet websites he sought to access, and any actual, physical structure or facility through which Defendants' services could be accessed or provided. To the contrary, Ouellette alleges only that Defendants' conduct has impeded his access to certain internet websites

In approving the magistrate report, the judge rejects the plaintiff's objection that a website's servers are the requisite physical place:

Neither a website nor its servers are “actual, physical places where goods or services are open to the public,” putting them within the ambit of the ADA. Weyer v. Twentieth Cent. Fox Film Corp., 198 F.3d 1104, 1114 (9th Cir.2000). The public access production facility might amount to such a place, but there is no nexus between the websites and Ouellette's inability to access that physical place.

The magistrate also rejects the plaintiff's attempts to turn 17 USC 512 into an affirmative cause of action. As I read it, the plaintiff argued that the defendants' failure to follow the notice-and-takedown and counter-notice/putback provisions of 512 creates an affirmative cause of action for a user who posted the affected content. This claim is putatively separate from the 512(f) claim, which I believe is the only affirmative cause of action in 512; in my opinion, the remainder of 512 is all a safe harbor. The magistrate (approved by the judge without substantive comment) rejects the plaintiff's argument:

Ouellette's reliance on the takedown and counter notice safe-harbor procedures in the DMCA is misplaced. The Defendants' alleged compliance, or non-compliance with the procedures does not provide a basis for liability. Defendants' liability to Ouellette, if any, could only be imposed under existing principles of law independent of the DMCA's procedural requirements. Ouellette's allegations, however, do not invoke any independent theory of liability. Therefore, his claims founded upon the DMCA should be dismissed.

I'd be more excited about these rulings if it didn't involve a pro per plaintiff, because then they might be more persuasive to other judges. Nevertheless, these rulings are a useful warning to future plaintiffs that it's frivolous to argue that websites are governed by the ADA and that failure to follow the notice-takedown-counternotice-putback procedures in 512 creates a cause of action.

Posted by Eric at 07:35 AM | Content Regulation , Copyright , Derivative Liability , Licensing/Contracts | TrackBack

May 11, 2011

47 USC 230 and Message Board Cases

By Eric Goldman

[I've been sitting on this blog post since March, so this post is slightly out of date. For example, I believe the recent Kruska ruling would be a new addition to the list. Putting aside any recent developments, I think this post tells a strong story about 47 USC 230's sweet spot.]

In March, I had the opportunity to research cases where 47 USC 230 applied to message board postings. Here's a report on what I learned:

In general, 47 U.S.C. § 230 means that websites are not liable for third party content except for federal criminal prosecutions, intellectual property claims, or claims under the Electronic Communications Privacy Act or state law equivalents. All other claims predicated on third party content are preempted.

As a specific application of the general rule, the statute immunizes websites from defamation claims based on user-submitted content. When websites allow users to post comments and those comments are defamatory, 47 U.S.C. § 230 eliminates the website’s liability for the comments.

The 47 U.S.C. § 230 immunity applies to media publishers who publish their articles online and let readers respond to those articles via defamatory comments. Two recent cases illustrate this point.

In Miles v. Raycom Media, Inc., 2010 WL 3419438 (S.D. Miss. Aug. 26, 2010), the WLOX television station in Southern Mississippi posted an allegedly defamatory article about the plaintiff to its website and allowed reader comments. She sued the television station for defamation based on both the article and reader comments submitted in response to the article. The court dismissed her defamation claim based on reader comments per 47 U.S.C. § 230.

In Collins v. Purdue University, 703 F. Supp. 2d 862 (N.D. Ind. March 24, 2010), the Journal & Courier newspaper in Lafayette, Indiana, published an article allegedly defaming the plaintiff in both the newspaper’s print and online editions. The online edition allowed reader comments. The plaintiff sued the newspaper for defamation based on both the article and reader comments submitted in response to the article. The court dismissed his defamation claim based on reader comments per 47 U.S.C. § 230.

A larger number of cases address a website’s liability for operating online “message boards” or similar functionality that allows third parties to post allegedly defamatory messages. 47 U.S.C. § 230 immunizes the website for the third party defamatory messages. I found over a dozen examples where 47 U.S.C. § 230 applied to such defamation claims since 2005 [current as of March 2011]:

Two Plus Two Publishing LLC v. Jacknames.com, 2010 WL 4281791 (D. Nev. Sept. 30, 2010)
Milo v. Martin, 311 S.W.3d 210 (Tex. App. Ct. April 29, 2010) (note: posts were to “guestbook”)
Shiamili v. Real Estate Group of New York, Inc., 892 N.Y.S.2d 52 (N.Y. App. Div. Dec. 17, 2009)
Finkel v. Facebook, Inc., 2009 N.Y. Slip Op. 32248 (N.Y. Sup. Ct. Sept. 15, 2009) (note: posts were to private user group)
Joyner v. Lazzareschi, 2009 WL 695539 (Cal. App. Ct. March 18, 2009)
Raggi v. Las Vegas Metropolitan Police Dept., 2009 WL 653000 (D. Nev. March 10, 2009)
Higher Balance, LLC v. Quantum Future Group, Inc., 2008 WL 5281487 (D. Or. Dec. 18, 2008)
Best Western International, Inc. v. Furber, 2008 WL 4182827 (D. Ariz. Sept. 5, 2008)
DiMeo v. Max, 248 Fed. Appx. 280 (4th Cir. Sept. 19, 2007)
Universal Communication Systems, Inc. v. Lycos, Inc., 478 F.3d 413 (1st Cir. Feb. 23, 2007)
Eckert v. Microsoft Corp., 2007 WL 496692 (E.D. Mich. Feb. 13, 2007)
Faegre & Benson v. Purdy, 367 F. Supp. 2d 1238 (D. Minn. Apr. 27, 2005)
Donato v. Moldow, 865 A.2d 711 (N.J. App. Div. Jan. 31, 2005)

Many other 47 U.S.C. § 230 cases involve methods of online user-to-user communication beyond article comments or message board posts, such as online classified advertising, consumer review websites, social networking site user profiles and chatrooms. Those cases are equally clear that the website operator is not liable for user-posted defamatory content per 47 U.S.C. § 230.

Posted by Eric at 08:46 AM | Content Regulation , Derivative Liability | TrackBack

April 26, 2011

Videos from the 47 USC 230 Conference Now Online

By Eric Goldman

Without any pretense of modesty, I think we have put on a number of first-rate High Tech Law Institute events over the years. However, unquestionably, the post-event buzz from our recent conference on 47 USC 230 has been as enthusiastic as any I can recall. Now, you can enjoy the event (or relive it, for those of you who were there) by watching the event's videos, now online. I hope you'll check it out.

Other resources related to the conference:

* Event recaps from me, Techdirt/Mike Masnick (1, 2, 3), BNA/Joyce Cutler, paidContent/Joe Mullin and Blog Law Blog/Eric Johnson
* Written remarks from Sen. Wyden and Ken Zeran
* Conference-related papers and other resources

Posted by Eric at 08:50 AM | Derivative Liability | TrackBack

April 20, 2011

Blogger Gets 47 USC 230 Dismissal for Third Party Comment--Kruska v. Perverted Justice

By Eric Goldman

Kruska v. Perverted Justice Foundation Inc., 2011 WL 1260224 (D. Ariz. April 5, 2011)

This is my third time blogging this case. The latest ruling involves a blog, run by Brocious, for people fighting pedophiles. Someone (presumably a third party user) allegedly posted a comment to the blog saying that Kruska had "starved a child." In 2008, I blogged how GoDaddy--in its role as a web host--exited the lawsuit per 47 USC 230. Last Fall, I blogged how Kruska's allegation that Brocious "actively contributed" to the website defeated Brocious' 230 immunity on a motion to dismiss.

Five months later, this case came back to the judge as a summary judgment motion based on 47 USC 230, which the judge granted. Like the Smith v. TRUSTe case, this is a situation where the judge might have been too cautious on the 12(b)(6) motion, causing the case to go longer and cost more money only to reach the inevitable result. Bummer.

The court dismisses the defamation claim for both failure of the prima facie case and on 230 grounds. With respect to the latter, the court's application of the law to this case:

Defendant argues that he is immune from suit under s 230 because "Plaintiff plainly cannot show that Defendant was involved in any of the activities that might otherwise give rise to liability for defamation." Plaintiff asserts that Defendant is not immune because "[s ] 230 does not immunize the actual creator of the content, whether he is a blogger, commenter, or anything else." The Court finds that Defendant is immune from suit under s 230 because at most, Plaintiff sets forth the possibility that Defendant, as the alleged publisher of the Blog, "viewed an[d] approved [the comment] before [it was] published." Such alleged passive participation would be akin to the alleged conduct in Batzel, where the Ninth Circuit held that s 230 immunity applied to a website administrator who selected, edited, and published the contents of an allegedly defamatory comment. Even if Plaintiff's assertion that Defendant took active steps to publish the alleged comment on the Blog was true, such steps are not the type of material contribution to the alleged misconduct that the Ninth Circuit found in Fair Housing Council. [cites omitted]

Good result; but it would have been better if it came on the motion to dismiss. Note that this is yet another case where Roommates.com is cited in favor of the defense; and once again, affirmative publication of content is covered by 47 USC 230. Also, this is another rejection of the plaintiffs' general attack that a site's operator is so hands-on with the site's operations that he/she becomes responsible for all of the content.
____________

BONUS 47 USC 230 COVERAGE (Another hidden track blog post):

Supplementmarket.com, Inc. v. Google, Inc., 2010 WL 6309991, 17 Pa. D. & C. 5th 321 (Penn. Ct. Common Pleas July 26, 2010)

Occasionally Westlaw spits out a case months or years after it was decided with no apparent explanation for the lengthy delay. Sometimes I get email tips about these cases; other times, the cases just fall through the cracks. This is one of those cases.

This case involves an allegedly defamatory posting to the Usenet newsgroup alt.sport.bodybuilding. I don't get to talk about Usenet very often; see Novins v. Cannon for one similar case. The plaintiff sued because Google failed to remove the post from Google Groups after getting a C&D. This is an incredibly easy 47 USC 230 case, and the court dismisses the suit in a brief opinion. For an analogous Google case, see Black v. Google.

Posted by Eric at 02:35 PM | Content Regulation , Derivative Liability | TrackBack

April 19, 2011

Bulk Emailers (Mostly) Lose Three 47 USC 230(c)(2) Rulings--Holomaxx v. Microsoft/Yahoo & Smith v. TRUSTe

By Eric Goldman

I've been so behind that it's taken me until now to blog these cases from last month. All three opinions involve the same basic fact pattern: a bulk emailer gets blocked by an email service provider (relying in part on third party filtering/blocking services) and sues to undo the block. These claims are largely preempted by 47 USC 230(c)(2), and the courts mostly get to the right place with the immunity (although not without small points of drama). The aggressive plaintiffs also assert claims not covered by 47 USC 230(c)(2), but these mostly don't go anywhere either. The lesson is pretty clear: if an email service provider blocks your email, the courts aren't going to help you out.

Holomaxx Technologies v. Microsoft Corp., 2011 WL 865278 (N.D. Cal. March 11, 2011), and
Holomaxx Technologies v. Yahoo, Inc., CV-10-4926-JF (N.D. Cal. March 11, 2011). Venkat's excellent prior blog post on the complaints. These rulings are substantially identical, so I'll discuss them together except where they diverge.

Holomaxx is a bulk email sender upset because Yahoo and Microsoft are blocking its emails based both on IP address blocks and reputation scores (including those provided by third parties). We've heard this refrain before in many cases over the years, and the law is pretty clear about this. Email service providers can't be obligated to carry emails they don't want to carry. There are a number of legal doctrines that help reach this conclusion, but the most salient one is 47 USC 230(c)(2), the immunity for filtering decisions.

In response to Holomaxx's lawsuit over the block, Microsoft and Yahoo interposed the 230(c)(2) defense on a 12(b)(6) motion to dismiss. Holomaxx objected that 230(c)(2) is an affirmative defense and not appropriate response for a 12(b)(6) dismissal motion. This is the issue that vexed the Ninth Circuit in the Barnes v. Yahoo case until they fixed the opinion. In this case, Judge Fogel properly concludes that 230(c)(2) can support a 12(b)(6) motion to dismiss. (He reached the same conclusion in Goddard v. Google).

Holomaxx then argued that 230(c)(2) does not prevent blocking of legitimate email because such a block doesn't fit within 230(c)(2)'s "otherwise objectionable" language. The judge says:

No court has articulated specific, objective criteria to be used in assessing whether a provider’s subjective determination of what is “objectionable” is protected by § 230(c)(2).

And Judge Fogel isn't going to be the first. Instead, he sidesteps the issue, holding that the service providers could deem the emails "harassing" because, even if Holomaxx had a 0.1% error rate, as it claimed in the Yahoo case, that still netted 2M bad emails/year. Therefore, the filtering decisions fit within the other statutory language in 230(c)(2). This is a cute intellectual move which potentially expands the scope of 230(c)(2) by reading "harassing" broadly.

Holomaxx also attacks the "good faith" requirement of 230(c)(2), but does so in a generalized way. The judge rejects the argument, saying (in the Yahoo case):

Holomaxx alleges no facts in support of its conclusory claim that Yahoo!’s filtering program is faulty, nor does it identify an objective industry standard that Yahoo! fails to meet. While it suggests that Yahoo! is “using cheap and ineffective technologies to avoid the expense of appropriately tracking and eliminating only spam email,” it offers no factual support for these allegations. Nor does Holomaxx cite any legal authority for its claim that Yahoo! has a duty to discuss in detail the particular reasons for blocking Holomaxx’s communications or to provide a remedy for such blocking. Indeed, imposing such a duty would be inconsistent with the intent of Congress to “remove disincentives for the development and utilization of blocking and filtering technologies.”

The Microsoft opinion's text is similar. Holomaxx gets another chance to marshal better allegations, but I'm guessing they won't be able to do so.

The court rejects the ECPA claim (which 230(c)(2) doesn’t immunize) because Holomaxx didn't explain clearly enough how the email service provider "intercepted," "used" or "disclosed" Holomaxx's email or how the ESP improperly accessed stored communications. The 17200 claim (which I think should be preempted by 230(c)(2), although that issue isn't discussed) also fails for lack of Holomaxx's specificity. A Microsoft-only defamation claim doesn't survive either:

Holomaxx alleges, on information and belief, that Microsoft "informed Dragon Networks in writing" that it had blocked all IP addresses originating from Dragon Networks because "certain of Holomaxx's .78 addresses had been rejected 'for policy reasons,' and were blocked manually 'or for spamming.'" Holomaxx does not explain how the alleged statement was defamatory or produce a copy of the alleged defamatory correspondence between Microsoft and Dragon Networks. Nor does it explain how the alleged communication amounts to "a statement of fact that is false."

As a result, the judge dismisses the lawsuit but with leave to amend.

Smith v. Trusted Universal Standards in Electronic Transactions, Inc. (d/b/a TRUSTe, Inc.), 2011 U.S. Dist. LEXIS 26757 (D. N.J. March 15, 2011).

Like Holomaxx, Smith sends a lot of email through Comcast. Comcast blocked his outgoing email twice. The first time, Comcast pointed to Microsoft's Frontbridge/Exchange Hosted Services (EHS) quarantine system. The second time, Comcast pointed to Cisco's IronPort/Senderbase blocklist. Smith sued all three entities (and others). Last year, the court rejected a 12(b)(6) motion to dismiss based on 47 USC 230(c)(2).

Ten months later, after presumably lots of wasted effort, the court converts Cisco's and Microsoft's 12(b)(6) motions into a summary judgment motion and grants the dismissal on 230(c)(2) grounds. I'm sure the defendants appreciate the dismissal, but I'm sure they would have been even more appreciative if the court had reached the result on the last go-around. The court still can't let the case go with respect to Comcast, however.

Cisco/SenderBase gets the 230(c)(2) defense as a blocklist provider. This may sound easy, but the statutory drafting makes the court’s analysis more arduous than it ought to be.

Cisco's senderbase.com website constitutes an ICS. This makes Cisco a "user" of an ICS because it uses its website to publish the blocklist. It is also a provider of an ICS because it runs the website. This is the issue that tripped up the court in the last ruling, and although it got to the right result, I don't think the court has fully wrapped its head around the statutory language. I read the court's discussion at least 6 times, and I couldn't make it make sense. Just know that a blocklist provider probably is both a provider and user of an ICS, so this element is met.

The blocklist easily satisfies the requirements of 230(c)(2)(B). As the court notes (citing Zango v. Kaspersky), whether material is "objectionable" is measured subjectively. Thus, the court dismisses Cisco, noting:

The Court notes that Plaintiff's breach of contract and defamation claims are dismissed because they specifically relate to Cisco's SenderBase service. Plaintiff defamation claim is based upon the fact that Cisco publishes IP scores. Plaintiff's breach of contract claim is based on the fact that Cisco refused to provide Plaintiff with the information that it used to calculate the reputation score for the IP address assigned to Plaintiff by Comcast.

Microsoft's EHS quarantine operates in the cloud by routing all email through its servers, which screen out emails based on its blocklist (as modified by customers' parameters). This should be even easier to qualify as a provider/user of an ICS. The court's discussion on this point doesn't make any sense either, but it reached the right result. As with Cisco, the court says the blocklist qualifies for 230(c)(2)(B) and the contract breach claim fails for the same reason.

Comcast doesn't get so lucky. The court once again finds that Comcast could have acted in "bad faith" which could disqualify it from 230(c)(2) coverage:

the Court finds that a reasonable jury could conclude that Comcast acted in bad faith when it failed to respond to Plaintiff's repeated requests for an explanation why it continually blocked Plaintiff's outgoing email...the Court is not convinced that an internet service provider acts in good faith when it simply ignores a subscriber's request for information concerning an allegedly improper email blockage...there is no reason why Comcast could not articulate its immunity (or provide another rationale for the blockage) when asked to do so by a paying customer.

Whoa. Hold on a sec. The court is saying that online providers have to provide explanations to their customers for their back-end choices. First, that's not in the statute. Second, Judge Fogel expressly rejected this argument in his Holomaxx rulings. Third, the court’s position is ridiculous. Being legally obligated to explain business decisions to affected customers would add an extra layer of expense/hassle to everyday business decisions, and the explanations will just become additional grist for the plaintiff's mill (see, e.g., Barnes v. Yahoo and the resulting incentives to tell customers less, not more). I'm 99%+ confident that an appellate court would reverse this judge on this point. I think he went off the rails. As a result, I don't plan to advise clients that they have to provide explanations for their blocking decisions, and I don't recommend you advise otherwise.

Although Comcast doesn't get the 230(c)(2) immunity, the court still ends up granting it summary judgment on all of the claims. There's some interesting discussion there too.

The court rejects Smith's ECPA claims and the substantively identical state claims. Cisco doesn't actually intercept emails, and Microsoft quarantines emails with its customers' consent.

Smith's contract breach and promissory estoppel claims against Comcast fail because Comcast didn't make any promises it failed to keep and because Smith was using a personal account for unpermitted commercial activities. (To me, this is facially inconsistent with any argument that Comcast had bad faith for 230(c)(2) purposes, but the court ignores that implicit contradiction).

Smith's NJ Consumer Fraud Act claim against Comcast also fails because he can't show fraud or ascertainable loss (because he only alleged that he lost time). The court dismisses a couple other claims, too.

Posted by Eric at 11:04 AM | Derivative Liability , Licensing/Contracts , Marketing , Privacy/Security , Spam | TrackBack

April 14, 2011

YouTube and its Amici File Their Briefs in the Viacom v. YouTube Appeal

By Eric Goldman

I'm catching up with the YouTube-side briefs in the Viacom v. YouTube appeal. (See my analogous post on the Viacom-side briefs). Once again, Michael Barclay has been kind enough to organize the briefs into a single post.

YouTube's brief, another fine piece of advocacy, didn't contain anything surprising to me on my cursory review. Then again, YouTube has the advantage of a solid district court win, so it doesn't have to get too fancy. I did like that YouTube is emphasizing that even Viacom's lawyers can't figure out which clips were authorized and which weren't. As the brief says: "Even Viacom’s lawyers were tripped up by Viacom’s stealth marketing: in the district court, they submitted two documents under penalty of perjury that incorrectly swore that Viacom had not posted any of the clips at issue." To me, this is pretty much dispositive on the question of whether YouTube had--or could have--"red flags" of infringement.

13 amicus briefs came in for YouTube. Overall, the briefs were pretty well done; I thought none of these briefs were "clunkers" (I would not say the same for the Viacom stack). However, I also thought many of the briefs were redundant with each other, plowing over the same statutory language, legislative history and relatively small number of precedent cases. I'm sure a law clerk or two will get glazed eyes seeing the same basic arguments presented over and over again, no matter how elegantly those arguments are expressed. A number of the briefs highlighted the recent Wolk v. Kodak case, and I wonder if the Second Circuit will find it interesting.

Some specific observations about the amicus briefs:

The Anaheim Ballet brief is from content owners with over 3.3 billion YouTube views, a nice touch. To similar effect is the NAMAC et al amicus brief--a not surprising convergence because the briefs both came from different Samuelson clinics (Anaheim Ballet from the one at Fordham; NAMAC from the one at Berkeley).

The Anaheim Ballet brief argues the "Safe Harbor provision acts as a check on consolidation in traditional media by fostering growth of OSPs which serve as competitors for new content and viewers," and this allows the amici to "avoid the old media’s bottlenecked model and connect directly with their audience." I like the "power of the long tail" sentiments, although the brief seemed animated by the 1990s view that the Internet was going to cause widespread disintermediation. It has disintermediated folks, all right, but in their place are new intermediaries with their own agendas--including YouTube. For more on this, see my Brand Spillovers article.

The Consumer Electronics Association amicus brief, from Michael Barclay and UNC prof. Deborah Gerhardt, does a nice job building off Mark Lemley's article in recounting the history of paranoid and mistaken content owner overreactions to new technology.

The Human Rights Watch et al amicus brief argued that (1) "Social media platforms, including YouTube, have become vital tools in global struggles for human rights, free expression, and political liberty" and (2) an expansive copyright liability scheme would threaten that benefit. I wasn't convinced that the conclusion in (2) followed from the premise in (1) (47 USC 230 plays a much bigger role on this front than 17 USC 512 ever will), but even the premise in (1) was helpful in explaining the legitimate uses that people make of YouTube.

I joined the IP and Internet Law Professors amicus brief by David Post and Annemarie Bridy. The brief reinforces the problems with "red flags of infringement" and the "least cost avoider" argument when content owners are spiking the databases with their own content.

I was spiritually in tune with the National Consumers League et al amicus brief, which made the argument that YouTube has become an important venue for consumer product reviews, and some of those reviews may use copyrighted material. Thus, the brief argues that without the notice-and-takedown scheme, these reviews would never make it to the web due to publisher liability fears. While this is unquestionably true, as we just pointed out in the doctoredreviews.com website, consumer reviews are vulnerable to bogus removal even in a notice-and-takedown world. I'll get to the misuse of IP doctrines to suppress consumer reviews in an academic paper in a few years.

I loved how the National Venture Capital Association amicus brief started out:

Twitter. eBay. Facebook. Yelp. Google.

These companies are the stars of the Internet, contributing billions of dollars a year to the American economy. They exist only because the American venture capital community risked investing in them, long before they had made a nickel, while they were still in the "inventor's garage." And they exist only because the DMCA's safe harbor, 17 USC 512, shields them from liability for their users' activities, providing investors with the certainty that they will not face the sort of ruinous damages Viacom seeks in this case.

That's really elegant prose; but I'm pretty sure at least some of it is counter-factual. I'd have to doublecheck when these companies first got VC funding, but I think some of them got the money well after they were out of the garage and actually earning revenue. And although it may not disprove the assertion, I would note that eBay was already a pretty successful company before 17 USC 512 even got enacted.

The Public Knowledge amicus brief responds to the Audible Magic and Vobile amicus briefs, both of which were sales pitches for their services. Public Knowledge points out that regardless of the accuracy of filtering technology in identifying third party content, filters can't make good judgments about the legitimacy of content republication. The brief also scored this point about error rates with identification:

Audible Magic, for instance, notes a 99% correct identification rate, with a false positive rate of better than 1 in 10,000....However, this percentage must also be measured against the volume of material to which it is being applied. YouTube claims that 35 hours of video are uploaded each minute of every day....Assuming that these videos are limited to 15 minutes in length, each year would yield at least 73,634,400 uploaded videos. If just 1 in 10,000 are incorrectly identified as matching submitted videos when they do not, this could mean that every year, some 7,363 videos would be flagged for infringements when they did not even match a clip provided by a cooperating copyright holders.

UPDATE: Michael Barclay has more comments about the briefs.

The case library (also see the EFF's helpful library):

Posted by Eric at 02:04 PM | Copyright , Derivative Liability | TrackBack

April 13, 2011

Announcing DoctoredReviews.com, a Website Against Doctors' Efforts to Squelch Online Patient Reviews

By Eric Goldman

I'm pleased to announce the launch of DoctoredReviews.com, a website that addresses Medical Justice's form contract that seeks to restrict patients' online reviews of doctors by taking a prospective copyright assignment in the patients' unwritten reviews. Medical Justice's practices have bothered me for years, but I never had the chance to organize my thoughts fully. Fortunately, last August, Jason Schultz of the Samuelson Law, Technology & Public Policy Clinic suggested that I could work with him and two Berkeley law students on this issue. After evaluating our options, we decided to pursue an advocacy website. Should the website fail to curb the bad practices, we may need to reconsider more aggressive options.

I have given some recent talks about Medical Justice and the misuse of copyright law to manage online reputations. See my talk slides and my related academic paper. I'd welcome the chance to discuss these issues in more detail.
____

Our press release announcing the site launch:

NEW WEBSITE EXPOSES MOVE TO SQUELCH PATIENTS' ONLINE REVIEWS

Media Contacts:
Susan Gluss, 510.642.6936, sgluss@law.berkeley.edu
Deborah Lohse, 408.554.5121, dlohse@scu.edu

SANTA CLARA and BERKELEY, CA, April 13, 2011 —Some U.S. doctors are using a questionable legal strategy to restrict patients’ rights to post online reviews about their medical care. In response, Santa Clara University’s High Tech Law Institute and UC Berkeley Law School’s Samuelson Law, Technology & Public Policy Clinic have created a new website, doctoredreviews.com, to expose the legal and ethical risks of restricting a patient’s right to free speech.

A private company, Medical Justice, has been marketing a contract to doctors designed to give them the legal right to expunge critical online comments. The company, originally formed to ward off malpractice suits, says the contracts give doctors the right to remove patients’ posts on sites like Yelp or Angie’s List— even if the comments are truthful and accurate.

“This practice poses a grave threat to the integrity of online consumer reviews,” said Eric Goldman, director of Santa Clara University’s High Tech Law Institute and a former general counsel to Epinions.com. “Doctors are trying to misuse a loophole in copyright law so that they can suppress any patients' reviews they don't like.”

Patients are typically asked to sign the contract before they first see a physician—often as part of a thick stack of other paperwork. As a result, patients may not realize that they’re relinquishing their rights to review the doctor. The contracts also promise greater privacy, but patients are already protected under federal and state information privacy laws.

“Doctors who use these gag-order contracts are essentially telling patients ‘if you want medical care, you must sign away your right to free speech,’” said Jason Schultz, co-director of Berkeley Law’s Samuelson Law, Technology & Public Policy Clinic. Schultz says this may be counterproductive for both patients and physicians, as many patients now want to see reviews—both good and bad—from other patients before choosing a doctor.

Rather than remove reviews from patients, doctors may publicly respond to negative reviews, said Schultz, as long as they maintain their patients’ anonymity. “More speech is the answer,” he said, “not censorship and copyright abuse.”

Schultz said the contracts could violate consumer protection laws and medical ethics rules, by using deceptive language and by putting a doctor’s financial interest ahead of the patient’s.

The doctoredreviews.com website delves into these issues in more depth with a wealth of information for patients, doctors, and online review sites. The site includes:

* Copies of the anti-review contracts.
* Suggested responses for patients asked to sign anti-review contracts.
* Material for doctors on why these contracts may be bad for business.
* Information for online review sites on why they do not need to honor takedown notices from participating doctors.
* Details about existing federal and state health information privacy laws that protect patient confidentiality.

Posted by Eric at 09:20 AM | Copyright , Derivative Liability | TrackBack

April 07, 2011

StubHub Denied Section 230 Defense in Scalping Case--Hill v. StubHub

By Eric Goldman

Hill v. StubHub, Inc., 2011 WL 1675043 (N.C. Super. Ct. Feb. 28, 2011). My previous blog post in this case.

This is a putative class action lawsuit against StubHub for violating North Carolina's anti-scalping laws, which both restrict the resales prices of tickets and service fees charged for the resale. The plaintiffs claim StubHub violates both provisions.

StubHub interposed a 47 USC 230 defense, something that StubHub has asserted with mixed success before. The court rejects the defense.

The court begins with a survey of Section 230 jurisprudence. Principally building off the bloated statements in Roommates.com, the court summarizes its legal assessment:

A review of the cases below leads this court to conclude that an internet service provider crosses the line and becomes liable for content on its website when the internet service provider (“ISP”) materially contributes to and/or specifically encourages the offending content. To “materially contribute” in this context means to influence the offending content in a way that promotes the violation of law that is represented by the offending content. To “specifically encourage” means to elicit and make aggressive use of the offending content in the business of the internet service provider. Each case must be decided on its own facts, giving deference to the public policy embodied in the statute. Cases in which the offending content is unlawful require a heightened degree of materiality and specificity. Intent to violate the law is not required. Conscious disregard by an internet service provider of known and persistent violations of law by content providers may impact the courts’ determinations of the service provider’s claim to immunity, especially where the ISP profits from the violations.

Elsewhere, the court says Section 230 "protects those ISPs which are truly innocent bystanders in use of the web."

What is the court talking about? It is a weird way of trying to distill the state of the law (which the court mischaracterizes by saying the "case law governing the question of loss of immunity as an internet service provider is not extensively developed"). Oddly, after spending 40% of its opinion supporting various cases that led it to draw this legal conclusion, the court doesn't explicitly use this recap to guide its analysis. Yet another reason not to give the recap much credit. One other point that undercuts the court's credibility: the court didn't address the highly relevant Milgram v. Orbitz case which reached the opposite result on similar facts.

In my opinion, the most interesting part of the court's opinion relates to Section 230's application to the ticket price. The court acknowledges that each seller sets his/her own price for the ticket. Nevertheless, StubHub can be responsible for the price sellers choose because StubHub does a number of things to manage prices on the site. (StubHub wants sellers to sell at the highest obtainable price because that maximizes StubHub's fees; but prices above the market-clearing price mean that no deals are done, in which case StubHub doesn't get any cut).

The court enumerates several ways that StubHub shapes the prices:
* StubHub decides which events it supports in the first place (it doesn't allow ticket sales for every event)
* "It actively solicits listings for high-demand events. It monitors its competition for listings."
* It cuts special deals for "LargeSellers" (a point also raised in the NPS v. StubHub case). The court says "StubHub influences the pricing of the LargeSellers" through various programmatic details.
* StubHub shows sellers pop-up windows telling them if their price is out of a targeted pricing range and encourages sellers to rethink the price.
* Later, the court gives other examples of how "StubHub is in total control of the transaction."

The court summarizes and concludes the pricing discussion:

StubHub’s business model does not require scalping practices. It encourages them. It is designed to produce the highest volume of ticket sales at the prevailing market price for events which are sold out, and thus likely to generate market prices higher than the face value of the tickets irrespective of the fees involved on both sides. Having engaged in detailed studies of pricing and pricing habits of its users and competitors, it strains credulity that StubHub had no information about the relation of market value to face value. It could not reasonably drive its customers’ prices to market value without that information. It does not provide information on the face value of tickets to buyers on its website. Further, it controls its website to prevent communication between buyers and sellers, thus facilitating its role as the arbiter of market price.

I feel like I'm missing something pretty fundamental. Don't all retailers--even marketplaces like eBay--try to drive their prices to "market prices"? Is there any other logical pricing outcome?

In its conclusion, the court says that StubHub

directly participated in developing the pricing on its system....StubHub encouraged illegal content. Phrased differently, the use of its website to scalp tickets in violation of North Carolina law was a predictable consequence of its business model. StubHub encouraged, materially contributed to, and made aggressive use of the pricing content on its website. It profited from tickets sold at prices higher than face value. It was consciously indifferent and willfully blind to the illegal prices being posted, knowing that the predictable consequences of its pricing model would be the generation of illegal prices. It is not entitled to immunity. It does not qualify as a Good Samaritan.

The odd thing about the court's pricing discussion is that, by the court's own admission, StubHub is usually encouraging sellers to reduce their offered prices. So if StubHub changes its practices in response to this opinion to improve its Section 230 defense, ironically consumers will likely pay higher ticket prices, not lower. Talk about a Pyhrric victory.

If it holds, this ruling about steering price-setting might apply to any e-commerce site that wants Section 230 protection for seller pricing choices. For that reason, obviously this opinion has risk for StubHub's parent, eBay, but I would note that the reason could be applied to Google's AdWords auctions. Google does a number of things to affect advertisers' bids in the auction, and this ruling could potentially affect Google's Section 230 coverage for those auctions. On the other hand, so much of the court's opinion turns on the illegality of scalping. If the marketplace auctions lead to a legal price, this opinion's rationale might drop away.

Then again, retailers have an increasingly tough time claiming 230 immunity for items they sell, especially items delivered offline. See, e.g., my post about Parisi v. Sinclair. Clearly, this judge thought StubHub was closer to a retailer than a marketplace.

The court says StubHub's buyer's fee is also illegal under the anti-scalping law.

StubHub's counsel has told me that they plan to appeal this opinion. It will be interesting to see how this ruling fares on appeal.

A final note: this ruling is just the latest detritus from the legally disastrous 2007 Hannah Montana concert tour. The legal developments arising from that tour have been horking the law for years--Ticketmaster v. RMG being the flagship example. Add this ruling to the list of reasons why Cyberlawyers should hate Hannah Montana.

Posted by Eric at 12:14 PM | Derivative Liability , E-Commerce | TrackBack

April 06, 2011

Republisher of Youthful Sexting Photos Avoids Liability (For Now)--Doe v. Peterson

By Eric Goldman

Doe v. Peterson, 2011 WL 1120172 (E.D. Mich. March 24, 2011)

This is an interesting sexting lawsuit. Doe took explicit photos of herself and sent them via MySpace to her then-boyfriend. She did not follow my recommendations for good legal practices when sexting. The parties dispute how old she was when she took the photos. Doe claims she was just under 18; the ex-boyfriend says she was over 18.

The photos subsequently started appearing at various websites. The opinion doesn't say whodunit. Eventually, someone uploads the photos to exgfpics.com, run by Erik Peterson. (Erik's dad got dragged into the lawsuit as well, but we'll just focus on Erik in this post). [Note: the website is strictly NSFW] The website did not conform to various practices that a lawyer might recommend. Erik apparently curated the photos but didn't verify the age of the women in the uploaded photos, he added his own comments about the photos (sort of in a "thedirty.com" way, although perhaps not as mercilessly mean), and he didn't maintain any 2257 records. Thus, the website occupied a weird zone between a "pure" UGC site and an editorially controlled publication; it's much closer to the latter, but it didn't appear to be run with the legal compliance that is expected of such publications.

Doe learned of the photos at exgfpics.com and asked her ex-boyfriend for an explanation. The case omits details of that conversation. In any case, her ex-boyfriend said he sent some takedown notices to exgfpics.com without results. Then, Doe sent her own takedown notices. Erik says he never saw those. Eventually, Doe sued and served Erik's dad. It still took a few more days before the photos came down.

The case first addresses Erik's "in pari delicto" defense--basically, that Doe broke the law by creating and distributing child porn (pictures of herself), and therefore the law shouldn't help her out. The court rejects the defense, concluding that Doe is considered a victim of the child porn statutes and therefore should not be denied the statutory protection.

At the same time, the court denies Doe's summary judgment motion under 18 U.S.C. 2252A(a)(2), the law that prohibits child porn distribution. The law has a civil remedies component to it, which is at issue here. (The opinion doesn't mention if the feds are considering a prosecution).

The parties still dispute Doe's age when she took the photo, but the court says it would deny Doe's motion even if that wasn't in dispute. The court disregards Erik's failure to maintain 2257 records, saying that only gives rise to criminal liability, and the absence of such records does not satisfy 2252A's "knowing" requirement.

Doe's takedown letters don't confer 2252A knowledge either. The court seems to require that the plaintiff send the republishing website evidence of her real age (such as a driver's license); merely asserting that she was underage aren't enough to create scienter. However, her notices did create inquiry notice, which the court doesn't resolve in this ruling. The court also says that Doe's asserted minority status wasn't apparent from the photos themselves (a fact Doe admitted).

Thus, on the knowledge standard, the court concludes:

At best, Plaintiff's allegations establish that there is a genuine issue of material fact regarding whether Defendants knew she was a minor in the pictures (because they read her emails) or that they were deliberately indifferent to that fact (because they had no verification procedures in place and failed to monitor the website's email accounts). This does not, however, amount to proof that Defendants violated 18 U.S.C. s 2252A as a matter of law.

There are so many oddities about this case, I'm not even sure where to begin. Let's start with the most obvious: why didn't Doe claim a copyright interest in her photos? Either Erik was the original publisher of the photos, in which case he would be strictly liable, or he was storing the photos at the direction of the uploader, in which case a 512(c)(3) takedown should have done the trick. (Although exgfpics.com doesn't have a 512 agent for service of notice, and obviously the site's legal compliance work wasn't the sharpest). I'm still a little confused why Doe didn't bring a copyright claim. Perhaps, like the Moreno v. Hanford Sentinel case, the copyright damages weren't worth the effort. Cf. the Lara Jade Coton case.

Now, a totally different oddity: could Erik claim 47 USC 230 protection here? After all, the photos came from a third party source, and Doe is suing Erik for republishing third party content. 47 USC 230 wouldn't protect Erik from a federal criminal prosecution, but it should apply to Doe's civil claim under federal anti-porn statutes. See, e.g., Doe v. Bates and Voicenet v. Corbett. Perhaps the site's overall structure as a quasi-revenge site might make the site more vulnerable to a Roommates.com attack (it's similar to the harassthem.com analogy in Kozinski's first opinion). Even so, it would have been logical to try the defense, but the opinion didn't mention it at all.

Next, if we're not governed by either 17 USC 512 or 47 USC 230, then exactly what legal standard applies to a web republisher of alleged child porn? The notice-and-takedown approach Doe tried here was potentially less legally effective than it would have been for copyright. That discrepancy seems odd for a civil child porn claim. Even though there is the obvious difficulty ascertaining the depicted individual's age, that information gap is what 2257 tries to fill, and determining age often isn't any more difficult than determining if a photo is free to republish under copyright law.

Finally, it is disquieting to see a commercial web publication publishing nude photos of women without their consent and without any effort to verify their age. (Given the site's premise as a quasi-revenge site, it's not surprising that neither the uploaders nor the site operator attempt to get the depicted individual's consent). Due to child porn's toxicity, this basic architecture seems like bad news. Erik appears to be lucky that this judge was able to maintain a cool head; many other judges would have thrown the book at him. Still, if it turns out that Doe was underage, can a criminal prosecution be avoided?

For another example of sexting gone wrong, you might want to look at this NYT story about what happens when a 13 year old sends a nude picture of herself to her then-boyfriend, who forwards it on to her nemesis, which leads to the photo goes viral, which leads to lots of bad things happening.

Posted by Eric at 09:02 AM | Content Regulation , Derivative Liability | TrackBack

April 05, 2011

Online Booksellers Get 47 USC 230 Immunity for Publisher-Supplied Marketing Collateral--Parisi v. Sinclair

By Eric Goldman

Parisi v. Sinclair, 2011 WL 1206193 (D.C. D.C. March 31, 2011). The complaint. More source documents.

Sinclair self-published a book that Parisi believes defamed him. The book showed up in Books-a-Million, B&N and Amazon. All of the retailers published an allegedly defamatory promotional statement supplied by the "publisher" (in this case, the author). In B&N and Amazon's cases, it appears that Sinclair's self-publication venue, Lightening Source, supplied a data feed that they used to automatically build a display page containing the allegedly defamatory statement.

With respect to the publisher-supplied promotional statement, the online booksellers claimed 47 USC 230 immunity. This proves to be an easy case because the online booksellers simply republished the third party-supplied content. The court explicitly rejected an argument that Books-a-Million "adopted" the publisher's collateral as its own. This is consistent with the uncited Black v. Google opinion. The court also explicitly granted Books-a-Million's 12(b)(6) motion to dismiss, saying that was appropriate when the immunity is apparent on the complaint's face, as it was here. (B&N and Amazon brought summary judgment motions).

Despite this being an easy 230 case, the court delineates two 47 USC 230 boundaries. First, it refuses to embrace the Perfect 10 v. ccBill conclusion that 230 preempts state IP claims, but it doesn't accept the alternative proposition (from the Project Playlist and Friendfinder cases) either. Instead, it dismisses the false light claim (which the court liberally construed as a publicity rights claim) on newsworthiness grounds.

Second, in FN3, the court says that B&N and Amazon can't claim 47 USC 230 immunity for the online sale of physical books delivered in realspace. The court distinguishes the republication of marketing collateral, which are covered by 230, from sale and delivery of the physical books themselves, which are not. This seems like a sensible distinction. Even though 230 immunizes offline conduct when the claim is based on online communications (see, e.g., Doe v. MySpace), offline deliveries of tortious material by the defendant should be outside the scope of 230. For more on this, see the uncited Curran v. Amazon.com case. The court suggests that a Kindle sale--where the online retailer sells third party materials but delivers them electronically--would also drop out of 230's protection. This is consistent with the uncited the Accusearch case, although I personally think 230 can apply in that situation.

Even though 230 isn't availing for the book sales themselves, the booksellers exit the case because they lacked the required actual malice.

Despite the two 230 limits identified by the court, this case is a good 230 win for the defense. Among other things, it reminds us that online retailers are fully eligible for 47 USC 230's immunity if they meet the requisite elements. Also, at our 230 retrospective, Kai Falkenberg of Forbes expressed a worry that this case may require online publishers to clearly demarcate their content from third party content. As it turns out, the consumers' perceived source of the allegedly defamatory content didn't come up in the court's discussion.

Posted by Eric at 10:12 AM | Content Regulation , Derivative Liability , E-Commerce | TrackBack

March 30, 2011

Defendant Succeeds On Second Attempt With a Section 230 Dismissal--Mealer v. GMAC

By Eric Goldman

Mealer v. GMAC Mortgage LLC, 2011 WL 1103357 (D. Ariz. March 25, 2011)

I previously blogged about this case a few weeks ago. Mealer claims that a GM employee, Kordella, bad-mouthed him in a comment on Mealer's blog, and that comment killed Mealer's hopes for a $200M business. Among a number of other defendants, Mealer sued GMAC, a separate company from GM, because the GM employee apparently used an Internet connection through GMAC to post the comment. Thus, effectively, GMAC was the Internet access provider in this triangle.

In the prior ruling, GMAC tried to end the case using 47 USC 230(c)(2), the immunity for filtering decisions. The court rejected the argument, saying that GMAC didn't explain its filtering efforts well enough. The court then added: "Although [Section 230(c)(1)] might defeat Mr. Mealer’s claims against GMAC, no such argument has been made."

GMAC's lawyers got the hint and moved for summary judgment on 230(c)(1) grounds. In a brief opinion, the court grants summary judgment and dismisses the case. The court runs through the elements of a 230(c)(1) defense:

* GMAC is an interactive computer service because it was functioning as an IAP here
* Mealer claims defamation, which is covered by the immunity
* the GM employee was a third party to GMAC

Check, check, check = successful immunity. The court then continues with an impossible-to-parse statement, so I quote it:

Mr. Mealer's argument seems to rest on the idea that Kordella committed a trespass to chattels and that GMAC is somehow also responsible. Mr. Mealer's argument reflects a fundamental misunderstanding of that common law tort. Mr. Mealer has not asserted a claim for trespass to chattels, nor could he. Mr. Mealer never had the $200,000,000 in prospective growth funding that he characterizes as a chattel.

If you understand what that means, let me know!

Fortunately, this case reaches its logical conclusion. I think this ruling "fixes" any problems created by the court's prior ruling on Section 230(c)(2), which I think was erroneous because I think both 230(c)(1) and 230(c)(2) could apply here. However, as Pat Carome indicated at our 230 shindig, clients gravitate towards 230(c)(1) instead of 230(c)(2) because they think it's easier to win. This case might further reinforce that trend.

UPDATE: Mealer emailed me to say that he plans to appeal the ruling.

Posted by Eric at 10:58 AM | Derivative Liability | TrackBack

March 28, 2011

Website Privacy Policy Supports Pseudonymous Poster's Expectation of Privacy -- Cornelius v. Deluca

[Post by Venkat Balasubramani]

Cornelius v. Deluca, 10-Cv-027-BLW (D.Id.; Mar. 15, 2011)

A district court judge in Idaho denied a request to unmask the identity of a pseudonymous forum poster. In support of its decision, the court looked to the website's privacy policy to find an expectation of privacy.

The case revolved around comments made on bodybuilding.com which Cornelius and his company are not happy about. The lawsuit has spanned two jurisdictions (Idaho and Missouri) and spawned two rulings mentioned on this blog. Professor Goldman's initial post describes the situation as follows:

DeLuca runs bodybuilding.com, a fitness website and online retailer. The plaintiffs sell dietary supplements ("syntrax," whatever that is). The plaintiffs allege that their competitors posted shill reviews to bodybuilding.com designed to harm the plaintiffs' business. The plaintiffs sued both bodybuilding.com and the putative shillers.

The first time around, the Missouri judge awarded bodybuilding.com an easy Section 230 win to the extent plaintiff tried to hold it liable for posts made by third parties. ("Online Retailer Isn't Liable for User Comments.") In a second ruling (after the dispute moved to Idaho), the court strayed from the Section 230 path and said that bodybuilding.com could be held liable for posts made by "moderators." ("Troubling Ruling About 47 USC 230 and Moderators.") In response to this ruling, plaintiff tried to find out the identity of a pseudonymous poster named "INGENIUM," who posted the following:

despite S103's constant matrix pimping in CASEIN threads, matrix is not a micellar casein product.

[I'm not even sure what the products in question are, and what claims are being made about them, but the extensive litigation activity in this case makes me think that they must be useful in some way.]

After a November 2010 hearing, the court allowed plaintiff to discover INGENIUM's identity, based in part on defense counsel's purported concession that bodybuilding.com did not object to disclosure of INGENIUM's identity. The court's earlier decision was also based on the court's conclusion - relying on a recent Ninth Circuit case (In re Anonymous Online Speakers) - that the statement in question was commercial speech. Bodybuilding.com complained, saying that counsel was not authorized to make this concession, and requested that the court reconsider its prior ruling. Also, in between the court's earlier ruling and its reconsideration of the order, the Ninth Circuit withdrew its opinion in In re Anonymous Online Speakers and left the opinion intact, except for the language that characterized the speech as commercial speech versus core political speech.

Anonymity v. Disclosure of INGENIUM's identity: The court decides that INGENIUM's speech is neither purely commercial nor core political speech, and it then looks to the question of whether plaintiffs' need for INGENIUM's identity outweigh INGENIUM's right to speak anonymously. Without deciding the appropriate test in this context, the court looks to previous cases and settles on five relevant factors (citing Sony Music v. Does, Dendrite, 2TheMart): the plaintiff's ability to establish a prima facie case; the specificity of the discovery request; the availability of alternate means to obtain the information; the need for discovery to advance plaintiff's claim; and defendant's (or the speaker's) expectation of privacy.

The court reverses itself and finds that plaintiffs could advance their claim without obtaining INGENIUM's identity - i.e., this information was not central to plaintiffs' claims. Noting that an 'extra-high hurdle' exists when a non-party's information is involved, the court finds that plaintiffs failed to clear that hurdle here. In particular plaintiffs sought to identify the precise nature of the relationship between bodybuilding.com and INGENIUM, but plaintiffs hadn't conducted any discovery directed to bodybuilding.com on this issue. Bodybuilding.com submitted a declaration setting forth its relationship with INGENIUM (that INGENIUM was a community-elected volunteer), but plaintiffs did not bother deposing the individual who submitted the declaration. Thus, there was no need for plaintiffs to unmask INGENIUM to obtain this information, at least not at this stage.

The privacy policy: The court also added that:

INGENIUM has an expectation of privacy based on bodybuilding.com's terms of service and privacy policy. Bodybuilding.com's terms of service state that no poster may make any post that would infringe on another poster's right to privacy. Bodybuilding.com's privacy policy also states that protecting users' privacy is a top priority, and bodybuilding.com has taken reasonable measures to protect users' private information.

Ultimately, the court concludes that plaintiff's attempt to discover INGENIUM's identity "is a fishing expedition based on speculation that INGENIUM was or is an agent or representative of bodybuilding.com."
__

There have been a couple of cases dealing with website privacy policies and their effect on whether a user should be unmasked. I blogged about Sedersten v. Taylor, where the court held that language in the policy providing that the site could freely use user information did not result in a waiver of the right to post anonymously. ("Online Commenter Did Not Waive Right to Anonymity by Agreeing to News Website's Privacy Policy.") In McVicker v. King, the court held - as the court did in this case - that language in the policy created an expectation of privacy. (Here's Tom O'Toole's post on that case: "Newspaper Website's Privacy Policy Creates Expectation of Privacy for Commenters?")

The expectation of privacy that is derived from a site or service's terms is something that courts have looked to in the Fourth Amendment context, in dealing with questions of privilege or whether an employer has the right to access employee communications, and whether disclosure of a person's social networking profile and communications is appropriate in civil litigation. But thus far, it has not made an appearance in anonymity cases. There are a couple of questions or concerns that this approach raises: (1) whether looking to terms in privacy policies would leave anonymous users at the whim of website terms (which may change from time to time based on business considerations), and (2) whether it makes sense to impute the expectation of privacy on users based on policies that they don't necessarily read or digest? (See Chris Soghoian's post the Twitter/Wikileaks disclosure order on the second point: "Federal judge in Twitter/Wikileaks case rules that consumers read privacy policies.") The First Amendment cases dealing with online anonymity do not discuss whether the poster had a "reasonable expectation" of privacy, and looking to the online terms and privacy policy will just muddy the analysis. While it bolsters the poster's privacy in this case, it may leave online posters in general worse off. Also, in many instances it will not be determinative because sites tend to include wiggle room in their policies so they can disclose user information if it's in their interest to do so.

Interestingly, the issue is in front of the court only because of its ruling that bodybuilding.com could be held liable if INGENIUM is found to be an "agent or representative of bodybuilding.com." See Professor Goldman's skepticism about this conclusion in his earlier post on the case: "Troubling Ruling About 47 USC 230 and Moderators."

Posted by Venkat at 12:55 PM | Derivative Liability , Evidence/Discovery , Privacy/Security , Publicity/Privacy Rights

Groupon Hit With Two Lanham Act Lawsuits, and One Takes Google Along for the Ride

By Eric Goldman

Groupion, LLC v. Groupon, Inc., 3:11-cv-00870-EMC (N.D. Cal. complaint filed Feb. 24, 2011)

San Francisco Comprehensive Tours, LLC v. Groupon, Inc., CV-1300 (N.D. Cal. complaint filed March 17, 2011)
__________

A company doesn't reach a purported $6B valuation without generating some angst. Groupon's marketing litigators will be earning their keep.

The Groupion Suit

Groupion is CRM software vendor. It's a pretty young company itself. having registered its domain name in 2007. It's unhappy with big spotlight on its friend without the "i," including being irked when Google suggests "Groupon" for searches on "Groupion."

It seems like the world should be big enough for Groupion and Groupon to coexist given their different spellings and market niches. I'm more interested in the fact that Groupion also named Google as a defendant. Apparently Groupon is buying "Groupion" as a keyword, so Groupion sues both Groupon and Google for these ads.

Side note: why is Groupon buying the keyword Groupion? Is it because consumers often make that misspelling? I also noticed that LivingSocial showed up as a keyword advertiser when I searched "Groupion" today. Will LivingSocial be the next defendant in Groupion's quest?

The complaint itself is minimalist drafting in a bad way. The actual claims appear to be cut-and-paste from a form book; the complaint simply recites the claim elements without applying any of the legal standards to the alleged facts. So it's a little hard to tell exactly why Groupion is beefing with Google. I imagine Groupion will have to do a better job explaining what Google did wrong if it wants to survive a motion to dismiss.

Groupion's pursuit of Google in an otherwise garden-variety trademark case reminded me a little of the Parts Geek v. US Auto Parts lawsuit, where a competitor-vs.-competitor suit similarly ensnared Google as a collateral victim. Parts Geek ended up voluntarily dropping Google, which is what I imagine Groupion will do eventually. Why tangle with a $30B/year company if you don't really need to???

San Francisco Comprehensive Tours suit

The plaintiff offers San Francisco area tours. It has successfully bid on keywords such as "San Francisco Tours," "Alcatraz Tours" and "Napa Wine Tours" for years. Then, starting in September, Groupon started bidding on these terms as well--and ranking very well, driving up the plaintiff's costs. The plaintiff is unhappy that Groupon uses those phrases in its resulting ad copy, although it asserts Groupon rarely offers "tours" as such. This made me wonder if Groupon was broad-matching to the place name and then automatically filling the ad copy with the search term as a variable. The complaint never addresses this possibility.

Even if Groupon is broad-matching, the plaintiff's beef could be legitimate if Groupon's ad copy constitutes false advertising. The complaint (para. 17) gives the example where, in response to the keyword "Alcatraz Tickets," Groupon's ad copy read "Alcatraz Tickets - 1 ridiculously huge coupon a day / Do Alcatraz CA at 50-90% Off." Yet, the ad that day was for acting lessons. The complaint further gripes about the resulting landing page, which it says are essentially content-free.

In this sense, the complaint tells a pretty good story that Groupon is using an algorithmic-driven ad campaign that has gone awry, much like eBay's algorithmic AdWords campaign used to reach farcical results. Even if Groupon wins this lawsuit, I hope they take a closer look at their AdWords campaign to make sure it's not generating nonsensical ads. What's less clear to me is why Google's ad relevancy scores aren't adequately punishing Groupon if this is the case. The complaint offers some hypotheses for Groupon's high rankings, none of which seemed very convincing to me. If Google drops the boom on Groupon for AdWords spamming, Groupon could end up being very unhappy itself.

The plaintiff alleges violations of the Lanham Act, California's false advertising law (B&P 17500) and other claims. Wisely, the plaintiff doesn't try to drag Google into this lawsuit.

The Pending Google AdWords Cases

One update of note: in the FPX and John Beck Amazing Profits cases, the court held a consolidated hearing regarding class certification. The court does not appear to have issued its ruling yet.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on March 27, 2011):

* ~~Ezzo v. Google~~
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* ~~Rosetta Stone v. Google~~ [on appeal]
* ~~Flowbee v. Google~~
* ~~Parts Geek v. US Auto Parts~~
* ~~Dazzlesmile v. Epic~~
* Pathak v. ICG
* Groupion v. Groupon

Posted by Eric at 08:55 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 25, 2011

Yelp Beats "Implied Extortion"/"Pay-to-Play" Lawsuit in Round #1--Levitt v. Yelp

By Eric Goldman

Levitt v. Yelp, 3:10-cv-01321-MHP (N.D. Cal. Mar. 22, 2011). See the motion to dismiss, the opposition and the reply. This ruling deals with the Second Amended Complaint. Levitt's initial complaint. Cats & Dogs Animal Hospital's first amended complaint.

This lawsuit rolls up several "pay-to-play" lawsuits against Yelp, all alleging that Yelp manipulated star ratings and user reviews based on whether or not businesses bought advertising from Yelp. Judge Patel reinterpreted the plaintiffs' allegations as claims of "implied extortion." (It wasn't express extortion because Yelp never explicitly threatened to harm their businesses if they failed to advertise). In this ruling, Judge Patel grants Yelp's 12(b)(6) motion to dismiss. However, she gives the plaintiffs leave to amend, so the case isn't over yet.

Judge Patel taxonomizes the plaintiffs' allegations into four groups:

"1) Yelp removed positive reviews, thereby changing the overall star rating, immediately after plaintiffs declined to purchase advertising or terminated their advertising contracts

2) Yelp maintained negative reviews even though the reviews violated Yelp’s Review Terms

3) Yelp manufactured its own negative reviews of plaintiffs’ businesses

4) Yelp stated that paying for advertising would help Plaintiff’s overall star rating because Yelp “tweaks” the ratings, “manually adds and removes reviews in its own discretion” and its employees have the ability to remove reviews"

None of these survive the 12(b)(6) motion, but for different reasons.

The court says #2 (continuing to publish negative reviews) is preempted by 47 USC 230(c)(1). Stitching together various statements from Roommates.com and Barnes, she says "Yelp cannot be held liable on a theory that it extorted plaintiffs by refusing to de-publish negative business reviews."

In contrast, 47 USC 230 doesn't preempt #3 (Yelp manufacturing fake reviews). Citing her own Mazur opinion from 2008, she also says #4 isn't preempted.

47 USC 230's preemption of #1 (removing positive reviews for failing to buy ads) is a "closer question." The judge concludes it isn't preempted for two reasons. First, "Choosing not to publish content for the purposes of harming a particular business or to coerce that business into purchasing advertising seems quite distinct from the traditional editorial functions of a publisher." Second, 230(c)(2) only applies when the filtering decision is exercised "in good faith," and the alleged conduct wouldn't qualify (citing Smith v. TRUSTe, which was just reversed by the district court in an opinion I need to blog, and the National Numismatics case).

So allegations #1, #3 and #4 survive the 47 USC 230 preemption challenge. Nevertheless, they still fail.

First, the plaintiffs' factual assertions are "entirely speculative": "The SAC provides no basis from which to infer that Yelp authored or manipulated the content of the negative reviews complained of by plaintiffs."

Second, the plaintiffs haven't adequately alleged that Yelp communicated an extortionate threat. The plaintiffs show correlation between Yelp's offers and good/bad consequences but do not show causation, and the mere fact of a correlation doesn't communicate a threat. The judge noted alternative hypotheses to explain the plaintiffs' experiences: "These fluctuations could just as easily be the result of planted ads by plaintiffs, the functioning of Yelp’s automated filter, or negative attacks from competitors or former employees." The various statements allegedly made by Yelp's salespeople don't change the analysis--Levitt was just promised more pageviews if it advertised, Paver Pro didn't talk to the salespeople at all, and with respect to Chan/Cats & Dogs Animal Hospital, "offers of favorable treatment in exchange for ad purchases are not the equivalent of an extortionate threat of harm."

Although this ruling is a little less 47 USC 230 favorable than I would have liked, overall this ruling is a fairly sensible assessment of the situation. However, as usual for consumer-oriented litigation like this, the opinion does set up a squeeze for the plaintiffs. Judge Patel wants the plaintiffs to provide a better causation story, but much of the evidence that might support the causation story is likely to be obtained only through discovery--which the plaintiffs won't get if they can't get past the 12(b)(6) motion to dismiss.

A final thought: given the discussion about implied extortion, I was surprised that the court didn't explore Reit v. Yelp (which also advanced the implied extortion claim as a 230 workaround) or the multitudinous Ripoff Report cases, many of which have addressed the 230/extortion interface.

[I have several other 47 USC 230 cases to blog, including Hill v. StubHub, the Holomaxx cases and Smith v. TRUSTe. I'll blog them as soon as I can!]

Posted by Eric at 01:57 PM | Derivative Liability , Marketing | TrackBack

March 24, 2011

Photo Hosting Site Gets DMCA 512 Safe Harbor--Wolk v. Photobucket

By Eric Goldman

Wolk v. Kodak Imaging Network, Inc., 2011 WL 940056 (S.D.N.Y. March 17, 2011)

Wolk (is this her?) is a visual artist whose work was allegedly infringed on Photobucket. She sent some 512(c)(3) takedown notices to Photobucket, which were promptly honored. At some point, it appears that she tired of sending 512(c)(3) notices, so she took the position that she didn't need to send any more--the prior notices had sufficiently put Photobucket on notice to guard against future infringements. The court summarizes her position: "Plaintiff contends that Photobucket is now aware that her copyrights are being infringed on its site, and it must now police its sight [sic] to uncover current infringements and prevent future infringements, without her providing DMCA-compliant notice in each instance." She felt strongly enough in this reading to litigate the issue pro se.

Her (mis)reading of the statute meets a predictable fate. The ruling itself doesn't break much new ground--although it has some rare discussion about 512(j) injunctions--but its routine nature makes the ruling remarkable. A sufficient body of defense-favorable 512 rulings have developed (in particular, this case repeatedly cites Io v. Veoh and Viacom v. YouTube) that the court treats this litigation as a fairly easy and routine case. Given how many tortured 512 rulings we've seen, this opinion is a refreshingly uncomplicated read.

The court guts Wolk's basic argument as follows:

The requirement that DMCA-compliant notices identify and locate specific acts of infringement undermines Plaintiff's position, as her past notices do not identify and locate other, and future, infringing activity. The Court does not accept her invitation to shift the burden from her to Photobucket....Without receiving notices identifying and locating each instance of infringement, Photobucket did not have "actual knowledge" of the complained of infringements or "aware[ness] of facts or circumstances from which infringing activity is apparent."

The court reiterates its rejection of Wolk's desired burden-shift later in the opinion:

Plaintiff contends that failure to grant her relief will require her to find infringing activity on Photobucket's site and report it to them through DMCA-compliant notices. She contends that this will be difficult and labor intensive. However, the purpose of her motion is to shift that same burden to Photobucket, without Photobucket having the benefit of knowing whether Plaintiff has authorized any of her works to be displayed on its site. While, as Plaintiff points out, Photobucket is the larger enterprise, the burden it would bear in having to continually search its site for infringing activity is heavy. Furthermore, saddling Photobucket with this responsibility is out of step with the DMCA, which, as noted above, places the burden of uncovering infringing activity on copyright holders.

Wolk tried to kick Photobucket out of the safe harbor by arguing that Photobucket could set up technological filters, presumably fingerprinted on the photos she had already identified as copyright infringing. The court rejects the argument because "Plaintiff concedes that such technology is very burdensome to implement and notes Photobucket's contention that it would not be feasible to use such technology." The court also says Photobucket doesn't derive financial benefit from the infringement, even though it has a financial tie-in with Kodak. The court says that tie-in doesn't turn on the infringing nature of the photos.

The court also discussed 512(j) injunctions. I did a quick Westlaw search and I found less than 10 cases citing 512(j) at all, and I believe none of them have ever done more than cite the statute. This court doesn't get into lots of detail, but this is the most detailed judicial discussion of 512(j) to date.

512(j)(1)(A)(i) authorizes an "order restraining the service provider from providing access to infringing material or activity residing at a particular online site on the provider's system or network." The court interprets this to mean that "Photobucket [must] block access to infringing material when given proper notice"--in other words, if the service provider hasn't already honored the 512(c)(3) takedown notice, a court can force it to do so. Here, since Photobucket had honored Wolk's 512(c)(3)-compliant notices, there wasn't anything to order Photobucket to do.

512(j)(1)(A)(iii) is a "catch-all" authorization for "Such other injunctive relief as the court may consider necessary to prevent or restrain infringement of copyrighted material specified in the order of the court at a particular online location, if such relief is the least burdensome to the service provider among the forms of relief comparably effective for that purpose." Because the language references "a particular online location," which is what Wolk refused to provide, the court says her requested relief falls outside this provision.

Considered together, the court's interpretation of (i) and (iii) indicates that copyright owners can't effectively force service providers to prospectively prevent further infringement of a work previously subject to a 512(c)(3) takedown notice. Because we don't often discuss 512(j), I don't know how many copyright owners actually thought they could get such an order. Nevertheless, this is a useful boundary-setting for service providers when dealing overzealous copyright owners who want turnkey never-infringe-my-stuff-again services.

Overall, the lessons remain fairly clear for copyright owners. Send 512(c)(3) takedown notices, and you'll get the results you want from most service providers; but if you're trying to find a way to avoid sending 512(c)(3) takedown notices, the courts aren't going to be very sympathetic.

Posted by Eric at 11:04 AM | Copyright , Derivative Liability | TrackBack

March 21, 2011

47 USC 230 Retrospective Conference Recap

By Eric Goldman

Earlier this month, we had a major academic event on 47 USC 230. My notes are especially incomplete because I had lots of administrative duties that day. I didn’t get any usable notes from the introductory sessions by Sen. Wyden or Chris Cox. Fortunately, you can read Sen. Wyden’s written remarks. As usual, my notes are my impressions of the conversation and not verbatim transcriptions; you should double-check anything you want to cite or rely upon. Fortunately, we had several other folks covering the day’s proceedings:

* Joyce Cutler of BNA
* Mike Masnick of Techdirt had several posts: 1, 2, 3
* Joe Mullin of paidContent
* Eric Johnson of Univ. of North Dakota

We also recorded the day’s proceedings and plan to post the video soon. I’ll circulate the announcement when the video is live.

In-House Counsel Panel

Laura Pirri: IP complaints are more expensive than 230 complaints—they take more resources and in-house attorney time

Alex Macgillivray: Twitter has 1,000 tweets posted a second. Twitter gets 10k complaints a month, and most of those are completely not actionable. Twitter has 24 people dealing with user complaints. “People who work with angry complaining users are some of the most fun people” but they are a bit weird. Alleged defamation is among the most useful stuff online (as opposed to real defamation which is among the worst).

Sandy Baron: has any judicial decision changed your practices? Pirri: Barnes v. Yahoo prompted her to look at the company’s processes. Linden Labs won’t make any representations about what LL will do for a complaining user until LL has actually done the work, even though that approach frustrates users. Laurence Wilson: our “message is ‘we’ll take a look at it.’”

Kai Falkenberg: She is closely following the pending lawsuit Parisi v. Sinclair (D.D.C.). Barnes & Noble’s and Amazon’s product pages include a book synopsis and publisher blurb that was allegedly defamatory. The plaintiff claimed that the heading “synopsis” isn’t clear to the reader if it came from Amazon/B&N or the third party publisher. Her lesson: the site should be clear where the content is coming from.

Alex: lots of complainers try to shoehorn defamation into copyright complaints. Twitter now sends its received takedowns to Chilling Effects. Laurence: unhappy businesses try to assert copyright in business listing or trademark in name to try to prevent discussion about the business altogether.

Sandy: how often do you get requests for user identifications? Laurence: not that frequently. Laura: never received an unmasking request covered by 230. Kai: zero. Laurence: Yelp might lend a hand to squash a subpoena targeted at a power user (presumably like a Yelp Elite member).

Sandy: what amendments would you like to see? Laurence: get 47 USC 230 passed in every country in the world. We don’t have to imagine a world without 230—he lives it every day.

Rep. Zoe Lofgren

1995 was a primitive time for the Internet. In 1996, she didn’t anticipate how the Internet would develop. Think of all the companies that didn’t exist then, including Google, Yelp, Facebook. Amazon and Yahoo were new start-ups. She called Yahoo’s GC TWICE about the Communications Decency Act—normally, companies are chasing her. She knew if we put liability on technology, we would stifle innovation.

Technology changes, but Hollywood, the recording industry and the FBI are always with us.

The threat is not gone: DHS takedowns of domain names without due process or consideration of fair use. [Lofgren expands on that point here.] Plus COICA could have an adverse impact on technology itself—no consideration of free speech or fair use. We should not let anti-piracy efforts impede innovation.

Declan McCullagh: are any changes to 230 necessary? Lofgren: it would be “unwise” to attempt to make adjustments. The courts are “not too far off” in terms of statutory interpretation. If there is any statutory change, it will be a change for the worse. Ex: anti-child porn advocates want permanent data retention.

Ken Zeran

(Ken has promised to send written notes for his talk, so I remain hopeful you will get to see his words verbatim). UPDATE: his comments are available here.

Zeran didn’t sue because he felt like a victim. Based on his background, he knew media law and felt that the statute wasn't consistent with the law. He wouldn’t have sued if he had felt AOL operate in the spirit of good faith.

Congress didn’t contemplate the statute’s effects of online anonymity. Zeran: "the underbelly of the internet is an engraved invitation for anonymous crime."

Congress mislabeled 47 USC 230 as a “Good Samaritan Act.” Zeran explained the biblical origins of the phrase. Today, he wants to play good Samaritan and come to the aid to 230. He proposed a statutory change where the FBI can put the squeeze on servers that facilitate harassment at penalty of civil liability.

Litigator Panel

Maria Speth: some of plaintiffs’ creative and not-so-creative attempts to get around 230:
* Claim the website is an ICP. This should be Rule 11able.
* Claim 230 doesn’t apply to injunctive relief. The Gentry case says otherwise. [I note that Noah v. AOL squarely addressed this issue as well]. The Blockowicz case provides even more support.
* Argue that the website is an ICP because it creates metatags and URLs. This exception would swallow the 230 rule. The Herman case rejected the argument.
* Argue the website isn’t following its own T&Cs, such as an anti-defamation covenant. Websites should write the T&Cs carefully. [Eric’s note: I made this point in response to the Lori Drew case. Also, I would broaden Maria’s argument to include false advertising claims based on site text beyond the T&Cs.]
* Assert IP claims. 1) Trademark infringement because the site references the plaintiff’s company name. [Eric’s note: see, e.g., the Lifestyle Lift v. RealSelf lawsuit.] 2) Copyright via the Medical Justice workaround.
* Make a promissory estoppel claim. Websites should not say “let me see if I can help you.” [Eric’s note: as we heard from the in-house counsel panel, well-advised companies have gotten this message.]
* Make an appeal to the court to ignore 230 because “there just has to be a remedy.”

Mike Rhodes discussed trendlines in last 15 years. Old days: it was easy to separate the content author from the technology provider. Now: 1) tools help shape content (Metrosplash, Roommates.com, Goddard) and that channels users into unlawful content. It’s hard to distinguish “neutral tools” from tools that shape content. 2) Complaining users are claiming privity via T&Cs—which creates direct liability instead of basing the claims on third party content. These trends have made his 230 practice harder than it was 10 years ago.

Pat Carome: Section 230 is counterintuitive. The statute lets intermediaries remove content without fear that such involvement increases liability exposure. Most intermediaries have been very responsible in taking down problematic content (he then made a not-so-subtle dig at Ripoff Report). He gave a nod to Judge Wilkinson. The Zeran decision was breathtaking in its scope when it didn’t need to be. The case interpretation went beyond the defamation/negligence claim; it reached all claims—not what you expect from a conservative judge. This helped increase the decision’s credibility. Amazing how quickly other courts followed behind the ruling.

Cindy Cohn: She is not in it to protect Google; she’s in it to protect Google’s users. We don’t see enough of the things Section 230 protects. She made an appeal: help EFF make visible all of the good things that Section 230 enables. She pointed to another way around 230: advance state IP claims. This was shut down by ccBill in the 9th Circuit.

In light of the observations by Maria and Mike R. that plaintiffs are invoking website T&Cs, Cindy asked: why do so many websites have T&Cs for web browsing? This seems to set up the privity bypass that plaintiffs are claiming.

Users are dramatically better under 230 than the DMCA/17 USC 512—censorship is much higher via 512 takedowns. A notice-and-takedown regime would result in flood of takedowns.

Colette Vogele: is 230 an immunity from suit or an immunity from liability? Carome: defendants can ask the judge to restrict discovery to just this issue. Rhodes: Sometimes it's hard to tell your client that you just spent a million dollars litigating an immunity from suit.

Speth: doesn’t think there’s a legal split at all about 230’s application. Rhodes: at trial court level, there is a big variation throughout the country. Some judges who aren’t technology-savvy are results-driven. Carome: confusion about line between first party content and third party content. This isn’t a well-drawn line. Most courts don’t parse the words like “responsibility,” “create,” “develop.” This line will get greyer with new technology innovations.

Cohn: fallout from Roommates.com: the more you help users to express themselves, more risk you take on. Websites won’t make their sites user-friendly.

Paul Levy: thinks Roommates.com was correct in all its respects. (By this time, Judge Kozinski had entered the room, so the litigators started fawning all over him). Lots of businesses are pushing the 230 envelope. Every immunity has its limits.

Vogele: what does “good faith” mean in 230(c)(2)? Carome: anti-competitive motivations may be bad faith. Good faith standards in immunity are always problematic because they invite litigation, which is why defendants go for 230(c)(1). Many cases have possible 230(c)(2) defenses, but clients don’t go there. Levy: one possible example of bad faith: if a website always takes down content that criticizes the website, its lawyer or its advertisers.

James Grimmelmann: what about harassthem.com? [Eric’s note: there seemed to be some confusion in response to James’ question. Harassthem.com was a fictional example in Judge Kozinski’s first Roommates.com opinion, and Joe Gratz subsequently registered the domain name for fun. Some of the responses from the panelists seemed to treat harassthem.com as if it were once an actual site.] Cohn: are those sites even visible? Levy: a lot of people would like to reopen the First Amendment. Cohn: remember that federal criminal law isn’t covered by 230 [Eric’s note: but which way does this cut?]

Mark Lemley: data retention as prerequisite to immunity? Cohn: this would eliminate controversial anonymous speech.

Judge Kozinski

Before the conference, Chris Cox sent Judge Kozinski an email saying that Judge Kozinski got the Roommates.com opinion correct. Judge Kozinski said this email was like a rabbi getting an email from God saying that swordfish is kosher.

When litigants argue “if you do X, you’ll bring down Google,” it's the equivalent of saying “if you do X, you’ll bring down the government.”

The Roommates.com en banc opinion reflects limits to the immunity, even though the Internet is a cool place. The Internet is a big commercial enterprise, not the Wild West. But the dissent is brilliant! Every time he reads the dissent, he thinks “gee, I must've been wrong.” Judges aren’t as awe-struck by the Internet as they were 5 or 10 years ago.

Lemley: is 230 just about protectionism for infant industry? Kozinski: The First Amendment doesn’t need protection. We don’t need a statute to help us interpret it. 230 goes beyond the First Amendment. 230 is an anti-liability statute, and those are swell. "I don't think there's anything I can do to sink the internet." Nothing persuades him that the Internet is any different from airplanes or other industries that both do good and cause harm. People shoot themselves over things online.

He lived fine without the Internet. He could live fine without it. If he could flip the switch to personally get rid of the Internet, he’s not sure which way he would go. The Internet has enabled instantaneous communication, perhaps to our detriment. He lamented the mentality: “you went 25 minutes without responding to my email. Are you dead?”

Why is anonymity the sine qua non of 230 protection or First Amendment? "Where is it written that you have a right to speak anonymously and commit defamation?" He’s skeptical of the absolutist position.

When he first looked at 230, it looked like overkill—an overreaction to a bad case. But he’s not so sure any more—judges can shape it through interpretation. He’s now moderately optimistic, now that we’ve gotten past the anything-goes on the Internet, that boundaries are getting to the right place. Thus, the statute may not need additional tinkering by Congress.

Academic Panel

David Ardia presented the results of his empirical study. My prior comments.

Felix Wu talked about 230’s application to the email forwarding cases.

I spoke about 47 USC 230 as good economic policy. My talk notes.

Nancy Kim recapped her arguments that websites should be treated like any other retailers.

Posted by Eric at 09:25 AM | Derivative Liability | TrackBack

March 16, 2011

FTC Online Endorsement Guidelines Strike Again - FTC Dings Legacy Learning Over Allegedly Misleading Affiliate Reviews

[Post by Venkat Balasubramani with some comments by Eric]

In re Legacy Learning Systems, Inc., FTC File No. 102 3055 [FTC Release] [Complaint (pdf)]

An FTC press release notes that the FTC settled with Legacy Learning over allegations that Legacy improperly utilized affiliates to "promote its courses through endorsements in articles, blog posts, and other online editorial material." Specifically, the FTC complaint alleges:

[Legacy] recruited "Review Ad" affiliates for [Legacy's affiliate program], who promote Legacy’s instructional courses through positive endorsements in articles, blog posts, or other online editorial copy that contain hyperlinks to Legacy’s website in close proximity to the endorsements. [Legacy's] Review Ad affiliates often post such endorsements using statements that give readers the impression the endorsements have been submitted by ordinary consumers.

As noted in the release, the guidelines - which govern endorsements or testimonials - require disclosure of a material connection between a reviewer and a company. Under these guidelines, a positive review from a person connected with the seller or product ("someone who receives cash or in-kind payment to review a product or service" or who gets a cut of the sales) should come with a disclosure. The complaint alleges that twenty-five of Legacy’s "review ad" affiliates were responsible for at least $5 million in sales of Legacy's products.

What did the reviewers do wrong?: Reviewers did not disclose that they were affiliates of Legacy - i.e., received a cut of the sales, and in some cases were paid to review Legacy products . These were not "the independent reviews reflecting the opinions of ordinary consumers." (Examples of the reviews can be found in Exhibit A to the Complaint [pdf].) In some cases, the reviewer websites had disclosures, but the disclosures were anemic at best and were not contained in the posts themselves (e.g., "we are paid by some of the companies who's [sic] products we review" - not exactly a robust disclaimer). [Italics added.]

Where did Legacy go astray: For one thing, Legacy called these affiliates "review ad" affiliates. I would probably avoid this terminology. The complaint did not include a copy of the affiliate terms, so we don't know whether Legacy contractually required the affiliates to comply with the FTC's guidelines or explained how to comply. The complaint also does not specify whether Legacy paid the reviewers for their reviews (it alleges that the affiliates received a cut of the sales), but judging from some of the reviews and the websites of the reviewers, and from Legacy's suggestions to its affiliates, this seems to be the case (at least with some reviewers). Legacy offered suggested disclaimers (to affiliates) on its website but even these were ambiguous ("Affiliate Disclosure Requirements and Examples Legacy Learning Systems"):

[Suggested] Disclosure: We are a professional review site that receives compensation from the companies whose products we review. We test each product thoroughly and give high marks to only the very best. We are independently owned and the opinions expressed here are our own. [emphasis added]

Regardless of what Legacy may have suggested or required of its affiliates, Legacy also did not have any sort of compliance program to make sure that its affiliates made the necessary disclosures.

As part of the (proposed) settlement, Legacy will:

- pay $250,000;
- monitor and submit monthly reports about their top 50 revenue-generating affiliate marketers;
- make sure that affiliates disclose they earn commissions for sales and are not misrepresenting themselves as independent users or ordinary consumers.

Professor Goldman has posted a bunch about possible section 230 issues with the FTC's guidelines ("Do the FTC's New Endorsement/Testimonial Rules Violate 47 USC 230?"; "A Fuller Explanation of Why the FTC Endorsement/Testimonial Guidelines Violate 47 USC 230"). The facts are somewhat similar to those alluded to in his example. Here, Legacy set up an online affiliate program (on its site, using ShareASale). Legacy is the provider of an interactive computer service. Its affiliates are third parties, and Legacy is being sued for content generated by third parties (its affiliates). This looks like Blumenthal v Drudge, where AOL was sued for allegedly defamatory content provided by Drudge and AOL had paid Drudge for the content. The only difference is that here, Legacy was subject to potential liability for content that was placed on the affiliates' websites, whereas AOL was sued for content which Drudge submitted to AOL's website. I don't have a good answer on the Section 230 issue (here's a response to Paul Levy to Professor Goldman's posts on the FTC guidelines and Section 230: "Do the FTC's New Advertising Guidelines Run Afoul of Section 230?"), but it looks like the FTC isn't too worried about Section 230 acting as a bar to enforcing their guidelines against companies whose products are promoted without proper disclosures.

Previously, the FTC went after a company which posted fake reviews on behalf of its client. ("FTC Dings PR Firm for Fake Reviews -- In re Reverb Communications.") The FTC also issued a warning shot to AnnTaylor over gifts to bloggers. ("FTC Drops Investigation of Advertiser Who Gave Gifts to Bloggers.") This time, rather than merely firing the warning shot, the FTC went after Legacy, and extracted a settlement.

_________________

Eric's Comments: I agree with Venkat's post, especially the questions about 47 USC 230's applicability to this situation. I should note that my view on 47 USC 230's applicability is idiosyncratic. In addition to Paul's post, Rebecca Tushnet has also voted that my arguments are bunk. Rebecca Tushnet, Attention Must Be Paid: Commercial Speech, User-Generated Ads, and the Challenge of Regulation, 58 Buff. L. Rev. 721 (2010). Nevertheless, I would love to see someone test the FTC's theory here. I don't see it as a slam dunk that a judge would accept the FTC's theories.

For this post, I'll raise a different issue. I wonder if this case is another step in an ongoing winddown of the online affiliate industry. We're already seeing a big contraction of online affiliate programs due to states' adoptions of the "Amazon tax." As we've seen repeatedly, Amazon and others toss their affiliates overboard when states adopt these laws. (Which ironically makes these laws a type of fool's gold for state legislatures: the laws have failed to generate new sales tax revenues but have reduced income tax bases for the states that have adopted them).

Now, the FTC is taking the position that an affiliate program operator is legally responsible for consumer reviews written by its affiliates that failed to make appropriate disclosures. Furthermore, the program operator's main crime is that it failed to check out these affiliates and find out what they were writing and whether they had made adequate disclosures. The FTC's fix is to require the program operator to monitor 100 affiliates (the top 50 plus another randomly selected 50) each month to see if they are up to no good. What a hassle. The FTC settlement also requires than any non-complying affiliates are supposed to get the axe immediately, without notice or a cure period--a one-strike rule. Nice. At the peril of an FTC investigation, who needs crap like this? For most affiliate program operators, the profit-maximizing response is to just cut loose the long-tail affiliates or shut down the program entirely. Combining this effect with the Amazon tax sweeping the nation, the affiliate industry is on the run.

Another ironic note: I bet many of the program operator's affiliates are, in fact, experts in that market niche and therefore are better positioned than many other consumers to evaluate the product offerings in the niche. So the FTC crackdown may counterproductively reduce the flow of USEFUL consumer reviews about products.

A final irony: courts are less willing to extend liability to affiliate program operators than regulators are. As the most recent example, see the 1-800 Contacts v. Lens.com ruling. We didn't see an affiliate program operator-friendly ruling in the Amazon tax litigation in New York, but I keep hoping that gets reversed on appeal. If it does, and if anyone actually stands up to the FTC juggernaut, perhaps we'll see the courts revitalize the affiliate industry. If not, I say we're at the beginning of the end for affiliate programs as we've known them for the past 15 years.

Posted by Venkat at 02:54 PM | Content Regulation , Derivative Liability , E-Commerce , Marketing

Jury Awards Damages Against Web Designer/SEO/Host on Contributory Trademark Infringement Theory--Roger Cleveland v. Prince

By Eric Goldman

Roger Cleveland Golf Co. v. Prince, 2:09-cv-02119-MBS (D.S.C. jury verdict March 10, 2011 and judgment March 14, 2011). See also the jury instructions.

I blogged about this case back in December. That ruling was a puzzling head-scratcher holding that a web design/SEO/host firm working with an alleged online retailer of counterfeit goods could be liable for contributory trademark infringement. The ruling didn't make any sense substantively, but the court clearly didn't appreciate the defense counsel's 1.5 page citationless summary judgment brief. The court separately ruled that the website did engage in counterfeiting--thus removing that issue from the jury's consideration--leaving two principal questions for the jury: (1) was the designer/SEO/host secondarily liable, and (2) damages.

The jury concluded that the designer/SEO/host was in fact contributorily liable and that both the website and the designer/SEO/host willfully infringed. The jury then awarded $28,250 in total damages against the website operator and $770,750 in total damages against the designer/SEO/host. As big as these numbers are, they are a drop in the bucket compared to the theoretical case maximum--the jury could have awarded statutory damages for willful counterfeiting of $2M per mark, or $22M in this case.

There are many puzzling aspects of the jury's verdict, but the one that has had me scratching my head all day is how the jury could award greater damages against the contributory infringer than it awarded to the direct infringer--28X greater. We've seen other massive damage awards against contributory IP infringers, but usually those awards are an amalgamation of many individual direct infringers' activities. Here, the jury verdict is only predicated on a single customer's infringement but awards 28X the damages against the secondary infringer. I think I'm missing something big.

The conclusion that the designer/SEO/host infringed willfully is also noteworthy. I haven't gone through the jury arguments, but the earlier ruling hinted that the designer/SEO/host coaxed the web operator into the counterfeiting world and was optimized for providing services to counterfeiting websites. The prior ruling did an absolutely horrendous job explaining exactly what the designer/SEO/host did wrong (a partial reflection of the unhelpful advocacy by its defense counsel), so we don't have a good sense of how likely it is that other web designers or SEOs/hosts will be sucked into the same liability trap. I do think we have some good reason to believe that courts are allergic to the entire "copycat"/"replica" business. Those code-words aren't fooling anyone.

Plaintiff's counsel released a press release touting their victory, saying:

This represents the first time that an SEO/Web Host or other Internet Intermediary was found liable for contributory infringement without having first received actual notification of the counterfeit sales from a third party. The case was presented and pursued by Cleveland Golf/Srixon based on a theory that Bright Builders knew or should have known of the infringing conduct based on the name of the website, the content of the website, and certain discussions Bright Builders had with Prince regarding his web site.

The NLJ article has more chest-beating.

I agree that I can't think of another case where contributory trademark infringement has been found online without so much as a takedown notice. I disagree that this portends a new era of secondary trademark liability; instead, I think it reinforces the likelihood that this case is a one-off attributable to a confluence of things that went wrong (starting with that 1.5 page summary judgment motion).

Even so, I expect that trademark owners will be revving up their engines looking for new defendants. Already, recently I've been hearing a lot of gleeful talk from trademark owners about the utility of the Akanoc case and especially the Gucci v. Frontline case to their enforcement efforts. This case completes a troika of cases in the past year where service providers to counterfeiters have gotten nailed. As the saying goes, bad things come in threes, and three may be the magic number to unleash a flood of new litigation.

Posted by Eric at 09:28 AM | Derivative Liability , Trademark | TrackBack

March 15, 2011

How 47 USC 230 Improves Marketplace Efficiency

By Eric Goldman

I have been working on a draft article currently titled "In Defense of 47 USC 230" (I'm probably going to change the name). As part of our 15 year retrospective of 47 USC 230, I presented a short sketch of the article's outlines.

I will blog a more thorough recap of the conference shortly, but in this post I am just sharing my talk notes. As you'll see, my work is a direct outgrowth of my broader project on reputation systems. See some of my past talk slides.

My main argument is that 47 USC 230 helps improve marketplace efficiency. I hope this argument opens up a new and productive area for discussion. So often "debates" about 47 USC 230 devolve into irresolute slogans. On the pro-230 side, some argue that it advances First Amendment values (whatever that means) or that it protects innovation (whatever that means). On the anti-230 side, some argue that it breaks tort law (usually expressed as an expectation that websites should adopt "reasonable precautions") or leaves injured victims remediless. There is merit to all of these arguments--but no clear way to decide how to favor one outcome over the other.

I can't fix that problem, but I do hope to shift the debate into 47 USC 230 as economic policy, not just social policy. If I can make the case that 47 USC 230 turbocharges our economy, then perhaps we can better appreciate some real-world economic sacrifices associated with any proposed change. We might still desire to make changes, but we'll also see the opportunity costs more clearly.

My talk notes:

* 230 advances many 1st Amendment interests, but I’m more interested in how it can improve our marketplace. In particular, I’m interested in 47 USC 230’s effect on “reputational information” = information about an actor’s past performance that helps predict its future performance

* Something truly new to the Internet: consumer review websites
- Offline, consumer opinions about marketplace goods/services were rarely published
- Online, consumer review websites can gather, organize and disseminate reputational information in the form of consumer reviews
- The result = explosion of consumer review content, much of it through consumer review websites. Practically every good/service in the marketplace is subject to consumer review website coverage
- 47 USC 230’s immunity enables consumer review websites in several ways. (1) Websites don't need to default to a notice-and-takedown scheme, pursuant to which vendors would only target negative reviews. (2) Empower review websites to cover long-tail items, which would not be financially viable in different liability regime. (3) 230's financial subsidy can be reinvested to subsidize review production. (4) Websites can experiment with different ways of organizing and disseminating consumer reviews without being locked into liability-minimizing approach, including fighting fake reviews without liability fears for exercising editorial control

* Why consumer review websites matter: they can help consumers make better marketplace decisions
- We want marketplaces to reward good producers and punish bad ones
- Marketplaces require readily available information about good/bad producers
- Consumer review websites help produce that information and make it readily available
- Thus, consumer review websites help guide the marketplace’s invisible hand

* Added bonus: if US has more favorable liability regime than our global competitors, we benefit in 2 ways
- New job creation from new consumer review website startups. US has emerged as global incubator of Web 2.0 start-ups, and we get the domestic jobs accordingly.
- Our domestic marketplace becomes more efficient over time than other countries’ domestic marketplace = our relative global position improves

* 47 USC 230 is already a good result, but we can improve its operation:
- Close the trademark hole (see, e.g., Lifestyle Lift)
- Enforce sanctions for clearly immunized cases
- Enact federal anti-SLAPP law
- Enact a “threats” action for bogus C&Ds
- Close the 512(c)(3) hole
- Extend the immunity to offline publishers

Posted by Eric at 01:41 PM | Derivative Liability | TrackBack

March 08, 2011

Stanford Technology Law Review Symposium on Secondary IP Liability

By Eric Goldman

Last week we had a cyberlaw-fiesta in the Silicon Valley, the likes of which have been rarely (if ever) seen before. The Stanford Technology Law Review hosted a symposium on Thursday on Internet intermediary liability, then we hosted a 15 year retrospective on 47 USC 230 on Friday, then we had the inaugural Internet Law works-in-progress event on Saturday. I will do blog posts on all (the Internet Law works-in-progress post will be at Goldman's Observations).

Today, my notes from the STLR event, Secondary and Intermediary Liability on the Internet. As usual, these are my edited notes/impressions and not verbatim transcriptions, so double-check before attributing anything to anyone. Further, I moderated the trademark panel, so I did the best to capture some high points while also doing crowd control over five strong personalities.
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Copyright

Julie Martin, Mozilla

Mozilla runs into UGC in two places:

1) Add-ons marketplace. 12,000 add-ons are available.
2) Personas gallery (browser skins). Users have posted 242,000 versions. Only 650 skins have been subject to takedowns = ¼%. Mozilla has never gotten a user putback request, even though some affected users have contacted Mozilla other ways. As a result, putting the burden of putbacks on users seems onerous to them.

Sometimes, copyright owners don’t give much thought to takedowns. When companies actually talk with Mozilla, they decide not to send takedowns because they reassess the possible impact of ticking off their fans. Skins are a great way to build brand loyalty, so why interfere with those folks’ relationship with the brand?

Mozilla struggles with jurisdictional questions. Also, when a takedown notice has 150 links, it’s only one letter for the copyright owner but imposes lots of research effort on Mozilla. Mozilla is also stressed by its exposure to high copyright damages.

Fred von Lohmann

Speaking for Google: Google receives takedowns covering 3M items each year in more than 70 languages. Google rejects a majority of takedown notices on receipt for deficiencies (not copyright, incomplete, etc), but even then it reaches out to the sender in each situation.

Not speaking for Google:

His paper will address rightsholders’ fears of a race to the bottom—that if a country grants immunity, intermediaries will do the minimum to comply, and that standard will become the benchmark globally.

Fred’s Q: do we see a race to the bottom empirically? Hypothesis: no, in fact we see the contrary. Ex: 35 hours of video uploaded to YouTube every minute, and Content ID automatically checks all of that. And racers to the bottom haven’t had much success in court.

So why do intermediaries do more than required? Is compliance due to service provider’s legal fears/uncertainty about DMCA? Compare 47 USC 230, where service providers have extremely robust immunity, but we don’t see a race to the bottom there. There are many business reasons why companies want licensed content.

[Eric’s comments: I like where Fred is going, but I wonder if the 230/512 comparison works. Many service providers do more than 230 "requires" because they are trying to establish their own reputation as a credible site—what I call the tertiary invisible hand in this paper. The same dynamic might play out for copyright, in that some service providers might want a reputation as a source of only authorized or licensed content. However, in many cases, a website can have a “legitimate” reputation even if it has a lot of infringing UGC; and there is significant commercial value in being known as a place where infringing content is available (while often there is little or no commercial value to being known as the website which harbors the kind of content that 230 protects). So it seems like a website’s motivations for policing against content immunized by 230 may not reach the same result with respect to infringing content.

However, I do agree with Fred that there are many reasons a website might license content even if not required under copyright law. I always make this point when I teach the Feist case—I ask the students if Feist might license Rural’s data even though the court said the data was completely unprotected by copyright law (the answer is yes, of course). Some reasons why a website might obtain a license even if the website isn’t worried about its copyright exposure:

• speed. The website might get content faster through a license.
• accuracy/authenticity. The website might want content versions that it knows haven’t been modified.
• comprehensiveness. The website might want everything in the content owner's vault, not just what users have uploaded.
• reduced risk of harmful code. The website might fear that user-supplied versions of content have introduced malware or other risks to users.
• package deal. The website and content owner may have multiple points of business overlap that enable them to put together a “package deal.” This is why I still can’t believe Viacom and YouTube didn’t settle their disputes a long time ago.
• reputation. As I mentioned, a website might find it commercially valuable to advertise itself as a licensed source.
• morality. A website might decide that a license is the right thing to do.

I’m sure there are other reasons that haven’t occurred to me quickly. I trust Fred will taxonomize the motives in his paper.]

Peter Menell

We probably all agree that Sony should have been allowed to release VTR machines, but the Supreme Court got there with an overbroad rule. Grokster court needed to create “exception” to that rule. But the inducement rule focuses on mental state, not marketplace actions—not a good focus.

Some low-hanging fruit for doctrinal changes:
1) Statutory damage regime aren’t well-calibrated for the digital age. If we fixed this, the Viacom case might go away.
2) Strong sanctions for bogus takedowns.

Fred's race-to-the-bottom isn’t the right Q. A few rogue actors can break the whole system.

Q&A

Jacqueline Charlesworth: many content owners don’t have the resources to prepare and send takedown notices. Who is cheapest cost avoider? It’s the service.

[Eric’s note: Why, why, WHY do content owners keep repeating this trope? If Viacom cannot figure out which YouTube videos were posted by its own marketing people, there is simply no credible argument that YouTube is the lowest cost avoider to make an infringement determination ex ante. It *might* be true that after YouTube gets an infringement notice, then it is the cheapest cost avoider to prevent further harm. But that’s exactly what 512 codifies.]

Everyone can agree Grokster was bad. But content owners are grumbly about shift of value from content owners to tech providers.

Julie Martin: determining content legitimacy requires facts the service provider doesn’t have. When content owners reflect on it, many of them decide to leave up content—so there’s no way for a service provider to categorically decide what the copyright owner wants.

Matt Neco: in his experience, content owners wanted the service provider to license their content *just to set up the filter.* He also raised the concern that the “standard technical measures” requirements may, over time, favor incumbents who have made investments to accommodate those measures.

Fred von Lohmann: Content ID cost Google tens of millions of dollars to develop. But fingerprinting isn’t silver bullet. On a P2P network with encrypted traffic, fingerprinting is useless. YouTube’s existence spurs unprecedented creativity. The 106 rights are part of that, but all the defenses are an integral part too.

