Technology & Marketing Law Blog

August 31, 2010

Broadcaster Gets 230 Defense for Readers' Website Comments--Miles v. Raycom

By Eric Goldman

Miles v. Raycom Media, Inc., 1:09-cv-00713-LG-RHW (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 US 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 ove