Technology & Marketing Law Blog: Derivative Liability Archives

Technology & Marketing Law Blog

May 14, 2013

UK's New Defamation Law May Accelerate the Death of Anonymous User-Generated Content Internationally (Forbes Cross-Post)

By Eric Goldman

Historically, United Kingdom defamation law has been victim-favorable. In an effort to modernize its defamation law, the UK Parliament recently enacted the Defamation Act 2013 (royal assent was given on April 25). The act generally makes it harder for plaintiffs to win defamation lawsuits, but I'll focus on the effects of Section 5 of the act, entitled "Operators of websites."

Section 5 sets up a "notice-and-takedown" system for defamation from user-generated content (UGC). A web host or other online service provider isn't liable for defamatory UGC unless it receives a takedown notice (containing specific information required by the act) and fails to remove the content on a timely basis. Moderating user content doesn't disqualify the website operator from the act's protection, but the act excludes when the website operator acts with "malice"--a proviso that might prove nettlesome in practice. All told, in theory, a defamation victim cannot sue a UK-based UGC website without first sending a takedown notice and giving the website the opportunity to remove the content.

Notice-and-takedown schemes create predictable problems. It's easy enough for anyone to send a takedown notice, especially because the UK act apparently doesn't impose any adverse consequence for sending bogus notices; and if a website faces liability only if it ignores the notice, it will reflexively remove content in response to takedown notices, irrespective of the notice's legitimacy. So surely the act's notice-and-takedown will be abused, as inevitably happens with all notice-and-takedown systems.

However, what's really interesting about Section 5 is its bonus requirement for UGC websites to avoid defamation liability: they qualify for the act's protection only if the defamation victim can find the user to sue him/her. The act doesn't explicitly say what information about its users the website operator must give a defamation victim or when (and some of these requirements will be spelled out in regulations that are being developed), but to me the implication seems clear: if the website operator can't provide authenticated identifying information about its users, the website operator will lose the act's protection (unauthenticated information is useless to plaintiffs if falsified).

The requirement that website operators help plaintiffs find their users represents a major new development in the law applicable to UGC. In particular, I think the rest of the act's notice-and-takedown scheme effectively codifies existing UK law. For example, a February ruling (Tamiz v. Google, Inc., [2013] EWCA Civ 68) basically adopted a notice-and-takedown rule for defamatory UGC on Google's Blogger.com platform; and the European Union's Electronic Commerce Directive (2000/31/EC, Article 14--apparently adopted by the UK) establishes a notice-and-takedown scheme for all types of UGC, not just defamatory content. So I believe the act's most change to existing law is creating a user-identification obligation.

(Note 1: I don't know EU law well enough to understand if UK imposing this additional requirement violates the EU E-Commerce Directive and, if so, what consequences that has. If you have thoughts about that, please let me know).

(Note 2: some UGC websites, including Facebook and Google+, have voluntarily adopted policies that require users to provide their real names. This law likely won't change their behavior, though it might make those sites feel like they don't have discretion to repeal their policies).

So while we expected the UK Defamation Act to provide additional legal comfort to website operators, instead it creates an apparent dilemma for them. If UGC websites want the legal protection of a notice-and-takedown system, they have to authenticate and identify their users. If they don't, then they lose the act's protection, exposing them to potential liability for defamatory UGC even if they never receive a takedown notice.

Faced with this dilemma, UGC website operators in UK surely will prevent users from publicly posting any content until the website operator has authenticated the user's identity and contact information. (For example, simply having a user's IP address doesn't seem to satisfy the act, nor will websites rely on the fact that it's hard to publish truly anonymous UGC). As a result, even if a user publishes online content "anonymously" or "pseudonymously," their words still will be attributable to them if legally challenged.

Although the act only applies to defamatory UGC, website operators won't authenticate users only when users are writing potentially defamatory content. Instead, website operators will collect and authenticate users' identifying information universally, meaning that data will be available for anyone who submits a qualifying subpoena--including governments and plaintiffs pursuing non-defamation claims. The act could have restricted third party access to this user data when it isn't being sought by a defamation victim, but it didn't.

Further, I expect more legislatures throughout the world will follow this template: conditioning website operator protection (whether based on notice-and-takedown or some other system) on the ability to getting identifiable information about the bad user. So not only will UK websites authenticate all users before allowing them to post UGC, but eventually UGC websites in other countries will do so as well.

All of this reinforces how the United States' Internet Law differs from the rest of the world. The United States does have a notice-and-takedown scheme for copyright infringing UGC (17 U.S.C. 512(c), a provision that's proven somewhat problematic), but the safe harbor doesn't require websites to authenticate users or attribute their content. (Per 17 U.S.C. 512(h), websites must turn over information about their users on request, but they aren't required to collect or keep information about their users). Otherwise, websites generally aren't liable for UGC, whether or not potential plaintiffs can find the users to sue (see 47 U.S.C. 230). Occasionally we've seen proposals in the United States to link website protection with user attribution (see, e.g., New York and Illinois), but (1) those proposals have gone nowhere, (2) they are probably unconstitutional, and (3) when done at the state level, they are preempted by Section 230 (see, e.g., this ruling involving Backpage).

Thus, while anonymous online content appears imperiled globally, websites in the United States should be able to preserve anonymous online content for the foreseeable future. I'll leave it up to you to figure out which approach you like better.

[Photo credit: The Houses of Parliament and Big Ben at night // ShutterStock]

Posted by Eric at 09:00 AM | Content Regulation , Derivative Liability , Privacy/Security | TrackBack

May 12, 2013

Perfect 10 Gets a Surprising Partial Sumary Judgment in 512 Case--Perfect 10 v. Yandex

By Eric Goldman

Perfect 10, Inc. v. Yandex N.V., 2013 WL 1899851 (N.D.Cal. May 7, 2013)

Few names strike as much fear--and derision--among Internet lawyers as Perfect 10. Perhaps the quintessential Internet Law plaintiff of the 2000s decade, Perfect 10 went on a dubious litigation campaign filled with precedent-setting losses and massive legal bills for all participants. Perfect 10 won a ruling here and there, but for the most part, Perfect 10's courtroom efforts have been a categorical failure. Indeed, few plaintiffs have created more favorable Internet Law precedent than Perfect 10.