Mark Lemley: filters suck. They are both over- and underinclusive. Content owners can supplement Content ID with takedown notices. But no good solution for filters catching legitimate content. This puts burden on users to fix problems with the filters, and they aren’t in good position to do so.

Fred von Lohmann: Google worked hard to include recourse for user who gets filtered and easy to initiate file dispute. But content owners resent having to look at these disputes.

Trademark

David Bernstein

The Tiffany v. eBay case’s result is inconsistent with Inwood, tort principles and Inwood's progeny, but David thinks it reached the right result. eBay did a lot of things right, such as VeRO and filtering. David wants to avoid generalizing the ruling to create a notice-and-takedown system.

If a service provider can reasonably anticipate that counterfeiting is taking place, the service provider must take reasonable precautions. Notice-and-takedown isn’t enough—service providers should also filter for keywords, authenticate sellers and bar repeat offenders (and prevent whack-a-mole). We can’t say what reasonable precautions are; courts can decide. The courts should not focus on service provider state of mind but instead they should look to see if the problem actually got solved. Example: if someone is selling 5 Tiffany items, it’s probably not a casual seller of personal used good.

Mark McKenna

Secondary trademark liability rules don’t necessarily derive from the common law of torts. Traditionally, torts had three categories of secondary liability:

1) Vicarious infringement. Normally, we restrict the categories of vicarious liability pretty strictly.

2) Accomplice liability = liability for third party intentional tort based on requisite scienter. Look for particularized knowledge of forthcoming harm. Ex: a promoter’s promotion of an illegal boxing match that leads to a battery. This is similar to Grokster, although it focuses on more speculative knowledge.

3) Negligence = probabilistic harm of third party wrongdoing = defendant knows some chance of harm by other people. Ex: gun manufacturers who know some guns will be used criminally.

Typically, these categories involve situations where the third party harm also require scienter; not predicated on strict liability. IP is strict liability infringement, so it differs from typical tort principles.

Tiffany is trying to collapse these three categories.

We should ask what reasonable precautions eBay should take, so he agrees with David. But Mark may disagree with David over whether eBay took reasonable precautions. Tiffany’s standard may push to get eBay to block all infringing activity. Don’t forget costs of such zero-tolerance: it will also shut down of legitimate secondary markets. We should be talking more about proximate causation. When does third party intentional tortious conduct cut off upstream causation?

Stacey Dogan

Secondary trademark law is heading towards a “know it when we see it” standard. Courts are sorting between good guys and bad guys and deciding results accordingly. Good guys get the benefit of the doubt.

Tiffany v. eBay rule leaves room to go after bad guys. Why did district court spend so much time discussing eBay’s efforts? This helped support that eBay’s business model wasn’t designed to promote infringement; instead, it illustrated that eBay’s interests were aligned with TM owners'.

Court also noted willful blindness and inducement doctrines as tools to punish bad guys. Inducement in TM law = people whose goal is to help others infringe.

Copyright and trademark doctrines are different enough that we should be cautious importing copyright rules into TM law. In TM, there may be situations where TM owner and service providers interests are aligned, such as counterfeits. But in many cases, their interests diverge, such as trademark owners’ interests in shutting down secondary markets. Also, the range of legitimate TM secondary uses are even broader than range of legitimate secondary CR uses—any use that doesn’t confuse consumers is legitimate TM use.

Need to guard against the “freeriding” arguments. Appeals courts need to guide lower courts not to overreact to freeriding allegations.

Discussion

Chris Sprigman: [Chris focused mostly on the Carroll Towing formula for reasonable precautions (Burden = Probability x Loss). He then hammered TM owners on the L:] The harm from counterfeits often overstated. Many people are looking for counterfeits because they can’t afford the original, but many of these people often end up buying the original later (his phrasing: “counterfeits are like a gateway drug”). Another faux harm: post-sale confusion. These situations may signal fashion “trends” that stimulate demand for the originals.

Mark McKenna: he thinks it’s right to think of Tiffany v eBay as a negligence case. It would have been nice if court had said so explicitly. We are still struggling with the theoretical split between TMs as consumer protection v. producer protection.

Mark Lemley: did Tiffany v. eBay set the floor of efforts required to police?

Mark McKenna: in tort framework, the reasonable precautions would adjust. But this isn’t clear because court didn’t talk in tort terms.

Posted by Eric at 09:02 AM | Copyright , Derivative Liability , Trademark | TrackBack

March 03, 2011

Jan.-Feb. 2011 Quick Links, Part 4

By Eric Goldman

Internet Freedom

* The EFF points out the inconsistency between Hillary Clinton's speech championing Internet freedom abroad when our own US government has gone rogue on its own citizens, including unlawful domain name seizures and an obsessive vendetta against Wikileaks.

* Fast Company: Why Twitter stood up for its users against the "secret" Wikileaks subpoena when other sites didn't.

47 USC 230

* Fleming v. Duncan: Yahoo wins 47 USC 230 motion to dismiss in Georgia state court.

* Neeley v. NameMedia, Inc., 2010 WL 5677069 (W.D. Ark. Dec. 16, 2010). 47 USC 230 preempts "outrage" claim over displaying nude photos in search results. A complementary follow-up ruling: Neeley v. NameMedia, Inc., 2011 WL 336174 (W.D. Ark. Jan 31, 2011).

* Several professors contributed essays to a book critical of 47 USC 230. Paul Levy takes them on.

* Jonathan I. Ezor, Busting Blocks: Revisiting 47 U.S.C. § 230 To Address The Lack Of Effective Legal Recourse For Wrongful Inclusion In Spam Filters, Richmond Journal of Law and Technology (Fall, 2010).

Spam

* Facebook, Inc. v. Fisher, 2011 WL 250395 (N.D. Cal. Jan. 26, 2011). Facebook gets $360M default judgment against spammers.

* Goodmail shutting down.

History

* Antone Johnson on the dot-com hangover of 2000-2002.

* 25 Best Startup Failure Post-Mortems of All Time.

Miscellaneous

* You can watch video from Next Digital Decade event. More on that event: 1, 2, 3. If you haven’t looked yet, you should check out the book.

* Unique Products Solutions v. Hy-Grade Valve (N.D. Ohio Feb. 24, 2011). Patent false marking qui tam process is unconstitutional.

* Shrader v. Biddinger, 2011 WL 678386 (10th Cir.(Okla.) Feb 28, 2011). In this Internet jurisdiction case, the Tenth Circuit adopts ALS Scan v. DSC as its test rather than Zippo.

* FairSearch.org has a new partial rival, Faretransparency.org, the web front for the Open Allies for Airfare Transparency, "a coalition representing all of the stakeholders in the travel booking industry, works to promote price transparency and full access to airline pricing and fee information." It's chaos in the online travel booking industry right now!

* Very useful table: State Cyberstalking, Cyberharassment and Cyberbullying Laws

* Evony sues its user for automated mapping of its site.

* ABA Journal: "For Federal Plaintiffs, Twombly and Iqbal Still Present a Catch-22"

* Direct Marketing Association v. Huber, No. 10-cv-01546-REB-CBS (D. Colo. Jan. 26, 2011). Judge strikes down Colorado's attempt to impose an "Amazon" tax as unconstitutional. My previous reference to the law.

* In the Silicon Valley, being the "Craigslist Congressman" might be considered a compliment. Unfortunately, that term will now be pejorative.

* Segal v. Amazon, 2:11-cv-00227 (S.D. Fla. Feb. 4, 2011). Amazon's participation agreement's venue selection clause upheld.

* Rep. Matheson wants to require age authentication to access online porn. Been there/done that 13 years ago with COPA. Lest you forget, it was unconstitutional.

Funny Stuff

* French second-graders are shown items like an old Fisher Price record player and 3.5 and 5 inch floppies and are totally baffled by them. Funny video.

* Great Dilbert strip riffing on the old joke of how you know if a lawyer is lying.

Posted by Eric at 11:53 AM | Content Regulation , Derivative Liability , Internet History , Patents , Spam | TrackBack

March 02, 2011

Unsuccessful 230(c)(2) Defense for Blog Comment--Mealer v. GMAC

By Eric Goldman

Mealer v. GMAC Mortgage LLC, 2011 WL 744895 (D. Ariz. Feb. 24, 2011)

Mealer is an automotive entrepreneur. He posted about General Motors to his company blog. He alleges that Kordella, a GM engineer, disparaged Mealer in a comment to Mealer's blog post. Apparently, this was quite a comment, because "Mr. Mealer believes that those remarks had considerable sway on potential investors such that Mealer Companies lost all potential investment capital to the tune of $200,000,000." He sued (pro se, naturally) a whole host of defendants, all of whom are now out of the case except for GMAC and related companies.

The moment Mealer started claiming $200M losses, he kind of lost any possible credibility he might have had. Indeed, the court makes it pretty clear his claim is going nowhere, later on saying "Mr. Mealer has asserted tenuous and abstract defamation-related claims against GMAC on the doubtful basis that GMAC owned computer equipment or provided internet access that facilitated blog commentary." This particular ruling also doesn't address the obvious question of when Mealer deleted the unwanted comment from his blog.

GMAC asserted a 47 USC 230(c)(2) defense against liability for Kordella's comment. We don't get many 230(c)(2) cases (in comparison to 230(c)(1), which comes up a lot). 230(c)(2) immunizes a website's own filtering decisions, as opposed to 230(c)(1)'s immunity for third party content. The short opinion doesn't explain the relationship between Kordella and GMAC--presumably not an employee-employer relationship if Kordella worked for GM--but apparently GMAC didn't do enough to explain how GMAC did the requisite filtering that 230(c)(2) immunizes. Because the facts aren't adequately connected to the legal defense, the court rejects it. The news isn't all bad for GMAC; even though it didn't get its 230(c)(2) defense, it is still clearly going to win this case.

Although GMAC didn't assert it, the court intimates that a 230(c)(1) defense may have been available. Presumably, if Kordella isn't GMAC's employee, then there's no theory to connect GMAC to Kordella's post that survives 230(c)(1). See, e.g., Novins v. Cannon. This case reminded me a little of the uncited Delfino v. Agilent case, where an employer got a 230(c)(1) defense for an employee's Internet conduct when the employer basically only acted as the Internet access provider to the employee for purposes of the tortious conduct. Where GMAC isn't even the tortfeasor's employer, the 230(c)(1) case seems even stronger.

Posted by Eric at 10:21 AM | Content Regulation , Derivative Liability | TrackBack

February 28, 2011

"Consumer Reviews of Doctors and Copyright Law" Talk Notes

By Eric Goldman

You may recall that Medical Justice is a vendor trying to help doctors squelch online patient reviews--most recently by getting a prospective copyright assignment of the unwritten reviews and then sending 512(c)(3) takedown notices for any unwanted online reviews that are now newly owned. This is a terrible hack on the entire consumer review ecosystem, and it's been bothering me for some time as I mentioned in my recent Regulation of Reputational Information paper.

Last month, I gave my first public talk about Medical Justice at the University of Houston. I styled the talk "Consumer Reviews of Doctors and Copyright Law," two topics I never thought would go together but apparently they do. My talk slides. I will have more to say about Medical Justice's system and its many deficiencies in the near future.

Posted by Eric at 03:55 PM | Copyright , Derivative Liability | TrackBack

February 25, 2011

Business Sues Facebook to Restore Its Fan Page--Complexions v. Complexions Day Spa

By Eric Goldman

Complexions Inc. v. Complexions Day Spa and Wellness Center, Inc., 1:11-cv-00197-GLS -DRH (NDNY complaint filed Feb. 18, 2011)

The primary litigants are two identically named but geographically separated day spas. It appears they are colliding online. This type of trademark clash (the Internet overlaid on geographically separate businesses) is as old as the Internet; my favorite early case of this genre is Bensusan Restaurant Corp., v. King, 937 F. Supp. 295 (S.D.N.Y.1996) (the "Blue Note" case). As those disputes go, this one looks run-of-the-mill.

The clash has spilled over to Facebook, and that's where things get more interesting. The plaintiff (who is seeking a declaratory judgment, so it is the alleged junior trademark user) maintained a Facebook fan page with 1,000 fans. In January, the DJ defendant sent a takedown notice asserting the fan page violated its copyright (the complaint says "copyright", but I wonder if it meant "trademark"), which prompted Facebook to take down the page. The DJ plaintiff (para. 85) wants the page back: "Plaintiff is entitled to injunctive relief restoring its Facebook Page to the Facebook Social Networking Site."

This request raises an issue that seems to be cropping up with increasing frequency: IP owner sends takedown notice, website acts on takedown notice, and alleged infringer seeks injunctive relief ordering the website to restore the status quo. I explored the issue in some detail in my post on Amaretto Ranch Breedables v. Ozimals.

The issue is so interesting because the DJ plaintiff's desired relief should be categorically unavailable. A court can't order a web service to restore an user's account/content for at least two independent reasons. First, such an order clearly violates the First Amendment-- the order would impermissibly circumscribe the service's freedom of speech and the press. Second, even if you don't want to get into the constitutional debate, IMO Congress resolved this issue in 47 USC 230(c)(2), which immunizes websites' "filtering" decisions. If Facebook takes down a fan page because it thinks the page is trademark infringing, 230(c)(2) says Facebook still has the full editorial discretion not to publish the page even if it later learns that the page wasn't trademark infringing at all.

A court *can* order the IP owner to stop sending takedown notices. See, e.g., Biosafe-Hawks, Design Furnishings, and Amaretto. My hope is that a web service would listen carefully to such orders in deciding if/how to remediate its prior responses to the takedown notices. My hope is that web services would also build in enough due process to their private adjudicatory processes so its users can fairly combat false takedown notices without needing judicial intervention at all. However, it remains fair game for the web service to make "bad" choices on both fronts, though we as consumers should draw our own conclusions about those who do.

The Complexions lawsuit has another interesting twist regarding the Facebook fan page. The DJ plaintiff alleges that the DJ defendant sent friend/fan requests to the fans on the DJ plaintiff's fan page, thus engaging in false advertising by trying to poach the fans who didn't realize the litigants were different businesses. To my knowledge, this is the first lawsuit battling over poached Facebook fans. I'm sure it won't be the last.

Posted by Eric at 12:42 PM | Derivative Liability , Trademark | TrackBack

February 22, 2011

Florida Court Fixes Erroneous 47 USC 230 Ruling--Giordano v. Romeo

By Eric Goldman

Giordano v. Romeo, 09-68539 CA 25 (Fla. Cir. Ct. Feb. 18, 2011)

I previously blogged about this case last month. Romeo posted a report to the Ripoff Report but, after being sued, later asked to have it removed--a request denied by the Ripoff Report per its standard policy. The plaintiffs then added the Ripoff Report back into the lawsuit (the Ripoff Report had initially been dropped per 230), and the court granted an injunction requiring the Ripoff Report to remove the post despite 230.

This was a lawless ruling from a rogue judge, but fortunately the error has been fixed. Judge Adrien, who made the ruling, was not reelected to the bench, so the case was reassigned to Judge Butchko. She makes quick work of Judge Adrien's mess, concluding "the cause of action of the Plaintiffs...against Xcentric for injunction relief is barred by the Communications Decency Act." Thus, Ripoff Report is dismissed (again) from the case with prejudice and "shall go hence without day." (I had to look up this odd idiom--apparently it reiterates that this is a final order. See the extensive discussion of the idiom here).

This doesn't end the wrangling. Of course, the plaintiffs could appeal. Also, the ruling intimates that the Ripoff Report may be eligible to recover some of its expenses, so it's possible the plaintiffs will be writing a check to the defense.

Assuming this ruling remains undisturbed, its net effect is that the plaintiffs have no way of legally forcing the removal of a Ripoff Report posting. For more on the implications of that resolution, see my writeup of the Blockowicz case.

Posted by Eric at 11:37 AM | Derivative Liability | TrackBack

February 18, 2011

Google Suffers Surprising Preliminary Loss in Keyword Advertising Case--Jurin v. Google

By Eric Goldman

Jurin v. Google, 2011 WL 572300 (E.D Cal. Feb. 15, 2011)

A surprising ruling! You may recall Jurin, trademark owner of the term "styrotrim." He sued Google in summer 2009, but quickly dismissed the lawsuit after he had a falling-out with his attorney. I thought the case was over then. Surprisingly, he found a new attorney and sued Google again in Fall 2009. The court fined Jurin $6,000 for wasting Google's time with the first go-around. Again, I thought the fine would end the case, but Jurin shockingly paid up. In round 2, Google has been progressively carving up the lawsuit, getting the court to dismiss some claims last March (including a pretty significant 47 USC 230 win) and more claims in September. Frankly, given the brutal treatment Jurin has been getting in court, I had already mentally counted this case as a win for Google.

Not so fast! In a stunning turnaround, the court refuses Google's motion to dismiss Jurin's "false association" claim. This is wholly unexpected for two reasons: first, the court had already rejected Jurin's "false association" claim TWICE (Jurin is on his Second Amended Complaint), and second, the court does not cite a directly relevant case on point--Heartbrand v. Lobel's--that dismissed a false designation of origin claim against Yahoo.

How did this case do a 180??? The court addresses Google's contention that a "false association" claim only applies when the defendant produces the falsely associated goods--which doesn't apply to Google, who simply presents advertising from other vendors. This argument worked in the March 2010 dismissal. This time, the court says "this Court declines to require Defendant to be the producer of goods in order to continue a claim for false association." In a footnote, the court acknowledges its internal conflict:

To the extent this conclusion runs counter to the Court’s 4 previous orders (ECF Nos. 19, 39) on Defendant’s prior Motions to Dismiss, the Court has now concluded that the analysis set forth herein is the correct one. Any earlier determination to the contrary is hereby revised in accordance with the provisions of Federal Rule of Civil Procedure 54(b).

Whoops. Nice try to bury an embarrassing flip-flop. Actually, IMO, the court got it right the first time(s).

This ruling would be a good choice for a motion for reconsideration to force the court to revisit its change with more precision. Failing that, it ultimately may be appropriate for an appeal.

On the plus side, the court does finally dismiss the breach of contract claim without leave to amend. I didn't really understand the court's discussion here, but at least the court got to the right result.

While this case plods to a more definitive conclusion, I fear this denial of a motion to dismiss will motivate a bunch of unnecessary, low-merit, and cost-unjustified lawsuits against Google and other search engines--just like we saw the Rescuecom case (also a motion to dismiss case) spurred the last flurry of lawsuits against search engines. Listen up, plaintiffs: this case only offers false hope! This is a bad ruling and Jurin will unquestionably lose in the end. Don't buy your lawyer a new boat when you could invest those dollars in a better product or more effective marketing.

PS: I have several other keyword ad cases to blog, including 1-800 Contacts, Consumerinfo.com and Binder. Sorry I'm running so far behind.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on September 11, 2010):

Posted by Eric at 10:39 AM | Derivative Liability , Search Engines , Trademark | TrackBack

February 17, 2011

Quirky 47 USC 230 Case Still Results in Defense Win--Coppage v. U-Haul

By Eric Goldman

Coppage v. U-Haul International, Inc., 2011 WL 519227 (SDNY Feb. 15, 2011)

The facts are garbled, but the plaintiff rented a vehicle from U-Haul and apparently suffered an injury he attributes to the vehicle. He also names Movinghelp.com as a defendant for unexplained reasons. Movinghelp describes itself: "We connect people with a reliable moving labor to do any of the following: packing help, unpacking help, loading help, unloading help, cleaning help and driving help." It's not clear from this opinion how the plaintiff used Movinghelp's services or how those services contributed to the alleged injury.

However, the court doesn't need to explore any of these details because it dismisses Movinghelp per 47 USC 230. The court's entire 230 discussion:

the Court dismisses Plaintiff’s claims against Movinghelp, a website appears to that connect people with movers and posts information provided by local moving companies, under the Communications Decency Act, 47 U.S.C. § 230(c)(1) (“CDA”). See Doctor’s Assocs., Inc. v. QIP Holder LLC, No. 06 Civ. 1710, 2010 WL 669870, at *23 (D. Conn. Feb. 19, 2010) (“Courts engage in a three part inquiry when determining the availability of immunity under the CDA, i.e., (i) whether Defendant is a provider of an interactive computer service; (ii) if the postings at issue are information provided by another information content provider; and (iii) whether Plaintiff’s claims seek to treat Defendant as a publisher or speaker of third party content.”) Because Movinghelp appears to be a provider of an interactive computer service (Compl. ¶ 3), and the postings have included information provided by another information content provider, i.e., U-Haul (Compl. ¶ 10), and the Complaint treats Movinghelp as a publisher of third party content, the Court dismisses all claims against Movinghelp, see Doctor’s Assocs., Inc. v. QIP Holder LLC, 2010 WL 669870, at *23; (Compl. ¶ 14).

The citation to the Subway v. Quiznos case is odd for at least 2 reasons: it's not in the same district (when there are numerous 230 cases in the SDNY), and unlike this case, that case was a 230 defense loss. Whatever. I'll put this case in the category of Doe v. MySpace, which stands for the proposition that no matter what online third party communications were facilitated by the defendant, 230 says the defendant isn't liable for any resulting offline injuries.

Posted by Eric at 03:58 PM | Derivative Liability | TrackBack

February 16, 2011

Ripoff Report Gets Another 47 USC 230 Dismissal--Herman v. Xcentric

By Eric Goldman

Herman v. Xcentric Ventures, LLC, 1:10-cv-00398-CAP (N.D. Ga. Feb. 14, 2011)

This is a run-of-the-mill lawsuit against the Ripoff Report by an unhappy vendor. Herman is a lawyer (once again, the dreaded lawyer-as-plaintiff) unhappy with a posted report from a client alleging bad service. The court churns it out in a brief and workmanlike opinion.

Quoting from Ripoff Report's summary judgment motion, the opinion says:

Since the CDA was enacted in 1996, every state and federal court that has considered the merits of a claim against the Ripoff Report has, without exception, agreed that Xcentric and Magedson are entitled to immunity under the CDA for statements posted by third-party users.

I know some plaintiff attorneys will look at that language as a thrilling challenge--NOT YET, they think. However, every Ripoff Report plaintiff should anticipate having this language cited against them.

Continuing to borrow liberally from Ripoff Report's motion, the opinion addresses two common contentions in Ripoff Report 230 litigation:

* the fact that the Ripoff Report added some components to its web page does not make Ripoff Report responsible for user-supplied portions. The court says "Because the defendants only created the generic portions of the Ripoff Report website and did not create or alter any part of the report about the plaintiffs, the CDA applies to bar the plaintiffs’ claims regarding the report and title at issue here."

* the "Ripoff Report" branding does not communicate anything about each individually profiled company. The court says "no reasonable reader would believe that the application of the term “Ripoff Report” implies the existence of any facts beyond those contained in the specific reports appearing on the defendants’ website. The plaintiffs cannot defeat the robust immunity of the CDA by trying to creatively plead around it."

This is a super win for the Ripoff Report and another sign that courts just don't want to hear the plaintiffs' arguments (no matter how creative/desperate) trying to put the Ripoff Report on the hook for user postings. I remain amazed how at many plaintiffs take on the Ripoff Report despite this unfavorable dynamic.

Posted by Eric at 09:22 AM | Content Regulation , Derivative Liability | TrackBack

February 15, 2011

Microsoft Adopts Google-Style Trademark Policy for Keyword Advertising

By Eric Goldman

I have gotten several emails relaying this announcement from Microsoft:

We are writing to alert you to some pending changes to the trademark policy within the Microsoft Advertising adCenter Intellectual Property Guidelines. Starting March 3, 2011, adCenter will no longer review trademark keyword complaints. However, adCenter will continue to investigate brand owner complaints related to trademark use in ad text.

We want to make it easier for you to manage your search advertising campaigns. By aligning the adCenter trademark policy with the current industry standard, we hope to help simplify your marketing efforts across the various online advertising programs. Please take a moment to review our updated trademark policy in the Intellectual Property Guidelines so that you may prepare for this change. If you have questions or need further assistance, please contact our support teams.

You can see the policy here.

Microsoft's reference to "the current industry standard" is interesting. For many years, Google's trademark policy has differed from almost every other search engine. But since Google is nearly 80% of the keyword ad market, I guess Microsoft can acknowledge them abstractly as the "industry standard" without actually referencing Google by name. ~~Now that Microsoft has adopted Google's general approach, I assume Yahoo will fall in line next.~~ [UPDATE: as a reader pointed out, now that Yahoo has outsourced keyword ad sales to Microsoft as part of their overall search integration, this policy change automatically applies to Yahoo's search engine as well.]

I'm interested in the timing of Microsoft's announcement. On the one hand, as I mentioned last year in my "Internet Law Trends" slide, the keyword ad battles--especially against search engines--seem to be winding down, and Google appears to have prevailed decisively. Given that Google has done all of the hard legal work for Microsoft, Microsoft can free-ride on its results. On the other hand, we still have a major pending appeal in the Rosetta Stone v. Google case, and the appeals court could issue a ruling that casts doubt on both Google's and (now) Microsoft's trademark policies. I guess Microsoft is willing to take that risk. The good news for Google is that with Microsoft and Google both standardized on the same program, Google doesn't look like an industry outlier, and it has gained a new and well-financed ally to support its policies.

Although Microsoft's new policy makes sense to me both doctrinally and as a matter of policy, Microsoft's decision reiterates how badly it is trailing Google, such that it has to follow the market leader. Microsoft is much more used to dictating terms rather than having to adopt someone else's. Also, I wonder if this is really just a cash grab. In the past, Microsoft's margins were so outrageous that it could ignore low-hanging revenue fruit if it wanted to. This development could be a suggestion that those days are over--especially in search, where Bing isn't profitable, so Microsoft's online endeavors need every cent they can get to keep up with the Google juggernaut.

UPDATE: World Trademark Review has more to say.

Posted by Eric at 02:05 PM | Derivative Liability , Search Engines , Trademark | TrackBack

February 11, 2011

Defamation, False Information & 47 USC 230 Talk Slides

By Eric Goldman

Earlier this week, I spoke at a PLI event, "Social Media 2011: Addressing Corporate Risks," on the topic of "Defamation, False Information and 47 USC 230" (this link takes you to the talk slides). I tried to skew the presentation towards topics that are relatively specific to social media defamation as opposed to generally applicable defamation issues. This also gave me yet another chance to remind folks about our 47 USC 230 conference on March 4, and the last slide (which I didn't reach during the presentation) previews some points I will make in more detail in my forthcoming paper on 47 USC 230.

Posted by Eric at 12:02 PM | Content Regulation , Derivative Liability | TrackBack

February 02, 2011

Web Host May Be Liable for Removing Only 1 of 3 Websites Operated by Its Customer--Hermeris v. Brandenburg

By Eric Goldman

Hermeris v. Brandenburg, 2:10-cv-02531-JAR -KMH (D. Kan. Jan. 23, 2011)

This is yet another web hosting copyright infringement case where the 17 USC 512 safe harbors aren't discussed. (For other recent examples, see Rosen v. Hosting Services and Perfect 10 v. RapidShare). It's not 100% clear why 512(c) didn't come up. The defendant seeking dismissal, theplanet.com, appears to have designated a 512 agent. However, the case implies (but never expressly says) that theplanet didn't properly honor the copyright owner's takedown notice.

The plaintiff runs SimpleFilings.com, an online document preparation business. The alleged copyright infringer is IncomeInc.com, which runs at least three websites (all virtually identical to each other) that provide rival services to the plaintiff's. Theplanet.com provides hosting services for all three websites. The opinion's facts are garbled, and the court doesn't say exactly what the alleged infringers copied from the plaintiff. More importantly, the plaintiff sent a copyright takedown notice to theplanet targeting only one of the three websites, and the opinion never makes clear what the notice said or what happened to the targeted website (the opinion implies that theplanet didn't take it down). The plaintiff also complains that in response to the takedown notice, theplanet should have removed the other two similar websites as well, so its failure to do so constitutes direct and secondary copyright infringement. This ruling addresses theplanet's motion to dismiss that latter allegation.

Fortunately, the court quickly rejects the direct infringement claim. The court says:

ThePlanet argues that merely hosting the websites does not rise to the level of copying, which is required to plead a cognizable claim for copyright infringement. The Court agrees.... liability is entirely premised on defendant’s participation as the host of the Brandenburg defendants’ websites.

A 512 discussion would have been helpful here. Whatever else 512 does, it should eliminate the claim that a web host is directly liable for a customer's copyright infringement without a proper 512(c)(3) notice. Because the court doesn't reference 512 at all, it appears the court is making a common law interpretation of direct infringement.

Things go less smoothly with the secondary copyright claims. Regarding contributory infringement, theplanet argues that it lacked the requisite knowledge of infringement. Because we don't know if the plaintiff sent a 512(c)(3)-compliant notice, it's hard to tell exactly what notice the plaintiff actually gave theplanet. The court says:

The Complaint alleges that plaintiff provided notice to ThePlanet of alleged direct infringement by the Brandenburg defendants with respect to plaintiff’s First Website. The Complaint further alleges that the Second and Third Websites are substantially similar to the First Website....[A]ssuming the facts alleged in the Complaint are true, ThePlanet had constructive knowledge of the direct infringement by the Brandenburg defendants based on plaintiff’s allegations that ThePlanet had actual knowledge of the direct infringement involving the First Website and that the Second and Third Websites are substantially similar to the First Website.

Holy non-sequitur, Batman! We'd need to see the exact notice, but knowing that there's one instance of infringement on the site doesn't automatically confer knowledge of all identical (let alone similar) infringements. Again, in the 512 context, we've seen this argument rejected many, many times where courts have required the plaintiffs to send takedown notices specifying each and every location of alleged infringement. See, e.g., Viacom v. YouTube and the many Perfect 10 cases. So if this plaintiff's notice didn't identify the second and third websites, under 512, the web host shouldn't have any responsibility to root out those sites. As you can see, without the 512 backdrop, this court's common law interpretation goes awry in a troubling way.

The court says theplanet may have materially contributed because it failed to act when it had the requisite knowledge. Again, the court imputes the knowledge of website #1 to spur the duty to take down websites #2 and #3.

On the vicarious infringement claim, the court appears to say (incorrectly IMO) that all web hosts have sufficient right and ability to supervise their customers' activities, at least for purposes of the motion to dismiss.

This opinion raises way more questions than it answers. Perhaps subsequent rulings (if it gets that far) will clear up some of the mysteries.

Posted by Eric at 08:53 AM | Copyright , Derivative Liability | TrackBack

January 31, 2011

Speakers Announced for "47 U.S.C. § 230: a 15 Year Retrospective" Conference, March 4, SCU

By Eric Goldman

On February 8, 1996--just about 15 years ago--President Clinton signed into law the Telecommunications Act of 1996, a lengthy law with significant implications for the entire telecommunications industry. As Justice Stevens wrote in Reno v. ACLU (1997), "The Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56, was an unusually important legislative enactment."

Tucked into a corner of that beefy bill was the Communications Decency Act, a law that defined its generation of Internet Law regulations and spawned a series of laws and court battles that took over a decade to resolve. Tucked away in a corner of the Communications Decency Act was Section 509, "Online Family Empowerment," a version of the Cox-Wyden bill that ultimately created 47 USC 230.

Of the many legacies of the Telecommunications Act of 1996, 47 USC 230 certainly looms large. It has become the cornerstone of the Web 2.0 economy, spawning the creation of many Internet giants we now use every day and creating countless billions of dollars of wealth. The law has also sparked extensive, and sometimes heated, debates over online free speech, content-based harms, and the legal and ethical responsibilities of online intermediaries.

On March 4, 2011, we will take a thorough look at 47 USC 230, its history, its implications and its future, from a wide range of perspectives. This event has been in development for more than a year, and I'm excited to see it finally come to fruition. Unlike many other cyberlaw conferences, which tend to encounter 47 USC 230 as a sub-component of the event's main topic, this conference puts the statute front-and-center for maximum geekery.

We have finally posted a tentative version of the day's agenda (subject to change, as always). The whole day is filled with highlights and expert speakers, but some of the parts I'm anticipating the most:

* former Rep. Chris Cox, who co-sponsored the Cox-Wyden bill that became 47 USC 230, will talk about the statute's origins and its legacy.

* Ken Zeran, the plaintiff in the seminal/watershed 47 USC 230 case Zeran v. AOL and an early victim of a "cyber-harassment" attack (before we even had the vocabulary to describe such things), will tell the story-behind-the-story of his litigation. I've heard parts of his story first-hand, and it has completely changed the way I think about the case.

* Chief Judge Alex Kozinski, who authored the majority opinion in Fair Housing Council v. Roommates.com, which some would argue is the most significant appellate court incursion into 230's immunity. Judge Kozinski has also recently articulated his views on Internet exceptionalism (he's against it). I'm not exactly sure what Judge Kozinski will say, but no matter what direction he chooses to go, it undoubtedly will be humorous and provocative.

The conference will be March 4, 2011, at Santa Clara University. You can see the complete speaker lineup, and register for the event, at the conference website. Registration costs $150 or less; we have lots of categories of discounted or free registration. If the registration fees pose a financial hardship for you, please contact us. If you can't make it, we plan to record the day's proceedings (assuming the speakers don't opt-out) and post the recordings online.

While making your travel plans, please note that we're informally celebrating Cyberlaw Week in the Bay Area during that time. You may be interested in two other related events:

* on the day before the 230 conference, the Stanford Technology Law Review is holding a conference entitled "Secondary and Intermediary Liability on the Internet" at Stanford. This has a nice list of speakers and topics that complement the 230 event very well.

* on the day after the 230 conference, we are hosting the inaugural Internet Law Works-in-Progress event at SCU, an annual event co-sponsored by SCU and the NY Law School. We anticipate having approximately 30 speakers present their cyberlaw works-in-progress. This is a closed-door event to allow for a high-level academic conversation, and we are restricting participants to folks who can contribute to an academic dialogue. If that describes you, we would like to welcome you as a participant. Although the deadline has passed, we're still willing to consider talk proposals and discussant requests.

So please come to one, two or all three of these events! I hope to see you there.

Posted by Eric at 11:14 AM | Derivative Liability , Internet History | TrackBack

January 29, 2011

Another Copyright Owner Sent a Defective Takedown Notice and Faced 512(f) Liability--Rosen v. HSI

By Eric Goldman

Rosen v. Hosting Services, Inc., 2010 WL 5630637 (C.D. Cal. Aug. 16, 2010).

[This case just showed up for me in Westlaw. It's not a major case but it's worth a brief note even 5 months later]

HSI is a web host. Barry Rosen is a professional photographer. I saw 25 entries in the C.D. Cal. PACER database since 2005 showing a Barry Rosen as plaintiff (many against Internet company defendants), so he may be a frequent user of judicial services.

Rosen sent a takedown notice covering 4 photos of "Daisy Fuentes," identifying the associated URLs. As it turns out, apparently the photos depicted Amy Weber. The host forwarded the takedown notice to its customer, who allegedly didn't remove the files before Rosen's lawsuit.

The court says HSI isn't contributorily liable because Rosen's takedown notice was insufficient to confer the requisite knowledge. The court doesn't reflectively explore the interplay between the common law principles of knowledge and the statutory requirements of 512; it treats a defective statutory notice as also defective for the common law analysis. I think this is a reasonable approach but the court doesn't get into the nuances.

The notice itself was defective because the "notice contains inherently inconsistent information. While it recites relevant URLs, the reference to Daisy Fuentes, who is not depicted at any of those URLs, makes the notice defective." The court amplifies in a footnote: "its incorrect identification of the allegedly infringing material made it impossible for HSI to assuredly find that material and assess Rosen's infringement claim." It's interesting to see the court apply a high level of formalism towards 512(c)(3) notices, just as courts sometimes are highly formalistic about the service provider's 512 requirements.

HSI counterclaimed on 17 USC 512(f), and the court denies Rosen's summary judgment motion, saying "the incorrect descriptions of the materials in question could be found to be a knowing material misrepresentation."

The parties settled the case shortly thereafter, so we'll never know how this story would turn out in court.

Posted by Eric at 08:32 AM | Copyright , Derivative Liability | TrackBack

January 27, 2011

Top 5 Cyberlaw Developments of 2010, Plus a 2010 Year-in-Review

By Eric Goldman

Earlier this Fall, I posted my top 8 trends in Internet law, and that's a good place to start if you want to see how I think things are developing. Because of that post, this year I'm shaking up the format of my year-end recap post a little bit. We'll start with the top 5 Cyberlaw events of 2010, but then we'll move to other topics. (This is a variation of my post to InformIT on Tuesday).

Top 5 Legal Developments

#5: Google pulls out of China. China's native search engines rejoice, but is this really a win for China's long term prospects? Meanwhile, I keep hoping Google will do the same in the EU too given how much the EU regulators hate Google.

#4: COICA and the pre-enactment COICA workaround, ICE's lawless seizure of 82 supposedly pirate-oriented domain names. Showing once again that domain name censorship is irresistible to government regulators.

#3: Righthaven goes on a litigation frenzy on behalf of newspapers. Which do you think will happen first--bloggers stop discussing newspaper articles for fear of being sued, or newspapers go out of business? What's amazing is that newspapers don't realize that the first will accelerate the second.

#2: Oracle gets $1.4B+ from SAP for competitive scraping. Oracle hit a grand slam with the damages in this case, ranking highly on several all-time-largest-awards charts.

And the top cyberlaw story of the year goes to...

#1: Wikileaks. Wikileaks finally forces us to confront many of the cyberspace governance issues we were debating in 1996. I'm sad to say that our government, and many private businesses, failed the test.

Other Key Developments

* Tiffany v. eBay. The Second Circuit thumps Tiffany's pathetic arguments and gives eBay a clean bill of trademark health. However, this ruling just preserved the status quo, so for my money, the much more important secondary trademark rulings involved providing other services to alleged counterfeiters. See Gucci v. Frontline, potentially exposing credit cards and other payment service providers to secondary liability for providing payment services to alleged counterfeiters, and Roger Cleveland Golf v. Price, potentially exposing SEOs/web designers to secondary liability as well.

* Viacom v. YouTube and Arista v. Limewire. These companion cases told us what we already knew: YouTube + 512(c) defense = good, P2P file sharing software vendor - DMCA safe harbor = bad.

* Sony v. Tenenbaum. I'm still waiting to see if this case is a blip or a watershed. It has the potential to make every copyright statutory damages case into a constitutional due process inquiry.

* Legally, it was a good year for Google. Google got a favorable trademark ruling in the ECJ. Google got a decisive win in its Rosetta Stone AdWords trademark case (and, as mentioned before, the YouTube case as well). Most of the other trademark plaintiffs lost or simply gave up.

* Legally, it was a lousy year for Google. Everyone in the world seems to be considering if they can run Google's algorithms better than it can: EU antitrust regulators, French antitrust regulators, the Texas AG, private plaintiffs, the New York Times and so many more. Google got trapped in a dangerous antitrust litigation in the unfavorable venue of Ohio state court. Google Street View has been a legal train wreck world-wide. The DOJ busted up a possible hiring cartel among Silicon Valley companies, and Google almost immediately handed out 10% pay raises for everyone. Buzz was a lousy product with a horrible launch, and it led to a multi-million dollar litigation kicker.

* It was a quiet year for 47 USC 230 litigation. From my perspective, quiet is good! The biggest defense win of the year: Milgram v. Orbitz. The biggest plaintiff win of the year: Swift v. Zynga.

* Perfect 10 v. Google. Google gets yet another win in this case, this time on 512(d)--one of the few cases interpreting the 512(d) safe harbor for linking to infringing content.

Notice I didn't put *any* of the Ninth Circuit Internet law jurisprudence on the list. There were plenty of interesting rulings this year: Krottner v. Starbucks, MDY v. Blizzard, Vernor v. Autodesk, DSPT v. Nahum, the Freecycle naked licensing case, Advertise.com v. AOL, Toyota v. Tabari, Visa v. JSL, CRS Recovery v. Laxton, Office Depot v. Zuccarini. However, I have lost all faith that 3 judge panel decisions by the Ninth Circuit have any binding precedential on other panels, so every case is effectively a one-off.

Less-Heralded But Nevertheless Interesting Disputes of the Year

Some under-the-radar legal disputes that I thought were more interesting than the overhyped stories:

* Barclays v. theflyonthewall. A brokerage house gets an injunction against the republication of its stock recommendations based on a hot news doctrine. The case is now on appeal to the Second Circuit. The case exposes the precarious business model of brokerage houses: they are content publishers trying to monetize via a commodity service, and brokerage house stock recommendations were exactly the kind of information John Perry Barlow explored in his 1994 Economy of Ideas article. Will the hot news doctrine prop up a doomed business model?

* Anderson v. Bell. Electronic signatures count towards the requirements for an election petition. This could launch a new era of citizen petitioning of the government.

* Snap-on v. O'Neil. A company can't scrape its own data from its outsourced vendor, seemingly authorizing the vendor to play hold-up games for companies that don't handle the contract correctly. The Eventbrite v. Cvent case provided some interesting contrast.

* Goforit v. Digimedia. A court upholds domain name wildcarding and says the TM owner/plainitff pursuing those wildcarded domain names may have engaged in reverse domain name hijacking.

* Lara Jade Coton v. TVX. The blog post title said it all: "Tip for Clean Living: Don't Use a 14 Year Old's Self-Portrait in Advertising for Porn."

Most Overhyped Stories

This year, for the first time, I'm separately breaking out a category for most overhyped stories of the year.

* Craigslist shuts down its adult services category. A toxic mix: Craigslist took a legally defensible but nevertheless obstinate position, and state AGs love to show their constituents how much they hate the Internet. When Craigslist finally gave in and shut down its adult services category (with a whining F-U), people went crazy.

* Borings get $1 for their trespassing claim. Google's Street View contractors made a mistake, drove up a private driveway, and captured what they saw. Google posted the photos until it got a complaint, then the homeowners with the odd surname ("Boring") went on a litigation frenzy. Their payoff for several years of litigation? $1. Not even enough for extra foam on a Starbucks mochachino.

* The Supreme Court's tech docket. Several fizzled out non-decisions from SCOTUS this year: Bilski, Quon, Costco. The Supreme Court is taking a steady diet of tech-related cases, but they are gun-shy about actually resolving them.

* Mark Hurd. Mark Hurd, Hewlett Packard's CEO, had an inappropriate relationship with an HP contractor/former B-list softcore porn actress and maybe fudged his expense reports. When he tried to take a job at HP's frenemy Oracle, HP got litigious, but it turns out their fur can be smoothed for a few million.

* Lost iPhone Prototype. Stop me if you've heard this joke before: an engineer walks in a bar and...loses a super-stealthy prototype of one of the most important new consumer technology launches ever...? I realize it's an uber-cool phone, but still, IT'S A PHONE, PEOPLE!

Our Snarkiest Company-Specific Posts

Occasionally, we get snarky about specific companies' practices. It's not our norm, but these posts sure do boost traffic. Companies in our crosshairs this year:

* The Problems With Google House Ads. Google's response to this post was pathetic and embarrassing.

* Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. I still use Scribd, but I have zero loyalty.

* Hypocrisy Alert?! Expedia, a "FairSearch" Member, Marginalizes American Airlines in Its Search Results. If you're going to wave the "Search Neutrality" flag, please keep it hypocrisy-free.

* Facebook pulls a rare hat trick of snark this year: Q2 2010 Quick Links Part 3 (Special Facebook Edition), Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com, Distrust in the Cloud Part #2: Facebook Blocks J.mp Links and Takes Down Lots of Status Updates in the Process. I'm officially no longer in love with Facebook. I post the exact same content to Twitter and Facebook, so please follow me at Twitter instead.

* My RapLeaf Profile is Amusingly Mistaken. This is What the Fuss is All About?. In response to an article in the Wall Street Journal's "What They Know"/privacy plaintiffs lawyers full-employment series of articles.

Most Popular Blog Posts of the Year

1) Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. Nearly 2X the traffic of #2. Putting profanity in the post title still works as a traffic booster.

2) Deleted Facebook and MySpace Posts Are Discoverable--Romano v. Steelcase (Topsy 100). I still can't figure out why this post was so popular; it just reminded us of something we already knew. See also the related but overreaching Millen v. Hummingbird Speedway.

3 & 5) #3: Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to "Twitter/TwitPic". Venkat also had an end-of-the-year hit with the #5 post, "Court Rejects Agence France-Presse's Attempt to Claim License to Haiti Earthquake Photos Through Twitter/Twitpic Terms of Service -- AFP v. Morel." Both posts were Topsy 100.

4) Viacom v. YouTube Summary Judgment Motions Highlights. Not surprisingly, the gossip about the lawsuit is way more popular than the blog post on the actual ruling.

One other post reached Topsy 100: "Ripoff Report Defeats Extortion Claim, But Plaintiffs Keep Trying--AEI v. Xcentric."

Lists of Yore

Previous top 10 lists from 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 06:56 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Licensing/Contracts , Search Engines , Trademark , Trespass to Chattels | TrackBack

January 25, 2011

Ad Networks Ordered to Drop Allegedly Infringing Site--Elsevier v. eNom

By Eric Goldman

Elsevier Ltd v. Whois Privacy Protection Service, Inc., 1:11-cv-10026-RGS (D. Mass. injunction dated Jan. 14, 2011). See the TRO from Jan. 6 and the complaint.

On the surface, this seems like a run-of-the-mill copyright enforcement. The plaintiffs Elsevier and John Wiley publish textbooks on pharmaceuticals and related topics. The website at issue, Pharmatext.org, allegedly republishes those copyrighted textbooks for free via an ad-supported website. If these were the only key facts, the publishers should be able to shut down the rogue site easily.

However, I think this is a pretty complicated case that isn't getting the nuanced legal analysis it requires. There are at least three major complexities to the case:

1) Pharmatext.org is now offline, but when I reviewed it in Google's cache, it looked like a linking site. In other words, the site itself wasn't hosting the allegedly infringing downloads but just linking to URLs where they were available. I didn't see anything in the complaint that connected the operators of Pharmatext to the uploads of the copyrighted material on third party servers.

Thus, this case could be about a website's liability for linking to infringing content. We might still conclude that Pharmatext is infringing, but we'd need to reach that through a secondary liability analysis, not a direct liability analysis. Of course none of this is mentioned in the materials I saw. The complaint does not clarify who is the direct infringer because those paragraphs are in the passive voice--is it the uploader, the individuals who download, or Pharmatext for unspecified activities that it did?

2) Pharmatext.com is owned by eNom as a privacy proxy (under its Whois Privacy Protection Service, the captioned defendant). I've previously blogged about domain name privacy proxies before and the legal troubles they are encountering (see my post on Solid Host v. NameCheap). The publishers sue WPPS for vicarious copyright infringement, alleging "it controls the domain name pharmatext.org and receives a direct financial benefit for doing so."

Hold on a sec. This is a really dense statement that requires unpacking. WPPS is the domain name registrant on behalf of an undisclosed principal. It does not "control" the domain name. Even if it did, the normal test for vicarious infringement requires the "right and ability to supervise the infringing activities." How does a privacy proxy do that? It controls the domain name, not the associated servers. See the old 9th Circuit ruling in Lockheed v. NSI. And typically vicarious infringement requires a direct financial benefit from the infringement. Sure, as a service provider, the privacy proxy gets paid by the website operator--but the payment amounts don't vary with the amount of infringement. This is like saying the electric company gets paid by an alleged infringer to supply power to the infringing website. Yes, the electric company gets paid, but no, that's not direct financial benefit from the infringement. (Ironically, in fact increased infringing activity might boost the amount of electrical consumption, so the electric company is more likely to profit from infringement than a privacy proxy.)

Finally, recall that I believe Pharmatext is a linking site that isn't the direct infringer. So WPPS is a distant service provider to a possible secondary infringer. Tertiary liability, anyone?

The court's response? It orders WPPS to disable the domain name, fork over the principal's identity, and freeze any transfer of the domain name.

I am extremely bearish on the future of domain name privacy proxy services. It seems inevitable that IP plaintiffs are going to drive that particular service offering into the ground with their litigation.

3) The publishers also sued two ad networks, Chitika and Clicksor, for contributory copyright infringement. The supporting allegations? The ad networks directly profit from the infringement and provide the funds to enable Pharmatext.com to continue its existence.

Traditionally, contributory copyright infringement requires knowledge of the infringing activity and a substantial contribution to the infringing activity. I didn't see any allegations of knowledge by the ad networks at all--no assertions that the ad networks had figured out that Pharmatext,org was a rogue website, and no assertions that the copyright owners sent a C&D or takedown notice. (I don't think the ad networks qualify for a 512 safe harbor because of the way those safe harbors are worded; but a C&D/takedown notice would still help the publishers in arguing that the ad networks knew it was a rogue website). The ad networks' only "contribution" to the infringement is the payment of money to the site, and this was expressly rejected as sufficient for liability in Perfect 10 v. Visa, which concluded that even if the payment system stopped the flow of money, it would not automatically stop the website and any associated infringement on it.

Further, if Pharmatext was a contributory infringer for linking to infringement, this means the ad networks would be contributing to a contributory infringer--another tertiary liability argument.

The court's response: it ordered the ad networks not to pay any money to Pharmatext and to drop them as customers.

From the PACER report, it appears that the defendants haven't contested the publishers' claims. I hope that will change. This is a case where the publishers have clearly overreached, and if the judge won't call them on it himself, we need the adversarial system to expose the major gaps in the publishers' logic.

Meanwhile, this case illustrates two broad themes. First, it illustrates how plaintiffs are going after an array of supporting service providers to make them responsible for their customers' activities. On the trademark front in the past 12 months, see, e.g., Louis Vuitton v. Akanoc (web hosts), Gucci v. Frontline (payment service providers), Roger Cleveland v. Price (web designers/SEO), Microsoft v. Shah (software vendors that assist website development). Plaintiffs are reading secondary liability doctrines very, very broadly, and courts aren't always slamming down those arguments as emphatically as they should.

Second, several other lawsuits have tried to nail ad networks for providing advertising support to infringing sites. As another example (also in the trademark realm), see the Vulcan Golf v. Google lawsuit. The only successful case that I can recall involves Triton Media, a ruling that was so skewed by its facts that I didn't think it was worth a full blog post. Wendy Davis discusses the comparison more.

If this lawsuit ends with the current injunction, I'll consider this ruling an interesting oddity. Any further developments in this case warrant careful scrutiny.

Posted by Eric at 09:27 AM | Copyright , Derivative Liability , Domain Names , Privacy/Security | TrackBack

January 24, 2011

Second Life Gets Out of Dispute Between Virtual Bunnies & Virtual Horses

By Eric Goldman

Amaretto Ranch Breedables v. Ozimals, 3:10-cv-05696-CRB (N.D. Cal.). The Justia page. The case library:
* Linden Lab's opposition to the preliminary injunction
* Ozimals' non-opposition to the preliminary injunction
* Amaretto's preliminary injunction motion
* The preliminary injunction
* The TRO against Linden Labs/Second Life
* The complaint with exhibits.
* Ozimals' C&D to Amaretto and its blogged statement on the case.

This case involves an IP dispute between virtual bunnies and virtual horses in Second Life. My previous blog post. The bunnies assert that the horses copy too much of the bunnies, so the virtual bunnies sent two DMCA takedown notices to Second Life. In a relatively rare move, the horses sued under 512(f) to enjoin further takedown notices, but in a bizarre twist, the court ordered Second Life--not a party to the lawsuit--from taking down the horses. The court's order raised both procedural and substantive issues: procedurally, how the court could enjoin a non-litigant, and substantively, how the court could restrict Second Life's editorial discretion.

Everything has turned out OK for Second Life. The bunnies acquiesced to the horses' requested injunction against sending more DMCA takedown notices to Second Life. The horses didn't directly back off of their interest in handcuffing Second Life, but the court granted an injunction that only applies to Ozimals' sending of takedown notices and makes no reference to restrictions on Second Life.

Although this ends the most interesting angle of the dispute, the bunnies vs. horses dispute remains pretty interesting on its own. Normally, I would expect a dispute like that to get resolved quickly. I'm a little baffled how the revenue streams from these virtual animals can profitably support full-scale litigation warfare. Unfortunately, the parties seem to be going down that path.

Posted by Eric at 09:12 AM | Copyright , Derivative Liability , Virtual Worlds | TrackBack

January 22, 2011

thedirty.com's 47 USC 230 Defense Rejected on Motion to Dismiss--Jones v. Dirty World Entertainment

By Eric Goldman

Jones v. Dirty World Entertainment, 2011 WL 221836 (N.D. Ky. Jan. 21, 2011). The complaint.

On occasion I've ended up at thedirty.com. It's not my kind of site, but clearly I'm not the target audience. Given its stock-in-trade in trashing people, I'm a little surprised we don't have more lawsuits relating to it.

The plaintiff in this case is Sarah Jones, a Kentucky school teacher and Cincinnati Bengals cheerleader. Jones was featured in two user-submitted posts on thedirty.com, both of them saying not-nice-if-untrue things about Jones. Based on what I saw in this ruling, thedirty.com's editorial contribution beyond the user-submitted content appears to be minimal and probably legally inconsequential.

This lawsuit has an odd history. The plaintiff initially incorrectly sued thedirt.com (instead of thedirty.com) and got a large ($11M) but uncollectible default judgment. See the Politico coverage. Whoops. I still think the plaintiff is suing the wrong defendant due to 47 USC 230, but at least now the plaintiff is targeting the correct website.

This week's ruling mostly denied thedirty.com's motion to dismiss for lack of jurisdiction. As with most Internet jurisdiction rulings, it's not all that interesting. In addition, the court touches on the 47 USC 230 motion to dismiss. The court's entire discussion on that point:

Dirty World, LLC relies on the Communications Decency Act (CDA) of 1996, 47 U.S.C. § 230(c), for the proposition that postings on its web site are privileged.

As stated above, the court cannot consider a possible defense under this Act on the personal jurisdiction issue. Therefore, this branch of defendant’s motion to dismiss will be treated as a motion for summary judgment. The motion is not supported by any affidavits or other materials suitable for summary judgment motions. Plaintiff has orally moved for a period of discovery to respond to the motion. In the opinion of the court, this motion is well-taken and will be granted.

The immunity afforded by the CDA is not absolute and may be forfeited if the site owner invites the posting of illegal materials or makes actionable postings itself. See Fair Housing Council of San Fernando Valley v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008)(en banc).

Defendant’s counsel properly admitted at oral argument that discovery was necessary to resolve this motion.

This appears to be a Roommates.com-attributable loss, because the court says that the Rooommates.com standard forces the defendant to participate in discovery. However, this loss could reflect thedirty.com's specific "value" proposition. In contrast, with many other websites, plaintiffs will not be able to make a colorable argument that the site invites illegal user submissions.

Posted by Eric at 11:50 AM | Derivative Liability | TrackBack

January 21, 2011

The Next Digital Decade Book Launch and Event Recap

By Eric Goldman

I’m pleased to call your attention to a new book called “The Next Digital Decade: Essays on the Future of the Internet,” edited by Berin Szoka and Adam Marcus of TechFreedom. This is a truly remarkable book. It contains 31 essays on various Internet law topics from some of the brightest and most provocative thinkers on Internet law topics. Please note that I have some self-interest in praising the book because I contributed 3 of the 31 essays, but I would be fawning over this book even if none of my essays were included. It’s that good.

What makes this book so special is that *every* essay I’ve read is top-notch. In contrast, in many essay collection books, the essays are spotty—some great, some clearly inferior. Berin and Adam did a fantastic job curating the collection. They also did a nice job tying the essays together into coherent chunks.

You can get the entire PDF as a FREE DOWNLOAD (love it!) and they have hard copies available for purchase if you (like me) are a luddite who prefers to read things in print.

In future blog posts, I will have more to say about some of the essays, including my chapter on Regulating Reputation as well as James Grimmelmann’s outstanding chapter on search “neutrality.” I have more to say on the search engine bias topic as well in a short essay that I intended to include in the book but didn’t get done in time.

As part of a book launch, earlier this week TechFreedom put together a symposium where book authors and other special friends discussed some of the themes in the book. Although the audience was well-stocked with techno-libertarians, the panels themselves were mostly nicely balanced, which led to a really great conversation. The remainder of this post reflects my notes from the day, which as usual are a blend of verbatim statements and my impressions of the speakers’ remarks.

Panel 1: Internet Optimism, Pessimism and Future of Online Culture

Participants:
Berin Szoka, TechFreedom (Moderator)
Andrew Keen, author of Cult of the Amateur
Adam Thierer, Mercatus Center
Prof. Ann Bartow, South Carolina School of Law

[Note: Jonathan Zittrain was supposed to participate but he was a last-minute scratch. That left a hole on the panel, as the panelists had prepared to discuss Jonathan’s work. So the panel ended up talking a lot about—and mostly criticizing—Zittrain’s work without Zittrain around to defend himself!]

Thierer: Two schools of Internet pessimism:
(1) people without much hope that Internet will improve society. They feel the good old days were better.
(2) people who are technology enthusiasts but are pessimistic about the future of technology. For example, Zittrain’s view of threats to generativity and Lessig’s view that code as law leads to perfect regulation. They feel we’re at the cusp of a dark age of openness.

Pasquale: Takes a “progressive” approach to Internet studies. Issues on his mind:
(1) Leading Internet powers are like utilities. We should be fearful of monopolies.
(2) Fusion between government and corporate sectors.
(3) Internet is accelerating inequality. Ex: Zittrain’s ubiquitous human computing.

Bartow: More women used to write about cyberlaw in the 1990s than now. Regarding Zittrain’s Future of the Internet, the Internet doesn’t need to be either open or closed; it could be somewhere in-between. She also noted that there’s not much “law” in Zittrain’s “cyberlaw.” He assumes technologists will lead the way. In typical Ann fashion, she provided a bonus tip: avoid doing a search on “lickety split” if you don’t want porn.

Keen: [Eric’s note: I had never seen Keen’s shtick first hand, and it was exactly what I anticipated: provocative statements mixed with out-and-out gratuitous trolling. I personally do not respond well to trolls, so I found his remarks mostly a massive turnoff, despite a few interesting nuggets interspersed here and then.

As part of his trolling, he started off with a series of gratuitous insults targeted at many of the other participants and audience members. In my world, it’s really not nice to deliberately insult a big chunk of your audience before you even get to your substantive points.]

He doesn’t understand what the law has to do with the Internet. Law professors have seized control over the debate. Law professors are paid by law schools to churn out articles that have no market value. In contrast, Keen is a paid author and therefore guided by market forces.

Keen wants to defend a professional creative class. He is interested in failure of new media to provide an economic environment to pay the creative class. (1) Curse of piracy. Some people take pleasure in demise of old media. (2) Internet as content monetization system. Keen is skeptical of Web 2.0.

[Two more observations about Keen’s trolling. First, I don’t necessarily care about preserving a “professional creative class.” I care about creative outputs and less about protecting one traditional way we get them. I wonder if we can get most or all of our socially desired outputs if we abolished the professional creative class completely. Second, I understand some people are elitist, but most of the time, they try to hide their elitism. In contrast, Keen was unapologetically elitist. This deliberately set up an unnecessarily divisive “us-vs.-them” dynamic that people usually try to avoid in polite society. Personally, I think we’ll get a lot farther looking for ways to work together rather than creating a class warfare dynamic. Then again, I’m a mere law professor paid by my law school to churn out worthless junk, so what do I know?]

Thierer: Keen is skeptical about the technological transition. Thierer’s response: “humans adapt.” In a multi-iteration game, players will change from iteration to iteration. Ex: AOL dominated the 1990s and look at them now.

If Keen is right, what do we want to do about it? We need to cope with the changes, not fight it. Pessimists: too quick to jump on current event catastrophes, without giving a chance for coping mechanisms to evolve. When things are darkest, biggest incentives to entrepreneurs. [The conversation took an odd turn when Frank said Thierer had ironically invoked Karl Marx, who had argue that we shouldn’t try to make things better for workers so they will have an increased willingness to revolt. I’m not sure who was more insulting: Keen trashing law professors or Pasquale calling Thierer a Marxist! But unlike Keen’s insults, I know Frank was just having fun with Thierer.]

Pasquale: we need more transparency about business practices to help government enforcers do their jobs better.

Bartow: Industry evolution cuts both ways. She gave two examples: (1) her local paper dropped coverage of the university when the paper went online and got the statistics showing the level of interest in those stories. (2) anti-virus software vendors need the continued release of new viruses to support their business model.

Thierer: compare where we are today to the past. In the past, we had information scarcity. Information overload is a much better problem to have.

Bartow: puzzled by Zittrain’s criticism of Onstar because it tracks folks when that’s the entire point of the service. Tradeoffs between tracking devices and the benefits of geolocation. A concern: technologists may not reflect women’s concerns given their backgrounds.

Szoka: Zittrain thinks everyone should want to tinker with technology, but some folks don’t want to tinker.

Audience Q&A
DelBianco: consumers are frustrated with the real problems with the Internet (crime, fraud, etc.). Governments are desperate for relevancy, so they may seize that opportunity to insert themselves into the process.

Keen: “I just have to respond to this libertarian stuff”: Zittrain’s book hasn’t been read outside of law schools. In the past, major historical events have required government management of the transition.

Pasquale: Europe is becoming the de facto regulator. If we don’t take the lead, they will fill the vacuum.

Q: Silicon Valley venture capitalists try to hit home runs by funding the new displacement technologies.

Szoka: business cycles are becoming shorter. Winners last for shorter times. Digital markets aren’t like Adam Smith’s perfect competition; but dominant players may be easier to oust today, so we might be willing to accept monopolies in the short term while new disruptive technologies are emerging that will organically trump the monopolist.

Panel 2: Internet Exceptionalism & Intermediary Deputization

Participants:
Adam Thierer, Mercatus Center (Moderator)
Prof. Eric Goldman, Santa Clara School of Law
Josh Goldfoot
Prof. H. Brian Holland, Texas Wesleyan School of Law
Prof. Mark MacCarthy, Georgetown University
Prof. Frank Pasquale, Seton Hall Law School

Me: two noteworthy dynamics (1) different types of Internet exceptionalism are proliferating, and (2) 230 liability umbrella allows for UGC experimentation like we’ve never seen before.

Holland: 230’s exceptionalism isn’t about absence of social norms. 230 enables the creation of social norms independent of legal norms. 230 sets initial condition (by mitigating legal norms, such as tort norms) and allows experimentation with new norms. Ex: Web 2.0 communities have, through contract and code, the ability to enforce their norms (we don’t just need government as only norms enforcer). Because Wikipedia isn’t forced by law to enforce, its users develop their own norms.

MacCarthy: Payment intermediaries have taken steps to police their networks. Ex: gambling, pharmaceuticals, child porn, tobacco, copyright infringement. These efforts were largely independent on legal regime in the 1990s—he thinks the payment systems didn’t qualify for First Amendment, 230, 512. Law enforcement thus reached out to payment intermediaries. He thinks this was a success. But on cost-benefit basis, it may not be worth regulating intermediaries. Plus, intermediaries have gotten the message and are voluntarily assuming responsibility. However, in the Wikileaks case, the intermediaries may have overreached.

Goldfoot: The Internet is a physical medium, and the online activities have offline payoffs. He favor a secondary liability regime similar to the secondary doctrines in copyright and patents.

Pasquale: We may need different rules for different niches in the Internet industry. Maybe it’s better to have only a couple of intermediaries, but we can trust them. If we get de facto monopolists, let’s call them a utility and embrace them accordingly.

Government agencies have difficulty getting the required expertise to understand and regulate industry. He favors bringing in expertise to the agencies. He praised the FTC for doing that with Christopher Soghoian and Ed Felten.

MacCarthy: the Internet is concentrating at every level due to network effects. So Frank’s consolidation is happening naturally. Combine with intermediaries’ willingness to police users, and we get back to media consolidation we saw with broadcasters and newspapers. So what do we do about private censorship? We’re not going to go back to FCC controls of media consolidation.

Goldman: I dispute the empirical assumption in MacCarthy’s claim of consolidation. Regarding Pasquale, I don’t trust either the government or its oversight.

Holland: More worried about Facebook than Google. Need data portability.

Pasquale: JuicyCampus/cyber-cesspools. He prefers users migrate to Facebook, which has rules, than at cesspools. [Eric’s comment: Really? I have a hard time encouraging anyone to use Facebook. See Q2 2010 Quick Links Part 3 (Special Facebook Edition), Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com, Distrust in the Cloud Part #2: Facebook Blocks J.mp Links and Takes Down Lots of Status Updates in the Process]

Goldman: government embrace of leading industry players may sterilize competition/innovation. With Facebook, if we lock it in as a government-monitored “utility,” will we prevent its displacer from emerging? Also, WRT JuicyCampus and People’s Dirt, the marketplace worked just fine—they both got drummed out.

MacCarthy: there are small numbers of gatekeepers at each level. Media world is always a concentrated market. How do we deal with their consolidated power?

Alex Howard from audience challenging MacCarthy: Top 10 blogs aren’t old line media (ex: Huffington Post, Mashable, Engadget, TechCrunch). Indeed, old line media are syndicating these new media players.

Goldman: even if mass-market topics consolidate on the Internet, the conversations in sub-communities are way more interesting and not consolidated at all.

Holland: small audiences are OK.

Goldfoot: should consider secondary liability on tort-by-tort basis, not blanket basis.

Audience Q&A
Milton Mueller: 230 establishes rules that enhance freedom. Contrast: utility.

Pasquale: competition/innovation isn’t our own goal. Let’s not forget that the public sector done some good things.

Braden Cox: why not extend 230 to offline world?

Goldman: I will argue for that at our 47 USC 230 conference on March 4.

Goldfoot: secondary liability has its role, such as in products liability, but maybe we could reduce liability for defamation because no one sues on those torts.

DelBianco: COICA goes after ad networks.

Goldman: If you’re going to regulate the payment systems, you have to regulate the ad networks too. Unfortunately, there is ongoing pressure to put a range of service providers to websites on the hook. We’re seeing lots of activity in this area in IP arena, but not in areas covered by 230.

Goldfoot: to be responsible, intermediaries must know what’s going and must be able to stop it.

David Johnson: Internet as global network. What entity is doing the deputization?

Goldfoot: international users delegate the power to the companies they use. Russian citizen accepts US law by using Facebook.

Jonathan Allen: does FCC net neutrality rules affect other Internet players?

Goldman: I’m seeing a quest to impose neutrality at every layer of telecom stack.

Panel 3: Who Will Govern the Net in 2020?

Participants:
Berin Szoka, TechFreedom (Moderator)
Prof. David Johnson, New York Law School
Prof. Milton Mueller, Syracuse University
Shane Tews, VeriSign
Chris Wolf, Hogan Lovells

This panel did not quite come together as the event organizers probably expected. David Johnson started out by describing himself as an “optimistic exceptionalist communitarian,” and it progressively got more esoteric from there. Part of the problem is that David J. and Milton enthusiastically agreed with each other, and the other two panelists didn’t really challenge them very much. Lovefests are fine but tend to make for less interesting panels.

The topics mostly addressed Internet transnational regulation and Internet community self-regulation. From my perspective, this conversation didn’t really seem that much different from a conversation we might have had a dozen years ago.

Chat with FCC Commissioner Robert McDowell

Moderated by Declan McCullagh.

Declan: why aren’t FCC Net Neutrality rules yet published in Federal Register?
McD: might be buried in bowels of the government

Declan: did FCC step in due to Congressional vacuum?
McD: we didn’t have the authority to step in

Declan: where can government facilitate technological innovation?
McD: tax policy—Ex: extend R&D credit. Get government out of the way.

Declan: Comcast/Level 3 dispute. Should FCC in peering disputes?
McD: FCC may not have jurisdiction, it shouldn’t be involved. Peering relationships have been working out fine. If there’s an antitrust problem, it should be reviewed by antitrust authorities.

Declan: Comcast/NBC
McD: Comcast consented to the net neutrality order because they were before regulatory agency.

Declan: will FCC authority wither away as more data moves to packet-switching?
McD: the Internet has shrunk the universal service pool, but we shouldn’t worry about fund shrinkage. As technology and consumer practices evolve, what is FCC’s role? Spectrum scarcity may be technologically mooted someday and undercut the rationale for FCC regulation, but this is long term.

Declan: should we be optimistic about next decade?
McD: Yes. We’re just entering golden age of wireless. But I worry about what government might do. Government is a blunt regulatory instrument.

Declan: predictions on Congress and Net Neutrality?
McD: No. I do what Congress wants. Congress could introduce legislation.

Declan: who will file first lawsuit over Net Neutrality?
McD: someone unhappy with the order! [the next day, Verizon sued in the DC Circuit]. He thinks FCC order will fail in courts.

Politico: which condition in Comcast/NBC merger are you most unhappy about?
McD: net neutrality condition. It makes one marketplace player live by the rule even if the rule is overturned; that’s misguided public policy.

Andrew Keen: there seems to be consensus that some compromise on net neutrality was needed.
McD: what was broken that the government needed to fix? Answer: nothing. The few examples of net neutrality problems all were fixed by existing law. Plus, there could be a chain reaction internationally. Are we inviting the other countries to impose their view of what’s reasonable regulation for the Internet? Plus, marketplace will be unsettled during litigation.

Thierer: FCC isn’t very transparent about releasing information.
McD: direct that comment to the chairman, who controls the process.

Mueller: Canada has done some net neutrality work. Good example?
McD: we know about it. Like us, the EU didn’t regulate net neutrality either. Most common request we get at the FCC: please regulate my rivals.

Q: hasn’t congress told the FCC to think in a stovepipe way?
McD: Yes, but statute should be modernized over time.

Posted by Eric at 11:20 AM | Derivative Liability , Internet History | TrackBack

January 20, 2011

CA Appeals Court: Claims Under State Spam Statute Not Preempted by CAN-SPAM - Hypertouch v. Valueclick

[Post by Venkat Balasubramani with some comments from Eric]

Hypertouch, Inc. v. Valueclick, Inc., et al., B218603 (Cal. Ct. App.; Jan. 18, 2011)

A California appeals court weighed in on a long-running debate: whether CAN-SPAM preempts California's spam statute. This is a significant decision that covers a lot of ground (I think it mentions just about every major spam case), and it is sure to be appealed.

Background: Two of the seminal anti-anti-spam cases were Mummagraphics and Virtumundo. Mummagraphics said that CAN-SPAM is intended to cover material misstatements in emails and preempted contrary state laws (to the extent they imposed liability for immaterial misstatements). Virtumundo said that only legitimate ISPs that have suffered actual harm can sue under CAN-SPAM. In Virtumundo, the Ninth Circuit also rejected the plaintiff's claims under Washington's email statute. The plaintiff in Virtumundo was pushing the envelope, and it was unclear as to whether the Ninth Circuit's rejection of his state law claims was restricted to the plaintiff's fanciful claims which clearly stretched the scope of Washington's spam statute to the breaking point. Mummagraphics and Virtumundo were from the Fourth and Ninth Circuit respectively, and they left open the question of how other state spam statutes would fare, including California's, which is one of the most expansive (and important). Lower federal courts courts struggled with applying Virtumundo and Mummagraphics to the preemption question in California, and decisions were all over the place. Some courts held that CAN-SPAM's savings clause only saves state statutes that sound in traditional fraud, and since California's spam statute didn't require proof of reliance and damages, it did not fall into this category and was preempted. (Here's my April 2010 post on Hoang v. Reunion.com, a case that struggled with the preemption question: "Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM -- Hoang v. Reunion.com.")

Factual Background: Hypertouch brought claims against Valueclick, various Valueclick subsidiaries, and PrimaryAds for violating section 17529.5 (California's spam statute). As the court describes it, Hypertouch is a small provider of email service to about 100 customers. Valueclick provides online marketing services to:

third-party advertisers who promote retail products. . . . Valueclick contracts with these third-party advertisers to place promotional offers on websites that are owned and operated by various Valueclick entities. Consumers, in turn, can visit Valueclick's websites and earn rewards in exchange for participating in the advertised promotional offers.

Valueclick contracts affiliates who "drive traffic" through methods chosen by the affiliates in their discretion. Valueclick provides the affiliates the creatives for a promotion, and the affiliates promote as they see fit (in many cases hiring sub-affiliates to effect the promotions). Valueclick alleged that it had no "knowledge of, or control over, the email delivery methods or header information used by [affiliates] or their sub-affiliates." [This is a risky admission!] PrimaryAds looks like it's similar to Valueclick - PrimaryAds operates a website which contains third party offers. PrimaryAds contracts with affiliates who download materials from PrimaryAds' website, engage in promotions (which are tracked by PrimaryAds). PrimaryAds requires its affiliates to sign agreements stating that the affiliates will comply with all laws, including anti-spam laws, in carrying out their promotion activities. PrimaryAds also alleged that it had "no control over the email delivery methods used by affiliates."

Hypertouch argued that Valueclick and PrimaryAds were advertised via emails that violated California spam statute in three ways: (1) the emails contained deceptive header information (because the from and to fields did not accurately reflect the sender or recipient); (2) the subject lines were likely to mislead recipients into thinking they would receive free stuff; and (3) the emails used third party domain names without the third party's permission. The trial court granted defendants' motion for summary judgment. The trial court held that defendants could only be held liable for emails they sent or caused to be sent (which cut out a chunk of the emails in question). The trial court also found that CAN-SPAM preempted state spam statutes which regulated misleading emails, unless the statutes covered "common law fraud or deceit." Since the claims did not cover the elements of common law fraud, they were preempted. Significantly, the court awarded defendants $100,000 in costs.

The appeals court's decision: The court reversed and ruled for Hypertouch, with an order that dramatically expands the reach of potential liability for products or companies that are advertised via email (regardless of whether they send the email). It's a blockbuster ruling for the anti-spam community.

Preemption: CAN-SPAM's preemption provision states that it preempts state statutes that regulate the use of commercial email "except to the extent that any such statute prohibits falsity or deception in any portion of a commercial email." The court acknowledges that CAN-SPAM's preemption was intended to accomplish a uniform standard for email regulation (to avoid requiring compliance with a "patchwork" of laws). The court also cites to a Senate Report that says that states laws prohibiting things like "fraudulent or deceptive headers, subject lines, or content" should not be preempted "because they target behavior that a legitimate business trying to comply with relevant laws would not be engaging in anyway."

The court disagrees with the trial court's conclusion on preemption and provides two main reasons, along with a lengthy discussion (and canvassing of the case law): (1) the language of the preemption clause does not support a finding of preemption; (2) allowing state law claims that reach misleading but not fraudulent emails would not undermine a national standard.

Hypertouch's claims survive summary judgment: Defendants argued that Hypertouch failed to put forth evidence that defendants either sent the emails or "knew" they were being sent by an affiliate in a misleading manner. The court responds that:

the plain text of 17529.5 indicates that its application is not limited to entities that 'send' the offending emails nor does it require plaintiff to establish that defendant had knowledge of such emails. Rather, the statute imposes liability on any 'person or entity' that 'advertises' in an email containing any of the forms of deceptive content described in section 17529.5 [(a)(1)-(3)].

Do the emails Violate the Statute?: Although plaintiffs asserted that the emails at issue violated three different prongs of section 17529.5, the court doesn't discuss the other two prongs, and merely focuses on the subject line prong. Section (a)(3) is the no misleading subject line prong, and the court finds that the following representative subject lines potentially violate the statute:

Get a FREE Golf Retreat to 1 of 10 destinations;

Let us know your opinion and win a free gift card;

Do you think Hillary will win? Participate now for a Visa card

In support of its summary judgment burden, Hypertouch put forth the testimony of its president (?) who says that he clicked on links in these emails and found out that in order to receive anything for free, you had to purchase something. As the court phrases it, the statute requires the subject line to mislead a recipient about a "material fact," and

if a subject line "creates the impression that the content of the email will allow the recipient to obtain a free gift by doing one act (such as opening the email or participating in a simple survey) and the content of the email reveal [sic] that the 'gift' can only be obtained by undertaking more onerous tasks . . . the subject line is misleading about the contents of the email.

1 year statute of limitations on liquidated damages claims: The California statute allows for statutory damages or actual damages. If the statutory damages are considered a penalty, then they are subject to a one year statute of limitations under California law. Hypertouch argued that statutory damages should not be subject to the one year time-bar because they are discretionary, but the court disagrees, holding that although the court has discretion with respect to the amount of damages it awards, it must award some amount of damages. Therefore, the court concludes that Hypertouch may seek actual damages for emails within three years of their receipt, but may only seek statutory damages for emails within one year of their receipt.

___

This is a big ruling on several levels.

The big practical effect is that it provides an avenue for California spam plaintiffs to seek relief under the California statute. Previous spam cases have backfired on spam plaintiffs due to over-reaching, but I wonder if the preemption argument backfired on defendants due to their over-reaching. Arguing that the preemption clause only saved claims which sounded in actual fraud was a stretch, and both Ethan and I expressed discomfort with rulings that embraced this standard. The court almost has an easy argument to knock down, and it happened to be an aggressive interpretation of the preemption clause that defendants were responsible for pushing.

The even bigger effect of this ruling is the fact that persons or entities who do not themselves send email but who are advertised in non-compliant email can now be held liable, without a showing that they knew or should have known that they were being promoted via non-compliant spam. This is going to throw a big monkey wrench in affiliate programs. Previous cases dealing with affiliate liability in the CAN-SPAM context required plaintiffs to show some sort of knowledge or facts sufficient to impute knowledge. ("Affiliate Spam Liability is Fact Question--US v. Cyberheat"; "Affiliate Liability Extravaganza".) .

In fact, the court expressly embraces a strict liability standard for affiliate liability. This is going to lead to some wacky results - for example, think of the case where a company located outside California is being promoted via email but does not know that its affiliates are emailing to California residents (the affiliates themselves may not know). All of a sudden, they find themselves subject to liability in California for violations of the California spam statute? (Does this present a section 230 issue, since neither of the defendants created the copy which allegedly violated the statute?)

The court's assessment of the substantive violations of the statute is cursory. The court tackles the subject line violations but where's the court's assessment of the violations of subsections (a)(1) (the domain name prong) and (a)(2) (misleading or forged header information prong). Setting aside the fact that the court's interpretation of the subject line prong is charitable (and aimed at protecting people who take on face value a claim via email that the recipient is getting something for free), there's no discussion from the court on how the emails violate the prong which prohibits the use of third party domain names without permission. The court similarly doesn't deal with the misleading header information prong, but Hypertouch's claims sound similar to the claims the Ninth Circuit rejected in virtumundo ("there is . . . nothing inherently deceptive in Virtumundo's use of fanciful domain names").

Interestingly, the California Supreme Court weighed on its spam statute just once. In a ruling last year in (Kleffman v. Vonage) the court held that use of random and multiple domain names even if they were intended to bypass spam filters does not violate California spam statute. ("Use of Multiple (Even Random or Garbled) Domain Names to Bypass Spam Filter Does not Violate Cal. Spam Statute -- Kleffman v. Vonage.")

Additional coverage: "C.A. Revives Action Charging Advertiser Under Anti-Spam Law" (Metropolitan News-Enterprise)
______

Comments by Eric:

This is an incredibly noteworthy opinion for several reasons.

First, published opinions on Internet law from California appeals courts are becoming rarer than a hen's tooth, so this is likely to be one of the few citable opinions by a California state court on spam issues for the foreseeable future (unless the Supreme Court takes it on appeal). As a practical matter, then, this opinion not only sets California law, but all federal courts interpreting federal law will also have to acknowledge this opinion. I anticipate this will be a heavily cited opinion in the future.

Second, the court's imposition of strict liability for advertisers promoted by spam is breathtaking. The court says "imposing strict liability on the advertisers who benefit from (and are the ultimate cause of) deceptive e-mails, forces those entities to take a more active role in supervising the complex web of affiliates who are promoting their products." Well, that's true in theory, but it's completely divorced from reality. Because of strict liability, even advertisers who undertake substantial efforts to police their affiliate network ARE STILL LIABLE FOR ANY PROBLEMS CREATED BY AFFILIATES. Maybe the court got confused about what it meant to impose STRICT LIABILITY. In reality, many advertisers won't rely on affiliates at all if they are strictly liable for what they do. I bet this court would view that as a perfectly fine outcome, but the it's disingenuous to say that strict liability will ratchet up the policing effort. A negligence standard might have done that; strict liability squashes the endeavor altogether.

For that reason, the strict liability standard for advertisers is the #1 thing (of a pretty long list) that needs to get fixed on appeal.

Venkat raised the issue of 47 USC 230's role here. I haven't had a chance to see if the issue was raised by the litigants, but my initial instinct is that an advertiser's 230 defense for ad copy written by a third party sounds pretty meritorious.

Overall, rulings like this reinforce to me how desperately we need to get states out of the business of trying to regulate the Internet. First, Congress built a structure to hold advertisers should be liable for spam violations in CAN-SPAM (a narrow liability scope, although I question the wisdom of even that). If California can impose a supplemental and much more expansive advertiser liability doctrine, Congress clearly did a crummy job with its preemption clause (so what else is new?). Second, this liability rule, if it sticks, is terrible policy destined to generate lots more of wasteful profit-seeking litigation. Third, it's unclear how California's policy would affect interstate advertising campaigns--a question we shouldn't even have to ask when dealing with Internet activities. We really, desperately, need to rethink our governance scheme that puts states in the business of regulating the Internet. IT DOESN'T WORK, and we lose a lot in the process.

Finally, a gossipy note. This is an unusual spam opinion in that it had big firm lawyers on both sides (Steptoe on the plaintiff side; Gibson Dunn on Valueclick's defense). I wonder if the court's decision to write a lengthy, detailed, footnoted and published opinion is the result of that.

Posted by Venkat at 05:22 PM | Derivative Liability , E-Commerce , Marketing , Spam

January 19, 2011

Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward -- Microsoft v. Shah

[Post by Venkat Balasubramani]

Microsoft Corp. v. Shah, et al., C10-0653 (W.D. Wash.; Jan. 12, 2011)

WSJ's Law Blog reports that Judge Martinez in the Western District of Washington (Seattle) issued an order allowing Microsoft to proceed on a novel theory of cybersquatting. Judge Martinez rejected defendants' motion to dismiss and held that Microsoft properly alleged claims for contributory cybersquatting and contributory trademark dilution.

The court's discussion of the background facts is brief (I've uploaded Microsoft's amended complaint to Scribd, which you can access here):

Defendants are alleged to have registered domain names containing Microsoft trademarks in order to drive traffic to their website. Consumers seeking a Microsoft website or product are mistakenly drawn to Defendants’ website through Defendants’ alleged use of Microsoft trademarks. Consumers who believe they are downloading a Microsoft product are then allegedly tricked into interacting with Defendants, who in turn solicit users to download emoticons. Defendants allegedly receive payment when a visitor clicks on links or advertisements displayed on their website, or when a visitor downloads or installs a product such as the emoticon toolbar.

Moreover, Defendants are alleged to have induced others to engage in infringement and cybersquatting by providing instruction on how to misleadingly use Microsoft marks to increase website traffic. Further, Defendants also allegedly sold a product that contained software to allow buyers to easily create websites incorporating Microsoft marks. This product allegedly included a video narrated by Defendant Shah.
[emphasis added]

Contributory Cybersquatting: Defendants moved to dismiss on the basis that claims for contributory cybersquatting and dilution are "not recognized." The court looks to two prior cases (Ford Motor v. Greatdomains.com and Solid Host v. Namecheap) and concludes that plaintiffs can assert claims for contributory cybersquatting. In Greatdomains, the district court discussed the "flea market" analysis but also found that since the cybersquatting statute required bad faith, a claim for cybersquatting would require a heightened standard - a cause of action against "cyber-landlords" would only be available in "exceptional circumstances." The court in Greatdomains declined to hold the defendant liable for contributory cybersquatting. Solid Host is a case where domain proxy registration services declined to turn over the identity of alleged thief and Solid Host brought contributory cybersquatting claims against the entity offering the proxy registration services. As an earlier blog post from Professor Goldman notes, the court there cited to the knowledge and control standard from the Ninth Circuit's Lockheed case, under which a plaintiff was required to prove:

that the defendant had knowledge and ‘[d]irect control and monitoring of the instrumentality used by the third party to infringe the plaintiff’s mark'.

In addition to these two cases, the court also cites to a recent case where the Ninth Circuit held - based on its view of an expansive reach of the ACPA - that a defendant who held on to a domain name to gain leverage in a business dispute (where the defendant claimed he was owed money) could be held liable under the ACPA. ("Holding on to a Domain Name to Gain Leverage in a Business Dispute Can Constitute Cybersquatting -- DSPT Int'l v. Nahum.")

Oddly, the court's discussion of the facts doesn't connect the dots. The court several times cites to the fact that the defendants sought to profit from "teaching others how to trade off the . . . recognition of [Microsoft's] mark in order to drive traffic to a given website," but the complaint doesn't seem to say that defendants sold any domain names to these third parties or helped these third parties acquire any domain names. The facts actually remind me of the SEO/web designer case Professor Goldman blogged about a couple of weeks ago where contributory trademark claims based on counseling and coaching were allowed to proceed against a web designer/SEO firm. (See "SEO/Web Design Consultant Faces Contributory Trademark Liability for "Copycat" E-Commerce Site--Roger Cleveland Golf v. Price".) Unless you have some revenue sharing arrangement going on, or benefit from the exploitation, it doesn't seem like giving someone the tools that would allow them to infringe should on its own subject you to liability.

Contributory Dilution: The court also declined to dismiss the cause of action for contributory dilution based on defendants "encourage[ment] of others to utilize the famous Microsoft mark in such a way that could cause dilution of the . . . mark." Plaintiffs consistently push for contributory dilution claims, and courts are not receptive to them. (See, e.g., the Second Circuit's result in Tiffany v. eBay: "eBay Mostly Beats Tiffany in the Second Circuit, but False Advertising Claims Remanded.") It's less than satisfying here for the court to recognize the cause of action, but treat the discussion of it as an afterthought.
__

The court gives lip service to the heightened test that is appropriate for a cause of action for contributory cybersquatting, but seems to give Microsoft a pass applying either of the tests to the allegations. It's tough to say whether this cause of action will alter the landscape for either cybersquatting or dilution, or whether this is a scenario where the court let the contributory claims move forward since Microsoft alleged primary claims for cybersquatting that on their face look strong. (Courts seem to have this bad habit.) If it sticks, it seems like a broadening of the scope of ACPA liability, which courts in the Ninth Circuit seem willing to do.

Other coverage:

"On Microsoft and ‘Contributory Cybersquatting’" (WSJ Law Blog)
"Microsoft Gets Green Light for Suit Asserting Novel Expansion of Cybersquatter Liability" (Law.com)
"Western District Denies Dismissal of Novel Trademark Theories" (Mike Atkins)

Posted by Venkat at 09:13 AM | Derivative Liability , Domain Names , Trademark

January 12, 2011

Search Engines Sued for Accepting Keyword Advertising on "Cheese of the Month Club" Trademark--Pathak v. ICG

By Eric Goldman

Pathak v. ICG America, Inc., 5:11-cv-00055-VAP -OP (C.D. Cal. complaint filed Jan. 6, 2011)

Pathak's lawsuit is the latest iteration in the litigation deathmatch royale taking place among retailers with "[Food] of the month club" trademarks. See this AP story about related litigation brought by Harry & David against Pathak over "Fruit of the Month Club," plus Harry & David has sued both Hickory Farms and ICG (one of the defendants in this case). See a recent ruling in favor of Harry & David in the ICG case. Finally, Pathak previously sued the PTO over its granting a trademark in "fruit of the month" (and Pathak sued Google as part of that lawsuit over keyword ad revenues). I suspect I'm missing some other battlefronts in the deathmatch.

What a load of nonsense. The world would be a better place if we just declared the phrase "[food] of the month club" generic so that no one could claim a trademark in it. Even if the phrase once was descriptive and thus capable of secondary meaning, it has become genericized through overuse. In contrast, so long as we recognize trademark rights in watered-down descriptive terms like "[Food] of the month clubs," we get bogus disputes between companies with crummy trademarks, all of them tearing each other down rather than actually doing a better job for their customers. What a shame.

OK, back to the latest case. Pathak runs a "Cheese of the Month Club" and has a registered trademark in the term. Apparently he learned some tricks from his defense of the Harry & David lawsuit, because now he's going on the offensive using recycled arguments that apparently were used against him. (Indeed, he apparently cloned-and-revised an anti-cybersquatting claim from his precedent source even though the complaint never discusses domain names). He asserts that some advertisers bought his trademark as keywords and used the term in ad copy. He then pulls the search engines into the lawsuit as well, arguing that they ignored his C&D against selling the trademark as an ad trigger and that makes them culpable. As a pro se going up against some mighty companies, I'd say Pathak's likelihood of success against the search engines is very, very low.

The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 2010):

Posted by Eric at 08:54 AM | Derivative Liability , Search Engines , Trademark | TrackBack

January 05, 2011

Lawyer-Spam Plaintiff Loses in the Sixth Circuit Over Allegedly Misleading DISH Network Emails -- Ferron v. Echostar

[Post by Venkat Balasubramani]

Ferron v. Echostar Satellite LLC, 09-4407 (6th Cir.; Dec. 28, 2010)

Ferron brought claims against Dish Network and its retail and marketing partners alleging that he had been deceived by the terms of email offers sent by defendants. According to defendants, Ferron's strategy was to actually sign up to receive emails which he claimed were deceptive. However, prior to receiving any emails, he allegedly called to verify the terms of Dish Network's service:

according to defendants, Ferron purposefully provided his email address to the approximately twelve satelitte dish websites from which he later received advertisements. Before he provided his email address to the websites, Ferron contacted Dish network call centers to obtain information about the terms and conditions of various Dish Network products and services. Accordingly, Ferron was aware of the terms allegedly excluded from the deceptive emails before he received them.

The trial court granted summary judgment, and the Sixth Circuit affirms in an unpublished opinion.

Ohio Consumer Protection Statute: Ferron claimed that he did not need to have been deceived personally to bring a claim under the OCSPA - it was sufficient that the emails contained objectively misleading information. The court disagrees. Citing overwhelming precedent in defendants' favor, the court concludes that a plaintiff must have been actually deceived in order to bring a claim under the OCSPA (i.e., individual plaintiffs cannot take the private attorney general route). Although Ferron argued that a ruling to this effect would foreclose legitimate claims, this argument didn't get much traction with the court:

Simply put, the only persons foreclosed by today's ruling are individuals who solicit emails from an advertiser after having researched and discovered the additional terms the advertisement allegedly excludes.

Ouch!

The Publisher Exception to the OCSPA: The Sixth Circuit also affirmed the trial court's ruling that one of the defendants (Hydra) who was a mere intermediary was entitled to the "publisher exception" to the OCSPA. As an initial matter, the court concludes that Hydra "was not involved in the creation of the . . . advertisements," and thus was precisely the type of entity who could take advantage of the publisher exception. Ferron argued that Hydra was not the type of publisher the legislature intended to fit within the exception, because Hydra received a referral fee each time a customer signed up (instead of a flat fee per ad, or a monthly fee). The court rejects this argument, reasoning that regardless of the fee structure, the publisher always has an interest in ensuring that customers respond to advertisements. Ferron also argued Hydra should not be entitled to take advantage of the publisher exception with respect to any ads transmitted by Hydra after the filing of the lawsuit. The court rejects this argument as well, since the mere filing of Ferron's complaint is not indicative of a violation of the statute (just that Ferron alleged that defendants violated the statute).

Request for Sanctions: Ferron requested sanctions on the basis that defendants did not maintain the ads in their native form (i.e., he could not click through and access the underlying links and graphics). The Sixth Circuit affirms the district court's rejection of Ferron's request for sanctions, noting that Ferron himself had the emails in question and should have saved them.
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The court's description of the facts makes me think a section 230 defense may have been available to Hydra, not that it ended up needing it anyway.

The bigger takeaway? When it comes to spam litigation at least, courts seem more than able to ferret out what they see as unworthy claims. This is one of a long line of losses by plaintiffs who seem to have made it a part of their business to seek out and sue people to send them unsolicited email (see Gordon v Virtumundo, Mummagraphics, etc.).

A couple of days after the Sixth Circuit issued its opinion in this case, it issued its ruling in Charvat v. Echostar, a case where Ferron was counsel for the plaintiff. This case involved alleged do-not-call violations against Echostar and third parties brought by Philip Charvat, whom the court describes as not being "shy in taking on the role of private attorney general under the Telephone Consumer Protection Act" and listed him as a plaintiff in 13 TCPA lawsuits. The Sixth Circuit delves into the thorny jurisdictional issues, but ultimately ends up punting to the FCC on the interesting issue of whether Echostar could be liable for TCPA-violating calls made by third party independent contractors/affiliates. The FCC's amicus brief in this case suggests that it has an expansive (and perhaps troubling) view of such imputed liability.

Previous post: "Email Ad Network Isn't Liable for Unsolicited Email--Ferron v. Echostar"

Coverage of an earlier Ferron lawsuit: "Q1 2009 CAN-SPAM Quick Recaps"

Posted by Venkat at 02:14 PM | Content Regulation , Derivative Liability , E-Commerce , Spam

January 04, 2011

Ripoff Report Ordered to Stop Publishing User-Submitted Report--Giordano v. Romeo

By Eric Goldman

Giordano v. Romeo, No. 09-68539-CA-25 (Fla. Cir. Ct. Dec. 28 2010). The complaint.

Today's case is a baffling and clearly erroneous ruling. What's even more bizarre is that the judge initially got the right result and *then* screwed up. Bummer.

The case involves an allegedly defamatory Ripoff Report posting by a user, Romeo. The plaintiff sued the user and Ripoff Report (Xcentric). The judge initially dismissed Ripoff Report based on 47 USC 230. So far, so good.

Then, the user agreed to a stipulated injunction that she would ask Ripoff Report to remove the post. Ripoff Report--following its standard no-removal policy--said no. The plaintiff then went back to court, got permission to add Ripoff Report back into the case as a defendant, and then sought a TRO against the Ripoff Report for failing to remove the post.

The judge signed the plaintiff's requested TRO form, which said “Xcentric [sic] refusal to comply with this Court’s Order and the demand of the publisher to remove the statements makes XCentric the publisher of the statements and therefore liable for damages.” The judge crossed out the phrase "and therefore liable for damages" and hand-wrote the following: “This is different from determining that they are the publisher solely because of the posting.” The TRO form also says "The court specifically finds that the CDA does not categorically bar this Court from issuing an injunction against Xcentric" and later "even if Xcentric were not treated as the publisher (and indeed, Plaintiffs do not seek to impose civil liability upon Xcentric), the CDA does not bar this court from entering injunction [sic] relief."

Whoa. The court can repeat as many times as it wants that Section 230 doesn't preempt injunctive relief, but it's greatly mistaken. Courts have repeatedly rejected injunctive relief in 230 cases in the past. See, e.g., Noah v. AOL Time Warner, Inc., 261 F. Supp. 2d 532 (E.D. Va. 2003):

plaintiff argues, unpersuasively, that § 230 does not apply to claims for injunctive relief, relying on Mainstream Loudoun v. Board of Trustees of the Loudoun Cty. Library, 2 F.Supp.2d 783, 790 (E.D.Va.1998)....Subsequent courts have not followed Loudoun in limiting § 230 immunity to claims for liability only, but have found § 230 applicable to claims seeking injunctive relief as well. See Ben Ezra, 206 F.3d at 983-986 (applying § 230 to claims for injunctive relief); Smith v. Intercosmos Media Group, Inc., 2002 WL 31844907 (E.D.La. Dec.17, 2002) (holding that § 230 provides immunity from claims for injunctive relief); Kathleen R., 104 Cal. Rptr.2d at 781 (same). Indeed, given that the purpose of § 230 is to shield service providers from legal responsibility for the statements of third parties, § 230 should not be read to permit claims that request only injunctive relief. After all, in some circumstances injunctive relief will be at least as burdensome to the service provider as damages, and is typically more intrusive.

Further, the court goes out of its way to call Ripoff Report a "publisher" of Romeo's content, which explicitly invokes the statutory language in 230(c)(1) that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." So by calling Ripoff Report a publisher, the court demonstrated that its ruling was unlawful. Worse, the idea that Ripoff Report isn't initially a publisher but can become one by failing to remove the post has been thoroughly rejected in a long string of cases dating back to the uncited AOL v. Zeran case. The Florida Supreme Court has even adopted Zeran in Doe v. AOL from a decade ago, so there really isn't any question that this judge went rogue.

This ruling is similar to the recent Blockowicz decision, but that case had a different procedural setting. There, Ripoff Report wasn't a defendant and had never been; the only issue was a statutory construction of language in FRCP 65(d). Here, for perplexing reasons, the court allowed the plaintiff to name the Ripoff Report as a defendant as a second time after having dismissed the Ripoff Report initially.

We've now seen several cases in the past few months involving injunctions against websites over user-generated content. Two of them, the Blockowicz and Bobolas cases, said an injunction against a user's post does not reach the hosting website per FRCP 65(d). In Amaretto v. Ozimals, the court issued an injunction against a non-party website without explaining how or why it could reach that site. Then, in this case, the court lets the plaintiff add the website as a defendant solely for injunctive relief purposes. The legal results in these cases are pretty jumbled right now, and I hope we get some definitive clarity soon. Perhaps we'll get it in this case, as the Ripoff Report plans to appeal.

Paul Levy has an excellent and lengthy writeup about this case, the Blockowicz case and their implications.

Posted by Eric at 09:10 AM | Content Regulation , Derivative Liability | TrackBack

January 03, 2011

Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals

By Eric Goldman

Amaretto Ranch Breedables v. Ozimals, Inc., 2010 WL 5387774 (N.D. Cal. Dec. 21, 2010). The Justia page. The complaint with exhibits. Ozimals' C&D to Amaretto and its blogged statement on the case.

Here's a line you don't see every day in judicial opinions: "The gist of the copyright dispute between the parties is whether Plaintiff's virtual horses infringe on copyrights associated with Defendant's virtual bunnies." This reminded me a little of that great line from Ghostbusters: "dogs and cats living together... mass hysteria!"

The underlying dispute involves rival sellers of virtual animals that require the users to keep purchasing food to keep the animals alive. The C&D letter to Amaretto goes into some detail about what it thinks Amaretto copied. I didn't follow it all, but some of the assertions are clearly dubious (in a Baker v. Selden kind of way) and none of them seemed like a surefire winner to me. The court interpreted Ozimals' position as asserting copyright over software functionality (clearly one of Ozimals' core concerns), and the court rightly dismisses the copyright merit of that position.

This ruling addresses Amaretto's request for a TRO based on 17 USC 512(f), which the court grants. This is now the third time I've seen 512(f) used as the basis of injunctive relief--the other two being Biosafe-One v. Hawks from 2007 and the recent Design Furnishings v. Zen Path LLC (which just had a new, much clearer ruling granting a preliminary injunction). In a clearly rushed opinion, the court didn't cite either case. It's interesting to see 512(f) emerge as an important tool in fighting back against cloud service providers who are too jumpy about copyright takedown notices. [UPDATE: I had forgotten about Novotny v. Chapman, a case that raised 512(f) and injunctive relief but ultimately sidestepped it.]

What's even more unusual about this case is that the court's TRO applies to Second Life (Linden Research), not Ozimals. The specific order: "Linden Research, and all persons in active concert or participation with Linden Research, are temporarily restrained from taking down from Second Life Plaintiff's Horse Product Line."

However, Linden/Second Life wasn't a party to the lawsuit, so the court is effectively stretching FRCP 65(d) to apply to Second Life as a non-party. This takes us squarely into the territory implicated by the recent Seventh Circuit Blockowicz ruling (and a funky ruling, Giordano, I will blog soon), which said that a hosting website wasn't automatically in active concert with a user who submitted enjoined content. Perhaps copyright liability is or should be different than defamation, especially given the different structures of 47 USC 230 and 17 USC 512. Otherwise, it seems like the court's TRO may be improperly trying to bind a non-party. At minimum, the court should have explained why it was discussing a TRO against Second Life.

The order binding Second Life also raises some troubling First Amendment issues. Second Life has the First Amendment rights to decide what to publish and what not to publish. If Second Life decides, for whatever reason, that it wishes to kibosh Amaretto's content, it seems improper for a court to force it to do otherwise. This point is completely unaddressed in the court's opinion because Second Life wasn't a litigant and couldn't advocate for its own interests. I could see why Second Life would basically agree to something analogous to an interpleader (effectively turning over the user-vs.-user copyright dispute to the judge and agreeing to abide by the judge's instructions). However, in a quick perusal of PACER, I didn't see anything that looked like Second Life consented to be bound by the proceedings. Were Second Life to fight this order on First Amendment grounds, I think it would have some mojo in that challenge.

In the other two cases I mentioned, the injunctive relief restrained the copyright owner from sending more takedown notices. In light of both the FRCP 65 problem and the First Amendment, it's not clear from this brief opinion why that approach wouldn't have sufficed. That way, Ozimals' 512(c)(3) takedown notices would stop, but Second Life could still retain its constitutionally protected editorial discretion.

Posted by Eric at 10:46 AM | Copyright , Derivative Liability , Virtual Worlds | TrackBack

December 30, 2010

Google Files Unredacted Brief in Rosetta Stone v. Google Appeal

By Eric Goldman

After some prodding by Paul Levy of Public Citizen, Google has filed an unredacted version of its response brief in the Rosetta Stone v. Google appeal. As Paul explains in his blog post, the newly disclosed information is nowhere close to confidential. Some of the new information:

* page 9: Google advertising performs well for Rosetta Stone. Between 2007-10, it made $27M from Google referrals (organic and paid) and got 330k+ orders from Google ads.
* page 10: Google helped Rosetta Stone catch fraudsters
* page 33: Rosetta Stone customers take 2-4 weeks to make a purchasing decision
* page 56: in 2005, Rosetta Stone's unaided consumer recognition was 2% and aided recognition was 13%

Some of these facts may be mildly embarrassing to Rosetta Stone, but way more embarrassing is that anyone thought this information was actually confidential.

In a partially related development, Marty Schwimmer and I are working with Public Citizen to request unsealing of the entire joint appendix in this appeal. Paul Levy blogged an explanation.

UPDATE: Oral arguments in the case are scheduled for the week of March 22.

The case library:

Posted by Eric at 07:49 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

December 29, 2010

Court Rejects Agence France-Presse's Attempt to Claim License to Haiti Earthquake Photos Through Twitter/Twitpic Terms of Service -- AFP v. Morel

[Post by Venkat with a few comments from Eric]

Agence France Presse v. Morel, 10 Civ. 2730 (WHP) (S.D.N.Y.; Dec. 23, 2010)

The Southern District of New York issued an order denying AFP's request to dismiss photographer Daniel Morel's copyright claims, rejecting AFP's argument that uploading pictures to Twitter/Twitpic granted third parties (including AFP) a broad license to exploit this content. The result is not surprising from a legal standpoint, but should allow photographers (and others who upload content into Twitter's ecosystem) to breathe a sigh of relief.

The court recaps in detail the factual background underlying the dispute in its order. In a nutshell, Morel took what turned out to be iconic photographs in the aftermath of the Haiti earthquake. He uploaded the photos to his Twitpic account and linked to them via his Twitter account. Shortly after Morel uploaded his photographs, Lisandro Suero copied the photographs and posted them to Suero's own Twitpic page. Suero did not attribute the photographs to Morel. The facts are somewhat murky, but it does not seem disputed that AFP downloaded the photographs from Suero's account, marketed and distributed the photographs, and initially credited Suero with taking the photographs. Ultimately, Morel cried foul, and AFP filed a declaratory judgment lawsuit saying it did not infringe. [Some of the discussions between AFP and Suero took place on Twitter, and make for interesting reading. I wonder if the casual nature of Twitter and email discussions contributed to AFP's foibles here.] [Also, the photos were broadly distributed and licensed downstream, so there are a slew of defendants. I've mostly omitted discussion of the various defendants, focusing on AFP.]

Copyright Claim: AFP's primary argument was that (1) "[it] had an express license to use Morel's images [by virtue of the Twitter or Twitpic terms]" or (2) that it was a third party beneficiary of the agreement between Morel and Twitter. The court rejects this argument:

[b]y their express language, Twitter's terms grant a license to use content only to Twitter and its partners. Similarly, Twitpic's terms grant a license to use photographs only to Twitpic.com or affiliated sites. . . . the provision that Twitter 'encourage[s] and permit[s] broad re-use of Content' does not clearly confer a right on others to re-use copyrighted postings

The court also rejects the argument that AFP was a third party beneficiary to the Twitter license agreement, since AFP was not a "partner or sublicensee" of Twitter - AFP acknowledged that it was only a "user."

Contributory/Vicarious Infringement: With respect to the contributory infringement claim, the court held that Morel's allegations were sufficient:

Morel's allegations that AFP and Getty knew that the images where his, disregarded his rights, and licensed his images to third parties are sufficient to plead knowledge and inducement of infringement.

The court similarly rejects AFP's and Getty's request to to dismiss the vicarious infringement claim. (The court does grant the request by CBS and CNN to dismiss the vicarious infringement claim because Morel failed to plead any "direct financial interest" in the exploitation of images by the affiliates of CBS and CNN.)

DMCA Copyright Management Information Claims: Morel's DMCA claims against AFP were premised on AFP's miscrediting of the images. AFP did not contest that the credit lines constituted "copyright management information" (as defined in section 1202), and the court finds that AFP acted with the requisite knowledge and intent. Interestingly, with respect to AFP, the court notes that Morel alleged that:

an AFP photo editor viewed [Morel's] photos before asking about identical photos on Suero's Twitpic page, and that when Morel failed to respond to the editor's email, AFP downloaded the pictures from Suero.

Morel brought a second 1202 claim based on AFP's "removal or alteration" of CMI, or distributing copyrighted material "knowing that CMI has been removed or altered." The crux of Morel's argument seems to be that he had posted CMI on his Twitpic page (e.g., by including "by photomorel," "daniel morel," and "morel") next to the photos when he uploaded them, and AFP violated section 1202 when it distributed photos downloaded from Suero's Twitpic account (which did not contain this information). The court construes the term CMI broadly, rejecting AFP's argument that CMI must be contained on the photograph itself. In the court's view, the information attached to Morel's Twitpic account constitutes CMI, and Morel's allegations regarding AFP's distribution of the photo which did not contain this CMI was sufficient to state a claim.

AFP argued that CMI is limited to a "component of an automated copyright protection or management system" (i.e., a technological measure that controls access and reproduction), but the court rejects this argument, and the line of cases which take this approach.

Lanham Act: The court rejects Morel's Lanham act claim as being foreclosed by Dastar, a case in which the Supreme Court rejected Lanham Act claims with respect to communicative products (finding that these claims should be brought under copyright law and allowing Lanham act claims would impermissibly broaden the scope of copyright protection).
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As I mentioned in a previous post, AFP's position was a stretch, and it's nice to have some clarity that uploading content into the Twitter ecosystem does not grant third parties a license to use that content outside the ecosystem. (Nor does sharing and encouraging others to share result in a license to third parties.) Twitter and its partners have a broad license, but that's different from a random third party coming along, and claiming rights to the content. Photographers can rest easy!

The court construes Morel's 1202 arguments broadly, and as Professor Goldman notes below, this is equally interesting (if not more so) than the Twitter/Twitpic license issue. This looks like a boon to content providers - almost any sort of notation which indicates that the content is yours can be copyright management information (under the court's definition), and disseminating the content without this information (or after having removed it) can cause someone to incur 1202 liability. It seems like the court's reading of section 1202 (although it is supported by the language of the statute) allows a plaintiff to assert exactly the type of claim the Supreme Court negated in Dastar.

Earlier posts:

"Agence France-Presse Claims Twitter's Terms of Use Authorize Its Use of Photographs Posted to TwitPic"

"Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to 'Twitter/TwitPic'" (I blogged that AFP's position was a stretch, but this post at duckrabbit contains a link to the oral argument, which will give you a flavor of how incredulous the court was at AFP's argument that it had a license through the Twitter or Twitpic terms: "AFP, CNN, Getty, ABC, V Morel, why this case matters to all professional photographers or why Getty could be selling your photos without you even knowing …")

Earlier coverage of the dispute:

* paidContent: "Lawsuit Tests Whether Twitter Pictures Are Free For The Taking"
* ReadWriteWeb: "Agence France-Presse: "All Your Twitpics Are Belong to Us"
* Techdirt: "AFP Still Not Giving Up On Its Bizarre Claim That Twitpic Images Are Freely Licensed To Anyone"

______

Eric's comments:

This case is a clusterf**k. AFP made numerous mistakes that resulted in infringing photos being injected into the news coverage of a major world crisis, which inadvertently tainted a variety of downstream media properties--all of whom, due to copyright's strict liability standard, are likely to write checks to Morel. AFP and its unfortunate partners should end their likely-futile and sometimes-silly defense and settle up with Morel so that everyone can move on to more productive endeavors.

Even though the Twitter/Twitpic discussion will get the most attention, I think the court's discussion about the 1202 liability is the opinion's most noteworthy aspect. There has been an ongoing schism in the 1202 jurisprudence about whether or not it's a 1202 violation to copy a copyrighted work without retaining the CMI located somewhere other than in the work itself. This case is a fine example of the problem: when people copied Morel's photos, they didn't go back to Twitpic to see what additional CMI might have been presented on the pages alongside the images. Some courts, recognizing the potential trap this creates, have read the 1202 statute narrowly, basically saying that metadata not in the file itself can't trigger a 1202 violation. I've been skeptical about the statutory fidelity of those rulings, but I've applauded their efforts to keep 1202 from becoming a backdoor Dastar as Venkat calls it. Other cases, including this one, have rejected these narrow readings of 1202 and indicated that failing to capture and republish metadata outside the file itself could violate 1202. Should more courts jump on this bandwagon, expect 1202 to become the copyright plaintiff's favorite new toy in 2011.

Posted by Venkat at 06:10 AM | Copyright , Derivative Liability , Licensing/Contracts

December 28, 2010

Ripoff Report Isn't Bound By Injunction Against User Post--Blockowicz v. Williams

By Eric Goldman

Blockowicz v. Williams, No. 10-1167 (7th Cir. Dec. 27, 2010)

I blogged about this case a year ago. The Blockowiczs objected to allegedly defamatory posts on the Ripoff Report. They obtained a default injunction against the posters requiring removal of the posts. With this default order and the defendants AWOL, the Blockowiczs approached Ripoff Report and other websites and asked them to remove the posts. The Ripoff Report has a well-publicized no-takedown policy, even if the author wants to remove his/her post, so the Ripoff Report refused. The Blockowiczs then claimed that the Ripoff Report violated FRCP 65(d) because the Ripoff Report was "in active concert or participation" with the initial posters by refusing the injunction's removal order. The district court disagreed with the Blockowiczs.

In this ruling, the Seventh Circuit affirms the district court and says that FRCP 65(d) does not require the Ripoff Report to remove the posts based on the default injunction. Ripoff Report can't be compelled to remove the posts through a direct legal action because of 47 USC 230, which the opinion didn't mention. As a result of the FRCP 65 interpretation plus 230's immunity, the Blockowiczs now have no way to force the posts' removal other than a contempt proceeding against the AWOL initial posters.

The legal question is whether the Ripoff Report was "in active concert or participation" with its users regarding their posting. The court rephrases this as whether Ripoff Report "aided and abetted" the posters' violation of the injunction. The court treats this as an easy statutory interpretation question and says:

the record indicates that Xcentric and Magedson have simply done nothing relevant to this dispute since the defendants agreed to the Terms of Service, which occurred before the injunction was issued. Further, the fact that Xcentric is technologically capable of removing the postings does not render its failure to do so aiding and abetting. Xcentric’s and Magedson’s mere inactivity is simply inadequate to render them aiders and abettors in violating the injunction.

The Blockowiczs point out various aspects of the Ripoff Report's user agreement, including clauses prohibiting defamatory posts and getting an indemnity from users. The court dismisses these facts as irrelevant. The court concludes:

With sympathy for the Blockowiczs, we conclude that Rule 65(d)(2)(C) is not the appropriate mechanism for achieving the removal of the defendants’ posts....The Blockowiczs likely could have pursued a contempt charge against the defendants for their failure to comply with the injunction. This avenue for relief may still be available.

One thing the court doesn't directly address: what happens if the Blockowiczs find the initial posters and force them to remove the post or be in contempt, but the Ripoff Report declines due its no-takedown policy? The court skirts the fact that the initial posters no longer have the technical capacity to remove the posts, so it's not clear what would happen if the Ripoff Report refuses the initial posters' removal requests.

The policy implications of this ruling are clear. If UGC websites refuse to voluntarily honor injunctions against user postings and the initial posters can't be found, there could be circumstances where pernicious content simply can't be forced off the web. I would be more troubled by this if I expected this outcome to arise frequently, but it won't. In addition to the Blockowicz case, I can think of one other situation where this issue has come up (the Bobolas v. Doe case), and it was still an open question there if the service provider would do a voluntary takedown. So for now the potentially troubling outcome of this case remains an interesting intellectual issue with minimal practical import.

UPDATE: The Ripoff Report has appended a statement to the three posts in question. See, e.g., this post. A highlight from the statement:

"Other sites claim they support free speech, but when the going gets rough, they will usually protect their bottom line rather than the Constitutional rights and freedoms this country was founded upon. Unlike other sites, even when the speech involved is harsh or negative and even if our position sometimes generates negative press for us, we think that the First Amendment requires us to put our principles before our pocketbook and fight against censorship."

The statement also notes:

"although the existing reports remain visible in their original form, we have made minor redactions to the titles of the affected reports to remove language that was needlessly offensive and profane. Furthermore, despite our decision not to remove this text, anyone reading these reports should keep in mind that a court order has been entered which finds the statements below are not true."

Posted by Eric at 09:05 AM | Derivative Liability | TrackBack

December 24, 2010

Deep Packet Inspection (NebuAd) Litigation: Court Dismisses ECPA Claim but CFAA Claim Continues

[Post by Venkat with comments by Eric]

Mortensen v. Bresnan Comm., CV 10-13-BLG-RFC (D. Mont. Dec. 13, 2010)

A district court in Montana hearing one of the many NebuAd "deep packet inspection" lawsuits partially granted a defendant's motion to dismiss. This lawsuit arises out of NebuAd's alleged attempt to monitor and use an end user's internet activity for advertisement targeting purposes - i.e., not using cookies or other tracking, but actually routing the communications themselves through NebuAd's "appliance." There have been a slew of lawsuits out of this practice; this lawsuit involved claims against Bresnan Communications, an Internet access provider, who is accused of letting NebuAd install the appliance for its profit.

Electronic Communication Privacy Act Claims: Bresnan first argued that it did not engage in any interception itself, so it could not be held liable under the ECPA. The court rejects this argument on the basis of plaintiff's allegation that Bresnan "allowed" NebuAd to install its device on Bresnan's network, and but for the appliance, the monitoring would not have occurred.

However, the court accepts Bresnan's argument that the plaintiffs agreed to the interception based on disclosures in the terms of service and elsewhere. The court quotes from Bresnan's "Online Privacy Notice," which says:

the equipment used to provide the service collects information . . . [including] information about . . . 'electronic browsing,' and the text of email or other electronic communications the [users] send or receive using [the] services.

The notice also references that the information that is collected will be disclosed to third parties. Bresnan's "Online Subscriber Agreement" contained similar disclosures. Finally, the court notes that Bresnan alleges that it provided customers "specific notice" and a link to opt-out from information collections.

Shockingly, plaintiffs did not contest that "they agreed, by way of Bresnan's Privacy Notice and Subscriber Agreement to the interception." (??) Instead, plaintiffs quibble with the scope of the documents in question and argued that Bresnan construes plaintiffs' consent "cavalierly." The court rejects plaintiffs' argument, and grants Bresnan's motion to dismiss the ECPA claim on the basis of consent.

Invasion of Privacy Claims: Plaintiffs brought a common law invasion of privacy claim. The court finds that the notice and disclosure (discussed above) undermines any expectation of privacy plaintiffs had in their use of the service. This ends the court's discussion.

Computer Fraud and Abuse Act Claims: Although the court rejects plaintiffs ECPA claim, the court allows plaintiffs' Computer Fraud and Abuse Claim to go forward. The court concludes (based on Bresnan's disclosures to its customers) that Bresnan's access of plaintiffs' computers had some authorization. Nevertheless, the court finds that Bresnan may have exceeded the authorization that was initially granted. The court bases this conclusion on the fact that the notices provided by Bresnan did not clearly apprise plaintiffs that "their computer settings were to be actively altered or tampered with by Bresnan." The court concludes that for purposes of surviving a motion to dismiss, plaintiffs have sufficiently alleged that:

Bresnan's act of tampering with the security and privacy protocols exceeded any authorization that Plaintiffs may have given.

The court also addresses the jurisdictional damage requirement, under which a CFAA plaintiff must show that the unauthorized access caused $5,000+ in damages. The court notes that plaintiffs' allegations of emotional distress are not compensable, since only economic losses are recoverable under the CFAA. However, the court finds that plaintiffs satisfy the jurisdictional damage threshold since they allege they were "forced to mitigate Bresnan's invasive actions by expending time, money and resources to investigate and repair their personal computer's diminished performance."

Trespass to Chattels: Finally, the court allows plaintiffs' trespass to chattel claims to go forward. With respect to the trespass claim, the court says that the plaintiffs sufficiently alleged an interference with their chattel (their computers).
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Venkat's Comments:

This is one of many privacy lawsuits that are percolating through the courts right now. I think this one differs qualitatively from many of the others in that here, there is an allegation of improper monitoring of the contents of the plaintiffs' communications. It's one thing to surreptitiously find out what websites someone has been visiting or leak someone's unique user ID. It's another thing entirely to read their email and the contents of what they access while browsing. This is an important distinction to keep in mind. I don't think you can necessarily extrapolate a tentative result in the other cases based on this result. Apart from the damages issue (discussed below) a key unknown in the pending cases is to what extent the information that is captured or disclosed are covered by the statutes in question.

I was somewhat surprised to see little or no discussion from the court on whether the policies were presented in a "leak proof" manner, or whether the disclosure satisfied FTC standards. Was there evidence that plaintiffs could not access the service without encountering the policy? (See Prof. Goldman's post on that topic: "Clickthrough Agreement With Acknowledgement Checkbox Enforced.")

The court's conclusion on the consent issue is also somewhat perplexing, in light of the exact same judge's earlier order denying Bresnan's request to compel arbitration, which you can access here. BNA recaps the decision denying Bresnan's request to subject the claims to arbitration as follows: "A mandatory arbitration clause in an internet service provider's terms of service—which was presented in capitalized text in the ninth paragraph of the unsigned document—was an inconspicuous part of a contract of adhesion and unenforceable under Montana law."

On the other hand, if plaintiffs conceded the consent/disclosure issue, then the court did not need to get into it. [What were the plaintiffs thinking, conceding this? If you are bringing this type of a lawsuit, you have to be able to put together enough allegations of no-consent to get past the motion to dismiss stage.]

At the end of the day, if consent is going to be the basis to defend against these types of privacy claims, defendants would be well advised to really be thorough in procuring this consent. In fact, I'm surprised that Bresnan - given that it is an IAP allegedly engaging in gray area practices - didn't just secure written consent at the time it first provided the service.

I'm also surprised at the court's conclusion on the Computer Fraud and Abuse Act damage issue, given its conclusion on the ECPA issue. If it was going to split hairs on the notice and consent (as it did with respect to the CFAA claims), it could have probably done so on the ECPA claims as well. Courts often keep in claims they may otherwise dismiss if they decided that some claims are going to survive. Also, some cases construe the CFAA narrowly as requiring damage to the protected computer (or an interruption in data). It's conceivable that plaintiffs could have suffered the requisite loss (which can be aggregated in the class action context), but the court's discussion of plaintiffs' allegations made the damage allegations seem awfully light. (Two posts from Nick Akerman look at some recent CFAA dismissals and discuss the restrictive approach taken by some courts with respect to the CFAA's jurisdictional damage requirement: "Dismissal of CFAA Claim for Lack of Jurisdiction" and "Why Two District Courts Dismissed Valid Computer Fraud and Abuse Claims for Lack of Jurisdiction.")

The dismissal of the ECPA claim as opposed to the CFAA claim could have some ramifications on the damages front. Statutory damages are available under the ECPA, but not under the CFAA. For what it's worth, there's conflicting authority on the issue of whether non-economic damages are recoverable under the CFAA. (See Garland-Sash v. Lewis, 348 Fed. Appx. 639 (2d Cir. 2009) (construing the phrase "compensatory damages" - which was added to a provision of the CFAA after the DoubleClick case came down - to include damages for pain, suffering, and other emotional harms").) Even if for some reason the court decides that plaintiffs are entitled to non-economic damages, it will be interesting to see how plaintiffs prove up these damages.

The trespass claim is a bonus claim, but again, the court doesn't dig in to the damage issue with respect to common law trespass. Although the court cites to California law, the court does not discuss damage or slowdown to the machine in question as articulated by the California Supreme Court in Intel v. Hamidi (an email bombardment case) or as interpreted by the Fourth Circuit in the Omega v. Mummagraphics case.

I'm not sure how much light this ruling will shed on the many pending privacy lawsuits that involve things like surreptitious tracking, sniffing, and leakage of personal information. Damages issues aside, the ruling may highlight the importance of choice, consent, and the requirement that any disclosures or disclaimers be conspicuous, all issues the FTC seems to frequently opine on and issue reports about.

(h/t Wendy Davis)
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Eric's Comments:

As Venkat notes, this ruling is an inconsistent mix of formalism and realism. In light of the judge's ruling last month that Bresnan made inadequate disclosures to uphold an arbitration clause, it's odd for the judge to now find that Bresnan made adequate disclosures to wipe away the ECPA and privacy invasion claims via dense/buried EULA language plus an opt-out notice; while that same consent wasn't good enough to wipe away the CFAA and Trespass to Chattels claim. The CFAA ruling on damages was also oddly formalist given the consent ruling. I respect formalist judges for being careful and methodical, but it would have been nice if this judge had been a little more aggressive about calling a spade a spade.

I am not a fan of deep packet inspection (DPI) by IAPs done on anything but an opt-in basis. We're basically back to the old battles about unwanted adware/spyware getting onto users' hard drives as part of some bundle. Sure, the adware vendors could claim user consent through a formalist reading of the contracts, but there wasn't true consumer consent, and we all knew it. I'm reminded a little of the FTC's bust of Sears for its trackware installations--Sears paid people for the installation, but the software did things far beyond anything users might have expected, even though these attributes were putatively explained deep in the EULA. If you're an IAP trying to implement DPI on an opt-out basis, bonne chance, and don't expect a lot of friends to rally around your cause.

At the same time, I'll be interested to see if the plaintiffs can marshal any true evidence of harm. If the plaintiffs are advancing a recycled version of the old, tired and completely laughable arguments that installing cookies on a user's computer creates cognizable harm, I hope this judge will quickly give them the boot they deserve. In that respect, I'm disappointed the judge didn't more aggressively police the trespass to chattels claim on the harm requirement per Hamidi. Personally, I think these plaintiffs should have been forced to put-up-or-shut-up on the harm issue early. Then again, this case came out the day before the Ninth Circuit's recent Starbucks case, but perhaps it's consistent with it.

Overall, this ruling is just another small data point in a much larger struggle over targetable consumer data. My Coasean Analysis of Marketing article doesn't directly address DPI by IAPs, but the article tells the story of how different intermediaries are fighting with each other to capture better datasets of targetable consumer behavior. After the flameout of the early 2000s model of adware, IAPs are trying to squeeze into the middle by using their more favorable position (compared to websites) to see more complete consumer data. Similarly, Facebook is trying to use tools like Beacon nee Instant Personalization to sweep up targetable consumer data from throughout the web, not just the smaller dataset it can capture at facebook.com. Meanwhile, Google is trying to move onto the desktop (the toolbar, Desktop, Chrome and its various OSes) to let it get closer to the honeypot of consumer data residing there, rather than just rely on the data it can get at google.com properties. Adware circa 2005 may be dead, but battles between different intermediaries fighting to get the good stuff is a perennial. For more, see my posts Adware is Dead and Relevancy Trumps Creepiness.

Posted by Venkat at 09:00 AM | Derivative Liability , Licensing/Contracts , Privacy/Security , Publicity/Privacy Rights , Spam , Trespass to Chattels

December 21, 2010

Ninth Circuit's Mixed Opinion in Glider/WoW Bot Case -- MDY Industries v. Blizzard

[Post by Venkat, with comments from Eric]

MDY Industries, LLC v. Blizzard Entertainment, Nos. 09-15932 & 16044 (9th Cir. Dec. 14, 2010)

The Ninth Circuit issued its opinion in the Blizzard Glider "bot" case, which is one of three cases in the Ninth Circuit that tackle the license vs. sale issue and what conditions the licensor can put in place. Vernor v. Autodesk, was the first, and Augusto v. BMG is still pending. The Blizzard ruling also covers some other ground in addition to the license vs. sale issue, including: (1) what parts of a licensing agreement support infringement claims (as opposed to breach of contract claims) and (2) the scope of a DMCA claim under section 1201. It will be interesting to see the effect of the case on two big cases from the Federal Circuit: Jacobsen v. Katzer (an open source case involving model train sets) and The Chamberlain Group v. Skylink Technologies (a garage door opener DMCA case). It took me a couple of times to read this case - it made my head spin!

The crux of the Blizzard dispute is that MDY made available a "bot" which World of Warcraft players could use to advance through levels without actually playing the game. Blizzard alleged that players' use of the Glider "bot" infringed on Blizzard's copyright (because the end user agreement contained a restriction on playing the game using a bot or other automated means), and Blizzard asserted claims for secondary infringement against MDY based on this. Blizzard also implemented measures (a software program ominously called the "Warden") to detect Glider's operation, which MDY allegedly circumvented. Blizzard asserted a DMCA claim based on this.

Copyright Infringement: Blizzard argued that MDY was secondarily liable for infringement by the players who used the bot. Blizzard's claims of infringement focused on the RAM copy made in the course of playing the game. If the transaction between Blizzard and the players was a sale, the players could take advantage of the "essential step defense," under which there is no infringement for copies that are created and used "as an essential step in the [use] of the program." (section 117(a)) The threshold question was whether WoW players were licensees or owners of the particular copies of the software that they had purchased. Applying Vernor v. Autodesk, the court concludes that the players are licensees and therefore, the RAM copies may be infringing unless they are licensed.

WoW License Agreement: Whether or not the bot-using players infringed turns on the terms of the WoW EULA. The court runs through the EULA process (which looks leak-proof) and then turns to the question of whether a violation of the no-bot provision of the license constitutes infringement. The court distinguishes between "covenants" and "conditions" -- violations of covenants are actionable as breaches of contract and violations of conditions are actionable as infringement. (A copyright infringement lawsuit has obvious advantages, such as statutory damages and injunctive relief, and in this case, infringement would have been a hook for Blizzard to hold MDY derivatively liable.) Ultimately, the court concludes that infringement by breach of a condition occurs only where the licensee:

exceeds the scope of the license in a manner that implicates one of the licensor's exclusive statutory rights.

With respect to Glider, the court holds: "Glider does not infringe any of Blizzard's exclusive rights. For instance, the use does not alter or copy WoW software." End result, no infringement by end users and no liability for infringement to MDY. But that wasn't the end of the story.

Blizzard's DMCA Claims: Although the court took a restrictive view of what violations of a license constitute copyright infringement, the court took an opposite approach with respect to Blizzard’s DMCA claim. The key question here was whether the cause of action created under section 1201(a) was "linked" to copyright infringement, or whether it created a totally separate cause of action. Blizzard implemented measures which prevented access to the game while the bot was in operation, but these measures did not prevent copyright infringement by the players (per the court's conclusion on the covenant/condition issue discussed above). The court concludes that regardless of whether the underlying use is infringing, anti-circumvention of a measure that restricts mere access to a work can support DMCA liability under section 1201. The court repudiates the Federal Circuit's approach in Chamberlain, the infamous garage door case, and concludes that:

a fair reading of the statute . . . indicates that Congress created a distinct anti-circumvention right under section 1201(a) without an infringement nexus requirement.

According to the court, Glider violated 1201(a) with respect to WoW's "dynamic non-literal elements" -- i.e. "the real-time experience of traveling through different world, hearing their sounds, viewing their structures, encountering their inhabitants and monsters, and encountering other players." The court found no violation with respect to the source code or actual audiovisual elements of the game because the anti-circumvention measures implemented by Blizzard did not effectively restrict access to these.
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This case made my head spin. Eric discusses more of the opinion's messiness below, but I wanted to offer a few quick comments.

1. Application of Autodesk to determine sale/license: the Ninth Circuit recently decided Vernor v. Autodesk where it ruled that Autodesk CAD software was licensed and not sold to its clients. One question the Autodesk decision raised is how the analysis would play out in other contexts -- i.e., where the software is less expensive, off-the-shelf, and looks more like a license. Surprisingly, the court here didn't spend much time on this, giving just one page to the treatment of the license/sale issue.

2. RAM copies and the essential step defense: The court's opinion contains this zinger:

Since WoW players, including Glider users, do not own their copies of the software, Glider users may not claim the essential step defense. 17 U.S.C. § 117(a)(1). Thus, when their computers copy WoW software into RAM, the players may infringe unless their usage is within the scope of Blizzard’s limited license.

Whether it's a matter of clunky legislative drafting or otherwise, the conclusion that people who purchase copies of software can be held liable for RAM copies that are necessary to utilize the program (i.e., "an essential step in the utilization of the computer program") is remarkable. If you were to accept the court's conclusion, I don't see much utility for section 117(a)(1) at this point. If section 117(a)(1) is not available to licensees, not many people are going to be able to take advantage of it.

3. The covenant/condition distinction: The court's conclusion that a breach of a license agreement term can constitute copyright infringement only where the licensee exceeds the scope of the license "in a manner that implicates . . . the licensor's exclusive statutory rights" drastically narrows the scope of available claims for copyright infringement in the licensing context. One big question this raises is how this squares with Jacobsen v. Katzer [pdf] where the federal circuit held that a failure to comply with certain open source attribution and "modification transparency" requirements constitute copyright infringement. The Ninth Circuit's opinion in Blizzard contains some pretty restrictive language with respect to the covenant/condition issue (the breach of license must be "in a manner that implicates one of the licensor's statutory rights"). Katzer, in contrast, referenced the fact that the requirements would inform downstream users and generate awareness for the incubation page which would further the "economic goal" of the copyright holder. How would Jacobsen have fared under the Ninth Circuit's standard in Blizzard? A 2008 EFF blog post by Michael Kwun flags the tension between the two decisions: "Condition or Covenant, and Why Should You Care?"

4. The DMCA Claim: What the Ninth Circuit taketh away with the copyright analysis, it giveth back with the DMCA analysis. After concluding that use of Glider while playing WoW does not cause the players to infringe, the court concludes that MDY violated the DMCA when it circumvented Warden. Here is the crux of Chamberlain [pdf]:

the anticircumvention provisions convey no additional property rights in and of themselves; they simply provide property owners with new ways to secure their property.

The obvious concern here is that the parade of horribles (and absurd claims) that Chamberlain warns of will come to pass if courts allow anti-circumvention claims that are divorced from copyright claims, as the court did here.

"Software Vendor Trumps First Sale Doctrine via License--Vernor v. Autodesk"

Other coverage:

paidContent: "New Ruling Will Impact Software Licensing Agreements"

EFF: "A Mixed Ninth Circuit Ruling in MDY v. Blizzard: WoW Buyers Are Not Owners – But Glider Users Are Not Copyright Infringers"

Wired: "Court Upholds Ban on World of Warcraft Bot"

_______________

Eric's comments:

Before I go off the rails here, let me start with the only piece of good news: I think the court reached the right result in finding for Blizzard and against MDY. I'll probably get some flack for that position, but I thought it was reasonably clear that MDY could not do what it did. As a result, if the panel had simply affirmed the lower court per curiam and vacated the lower court's opinion, I would have viewed this outcome as appropriate.

(This assessment differs from my normative view. I understand that Glider posed some potential problems for WoW gameplay, but I think Blizzard overreacted. At minimum, Blizzard should thank MDY for showing the existence of an underserved market segment worth millions of dollars. The fact that Blizzard doesn't directly capitalize on that market demand, such as by setting up a “fast play” WoW on servers separate from the normal WoW, puzzles me).

Unfortunately, the Ninth Circuit panel attempted to explain *why* it was ruling for Blizzard, and everything went to hell.

Nevertheless, I'd be more upset about this opinion if I actually believed it. The Ninth Circuit clearly makes up Internet law with each new case and each new panel, so I have no reason to think this opinion will stick any more than the dozens of other implicitly reversed Internet law opinions from the Ninth Circuit over the past 15 years. Because I think this opinion's predictive power for the next opinion is so low, I don't really believe this panel means what it says. At least, I choose not to believe it. This would be a great opinion to take en banc, although that would probably only further solidify the doctrinal disasters lurking in this opinion.

The opinion gets itself into trouble for a number of reasons, but the biggest reason IMO is that the opinion dances around the seminal cyberlaw issue of whether web browsing is infringement. We all know what copyright law says, and should say, about browsing. So long as copies into RAM are putatively infringing unless there's a defense, current copyright law says browsing can be infringement. Copyright law *should* say that browsing isn't infringement, which would eliminate some pressure that caused the court to engage in doctrinal gymnastics here.

This was not exactly a browsing-as-infringement case because Blizzard also licensed client-side software that facilitated player access to the copyrighted materials on WoW servers. However, as more websites load client-side software as part of web browsing, that distinction may be diminishing. Plus, Glider didn't modify Blizzard's client-side software; it only interacted with Blizzard's servers. As a result, Glider was part of the way players browsed Blizzard's web service.

Perhaps in response to the problems of treating browsing as copyright infringement, the court makes it clear that violating a website's EULA by browsing would most likely just be a breach of contract, not a copyright infringement. Eliminating browsing as infringement would clean up the problems applying 1201(a) because it would not treat browsing as "accessing" copyrighted works on web pages. To take this issue off judges’ minds, we would benefit from a statutory amendment saying that web browsing isn't infringement.

Treating a software license breach as sometimes creating copyright infringement and other times creating solely a breach of contract isn't new legal doctrine, but it's problematic. It does ameliorate concerns about oppressive but marginally relevant license terms buried in EULAs; in many cases, this opinion says those terms can’t be enforced via the coercive power of copyright remedies. However, trying to cleave between infringement-related and other contract restrictions sounds like a litigation morass; and I'm unclear if fancy drafting (e.g., stating that all EULA covenants are conditions on the software license) is an all-too-easy workaround. See, e.g., the provision where the court says "Although ToU § 4 is titled, 'Limitations on Your Use of the Service,' nothing in that section conditions Blizzard’s grant of a limited license on players’ compliance with ToU § 4’s restrictions." By inference, simple changes in EULA drafting could change this calculus.

I also wonder how this ruling affects open source licenses. The Jacobsen v. Katzer case held that an open source license was a condition on the enjoyment of the copyrighted software. The Jacobsen case didn't directly address the fact that the open source license failed to meet basic contract formation requirements. To the extent this case indicates that some software license agreement breaches are only contract breaches, not conditions on the enjoyment of copyright, this case leads to one of two outcomes, both of which are weird. Either (a) the "conditions" in open source licenses are not subject to the rules in this case, in which case provisions not included in a binding contract will be more enforceable than provisions in properly formed software license agreements (a result that can't be right), or (b) conditions in open source licenses are equally enforceable as software license agreements, in which case some provisions of open source licenses are enforceable only as contract breaches--but since open source licenses usually aren't properly formed as contracts, those provisions will be effectively unenforceable. Either result seems like a catalyst for anarchy.

In addition to these issues, I'll reiterate two other obvious areas of mischief noted by Venkat:

1) By reiterating Vernor's standards for ownership vs. license of material, this case does not reduce the risks that copyright owners will contractually eliminate the first sale doctrine for copyright-containing chattels (such as books) by characterizing the copyrighted material transfer as a license. I'm still hoping the UMG v. Augusto case gives us some better news on this front.

2) The court's standards for a 1201(a) circumvention raise all of the anti-competitive concerns we feared with the Chamberlain case where two independently manufactured chattel (which contain software) need to make an electronic handshake with each other. This happens all the time for interoperability purposes, including the sale of replacement or complementary goods. The court punts on the antitrust issue:

Concerning antitrust law, we note that there is no clear issue of anti-competitive behavior in this case because Blizzard does not seek to put a direct competitor who offers a competing role-playing game out of business and the parties have not argued this issue. If a § 1201(a)(2) defendant in a future case claims that a plaintiff is attempting to enforce its DMCA anti-circumvention right in a manner that violates antitrust law, we will then consider the interplay between this new anti-circumvention right and antitrust law.

Only time, and future Ninth Circuit panel flip-flops, will tell us if these fears will come to pass.

Posted by Venkat at 09:41 AM | Copyright , Derivative Liability , Licensing/Contracts , Virtual Worlds

December 17, 2010

Domain Name Privacy Protection Services Not Liable for Failure to Disclose Identity of Alleged Spammer -- Balsam v. Tucows

[Post by Venkat]

Balsam v. Tucows, No. 09-17625 (9th Cir.; Dec. 16, 2010)

Prolific spam litigant Dan Balsam sued the registrant of [adultactioncam.com] under California's spam statute for allegedly sending Balsam thousands of pieces of spam. Balsam obtained a default judgment in the amount of $1,125,000 (!) against Angeles Technology, Inc., who was listed as the registrant of [adultactioncam.com]. Balsam was ultimately unable to recover against Angeles and then sued Tucows. His beef with Tucows was that Tucows refused to turn over the identity of the registrant of [adultactioncam.com] (when he conducted his initial search, apparently, Angeles was the registrant, but at some point later, Angeles opted into Tucows' privacy protection services). He demanded that Tucows disclose the identity of the registrant "or pay the default judgment." Tucows predictably refused, and Balsam sued, trying to hold Tucows liable. I should note that the court's description of the facts is much better than mine, although it's somewhat charitable to Balsam. The court concludes its recitation of facts by saying that "[a]lthough [Balsam's] approach is novel and creative, it cannot survive a motion to dismiss."

Balsam's main argument is that Tucows as the registrar is bound by the ICANN registrar accreditation agreement, which contains the following provision (Sec. 3.7.7.3):

A Registered Name Holder licensing use of a Registered [domain] Name . . . shall accept liability for harm caused by wrongful use of the Registered Name, unless it promptly disclosed the identity of the licensee to a party providing the Registered Name Holder reasonable evidence of actionable harm.

As the court notes, Balsam's claim against Tucows depends on his status as a third party beneficiary to the RAA agreement between ICANN and Tucows. The court concludes that Balsam is not a third party beneficiary because among other things, the agreement contains an explicit "no third party beneficiary clause," and because the agreement itself does not contain terms applicable to ICANN or any registrar - it merely provides that a a registrar must include certain terms (including this one) in its domain name registration agreements. Balsam responded that the "no third party beneficiary" clause does not relieve Tucows of its obligation as a registrant (which it or one of its affiliated entities is in name when it provides privacy protection services) but the court rejects this argument as well. Tucows entered into the agreement as a registrar, and didn't agree to bind itself as a registrant.
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Balsam has an uphill battle arguing that the RAA creates third party rights. See Register.com v. Verio, 356 F.3d 393 (2d Cir. 2004.) (Interestingly, Register v. Verio dealt with the use of WHOIS information where Verio sent unsolicited emails to Register registered domain names advertising Verio's services.) However, more relevant to the court's discussion is a recent case involving proxy registration services - Solid Host v. NameCheap - where the court found that NameCheap could be held liable for contributory cybersquatting based on the actions of the registrant-in-fact. Here's Prof. Goldman's post on the muddled ruling in that case: "Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?--Solid Host v. NameCheap." As he mentions in that post, it's important to be clear about who is the registrar and registrant (and in what capacity a particular entity is acting when it's providing services). He raises the issue of whether registrars will shy away from providing privacy protection services. I don't know the answer to that, and although it may be early to assess the fallout (if any) of the NameCheap case, this case seems to indicate that proxy registrars don't roll over and readily disclose registrant information absent a court order.

In any event, I don't think Balsam had a strong argument here since Angeles's utilization of the privacy protection services did not contribute in any way to the alleged harm. Although the facts aren't crystal clear, it seemed like Balsam obtained a judgment (after having determined that Angeles was the registrant) and only then did Angeles opt in to the privacy protection feature. The damage (if any) was done by the time the privacy protection feature entered into the picture. Additionally, as the district court's order notes, the Angeles lawsuit was pending at the time Tucows declined to reveal the underlying registration info - Balsam had an obvious solution (which he failed to take advantage of). He could have issued a subpoena seeking the registrant information and could have easily obtained it. There may be some set of facts under which a refusal to reveal the registrant information could support a claim, but those facts were not present here.

This also raises the issue of the appropriate response from a company who provides private registration services. The registrars have an interest in not freely disclosing registrant information absent a court order, but NameCheap suggests that in some cases, a failure to disclose may result in liability to the provider of privacy protection services. (NameCheap raised the issue of whether the registrar was acting in its capacity as registrar or in another capacity - in its capacity as registrar, it may be able to take advantage of an ACPA safe harbor. As I mentioned in my previous post about this case, Tucows may have been able to take advantage of a Section 230 defense, although ultimately it didn't end up needing to invoke the protections of Section 230, given the court's ruling.) This case indicates that courts are reluctant to freely impose liability on a registrar who provides proxy registration services, which isn't necessarily a bad thing from the standpoint of protecting registrant anonymity and privacy. A finding of possible liability in this case could have resulted in registrars getting more nervous when they receive requests for the identity of the underlying registrant.

"Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?--Solid Host v. NameCheap"

"Plaintiff Wins $7,000 Following Bench Trial on Claims Under California Anti-Spam Statute -- Balsam v. Trancos"

Posted by Venkat at 09:29 AM | Derivative Liability , Domain Names , Privacy/Security , Spam

December 13, 2010

Viacom, FAPL and Amici File Briefs in Viacom v. YouTube Second Circuit Appeal

By Eric Goldman

[note: all of the briefs referenced in this post are linked in the case library at the bottom of the post]

Viacom and the FAPL have filed their opening appellate briefs in the Second Circuit appeal of Viacom v. YouTube. As Wired and others have pointed out, the standout line from Viacom's brief was its empirically unsupported assertion that upholding the lower court ruling "would radically transform the functioning of the copyright system and severely impair, if not completely destroy, the value of many copyrighted creations." Really...? I would find such hyperbole more convincing if Viacom hadn't acquiesced to YouTube's behavior post-May 2008 and wasn't using it extensively today to create substantial value for itself.

Viacom's brief shows that it's not sparing any expense in this litigation. (Nor is Google, which has said it has spent $100M defending this lawsuit). Viacom has three high-priced Biglaw firms on the brief: Jenner & Block, Shearman & Sterling, and former Solicitor General Ted Olsen of Gibson Dunn.

A small but ironic tangent: In Ouellette v Viacom, a pro se litigant recently sued both Viacom and YouTube, putting them in the position of possibly jointly defending the lawsuit...if they can find a way to work together against a common enemy...

In addition to the litigants' briefs, another 15 amicus briefs poured in. Michael Barclay has helpfully aggregated the briefs. See also the Justia page.

Three of the briefs, from AIPLA, Audible Magic and Vobile, support neither party. Audible Magic's brief (which YouTube did not grant consent to file) is a sales pitch designed to respond to the district court's implicit disparagement of its filtering technology. Vobile's brief (which YouTube also did not grant consent to file) is also a sales pitch to explain how great its filtering technology is. APILA's brief took an unusual (for them) pro-defendant position:

AIPLA urges this Court to affirm the district court’s holding that more than a generalized knowledge of infringement is required to deprive an Internet service provider (“ISP”) of the protection of the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”)....the level of knowledge that is sufficient to strip the ISP of its protection under Section 512 of the Copyright Act, as amended by the DMCA is knowledge of specific instances of infringement. The district court’s holding is consistent with the legislative history of the DMCA and relevant case law. AIPLA urges this Court to reject Viacom’s broad attempt to deprive Internet service providers of the benefits of the safe harbor provisions of the DMCA based on generalized knowledge that infringing activity is occurring on a site.

The remaining briefs, all in support of the plaintiffs, include several from copyright owner agglomerations. Most of these briefs generally riff on the premise that the Angel of Death will descend upon the world if the lower court's ruling is upheld. See, e.g., the BMI et al brief, which says:

Instead of providing protections for both copyright owners and qualifying service providers, the District Court has perversely turned the DMCA into a roadmap to build a business based on massive use of copyrighted works without paying for them. As a result, copyright owners – both large and small – lose control of their creations and are limited significantly in their ability to license their works, while their property is disseminated virally over the internet worldwide to anonymous users, without consent or compensation.

A little more drama: YouTube did not automatically consent to filing of the MPAA's brief; instead, it withheld judgment until it could review the brief.

A few observations about the other briefs.

I'm sure you're shocked to learn that Microsoft weighed in with a brief against YouTube. Is there any opportunity Microsoft won't take to tweak its arch-rival Google--no matter how contrary to its own long-term interests?? Microsoft has many UGC businesses, yet as usual it emphasizes its software divisions' interests over its online services' interests.

One of the more interesting briefs was filed by eight "professors and scholars who, from various perspectives, focus their work on the economic incentives of legal liability rules, including questions about efficiency and deterrence." They argue that willful blindness is bad from an economic standpoint. It's a little hard to tell if this brief simply responds to a strawman argument (is anyone arguing in favor of willful blindness?). In any case, as far as I can tell, the brief mostly argues against the statutory allocation of responsibilities in 512(c). As a result, these arguments might be better directed towards Congress.

The Brotman/Cass/Nimmer (Ray, not David) brief covers similar ground, and it probably should have merged with the 8 professors' brief. The Brotman et al brief makes a "least cost avoider" argument, which to me points in favor of YouTube. Recall that even Viacom and its high-priced and very smart battalion of attorneys couldn't figure out which video uploads were authorized and which it thinks were infringing; yet they were in a way better position than YouTube to make that determination. Ironically, YouTube is doing many of the things the brief wants it to do (like filtering), so this further reinforces that this brief should have been in support of YouTube, not Viacom.

I was amused by the poorly written International Intellectual Property Institute amicus brief by Bruce Lehman, who held key IP-related roles in the Clinton administration. Attempting to resurrect failed arguments from the infamous copyright-maximalist "Green" and "White" Papers from the 1990s, the brief makes the stunning argument that the DMCA online safe harbors only protect data carriers, not content providers. For example, the brief says: "This Court should respect congressional intent and not extend the DMCA’s safe harbor to include content providers." What???

The seven IP professors' brief, by Marquette Law professor Bruce Boyden, argues that the district court did not properly consider the "red flags" of infringement standard. I exchanged emails with Bruce about this brief. In one of my emails, I wrote:

In particular, the "red flags" provision never contemplated that the copyright owners would post their own content designed to look like stolen content and in such a way that the legal department (and outside lawyers) couldn't figure out that their own marketing department had posted the content. As a result, I personally don't think it's possible to have "red flags of infringement" any more--whatever it meant initially--because even things that look like they are ripoffs might in fact be legitimate.

The case library (also see the EFF's helpful library):

Posted by Eric at 10:37 AM | Copyright , Derivative Liability | TrackBack

December 10, 2010

SEO/Web Design Consultant Faces Contributory Trademark Liability for "Copycat" E-Commerce Site--Roger Cleveland Golf v. Price

By Eric Goldman

Roger Cleveland Golf Co. v. Price, 2010 WL 5019260 (D. S.C. Dec. 3, 2010). [Note: the case captioning is probably wrong. Apparently, it should have been Roger Cleveland Golf Co. v. Prince]

Online contributory trademark infringement liability remains a key underdeveloped area of Cyberlaw. This year, we've seen a strong defense win in Tiffany v. eBay, but we've also seen some puzzling and troubling defense losses, including the Louis Vuitton v. Akanoc ruling against a web host and the Gucci v. Frontline ruling against various payment service providers.

This ruling is another puzzling defense loss, but the outcome may be attributable in part to the defendant's procedural choices, not the substantive merits of its legal position. The defendant sought summary judgment using an unusually laconic motion of 1.5 pages that lacked legal citations or supporting evidence. The judge did not respond well to this approach.

Substantively, this case involves the domain names copycatclubs.com, worldtimegolf.com and legacygolfclubs.com, all of which led to a store that described itself as “your one stop shop for the best COPIED and ORIGINAL golf equipment on the internet.” Starting with the copycatclubs.com domain, a Roger Cleveland "mystery shopper" ordered counterfeit Roger Cleveland golf clubs through the site. In response, the TM owner sued a number of folks involved with the website.

This ruling involved the defendant Bright Builders, which allegedly provided several secondary support services to the website operators. Specifically, the TM owner asserted that Bright Builders played the following roles:

Bright Builders participated in the design, building, marketing, and support of the business model and websites through which Plaintiff’s trademarks were infringed, including but not limited to instructing Defendants on search engine optimization and methods of embedding keywords, such as Plaintiff’s federally registered trademarks, into metadata within Defendants’ websites and providing Defendants with a complete “Bright Builder Help Team” which, among other things, located vendors to supply the counterfeit products sold through Defendants’ websites . . . . Bright Builders . . . knew or should have known from the name of one of Defendants’ websites, “copycatclubs.com”, from the text contained thereon claiming to be a leading website for “copied” clubs, from the use of Chinese wholesalers to provide clubs for resale on Defendants’ websites, and from the use of Plaintiff’s trademarks as metatags for those websites that it was participating in trademark infringement.

Elsewhere, the TM owner asserted:

that, upon Bright Builders’ assurance that Prince would make at least $300 per month from operating his online store, Prince paid Bright Builders $10,000 to provide “coaching and mentoring” services to assist him in building his online business...Bright Builders provided Prince with a Project Advisor that had one-on-one discussions with him about developing copycatclubs.com; Prince specifically discussed his ideas about selling golf clubs with his Bright Builders team, at least one member of which encouraged Prince to do so...; under Bright Builders’ tutelage, Prince opted to “drop ship” his merchandise, a method of doing business that Prince’s Project Advisor seemed to acknowledge would not be a profitable way to sell name brand products without “massive” mark ups...; Bright Builders helped Prince design and build the website copycatclubs.com, whose name alone Plaintiff argues should have put Bright Builders on notice of Prince’s intention to sell counterfeit (or “copycat”) golf equipment; similarly, Plaintiff argues that the site’s content, which expressly anoints itself “your one stop shop for the best COPIED and ORIGINAL golf equipment on the internet,” should have put Bright Builders on notice of Price’s intention to sell counterfeit golf equipment.

These factual recitations were more than enough to defeat the defendant's 1.5 page summary judgment motion.

What's stunning to me is how many of the plaintiff's asserted facts seem facially irrelevant to Bright Builder's contributory trademark liability. Of what relevance is it that Bright Builders provided coaching/mentoring services? Or that a Bright Builders employee discussed selling golf clubs via the website? These and most of the other asserted facts don’t seem responsive to any relevant legal doctrine. I want to drill down more deeply on two of the asserted facts:

1) the plaintiff repeatedly harps on the domain name "copycatclubs.com." There are two problems with this. First, unless the golf clubs are protected by some industrial design doctrine (which will be true in some but not all cases), making "copycat" versions is a completely legitimate activity so long as they aren't marketed as the original goods. Second, the domain name, by itself, does not automatically set off red flags. For example, in Perfect 10 v. ccBill, the court said that the domain names "illegal.net" and "stolencelebritypics.com" did not confer "red flags" of copyright infringement because it could just be marketing hype. Although that case involved copyright, not trademarks, its reasoning seems highly analogous--ESPECIALLY when combined with the first fact that "copycat goods" aren't per se illegal.

2) the facts don’t specify what metatags were used, but we know that (a) Google ignores keyword metatags and (b) judges mistakenly think that keyword metatags are the holy grail of SEO. If you're an SEO who continues to believe that keyword metatags might help and can't hurt, you are 100% wrong from a legal standpoint.

Although the defense's procedural defects may overwhelm the substantive lessons we might take away from this case, I want to highlight three possible implications:

A) SEOs and web designers should not just assume they will avoid legal liability if they deal with shady businesses. I'm not saying the websites here were shady. However, if the court decides they were, Bright Builders might share legal liability with the client. Website service providers, pick your clients wisely. Not every paycheck is a good deal. Sarah Bird recaps some other examples of potential secondary liability for SEOs and web designers/hosts.

B) This case reminded me a lot of the Gucci v. Frontline case. In both cases, the judges seemed to have strong allergic reactions to sites selling "copycats" or "replicas"--strong enough to sweep in service providers who were a few steps removed from the bad action. As Venkat told me as we were discussing this case, a domain name like "copycatclubs" will almost certainly rub judges the wrong way. At minimum, judges are going to require lots of evidence showing good faith and legitimate activity at a site like "copycatclubs" to help them overcome their initial strongly negative reaction to such a domain name.

C) If you are an online business defending a secondary trademark claim, never treat contributory trademark claims lightly. Retain the most trademark-savvy litigators you can afford. The stakes are high for any litigation missteps. See, e.g., the $32M jury award against Akanoc.

Note: I sent an email requesting comment to Bright Builder's lawyer, Paul J. Doolittle of the Jekel-Doolittle, LLC firm in Mt. Pleasant, South Carolina, with a home page title of "South Carolina Nursing Home Negligence | Nursing Home Abuse Law Firm." He acknowledged my email but did not provide a public comment before my deadline.

Posted by Eric at 10:00 AM | Derivative Liability , Trademark | TrackBack

December 07, 2010

Rosetta Stone v. Google Amicus Briefs in Support of Google

By Eric Goldman

Three amicus briefs were filed in support of Google in the Rosetta Stone v. Google appeal.

eBay and Yahoo.

This is the "industry" brief, although in the past, typically more players have joined a brief like this. Easily the most interesting aspect is that eBay emerged as a Google supporter after an organization it supports, the Association for Competitive Technology, joined a pro-Rosetta Stone brief along with co-joiner Tiffany. I haven't heard what happened in response to that apparent oversight, but I've always assumed it would end badly for eBay's relationship with ACT. (As of now, eBay is still listed as an ACT "supporter").

Substantively, the brief addresses contributory trademark infringement standards and the importance of keyword advertising. The brief surprisingly engages in a few places with the Carfax amicus brief (most of the time, amici ignore each others' briefs). The brief also tries to distinguish the troubling 4th Circuit decision in Georgia Pacific Consumer Products LP v. Von Drehle Corp.

Public Knowledge and EFF.

This brief argues that Google doesn't make a trademark use in commerce (I can't believe they waded into those waters again) and Google and its advertisers engage in trademark fair use.

Public Citizen.

The summary:

We argue that, because both keyword advertising, and the “sale” of keywords, are commercial speech, the regulation of this practice must be consistent with the First Amendment. Next, we discuss trademark law’s basic principles and show that they are limited to protecting consumers against confusion about whether goods and services emanate from the trademark holder, and show that it is not Google’s function to deliver Internet users to a trademark holder’s official website. We further contend that those who compete with or criticize a trademark holder are entitled to call their own web content to the attention of those who have displayed interest in a trademarked term. Finally, we argue that, if any trademark confusion is at issue in this case, it is “initial interest confusion.” This Court has previously expressed skepticism about that doctrine; Rosetta cannot rely on that concept to hold Google liable here.

______

The case library:

Posted by Eric at 01:25 PM | Derivative Liability , Search Engines , Trademark | TrackBack

December 06, 2010

Rosetta Stone v. Google Appellate Briefs: Google's Opening Brief and Rosetta Stone's Unredacted Brief

By Eric Goldman

Due to the intervention of Public Citizen, Rosetta Stone filed an unredacted brief in its appeal of Rosetta Stone v. Google. The actual redacted material seemed hardly worthy of confidentiality; in some cases, the information already was clearly public, and in other cases the information was so inconsequential that it strains my mind trying to think why anyone cared about its confidentiality.

I've gone through the redactions, and a few of the more interesting tidbits of newly revealed information:

- discussion of Google's consumer survey in 2004 when third party trademarks appeared in the ad copy (page 8). One survey distillation said that there was an "overall very high rate of consumer confusion" with an average of 30-40% and 94% of consumers confused at least once. I'd need to parse the actual studies, but we should remember this was 2004, when Google's method of presenting advertising was relatively new. Six years later, I would love to see the stats if we replicated that study. I am confident there would be much lower rates; and compared against a baseline level of confusion among online users generally regardless of what they see, my guess is that the numbers would be pretty close to the baseline.

- discussion of Google's trademark policy change in 2009. The brief argues that the 2004 survey evidence shows Google knew consumers would be confused in 2009. Given the many changes in technology and consumer expectations from 2004 to 2009, that's not really a credible argument to me. More remarkable to me is that Google says it didn't test consumer reactions to this policy change at all. Google is known for being an obsessive tester of UI changes, so to fly blind on this seems conspicuously anomalous.

The evidence also indicates that Google expected to generate at least $100M of new annual incremental revenues from the 2009 policy change, and up to $1B annual. For those pundits who were loving Google's year-over-year profit increases from 2009 to 2010, we have a partial explanation.

- Rosetta Stone has spent approx. $100M on advertising (page 23). It would be interesting to compare how much Rosetta Stone is wasting on legal fees in this case and how far they could advance their marketing objectives if they redirected those litigation dollars.

- Both Google's current and former Chief Trademark Counsels (Terri Chen and Rose Hagan, respectively) "could not tell that three of the sponsored links - two ads for counterfeiters and one for a Rosetta Stone competitor - were not advertising the sale of genuine Rosetta Stone software" (page 36).

This seems to cut against Rosetta Stone's position. If Google's most experienced trademark counsel can't spot the ads for fakes, then how does Rosetta Stone expect lower-level employees or machines to do so?

In this respect, I'm reminded of the ludicrous arguments from Viacom about YouTube's ability to spot fake uploads. Viacom and its lawyers couldn't do it (recall that Viacom's lawyers TWICE withdrew its complaint about videos that it thought were illicit uploads but weren't); so how could Viacom expect YouTube to be more accurate than its lawyers? Ditto for Rosetta Stone.
______

Unfortunately, Google's opening appellate brief is similarly swiss-cheesed by redactions. I believe Paul Levy will be working to get those redactions revealed. Substantively, Google's brief covers predictable ground; I thought this paragraph nicely distilled Google's factual position:

The core facts relating to the alleged trademark infringement are undisputed. It is undisputed that Google operates an advertising program through which advertisers can bid for the opportunity to have their ads displayed next to search results in response to user queries that contain trademarks. It is undisputed that Google does not prohibit resellers and information websites from using trademarks in ad text to refer to genuine products. It is undisputed that advertisers are responsible for their selection of keywords and ad text and that Google contractually prohibits advertising counterfeit goods or otherwise infringing intellectual property. It is undisputed that Google takes substantial proactive and reactive efforts to enforce its policies. It is also undisputed that counterfeiters exist and sometimes violate Google’s policies and take evasive actions to further their own agendas. It is undisputed that Google has never suggested to any counterfeiter that it copy and sell fake Rosetta Stone software, or otherwise induced any counterfeiter to do so. And it is undisputed that Google responded to Rosetta Stone’s complaints about ads that were not in compliance with Google’s policies.

______

The case library:

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

Posted by Eric at 09:07 AM | Derivative Liability , Search Engines , Trademark | TrackBack

November 28, 2010

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

November 22, 2010

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

By Eric Goldman

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

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

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

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

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

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

November 12, 2010

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

By Eric Goldman

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

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

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

Legal Analysis

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

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

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

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

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

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

Implications

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

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

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

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

Rebecca's post on this ruling.

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

November 11, 2010

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

By Eric Goldman

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

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

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

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

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

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

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

The court distinguishes the Goddard case because:

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

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

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

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

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

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

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

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

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

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

November 10, 2010

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

By Eric Goldman

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

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

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

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

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

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

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

Some implications of this case:

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

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

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

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

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

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

November 08, 2010

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

By Eric Goldman

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

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

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

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

Two other small points of note:

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

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

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

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

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

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

November 04, 2010

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

By Eric Goldman

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

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

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

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

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

* Young's fraud allegations lacked the requisite specificity.

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

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

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

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

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

Some related posts:

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

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

November 03, 2010

Plaintiff-Side Briefs in Rosetta Stone v. Google Appeal

By Eric Goldman

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

Rosetta Stone's opening appellate brief.

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

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

INTA's amicus brief.

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

Carfax et al amicus brief.

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

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

Association for Competitive Technology et al amicus brief.

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

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

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

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

ConvaTec et al amicus brief.

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

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

Volunteers of America amicus brief.

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

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

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

Case library:

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

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

November 01, 2010

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

By Eric Goldman

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

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

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

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

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

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

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

October 21, 2010

Blogger Wins Fair Use Defense...On a Motion to Dismiss!--Righthaven v. Realty One

By Eric Goldman

Righthaven LLC v. Realty One Group, Inc., 2010 WL 4115413 (D. Nev. Oct. 19, 2010)

I've mentioned Righthaven before in my quick links, but this is my first full blog post about them. I trust most of you are familiar with Righthaven by now. Righthaven is a serial copyright plaintiff that searches for republications of newspaper articles, acquires the copyrights from participating newspapers (the Las Vegas Review-Journal is the largest and highest profile participating paper), sues the republisher for copyright infringement without any prior notice--seeking $75k or $150k in damages and transfer of the infringer's domain name--and then sends a settlement offer to the surprised defendant. According to this website, Righthaven has brought 157 lawsuits and settled 56 of them.

Righthaven is controversial for many reasons, including:

* Righthaven does not give defendants any warning before suing them, even though many of the defendants would happily remove the article if asked. Righthaven argues that it's too costly for newspapers to constantly chase down Internet republications. Plus, Righthaven thinks a litigation crusade will generate an in terroram effect to dissuade others from making unauthorized republications in the first place. A similar in terroram campaign has had, at best, mixed results for the record labels, so it's not clear how well that's going to work for newspapers.

* Many of the defendants linked to the original newspaper article as part of their posts. These links don't directly cure any infringement, but they do represent a way of transferring value to the newspapers. First, the links may prompt readers to investigate the original source--even when the post contains the full text of the article. Second, the links count as votes in Google's PageRank algorithm, which increases the overall search engine profile of the newspaper. Some Righthaven critics do not understand why newspapers would want to discourage or eliminate these value transfers.

* Many defendants are small-time non-commercial bloggers or non-profit organizations, most of whom simply can't afford to litigate. Unfortunately, in the blogger and non-profit communities, many people (often mistakenly) assume fair use permits them to freely republish any articles they think would be interesting to their audiences. Thus, Righthaven's lawsuits blindside these republishers, as they (perhaps mistakenly) thought they were following appropriate protocols.

* Righthaven acquires an interest in the article's copyright only after it has identified an infringement and wants to bring a lawsuit. Some defendants (and commentators) have accused Righthaven of champerty and barratry.

* Righthaven has sued defendants who have quoted only a portion of the original newspaper article. For example, in today's case, the defendant quoted the first 8 sentences from a 30 sentence article.

* Righthaven has sued numerous web operators for articles reposted by users. As discussed above, Righthaven never sends 512(c)(3) takedown notices, but Righthaven apparently only sues defendants who haven't made the required 512-related filing with the Copyright Office. Even so, Righthaven's pleadings rarely distinguish between user postings and operator postings, effectively assuming the operator will be automatically culpable for user postings.

* The Copyright Act provides zero support for Righthaven's demand to get the defendant's domain name. Instead, this demand looks like a pressure tactic to increase defendants' incentives to settle the case (i.e., settle up over this one article or we will permanently take your entire site offline).

* Some Righthaven defendants have been helpful to the participating newspapers. For example, Righthaven sued a source that provided helpful material to the Las Vegas Review-Journal; the source then republished the resulting article on its website. Being a source to a story doesn't give the source automatic rights to republish the story, but a lawsuit isn't a great way for the newspaper to say thanks for the help, either.

* Righthaven sued Sharron Angle, a Republican US Senate candidate in Nevada, for republishing a Las Vegas Review-Journal story on her campaign website. Suing major political candidates isn't a great way to curry favor with important media subjects. Even more bizarrely, the Las Vegas Review-Journal endorsed Angle's Senate candidacy [nofollowed link] over incumbent Harry Reid--while its infringement lawsuit against Angle was still pending!

Put aside all of these controversies for a moment. The main question on my mind is whether Righthaven can be a profitable business and, if so, whether Righthaven can generate new incremental revenues for financially beleaguered newspapers.

For Righthaven defendants, it's almost always cheaper to settle than fight. Righthaven has been willing to accept settlements in the few thousand dollar range, and it's effectively impossible to defend a copyright case for less than that. So from a defendant's standpoint, Righthaven's settlement offer is a better financial deal than fighting the suit. This is why so many people have analogized Righthaven to "patent trolls."

Because it's effectively running a settlement mill, Righthaven needs quick and easy settlement. Otherwise, Righthaven will incur investigation, filing, serving and litigation costs that grow with each step in the process; and after the revenue split with the newspapers, the remaining gross margin per suit will be pretty small if Righthaven takes relatively small dollar value settlements. Of course, Righthaven could get its requested $75k-$150k in damages and attorneys fees from a successful court battle, but its costs to get those damages will be significant--especially if it doesn't get the attorneys fees--and small-time blogger or non-profit organization defendants may not have the cash to satisfy the judgment. In reality, I don't expect Righthaven to get big payoffs in the cases it successfully fights to the end. It's more likely judges will award Righthaven only the statutory damages minimums and no fees, which actually would be a big loss for Righthaven (i.e., to spend the time and money to litigate a case through damages only to get less than its typical initial settlement offer).

What clearly won't maximize Righthaven's profits are lengthy court fights that lead to Righthaven losses--especially if the defendants get their attorneys fees under the 17 USC 505 fee-shifting provisions. If lots of defendants fight back against Righthaven and some of them win, and some of those getting their attorneys fees, it will be hard to get enough cheap-and-easy settlements to make a decent profit.

As it turns out, lots of defendants have made the economically irrational decision to reject Righthaven's settlement offer and fight in court. These defenses are producing a trickle of early rulings. For example, in the Klerks ruling, the court overturned a default judgment on the basis that the defendant may have meritorious defenses such as fair use and implied licenses.

Yesterday, we got the most important Righthaven ruling yet, this time in the Realty One Group case. The case involves a real estate broker's republication of 8 sentences from a 30 sentence Las Vegas Review-Journal article on the broker's blog, www.michaeljnelson.featuredblog.com (now devoid of content). The court granted the blogger's fair use defense...on a motion to dismiss! The court notes the blogger quoted a relatively small percentage of the source article and, more to the point, says the blogger's "use of the copyrighted material is likely to have little to no effect on the market for the copyrighted news article."

Successful fair use defenses on a motion to dismiss are exceptionally rare. It is hard (impossible?) to resolve fair use questions without relying upon disputed facts--a no-no on a motion to dismiss. Thus, it appears the court cut some procedural corners, and I could see an appeals court requiring the district court to try again. So as exciting as this result is, it may be vulnerable to an appeal if Righthaven pursued it. However, according to the Las Vegas Sun, "Righthaven CEO Steven Gibson, a Las Vegas attorney, on Wednesday said Righthaven likely won't appeal the Nelson ruling since it reached a confidential settlement with Nelson prior to the ruling being filed."

Despite the procedural limitations of the ruling, the opinion nevertheless provides some useful insights into the viability of Righthaven's tactics. The case shows that judges will pay close attention to fair use defenses, especially when it's simply not credible that the republications had any detrimental effect on the newspapers. The case also shows that judges will tolerate partial quotations of articles. Righthaven has repeatedly claimed that almost all of its cases involve 100% verbatim copying of the entire article, and this case shows that any exceptions to Righthaven's stated approach will fare less well in court. Most obviously, the ruling shows that the courts would rather clear low-merit cases off their dockets quickly, even if they have to cut some procedural corners to do so. Indeed, by kiboshing Righthaven cases early, the court avoids wasting time and money on bogus claims. For these reasons, even if an appeals court reverses the Realty One ruling on procedural grounds, it's clear that Righthaven has zero chance of winning this case.

If the parties hadn't settled, this ruling would be an excellent candidate for a 505 fee shift to the defendant. Any fee shifts could seriously erode Righthaven's margins. That's why I continue to wonder if Righthaven will ever find a profitable niche.

Even if Righthaven has a profitable business, it remains unclear if the participating newspapers get a good economic deal by participating in Righthaven's program. In the copyright world, almost every infringer is a potential customer, so newspapers might get better results by trying to work with republishers rather than blasting them.

Further, it's an empirically unresolved question if the traffic-generation-plus-pagerank-boost payoffs from unauthorized republication more economically valuable than any net proceeds Righthaven might generate from its enforcement actions. For example, in response to the in terroram campaign, people might be scared to talk about the newspaper's articles online.

Indeed, we're seeing this already with respect to links that don't involve any republications. The well-regarded law firm of Sheppard Mullin blogged an advisory that "blogs should be careful not to hyperlink to newspaper articles or other material that may be copyrighted" (they have since amended their post to water down their admonition), and a National Law Journal article (unfortunately behind a paywall) wrote that "Although providing a direct link to an online article is generally considered less risky than copying the original article in its entirety, linking may not fully insulate bloggers and other online users from copyright infringement claims." These fears over linking are unwarranted, but the muddled messages from Righthaven's in terroram campaign could effectively isolate Righthaven-participating newspapers from the rest of the information ecosystem. Obscurity may be a far worse fate for newspapers than unauthorized republication by the kind of defendants that Righthaven is suing. FWIW, unless there is no other way to communicate my message, I will not link to any newspaper that I know is working with Righthaven.

Finally, Righthaven's lawsuits against the newspapers' friends (such as its sources or major political figures) seem counterproductive. In desperate times like now, newspapers need all the friends they can get. Lawsuits against friends are a pretty sure way to convert them to enemies. FWIW, I will not act as a source for any newspaper that I know is participating in the Righthaven program, either.

If you're interested in more information on Righthaven, see:

* September 21 Nevada Public Radio program about Righthaven, which included (among others) Peter Menell and me
* Righthaven Lawsuits website (a comprehensive meta-site)
* Righthaven Victims blog
* Joe Mullin's story on my sparring with Steve Gibson of Righthaven in September. UPDATE: MP3 of the conference call

Steve Green from the Las Vegas Sun has been covering the Righthaven story pretty closely. Follow him at Twitter.

Posted by Eric at 10:00 AM | Copyright , Derivative Liability | TrackBack

October 12, 2010

Blog Host Can't Be Bound by TRO for User Posts (Blockowicz redux)--Bobolas v. Does

By Eric Goldman

Bobolas v. Does 1-100, 2010 WL 3923880 (D. Ariz. Oct. 1, 2010)

This lawsuit involves Bobolasgate.info, a Greek-language blog/website that appears to criticize Greek real estate and media mogul George Bobolas (ranked as one of the top 10 wealthiest Greeks in 2009). I say "appears" because the site is in Greek and Google's translation was indeterminate. Given the blog is in Greek and targets Greece-focused issues, it's not clear which, if any, bloggers are located in the US, but the court assumes that one or more Does are US residents.

Bobolas seeks a TRO against both the blog authors and against non-party GoDaddy, which appears to host the blog and act as its domain name registrar.

The court asks why Bobolas didn't sue GoDaddy. Bobolas' attorney correctly replied that 47 USC 230 immunizes GoDaddy (see, e.g., GoDaddy's easy win in the Kruska case), but the court then observes that "Plaintiff has cited no authority suggesting that GoDaddy cannot be named as a defendant solely for purposes of effectuating injunctive relief." I've consistently taken the position that 230 preempts all form of relief, both monetary and injunctive, so I would cite the statute as the authority the judge seeks. Indeed, I would argue that suing GoDaddy for provisioning services to the blog should be sanctionable, so Bobolas' attorneys got it 100% right proceeding with GoDaddy as a non-party.

But Bobolas' attorneys got it 100% wrong thinking they could bind GoDaddy to injunctive relief as a non-party. I last addressed this issue in connection with the Blockowicz opinion from almost a year ago. FRCP 65 binds non-parties to injunctive orders only when the non-parties are related to the defendants, such as their agents or acting in concert with the defendants. As a garden-variety service provider to the blog, GoDaddy isn't anywhere close to the required level of interaction sufficient to be bound by FRCP 65. The court says:

Plaintiff's counsel argued that GoDaddy is an agent of Defendants given its role as website host and domain name registrar, but Plaintiff has made no such allegation in the complaint and provides no factual or legal proof on this point in its papers. As a result, the Court cannot enter a TRO against GoDaddy.

The court goes on to cite the Blockowicz precedent, saying "some courts have held that injunctions requiring defendants to remove defamatory statements from a website cannot be enforced against non-party website hosts like GoDaddy....Plaintiff does not address this authority."

The court doesn't say it outright, but the net effect of this ruling is that (like in Blockowicz) the plaintiff may end up with no ability to judicially force the content off the Internet. Bobolas may not be able to find the Does, or they may not be in countries that will recognize Bobolas' claims, or US courts may not recognize a foreign injunction (see Global Royalties v. Xcentric). If the content is truthful, this is a great outcome; if the content is wrong, it is less than optimal.

Of course, even without judicial compulsion, GoDaddy could help out Bobolas voluntarily. I've noted before that GoDaddy is not the fiercest champion of its users' interests (1, 2). As a result, a more likely scenario is that GoDaddy will intervene in deference to even minimal judicial provocation. In contrast, the Blockowicz conundrum arose only when Ripoff Report declined to honor a default judgment.

In any case, seeking a TRO against critical content is misdirected. The court rejects the TRO against the US Does, saying that Bobolas hasn't been able to show that the allegedly defamatory posts were made by them and did not provide enough evidence to support that the published statements were actionable defamatory (as opposed to non-actionable opinions or lacking the requisite scienter). The court also rejects a request to shut down the blog entirely, properly noting that doing so would be an impermissible prior restraint.

UPDATE: Paul Levy adds some thoughts about the lack of jurisdiction.

Posted by Eric at 01:45 PM | Content Regulation , Derivative Liability , Domain Names | TrackBack

October 08, 2010

September 2010 Quick Links, Part 2

By Eric Goldman

Contracts

* Hutchison v. Yahoo, 2010 WL 3706571 (9th Cir. Sept 20, 2010). AT&T's early termination fee wasn't a penalty, even as applied to a termination with only 2 weeks of service left.

* Evan Brown: Software contractor not bound by EULA it clicked on behalf of client.

* Zev J. Eigen, When and Why Do Individuals Obey Form-Adhesive Contracts?: Experimental Evidence of Consent, Compliance, Promise and Performance: “Individuals are more likely to comply with contract terms obligating them to perform an undesirable task when they see and choose to include the terms in the contract during the consent phase. The research also shows that demands for enforcement framed in moral terms–as a promise made that must be lived up to—similarly yield a greater likelihood of compliance than threats of legal action, instrumental appeals or pressure to conform socially.”

* Ewert v. eBay, 2010 WL 3893681 (N.D. Cal. Sept. 30, 2010). Class of sellers certified against eBay over alleged misrepresentations over the duration of auctions.

47 USC 230

* Voicenet Communications, Inc. v. Corbett, 2010 WL 3657840 (E.D. Pa. Sept. 13, 2010). Police raided a Usenet service provider looking for child porn and seized almost everything they could find. The service provider unsuccessfully sued for 1st and 4th amendment violations. In this ruling, the court also refuses to grant injunctive or declaratory relief to the service provider based on the service provider's 47 USC 230 immunity. My prior post on this case.

* Black v. Google Inc., 2010 WL 3746474 (N.D. Cal. Sept. 20, 2010): "Plaintiffs appear to argue that Congress did not intend to grant immunity under § 230 in circumstances involving anonymity....However, there is no provision in the CDA that imposes such a limit." Prior blog post.

Content Regulation

* The jury ruled for the defense in Moreno v Hanford Sentinel, an instant-classic cyberlaw case. My prior blog post.

* Defamation lawsuits against the media are down sharply.

* Nebraska v. Drahota (Neb. Sup. Ct. Sept. 24, 2010). Anonymous harsh emails cannot be prosecuted as a breach of the peace when they did not amount to "fighting words."

* California enacts an "e-personation" law against fake online identities. CA Sen. Joe Simitian’s commentary.

* Congress goes after crush animal videos again.

* Useful Berkman Center report on the legal regulation of sexting, although not surprisingly the report does not offer any good answers.

Technology and our Legal System

* U. S. v. Diehl-Armstrong, 2010 WL 3718941 (W.D. Pa. Sept. 20, 2010). No change in the trial’s venue due to either popular YouTube videos related to defendants (which do not indicate the geography of viewers) or a Wikipedia entry.

* In re Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, 2010 WL 3720406 (S.D.N.Y. Sept. 7, 2010): "Search engines have indeed created significant new dangers for the judicial system. It is all too easy for a juror to find out more than he or she should by typing a few carefully chosen words into a search engine. Nevertheless, in this instance, the jury was not too polluted by the receipt of extra-judicial information such as to prevent it from rendering a fair verdict based on the evidence introduced at trial."

* NY State Bar Association Opinion #843 (Sept. 10, 2010): "A lawyer representing a client in pending litigation may access the public pages of another party's social networking website (such as Facebook or MySpace) for the purpose of obtaining possible impeachment material for use in the litigation."

* ABA Formal Opinion 10-457: Lawyer Websites: "Lawyers must not include misleading information on websites, must be mindful of the expectations created by the website, and must carefully manage inquiries invited through the website. Websites that invite inquiries may create a prospective client-lawyer relationship under Rule 1.18."

Miscellaneous

* Posted to my personal blog: “Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist”. As Wired explains, Scribd’s meltdown continues.

* Slashdot on a competition for automated Wikipedia anti-vandalism efforts. Later this year, I’ll address how and why my Wikipedia doomsday predictions haven’t come to pass.

* AOL quietly settled its community leaders lawsuit for $15M. The money was distributed this summer, so I believe the lawsuit is over. Unfortunately, this case leaves unresolved important issues about employment law applied to crowdsourcing.

* Apple has clarified and liberalized its App Store policies. Always smart to keep developers on your side.

* Zamora Radio, LLC v. Last.FM, 2010 WL 3893985 (S.D. Fla. Sept. 30, 2010). Internet radio station may not be sufficiently interactive to support remote jurisdiction.

* Evan Brown on Reed Construction Data v. McGraw Hill Companies, a case where competitor A accessed competitor B's proprietary database using stealth contractors.

* The Supreme Court denied certiorari in the Boring v. Google case.

* Law.com: 25 Most Influential People in IP. I nominated several of the selected folks. However, I did notice one group was categorically not present—the list does not contain any bloggers...

Posted by Eric at 12:04 PM | Content Regulation , Derivative Liability , General , Licensing/Contracts | TrackBack

October 01, 2010

Seventh Circuit Tosses Beverly Stayart's False Endorsement Claims--Stayart v. Yahoo

By Eric Goldman

Stayart v. Yahoo! Inc., 2010 WL 3785147 (7th Cir. Sept. 30, 2010).

I have previously blogged about Beverly Stayart's lawsuits against Yahoo and Google for apparently sploggy (and possibly cloaked) objectionable search results delivered when she searched on her name. Whatever sympathy I might otherwise feel for her is overridden by the lawsuits' complete lack of merit.

Yesterday, the Seventh Circuit affirmed the dismissal of her false endorsement claims against Yahoo. My prior posts on the district court opinion and her initial complaint. The court efficiently points out that she has not made a use in commerce of her name sufficient to trigger Lanham Act protection, and therefore she lacks standing for a false endorsement claim.

Stayart argued that her humanitarian/charitable work satisfies the Lanham Act commerciality requirement. This is a nonsense argument that the court easily rejects: "While Stayart’s goals may be passionate and well-intentioned, they are not commercial. And the good name that a person garners in such altruistic feats is not what § 43 of the Lanham Act protects." The Lanham Act's false endorsement provisions are not a general purpose publicity right.

The district court cited two other reasons (beyond standing) to dismiss the case, including an analytically confused 47 USC 230 defense. The Seventh Circuit opinion did not address the 230 issue at all.

While this *should* be the end of Stayart's litigation, it probably won't be. She can refile her state law claims against Yahoo in state court. She also still has a pending lawsuit against Google.

An aside: It's been a busy Cyberlaw week at the Seventh Circuit, including uBID v. GoDaddy, Chicago v. Craigslist and now this opinion.

Posted by Eric at 01:02 PM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

September 30, 2010

StubHub Can't Beat Tax Collection Obligation Using 47 USC 230--Chicago v. StubHub

By Eric Goldman

City of Chicago, Ill. v. StubHub!, Inc., 2010 WL 3768072 (7th Cir. Sept. 29, 2010)

In my recent post about Milgram v. Orbitz, I wrote that "online tickets have become a major subfield of cyberlaw" and collected some of our blog posts on the topic. This is yet another case over online ticket sales, this time involving StubHub and reaching the 7th Circuit. I am amazed at how StubHub seems to be a bottomless well of litigation. What a litigation generation machine they've been.

This case involves Chicago's attempt to force StubHub to collect a ticket resale tax on its behalf. StubHub responded that if Chicago wants the tax revenue, it should take the matter up with StubHub's buyers and sellers. Apparently Chicago didn't like that answer, so it amended its laws to make it more explicit that StubHub should qualify as "reseller's agent" who must collect the Chicago tax on ticket resales.

StubHub responded that 47 USC 230 preempted this tax collection obligation. Judge Easterbrook does not respond well to this argument, although it does give him an excuse to reiterate his idiosyncratic view of 230 as articulated in Doe v. GTE and amplified in CLC v. Craigslist:

As earlier decisions in this circuit establish, subsection (c)(1) does not create an “immunity” of any kind....It limits who may be called the publisher of information that appears online. That might matter to liability for defamation, obscenity, or copyright infringement. But Chicago’s amusement tax does not depend on who “publishes” any information or is a “speaker”. Section 230(c) is irrelevant.

From my perspective, StubHub's 230 argument was a stretch, so I'm not surprised it failed. However, Easterbrook's reason for deeming it unsuccessful (230(c)(1) isn't an immunity) is quirky.

The court is kinder to another StubHub defense that Illinois' state tax obligations preempt Chicago's tax obligations. The panel certifies that issue to the Illinois Supreme Court for a ruling.

Posted by Eric at 05:05 PM | Derivative Liability | TrackBack

September 23, 2010

Georgia Pacific's Effort to Control Towel Dispenser Refills Fails in 8th Circuit--Georgia Pacific v. Myers Supply (Guest Blog Post)

Georgia Pacific Consumer Products LP v. Myers Supply, Inc., 2010 WL 3564834 (8th Cir. Sept. 15, 2010)

By guest blogger Mark Bartholomew

After a decision by the Fourth Circuit seemed to open the door for businesses to use contributory trademark law to block the sale of complementary goods, a recent case in the Eighth Circuit adopts what I think is a more reasonable approach. In both cases, the plaintiff and the technology at issue were the same, but the outcomes are completely different.

Plaintiff Georgia Pacific (GP) employs the following strategy to try and prevent competitors from offering cheaper paper towels for the paper towel dispensers it manufactures. It leases its hands-free enMotion brand paper towel dispensers to distributors who in turn lease the dispensers to businesses like restaurants and gas stations. In its leases, GP conditions any use of the dispensers on exclusive use of GP brand paper towels. GP also places a sticker on the dispensers warning any sublessees that only GP-brand replacement towels may be used.

In the Fourth Circuit dispute, GP claimed contributory trademark infringement against a rival paper towel manufacturer, Von Drehle. The Fourth Circuit reversed a grant of summary judgment in Von Drehle’s favor. To the extent Von Drehle knowingly created its towels for use in the enMotion machines and supplied those towels to distributors knowing how they were to be used, Von Drehle could be liable for contributory trademark infringement. The Fourth Circuit was sympathetic to GP’s claim that its reputation would suffer if it could not control the quality of the toweling used in its dispensers.

GP also tried its luck in the Eighth Circuit, this time suing a distributor of Von Drehle paper towels named Myers Supply. In the district court, Myers won. Although the judge found that Myers knew that its customers were stuffing the Von Drehle towels in enMotion dispensers and continued to supply the towels in the face of this knowledge, he held that GP failed to demonstrate an underlying likelihood of confusion. GP appealed, contending that the district court improperly discounted its survey evidence. The same survey evidence had been offered as evidence of confusion in the Fourth Circuit case.

The Eighth Circuit affirmed the district court. In one sense, the Eighth Circuit’s decision does not represent a complete break from the Fourth Circuit. It was reviewing a district judge’s finding of no likelihood of confusion after a bench trial, a decision entitled to some deference. By contrast, the Fourth Circuit overturned a grant of summary judgment on the issue of contributory infringement and could not be accused of simply interpreting the proffered evidence of confusion in a different way from the trier of fact. But the Eighth Circuit’s decision also offers some hints that, unlike the Fourth Circuit, it might not be willing to allow the controversial and unsettled area of contributory trademark infringement doctrine to ratify GP’s strategy for blocking competitors.

First, the Eighth Circuit spent a lot of time on industry custom. On multiple occasions, the court notes, “it was unobjectionable and common practice to put towels of one brand into a dispenser of a different brand.” GP’s own behavior, apart from its strategy with the enMotion machines, meshed with this industry practice. GP manufactures “universal” paper towel dispensers that can accept towels from other businesses and its products catalog indicates that it provides towels for use in other companies’ universal dispensers. By including these facts, the Eighth Circuit may be suggesting that GP should not be allowed to have it both ways, i.e., freely participating in a robust market for complementary goods while prohibiting any such goods for use in its enMotion machines. The Eighth Circuit even ratified the district court’s decision to credit this evidence of industry custom over survey evidence demonstrating that 23 percent of respondents using enMotion machines thought the brand of the towel inside was the same as the brand of the dispenser. In contrast, the Fourth Circuit largely ignored evidence of industry practice, instead limiting its likelihood of confusion analysis strictly to whether “restroom visitors” could be confused as to the source of the towels found in enMotion dispensers.

Second, GP also claimed tortious interference with contract but the Eighth Circuit dispatched this cause of action quickly. Myers admitted at trial that it knew there was a “99 percent” probability that its customers were buying Von Drehle towels and stuffing them in enMotion dispensers. Nevertheless, the Eighth Circuit decided that just “fill[ing] the orders of its customers” could not make Myers liable for tortious interference. In dissent, Judge Clarence Bean argued that Myers’ conduct could be deemed improper since it knew that its customers were violating their sublease and kept providing the cut-rate towels anyway. (Note how this is largely the same analysis required for a claim of contributory infringement: did the defendant know that its customers were engaging in trademark infringement and did it continue to supply its product after having that knowledge?) Similarly, the Fourth Circuit reversed a grant of summary judgment in favor of von Drehle on the tortious interference issue, disagreeing with the lower court’s view of von Drehle’s behavior as “legitimate competition.” It seems to me that the majority in the Eighth Circuit opinion, given its focus on industry custom, was willing to deem the paper towel stuffing at issue as “legitimate competition.”

Which leads me to a final point. The specific claim here might have been contributory trademark infringement, but the Eighth Circuit’s analysis is really more about unfair competition. Concerned that GP’s lawyers were making an anti-competitive end run around the rest of the industry, the court used industry custom to knock out GP’s infringement and tortious interference claims. I’m not sure that the decision maintains complete fealty to traditional trademark infringement doctrine—it seems to me that survey evidence showing double-digit rates of confusion is probably more probative of confusion than evidence of industry custom. But when confronted with an anti-competitive practice and a body of secondary trademark infringement doctrine providing increasing support for such practices, the court chose to use the discretion built into the likelihood of confusion analysis to find the right result. In this way, I think the decision represents an improvement over the Fourth Circuit’s decision just one month before.

Posted by Eric at 03:37 PM | Derivative Liability , Trademark | TrackBack

September 13, 2010

Yelp Wins 47 USC 230 Dismissal of Dentist's Lawsuit--Reit v. Yelp

By Eric Goldman

Reit v. Yelp!, Inc., 2010 WL 3490167 (N.Y. Sup. Ct. Sept. 2, 2010)

Dr. Glenn Reit is a Manhattan dentist. His Yelp page and website. As of May 2009, the Yelp page had 11 reviews: 10 favorable reviews and 1 negative review from "Michael S." Dr. Reit believes the Michael S. posting was defamatory because it included "statements that his office is 'small,' 'old' and 'smelly,' and 'the equipment is old and dirty.'"

[An aside: these statements do not sound anywhere close to defamatory, and Dr. Reit looks a little thin-skinned for complaining about these statements. He might be interested in the literature showing how some negative reviews can bolster the credibility of positive reviews. See, e.g., this CNN article.]

Dr. Reit alleges that Michael S.'s post caused Dr. Reit to lose 5-11 calls per day. When Dr. Reit complained to Yelp about the review, he claims that Yelp removed all of the positive reviews and kept only Michael S.'s post. Eventually, that post got removed too. Dr. Reit's Yelp's page now has only 2 posts, both made in the past 4 months. Dr. Reit argues that Yelp removed the positive posts as part of Yelp's alleged scheme to get business owners to pay for advertising.

Dr. Reit tried a frontal legal assault against 47 USC 230 by alleging Yelp committed defamation by continuing to publish Michael S's review. For this claim, Yelp should get the 230 immunity for Michael S's review, and it's not even close.

[Another aside: Reit's lawyer is the well-known computer law pioneer Richard Raysman (check out this bizarre Wikipedia entry). I'm a little surprised Raysman frontally assaulted 230; surely he knew the defamation claim against Yelp would fail.]

To get around the obvious 230 immunity, Reit argued that Yelp's decision to remove the positive posts wasn't editorial, it was a "business decision," and this somehow makes Yelp liable for the negative review that remained. Similar arguments about profit-maximizing editorial judgments have been tried without success in several Ripoff Report cases, and the argument fails here as well. Instead, the court (citing the pretty analogous Shiamili case) effectively says that third party content remains third party content even if Yelp publishes reviews as part of a pay-for-play scheme:

The allegedly defamatory content was supplied by a third party information content provider and consisted of a message board posting. That Yelp allegedly uses "bad" posts in its marketing strategy does not change the nature of the posted data. Moreover, Yelp's selection of the posts it maintains on Yelp.com can be considered the selection of material for publication, an action "quintessentially related to a publisher's role"

This case doesn't cite the Ripoff Report cases, but it is consistent with them. As a result, this ruling is an unexpected boost for Ripoff Report's legal defenses.