Thus, it's a little disorienting/surprising to see Perfect 10 win anything in court, even if it's a small preliminary ruling. Perfect 10's target in this lawsuit is Yandex, the Dutch company operating the leading Russian search engine. In this ruling, the parties are wrangling over Yandex's ability to qualify for the 512 safe harbors.

Consistent with its past (and IMO unnecessarily sloppy) practices, Perfect 10 didn't send a prototypical 512(c)(3) notice. Instead, one takedown notice it sent consisted of:

a cover email attaching the DMCA notice. Next, there was an attached PDF file. The PDF file began with a short DMCA notice letter that described the contents of the DMCA notice itself and requested that the images be taken down. The notice letter was followed by several pages of screen shots from Yandex's own image search web sites. The screen shots showed the allegedly-copyrighted images in Yandex's search results along with corresponding links to the party directly hosting the content. In many instances the links to the third-party sites were truncated, but it was possible to copy the whole link by right-clicking on the image in the file. At the end of each sample notice was a single screen shot from Perfect 10's own website that included the allegedly copyrighted images in a four-by-four grid of images.

Yandex raised several objections to this notice. Yandex says that Perfect 10's notices should be reviewed in combination with the others because the aggregated workload processing the many PDFs it received was unnecessarily high, but the court accepts Perfect 10's request just to look at this one. (That turned out to be an uncharacteristically savvy litigation move from Perfect 10). The court is unmoved by Yandex's beef that it's burdensome to extract the full URLs from the PDF and to match the screen shots to the thumbnails. The court thinks these obligations are within the scope of the service providers' responsibilities, and because Perfect 10 asked the judge to evaluate just one takedown notice in isolation, the court denigrates the amount of work required for Yandex to review each notice in isolation (calling Yandex's gripe "disingenous" at one point). Thus, the court grants Perfect 10's summary judgment request that this PDF takedown notice satisfied 512(c)(3).

(An aside: I find it incredible that Perfect 10's PDF approach was the most efficient way to prepare 512(c)(3) notices. It seems almost like Perfect 10 was trying to satisfy the minimum 512(c)(3) requirements using the most onerous and expensive approach for recipients. They wouldn't be that devious...would they? At minimum, Perfect 10 could have saved itself a lot of future litigation time and expense by sending more traditional notices.)

Yandex also categorically loses any 512(c) safe harbors for the period of time it didn't have a designated agent for service of notice, a step that didn't happen before 2012. Designating an agent is a clear minimum requirement for 512(c) protection, but it highlights the challenges faced by some foreign defendants. It sort of makes sense that a European search engine wouldn't satisfy a US formality, but Yandex was big enough that it should have checked off this box. Whoops.

If history has any predictive power, Perfect 10 will ultimately lose this lawsuit. Still, Perfect 10 got a couple of favorable points out of this ruling. To me, that reinforces the structural design failings of 512's safe harbor.

See more blog posts on Perfect 10.

[Photo credit: Play on ten. Success metaphor // ShutterStock]

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

May 08, 2013

Suing Like It's 2009: Parts.com Sues Google and Yahoo for Keyword Advertising

By Eric Goldman

Parts.com v. Google, 3:13-cv-01074-JLS-WMC (S.D. Cal. complaint filed May 6, 2013); and
Parts.com v. Yahoo, 3:13-cv-01078-AJB-JMA (S.D. Cal. complaint filed May 6, 2013)
_____

In the immediate wake of the Second Circuit's Rescuecom ruling in 2009, about a dozen trademark owners sued Google for selling keyword ads. Google resolved each and every one of those cases, and a couple more since then, without suffering a final adverse ruling in any of them. Following its important settlement with Rosetta Stone, I believe Google now has only three pending trademark lawsuits over keyword advertising, all of which seemed doomed to me: the CYBERsitter and Home Decor Center cases, both filed in 2012 in the wake of the Fourth Circuit's Rosetta Stone ruling, and the quixotic Carla Ison case in state court.

Earlier this week, Parts.com joined this dubious plaintiff-vs.-Google club (and it sued Yahoo for good measure). There's nothing fancy or creative about Parts.com's lawsuit--it's a direct, and probably futile, frontal assault on Google's AdWords cash cow that generates around $40B a year. Some of the interesting angles to this lawsuit:

* Parts.com is a terrible trademark, about as protectable as Pets.com (which trademark lawyers often use as a prime example of a completely untrademarkable phrase). Indeed, there's good reason to believe Parts.com is generic following the Advertising.com, Hotels.com and Mattress.com rulings. If Parts.com doesn't voluntarily drop this lawsuit (a surprisingly common outcome for AdWords challengers), I predict Parts.com ends this lawsuit with an invalidated trademark; similar to how American Blinds ended its Google lawsuit with fewer trademarks. I really don't understand the business rationale for investing dollars in litigation where a likely outcome is having a judge conclude that your assets are worthless, but more than one trademark owner has asked Google to help it achieve this dubious outcome.

This lawsuit fits a trend that I've mentioned before: trademark owners with crappy trademarks are often unusually pugnacious about enforcing their purported trademark rights. 1-800 Contacts is my premier example of that phenomenon. Some of the "trademark" owners that have challenged Google include Home Decor Center, American Blinds, and now Parts.com. See the trend?

* Parts.com says it first contacted Google in 2007 to complain about its keyword ad sales. Trademark doesn't have a statute of limitations, but six years is a mighty long time for this issue to fester, so I could see a strong laches defense. See, e.g., the Southern Grouts v. 3M case, where laches barred a five year delay in enforcement.