After efficiently disposing of Yelp's defamation liability, the court addresses Dr. Reit's claim that Yelp committed deceptive business acts under NY state law. Dr. Reit argues that Yelp overclaims that its review sorting is entirely algorithmic and not manipulated by humans. The language cited by Dr. Reit comes out of Yelp's Business Owner Guide. The court says that the NY statutes only cover consumer-oriented conduct, and the Business Owner Guide was aimed at advertising businesses and not consumers.

Because this latter point turns on the NY statutes' specific language, I'm not sure how much this ruling helps Yelp in the other pending lawsuits against Yelp for its alleged pay-for-play business operations (see 1, 2, 3). The most interesting question is why the court sidestepped 230's application to the deceptive conduct statutes. The court simply and opaquely says that 230 "does not contemplate protecting Yelp's usage of [defamatory third party reviews] as leverage in its business model." Although I remain skeptical about 230's immunity for self-promotional advertising advanced by websites, I see that as a more contestable issue than the court treated it here. See, e.g., the Mazur case.

While Yelp avoided liability in this lawsuit, it should scrub its site to ensure it does not claim that Yelp's reviews are bias-free or the sole product of automated algorithms. For example, the complaint alleges that Yelp's guide says "We remove the guesswork by screening out reviews that are written by less established users. The process is entirely automated to avoid human bias." Obviously, the second half of the statement contains a fatal logic flaw; any algorithm intrinsically reflects human biases in its configurations. See my Search Engine Bias paper for more.

One minor procedural note: the court initially granted Dr. Reit a *TRO*. Fortunately, this opinion reflects a change of heart. I can't really imagine what the court was thinking granting a TRO. There are significant free speech and public policy considerations here, so I can't imagine how a meaningful TRO would be either constitutional or a good idea.

One final thought. One of my stock jokes to reporters is that I would never publish a negative consumer review of my dentist because of his/her retribution power, i.e., to dispense immense pain on my next visit. Either Michael S. is an untraceable pseudonym, or he never plans to go back to Dr. Reit, or he is a much bolder man than I am!

Other coverage of the ruling:
* Rebecca
* Evan Brown

Posted by Eric at 03:30 PM | Content Regulation , Derivative Liability , Marketing | TrackBack

September 11, 2010

Google Gets Good Results in Three AdWords Trademark Cases (Jurin, Flowbee, Dazzlesmile)

By Eric Goldman

Jurin v. Google, 2010 WL 3521955 (E.D. Cal. Sept. 8, 2010)

Jurin is one of the multitudinous trademark owners objecting to Google's AdWords program. Echoing a prior ruling, the court has rejected Jurin's claims for false designation of origin and false advertising on a 12(b)(6) motion to dismiss. The court also rejected Jurin's claim of contract breach (based on Google allegedly failing to follow its trademark takedown policy) because Google never made the promises that Jurin asserts. The court gives Jurin another chance to file a second amended complaint, so I'm counting this as a pending lawsuit. However, Jurin has no chance of winning, and I wonder if he will get hit with an attorneys fee award again if he continues his futile quest.

Separately, last month, Google resolved the Dazzlesmile and Flowbee trademark cases over AdWords. See the Dazzlesmile stipulation of dismissal and Flowbee stipulation of dismissal. I couldn't easily find any public announcements about either case, but both appear to be settlements.

With these two dismissals, Google has whittled its portfolio of pending AdWords trademark lawsuits down to three from a high of twelve. (I'm not counting the Rosetta Stone case, which is on appeal after Google's remarkable win).

The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 2010):

Posted by Eric at 12:17 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

September 07, 2010

Online Ticket Resellers Get Significant 47 USC 230 Win--Milgram v. Orbitz

By Eric Goldman

Milgram v. Orbitz Worldwide, LLC, ESX-C-142-09 (N.J. Super. Ct. Aug. 26, 2010)

Introduction

It's been a relatively quiet year for 47 USC 230, in a good way. We've had a few minor aberrational rulings (Subway v. Quiznos, Cornelius v. DeLuca, Scott P v. Craigslist) but, for the most part, the immunity has been working exactly as we'd expect.

Given the quiet year, this could be the most interesting 47 USC 230 decision of 2010 so far. Orbitz and TicketNetwork (part of CheapTickets) get a decisive 230 win against the New Jersey attorney general for reselling third party tickets. In addition to reaching the right result, the opinion is thoughtfully drafted and well-structured. It would make a great teaching case. It's worth reading.

Facts

This lawsuit relates to a private label site operated by CheapTickets (TicketNetwork) and branded by Orbitz. (Is it this site?). Orbitz specified the branding and design elements of the private label site. Orbitz also had the power to request content be removed from the site; to insert text and links for specific ticketed events; and to set prices of the offered tickets.

TicketNetwork hosted and operated the private label site as well as its own site. It sent confirming emails to buyers, processed the credit cards, and handled customer support inquiries. Perhaps most importantly, TicketNetwork handled the relations with third party ticket brokers who submitted offers to the site. It pre-approved brokers and attempted to factually verify the event information in submitted offers. TicketNetwork also provided consumers with various performance guarantees, including that the tickets would be valid and would arrive on time.

The specific offers giving rise to this lawsuit relate to Bruce Springsteen's Fall 2009 concert tour, which made a multi-date stop at the now-demolished Giants' stadium in East Rutherford, NJ. I imagine this event had significant local interest; the Boss is a native son of NJ, and his music has (for decades) addressed issues that relate to NJ. The NJ AG alleged that the sites offered 900 concert tickets 6 days before the official on-sale date; some of those tickets were not actually in the seller's possession/control before being offered for sale; and a few of the tickets listed seat numbers that didn't actually exist. The investigator purchased two tickets and confirmed that the seller pre-sold them before he/she had the tickets in hand; although band insiders and other dignitaries may have legitimately gotten ticket commitments before the on-sale date.

Legal Analysis

The state AG sued TicketNetwork and Orbitz for violations of NJ's Consumer Fraud Act and Advertising Regulations. Orbitz and TicketNetwork defended on 47 USC 230 and other grounds.

The court does a textbook 3 pronged 230 analysis:

1) Orbitz and TicketNetwork were providers of interactive computer services.

2) The claim treats them as publishers/speakers. The NJ AG argued 230 does not apply because of the defendants' "commercial" conduct--including charging service/administrative fees to ticket sellers. The court does not cite many of the cases upholding a publisher's 230 eligibility for advertising (I last aggregated 230-and-advertising cases in this post), but citing the Jurin ruling, the court nevertheless makes it clear that web publishers aren't liable for third party advertisements. The court says:

The fact that the defendants charge "service" or "administrative" fees is irrelevant to the CDA analysis. Plaintiffs seek to enjoin defendants from "advertising and selling concert tickets to consumers without actually having those tickets in their possession or control." This conduct, however, conduct [sic] fits squarely within the CDA's purview.

3) Orbitz and TicketNetwork don't qualify as "information content providers." Citing Donato v. Moldow (an NJ case from 2005 binding on the court here) and the Carafano case, the court rejects the NJ AG's efforts to treat Orbitz and TicketNetwork as ICPs because they helped create/develop the content at issue. The court correctly says the potentially liability-creating content at issue (the offer of misleading/inaccurate tickets) came from third parties, and Orbitz/TicketNetwork did not make "a material, substantive contribution to the ticket listings" sufficient to change its third party character.

The court distinguishes Roommates.com by reading its holding narrowly. The court says "the linchpin of the Ninth Circuit's decision was the fact that Roommates.com was actively participating in creating the objectionable content, i.e., by providing the illegal questions and by requiring users to answer them." In contrast, here the defendants "do not supply the content to which plaintiffs object -- the inaccurate or misleading ticket listings....Defendants do not ask ticket sellers to provide any information for any unlawful purpose, nor have they designed its [sic] Internet marketplace to violate any federal or state laws." Yet another case where the court ultimately cites Roommates.com in siding with the defense.

The court also distinguishes a pretty similar case, NPS v. StubHub. The StubHub case arose in a very different context--the New England Patriots were trying to get control over secondary ticket resales--but both lawsuits involve a website allegedly violating the law by reselling tickets. This court first questions the StubHub court's factual predicates and then rejects the case as "in contradiction with the spirit of Donato, and [thus it] cannot be relied upon by the court."

The court's conclusion is worth highlighting:

Defendants' services help to create and maintain a vibrant, competitive, market for consumers looking to purchase travel and entertainment related products and services online. As a result, defendants' services are consistent with the Congress's intent to encourage commerce over the Internet and ensure interactive computer services are not held responsible for how third parties use their services. Accordingly, defendants' motions for summary judgment are granted as plaintiffs' state law claims are barred by the CDA as a matter of law.

A subtle but unmistakable rebuke to the state consumer watchdogs that they barked up the wrong tree.

Implications

There are a number of interesting implications of this ruling:

* Rare defeat for a consumer protection agency. Many consumer protection agencies (both state and federal) are in partial denial that 47 USC 230 might apply to their enforcement actions. This ruling reminds them that 230 is a powerful restriction on their enforcement territory.

Further, consumer protection agencies usually win if they get into court. Judges are very sympathetic to consumer protection issues when the government raises them. Here, the clear-thinking judge recognized that NJ's enforcement action was not necessarily in the consumers' best interests.

* NPS v. Stubhub rejected. We've had a very small number of post-Roommates.com plaintiff wins where Roommates.com was cited favorably for the plaintiff. The NPS v. StubHub case is one of them. Here, the court rejects that precedent, potentially limiting the case's incursion into 230's immunity.

* 230 protects e-commerce sites. Curiously, the court doesn't mention FTC v. Accusearch, one of the other plaintiff wins post-Roommates.com, which had some factual resemblances. In the Accusearch case, the defendant resold pretexted phone records. Unlike Orbitz/TicketNetwork, Accusearch actually fulfilled the purchase. However, I've seen some discussion that the Accusearch case signals that e-commerce sites will get limited protection under 230. Here, TicketNetwork processed the payments and provided sales guarantees, yet the listings were still third party content. This case reinforces that e-commerce marketplaces still get 230 for third party commercial activity, even if the marketplace provides services to the vendors.

* Legal battles over online tickets aren't going away. Online tickets have become a major subfield of cyberlaw. Consider some of the following posts we've made over the past 3 years:

- Online Sports Ticketing Exchange Wins Dismissal Under Website User Agreement -- Duffy v. The Ticketreserve, Inc. (July 2010)
- NPS LLC v. StubHub, Inc. (April 2009)
- StubHub Wins 230 Dismissal in Anti-Scalping Case (Sept. 2008) [note: this one also involved Springsteen's tour]
- StubHub Denied 230 in Hannah Montana Ticket Scalping Case--Hill v. StubHub (July 2008)
- Ticketmaster Wins Big Injunction in Hannah Montana Case, But Did the Public Interest Get Screwed?--Ticketmaster v. RMG (Oct. 2007)

We've also mentioned the various state legislation governing online ticket sales (mostly along the lines of squelching line-jumpers).

Perhaps 2010 being a down year for concerts will help take some of the legal edge off the battle for tickets. Otherwise, I expect more litigation over the online resale of hot tickets until we see one of two structural changes in the ticket sales market: (1) ticket buyers can't transfer their tickets easily because they are just a database code attached to the initial buyer, or (2) tickets are sold via auction. Personally, I hope we see more of #2 rather than the continued litigation madness.

Conference Reminder

It's still 6 months away, but we've opened registration for our 47 USC 230 blowout party on March 4. I anticipate a possible sell-out situation, so get your tickets while there are still plenty. We aren't auctioning the tickets off, and I'm not sure if our anti-gaming devices will be strong enough to suppress robo-buyers if they sweep through.

Posted by Eric at 12:10 PM | Derivative Liability , E-Commerce , Marketing | TrackBack

September 03, 2010

P2P Gambling Site is Illegal Bookmaker--Betcha v. Washington

By Eric Goldman

Internet Community & Entertainment Corp. v. Washington State Gambling Commission, 82845-8 (Wash. Sup. Ct. Sept. 2, 2010)

Betcha is one of those too-clever-by-half dot com ideas that practically beg VCs to roll the dice. Rather than allow illegal gambling on its site, Betcha styles itself as a P2P betting platform. Effectively, it is a messaging service for people making bets with each other, where Betcha charges the parties to talk with each other. Betcha also escrows the wager, but it allows the losing bettor to renege. Exercising that right, however, has bad reputational consequences that I suspect are tantamount to on-site seppuku.

From a realpolitik perspective, we all know what's going on here (i.e., illegal gambling). Betcha crapped out at the district court, but the appellate court reversed in a split opinion. Unfortunately, Lady Luck has stopped smiling on Betcha as the Washington Supreme Court reversed 9-0. I guess if you're going to lose, you might as well lose big. This makes me wonder: did any Betcha users make bets on the outcome of this case? Maybe someone other than the lawyers got lucky from Betcha's legal misfortune.

The court's opinion makes it clear that expansive anti-gambling laws leave almost no room for entrepreneurial yet legal Internet gambling enterprises. Here, Betcha is tripped up by the definition of "bookmaking," defined as "accepting bets, upon the outcome of future contingent events, as a business or in which the bettor is charged a fee or ‘vigorish’ for the opportunity to place a bet." This strikes at Betcha's model of charging the parties to communicate with each other regarding betting. The court is not swayed by Betcha's formalist argument that because the loser could renege on the bet, the wager did not meet the statutory definitions for gambling. The court says the bookmaking definition applies whether the bets are made for money or not.

The statute also restricts sending or receiving "gambling information." The court said that because Betcha was running a professional gambling site (under the statutory definitions), it also tripped over this definition. This confused me because this provision should be preempted by 47 U.S.C. 230, at least as applied to Betcha. The court says the "information on wagers and odds it received from its users must be presumed, under the plain terms of the statutes, as intended for use in professional gambling," but that goes straight into a 230 immunity. However, 230 wasn't discussed at all. Because this was only one of several legal problems for Betcha, a 230 immunity on this point would not have changed the outcome.

The court also said that Betcha illegally possessed "gambling records." It wasn't clear if this referred solely to user information or to Betcha's own business records, so I couldn't tell if 230 (also not discussed) would have been relevant.

With the court's expansive definitions of bookmaker, gambling information and gambling records, my not-so-creative mind could not easily think of any easy ways to circumvent the statute and legally run a P2P site enabling betting or gambling. However, I would love to see a more cogent discussion about the 230 overlay before reaching a definitive conclusion.

Posted by Eric at 08:57 AM | Content Regulation , Derivative Liability , E-Commerce | TrackBack

August 31, 2010

Broadcaster Gets 230 Defense for Readers' Website Comments--Miles v. Raycom

By Eric Goldman

Miles v. Raycom Media, Inc., 2010 WL 3419438 (S.D. Miss. Aug. 26, 2010).

WLOX is a TV broadcaster in coastal Mississippi (although with those call letters, I expected it would be located in Brooklyn). Toni Miles, a WLOX anchor at the time, was arrested during a drug bust and subsequently fired from her job. WLOX reported on the bust via a story on its website (this story?), allegedly defaming Miles in the process, and user comments piled onto the story with allegedly false statements. Miles ultimately was not indicted for the drug bust.

With respect to the user comments, WLOX claims immunity under 230. This is a super-easy case, especially after the cited Collins v. Purdue case, and the court expends few words granting the immunity. The relevant discussion:

In the present case, Miles alleges that the defendants “ran a news article and subsequently allowed unfiltered online comments which contained false information.” (Compl. at 5). Miles does not allege that the defendants wrote or revised the false comments. In fact, she alleges that the comments were not filtered by the defendants. Furthermore, she complains that the defendants merely allowed the comments, and there is no indication or allegation that the defendants encouraged defamatory comments on their website. As a result, the Court finds that the defendants are immune from liability for the allegedly defamatory third-party comments published on its website pursuant to the Communications Decency Act.

The publisher also avoids liability for defamation and negligent emotional distress, but other claims are still pending.

Posted by Eric at 12:56 PM | Content Regulation , Derivative Liability | TrackBack

August 20, 2010

Selling Replacement Supplies Could Constitute Contributory Trademark Infringement–Georgia Pacific v. Von Drehle (Guest Blog Post)

by guest blogger Mark Bartholomew

[Eric's introduction: Mark is a law professor at the University of Buffalo. He has written several articles on secondary copyright and trademark infringement. See his SSRN page. We were swapping emails about this ruling, and he graciously agreed to write a post about it. I've appended a brief comment after his.]

Georgia Pacific Consumer Products LP v. Von Drehle Corp., 2010 WL 3155646 (4th Cir. Aug. 10, 2010)

The Fourth Circuit recently held that a maker of paper towels may violate the Lanham Act when it convinced merchants to stuff its paper towels into Georgia Pacific’s branded automatic towel dispensers instead of using towels provided by Georgia Pacific. The case is worth a look as it touches on issues of contributory trademark infringement, post-sale confusion, and antitrust law.

Plaintiff Georgia Pacific (GP) leases hands-free enMotion brand paper towel dispensers to distributors. The distributors then sublease the dispensers to businesses that have a use for them, like stadiums and restaurants. In its leases, GP conditions any use of the dispensers on exclusive use of GP brand paper towels. Unlike other automatic paper towel dispensers, enMotion dispensers are specifically designed to accept only a particular sized towel manufactured by GP.

Von Drehle is also in the paper towel business. In 2004, it developed a new type of toweling specifically for use in GP’s enMotion dispensers. It then instructed its sales staff to go out and convince distributors to resell its cheaper toweling to customers for use in enMotion dispensers. GP sued for contributory trademark infringement under the Lanham Act, along with violations of North Carolina’s unfair competition law and tortious interference with contractual relationships. Von Drehle counterclaimed for violation of the Sherman and Clayton acts.

The district court held in favor of Von Drehle on the trademark infringement and unfair competition claims. It explained that in evaluating likelihood of confusion, it was the mind sets of the business owners who purchase paper towel rolls for their restrooms that matter, not the expectations of restroom visitors. The court rationalized that restroom users don’t have a choice as to what type of paper towel they will receive, and “[n]o evidence exists to indicate that restroom visitors play any meaningful role in deciding which paper towel roll a business owner purchases from a distributor.” It held in GP’s favor on the antitrust claim because it found that GP had not taken coercive actions to enforce its lease agreements.

The Fourth Circuit reversed on the trademark and unfair competition claims. It described “the judicially created doctrine of contributory trademark infringement, derived from the common law of torts” as boiling down to a simple formula enunciated by the Supreme Court in a footnote to its landmark 1984 copyright decision, Sony v. University City Studios:

[A] manufacturer or distributor could be held liable to the owner of a trademark if it intentionally induced a merchant down the chain of distribution to pass off its product as that of the trademark owner's or if it continued to supply a product which could readily be passed off to a particular merchant whom it knew was mislabeling the product with the trademark owner's mark.

Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439 n. 19 (1984).

The Fourth Circuit decided that there could be actionable post-sale confusion here because GP’s survey evidence showed that over 40 percent of the public expected the paper towels they used to match the brand of the enMotion dispenser, and GP’s reputation may be hurt if it could not control the quality of the toweling used in its dispensers. To the extent Von Drehle intentionally created and distributed its towels for use in the enMotion machines and continued to supply its towels to distributors knowing how they were to be used, Von Drehle could be liable for contributory trademark infringement.

What’s interesting to me about this case is not so much the court’s specific analysis of contributory trademark infringement or post-sale confusion. Both of these topics are controversial issues in trademark law and have been dealt with much more thoroughly in other cases. What’s interesting is how the case shows how these controversial doctrines intersect with antitrust law, and the serious threat wide application of these doctrines poses to the competitive goals trademark law is designed to further. GP designed a new device and required any user of that device to purchase its own, more expensive paper towels. Although in decline in recent years, the doctrine of patent misuse prevents patent holders with sufficient market power from suing a licensee for infringement when the licensee uses a patented device in conjunction with certain materials outside of the patent. A copyright misuse defense has been used to defeat an infringement claim when the copyright holder requires a licensing agreement for use of its work that also prohibits use of competing works. Instead of a patent or copyright claim here, GP is using trademark law to compel users of its device to purchase arguably extraneous goods. The big question here is whether this decision allows GP to make an end run around antitrust concerns.

Yet the Fourth Circuit spends no time on the competitive consequences of its decision. Maybe this is understandable—von Drehle did not appeal the district’s courts adverse ruling on its tying claim. Even so, the Fourth Circuit’s decision strikes at the heart of what is and is not fair competition and the policy issues surrounding enMotion’s practices probably deserved further discussion. (A concurrence by Judge Samuel Wilson hinted at this, noting that the antitrust implications of an arrangement like GP’s “will have to play out . . . on another day and, perhaps, on a different stage.”) In his treatise, McCarthy notes that in not a single reported case has a court refused to enforce a trademark because it was used in violation of antitrust law. But if doctrines like contributory trademark infringement liability and post-sale confusion continue to expand and receive widespread acceptance by the courts, the competitive position of individual manufacturers will continue to strengthen and a defense of “trademark misuse” may deserve more attention.
_____

Eric's comment:

GP's distribution scheme for its towel dispensers is, from an IP standpoint, both brilliant and insidious. If you're a manufacturer looking to control the sale of complementary goods, this case provides a playbook for how to use trademark law to assert control over secondary markets in a way that courts might uphold--despite, as Mark explains, a thick set of antitrust issues. I share Mark's disappointment that the majority opinion basically was blind to the hugely anti-competitive effects of its ruling. But make no mistake, this opinion will not help improve marketplace competition. If GP succeeds with this litigation, it will have successfully kicked out a competitor out of the replacement supplies marketplace, and I expect many, many other manufacturers will try to follow in GP's footsteps to do the same.

Posted by Eric at 12:25 PM | Derivative Liability , Trademark | TrackBack

August 19, 2010

47 USC 230 Preempts Sponsorship/Endorsement Liability--Black v. Google

By Eric Goldman

Black v. Google, Inc., 2010 WL 3222147 (N.D. Cal. Aug. 13, 2010). The complaint.

The Blacks run a roofing company. They claim someone posted an anonymous defamatory comment on an unspecified Google website, and this "comment misrepresents their work and has devastated their businesses." They sued Google for several business torts (although, interestingly, not defamation). I posted the complaint back in May and tweeted:

Roofing contractor sues Google over negative business review. Hello 47 USC 230!

I believe the plaintiffs and 47 USC 230 are now properly introduced. The court efficiently gets to the heart of the matter: "A fair reading of Plaintiffs’ complaint demonstrates that they seek to impose liability on Defendant for content created by an anonymous third party...Based on these allegations, Defendant is immune from their suit."

The plaintiffs, working pro se, try to get around 230 by arguing that they seek to hold Google liable for its "programming." Neither the judge nor I are clear on what that means, but we're both clear that the allegation doesn't change the answer.

Next, the plaintiffs argue that Google endorsed or sponsored the allegedly tortious content. The court recognizes this for exactly what it is: "an end-around the prohibition on treating it as the publisher or speaker of it." The court continues: "Such a ploy, if countenanced, would eviscerate the immunity granted under § 230."

I heartily agree. I made this exact point when critiquing the FTC's Endorsement and Testimonial Guidelines, where the FTC sought to impose liability on advertisers for online content posted by independent third parties; and I made a similar point when critiquing the SEC's proposal to impose liability on issuers for linking to third party websites. This case is entirely clear that 230 preempts liability premised on endorsing or sponsoring third party online content. Hey, FTC and SEC, I hope you're paying attention! The courts may not back up your expansive liability theories.

Finally, the plaintiffs argue that Google lacked an adequate dispute resolution procedure. 230's immunity isn't predicated on having such a procedure, and the court treats this as a subspecies of the unsuccessful argument that notice of a problem disqualifies the service provider from 230's immunity.

Thus, an easy case leads to a quick dismissal with prejudice.

Posted by Eric at 08:59 AM | Content Regulation , Derivative Liability , Search Engines | TrackBack

August 11, 2010

New Anti-Libel Tourism Act (HR 2765) Extends 47 USC 230 to Foreign Judgments

By Eric Goldman

President Obama signed HR 2765, the "SPEECH Act," into law, codified at 28 USC Secs. 4101-4105. The act prohibits US courts from enforcing foreign defamation judgments unless (1) the judgment would satisfy First Amendment or similar state constitutional protections, and (2) the foreign court making the ruling had jurisdiction that comports with our due process requirements. To get a US court to enforce the foreign judgment, the plaintiff bears the burden of proof that the judgment meets these standards. Effectively, these requirements will prevent a defamation plaintiff from forum-shopping globally; even if the plaintiff finds a more friendly jurisdiction, it will still have to satisfy US legal requirements for defamation before enforcing the judgment here.

The act also applies 47 USC 230 to foreign judgments; if the subject information would have been protected by 47 USC 230 in the US, the plaintiff has the burden to show that the foreign judgment comports with 230. Very late in the drafting process, I raised a minor concern that the shield only applies to "providers of interactive computer services" and not ICS "users," even though 230 protects both providers and users. This is a minor drafting error, but I hope it will not result in any judgments that slip through the cracks. Also, the statute expressly pertains only to defamation claims; other causes of action do not get the shield, and usually multiple causes of action are asserted alongside a defamation claim.

As far as I can recall, this is only the third time that Congress has monkeyed with 230 since its initial passage. The other two:

* In 1998, Congress added 230(d), which requires ICSs to tell their customers about the availability of filtering technology. 230(d) is a stupid disclosure requirement, and I rarely see it complied with in the field. I have often wondered if plaintiffs will ever try to argue that making the 230(d) mandatory disclosure is a precondition to 230(c)'s immunity. I've not seen that argued before, and I don't think the statutory construction supports that interpretation, but plaintiffs are running out of creative arguments to get around 230's immunity.

* In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act of 2006, which attempted to regulate Internet gambling. At the time, I wrote:

The statute partially reduces the 230 limitations by allowing the DOJ or state AGs to seek a court order requiring ICSs to take down a lawbreaking website. 31 USC 5365(c). Without this statutory exception, 230 should have barred any civil orders. At the same time, the statute appears to expand 230 protection to eliminate ICS liability under the Wire Act unless the ICS has “actual knowledge and control of bets and wagers” and owns or operates an illegal gambling website. I’m not exactly sure it means to have “actual knowledge and control of bets and wagers,” but my suspicion is that this defines a very narrow universe of activities. So, on balance, it looks like this law may have slightly expanded ICS immunization by providing some limits on ICS liability for third party criminal gambling activities.

Because Congress so rarely modifies 230's coverage, the SPEECH Act is important for that reason alone. However, in practice, I can't recall a foreign judgment being enforced in the US against a service provider that would have claimed 47 USC 230 in the US, while we have seen libel tourism against the direct publishers. As a result, I don't expect the 230-related prong of the SPEECH Act to be invoked frequently, but it's definitely nice to have.

A final nice touch: successful defendants under the statute should generally get their attorney's fees.

I spend a lot of time bashing legislatures on this blog, so I want to take a moment to commend Congress for getting something right. This law has two meritorious effects: it hinders transborder litigation gamesmanship and ensures First Amendment and 47 USC 230 protections for US defendants so long as they are in US courts. This is great news all around. Many people deserve credit for getting this law to the finish law, but I want to specially commend Rep. Steve Cohen of Tennessee, who sponsored this law as well as the much-needed federal anti-SLAPP law. These two bills represent the kind of work I wish all of our legislators were pursuing.

Posted by Eric at 09:20 AM | Content Regulation , Derivative Liability | TrackBack

August 05, 2010

Web Host Gets Easy 47 USC 230 Win in Catfight--Johnson v. Arden

By Eric Goldman

Johnson v. Arden, 2010 WL 3023660 (8th Cir. August 4, 2010). The CMLP page with lots of source materials.

I've been looking at over-the-top cute kitty pictures all morning. Just try to suppress the "aahs" on a page like this. I'm on cute overload! But there's nothing cute about litigating 230-preempted claims to the Eighth Circuit.

This lawsuit involves the breeding and sale of Persian and Himalayan cats and related "designer" cross-breeds. “Cozy Kitten Cattery,” run by the Johnsons in Missouri, allege that Heineman, a former business associate now affiliated with BoutiqueKittens.com, and Lowry, whose relationship with the Johnsons isn't clear, both posted allegedly defamatory comments about the Cozy Kitten Cattery business to ComplaintsBoard (run by Arden), which InMotion hosts. (A quick perusal of ComplaintsBoard reveals that cattery-related complaints are disturbingly common.) The plaintiffs filed suit against all of these folks and others, alleging they jointly committed defamation. Insert your own cat-related pun here (maybe involving flying fur or scratching claws). However, the plaintiffs actually served only Heineman, Lowry and InMotion.

ComplaintBoard's eligibility for 230's immunity wasn't discussed, but that should be an easy case despite the conspiracy-esque allegations. InMotion's eligibility for 230, as a service provider to the service provider, is an even easier call--indeed, the savvy district court raised the 230 defense sua sponte!--and the Eighth Circuit appropriately treats it as such in what I believe is the first Eighth Circuit opinion on 230. The court says, "It is undisputed that InMotion did not originate the material that the Johnsons deem damaging," and that pretty much ends the inquiry. The court concludes: "we decline the Johnsons' invitation to construe § 230(c)(1) as permitting liability against InMotion for material originating with a third party." This reminds me a little of the uncited Novins v. Cannon case from earlier this year, where the court says there can be only 1 defendant in an online defamation case--the content originator. Everyone else in the publication chain should get 230 immunity.

The opinion then discusses personal jurisdiction. The court rejects plaintiff's home court jurisdiction over Heineman under the Effects Test despite some highly critical comments about the plaintiff's business. Courts have been splitting about the jurisdictional effects of gripe postings, so it's great to see the Eighth Circuit establish that a gripe post doesn't automatically confer jurisdiction in plaintiff's home court.

The court also rejects jurisdiction on trademark grounds based on allegations that Heineman used the phrase "Cozy Kittens and Cuddly Cats" on BoutiqueKittens.com. The court says "there is no evidence in the record that Heineman engaged in any transaction or exchange of information with a Missouri resident via www.BoutiqueKittens.com, or that a Missouri resident ever accessed the website. We decline to confer personal jurisdiction based on only the possibility that a Missouri resident had contact with Heineman through www.BoutiqueKittens.com."

Posted by Eric at 01:10 PM | Content Regulation , Derivative Liability | TrackBack

August 04, 2010

Google Gets Complete Win in Rosetta Stone Case

By Eric Goldman

Rosetta Stone Ltd. v. Google Inc., 1:09-cv-00736-GBL-TCB (E.D. Va.). Opinion granting Google's motion to dismiss filed August 3, 2010, 2010 WL 3063152. Order granting Google's motion to dismiss the unjust enrichment claim filed August 2, 2010, 2010 WL 3063857.

Back in late April, many of us were eagerly awaiting the impending trial in Rosetta Stone v. Google, which was going to be the first trial in a trademark owner v. search engine keyword advertising case since the GEICO v. Google case in 2004. Then, just days before the scheduled trial, the judge granted Google's motions to end the case, which negated the scheduled trial. However, because the case had been moving too fast in the Rocket Docket, the judge made that ruling without providing any written explanation of why. For about 3 months, we've been wondering how good a win Google got.

The opinions are finally out, and we've learned that Google got a complete win, in that the judge endorsed Google's basic business structure. As I explore below, the specifics are a little sketchy (the judge obviously cut some analytical corners), but the opinion’s overall tenor is that the judge completely rejected Rosetta Stone's fundamental contention that Google was doing something wrong by making money off Rosetta Stone's trademarks. Because Rosetta Stone's core liability paradigm failed to convince the judge, all of opinion's detailed reasoning is less essential.

Unfortunately for Google, the opinion contains several minor doctrinal errors that could attract attention from an appellate court. That makes this ruling vulnerable on appeal. I could see why Rosetta Stone would choose to appeal the case to fix those errors--although even a Fourth Circuit reversal would be only marginally helpful to Rosetta Stone if the case gets remanded to the same judge, who clearly isn’t going to find for Rosetta Stone.

Irrespective of subsequent proceedings in this case, for now this opinion could prove extremely useful to Google in trying to finish off the half-dozen remaining trademark lawsuits against AdWords (and thwarting new cases). In particular, I expect Google will tout two of the key rulings in this opinion--summary judgment on the likelihood of consumer confusion, and Google's eligibility for the trademark functionality defense. If other judges accept either of these two rulings, Google might quickly clear its AdWords litigation docket.

A deeper look at some of the judge's discussion:

* the judge grants Google summary judgment on the likelihood of consumer confusion question. The court says "no reasonable trier of fact could find that Google's practice of auctioning Rosetta Stone's trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone's products." This is just the latest defense win on the factual question consumer confusion attributable to keyword advertising, joining such recent cases as College Network v. Moore and Fair Isaac v. Experian (both trademark owner v. advertiser lawsuits). As precedent builds that trademark owners aren't likely to win on the central consumer confusion question, we might see a categorical reduction in AdWords-related litigation.

* In reaching this conclusion, the court rejects several typical plaintiff arguments:
- on the question of Google's intent, the court rejects that an intent to profit is sufficient, even if Google liberalized its trademark policy to goose its revenues. Instead, the judge requires evidence of palming off by Google--which keyword ad sales clearly are not.
- on the question of actual confusion, Rosetta Stone offers the testimony of 5 allegedly confused individuals. The court says this de minimis confusion out of the 100M ad impressions delivered on searches for Rosetta Stone's trademarks. Further, those 5 testimonials apparently all relate to counterfeit Rosetta Stone purchases, and the court attributes those sales to confusing web vendors and not Google's role in the keyword advertising of those sites. Other consumer complaints in Rosetta Stone's logs weren't necessarily attributable to keyword advertising. Finally, the court rejects the plaintiff's survey on whether consumers thought Rosetta Stone "endorsed" the ads, saying endorsement confusion isn't the same as source confusion. I'm not sure about that distinction, but clearly the court wasn't interested in the survey.
- on the question of consumer sophistication, a language learning system is an expensive and complicated purchase, which makes consumers more cautious.
- the court says the parties didn't contest the other likelihood of consumer confusion factors, although it's unclear how many of those other uncontested factors favored Rosetta Stone. Thus, the court does a truncated multi-factor analysis, only looking at the 3 contested factors, saying they all weigh in favor of Google, and then finding this supports SJ for Google. I could see an appellate court wanting to look more closely at the other undiscussed factors.

* The court's most novel ruling is that Google's use of trademarks as keyword ad triggers qualifies for the trademark functionality doctrine. Typically, the functionality defense arises only in trade dress cases. The functionality defense in the keyword advertising context failed in the 9th Circuit's Playboy v. Netscape ruling, which this court surprisingly doesn't cite. The court says that the trademarked keyword triggers "have an essential indexing function because they enable Google to readily identify in its database relevant information in response to a web user's query." This is correct, of course, but doctrinally I think this conclusion better fits into a doctrinal conclusion that Google isn't using the trademark as a mark. (See more on this point in my Deregulating Relevancy article). Nevertheless, Google and other keyword advertising sellers will be thrilled if other courts accept the functionality defense. I expect most other courts will address the 9th Circuit's Netscape ruling before doing so.

* Google's keyword suggestion tool does not constitute inducement for contributory trademark infringement. The court says it's smart business practices, not inducement, for Google to upsell its advertisers. Per Tiffany v. eBay, Google also lacks the requisite scienter because it contractually prohibits counterfeiter ads, honors takedown notices, and has a Trust & Safety team looking for problems. Plus, like eBay, Google had no way of confirming if advertisers were selling legitimate or counterfeit goods.

* The court uses a goofy legal standard for vicarious trademark infringers, which it says can occur if "Google has joint ownership or controls the allegedly infringing advertisements appearing on its site." This standard is WRONG. Unlike vicarious copyright infringement, vicarious trademark infringement is rooted strictly in agency law. So the vicarious infringer normally requires a principal/agency-like control over the direct infringer's conduct. Here, the court devolves the vicarious trademark infringement test into a bastardized version of the vicarious copyright infringement test. This is a significant doctrinal error. Nevertheless, it proves to be harmless for Google because "Rosetta Stone has not shown that Google controls the appearance and content of the Sponsored Links and the use of the Rosetta Stone Marks in those Links."

* I'm no fan of the dilution doctrine, but this court's rejection of the dilution claim was bizarre. Google wins the dilution claim because it "does not sell language learning software," i.e., Google wasn't using the trademark as an identifier of its own products. Huh? The court also says blurring did not occur because Rosetta Stone's brand awareness grew during the period of time Google is selling keyword-triggered ads. Huh? This confuses correlation with causation. What would Rosetta Stone's brand awareness have been without the keyword ads? We have had very few rulings addressing keyword advertising and dilution (this uncited 2007 ruling is the only one that comes immediately to mind), so this conclusion on dilution could be a fairly influential ruling as well.

* In a separate opinion, the judge rejected Rosetta Stone's unjust enrichment claim on a motion to dismiss. It's a little odd to be dealing with a pending motion to dismiss when the case was on the brink of trial, but that's the consequence of racing too fast in the Rocket Docket. The court rejects the unjust enrichment claim for failure to satisfy the requisite claim elements--basically, because this is not a quasi-contract situation where Google made an implied promise to pay Rosetta Stone. As I mentioned earlier, the court otherwise rejected Rosetta Stone's basic contention that Google has money it doesn't deserve. Interestingly, the court also rejects the unjust enrichment on 47 USC 230 grounds, basically treating the unjust enrichment claim as an attempt to hold Google liable for third party conduct. I didn't totally follow the judge's reasoning, and frankly I'm not sure 230 is the right basis to squelch the unjust enrichment claim. Nevertheless, unjust enrichment claims are almost always junky/throwaway claims, so a 230 immunity would be an effective way to clean them up fast.

In a mostly unrelated development, today Google liberalized its AdWords trademark policy in Europe. I'll blog on that soon.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* ~~Ezzo v. Google~~
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* ~~Rosetta Stone v. Google~~
* Flowbee v. Google
* ~~Parts Geek v. US Auto Parts~~
* Dazzlesmile v. Epic

Posted by Eric at 11:55 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

July 30, 2010

Google Protected by 17 USC 512(d) for Links to Infringing Content; Perfect 10's Takedown Notices Were Mostly Insufficient

By Eric Goldman

Perfect 10, Inc. v. Google, Inc., 2:04-cv-09484-AHM-SH (C.D. Cal. July 26, 2010)

In 2007, the Ninth Circuit issued an important but befuddling ruling in Perfect 10 v. Amazon and Google. That ruling addressed Perfect 10's prima facie case of secondary copyright infringement against Google (and Amazon, which was using Google results) and remanded the case back to the district court for consideration of that issue as well as the underexplored 17 USC 512 safe harbors.

We've had a couple of blog-worthy rulings since then (on a motion to dismiss and A9's eligibility for the DMCA safe harbors), but it's taken 3 years to see where the court stands on Google's eligibility for the DMCA online safe harbors. The news is largely good for Google.

* Google's lack of user accounts for content loaded into web search and image search means that Google can't have a repeat infringer policy for those services. Google's Blogger practices satisfied the requirement to terminate repeat infringers.

* Google web search, image search, Blogger (to the extent the problem is user posted links) and search cache (also to the extent the problem is cached photos) are all eligible for protection under 17 USC 512(d) with minor exceptions I'll discuss in a moment. This is a noteworthy ruling because it's one of only a handful explicitly addressing 512(d), which provides a safe harbor for links to infringing content. Most of the online safe harbor rulings have involved 512(c), the safe harbor for hosting infringing content. To refresh my memory, I did a quick search in Westlaw, and I did not immediately recall a prior ruling where a service provider won a 512(d) defense. If so, then this is an important precedent. (Please email me to let me know what 512(d) cases I've forgotten).

* The parties divided Perfect 10's takedown notices into three groups:

- Group A. These were categorically defective because Perfect 10 sent them to the wrong google.com email address and they "uniformly do not identify specifically which copyrighted works were infringed."

- Group B. Apparently most of these notices referenced bogus URLs, but some URLs were legit, which gave Google enough information to locate the infringing links. There is a factual dispute about how long it took Google to respond to the legit notices; Perfect 10 alleges that it was up to 7 months, which probably won't qualify as an expeditious response. As a result, for the legitimate Group B takedown notices, Google could be on the hook for any that weren't honored expeditiously.

- Group C. The court describes this group of Perfect 10's takedown notices:

The Group C notices generally consist of a cover letter, a spreadsheet, and a hard drive or DVDs containing electronic files. Where P10 provided spreadsheets, the spreadsheets do not identify the infringing URL, but merely the top-level URL for the entire website. P10 evidently expected Google to comb through hundreds of nested electronic folders containing over 70,000 distinct files, including raw image files such as JPEG files and screen shots of Google search results, in order to find which link was allegedly infringing. In many cases, the file containing the allegedly infringing image does not even include a URL, or the URL was truncated. The spreadsheets also do not identify the copyrighted work that was allegedly infringed....P10 then expected Google to search through a separate electronic folder—attached only to the June 28, 2007 DMCA notice—containing all of the more than 15,000 images that appeared on P10's website as of June 2007, in order to identify the copyrighted work that was infringed. [citations omitted]

Per the Ninth Circuit's ccBill ruling, this paint-by-numbers approach to takedown notices does not work. The delivery of a big database of copyrighted works does not sufficiently identify the infringed works as required by 512(c)(3), nor does Google have to navigate multiple documents to piece together the 512(c)(3) elements. The court helpfully lays out how the 512(c)(3) information must be presented to count as a 512(c)(3) notice:

at a minimum, the essential elements of notification—the copyright owner’s attestations of ownership, nonlicensed use, and veracity of the notice; contact information for the complainant; identification of the copyrighted work; and identification of the infringing material (including the location of that material and if necessary, a specific link under section 512(d))—must be included in a single written communication.

* Google qualifies for 512(c) for hosting infringing copies in Blogger with the exception of up to 23 URLs that might have been covered by a legitimate Group B notice.

The implications of this ruling are pretty straightforward. Copyright owners who want service providers to intervene on their behalf should not get creative or lazy with their 512(c)(3) takedown notices. Over and over again, we've seen that the big service providers will respond quickly to properly drafted takedown notices; and we've seen judges become increasingly less tolerant of plaintiffs who couldn't bother to follow the statutory roadmap. So plaintiffs, please just follow the statute; it's pretty clear on what you need to do.

Overall, this case reminded me of the recent (uncited) Perfect 10 v. RapidShare ruling because that judge also implicitly showed little sympathy to Perfect 10. Perhaps the courts are finally prepared to put an end to Perfect 10's litigation madness. However, given there are a sliver of legitimate Group B notices, Perfect 10 still has a way to continue to make Google's life miserable.

More comments on the case from the EFF and Techdirt.

Posted by Eric at 09:23 AM | Copyright , Derivative Liability , Search Engines | TrackBack

July 27, 2010

Yet Another TM Owner Gives Up Against Google--Ezzo v. Google

By Eric Goldman

Jamil Ezzo has apparently given up his lawsuit against Google over AdWords. The dismissal. This was a silly lawsuit that never should have been brought (it was over the purported trademark "Locate Plastic Surgeon" for gosh sakes), and the only surprising thing is that the lawsuit lasted this long. The most noteworthy thing about this dismissal is that Google has successfully whittled the pending AdWords trademark cases down to five from a high water mark of a dozen--an impressive display of litigation skill and financial wherewithal.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* ~~Ezzo v. Google~~
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* ~~Rosetta Stone v. Google~~
* Flowbee v. Google
* ~~Parts Geek v. US Auto Parts~~
* Dazzlesmile v. Epic

Posted by Eric at 04:19 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 07, 2010

Scribd Can't Shake Copyright and Publicity Rights Lawsuit on Motion to Dismiss--Williams v. Scribd

By Eric Goldman

Williams v. Scribd, 3:09-cv-01836-LAB -BGS (S.D. Cal. June 23, 2010).

Larry Williams has written several books on commodities trading (their titles suggest they fit into the "Make Money Fast" genre). He alleges that rogue Scribd users, including the alias “GalaxiaMia Guy” [is it this user?], have repeatedly posted his books to Scribd. Williams sued Scribd for direct, contributory and vicarious copyright infringement and publicity rights misappropriation. The first amended complaint.

Scribd moved to dismiss but ran into a judge who appears to be a stickler about letting unmeritorious cases survive to summary judgment rather than crunching them quickly on 12(b)(6). The judge does nix the direct copyright infringement claim against Scribd. The judge notes Williams' only argument in support of direct infringement is that GalaxiaMia Guy is “friends” on Scribd with Scribd's CEO Trip Adler. Williams seems to think they are in cahoots with each other, but the judge rejects this ill-formed suspicion.

Along the way, the judge snarkily laments: "it’s no secret that the ‘friend’ label means less in cyberspace than it does in the neighborhood, or in the workplace, or on the schoolyard, or anywhere else that humans interact as real people." Ouch! I'm guessing the judge isn't a power Facebook user.

Then again, I don't understand the "friend" vernacular on Scribd. Scribd allows people to "subscribe" to each other's feeds--like a “follow” on Twitter, it isn't mandatorily reciprocal like a Facebook “friend.” Trip Adler has over a half-million subscribers on Scribd, so if GalaxiaMia Guy was one of those half-million, that doesn't mean anything. No matter what, the judge repeatedly says the "friends" argument is altogether irrelevant.

[This may be a good time to mention that I have been regularly using Scribd to post source materials. I often don't blog about what I post; in some cases, I don't even announce the posting to Twitter. So if you want to see everything I'm posting to Scribd, you can subscribe at Scribd.]

The court rejects Scribd’s motion to dismiss the contributory and vicarious infringement claims as well as Scribd’s 512 defense, all on the same basis that a 12(b)(6) is too early to make a decisive call. For example, regarding the 512 safe harbor, the court says that's properly awarded on a 12(b)(6) only "where the answer to the question is nearly obvious," which apparently isn't the case here. The court also breezes through a 47 USC 230 defense to the publicity rights claim, rejecting the immunity on a motion to dismiss "[b]ecause there are open questions in this case about the extent to which Scribd participated in the alleged infringement." Of course, many cases have granted 230 immunity on a motion to dismiss, but I'm guessing none of those were in front of Judge Burns.

Although Williams' complaint lives to see another day, it’s also clear that Williams will ultimately lose. The judge disparages the complaint (the complaint "isn’t a model of lucidity"), criticizes plaintiff's counsel for various factual omissions in the complaint (which "risks denting his credibility"), calls the remaining copyright claims "thin" and invites Scribd to seek summary judgment ("Scribd seems to have all of its arguments for summary judgment already teed up"). The judge continues:

Based on the evidence and the pleadings, the Court is inclined to say that it appears Scribd has the better arguments in this case; Scribd’s motion to dismiss is largely denied only because it is too early to raise those arguments. Williams should give serious consideration to whether he sincerely believes Scribd does not qualify for the safe harbor protections of the DMCA, as well as whether Scribd did not act as expeditiously as possible to remove Williams’s copyrighted works from its website as soon as it was asked to do so.

With a warning to the plaintiff like that, this case is an excellent candidate for a fee award to Scribd under 17 USC 505 when Scribd wins. I'll be interested to see if the judge remains irascible when it comes time to penalize Williams for wasting everyone's time.

Ben Sheffner has also blogged the case.

BONUS Blog Coverage! (kind of like a hidden track on a record album)

This is also an opportune time to note a recent ruling in Perfect 10 v. RapidShare, another opinion involving secondary copyright infringement also from the S.D. Cal. (in front of Judge Huff instead of Judge Burns). Like Scribd, RapidShare is a UGC web host that's agnostic about the types of content users publish; like Williams, Perfect 10 is a wild-eyed plaintiff.

However, unlike Scribd, RapidShare isn't eligible for the 512 safe harbors because it has not made the requisite Copyright Office filing. RapidShare is also unusual because it lacks any internal search functionality or navigation structure. Instead, each user self-publicizes the file's URL.

Procedurally, Perfect 10 faced a higher burden of proof than Williams because Perfect 10 requested a preliminary injunction, which requires the court to consider Perfect 10's likelihood of success.

Perfect 10's direct copyright infringement claim, based on a 106(3) distribution, isn't likely to succeed because RapidShare never indexes the file itself. The court also rejects an inducement claim.

Regarding contributory infringement, without 512 eligibility, Perfect 10 does not need to send 512(c)(3) notices. Instead, per Perfect 10's typical modus operandi, Perfect 10 simply sent a disk containing its copyrighted photos and basically told RapidShare to block those photos. The court says the disk delivery gave RapidShare actual knowledge of infringement. Wow. I miss 512(c)(3) after all!

Nevertheless, RapidShare does not make a material contribution because "RapidShare does not provide an integrated service that allows users to locate and download infringing files." Further, even though Perfect 10 didn't identify infringing URLs, RapidShare's other remediation efforts led the court to conclude that "RapidShare is using information provided by Plaintiff to locate and remove infringing materials, and is also taking independent steps to identify, locate, and remove infringing files." Therefore, "RapidShare is [not] failing to take simple measures to prevent further damage to Plaintiff’s copyrighted works."

Following this ruling, RapidShare countersued Perfect 10 for being a "copyright troll." I'm not sure about the legal merits of RapidShare's countersuit, but I heartily applaud its sentiments!

Posted by Eric at 08:31 AM | Copyright , Derivative Liability , Publicity/Privacy Rights | TrackBack

July 05, 2010

Q2 2010 Quick Links Part 1 (Content Regulation Edition)

By Eric Goldman

Online Publication

* Too Much Media, LLC v. Hale, 2010 WL 1609274 (N.J. Super. A.D. April 22, 2010). Curating blogger and message board commenter does not qualify for New Jersey's reporter shield law. The case also says that online defamation is libel, not slander (to the extent it makes a difference).

* Insightful interview with the FTC's David Vladeck. "We did not do a good job with the...Endorsement Guides [rollout]." Really…you think? The latest "guidance" from the FTC, the Facts for Businesses, hardly improves the situation.

* Former nurse charged with encouraging other folks in Internet chat rooms to commit suicide, which at least two did.

* Brayshaw v. Tallahassee, 4:09-cv-00373-RS-WCS (N.D. Fla. April 30, 2010) Publishing personal information about police officers to Ratemycop.com is protected by the First Amendment.

* Mortgage Specialists v. Implode-Explode Heavy Industries (N.H. Sup. Ct. May 6, 2010). Dissolving an injunction against a website republishing user-submitted comments on First Amendment grounds.

* Jiron v. Jiron, 2010 WL 1978704 (Ind. App. Ct. May 18, 2010). Mom giving a 10 year old unsupervised access to a MySpace account (and listing his age as 19) was a factor in Mom losing custody rights.

* McGee v. Patel, 2010 WL 1838621 (Cal. App. Ct. May 7, 2010). Ex-boyfriend sets up a password-protected blog and writes about his ex-girlfriend and her new boyfriend. The ex-girlfriend has a password to the blog, and she gives her new boyfriend the password after seeing blog postings threatening him. The ex-boyfriend says he didn’t expect the new boyfriend to be reading the blog because:

[California Penal Code] Section 502 provides that it is a public offense for a person to “[k]nowingly and without permission provide[ ] or assist[ ] in providing a means of accessing a computer, computer system, or computer network....” or to “[k]nowingly and without permission access[ ] or cause[ ] to be accessed any computer, computer system, or computer network.” There is nothing in the record to suggest that appellant's blog could be considered a “computer, computer system, or computer network.” More importantly, it is clear that respondent had J.S.'s permission to use her personal password to access appellant's blog, and respondent therefore was not acting “without permission” when he read appellant's posts.

I think this is wrong on two fronts. The servers hosting a blog should qualify for 502 protection, and an authorized user can’t share passwords without permission and have all of the password recipients also become authorized users.

* Edelman v. Croonquist, 2010 WL 1816180 (D.N.J. May 4, 2010). Court dismisses mother-in-law’s lawsuit that a comedienne’s shtick constitutes defamation, false light or infliction of emotional distress because the jokes were non-actionable opinions, not statements of fact.

* NY Times on the difficulties that schools have policing/responding to cyberbullying.

* JC v. Beverly Hills Unified School District, 2010 WL 1914215 (C.D. Cal. May 6, 2010). “Plaintiff's geography-based argument-i.e., that the School could not regulate the YouTube video because it originated off campus-unquestionably fails.” However, “the Court finds that no reasonable jury could conclude that J.C.'s YouTube video caused a substantial disruption to school activities, or that there was a reasonably foreseeable risk of substantial disruption as a result of the YouTube video…. C.C. felt embarrassed, her feelings were hurt, and she temporarily did not want to go to class. These concerns cannot, without more, warrant school discipline.”

* Insider Pages has launched a new doctor review website called Doctor Finder. Some of the data comes from HealthGrades (not a blog favorite). I’ll be interested to see how Medical Justice feels about Doctor Finder.

Pornography

* U.S. v. Strayer, 2010 WL 2560466 (D. Neb. June 24, 2010):

The court finds the seventeen-and-a-half to twenty-year sentence recommended under the Guidelines (based on the imposition of numerous and excessive enhancements for circumstances that appear in nearly every child pornography case such as use of the Internet, amassing numerous images, possessing images of prepubescent minors and violence, and some “distributing” of images in return for other images) is greater than necessary to protect the public and to deter Strayer from re-offending. The mandatory minimum sentence of five years is appropriate to achieve the goals of sentencing in this case. Five years is a significant term of imprisonment for a first offender. The public will be adequately protected by a five-year term of supervised release with strict conditions and by the provision of mental health treatment and sex offender treatment to Strayer.

The mere fact of the prosecution of these cases arguably deters others from engaging in this sort of conduct. The additional deterrent value of a sentence any longer than five years would be marginal. With respect to general deterrence, although conduct like Strayer's may sustain the market for child pornography, much of that market is driven by compulsive behavior that arguably will not be deterred in any event. The deterrent effect of a lengthy sentence is further lessened by the international character of the market for child exploitation offenses. To the extent that harsh punishment is necessary to deter harm to children, punishing a less-culpable offender as harshly as the worst does not satisfy the goals of sentencing and encourages disrespect for the law.

* American Booksellers Foundation for Free Expression v. Strickland, 2010 WL 1488123 (6th Cir. April 15, 2010). Upholding a state restriction on distributing "harmful to minors" material. Shades of O'Connor's concurrence/dissent in Reno v. ACLU.

* United States v. Richardson, No. 09-4072 (4th Cir. June 11, 2010). AOL, as an email service provider, was not a government agent when it automatically searched its network for child porn and then complied with its statutory child pornography reporting obligations.

47 USC 230

* The Ohio Attorney General has weighed in on myTriggers’ side in the myTriggers v. Google antitrust lawsuit, arguing that 47 USC 230(c)(2) doesn’t protect Google. For more on the myTriggers & TradeComet antitrust lawsuits against Google, see this interesting American Lawyer article.

* ReputationDefender’s GC on 47 USC 230 and the Internet's maturation. When he says "near-perfect anonymity is easily achieved," he might want to check with the AutoAdmit defendants to see if they agree!

Posted by Eric at 09:57 AM | Content Regulation , Derivative Liability | TrackBack

July 02, 2010

OECD Project on Internet Intermediaries, Part 2

By Eric Goldman

As I mentioned last week, in June I went to Paris to participate in an OECD Experts Workshop on Internet Intermediaries. At the end of the day, I was one of several people to try to summarize the day's lessons. The notes for my 5 minutes of remarks:
______

My remarks: 2 big points that are clear and some implications that are less clear

1) Clear: intermediaries play an important role on the Internet. This workshop effectively rejects the Internet as disintermediator (as contemplated in the late 1990s).

1a) Less clear: what constitutes an Internet intermediary, and what common properties they share. Among other things, different intermediaries face very different competitive environments (different entry barriers; lots of competition vs. little vs. non-commercial) and have different consumer relationships (free, subscription, B2B/no interaction at all).

1b) Less clear: how Internet intermediaries have different properties than offline intermediaries. In that sense, this workshop embodies Internet exceptionalism.

2) Clear: Internet intermediaries have the technical capacity to prevent harms. But other than violating the laws of physics, anything is possible with the proper application of time and money. As Archimedes pointed out, with a long enough lever, we can move the earth.

2a) Less clear: the overall consequences of deputizing intermediaries to exercise that capacity for the government.

2b) But some likely consequences:

• deputization shifts financial burdens from government to private actors, and that makes it harder for free-to-consumers Internet services and can entrench big players to the exclusion of new entrants.

• Moral hazard—the consumers’ interests in privacy and free speech may conflict with the intermediaries’ profit-maximizing choices.

2c) Possibly clear: if we deputize intermediaries, we expect that the deputization will incorporate “due process” like government proceedings would. Prof. Mueller offered some possible elements:

• transparent process
• accurate disposition
• accountability and right of redress
• minimize collateral damage
• remedy proportionality
• respects personal data obligations and user privacy
______

Lillian Edwards provided a partial summary of the day's proceedings.

As part of the workshop, in April, the OECD issued a report entitled "The Economic and Social Role of Internet Intermediaries." I'm not sure what to say about the report except that its definitional problems seem apparent. Also, it may seem odd to most cyberlaw academics to try to address the universe of "Internet intermediary" legal issues in a single project.

Posted by Eric at 07:05 AM | Derivative Liability | TrackBack

June 30, 2010

Must-Read Empirical Study of 47 USC 230 Jurisprudence by David Ardia

By Eric Goldman

David S. Ardia, Free Speech Savior or Shield for Scoundrels: An Empirical Study of Intermediary Immunity Under Section 230 of the Communications Decency Act, 43 Loyola of Los Angeles Law Review 373 (2010)

Let me start with the punchline: if you are interested in 47 USC 230 jurisprudence (and let's face it, who isn't???), then you need to read this article. In fact, clear your calendar for this afternoon. Although I am not completely sold on its conclusions, any cogent discussion about 47 USC 230 jurisprudential trendlines must acknowledge this article.

David Ardia directs the Citizen Media Law Project, a frequent outlink on this blog. He undertook the heroic (and some might say ill-advised) task of finding and coding 47 USC 230 cases--a total of 184 decisions--and then generating some statistical conclusions from the dataset. This is not a project I would have undertaken because empirical research is such a quagmire, but we as a community of 47 USC 230 scholars and practitioners get the benefit of David's efforts.

(I should note that David sent me a draft of this article last Fall, which sat unread in my inbox for 3 months. I then sent David an extremely lengthy and detailed set of comments about a week before his final edits were due to the law review. Some of my critiques are not news to David, but he may not have had a chance to fully address them based on my delayed feedback.)

(I further note that I have not doublechecked David’s dataset or coding. For this post, I assume he did it “correctly.”)

If you have limited time (the PDF is 134 pages), start on page 41 of the PDF, which is where the empirical discussions heat up. There is a lot to discuss and explore, but I will highlight two significant statistical conclusions.

First, the paper calculates that 230 defendants win the defense "only" about 2/3 of the time, leading him to conclude that the statute "has not been the free pass many of its proponents claim and its critics lament." This is an interesting conclusion, but it leaves me wondering how this compares with the hypothetical calculation of cases where the 230 defense should have failed vs. the situations where it should have succeeded. Still, I am one of the people who thinks 230 is a free pass for defendants, so the successful batting average was lower than I expected.

Second, the paper makes the following assertion on page 108:

"many of the intermediaries that invoked section 230 likely would not have faced eventual liability under the common law because they lacked knowledge of and editorial control over the third-party content at issue in the cases. Given this prediction, one might question whether section 230 is necessary."

Whoa! This is an important and implicitly troubling statement. The paper is positing an alternative scenario where 230 doesn't exist and arguing that we might not notice a difference. Of course, we know that other countries are having very different experiences with UGC due to the 230's absence. At the same time, US common law still differs from other countries' laws, so perhaps the US common law's trajectory would have reached a similar place. Having said that, for reasons the paper does explore, we are better off for having the statutory immunity than relying on common law developments. Furthermore, 230’s real brilliance is that it immunizes service providers *because they exercise* editorial control, which leads to better outcomes.

I'll briefly mention two other stats that puzzled me.

On page 59, the paper says: "in more than half of the section 230 decisions (58.8%), the speech at issue was not published anonymously." Later, on page 115, the paper advances the inverse stat: "41.2% of the decisions studied involved anonymous content." In theory, this means 40% of cases involve primary tortfeasors who can't be found, but I'm skeptical about this because successful online anonymity is really hard. After all, the AutoAdmit authors thought they were anonymous until they were de-anonymized. For more, see Paul Ohm's paper on reidentification.

On page 117, the paper says "in more than half of the cases (55%), the content plaintiffs sued over was no longer available as of mid-2009," which suggests plaintiffs can get content takedowns despite 230 because the service provider voluntarily helps or the author takes the content down him/herself (or, in some cases, the court ordered the takedown). This brought to mind the Ripoff Report's refusal to remove content at the author's request, a relatively unique posture for UGC hosts. See Blockowicz v. Williams.

The paper gives me another reason to remind you that SCU will be hosting a 47 USC 230 celebration on March 4, 2011, where I hope we will discuss cutting-edge research on 230 like this paper. More details to come, but mark your calendar now. If you are working on 230-related research that you think might be appropriate to present at this conference, please contact me.

UPDATE: David's CMLP blog post on his article.
____________

The abstract:

In the thirteen years since its enactment, section 230 of the Communications Decency Act has become one of the most important statutes impacting online speech, as well as one of the most intensely criticized. In deceptively simple language, its provisions sweep away the common law’s distinction between publisher and distributor liability, granting operators of Web sites and other interactive computer services broad protection from claims based on the speech of third parties. Section 230 is of critical importance because virtually all speech that occurs on the Internet is facilitated by private intermediaries that have a fragile commitment to the speech they facilitate.

This Article presents the first empirical study of the section 230 case law. It begins by providing a doctrinal overview of common law liability for intermediaries, both online and offline, and describes how section 230 modifies these doctrinal approaches. It then systematically analyzes the 184 decisions courts have issued since the statute’s enactment. The Article also examines how courts have applied section 230, finding that judges have been haphazard in their approach to its application.

The Article closes by discussing the study’s findings and by offering some insights into how plaintiffs and defendants have fared under section 230. While section 230 has largely protected intermediaries from liability for third-party speech, it has not been the free pass many of its proponents claim and its critics lament. More than a third of the claims at issue in the cases survived a section 230 defense. Even in cases where the court dismissed the claims, intermediaries bore liability in the form of litigation costs, and it took courts, on average, nearly a year to issue decisions addressing an intermediary’s defense under section 230.

Posted by Eric at 08:38 AM | Derivative Liability | TrackBack

June 29, 2010

Payment Service Providers May Be Liable for Counterfeit Website Sales--Gucci v. Frontline

By Eric Goldman

Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y. June 23, 2010)

This case relates to an online seller of Gucci counterfeit goods called TheBagAddiction.com, run by Laurette. Gucci already successfully shut down the counterfeit website, but it remains on the warpath, looking to nail more defendants. It has sued three additional companies, Durango, Frontline and Woodforest. Durango helps hard-to-service merchants such as TheBagAddiction and other sellers of "replica products" find payment service providers. Frontline and Woodforest are both payment service providers that service Visa, Mastercard and AmEx (Frontline also services Discover). Thus, in this action, Gucci is chasing the payment service providers who helped the counterfeit site get paid. In this respect, the case is analogous to Perfect 10's suits against ccBill and Visa, except that Gucci is proceeding on a trademark claim and not copyright.

In this ruling, the court says that Gucci's contributory trademark claims survive the defendants' motion to dismiss. The court dismisses the direct and vicarious trademark claims.

The court says that Durango, the matchmaker/finder, could be liable on an inducement theory because it advertised its services as finding payment services for "high risk" merchants such as those selling "replica" merchandise. Gucci is basically taking the realpolitik position that everyone knows that high-risk merchants selling replicas are just counterfeiters and so Durango should be brought to justice for assisting that retailer niche. Gucci also alleges that Durango encouraged merchants to reduce chargebacks by including a checkbox on the consumer checkout screen saying that they acknowledged they were buying replicas. Although the checkbox didn't help Durango here, I wonder what it will do to the underlying questions of consumer confusion about product source.

In contrast, Frontline and Woodforest didn't induce because "they did not bring [the website] to the table the way Durango allegedly did." While that's true, I'm not clear about the line the judge is drawing.

The court instead evaluates Frontline's and Woodforest's contributory trademark liability (as well as Durango's) under the following legal standard: "if it supplied services with knowledge or by willfully shutting its eyes to the infringing conduct, while it had sufficient control over the instrumentality used to infringe." This appears to be a further bastardization of the loosely-drafted and gratuitous language in Tiffany v. eBay about "willful blindness." As I wrote in my post about the Tiffany ruling, "I expect plaintiffs to get frisky with this 'willful blindness' toy and start asserting that defendants had 'reason to suspect' user infringement and 'ignored that fact.'" This case appears to be an example of that friskiness.

Gucci's allegations against Durango satisfied the scienter requirement because:

Durango allegedly held itself out to high risk replica merchants. Its sales agent, Counley, traded emails with the Laurette Counterfeiters who expressly told him that they were unable to get credit card services because they sold “replica” items. Counley later wrote back to say he had found a U.S. bank that “can do replica accounts now.” Surely, a connection between an inability to get the services needed to transact goods online and the sale of replicas should have attracted Durango's attention.

[note: throughout this post, I have removed some citations from the blockquotes]

Gucci's allegations against Frontline satisfied the scienter requirement because:

Laurette completed an application to obtain Frontline's services, and Nathan Counley, though a Durango employee, is listed as Frontline's sales agent. Counley “acted as Frontline's agent in soliciting and directing credit card processing business from replica merchants like the Laurette Counterfeiters” and therefore Frontline may be charged with his knowledge, including his understanding of Laurette's difficulty to obtain services for selling replicas. Gucci alleges that the “replica acknowledgment” described above that was created for the Laurette website with Counley's assistance was also reviewed by Frontline, who made suggestions as to where they should place this warning on the website. Even more significantly, Frontline allegedly performed its own investigation of products sold through TheBagAddiction.com as part of Frontline's chargeback reviews. When faced with a chargeback, Gucci claims that Frontline received supporting documentation from Laurette that included information about the specific item ordered, including a description of the item purchased. Not only did Frontline allegedly review the specific item description, Plaintiff also claims that the relatively small price tag for the item, as well as specific complaints from customers who made chargebacks about not receiving what the website purported to sell, e.g. a product made of genuine leather, should have alerted Frontline that these were infringing products. These fact-specific claims are enough to at least infer that Frontline knew or consciously avoided knowing that the counterfeit products were sold on TheBagAddiction.com

There are a number of analytical problems with this reasoning, but I'm still stuck on the argument that the payment processor is charged with the knowledge of a third party entity's salesperson. What?

Gucci's allegations against Woodforest satisfied the scienter requirement because:

As was the case with Frontline, Counley represented himself on Laurette's application as Woodforest's sales agent. The application itself said that Laurette was a “wholesale/retail designer [of] handbags,” and listed the supplier as a Chinese bag manufacturer rather than Gucci. Gucci also claims that Woodforest specifically reviewed the website and the products listed on it as part of its initial decision to do business with Laurette. A Woodforest employee allegedly completed an “Internet Merchant Review Checklist,” which required him or her to review the website and confirm whether it contained a complete description of the goods offered. Based on these claims and the website images provided by Plaintiff, even a cursory review of the TheBagAddiction.com would indicate that they claimed to sell replica Gucci products. Indeed, Plaintiff alleges that Woodforest printed out a number of pages that displayed goods that were for sale, including counterfeit Gucci products, and maintained these pages as part of their business records. Woodforest would also perform a second-level review, performed repeatedly after it accepted the business, where an employee would complete a purchase and request a refund. Finally, like Frontline, Woodforest investigated chargeback disputes and received supporting documentation that allegedly should have tipped them off to the infringing conduct. These claims are more than sufficient to suggest, at this stage of the litigation, that Woodforest knew or shielded themselves from the knowledge that Laurette was selling counterfeit Gucci products with their credit card processing system.

Even with the court's generous standards for scienter, what about control over the infringing instrumentalities? In Lockheed v. NSI, a domain name registrar lacked that level of control because it simply provided a matching service between domain names and IP addresses. In contrast, in Louis Vuitton v. Akanoc, Akanoc arguably had the requisite control because it hosted the sites. Here, Durango was just a matchmaker between merchants and payment service providers, and on that ground lacked the requisite control. However, Gucci sufficiently alleged the requisite control by the payment service providers:

Gucci's complaint indicates that Frontline and Woodforest's credit card processing services are a necessary element for the transaction of counterfeit goods online, and were essential to sales from TheBagAddiction.com. Although other methods of online payment exist, such as online escrow-type services like PayPal, generally speaking “credit cards serve as the primary engine of electronic commerce.” Perfect 10, 494 F.3d at 794. Indeed, Gucci points out that Durango's website claims that “9 out of 10 people use a credit card for their online orders.” As such, without the credit card processing operation set up by these two defendants, Gucci alleges that TheBagAddiction.com would largely have been unable to sell its counterfeit Gucci products. They further support this claim with an affidavit by one of the website owners, who states that “[a]pproximately 99% of payments from my customers were made using credit cards.” Both Frontline and Woodforest processed transactions for cardholders with major credit card institutions-Visa, MasterCard, and so forth-and, according to Gucci, Laurette sold over $500,000 in counterfeit products “during the time they utilized Defendants' merchant bankcard services.” By processing these transactions, both companies allegedly earned significant revenue from the transaction fees they charged. Put another way, “[t]hey knowingly provide a financial bridge between buyers and sellers of [counterfeit products], enabling them to consummate infringing transactions, while making a profit on every sale.” Perfect 10, 494 F.3d at 810-11 (Kozinski, J., dissenting). Though both Frontline and Woodforest insist they are middlemen with no ability to prevent a transaction, they do not dispute that they could have simply refused to do business with “replica” internet merchants, just like the flea market purveyor who refuses to provide a booth to a counterfeiter. See Compl. ¶ ¶ 87-89 (Woodforest and Frontline “facilitated the Laurette Counterfeiters ability to quickly and efficiently transact sales for Counterfeit Products through their website by enabling customers to use personal credit cards to pay for purchases on TheBagAddiction.com”). According to one of the website operators, “[i]f I did not receive an approval for a credit card charge, I would not ship the customer's order.” These allegations indicate that the infringing products “are delivered to the buyer only after defendants approve the transaction ... This is not just an economic incentive for infringement; it's an essential step in the infringement process.” Perfect 10, 494 F.3d at 811-12 (Kozinski, J., dissenting).

While all of this is true, how does this relate to the *instrumentality* used to infringe? The court closes the loop by effectively reading that requirement out of the test, saying "instrumentality in this case is the combination of the website and the credit card network, since both are allegedly necessary elements for the infringing act-the sale and distribution of the counterfeit good." But using this standard, every "sine qua non" vendor to a counterfeit website is an instrumentality--the power company, the water company, the landlord, etc. That's exactly what the 9th Circuit rejected in Perfect 10 v. Visa. The court weakly distinguishes that case by noting the difference between rivalrous and non-rivalrous goods; the copyright infringing websites could continue publishing the non-rivalrous goods without credit card payment, while the Gucci counterfeit site wouldn't ship the rivalrous goods until credit card payment was made.

This is a terrible ruling on both a doctrinal and normative level. On a doctrinal level, the court bypassed the main holdings of Tiffany v. eBay (binding on the court), Perfect 10 v. ccBill and Perfect 10 v. Visa. Instead, the court stitched together crappy dicta from the Tiffany v. eBay case with Kozinski's dissent in Perfect 10 v. Visa to come up with an expansive secondary trademark liability rule applicable to vendors to counterfeit websites. I expect payment service providers to become the latest defendant-du-jour among trademark plaintiffs looking for deep pockets in web infringement cases. Something to look forward to.

Normatively, this ruling raises the specter that payment service providers will attempt to exercise even more business control over the businesses they service, effectively deputizing the payment service providers into cops on the Internet beat. As I mention in my notes about the OECD efforts on Internet intermediaries (which I will post soon), this deputization of private vendors into content cops has numerous disadvantages. I'm hoping this ruling gets fixed by the judge or on appeal so that we don't suffer the logical consequences of this bad ruling.

Posted by Eric at 12:19 PM | Derivative Liability , E-Commerce , Trademark | TrackBack

June 23, 2010

YouTube Gets Decisive Win in Viacom/FAPL Case

By Eric Goldman

Viacom International, Inc., v. YouTube, Inc., 2010 WL 2532404 (SDNY June 23, 2010).

The Viacom v. YouTube case has been noteworthy for numerous reasons. It involves the cherished Internet brands YouTube and Google, it's been going on forever (see my initial blog post on Viacom's complaint from March 2007), and it's generated lots of water cooler talk (see the salacious details from the parties' summary judgment motions).

Now, the case is also noteworthy because it hands YouTube a clean and decisive win on the DMCA 512(c) safe harbor. The ruling basically says that the current industry standard practices of notice-and-takedown for user-caused copyright infringement satisfies the safe harbor. Although this seems like an uncontroversial result when stated like that, the reality is that copyright owners have repeatedly angled to get a better deal than Congress gave them in 512. This case will squelch many of those copyright owner requests to force service providers to go beyond current industry-standard practices. Of course, we have to see how the opinion fares on appeal.

The opinion stays above the fray and avoids most of the messy facts from the parties' voyeuristic filings earlier this year. On the decisive question of what constitutes YouTube's actual knowledge or red flags awareness of infringement, the court immediately turns to the legislative history. Fortunately for YouTube, the legislative history is replete with defense-favorable statements. Thus, the court summarizes the legislative history by saying its "tenor" requires that service providers have "knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough." Subsequently, the court reinforces that "General knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements."

The court supports these conclusions by noting the difficulty service providers have monitoring/policing large databases of UGC and the fact that the notice-and-takedown system worked well in Viacom's case when it actually submitted notices. The court also favorably cites the ccBill, UMG v. Veoh, Corbis v. Amazon and Tiffany v. eBay cases. By doing so, the court subtly does two things. First, it imports 9th Circuit 512 jurisprudence into a 2nd Circuit-bound court, and second, it imports the 2nd Circuit's recent secondary trademark liability analysis into a copyright case. Both moves also favored YouTube.

The latter is particularly interesting because it seems to accept a notice-and-takedown regime for trademark--not the statutory requirement, but nevertheless the logical implication of Tiffany v. eBay. Perhaps we are seeing some convergence in secondary copyright and secondary trademark infringement cases, despite their different statutory foundations.

The court distinguishes Grokster "and its progeny" (Usenet.com, Fung and LimeWire) as having "little application here." Grokster, Fung and LimeWire all involved P2P file sharing services, which are not covered by 512 (although I've always thought 512(d) deserved more consideration than it did). The court distinguishes Fung as "an admitted copyright thief."

The court further distinguishes Grokster by saying "its application to the particular subset of service providers protected by the DMCA is strained." I completely agree with this, and the court properly notes the factual differences between a P2P file sharing service and a web host. In response to Viacom's apparent belief that Grokster was highly relevant, the court cites that "Viacom’s General Counsel said in a 2006 e-mail that '....the difference between YouTube’s behavior and Grokster’s is staggering.'" This was the only duplicitous statement the court pulled out of the many ones quoted (on both sides) in the summary judgment briefs.

The court makes a few other abbreviated rulings rejecting various attempts to kick YouTube out of the safe harbor:
* YouTube's video embedding feature does not eliminate the 512 safe harbor, citing the Io v. Veoh case. The court does indicate that some activities are beyond the fair meaning of "storage" and ancillary activities, and it appears the plaintiffs could try to push this angle (although I doubt they will get much play if they try).
* the court says that YouTube's "right and ability to control" must be measured on an item-specific basis, so the "right and ability to control" does not kick in until the service provider gets a qualifying notice or otherwise has red flags awareness. This is a powerfully restricted interpretation of that term.
* YouTube's method of counting three strikes did not disqualify it from the statute. This includes the fact that YouTube does not count a strike when Audible Magic automatically filtered UGC.
* the fact that the statute allows copyright owners to submit a "representative list" of infringed works does not override their obligation to specifically identify the location of any allegedly infringing UGC files in their notices.

The opinion does not clearly say it applies to all of the plaintiffs and not just Viacom. However, Google's post indicates that it thinks the opinion applies to all plaintiffs, thus effectively removing most issues from the case. The court orders the parties to talk further to see what's left open by this ruling. There isn’t much. One possibility: 512(c) only eliminates damages, not an injunction, so the plaintiffs could press for an injunction despite this ruling. However, based on the judge’s treatment of the plaintiffs’ arguments, I don't see how that would be productive. At most, I think this judge would only require YouTube to keep following the statute--something YouTube has already proven that it does. Therefore, probably the next major step in the case will be the appellate ruling--which, in the Second Circuit, could take years.

Posted by Eric at 04:10 PM | Copyright , Derivative Liability , Trademark | TrackBack

My OECD Position Paper Lauding 47 USC 230 (OECD Project on Internet Intermediaries, Part 1)

By Eric Goldman

Last week, I participated in an OECD expert workshop on Internet intermediary liability in Paris. I will blog more about the OECD project and my trip to Paris shortly.

In preparation for the event, I was asked to write a one page position paper on any topic related to Internet intermediary liability. Regular readers are surely not surprised that I chose to offer some laudatory remarks about 47 USC 230. My position paper (or see the PDF):
____

I am delighted to participate in the OECD’s workshop as a CSISAC expert. My remarks at the workshop will undoubtedly cover several subjects. This position paper outlines my thoughts on just one of the project’s topics.

My recent research has focused on “reputational information,” which I define as information about a producer’s past performance that can help a consumer decide whether or not to transact with the producer. Reputational information includes both objective data (e.g., product recall rates) and subjective data (e.g., consumer reviews).

Reputational information plays a crucial role in the efficient functioning of markets. We expect the market’s “invisible hand” to reward good producers and punish poor ones, but this occurs only when producers are, in fact, accountable for their performance. Reputational information can improve producer accountability when it is readily available and relatively free from distortions. Unfortunately, improperly calibrated regulation can undermine the optimal flow of reputational information in several ways. Two examples:

First, positive consumer reviews presumably help producers, but producers will seek to remove negative consumer reviews about them. If producers can easily take down negative reviews simply by alleging defamation or other legal violations, a “lopsided”—and unhelpful—database of only positive consumer reviews will remain.

Second, consumers expect Internet publishers to organize and filter voluminous amounts of reputational information while preserving the “wisdom of the crowd.” To meet these needs, Internet publishers constantly try new ways to procure, order and display reputational information. This type of experimentation can occur only when Internet publishers do not make editorial choices designed principally to minimize their legal risks.

The United States has seen an explosion of entrepreneurial activity from Internet publishers of reputational information—a process fostered by 47 U.S.C. § 230, which Congress enacted in 1996 as part of the Communications Decency Act. Content originators remain liable for their content, but 230 provides Internet publishers with a powerful immunization for content originated by third parties. With 230’s protection, Internet publishers are developing innovative ways to supply consumers with helpful reputational information, freed from concerns that innovation will increase their liability for user content. 230 also helps Internet publishers avoid lopsided databases because publishers can confidently resist demands to suppress negative reviews. Thus, 230 has improved both the quantity and quality of reputational information available to help consumers make their marketplace decisions.

As a result, 230’s liability immunity strengthens the marketplace’s ability to reward good producers and punish poor ones. In its review of regulatory options, I encourage the OECD to analyze the benefits of immunity regimes for Internet publishers that can achieve similar objectives.
____

You can see all of the submitted position papers here.

My position paper is effectively the abstract of a paper I am writing this summer entitled "In Defense of 47 USC 230." If you're currently working on a 230-related paper or have written a paper on 230 that you want to make sure I don't miss, please let me know.

Also, mark your calendars: on March 4, 2011, Santa Clara University will be co-hosting (with a distinguished list of co-sponsors) a 15 year retrospective/anniversary party for 47 USC 230 that I promise will be the biggest--and most exciting (if that's not an oxymoron)--47 USC 230 geekfest to date. We're still putting the program together, so we have not made a formal public announcement, but one is coming soon.

Posted by Eric at 10:44 AM | Derivative Liability | TrackBack

June 11, 2010

Craigslist Loses 230 Defense to Promissory Estoppel Claim--Scott P. v. Craigslist

By Eric Goldman

Scott P. v. Craigslist, Inc., CGC-10-496687 (Cal. Superior Ct. June 2, 2010). The CMLP page with source materials.

In a situation not dissimilar to the venerable Zeran case, starting in March 2009, Scott P. was criminally victimized by a campaign of fake Craigslist posts, including ones falsely soliciting gay sex and offering to give away his possessions. Three times after such posts, he contacted Craigslist to request that they stop postings that contain his name, number or address, and each time Craigslist's CSRs allegedly replied that Craigslist "would take care of it." In the second exchange, Craigslist allegedly also said it would take steps to stop the fake posts. In the third exchange, Craigslist allegedly also said that it had already taken steps to stop the fake posts. I doubt the CSRs made any promise that fake posts would never occur again, but that's apparently what Scott heard (or wanted to hear).

All three Craigslist responses came just before the Ninth Circuit's ruling in Barnes v. Yahoo, which indicated that 47 USC 230 did not eliminate websites' liability for promissory estoppel if a website promises to fix user-supplied content. Post-Barnes, Craigslist probably no longer tells folks that it will "take care of it" or promise any remediation of any sort. Instead, I assume Craigslist is more equivocal in response to complaints about user activity, i.e., "We might or might not help you, but don't rely on anything we say." I'm not sure equivocal responses from sites like Craigslist are what society really wants, but that's the logical protocol following Barnes.

Unhappy that Craigslist didn't uphold the promises he thought it made, Scott sued Craigslist for promissory estoppel and CA B&P 17200 for unacceptably weak user verification procedures. Last week, the court partially granted and partially dismissed Craigslist's 230-based demurrer:

Defendant Craigslist, Inc's Demurrer to 1st Amended Complaint. Argued and the Court adopted its tentative ruling as follows: sustained without leave to amend as to cause of action 2 both because the claim is barred by Section 230 and because plaintiff lacks standing. Overruled as to cause of action 1 because plaintiff has sufficiently pleaded an agreement supported by promissory estoppel. 10 days to answer. Further, defendant Craigslist, Inc's oral request for a stay of discovery is granted for 2 weeks to permit defendant to seek a writ and give time to the court of appeal should it choose to accept that writ and extend a stay, should it choose to do so. Ms. McDougall to submit a proposed form of order.

So Craigslist successfully eliminated the 17200 claim per 230, but Scott's promissory estoppel claim survived the demurrer due to Barnes. I haven't yet seen too many 230 Barnes-style bypasses, but this is a fine example that the plaintiffs are paying close attention to any 230 workarounds. I'm skeptical that Scott can ultimately succeed with his promissory estoppel claim, though. What more could he have done that he chose not to do based on Craigslist's alleged promises? Meanwhile, my understanding is that Craigslist will seek an expedited writ from the appellate court, so this case could break more legal ground soon.

Overall, this case illustrates why 230 makes so much sense. The underlying problem involves a workplace harassment campaign that took place both online and off. Craigslist was just one of several tools used by the harasser(s) as part of the campaign. For example, the harasser(s) allegedly obtained a fake Hotmail account in the plaintiff's name, so why not sue Hotmail? The plaintiff didn't, even though the Hotmail account was an integral part of the scheme. Meanwhile, the people misusing the tools remain accountable for their choices. Most conspicuously, one harasser has already been criminally busted for his behavior in this matter. In light of the criminal bust, I don't understand why the plaintiffs think Craigslist should be part of the liability chain, and presumptively 230 reinforces its illogic by preventing the plaintiff from complaining about third party conduct. The Barnes promissory estoppel workaround will work for plaintiffs only so long as service providers actually respond to inquiries from victims like Scott. If this lawsuit shows any success, you can kiss those responses goodbye.

Posted by Eric at 07:02 AM | Derivative Liability , Licensing/Contracts | TrackBack

June 10, 2010

Google Can't Shake Cybersquatting Claim--Vulcan Golf v. Google

By Eric Goldman

Vulcan Golf, LLC v. Google Inc., 1:07-cv-03371 (N.D. Ill. June 9, 2010). My 2007 blog post when the complaint was filed. My 2008 blog post on the denial of a motion to dismiss. My 2008 blog post on denial of class certification.

A year ago I blogged about Solid Host v. NameCheap, a case that raised the specter of a "contributory cybersquatting" claim under the ACPA. This case also deals with a type of contributory cybersquatting. It might represent the vanguard of increased trademark owner efforts to proliferate ACPA cybersquatting claims against a wider range of defendants.

This long-running case involves Google's AdSense for Domains program, which the plaintiffs believe violates their trademark rights when the parked domains contain their trademarks or variations thereof. The case appears to be entering the home stretch. In late 2008, the plaintiffs were denied class certification, which substantially narrowed the scope of the lawsuit. All other defendants have now settled, leaving only Google's liability for resolution. This ruling addresses Google's unsuccessful attempt to knock out the ACPA claim on summary judgment. As a result, the ACPA claim is queued up for trial unless the parties settle.

Google's ACPA liability turns on whether it is an "authorized licensee" of the parked domains. If so, the ACPA is clear that a licensee of a cybersquat domain name can be on the hook. The court holds that if there is a license agreement that calls itself a license, then the ACPA applies to the agreement. However, the court will not infer a licensing agreement from some less explicit arrangement, i.e., presumably not from a parking arrangement where the ad provider (Google) does not expressly license the domain name. Therefore, it appears that where Google licensed the domain name from the parker (a seemingly unnecessary step for delivering ads to parked domains), Google put itself into the ACPA liability chain.

With the legal standard established, normally this should be an easy case to resolve on summary judgment. However, apparently Google and the plaintiffs can't agree on the accurate copy of the applicable agreements with domain parkers (specifically Dotster). If the parties can work out the confusion over documents, the ACPA claim is ripe for a settlement.

Posted by Eric at 07:05 AM | Derivative Liability , Domain Names , Licensing/Contracts , Search Engines , Trademark | TrackBack

June 07, 2010

Another Trademark Owner Apparently Gives Up Lawsuit Against Google--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. U.S. Auto Parts Network, Inc., 5:10-cv-01713-JF (N.D. Cal. voluntary dismissal May 5, 2010)

In April, Google successfully transferred the Parts Geek keyword advertising lawsuit from New Jersey to its home court in Northern California. Then, in an abandonment reminiscent of Rescuecom's, Parts Geek quietly dropped the lawsuit last month against both US Auto Parts and Google. It's not clear if the venue transfer was fatal to the case, but it certainly didn't help Parts Geek's cause. There was an interesting competitive website scraping issue in the case as well; the dismissal means we won't learn more about the legality of that, either.

I have been waiting to blog on Google's successful dismissal of the Rosetta Stone case until I see the written opinion. That, plus this voluntary dismissal, means that Google has successfully whittled its docket of over a dozen trademark challenges to its AdWords program down to 6. Google has several nice intermediate wins with some of those other cases, including its venue transfer in the Flowbee case and its partial elimination of the Jurin case. After we see the Rosetta Stone written opinion, the remaining cases may be substantially undercut further.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* Ezzo v. Google
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* ~~Rosetta Stone v. Google~~
* Flowbee v. Google
* ~~Parts Geek v. US Auto Parts~~
* Dazzlesmile v. Epic

Posted by Eric at 09:19 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 05, 2010

Contributory Copyright Infringement Claim May Need Direct Infringer as a Defendant to Succeed--Miller v. Facebook

By Eric Goldman

Miller v. Facebook, Inc., 2010 WL 2198204 (N.D. Cal. May 28, 2010)

This is my third time blogging about this case (Jan. 2010 post; April 2010 post). The facts as alleged by the plaintiff have always been a bit sketchy, but here's my understanding of plaintiff's beef. Plaintiff is a game developer who developed a game called Boomshine. He alleges Yeo created an infringing version of Boomshine. Yeo then distributed the allegedly infringing version via Facebook, but Facebook's misconduct has been a little muddled. Miller's latest attempt to explain Facebook's wrongful behavior is that (1) "the ChainRxn game was allegedly presented by Facebook's website to its users through the use of an inline frame (or an 'iFrame') so that the content appeared to be originating from Facebook's website" and (2) Facebook "'took the 'affirmative step' to approve the ChainRxn game for publication in the Facebook Application Directory." These allegations take the lawsuit squarely into territory governed by the Ninth Circuit's Perfect 10 v. Amazon ruling.

Miller sued both Yeo and Facebook. In January 2010, Facebook successfully invoked its user agreement to transfer the lawsuit from Georgia to its home court in California. Then, in April 2010, Facebook got the complaint dismissed with leave to amend. This ruling deals with Miller's request to file a second amended complaint, which the court mostly grants, although the court instructs Miller to provide some more factual clarity.

Miller's latest complaint removes Miller's direct and vicarious copyright claim against Facebook, proceeding only with a contributory claim, which still requires a showing of Yeo's direct infringement. The court says that Miller has properly alleged that except with respect to the public display right.

Miller also properly alleged the contributory claim:

First, there is no question that Facebook provides Internet services to the public as a social networking website. Second, the proposed complaint clearly alleges that Facebook had actual knowledge that specific infringing material was available using its system. Plaintiff sent Facebook a letter on May 7, 2009, demanding that Facebook remove ChainRxn from its website because it violated plaintiff's copyright in Boomshine. Third, plaintiff makes clear that Facebook could have taken one or two simple measures to prevent further harm to his intellectual property rights after this notice was provided-namely, by either disabling defendant Yeo's Facebook account or by removing ChainRxn from the Facebook Application Directory. Fourth, the proposed complaint alleges that despite this actual knowledge by Facebook and the availability of two simple measures to prevent further harm, Facebook continued to allow its users to search for and access the allegedly infringing work for some period of time thereafter. Fifth, given the immense popularity of the Facebook website, it is a reasonable inference that the continued listing of ChainRxn in the Facebook Application Directory and the access provided to ChainRxn through the Facebook website had the effect of significantly magnifying what might otherwise have been immaterial infringing activities had the ChainRxn game not been part of the Facebook social network.

The most interesting discussion relates to Miller's apparent inability to serve Yeo. Normally, a contributory copyright infringement claim can be successfully brought without naming a direct infringer as a defendant (see, e.g., most of the lawsuits against P2P file-sharing services). However, the court says that Yeo may be "essential" to Miller's successful claim against Facebook because, to establish direct infringement, Miller will need to prove:

Mr. Yeo unlawfully “reproduced” the protected elements of Boomshine's source code to create the accused ChainRxn video game. Without Mr. Yeo in the case to provide testimony and the ChainRxn source code, however, it is unclear how plaintiff would be able to prove such unlawful copying. Without such proof that ChainRxn is an unlawful “reproduction” of Boomshine, plaintiff's remaining claims all crumble.

I'm a little confused by this. The court apparently treats the case as a source code ripoff, but Yeo's game could infringe Boomshine's display/look-and-feel, and Yeo's testimony isn't critical to a look-and-feel comparison. Furthermore, in theory, Yeo could supply the necessary testimony without being a defendant. But it's clear the court expects Miller to find Yeo and try to bring him to justice. The court concludes with this ominous warning: "if plaintiff Yeo is not brought into this action BY JULY 30, 2010, evidenced by proof of service of the summons and complaint, the case will likely be dismissed." I'm sure Facebook wouldn't mind seeing the case end on such a technicality.

Posted by Eric at 08:33 AM | Copyright , Derivative Liability | TrackBack

May 25, 2010

Life May Be "Rad," But This Trademark Lawsuit Isn't--Williams v. CafePress.com

By Eric Goldman

Williams v. Life's Rad, 2010 U.S.Dist. LEXIS 46763 (N.D. Cal. May 12, 2010)

This lawsuit bummed me out. The trademark at issue--the surfing-inspired "Life's Rad"--is supposed to lift people up, but it's hard to maintain a sunny outlook once the lawyers take over. It reminds me of other hippie-dippy icons that have been the basis of IP legal battles, such as the "Keep on Truckin'" logo, color designs for tie-dye shirts (Banzai v. Broder) and the smiley face. IP lawsuits like these really harsh my mellow.

Both Life's Rad and "Life is Rad" (Williams' offering of radiology-related apparel--get it?!) sell merchandise via CafePress, which means they both agreed to CafePress' user agreement. [An aside: does anyone still use the slang "rad" any more? I thought it died out with "bitchin," "tubular" and "grody."] Life's Rad sent a takedown notice to CafePress, which CafePress honored. Life's Rad seems a little thin-skinned here given its trademark's significant contextual distance from radiology-themed schwag. Further, perhaps CafePress should not have been quite so trigger-happy, although their position is understandable in light of trademark's amorphous boundaries. Williams protested the takedown to no avail and then sued both Life's Rad and CafePress. Williams proceeded pro se. In this ruling, CafePress exits the lawsuit.

Williams tried several of the typical legal arguments that customers trot out when vendors terminate them, such as due process violations (nope--no state action), unfair competition (no--CafePress just exercised its rights under its user agreement) and interference with prospective economic advantage (the court calls that "frivolous"). I haven't pulled the filings to see if CafePress argued 230(c)(2), but that also should have been a possibility.

Williams also tried some unusual legal twists. He argued that CafePress violated the DMCA put-back provisions (17 USC 512(g)). This is misguided on several fronts. First, 512 only applies to copyright, not trademark. Second, CafePress' user agreement authorized its takedown. Third, Williams did not send a proper 512(g)(3) putback request. Fourth (a point the court doesn't note), 512(g) is an option available to a service provider to minimize its liability, not a mandatory requirement to put back content at the user's request.

Williams also claimed that CafePress' takedown violated his trademark rights. The court tosses this aside because (1) Williams didn't claim a trademark in "Life is Rad," (2) CafePress' user agreement authorized the takedown, and (3) "Plaintiff has not identified (nor has the Court been able to identify) any provision of the Lanham Act that restricts an internet service provider's discretion to remove items from its website as a result of any third party party claim of trademark infringement."

This is a great win for CafePress, especially because the court implicitly upholds CafePress' user agreement. Further, this ruling is yet another data point showing that vendors have a lot of discretion to take down their users' offerings without fear of liability to the user. Among other cases in this line: Mehmet v. Add2Net, Estavillo v. Sony and the various Google de-indexing lawsuits (KinderStart, Langdon). See also my 2005 article on virtual world provider discretion to terminate customers.

Some other blog posts on CafePress-related litigation:
* Connecticut Blogger Not Subject to Texas Jurisdiction--Healix Infusion v. Helix Health
* Griper Selling Anti-Walmart Items Through CafePress Doesn't Infringe or Dilute--Smith v. Wal-Mart
* CaféPress Denied 230 Motion to Dismiss--Curran v. Amazon

Posted by Eric at 09:26 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

May 17, 2010

FTC Busts Check-Issuing Website for Unfair Practices--FTC v. Qchex

By Eric Goldman

Federal Trade Commission v. Neovi, Inc., 09-55093 (9th Cir. May 14, 2010)

Qchex allowed registered users to create and send checks via a website. Initially, users could submit bank account information and payee information, and Qchex would manufacture a check and send it (in some cases physically, in other cases electronically, depending on the sender's request) to the payee. Given that bank account information is widely available (i.e., it's on every check we send and receive), it sounded like it was trivially easy for fraudsters to submit other people's bank information and send an official-looking check drawing on an innocent bystander's account. These bogus checks can wreak havoc on the payment system when they are presented and then bounce (or worse, clear). According to the opinion:

Indeed, over a six-year period, Qchex froze over 13,750 accounts for fraud. Those accounts spawned nearly 155,000 checks, supplied over 37,350 bank account numbers, and were the source of checks totaling more than $402,750,000—an amount more than half of the total drawn during that time.

Eventually, Qchex enhanced its security procedures to deposit a small amount in a bank account and then require the accountholder to report that amount back to Qchex to authenticate the account. For a variety of reasons, this authentication procedure did not eliminate fraud.

The FTC pursued Qchex for unfair trade practices under Section 5 of the FTC Act. Qchex defended on lack of causation, saying the users supplied the relevant information and therefore were responsible for the bum checks. The court's response:

Qchex created and controlled a system that facilitated fraud and that the company was on notice as to the high fraud rate. Qchex’s approach would immunize a website operator that turned a blind eye to fraudulent business made possible only through the operator’s software. Even if the creation of the checks was impossible without user input, that does not mean Qchex did not create the checks that it later delivered.

(I dig the double/triple/quadruple negative in the last sentence. Say what?)

Even if the court's statement is true, isn't this exactly what 47 USC 230 was supposed to immunize? Amazingly, 230 isn't referenced in the opinion at all, although the court does cite the 230-based Accusearch case in support of its conclusion. It's not like 230 was unfamiliar to this panel; the opinion author is Judge McKeown, who also authored a pro-230 dissent in the Roommates.com en banc case.

Put the doctrinal finery to one side for a moment. We know Qchex has to go down for its sloppy authentication processes and the calamitous effect on our banking system. Fine. But the legal reasoning in support of this takedown is troubling. First, it's based on Section 5's unfairness restrictions, a lightly used prong because "unfairness" is unbelievably subjective and malleable. Second, it's based on some type of but-for causation theory, which applies universally to many service providers throughout the Internet (i.e., without PayPal, there would be no PayPal fraud). Third, the courts gave typical deference to the FTC—but perhaps too much deference. Finally, the causation discussion superseded any discussion about 47 USC 230--a conspicuous omission given that Qchex's whole system was premised on user-supplied content.

Having said that, it's not clear that Qchex’s 230 defense would have succeeded. The court emphasizes that liability is due to Qchex's conduct, not its users’. The court says "Qchex caused harm through its own deeds—in this case creating and delivering unverified checks." I expect any other businesses manufacturing inadequately authenticated fake checks will suffer a similar fate. However, I’m not sure this explanation adequately distinguishes between first party and third party content/actions.

It will be interesting to see how the plaintiffs try to misuse the language I quoted above for other types of claims. For example, replace the word “fraud” with “defamation” and see how the language reads. My hope is that the courts will entertain such citations only in FTC Act unfairness cases and not others, but I expect plaintiffs will try to expand its scope nonetheless.

This case brought to mind an old blog post on a site called "Cheezus," which provided a tool that people could use to create and print fake newspaper articles about another person's sexual misconduct. (Unlike Qchex, the user printed the resulting article). Cheezus caught my attention when a mischievous teen used the tools to prank his teacher and got disciplined. I thought the site was irresponsible, but under this rationale, is the Cheezus tool also illegal because it engaged in Sec. 5 unfair practices? If not, why not?

Posted by Eric at 01:55 PM | Content Regulation , Derivative Liability , E-Commerce , Privacy/Security | TrackBack

May 13, 2010

LimeWire Smacked Down for Inducing Copyright Infringement--Arista Records v. Lime Group

By Eric Goldman

Arista Records LLC v. Lime Group LLC, 2010 WL 1914816 (S.D.N.Y. May 11, 2010)

This is one of the rare cases where the news reports mostly got it right. Plain and simple, the record labels won a decisive copyright infringement victory against LimeWire, its chairman and its principal investor. There is no way that the defendants can spin this ruling as good news on any front.

However, this case also doesn't tell us much about the law that we didn't already know. LimeWire was a bit of an anachronism. It is a P2P file sharing system built in 2000 on the Gnutella platform, and therefore it invites a fairly straightforward application of the Supreme Court's Grokster ruling.

Furthermore, as I explain to my students, there is "normal" copyright law and then "P2P file sharing" copyright law, and it's a mistake to think those two legal doctrines are closely related. As this case reinforces, judges will find a way to interpret copyright law to smack down P2P file sharing systems unless those system operators somehow can manage to thread the contributory/vicarious/inducement needle. Given that it had made many of the most damning choices before 2005 (i.e., before the Grokster ruling provided some important clarification), LimeWire really had no chance.

The court's inducement analysis illustrates its smackdown imperative. The court says "the following factors, taken together, establish that LW intended to encourage infringement by distributing LimeWire: (1) LW’s awareness of substantial infringement by users; (2) LW’s efforts to attract infringing users; (3) LW’s efforts to enable and assist users to commit infringement; (4) LW’s dependence on infringing use for the success of its business; and (5) LW’s failure to mitigate infringing activities." Deconstructing the language, this is really just a fancy way of saying that LimeWire operated a P2P file sharing system. And the problem is compounded by LimeWire's venerability. A lot of the evidence of inducement comes from pre-2005 evidence of bad intent, which more "modern" file sharing systems would not have based on their learnings from the Grokster ruling.

On the substantial infringement by users, the court relied on an expert report (challenged by LimeWire, but those challenges were rejected):

Dr. Waterman analyzed a random sample of files available on LimeWire, and determined that 93% of those files were protected or highly likely to be protected by copyright, and thus not authorized for free distribution through LimeWire. (Waterman Report, 2-3.) Dr. Waterman also analyzed the rate at which the sample files were requested for download by LimeWire users. Based on this analysis, he estimated that 98.8% of the files requested for download through LimeWire are copyright protected and not authorized for free distribution.

Thus, like Grokster, there is a certain realpolitik to this decision. The court simply couldn't ignore a large P2P service that was used so predominately for infringement.

The court also reinforces that a service's marketing efforts can be used against it. In this case, the court looks at LimeWire's AdWords keyword advertising campaign and finds that the campaign indicated that LimeWire was trying to compete against other "bad" P2P file sharing services:

From 2002 to 2006, LW conducted a marketing campaign through Google AdWords, whereby Google users who entered certain search queries, such as “replacement napster,” “napster mp3,” “napster download,” “kazaa morpheus,” “mp3 free download,” and dozens of other phrases containing the words “napster,” “kazaa,” or “morpheus,” would see an advertisement leading them to the LimeWire website.

Notice that none of the keywords specifically targeted words that directly confirm a user's desire to infringe. Instead, the keywords indicate a taint by association--LimeWire signaled that it was competing for the same users as Napster, KaZaA and Morpehus, all systems that have been trashed by other courts.

The court also reinforces (consistent with the discussion in Columbia v. Fung) that a service's efforts to provide its users with useful organizing metadata will be held against it based a chain of inferences about bad intent:

A number of LimeWire’s genre categories – including “Classic Rock,” “SoundTrack,” and “Top 40” – relate specifically to popular music and inevitably guide users to copyrighted recordings.

One unusual tidbit: the court says that the common law copyright claims (for sound recordings made before 1972) are equally eligible for inducement as the federal copyright claims.

The court also pierces the corporate veil and holds LimeWire's chairman and its majority investor (the Lime Group, also closely tied to the CEO) liable for LimeWire's inducement. If you're looking for a paper topic, I'd love to see some clarification about when courts will pierce the corporate veil in copyright cases and how that compares to corporate veil-piercing in other tort contexts.

While the court treats this as an easy inducement case, the court denies summary judgment on the contributory copyright infringement claim because it needs more facts on the LimeWire's capacity for substantial non-infringing uses. This is a logical punt given the Supreme Court's deadlock on this issue in Grokster.

The court rejects LimeWire's summary judgment on vicarious copyright infringement, saying (among other things) "There is substantial evidence that LW had the right and ability to limit the use of its product for infringing purposes, including by (1) implementing filtering; (2) denying access; and (3) supervising and regulating users." In other words, LimeWire ran a P2P file sharing system. Note that these 3 elements are true with every online service, but I think the court meant to say that these factors only matter when applying P2P file sharing copyright law, not normal copyright law. Although the plaintiffs didn't ask for summary judgment on the vicarious claim, it appears the court will entertain the plaintiff's motion.

As usual in P2P file sharing system cases, the 512 safe harbors were completely irrelevant to the discussion and not even referenced by the court.

Posted by Eric at 12:04 PM | Copyright , Derivative Liability | TrackBack

May 11, 2010

Internet Access Provider & Blocklist Publishers Denied 230(c)(2) Immunity for Anti-Spam Efforts

By Eric Goldman

Smith v. Trusted Universal Standards in Electronic Transactions, Inc., 2010 WL 1799456 (D.N.J. May 4, 2010)

It's usually a drag to read opinions in pro se lawsuits. Most of the time, the litigant gets flattened mercilessly. Occasionally, however, the judge bends over backwards to give the litigant the benefit of the doubt. Either way, the opinions are messy and untrustworthy.

This case fits that description. The judge says he can't figure out the facts from the complaint. but here's his best guess. It appears that Smith is a Comcast Internet subscriber. Comcast blocked his outgoing mail twice because he was allegedly sending spam. When pressed why it thought Smith's emails were spam, Comcast pointed the finger at IronPort (owned by Cisco), who in turn pointed the finger at Spamhaus. Smith then filed a "Consumer Watchdog" complaint against Comcast with TRUSTe (misnamed as the lead defendant).

Independently, Microsoft put Smith's email server on its Frontbridge blocklist. Smith separately filed a TRUSTe complaint against Microsoft for that. Smith ultimately decided to sue TRUSTe, Comcast, Cisco and Microsoft for 8 different legal violations in one big litigation fiesta.

Smith's claims go nowhere. The court dismisses all of them with leave to amend the complaint, so the story turns out largely happily for the defendants. Unfortunately, the plaintiff does get one more chance, and he even attached a massive 404 page (!) draft amended complaint. (Note: this is 404 pages, not a 404 error, although it certainly is an error). The court reminds the plaintiff that the rules require a short and plain statement of the claims.

Along the way, the court reaches a decidedly defendant-unfriendly conclusion by rejecting Comcast's, Cisco's and Microsoft's 230(c)(2) defense, the statutory immunity for online filtering decisions--and the often overlooked cousin of 230(c)(1) which I have blogged about many times. Worse, the court reaches its conclusion in the face of several clearly applicable precedent cases. In my opinion, this is an example of how Smith's pro se status causes the court to be overly cautious…to the point of reaching the wrong result.

The court starts off right by concluding that spam could qualify as "otherwise objectionable" content under 230(c)(2) (cite to e360insight v. Comcast). Doing a light ejusdem generis analysis, the court says "nothing about the context before or after that phrase limits it to just patently offensive items."

However, Comcast is denied 230(c)(2) on a motion to dismiss because Smith alleged that Comcast acted in bad faith. In support of this, Smith alleged that Comcast told him that they didn't mind his emails, but he just needed to upgrade to a more expensive subscription. The court says if this is true, "Comcast was not concerned that people were receiving large quantities of emails, or concerned about the content of the emails, but rather was concerned that Plaintiff had not purchased a sufficient level of service. This is not a good faith belief that the emails were objectionable, but rather a belief that they violated a service agreement."

This is a garbled statement at best. What I think the court was trying to say is that Comcast had a pink contract that allowed spam if the user paid enough money, and Smith hadn't gotten a pink contract. If so, then I can see the court's point that Comcast is being duplicitous arguing that spam is objectionable content because Comcast's assessments could be bought.

I was uncomfortable with the court's almost off-hand reference that "One would expect that if an interactive computer service had acted in good faith, it could and would come forward with the legitimate basis for its actions when questioned (though the Court is not suggesting they must do so)." First, as the court notes, this is a motion to dismiss, so Comcast can't proffer new evidence. Second, this is a burden-shift. As regular readers know, I believe 230 is an immunity against suit, not an affirmative defense, so the plaintiff has the burden to show why the service provider did not possess the requisite subjective good faith when making its filtering decision. It's not Comcast's responsibility to prove its own subjective good faith beliefs. (How does one prove those in any case?)

Cisco and Microsoft both published blocklist-type information. They try to fit into 230(c)(2)’s statutory definition of "access software providers," which requires them to show that they "provide or enable computer access by multiple users to a computer server." This issue was litigated in the Zango v. Kaspersky case, where Kaspersky distributed anti-spyware software that phoned home for new definitions. The Ninth Circuit said that the phone home feature satisfied the statutory requirement. In contrast, the court appears to say that pure blocklist publishers (i.e. those who do not distribute accompanying software with a phone home capacity) do not; this reading effectively kicks blocklist publishers out of the statute.

As the court acknowledges, this conclusion seemingly conflicts with the 2004 OptInRealBig decision, where the court held that IronPort as a blocklist publisher qualified for the statute because it was a user of an interactive computer service. The court doesn't explain why IronPort doesn't still qualify as an ICS user except to say that IronPort didn't make the requisite showing. The court also does not note that the OptInRealBig case was a 230(c)(1) decision (not a 230(c)(2)) because IronPort republished third party reports, and that should have applied here as well. The court also does not address the extensive 230(c)(1) precedent effectively treating online content publishers (which would include blocklist publishers) as "users" of ICSs, ranging from Barrett v. Rosenthal to the implicit conclusion in Novins v. Cannon.

More specific to 230(c)(2), the court doesn't explore either Pallorium v. Jared or MAPS v. Black Ice (an old 2000 case), both of which arguably contradict this particular conclusion in the 230(c)(2) context. Thus, because the court did not engage the applicable precedent, was overly solicitous to a pro se litigant, and knew that its discussion was dicta because it was ruling for the defendants anyways, the court chunks the analysis.

For more on 230(c)(2), see my 230(c)(2) talk notes from last summer.

One other noteworthy aspect of the ruling. Smith alleges that Comcast breached its privacy policy, but the court dismisses the contract claim because he doesn't show any loss from the alleged breach. This is yet another case holding that merely breaching a privacy policy isn't an actionable contract breach without more. See, e.g., the cited JetBlue case.

UPDATE: John Levine provides some perspectives about what might have happened.

Posted by Eric at 10:37 AM | Content Regulation , Derivative Liability , Privacy/Security , Spam | TrackBack

May 06, 2010

Brazil's Proposed Internet Regulation--an Update (That's Actually Good News) (Guest Blog Post)

by Guest Blogger Marcel Leonardi

Some fantastic news: in response to the waves of criticism toward the proposed notice and takedown regime that might have curbed online speech in Brazil - see my prior blog post - the Brazilian Ministry of Justice has announced a completely different system for online service provider liability and content removal.

According to the new system, online service providers are only liable for third-party content if they do not comply with a takedown order issued by a court of law. In addition, the proposed notice and takedown system is completely gone: instead of a simple request from the alleged victim, a court order will be mandatory to take down alleged harmful content, requiring a prima facie analysis of said content by a judge.

This does not mean, however, that online service providers cannot do anything unless ordered by a judge. In fact, online service providers can still remove any content on their own if it violates their terms of service or for any other legitimate reason. It is also worth noting that other Brazilian laws may require that Internet intermediaries take down specific illegal content as soon as they are made aware of its existence, as is the case of child pornography.

This is the text of the new article 20 of the bill:

An Internet service provider shall only be held responsible for damages resulting from content created by a third party if, after receiving a related court order, it does not take measures to render unavailable (within the scope of its services and within the timeframe specified) the content identified as infringing.

This new system acknowledges that removing true harmful content from the Internet is a legitimate goal and also recognizes that determining what is legal or illegal is a task best left for the courts, not to the whim of users or ISPs.

I am thrilled that all the criticism from civil society was heard and that quick measures were taken. This change in the text of the bill in such short time demonstrates that the public consultation regarding this bill is indeed very democratic and open to any helpful suggestions.

This bill also deals with some other equally important, different issues - data retention, net neutrality and judicial requests for user information, to name a few - and it is still open to discussion till May 23rd.

I would like to thank Eric Goldman and all readers of this blog for helping me bring awareness to this very important issue. Thanks to you, we may have a more balanced approach to Internet intermediary liability and online freedom of speech in Brazil.

Posted by Eric at 04:10 PM | Content Regulation , Derivative Liability | TrackBack

May 05, 2010

Troubling Ruling About 47 USC 230 and Moderators--Cornelius v. DeLuca

By Eric Goldman

Cornelius v. DeLuca, 2010 WL 1709928 (D. Idaho April 26, 2010)

I blogged about this case last year. In that post, I described the situation:

DeLuca runs bodybuilding.com, a fitness website and online retailer. The plaintiffs sell dietary supplements ("syntrax," whatever that is). The plaintiffs allege that their competitors posted shill reviews to bodybuilding.com designed to harm the plaintiffs' business. The plaintiffs sued both bodybuilding.com and the putative shillers.

In the previous ruling, a Missouri judge dismissed without prejudice a civil conspiracy claim against bodybuilding.com per 47 USC 230. Since then, the case has been transferred to Idaho, and the plaintiffs have launched another foray against bodybuilding.com, alleging that bodybuilding.com is derivatively liable for a Lanham Act false advertising claim. The court sidesteps a number of interesting questions, such as how 230 interacts with a Lanham Act false advertising claim, to what extent Lanham Act false advertising claims support derivative liability, and how a derivative claim interacts with the printer/publisher defenses in the Lanham Act. Instead, the court reaches two conclusions in response to bodybuilding.com's 12(b)(6) motion to dismiss:

1) Even though bodybuilding.com uses third party moderators, bodybuilding.com is not liable for every posting made on the site. This is a correct ruling and fully consistent with 230's immunization of the editorial function.

2) However, allegations that a moderator posted one of the offending messages survives a 12(b)(6) motion to dismiss based on the allegations that the moderator was a representative of the site and posted the message within the scope of the representation.

My hope is that the court will see the error of conclusion #2 on summary judgment. There are a number of cases that have rejected this agency-style argument as a workaround to 230, including the cases I cited in the last post:

* Joyner v. Lazzareschi: conspiracy argued but not alleged
* Higher Balance v. Quantum Future Group: no "alter ego" liability
* Cisneros v. Yahoo: no "aiding and abetting" liability. Accord: Goddard v. Google
* Best Western v. Furber: no liability for co-website operator activities

More recently, Novins v. Cannon says that there can be only 1 online defamation defendant per case. I also note the questionable Delfino v. Agilent case, where the court found the employer had a 230 defense for its employee's rogue actions.

Should conclusion #2 be followed by other courts (a doubtful proposition), it puts further legal pressure on websites relying on third party moderators. I have already raised this concern in my post on the uncited Columbia v. Fung case, which had some gratuitous language about site admins and moderators that is consistent with this case. I wrote:

The court also attributes the statements of site admins and moderators to the defendants, such as the admins’ technical support to people looking for or downloading copyrighted works. This part of the opinion was especially troublesome. Generally, UGC site moderators are unquestionably independent contractors, not agents, so the website isn't automatically liable for their statements and actions. Here, the court finds an "apparent agency" relationship between the admins and moderators because "Defendants assign this status and give these individuals authority to moderate the forums and user discussions. These individuals were under the control of Defendants and assigned duties related to the administration of the web forums." I believe this is a bad ruling, both normatively and doctrinally (see contrary discussion in, e.g., the Furber and Higher Balance cases in the 230 context). I could see UGC sites deciding to crack down or even eliminate non-employee moderators based on the agency exposure suggested by this opinion.

I am hoping these two rulings are outliers that other courts won't follow. I really can't imagine Web 2.0 succeeding without a robust cadre of site admins and moderators helping self-police an online community.

The rest of the opinion is filled with interesting nuggets too. For example, there is an interesting discussion about the (non-existent) statute of limitations in Lanham Act cases. Regarding the posters' direct liability for their allegedly shill posts, Rebecca recaps the discussion. The short story is that the court concluded many of the posts were non-actionable puffery. In her own unique way, she explains why the discussion about the commerciality of the allegedly shill posts may be "not just odd and marginal, it is bizarrely wrong."

My favorite part of the opinion was the court's straight-faced discussion about whether calling someone a "Cornholio" is defamatory. Believe it or not, this is not the first opinion in Westlaw to use the term "Cornholio"--that "honor" is reserved for State v. Lane, 2006 WL 687949 (Ohio App. Ct. March 17, 2006), which described a person as walking with his shirt over his head, "Cornholio style." This court says:

Calling Cornelius "Cornholio" is not a statement of fact. Cornholio is the alter-ego of a cartoon character, Beavis, from "Beavis and Butt-Head." See Beavis, in Wikipedia, the Free Encyclopedia, http://en.wikipedia.org/wiki/Beavis, last visited on April 8, 2010 FN6. While being compared to Cornholio is not flattering, it is not a "specific and measurable claim." Nor can it be reasonably interpreted as a statement of objective fact.

In FN6, the court admits to being embarrassed to having to cite the Wikipedia entry: "The Court does not encourage citations to Wikipedia. However, in rare circumstances, citation to a pop-culture encyclopedia is necessary in order to explain a pop-culture character." In fact, the Wikipedia cite looks significantly better than the Urban Dictionary, the only other marginally credible cite I could see in the first page of my Google results.

Posted by Eric at 10:04 AM | Content Regulation , Derivative Liability , Marketing | TrackBack

May 03, 2010

Proposed Internet Regulation in Brazil Might Curb Online Speech (Guest Blog Post)

by Guest Blogger Marcel Leonardi

[Marcel Leonardi is an attorney in São Paulo, Brazil, and Professor of Law at FGV-SP. He was a Google Policy Fellow in 2009, working with the international team at the Electronic Frontier Foundation. He has published articles and books in Brazil about ISP liability, online privacy and other Internet law issues. He can be reached at marcel@leonardi.adv.br, or follow him at Twitter.]

[Eric's introduction: notice-and-takedown schemes are generating lots of discussion. We've repeatedly seen problems with the notice-and-takedown scheme in copyright law (see, e.g., Wendy Seltzer's latest article), yet advocates keep evangelizing it as the solution for a range of unwanted content (see, e.g, Rep. McCotter's ill-fated proposal). Marcel has generously agreed to update us on a brewing notice-and-takedown initiative in Brazil.]

Brazil lacks a specific legal framework regarding the Internet. In order to create one, a collaborative process has been organized by the Ministry of Justice and the Center for Technology and Society from FGV-Rio. After a period of 45 days when anyone could suggest what this legal framework should encompass, the organizers have now published a draft of a bill, which is open for comments here.

The process has been touted as an unique collaborative approach to public policy. As far as allowing anyone to comment and discuss the draft online, it is indeed very democratic. Sadly, the same cannot be said of the bill itself.

The main issue is that the proposed legislation has the potential to curb online speech dramatically. It creates a notice and takedown system that allows any person or company to demand that any kind of online content is taken down.

In a nutshell, this system would work like this:

a) upon receiving a valid complaint, an intermediary must take down the questioned content “within a reasonable period”;

b) after the content is offline, the intermediary must notify the user responsible for the content, explaining the removal;

c) the user can either accept the removal or claim full responsibility for the content, in which case he or she can send a counternotice and demand that the intermediary puts the content back online;

d) if the intermediary receives no answer or cannot reach the user, the content remains offline;

e) any other person or company can also claim full responsibility for the content in place of the user, send a counternotice and demand that the intermediary puts it back online. Doing so subjects this person or company to the same legal risks and consequences the user would face;

f) if the intermediary fails to follow this procedure, it will be liable for the third-party content.

This system stems from articles 20-24 of the bill, which state the following:

Art. 20 An Internet service provider shall only be held responsible for damages resulting from content created by a third party if it has been notified by the injured party and has not taken measures to render unavailable (within the scope of its services and within a reasonable period) the content identified as infringing.

1. Internet service providers must offer in a conspicuous manner at least one electronic means of receiving notices and counternotices.

2. An Internet service provider is allowed to create an automated mechanism to respond to the proceedings provided by this section.

Art. 21. On penalty of invalidity, the notice contemplated by article 20 must contain:

I - the identity of the complainant, including complete name, identity and tax registration numbers, and current contact information;

II - date and time of transmission;

III - clear and specific identification of the content claimed as infringing, permitting the unambiguous location of the material by the recipient of the notification;

IV - description of the relationship between the complainant and the
content described as infringing; and

VI - legal justification for removal.

Art. 22. Upon making the content inaccessible, the service provider shall be responsible for informing the user responsible for the publication of this fact, advising the user of the substance of the complaint and establishing a reasonable period for the complete
elimination of the content.

Provided. If the user responsible for the infringing content is not identifiable or cannot be found, but all the required elements for the validity of the notice are present, the service provider is responsible for maintaining the blockage.

Art. 23. The user responsible for the publication may, following the requirements of article 21, counternotify the service provider, requesting the continued availability of the content and assuming exclusive responsibility for the eventual damages caused to third parties, in which case the service provider will have the duty to re-establish access to the content to which access was disabled and inform the complainant of the re-establishment of access.

Provided. Any other interested party, whether a natural or legal person, following the requirements of article 21, may counternotify the service provider, assuming responsibility for the maintenance of the content.

Art. 24. A complainant as well as a counternotifier shall have responsibility according to law for false or erroneous information and for abuse or bad faith.

My concern is that a notice and takedown system that can be used for any kind of content, like this one, will quickly become a tool to chill legitimate speech. So far, in the absence of regulation, Internet intermediaries in Brazil are free to take down content if they deem it inappropriate or if said content violates their terms of service. Outside of those situations, however, a court order is necessary to take down the alleged harmful content. After a prima facie analysis, judges can grant or refuse to grant an injunction for content removal, depending on the nature of the questioned content and the rights at stake.

Even though the judicial system is far from perfect, Brazilian judges have been exercising great care when analyzing lawsuits demanding online content to be taken down, refusing to grant injunctions that would affect legitimate, yet unwanted, speech.

Therefore, under the current system - created by legal doctrine and precedent - a lot of controversial, critical and political speech stays online in Brazil because those interested in its removal are very aware that judges would probably never grant injunctions to take it down. Frivolous and petty requests are not even filed, since whoever loses a lawsuit in Brazil must pay reasonable attorneys’ fees awarded by the judge. Other would-be plaintiffs give up, fearing the ever increasing “Streisand effect” - when the questioned content becomes “viral” and hugely popular precisely because it was questioned - which is an even bigger issue when an injunction is denied and news of the lawsuit reach the public (a situation that often leads plaintiffs to quickly ask the court for dismissal, before the defendant even knows about the lawsuit).

American readers should also bear in mind that, contrary to the situation in the United States, in Brazil it is neither too complicated nor too expensive (at least in comparison to American standards) to file a lawsuit demanding content to be taken down. In fact, under certain circumstances, such lawsuit can even be filed directly by the alleged victim in a small claims court at little to no cost. This partially explains why the Brazilian numbers are so high in the recent statistics about content removal and data requests that were published by Google, as these numbers include court orders for the removal of content, which often originate from private-party disputes, as explained here.

In summary, Brazilian victims of real online harms can find appropriate redress and take down content via the local judicial system. However, if this bill becomes law, I fear that this notice and takedown system will be heavily abused, as people and companies will then have a channel where they can send all of their previously unfiled frivolous, petty and abusive requests. All they have to do, after all, is complain to the intermediary, which must take the questioned content down to avoid liability.

This approach is significantly more problematic than the notice and takedown system established in the European Union by the e-commerce Directive (2000/31/EC). According to the Directive, hosting providers in the European Union are only required to remove content after being “aware of facts or circumstances from which the illegal activity or information is apparent”. This requirement does not exist under the proposed Brazilian system: all requests for content removal must be accepted, regardless of the legality of the content, or else intermediaries risk liability.

On the other hand, even if users are made aware of their ability to dispute the removal of their content, it is easy to see that many will not be willing to take the risk, even if there is nothing wrong with such content. I believe it is safe to assume that most users will simply be terrified of the potential liability, as they know that fighting back means risking a lawsuit, with all the emotional and financial costs it brings, even when the odds are in their favor. This is also why I do not believe that allowing anyone to “take the heat” in place of the user will solve the problem. In fact, it just adds another target for a lawsuit, as the user is not exempt from liability in this situation.

To be fair, the bill does mention that bad faith requests will be punished, albeit it fails to define how. Practicing attorneys like myself, however, know that proving bad faith in court is not an easy task. Besides, since anyone can send a complaint - not just the victim of the alleged wrongdoing - it is easy to imagine how different people could be used to send complaint after complaint to chill legitimate speech.

It is also worth noting that this system is not final. Even if the content remains online after the notice/counternotice process, the allleged victim can still go to court requesting an injunction for the content to be taken down.

In conclusion, if this bill becomes law, it is very possible that the number of lawsuits related to online content may drop. Ironically, though, the chilling effect on online speech might become far greater than ever before.

Removing true harmful content from the Internet is a legitimate goal, but determining what is legal or illegal is a task best left for the courts, not to the whim of users or ISPs. Despite the differences between the Brazilian and American legal systems, I believe the CDA 230 protections and DMCA histories of abuse can demonstrate the risks and potential pitfalls of a notice and takedown system, specially one that can be (ab)used for any kind of content.

Wth that in mind, I invite all readers to provide some feedback on the draft of this bill. An English version is available here.

Posted by Eric at 07:27 AM | Content Regulation , Derivative Liability | TrackBack

April 30, 2010

Website Gets 230 Immunity Despite Claim of Site Content Accuracy--Milo v. Martin

By Eric Goldman

Milo v. Martin, 2010 WL 1708895 (Tex. App. Ct. April 29, 2010)

This case involves allegedly defamatory "guestbook" messages posted by unknown users to a website entitled "The Watchdog." Framed like that, the precedent says the website should get an easy and uncontroversial 47 USC 230 dismissal (and IMO Rule 11 sanctionable).

The plaintiffs try to get around 230 by citing The Watchdog's first page, which contained the following statements:

The WATCHDOG

The unfiltered truth about Conroe politics and your tax dollars.

The Watchdog is a monthly publication by newsletter and website. It contains facts believed to be totally accurate by sources with character and truthfulness as their primary attributes. Our agenda is the truth and nothing less. Our sources and any information obtained are absolutely confidential and will remain so.

The plaintiffs argue that by asserting the website content's accuracy, The Watchdog "developed" the defamatory content and thus became a content provider of the user-supplied content. The majority doesn't bite, saying:

The Watchdog's failure to verify the accuracy of the information in the posts in issue here does not, in itself, make the Watchdog the "information content provider" of the defamatory statements about which [the plaintiffs] complain.

The court further rejects the plaintiff's arguments on several other grounds:

* this statement was not a guarantee against inaccuracies on the site
* the statement doesn't apply to the guestbook, which readers would have quickly assessed was not an area the site operators were policing for accuracy, especially because users had posted critical views of The Watchdog to the guestbook.

In its concluding remarks about the defamation claim, the court (like so many others) cites Roommates.com for the defense, saying that the plaintiffs did not provide any evidence that The Watchdog itself layered the allegedly unlawful material onto the user-supplied content.

The majority opinion sidesteps whether 230 would preempt an intentional infliction of emotional distress claim (it does if the claim is based on third party content—see, e.g., Barnes and Friendfinder), instead concluding that The Watchdog lacked the requisite scienter/bad faith.

The majority opinion concludes with a gratuitous parting shot at Congress:

We note our concern that section 230 does not provide a right to request a website's owner to remove false and defamatory posts placed on a website by third parties, and does not provide the injured person with a remedy in the event the website's owner then fails to promptly remove defamatory posts from its site, at least in the absence of extreme and outrageous circumstances that are not present here. Instead, Congress chose with only narrow exception to protect internet service providers from their potential liability for publishing false and defamatory content when that content is created by third parties and when the interactive computer service has not acted as an information content provider. Despite our concerns about section 230's breadth, the trial court did not err in applying section 230 to render summary judgment in this case.

Get in line with the other judges that dislike 230. It's a growing queue.

The concurring opinion bristles with even more hostility towards 230. I don't think I can do it justice by trying to summarize the arguments, in part because they are novel bordering on nonsensical. If I understand the concurring judge's arguments correctly (a big if), he collapses 230(c)(1) and 230(c)(2) into a single operative provision and uses the "good faith" language from 230(c)(2)(A) to restrict the availability of the 230(c)(1) immunity. This would be a crazy (mis)reading of 230, and fortunately the majority judges' cooler heads prevailed.

The concurring judge uses his odd logic to conclude that "In my view, if a malicious website operator intentionally and unreasonably refuses to delete an anonymous third-party's obviously defamatory statement, a claim based on an intentional tort may be asserted in the appropriate circumstances against the operator under Texas law." I suspect this is why the majority sidestepped a definitive conclusion that 230 preempts intentional infliction of emotional distress claims and ruled instead on scienter grounds. Even the concurring judge agreed that the defendants here did not engage in the required "extreme and outrageous" conduct by failing to remove the post because (1) the plaintiffs didn't make the removal request until after the litigation started, and (2) at that point, the defendants relied on their counsel's advice not to remove the post (presumably for evidence spoliation purposes).

Even though we get some fresh/novel/crazy readings of 230 here, the opinions suggest that everyone involved in the litigation missed at least two key points:

1) the takedown/stay-up decision is an editorial one, and 230 categorically protects these editorial decisions however they come out. So all of the concurring opinion's machinations about the website’s decision not to remove are completely immaterial in light of 230.

2) the plaintiffs might have had more success with a Mazur-style attack, skipping the defamation claim against the website and instead trying to hold the website liable for its first party marketing representations. Here, the website voluntarily announced that it "contains facts believed to be totally accurate by sources with character and truthfulness as their primary attributes." What, if anything, did the website do to make that statement correct with respect to the guestbook postings? If the answer is nothing, that creates an opportunity to hammer the defendants for possibly bogus marketing representations. The Mazur attack might not have succeeded even in this case; the majority opinion indicates that site visitors would not have assumed the marketing representations extended to the guestbook postings. Nevertheless, it would have been interesting to see the discussion (especially given both the majority and concurring judges' antipathy towards 230) if the plaintiffs had framed this case about the marketing representations specifically and not the defamatory postings.

For more on the interplay between marketing representations and 230, see, e.g.:

* 47 USC 230 and Consumer Protection Talk Notes
* 47 USC 230 Talk at Fordham
* Ninth Circuit Mucks Up 47 USC 230 Jurisprudence....AGAIN!?--Barnes v. Yahoo

Posted by Eric at 11:09 AM | Content Regulation , Derivative Liability | TrackBack

April 29, 2010

Online Defamation Action Can Have Only One Defendant--Novins v. Cannon

By Eric Goldman

Novins v. Cannon, 2010 WL 1688695 (D. N.J. April 27, 2010). The CMLP page on Novins' initial demand letter. The CMLP page on the lawsuit. An aborted lawsuit blog putatively by Novins.

This is a defamation action over a USENET post. Doing research for this blog post required me to go back into USENET, a place I haven't been in years, and I was instantly reminded why I don't go there any more. Putting aside the signal-to-noise ratio, I simply could not intellectually comprehend most of the posts I saw. It's like the posts were written for people who live in a parallel English-speaking universe with a very different grammar and logic than mine. Who is still reading and writing this stuff??? And who in the world takes anything in an unmoderated USENET group seriously???

Charles Novins is an attorney. On Feb. 13, 2008, a person using the name Kevin Cannon posted to several USENET groups (apparently, none topical, e.g., alt.culture.alaska) a not-nice-if-untrue post entitled "Law Offices of Charles Novins hires drug addicts to fill your legal needs." The text is also attached to the end of the original complaint. Novins alleges that the post cost his firm money and spooked clients, prospective employees and colleagues.

Novins sued a whole bunch of people. The complaint is opaque about what role these people played in publishing the defamatory post but, as it turns out, it doesn't matter. The court says that 47 USC 230 does not immunize the post's author (presumptively Cannon), but it applies to everyone else regardless of their role as publishers/republishers/whatever. Effectively, then, the court's logic indicates there can only be one defendant in an online defamation action--the originator of the defamatory content. Everyone else should be protected by 230, period. As the court says:

it does not matter how Defendants republished the alleged defamatory statements—whether by email, website post, or some other method. The point is that all the Defendants in this case—with the exception of Cannon—acted as re-publishers of another person’s information, and as such they are protected by the CDA.

This ruling just reinforces what we already knew, but it is a good reminder that Web 2.0 participants (and even USENET participants) will not be liable for other people's content.

Posted by Eric at 08:16 AM | Content Regulation , Derivative Liability | TrackBack

April 23, 2010

Beverly Stayart Strikes Again! This Time, Stayart Sues Google

By Eric Goldman

Stayart v. Google, Inc., 2:10-cv-00336-LA (E.D. Wis. complaint filed April 20, 2010)

I've previously blogged about Beverly Stayart (a/k/a Bev Stayart) and her mockable lawsuit against Yahoo. She has repeatedly declared that she is the only Beverly Stayart / Bev Stayart in the world and that her name--due to the cachet she has built up from being a quality human being--is being used to peddle sex-related pharmaceuticals. She lost her first foray against Yahoo on 47 USC 230 grounds but nevertheless is trying again.

Now, she has launched another effort to defend her name—this time she is suing Google for similar concerns. (Like we couldn't see that coming!). She objects to the fact that Google Suggest prompts searchers on "bev stayart" to search for "bev stayart levitra." (para. 13). Anticipating a 47 USC 230 defense, she argues (para. 15) that Google Suggest represents first party editorial content that drops out of 230 coverage. The complaint also seems to raise the question of whether selling a personal name as a keyword trigger constitutes a publicity rights violation; but the complaint does not appear to evidence any understanding of broad matching, i.e., that a search for "bev stayart levitra" will deliver Levitra-related broad-matched ads for reasons having nothing to do with Bev Stayart. (See this recurring defect in paras. 90-109).

(Note: this prompted me to check out a search for "eric goldman levitra." My first result, from www.hosmersoda.com, looks pretty sploggy to me, but there's no way I'm going to click on these links!!!)

Some unsolicited advice for Bev Stayart: stop suing search engines, and stop running vanity searches on the search engines. Life is too short to fret about sploggers!

Two final notes: Bev's attorney is, once again, Gregory A. Stayart, her employer and presumably a family relation. Also, searches for "Bev Stayart" and "Beverly Stayart" are worth a look—I can’t recall other search results quite like that.

Posted by Eric at 09:29 AM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Spam | TrackBack

April 13, 2010

Google Sued for Publishing Home Address--Harris v. Google

By Eric Goldman

Harris v. Google, Inc., 1:10-cv-21119-AJ (complaint removed to S.D. Fla. April 8, 2010). The original complaint filed in state court. Google's removal to federal court.

Jonathon Harris sells rare coins. His business office is in Stuart, Florida, and he lives in Jupiter, Florida. As gold prices soared, Harris claimed a heightened fear of being robbed; and to the extent his home address was publicly known, he feared that criminals would seek him out there.

Searches for Harris' business in Google Phonebook pointed potential customers to his home address in Jupiter, not his business address in Stuart. Google Phonebook provides a takedown procedure that promises a "permanent" fix within 48 hours. Harris claims that he made a takedown submission and Google initially honored it; but subsequently his home address showed up again, and Google then ignored multiple takedown requests. He sued in state court for public disclosure of private facts and intentional infliction of emotional distress. Google has removed the complaint to federal court.

On its face, I am skeptical that publication of Harris' home address was sufficiently "outrageous" to satisfy the prima facie elements of either of his claim. But even if it does, Google ought to be protected by 47 USC 230. It appears that Google Phonebook is provided by a third party provider, so it should qualify as third party content to Google, and the types of claims Harris makes are squarely covered by 230. Compare, e.g., the Doe v. MySpace cases, where the victims actually experienced physical harm; here, Harris just raises the possibility of prospective harm.

While this looks like an easy 230 case, I wonder if this case implicates some of the interstices of the Barnes v. Yahoo ruling. At its core, Harris isn't complaining just about the publication of his home address; he is also complaining that Google Phonebook's promised a fix and didn't deliver. Per Barnes, any negligence-style claim for failure to remove should be preempted; but did the website disclosures provide Harris with sufficient grounds for a promissory estoppel claim? (Note he didn't make a promissory estoppel claim per se, but it is perhaps implicit in the claims he did make). Ultimately, even if he tries to push the promissory estoppel angle, Harris may have difficulty establishing sufficient reliance on the Google Phonebook disclosures.

I am a little confused why Harris' court filings didn't redact his home address. As is so common for plaintiffs bringing privacy invasion lawsuits, Harris' lawsuit may have been counterproductive at trying to keep the world from knowing his home address. In this respect, I'm reminded a little of the Boring v. Google lawsuit; like the Borings, perhaps Harris is unusually sensitive about his home privacy, and a public lawsuit is an ineffectual method of preserving that. Then again, I bet Harris' lawsuit would not have even materialized if he hadn't felt that Google was such a black box when he repeatedly complained.

Posted by Eric at 09:01 AM | Derivative Liability , Publicity/Privacy Rights | TrackBack

April 12, 2010

Google Successfully Transfers Another AdWords Case to California--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek, LLC v. U.S. Auto Parts Network, Inc., 2010 WL 1381005 (D.N.J. April 1, 2010)

Google has successfully transferred another trademark lawsuit over AdWords to its home court in California based on the mandatory venue clause in its AdWords contract. This is the latest success Google has had invoking its venue clause; similar recent victories include the TradeComet and Flowbee rulings. Indeed, the only case I can recall where Google has unsuccessfully invoked its AdWords venue selection clause is the Rosetta Stone case (see this transcript from Sept. 2009). (There may be other failed efforts, but I can't recall them). As a result, the Rosetta Stone case remains on the rocket docket with a trial scheduled for next month, but it appears some of Google's other litigation parties will be moving to California.

The most interesting thing about this particular ruling is that the court doesn't cite to either the TradeComet or Flowbee rulings in deciding for Google. Instead, the court anchors its decision in its putatively sui generis analysis of 3rd circuit caselaw.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:50 AM | Derivative Liability , Search Engines , Trademark | TrackBack

April 11, 2010

Veoh Denied Attorneys' Fees in UMG v. Veoh. Does FRCP 68 Apply to Copyright Cases?

By Eric Goldman

UMG Recordings, Inc. v. Veoh Networks Inc., 2010 WL 1407316 (C.D. Cal. April 6, 2010)

Copyright law contains a statutory fee-shifting/"loser pays" provision (17 USC 505) that, in specified circumstances, gives the judge discretion to award attorneys' fees to a copyright lawsuit winner. Veoh decisively won a 512(c) defense against UMG's copyright infringement claim, so Veoh applied for its attorneys' fees under 505. The court, exercising its discretion, declined to award them. The court concluded that UMG "played hardball" but its lawsuit was not "improper, in bad faith, or contrary to the purposes of the Copyright Act" and "UMG's position was not legally untenable."

I think the judge's decision is a fair application of the statute, but consider its consequences. UMG helped drain Veoh's coffers through the litigation, yet the court does not impose any disincentives for plaintiffs to bring such a lawsuit. As a result, UMG walks away from the lawsuit while Veoh goes belly-up.

The next part of the ruling confused me, and maybe my litigator friends can help me understand it. As a fallback position, Veoh asked for its attorneys' fees under FRCP Rule 68. Rule 68 tries to encourage litigants to settle their disputes by providing a penalty for refusing a reasonable settlement offer. If Party A proposes settlement terms and Party B declines (because it expects to do better in court), but the ultimate judgment is less favorable to Party B than the proposed settlement, Party B has to pay Party A's costs that accrue post-settlement offer. Rule 68 makes a lot of sense from a game theory standpoint, but I've been told by litigators that it doesn't mean much in practice, and this case might illustrate why.

The court doesn't provide the terms of Veoh's Rule 68 settlement offer, but because Veoh won the case, any settlement offer Veoh made by definition was better for UMG than the actual results UMG got. Therefore, on its face, Rule 68 seems to say that, at minimum, UMG should pay Veoh's costs post-settlement offer.

However, the court looks at the interaction of copyright law's 505 fee-shifting provision and Rule 68 and, in effect, concludes that 505 moots Rule 68. The court says it couldn't find any on-point precedent (I haven't double-checked, but this was the first time I recall seeing any discussion of this interaction), so it cites an analogous case for the proposition that Rule 68 was not designed to expand the bases of fee awards. Thus, because the court had already concluded that Veoh wasn't entitled to a fee award under the Copyright Act, that eliminated any Rule 68 cost award.

This result makes no sense to me. The ruling makes Rule 68 effectively irrelevant to copyright actions. Based on the court's reasoning, there's virtually no circumstance where a copyright defendant eligible for fees would want Rule 68 to apply. 505 allows a court to award ALL of the defendant's costs, while Rule 68 limits the awardable costs to those incurred post-settlement offer. Rule 68's calculation is mandatory, not discretionary, so in theory it could set a minimum award for the judge--once the judge decides fees are awardable at all. However, I rarely if ever see a judge who grants a fee award under 505 force the defendant to take a big enough haircut on awardable fees where the Rule 68 calculation would be more favorable. Therefore, if anyone wants Rule 68 to apply, it seems more likely that a losing copyright plaintiff might try to invoke Rule 68 to cap its fee exposure.

The analysis is about the same from the perspective of plaintiffs eligible for fees, except that copyright plaintiffs can only become eligible for a 505 award if they have registered their copyright within the statutory time period. But if they are 505 eligible, I would expect most judges to award all of their attorneys' fees, not just those post-Rule 68 settlement offer.

While it's certainly fair game for Congress to decide that Rule 68 is irrelevant to copyright actions, I find it hard to believe that's what was intended. Rule 68 serves a valuable social policy of encouraging early settlements, and we should value that result in copyright litigation just as much as any other area of litigation. So it seems like someone--either the judge or Congress--screwed up; either way, it should be fixed so that Rule 68 becomes a fallback to statutory fee-shifting provisions rather than being mooted by them.

Although the court doesn't address it, it seems like its logic should apply equally to the fee-shifting provisions in the patent and trademark statutes. Therefore, if this ruling holds, it appears that Rule 68 is effectively irrelevant to all federal IP litigation. Students looking for paper topics, especially on ADR in IP, the intersection between Rule 68 and the IP statutory fee-shifting provisions seems like a fertile ground for exploration.

UPDATE: The analysis is embedded in a self-promotional post, but Ray Dowd of the Copyright Litigation Blog provides support and a case cite for why he thinks the court made a mistake on the Rule 68 analysis.

UPDATE 2: David Gingras sent the following references:

Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997) says that under Rule 68, a party who makes an offer of judgment in a copyright case and obtains a result better than the offer is entitled to a mandatory award of costs AND fees (because costs are defined by 17 USC § 505 as including fees, and Rule 68 makes an award of costs mandatory). This view seems totally practical and totally consistent with the purposes of Rule 68.

Champion Produce, Inc. v. Ruby Robinson Co., 342 F.3d 1016 (9th Cir. 2003) says the EXACT opposite. The court tried to outsmart everyone else by saying that although the result in Jordan makes sense and seems logical, fees can only be awarded as costs under 17 USC § 505 to the "prevailing party", and they felt that a defendant who made a $20k or whatever offer of judgment under Rule 68 but then lost at trial in which the plaintiff received a judgment of only $19,999 could not be considered as the "prevailing party" and thus could not recover fees as part of the mandatory costs award under Rule 68. Of course, this completely ignores the purposes of Rule 68 and it rewards plaintiffs who reject settlement offers and seek to roll the dice at trial.

It appears this particular issue is baffling to judges and to many smart litigators. Excellent paper topic.

UPDATE 3: Ron Coleman says: "Defendants don’t get their fees."

Posted by Eric at 10:32 AM | Copyright , Derivative Liability | TrackBack

April 06, 2010

Facebook Preliminarily Wins Copyright Lawsuit over Third Party App--Miller v. Facebook

By Eric Goldman

Miller v. Facebook, Inc., 2010 WL 1292708 (N.D. Cal. March 31, 2010)

Miller developed a videogame called Boomshine. He is upset that Yeo made an allegedly infringing knockoff variation of the game, called ChainRxn, and distributed the knockoff as a Facebook app. Miller sued both Yeo and Facebook for copyright infringement. In January, I blogged on Facebook's success invoking the venue clause in its user agreement to move the case to its home court.

The court dismissed Miller's first amended complaint because the copyright infringement allegations were too vague. Miller alleged "that defendant Facebook 'published ChainRxn in their [sic] Application Directory' and that defendant Facebook 'took the affirmative step to approve ChainRxn for publication on its Application Directory'," but according to the court, these allegations do not make it clear "whether defendant Facebook published a copy of the game on its application directory, published a link to the game, included a place for Facebook users to blog about the game, or published a combination of these and/or other things."

The court also rejects Miller's allegations of Facebook's secondary infringement for Yeo's activity. The contributory claim fails because Miller did not adequately allege material contribution given that the judge can't figure out what Facebook did wrong. The vicarious infringement claim fails because Miller did not adequately allege a right and ability to supervise the infringement given the ambiguity over what took place on Facebook's premises.

The judge does give Miller another chance: "Within FOURTEEN CALENDAR DAYS, plaintiff may file a motion on a normal 35-day track seeking to cure the foregoing deficiencies and appending to the motion a proposed amended complaint. The motion should explain why each new claim overcomes the deficiencies. Leave to amend is otherwise denied." I'm sure Miller will avail himself of this opportunity, but I don't see a rosy long-term prognosis to his litigation efforts.

Posted by Eric at 08:55 AM | Copyright , Derivative Liability | TrackBack

April 05, 2010

230 Protects Newspaper from Liability for Reader Comments--Collins v. Purdue

By Eric Goldman

Collins v. Purdue University, 2010 WL 1250916 (N.D. Ind. March 24, 2010)

The plaintiff, Timothy J. Collins, III, is a Purdue student. The defendant in this ruling is Federated Publications, which publishes a Lafayette, Indiana daily newspaper, the Journal & Courier.

On Jan. 13, 2007, Collins was assaulted on campus and sought hospital treatment. Separately, another Purdue student, Wade Steffey, was reported missing and last seen on Jan. 12. (Months later, Steffey was discovered dead on campus--as far as I can tell, his death still has not been satisfactorily explained). UPDATE: This report explains Steffey's tragic accidental death.

In mid-January, the police started investigating Collins in connection with Steffey's disappearance. On Feb. 5, the police charged Collins with "False Informing" for alleged misinformation Collins had provided to the police. On Feb. 10, the Journal & Courier reported on Collins' Feb. 5 charges in an article, "Student Who Reported Mugging Charged," published both online and off. The article led some readers to infer that Collins was involved in Steffey's disappearance, a topic explored in the online article's "vitriolic and hateful" user comments. The court recaps that "The posting of these readers' comments fueled the suspicious, charged atmosphere on campus at that time and inflamed the frenzied efforts to unravel the Steffey mystery."

This opinion doesn't explicitly say why Collins is on a litigation tear, but I infer that Collins believes he was improperly linked to the Steffey disappearance and was subjected to some harsh treatment by those who made that link. In this ruling, Federated Publications seeks to exit his lawsuit (although many other defendants are left).

Federated defends Collins' libel and false light claims on 47 USC 230, saying part of his claims are based on third party comments. Collins responded that the newspaper website doesn't qualify as a provider/user of an interactive computer service, an argument that goes nowhere. Instead, the court treats this as easy case (which it is):

Federated can be held liable for defamatory statements in its own material published on the website-such as the article if the article was defamatory-but cannot be held liable for the publication of remarks or postings by third parties. Like the defendant in Dimeo, Federated did not create or develop the posted comments and cannot be held responsible for them. Also like Dimeo, none of the facts before the court show any encouragement by Federated for readers to comment on the website articles in a defamatory way. Moreover, Collins has made no assertions in either his First Amended Complaint or his response briefs suggesting that Federated engaged in any of the revisions or redrafting discussed in Nemet or applied any editorial function whatsoever over the comments posted by the readers on its website. Collins himself titles these counts in his First Amended Complaint as “reader comments,” making them unattributable to Federated. Because Federated is immune from liability for the third-party content posted on its website by the CDA, Collins' claims charging Federated with liability for the third-party postings on its website fail.

To get around this, Collins tried an "inducement" style attack on 230, but the court rejected that as well:

Federated did nothing to induce any readers to post a commentary on the article nor to express a preference for a particular viewpoint in the posts. Nowhere in Collins' Amended Complaint is the assertion that Federated chose the particularly hateful and denigrating posts over a batch of kinder, gentler comments. Nor does Collins suggest that any of Federated's staff writers or editors were responsible for the particular posts or their content. To the contrary, Collins has identified these posts on the website as “reader comments” or “reader posts”, and taking Collins at his word, Federated cannot be liable for the statements made by these third-parties.

Note that 230 should have applied even if Federated had done some of these things--especially making editorial judgments about user comments--but the court didn't need to be more precise because Collins' argument failed on the facts he was working with. So in the end, this is an easy 230 case holding that the newspaper isn't liable for the online user comments.

The newspaper wins on other grounds too. The emotional distress claims were dismissed because the newspaper article was not outrageous or published with the requisite scienter; the libel and false light claims were dismissed because of the veracity of the story's exact words; and the statute of limitations also applied.

Posted by Eric at 03:16 PM | Content Regulation , Derivative Liability | TrackBack

April 01, 2010

eBay Mostly Beats Tiffany in the Second Circuit, but False Advertising Claims Remanded

By Eric Goldman

Tiffany (NJ) Inc. v. eBay Inc., 2010 WL 1236315 (2d Cir. April 1, 2010)

In a subtle opinion with potentially significant implications, eBay has preserved most of its big 2008 district court victory in the long-running Tiffany v. eBay case. However, as seems to be the norm with federal appellate opinions, the opinion intentionally sidesteps some key open doctrinal questions squarely raised by the case--such as if the Second Circuit recognizes the nominative use defense, or the Second Circuit's standards for contributory trademark infringement. As a result, we don't get the clean and decisive doctrinal standards that help make a case truly precedent-setting; if anything, some aspects of the case are pretty eBay-specific. And while the opinion is generally a win for defendants, there are at least two tangents (the willful blindness standards and the false advertising discussion) that future plaintiffs will unquestionably explore.

What is clear from the opinion is that Tiffany has lost the battle to force eBay to change its system to do more for Tiffany. (Unless Tiffany successfully appeals to the US Supreme Court, which it has said it is considering). What isn't clear to me is how much money is still on the table for the false advertising claim. If Tiffany can make this a backdoor way to get its alleged damages from counterfeits on the eBay site, then there's still potentially a lot of money left to fight over. But otherwise, it would make way more sense for the parties to settle up rather than pursue the remaining false advertising issue.

Overview of the Rulings

* eBay isn't directly liable for trademark infringement based on its advertising activities due to the nominative use doctrine (even though the panel did not adopt the doctrine)
* eBay isn't secondarily liable for counterfeit sales because generalized knowledge is not enough and eBay followed a notice-and-takedown procedure
* eBay isn't liable for direct trademark dilution based on the unadopted nominative use doctrine
* the appellate court rejected the lower court's reliance on a nominative use defense to the false advertising claim.

The ultimate disposition: “The case is therefore remanded…for further proceedings for the limited purpose of the district court's re-examination of the false advertising claim in accordance with this opinion.”

Direct Trademark Infringement

The Second Circuit has never expressly adopted the nominative use defense, one of the many reasons why I favor doctrinal gatekeepers like "use in commerce" rather than relying on the inconsistently interpreted defenses. This panel doesn't adopt a nominative use defense for the Second Circuit either, but it does say "a defendant may lawfully use a plaintiff's trademark where doing so is necessary to describe the plaintiff's product and does not imply a false affiliation or endorsement by the plaintiff of the defendant." This is pretty similar to the Ninth Circuit’s standard, though it omits the factor that the defendant took only as much of the trademark as was needed (in practice, that might be subsumed in the "necessary" requirement).

eBay qualified for the nominative use defense for both its website references to Tiffany and its use of Tiffany in sponsored links because "eBay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website. And none of eBay's uses of the mark suggested that Tiffany affiliated itself with eBay or endorsed the sale of its products through eBay's website."

Other than the district court opinion in this case, I can't think of another case that has found a nominative use defense in a keyword advertising case. This ruling suggests that anyone who might qualify for a nominative use--certainly retailers and affiliates, but potentially even competitors--might have some additional traction to their defense. Potentially, this case will take some wind out of the sails of Rosetta Stone, which has partially complained about advertisements by folks in its channel. All of those people should be protected by the nominative use doctrine, and the Second Circuit may have just filleted those folks out of Rosetta Stone's case.

Note that at least one of eBay's ads was triggered by "tiffany" and included "tiffany" in the ad copy, so it appears that the nominative use defense extends to the trigger. The ruling does not address what happens if the trademark acts as a trigger but does not show in the ad copy. Before the 2nd Circuit's April 2009 Rescuecom v. Google ruling, the trial judge held that triggering by itself didn't qualify as a use in commerce. The appellate court doesn't cite Rescuecom or address use in commerce at all; but I believe this is the first Second Circuit keyword advertising case since Rescuecom, and it turns out fine for the defense.

The court rejected Tiffany's argument that eBay's general knowledge of counterfeiting activity was relevant to the direct infringement inquiry. The court also sensitive to Tiffany’s apparent motive of trying to suppress competition from legitimate resales.

Contributory Trademark Infringement

The flagship case articulating an online standard for contributory trademark infringement is the 1999 Ninth Circuit Lockheed v. NSI case. This court was squarely presented with the issue of the Second Circuit's standard, and the court punted. Instead, the court said that both eBay and Tiffany had agreed to use the Inwood standard (referencing a 1982 Supreme Court opinion, the leading offline case for contributory trademark infringement). The court recaps the standard: “there are two ways in which a defendant may become contributorially liable for the infringing conduct of another: first, if the service provider ‘intentionally induces another to infringe a trademark,’ and second, if the service provider ‘continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.’” Inducement was not an issue here.

eBay followed a notice-and-takedown scheme, so actual knowledge was not at issue either. eBay's generalized knowledge of counterfeiting activities on the site was insufficient; the court required "[s]ome contemporary knowledge of which particular listings are infringing or will infringe in the future." Tiffany's demand letters weren't specific enough, and its specific requests were honored. Therefore, eBay lacked the requisite scienter.

Unfortunately, the court did not stop there. Instead, the court brought up the possibility of "willful blindness." The court articulated a new and troublesome legal standard: “When [a service provider] has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.”

What does this mean??? What lays the foundation for a service provider to have "reason to suspect" that users are infringing? Does a C&D letter do that? The answer seems to be no; Tiffany sent those. Does proactive filtering confer that foundation? Perhaps, because eBay did undertake some extra filtering efforts for Tiffany. In FN 14 the court says “contributory liability may arise where a defendant is (as was eBay here) made aware that there was infringement on its site but (unlike eBay here) ignored that fact.”

It’s great for eBay that it didn’t ignore the fact, but what exactly did eBay do right (other than win at trial court)? I'm not sure, and that's telling for the weaknesses in the court's language and logic. As a result, I expect plaintiffs to get frisky with this "willful blindness" toy and start asserting that defendants had "reason to suspect" user infringement and "ignored that fact."

Sadly for Tiffany, it won't get the benefit of this loose language. The court concludes its discussion on willful blindness by saying “eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website….Without more, however, this knowledge is insufficient to trigger liability under Inwood. The district court found, after careful consideration, that eBay was not willfully blind to the counterfeit sales….That finding is not clearly erroneous. eBay did not ignore the information it was given about counterfeit sales on its website.”

Dilution

The court seems to say that there cannot be blurring or tarnishment when the defendant makes a nominative use. The court says simply “There is no second mark or product at issue here to blur with or to tarnish ‘Tiffany.’” This is interesting because the post-TDRA statute expressly provides a defense for nominative use, but the court doesn't rely on it. Instead, it seems to treat nominative use as a definitional requirement--if the defendant is making a nominative use, tarnishment and blurring should be categorically impossible and defendants should win on a 12(b)(6) motion to dismiss. But if that's the case, why have the statutory defense? (Don't get me started on the "commercial use" infinite loop in the dilution statute).

To the extent counterfeiting causes dilution, eBay didn't sell the goods itself, so it did not commit that dilution. The court mucks its words about contributory dilution; what it should have said is that there is no such thing.

False Advertising

The court describes eBay's advertising at issue:

eBay advertised the sale of Tiffany goods on its website in various ways. Among other things, eBay provided hyperlinks to "Tiffany," "Tiffany & Co. under $150," "Tiffany & Co.," "Tiffany Rings," and "Tiffany & Co. under $50."...eBay also purchased advertising space on search engines, in some instances providing a link to eBay's site and exhorting the reader to "Find tiffany items at low prices."

The court says that these statements are not literally false because genuine Tiffany merchandise was available on eBay, "[b]ut we are unable to affirm on the record before us the district court's further conclusion that eBay's advertisements were not ‘likely to mislead or confuse consumers.’” The court effectively rejected the district court's use of nominative use as a categorical defense to false advertising claims. I wasn’t too surprised to see this; in my post about the district court ruling, "I fear the court may have cut some corners here."

What about 47 USC 230? eBay has used the immunity to defend its ad copy from non-IP claims to the extent the ads are rendered untrue by third parties (see the uncited Mazur case). The court does not directly address 230, but it would not be a fan of such a defense: “eBay did affirmatively advertise the goods sold through its site as Tiffany merchandise. The law requires us to hold eBay accountable for the words that it chose insofar as they misled or confused consumers.”

Then, the court takes another weird detour. eBay appears to be free to advertise that it vends legitimate Tiffany goods, but it can't mislead consumers into thinking that all Tiffany goods on eBay are legitimate. How is eBay supposed to strike that balance? The court says: “An online advertiser such as eBay need not cease its advertisements for a kind of goods only because it knows that not all of those goods are authentic. A disclaimer might suffice. But the law prohibits an advertisement that implies that all of the goods offered on a defendant's website are genuine when in fact, as here, a sizeable proportion of them are not.”

Wait a minute. What kind of disclaimer is the court thinking of here? Maybe "Please come to eBay for Tiffany goods. Disclaimer: we have lots of fakes on our site." Putting aside the implications for eBay’s scienter, how is eBay supposed to fit such a disclaimer into the tight space constraints of an AdWords ad? This reminds me a little of the FDA's threats that it expected pharma companies to make side effects disclosures in AdWords copy...NOT POSSIBLE.

And what constitutes a "sizeable proportion"? The parties did not agree on the exact amount of counterfeiting taking place, and Tiffany's expert report was partially discredited by the trial judge. Does this mean we're back to taking snapshots of infringing activity and arbitrarily picking a percentage as too high? I thought we got past that with the Grokster Supreme Court opinion.

Rebecca has useful things to say about the false advertising discussion.

Implications of this Ruling

Between this ruling and the Akanoc ruling (and perhaps the Google ECJ opinion, if you look internationally), I think it's pretty clear now that trademarks are subject to a notice-and-takedown rule. We don't have a DMTA to complement the DMCA's notice-and-takedown procedure, and perhaps we would benefit from some statutory clarity about the precise mechanics/specifications of the notice and takedown. But even without a DMTA, I think we've arrived at the same basic place. From my perspective, this is not inherently good or bad. I guess I've always thought we'd get here eventually.

I continue to believe that courts reward service providers who do more than statutorily required for IP owners. For example, in FN 16, the court favorably notes that “eBay's efforts to combat counterfeiting far exceeded the efforts made by the defendants in” the flea market cases. I continue to encounter pockets of folks who believe that undertaking any voluntary efforts above the minimum makes the site a guarantor against bad activity. I think that's very outdated thinking. When I asked above what eBay did right to avoid being willfully blind, the answer is that they were proactive about working with IP owners. This case shows that those good faith efforts can be rewarded in court. UPDATE: Greg Lastowka explores this point more.

Having said that, I remain concerned that efforts to cater to IP owners' concerns can create a competitive barrier to entry. Not every site is sufficiently capitalized to undertake the same efforts as eBay. I hope courts will be circumspect about letting the law effectively reduce service provider competition from new entrants.

It remains to be seen what result this ruling will have on the keyword advertising cases. Through its broad reading of nominative use, it's possible the Second Circuit implicitly undercut some of the lawsuits against Google.

Finally, junky false advertising claims are so ubiquitous that we often don't give them much respect. However, here's a good example where the false advertising claim was more potent than the trademark claim. I believe false advertising will remain a hot area of legal practice.

Posted by Eric at 02:02 PM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack

March 29, 2010

Unregulating Online Harassment Essay

By Eric Goldman

I posted a very short essay to SSRN called Unregulating Online Harassment. This essay recaps and expands some of my remarks from the Denver University “Cyber Civil Rights” Symposium last November. I previously posted a lengthy recap of the conference.

The essay provides a high-level defense of 47 USC 230--in its current form and without any embellishments--as a response to the way the immunity rankles many advocates against online harassment. If you can believe it--and it may be hard to do so given how many times I've blogged about 47 USC 230 cases--this brief-'n'-breezy essay is actually the first time I have written about 47 USC 230 in the (quasi-)academic literature. The publication specs make the essay almost embarrassingly glib as a contribution to the academic discourse; it's only about 1,000 words and has almost no footnotes, so it's neither industrial-grade nor the final word on this topic. However, I find that people are more likely to read short academic works than the big battleship pieces, so perhaps a piece like this has a place in the academic canon despite its format limitations. I promise a different but more industrial-grade academic defense of 230 when I get around to writing up my regulating reputational systems research.

Adam Thierer and Berin Szoka of PFF posted a response to the essay, praising 230 as "the very cornerstone of Internet Freedom, since it makes possible an online 'utopia for utopias.'" My favorite part of their post (other than the link love, of course!) is a BCG-like four-quadrant matrix of pressures to deputize online intermediaries to intervene on third party content.

Posted by Eric at 09:40 AM | Derivative Liability | TrackBack

March 26, 2010

YouTube Uploader Can't Sue Sender of Mistaken Takedown Notice--Cabell v. Zimmerman

By Eric Goldman

Cabell v. Zimmerman, 2010 WL 996007 (S.D.N.Y. Mar 12, 2010)

A few other folks have written about this case already, but it's worth noting a couple of points.

Cabell posted a video, Pretty Faces, to YouTube. Actors' Equity Association sent a takedown notice to YouTube for the video, which YouTube honored. After Cabell complained, AEA realized that it sent the takedown notice in error. Cabell then sued AEA for the bogus takedown notice.

Cabell argued that AEA's takedown notice constituted a copyright infringement because it interfered with Cabell's ability to exercise his 106 rights. For example, the notice caused YouTube to take down the video, which cut off Cabell's "distribution" of the work. I've never seen this argument advanced before, so in that sense it's creative, but unfortunately it's a completely misguided reading of copyright law. A defendant can't infringe copyright without making a copy, distribution, performance or display of the copyrighted work--and sending a bogus takedown does none of those things. So as much as I would be excited by finding a creative new theory to curb bogus takedown notices, this wasn't it.

Cabell's 512(f) claim failed because the AEA made a mistake--at most, negligently--rather than making the error with a legally actionable level of scienter. The state law claims were dismissed without prejudice to refiling in state court.

Two observations:

1) Cabell's situation is an example of collateral damage from our notice-and-takedown scheme. AEA made an error, YouTube jumped at AEA's request (as 512 expects it to do), and Cabell's legitimate content was temporarily stripped from the information ecosystem through no fault of his own. Obviously, every legal rule will create errors of omission and inclusion, so we shouldn't overweight this one--but this case reminds us that bogus takedown notices do have a cost. Perhaps the Lenz v. Universal case will help sharpen up the quantifiable costs to the uploader, but there's little chance that we can fully account for the social losses.

2) This is another example supporting YouTube's argument in the Viacom v. YouTube lawsuit that YouTube can't tell which user-posted videos are licensed or not because--once again--the rightsholder couldn't figure it out either. After confirming the error, the AEA representative wrote to YouTube: "The clips from Pretty face [sic] were submitted to me by someone claiming that it was done with Equity Actors; I took it on blind faith that the person was correct." If the AEA representative, who has unrestricted access to all of the necessary information to figure out what assets it has the right to enforce, can't even try to figure out if it's properly enforcing a copyright, how can YouTube accurately ferret out illegitimate videos with none of that information?

UPDATE: Ben Sheffner thinks Cabell did not assert a the 512(f) cause of action. I also agree that Cabell's lawsuit was an overreaction, but I'm less sympathetic to copyright owner errors than he is--especially in this case, where it appears the takedown notice sender did not do any investigation before sending the notice.

Posted by Eric at 10:43 AM | Copyright , Derivative Liability | TrackBack

March 23, 2010

Google Gets Favorable ECJ Opinion, But Will It Prove to Be a Hollow Victory?

By Eric Goldman

The European Court of Justice issued its long-anticipated decision in the three Google AdWords cases (C-236/08, C-237-08 and C-238/08) referred to it by the French Cour de Cassation. The ruling only answers the questions posed to it by the Cour de Cassation, so in that sense it does not provide a blanket resolution of keyword advertising legitimacy in Europe. Nevertheless, all three answers by the ECJ are favorable to Google and other keyword advertising vendors—although, as I explore below, litigatable questions remain.

In broad strokes, the ECJ adopted Google’s position that it merely provides technology services to advertisers who make legally significant judgments using the technology. For example, the ECJ says that advertisers, not Google, make the requisite trademark “use,” and Google can qualify as a web host of its advertisers’ content—and thus is eligible for the associated safe harbor—if it remains sufficiently passive.

While these rulings improve Google’s legal position against trademark owners, the news isn’t uniformly good for the keyword advertising industry. The opinion identifies a number of potential legal pitfalls for keyword advertisers. We may learn more about these pitfalls from the other trademark owner-v.-advertiser cases pending before the ECJ. My understanding is that 5 such cases are pending, with one ruling coming on Thursday. Based on the language in this opinion, I think it’s probable that the subsequent ECJ rulings will show that keyword advertisers face significant legal exposure when buying competitive keyword advertising.

As a result, Google’s legal victory may prove to be a little hollow. Even if Google eventually earns a clean bill of health for itself, it could still see revenue contraction if advertisers are dissuaded by their legal exposure.

The ECJ Rulings

As typical with European legal opinions, this ruling (although briefer than many, including the Advocate General’s advisory opinion in the case) was unnecessarily long and written in inscrutable language. For example, the opinion refers to search engines selling keyword advertising as “referencing service providers” and keywords as “signs.” Huh? Further, like most European opinions, the opinion starts out with a lengthy but largely unenlightening recitation of facts and law. If you are looking to save a little time, skip ahead to paragraph 42.

Or, better yet, just start reading the opinion at the end. There, the court helpfully lays out its conclusions in three standalone paragraphs:

1. Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.

2. An internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign within the meaning of Article 5(1) and (2) of Directive 89/104 or of Article 9(1) of Regulation No 40/94.

3. Article 14 of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) must be interpreted as meaning that the rule laid down therein applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned.

A closer look at each of the three holdings.

Holding #1: Keyword Ad Copy Must Sufficiently Distinguish the Trademark Owner

This holding does not directly address Google’s liability; it only references the advertiser’s liability. The EU generally lacks a well-developed doctrine of secondary trademark liability. Therefore, even if an advertiser’s ad is problematic, that may not be imputable to the keyword vendor. (I discuss advertiser liability below).

In several places, the court’s language reinforces that keyword advertising systems do not create independent liability for their vendors. For example, in paras. 56-57, the court says that a “referencing service provider allows its clients to use signs which are identical with, or similar to, trade marks, without itself using those signs….The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign.”

Further, in paras. 94-95, the fact that other advertisers’ bids may increase the trademark owner’s price to display ads triggered by its own trademark (and Google’s consideration of ad quality) does not “constitute an adverse effect on the advertising function of the trade mark.” The court goes on to say (paras. 97-98):

when internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list. That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’. Having regard to those facts, it must be concluded that use of a sign identical with another person’s trade mark in a referencing service such as that at issue in the cases in the main proceedings is not liable to have an adverse effect on the advertising function of the trade mark.

As every SEO knows, nothing is “guaranteed” when it comes to search engine placement. Trademark owners usually show up well in organic search results for their trademark, but Google may have de-indexed or downgraded the trademark owner’s website. Further, personalized search results and universal search results can cause unexpected orderings. What happens to the court’s reasoning when the trademark owner doesn’t show up prominently in the organic results?

Holding #2: Search Engines Don’t Make a Legally Recognized “Use” of the Trademarks

In the Second Circuit ruling in Rescuecom v. Google, which held that Google made a “use in commerce” by selling trademarked keywords for keyword advertising. After that ruling, it was pretty clear that both buying and selling trademarked keywords constituted a “use in commerce” under US trademark law, shifting the litigation battle to likelihood of consumer confusion and the defenses.

Here, the court reaches the superficially opposite result, saying that advertisers, not Google, make the legally actionable “use in the course of trade.” These divergent results may just reflect differences in the statutory wording. Nevertheless, for enthusiasts of the “use in commerce” doctrine, its spirit apparently lives on in Europe!

Holding #3: Keyword Vending Can Qualify for E-commerce Directive

This was a doctrinally interesting conclusion. The E-commerce Directive was inspired by the Digital Millennium Copyright Act online safe harbors (17 USC 512), so it was oriented towards online copyright issues. For example, it has a safe harbor for caching that really only makes sense in the copyright context.

Here, the ECJ applies the E-commerce Directive to a trademark dispute, effectively treating Google as the web host of the advertiser’s ad content. While this is a promising interpretation, it leaves open some ambiguity about what will constitute disqualifying activity. The opinion makes it fairly clear that Google would have an “active role”—and therefore become disqualified for the safe harbor—if it helps the advertiser prepare the ad copy. However, Google can participate in its advertising campaigns in a variety of ways, such as suggesting bid amounts and keywords to purchase (through its keyword suggestion tool). Will these other participatory activities constitute a disqualifying “active role”?

Liability of Keyword Advertisers

The opinion highlights several potential liability risks for keyword advertisers. First, the opinion says that keyword advertisers can’t avoid liability by indicating that their products are “imitations” or “copies” in the ad copy. (Paragraph 102).

Second, regarding Holding #1, the opinion (paras. 83-85) raises concerns about ads triggered by keywords identical to a trademark where “normally informed and reasonably attentive internet users” cannot easily determine if the advertised goods originate with the trademark owner.

The precise wording of Holding #1 limits its applicability to a keyword that is identical to the trademark and to goods that are identical to the trademark owner’s goods. By inference, the language does not govern keywords that are similar to the trademark (does it exclude typographical error versions?) or goods such as complementary goods or replacement components. In addition, the standard seems to limit trademark coverage by class of goods—something that can be ambiguous when a single keyword is the trademark of multiple trademark owners in different classes. However, given the wording of the answer, I do not assume that these unaddressed circumstances will be found permissible when tested in future cases.

In the situations described in the holding, “the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark.” The court says that national courts have the power to adjudicate whether that source confusion actually occurred (para. 88), but the following ads appear to be presumptively problematic:

* “where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark” (para. 89).

* “where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor” (para. 90).

If this language is intended to cover ad copy that constitutes bait-and-switch or passing off, this language isn’t a big deal. However, this language appears to be broader, and I’m not entirely clear what advertisers can do to avoid these risks. A typical text ad has very limited space for subtle legal explanations, and Google’s trademark policies allow the trademark owner to prohibit the advertiser from referencing the trademark in the ad copy even for clarification purposes. For example, an advertiser purchasing the “smith” trademark as a keyword can be blocked from saying “compare our products to smith’s” in the ad copy. If the ad copy says “switch to us” or “we’re better than other brands,” will those types of implicit comparisons be enough to eliminate the ambiguity feared by the court? At minimum, the court’s language leaves plenty of room for trademark owner-vs.-advertiser lawsuits asserting ambiguous ad copy. Perhaps the pending ECJ AdWords cases will provide some further clarity.

What’s Next

I find EU governance structures generally baffling, so it’s impossible to anticipate all of the possible implications of this ruling. However, trademark owners steamed about this ruling have a wide range of options, including the following:

* they could seek a new directive, or seek to modify an existing directive, to expand keyword advertising vendor liability.
* to the extent possible (something I can’t easily evaluate), they can seek legislative changes at the national level to get back some of the ground lost in this ruling.
* they can continue to litigate the interstices of this ruling. For example, they can try to disqualify Google from the E-commerce Directive’s safe harbor by arguing that Google plays an active role in its advertisers’ decisions.
* they can seek to expand advertiser liability through any of these methods.
* they can litigate against advertisers one-by-one.
* as always, they can continue to send takedown notices or avail themselves of the search engine trademark policies.

Other good options may exist.

From Google’s perspective, I wonder if this opinion gives it enough comfort to liberalize its European trademark policy to match the rest of the world (i.e., allow trademark owners to block only certain ad copy references and not keyword purchases). For example, to retain its eligibility for the E-commerce Directive, Google still needs to follow a notice-and-takedown regime, although I wasn’t clear if Google’s takedown can just be the ad copy or has to be the keyword as well. Google did liberalized its UK and Ireland trademark policy after the Mr. Spicy ruling, which also concluded that Google did not make a legally actionable “use,” so perhaps Google will feel emboldened by Holding #2.

What Google SHOULD do is take a more proactive stance on the legality of the keyword advertising industry. It should propose legislation that protects both itself and its advertisers. It should also intervene in some of the trademark owner-vs.-advertiser cases that have the potential to establish disadvantageous legal rules for its advertisers. Google has been remarkably passive in terms of legal developments, playing defense only when threatened. I believe this is not a long-term winning strategy. Cf. the Battle of Hastings and how a determined and powerful opponent can eventually breach a shield wall. Google currently has to defend a wide array of battlegrounds, and a loss in any one of those venues could materially diminish its earning potential. To ensure the long-term viability of the keyword advertising industry, Google may need to go on the offense.

I don’t expect that this opinion will affect any US legal developments. For the most part, the opinion interprets governing EU directives and regulations. Because the words in those statutes are not the same as the words we use in the US, the opinion is not readily exportable to US law.

Nevertheless, this opinion could be the vanguard of an emerging legal trend to put the trademark compliance legal burden on keyword advertisers and not keyword vendors. We have not yet reached that conclusion in the United States, but it’s entirely sensible to me that the keyword vendors should not be trademark arbiters, and my hope is that US judges will get there eventually. For more on why I believe we should deregulate keyword ad sales, see this article.

Posted by Eric at 10:25 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 22, 2010

Search Engine Legal Developments to Watch in 2010

By Eric Goldman

I recently spoke on a panel about search engines and the law at SMX West. I previewed four major trends in search engine law to watch in 2010:

1) Competition issues. Antitrust/competition law has become a big part of the search engine industry. There are two main flash points: Google’s high percentage of the search advertising business and Google’s black box algorithm for organic search results. Both facets are troubling to competitors and regulators, but they are creating extra friction with “vertical search engines” that portray themselves as competition for Google.

Recent antitrust/competition battles:

* Google-DoubleClick acquisition scrutiny
* Google-Yahoo search syndication deal killed by DOJ
* >a href="http://blog.ericgoldman.org/archives/2009/07/microsoftyahoo.htm">Microsoft-Yahoo deal
* DOJ and Microsoft opposition to Google Book Search settlement
* Person, KinderStart and Langdon civil lawsuits against Google

Present battles:

a) EU complaints from a UK price comparison site, Foundem, a French legal search engine called ejustice.fr, and Microsoft's Ciao! from Bing. Wired: “Google says the companies accuse it of wielding its dominance as a search engine to squelch competition by preventing people from finding their vertical search engines.”

b) US actions: TradeComet and myTriggers. Do these lawsuits have Microsoft ties? In a blog post “Competition Authorities and Search,” Microsoft came out of the closet and admitted it was harassing Google on antitrust issues.

The underlying battle: who should decide what content and ads that searchers see? Two main options: search engines or regulators. Seems like an easy call to me. See my Search Engine Bias article. An under-addressed issue: the role of 47 USC 230(c)(2) in search engines' filtering decisions.

2) keyword advertising lawsuits against Google. 8 lawsuits are pending. The Rosetta Stone case scheduled for trial in May. There are no known US legislative initiatives, especially now that the Utah legislature has adjourned for the year. We are all anxiously awaiting the issuance of the ECJ opinion tomorrow at 1:30 am CA time (I'll blog it as fast as I can).

3) Search engines and copyright. Pending US cases include Viacom v. YouTube, Perfect 10 v. Google and the Google Book Search settlement. Plus, Google's tussles with AP, News Corp. and other news organizations.

4) Search engine compliance with foreign laws, including the Google-China flap and the Google Videos conviction in Italy. This has stirred the pot in Congress again. The latest: Sen. Durbin’s is threatening to force Web companies to join the Global Network Initiative and stop dealing with repressive regimes…which is a resurrection of Chris Smith’s Global Online Freedom Act. Hypocrisy alert! In light of point #1, will the US itself be put on the list of repressive regimes? Plus, as we’ve seen, Google’s single-handed efforts to take down the Chinese government haven’t worked so well.

Posted by Eric at 10:15 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Search Engines , Trademark | TrackBack

March 20, 2010

Another Bad Ruling in Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 5:07-cv-03952-JW (N.D. Cal. March 19, 2010)

I have not seen a definitive statement of facts in this case, so synthesizing various cryptic statements by the court, here's my understanding of the situation. Akanoc is a US-based web host primarily servicing Chinese customers. Some of those Chinese customers advertise and sell counterfeit goods, including counterfeits of Louis Vuitton, to a US and global consumer base. Louis Vuitton sent copyright and trademark takedown notices to Akanoc, some of which Akanoc ignored. Louis Vuitton sued Akanoc for direct and secondary copyright and trademark infringement. In Dec. 2008, the judge denied Akanoc's dismissal motion, sending the case to a jury trial. In Aug. 2009, the jury tagged the defendants with a $32M+ judgment.

In the latest ruling, Louis Vuitton requests a permanent injunction and Akanoc tries to salvage what it can from the jury loss through various JMOLs. The result is an omnibus ruling that has zero good news for web host defendants. Some "high"lights:

* posting photos of counterfeit goods constitutes direct copyright infringement

* web users who browsed those photos of counterfeit goods did not make a fair use by browsing (FN 9)

* it's not a defense to contributory copyright infringement that the direct infringers were overseas and thus not subject to the court's personal jurisdiction (FN 10) (this seems right to me)

* web hosts made a material contribution to copyright infringement when they (1) "provided servers with data storage, routers, and data bandwidth to the websites," (2) "continued to host those websites despite receiving notice from Plaintiff of particular websites that engaged in such conduct, and (3) "rarely used several of the tools at his disposal to punish or deter the operation of the counterfeiting websites on Defendants’ servers."

* the defendants didn't designate a 512 agent for notice until 4 months after the case was filed, so they could not claim 512 protection before that time (why did they wait so long?)

* the 512 safe harbors also didn't apply because "evidence that Defendants had reasonably implemented a policy to terminate repeat infringers was limited, at best. For example, Defendant Chen, the designated agent for Defendants, testified that he did not understand the DMCA’s requirements as to maintaining or implementing the required policy....Other evidence indicated that Defendants had not terminated certain repeat offenders."

* the web host had the requisite control over the direct trademark infringers to support contributory trademark infringement when "Defendants had numerous tools at their disposal for monitoring their servers and terminating abusive users. For example, Defendants had the ability to suspend a particular user, disable IP addresses used by a particular website or, if necessary, unplug a server that contained the data for a particular website."

* it's become vogue to challenge copyright statutory damages on constitutional grounds, but this court rejects a due process challenge against both copyright and trademark statutory damages. A Gore challenge to the ratio of actual to "punitive" damages was inapplicable to statutory damages. (FN 25)

* the defendant's sole officer was personally liable for the infringements because he "had nearly complete control over Defendants’ operations. He was the general manager and sole owner of the corporate Defendants....He also held the principal decision-making authority as to responding to infringement notices, and he instructed his part-time employee regarding how to respond to such notices....Moreover, he was the designated agent under the DMCA for receiving infringement notices and decided whether or not to terminate offending customers." Does this ruling imply that the person designated as the 512 agent for notice has an increased risk of personal liability...?

Stepping back from the details, I can see why the defendants lost. There appears to be a fair amount of evidence that the web host provided services to counterfeiters and didn't deploy state-of-the-art risk management techniques, such as a proper 512 designation of an agent for notice. More importantly, the web host appeared not to respond to takedown requests in an industry-standard fashion. Finally, the defendants made some bizarre legal arguments that superficially appeared doomed, such as the repeated assertions of extraterritoriality issues when a US-based web host was being sued in a US court for violations of US law. For these reasons, I sincerely hope the defendants don't appeal this case to the Ninth Circuit. That could end up doing a lot of long-term harm to Cyberlaw doctrines.

Despite this, I remain troubled by the implications of this case for all web hosts. For example, this case's legal standard for contributory trademark infringement leaves all web hosts at some risk. At minimum, it seems to confirm a common law notice-and-takedown regime for online trademark complaints. (This is reinforced by the injunction, which codifies a notice-and-takedown system for injunction violations). After this case, I think all web hosts will need to be quick on the trigger when they get trademark takedown notices.

I was also deeply troubled by the court's extension of personal liability to the 512 designated agent for notice. What sucker will agree to be a 512 agent in the future?

Posted by Eric at 01:25 PM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

March 18, 2010

Viacom v. YouTube Summary Judgment Motions Highlights

By Eric Goldman

Who doesn’t enjoy a good old-fashioned mud-slingin' showdown? That’s exactly what we’ve got on our hands in the dueling summary judgment motions from Viacom and YouTube in the long-running copyright infringement case (see my initial post from March 2007). While we might have some voyeuristic fun watching the sparks, the latest salvos prove that the parties are both losers for not finding a way to settle this case. Only the lawyers win when two heavyweight contenders get locked into a cosmic death struggle. Everyone else would be better off if Viacom and YouTube instead had poured their millions of dollars of legal fees towards developing innovative and profitable ways to serve consumers’ interests. It’s ridiculous that they can’t find a way to do this.

Combined together, the filings tell a “Tale of Two YouTubes.” Viacom focuses on YouTube of Yore, circa 2005-06, while YouTube’s brief largely focuses on YouTube of Now. In that sense, the briefs largely talked past each other.

By focusing on the past, however, it shows that time is slowly working against Viacom in two ways. First, the legal precedent since Viacom’s filing has been largely YouTube-favorable. The three Veoh opinions (Io v. Veoh, UMG v. Veoh 1, and UMG v. Veoh 2) have filled in some key legal gaps that existed at the time of Viacom’s filing. While the Veoh cases aren’t binding on the judge, this judge now can follow in someone else’s footsteps rather than trail-blaze. Viacom does cite the Columbia v. Fung case, which helps its cause some, but I think YouTube gets the better of that exchange.

Perhaps more importantly, the intervening time has been good to YouTube as a business and as a brand. In this sense, compare Grokster to YouTube. At the time of the Grokster cases, it was still very much an open question whether Grokster would ever evolve into a tool where legitimate activity dominated. While we might still have had that same question about YouTube in 2006, by 2010 YouTube has answered that question resoundingly. YouTube’s business practices have matured, everyone has had positive legitimate experiences with YouTube (even behind-the-curve judges), and it’s clear that major legitimate players have adopted YouTube as a platform for their legitimate activities. For example, YouTube’s brief makes the point that all of the 2008 presidential candidates published YouTube videos as part of their campaign. I’m guessing no 2004 presidential candidates used Grokster for campaign purposes.

So as time goes on, YouTube solidifies a brand as a legitimate part of our information infrastructure. As we learn that the YouTube story has a happy ending, I suspect judges become less interested in punishing YouTube for past practices. For this reason (and others), I thought a lot of Viacom’s inducement arguments ran hollow because they ran counter to my brand impressions of YouTube. I would also note that Viacom appears to be giving up its litigation over activity after May 2008, so even Viacom seems to be happy with YouTube in its current form.

This raises an interesting legal point that I can’t resolve. Let’s assume for sake of argument that Viacom is right that YouTube induced infringement in 2005-06. Let’s also assume that no one is arguing that YouTube currently induces infringement (after all, Viacom isn’t contesting post-May 2008 activity). How do we determine when YouTube flipped the switch from inducing to not? And does flipping the switch cure any of the past infringement, or does it only cut off future claims? Because we have so few cases of inducement, we really don’t know how the doctrine works with a site that morphs over time.

I thought both YouTube and Viacom scored points against each other in the briefs. I’ll summarize some of those points below, but first I want to highlight a few standout points for both parties:

In YouTube’s case, I could not get over that Viacom has TWICE withdrawn clips from its complaint. I thought the first time Viacom did that was embarrassing and damaging to Viacom’s case, but then Viacom admitted that it didn’t catch all of its errors on the first withdrawal and therefore had to make a second withdrawal of clips. WTF? How hard it is for Viacom to accurately determine which clips it has not permitted to show on YouTube? Whether it intended to or not, Viacom has answered that question to its detriment: hard enough that an entire brigade of extremely expensive lawyers obligated to do factual investigations by Rule 11 can’t get the facts right the first OR SECOND time. For me, this undercuts Viacom’s credibility to its core. Rather than YouTube simply making intuition-based arguments to the judge that it’s really hard to figure out legitimate vs. illegitimate clips, Viacom’s failings have proven to the judge that it’s too hard—too hard for lawyers charging upwards of $1k an hour despite having unrestricted access to accurate information in their clients’ possession, and clearly too hard for YouTube’s slightly-above-minimum-wage customer support representatives with no such information advantages.

YouTube also scored points for its descriptions of Viacom’s stealth marketing practices. Although these facts only help YouTube’s legal posture a little, the lawsuit’s discovery process has unveiled some non-public information about Viacom’s practices that should be interesting to the FTC and state attorney generals. Viacom’s alleged stealth marketing practices are aggressive—close to the permissible line, if not over it. As a result, they might be exactly the kind of consumer misdirection and inauthentic online content that the FTC has been railing against, and we know the FTC is looking for test cases in this area. So, a lawsuit that began as Viacom v. YouTube might morph into FTC v. Viacom. This is one of the known risks of picking a fight—once started, you can’t control where it goes.

From Viacom’s brief, two references really stood out. First, Viacom found an email where Google employees characterized YouTube (pre-acquisition) as a “video Grokster.” Viacom argues that YouTube was like Grokster factually and therefore should be treated like Grokster legally. The Google email admits (in the lay sense, not the legal sense) this factual equivalence. Google can legally discredit the email's importance, but it can’t easily avoid talking out of both sides of its mouth.

Second, I was struck by the fact that Chad Hurley lost his entire email repository. I’ve had that happen to me too, so that fact standing alone isn’t damning. However, the brief goes on to say that when he was grilled about his co-founder’s email stash, Hurley developed “serial amnesia.” The combination did make me wonder about this situation.

As I read the brief, I made some brief notes about points of particular interest. Those notes:

YouTube’s Summary Judgment Motion

I thought both briefs were well-written and generally effective. However, the YouTube brief successfully struck a conversational tone—a nice balance between formality and accessibility.

[note: my references are to the PDF’s page numbering, not the brief’s page number at the page bottom]

PDF Page 21: Viacom sent a bulk takedown request covering about 100,000 clips on February 2, 2007, but this purge didn’t reduce YouTube traffic or increase Viacom’s traffic.

PDF Page 24: plaintiffs are suing over at least one clip of 1 second. 1 second???

PDF page 34: YouTube has terminated 400,000+ user accounts for infringement out of its 250M accounts. Although that’s a low percentage, that’s a surprisingly high absolute number.

PDF page 40 (FN 9): some litigated clips never got a takedown notice at all.

PDF page 45: YouTube says it did lacked “red flags” knowledge of infringing activity because, in some cases, the copyrights were obscure.

PDF page 47: No red flags because copyright owners routinely voluntarily upload lots of copyrighted material to YouTube, and copyright owners try to cover their tracks. Copyright owners do this because YouTube marketing works. Copyright owners’ embrace of “viral marketing”/“stealth marketing” eliminates any potential red flags.

PDF page 49-50: Details of Viacom’s stealth marketing efforts:
* It uses an “army” of third party marketing agents (at least 18 firms)
* Account names don’t indicate a Viacom relationship
* Email addresses aren’t linked to Viacom
* Clips are deliberately uploaded from networks not tied to Viacom, such as Kinko’s
* Clips are deliberately altered videos to make them look stolen. I thought this was the most damning fact. It’s disingenuous to rail against piracy and yet try to take advantage of the marketing benefits of seemingly unauthorized copying.

PDF page 50: Viacom has released clips with the intent that users spread them virally.

PDF page 53: Viacom has a deliberate and complex strategy for leaving up clips. This part of the brief was confusing so I didn’t fully follow the timeline. Here’s what I understood about Viacom’s “leave-up” policy. Through Oct. 2006: leave up clips less than 5 minutes. Oct 2006: Viacom tells BayTSP to leave up all clips shorter than 2.5 minutes [or is it 3 minutes?]. Then, Viacom expanded the leave-up policy to include every clip shorter than a full episode; and in some cases, even full episodes were expressly left up.

PDF page 54-55: Viacom found 316 clips of South Park and took down only 1.

PDF page 56: “If Viacom deliberately refrained from sending takedown notices for certain videos, how could it be that YouTube was obligated to remove those same videos on sight—without any request from Viacom?”

PDF page 59-60: No red flags because some copyright owners granted licenses that permitted YouTube uploading. Also, some clips may be subject to joint ownership, and YouTube can’t tell if one of the joint owners had consented.

PDF page 61: no red flags because of fair use/de minimis use. I was surprised that the Lenz case wasn’t explored.

PDF page 73: Viacom had complex whitelists of YouTube accounts that wouldn’t be challenged.

PDF page 75: Viacom sued over clips it had authorized for posting.

PDF page 99: less than 1% of YouTube clips have been subject to a takedown notice. Again, I am surprised that this was appropriately rounded to 1%; I would have expected an even smaller fraction.

PDF page 105: Viacom spent over $1M advertising on YouTube from 2006-08. All of which (and more) YouTube has reinvested in its litigation against Viacom.

Viacom Summary Judgment Motion

PDF page 9 (FN 1): This was a confusing footnote, but a crucial one. It appears that Viacom is only interested in infringement pre-May 2008 (before YouTube deployed digital fingerprinting for Viacom). The way I read it, Viacom isn’t going to pursue any claims for activity post-May 2008. Thus, Viacom apparently is acquiescing to—or even happy with—YouTube’s current practices. Consistent with the Tale of Two YouTubes, Viacom reinforces that it’s really only interested in the past, not the present.

Viacom complains that it took too long for YouTube to deploy the digital fingerprinting for it. It says that YouTube withheld the tool as part of a quid-pro-quo to require content owners to sign a license and revenue share deal.

PDF page 14: YouTube founder Karim uploaded infringing content himself.

PDF page 14-15: YouTube was a junkie for traffic to infringing content—it wanted and needed the traffic. They felt they would lose 80% of their traffic if they did a crackdown of obviously infringing clips.

PDF page 17: YouTube tried and then removed the ability for every user to flag clips for copyright infringement. I personally think Viacom overemphasized this point. Service providers are trapped in a dilemma. If they do more screening than 512 requires, copyright owners say that evidences their right and ability to control (indeed, Viacom itself makes that argument in its brief). But if they don’t do more, copyright owners complain that they could have done more. Good grief. With respect to user flagging of copyright infringement, users are a terrible source of credible information about what constitutes copyright infringement (at least, when it’s not their works involved), so the user flagging tool inevitably would generate too many false positives. Requiring 512(c)(3) notices is a logical way to avoid the deluge of false positives.

PDF page 17: Dunton surveyed top clips on YouTube and thought 70%+ were copyrighted. Later, Dunton said 75-80% of clip views were from copyrighted content.

PDF page 19: Karim says in a board meeting that the site would benefit from preemptive takedowns of blatantly illegal content, but no changes were made.