Especially perplexing is that Parts.com got its trademark registration in Sept. 2008, so if it waited four more months, its trademark should have become incontestable. Incontestability wouldn't overcome the serious genericism problem it faces; but if you're going to wait six years to bring a suit, why not wait a few more months to get the limited benefits of incontestability....before poking at giants who will deploy massive resources to destroy the trademark?

[I emailed Parts.com's counsel about both of these issues but didn't get a response.]

* I am unclear if Google broad-matches the noun in a "[noun].com" query. So, in this case, does Google deliver ad results based on just the keyword "parts" if someone does a search for "parts.com"? I've asked a few folks but haven't got a reliable answer yet. If Google broad-matches this way, then Parts.com has even less to complain about. (I don't know Yahoo's broad-matching policy, but I'd welcome input on that too).

One final oddity: this is the second time that Google has been sued by an online parts retailer for trademark infringement due to keyword advertising (PartsGeek was the first). Selling parts online must be a pretty ugly business if suing Google is a good business decision. Parts.com claims it can prove losses of $2M due to infringing keyword advertising, but I'm calling BS on that. Based on the numbers we've seen in other cases, my guess is that the total value of "diverted" clicks--if any exist at all--is more properly measured by pennies, not millions.

____

Pending roster of AdWords trademark lawsuits against Google:

* Parts.com v. Google
* CYBERsitter v. Google [Latest post]
* Home Decor Center v. Google
* Carla Ison v. Google [the appellate docket]

____

My recent Tertium Quid blog posts on keyword advertising lawsuits:

* Florida Proposes to Ban Competitive Keyword Advertising by Lawyers
* More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide
* Google's Search Suggestions Don't Violate Wisconsin Publicity Rights Law
* Amazon's Merchandising of Its Search Results Doesn't Violate Trademark Law
* Buying Keyword Ads on People's Names Doesn't Violate Their Publicity Rights
* With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally
* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid--Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

[Photo credit: New year's odometer // ShutterStock]

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

May 07, 2013

Crazy SOPA-Like Attempt to Hold International Banks Liable for Pharmacy Spam Fails on Jurisdiction Grounds--Unspam v. Chernuk

[By Venkat Balasubramani with comments from Eric Goldman]

Unspam Technologies, Inc. v. Chernuk, 2013 WL 1849080 (4th Cir. May 4, 2013)

We’ve mentioned “Project Honeypot,” the efforts of a company (founded by Matthew Prince) to track down and prosecute spammers. This lawsuit was ambitious in its scope and suitably quixotic. Like SOPA, it sought to attack pharmacy spam by going after the money.

Unspam (operator of Project Honeypot) and John Doe sued two individuals for pharmacy spam. They also named a slew of international banks who allegedly provided transaction processing services to pharmacy spammers. The banks submitted affidavits demonstrating that they had no activity or customers in the United States, and therefore they should not be subject to personal jurisdiction in the U.S. The district court agreed, granting the banks’ motion to dismiss on jurisdictional grounds. Unspam appealed to the Fourth Circuit.

Unspam fared no better on appeal. In a published opinion, the Fourth Circuit affirms the district court’s dismissal of the banks on jurisdictional grounds:

Not one of the banks directed its business to Virginia or aimed its commercial efforts at customers in Virginia. Indeed, there is no evidence that any drug transactions involving the plaintiffs were connected by intermediaries to these banks. Moreover, even if we were to assume that Doe's purchase was presented by some Internet “pharmacist” to one of the foreign banks for processing through the international Visa network, that transaction still would be too remote an act to justify jurisdiction in Virginia. The transaction would have occurred in the foreign country where the pharmacist presented the Visa charge to the bank, and thereafter, the bank would simply have collected the charge through the Visa network. The foreign bank's relevant activity would thus be localized to the foreign country where it did business, and its only conduct “aimed” from that location would be the transmittal of the transaction into the Visa network. The fact that the transaction ultimately rippled through other countries for the collection of monies would not indicate that the bank purposefully availed itself of the laws of the countries where subsequent transactions occurred..

Plaintiffs also argued that they need not establish jurisdictional facts over the banks because the banks were part of a conspiracy and were subject to jurisdiction based on the acts of co-conspirators. Plaintiffs argued, relying on “blog research and internet searches” that “Canadian Pharmacy” was a trade name for two of the defendants and that Chronopay [described as “the PayPal of Russia”] provided transaction processing services to defendants, with the defendant banks acting as links in the chain. The court says this is mere speculation, and there is no evidence or allegation regarding the transaction(s) involving the doe plaintiff.

Finally, plaintiffs tried to rely on Rule 4(k), which provides personal jurisdiction based on federal claims where the defendant may not be subject to jurisdiction in a particular state, but has minimum contacts with the U.S. as a whole. The court says that defendants do not have sufficient contacts with the United States as a whole for plaintiffs to invoke Rule 4(k) as a basis of jurisdiction.
_____

As mentioned in my post on the district court ruling (Is SOPA's "Follow the Money" Meme Infecting Anti-Spam Litigation? – Project Honey Pot v. Does), on the merits, plaintiffs' claims were a serious stretch. It’s not surprising that the plaintiffs got zero sympathy from the Fourth Circuit on the jurisdictional issues.
_____

Eric's Comments. The Fourth Circuit reached the logical result in this case. However, I view this lawsuit as a cautionary tale of how close we are to breaking the Internet.

The overzealous war against Internet pharmaceuticals has already taken a half-billion dollar toll on Google and another $40M toll on UPS (yes, the shipping company). In both cases, these intermediaries "agreed" (with the DOJ's axe ready to swing if they didn't acquiesce) to become the DOJ's deputies and police their customers more aggressively. The result is that we now have key cogs in the wheel making legal determinations about the legitimacy of their customers' activities, with zero due process or other oversight of any errors they make make against customers.