PDF Page 22: pre-acquisition, a Google employee referred to YouTube as a “video Grokster” and a “rogue enabler of content theft.”

PDF Page 22: Google’s investment banker Credit Suisse reported to Google that 60%+ of YouTube’s views were of “premium” content, of which only 10% was authorized.

PDF Page 29-30: Hurley lost all of his emails, and Schmidt deletes all emails after he reads them (guess he doesn’t use Gmail’s “archive” feature). Hurley developed “serial amnesia” when confronted with Karim’s emails.

Posted by Eric at 04:08 PM | Copyright , Derivative Liability , Internet History | TrackBack

March 17, 2010

Regulating Reputational Systems Slides

By Eric Goldman

Last week, I presented my Regulating Reputational Systems talk to non-lawyers at the Jewish High Tech Community. My talk slides. I've been working on this topic now for about 18 months, and I'm finally getting closer to nailing down the arguments and writing up the papers. As you can see from the slides, I believe I have come up with an under-explored policy justification for 47 USC 230. As always, comments appreciated.

I will be giving slight variations of this talk four more times this semester:

* at the UC Berkeley School of Information on April 14, 4 pm.
* at the San Jose State School of Library and Information Science on May 11, noon. I believe this will be webcast, and I will post the details to my Twitter account.
* at Erasmus University in Rotterdam, Netherlands, on May 28.
* at the University of Amsterdam on June 1, noon.

If you would like to attend any of these event, please email me and I will provide details as they become set. If you are in the Netherlands and would like to visit professionally or socially on my trip, please email me.

Some previous versions of my reputation talk slides:

* DePaul Reputation Talk Slides (October 2009)
* George Mason Talk and Paper on Economics of Reputational Information (May 2009)
* Economics of Reputational Information Talks (Oct. 2008)
* Economics of Reputational Information Talk (Aug. 2008)

Posted by Eric at 09:07 AM | Derivative Liability , E-Commerce | TrackBack

March 16, 2010

Stratton Faxon v. Google Dismissed

By Eric Goldman

Stratton Faxon v. Google, Inc., NNH-CV-09-5031219S (Conn. Superior Ct. dismissed March 8, 2010)

Stratton Faxon v. Google was always an oddball case in the constellation of trademark owner challenges to Google AdWords. First, the plaintiff--a law firm that woke up one day in 2009 and discovered competitive keyword advertising--didn't allege trademark infringement but instead took an unusual and questionable legal path. Second, the case was filed in state court, not federal court, which made the case much more difficult to track than cases in federal court.

These oddities are now irrelevant. The court issued a "motion for judgment" on March 8 granting a motion brought by Google to dismiss the case. I haven't seen any of the underlying motions, but the net effect is that the case is closed.

However, the case may not be over. In my prior email exchanges with Stratton Faxon, they indicated that they may refile in federal court. So we'll see if this case resurrects itself.

Combined with Rescuecom giving up, Google has now whittled its pending AdWords challenges down to 8 pending cases. Furthermore, the Utah legislature has adjourned for the year without banning Google's cash cow again. In the world of Google's legal affairs, these two developments qualify as good news! Next stop: the ECJ's opinion addressing Google's trademark liability in the EU, expected one week from today.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* ~~Stratton Faxon v. Google~~
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 05:33 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 08, 2010

Crowdsourced Ads May Not Be Protected by 47 USC 230--Subway v. Quiznos

By Eric Goldman

Doctor's Associates, Inc. v. QIP Holders LLC, 2010 WL 669870 (D. Conn. Feb. 19, 2010). My prior post on this case.

As a long-time vegetarian (over a quarter-century), I find America's obsession with "more meat" competitions simultaneously amusing and repulsive. On my personal blog, I have routinely chronicled the "burger wars" between heartland restaurants trying to outdo each other by offering bigger and bigger burgers. As far as I know, the current high-water mark is the Beer Barrel Main Event Charity Burger, a 123 pound burger that includes 80 pounds of meat. See the photo. If you're one of those people who thinks a burger can never have too much meat, good luck working on that bad boy.

Today's post involves subway sandwiches instead of burgers, but it turns out that subway sandwich restaurants’ competition over claims of having more meat is no less stiff. Quiznos kicked off the war in 2006 by launching a "double meat" line of sandwiches. Quiznos ran two TV ads comparing the meat in its sandwiches to Subway's and set up a website soliciting individuals to make and submit their own comparative digital video ads. Subway was not amused and ultimately filed a seventh amended complaint (!) over Quiznos' ad campaigns. (What a patient judge).

The parties hotly contested every aspect of the litigation, and Rebecca does a thorough recap of the lengthy ruling. I'm going to focus on the court’s discussion of the crowdsourced video ads published on Quiznos' ad campaign website, which Quiznos defended on 47 USC 230 grounds.

Citing the MCW v. Badbusinessbureau case from 2004, the court says "the critical inquiry with respect to CDA immunity in this case is whether the Defendants merely published information provided by third parties or instead were actively responsible for the creation and development of disparaging representations about Subway contained in the contestant videos."

The MCW decision was questionable even at its time, but it's bizarre to see the court reach into history for this obscure, archaic, unpublished and geographically distant (it was a TX precedent being cited in a CT court) district court precedent. To do this, the court bypasses dozens of more recent—and more thoughtful—cases, including the multiple Ripoff Report cases that have expressly and implicitly rejected the MCW case. A more natural citation would have been the Roommates.com case, which also referenced legal distinctions between active/passive websites similar to the legal standard quoted above. However, if the court had followed Roommates.com, it almost certainly would have ruled for the defense, as Quiznos didn't require illegality or even channel users towards illegality. (Rebecca makes the same point). Therefore, I'm baffled how the court got to this legal standard citing this legal precedent.

Using this odd legal standard, the court says it's up to the jury to decide if Quiznos just exercised traditional editorial control or impermissibly "actively participated in creating or developing the third-party content submitted to the Contest website."

Unquestionably, sending this case to a jury is a 230 loss, but how bad is unclear. We'll never find out what the jury would do with the case because the parties promptly settled the case after this ruling. However, a plaintiff's ability to hold a case open through trial, rather than having it disposed of earlier in the proceedings, would itself represent a significant win for plaintiffs--it would mean plaintiffs can get discovery to fish for embarrassing facts, force the defense to incur lots of litigation costs, and get a chance to tell their sob story before a jury. (FWIW, I am not aware of any 230 case that has ever reached a jury—am I forgetting something?) Nevertheless, I think very few courts will follow this precedent given the plethora of more persuasive precedents and the fact that Quiznos' crowdsourced ads were just one part of Quiznos' larger allegedly false ad campaign. Therefore, I don't expect this 230 loss to spread to many other cases.

I also don't think this case shines much light on the legitimacy of crowdsourcing ads. There's no reason to believe that crowdsourced ads are per se problematic. At the same time, if the advertiser uses the ads offline, clearly the advertiser "adopts" the ad and takes full responsibility for its contents. If the advertiser only publishes the ad online, 230 might be available but the advertiser still might tread cautiously due to the FTC Endorsement and Testimonial Guidelines, which basically ignores 230 and holds advertisers liable for certain types of third party advertisements anyway. I think 230 may nullify this part of the FTC guidelines, but most advertisers would rather not tangle with the FTC to establish the deficiencies in the FTC's thinking. As a result, I expect most advertisers will vet most crowdsourced ads, even if they only publish them only, as if the advertiser is legally responsible for the ads and not protected by 230.

BTW, the Subway v. Quiznos lawsuit isn't the only litigation over subway restaurants' claims of double meat. In an apparently unrelated lawsuit, last month a class action suit was filed over Blimpie's "Super Stacked" sandwich for overclaiming that it had double meat.

I confess some schadenfreude when I see lawsuits against meat pushers for overhyping meat quantities. I would not shed a tear if the meat pushers lock up each other in litigation death struggles and sue each other to oblivion. Of course, consumers can facilitate that outcome by refusing to patronize vendors who "compete" with each other by encouraging us to overconsume the Earth's resources.

Posted by Eric at 07:16 AM | Derivative Liability , Marketing | TrackBack

March 05, 2010

Rescuecom Abandons Its Litigation Against Google

By Eric Goldman

Today, Rescuecom issued a press release declaring victory in its litigation against Google. But it's an odd definition of "victory" given that Rescuecom has apparently voluntarily abandoned its 6 year litigation effort without any new concessions from Google. The dismissal notice.

This development reminds me a lot of the American Blinds v. Google denouement, where American Blinds also simply gave up and dropped its multi-year lawsuit without any concessions from Google. Note to future plaintiffs: if you're going to threaten Google's $20B/year cash cow, chances are pretty good that they have the resources to outlast you.

Why did Rescuecom give up? According to Rescuecom's press release, "Google has recently confirmed to Rescuecom that it has removed Rescuecom’s trademark from its Keyword Suggestion Tool." That, plus the fact that Google blocks trademark references in ad copy, means that Rescuecom feels it has "obtained two of the three things we initially sought in our complaint against Google." And if two out of three is good enough for Meat Loaf, apparently it's good enough for Rescuecom. At minimum, having low standards makes it a lot easier to declare victory when you give up.

However, this explanation is pretty hollow. Although the press release treats Google's removal of Rescuecom from the keyword suggestion tool as a new development, it appears that Google made this change IN 2005. Wendy Davis reports:

[Rescuecom CEO] Milman says he only learned last week that Google had stopped suggesting Rescuecom as a keyword. "Who knows what would have happened if they had told us back in 2005 that they had taken our name out of their keyword tool?" he said.

Hmm...I think I know the answer to that question! Then again, if getting out of the keyword suggestion tool really was one of Rescuecom's Big Three objectives all along, maybe they might have asked Google about it in 2005...or 2006...or 2007...or, well, you get the point. Spin it however they want, it's hard for Rescuecom to look good while dropping a lawsuit based on a 5 year old fact.

Nevertheless, I'm interested in knowing more about this removal. Does Google have a way for trademark owners to "opt out" of having their trademarks in its keyword suggestion tool? I would expect that option to become very popular if it were well-known. If anyone has information about how trademark owners can make an election with Google, please share it.

Given the completely disingenuous nature of declaring victory based on getting out of the keyword suggestion tool, there may be a better--and more self-interested reason--for Rescuecom to give up. Rescuecom is defending a trademark lawsuit brought by Best Buy over Rescuecom's competitive AdWords purchases of the "geek squad" trademark. Rescuecom was caught in the duplicitous position of making plaintiff-side arguments against Google while making highly contradictory defense-side arguments against Best Buy. As a result, every positive step in its Google case had the potential to degrade its position in the Best Buy case. By abandoning the Google fight, Rescuecom avoids this difficult dilemma.

As an odd byproduct of this development, Google and Rescuecom are now aligned in advancing the arguments that competitive keyword advertising in AdWords is legitimate. Isn't there a passage in the Bible about the lion and the lamb lying down together?

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* ~~Rescuecom v. Google~~
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 10:45 AM | Derivative Liability , Search Engines , Trademark | TrackBack

Eighth Circuit: No Derivative Liability Under Iowa Spam Statute -- Kramer v. Bartok

[Post by Venkat]

Kramer v. Bartok, Case No. 08-3841 (8th Cir. Feb. 19, 2010) (scribd link).

The Eighth Circuit recently reversed an award of $236 million in damages against a spam defendant based on a theory of secondary liability. The court found that the clear language of the Iowa statute only allowed for the imposition of liability against the sender.

Background: Kramer sued defendants Bartok, Perez, and Brown after allegedly receiving millions of spam emails advertising mortgage refinancing services. Kramer asserted claims, including claims under the Iowa's spam statute (then Iowa Chapter Code 714E, which while the suit was pending was replaced with Iowa Chapter Code 716A (which looks fairly different, and does not contain the term "initiate")), the Computer Fraud and Abuse Act, and trespass. According the Eighth Circuit, Kramer (who ran an ISP) actually only received twenty three offending emails, as the remaining millions of emails were blocked by Kramer's spam filter. Defendants produced no evidence at trial, and the lower court found that one of the defendants "dissembled" and sold the computers used by the enterprise. Kramer did not produce evidence that defendant Bartok actually sent the messages in question. The only evidence of Bartok's involvement was that she was "half owner of a business whose sole source of income was predicated on spamming," she signed an agreement for the procurement of mortgage leads, and she assisted Perez in destroying some of the relevant records in question.

The lower court found that Kramer produced no evidence of "actual damages," and rejected all of the claims except for the claims under Iowa's spam statute. With respect to this claim the court awarded $236 million in statutory damages ($10 per spam email).

The Eighth Circuit's ruling: The Eighth Circuit looked to the plain language of the statute and found that the statute only imposed liability on those who "use an interactive computer service to initiate the sending of bulk electronic mail." In other words, the statute was clear that it only imposed liability on someone who actually hit the send button.

Kramer argued that he had produced sufficient evidence of a civil conspiracy between Bartok and the other defendants to sustain a finding of derivative liability, but the court rejected this theory. In the court's view, if the statute didn't authorize the imposition of liability on those who conspired with the person(s) who initiated transmission of the messages (through the use of an interactive computer service), the court was not free to imply a cause of action based on this theory. While Kramer argued a common law conspiracy claim, the court found that Kramer's failure to produce evidence of actual damages precluded the imposition of derivative liability on Bartok. To allow Kramer to assert liability against Bartok based on a conspiracy theory absent evidence of actual damages would be an end-run around the statute's limited focus on those who actually sent the offending messages.

My thoughts: Derivative liability regarding spam and other types of advertising is a favorite topic of Professor Goldman's. I agree that absent clear standards, liability can move up the chain to advertisers and service providers, and this can cause obvious problems.

Here, the court interpreted a statute which by its terms only imposed liability on the person who initiated the transmission of the messages, so the court's conclusion isn't particularly surprising. The fact that the plaintiff in this case only produced 23 emails and was awarded a whopping $236 million in damages (despite having failed to put forth evidence of actual damages) was probably not lost on the court either.

How does this relate to CAN-SPAM: In the context of CAN-SPAM, the standards are slightly different. CAN-SPAM imposes liability on those who "initiate" or "procure" the initiation of noncompliant messages. "Initiate" is defined as "to originate or transmit [messages] or to procure the origination or transmission of [messages] . . . ." "Procure" is defined as "intentionally, to pay or provide other consideration to, or induce, another person to initiate [messages] on one's behalf." Where a civil claim is brought by an ISP, the term procure contains an actual knowledge or a conscious avoidance limitation. (section 7706(g)(2)) CAN-SPAM thus allows for the imposition of derivative liability, but makes it more difficult when the ISP is the one enforcing.

How have CAN-SPAM plaintiffs fared when they sought to impose this type of liability? Not very well. I haven’t done an exhaustive tally, but on the civil side there have been several defense wins (Hypertouch v. Kennedy Western, Asis Internet v. Optin Global, Fenn v. Redmond Venture). On the affiliate liability issue, these cases are typically resolved in favor of defendants on the basis that defendants were not (and had no reason to be) aware of the underlying violations. With respect to enforcement efforts by the FTC, the FTC lost a jury trial (Impulse Media), settled one case after the court found that affiliate liability is a question of fact (Cyberheat), and obtained a conviction (US v. Kilbride). (Oddly, after losing the jury trial in the Impulse Media case, the FTC sought to obtain injunctive relief against Impulse Media. The court denied this request.) Overall, the case law is largely defense favorable. Although CAN-SPAM allows for derivative liability, courts and juries have not been quick to impose it.

Related posts: "Affiliate Liability Talk Notes From SMX West"

Posted by Venkat at 09:15 AM | Derivative Liability , Marketing , Spam

March 04, 2010

Google Dismisses Some Claims in Jurin v. Google and Gets Some Attorneys' Fees

By Eric Goldman

Jurin v. Google, Inc., 2010 U.S. Dist. LEXIS 18208 (E.D. Cal. March 1, 2010)

Jurin v. Google is one of the 10 outstanding trademark-based claims against Google's AdWords programs--in this case, over advertiser purchases of Jurin's trademark "styrotrim." This particular lawsuit took a sizable hit, as Google successfully got a quick dismissal of several claims. As an added perk, the judge awarded Google $6k in legal fees for harassing litigation behavior.

The court dismisses Jurin's Lanham Act false designation of origin claim because Google never represents that it produces Styrotrim. The court says "Even if one accept as true the allegation that a 'Sponsored link' might confuse a consumer, it is hardly likely that with several different sponsored links appearing on a page that a consumer might believe each one is the true 'producer' or 'origin' of the Styrotrim product." This conclusion is consistent with the uncited Heartbrand Beef v. Lobel's case.

The court dismisses the Lanham Act false advertising claim because Google isn't a competitor of Styrotrim.

The court then dismisses a host of claims (Negligent Interference with Contractual Relations and Prospective Economic Advantage, Intentional Interference with Contractual Relations and Prospective Economic Advantage and Unjust Enrichment) on 47 USC 230 grounds. Jurin argued that Google creates content through its keyword selection tool. The court rejects this, saying that Google is just a provider of advertising space and the keyword selection tool "merely helps third parties to refine their content"--an editorial process protected by 230. The court also says that Google just provides "neutral tools" and "Defendant’s Adwords program simply allows competitors to post their digital fliers where they might be most readily received in the cyber-marketplace."

This is an interesting ruling on at least two fronts. First, I can't recall another conclusion that Google's keyword selection tool is covered by 230 (there may be others, I just can't think of them). Google's keyword selection tool has been problematic because some judges interpret it as Google steering advertisers towards third party trademarks for its own profit (see, e.g., the problems it caused in the Rescuecom case). Here, Google gets a nice judicial affirmation of the tool.

Second, the court echoes Google's mantra that it doesn't sell "keywords" but it just sells "advertising space." I have been to countless dog-and-ponies where Google lawyers have made this pitch to the audience, and it's consistently fallen flat IMO. It may be technically true that Google sells ad space and not keywords, but the reality is that Google takes money for keywords, and I think most judges would embrace substance over form. But in this case, the judge parrots Google's arguments nicely. Again my memory could be failing, but I think this is the first time a court has referenced Google as a space seller rather than a keyword seller.

[Note: I'm still working on another recent 230 ruling in the Subway v. Quiznos lawsuit--more on that soon.]

Finally, the court awards Google $6k in costs incurred the first time Jurin sued Google, which Jurin voluntarily dismissed when he lost his attorney. The court says that the claims are basically the same, so refiling harassed Google. I predict Google's likelihood of getting the $6k is about as high as the sun rising in the West tomorrow.

Despite Google's success, Jurin's trademark claims--the main issue in the lawsuit--are still on the table (Google didn't try to knock those out on the 12(b)(6)). However, the writing is on the wall for this lawsuit, and some of the language from this opinion bodes very well for Google when the court turns its attention to the trademark claims.

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 08:13 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 03, 2010

Why I Support HR 4364, the Proposed Federal Anti-SLAPP Bill

By Eric Goldman

In mid-December, in a move that got a little lost in the holiday shuffle, Rep. Steve Cohen (D-TN) introduced HR 4364, the “Citizen Participation Act of 2009,” proposing a federal anti-SLAPP law. This blog post explains why I enthusiastically support this bill as way to help preserve the Internet's vibrancy as an information resource.

What is a "SLAPP"?

SLAPP stands for "Strategic Lawsuit Against Public Participation." The term was coined about three decades ago by two Denver University professors, George Pring and Penelope Canan. Pring and Canan recognized that lawsuits were discouraging people from participating in vital government processes. Thus, they advocated for a statute that would curb these anti-democratic lawsuits.

How Do Anti-SLAPP Laws Work?

In the past quarter-century, more than half of the states have implemented anti-SLAPP protection. These laws vary in several key respects, but they generally have two features. First, they provide an expedited procedure for defendants to end SLAPPs early. Effectively, defendants can turn the tables on the plaintiffs, file an anti-SLAPP motion to strike the litigation, and thereby ask the court to end the lawsuit much more quickly than under traditional rules. Second, anti-SLAPP laws allow successful defendants to be awarded their legal defense costs.

Thus, anti-SLAPP laws have a number of benefits: they get meritless cases off court dockets early, they force plaintiffs to think carefully about their lawsuits’ merits, and they make defendants financially whole for improper lawsuits. The laws protect online and offline speech equally.

The Benefits of a Federal Anti-SLAPP Law

While a majority of states already have anti-SLAPP laws, a federal anti-SLAPP law would provide a baseline level of protection in those states plus provide new protection in the 20+ states that do not have an anti-SLAPP law. For more on this, see this blog post.

Why I Support the Proposed Legislation

Originally, SLAPPs were conceived as lawsuits suppressing citizens' rights to monitor government functions. Over time, we've realized that this construction is too narrow. Although we still need to protect government watchdogs, we also need to guard against plaintiffs who use litigation to remove socially valuable content from our information ecosystem.

Personally, I am especially interested in the flow of information about goods and services in our marketplace, such as consumer product reviews. All too often, vendors use actual or threatened litigation to take down content that criticizes their offerings. The proposed federal anti-SLAPP law applies to those lawsuits. Thus, if enacted, the federal anti-SLAPP law will help consumers share their true feeling about marketplace offerings with less fear of meritless lawsuits from vendors who would rather fight in court than compete.

BoingBoing’s recent resolution of a lawsuit brought by MagicJack nicely illustrates the virtues of anti-SLAPP laws. BoingBoing blogged some criticisms of MagicJack’s offerings, and MagicJack unwisely responded to that post with a lawsuit. Fortunately for BoingBoing, MagicJack sued it in California, which has a robust anti-SLAPP law. As a result, BoingBoing was able to end the lawsuit early (BoingBoing won its anti-SLAPP motion less than 3 months from complaint filing) and get the court to order MagicJack to pay its attorneys’ fees of over $50k. This story would have ended less happily for BoingBoing if the exact same lawsuit had been brought in a state without an anti-SLAPP law (or with narrower anti-SLAPP protection). In those states, even if BoingBoing had defeated the lawsuit, it would have taken much longer, and BoingBoing would have borne its $50k+ litigation costs. The federal anti-SLAPP law will ensure that content publishers throughout the country will enjoy the same protection that BoingBoing got.

For other examples of successful anti-SLAPP motions that I’ve covered on this blog, see:

* Griping Blogger Gets Fair Use and Anti-SLAPP Win--Sedgwick v. Delsman
* Gardner v. Martino (9th Cir. April 24, 2009)
* McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008)
* Stress-Relieving Company Gets Anti-SLAPPed Per 230
* Vanginderen v. Cornell (S.D. Cal. June 3, 2008)
* Optima Funding, Inc. v. Strang, 2007 WL 1430699 (Cal. Ct. App. May 16, 2007)
* Blogger Protected by Anti-SLAPP Statute--GTX v. Left
* KinderStart v. Google Dismissed--With Sanctions Against KinderStart's Counsel (the anti-SLAPP motion was denied, but it should have been granted)
* Google Wins Lawsuit Over Search Results--Maughan v. Google

Why Federal Anti-SLAPP Legislation Isn't Enough

Although I strongly support the federal anti-SLAPP legislation, it’s just a start. Only a small fraction of disputes over consumer product reviews lead to court (which then triggers anti-SLAPP coverage), so anti-SLAPP protection--though valuable in litigated cases--won't help in the vast majority of disputes. Thus, I would like to see legislation that creates a cause of action when content publishers a receive bogus cease-and-desist/nastygram takedown demand. Those illegitimate demands intimidate many recipients who fear a lawsuit, even if they would win an anti-SLAPP motion. Accordingly, using meritless threats, vendors can excise critical content from the Internet. 17 USC 512(f) provides a limited counterbalance against bogus copyright takedown notices; it could provide a useful starting point for conceptualizing a broader anti-bogus-takedown law.

How You Can Help

While there’s no effort yet to extend 17 USC 512(f) protection beyond copyright law, we do have a federal anti-SLAPP bill pending in Congress that needs your support. Learn more about this important effort from The Public Participation Project. With so many issues percolating in Congress, it would be easy for the federal anti-SLAPP bill to get overlooked. As a result, the bill will require significant grassroots support to climb up the legislative priority list. If you are interested in being actively involved in the effort, contact me or go here.

Posted by Eric at 09:43 AM | Content Regulation , Copyright , Derivative Liability | TrackBack

March 02, 2010

February 2010 Quick Links

By Eric Goldman

Copyright

* Mavericks Recording Co. v. Harper (5th Cir. Feb. 25, 2010). 17 USC 402(d) precludes an innocent infringement defense in P2P downloading case when the record companies place proper copyright notices on their works. This is consistent with language from BMG v. Gonzalez in the Seventh Circuit.

* Perfect 10 and Amazon settle on confidential terms; Perfect 10 v. Google will keep going. Previous blog coverage of this case (1, 2, 3, 4, 5).

* Veoh won in court (1, 2, 3) but still got knocked out of the marketplace.

* Project DoD, Inc. v. Federici, 2010 WL 559115 (D. Me. Feb. 11, 2010). In a 512(f) lawsuit I blogged about in December, the judge upheld the magistrate report dismissing for lack of personal jurisdiction because the plaintiff had moved and no longer had ties to Maine.

* MCS Music America, Inc. v. YAHOO Inc., 2010 WL 500430 (M.D. Tenn. Feb. 5, 2010). MCS sued Yahoo over infringement of its songs, and the court says that it can only get statutory damages for each song infringed. This means that if Yahoo performed 8 different covers of the song, MCS is only entitled to statutory damages for one infringed work.

Trademark

* Monex Deposit Co. v. Gilliam, 2010 WL 325570 (C.D. Cal. Jan, 25, 2010). The courts says a gripe site called "MonexFraud.com" may cause initial interest confusion of the Monex trademark. Are you kidding me?

* Typographically erroneous phone numbers always struck me as a much greater problem than "typosquatters."

Contracts

* Jacobsen v. Katzer settles.

* Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC (3rd Cir. Jan. 25, 2010). 3rd Circuit upholds consequential damages waiver in B2B Internet connectivity contract. Prior blog discussion.

Blogging/Social Networking Sites

* Cats & Dogs Animal Hospital v. Yelp (C.D. Cal. complaint filed Feb. 24, 2010). The plaintiffs allege that Yelp violates California B&P 17200 by using a pay-for-play scheme.

* Rick Frenkel speaks about his Troll Tracker blogging days.

* In re Perry, 2010 WL 374770 (Bankr. S.D. Tex. Feb. 3, 2010). Emailing links to a third party's defamatory blog constituted "publication" of the blog for defamation purposes. The court doesn't discuss 47 USC 230 at all!

* Cunningham v. West Virginia, 2010 WL 415257 (S.D. W.Va. Jan. 26, 2010). MySpace does not impermissibly discriminate against sex offenders.

* Evans v. Bayer, 2010 WL 521119(S.D. Fla. Feb 12, 2010). A student's off-campus creation of a Facebook Group called "Ms. Sarah Phelps is the worst teacher I've ever met" may not be an appropriate grounds for school discipline.

* Snowball fight leads to a rampage at Macy's? Blame Facebook!

* Marshall v. City of Savannah, 2010 WL 537852 (11th Cir. Feb. 17, 2010). A probationary firefighter posted an official fire department photo on her MySpace page. After a reprimand, the employment relationship deteriorated and she was fired. The 11th Circuit affirms the dismissal of her discrimination and retaliation claims.

* BoingBoing gets an anti-SLAPP win--including its attorneys' fees--in a defamation lawsuit over one of its blog posts. The anti-SLAPP ruling.

* Berkery v. Estate of Stuart, 2010 WL 610631 (N.J. Super. A.D. Feb. 23, 2010). "The investigative function an author performs is not substantively different from an investigative journalist. The dispositive element is not the form of the investigative process. In an era marked by a diminution of the classic newsmedia and the print investigative journalist and the proliferation of investigative reporting in media such as cable television, documentary journalism-both televisions and movies-internet reporting and blogging, the need for protection remains the same. Whether Hornblum was writing a book, news article, a screenplay or a blog, the substance of his body of work remains the same."

Search Engines

* After some innuendo about Microsoft’s role in harassing Google on antitrust/competition issues, Microsoft effectively admits as much. Also see this Wall Street Journal article on the Microsoft-Google tussles.

* Search Engine Land: Google AdSense Using Search History In Contextual Matching

* Munger v. State, 2010 WL 537641(N.C. App. Feb. 16, 2010). Rejecting a taxpayer challenge against a NC law designed to provide financial incentives for Google to build a facility there.

* Lengthy Wired article on Google's algorithm.

* Nature: Chinese researchers don’t want to lose access to Google. My blog post on this topic.

* Business Insider: In Case You Had Any Doubts About Where Google's Revenue Comes From

Advertising

* Thomas O'Toole: Does "No Contract" Really Mean No Contract?

* MediaPost: Start-Up Links 65 Million IP Addresses To Users, Readies Targeting Platform. This is not going to end well.

* More troubling words for online advertisers from FTC BCP Director David Vladeck.

* Zelotes v. Rousseau (Conn. Grievance Committee). Attorneys participating in an Internet lead generation system that allocated leads geographically didn't violate the attorney Rules of Professional Conduct.

Online Crimes

* F.T.C. v. Pricewert LLC, 2010 WL 329913 (N.D. Cal. Jan. 20, 2010). FTC gets a default injunction against an Internet access provider that allegedly provided connectivity for activities such as child pornography, botnets, spyware, and viruses.

* US v. Little. The Eleventh Circuit disagrees with the Ninth Circuit regarding the appropriate geographic scope to measure the obscenity of Internet material.

* 3 Google executives were convicted in Italy of criminal privacy violations for a user-uploaded video to Google Video. NYT article. Google's response. A refresher on the Felix Somm conviction from 1998.

* Online ticket sellers are getting the smackdown. Criminal prosecutions of online ticket brokers who allegedly played dirty in jumping the queue. The FTC cracks down on Ticketmaster and warns other online ticket sellers.

Posted by Eric at 05:04 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

February 26, 2010

Forwarding Defamatory Email with Introductory Comments Protected by 47 USC 230--Phan v. Pham

By Eric Goldman

Phan v. Pham, 2010 WL 658244 (Cal. App. Ct. Feb. 25, 2010)

This is the first 230 case I'm blogging about in 2010 (see my 2009 recap), and what a nice ruling to start the year. The facts are crisp and clean: An email author wrote an allegedly defamatory email about plaintiff Phan and sent it to a group of recipients, including defendant Pham. Pham then forwarded the email with the following additional comments to at least one recipient:

“Everything will come out to the daylight, I invite you and our classmates to read the following comments of Senior Duc (Duc Xuan Nguyen) President of the Federation of Associations of the Republic of Vietnam Navy and Merchant Marine.”

[Note: the relevant emails were originally in Vietnamese, but no one contested the English translations]

As we know, 47 USC 230 divides the universe of content into two buckets: first party content and third party content. In some cases, like Roommates.com or Mazur, the division between the two buckets is very murky. But in this fact pattern, Pham's email can be cleanly zoned into first party and third party content, which makes 230's application pretty simple. Per the 2006 California Supreme Court ruling in Barrett v. Rosenthal, California law is unambiguous that Pham isn't liable for the contents of the forwarded email.

But what about the fact that Pham chose to forward the email? In the post-Roommates.com era, I routinely encounter misguided arguments that an online actor's affirmative decision to republish third party content strips away 47 USC 230 protection. Roommates.com even has some ambiguous language suggesting this outcome. (The court is so baffled by the Roommates.com opinion that it simply quotes multiple paragraphs in a footnote, as if we will be able to divine some coherence from the language that escaped this judicial panel).

However, that's never been the law. See, e.g., Barrett v. Rosenthal, Batzel v. Smith, D'Alonzo v. Truscello and the many Ripoff Report cases; but see the goofy Woodhull case). As this case illustrates, nothing on this point has changed in the post-Roommates.com era. Instead, the court believes (as I do) that the Roommates.com opinion turned on the fact that Roommates.com "created a website 'designed to solicit and enforce housing preferences that are alleged to be illegal.'” Without the mandatory illegality, 230(c)(1) protects an editorial decision to publish third party content just as much as it protects the decision not to. The court expressly rejects any implication that Roommates.com trumped Barrett v. Rosenthal or California law on that point.

In a footnote, the court says it is expressly not addressing the Moreno concurrence in Barrett v. Rosenthal that an alleged conspiracy between content originator and content republisher would trump 230.

For those of you keeping score, this is a rare case where Roommates.com was distinguished rather than cited in support of the defense. But in the end, the defense still easily won the 47 USC 230 ruling.

With 230 resolved in Pham's favor, the only remaining question is Pham's liability for his first party content--the email introduction he wrote. There's no question that Pham can be liable for his own words (see, e.g., the uncited Tefft case), but in a brief and breezy opinion, the court says that Pham didn't say anything impermissible. The only "substance" to Pham's introduction is a vague assertion to the effect that the truth will come out. That's not defamatory, even if it implicitly suggests that the forwarded email may help enlighten the truth.

Posted by Eric at 11:56 AM | Content Regulation , Derivative Liability | TrackBack

February 16, 2010

Kozinski and Goldfoot on Cyberspace Exceptionalism and Internet Regulation

By Eric Goldman

Alex Kozinski & Josh Goldfoot, A Declaration of the Dependence of Cyberspace, 32 Colum. J.L. & Arts 365 (2009).

Introduction

In early 1996, in response to Congress' enactment of the Communications Decency Act (the first comprehensive attempt to regulate the Internet), John Perry Barlow published his cyberspace exceptionalist screed, “A Declaration of the Independence of Cyberspace.” The manifesto (naively, IMO) tells government regulators that they are outdated and should not—and cannot—regulate the Internet.

Judge Kozinski, chief judge of the Ninth Circuit, and Josh Goldfoot, a trial attorney in the DOJ's CCIPs division, use Barlow's article as an entry point to discuss Internet exceptionalism/regulation generally. Although the article expresses the authors’ personal views, the article amplifies some themes Judge Kozinski has been developing in his recent Internet jurisprudence, most notably the Roommates.com case and Perfect 10 v. Visa. Because Judge Kozinski plays a crucial role on the federal appellate court governing both Hollywood and the Silicon Valley, this article is worth a close look.

Internet Exceptionalism

Judge Kozinski made his distaste for Internet exceptionalism clear in the Roommates.com opinion. In this article, the authors explain this view more thoroughly:

It is a mistake to fall into Barlow's trap of believing that the set of human interactions that is conducted online can be neatly grouped together into a discrete “cyberspace” that operates under its own rules. Technological innovations give us new capabilities, but they don't change the fundamental ways that humans deal with each other....[W]hen the internet is involved in a controversy only because the parties happened to use it to communicate, new legal rules will rarely be necessary. When the substance of the offense is that something was communicated, then the harm occurs regardless of the tools used to communicate....[T]he vast majority of internet cases that have reached the courts have not required new legal rules to solve them.

While I generally agree with this, I also think it’s an antiquated sentiment. Whether or not cyberspace exceptionalist law are logical or even appropriate, legislators have found them irresistible, resulting in dozens or hundreds of Internet-specific statutes. I explore this dynamic in my article “The Third Wave of Internet Exceptionalism.” So to the extent the authors are arguing that we don’t need new cyberspace-specific laws, that ship sailed a long time ago.

The authors conclude that "the internet is doing wonderfully. It has survived speculative booms and busts, made millionaires out of many and, unfortunately, rude bloggers out of more than a few. The lack of a special internet civil code has not hurt its development."

I agree that the Internet is doing wonderfully, but I would assign causality differently. Legislatures in the 1990s passed a number of Internet-favorable laws, such as the Internet Tax Freedom Act, which kept taxing authorities from loving the Internet to death, and 47 USC 230, which provided a crucial immunity to online intermediaries. Reverse-engineering the Internet’s success is a tricky science, but my hypothesis is that the success is partially due to these “special Internet civil codes,” not due to their absence. For more on this with respect to 47 USC 230, see my talk notes from the Denver University Cyber Civil Rights event.

”Death of the Internet” and “Death of Innovation” Arguments

The authors address two common arguments that Internet defendants make to support favorable exceptionalist rulings, including that an adverse ruling (1) will end the Internet or (2) harm innovation.

They suggest that "end of the Internet" arguments can be powerful (specifically addressing Judge McKoewn’s doomsday concerns in her Roommates.com dissent):

The argument that a legal holding will bring the internet to a standstill makes most judges listen closely. Just think of the panic that was created when the Blackberry server went down for a few hours. No one in a black robe wants to be responsible for anything like that, and when intelligent, hard-working, thoughtful colleagues argue that this will be the effect of one of your rulings, you have to think long and hard about whether you want to go that way. It tests the courage of your convictions.

While end-of-the-Internet arguments can grab judges' attention, I have to assume that the litigant loses credibility if the claim is overstated. So use the argument sparingly, like when your client's loss will pry beloved Crackberries out of the judges' hands.

The authors are less impressed with the "death of innovation" argument.

[P]romoting innovation alone cannot be a sufficient justification for exempting innovators from the law. An unfortunate result of our complex legal system is that almost everyone is confused about what the law means, and everyone engaged in a business of any complexity at some point has to consult a lawyer. If the need to obey the law stifles innovation, that stifling is just another cost of having a society ruled by law. In this sense, the internet is no different than the pharmaceutical industry or the auto industry: they face formidable legal regulation, yet they continue to innovate.

There is an even more fundamental reason why it would be unwise to exempt the innovators who create the technology that will shape the course of our lives: granting them that exemption will yield a generation of technology that facilitates the behavior that our society has decided to prohibit. If the internet is still being developed, then we should do what we can to guide its development in a direction that promotes compliance with the law.

I’m sympathetic to this point. Personally, I feel like arguments that a ruling or law will harm “innovation” are often make-weight. “Innovation” is ill-defined and difficult to measure (i.e., some folks believe patent applications/issuances quantify innovation, but we know better), and it is politically incorrect to oppose “innovation” (you might as well oppose other incontrovertible ideals like freedom, Mother Teresa and puppies). Thus, the “harms innovation” argument automatically, and often unfairly, puts the opponent on the defensive—they can either try to debate what’s better for innovation or stand silently and look like they oppose innovation. But debates about what’s best for “innovation” are almost always irresolute because innovation can take many forms, and we do not know what precise mixture of government intervention and deregulation will foster socially optimal levels of innovation. For more on this, see, e.g., Niva Elkin-Koren and Eli Salzberger’s analysis of Coasean allocations on innovation.

At the same time, the authors’ arguments are a little disquieting because they imply that innovation can result in only one of two outcomes—legal or illegal, with nothing gray in between. From my perspective, much (most?) Internet entrepreneurship/“innovation” exists between the two endpoints of the legality continuum. For example, in 1996, I believe many legal experts would have said that unconsented spidering and indexing of a website was probably illegal (a question that has not been definitively resolved even today)—so if we wanted to avoid possibly illegal innovation, Google would not exist today. As a result, it might sound great to channel innovation towards only clearly legal activities, but I don’t really think that’s what we want.

Secondary Liability and Anonymity

The article also has some troubling remarks on secondary liability and anonymity:

If the legal rules change, and companies are held liable more often for what their users do, then the cost of anonymity would shift away from victims and toward the providers. In this world, providers will be more careful about identifying users. Perhaps online assertions of identity will be backed up with offline proof; providers will be more careful about providing potential scam artists in distant jurisdictions with the tools to practice their craft. All this would be expensive for service providers, but not as expensive as it is for injured parties today.

I would like to see some empirical support for the last sentence’s comparison of expenses. It’s not self-evident to me. Further, if we are going to do a cost accounting, we also need to consider what socially beneficial activity is dissuaded by service provider authentication of identity.

The authors continue:

Secondary liability should not reach every company that plays any hand in assisting the online wrong-doer, of course. Before secondary liability attaches, the plaintiff must show that the defendant provided a crucial service, knew of the illegal activity, and had a right and a cost-justified ability to control the infringer's actions. This rule will in almost every case exclude electrical utilities, landlords, and others whose contributions to illegal activity are minuscule.

This argument is consistent with traditional tort principles (as well as Judge Kozinski’s dissent in Perfect 10 v. Visa regarding copyright liability). 47 USC 230’s immunity breaks these venerable principles. As I’ve noted before, bright judges imbued in the common law can have a tough time with Congress’ rejection of traditional tort principles (as well as the concomitant reduction in judicial discretion).

Meanwhile, I’m wondering about the qualifier in the last sentence (“in almost every case”). Unless specified in a statute, I can’t imagine *any* circumstances where it would be appropriate to hold people who make “minuscule contributions” responsible for third party torts—especially electrical utilities, who as regulated monopolies usually have no discretion about whether or not to provide power to their customers.

Conclusion

Although in general most Ninth Circuit Internet rulings have reached the right result, recent Ninth Circuit rulings have shown some hostility towards 47 USC 230 specifically and Internet defendants generally. I am concerned that the Ninth Circuit has become a dangerous circuit for Internet defendants, and this article does not dispel my fears. I think Internet defendants should carefully weigh the pros and cons before appealing a case to the Ninth Circuit. The wild card factor is high, and the likelihood of getting an incomprehensible legal standard is higher still.

Posted by Eric at 01:40 PM | Derivative Liability , Internet History | TrackBack

January 31, 2010

January 2010 Quick Links

By Eric Goldman

Copyright

* An English translation of Google's December loss in France on a Google Book Search lawsuit.

* Ed Felten reports on a survey of files available via BitTorrent. Acknowledging some methodological limits, he estimates ~99% were likely copyright infringing.

* Elsevier B.V. v. UnitedHealth Group, Inc., 2010 WL 150167 (S.D.N.Y. Jan 14, 2010). Denying copyright statutory damages and attorneys' fees to unregistered foreign works is constitutional because the Berne Convention (which Elsevier argued prohibits the statutory formalities) is not self-executing.

* Techdirt: Singapore Court Rules That Online DVR Is Infringing...While Noting How Copyright Law Isn't Really Set Up For This

* Techdirt: If Banning The Internet For Sex Offenders Is Unfair, Is Banning The Internet For Copyright Infringers Fair?

* The Copyright Office issued new regulations on the deposit of online-only works: “The regulation establishes that online–only works are exempt from mandatory deposit until a demand for deposit of copies or phonorecords of such works is issued by the Copyright Office.”

Trademark/Publicity Rights

* American Airlines v. Yahoo settled. Previous coverage:
- Yahoo Subpoenas Expedia in American Airlines Lawsuit
- Fifth Circuit Denies Yahoo's Jurisdictional Appeal in American Airlines Case
- American Airlines v. Yahoo Venue Transfer Denied
- Yahoo Countersues American Airlines for Declaratory Judgment
- American Airlines Sues Yahoo for Selling Keyword Advertising

* Duplicity alert! Rescuecom is in court defending its keyword ads triggered by competitor Best Buy's TMs.

* Bev Stayart sues Yahoo again over publicity rights. My September 2009 blog post on her prior loss against Yahoo.

Pornography

* Clark v. Commonwealth, 2009 WL 5125009 (Ky. App. Ct. Dec. 30, 2009). Upholding a conviction when "Clark knowingly used a computer for the purpose of getting a minor, or a peace officer whom Clark believed was a minor, to take a sexually explicit photograph of herself."

* Am. Booksellers Found. for Free Expression v. Cordray, Slip Opinion No. 2010-Ohio-149 (Jan. 27, 2010). Ohio's Supreme Court partially upholds its state law restricting Internet distribution of harmful to juveniles material to juveniles when the communications are to recipients known or believed to be juveniles.

Spam

* United States v. Zein (E.D. Mich. 2009). Posting an ad on Craigslist constituted a "mass marketing" activity sufficient to trigger a 2 level sentencing enhancement.

* Comcast and e360 settled their lawsuit. Previous blog coverage.

Blogs/Social Networking Sites

* Sieber v. Brownstone Publishing Company, 2007 CA 002549 B (D.C. Superior Ct. Dec. 23, 2009). A building contractor sued Angie's List and other people over consumer reviews. My prior mention of the case. After 2 years of litigation, a DC trial judge dismissed all defendants on summary judgment and awarded one defendant-counterclaimant $18k+. The entire text of the memo opinion:

MEMORANDUM OPINION AND ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT OF ALL DEFENDANTS, DENYING PLAINTIFFS' MOTIONS FOR SUMMARY JUDGMENT, and GRANTING POOLE'S MOTION FOR SUMMARY JUDGMENT ON HIS COUNTERCLAIM signed by Judge Long, efiled, eserved, and docketed in chambers on December 23, 2009. It is ORDERED that the Motions for Summary Judgment of Brownstone Publishing Co., the Washington Post Company, John Kelly, and John W. Poole are granted; and it is FURTHER ORDERED that the Motions for Summary Judgment filed on behalf of the plaintiffs are denied; and it is FURTHER ORDERED that judgment shall be entered in favor of all defendants against the plaintiffs as to all claims in the Second Amended Complaint; and it is FURTHER ORDERED that judgment shall be entered in favor of defendant Poole and against plaintiff SCS Contracting Group LP as to Poole's Counterclaim against plaintiff SCS Contracting Group for $18,300 plus 6% (six percent) per annum interest, and a separate money judgment for this sum shall be docketed. Court Jacket not in chambers.

* FINRA Regulatory Notice 10-06: Guidance on Blogs and Social Networking Web Sites.

* Duer v. Henderson, 2009-Ohio-6815 (Ohio App. Ct. Dec. 23, 2009). A web publication telling a ghost story and describing the location of purportedly paranormal phenomenon on private property is not liable for any resulting trespass to real property.

* The “moldy tweet” lawsuit was dismissed.

* Two lawsuits holding that bloggers aren't subject to jurisdiction in the plaintiff's home court:
- Silver v. Brown, 2009 WL 5220297 (D. N.M. Nov. 30, 2009).
- Workman Sec. Corp. v. Phillip Roy Financial Services, LLC, 2010 WL 155525 (D. Minn. Jan 11, 2010)

* BBC: France ponders a right-to-forget law.

E-commerce

* Appliance Zone, LLC v. NexTag Inc., No:4-09-cv-0089-SEB-WGH (S.D. Indiana Dec. 22, 2009). Upholding NextTag's clickthrough-formed advertiser agreement. Mehmet Munur’s comments.

* Edward A. Zelinsky, “New York’s 'Amazon Law': Constitutional But Unwise.”

* Largo Cargo v. Google, a new complaint over allegedly mismanaged AdWord bids. This is the latest incarnation of the Almeida case. I think Largo Cargo’s complaint is still a no go.

* The NYT catalogs an impressive roster of futility for US dot coms trying to compete in China.

Miscellaneous

* Gmail will consult the user's prior emails to pick an ad if a particular email doesn't lend itself to a good ad.

* Illustrating the divergence between the open source community and the Wikipedia community, APC reports that 75% of Linux code is now written by paid developers.

* Oddee: 15 Funny Facebook Fails.

* I expect to be in the Netherlands May 23-30. Let me know if you would like to meet up there.

Posted by Eric at 01:19 PM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark | TrackBack

January 11, 2010

Top Cyberlaw Developments of 2009 (Eric's List)

By Eric Goldman

Guest blogger John Ottaviani recently dropped by to offer his perspectives on 2009’s top Cyberlaw developments. While I like his list a lot, I independently developed my own top 10 list that has a different emphasis. You might enjoy the contrasts. My list:

#10: Louis Vuitton v. Akanoc. After the judge ordered a web host to stand trial, a jury awarded the trademark owner $32 million due to the web host’s contributions to trademark infringement by its customers. This case stands out for the big damages award and as a rare example where an online provider was held liable under a contributory trademark liability theory. Many trademark practitioners are scratching their heads trying to figure out the import of this case, however. Does this case represent a dangerous new frontier of online liability? Was this a bad jury verdict fueled by poor defense lawyering? Or was this an appropriate outcome because the web host actually engaged in bad behavior that distinguishes it from most “legitimate” web hosts? 2010 may help us understand if this case is part of a new trend or an aberration.

#9: Gordon v. Virtumundo. We’ve seen a lot of silly anti-spam litigation, including the emergence of an entirely new group of entrepreneurs called “spam litigation entrepreneurs” who try to make a living on anti-spam lawsuits. These folks have a true love-hate relationship with spam; they hate it so much that they devote their lives to fighting it, but they love getting spam because each one is a potential revenue source. In general, judges hate spam a lot too, so over the years we have seen a number of doctrinally unsupportable results where judges bent the law to make sure spammers lost.

However, the judicial pendulum has swung in the opposite direction, and in Gordon v. Virtumundo, the Ninth Circuit destroyed a serial anti-spam plaintiff’s entrepreneurial business in a doctrinally questionable but strongly worded opinion. In short order, a number of other spam litigation entrepreneurs have seen their lawsuits shut down with emphasis. Due to this ruling, the era of anti-spammers partying in courts may be on the wane.

#8: Zango v. Kaspersky. The question raised in this issue is simple to state but hard to answer: who should decide what constitutes spam, spyware or a virus? Vendors of software designed to curb these threats would like unfettered discretion to make their classifications; businesses who are classified as a threat would like judges to overturn adverse decisions. As it turns out, in a relatively obscure provision (47 USC 230(c)(2)), in 1996 Congress said that software vendors get to make classifications decisions and unhappy businesses can’t complain about them. In June, the Ninth Circuit upheld Kaspersky’s decision to classify Zango’s software as a threat and rejected Zango’s efforts to take the classification decision out of Kaspersky’s hands. This ruling gives enormous freedom to vendors of anti-spam/anti-spyware/anti-virus software to do their best to keep us safe.

#7: Columbia Pictures v. Fung. This case came out just before the Christmas holiday, so it got lost in the holiday hoopla a bit, but it’s a case of potentially significant import. First, it held that the specific torrent sites at issue induced copyright infringement. Second, the court denied the torrent sites’ eligibility for the DMCA online safe harbors. In part, the court said that an inducing website was categorically disqualified from the DMCA online safe harbors. Like the Akanoc case, it’s not entirely clear if this result was a legal aberration or an appropriate reaction to the defendants’ poor choices. Either way, it is possible that more “legitimate” websites may change their behavior to minimize their exposure based on the legal precedents in this case. If they do, this case could have a major impact on UGC websites.

#6: Lori Drew’s acquittal. Megan Maier’s suicide remains a heartbreaking tragedy, but unfortunately, overzealous prosecutors compounded the tragedy by prosecuting Lori Drew using bogus legal doctrines. The tragic facts got a jury to convict Drew of some misdemeanor crimes. Fortunately, the judge recognized the legal errors of the prosecution’s theory and the jury’s conclusions and granted Drew an acquittal despite the jury findings. The judge finally got to the right result as a matter of Cyberlaw, but the case remains a chilling testament to prosecutorial power.

#5: Harris v. Blockbuster. The rule is really clear. Service providers can't amend online user agreements in the provider’s sole discretion without notice. As the Ninth Circuit informed us in 2007, those contracts don’t fare well in court. So although these provisions are in just about every online user agreement, they don’t work--as Blockbuster found out the hard way.

As part of the litigation detritus from the Facebook Beacon experiment, users sued Blockbuster for sharing their rental transactions with Facebook and all of their friends, allegedly in violation of the Video Privacy Protection Act. Blockbuster tried to bust the class action by invoking the contract’s arbitration clause. Instead, because Blockbuster had the impermissible amendment provision in its user agreement, the court said the contract was illusory and refused to send the case to arbitration.

This case should signal the end of the ridiculous amendment clauses. We’ll see how long it takes the lawyers to give the provisions up.

#4: Battles Over the First Sale Doctrine. We have seen numerous legal battles this year over the First Sale defenses in both copyright and trademark law.

Copyright owners try to engage in price discrimination by carving up the world into geographic territories with different prices for the same product. If they can use copyright law to keep the cheap products from entering the other geographic market, this keeps the product from effectively price-competing with itself.

This year, two cases involved European textbooks which were functionally equivalent to the textbooks being sold in the United States at higher prices. Entrepreneurs were buying the cheap European texts, shipping them to the US and then selling them online. The entrepreneurs invoked the First Sale doctrine, which says that copyright law can’t prohibit the legitimate purchaser of a tangible copyrighted item from reselling the item to whomever they want at whatever price they want.

However, copyright law has another provision that allows copyright owners to block the importation of copyrighted works into the United States. In the 1998 Quality King case, the US Supreme Court said that the First Sale doctrine trumped the importation right when the goods were manufactured in the US, sold overseas, and then imported back to the US. However, in Pearson v. Liu and John Wiley & Sons v. Kirtsaeng, the judges said that the importation right trumps the First Sale doctrine when the goods were initially manufactured overseas. This issue is ripe for further adjudication, though. A similar importation case, Costco v. Omega, is pending before the US Supreme Court, which is deciding whether or not it wants to hear the case. If it does, we may get clearer instructions about the interplay between the First Sale doctrine and the copyright importation right.

Copyright’s First Sale doctrine was also at issue in Vernor v. Autodesk, where the purchaser of a software disk wanted to resell the disk on eBay despite restrictions in the software licensing agreement barring such resales. The court held that the First Sale doctrine applied and allowed the resale. There are other cases percolating through the court system involving the resale of tangible media contained copyrighted material despite contractual restrictions on resale, so this issue remains a hot one.

Trademark owners also try to prevent competition with their products that leak out of their official channels of distribution. eBay has been the site of a couple battles over the First Sale doctrine in trademark law. In Mary Kay v. Weber, the court held that the trademark First Sale doctrine may not permit the eBay resale of expired cosmetics by a Mary Kay independent beauty consultant. In Beltronics v. Midwest, a trademark owner shut down the eBay resale of radar detectors that had leaked out of the manufacturer’s channel and were being sold (at a cheaper price) without the manufacturer’s warranty.

Clearly, the First Sale doctrine matters a lot to eBay and other consumer-to-consumer e-commerce websites. With a possible pending Supreme Court case and lots of IP owners looking to stifle competition from goods they have already profited from, expect the First Sale doctrines to get lots of attention in 2010.

#3: 47 USC 230. In my opinion, 47 USC 230 is the most important Cyberlaw statute, so new 230 developments will make my top 10 list for the foreseeable future. This year, there were three federal appellate court rulings interpreting 47 USC 230(c)(1):

* in Barnes v. Yahoo, the Ninth Circuit held that 230 protected a website’s negligent delay in removing user content. However, if the website had promised removal to the user, the user could have a viable claim for promissory estoppel that would not be preempted by 230.
* in FTC v. Accusearch, the Tenth Circuit held that a website’s resale of pretexted phone records—even if those records were supplied by third party suppliers—did not qualify for 47 USC 230 protection because of their illegality.
* in Nemet Chevrolet v. ConsumerAffairs.com, the Fourth Circuit held that a consumer review website was not liable for user-supplied reviews, even when the website worked with the user to submit the review, and despite the plaintiff’s unsubstantiated claims that the website had fabricated the reviews itself.

Really, the big 47 USC 230 news in 2009 is the absence of big news. Specifically, 2009 reinforced that the Ninth Circuit’s 2008 Roommates.com decision—one of the most significant defense losses under 47 USC 230—did not rip open a major hole in the statutory protection of websites. Of the 13 cases that I have seen that have cited the Roommates.com en banc opinion, eleven have cited the case in favor of the defense. (See the list here). The two exceptions are the Accusearch case, mentioned above, and the New England Patriots’ lawsuit against StubHub over season ticket resales, an odd opinion that may not have much influence. Therefore, despite our fears about Roommates.com, the 47 USC 230 immunity remained healthy and vibrant in 2009. For more on this topic, see my special recap of 47 USC 230's year-in-review for 2009.

#2: Keyword Advertising Battles. Keyword advertising battles are another perennial topic on these year-in-review lists. A multi-billion dollar a year industry has sprung up around the sale of keyword-triggered advertising, including some keywords that may be third party trademarks, and trademark owners don’t like it at all. This has led to a multi-front battle between trademark owners, keyword advertising sellers (such as Google), and keyword advertising buyers.

One of the biggest Cyberlaw cases of the year was the Second Circuit’s ruling in Rescuecom v. Google. In the district court in 2006, Google won an easy victory against a trademark owner because the court said that Google did not make the requisite “use in commerce” of the trademark. The Second Circuit reversed the district court, sending the case back for further proceedings. The reversal does not ensure Google’s defeat; Google will now litigate other legal doctrines and might very well win on one of those. However, the Second Circuit’s opinion largely spells the end of any “use in commerce” defense by either keyword advertising sellers or buyers.

Because of the “use in commerce” defense’s demise, keyword advertising cases will now likely turn on whether the advertisements create a likelihood of consumer confusion. One case, Hearts on Fire v. Blue Nile, offered up a new and complicated test for gauging consumer confusion. If other courts adopt this test, keyword advertising cases will get even more expensive and complicated—highlighting how important it was that the Rescuecom case eliminated an easy way to end these lawsuits early.

Meanwhile, despite the fact that keyword advertising battles have been taking place for at least a decade, we have not heard what a jury thinks about the practice—until the November jury ruling in Fair Isaac v. Experian. In that case, the jury found for the defense that the keyword-triggered ads did not create the requisite likelihood of consumer confusion. It remains to be seen if other juries reach the same conclusion. If they do, keyword advertising lawsuits should slowly fade away over time because the trademark owners can’t win in the end.

As for now, keyword litigation is going strong and hardly fading away. In Spring, Google made two changes to its trademark policies where it voluntarily agrees to take down certain types of ads at the trademark owner’s request. In May, Google extended its more liberal US-based policy to nearly 200 other countries, replacing the more restrictive policies it had in place there. Shortly thereafter, Google modified its US policy to do less for trademark owners in situations involving product resales, review websites and sales of complementary/replacement parts. Trademark owners were none too pleased with these changes. In response to these changes and the door opened by the Second Circuit Rescuecom decision, Google got hit with about a dozen new lawsuits, including some class action lawsuits, of which I believe 10 are currently still active.

Finally, all of the wrangling in court and over voluntary trademark policies could be mooted by legislative action, and for the third time, the Utah state legislature considered resolving the keyword advertising issue itself. A law regulating keyword advertising passed the Utah house but died in the Utah senate. Expect the pro-regulatory forces to round up the troops for a fourth try in 2010.

#1: FTC Endorsement Guidelines for Bloggers. The Obama administration has breathed new life into a pro-regulatory FTC, and the FTC sure is interested in all things Internet. The FTC has been nosing around Internet privacy and Internet marketing practices pretty carefully, and I expect 2010 to bring more FTC pronouncements designed to tackle the Internet.

But nothing stirred up a hornet’s nest of confusion and anger in 2009 like the FTC’s Endorsement and Testimonials Guidelines. I think it’s fair to say that the FTC’s guidelines rollout was a complete failure. As usual, the FTC’s guidelines were mealy-mouthed and filled with conditional statements (the FTC hates to lay out bright line rules that might constrain their future discretion). However, the FTC’s general gist was clear: bloggers should disclose when they receive financial or other consideration for their blog posts.

Unfortunately, this general principle leaves open some fairly fundamental questions, like when is disclosure required in situations less clear than straight cash-for-posting, and where should disclosure be made, especially in space-constrained media like Twitter. Needless to say, unhappy bloggers can be very noisy, so blogger response to the FTC’s announcement was loud and vituperative. The FTC tried to backpedal a little by saying that it did not intend to pursue individual bloggers, but this announcement only reinforced that bloggers do not understand what the FTC wants from them.

Meanwhile, the FTC’s proposed guidelines also took an interesting position about an advertiser’s liability for rogue blogger’s posts. This position is generally consistent with government enforcement agencies’ views that commercial players can be legally responsible for content they endorse or link to (see, e.g., my comments on the SEC’s liability-for-linking policy), but this position runs directly contrary to 47 USC 230’s provisions that say A isn’t liable for B’s online content. As a result, I believe that part of the FTC’s proposed guidelines violate 47 USC 230 and would not survive a court challenge.

Overall, the firestorm over the FTC’s Endorsement and Testimonials guidelines is a small part of a larger effort to regulatorily separate advertising from content. The Internet has collapsed those distinctions, perhaps irreparably, so regulators may be trying to accomplish the impossible. Nevertheless, the FTC seems determined to prop up the distinction, and I expect 2010 will bring more FTC efforts on this front.

* * * * *

While that concludes my top 10 list, there were a number of other interesting developments in 2009 that are worth a brief note:

* Moreno v. Hanford Sentinel. A woman trashed her hometown in an obscure but public MySpace posting and learned there is no “do-over” for Internet content publication. My vote for the most factually interesting Cyberlaw case of 2009.

* Google’s keyword metatag announcement. Courts generally treat the inclusion of third party trademarks in keyword metatags as per se trademark infringement. But Google has confirmed that it ignores keyword metatags. Will courts get the message?

* Google Book Search settlement. If the Google Book Search settlement ever gets approved, it may reshape the book industry, redefine libraries, and make all kinds of other socially significant changes. But the list of opponents to the settlement is long and growing. Professor James Grimmelmann of New York Law School is our community’s maven for all things “GBS.”

* Kindle book deletion. The Kindle store sold e-books it didn’t have the right to sell, so it took them back. Users learned of a key factual difference between physical books and e-books—the vendor can remotely make e-books go poof.

* States’ efforts to impose sales tax efforts based on marketing affiliates. For years, states have been looking for ways to make online retailers collect sales tax for them. They are generally stopped by Supreme Court precedent, but in 2008 New York finally figured out a workaround. The New York statute said that marketing affiliates were like traveling salespeople and thus created the physical nexus required for a state to impose sales tax collection obligations. The New York statute survived its first legal challenge, which opened the floodgates of other states passing similar laws hoping to get their piece of the action. Meanwhile, online retailers aren’t just rolling over; instead, they are threatening to cut off (or actually cutting off) marketing affiliates in states that enact these laws—thus potentially costing the states income tax from the marketing affiliates’ revenue, and creating the potential for the entire affiliate industry to be torn apart.

* Maine kids privacy law. Maine thought it could pass a law banning marketing to kids. It was wrong. The state had to withdraw the law and go back to the drawing board.

* UMG v. Veoh. Veoh won another nice DMCA online safe harbor victory.

* US v. Kilbride. The Ninth Circuit says that online obscenity prosecutions need to evaluate national attitudes towards obscene content, not local community standards.

* Kentucky domain name seizure. Kentucky tried to grab 141 domain names that enabled Kentucky residents to engage in illegal gambling. But those domain names also serviced customers for whom the gambling was completely legal, so the Kentucky courts are rethinking the grab.

* FTC v. Sears. As another example of the new pro-regulatory winds blowing through the FTC, the FTC cracked down on Sears for installing spyware on users’ computers that looked at the users’ hard drives, even though Sears paid the users for the installation and disclosed the spyware’s snooping in the user agreement (though in an inconspicuous manner). This case has made a lot of lawyers concerned that adverse disclosures in user agreements won’t satisfy the FTC.

* Facebook the Drama Queen. Ah, Facebook. Love it. Hate it. Facebook is a pretty nifty site and part of my daily routine, but boy, they sure do have a knack for stirring up trouble.

- In February, they made a relatively modest change to their user agreement that caused people to freak out.
- In response to this, Facebook took the provocative step towards user self-governance. Facebook let users vote on some choices and promised to be bound by the results, but with an asterisk: Facebook decided what options users could vote on, and Facebook would honor those choices only if a prohibitively large number of users exercised their franchise. Still, it was a nice gesture towards cyberspace community self-governance.
- In summer, they tried to settle their Beacon litigation, but that also reminded folks of how much Beacon irritated them in the first place.
- Summer also brought allegations of click fraud on Facebook, and lawsuits followed.
- Finally, in Thanksgiving, Facebook rolled out some changes to its privacy options that it pitched as giving users more choices, but it also took away some choices and defaulted users into some options that surprised them.

Given this track record, is it unrealistic to expect more Facebook drama in 2010?

* Estavillo v. Sony. Speaking of self-governance, virtual world enthusiasts would love to establish the legal proposition that virtual worlds are legally equivalent to governments and therefore obligated to restrain their actions just like governments are. One virtual world enthusiast sued Sony for kicking him off the network, claiming that Sony was legally governed as a “company town” and therefore lacked the discretion to kick him off. WRONG (and it wasn’t even close).

* Wikipedia's policy change. In August, the English-language Wikipedia announced that it was going to tighten up its editorial policies, and people Freaked Out. (In fact, I have predicted that Wikipedia cannot avoid increased editorial restrictions over time, so this change should not have been surprising). However, it turns out that everyone got it wrong, and Wikipedia’s editorial changes are far less dramatic (and consequential) than initially reported. I will post a separate recap on Wikipedia shortly.

If you would like a stroll down memory lane, you can see my previous top 10 lists from 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 10:46 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark , Virtual Worlds | TrackBack

January 05, 2010

47 USC 230 Year-in-Review for 2009

By Eric Goldman

I will do a more comprehensive year in review for Cyberlaw generally, but I thought it would be fun to take a close look at how 47 USC 230 fared in 2009. This is the first full calendar year following the Ninth Circuit’s en banc Roommates.com opinion, and many of us initially feared that the case would create a huge hole in 230’s otherwise solid immunity. As it turns out, those concerns have not come to pass. If anything, 2009 shows us just how strong the immunity remains.

I blogged on a total of 22 cases issued in 2009 that discussed the statute. (I blog on every case I see that substantively discusses 47 USC 230). I blogged on other cases in 2009 that were decided before 2009, such as the Woodhull v. Meinel case from October 2008 and DC v. Harvard-Westlake, a 2007 arbitrator’s dismissal that came to light in 2009.

Of the 22 calendar year 2009 cases, I would classify 14 of them (63%) as easy defense wins, frequently on a 12(b)(6) motion to dismiss or state law equivalent. Even many of the remaining 8 cases contained good news for defendants. For example, in Shiamili, the defense inexplicably lost at the district court level but got an easy reversal on appeal. The Stayart court granted Yahoo an easy defense win, although co-defendant Various didn’t get the 230 ruling. Similarly, the Barnes case granted the defense an easy 230 win on one theory (negligent undertaking) but denied 230 for a different one (promissory estoppel). The Certain Approval Process case said 230 did not prevent the plaintiff from amending the complaint to add a cause of action, but once added, the court instantly zapped the claim on other grounds.

This leaves four unambiguous 230 defense losses in 2009. The leading 230 defense loss was the Tenth Circuit FTC v. Accusearch case, which held a retailer liable for reselling illicit phone records. The other major 230 defense loss was the NPS v. StubHub case, which held that 230 may not apply to a lawsuit over the alleged illegal ticket scalping by StubHub’s sellers. Both of these cases involve the retailing of illegal items, suggesting that 230’s boundaries may not reach that far.

The other two defense losses are less consequential. The Project Playlist held that 230 does not preempt state IP law claims, a conclusion that deserves note only because the Ninth Circuit held otherwise in the 2007 ccBill case. I believe that no other courts will follow the Ninth Circuit’s rule that 230 preempts state IP laws, making the Project Playlist ruling unsurprising.

In People v. Gourlay, a web host was denied a 230 defense to a criminal prosecution for child molestation- and child pornography-related claims. This case turns mostly on the web host’s active role creating the child pornography (as well as the host’s molestation of the child actor); with that context, this case may have little influence on other cases. Indeed, the court made clear that web hosts providing standard web hosting services could fully qualify for 230 protection against a state criminal prosecution of child pornography dissemination.

In reverse chronological order, a brief overview of the 230 cases from 2009:

Nemet Chevrolet v. ConsumerAffairs.com (4th Cir. Dec. 29, 2009). One of three federal appellate court 230(c)(1) rulings in 2009 (Barnes and Accusearch are the others). A solid defense win for a consumer review website. The plaintiff’s claims that the website contributed to the reviews’ development and fabricated reviews were tossed on a 12(b)(6) motion to dismiss.

Shiamili v. Real Estate Group (N.Y. App. Div. Dec. 17, 2009). In an unpublicized January 2009 decision, the trial court denied a website’s 230 dismissal request for claims based on user-supplied comments. In December, this error was fixed on appeal despite allegations that the website “chooses and administers” the user content.

Dart v. Craigslist (N.D. Ill. Oct. 20, 2009). Craigslist got a big win in its ongoing battles with various government agencies over prostitution ads on Craigslist when the court held it wasn’t liable for those ads.

Riggs v. MySpace (C.D. Cal. Sept. 17, 2009). A goofy case. The court holds that MySpace’s deletion of Riggs’ account was protected by 230(c)(1) on the apparent theory that Riggs (the plaintiff) was the third party supplier of the deleted content. This case would make more sense as a 230(c)(2) case.

Finkel v. Facebook (N.Y. Sup. Ct. Sept. 15, 2009). Facebook wasn’t liable for the contents of a user’s private group even though Facebook placed a copyright notice on the page.

Intellect Art v. Milewski (N.Y. Sup. Ct. Sept. 15, 2009). Ripoff Report wins again.

Stayart v. Yahoo (E.D. Wis. Aug. 28, 2009). An convoluted, and possibly confused, ruling that Yahoo wasn’t liable for search results snippets. However, Various was denied 230 because it may have originated the content in question.

Cornelius v. DeLuca (E.D. Mo. Aug. 18, 2009). An online retailer wasn’t liable for user-supplied comments despite a “conspiracy” allegation.

Goddard v. Google (N.D. Cal. July 30, 2009). This is a follow-on ruling to an important December 2008 ruling in this case, which dismissed the plaintiff’s complaints but gave the plaintiffs another chance. The December 2008 ruling is one of the most interesting and important decisions interpreting Roommates.com. In the July ruling, the judge again found that 230 insulates Google from liability due to allegedly fraudulent ads run through its network and granted a final dismissal.

Doe II v. MySpace (Cal. App. Ct. June 30, 2009). MySpace isn’t liable for users’ sexual assaults on other users.

FTC v. Accusearch (10th Cir. June 29, 2009). The second of three federal appellate court rulings on 230(c)(1). The defendant was an online retailer of illegal phone records. The retailer claimed that the phone records came from third party suppliers and therefore 230 immunized the retailer from liability associated with the records. The court echoed the Ninth Circuit’s Roommates.com decision, effectively extending that case to the Tenth Circuit, and said that the retailer was responsible for selling the illicit phone records despite 230.

Zango v. Kaspersky (9th Cir. June 25, 2009). This is the only 2009 ruling addressing 47 USC 230(c)(2), the overshadowed and frequently overlooked sibling of 230(c)(1). Despite the rarity of 230(c)(2) cases, this case could be fairly influential. The Ninth Circuit held that 230(c)(2) protected an anti-spyware software vendor’s decision to classify software as a threat. If you missed it, you might want to take a look at my presentation slides on 230(c)(2), which distill my deep look at 230(c)(2) this summer.

Gibson v. Craigslist (S.D.N.Y. June 15, 2009). Craigslist isn’t liable for physical injury caused by a gun purchased via a Craigslist ad.

Doe IX v. MySpace (E.D. Tex. May 22, 2009). MySpace isn’t liable for users’ sexual assaults on other users.

Barnes v. Yahoo (9th Cir. May 7, 2009; amended opinion June 22, 2009). The third of three federal appellate court opinions on 230(c)(1). The Ninth Circuit held that 230 preempted a claim against a service provider for negligently delaying the removal of user content (essentially, Zeran redux), but 230 did not preempt a promissory estoppel claim based on promises the service provider made to the person requesting takedown. The initial Ninth Circuit opinion had two other unfortunate digressions: (1) it said that 230 was an affirmative defense that did not support a 12(b)(6) motion to dismiss, and (2) the opinion had ambiguous language implying that 230 preempted only state claims, not federal claims. The amended opinion helpfully eliminated both digressions.

Atlantic Records v. Project Playlist (S.D.N.Y. March 25, 2009). 230 does not preempt a state IP claim—in this case, a violation of state copyright law for pre-1972 sound recordings.

Joyner v. Lazzareschi (Cal. App. Ct. March 18, 2009). A message board operator wasn’t liable for user posts.

Raggi v. Las Vegas Police (D. Nev. March 10, 2009). A union wasn’t liable for messages that union members posted on the union-operated message board.

Certain Approval Programs v. Xcentric Ventures (D. Ariz. March 9, 2009). 230 did not bar amending a complaint to add a new cause of action when the plaintiff also adequately alleged that the Ripoff Report contributed to the creation and development of the content at issue.

People v. Gourlay (Mich. App. Ct. March 3, 2009). This case involves the prosecution of a pornographic web host who also molested the child actor. The web host asserted a 230 defense in trying to overturn the conviction for the charges related to pornography dissemination. Although 230 can preempt state criminal prosecutions, and web hosts are protected by 230 for their ordinary web hosting activities, this web host actively participated in the site’s development and therefore lost 230’s protection.

NPS v. StubHub (Mass. Super. Ct. Jan. 26, 2009). In a long-running battle between the New England Patriots and season ticketholders who want to resell their tickets via StubHub, StubHub was denied summary judgment on 230 grounds. The court cites Roommates.com in saying that StubHub may have contributed to illegal ticket scalping sufficient to potentially disqualify it for 230 protection.

GW Equity v. Xcentric Ventures (N.D. Tex. Jan. 9, 2009). Ripoff Report is protected by 230 even though it offers pull-down menus and manipulates user-submitted reports.

Posted by Eric at 11:45 AM | Derivative Liability | TrackBack

January 04, 2010

Terminated eBay Vendor Gets Day in Court Against eBay--Crawford v. Consumer Depot

By Eric Goldman

Crawford v. Consumer Depot, Inc., 05-3242 (Tenn. County Ct. Dec. 9, 2009)

Essex and Consumer Depot are competitors in the eBay consignment business. According to the court, prior to 2005 Essex used to allow its employees to bid on its auctions, and in 2004 one of its executives was personally suspended for shill bidding. Consumer Depot allegedly accused Essex of shill bidding, sparking a lengthy multi-front battle between the two companies (dating back to summer 2005).

In 2005, eBay suspended Essex for alleged shill bidding. eBay says it made an independent assessment (easily supported because of Essex's past practices) and didn't rely on reports from Consumer Depot. While Essex was negotiating with eBay over possible reinstatement, Essex tried to unload its warehouse by hiring independent contractors who worked very closely with Essex. eBay decided that this end-run was uncool and terminated Essex. Essex eventually sued eBay for the termination.

eBay defended in part on its user agreement. Essex attacked the user agreement in a number of ways, including:

* it never agreed to the user agreement and the company wasn't bound by it. The court says that no one is allowed to sell on eBay without registering for an account, and the registration process requires acceptance of the user agreement. Any employees registering the Essex account automatically bound the corporation. (Cite to the Motise case, briefly discussed here).

* the contract was unconscionable and a contract of adhesion. The court says that although eBay is an important marketplace, people are free to go elsewhere, eBay is free to decline to business with anyone, and in this case Essex was a sophisticated business with experienced principals.

* the contract is illusory because eBay may modify it (see, e.g., the uncited Harris v. Blockbuster). The court rejects this argument because the changes require notice.

* the contract is illusory because eBay can terminate the relationship if it believes that Essex posed a threat to the site's integrity. The court says this provision is sufficiently definite, but only if the court reads into it a "good faith reasonableness" standard for eBay's belief. Further, Essex's multi-year relationship with eBay creates a course of dealing that overlays the agreement. The court’s discussion is a little garbled, but it is clear that the court added a provision to the contract that eBay may exercise its termination right only reasonably and in good faith.

The courts says eBay had an ambiguous anti-shill bidding policy at the time, and Essex alleges that eBay was looking for a big player to use as an example to other vendors. Thus, Essex may be able to prove that eBay "falsely and as a pretext stated that it found Essex guilty of shill bidding."

Based on the modified contract and eBay’s alleged pretextual justifications, the court denies summary judgment to eBay on the contract and state consumer protection claims. Further, the court says that eBay's liability limit clause applies to the contract but not the consumer protection tort claim. With the open damages on the tort claim, this has become a very dangerous lawsuit for eBay. A jury isn’t going to like a shill bidder, but a Tennessee jury isn’t going to like a Silicon Valley bully beating up on a hometown employer either.

My question is: could eBay have successfully defended all claims based on 47 USC 230(c)(2), the statutory protection for filtering decisions? (Not 230(c)(1), which protects against liability for third party content). Policing against shill bidding seems consistent with the spirit of 230(c)(2)--it's something we want service providers to do, and (c)(2) seems to immunize the steps a service provider takes to do so. Perhaps the real core of this dispute is that eBay publicly called out Essex as an example of a shill bidder. This would bring to mind the National Numismatics case where eBay was denied 230(c)(2) for sloppily worded public announcements intimating that some coins were fake when those coins merely didn't satisfy eBay's certification process. If this case is really about eBay’s public callout of Essex for engaging in behavior that violated eBay’s ambiguously worded anti-shill bidding process, then perhaps 230(c)(2) wouldn’t help here either.

Posted by Eric at 04:32 PM | Derivative Liability , E-Commerce , Licensing/Contracts | TrackBack

December 31, 2009

512(f) Claim Dismissed on Jurisdictional Grounds--Project DoD v. Federici

By Eric Goldman

Project DOD, Inc. v. Federici, 2009 WL 4910320 (D. Me. Dec. 13, 2009)

17 USC 512(f) creates a cause of action for sending bogus copyright takedown notices. In a regulatory environment where service providers have itchy trigger fingers, it is crucial to suppress bogus takedown notices or the entire notice-and-takedown scheme becomes easily corrupted. Unfortunately, 512(f) cases have not fared well in the courts, and this one fails (at least temporarily) on procedural grounds. Nevertheless, the case illustrates the challenges faced by service providers dealing with copyright owners who freak out.

[The facts recited by the court are based on the complaint, so they have yet to be contested] The websites at issue are www.advocatesforchildrenintherapy.org and www.childrenintherapy.org run by ACT, both of which are critical of defendant's method of providing psychology services. The plaintiff Project DoD, a non-profit organization which offers "censorship-free hosting" and caters to "the Internet's rejects," hosts the two websites. The defendant sent an incomplete takedown notice, which the plaintiff initially honored but then vacillated. The defendant submitted another takedown notice satisfactory to the plaintiff. The plaintiff sent the notice to ACT, who submitted a counternotification. After the statutory waiting period, the plaintiff restored the two websites.

So far, this looks like a typical notice-and-takedown interaction. Then, the court's recitation of the complaint suggests the situation went off the rails. The plaintiff alleges that the "defendant and others engaged in a course of harassing communications with the plaintiff." Allegedly, at least 6 other individuals--all of whom practice the same psychological methods--sent takedown notices to the plaintiff as well, each of which caused the plaintiff to take down the sites until it received ACT's counternotice and waited the statutory waiting period, at which point they were restored. The defendant also allegedly sent a takedown notice to the plaintiff's upstream connectivity provider, which allegedly has prompted that vendor to contemplate cutting off service to the plaintiff and, by necessity, all of the plaintiff's others customers.

Two other points: the plaintiff takes the position that ACT is engaged in fair use commentary of the defendant's copyrighted works (allegedly necessary to critique the defendant's psychological methods), and there is no mention that the defendant or anyone else has brought a copyright infringement lawsuit against ACT.

The court dismisses the plaintiff's 512(f) claim on jurisdictional grounds, citing the rule that sending a C&D letter does not create jurisdiction in the recipient's home court. That rule makes sense, but it seems inapplicable to the plaintiff's allegations. This lawsuit is not merely about the takedown notices sent to the plaintiff; it is about the alleged harassment campaign designed to kick ACT and its web host off the Internet. Such a harassment campaign should easily qualify under the Calder v. Jones "Effects Test" of expressly targeting harms towards the victim. For this reason, I think the jurisdictional dismissal is a bad ruling.

The court also seemed to misunderstand the point of 512(c)(3) notices because the court says they targeted ACT, not Project DoD as ACT's host. Although the notices superficially target user-supplied content, the notices work mainly because they remove 512's protective shield from the service provider--thus leaving the service provider exposed to becoming a copyright infringement defendant along with the targeted user. Every 512(c)(3) notice is an implicit threat to sue the service provider; the threat need not be made explicitly because every service provider automatically internalizes this threat.

More generally, this case provides a glimpse into some of the anarchy created by 512's notice-and-takedown scheme. The system generally works OK for "mainstream" cases involving commercial copyright owners and commercial service providers (except when copyright owners want more than 512 provides, which leads to the multi-year Viacom v. YouTube litigation). However, 512's balance can break down when applied to other types of disputes, such as this one involving an independent copyright owner going up against an ideologically motivated web host. In those non-mainstream cases, 512(c)(3) notices can (and often are) used to advance goals having nothing to do with protecting copyright interests.

UPDATE: Chris Mooney of Project DoD provides a useful recap of the dispute and the litigation, along with links to source materials.

Posted by Eric at 08:23 AM | Copyright , Derivative Liability | TrackBack

December 30, 2009

Torrent Sites Induce Infringement and Lose DMCA Safe Harbor--Columbia v. Fung

By Eric Goldman

Columbia Pictures Industries, Inc., v. Fung, 2:06-cv-05578-SVW-JC (C.D. Cal. Dec. 21, 2009)

In a potentially significant ruling that got a little lost in the Christmas rush, a federal district court ruled on summary judgment that the “torrent site” Isohunt and related websites induced copyright infringement and were not eligible for the online safe harbors in 17 USC 512. This is one of only a few cases finding copyright inducement post-Grokster, and I believe it is the first to say that an inducement finding categorically eliminates any possible 512 safe harbor. While the loss of Isohunt from the marketplace may not be a big deal, it remains unclear if other, more "legitimate" websites will believe the court's analysis also applies to them. If they do, this case could potentially affect the entire UGC industry.

Background

Fung runs several "torrent" websites, including Isohunt, Torrentbox, Podtropolis and ed2k-it, that facilitate file downloads using BitTorrent (except ed2k-it, which uses eDonkey). As I see it, BitTorrent is the fourth wave of online file sharing:

* the first wave was websites that hosted files themselves
* the second wave was Napster, where the file hosting was decentralized but the operator kept a centrally maintained index
* the third wave was Grokster, Streamcast and their ilk, where both the hosting and indexing was decentralized
* BitTorrent is the fourth wave, where not just the file hosting is decentralized, but also the file serving--in that multiple individual users might contribute to serving a file, not any one single user.

The websites provided a variety of navigational metadata to users, including category tags like “Top Searches,” “Top 20 Movies,” “Top 20 TV Shows,” “Box Office Movies,” “High Quality DVD Rips” and “TV Show Releases,” and the Isohunt website's home page published the list of top 20 films to encourage their uploading. All of these category tags were filled with infringing files, and the plaintiffs introduced a survey claiming that 95% of downloads were infringing. (The court says "the precise percentage of infringement is irrelevant: the evidence clearly shows that Defendants’ users infringed on a significant scale"). The website also included the term "warez" in the metatags.

[An aside: PLEASE PLEASE PLEASE, DON’T USE KEYWORD METATAGS EVER FOR ANYTHING. Google ignores them but judges still think keyword metatags mean something, and at least one technical "expert" (of questionable competence) is erroneously claiming that Google does index them.]

The court also points out Fung’s ill-advised statements, such as a statement that "copyright infringement when it occurs may not necessarily be stealing" and a public acknowledgement that the availability of an infringing file increased traffic. Fung also allegedly provided technical support to users trying to download infringing files and downloaded infringing files himself through the sites. I had thought that most website operators had learned from the Grokster opinion not to say and do such things, but maybe Fung didn't get the memo.

Inducement

We have long wondered how the Grokster opinion would apply to torrent sites. 4 1/2 years ago, right after the Grokster case came out, guest blogger Mark Schultz predicted that the Grokster ruling meant that "Some services that use BitTorrent to promote infringing file sharing for commercial gain, like the now defunct Suprnova.org, are most likely in trouble." It's taken a while to prove him right, but I think he nailed it.

Doctrinally, the court says that inducement is a distinct prong of contributory copyright liability. As a result, the court doesn't talk about the traditional contributory or vicarious infringement tests because 'Defendants’ inducement liability is overwhelmingly clear."

The Legal Standard

The court initially defines inducement as when "the defendant has undertaken purposeful acts aimed at assisting and encouraging others to infringe copyright." Contrast the precise holding of the Grokster Supreme Court opinion, which said that inducement occurs when a defendant "distribute[s] a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement." It's unclear why the court offered its own broader definition of inducement; the court later quotes the Grokster language and explores it in some detail. I believe this court's definition is impermissibly broader than the Supreme Court's standard. At minimum, I expect future courts will adhere to the exact words of the governing Supreme Court precedent, especially when completely bypassing the venerable contributory infringement test.

Direct Infringement

The court starts by determining if website users directly infringe. In FN 18, the court says downloading a file via BitTorrent counts as copyright infringement; "To conclude otherwise would be to elevate form over substance." Fung argued that many website users were located outside the US, so their infringements shouldn't count. I'm not sure about this defense strategy. It wasn't a jurisdictional attack (there were US servers), and even the defense acknowledged (FN 17) that at least a quarter of site users were from the US. The court concludes "Plaintiffs’ evidence conclusively establishes that individuals located in the United States have used Fung’s sites to download copies of copyrighted works," and I don't see how the defendants expected they could establish otherwise.

Inducement

Having found direct infringers, the court cites the following four factors as evidence that the websites induced their infringement:

1) the websites "disseminated a message 'designed to stimulate others' to commit infringements." Supporting facts include Fung’s website statements encouraging/assisting infringement, Fung’s personal campaign to encourage infringement, the “warez” metatags, and various forms of metadata on the website, including honors bestowed on frequent uploading users and taxonomical categories like “Box Office Movie.” With respect to the taxonomical metadata, the court says "Defendants designed the websites and included a feature that collects users’ most commonly searched-for titles. The fact that these lists almost exclusively contained copyrighted works…and that Defendants never removed these lists is probative of Defendants’ knowledge of ongoing infringement and failure to stop this infringement."

2) "directly assisted users in engaging in infringement," such as technical support for users trying to find or enjoy copyrighted works.

The court also attributes the statements of site admins and moderators to the defendants, such as the admins’ technical support to people looking for or downloading copyrighted works. This part of the opinion was especially troublesome. Generally, UGC site moderators are unquestionably independent contractors, not agents, so the website isn't automatically liable for their statements and actions. Here, the court finds an "apparent agency" relationship between the admins and moderators because "Defendants assign this status and give these individuals authority to moderate the forums and user discussions. These individuals were under the control of Defendants and assigned duties related to the administration of the web forums." I believe this is a bad ruling, both normatively and doctrinally (see contrary discussion in, e.g., the Furber and Higher Balance cases in the 230 context). I could see UGC sites deciding to crack down or even eliminate non-employee moderators based on the agency exposure suggested by this opinion.

The court also rejects the defendants’ silly and facially futile First Amendment challenge to the use of the defendants' and moderators' statements as evidence of inducement.

3) the websites’ technical configuration, including the facilitation of BitTorrent downloads and categorization of downloads using "screener" and "PPV" (an acronym for "pay per view") tags, both of which are likely to categorize likely-to-infringe files. Fung also spidered other sites, such as Pirate Bay, to locate more torrent downloads.

4) the websites’ advertising business model where copyrighted works acted as a traffic draw.

The court brusquely rejects the defendants’ argument that infringing activity wasn't taking place on the sites, citing the language from Aimster that "Defendants’ 'ostrich-like refusal to discover the extent to which its system was being used to infringe copyright is merely another piece of evidence' of Defendants’ purposeful, culpable conduct in inducing third party infringement."

The 512 Safe Harbor

Fung's websites link to the actual BitTorrent files, so 512(d) (the DMCA safe harbor for linking to infringing works) theoretically applies. However, this court acknowledges the statutory ambiguity of whether the DMCA 512(c) and (d) safe harbor insulate all three flavors of copyright liability (direct, contributory or vicarious) or just direct infringement. You may recall the recent UMG v. Veoh case indicated that vicarious copyright infringement differed from the safe harbor exclusions, even though both tests use identical words--meaning that the safe harbor had the theoretical capacity to insulate vicarious infringement.

This court starts off with an alternative statutory interpretation:

In many ways, the Digital Millennium Copyright Act is simply a restatement of the legal standards establishing secondary copyright infringement - in many cases, if a defendant is liable for secondary infringement, the defendant is not entitled to Digital Millennium Copyright Act immunity; if a defendant is not liable for secondary infringement, the defendant is entitled to Digital Millennium Copyright Act immunity.

While the court had some weasel words in that statement, it's clear this court thinks the DMCA online safe harbors only insulate against direct infringement, not secondary infringement. The interplay between the safe harbors and secondary infringement remains a multi-billion statutory ambiguity (see, e.g., the Viacom v. YouTube litigation).

As applied to this case, the court proceeded to say that the defendants had the requisite red flags of obvious infringement (or at least turned a willful blind eye to them) to disqualify them from 512 protection. This is a realpolitik conclusion: the court says the websites got 10M visitors a month, at least 25% from the US, who could access files that were 90-95% infringing. Like the Grokster court, the judge couldn't ignore this overall volume of infringing activity, and it says that neither could Fung. The fact that the websites presented metadata about popular downloads only exacerbated the problem. As the court says, "unless Defendants somehow refused to look at their own webpages, they invariably would have been known that (1) infringing material was likely to be available and (2) most of Defendants’ users were searching for and downloading infringing material."

The court concluded by saying that "the statutory safe harbors are based on passive good faith conduct aimed at operating a legitimate internet business," so “inducement liability and the Digital Millennium Copyright Act safe harbors are inherently contradictory.” Thus, the DMCA safe harbors were categorically unavailable to the defense once the court concluded that they had induced infringement.

Although this bright line rule, starkly stated, makes me nervous, it is implicitly consistent with Grokster. After all, the Supreme Court didn't even mention 512 in its Grokster opinion. One way of interpreting that omission is that, as this court says, 512 is irrelevant when inducement applies. Fortunately, this situation may not arise very often given the relative paucity of inducement cases.

Implications

Wired indicates that Fung is mulling an appeal. The opinion does have some goofy quirks, but the Napster precedent might constrain the Ninth Circuit’s doctrinal flexibility. In the end, this looks like one of those cases where the defendants are going down one way or another.

For now, one way to read this case, especially in the context of Napster, Aimster, Grokster and the other P2P file sharing cases, is that courts don't really care how file sharing technology works under the hood. It doesn't matter much if the files are hosted or served centrally or not; they are all legally indistinguishable. Indeed, the court acknowledges as much in FN4, when it says that the ed2k-it website used eDonkey instead of BitTorrent but "'the basic elements of eDonkey and BitTorrent technology play similar roles,' and that the minor technical distinctions are not material to the present dispute."

Consistent with this reading, courts might assume that all P2P file sharing technology is illegitimate under the hood, which shifts the judicial inquiry to the "front end"--how did the defendant’s user interface help users navigate this presumptively illegitimate activity? Viewed that way, this is not a case about the legitimacy of BitTorrent as a technology. Instead, this case is about the legitimacy of a torrent site's marketing and customer relations. Fung's activities didn't pass muster here.

Like the Roommates.com case, this case raises some troublesome issues about the legal consequences of websites providing organizing and taxonomical metadata, such as providing lists of top downloads. This case makes all inferences against the website operators for organizing user activity into metadata when such organization may help highlight infringing activity. I fear that taxonomical metadata is becoming litigation bait--plaintiffs and judges will look there for problems, so website operators may need to beat them to the punch with proactive policing.

The discussion about moderators being agents is also troublesome. I hope other courts will be reluctant to follow this court's results-driven finding of agency. Otherwise, UGC websites should take a careful look at the cost-benefits of their existing moderator programs.

Overall, I believe this opinion reflects an ongoing strain of P2P doctrinal exceptionalism. I can rationalize the Napster ruling (and the many cases trying to follow in its footsteps) only by concluding that P2P copyright law irreconcilably deviates from mainstream copyright law. We have P2P copyright law on the one hand, and mainstream copyright law on the other, and it simply isn’t possible to harmonize them. If I’m right that there exists a branch of copyright law for P2P cases, this case is consistent with a results-driven decision where the court pre-determined that the defendants’ activities was illegitimate and needed to be stopped. Viewed that way, this case does not teach us much about non-P2P copyright law or about how "legitimate" websites should manage their affairs. Instead, I believe Veoh’s successful defenses--including Veoh’s proactive steps to suppress infringing activity--provide more insightful actionable lessons than the strictures of this case.

Posted by Eric at 09:41 AM | Copyright , Derivative Liability | TrackBack

December 29, 2009

Consumer Review Website Wins 230 Dismissal in Fourth Circuit--Nemet Chevrolet v. ConsumerAffairs.com

By Eric Goldman

Nemet Chevrolet Ltd. v. ConsumerAffairs.com, Inc., 2009 WL 5126224 (4th Cir. Dec. 29, 2009)

Introduction

Citing 47 USC 230, today the Fourth Circuit upheld a 12(b)(6) dismissal of defamation and related claims against a consumer review website. This case is noteworthy because the court rejected some common allegations that plaintiffs make to evade 230, so this case may help defendants get 12(b)(6) motions to dismiss more easily.

ConsumerAffairs.com is a consumer review website with a twist: it works in conjunction with a law firm that mines the submitted complaints for potential class action lawsuits. In June 2008, I blogged about the district court's 12(b)(6) dismissal of the case.

Development of the Reviews

Nemet tried two tactics in its complaint to draft around 230. First, it alleged that ConsumerAffairs.com partially developed 20 reviews. Nemet pled:

Upon information and belief, Defendant participated in the preparation of this complaint by soliciting the complaint, steering the complaint into a specific category designed to attract attention by consumer class action lawyers, contacting the consumer to ask questions about the complaint and to help her draft or revise her complaint, and promising the consumer that she could obtain some financial recovery by joining a class action lawsuit. Defendant is therefore responsible, in whole or in part, for developing the substance and content of the false complaint . . . about the Plaintiffs.

These allegations do not survive a 12(b)(6) motion to dismiss.

* the website "structure and design" argument fails, despite Nemet's attempt to invoke Roommates.com, because ConsumerAffairs’ structure was not illegal. To me, the court's discussion reinforces that Roommates.com’ real holding is “If you don’t encourage illegal content, or design your website to require users to input illegal content, you will be immune.” Chalk this case up as yet another citation of Roommates.com for the defense.

* Asking users questions about their posts does not qualify as development.

* The unsupported assertion that ConsumerAffairs edited posts did not pass the Iqbal standard. Plus, as Zeran indicated, 230 protects editorial decisions, so the allegations needed to assert some editing beyond this protected zone.

Review Fabrication

Second, Nemet alleged that ConsumerAffairs fabricated 8 reviews. Nemet pled:

Because Plaintiffs cannot confirm that the [customer] complaint . . . was even created by a Nemet Motors Customer based on the date, model of car, and first name, Plaintiffs believe that the complaint. . . was fabricated by the Defendant for the purpose of attracting other consumer complaints. By authoring the complaint . . . the Defendant was therefore responsible for the substance and content of the complaint.

This allegation has an obvious (and IMO embarrassing) logic flaw. Even if Nemet can't use its records to validate the facts in a consumer review, ConsumerAffairs.com’s fabrication of the post is only one of many possible explanations. The court notes some other possible explanations: "the post could be anonymous, falsified by the consumer, or simply missed by Nemet." (I would also add the possibility of weak recordkeeping by Nemet). To try to get around this logical deficiency, Nemet marshals up some additional allegations:

(1) that Nemet has an excellent professional reputation, (2) none of the consumer complaints at issue have been reported to or acted upon by the New York City Department of Consumer Affairs, (3) Consumeraffairs.com’s sole source of income is advertising and this advertising is tied to its webpage content, and (4) some of the posts on Consumeraffairs.com’s website appeared online after their listed creation date

But all of these facts are non-sequiturs; none of them show that ConsumerAffairs fabricated the posts, and post-Iqbal these allegations are not enough to state a claim. The dissent disagreed with this conclusion (about the alleged fabrication) and would have allowed those claims to proceed.

230 as an Immunity Redux

In FN 4, the court notes that the Seventh Circuit questioned if 230(c)(1) was just a definitional section. Citing Zeran, which addressed this issue explicitly, the court says "Of whatever academic interest that distinction may be, our Circuit clearly views the § 230 provision as an immunity:" As a result, the court "aim[s] to resolve the question of § 230 immunity at the earliest possible stage of the case because that immunity protects websites not only from 'ultimate liability,' but also from 'having to fight costly and protracted legal battles.'" It looks like there could be a brewing catfight between circuits over whether 230(c)(1) is an immunity, an affirmative defense, a definitional section or something else.

Conclusion

Given that this court was bound by the Zeran precedent, it's perhaps not surprising that the court found 230 protection for a consumer review website. Nevertheless, by rejecting another plaintiff’s attempt to make hay from Roommates.com and rejecting weakly supported allegations of fabrication, this court gave defendants even more support to fend off claims that are, at their core, based on third party content.

The updated census of Roommates.com citations:

Roommates.com Cited for Defense (11 cases): GW Equity v. Xcentric, Best Western v. Furber, Goddard v. Google (and second ruling) Joyner v. Lazzareschi, Atlantic Records v. Project Playlist, Barnes v. Yahoo (note: although the case was a partial loss for the defendant, the Roommates.com discussion came in the defense-favorable part), Doe IX v. MySpace, Doe II v. MySpace, Dart v. Craigslist, Shiamili v. Real Estate Group, Nemet v. ConsumerAffairs

Roommates.com Cited for Plaintiff (2 cases): NPS v. StubHub, FTC v. Accusearch

Posted by Eric at 02:53 PM | Derivative Liability | TrackBack

December 26, 2009

November-December 2009 Quick Links, Part 1

By Eric Goldman

Trademarks/Domain Names

* Yahoo and Mary Kay settled Mary Kay's trademark lawsuit over Yahoo's email shortcuts.

* uBID Inc. v. The GoDaddy Group Inc., No. 09-cv-2123 (N.D. Ill. Nov. 5, 2009). uBid’s anti-domain name parking lawsuit failed on jurisdictional grounds. Tom O'Toole explains why this is an unusual jurisdictional ruling.

* Trademark Blog: “Sellify, operator of ONEQUALITY.COM, sues Amazon over Amazon affiliates' alleged misuse of ONEQUALITY.COM as Google keywords.”

* In an unenlightening memo opinion, Second Circuit affirms the Cintas v. Unite Here opinion involving union activists’ web activities using a target company’s trademark. My initial blog post on the case.

* Bloomberg: Buyers of counterfeit luxury goods understand they are getting counterfeits, and many of them upgrade to the real thing eventually.

* Transamerica v. Moniker Online Services, 2009 WL 4715853 (S.D. Fla. Dec. 4, 2009). Domain name registrar does not qualify for ACPA's registrar safe harbor when: "Transamerica alleges that Oversee and the Moniker Defendants, together with the ostensible registrants-the John Doe Defendants-are the de facto registrants of the domain names in question. Transamerica claims that Moniker was not merely acting as a registrant in providing registration services to the John Doe Defendants for the infringing domain names, but instead was part of a scheme to profit from the use of the infringing names. As Transamerica points out, Moniker receives a fee each time an internet user clicks on one of the links attached to the infringing domain sites; such payment establishes at least partial ownership in the domain name." Troubling ruling.

* SafeWorks, LLC v. Spydercrane.com, LLC (W.D. Wash. Dec. 7, 2009). A trademark owner's preemptive registration of domain names containing typographical errors of the registrant's trademarks does not infringe a third party trademarks.

Marketing and Advertising

* In re Gemtronics (FTC ALJ decision Sept 16, 2009). A dietary supplement seller wasn't liable for comments on a website that it didn't own or control but (among other things) it had linked to. While this is great, I still believe the FTC needs to rethink its entire liability scheme of online content endorsement or adoption due to 47 USC 230. See 1, 2.

* Avvo settles Florida bar lawsuit and gets Florida to admit that client testimonials on Avvo aren't lawyer advertising. Rebecca explains why an analogous South Carolina regulation violates 47 USC 230.

* After the FDA spooked pharmaceutical companies to stop engaging in search advertising, the FDA held hearings on Internet pharmaceutical marketing. The Arnold & Porter recap. Ironically, BusinessWeek ran a story wondering if pharmaceutical ads reduce consumer demand.

* The FTC cracks down on online negative option/"continuity plan" offerings.

* In re Miva Inc. Securities Litigation, 2009 WL 3821146 (M.D. Fla. Nov. 16, 2009). The court dismissed a securities class action lawsuit over Miva's/FindWhat's investor disclosures relating to click fraud and spyware. My initial blog post on the case.

* NYT: False advertising litigation is a growth industry.

Search Engines

* A Milwaukee lawyer has alleged that another lawyer buying keyword advertising triggered by his name violates his publicity rights. I’ve posted the complaint to Scribd.

* Google is now personalizing search results for everyone, not just logged-in users. In 2006, I wrote about how universal personalization would affect SEO and concerns about search engine bias. Danny Sullivan believes Google’s change deserves "extraordinary attention."

* Google took out an ad from itself to explain why its image search results for Michelle Obama contained an offensive result. This is after it first tried to remove the image on the pretext that the website was hosting malware.

* Danny Sullivan asks some good questions about Google's integration of Twitter into its search database.

* BusinessWeek: Matt Cutts, Google’s search engine anti-spam superstar, talks about his job. He doesn't sound like the most fun person to travel with

* Rose Hagan, Google's chief trademark counsel, is retiring after 7 years at Google. She leaves behind big shoes to fill.

Posted by Eric at 02:59 PM | Adware/Spyware , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 22, 2009

Ripoff Report Not Bound by Takedown Injunction Against User--Blockowicz v. Williams

By Eric Goldman

Blockowicz v. Williams, 1:09-cv-03955 (N.D. Ill. Dec. 21, 2009)

Last month, I wrote about the interaction between 47 USC 230 and FRCP 65. FRCP 65 says that anyone acting in concert with a litigant is obligated to honor an injunction against the litigant. 47 USC 230 says that websites can't be liable for user content. So, if a user is ordered to take down content he/she publishes on a third party website, must the publishing website comply with the order per FRCP 65, or it is free to ignore the injunction due to 47 USC 230?

To be fair, this issue only arises when a website won't voluntarily remove user content. As we know, many websites instantly fold when sent a nastygram, irrespective of 47 USC 230's protection, and even those that don't usually will cheerily comply with a court order. So to encounter the problem, a website would need an absolute no-takedown policy--even if the user requests the takedown, and even in the face of a court order against the user. Few websites have such absolute policies.

The Ripoff Report is one of those websites, however, and they ran into this issue recently. An individual posted allegedly defamatory remarks about the plaintiffs on Facebook, MySpace, complaintsboard, Ripoff Report and other websites. I believe these are the posts at issue (1, 2)--definitely not nice postings if untrue, and as usual for Ripoff Report, they showed up as top search results in Google (in case you're wondering, I nofollowed my links). The plaintiffs got a default judgment against the poster. The judgment included a takedown order, which the plaintiffs presented to Ripoff Report and the other websites. All of the other websites complied with the takedown order, but the Ripoff Report refused. Instead, the Ripoff Report argued (among other things) that it is not acting in concert with the poster and 47 USC 230 protects its publication decisions.

Surprisingly (to me), the judge agreed with the Ripoff Report. The judge skirted the 230 issue, instead concluding that Ripoff Report's relationship to the user is too "tenuous" (by entering into a user agreement for content publication) to constitute "acting in concert" under FRCP 65.

The court expressly acknowledges that its ruling means that defamatory content could be categorically immune from legal challenge: "The court is sympathetic to the Blockowiczs’ plight; they find themselves the subject of defamatory attacks on the internet yet seemingly have no recourse to have those statements removed from the public view." Although this is the right doctrinal result, the normative issues are still gnawing at me. I'm troubled that online content could be categorically off-limits from compelled takedown based on a service provider’s choices. In some circumstances, continued publication may not be the right result.

UPDATE: Comments from Nate Anderson at Ars Technica (including a more thorough recitation of the case's factual background) and Ben Sheffner (including links to many of the source materials in the case). It's crucial to understand that the judge's ruling turned solely on a statutory interpretation of FRCP 65 and not on how 47 USC 230 might interact with FRCP 65. So, in that sense, 230 is irrelevant to the question at hand. At the same time, as Sheffner notes, that interaction becomes relevant only because 230 bars a claim against the service provider.

Also, as much as I know people enjoy beating up on Ripoff Report, we should not forget that an integral part of this issue is Google's remarkably favorable indexing of Ripoff Report pages.

Posted by Eric at 06:44 PM | Derivative Liability | TrackBack

December 21, 2009

Website Initially Denied 230 Dismissal But Gets It on Appeal--Shiamili v. Real Estate Group

By Eric Goldman

Shiamili v. Real Estate Group of New York, Inc., 2009 WL 4842470 (N.Y. App. Div. Dec. 17, 2009)

Unfortunately, I am only working from a short and opaque appellate memo. It appears that the defendant operated a website that "administered and chose" to publish user comments. A third party posted an allegedly defamatory comment about the plaintiff, an NYC real estate broker, to the website. On this basis, we know that the website isn't liable for the post per 47 USC 230. I don't think I could do a comprehensive census of message board/user comment cases, but similar defense wins in the past 5 years include Finkel v. Facebook, Cornelius v. DeLuca, Joyner v. Lazzareschi, Raggi v. Las Vegas Police, Higher Balance v. Quantum, Best Western v. Furber, Gregerson v. Vilana, Universal Communications System v. Lycos, Eckert v. Microsoft, DiMeo v. Max, Hammer v. Amazon and Faegre & Benson v. Purdy (wow, this list is a blast from the past!). I'm not including the pure web hosting cases or any of the Ripoff Report cases, yet I'm sure there are other cases I'm forgetting. Indeed, given the airtight nature of the precedent, I personally think plaintiffs should be sanctioned for bringing such meritless cases.

Instead, the lower court initially denied the defendant's motion to dismiss in January 2009. Because this case is in state court, I don't have easy access to the state court opinion to see how the judge got it wrong. Fortunately, in a brief and unanimous opinion, the appellate court corrected this rogue trial court judge and dismissed the case per 230. Because the appellate opinion is so brief, I'm going to quote the court's substantive application of 230 to this case in its entirety:

Plaintiff's claim is barred by the CDA. The complaint makes no allegation that defendants authored any defamatory statements. It merely alleges that defendants “choose and administer content” that appears on the Web site. This is precisely the kind of function that the CDA immunizes ( see e.g. Fair Hous. Council, 521 F3d at 1173-1174; Batzel, 333 F3d at 1031). Even accepting as true all of plaintiff's allegations and giving it the benefit of all favorable inferences ( see Leon v. Martinez, 84 N.Y.2d 83, 87-88 [1994] ), the complaint does not raise an inference that defendants were “information content providers” within the meaning of the CDA. Plaintiff argues that defendants engaged in a calculated effort to encourage, keep and promote “bad” content on the Web site. However, message board postings do not cease to be data “provided by another information content provider” merely because “the construct and operation” of the Web site might have some influence on the content of the postings ( see Universal, 478 F3d at 422; see also Chicago Lawyers' Comm., 519 F3d at 671-672; Carafano v. Metrosplash.com, 339 F3d 1119, 1124-1125 [9th Cir2003] ).

Where, as here, there is no allegation that defendants authored the defamatory statements, it is not appropriate to permit discovery to determine if a cause of action exists ( see Walsh v. Liberty Mut. Ins. Co., 289 A.D.2d 842, 844 [2001]; see also Universal, 478 F3d at 425-42; cf. Fair Hous. Council, 521 F3d at 1174).

Two observations:

1) I believe there are some folks who believe that a website becomes liable for any user content it "encourages." This is one possible reading of Roommates.com, and it underlies the government enforcement agencies' (e.g., SEC and FTC) content endorsement theories. However, I don't see precedent supporting that proposition at all. This case, like so many others, doesn't care if the website encourages the allegedly tortious content. Instead, the only relevant inquiry is whether the content originated from a third party. If so, 230 applies without any need for further inquiry.

2) This is yet another case where the court cited Roommates.com in favor of the defense. The updated census of Roommates.com citations:

Roommates.com Cited for Defense (10 cases): GW Equity v. Xcentric, Best Western v. Furber, Goddard v. Google (and second ruling) Joyner v. Lazzareschi, Atlantic Records v. Project Playlist, Barnes v. Yahoo (note: although the case was a partial loss for the defendant, the Roommates.com discussion came in the defense-favorable part), Doe IX v. MySpace, Doe II v. MySpace, Dart v. Craigslist and now Shiamili v. Real Estate Group

Roommates.com Cited for Plaintiff (2 cases): NPS v. StubHub, FTC v. Accusearch

The 10th Circuit beachhead for Roommates.com is troubling, but overall I think it's entirely clear that Roommates.com has not changed 230 jurisprudence in any meaningful way--except that it may be giving plaintiffs false hope of success and causing them to overinvest in their cases.

UPDATE: The trial court opinion, which quotes some of the allegedly defamatory posts.

UPDATE 2: The complaint. This has a full list of the alleged defamatory postings. It also indicates that the venue in question was a website/blog called "shittyhabitats.com," apparently now defunct. The archive.org page from Feb. 2, 2007 and Feb. 5, 2008.

Posted by Eric at 09:18 AM | Derivative Liability , Internet History | TrackBack

December 18, 2009

Top Cyberlaw Developments of 2009

By John E. Ottaviani

(Thanks to Eric for letting me post this list here!)

[Eric's note: some of you may recall John, a regular blog guest contributor from 2005-07. It's great to have another contribution from him.]

Eric will post his own list later, but I thought we could start off the holiday season with one person’s view of the top Cyberlaw developments of 2009. It was an interesting year. While intellectual property issues continue to dominate, and we continue to see plaintiffs and their attorneys running smack into Section 230 of the Communications Decency Act, we’ve also seen developments in the areas of Constitutional law, criminal law, and state and federal regulation. So, let’s recap 2009. Unlike David Letterman’s lists, this list is in no particular order of importance.

1. File Sharing Decisions.

After years of lawsuits against file sharers, we finally have two trial decisions. Both held against the peer-to-peer file sharers. Jammie Thomas managed to turn a 2007 verdict of $222,000 (which was later thrown out due to a mistrial) into a 2009 verdict of $1.29 Million. Her motion to reduce the award is pending.

Joel Tenenbaum received more favorable treatment and was subjected to only a $675,000 jury verdict after he admitted liability and his fair use defense was rejected by Judge Gertner. His motion to appeal/reduce the award is due to be filed in early January. Judge Gertner wrote a compelling decision urging Congress to modify the strict liability consequences of new technologies such as peer-to -peer file sharing. In her decision rejecting the fair use defense, Judge Gertner implored Congress “to amend the [Copyright Act] to reflect the realities of file sharing. There is something wrong with a law that routinely threatens teenagers and students with astronomical penalties for an activity whose implications they may not have fully understood. The injury to the copyright holder may be real, and even substantial, but, under the statute, the record companies do not even have to prove actual damages.” We’ll see if Congress listens.

2. Rise of Copyright First Sale Doctrine.

There were several decisions that turned on applications of the copyright “first sale” doctrine to new online situations. Section 209(a) of the Copyright Act permits the owner of a lawfully made copy of a work to sell or dispose of that copy without the consent of the copyright owner.

First, the held that resales of the AutoCAD software were permitted under the first sale limitations in Section 109(a). The court found that although the underlying documents were styled as “licenses,” the fact that the licensee was entitled to perpetual possession of the copies was the key fact.

We also had two cases (John Wiley & Sons; Pearson Education v. Liu) dealing with the importation of copyrighted works (mostly textbooks) printed abroad and then imported into the United States for sale. Two courts said these transactions are not protected by the first sale doctrine because of the importation provision in Section 602. The courts so far have been following dicta in the Supreme Court’s 1998 Quality King case that goods manufactured overseas and then imported are not protected by the first sale right, despite their reluctance to do so. We may get a resolution of this issue in 2010. The U.S. Supreme Court has invited the Solicitor General to file a brief in the Costco Wholesale Corporation v. Omega, which is on a petition for certiorari to the Ninth Circuit Court of Appeals.

A third entry is Apple v. Psystar. Psystar specialized in creating copies of Apple’s Macintosh OS-X operating System and loading them onto Mac “clones.” The court rejected the first-sale doctrine defense because Psystar’s copies of the Macintosh OS-X operating system were not “lawfully made” within the meaning of Section 109. The parties subsequently settled all claims except for copyright infringement, and Apple obtained a permanent injunction against Psystar.

3. Demise of “Use in Commerce” Defense in Keyword Cases.

In Rescuecom v. Google, the Second Circuit reversed the district court and said that Google’s sale of trademarked keywords as ad triggers constitute a “use in commerce.” This probably is the end of the “use in commerce” defense in keyword advertising cases, which will now turn more on likelihood of confusion (or initial interest confusion) factors.

4. Internet Gambling.

Internet gambling continues to be regulated by a tangle of federal laws ill-adapted for the purpose. Some of the laws date back to the 1961 adoption of the federal Wire Act. This is an areas where Congress should really clean things up, especially with criminal liability sometimes at stake.

Proponents of online gambling took a couple of hits in 2009. In Interactive Media Entertainment and Gaming Association v. Holder, the Third Circuit upheld challenges to the Unlawful Intent Gambling Enforcement Act (UIGEA) on Constitutional grounds. The UIGEA does not prohibit Internet gambling, but does prohibit gambling businesses from accepting financial payments in connection with bets that are illegal under any federal or state law. (This Act has effectively forced legitimate offshore gambling sites to stop taking bets from the United States). The Third Circuit held that the phrase “unlawful Internet gambling” is not vague, and that there is no Constitutionally protected privacy right to gamble in one’s home.

Earlier in the year, the Department of Justice ordered four banks to freeze over $34 million in payments owed to about 27,000 poker players. Although the legality of online poker in the United States is a gray area, the DOJ takes the position that online poker games are prohibited by the federal Wire Act. The DOJ position runs counter to several court decisions that have refused to apply the Wire Act to non-sports related Internet gambling. After the funds were seized, the affected poker sites reportedly reimbursed the players the money that was seized.

5. State Attempts to Regulate the Internet.

This trend, a favorite target of Eric’s ire, continued in 2009. Some more notable attempts include Maine’s passage of a little COPPA Act, banning the use of personal information about minors for marketing purposes (which the Maine Attorney General then refused to enforce), Kentucky’s seizing of domain names associated with alleged gambling websites (the legality of which is pending before the Kentucky Supreme Court), and Utah and other state’s attempts to put sex offender information online or require sex offenders to register websites to which they belong and their passwords.

6. Attempts to Criminalize Breaches of Terms of Use.

Lori Drew created a fake MySpace profile to humiliate a 13-year-old neighbor girl and was subsequently blamed for the girl’s suicide death. Drew was convicted of three misdemeanor counts of unauthorized access to computers under the federal Computer Fraud and Abuse Act for violating MySpace’s terms of service. In United States v. Drew, the court dismissed Lori Drew’s conviction, concluding that MySpace’s terms of service were Constitutionally vague. The result is not surprising, because terms of service are not generally written with criminal prosecution in mind. The MySpace terms at issue prohibited a wide variety of conduct but did not explain what activities would make a user’s access “unauthorized”. The user’s conduct was reprehensible, but not criminal.

7. Online Endorsements.

In October, for the first time since 1980, the Federal Trade commission updated its guidelines for advertisers on how to keep their endorsements and testimonial advertisements in line with the FTC laws. The new guidelines explicitly target online endorsements by bloggers and others who receive cash or in-kind payments to review a product. Bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. While the new guidelines caused a stir among bloggers, they seem to be a reasonable extension of the FTC’s disclosure guidelines in other contexts

8. DMCA Take-Down Notices.

In UMG Recordings v. Veoh Networks, we received some further guidance on what constitutes a proper take-down notice. Here, the court said the copyright owner has the burden of identifying “potentially infringing materials.” A letter merely listing recording artists whose works were allegedly infringing did not give the Internet Service Provider actual knowledge of infringement because the letter does not comply with the DMCA requirements. The court also said that the ISP was not on general notice of copyright infringement just because the website allows users to post music files, which are frequently infringing content.

9. Section 230 of the Communications Decency Act.

There are too many cases to list here, and I am sure Eric has done (or will do) his own exhaustive compilation. The courts clearly expanded the scope of the Section 230 defense in various Craigslist cases (no liability for advertisements for guns or prostitution).

Barnes v. Yahoo showed us that service providers should not make statements and then not follow though. In that case, the plaintiff’s ex-boyfirend created fake personal ads for her on Yahoo and impersonated her in various online forums. She asked Yahoo to take the information down,. A Yahoo employee told her that Yahoo would take the profile down, but Yahoo did not do so until after the complaint was filed.. The Ninth Circuit upheld Yahoo’s Section 230 defenses for claims that Yahoo had an obligation to take the fake profiles down, and that Yahoo did not try to remove some objectionable material. But the court did permit the plaintiff’s claim to go forward that Yahoo had breached its oral contract with her to take the material down, which the Court held amounted to a modification of the “baseline” Section 230 rule.

10. Right to Privacy.

When someone publishes something on a MySpace website without her full name, and then deletes the post, does she have an expectation of privacy? In Moreno v. Hanford Sentinel, Inc., the California Court of Appeals said no. Here, the plaintiff posted an essay that was derogatory of her home town on her MySpace page and then deleted it six days later. In the meantime, the principal at the local high school saw the posting and submitted the poem to a local paper, where the editor (a friend of the principal) published the poem in the Letters to the Editor column and signed the plaintiff’s full name to it. The author and her family received death threats and her father had to close a 20-year old family business. However, the California Court of Appeals ruled that the principal did not invade the author’s privacy by handing the posting to the editor, and further held that the editor did not violate the author’s rights when it published her full name. (The case was remanded in order to address a claim of intentional infliction of emotional stress.)

Let’s hope 2010 brings even more exciting Cyberlaw developments. We have the potential for two Supreme Court rulings, in the Costco case (discussed above) and the Bilski case, which may address the validity of business method patents.

Posted by John Ottaviani at 07:04 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Licensing/Contracts , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 17, 2009

Barnes v. Yahoo Survives Dismissal Motion on Remand

By Eric Goldman

Barnes v. Yahoo!, Inc., 2009 WL 4823840 (D. Or. Dec. 11, 2009)

You recall Barnes v. Yahoo, the case where Yahoo promised to promptly take down a fake profile created by a third party but didn't do so. The district court initially dismissed the case on 47 USC 230 grounds, but the Ninth Circuit reversed in an opinion that stirred up some trouble due to its sloppy 230 discussion. The Ninth Circuit subsequently fixed its worst excesses in an amended opinion and sent the case back to the district court with a revived promissory estoppel claim. Following that ruling, Barnes amended her complaint and Yahoo sought to dismiss it.

The district court opinion addresses three points:

1) The Ninth Circuit had not validated Barnes' promissory estoppel claim but only concluded that a 230(c)(1) defense wasn't available.

2) Barnes sufficiently alleged reliance when she diffused the media coverage of her story based on Yahoo's takedown promise.

3) Barnes sufficiently alleged that she detrimentally changed her position due to Yahoo's promise because the fake profiles were online longer.

I am a little surprised to see Yahoo even try the motion to dismiss. I think this case is a great candidate for settlement.

The case library:

* Amended Ninth Circuit Opinion
* Barnes' petition for rehearing
* Public Citizen et al amicus brief in support of rehearing
* Yahoo's petition for rehearing
* Ninth Circuit opinion and my blog post on it
* Ninth Circuit oral arguments
* District court opinion and my blog post on it
* Barnes' response to Yahoo's motion to dismiss
* Yahoo's brief in support of its motion to dismiss
* Yahoo's motion to dismiss
* Yahoo's notice of removal to federal court (which contains Barnes' initial complaint)

The Justia page has even more materials from the district court proceedings.

Posted by Eric at 09:19 AM | Derivative Liability , Licensing/Contracts | TrackBack

December 11, 2009

Denver University “Cyber Civil Rights” Symposium Recap

By Eric Goldman

The week before Thanksgiving, I attended an unusual symposium sponsored by the University of Denver Law Review entitled “Cyber Civil Rights: New Challenges for Civil Rights and Civil Liberties in our Networked Age.” The symposium covered standard Cyberlaw topics, but the raison d'être was University of Maryland law professor Danielle Citron’s two recent articles on online harassment of women: "Law's Expressive Value in Combating Cyber Gender Harassment" (Michigan Law Review) and "Cyber Civil Rights" (Boston University Law Review). It is unusual for a law school to celebrate another school’s professor and her research, especially when the professor is fairly junior. Nevertheless, Danielle’s participation brought together academics from both the Cyberlaw and civil rights communities, which provided a rare and interesting mix of folks..

First Panel

Danielle Citron started off by recapping her two papers. Online participation, such as blogging, is essential to professional standing, and employers are reviewing online profiles of prospective employees as part of their hiring considerations. However, women are being targeted for abuse online. These attacks are harming women by changing their online and offline activities, reducing their job opportunities, and causing women to change their gender representations online. Further, folks are trivializing these problems. Women are underreporting the attacks, and law enforcement only intervenes when there are offline harms. New laws can serve an expressive function to communicate that online attacks against women are socially unacceptable. The new laws can validate women’s feelings that they have been harmed and encourage law enforcement to pursue more cases.

Commenting on the papers, Robert Kaczorowski of Fordham Law (and Danielle’s stepdad) made an extended analogy between the Ku Klux Klan and cybermobs.

Wendy Seltzer asked if we could deemphasize the effect of words rather than prohibit them. Danielle responded that we don’t know how seriously to take any particular threat.

An audience member asked if is there a difference between mobs and individual actors who are just taking advantage of being anonymous. Danielle answered that groups can become more extreme online. I think this point deserves more exploration: a series of uncoordinated individual decisions to “pile on” to an attack can look like a coordinated attack to the victim. This is part of why I thought the KKK references were puzzling—KKK activities are clearly coordinated, while online attacks against women can succeed without any coordination or ongoing connection between the attackers.

Paul Ohm argued that that legal solutions are better for cyber civil rights problems than technological solutions. Paul discussed what he labeled “Felten’s Third Law.” (He doesn’t know of two earlier laws named for Ed Felten; he just assumes they exist given Ed’s impressive and influential oeuvre). As articulated by Paul, Felten’s Third Law is that in Cyberlaw conflicts, lawyers love technical solutions and technologists love legal solutions. In other words, we love the solution we don’t know because we assume it has to be better than the one we do. As both a law professor and technologist, Paul picks law over technology for these problems.

Paul categorically rejects any technical solution that would create a “fully identified Internet.” For example, we should not mandate server log retention because we know the logs will be co-opted to regulate other forms of unwanted content, not just online harassment.

Wendy Seltzer discussed the unintended consequences of legal intervention. For example, mandatory Internet filtering in school libraries hasn’t stopped kids from bypassing the filters, but it has facilitated a marketplace for improving filtering technologies that has benefited repressive regimes. Another example: anti-circumvention technology fails to restrict copying but has reduced innovation around DRMed content. Wendy also noted how norms can help curb abuses. For example, while there are online cesspools, she praised Wikipedia’s evolving guidelines for living people’s biographies.

In response, Danielle admitted that her solutions need to be more surgical. She said she might consider moving from a notice-and-takedown model to a notice-and-preserve model for intermediaries.

Second Panel

This panel was composed of three women academics from the civil rights community, so it was a noticeable shift from the typical Cyberlaw academic discussion.

Mary Anne Franks is a University of Chicago Bigelow Fellow and soon-to-be full-time law professor. She expresses our collective disappointment that cyberspace isn’t a utopia that allows people to escape offline discrimination and harassment. She laments that women can lose control of their identities online, such as when someone creates a fake online profile in their names.

She then addressed how cyberspace is unique/special/different with respect to gender harassment. Many commentators try to duck cyberspace exceptionalism, so it was refreshing to see her tackle the issue squarely. Existing offline discrimination/harassment laws assume interactions between repeat players at work and school; online harassment can be divorced totally from any existing social networks. However, because the online activities still harm targeted individuals at work and school, we should treat the harms the same. Offline, there are switching costs to changing jobs or school; online, search engines’ consolidation of results for search on a person’s name creates a different type of switching cost. In terms of supervisory power, she thinks web operators have analogous control to employers or school administrators. Thus, when web operators receive notice of online harassment, they should have a duty to do something about it. Offline, employers can develop a variety of responses and policies to combat workplace harassment. Web operators should have similar latitude; for example, they can delete offending posts or suspend/ban accounts.

Helen Norton, a University of Colorado law professor, did not share Danielle’s optimism (expressed in her first article) that existing discrimination laws can curb online harassment. Instead, Helen thinks a new civil rights statute is needed, but she might limit its remedies to exclude money damages. Helen is pessimistic that there will be regulation any time soon, noting that it can take years to enact civil rights legislation. Helen would also like to see more precise definitions of the exact harms that women are experiencing only online.

Nancy Ehrenreich, a Denver University law professor, began her talk by saying that we should not overstate the Internet’s benefits. She then clarified that we should not assume that disadvantaged folks can overcome barriers online. For example, we impose cultural categories on people in every interaction, so even if people try to mask their identity online, they can’t really escape. She wondered why we aren’t talking about an anti-discrimination law for the web. Her concern is that discrimination denies individuals access to the Internet.

In Q&A, Paul Ohm observed that civil rights scholars often invoke free speech as the countervailing concern to their desired regulations, but Cyberlaw scholars are often more interested in other “generative” effects of the Internet, such as new business models, new labor models and new modes of production.

Panel 3

James Grimmelmann (see his slides) started with the Skanks in NYC case. In that case, the defendant criticized someone else in her social network on a blog, calling the plaintiff (among other unflattering things) a “skank.” The plaintiff sued to obtain the blogger’s identity. After a successful unmasking, the plaintiff dropped the lawsuit, having successfully publicly shamed the blogger.

James hypothesized that this unmasking and shaming was an appropriate remedy—the blogger got shamed (like “an eye for an eye”), and unmasking is a better outcome than other legal remedies like damage suits. James then posited a thought exercise that provided plaintiffs with an expedited unmasking procedure if they drop any damages claim. This would have a number of benefits. Unmasking curbs online harassment is especially effective at busting online mobs. Also, an unmasking remedy avoids messy debates over the First Amendment’s scope, and it may be more desirable than trying to hold online providers liable.

Having advanced his own strawman, James then cut it down. In some cases, defamation remedies may be more desirable, and plaintiffs may not know that until they learn the putative wrongdoer’s identity. In other cases, plaintiffs who just want unmasking would appreciate a lower legal hurdle. Also, we provide legal protection for anonymity for good reasons.

James’ lessons from the thought exercise: we should consider ways to decouple an unmasking remedy from litigation. At the same time, we need to protect defendants from pretextual unmasking; in some cases, retaliation is a big concern, and we should incorporate this concern into the unmasking decision.

From Chris Wolf’s talk (see his full remarks), the most interesting thing I learned is that 18 states have laws banning wearing masks in public, enacted to suppress KKK activities. This was the second speaker’s KKK reference of the day, and it made me wonder if we were experiencing some variation of Godwin’s Law.

Panel 4

Viva Moffat observed that secondary liability issues generate the most heat in online harassment discussions. She expressed concern that imposing legal duties on third parties may not help law’s norm-shaping effect, and it’s not appropriate to impose liability just because the provider has deeper pockets or the direct actor can’t be found. She also suggested that imposing liability on third parties creates a greater risk of collateral damage than direct liability. [Note: I would like to know more about this last assertion. I suspect we cannot make a utilitarian calculation a priori]. As a result, she favors focusing more efforts on sharpening direct liability.

Ed Felten talked about identifying and anonymizing online activity. He explained the usual sequence of events in chasing bad online content:

log file => IP address => identity => justice

But the IP address => identity step breaks down when users use an anonymizing proxy or the user’s network uses network address translation (used by home wireless routers or in coffee shops) and all connected devices’ requests share a single IP address. He said that a majority of Internet connections use NAT.

Because IP address tracebacks can dead-end at the intermediary, an IP address can reveal too little information. However, even when users aren’t investigatory targets, IP addresses can reveal too much information, such as geolocation. This paradox—IP addresses simultaneously reveal both too much and too little information—reflects that the IP address system was built for routing, not identification. So could we design a better authenticating technology?

He then conducted a “semi-realistic” thought experiment of a new technological “tag” that could be used instead of IP addresses. This tag could have the following attributes:

* can be placed by any intermediary
* conveys no information about the sender unless unwrapped by the intermediary (presumably for good legal cause)
* unwrapping the tag yields the best identity information the intermediary has
* the tag’s use is voluntary as a technical matter
* the tag is removable as a technical matter

I then batted clean-up. A summary of my remarks:

Today’s conversation has revisited long-standing Cyberlaw issues, such as:

* anonymity v. accountability, and who should be responsible for online content and actions
* cyberspace as a physical place. See, e.g., Noah v. AOL (an online discrimination case), National Federation of the Blind v. Target (also an online discrimination case) and Estavillo v. Sony
* cyberspace exceptionalism and cyberspace utopianism (on the latter point, see my article on search engine utopianism)
* when is the optimal time to regulate rapidly evolving technology? Early, when the technology is still in its infancy, or later, when market forces and new technological evolutions may have cured the early problems?

Danielle’s articles convinced me that women are experiencing serious harms online that men—including me—could easily trivialize. Danielle’s articles also convinced me that online harassment has strong parallels to the 1970s legal evolution of workplace harassment doctrines, where a big part of the battle was to get people to take the harms seriously.

While I find a lot of descriptive value in Danielle’s work, the normative implications are not as clear. As usual with attempts to regulate rapidly evolving technology, there are many important but overwhelmingly hard definitional challenges, such as who is an “intermediary,” what are “online mobs” and what constitutes online “harassment.” For example, I do not think the Skanks in NYC incident is an online harassment case or an “attack,” but James Grimmelmann’s talk assumed those characterizations.

While we can debate what should be the right level of regulatory intervention, we should not overlook that Congress already enacted a law squarely governing intermediary liability for online harassment: 47 USC 230. The angst that prompted this conference—bad behavior online—is the logical consequences of 230’s broad immunity. The statute enables websites to adopt policies that they will not police user content or retain server logs of user activity. These choices aren’t a surprise or a per se abuse of the immunity; instead, they are the unavoidable implications of Congress’ action.

We might question Congress’ wisdom in adopting 230, but we should not diminish its potential importance to the Internet as we know it. [In Q&A, Chris Wolf asked about the comparative experience in countries that don’t have such broad immunity. In those countries, we know that websites take down user content much more freely, and I believe that the most interesting UGC innovations are all taking place here in the US, not countries with more restrictive UGC liability.] I can, at most, only prove correlation and not causation, but I believe 230 is one of the main causal reasons why the Internet has succeeded so well.

When I speak around the country about 230, I often encounter folks who generally accept 230’s immunity scope but want just one new exception, i.e., their pet topic. If everyone got their “just one” exception, the law would be eviscerated. (I said it would be Swiss-cheesed to death; maybe I should have said it would be overcome by a thousand duck bites). I’m not rejecting new exceptions categorically (they should be each considered on their own merits), but in aggregate 230’s immunization benefits are actually quite precarious. I believe 230 works precisely because of its strength and simplicity, so adding more exceptions could significantly reduce its efficacy.

I concluded my remarks by observing that online harassment is a subspecies of bullying and incivil behavior in our society. While we can and should work to curb online harassment, I am more interested in addressing bullying and incivility in all its forms, wherever it takes place.

In this regard, I have been impressed by how my son’s school is proactively addressing bullying. See more about this effort, called Project Cornerstone. The school is teaching kids not to bully or to tolerate being bullied, and the project gives bullied kids tools to go on the offensive against bullies. There’s no guarantee that anti-bullying programs will work in the short or long run, but I remain hopeful that online harassment today partially reflects that many current Internet users never got any anti-bullying education. Perhaps, then, online harassment issues will naturally abate (without any regulatory intervention) as new generation of Internet users, better educated about bullying, come onto the Internet.

Following my remarks, we had more Q&A.

Paul Ohm Q: Some cyber folks argue against secondary liability because they believe that a victim can pursue a direct action, but Ed’s talk suggests that user anonymity will continue to be possible.

Mary Anne Franks: civil rights isn’t about individual claims because victims have to bear too high a burden to pursue claims. Instead, civil rights are about changing large-scale social norms. The goal is to achieve anti-discrimination by any means necessary. Thus, civil rights scholars have already discussed and concluded that it’s appropriate to impose liability on intermediaries like employers and schools.

Danielle: intermediaries are the lowest cost avoiders.

James Grimmelmann: no, the harassers are the lowest cost avoiders. Civil rights folks would get more support from the Cyberlaw crowd if they focused their regulatory desires towards intermediaries who are in active concert with the bad actors.

Danielle's Wrap-Up

We all agree that:

* education can make a big difference
* online communities need to self-police
* there are numerous limits to using the law as a solution, including that lawsuits don’t make sense and 230’s immunity.

We don’t agree on what to do next. There are First Amendment limits, and technology doesn’t offer any panaceas.

Posted by Eric at 07:12 AM | Content Regulation , Derivative Liability , Internet History , Publicity/Privacy Rights | TrackBack

December 08, 2009

Record Label Sues Google and Microsoft for Linking to Infringing Music--Blues Destiny v. Google

By Eric Goldman

Blues Destiny Records LLC v. Google, Inc., 3:09-cv-00538-WS-EMT (N.D. Fla. complaint filed Dec. 7, 2009) [warning: 1.5MB PDF]

Blues Destiny Records, a small Blues music label, doesn't like RapidShare, a website that allows users to publish files, because users are posting its copyrighted music there. It also doesn't like that people who search for the label's artists in Google and Microsoft get search results that link to sites that link to allegedly infringing copyrighted copies on RapidShare. The complaint was ambiguously worded in describing whether Google and Microsoft directly link to RapidShare or only indirectly link to sites that link to RapidShare, but my own searches indicated that Google's search results did not take searchers directly to RapidShare. So I believe the information flows are something like this:

Uploading user => RapidShare => site linking to RapidShare => search engine => searcher/downloading user, who goes to linking site and then follows the link to RapidShare to complete the allegedly illegal download

As is typical for lawsuits of this nature, the copyright owner didn't sue either the uploading or downloading users. The copyright owner also didn't sue the individuals who posted the links that take people to RapidShare. Instead, the copyright owner brings a frontal 17 USC 512 assault by suing RapidShare (theoretically eligible for 512(c) for hosting the infringing files) and the search engines, who are putatively covered by 512(d) for linking to infringing files (although this claim appears to be even more attenuated if the search engines actually were 2 links away from the download).

The copyright owner appears to have initially struggled with sending proper 512(c)(3) notices, but it got there (or close enough) eventually. The complaint acknowledges that Microsoft disabled the links after receiving some type of notice. As a result, I'm not sure how Microsoft could be liable if they expeditiously removed the links after receiving the copyright owner's notices. Google apparently has not taken down the links (because I can still find them) after seventeen increasingly exasperated requests from the copyright owner, but Google's delayed response/non-response could be due to the copyright owner's imprecision about whether Google was actually linking directly to infringing RapidShare files or only to websites that had allegedly illegal links on them.

As for RapidShare, I didn't see a registration of agent for 512 service of notice, so they may not be claiming 512(c) protection. Then again, the complaint says they are a German/Swiss operation, so they may be impossible to serve and sue in the US, and RapidShare may not have felt any need to satisfy a US law formality.

There have been other lawsuits against websites for linking to infringing content, but plaintiffs usually try to avoid suing power players like Google and Microsoft--both well-funded defendants who aren't likely to roll over on this issue. One of the major exceptions is the Perfect 10 v. Amazon and Google lawsuit, which also involved Google's links to infringing files (in that case, infringing copies of pornographic photos). That lawsuit led to an important but confusing Ninth Circuit ruling from 2007, which left open Google's secondary liability for its links as well as Google's eligibility for a 512 safe harbor for those links. Given the ambiguities of that opinion, the plaintiff's action here isn't clearly wrong as a doctrine matter. However, in my opinion, it is nevertheless ill-advised and unlikely to succeed.

Posted by Eric at 03:47 PM | Copyright , Derivative Liability , Search Engines | TrackBack

December 04, 2009

Ninth Circuit Rebuffs Another CAN-SPAM Plaintiff -- Asis Internet Services v. Azoogle.com, Inc.

[Post by Venkat]

The Ninth Circuit recently rejected [pdf] two appeals brought by CAN-SPAM plaintiff Asis Internet Services. The trial court granted summary judgment in favor of Azoogle and awarded costs. See Eric's earlier blog post on that ruling. Asis has brought numerous lawsuits against different defendants. While this ruling won't necessarily be used preclusively against Asis it will definitely be cited by the defendants in those cases.

Citing Gordon v. Virtumundo, the court finds that:

the mere costs of carrying SPAM emails over Plaintiff's facilities does not constitute a harm as required by the statute. While Plaintiff argues that employee time was spent on spam-related issues, Plaintiff concedes that it has no records detailing employee time. Plaintiff also spent money on email filtering, though the cost of email filtering did not increase due to the emails at issue. Such ordinary filtering costs do not constitute a harm. [cite omitted] Thus, Plaintiff has not suffered a harm within the meaning of the statute and lacks standing.

The entire memo opinion is about two pages, and the court spends a sentence noting that Asis is not entitled to relief under the California statute (17529.5) because Azoogle "neither sent nor procured the emails at issue, and therefore did not 'advertise' within the meaning of the statute."

The big take away is that courts seem to be able to sniff out people who they view as pursuing litigation for the wrong reasons. It's unlikely that Asis was truly damaged to the extent of even a fraction of fees and resources it spent on this case.

Plaintiffs who aren't large ISPs or social networking websites haven't found a very sympathetic audience, particularly at the appellate level. We're probably left with a regime where only larger ISPs, social networking websites, and state actors are able to effectively bring anti-spam lawsuits. The scope of preemption of California's anti-spam statute is still unclear (Kleffman v. Vonage was certified to the California Supreme Court) so this is one possible option for plaintiffs, but I can't imagine they'll be spending much energy on this.

Posted by Venkat at 07:31 AM | Derivative Liability , Marketing , Spam

December 02, 2009

Case Western “Signifiers in Cyberspace” Conference Recap

By Eric Goldman

In mid-November, I attended a conference at Case Western Reserve University School of Law in Cleveland, Ohio entitled “Signifiers in Cyberspace: Domain Names & Online Trademarks.” My notes:

David Fewer spoke about Canada’s WHOIS policy. The old Canadian registry policy published registrant information without restriction. Then, the registry proposed a new policy not to publish personal information in the WHOIS database for individual registrants and for organizations that can show harm from publication. To reveal registrant information in those situations, a warrant would be required. That policy got amended to allow warrantless access for cybercrime enforcement, registered IP infringement and ID theft. Fewer argued that the amended policy violates Canadian privacy laws (PIPEDA) because consumers are not given adequate disclosures, the exclusions from the privacy policy are arbitrary, and consumers aren’t given the required option not to participate.

Corynne McSherry of EFF discussed how TM owners are bypassing direct challenges against gripers and instead putting pressure on domain name registrars. She focused on the Yes Man spoof website of the New York Times, which included a parody ad of the De Beers diamond manufacturer. Humorless De Beers sought relief from Joker.com, the parodist’s registrar. EFF has responded to De Beers that the parody is legitimate because it has no commercial aspect, it’s nominative use, and the First Amendment applies. The EFF is also encouraging Joker.com to ignore De Beers because it (as the registrar) can’t be liable for the registered domain name. So why is Joker.com even entertaining De Beers’ complaint? Corynne notes the registrar’s revenue from any single domain name registration is less than legal cost of investigating and responding. Corynne discussed how parodists and gripers can minimize their legal risk (I blogged on these recommendations in May).

I remain very interested in situations where domain name registrars apply their own takedown policies to their customers. For example, I’ve previously mentioned GoDaddy’s “itchy trigger finger” when it comes to intervening with its registrants. I suspect there is significant heterogeneity among registrars’ interventionist tendencies. I think this is an area worth exploring. If you have other examples of domain name registrar intervention in its customers' content, please share them.

Stacey Dogan spoke about the aftermath of the Rescuecom ruling. Stacey is disappointed that courts aren't adopting her arguments to use the “trademark use in commerce” doctrine to insulate intermediaries (she calls it her “biggest failure in life”). She described three post-Rescuecom uncertainties: (1) what acts by intermediaries constitute TM infringement? (2) on what doctrinal basis? (direct v. contributory), and (3) what remedies do the intermediaries face?

Stacey thinks courts need to be more precise about the nexus between defendant behavior and TM owner harm. This should lead to better distinctions between direct and contributory infringement.

She offered a taxonomy of claims against intermediaries:

* General confusion = when the intermediary creates confusion through the blurring of ads and editorial content. Stacey thinks these aren’t TM issues. But if commingling is the problem, then the remedy should be an injunction requiring the intermediary to label the ads.

* Strict liability = when the search engine is automatically on the hook for its involvement with the ads. Stacey says courts should reject this approach due to the search engines' lack of proximate causation for consumer confusion. If a search engine faces any liability, it should be solely on the basis of contributory infringement (with its higher scienter bar).

* Failure to act = when the search engine fails to respond to TM owner’s takedown notice. She said we don’t see this in search engine cases [a point I disagree with given that the TM owner vs. search engine lawsuits all represent a failing of the search engines’ voluntary TM policies]; instead, she was thinking of the Tiffany case. Stacey thinks the failure of act prong is where the legal action should be. She wants courts to map out appropriate scienter levels. General knowledge of infringement isn’t enough, and courts should let defendants make reasonable judgments about whether the advertiser will qualify for any trademark defenses. If the advertiser is obviously infringing, and intermediary gets notice and fails to act, she thinks contributory liability could be appropriate.

Graeme Dinwoodie believes the ECJ will not follow the Advocate General’s opinion in the Google case. He explored two parallels between the AG’s opinion and Rescuecom: Both get away from trademark use of commerce, and both consider underlying policy values. Graeme thinks search engine defendants should move away from disputing the lack of harm to the trademark owner; instead, he thinks they will get more traction by showing the countervailing benefits of their advertising. For example, he thinks they should be showing how keyword advertising can facilitate investment and innovation.

Jeffrey Samuels shared his perspectives as a panelist in 200 UDRP proceedings. Since the UDRP’s implementation, there have been about 25,000 UDRP decisions. 40% are US registrations. 75% involve .com. 75% are defaults.

The UDRP isn’t designed to solve all domain name disputes. He gave an example of a domain name registration containing a celebrity child’s name. The UDRP isn't helpful because a 2 week old kid doesn’t have protectable trademark rights.

“The UDRP is hardly a model of clarity.” All cases are fact-dependent. If a UDRP proceeding has unusual facts, he recommends requesting a 3 member panel--these proceedings get more carefully evaluated opinions and minimize the effects of any one panelist’s idiosyncratic views.

Some issues that regularly arise in UDRP proceedings:

* What the TM owner has to do to establish its rights. The majority view is that a registration anywhere in the world suffices. Common law rights generally require presenting sufficient evidence validating the rights.
* There remains a split of authority on “sucks” sites.
* In the early days, panelists used to run through the multi-factor likelihood of confusion factors. That’s rarely done today. Now, most panelists just make sight and sound comparison.

Karl Auerbach discussed two interrelated issues: (1) ICANN lacks any political authority for its “Internet governance” role, and (2) technology does not require that ICANN monopolize DNS root services. He argues that we would benefit from competition among DNS root services. His argument reminds me a bit of the net neutrality debate. We can hypothesize many possible net neutrality problems, but most of them go away with vigorous competition. Similarly, ICANN’s often-ridiculous shenanigans would be less vexing in the face of bona fide competition for DNS root services.

Dan Hunter spoke about a new paper he’s writing with Mark McKenna. Their target is the fundamental trademark principle that trademark law protects against consumer confusion. They think consumer confusion is an imperfect proxy for our normative goal of protecting consumers. Some confusion is endemic in a complex society; and some methods of communication, like humor, require confusion to work. Therefore, they want to move away from trying to block consumer confusion and instead refocus trademark law on reducing errors in consumer decision-making. This seems like a fruitful endeavor, but they are also taking a swipe against the consumer search cost justification for trademark law, a move I didn't follow.

Bill McGeveran recapped his recent work on social networking sites and gave a preview of his next article. His target is fake online profiles such as the Tony La Russa fake Twitter account. He expects to see more pressure to create IP rights in personal identities.

I spoke about trademarks and behavioral targeting, and in particular the competition among marketers for consumer preference information. For example, I believe the anti-deep packet inspection pushback wasn’t based solely on privacy concerns. Instead, destination websites fear that an IAP will disintermediate them and use its prime access to consumer preference information to steer customers to competitors. (See this blog post for more on that point). My (very brief) slides.

Posted by Eric at 07:16 AM | Derivative Liability , Domain Names , Internet History , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

November 30, 2009

MySpace Quietly Won Goofy 230 Ruling in September--Riggs v. MySpace

By Eric Goldman

Riggs v. MySpace, Inc., 2:09-cv-03073-GHK-CT (C.D. Cal. Sept. 17, 2009)

This case has received some modest attention throughout its history (including a quick mention here when the court upheld MySpace's user agreement), but the district court's dismissal of the case appears to have been completely overlooked.

Riggs created a MySpace profile that she used to authenticate celebrities' MySpace pages to distinguish them from the many fake celebrity profiles on MySpace. Her most substantive gripe is that MySpace deleted Riggs’ profile twice, and she claims MySpace was negligent to do so. There are several reasons why MySpace should not be liable for deleting her profile, including most obviously the many self-serving provisions in MySpace's user agreement (which the court mentions as an alternative basis of its dismissal). However, 47 USC 230(c)(1) does not appear to help MySpace because it only immunizes MySpace from liability based on third party content. Nevertheless, the district court rules against Riggs on 230(c)(1) grounds, saying:

Given that both claims for negligence are based on the deletion of Plaintiff’s profiles, a decision by MySpace to effectively “remove content” created by Plaintiff from its website, MySpace’s actions are immune from liability under Section 230(c)(1) of the CDA.

After reading this sentence a couple of times, it appears that the court is treating Riggs' own content as the content that Riggs wanted to hold MySpace liable for—technically, the "information provided by another information content provider." I believe that treating a plaintiff's content as "information provided by another information content provider" is a novel reading of 230(c)(1). I also don’t think it’s the logical reading of 230(c)(1)’s grammar, especially the reference to “another.”

The court’s decision is even more puzzling because 230(c)(2), which immunizes a service provider for filtering content it subjectively deems "objectionable," seems to squarely cover MySpace’s deletion of Riggs’ account. Could the court have intended to rule for MySpace on 230(c)(2) grounds, not 230(c)(1) grounds, and just got confused? Or perhaps the court collapsed the two provisions together, which my research assistant and I found occurred with surprising regularity in our comprehensive survey of 230(c)(2) cases. So while I think the 230(c)(1) dismissal was goofy, I would support the same outcome on 230(c)(2) grounds.

Riggs also complained that MySpace should have taken more efforts to police against fake celebrity profiles. The court rejected this claim on 230(c)(1) as well (appropriately used this time).

The remainder of Riggs' arguments didn't fare any better, and the court dismissed the entire complaint without leave to amend. Riggs has appealed the case to the Ninth Circuit. It will be interesting to see what they do. Given the Ninth Circuit's apparent loathing of 230(c)(1) and the district court's goofy statutory reading, there is a non-trivial risk that the Ninth Circuit will do something crazy here.

Posted by Eric at 12:57 PM | Derivative Liability | TrackBack

November 24, 2009

Teeth Whitening System Brings "Sue the World" Lawsuit Against Ad Agency, Competitor and Search Engines--Dazzlesmile v. Azoogle

By Eric Goldman

Dazzlesmile, LLC v. Epic Advertising, Inc., 2:09-cv-01043-PMW (D. Utah complaint filed Nov. 23, 2009)

Dazzlesmile sells a teeth whitening system. Presumably these systems generate fat profits, because Dazzlesmile has brought an expensive "sue-the-world" lawsuit against its ad agency, its competitor and the search engines.

Azoogle/Epic

The lawsuit against Azoogle/Epic is partially based on a miscalibrated cost-per-acquisition (CPA) deal. Azoogle sold Dazzlesmile on a CPA deal which pays Azoogle $43 for making a $4 sale with negative-option continuing revenue streams, i.e., the consumer has to cancel after the free trial period or he/she automatically gets shipped and charged for more whitening stuff. If the ongoing revenue stream is great enough, it can make sense to pay out big upfront commissions to get the sale. However, this payment structure creates lots of mischief possibilities.

In this case, Dazzlesmile alleges that its competitor engaged in "CPA fraud" by placing thousands of orders, coincidentally generating over $100k of commissions to Azoogle in one week. Dazzlesmile also complains that its products were being promoted by spam, fake blogs and other problematic ads in contravention to Azoogle's promises. Finally, Dazzlesmile complains that a rogue affiliate packaged two different systems into the same ad, causing consumers to order both products and then renege when they realized Dazzlesmile's terms.

The odd thing about this complaint is that Dazzlesmile tries to portray itself as the white-knight advertiser that wants to do right by consumers, while the evil Azoogle kept tempting Dazzlesmile to cut corners and take undeserved money from consumers. I understand the value of this positioning, but I find it a little hard to believe. You kind of know what to expect when you're dealing with Azoogle, and I'd be surprised if Dazzlesmile is a fully innocent naïf.

Competitor Lawsuits

Dazzlesmile also claims that its competitor slapped counterfeit "Dazzlesmile" labels on a different teeth whitening system. It further claims that Azoogle and the competitor conspired to use Dazzlesmile's advertising copy in Azoogle's network to direct teeth whitening customers to the competitor. It also claims these defendants used the Dazzlesmile trademark in a host of inappropriate ways, including in spam, as keyword ad triggers, in domain names, and in astroturfed content. Dazzlesmile claims it has received 10,000 misdirected customer support inquiries from duped customers.

Lawsuits Against the Search Engines

Dazzlesmile drags Google, Yahoo and Microsoft into the lawsuit for selling keyword advertisements despite Dazzlesmile's cease & desist letter to stop doing so. Oddly, the complaint pleads the search engine's liability as "vicarious liability," which should be DOA. Vicarious trademark infringement requires an agency relationship between the search engines and the advertisers, which the complaint doesn't (and can't) plead. If it's a non-IP form of vicarious liability, then it's preempted by 47 USC 230. So I predict Dazzlesmile will have to amend its complaint against the search engines to allege some other legal theory, or the search engines will exit this particular matter quickly.

Interestingly, the complaint alleges ripoffs of both its copyrightable ad copy and its trade secret protectable marketing plans, but the complaint does not allege either copyright infringement or trade secret misappropriation.

Conclusion

Dazzlesmile's complaint, if completely accurate, tells a story filled with legal wrongs, but I'm not sure I found it all that convincing. I will have to see the defendants' responses before I can begin to form any conclusions about its overall merit.

It does point out one troublesome spot as a good practice pointer. I know a lot of advertisers think they prefer CPA pricing over CPC or CPM pricing because they are more clearly paying for results, but this case provides a good illustration that a miscalibrated CPA price is no better at reducing unwanted spending than a miscalibrated CPC or CPM. At minimum, I’m surprised that Dazzlesmile apparently didn't include some provision in the CPA formula allowing it to avoid payment for chargebacks or immediately returned products. If you're an advertiser doing CPA deals, make sure you have robust enough exclusions to the CPA obligations so that you are truly paying for bona fide results.

AdWords Lawsuit Roster

The updated roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* Stratton Faxon v. Google (not initially a trademark case)
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 06:05 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

November 10, 2009

A New Way to Bypass 47 USC 230? Default Injunctions and FRCP 65

By Eric Goldman

I recently got the following email from David Gingras, the relatively new General Counsel of the Ripoff Report (reposted with his permission):
________

"As you know, Ripoff Report has defended, and won, a lot of CDA cases in the past few years. Although we still get a new case every so often, plaintiffs and their lawyers seem to have gotten the message that lawsuits against us aren’t likely to prevail. Good news, I suppose.

Despite this, a new strategy is arising....In a nutshell, what seems to be happening is that defamation plaintiffs are no longer naming Ripoff Report as a party (which is good). Instead, they are going after the original author (also good, assuming the claim is legitimate).

However, something odd is happening – these cases almost always result in a default. Without any defendant there to argue otherwise, the courts seem willing to grant virtually any relief requested by the plaintiff; i.e. an injunction requiring the removal of the offending material. Once that happens, the plaintiff will approach Ripoff Report with their default injunction and demand that we remove whatever postings they ask us to, even when we were not a party to the case and even if the truth of the statements has never been litigated. Their argument tends to be that under FRCP 65, injunctions can be enforced against non-parties as long as they are acting in “active concert” with a party, so they simply claim we are acting in concert with the author, whatever that means.

In this scenario, it’s almost as if 47 USC s. 230 doesn’t exist at all. In other words, if you are a plaintiff seeking to remove a negative online posting, you’re not going to succeed with any claims against the site. However, that need not stop you – all you have to do is file a lawsuit against someone, claim they were the author, make sure they default, and then ask the court for an injunction (even if it affects a non-party) and voila! You have just accomplished your goals without even really trying!....

[I]t seems to me that if courts allow this type of thing to happen, then the CDA is essentially meaningless – by “litigating” the merits of the case against a non-existent defendant and then approaching Ripoff Report after-the-fact, a plaintiff can obtain relief that they would never be able to get in a legitimate adversarial proceeding, and we’re stuck trying to get the judge to put the genie back into the bottle.

Can plaintiffs use this tactic to get damages from a website/host? Well, not initially, but once you have an injunction requiring the removal of material from the site, the door is open to asking for contempt sanctions if the website doesn’t comply, and that could allow essentially unlimited damages – even when the original claims were time-barred (note: the statute of limitations is an affirmative defense which is waived if the defendant defaults), or even if the original postings were true.

...I am very concerned that this is the start of a new trend. Using a baseball analogy, it’s almost like the plaintiff takes the field alone, plays the game, declares itself the winner, and then finally tells the other team about the game. Should the umpires allow this? No, of course not, but what happens when they do?"
________

David's email raises a fascinating doctrinal question of the interaction between FRCP 65(d) and 47 USC 230, but I wonder how often these issues come up in the field. Ripoff Report is relatively unique among consumer review sites (and UGC sites generally) because it vows never to remove user postings, even if a user asks Ripoff Report to remove the post. In contrast, most UGC sites would speedily comply with a default injunction, no questions asked—especially if the user is not around to protest the takedown. Or the user folds in the face of a demand from a putative plaintiff and deletes the content him/herself, at which point the service provider doesn't even know there was a problem.

Nevertheless, I think David may be witnessing a new and cutting edge way to effectuate illegitimate content takedowns. Many websites that initially stand up for their users, emboldened by the 230 shield, will instantly crumble when presented with a default injunction. For the price of a complaint and a defendant’s default (which can be engineered by targeting a phantom author), plaintiffs obtain an effective cudgel to excise unwanted content throughout the web. Because this could become a cost-effective way of suppressing socially valuable critical content, I encourage UGC sites to be circumspect about honoring default injunctions against user content.

If a UGC site chooses to contest a default injunction, 47 USC 230 should trump FRCP 65. FRCP 65(d) applies to non-litigants in "active concert or participation" with the defendant. Typically, the only relationship between the content producer/defendant and a UGC website is that the website is republishing the defendant’s content. 230 preempts any effort to treat a website as the publisher of third party content, and I think that’s exactly what FRCP 65(d) does.

Now, if a court has properly adjudicated some content as tortious or illegal, it would be socially desirable for the website to remove the content. This is why a court orders the injunction in the first place. However, David’s example assumes an incomplete adjudication because of the default. So if a website contests a default injunction against user-supplied content, a court should do a more thorough evaluation of the plaintiff’s merits. If the court concludes—following a properly contested proceeding—that the injunction was in fact appropriate, only then should the publisher be compelled to remove the content.

Unfortunately, most judges will expect websites to honor a default injunction without question, and therefore they will be reluctant to reconsider the injunction’s merits. Apropos of that, David sent me a report of a hearing from last week involving Ripoff Report's effort to contest a FRCP 65 default injunction. He says that the "judge was apparently ‘incredulous’ at our position – [wondering] why can’t we just agree to take the postings down?" Nevertheless, the judge gave Ripoff Report a chance to brief the matter. I’ll be interested to see if Ripoff Report can make any headway with the skeptical judge. Whatever you think about Ripoff Report generally, I applaud their efforts to defend their users’ words and ensure judicial accuracy rather than rolling over like most UGC sites would.

Posted by Eric at 11:50 AM | Derivative Liability | TrackBack

November 06, 2009

Google AdWords Litigation Keeps Rolling In--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. US Auto Parts Network Inc.,3:2009cv05578 (D.N.J. complaint filed Nov. 2, 2009) [warning: 3MB PDF]. The Justia page.

In my world, we have an honor code among geeks--thou shalt not harm other geeks. As you can imagine, then, I was a little sad to see geek-on-geek litigation like this one, where auto parts geeks are suing computer geeks. Can't we geeks all get along?

Parts Geek is an online retailer of auto parts. US Auto Parts Network is a competitor who has bought keyword ads triggered by Parts Geek's trademarks. (However, when I searched this morning for Parts Geek, I didn't see any US Auto Parts' ads). In response, Parts Geek is suing its competitor as well as Google for the keyword advertising.

With respect to Google's involvement, the complaint doesn't break any new ground. I'm pretty sure it's largely a rip of another complaint, but I can't remember which one(s). According to my count, this lawsuit brings Google back up to 9 AdWords lawsuits.

In contrast, there are a couple of interesting facets of the claims against US Auto Parts. First, Parts Geek alleges (para. 42) that US Auto Parts set up a blog entitled "Auto Parts Geek" to divert traffic. Can you imagine a more perfect descriptive fair use situation? I think this will become my new favorite example.

Second, Parts Geek makes a Computer Fraud & Abuse Act claim because US Auto Parts allegedly crawled Parts Geek's site to extract "proprietary data and pricing." The CFAA claim seemed like an afterthought tacked onto allegations that focused almost exclusively on the trademark issues, and it wasn't as fleshed out or robust as we normally see in anti-crawling lawsuits (i.e., no claims for breach of contract, trespass to chattels, copyright infringement or violations of a state computer crimes law). Nevertheless, I'm always interested in anti-crawling lawsuits, especially ones with anti-competitive angles like efforts to keep competitor A from learning competitor B's prices. Further, Parts Geek claims that US Auto Parts' access to its website was delimited by a "terms of use" which, from my limited review of the Parts Geek site, appears to be at best a very obscure "browsewrap." The CFAA is more tolerant of obscure disclosures than contract law is, and this CFAA claim is hardly unusual, but I'm nonetheless troubled by the implications of treating obscure browsewraps as effective anti-crawling mechanisms.

The roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* Stratton Faxon v. Google (not initially a trademark case)
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts

Posted by Eric at 07:17 AM | Derivative Liability , Search Engines , Trademark , Trespass to Chattels | TrackBack

November 03, 2009

Law Professor Sues Over 'Above the Law' Blog Posts--Jones v. Minkin

By Eric Goldman

Jones v. Minkin, 1:09-cv-23256-MGC (S.D. Fla. complaint filed Oct. 27, 2009). The Above the Law blog post on the lawsuit with links to the posts in question.

Given its history of provocative and occasionally aggressive blog posts, it's actually a little surprising that popular law blog Above the Law has not been sued before. A blogger's life is inherently filled with peril. We bet our houses with every blog post, and eventually the law of large numbers starts working against us. The risks are even greater for bloggers covering legal topics. By definition, we routinely cover people who are prepared to mix it up in court. As a result, it's almost inevitable that blawgers who keep at it long enough will get sued eventually.

The plaintiff in this case is University of Miami law professor D. Marvin Jones, who in 2007 was improperly detained by police for possibly racist reasons. This prompted a series of blog posts on Above the Law that included an unflattering cartoon and unfavorable characterizations. Jones now claims that the blog posts put him in a false light, invaded his privacy and constituted copyright infringement because the blog posts used the photo from his university profile page. Although the complaint uses the word "defamation" earlier in the pleading, no defamation claim was alleged. For these violations, Jones asks for tens of millions of dollars to right the alleged wrongs.

I'm skeptical about all three claims, but the copyright claim is almost unquestionably bogus. It's not properly pleaded; there's no allegation of a copyright registration. More importantly, I would be shocked if Jones owned the copyrights in the photo on his faculty page. Usually faculty photos are taken by a university photographer or a third party vendor; in either case, the photo subject normally does not obtain ownership or an exclusive license to the copyright. Perhaps Jones has managed his IP affairs better than 99+% of professors. If not, 17 USC 505, the copyright fee-shifting provision, seems like it sets up Jones to potentially write a check to the defendants. (Fair use also seems strongly possible, but we don't need to get there if the plaintiff can't establish a prima facie case of infringement).

With respect to the alleged privacy violations, there is the obvious problem that police incident reports should be public documents. However, I’m also interested Jones' faculty bio does much to trumpet his high public profile. He self-describes himself as a "public intellectual" (a fairly rare self-characterization among academics) and says he has "appeared as an expert on national and local television" and "is a sought after speaker at many universities." These self-reported assessments about his public visibility don't obviate his privacy rights, but they do suggest that a police detention--especially one with racial overtones, exactly the type of thing he discusses in these public spaces—and the associated report either don't qualify as a "private fact" or are sufficiently newsworthy to trump his privacy interests.

Ben Sheffner's post on this case makes good points about the false light claim. He says it's DOA because (1) Florida doesn't recognize the cause of action, and (2) to the extent it's based on the cartoon, the cartoon was provided by a third party and therefore 47 USC 230 preempts the claim.

This lawsuit reminded me a little of the long-running Steinbuch v. Cutler lawsuit, which also involved a law professor/plaintiff Robert Steinbuch (now at UALR) claiming privacy violations against a blogger. That legal battle hasn't turned out so well for Steinbuch. Putting aside a number of substantive losses along the way, the lawsuit has been going nearly 5 years with no clear end in sight. Some of the delay was caused by Cutler's bankruptcy, but much more of it was due to the inherent weakness of judicial proceedings as a redress for unwanted speech. And in the end, I don't think the lawsuit has done much to enhance Steinbuch's reputation as a law professor or otherwise.

Two other minor points about the lawsuit. First, the complaint repeatedly criticizes Above the Law for referring to Jones as "D. Marvin Jones" rather than some other variation of his name, alleging that the usage was designed to ensnare searchers looking for his book. Perhaps that was the intent (doubtful, but possible), but I have chosen to refer to Jones by the name he uses on his faculty profile...which is "D. Marvin Jones." Second, it was jarring to see "Barack Obama" misspelled in a complaint (especially given the plaintiff's expertise) as "Barrack Obama."

Unfortunately for Above the Law, Florida does not have a robust anti-SLAPP statute. Nevertheless, given its facial lack of merit and the possibility that Jones will want to minimize the size of the check he has to write the defendants for his ill-conceived copyright claim, I hope this lawsuit will reach a quicker resolution than the Steinbuch v. Cutler saga.

FWIW, there is an attractive free conference tomorrow afternoon in San Francisco that, quite topically, will address the unique challenges of online reporting of legal cases. (The official page is down, but this page has all the relevant details). Hope to see you there.

UPDATE: Jones has voluntarily dismissed the case within days of bringing it.

Posted by Eric at 01:57 PM | Content Regulation , Copyright , Derivative Liability , Publicity/Privacy Rights | TrackBack

November 02, 2009

October 2009 Quick Links

By Eric Goldman

Just a reminder that I am posting most of these types of links exclusively to my Twitter feed.

* Tricome v. eBay, Inc., 2009 WL 3365873 (E.D.Pa. Oct 19, 2009). Court upholds eBay user agreement's venue selection clause. Evan Brown covers the case.

* The AutoAdmit case is over. Above the Law and the Yale newspaper.

* Google doesn't want to hear your complaints about your reputation management.

* Moneygram settles with the FTC (to the tune of $18M) that its money wiring service was used to perpetrate fraud.

* The FTC scores a rare COPPA settlement, this time with Iconix for $250,000.

* John Wiley & Sons, Inc. v. Kirtsaeng, 2009 U.S. Dist. LEXIS 96520 (SDNY Oct. 19, 2009). Another federal court holds that the purchase of foreign-manufactured textbooks and resale in the US via the Internet is blocked by the importation right and not excused by the First Sale doctrine. My coverage of the analogous Pearson v. Liu ruling.

* Utah's "Don't Spam the Kids" registry survived a constitutional challenge. That doesn't make it good policy!

* Saadi v. Maroun. Blogger hit with $90k judgment for defamation. MLRC coverage. My initial blog post on the case.

* Erik Estavillo, the gamer who sued for being kicked off the PlayStation Network, is appealing his district court loss to the Ninth Circuit. I guess he wants to lock in the adverse ruling as the binding law of the Western United States. My blog post on the district court ruling.

* Susan Gindin, When are a Posted Privacy Policy and 'Enforceable' Terms of Use Not Enough? The Many Lessons Learned and Questions Raised by the FTC’s Action Against Sears.

* Rep. Paul Kanjorski wants to end 47 USC 230 with respect to bogus stock investing info? This legislation needs careful monitoring due to its potential perniciousness.

* Venkat has his own version of Quick Links on his site.

Posted by Eric at 05:08 PM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Privacy/Security , Spam | TrackBack

October 23, 2009

Google AdWords Litigation Updates--Google Adds One Lawsuit and Ends Another

By Eric Goldman

It's been a little quiet on the Google AdWords trademark litigation front in the past couple of months, so it's timely to check in on the situation.

Jurin v. Google, Inc., 2:09-at-01695 (E.D. Cal. complaint filed Oct. 22, 2009)

You may recall Daniel Jurin, who claims ownership in the trademark "styrotrim" (a type of building exterior covering). In June, he sued Google for trademark infringement and related claims as part of the spate of lawsuits filed after Google changed its trademark policies in May. Then, less than 2 months later, he voluntarily dismissed the lawsuit after having parting ways with his attorneys. I figured losing his attorney would spell the end of Jurin's quest, but no! Breaking a two month dry spell in new Google AdWords lawsuits (the last being Flowbee in mid-August), Jurin has found a new attorney, Paul Bartleson, and has decided to tangle with the tiger once again. Welcome back to the party!

It appears that Jurin had to cast a pretty wide net to find a substitute attorney. Paul's website says for the past 19 years he "has focused almost exclusively on Bankruptcy matters," and his LinkedIn page says he is "also an entrepreneur and business development consultant in a business that teachers leadership, values and relationship skills, while capitalizing on the wealth building potential of the internet." Huh? Not sure what that means, but could this lawsuit be an example of their "wealth building" prowess???

The complaint itself doesn't break any new ground. It's fairly internally redundant, and the narrative appears to conflate paid ads with organic listings fairly freely (while ironically complaining that Google confuses ads and organic results).

Soaring Helmet Corp. v. Bill Me Inc., 2:2009cv00789 (W.D. Wash. voluntarily dismissed Oct. 15, 2009)

In an unpublicized move, Soaring Helmet voluntarily dismissed Google from its trademark lawsuit against Bill Me last week. Even with Google out of the picture, the trademark owner v. advertiser lawsuit appears to be going strong. My initial blog post on that lawsuit.

Rosetta Stone v. Google

A month ago, Rosetta Stone's lawsuit largely survived Google's 12(b)(6) motion to dismiss. In a non-substantive opinion, the court tossed out the false endorsement and conspiracy claims but left the remainder intact.

Google v. John Beck Amazing Profits

In mid-September, Google voluntarily dismissed its declaratory judgment action trying to wrest the John Beck v. Google lawsuit venue out of Texas. This dismissal does not appear to have affected the original John Beck v. Google case, nor did it succeed in affecting venue.

The roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google ~~and the companion Google v. John Beck Amazing Profits~~
* Stratton Faxon v. Google (not initially a trademark case)
* ~~Soaring Helmet v. Bill Me~~
* ~~Ascentive v. Google~~
* ~~Jurin v. Google 1.0 (voluntarily dismissed)~~, succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google

Posted by Eric at 09:54 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 22, 2009

Facebook Not Liable for Private User Groups Per 230--Finkel v. Facebook

By Eric Goldman

Finkel v. Facebook, Inc., 2009 N.Y. Slip Op. 32248 (N.Y. Sup. Ct. Sept. 15, 2009)

This is a really interesting legal dispute with an entirely predictable outcome for Facebook as a defendant. See my initial blog post on the matter. A half-dozen high school students participated in a private Facebook group that ridiculed one of their peers. This wasn't a nice thing to do, and the conversation exhibits the kind of mean-spirited puerile comments forged by the insecurities and social pressures of high school. Whether the underlying conversation is actually tortious remains unresolved, but I have my doubts.

Nevertheless, we knew all along that Facebook wasn't liable for its users' private group or their conversations per 47 USC 230. This wasn't even close to a colorable question. The plaintiff's lawyer mistakenly read the law differently and unwisely sued Facebook. To get around 230, he alleged that Facebook took an ownership interest in the private group's messages, which he argued should cost Facebook its 230 immunity. There are at least two problems with this theory, though. First, Facebook doesn't take anything close to ownership in private group messages; at most, I believe they take a limited non-exclusive license. Second, even if Facebook did take ownership of the group's contents, 230 applies to third party-created online content irrespective of the ultimate IP ownership of the content. Several cases support that proposition, including Blumenthal v. Drudge from 1998 and Schneider v. Amazon.com from 2001. Here, the court makes the point emphatically, saying "Ownership of 'content' plays no role in the Act's statutory scheme."

Given this very clear and plainly stated proposition, the trial court judge gives Facebook its deserved early exit from the case per 230, correctly labeling the plaintiff's argument "meritless." Fortunately for the plaintiff's counsel, the court decided not to grant sanctions to Facebook, saying that the argument wasn't "frivolous." Future plaintiffs with similarly misguided theories about 47 USC 230 may not be so lucky.

For more, see CMLP.

Posted by Eric at 09:36 AM | Derivative Liability | TrackBack

October 21, 2009

Craigslist Isn't Liable for Erotic Services Ads--Dart v. Craigslist

By Eric Goldman

Dart v. Craigslist, Inc., 09 C 1385 (N.D. Ill. Oct. 20, 2009)

Yesterday, Judge John F. Grady of the Northern District of Illinois federal court dismissed Cook County Sheriff Dart's lawsuit against Craigslist for user-posted advertisements in Craigslist's erotic services/adult services category on 47 USC 230 grounds. This is hardly surprising, as I wrote in March that "this lawsuit is almost certainly preempted by 47 USC 230." However, it was nice to see such a clean and decisive opinion--and a little ironic, as our law enforcement officials, who are supposed to enforce the laws rather than bypass them, got schooled in the limits of their legal authority.

With respect to the 230 analysis, the court characterizes Sheriff Dart's claims as alleging that Craigslist negligently published the user-supplied ads. The court says that the Seventh Circuit implicitly said that 230 preempted such claims in the 2008 CLC v. Craigslist case. To get around this, Sheriff Dart tried a Roommates.com styled attack, arguing that Craigslist induced the users' advertisements by creating an erotic/adult services category and letting users do keyword searches. These arguments go nowhere (making this yet another case where Roommates.com is cited for the defense). An adult services category can legitimately contain postings for legal services, and the keyword search functionality was agnostic about the illegality of the search and therefore a "neutral tool" (whatever that meant from Roommates.com).

Two other interesting doctrinal notes from the opinion:

* In FN 6, the court reiterates that 230 preempts a civil action to enforce a federal criminal statute. See Doe v. Bates.

* the court rejects arguments that Craigslist "arranges" meetings for prostitution, "directs" people to prostitution or "provides" contact info for prostitutes because, in all three cases, the user-supplied ad (if anything) satisfies those verbs. Similarly, Craigslist's role in "facilitating," "assisting" or "aiding and abetting" these user activities is governed by 230. I believe this is consistent with my view that 230 should preempt any claim that one party "endorses" third party online content.

Given some ambiguous language floating in Seventh Circuit 230 jurisprudence from the CLC v. Craigslist case and the old Doe v. GTE case, it wouldn't surprise me if Sheriff Dart tried an appeal. However, this opinion was solidly reasoned and completely consistent with that jurisprudence, so I wouldn't expect a different result on appeal.

Posted by Eric at 01:13 PM | Content Regulation , Derivative Liability , Marketing | TrackBack

October 19, 2009

DePaul Reputation Talk Slides

By Eric Goldman

Last week I presented on my long-running Economics of Reputational Information project once again--this time at a DePaul conference on cyberlaw. I titled the talk "A Tale of Two Reputation Systems" and approached it as a comparative study between job references and online product reviews. As always, I'd gratefully welcome your comments.

Posted by Eric at 10:07 AM | Derivative Liability | TrackBack

October 17, 2009

Q3 2009 Quick Links, Part 3

By Eric Goldman

Copyright

* AP v. All Headline News settles. My initial blog post. The settlement order.

* The Turnitin case has settled. My blog post on the district court ruling.

* Corbis Corp. v. Starr, No. 3:07CV3741 (N.D. Ohio Sept. 2, 2009).. Company that retained web developer could be liable for copyright infringing photos included in the developed website. David Johnson's coverage.

* Creative Commons commissioned a study of what people think qualifies as “commercial” or “non-commercial” activity. While this is relevant to how CC drafts its various license flavors, these words also have significant import to many facets of the law, including copyright (such as the fair use test) and trademark (such as the definition of “use in commerce”). The executive summary:

Both creators and users generally consider uses that earn users money or involve online advertising to be commercial, while uses by organizations, by individuals, or for charitable purposes are less commercial but not decidedly noncommercial. Similarly, uses by for-profit companies are typically considered more commercial. Perceptions of the many use cases studied suggest that with the exception of uses that earn users money or involve advertising – at least until specific case scenarios are presented that disrupt those generalized views of commerciality – there is more uncertainty than clarity around whether specific uses of online content are commercial or noncommercial.

eBooks

* Advocates for the blind sue Arizona State University for distributing electronic textbooks via the Kindle.

* Rebecca on the relationship between the Kindle 1984 debacle and the Google Book Search settlement. See also this Slate article.

Search Engines

* Train2Game v. Google, [2009] EWHC 1765 (QB): UK opinion that Google isn't liable for its search results snippets.

* CEO Bartz said Yahoo was never a search company. What??? Danny Sullivan calls her out for her "revisionist history."

* Greg Linden: Google AdWords Now Personalized.

* ThirdVoice redux: Google launches SideWiki. Let the legal games begin! (See, e.g., this BusinessWeek article). I’d be more worked up if Google had a more successful track record with non-search offerings, especially user-generated content projects. Lively, anyone?

Marketing

* Some craziness in Maine, when the legislature tried to restrict marketing to kids. PUBLIC Law, Chapter 230 LD 1183, item 1, 124th Maine State Legislature. The Maine AG said she won't enforce it, and subsequently the law was given a timeout so the Maine legislature can rethink the error of its ways.

* eBay is changing to a per-click model for paying affiliates, where the per-click amount is reset daily based on actual value delivered by the affiliate.

* Ethical Quandary: Faxed attorney newsletter doesn’t violate TCPA.

Posted by Eric at 04:47 PM | Copyright , Derivative Liability , Internet History , Marketing , Search Engines | TrackBack

October 15, 2009

Q3 2009 Quick Links, Part 2

By Eric Goldman

Trademark

* Venkat: Twitter makes the dictionary.

* Federal Circuit says Hotels.com is generic.

* Steve Madden sues eBay for trademark infringement. Marty's coverage. Justia page. I found the fifth cause of action, "trademark delusion," a surprisingly apt malapropism.

* Yahoo! Inc. v. Ashantiplc Limited. Yahoo is suing over Flicker.com.

* Lots of action involving Mary Kay.

- Mary Kay sued Yahoo for its shortcuts being triggered by the Mary Kay trademark. The Justia page.

- Mary Kay brought another lawsuit to shut down aftermarket resales.

- The Mary Kay v. Weber case has reached a conclusion. See my initial blog post on the case. In March, Mary Kay won a jury verdict against Weber. In August, the district court judge denied Weber post-trial relief. Mary Kay v. Weber, 2009 WL 2569070 (N.D. Tex. Aug. 14, 2009). On Sept. 29, the judge awarded Mary Kay $1.1M, computed as “the defendants' pre-tax net profit for the years 2005 through 2008.”

* I hate greeting card IP cases...especially when they involve Paris Hilton. See the Ninth Circuit opinion.

* Rebecca on a complicated trademark and false advertising case involving cell phone reflashing.

* Third Educ. Group, Inc. v. Phelps, 2009 WL 2029758 (E.D. Wis. July 10, 2009). An oblique nod to a co-blogging situation:

It is possible to have a situation in which a voluntary association develops out of a preexisting creation of an individual (take, for example, a blog created, named, and operated entirely by a single individual that then expands into a voluntary association as it includes more collaborative members but continues to utilize the original name). Under such circumstances, the founding individual might register the name of the voluntary association as a trademark solely in his own name and then license it to the voluntary association because he has used the trademark separate from the voluntary association. However, that did not occur here.

* CollegeSource, Inc. v. AcademyOne, Inc., 2009 WL 2705426 (S.D. Cal. Aug. 24, 2009): "Plaintiff argues for personal jurisdiction on the grounds that Defendant purchased two of Plaintiff's trademarks from internet search engines, so that those engines would display Defendant's advertisements when Plaintiff's word marks were searched….Defendant's uncontroverted affidavit avers that its Adwords were selected by the search engines and were purchased before Defendant knew Plaintiff was located in California.…Accordingly, even if Defendant intentionally infringed Plaintiff's marks, there is no showing that act was “expressly aimed at the forum state” or that it caused “harm that the defendant knows is likely to be suffered in the forum state.”"

* GMA Accessories, Inc. v. BOP, 2009 WL 2634771 (S.D.N.Y. Aug. 25, 2009). A really interesting and confusing lawsuit that says (I think) that electronic usage of third party trademarks does not qualify as a use in commerce and may not constitute contributory trademark infringement, with obvious implications for the search engine keyword advertising cases:

Electric Wonderland's second alleged meritorious defense is that it did not use the CHARLOTTE or CHARLOTTE SOLNICKI marks....Electric Wonderland's President described its business as follows:

Electric Wonderland brokers and/or processes orders from wholesale purchasers for fulfillment by clients of Electric Wonderland. Electric Wonderland does not directly sell its clients [sic] products, does not fulfill orders, does not acquire or maintain any inventory for sale, and does not purchase products from its clients for resale. Electric Wonderland does receive commissions on sales it brokers....

According to the Flack Declaration, these were the services Electric Wonderland provided to Charlotte Solnicki. (Flack Decl. P 3.) "Electric Wonderland did not directly sell Charlotte Solnicki products, did not fulfill orders, did not acquire or maintain any inventory of such products for sale, and did not purchase such products from Charlotte Solnicki for resale." (Flack Decl. P 3.) If this were the extent of Electric Wonderland's role, a fact-finder could find that Electric Wonderland did not "use" the CHARLOTTE or CHARLOTTE SOLNICKI marks, because it did not place the marks on any goods. Likewise, a reasonable fact-finder could determine that Electric Wonderland never used the marks to sell or advertise any of the services Electric Wonderland rendered. Thus, Electric Wonderland would not be liable for direct trademark infringement.

...Electric Wonderland's president claims that "[a]t no time while Charlotte Solnicki was a client of Electric Wonderland was Electric Wonderland aware of GMA's 'Charlotte' products nor of any possibility that the Charlotte Solnicki products were potentially infringing any third party's trademark rights." (Flack Decl. P 5.) If true, a reasonable fact-finder could find that Electric Wonderland neither knew, nor had reason to know of the alleged infringement during the period in question.

In addition, the Second Circuit has not decided whether contributory infringement applies to entities like Electric Wonderland, which provide services instead of products....Thus, Electric Wonderland, as a matter of law, may have a complete defense to contributory infringement liability, a matter which this Court need not decide at this juncture.

* Dan Burk and Brett McDonnell, Trademarks and the Boundaries of the Firm. Interesting discussion (among other things) on how an entrepreneur's/employee's personal reputation and corporate reputation can be interlinked.

Domain Names

* The Eleventh Circuit affirmed the defense win in the domain name case of Southern Grouts & Mortars v. 3M, 2009 WL 2182605 (11th Cir. July 23, 2009). See my initial blog post on the case.

* John Levine: What are TLDs Good For? Bringing to mind the famous Edwin Starr song (I think the answer is the same!).

* ICANN claims it has killed domain name tasting.

Posted by Eric at 09:53 AM | Derivative Liability , Domain Names , E-Commerce , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

October 14, 2009

Q3 2009 Quick Links, Part 1

By Eric Goldman

My system of managing news items that don't warrant a full blog post but can't fit into a 140 character Twitter post has broken down. So, I'm belatedly catching up on my backlog of things that caught my attention in Q3 2009. This part focuses on online content issues:

Defamation

* Ava v. NYP Holdings, Inc., 2009 WL 1885099 (N.Y.A.D. July 2, 2009). A NY Post story quoting part of the plaintiff's MySpace page and characterizing it as a "fantasy" wasn't defamatory.

* Terrific post by Paul Levy on Ripoff Report, InfomercialScams.com, Video Professor and UGC sites that go bad

* A tweet about moldy apartment leads to a defamation lawsuit. MLRC and CMLP coverage.

* Cohen v. Google, Inc., 2009 WL 2883410 (N.Y. Sup. Ct. Aug. 17, 2009). Calling a woman a “skank,” in the context of a blog with photos and other critical material, was prima facie defamation sufficient to support a pre-action disclosure of the anonymous blogger’s identity.

* Cash4Gold sued Consumerist but then dropped it as a defendant.

* You may recall my earlier blog post on the Higher Balance lawsuit, a nice 230 defense win. Subsequently, the Higher Balance defendants were awarded over $50k in attorneys fees.

* Crookes v. Newton, 2009 BCCA 392 (Sept. 15, 2009). A British Columbia appellate court says that linking to defamatory content isn’t defamation.

* Joe Mullin: "Troll Tracker" blogger defamation lawsuit settles

Cyberbullying

* Larry Magid on the definitions of cyberbullying

* US v Voneida: 3d Circuit says student's MySpace postings were "true threats" that supported 19 month sentence

* Smoking Gun: Placing a bogus Craigslist ad is being prosecuted as felony cyberbullying.

* News.com: A Missouri prosecution under Missouri's new Megan Maier anti-cyberbullying aw.

Blogs and Social Networking Sites

* A New Jersey court says a blogger isn't entitled to the reporter shield.

* Pietrylo v. Hillstone Restaurant Group, No. 06-5754 (D.N.J. June 16, 2009). Jury verdict against a restaurant owner that forced employees to allow it to view their private MySpace group.

* HB1314: Illinois bans sex offenders from using social networking sites. Evan Brown explores the statute's constitutionality.

* Facebook Beacon is dead…and yet another privacy organization springs up in its wake. News.com, settlement agreement and motion for settlement.

* Public Citizen v. Louisiana Attorney Disciplinary Board, 2009 WL 2390866 (E.D. La. Aug. 3, 2009). A federal court struck down Louisiana’s state bar rules restricting lawyer advertising via the Internet.

Posted by Eric at 10:15 AM | Content Regulation , Derivative Liability , Privacy/Security | TrackBack

October 12, 2009

A Fuller Explanation of Why the FTC Endorsement/Testimonial Guidelines Violate 47 USC 230

By Eric Goldman

Last week’s release of the FTC's new Endorsement and Testimonial Guidelines has generated a significant amount of angst online. The resulting commentary has been strongly and almost uniformly negative. Frankly, none of the sources I read have praised the guidelines, but perhaps I'm locked in an echo chamber. Declan has a useful recap/linkwrap.

In this environment of heightened negativity, people have been searching for angles to prove the FTC can't do what it's doing. This has led folks to my post from last week arguing that certain facets of the guidelines violate 47 USC 230.

Despite the general popularity of the post, privately it has attracted some skepticism. Several smart law professors/lawyers disagreed with my post in Facebook profile page comments, and I've gotten some private emails to the same effect. What’s caught my attention is that these disagreements are coming from folks who normally agree with my expansive 230 interpretations. This clearly indicated to me that 230’s application to the FTC’s scenario was not nearly as self-evident as I thought it was.

As a result, in this post, I'm going to describe my analysis in more detail than my previous post. I'm not sure I'll convince the doubters, but they deserve more detail than I initially provided.

The FTC's Example

There are many facets to the new guidelines, but I am focusing solely on Example #5 to §255.1, which reads:

Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. [my emphasis]

The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services. [See § 255.5.]

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.

The FTC doesn't define what qualifies as a "blog advertising service," but it's fairly clear the FTC is targeting PayPerPost/Izea and its competition. So the example could be restated as:

* advertiser contracts with PayPerPost to get bloggers to write about its product
* PayPerPost makes a match with a blogger. There is no employment or agency relationship between the advertiser or the blogger; this is an ordinary customer-vendor relationship, mediated by PayPerPost
* without any pre-review or kibitzing by the advertiser, the blogger makes a truthful statement about the blogger's experience about the product, but the statement would be impermissible marketing if made by the advertiser
* the FTC treats the advertiser as having made the blogger's statement

Prima Facie Elements of a 47 USC 230 Defense

47 USC 230(c)(1) reads:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

A successful 230(c)(1) defense breaks down into three prima facie elements:

1) the defendant must be a "provider or user of an interactive computer service"
2) the content generating the alleged liability must be "information provided by another information content provider"
3) the legal claim has to treat the defendant as the "publisher or speaker" of the third party content

230 has a number of statutory exclusions, but I don't think any of them are relevant to Example 5.

Application of 47 USC 230 to Example #5

With this in mind, the FTC's Example #5 satisfies the prima facie elements of a successful 230 defense as follows: the advertiser is the user of an interactive computer service, the blog post is content provided by another information content provider, and the FTC's theory that the advertiser adopts or endorses the blog post treats the advertiser as the publisher or speaker of the third party blogger's blog post.

I received significant skepticism about my characterization of the advertiser as the "user" of an interactive computer service. I can reach this conclusion in two ways. First, PayPerPost provides an interactive computer service, and the advertiser uses PayPerPost. Second, the advertiser is a "user" of some Internet connectivity provider just by getting online.

Admittedly, explanation #2 is expansive, perhaps disconcertingly so. By this reasoning, anyone online automatically qualifies as a "user" of an interactive computer service by definition, thus seemingly expanding the 230 immunization eligibility to everyone without restriction. While this may sound wrong, it’s entirely consistent with how courts have interpreted the term “user.” The leading case on the topic, the California Supreme Court opinion in Barrett v. Rosenthal, never provides a single crisp definition of "user" but seemed to contemplate that merely being online qualified. Some minor cases possibly read "user" more narrowly, but I think the dominant line of cases gives “user” an expansive definition.

From a doctrinal standpoint, I think the broad reading of 230's application makes a lot of sense. The cases over the past 13+ years have taught us that 230(c)(1) can be distilled into a simple syllogism: unless the plaintiff’s claim fits into one of the statutory exclusions (IP, federal crimes, ECPA), A isn't liable for third party B's online content or actions. Period.

In the FTC’s Example #5, A is the advertiser and B is the blogger. Applying the same syllogism as above, the advertiser can’t liable for the blogger's online content or actions. Period.

The fact that the advertiser paid the blogger to write the content doesn't change my analysis one bit. For example, in the 1998 Blumenthal v. Drudge case, AOL got a 230 defense for Matthew Drudge's allegedly defamatory content, even though AOL paid $3,000 a month for Drudge's columns and retained editorial control over the content. I'm pretty sure 230 has applied in other cases where the defendant paid for the content. If you can think of others, I’d appreciate the reminder.

Further, the payment doesn't create a respondeat superior relationship between the advertiser and blogger. There is no credible argument that the blogger is the advertiser’s employee. I don’t think the example indicates an agency relationship because the advertiser lacks the requisite control over the blogger. PayPerPost’s mediation of the advertiser-blogger relationship further reinforces the lack of agency; indeed, the advertiser may not even be communicating directly with the blogger. And even if the blogger were the advertiser’s employee or agent, 230 still might apply for the blogger’s statements that exceed the advertiser’s authorization. See Delfino v. Agilent and the Higher Balance case.

If you don't like the broad reading of "users" (even though I think it is defensible under the case law), then go back to my first explanation that both the advertiser and blogger are "users" of the interactive computer service provided by the blog advertising service provider (e.g., PayPerPost). This argument works just fine too.

Applicable 230 Precedent

Unfortunately, I can’t point to many 230 cases applying the immunization to circumstances where the defendant did not host or republish the allegedly tortious content. Most 230 cases involve a provider's liability for its user's content or actions (the “paradigmatic” 230 case).

In contrast, we don't see many cases interpreting the user defense, but then again, those lawsuits may be so tenuous anyway that they are rarely brought. For example, I could not find any specific cases applying 230 to the linking situation I critiqued in my SEC comments.

Even without any obvious precedent, I think the statute on its face leads easily to the conclusion that advertisers can't be liable for bloggers' independent posts. As I indicated in my initial post, I don't even see that as a close case under 230.

One reasonably close precedent, the Subway v. Quiznos case, hasn’t reached a solid 230 ruling yet. In that case, Quiznos reposted some user-created advertising videos, and Subway contended that the videos constituted false advertising. The court rejected Quiznos' 230 defense solely on the grounds that it was raised in a 12(b)(6) motion to dismiss, which the court said was too early. (This same issue arose in Barnes v. Yahoo, where the Ninth Circuit initially agreed with this court and then withdrew that portion of its opinion). Although 230 didn’t apply at the 12(b)(6) stage, could Quiznos claim 230 for the videos at a later stage of the proceeding? I think it can, even if it "adopted" the user-generated videos by republishing them, unless it actually authored the statements that are deemed false advertising. For examples where a republisher can claim 230 for content is putatively “endorses” through its republication, see, e.g., the Barrett case, the Batzel case, the Tefft case (one of the minor cases narrowly interpreting “user”), the D’Alonzo case and the Furber case. I’m sure I could find others.

I think the FTC's Example #5 is an even easier 230 case than Quiznos’ situation. Unlike Quiznos, the advertiser in Example #5 never republished the blog post or even signaled any adoption of or agreement with the post. With such a tenuous relationship between the advertiser and the blogger, the FTC’s overreaching—and the role 230 plays in preventing that overreaching—is even clearer.

Conclusion

As the old expression goes, when you’re a hammer, everything looks like a nail. So perhaps I’m just such a 230 enthusiast that I’m finding it in places it doesn’t belong.

However, having read many dozen 230 cases over the past 13 years, I’ve formed the strong opinion that courts treat 230 as saying A isn’t liable for third party B’s online content. If you accept that proposition (and resist the temptation to manufacture provisos and qualifications that don’t actually exist in the cases), then it should be clear why 230 preempts Example #5—because that’s exactly what the FTC is trying to do.

UPDATE: Paul Levy disagrees with my analysis in this post.