This problem only exacerbates as we continually expand the list of potential deputies who should be combating illicit activity online. There is no natural boundary for that witchhunt, and lots of defendants got tossed into the litigation mix and have to spend lots of money defending their conduct (even if legitimate). Worse, any vendor who might be deputized becomes adversarial to their customer base, with the inevitable waste of resources and chilled environment for innovation. For those of you who think that a narrow "follow the money" liability trail as an alternative to more draconian intermediary deputization, I encourage you to review this lawsuit and think carefully if this is the world you want. For more on this, see my six month retrospective of SOPA.
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Previous post:

Is SOPA's "Follow the Money" Meme Infecting Anti-Spam Litigation? – Project Honey Pot v. Does

[image credit: Shutterstock - Matthew Cole - "Illustration of a Honey Bee on a White Background"]

Posted by Venkat at 07:24 AM | Derivative Liability , E-Commerce , Evidence/Discovery , Spam

May 02, 2013

More Evidence That Congress Misaligned the DMCA Online Copyright Safe Harbors--UMG v. Grooveshark (Forbes Cross-Post)

By Eric Goldman

UMG Recordings, Inc. v. Escape Media Group, Inc., 2013 WL 1729431 (N.Y. App. Div. April 23, 2013)

Grooveshark runs a user-generated content (UGC) website that allows users to upload sound recordings and other users to stream those recordings. UMG Recordings (a subsidiary of Vivendi, VIV:FP) sued Grooveshark for copyright infringement based on its users' activities. This week, a New York state appellate court partially denied Grooveshark's eligibility for the online safe harbors enacted by Congress in the 1998 Digital Millennium Copyright Act. This ruling creates several problems for UGC websites that let users post sound recordings, and it demonstrates one way Congress mishandled drafting its online safe harbors.

The Ruling

In 1998, Congress provided UGC websites with a safe harbor for user-caused copyright infringement (17 U.S.C. 512(c)). To be eligible for the safe harbor, UGC websites must satisfy some preconditions. If they do, copyright owners unhappy about users committing copyright infringement can send takedown notices to the UGC website. If the UGC website responds quickly to a takedown notice, the DMCA online safe harbor says that the website avoids further copyright liability for the items identified in the takedown notice. In contrast, if the UGC website ignores/rejects the takedown notice, it potentially bears legal responsibility for its users' actions. Obviously, most UGC websites prefer to limit their risk, so they routinely take down items identified in the takedown notices.

I acknowledge that you probably think most court opinions address arcane legal issues, but even I think this ruling dealt with unusually arcane legal issues. The DMCA online safe harbors apply to "copyright" claims, but it turns out the word "copyright" is ambiguous. In the 1976 Copyright Act, Congress attempted to eliminate most state copyright laws. As a result, today most potentially copyrightable works either are protected under federal law, or they are not protectable under federal or state copyright law at all. However, Congress preserved a few categories of works that can be covered by state copyright law--the most commonly-encountered example is certain bootleg recordings of concerts. Congress also said that sound recordings made before 1972 remain protected under state copyright laws. Some of these pre-1972 sound recordings are hugely important and highly recognizable cultural assets; for example, the Grooveshark court cites the UMG-owned recordings of “Peggy Sue” by Buddy Holly, “Johnny B. Goode” by Chuck Berry, “My Girl” by the Temptations and “Baby Love” by the Supremes.

It's this latter group of pre-1972 sound recordings at issue in the Grooveshark case. Grooveshark argued that the DMCA safe harbors applied to both federal and state copyrighted works. UMG argued that the safe harbors only apply to federal copyrighted works, not state copyrighted works. In a short and relatively unenlightening opinion, the New York state appellate court sided with UMG and ruled that the DMCA safe harbor's "notice-and-takedown" scheme doesn't apply to state copyrighted works.

Implications

I see at least three problems with the court's ruling:

Problem #1: In 20111, a New York federal court (in Capitol v. MP3Tunes) reached the directly opposite conclusion and held that state copyrighted works are covered by the DMCA. (The Grooveshark opinion acknowledged this precedent but made no effort to distinguish it). In 2007, the federal Ninth Circuit Court of Appeals held in 2007 that all state IP claims against UGC websites (including, presumably, state copyright laws) categorically are preempted by a different federal website immunity, 47 U.S.C. 230 (see Perfect 10 v. ccBill).

Thus, we have three different and conflicting interpretations of the DMCA's applicability to pre-1972 sound recordings. What a mess! It's never good for anyone when courts have three different answers to the same legal question. It also means litigants may engage in wasteful forum-shopping efforts to find the judicial venue where the rules are most favorable them.

Problem #2: The ruling doesn't hold Grooveshark liable for users' copyright infringement of pre-1972 sound recordings. Instead, Grooveshark simply failed to qualify for the safe harbor for those works, so the judicial inquiry will now turn to the default laws applicable to "secondary" infringement of state copyrighted works. Unfortunately, we have no idea what those rules are. Because most UGC-related copyright infringement cases have been resolved by the DMCA safe harbor, we don't have many rulings interpreting the secondary infringement rules in those rare situations when the safe harbor doesn't apply (see this post for more about that). Furthermore, we have even scarcer caselaw interpreting secondary liability for infringement of state copyrighted works. (It's probable the rules will track the federal copyright laws, but that's not guaranteed). Thus, this case now involves novel and unpredictable legal questions.

Problem #3: Grooveshark has no easy way to distinguish which user-submitted sound recordings are covered by federal copyright versus state copyright. However, its legal liability depends on this difference. Operationally, how should Grooveshark proceed? Without universal protection from the DMCA's safe harbor "notice-and-takedown" scheme, Grooveshark may be required to pre-screen user uploads to assess whether the file is a pre-1972 sound recording or not, and then it may have to handle those files differently.

However, if that's the result, Grooveshark probably doesn't have a viable business. The pre-screening costs would be exorbitant, Grooveshark would make many classification errors, and copyright owners would subsequently argue (probably unsuccessfully, though we are not sure) that Grooveshark should lose the DMCA safe harbor if it fails to catch infringing files during its pre-screen. (See the latest Viacom v. YouTube ruling for examples of copyright owners' arguments about website operator scienter).

More importantly, if Grooveshark must build a uniform site-wide operational process to deal with the small minority of user-uploaded recordings protected by state copyright law, then the DMCA online safe harbors failed at a fundamental level. Even if the safe harbor applies to 99% of the works, the safe harbor doesn't help UGC websites with their business planning because the UGC website must still anticipate and address the 1%--and this becomes impossible if, without further research, the 1% looks identical to the 99%.

In a recent post, I discussed some key design attributes of safe harbors and immunities. One element I identified was "global preemption," meaning that a successful safe harbor has to swipe out all overlapping claims covering the same activity. The Grooveshark ruling suggests Congress failed that design principle by leaving open a state copyright workaround. In my prior post, I identified some other ways that the DMCA online safe harbors violated best-practice design principles. I doubt Congress will be revisiting the DMCA online safe harbors soon (nor would I anticipate any beneficial changes when it does), but its mistakes with the DMCA safe harbors offer useful lessons for Congress' next attempts to draft effective safe harbors.

For more discussion about the DMCA online safe harbors, see the recordings and resources from the recent 15 Year DMCA Retrospective Conference at Santa Clara University.

Posted by Eric at 11:09 AM | Copyright , Derivative Liability | TrackBack

April 21, 2013

Talk Slides on Section 230, Anti-SLAPP Laws and Housing Anti-Discrimination

By Eric Goldman

On Friday I presented at the California State Bar's Fifth Annual Fair Housing and Public Accommodations Symposium. My topic was to discuss how Roommates.com, Section 230 and anti-SLAPP laws restrict the ability of housing anti-discrimination to sue online intermediaries. My talk slides.

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

April 19, 2013

Viacom Loses Again--Viacom v. YouTube

By Eric Goldman

Viacom International Inc. v. YouTube Inc., 2013 WL 1689071 (S.D.N.Y April 18, 2013)

Persistence is a virtue, but stubbornness is a sin. I'm pretty sure Viacom has sinned a lot in its six years of litigation against YouTube. How many things have to go wrong for Viacom before it wakes up and smells the hummus? It's now lost twice in the district court, it's created a bunch of precedent unfavorable to its interests, it's proven that even it can't figure out which clips it authorized to post on YouTube and which it didn't, it gave up complaining about YouTube's behavior after 2008 (making the case entirely backward-looking), it got caught repeatedly astroturfing, and in general it's looked like a massive jackass. Perhaps its next appeal will finally kill this case as it deserves, though that will single-handedly cause a new downturn in the legal industry as hundreds of lawyers look to find new sugar daddy clients.

Personally, I blame the Second Circuit for unnecessarily extending the case. The Second Circuit's remand clouded the law and ensured the parties would waste millions of dollars more before YouTube reaches its inevitable victory. On remand, the case went back to Judge Stanton, who ruled quickly on YouTube's motion for summary judgment (YouTube's final brief was filed less than 2 months ago). It's hardly surprising that Judge Stanton ruled for YouTube again--after all, he ruled for YouTube previously, and he shouldn't have been reversed by the Second Circuit--but he left no doubt that he feels Viacom's case is bogus.

It doesn't help Viacom that, in its opposition to YouTube's summary judgment motion, it admitted:

It has now become clear that neither side possesses the kind of evidence that would allow a clip-by-clip assessment of actual knowledge.

This was a devastating admission by Viacom, though extraordinarily helpful for framing the case. If the safe harbor is available only if the defendant can prove the negative, i.e., that it didn't have actual knowledge of infringement with respect to each and every user-uploaded file that a copyright owner challenges, then the safe harbor is a nullity. Service providers can't prove the negative, and trying to do so would lead to lots of socially wasteful efforts by the service provider recording its every move--just in case some future copyright owner decides to sue.

Judge Stanton shreds Viacom's argument in an incredibly satisfying way. He correctly disparages this argument as "an anachronistic, pre-Digital Millennium Copyright Act (DMCA) concept" because it basically presumes the service provider knows of user-caused infringement unless it can prove otherwise. The judge further mocks Viacom's "extravagant" request to deny YouTube the DMCA safe harbor because YouTube doesn't have adequate evidence. The judge says the fact neither party can tender clip-by-clip evidence of actual knowledge:

demonstrates the wisdom of the legislative requirement that it be the owner of the copyright, or his agent, who identifies the infringement by giving the service provider notice...Thus, the burden of showing that YouTube knew or was aware of the specific infringements of the works in suit cannot be shifted to YouTube to disprove. Congress has determined that the burden of identifying what must be taken down is to be on the copyright owner, a determination which has proven practicable in practice.

[Note: check out the videos and other resources from the HTLI's 15 Year Retrospective of the DMCA in March, with some great discussion on these points. See especially Judge Whyte's discussion of the pre-DMCA Netcom case.]

The court then turns to Viacom's willful blindness argument. The Second Circuit's implication that willful blindness could be relevant to a 512 safe harbor inquiry was a terrible moment in 512 jurisprudence. As I wrote about that opinion:

By adding another category of knowledge but not defining it, this opinion adds substantially to the transaction costs for a [scienter] category that may not exist in the real world. The judges may be happy with themselves that they've done a more thorough taxonomizing job, but everyone else is miserable trying to figure out what belongs in that taxonomical node.

Judge Stanton does some fancy footwork around the Second Circuit's muddled legal standard. I think the most honest characterization of Judge Stanton's handling is that he effectively merges willful blindness into the other two statutorily specified scienters (actual knowledge via takedown notices or "red flags"). This is entirely logical. The willful blindness standard was a mistake in the first place, so it makes sense (and is jurisprudentially helpful) to gut the standard. Still, Viacom will surely press the Second Circuit to clarify the willful blindness hairball it coughed up last time. Ideally, the Second Circuit will fix its prior mistake and recant the whole willful blindness sideshow.