Posted by Eric at 11:55 AM | Derivative Liability , Marketing | TrackBack

October 06, 2009

Do the FTC's New Endorsement/Testimonial Rules Violate 47 USC 230?

By Eric Goldman

In reading the FTC's new rules on endorsements and testimonials in advertisements, I was struck by the FTC's expansive vision of advertiser liability for third party-caused violations. In particular, the FTC apparently has made the same analytical error that the SEC recently made in the SEC's proposal to hold securities issuers liable for third party content they link to. In my comments to the SEC, I explained that trying to hold a linker liable for content at the terminus of a link violates 47 USC 230.

In this case, in commentary to §255.1, the FTC provided example #5 (starting on page 63 of the PDF) clearly targeting PayPerPost/Izea and its competitors:

Example 5: A skin care products advertiser participates in a blog advertising service. The service matches up advertisers with bloggers who will promote the advertiser’s products on their personal blogs. The advertiser requests that a blogger try a new body lotion and write a review of the product on her blog. Although the advertiser does not make any specific claims about the lotion’s ability to cure skin conditions and the blogger does not ask the advertiser whether there is substantiation for the claim, in her review the blogger writes that the lotion cures eczema and recommends the product to her blog readers who suffer from this condition. The advertiser is subject to liability for misleading or unsubstantiated representations made through the blogger’s endorsement. [my emphasis]

The blogger also is subject to liability for misleading or unsubstantiated representations made in the course of her endorsement. The blogger is also liable if she fails to disclose clearly and conspicuously that she is being paid for her services. [See § 255.5.]

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.

Per this example, the FTC appears to think advertisers can be liable for a blogger's rogue content merely because there is an underlying sponsorship relationship. This situation is prima facie preempted by 47 USC 230. Frankly, this doesn't even look like a close case.

I'm kicking myself because I should have raised the 47 USC 230 concern with the FTC during the comment period. My weak excuse: too many misguided regulatory proposals, not enough Eric. The FTC's discussion prefacing its guidelines doesn't mention 47 USC 230 at all, which now makes me wonder if anyone raised the statutory concern to the FTC. Instead, the FTC breezily brushed off concerns about over-expansive advertiser liability by treating this as a situation where the advertiser assumes the risk that bloggers might write rogue content:

Imposing liability in these circumstances hinges on the determination that the advertiser chose to sponsor the consumer-generated content such that it has established an endorser-sponsor relationship. It is foreseeable that an endorser may exaggerate the benefits of a free product or fail to disclose a material relationship where one exists. In employing this means of marketing, the advertiser has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk. The Commission, however, in the exercise of its prosecutorial discretion, would consider the advertiser’s efforts to advise these endorsers of their responsibilities and to monitor their online behavior in determining what action, if any, would be warranted. [emphasis added]

Uh, no. As I tried to explain at the ABA Consumer Protection Conference this summer (which many FTC staffers attended), 47 USC 230 requires the FTC and other consumer protection agencies to fundamentally rethink their basic endorsement liability paradigms. If you're looking for a paper topic, I think the interplay because 47 USC 230 and government agencies' theories about liability for endorsing online content is ripe for smart analysis.

While an FTC enforcement action pursuant to its misguided advertiser liability theory should be an easy defense win, I don't expect we'll ever see that result. As we know, the FTC is fairly careful in selecting enforcement actions, and most defendants choose quickly settle rather than fight. Those that don't settle usually don't present the best facts to the court, and sometimes their lawyers don't even know about 47 USC 230.

If the issue ever does get to court, I'd expect the FTC to marshal up every plaintiff win under 230 to show how it can pin third party content on the advertiser. However, at the moment, I don't think any of the scrappy plaintiff wins bolster its theory. For example, I don't think the Roommates.com case helps because this isn't a situation where the advertiser has encouraged illegal content. I also don't think the Mazur case helps the FTC because the advertiser never chose the words communicated by the blogger.

Because it appears fundamentally inconsistent with 47 USC 230, I hope the FTC will reconsider its basic liability approach here.

UPDATE: In response to comments I've received on this post, I have provided a fuller explanation of my thinking about 47 USC 230 and the new guidelines.

Posted by Eric at 10:04 AM | Derivative Liability , Marketing | TrackBack

October 05, 2009

Ripoff Report Rolls to Another Win--Intellect Art v. Milewski

By Eric Goldman

Intellect Art Multimedia v. Milewski, 117024/08 (NY Sup. Ct. Sept. 15, 2009). For more background on the lawsuit, check out the companion blog.

This case involves the "Swiss Finance Academy," an expensive summer college program. A disgruntled student posted some criticisms about the program on Ripoff Report. See the post in question. The program brought a lawsuit against both the posting student and the Ripoff Report.

The plaintiff alleged defamation and a products liability claim against Ripoff Report. Both are dismissed per 47 USC 230. The court's discussion regarding the products liability claim is particularly interesting. First, the court says the site is a service, not a product, and therefore may be categorically excluded from any products liability doctrine. Second, the court says:

"the court does not need to reach this novel issue, since plaintiff has not even alleged that the website was in a defective condition which gave rise to its claimed injuries. Rather it was [the student's] purported posting that gave rise to plaintiff's injuries, not Xcentric's website itself. The claim that Ripoff Report was defectively designed to elicit defamatory statements from its users is devoid of commonsense and reasoning, is unsupported by law, and is, therefore, reject." [sic]

Oof. I've occasionally seen previous arguments that product liability doctrines get around 230. This case is one data point that they aren't...and arguments to the contrary are "devoid of commonsense and reasoning." Plaintiffs beware.

The plaintiff tried to add a few new claims against Ripoff Report and none of those get a chance mostly because of deficient allegations rather than 230. The tortious interference claims fail for lack of allegations about the specific affected relationships. The contract fails because the plaintiff isn't a third party beneficiary of the Ripoff Report-student contract. The negligent misrepresentation claim failed for lack of a special relationship. The negligence claim failed for lack of an alleged duty. The negligent falsehood claim fails for lack of alleged special damages.

In the end, the Ripoff Report walks away from this lawsuit.

The student also gets a good ruling. The court rejects the defamation claim because it characterizes all of the student's statements as protected opinion. [Note: the Ripoff Report posting was under a pseudonym, so it's not confirmed that the student is the same person as the poster.] It seemed to me that the court was cutting corners here. For example, the report said that the school only fed students toast for breakfast. That seemed like a pretty factual assertion to me; I'm not sure how to style that statement as an opinion. Even so, the court cut the corners for a good reason:

"the website, when viewed in its full context, reveals that Milewski is a disgruntled consumer and that his statements reflect his personal opinion based on his personal dealing with plaintiff. They are subjective expressions of consumer dissatisfaction with plaintiff and the statements are not actionable because they are Milewski's personal opinion."

Milewski isn't totally off the hook, as there are still unresolved issues about unpaid tuition. But otherwise, this court shuts down another vendor's attempt to squelch negative feedback about its business practices.

David Johnson has a more plaintiff-friendly take on this case.

Posted by Eric at 09:59 AM | Content Regulation , Derivative Liability | TrackBack

September 29, 2009

Another Copyright Owner Doesn't Like 512(c)...and Thinks an Anti-Copying Filter is Copyright Infringing--Scott v. Scribd

By Eric Goldman

Scott v. Scribd, Inc., 4:09-cv-03039 (S.D. Tex. complaint filed Sept. 18, 2009) (linked to a copy of the complaint hosted on Scribd, of course!). If you're interested, my page of Scribd uploads.

I hadn't planned to blog on this lawsuit, but I was finally prompted to read the complaint and thought there was enough stuff to ridicule to warrant a brief post:

There can be a fine line between brilliance and crazy when it comes to new lawsuits, and this one falls on the crazy side of that equation. It is a frontal assault on the DMCA online safe harbors and a backdoor assault on the burgeoning efforts to develop anti-copying filters. I think both efforts are wildly misdirected.

The 512(c) Assault

With respect to 512(c) assault, the plaintiff doesn't bring much new to the party. If 17 USC 512(c) preempts all flavors of copyright infringement (both direct and secondary), then this lawsuit is probably DOA.

Note: Fred kindly linked to my write-up of the recent UMG v. Veoh ruling but took issue with my assessment that it's ambiguous if 512(c) only preempts direct copyright infringement or all flavors of infringement. He correctly notes that the legislative history is entirely clear that 512 preempts all flavors…but this only helps if a court reaches that legislative history. On its face, the statute has express exclusions that mirror language from the secondary copyright infringement tests, so other courts could simply rely on the statute to narrow the statutory protection only to direct infringement. Indeed, a number of courts have implicitly reached this interpretation without acknowledging the ambiguity; which made the UMG v. Veoh's determination that the words in the statute mean something different than the exact same words used as part of the vicarious copyright infringement test all the more interesting.

Back to Scribd's 512(c) defense. Recall that I said the lawsuit was “probably” DOA. As part of trying to oust Scribd from 512(c), the plaintiffs challenge Scribd's compliance with the statutory formalities by noting an inconsistency between Scribd's contact info on its site and in its copyright office filing. (See para. 35-36). It's possible that this highly technical "problem" could be a greater threat to Scribd's 512(c) eligibility than the plaintiff's more substantive assaults.

The Copyright Filter Assault

With respect to the fact that Scribd uses copyrighted works to create a filter to prevent their reloading, I think this lawsuit is way, way off-base.

First, the Fourth Circuit recently held that the Turnitin anti-plagiarism filter (built using copyrighted works that were, in some cases, included in the system through quasi-coercion) was a fair use. See my blog post on the district court ruling AV v. iParadigms for more detail on the coercion and fair use points. Further, in that case, Turnitin monetizes its database directly by licensing access to it, while the complaint apparently alleges that Scribd uses the database only for its own filtering purposes and does not license it to others. As a result, Scribd's internal usage of the database (without separate monetization) seems like it would tilt the fair use equitable factors even more clearly in its favor.

Alternatively, courts could reach fair use by concluding that Scribd's copying into the filter is an intermediate copy to create a non-infringing/fair use output. See, e.g., Sega v. Accolade; Kelly v. Arriba; Perfect 10 v. Amazon. In fact, as far as the complaint indicates, Scribd never republishes any of its copy used for filtering, while Turnitin republished portions of its copies as part of its originality reports.

Second, several courts recently have encouraged defendants to build filters to suppress infringing or wrongful behavior and given the defendants extra legal protection because they are using these filters. See Io v. Veoh; UMG v. Veoh; Tiffany v. eBay; Cisneros v. Yahoo. For example, the recent UMG v. Veoh case lauded Veoh for upgrading its infringement suppression filter from a weak hashing technology to the more robust Audible Magic system. Given this trend, it seems likely that future courts will legally protect efforts to build more robust anti-copying filters, even if copyrighted works are copied along the way.

Third, this attack on the filtering efforts, and the fact that it's probably not Rule 11 sanctionable despite its ridiculousness, shows just how misdirected copyright law has gotten. The plaintiffs seek to set up what Wikipedia says is a "Morton's Fork" (which, I think, most people refer to as a Hobson's choice). A service provider can choose not to automatically filter the site, in which case infringement can run rampant and excise the service provider from 512(c) based on the statutory technicalities and exclusions. But if the service provider builds a filter to automatically filter for copyright, the plaintiffs believe the service provider should face liability for building the filter.

Courts recognize and would like to avoid this dilemma, and the copyright owners' countervailing interests are weak. Other than the theoretical and highly formalistic loss of control over their copyrighted works, exactly how are copyright owners harmed by having their works in Scribd's anti-copying filtering database? (Some of us would argue that the only harm is if the filter actually blocks potentially valuable exposure that might have come from having the works published through Scribd, but I don't think that's what the copyright owners are complaining about!). The filter helps copyright owners prevent future infringements, so in that respect it only preserves, not reduces, the value of the copyrighted works. Thus, without any harm, lawsuits like this simply reflect a ridiculous effort to use copyright law to stop progress. This isn't what copyright law is about, and it’s dispiriting to see some copyright owners try nonetheless.

Posted by Eric at 10:47 AM | Copyright , Derivative Liability | TrackBack

September 18, 2009

Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host--Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., 5:07-CV-03952 (N.D. Cal. jury verdict returned Aug. 28, 2009). My blog post of the December 2008 ruling on summary judgment motions in the case.

Last month, a jury returned a $32+ million verdict against a web host (and related parties) for contributing to trademark infringement committed by its customers. This ruling was breathtaking on a number of fronts, but two attributes stood out: the size of the verdict and the fact that a web host was contributorily liable. Online cases interpreting contributory trademark liability are rare, and the few cases we've seen--such as the 1999 Lockheed v. NSI case, which remains the flagship case on the topic, and the Tiffany v. eBay case--generally have been defense-favorable. Indeed, I can't think of a prior case where a web host lost a contributory trademark infringement ruling, although Lockheed v. NSI case dicta implicitly contemplates that a web host could have the requisite degree of "direct control and monitoring of the instrumentalities used to infringe" that NSI, as a domain name registrar, lacked in that case.

Because this case takes us into uncharted waters, the ruling looks significant on first blush. However, some things have been bothering me about the case. First, because we're working with a jury verdict, it's hard to identify and distill the key facts that led to Akanoc's loss. If nothing else, the jury verdict blunts the precedential impact of the case; there's no written opinion, there's nothing citable, and by definition the ruling is fact-dependent. Second, I have been having this nagging suspicion that Akanoc did something goofy that stood out from industry standards. In contrast, the December 2008 ruling in this case, though troubling, didn't raise huge red flags for me, so the result seemed like an unexpected odd turn.

As we post-mortem the case, two key facts are emerging. First, Akanoc's defense invoked a jurisdictional component that any infringing activity wasn't taking place in the US. I believe the basic argument is that Akanoc's web hosting customers are Chinese and marketing the allegedly infringing goods to Chinese customers. All that may be true, but it's not clear how well that jurisdictional argument works for a US-based company (Akanoc is located in Fremont, CA). Accordingly, I don't think I would have advanced this jurisdictional defense if it were my choice.

Second, and much more importantly, Louis Vuitton claims it sent 19 takedown notices to Akanoc and most were ignored. I haven't researched the case enough to see the exact wording of the takedown notices, and I'm often skeptical of such claims because IP owners routinely send ridiculously broad takedown notices or requests with unreasonable demands that deserve to be ignored (see, e.g., Tiffany's demands that eBay enforce rules that Tiffany made up). Nevertheless, if the jury decided that Louis Vuitton sent multiple proper takedown notices that were ignored, then this verdict wouldn't be all that surprising or, frankly, all that earth-shattering. Although there is no statutory notice-and-takedown regime for online trademark complaints, I think many web hosts (and other intermediaries) follow the DMCA notice-and-takedown regime--built for copyright complaints--for trademarks as well. If Akanoc's failure to honor Louis Vuitton's takedown notices was the dispositive fact for the jury, it's unlikely that many web hosts would find themselves in a similar position. In that case, then, this case is hardly as disconcerting as it appears on the surface.

Having said that, I think the entire web hosting industry would benefit from a clear rule that notice-and-takedown eliminates contributory trademark liability, as well as clarity about what constitutes a proper takedown notice. Due to the uncertainty of this lawsuit's result, if I ran a web hosting business, I would probably take down users in response to less clear or more expansive trademark take-down requests than I would in the copyright realm where 512(c)(3) spells out the specific requirements for a proper notice. In that respect, then, I think the likely consequence of this case is to make web hosting customers more vulnerable to losing service and going dark on the basis of bogus or questionable trademark take-down requests.

We haven't seen much movement towards a statutory solution to online contributory trademark infringement problems. Maybe it's time. Or, perhaps the Second Circuit's Tiffany v. eBay ruling will give us enough clarity to sort out the issues without statutory intervention.

September 17, 2009

Veoh Gets Yet Another Terrific 512 Defense Win--UMG v. Veoh

By Eric Goldman

UMG Recordings, Inc. v. Veoh Networks, Inc., 2:07-cv-05744-AHM-AJW (C.D. Cal. Sept. 11, 2009)

What's the difference between the market leader and an also-ran? When the also-ran wins its third big legal victory in a row, the first question everyone asks is "what does this mean for the market leader?"

Specifically, when the copyright infringement lawsuits were filed against YouTube in 2007, everyone got really excited about a looming legal determination of the legitimacy of YouTube's practices. (See, e.g., 1, 2). But, we haven't learned very much about substantive law from YouTube's litigation in the 2+ years since. Instead, while the YouTube cases are mired in procedural heck, Veoh has notched three powerful defense-side wins that surely help YouTube (see my previous posts on the Io case and the earlier 512 ruling in this UMG case). These cases have established Veoh as the litigation leader of the user-generated online video business, even if it's not the market leader.

In the December ruling in this case, Judge Matz concluded that the videos in Veoh's network were "stored at the direction of users" even though Veoh's system technologically manipulated the user-supplied video. Having established that, this ruling addresses whether Veoh met the other requirements of 17 USC 512(c).

Actual/Red Flags Knowledge

A service provider loses 512(c) eligibility if it does not expeditiously remove infringing items after getting actual knowledge or has sufficient awareness of infringement. This standard has proven tricky because plaintiffs keep trying to establish knowledge and awareness based on something other than the 512(c)(3) notices contemplated by the statute. In this case, everyone agreed that Veoh responded expeditiously to 512(c)(3) notices, so UMG argued—and the judge rejected—that Veoh got enough culpable scienter from other things, such as

* Veoh was in the music business, and music is protected by copyright.
* Veoh had tagged videos as "music videos"
* Veoh bought search ads keyed to the titles of UMG copyrighted works (but all identified instances were for artists where Veoh had a license covering some of the artists’ works)
* a non-512(c)(3) compliant notice categorically opting out for specified artists. The court rightly rejects such notices as construing actual knowledge because artist names are too imprecise (they do not identify either the infringed works or the infringing works.

The latter point is a contentious one. Compare the wrongly decided 2001 ALS Scan v. RemarQ case, which said that the service provider had to assume that everything published in USENET newsgroups containing the plaintiff's trademarks was categorically verboten. Also compare the Hendrickson case (distinguished in a footnote). However, the judge leaves open the possibility that a non-512(c)(3) compliant notice could still confer actual knowledge if the copyright owner categorically identifies the title of the infringed work or made the representation that all works of a particular artist were unconsented.

The judge also rejects the argument that Veoh had generalized knowledge that widespread infringing activity was occurring on its site.

Finally, UMG argued that Veoh got the requisite scienter from its failure to use filtering technology properly. Veoh went through three iterations of filtering: first, none, then in 2006, a hashing technology, and finally in 2007, Audible Magic. UMG argues that Veoh should have adopted Audible Magic earlier and should have filtered its back catalog quicker once it adopted the technology. The court rejects this argument because (1) Veoh wasn't obligated to adopt filtering technology at all, and (2) it showed good faith by migrating from a poor solution (the hashing technology) to a more robust system.

System Control

To be eligible for 512(c), a service provider also must show that it lacked the "right and ability to control" the infringements. The court clarifies that this must mean something other than the operation of the system and the ability to take down content; otherwise, every service provider would be disqualified. Veoh's ability to deploy filtering software is also irrelevant per 512(m) (a rarely discussed corner of the statute).

However, this court is bound by the awful and antiquated Napster precedent, which had a very expansive view of "right and ability to control." The court sidesteps Napster by saying the Ninth Circuit's Napster interpretations only apply to the prima facie case of vicarious copyright infringement, not the identical words contained in 512(c). This is an awkward conclusion because (1) the words are identical, and (2) in ccBill, the Ninth Circuit held that the 512(c) words "direct financial benefit"--immediately adjacent to "right and ability to control" in 512(c)--should be interpreted the same as the usage in the prima facie case. So this court reaches the tough conclusion that "direct financial benefit" means the same thing in 512(c) and the prima facie case while the words "right and ability to control" do not.

This dichotomous language parsing seems particularly unstable. However, it is a logical consequence of the Ninth Circuit's steadfast but ill-fated refusal to overturn the analytically corrupt Napster ruling, which has been horking Ninth Circuit Internet copyright jurisprudence since 2001.

Termination of Repeat Infringers

Finally, the service provider is obligated to terminate repeat infringers. UMG argued that Veoh is disqualified because it doesn't automatically terminate users whose videos are filtered out by the Audible Magic technology. The judge disagrees because Audible Magic's system is a black box, so no one knows how many false positives it produces. Further, other courts have said that a compliant 512(c)(3) notice isn't accurate enough to automatically trigger an obligation to kick the target user off, so Audible Magic's fallibility makes its assessments even less compelling.

UMG also argued that it was unreasonable that Veoh did not kick off users who had uploaded multiple files that were covered under the same 512(c)(3) notice. (Veoh had a two-strikes rule for those users). The judge rejects that argument too, saying that Veoh's policy was appropriate.

Overall Assessment

Overall, this case is another terrific defense win. In every instance of ambiguity, the judge sided with the defense, repeatedly noting that copyright owners have to shoulder more burden to prepare compliant 512(c)(3) notices and service providers have no burden to filter or take other steps that copyright owners demand but aren't in the statute. Some of this categorical siding with the defense might also reflect that UMG appears to have annoyed this judge. I laughed out loud when I saw FN 10, which says "Veoh cited Io Group extensively in its opening brief. UMG did not mention it at all in its Opposition." You can run from precedent, UMG, but you can't hide.

While there is a lot of good news in this opinion, it's also noteworthy for what it didn't say. As I've mentioned repeatedly in past blog posts, 512(c) has a critical embedded ambiguity--does it insulate service providers from all three flavors of civil copyright infringement (direct, contributory and vicarious) or only direct infringement? Amazingly, courts generally have avoided discussing this crucial threshold consideration, instead proceeding ahead with an assumption (not always the same assumption from case to case!) on this crucial question but not resolving it. This case is no different; the court apparently makes an unexamined assumption that 512(c) is a defense to all three flavors of infringement. This is a terrific assumption for Veoh, YouTube and all 512 defendants, but it would be even better if the court actually said that.

The court does come closer than many other courts to addressing this ambiguity when it said there was a difference between the prima facie vicarious copyright infringement and 512(c) uses of the phrase "right and ability to control." However, I will be very interested to see if the Ninth Circuit agrees with that dichotomy on appeal. Even if they affirm the judgment, I suspect this dichotomy won’t survive intact.

Posted by Eric at 01:57 PM | Copyright , Derivative Liability | TrackBack

September 08, 2009

Yahoo's Search Results Snippets Aren't False Endorsement--Stayart v. Yahoo

By Eric Goldman

Stayart v. Yahoo! Inc., 2009 WL 2840478 (E.D. Wis. Aug. 28, 2009)

Earlier this year, I blogged about Beverly Stayart's quixotic lawsuit against Yahoo and others for showing search results snippets that contained her name adjacent to spammy porn and adult content links. Last month, the court efficiently dismissed her federal Lanham Act "false endorsement" claims and then dismissed the remainder of her lawsuit on procedural grounds, allowing Stayart to refile those claims in state court if she chooses. (She shouldn't but she probably will). The court rejected Stayart's Lanham Act false endorsement claim on three different grounds.

Commerciality

The court says that Stayart has not made adequate efforts to commercialize her name sufficient to give her standing for a Lanham Act claim. I agree with the court's factual assessment. Although Stayart alleged that she has been an active participant in online communities, she hasn't done anything to commercialize her name. Stated differently, if Stayart has standing under the Lanham Act's false endorsement provisions, then just about everyone in the world would.

Confusion

The court rejects any likelihood of consumer confusion. I don't particularly like the court's reasoning, which seems to be that since Stayart has lived a squeaky clean life, no one would believe that she could be associated with the seedier activity promoted in the spammy links. This reasoning seems completely inconsistent with the nature of gossip. Nevertheless, the court is completely right when it says "No one who accessed these [spammy] links could reasonably conclude that Bev Stayart endorsed the products at issue." I think this is true because the spammy links lack internal credibility enough for anyone to believe them at all.

With respect to Various, the defendant whose adult website was advertised at some of the spammy links, Stayart argued initial interest confusion because people interested in her might be induced to click on the spammy links. The court rejects the argument by saying "The type of person looking for information about Bev Stayart would not be fooled into using an online adult-oriented dating website." I'm not sure why the court thinks this is true; people have all sorts of “hidden interests.” Nevertheless, I'd like to think no prudent person would be fooled into clicking on spammy porn links in a search engine, even if it referenced Stayart's name.

47 USC 230

The court's discussion up to this point has some odd reasoning, but the 47 USC 230 discussion is quite bizarre. The court's conclusion is that "Yahoo! should be entitled to immunity because it acted as an interactive computer service, even though Stayart’s claims are nominal intellectual property claims....Immunizing Yahoo! from Stayart’s claims would not limit the laws pertaining to intellectual property because Stayart does not state a valid intellectual property claim."

What? Is the court saying that it doesn't need to discuss 230 because Stayart failed to state a valid IP claim, or is the court saying that Yahoo qualifies for the 230 immunity because doing so would be consistent with 230's policies--even if the court has to ignore 230's statutory exclusion for IP claims? The court could have found a role for 230 by concluding that the Lanham Act false endorsement claim wasn't really an IP claim at all, any more than a Lanham Act false advertising claim is an IP claim, but I don't think the court said that.

So I'm not sure what the 230 references means, and I personally think the court would have been better off not discussing 230 at all. (As Rebecca writes, the whole 230 digression was "obviously useless.") At minimum, I don’t think it would be accurate to say that this court found a 230 defense to a federal IP claim. As a result, I’m filing this case in the bucket of “not very interesting” 230 cases.

Note: we already knew that 230 protects search engines from liability for their search results snippets when IP claims aren’t involved. See, e.g., Maughan v. Google and Murawski v. Pataki. A British court also reached the same result on common law grounds. See the Metropolitan International Schools case.

Conclusion

The court denies Various' 230 defense because its association with the banner ad was unclear. Having dismissed the federal Lanham Act claims completely, the court then declines supplemental jurisdiction over the state law claims. The court also rejects Stayart's guffaw-inducing request for sanctions against the defendants for having the temerity of moving to dismiss her complaint.

I'm glad to see Stayart's lawsuit quickly dismissed. It was a ridiculous lawsuit from inception. At the same time, the court's corner-cutting leaves me lamenting the absence of better doctrines to deter junk lawsuits like this in the first place. It's actually can be tricky to say that any trademark complaint is "wrong" given how much doctrinal contortions some courts have indulged in--even when lawsuits like this are so clearly wrong.

More comments on the case: Rebecca Tushnet, Mike Masnick (who has had first-hand dealings with Stayart) and Ars Technica

Posted by Eric at 03:05 PM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

September 03, 2009

Employer Isn't Liable for Employee Misuse of the Internet--Maypark v. Securitas

By Eric Goldman

Maypark v. Securitas Security Services USA, Inc., 2009 WL 2750994 (Wis. App. Ct. Sept. 1, 2009)

As part of my efforts to keep up with new cyberlaw developments, I read a lot of cases involving yucky facts. But even with my constitution hardened over time, occasionally I still find some cases that really gross me out. So for this case, I'm just going to quote the key factual sentences from the court's opinion:

"At some point, Schmidt copied the photographs of approximately thirty female employees to a flash drive. He printed the photographs at home, ejaculated on them, and posted pictures of the adulterated photos on adult websites he created on Yahoo!." He made these postings without using the company's connectivity.

Schmidt was the employee of a third party vendor that provided security for a Wisconsin manufacturer's facility. The affected manufacturer's employees sued the security vendor for negligent training and supervision. In the trial court, the employees got total damages of $1.4M.

The appellate court reversed this ruling and held that Schmidt's employer was not negligent as a matter of law because Schmidt's misconduct wasn't foreseeable. Implicitly, the court rejects the argument that merely providing Internet access to employees, without more, constitutes per se negligent supervision or training. As the court says, "There is nothing inherently dangerous about permitting employees to access the internet at work."

The court goes on to say that public policy limits the employer's exposure to damages here. First, as the court says, "It would be an understatement to say Schmidt's actions were bizarre and unexpected. Schmidt's actions were unimaginable." Second, "employers have no duty to supervise employees' private conduct or to persistently scan the world wide web to ferret out potential employee misconduct."

This case reminded me a little of Delfino v. Aglient, where an employer avoided liability for an employee's rogue Internet activities on 47 USC 230 grounds. I never felt comfortable with 47 USC 230 applied to employer-employee relationships, but I liked that it offered an easy and decisive limiting doctrine to cut off employer liability for bizarre employee Internet conduct (otherwise, we get $1.4M judgments at the trial court level). In the Maypark case, I like how the appellate court anchored its reasoning, in part, on public policy grounds without getting into ambiguous statutory grounds like 230. I found the last statement I quoted ("employers have no duty...to persistently scan the world wide web to ferret out potential employee misconduct") especially apropos.

Posted by Eric at 10:29 AM | Content Regulation , Derivative Liability | TrackBack

August 26, 2009

Yahoo Subpoenas Expedia in American Airlines Lawsuit

By Eric Goldman

Yahoo and American Airlines are still tussling over Yahoo's sale of American Airlines' trademarks as keyword triggers (see background at 1, 2, 3). According to Yahoo, American Airlines is arguing that online travel agencies such as Expedia are directly infringing American Airlines' trademarks by buying keywords from Yahoo, which would make Yahoo a secondary infringer by facilitating Expedia's direct infringement.

From my perspective, American Airlines' direct infringement argument looks questionable because Expedia and others should be fully protected by the First Sale/trademark exhaustion doctrine for advertising that it sells American Airlines' branded services--just like any other retailer is free to advertise the trademarks of the manufacturers it vends. However, perhaps American Airlines restricts Expedia's advertising by contract and is taking the position that Expedia exceeded the contract and such a contract breach constitutes trademark infringement. American Airlines is also arguing that Yahoo is tortiously interfering with the American Airlines-Expedia contract, so that seems possible. Even then, it's not clear to me that if Expedia exceeds the contract by buying trademarked keywords, the contract breach would qualify as trademark infringement. The analysis should go back to default trademark law, which should excuse Expedia's purchases under the trademark exhaustion doctrine.

ASIDE AND REQUEST FOR HELP: I have done a fair amount of digging trying to find cases that apply the trademark exhaustion doctrine to the legitimate resale of third party services. I have only been able to find the trademark exhaustion doctrine applied to the resale of physical goods/chattels, not the resale of services, but it seems like the doctrine should apply to both. The travel business is a great example. Travel agents routinely advertise to consumers that they resell travel packages that include a flight on, say, American Airlines. I have been struggling to find any cases or other supportive sources indicating that such advertisements by travel agents are protected by trademark exhaustion. Presumably, in some cases, the advertising and resale is expressly permitted by a contract with the upstream service provider (such as in a consolidation contract between the travel agent consolidator and the airline), but I'm sure there are plenty of cases where there is no contract at all. Any tips/referrals/suggestions on cases applying trademark exhaustion to the legitimate resale of services would be very much appreciated. END OF ASIDE

So, American Airlines is pointing the finger at Expedia as the direct infringer. [Even though, conspicuously, American Airlines isn't suing Expedia, for reasons I explore in my Brand Spillovers paper]. Naturally, Yahoo wants to know more about Expedia's possible exposure as a direct infringer so that Yahoo's defense can include disproving the direct infringement. Therefore, Yahoo sent a subpoena to Expedia requesting all kinds of goodies, such as the American Airlines-Expedia contract, consumer conversion rates from sponsored link ads, and other information about consumer behavior on Expedia.

Not surprisingly, Expedia responded "no thanks" to Yahoo's request. I can think of at least three reasons why. First, Expedia would rather not spend any time and money on someone else's lawsuit. Second, some of the information Yahoo is asking for could have significant competitive advantage to Yahoo. Yahoo partially competes with Expedia via its Yahoo Travel service, plus Yahoo's knowledge of the profitability of its referred customers could affect Yahoo's management of the travel category auctions. Third, some evidence could prompt American Airlines to close the litigation circle by suing Expedia directly.

In response to Expedia's nyet, Yahoo is seeking a motion to compel Expedia's response to its subpoena. Typically, these discovery disputes result in a split-the-baby outcome (either via a settlement or ordered by a judge) where Yahoo gets less than it asked but Expedia also forks over some info. We'll see. Meanwhile, Yahoo's effort is consistent with a trend I first spotted in connection with the Rhino Sports case--advertiser behavior regarding keywords has significant value in litigation discovery and for competitive purposes, so I expect to see more subpoenas like this over time.

Posted by Eric at 09:37 AM | Derivative Liability , E-Commerce , Marketing , Search Engines , Trademark | TrackBack

August 24, 2009

Online Retailer Isn't Liable for User Comments--Cornelius v. DeLuca

By Eric Goldman

Cornelius v. DeLuca, 2009 WL 2568044 (E.D. Mo. Aug. 18, 2009)

DeLuca runs bodybuilding.com, a fitness website and online retailer. The plaintiffs sell dietary supplements ("syntrax," whatever that is). The plaintiffs allege that their competitors posted shill reviews to bodybuilding.com designed to harm the plaintiffs' business. The plaintiffs sued both bodybuilding.com and the putative shillers. This ruling deals only with bodybuilding.com's liability.

As you know, these facts set up an easy defense win per 47 USC 230. To get around 230, the plaintiffs allege that bodybuilding.com was in a "conspiracy" relationship with the shillers. I know conspiracy has been raised as a 230 bypass before, but I'm struggling to remember another case that decisively addressed the argument. This court tackles the issue squarely and efficiently dismisses the claim (without any citations). The only thing that matters to the court is whether the defendants posted the allegedly tortious content. Because the answer is no, case dismissed.

Some other 47 USC 230 cases that have reached analogous results:

A tip to plaintiffs' lawyers: STOP TRYING TO PLEAD AROUND 47 USC 230!

Posted by Eric at 07:07 AM | Derivative Liability | TrackBack

August 20, 2009

Private High School Not Liable for Cyberbullying--DC v. Harvard-Westlake

By Eric Goldman

D.C. v. Harvard-Westlake School, 2009 WL 2500343 (Cal. App. Ct. Aug. 14, 2009)

Harvard-Westlake is a highly-regarded private school in the Los Angeles basin with an impressive alumni roster and a lot of very affluent parents. I've known a few alums and, based on their descriptions, they seemed to have a remarkable and resource-rich experience far beyond what I had in public school.

DC was a Harvard-Westlake high school student and an aspiring entertainer. He ran a self-promotional website that contained a guestbook. Unfortunately, some of DC's peers were not fans of his, and they littered his guestbook with hateful homophobic "death threats." (I put that in quotes because they were ultimately deemed not to be serious threats.) It really breaks my heart to see coordinated venomous attacks like this among high schoolers. I understand that experimentation and limits-testing is part of the teenage experience, but IMO the hostility of these comments crossed the line. The death threats were so disconcerting that DC's parents contacted the local police, who brought in the FBI. Eventually the authorities advised DC to change schools. DC and his family followed this advice, requiring his entire family to relocate. The police ultimately decided not to prosecute the attacking students; according to one news report I saw, that decision was based on a conclusion that the attackers never actually intended to physically harm DC.

DC and his parents initially sued only Harvard-Westlake for a long list of claims, largely predicated on the school's allegedly derelict response to the students' attacks on DC. Among other things, the attacking students used Harvard-Westlake's computer network as part of their attacks, and the school did not suspend or expel any of the attacking students (although news reports indicate that the students were disciplined in some unspecified manner). The plaintiffs also complained that the student newspaper (supervised by a faculty member) published numerous stories about these incidents, including disclosing DC's new residence and school and repeating claims of his alleged homosexuality.

Subsequently, DC and his family also sued the attacking students and their parents. Needless to say, this has spawned a lengthy and expensive legal battle. The initial complaint was filed in 2005 and the proceedings are still going strong.

With respect to Harvard-Westlake as a defendant, DC's parents signed an enrollment contract that contained an arbitration clause and a fee-shifting provision. In 2005, the trial court ordered the Harvard-Westlake dispute to arbitration and stayed the actions against the attacking students and their parents until the arbitration was completed.

In Fall 2006, the arbitrator issued her first substantive ruling--the one that initially triggered my alert. In that ruling, the arbitrator dismissed several claims, including a state "hate crime" civil claim (the statute expressly protects sexual orientation) against the school on 47 USC 230 grounds. The arbitrator's ruling means that even if the school's computer network was used in the attack, the school isn't liable for that. Given its age, this is old news, and it isn't precedential because the ruling was made in arbitration. Nevertheless, in light of the various ongoing concerns about cyberbullying, I think this remains an interesting data point.

Subsequently in 2007, the arbitrator dismissed the remaining claims against the school and, per the fee-shifting agreement, awarded fees and costs to the school of over a half-million dollars. Last week's ruling in this case deals with (among other things) the plaintiffs' effort to avoid this award of fees and costs. They get a little relief from this court. To avoid discouraging plaintiffs with the specter of possible liability for defense costs, California's hate crime statute has its own "one-way" fee-shifting provision only for successful plaintiffs. Accordingly, the court concludes that public policy trumps the parties' enrollment contract and prohibits the plaintiffs from having to pay arbitration costs or defense attorneys' fees related to the hate crimes claim despite the contract.

The opinion isn't entirely clear about what happens next, but I believe the trial court ought to sever out any of the arbitration costs and defense legal fees tied to the defense of the state hate crimes claim. However, because the plaintiffs raised a long list of other claims in their lawsuit, I think a lot of defense legal fees still should be awardable under the fee-shifting provision in the enrollment contract. If so, the plaintiffs eventually will have a write a check of hundreds of thousands of dollars to the school.

I've previously blogged on other lawsuits involving high schoolers being mean to each other. The Sandler v. Calcagni and Finkel cases stands out most in my mind. These lawsuits seem to have some commonalities--they can be long-lasting all-out litigation wars that cost hundreds of thousands of dollars of legal fees. Based on my limited observations, my working hypothesis is that lawsuits over bad high schooler-on-high schooler behavior have no real chance of improving the plaintiff's life, regardless of the court's final disposition. Testing this hypothesis might be an interesting area to study. I wonder if a method like restorative justice might yield more satisfying results for plaintiffs than decade-long lawsuits.

I'm also wondering if Harvard-Westlake could have and should have done more to protect DC. I don't think the school was an appropriate defendant, but at the same time, there was clearly a crisis in its community that was detrimentally affecting the ability of one of its students to enjoy life. I'd welcome your thoughts about how schools can appropriately intervene in student-on-student cyberbullying attacks when they occur.

A final note: the court opinion does not mention either DC's identity or his parents' identity, so I've made the decision that it's not important for my blog post to identify the plaintiffs by name either. However, it was trivially easy to identify the plaintiffs. For example, you can see a list of most litigants from the lower court record in Case Number: BC332406 at the LA Superior Court website.

Posted by Eric at 02:12 PM | Content Regulation , Derivative Liability | TrackBack

August 14, 2009

Flowbee Latest Trademark Owner to Sue Google--Flowbee v. Google

By Eric Goldman

Flowbee International, Inc. v. Google, Inc., 2:09-cv-00199 (S.D Tex. complaint filed Aug. 13, 2009) [NB: the complaint is split into 2 PDFs totaling 8+ MB]

After the Jurin and Ascentive lawsuits against Google dissolved, the Google lawsuit tally is once again on the rise. Flowbee is the latest trademark owner to line up against Google. This brings the total number of AdWords lawsuits against Google back up to 8.

I can't do a redline comparison to see how much of this complaint is a clone-and-revise, but I definitely recognized a lot of language from American Airlines' complaints against Google and Yahoo. Most conspicuously, this complaint ripped off the stock Gibson Dunn apology (in Para. 6) that Flowbee "does not bring this lawsuit lightly." It appears that this catchphrase has become the equivalent of the American flag lapel pin for politicians--you have to wear it or else you are clearly anti-American. Similarly, it seems like the emerging trend is that if you don't declare your heavy heart for suing the beloved Google, by negative inference you clearly must be engaged in litigation frivolity. I wonder how Gibson Dunn feels that another law firm is invoking its catchphrase.

I can't recall if language in Para. 63 is just copied from the Gibson Dunn complaint, but this complaint says "A statistically significant number of consumers are likely to believe falsely that it was Flowbee who 'sponsored' the links that appear above or alongside the PageRank search engine results." This, of course, remains one of the most crucial unresolved empirical questions underlying all of the AdWords-related lawsuits: exactly what do consumers think is the reason they are seeing specific keyword-triggered ads? For now, I'm more interested in a procedural question: I would love to know the exact steps Flowbee and its lawyers took to satisfy themselves of this factual statement before asserting it.

If it had not sued, Flowbee would have automatically been governed by the Firepond class action lawsuit (representing all Texas trademark owners) if that case ever gets class certification. As a result, Flowbee could have just free-rode on that lawsuit. I wonder just how much Flowbee is losing from competitive keyword ads to justify the costs of bringing its own standalone action.

The current roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and now Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* ~~Ascentive v. Google~~
* ~~Jurin v. Google~~
* Rosetta Stone v. Google
* Flowbee v. Google

Posted by Eric at 10:01 AM | Derivative Liability , Search Engines , Trademark | TrackBack

August 12, 2009

2009 Cyberspace Law Syllabus and Some Comments

By Eric Goldman

I have posted my syllabus for this semester's Cyberspace Law course. This blog post describes the changes from my 2008 course reader. For more on my pedagogical approaches to the course, see my Teaching Cyberlaw article.

Trademark

* Deleted the Tiffany v. eBay case. This is a really rich and fascinating case, but it is really long and I ran out of time to cover it last year. Also, it will be mooted in the not-too-distant future by a Second Circuit opinion.

* Replaced the Playboy v. Netscape and FragranceNet keyword advertising cases with Hearts on Fire v. Blue Nile. The Hearts on Fire case isn't a perfect teaching case, but it discusses use in commerce, likelihood of consumer confusion/initial interest confusion, and a bit of the policy issues. I suspect a number of my Cyberlaw colleagues are teaching the Rescuecom case, but I chose not to. First, it is doctrinally narrow. Second, it is a confusing opinion. Third, I tried to teach it as a last-minute substitution in my IP survey course last semester and was not satisfied with the results. Finally, it involves the less common fact pattern of keyword sales rather than keyword purchases. So I decided that this year the Hearts on Fire case could cover all the necessary issues adequately.

An interesting note: this is the first time in 15 years that I am not teaching a Playboy case in Cyberlaw. Frankly, I had expected to teach at least one Playboy case in Cyberlaw forevermore!

* Added Google's trademark policy. I'm a little surprised it never occurred to me before to include this in my reader.

* Updated my all-new keyword advertising slides from my May presentation.

Copyright

* Deleted the Perfect 10 v. ccBill and Perfect 10 v. Visa cases. I have been struggling with how to teach the Ninth Circuit's Perfect 10 troika of cases for the last couple of years. The troika was over 100 pages of reading that nevertheless left students befuddled after all that work. But I felt constrained because the troika is the most definitive statement of Ninth Circuit law, and it is insightful to see the cases evolve. Nevertheless, I decided that the Amazon case was the most doctrinally significant, so I kept that and ditched the other 2.

* Added Io v. Veoh. To make up for taking out the Perfect 10 cases, I've added this case, which I think is a very clear exposition of a DMCA online safe harbor case.

* Added Parker v. Yahoo. I think this will be a good case to tie together some copyright doctrinal threads as well as provide a nice compare/contrast with the Ticketmaster v. RMG case.

Trespass to Chattels

* Replaced the Computer Fraud & Abuse Act statute with the most recently amended version.

* Included a slide that synthesizes the various trespass to chattel doctrines into a summary format.

Contracts

* Added the Harris v. Blockbuster case. It's a short case that efficiently makes several powerful pedagogical points--including perhaps most importantly, the perils of robo-drafting by copying language from other people's agreements.

Blogs and Social Networking Sites

* Replaced my old materials on blog law and social networking sites law with my most recent talk on both from February.

* Added my Third Wave of Internet Exceptionalism article

* Added the Moreno v. Hanford Sentinel case as an end-of-the-semester review case. As I said when I first blogged on the case, I think "this is one of the most interesting cases I've seen in a while," and I'm really excited about teaching it. I think it will be an excellent issue-spotting opportunity for students as well as a powerful reminder of the power of published words (and how those words can unintentionally affect the people we love).

Change to the Grading Options

My other big change this year is that I am giving students the option to write a wiki entry on a cyberlaw topic as part of their grade. This was inspired by my forthcoming paper on Wikipedia (which you'll hear more about soon). In connection with that paper, I was researching alternative labor sources that could power Wikipedia, and students working as part of a class assignment was one option I explore in the paper (with some reservations). As part of "eating my own dog food" (a terrible idiom that seems to be prevalent in the Silicon Valley), I figured I should give it a try myself. As you can see, the wiki-drafting is optional, not mandatory, so I'll be interested to see how many students choose the option. I'll also be interested to see what happens when the students actually try to submit their work to Wikipedia. I have a mental image of a massive buzzsaw, but perhaps I'm being too cynical.

Posted by Eric at 09:36 AM | Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Search Engines , Trademark , Trespass to Chattels | TrackBack

August 03, 2009

Google Goes on Offensive in AdWords Trademark Lawsuit--Google v. John Beck Amazing Profits

By Eric Goldman

Google, Inc v. John Beck Amazing Profits, LLC, C09 03459 (N.D. Cal. complaint filed July 27, 2009). [Warning: 1.4MB file] The Justia page.

A couple of interesting developments in John Beck Amazing Profits v. Google, the putative nationwide trademark owner class action lawsuit against Google over AdWords.

First, as of last week, the plaintiff had not served the complaint on Google even though it's been on file for over 2 months. I'm not sure what's the hold-up, but in my limited experience, delays in serving an already-filed complaint are often a leading indicator of a troubled lawsuit.

Second, last week Google sued the individual named plaintiff in that case, John Beck Amazing Profits, for both a declaratory judgment that AdWords doesn't infringe plus a breach of contract claim that the lawsuit filing breached the AdWords contract provision requiring any AdWords-related lawsuit to be brought in California. Going on the offensive against a plaintiff is characteristic of Google's litigation strategy; Google often tries to turn the tables on its litigation opponents. In this case, a major goal for Google surely is to get the case out of the Eastern District of Texas, which has been a dangerous venue for patent defendants.

Although the declaratory judgment and counterclaim is consistent with Google’s standard practices, in this case Google is ripping a page out of Yahoo's playbook in its litigation with American Airlines. American Airlines sued Yahoo over selling trademarked keywords in a Texas federal court; Yahoo shot back with a in a California federal court to try to get the case in a more favorable venue. The “dueling lawsuits” have led to an ongoing jurisdictional tussle that has slowed down progress on the substantive merits of American Airlines' claim.

As I wrote in connection with Yahoo's efforts, it was not clear to me that a defendant can wrest jurisdictional control of a case through the declaratory judgment process. In Google's situation, it's even more complicated because John Beck Amazing Profits is just the named plaintiff in a class action lawsuit. The plaintiffs could easily replace John Beck Amazing Profits with another named plaintiff who isn't an AdWords advertiser and isn't subject to California jurisdiction. At that point, I'm not sure what happens to the class action. (And, even if Google succeeds in moving the nationwide case, it should have no bearing on the Firepond putative class action lawsuit, which only covers a class of Texas trademark owners). Moreover, even if Google wins the declaratory judgment, it would have no binding effect on other class members.

So other than a not-certain-to-work ploy to pull the nationwide class action out of a bad venue, the only other benefit I see from the litigation is to send a warning shot to any named plaintiff who might succeed John Beck Amazing Profits that Google will be coming after them too. Let's see how that message is received.

The current roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and now Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* ~~Ascentive v. Google~~
* ~~Jurin v. Google~~
* Rosetta Stone v. Google

Posted by Eric at 03:51 PM | Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack

July 31, 2009

Google Not Liable for False Ads--Goddard v. Google

By Eric Goldman

Goddard v. Google, Inc., 5:08-cv-02738-JF (N.D. Cal. July 30, 2009)

I previously blogged on this case in December 2008. The case involves AdWords advertisements for allegedly fraudulent mobile subscription services. In an underappreciated opinion, Judge Fogel wrote the smartest 47 USC 230 opinion of 2008 dismissing the case with leave to amend. In that ruling, he said that plaintiffs could state a valid claim if "Plaintiff could establish Google's involvement in 'creating or developing' the AdWords, either 'in whole or in part.'"

It was pretty clear then that further efforts would be a waste of time. I wrote "the writing is on the wall for this lawsuit. The plaintiff can't win, and it would be a mistake for the plaintiff to refile." But hope springs eternal among many plaintiff's lawyers, so naturally they tried anyway. Not surprisingly, their second attempt was futile, and Judge Fogel shuts the door by dismissing without leave to amend this time. Among other things, he is sensitive to the costs of fruitless litigation undercutting 230’s policy objectives. He writes "this Court’s conclusion that Plaintiff almost certainly will be unable to state a claim compels the additional conclusion that Google must be extricated from this lawsuit now lest the CDA’s ‘robust’ protections be eroded by further litigation." I hope other judges will embrace early ends to 230 cases for the same reason.

The Roommates.com Attack

To plead around 230, the plaintiffs allege that Google's keyword suggestion tool encourages advertisers to buy "free ringtone" as a keyword when advertisers are buying "ringtone." The plaintiffs then argue that Google should know that "free ringtone" is frequently used by shady players, and therefore suggesting the term to other advertisers kicks Google out of 230. This weak argument makes numerous unsupported inferences, and Judge Fogel easily rejects it. He says:

a plaintiff may not establish developer liability merely by alleging that the operator of a website should have known that the availability of certain tools might facilitate the posting of improper content. Substantially greater involvement is required, such as the situation in which the website “elicits the allegedly illegal content and makes aggressive use of it in conducting its business.” [cite to Roommates.com]

I'm not exactly sure what it means to make aggressive use of content, but I'm glad to see the Google's keyword suggestion tool isn't that.

The Barnes Attack

The plaintiffs also attack 230 using the promissory estoppel discussion from Barnes v. Yahoo. The basic argument is a familiar one in 230 jurisprudence. The plaintiffs allege that Google's AdWords contract had negative covenants restricting the advertisers' behavior, and this language in the Google-advertiser contract acted as a promise to consumers that the restricted advertiser behavior would not occur on Google's network. I have repeatedly criticized the illogic of these arguments, and fortunately it doesn't fly here. Judge Fogel guts it when he points out that "there is no allegation that Google ever promised Plaintiff or anyone else, in any form or manner, that it would enforce its Content Policy."

I'm sure we'll see many plaintiffs make this same bogus argument in future cases, and I hope other judges reach the same conclusion. At the same time, I think websites should prune their ever-expanding lists of negative behavioral covenants in their contracts to curb plaintiffs’ misdirected arguments and to avoid unintentionally criminalizing users (see the Lori Drew conviction).

Dismissal on 12(b)(6) Motion

A major gripe about the initial Ninth Circuit Barnes opinion was its loosely worded and poorly researched conclusion that 47 USC 230 was an affirmative defense that could not support a 12(b)(6) motion to dismiss. The plaintiffs argue that Judge Fogel shouldn’t dismiss the case now for that reason, even though the Ninth Circuit withdrew that portion of the opinion. Judge Fogel cites to several cases allowing a 47 USC 230 defense on a 12(b)(6) motion to dismiss before doing the same himself.

Posted by Eric at 10:59 AM | Derivative Liability , Marketing , Search Engines | TrackBack

July 30, 2009

Google Down to 7 AdWords Lawsuits--Ascentive v. Google Voluntarily Dismissed

By Eric Goldman

Ascentive v. Google, Inc., 2:09-cv-02871 (E.D. Pa. voluntary dismissal July 30, 2009)

The litigation count on Google's keyword ad lawsuits has started trending downward. For the second time in a week, a plaintiff has voluntarily dismissed its trademark lawsuit over Google AdWords. Last week Jurin dismissed his lawsuit voluntarily because he had a falling out with his attorney. Today Ascentive voluntarily dismissed its lawsuit, although I don't know why. (As usual, the filing is silent). You may recall that Ascentive's lawsuits raised some interesting issues about organic search in addition to the AdWords issues; apparently those will have to wait.

Ascentive's dismissal leaves 7 pending cases against Google over AdWords:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* ~~Ascentive v. Google~~
* ~~Jurin v. Google~~
* Rosetta Stone v. Google

Posted by Eric at 02:07 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 23, 2009

Google Down to 8 AdWords Lawsuits--Jurin v. Google Voluntarily Dismissed

By Eric Goldman

Jurin v. Google, Inc., 2:09-cv-03934-GHK-E (C.D. Cal. voluntarily dismissed July 23, 2009)

Google's AdWords litigation docket has reversed direction, at least temporarily, as Jurin has voluntarily dismissed his lawsuit against Google. This dismissal came shortly after Jurin had a falling-out with his attorneys, which prompted his attorneys to ask to withdraw from the case. The voluntary dismissal means that Jurin is free to pursue his case elsewhere if he chooses, but I am fairly confident that this case won't be coming back.

Jurin's dismissal leaves 8 pending AdWords lawsuits against Google:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* ~~Jurin v. Google~~
* Rosetta Stone v. Google

Posted by Eric at 07:47 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 21, 2009

Ripoff Report Hires New General Counsel

By Eric Goldman

I don't normally blog on personnel matters, but news about the Ripoff Report is a perennial favorite of blog readers. So I'm sharing the news that David S. Gingras has taken the mantle as the General Counsel at Ripoff Report. His law firm bio page and his LinkedIn page. Before David, the Ripoff Report's General Counsel was Thomas Duffy.

My impression is that, pound-for-pound, the Ripoff Report is probably involved in more litigation (mostly defense, but occasionally on offense (e.g., 1, 2)) than any other organization I track. Therefore, having David in-house should be very helpful to the organization. Fortunately, David is already very familiar with the Ripoff Report, as he previously worked at Jaburg & Wilk, an Arizona boutique law firm that handles a lot of Ripoff Report litigation, including several that David was personally involved with.

Coincidentally, I just blogged about joining a technology organization as its new General Counsel. Congratulations on the new gig, David, and best of luck!

Posted by Eric at 11:05 AM | Derivative Liability | TrackBack

July 20, 2009

47 USC 230(c)(2) Talk Slides Draft--COMMENTS REQUESTED

By Eric Goldman

Later this week I'm giving a brand new talk on 47 USC 230(c)(2), the overlooked sibling of 47 USC 230(c)(1). With the help of a research assistant, we tried to identify and review every case referencing 47 USC 230(c)(2). I was surprised at how many cases cited 230(c)(2) (>30) and how few of them (<12) involved an actual holding turning on 230(c)(2) instead of discussing the provision in dicta or just citing it. I was also surprised at how little interpretative material discusses 230(c)(2) in any cogent way. The legislative history is useless, and the provision appears to have been virtually ignored in the law review literature--which itself is fascinating because 230(c)(2) is a really interesting and provocative doctrinal solution that warrants, at minimum, an appropriate theoretical justification (if one is possible). My talk is surely not the first to explore 230(c)(2) in a systematic way, but my research assistant and I really didn't find much to guide us.

That's where you come in. I've posted my draft slides. I would be very grateful if you could take a look and let me know what you think about my taxonomy of 230(c)(2) cases (and if you think I missed any cases) and my list of Constitutional and statutory substitutes. Also, if you are aware of any law review articles or other secondary materials that specifically discusses 230(c)(2) (and not just 230(c)(1) or 230 generally), I would appreciate the citation. For that matter, I would gratefully welcome all comments on the slides!

If I make any changes to my slides before I give the talk, I'll repost the "final" version of the slides by early next week to the same URL and announce the new version via Twitter.

Posted by Eric at 06:06 PM | Content Regulation , Derivative Liability | TrackBack

July 10, 2009

Ninth Lawsuit Against Google Over AdWords--Rosetta Stone v. Google

By Eric Goldman

Rosetta Stone Ltd. v. Google, Inc., 1:09-cv-00736-GBL-JFA (E.D. Va. complaint filed July 10, 2009)

[Note: some of you may wonder how my litigation count reached #9 when my last blog post in this series was at #7. I subsequently realized that I had forgotten to include Ezzo v. Google, a doomed-to-failed pro se lawsuit filed pre-Rescuecom. Indeed, I remain unclear precisely how many lawsuits are pending; the number could be greater than 9].

Kudos to Rosetta Stone for its fine PR work. It was able to get a number of major media outlets to cover its lawsuit against Google alleging trademark infringement and related claims for Google's AdWords practices, even though by my count this is merely the 9th pending lawsuit and these lawsuits are becoming a near-daily routine.

Obviously, I'm suffering a little ennui on this topic. Another trademark owner doesn't like Google's AdWords practices and decided to sue in court. And in other breaking news, the sun rose in the east and set in the west today.

How routine has this become? Rosetta Stone's law firm is Gibson Dunn, which includes Terence Ross on the team. Terence lost some of the early WhenU keyword ad cases including the once-seminal 1-800 Contacts v. WhenU ruling. He also sued and procured a settlement from Google on behalf of American Airlines. Gibson Dunn's team also has a pending lawsuit against Yahoo on behalf of American Airlines. I haven't put all of Gibson Dunn's complaints side-by-side, but I have observed over the years that they have mastered the skill of cloning-and-revising--right down to recycling a stock phrase that might become Terence Ross' signature line (and perhaps his trademark some day?) that the plaintiff "does not bring this lawsuit lightly." (Para. 6 of the complaint; compare Para. 6 of the AA v. Google and AA v. Yahoo complaints). I'm glad Gibson Dunn's clients don't sue lightly. I wish all lawyers could say the same of their clients. Then again, at the lofty fees I suspect their clients are paying for the firm's services, this statement is probably the one assertion in the complaint that no one--not even Google or the judge--could possibly dispute.

As a partially cloned-and-revised complaint, it shouldn't surprise you that this complaint doesn't break much new ground. See my deconstruction of the American Airlines v. Google complaint--because many of the provisions were recycled, my commentary of that complaint applies almost in toto. However, a couple of small points that did jump out at me from this complaint:

* Rosetta Stone has some really, really weak trademarks. "Global Traveler"??? "Language Library"??? "The fastest way to learn a language. Guaranteed"??? Are you serious?

* Among the keyword advertisers that Rosetta Stone complains about are retailers who sell both Rosetta Stone and other language products. Whoa. I'll be interested to see how Rosetta Stone gets around the First Sale doctrine for those advertisers.

Two concluding thoughts

* Is it time for these 9+ lawsuits to be consolidated in a multi-district litigation yet? From my perspective, that seems inevitable, but I'm not much of an expert on the procedural aspects of MDLs.

* Any predictions on whether another trademark lawsuit over AdWords will be filed in the month of July?

The other eight lawsuits I'm tracking:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google

Posted by Eric at 01:10 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 09, 2009

"Keyword Advertising Law" Talk (New and Improved!)

By Eric Goldman

I recently spoke on the state of keyword advertising law, which prompted me to rewrite my PowerPoint slides from scratch in light of the many recent developments. So, now available for your enjoyment:

* my talk slides
* an 80 minute free audio recording of my June presentation of this slide deck (plus Q&A) to the IAB Legal Affairs Committee. You can listen in QuickTime or download from iTunesU (for free; go to item 26)
* the CLE written material, a compilation of recent blog posts on the many lawsuits against Google and Google's two trademark policy changes. I would now add the Ezzo, Ascentive and Jurin cases to the written materials.

If this isn't enough for you, I am participating in two expensive (overpriced?) webinars on keyword advertising law in July:

* On July 10 (tomorrow!), "Keyword Advertising Do's and Don'ts," a 1 hour PLI webinar co-presented with Marty Schwimmer of the Trademark Blog.

* On July 22, "Trademark-Based Keyword Advertising: Potential Liability and Avenues for Relief," a 90 minute Pike & Fischer webinar co-presented with Rose Hagan of Google, Elisabeth Escobar of Marriott and John Slafsky of Wilson Sonsini.

Posted by Eric at 10:37 AM | Derivative Liability , Search Engines , Trademark | TrackBack

July 08, 2009

Mixed Ruling on Damages in Premier League v. YouTube

By Eric Goldman

The Football Association Premier League Ltd. v. YouTube, Inc., 07 Civ. 3592 (S.D.N.Y. July 3, 2009)

This is a ruling about potential damages in one of the copyright infringement lawsuits against YouTube. It's a pretty technical ruling interpreting some arcane aspects of copyright law, including the "live broadcast exception" in 17 USC 411(c) (which until a year ago was 411(b)). I'll confess that I had never given any thought to the 411(c) exception, and I don't even know who to call who is guaranteed to have expertise in it. (When in doubt, I always take my tough copyright questions to my colleague Tyler Ochoa). And like you, my eyes glaze over when I see "Berne" and "TRIPs" in a legal opinion.

The substantive rulings in the case can be understood even if 411(c), Berne and TRIPs all go over our collective heads. The court says:

1) Unregistered foreign copyrights are not eligible for statutory damages...
2) ...except for some broadcasts of live events if the copyright owner complies with some statutory formalities, including a requirement that the copyright owner send what is effectively a pre-event prospective "take-down" notice.
3) Punitive damages aren't available in copyright claims.

[Note: the ruling only addressed foreign copyrights, so potential damages on domestic copyrights are unaffected by this ruling. However, domestic works should follow an identical formula.]

#3 is not news; “no punitive damages” has been well-accepted copyright doctrine for as long as I can remember. #1 was perhaps a little more contestable as applied to foreign works but was also pretty well-accepted. #2 is new ground for me and probably for lots of other copyright lawyers who don't normally deal with copyrights in live events, but the result is fairly intuitive from a fresh reading of the statute. So although I'm not sure how often the precise issues have come up, overall this ruling seemed to be a fair and straightforward reading of the statute.

It's less straightforward declaring who "won" this ruling. Ignoring the claim for punitive damages, an argument which struck me as never having a chance in the first place, the ruling is a mixed bag for the parties--YouTube won #1 and the plaintiffs won #2. As a putative class action, though, #1 seems more important. Considering the overall class of copyrighted works potentially eligible for coverage under the class action, the court has said that some of those works are now eligible only for actual damages. My guess is that actual damages are less valuable than statutory damages for those works. The plaintiffs may be to show actual damages for some infringing YouTube clips, such as if the plaintiffs can establish a bona fide market rate for licensing short clips (a meaningful possibility in some cases). However, I think most works will have zero actual damages from YouTube infringements. If so, this ruling implicitly knocks most foreign unregistered copyrighted works out of the lawsuit.

YouTube still faces potential statutory damages for foreign live broadcasts that complied with the requisite formalities. The ruling cites a declaration by plaintiffs that there are at least 340 such works. While YouTube would have preferred to knock out statutory damages for all unregistered foreign works, I think this ruling should effectively reduce the parties' overall dollar value assessment of the case's worth. Unfortunately, I doubt the ruling reduces that dollar value enough to enable meaningful settlement discussions.

Posted by Eric at 07:51 AM | Copyright , Derivative Liability | TrackBack

July 07, 2009

June 2009 Quick Links, Part 2

By Eric Goldman

State Regulation of the Internet

* iAWFUL, the Internet Advocates Watchlist for Ugly Laws

* Texas HB 2003. Part of the anti-cyber-harassment mania. Very broad statute with lots of room for prosecutorial mischief.

* BNA (BNA subscription required): "State Legislatures Consider Criminal, Civil Restrictions on Ticket Purchasing Software": "At least six state legislative bodies are considering bills this session that would place restrictions on the use of “ticket bots.""

* Because states are embracing the Amazon affiliate tax, the online affiliate industry is shrinking as we speak (1, 2, 3). But in one of his rare good moves, Schwarzenegger has vetoed CA's attempt to impose the Amazon tax.

* Clive Thompson in Wired: "By severing the link between location and geography, the internet turned everything upside down. Now mobile phones are inverting everything again, in the other direction — because your location becomes most important thing about you. So how is the return of geography going to change our lives?" My previous commentary on geolocation and the law.

Blogs/Social Networking Sites

* Yath v. Fairview Clinic, 2009 WL 1751767 (Minn. App. Ct. June 23, 2009). Posting illegitimately obtained health information to a MySpace page qualified as “publicity” for purposes of an invasion of privacy claim. The court says: “Yath's private information was posted on a public MySpace.com webpage for anyone to view. This Internet communication is materially similar in nature to a newspaper publication or a radio broadcast because upon release it is available to the public at large.” As a result, the publication qualified as “publicity” even if the material was posted for less than 48 hours and the plaintiff could only prove that a small number of folks actually saw it. Compare the Moreno v. Hanford Sentinel case, where republication of information the plaintiff voluntarily published on her MySpace page could not support an invasion of privacy claim.

Nevertheless, the defendants were excused because they had not created the MySpace page, even though they had supplied the information republished on the MySpace page.

* Richerson v. Beckon. Ninth Circuit upheld reassignment of teacher-mentor based on negative blog comments. My blog post on the district court opinion.

* Kaufman v. Islamic Soc. of Arlington, -2009 WL 1815641 (Tex. App. Ct. June 25, 2009). An online-only journalist qualified as a "member of the electronic or print media" for purposes of an interlocutory appeal statute.

* After von Brunn committed his hate crime outside the US Holocaust Museum, a bunch of his digital trails went dark as websites newly realized his vitriol was posted there.

* If you're looking for a paper topic, here's one: the use of MySpace, Facebook and other social networking sites in family law disputes, especially over child custody. I'm seeing cases every week where social networking site postings are being introduced to corroborate or contradict testimony about a parent's fitness.

Security

* FTC v. Pricewert. The FTC takes down an allegedly rogue Internet access provider. To the extent that the IAP is engaged in criminal activities, no problem; but it's less clear to me if the FTC can get a civil injunction under its Sec. 5 authority to stop the IAP from serving its putatively illegal customers. Such an action could be preempted by 47 USC 230. The FTC, in its brief, says the IAP fits into a Roommates.com exception, an argument presumably bolstered by their 10th Circuit win in FTC v. Accusearch.

* Johnson v. Microsoft Corp., 2009 WL 1794400 (W.D. Wash. June 23, 2009). This is a putative class action over Microsoft’s use of Windows Genuine Advantage (WGA) to validate copies of Windows XP. In this ruling, Microsoft gets SJ on the claim alleging that the contract prevented Microsoft from doing WGA validation. Especially interesting is the court’s conclusion that IP addresses are not personally identifiable information.

* Microsoft v. Lam. Microsoft brings a lawsuit against alleged click fraudders who caused Microsoft to issue $1.5M in credits to advertisers. The NYT article.

* EFF on the most recent amendments to the Computer Fraud & Abuse Act.

Miscellaneous

* Expedia tagged for $184M in damages for improperly marking up its service fees.

* In re Jamster Mktg. Litig., 2009 U.S. Dist. LEXIS 43592 (S.D. Cal. May 22, 2009). Wireless carriers aren’t liable under RICO and false advertising laws for various deceptive practices by wireless content providers.

* New unmeritorious patent lawsuit trend: lawsuits over patent markings for expired patents.

* NYT: Investing in Lawsuits, for a Share of the Awards

* Oddee: 15 geekiest license plates:

Posted by Eric at 09:18 PM | Content Regulation , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines | TrackBack

July 06, 2009

June 2009 Quick Links, Part 1

By Eric Goldman

Just a reminder that I post some items to Twitter that don’t make it into these monthly recaps. If you want even more, you can track a superset of my online activities at Friendfeed.

Search Engines

* All Things Digital had an interesting 3 part series on the role of humans in configuring Google's algorithms: Scott Huffman; Matt Cutts; Amit Singhal. My initial 2005 blog post on the topic.

* More evidence of the deleterious consequences of latency on users' enjoyment of search results pages.

* Google is stumping in favor of its book search settlement deal and putting on the "charm offensive."

* Wired on niche search engines competing around the edges of Google.

* Google has dropped its feature that allowed quoted sources to reply in Google News.

* First, kosher phones. Now, kosher search engines.

Trademark

* Wendy Davis on a trademark lawsuit against Craigslist for allegedly infringing ad copy supplied by one of its users.

* Rookie mistake: Tony LaRussa publicly announced a settlement deal in his trademark lawsuit against Twitter before the papers were signed. Guess what....NO DEAL! UPDATE: A deal was struck subsequently.

* Speaking of which...the WSJ on Twittersquatting.

* WSJ: Europe's High Court Tries On a Bunny Suit Made of Chocolate. The EU struggles with trademarkability of chocolate bunnies.

* Productive People, LLC v. Ives Design (D. Ariz. May 29, 2009). TRO against a domainer.

* Oddee: 10 of the Worst Restaurant Names ever.

Copyright

* Supreme Court declined certiorari in the Cartoon Network v. CSC case.

* Arista Records LLC v. Usenet.com, Inc., 2009 WL 1873589 (S.D.N.Y. June 30, 2009). Usenet service provider committed (1) direct copyright infringement (because it “actively engaged in the process so as to satisfy the “volitional-conduct” requirement for direct infringement”) as well as contributory infringement, vicarious infringement and inducement of infringement. This case was colored by defendants’ evidence spoliation and the lack of a viable 512 defense; in situations like this, courts smack down defendants hard. The court’s analysis would be troubling for many online service providers if this case isn’t an outlier. Mike Masnick has more on the import (or lack thereof) of this case.

* Brave New Films 501(C)(4) v. Weiner, 2009 WL 1622385 (N.D. Cal. Jun 10, 2009). BNF was denied summary judgment on its declaratory judgment request because (a) Savage never threatened BNF directly, and (b) ORTN, which did threaten BNF directly, isn't the copyright owner. My previous coverage of this case.

User Agreements

* In the Matter of Sears Holdings Management Corporation. The FTC busted Sears for installing tracking software/spyware, even though Sears (1) asked all users to expressly opt-in, (2) paid users $10 to install the software, and (3) made full disclosure of the thorough tracking function of the spyware in the user agreement, albeit late in the installation process and in a buried fashion.

* Universal Grading Service v. eBay Inc., No. 08-CV-3557 (E.D.N.Y. June 10, 2009). eBay venue selection clause upheld.

* McMillan v. Wells Fargo, 2009 WL 1686431 (N.D. Cal. June 12, 2009). Wells Fargo asks some customers to agree to four different documents with differing governing law/venue selection clauses, leading to massive judicial confusion about how to determine governing law and venue.

* I’m using EFF's new "TOSBack" tool to track changes to major online services' user agreements. For my commentary on an article by Becher/Zarsky predicting the development of tools like this, see my writeup.

Posted by Eric at 04:54 PM | Adware/Spyware , Copyright , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

Seventh Lawsuit Over Google AdWords--Jurin v. Google

By Eric Goldman

Jurin v. Google, Inc., CV 09-03934 (C.D. Cal. complaint filed June 2, 2009)

Frankly, I don't know exactly how many lawsuits are pending against Google over its AdWords service. I know of seven, including this one, but I don't a high confidence that I've seen all of them. For example, I missed this lawsuit initially because PACER misidentified the defendant as Goggle, not Google. (PACER is notorious for sloppy typos). See the Justia page.

Even if the lawsuit count is currently "only" seven, Google is seeing plenty of litigation activity. Clearly, one or more factors have changed the plaintiffs' cost-benefit calculus sufficient to open the litigation floodgates. Now, I'm wondering when all of these lawsuits will be consolidated into a multi-district litigation (MDL) proceeding...?

Substantively, this complaint isn't materially different from the others. The plaintiff owns a trademark in the term "Styrotrim" for building materials, competitors are buying the term for competitive keyword ads, and Google is suggesting the purchase through its keyword suggestion tool. As with most of the other lawsuits, the plaintiff also alleges consumer confusion about the distinction between sponsored links and organic search results. The plaintiff's press release.

The six other AdWords-related lawsuits I'm tracking. If you think I've missed any, I'd be grateful for the reference.

* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)
* Soaring Helmet v. Bill Me
* Ascentive v. Google

UPDATE: As a good example of my imprecise counting, I had forgotten Ezzo v. Google, a doomed-to-fail pro se case filed before the Rescuecom case. So my count is now 8, not 7.

Posted by Eric at 09:06 AM | Derivative Liability , Marketing , Trademark | TrackBack

July 01, 2009

MySpace Wins Another 47 USC 230 Case Over Sexual Assaults of Users--Doe II v. MySpace

By Eric Goldman

Doe II v. MySpace, Inc., 2009 WL 1862779 (Cal. App. Ct. June 30, 2009)

Capping off a busy month for 47 USC 230 jurisprudence, MySpace has won another case over its role in facilitating sexual assaults of underaged female users. This victory follows the 2008 Fifth Circuit Doe v. MySpace case and Doe IX v. MySpace from May. (Note: although California is apparently lagging behind Texas in Doe complaints, this opinion consolidates 4 plaintiffs, including Julie Doe V). As with the previous lawsuits, this lawsuit is generally premised on MySpace's allegedly inadequate measures to protect its underaged users and use appropriate age-verification technology.

The court could have simply tossed the case by citing the Fifth Circuit opinion, which had already addressed and rejected these arguments. (I believe the plaintiffs’ attorneys are the same in both cases). As the court points out, the plaintiffs didn’t really try to work around the Fifth Circuit opinion: "Not surprisingly, appellants cannot and do not distinguish the Fifth Circuit's opinion…which is exactly on point. They only contend that the Fifth Circuit was wrong."

Nevertheless, after canvassing the federal precedent (all of which is adverse to the plaintiff), the court considers if California's 230 jurisprudence leads to a different result. The court cited three California cases that have used 230 to reject negligence claims against service providers (Barrett, Delfino, Gentry). The court then correctly concludes that plaintiffs seek to hold MySpace liable for user-to-user communications:

It is undeniable that appellants seek to hold MySpace responsible for the communications between the Julie Does and their assailants. At its core, appellants want MySpace to regulate what appears on its Web site.

That's precisely what 230 precludes plaintiffs from being able to do. The plaintiffs' attempt to focus on the offline physical harm doesn't change that analysis:

In all but one of these [precedent 230] cases, the harm actually resulted from conduct that occurred outside of the information exchanged, whether that information was actionable or not.

This is a crucial point that sometimes gets overlooked. The 1997 Zeran case involved online postings that led to offline harms--in that case, a high volume of angry telephone calls, including death threats. And Zeran was a negligence case, not a defamation case. So the MySpace cases, alleging the service provider was negligent in preventing offline harms, seem to be substantively indistinguishable from the Zeran precedent from a dozen years ago.

The plaintiffs also try a Roommates.com attack on 230, arguing that MySpace loses 230 protection because it helped users create profiles and structured the search of these profiles. Doe IX v. MySpace had already expressly addressed and rejected this argument. The court doesn't cite Doe IX (or any other cases interpreting Roommates.com, for that matter), but still rejects the argument:

Unlike the questions and answers in Roommates.com, however, Appellants do not allege that MySpace’s profile questions are discriminatory or otherwise illegal. Neither do they allege that MySpace requires its members to answer the profile questions as a condition of using the site.

The voluntariness of the profiles was the same ground relied upon in the Doe IX case. The lack of illegality in the questions is a new point.

So, yet again, Roommates.com is cited in a defense win. My updated scorecard on Roommates.com citations is 8-2 for the defense:

Roommates.com Cited for Defense: GW Equity v. Xcentric, Best Western v. Furber, Goddard v. Google, Joyner v. Lazzareschi, Atlantic Records v. Project Playlist, Barnes v. Yahoo (note: although the case was a partial loss for the defendant, the Roommates.com discussion came in the defense-favorable part), Doe IX v. MySpace and this opinion (Doe II v. MySpace)

Roommates.com Cited for Plaintiff: NPS v. StubHub, FTC v. Accusearch

Posted by Eric at 11:17 AM | Derivative Liability | TrackBack

June 30, 2009

Roommates.com Infects the Tenth Circuit--FTC v. Accusearch

By Eric Goldman

F.T.C. v. Accusearch Inc., 2009 WL 1846344 (10th Cir. June 29, 2009). My blog post on the district court opinion.

Introduction

June has been an active month for 230 jurisprudence. Cases this month include Doe IX v. MySpace (actually a May opinion but I blogged it in June), Gibson v. Craigslist, the Barnes v. Yahoo amendment, and Zango v. Kaspersky--all defense-favorable outcomes. As I mentioned in my post on the Doe IX case, the Ninth Circuit Roommates.com en banc decision has not cast a long shadow on 230 jurisprudence; it has been cited less than 10 times in the past year, and prior to yesterday, only once in favor of the plaintiff. Unfortunately, those good times may be over. The Tenth Circuit has largely adopted the rule and reasoning of Roommates.com in FTC v. Accusearch, effectively making Roommates.com the governing law west of the Rockies.

The FTC's Enforcement Action Against Accusearch

This is a prime example of bad facts making bad law. Accusearch runs Abika.com, a website that tried to style itself as a matchmaker between customers seeking, and vendors selling, private/personal records about people. The specific records at issue here contain "customer proprietary network information" (CPNI), the metadata about telephone calls. CPNI resales were probably illegal at the relevant time periods; following the Hewlett-Packard pretexting scandals, Congress cleared up any confusion and criminalized the resale of CPNI via the Telephone Records and Privacy Protection Act of 2006, 18 U.S.C. §1039.

If Abika.com was structured as a pure advertising site to facilitate off-site transactions, like Craigslist or eBay, perhaps Abika.com would have a stronger case for qualifying for 47 USC 230 protection for the sale and delivery of CPNI reports from Abika's vendors to their customers. However, Abika.com apparently was structured as a classic retailer in that it advertised the third party reports, processed customer payments, and delivered the subsequent reports to customers as if the reports were its own (Abika.com even stripped out the third party vendor's identifying information). So the veneer of Abika.com simply being a passive intermediary between customers and vendors may have been overwhelmed by Abika's active and overwhelming presence in the transaction.

The FTC went after Accusearch claiming that Abika.com was engaged in "unfair" trade practices under the FTC Act. (Note: the FTC has the power to pursue unfair commercial practices, even when they are not deceptive. However, the standards for "unfair" are amorphous, making such enforcements potentially problematic and controversial. Fortunately, the FTC generally wields this power sparingly). Accusearch's principal defense was 47 USC 230 on the theory that Accusearch procures the CPNI reports from third party vendors and merely republishes the third party reports to Accusearch's customers.

It's really hard to defend CPNI resales, and the court says that Accusearch had the requisite scienter that such resales were illegal/impermissible. With the combination of scienter, illegal transactions, active intermediation and the FTC as a plaintiff, it really seemed to me that Accusearch had no chance of winning this case. But this combination also tempted the judges to use loose reasoning to reach that unavoidable result.

The Opinion’s Discussion of 47 USC 230

A defendant must establish three elements of a successful 230 defense, and the majority opinion muddles the discussion on all of them:

1) "provider or user of an interactive computer service." Based on the funky definition of ICS, the FTC argued that websites qualify for 230 protection only when they enable user-to-user communications. The majority declines to accept this argument but doesn't reject it outright either, basing its decision on another prong. Although the statute could be clearer (like, for example, saying that websites qualify for 230 protection), the caselaw is extremely thick that every website qualifies for 230 protection. Unfortunately, with the majority's pathetic response, I wouldn't be surprised if plaintiffs unnecessarily put this issue into play in future 10th circuit cases.

2) "publisher or speaker of content" The concurring judge argues for a speech/conduct distinction and argues that the FTC is pursuing Accusearch for its conduct, not its speech. The speech/conduct distinction is almost meaningless in this case given that Accusearch was reselling information, which means that Accusearch was electronically republishing that information. The majority disagrees with the speech/conduct distinction but otherwise doesn't discuss this prong.

3) "created or developed by another information content provider." Adopting the arguments from the Roommates.com case, the majority says that Accusearch didn't "create" the reports but it was "responsible" for "developing" the reports. To reach this conclusion, the majority defines "responsible" and "develop":

* citing old French, "develop" means to "unwrap." Huh? Thus, "when confidential telephone information was exposed to public view through Abika.com, that information was 'developed.'" Does this definition make "develop" a synonym for "publish"?

* the majority initially says when "responsible" doesn't mean: "to be 'responsible' for the development of offensive content, one must be more than a neutral conduit for that content." This reference to "neutral conduit" parallels the Roommates.com case, which used the term "neutral tools" five times but never defined the term once.

The majority then says "a service provider is 'responsible' for the development of offensive content only if it in some way specifically encourages development of what is offensive about the content." This phrasing allows the court to distinguish the old 10th Circuit Ben Ezra precedent, which absolved AOL of liability for republishing inaccurate stock quotes. There, AOL didn't ask its vendors to give it false reports; here, the majority says that Accusearch asked its vendors to get information it knew was illegal to obtain:

Accusearch solicited requests for such confidential information and then paid researchers to obtain it. It knowingly sought to transform virtually unknown information into a publicly available commodity. And as the district court found and the record shows, Accusearch knew that its researchers were obtaining the information through fraud or other illegality.

Implications

I doubt the literal holding of this case is all that troubling to most folks. If you're in the business of reselling illicit phone records and the FTC comes calling, 230 isn't likely to help you.

However, this opinion could be problematic for any online retailers who thought they could use 230 to insulate themselves. It's never been clear how much 230 protects online retailers when they are making sales for their own account (as opposed to advertising services like eBay or Craigslist), and this opinion raises the specter that 230 won't apply even when "retailing" involves republishing third party content. Indeed, the loose language means the case could be a major carveback of 230's coverage in the Tenth Circuit. As the concurrence points out, the majority's reading is "an unnecessary extension of the CDA’s terms 'responsible' and 'development,' thereby widening the scope of what constitutes an 'information content provider' with respect to particular information under the Act."

Then again, between its role as a retailer and the illicit nature of its goods, Accusearch was always at the periphery of 230's coverage. Today, 230 would be irrelevant if a federal government agency pursued a CPNI reseller under the new criminal provisions in 18 U.S.C. § 1039. So I think a better interpretation of this case is that where an online provider is dabbling too close to third party illegal activity, judges simply will ignore 230 as a bailout. Framed that way, this ruling is akin to Roommates.com, which was a largely a normative judgment by the Ninth Circuit that the Fair Housing Act should trump 230 regardless of 230’s precise statutory contours.

I'll conclude with a few more thoughts about the concurrence. Although the concurrence's proposal to distinguish between speech and conduct wasn’t a good one, there was a useful nugget embedded in it. To bypass 230, perhaps the case could have focused on first party content published by Accusearch--namely, copy written by Accusearch advertising the availability of CPNI records, including any express or implied statements that it was reselling legitimate records. I've repeatedly blogged on the challenges of first-party/third-party content distinctions in 230 (see, e.g., my recent discussion about 230 and consumer protection), but in this case, I think focusing on Accusearch's own representations may have led to a cleaner doctrinal result than the one we got.

Finally, in the concurrence's FN5, Judge Tymkovich says:

If Accusearch had run a traditional business out of a physical location and offered similar services, it would seem the FTC would have the same unfair business practices complaint. Nothing would immunize Accusearch’s conduct had it chosen to deliver the confidential telephone records to requesters through hard copy print-outs either in person or through the mail. Accusearch’s duty to refrain from engaging in the solicitation and distribution of unlawfully-obtained confidential telephone records should not depend on the medium within which it chooses to operate.

Uh, NO. As with some other bright judges dealing with 230 cases, Judge Tymkovich has fallen into the mental trap that smart common law judges applying their powers of reasoning can simply intuit what the law should be. Congress has made it abundantly clear that it did exactly what Judge Tymkovich rejects; via 230, Congress created medium-specific rules that make some activities online permissible even if their offline analogue would not be. As challenging as it may be, judges should resist the temptation to make these kinds of normative assumptions in the face of clear Congressional intent.

Posted by Eric at 10:28 AM | Derivative Liability , E-Commerce , Privacy/Security | TrackBack

June 29, 2009

Sixth Lawsuit Filed Over Google AdWords, Plus an Assault on Google's Organic Search Results--Ascentive v. Google

By Eric Goldman

Ascentive, LLC v. Google, Inc., 2:09-cv-02871-JS (E.D. Pa. complaint filed June 25, 2009)

Guess who got sued again? Google now has 6 pending lawsuits challenging its AdWords service. The previous five are:

* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)
* Soaring Helmet v. Bill Me

The latest lawsuit has a different spin than the others. Ascentive makes software that it claims will improve the speed of its users' computers and combat spyware. Earlier this year, Ascentive had a run-in with StopBadware, which initially labeled Ascentive as a scamware-like offering that hyped the threats on users' computers to induce them to pay to upgrade their Ascentive software. (See the initial StopBadware alerts 1, 2). StopBadware has since reached a compromise with Ascentive and repealed its warning, a move that appears to have been fairly unpopular in some segments of the security community. (This post gives a sense of the sentiments towards Ascentive and StopBadware).

Around the same time, the Ascentive-Google relationship deteriorated, which Ascentive speculated was due to StopBadware's classification (Google's correspondence just cryptically cited "multiple policy disapprovals"). After Ascentive had spent over $645k as an AdWords customer in 2008, Google kicked Ascentive out of the AdWords program. A week later, Google completely dropped Ascentive's website from its search index. As a result, Ascentive was frozen out of both Google's organic search results and sponsored links, and not surprisingly, Ascentive suffered a "severe drop in online sales" from this double-whammy. Ascentive's entreaties to Google were rebuffed.

Ascentive makes two broad legal attacks on Google. First, as has become typical, Ascentive alleges that Google commits trademark infringement and related torts by selling competitive ads keyed to its trademark and by suggesting that advertisers buy Ascentive's trademarks in Google's keyword suggestion tool. Among other specific issues, Ascentive complains that Google didn't respond to its trademark appearing as a third-level domain in a competitor's ad copy or the inclusion of "Finally Fast" in ad copy (Ascentive's applicable trademark is "FinallyFast.com"). Overall, these complaints don't break much new ground compared to prior allegations against Google's AdWords program.

Second, Ascentive alleges a variety of legal violations because Google kicked Ascentive out of its organic search results index. This is a bit like KinderStart redux. The allegation that really caught my attention starts in Para. 83, which reads "Google's refusal to list Ascentive's website in its natural search result listings violates the Lanham Act" as a false designation of origin. Whoa! The complaint doesn't explain this allegation thoroughly, but the theory seems to be that consumers expect to see the trademark owner in organic search results for the trademark and therefore consumers will be actionably confused if the trademark owner doesn't appear there.

Framed that way, of course we know such a claim is DOA. Indeed, as exciting as it would be to see some meaty discussion on the topic of Google's liability (or lack thereof) for deciding who gets into its search index, I'm guessing Google will beat this prong of the complaint quickly and completely. One way Google could get there is through 47 USC 230(c)(2) (which I just blogged about last week), which completely protects Google's ranking decisions as a subspecies of filtering choices generally. However, to get there, a court will have to conclude that a false designation of origin claim isn't an "IP claim" which is excluded from 230's coverage. If it doesn't want to reach that doctrinal issue, the court has a wide smörgåsbord of other doctrinal choices to squash this claim.

Posted by Eric at 07:32 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 26, 2009

Anti-Spyware Company Protected by 47 USC 230(c)(2)--Zango v. Kaspersky

By Eric Goldman

Zango, Inc. v. Kaspersky Lab, Inc., 2009 WL 1796746 (9th Cir. June 25, 2009)

The case involves Kaspersky, an anti-spyware software vendor, and Zango, the former purveyor of adware (I say "former" because Zango shut down a few months ago). Kaspersky classified Zango's software as adware and did some other things that allegedly interfered with Kaspersky users' ability to download and enjoy Zango software. Zango sued Kaspersky, and Kaspersky defended on 230(c)(2) grounds.

Note: 47 USC 230(c)(2) is the underlitigated/under-discussed sibling of 230(c)(1), which provides nearly absolute immunity for third party online content and actions.

In my opinion, 230(c)(2) fairly clearly protects all types of online filtering decisions, and this panel confirms that it protects anti-spyware classifications. As the court concludes:

a provider of access tools that filter, screen, allow, or disallow content that the provider or user considers obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable is protected from liability by 47 U.S.C. § 230(c)(2)(B) for any action taken to make available to others the technical means to restrict access to that material.

While I think this is the right result, both normatively and descriptively, 230(c)(2) is not exactly the best-drafted statute, and this panel (being the first appellate court to work through the language) appeared to struggle with some of its frayed edges.

For example, to become eligible for 230 protection, the defendant must be a provider or user of a service that "provides or enables computer access by multiple users to a computer server." [In this case, Kaspersky didn’t claim it was a user.] How does this language apply to an anti-spyware software provider? Typically, anti-spyware software phones home for new spyware definitions, but if a phone-home capability qualifies for 230 protection, then many/most software vendors should qualify (so long as they offer some filtering capability). I’m personally OK with that result, but I suspect it takes the statute beyond the drafters’ initial intent.

The panel also sidestepped some other drafting problems in 230(c)(2), including:

* does it immunize decisions to filter other software, as opposed to filtering content? The drafting clearly meant to immunize filters of porn and similar kid-unfriendly content, but the language doesn’t apply as clearly to software filtering.

* must the filtering provider make its categorizations in good faith? The court ducks this question. However, Judge Fisher’s concurrence expresses concern that 230(c)(2) might literally protect a vendor’s anti-competitive or capricious blocking. He gives an example of “a web browser configured by its provider to filter third-party search engine results so they would never yield websites critical of the browser company or favorable to its competitors. Such covert, anticompetitive blocking arguably fits into the statutory category of immune actions.” I agree with this, although I’m also confident that any such browser provider would lose its customer base if such biases were ever publicly exposed. Therefore, legal liability may not be necessary to discourage this behavior.

Ultimately, this ruling may not affect the litigants very much, as Zango has already gone belly-up, making this effectively an advisory opinion. However, I think this ruling is important for everyone else for two reasons:

First, the Ninth Circuit's last two 230 opinions (Roommates.com and Barnes) have exhibited some hostility to expansive 230 readings. In refreshing contrast, this opinion gives a robust interpretation to 230’s immunizations.

Second, this opinion is terrific news for vendors of anti-spam/anti-spyware/anti-virus services. Although we have long suspected that they would be protected under 230(c)(2), this opinion codifies their immunization as Ninth Circuit law. As a result, these vendors should continue to have a high degree of freedom to make judgments about how to best serve their customers. On the flip side, this opinion confirms that anyone blacklisted by these software vendors can’t use judicial proceedings to change the classification. Fortunately, most reputable vendors offer an extra-judicial mechanism to correct their misclassification errors.

It remains less clear if this opinion protects search engines for their ranking determinations. The statutory words interpreted in this opinion aren’t germane to search engines. Even so, the panel’s broad reading of 230(c)(2) can’t be bad news for the search engines.

The case library:

* Ninth Circuit oral arguments
* Zango's reply brief [warning: 3+ MB file]
* 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 01:13 PM | Adware/Spyware , Derivative Liability | TrackBack

June 24, 2009

47 USC 230 and Consumer Protection Talk Notes

By Eric Goldman

Last week I made a very short presentation on 47 USC 230 and consumer protection at the ABA Antitrust Section’s Consumer Protection Conference. (I was scheduled for 6 minutes, but I think I took about 8). My talk notes:

47 USC 230 tries to divide online content into first party content and third party content. In its simplest form, 230 says that online actors can’t be liable for third party content unless (1) ECPA, (2) federal criminal enforcement, or (3) IP claims.

230 is the flagship example of cyberspace exceptionalism. As a result, its outcomes can challenge our traditional notions of tort law. This befuddles bright lawyers.

Despite 230, websites always remain liable for first party content.
* Ex 1: if they post their own content, they are liable
* Ex 2: if they make marketing representations, they are liable under standard doctrines like contract and false advertising law. Even so, some courts have been giving websites a pass for marketing representations which are rendered untrue by third party actions.
* Ex 3: Barnes v. Yahoo: website can by liable under promissory estoppel theory if it promises to remove third party content

Plaintiffs often try to argue that third party content becomes first party content.
* Ex 1: website contract may take ownership of user-supplied content
* Ex 2: SEC says that issuers endorse/adopt content that they link to
However, these arguments generally fail under 230. If content starts out as third party content, there is almost nothing the website can do that will convert the content into first party content. As a result, agency civil enforcement actions can unexpectedly run afoul of 230 when they collapse the distinctions between first party and third party content.

However, there is a possible workaround. In the Roommates.com case, the Ninth Circuit said that websites can lose their 230 protection in civil cases if they “encourage illegal content” or “require users to input illegal content.” The FTC is relying on this language in its recent Pricewert/3FN enforcement action against an Internet access provider who facilitated customers allegedly engaged in illegal activities. From my perspective, the Pricewert enforcement action could make sense in the following postures:
* if the FTC is bringing a criminal enforcement action, 230 is irrelevant
* if the FTC’s civil enforcement action is premised on Pricewert’s actual illegal behavior, 230 is irrelevant
* otherwise, if the civil enforcement action is premised on the illegal behavior of Pricewert’s customers, then this might fit into the Roommates.com exception if such an exception exists. However, I am troubled by such an exception, especially given that the enforcement action might also adversely affect Pricewert’s customers who only engaged in completely legal activity.

Two concluding observations:

1) 230’s basic division between first party content and third party content sounds great in theory but is tough to apply in practice.

2) In light of 230, enforcement agencies should rethink their expansive liability theories that basically assume that everyone should be responsible for a common set of online behavior (unless the agency is pursuing a criminal enforcement action).

Posted by Eric at 10:08 AM | Derivative Liability , Marketing | TrackBack

June 22, 2009

Ninth Circuit Helpfully Amends Barnes v. Yahoo Opinion

By Eric Goldman

Barnes v. Yahoo, Inc., 05-36189 (9th Cir. Amended Opinion June 22, 2009)

The Ninth Circuit has issued an amended opinion in last month's Barnes v. Yahoo opinion. The amended opinion makes two changes to the initial opinion, both of significant value.

First, the opinion deletes the entire old section II, a two paragraph section where the panel declared that, under Ninth Circuit law, 47 USC 230 is an affirmative defense that could not support a 12b6 motion to dismiss. That discussion was poorly researched, sloppy and completely gratuitous. Rather than try to fix the section, the panel wisely decided just to kill it. This still leaves open the possibility that a district court will reject a 230 defense to a 12b6 motion, although I think the better result is that 230 can support a 12b6 motion as the Gibson v. Craigslist case just held.

Second, the panel added a new footnote to its recap of the prima facie elements of a 47 USC 230 defense. You may recall that in my initial blog post, I excoriated the panel for saying, in plain language, that 47 USC 230 only applied to state law claims. To fix this obvious error, the panel added the following footnote:

"We limit our restatement of section 230(c)(1) to state law claims because we deal in this case with state law claims only. We have held that the Amendment’s protection also extends to federal law causes of action, see, e.g., Fair Housing Council of San Fernando Valley v. Roommates.com, 521 F.3d 1157 (9th Cir. 2008) (en banc) (applying the Amendment to a cause of action under the Fair Housing Act, 42 U.S.C. § 3601 et seq.). Because no federal law cause of action is present in this case, we need not decide how or whether our discussion of section 230(c)(1) would change in the face of such a federal claim."

I don't know why the last sentence of the footnote is there. I guess this is super-CYA, but everyone knows that the 230(c)(1) analysis doesn't change one bit between federal and state law claims. Nevertheless, this footnote should eliminate any efforts by plaintiffs' lawyers to misuse the prior unnecessarily sloppy language.

Both of the changes in this amended opinion were directly responsive to the requests Yahoo and its amici made. I suspect both groups are pleased with these changes. I certainly am, although I remain disappointed that the entire exercise was necessitated by the panel's sloppy work up-front. Given that this is the second time in 2 years that the Ninth Circuit has had to fix badly drafted 47 USC 230 opinions, I remain (over?)optimistic

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