Regarding YouTube's right and ability to control infringements, Judge Stanton rearticulated the legal standard:

knowledge of the prevalence of infringing activity, and welcoming it, does not itself forfeit the safe harbor. To forfeit that, the provider must influence or participate in the infringement.

I don't really love this standard. What do "influence" or "participation" mean? Those words are not in the 512(c) statute, nor are they normally part of the common law vicarious copyright infringement test (participation is part of contributory infringement, not vicarious). The court gives three examples of what might constitute improper influence or participation, but two examples relate to online marketplaces and not more typical UGC sites. The other example, "prescreening content, rendering extensive advice to users regarding content and editing user content" (from the Wolk case), seemed OK if all three elements are required.

Having left us a little confused about the legal standard, Judge Stanton concludes:

YouTube's decisions to restrict its monitoring efforts to certain groups of infringing clips, like its decisions "to restrict access to its proprietary search mechanisms," do not exclude it from the safe harbor, regardless of their motivation. Plaintiffs' remaining evidence of control goes no than the normal functioning of any service provider, and shows neither participation in, nor coercion of, user infringement activity.

The court does indicate that YouTube may have "steered viewers towards infringing clips" by manually highlighting two clips-in-suit on its home page. However, both clips had authorization. Otherwise:

There is no evidence that YouTube induced its users to submit infringing videos, provided users with detailed instructions about what content to upload or edited their content, prescreened submissions for quality, steered users to infringing videos, or otherwise interacted with infringing users to a point where it might be said to participated in their infringing activity.

What a hash. I'm sure the Second Circuit will make a further hash of this point. If these elements are an "or," meaning plaintiffs merely need to allege a service provider engaged in any one of these activities, we're going to have lots of arguments about the right and ability to control prong in the future.

Finally, the judge rejects the syndication issue. The clips hand-selected and delivered to Verizon weren't at issue in the lawsuit, and YouTube's other automated syndication arrangements were consistent with the safe harbor.

Having disposed of the four issues remanded by the Second Circuit, the judge granted YouTube's summary judgment motion.

Overall, the judge reached a solid and defensible result. However, the common law interpretations of the 512 safe harbors are getting messier and more convoluted due to this lawsuit and the parallel suits like UMG v. Veoh. Basically, rather than handing defendants clean wins, the courts keep adding extra factors and layers of analysis to the statutory elements, which jacks up the adjudication costs and reduces predictablity. To me, this opinion exemplifies the weakness of the 512 safe harbor design (see my recent blog post on optimal safe harbor design for more). Although we could point fingers at the judges (especially the Second Circuit for its stupid willful blindness digression), the real blame goes to Congress for making its safe harbor requirements too detailed and giving judges too much room to color between the lines. Judge Stanton's ruling isn't a model of judicial reasoning, but it's pretty good in light of how the courts have scrambled the safe harbors due to Congress' defective drafting.

Case Library

[Photo credit: Businessman not listening // ShutterStock]

Posted by Eric at 08:38 AM | Copyright , Derivative Liability | TrackBack

April 15, 2013

Designing Optimal Immunities and Safe Harbors (Forbes Cross-Post)

By Eric Goldman

[Note: this is one of those posts that languished in the queue for a few years. Depending on your response, I may decide to turn it into a lengthier academic paper. Please send me your thoughts!]

You already know the legal system is screwed up, but I'd like to be more specific about why. When we say lawyers are "litigious," what we really mean is that too many lawyers spend too much time thinking about how to sue someone else. Similarly, legislators spend their time manufacturing new laws, which usually create more opportunities for people to sue each other (see the Economist’s discussion of this point). Law professors typically do the same; the typical law review article focuses on a social problem and proposes to solve it with a new legal rights. (Just take a look at the torrent of recent academic articles about privacy and you'll see what I mean).

I don't understand why we as a society spend so much time thinking about suing people. I'm much more interested in figuring out how we can stop suing each other. If we could create "lawsuit-free zones," we'd avoid the individual and social costs of adjudicating disputes, including the' settlements payments to get rid of nuisance and otherwise meritless lawsuits. Plus, lawsuit-free zones stimulate business investments by providing more legal certainty to entrepreneurs, which should translate into more jobs. So finding ways to dial down litigation might be the best “jobs stimulus” effort our legislators could undertake.

The way to create lawsuit-free zones is through "immunities" and "safe harbors." Immunities categorically eliminate legal liability in the specified contexts. Safe harbors allow defendants to avoid liability if they take the specified steps. Both help motivate socially beneficial and job-creating activity. Three examples:

* 47 USC 230, an immunity that says websites aren't liable for user-generated content (UGC) except with respect to intellectual property claims and a small number of other specified circumstances. This immunity has become the foundation of the UGC industry, which has created lots of jobs and improved the flow of socially beneficial information. For more on Section 230's merits as economic policy, see my Regulation of Reputational Information paper.

* 17 USC 512, a safe harbor for websites to avoid liability for user-committed copyright infringement. While this safe harbor has some serious flaws (especially when compared to 47 USC 230), it has still provided enough legal certainty to help the UGC industry grow.

* California Business & Professions Code (B&P) 16600, which voids non-compete clauses in California in most circumstances. In her book Regional Advantage: Culture and Competition in Silicon Valley and Route 128, Prof. Annalee Saxenian persuasively demonstrated that this immunity plays an essential role in Silicon Valley's success.

While technically not immunities and safe harbors, two other examples of legal doctrines that help create a lawsuit-free zone:

* the "standing" requirements in Article III of the Constitution, which requires (among other things) that plaintiffs show they have suffered a cognizable harm before they get access to the Federal court system. In particular, Article III standing efficiently kills meritless Internet privacy cases where plaintiffs have suffered no real harm. In turn, the lawsuit-free zone created by Article III standing facilitates experimentation and innovation on privacy-related matters.

* Anti-SLAPP laws applicable to lawsuits brought to suppress socially beneficial speech. Anti-SLAPP laws end those lawsuits quickly and put plaintiffs on the hook for the defendant's attorneys' fees. California has a strong anti-SLAPP law, and it's dramatically reshaped many litigation areas.

Based on these examples, it's possible to reverse-engineer some key attributes of immunities/safe harbors that help create strong lawsuit-free zones:

* Minimal Formalities/Prerequisites. Immunities and safe harbors work best when they don't require technical steps that might be inadvertently overlooked or mishandled. Thus, Section 230 automatically protects every UGC website; and B&P 16600 automatically protects every employee and future employer. In contrast, Section 512 has a long list of technical prerequisites (what we call "formalities") that can disqualify well-meaning but sloppy or uneducated entrepreneurs--or, at minimum, prompt expensive legal fights over whether the formalities have been satisfied.

* Drafting Brevity. The longer the statute, the more things that plaintiffs can fight over. Section 230(c)(1)'s main operative language is only 26 words, which doesn't give plaintiffs a lot of bases to fight. In contrast, Section 512 runs for thousands of words, creating dozens of different vectors to attack a safe harbor defense. As a result, with so many more words to fight over, Section 512 judicial opinions are typically much lengthier--and more expensive to the litigants--than Section 230 opinions.

* Global Preemption. Because too many legal doctrines overlap, an immunity/safe harbor that protects defendants against only one legal doctrine is typically useless; plaintiffs can just focus their energies on other overlapping causes of action that might apply to the same behavior. Thus, an effective immunity/safe harbor eliminates the defendant's liability completely, regardless of what cause of action the plaintiff asserts. For example, Section 230 and Article III standing work so well because they usually categorically preempt all causes of action asserted by the plaintiff, no matter how many or wide-ranging.

* No Weasel-Words. Subjective elements of an immunity or safe harbor, such as the requirement that the defendant act in "good faith" or "innocently," are tautological. They give judges an opportunity to inject their normative views, and they create more opportunities for plaintiffs to fight. As a result, weasel-words can destroy the effectiveness of an immunity or safe harbor. For example, one part of Section 230 (Sec. 230(c)(2)) depends on the defendant's "good faith" conduct; that part has been comparatively useless to defendants as a result.

* Specifically Described Scienter. "Scienter" means the amount of the defendant's bad knowledge or intent. I favor immunities and safe harbors that protect defendants regardless of their scienter. Section 230 does that; websites aren't liable for third party content no matter what the plaintiff alleges about the website's knowledge of the content. Realistically, though, legislators typically will not excuse defendants who have sufficiently bad scienter. If so, the statute should spell out precisely when the defendant has the requisite scienter. For example, Section 512 defines exactly when the defendants have disqualifying scienter about user-caused copyright infringement--defendants must have actual knowledge or awareness of apparent infringement--and it defines the elements of a copyright owner's takedown notice that is sufficient to provide actual knowledge. Unfortunately, Section 512 has been a failure at circumscribing disqualifying scienter. Courts have added other types of disqualifying scienter ("inducement" and "willful blindness" are two examples) that have encouraged plaintiffs to sue over behavior that should be plainly protected by the safe harbor. Thus, Section 512 has become a good cautionary tale of how an immunity or safe harbor's failure to adequately circumscribe disqualifying scienter properly can undermine the immunity/safe harbor's efficacy.

* Quick Resolution. An effective immunity/safe harbor ends unmeritorious lawsuits quickly and cheaply. At minimum, it should keep the case out of discovery, where the costs grow so quickly that the lawsuits punish even successful defendants. Veoh provides a good example of how a safe harbor can become useless if it takes too long. The Ninth Circuit ruled Veoh had properly qualified for a Section 512(c) safe harbor, but the ruling came too late. By the time the Ninth Circuit blessed Veoh's practices, Veoh was already dead due to its unsupportable litigation costs. In contrast, Section 230 cases are usually decided on motion to dismiss grounds and thus are comparatively quick and cheap for defendants, making the immunity a more useful tool for entrepreneurs.

* Sanctions for Bogus Claims. Plaintiffs should internalize the costs of their bad choices. For example, anti-SLAPP lawsuits make plaintiffs pay defendants for bring anti-social lawsuits. This risk that the plaintiff will write a check to the defense--for a lawsuit initiated by the plaintiff--raises the strategic stakes for plaintiffs. It also makes defendants financially whole.

I welcome your further thoughts about the optimal design of successful immunities and safe harbors.

[Photo Credit: 3d rendered illustration defending some pollen // ShutterStock]

Posted by Eric at 11:43 AM | Content Regulation , Copyright , Derivative Liability , General , Internet History | TrackBack

April 13, 2013

Another 512(f) Claim Fails--Tuteur v. Crosley-Corcoran

By Eric Goldman

Tuteur v. Crosley-Corcoran, 2013 WL 1450930 (D. Mass. April 10, 2013). The complaint (page 5 shows the photo in question).

We don't see that many 17 USC 512(f) lawsuits over bogus copyright takedown noties, and we see even fewer successful ones. Here's another failed one.

I hate it when bloggers attack each other rather than finding a way to get along. After all, the rest of the world hates us as bloggers, so why can't we bond together in solidarity? C'est la vie.

This pair of dueling bloggers come from the highly charged community discussing home birthing. The doctor believes home birthing increases neonatal deaths, the doula disagrees. In a literal F-U to the doctor, the doula blogged a photo with (as the court described it) a "graphic gesture with her middle finger that is often associated with an unrealized ambition of French soldiers at the Battle of Agincourt." [FN] The doctor copied the photo and posted on her blog. The doula sent a takedown notice to the doctor's web host. Some more background on this case.

[FN] I'm not an expert in the famous Battle of Agincourt, but I believe there's some controversy whether English longbowmen gave French enemies a one- or two-fingered salute/taunt; the latter being what we now call the V sign. So I'm not sure the court's historical allusion is accurate. Just in case there's any doubt, the doula is definitely not making the V sign.

The doctor brought a 512(f) claim for the takedown notice to her host. The doula tried to dismiss the 512(f) lawsuit on jurisdictional grounds, but the court (apparently sue sponte) says that it needs to address Article III standing to avoid the "thorny" Internet jurisdiction questions. It's the most bizarre Article III analysis I've seen. The court says it seriously doubts the doctor has a viable 512(f) claim. How hard is it to win a 512(f) claim? The court says the doctor has "plausible" fair use and implied license defenses to a copyright infringement claim, suggesting that perhaps the doula didn't adequately consider those doctrines. No matter. The court says:

there is no requirement in the DMCA that a notice-giver inform the service provider of an infringer's possible affirmative defenses, only that she affirm her good faith belief (as appears to be the case here) that the copyrighted material is being used without her (or her agent's) permission

Apparently satisfied the doula did that, the court says the doctor's cause of action isn't viable. The tortious interference similarly fails based on the apparent legitimacy of the doula trying to enforce her copyright.

Having made a ruling on grounds that the parties didn't brief or argue, the court gives the doctor 21 days to object to this ruling. Given the acrimony underlying this lawsuit, the doctor will surely object. The court will then slam the door on her 512(f) lawsuit, with the inevitable appeal to follow.

[Photo Credit: Battle of Agincourt in 1415 and Hand showing the sign of victory// ShutterStock]

Posted by Eric at 07:55 AM | Copyright , Derivative Liability | TrackBack

April 06, 2013

Google Immunized for Its Search Results--Mmubango v. Google (Catch-up Post)

By Eric Goldman

Mmubango v. Google, Inc., 2013 WL 664231 (E.D. Pa. February 22, 2013). The initial complaint.

This is one of the many bogus pro se lawsuits over Google search results. Like the others, it goes nowhere (though the judge patiently let the plaintiff file a third amended complaint). The plaintiff claims he was being defamed on a third party website and he asked Google to de-index the website but it refused. So he sued Google for defamation.

This is an easy 47 USC 230 case:

1) Google provides an interactive computer service (cites to Parker, Langdon, Jurin).

2) The plaintiff seeks to hold Google responsible for content from the third party website (cite to Carafano). The court says the plaintiff "alleges that Google “stored” and “broadcasted” the information."

3) The plaintiff seeks to hold Google as a publisher of the third party content (cites to Green v. AOL, Parker, Zeran v. AOL and Ben Ezra v. Weinstein)

The court summarizes:

Google cannot be held liable for state law defamation on the facts that it “decided” to publish a third party's statements, which has been identified by the Third Circuit as a traditional editorial function. In the same vein, Google cannot be held liable for failing to withdraw this statement once it has been published.

In a footnote, the court rejects the plaintiff's assertion of "aiding and abetting," but it doesn't cite any of the numerous precedents supporting that conclusion, such as the Backpage case, Simmons v. Danhauer, Cisneros v. Yahoo, Goddard v. Google, Dart v. Craigslist and Doe v. GTE.

Some similar cases:

* Nieman v. Versuslaw / Getachew v. Google
* Murawski v. Pataki
* Maughan v. Google

[Photo Credit: The computer screen reads, 'Soul Search, No Results'. // ShutterStock]

Posted by Eric at 07:58 AM | Content Regulation , Derivative Liability , Search Engines | TrackBack

April 05, 2013

First Sale Doctrine Doesn't Allow Resale of Digital Songs – Capitol Records v. ReDigi

[Post by Venkat Balasubramani, with comments from Eric]

Capitol Records, LLC v. ReDigi Inc., 2013 WL 1286134 (S.D.N.Y. Mar. 30, 2013)

[There has been a recent whirlwind of copyright activity in the courts. We will try to get caught up soon!]

ReDigi looks like a law professor’s exam question that sprang to life. The basic question involves the legality of a marketplace for digital music files. Unfortunately for ReDigi, the court is not very sympathetic to its enterprise, and the court grants Capitol’s request for summary judgment. I expect an appeal will be forthcoming.

Background: ReDigi put some good energy into architecting its service to try to avoid infringement. It only allowed for re-sale of certain files, and more importantly, took steps to insure that only one user could enjoy a particular song at any one time--it made sure that if you sold a track, the computer did not contain extra copies of this track. Although it wasn’t foolproof (the system did not detect whether you retained copies of your track elsewhere), it did prompt you to delete any versions of a song on the particular computer that’s interfacing with ReDigi; and if you declined, it would terminate your account. Sounds pretty carefully structured to me.

Reproduction and Distribution: The court says ReDigi trips over the fact that it must make a copy in order to transfer files between people who trade them. ReDigi tried a bunch of analogies to say that a copy-less transfer occurred, but the court is not sold:

ReDigi asserts that the process involves ‘migrating’ a user’s file, packet by packet – analogous to a train . . . the device was [also] likened to the Star Trek transporter – “Beam me up, Scotty” – and Willy Wonka’s transportation device, Wonkavision.

(James Grimmelmann has an excellent post deconstructing these fictional technology references).

Although the court notes that it’s not aware of any authority dealing with the scenario where digital files are transferred and only one copy exists before and after the transfer, the court says that what occurs through ReDigi’s platform is a “reproduction within the meaning of the Copyright Act.” The court says this reading is supported by the plain text of the Copyright Act (that says reproduction occurs when the work is fixed in a new “material object”) and the legislative history. [The ruling contains a very interesting discussion around the semantics of “reproduction” that is worth reading. As usual, I wasn’t totally sold one way or the other.]

The court also agrees with Capitol that, in addition to the unauthorized reproduction, the sale via ReDigi also implicates the distribution right. Absent an affirmative defense, the court says that there would also be an unauthorized distribution.

No Fair Use or First Sale Defenses: The court applies the fair use factors and says ReDigi comes up short. There’s no transformation of the works (songs). The entirety of the work is copied, and conceivably this will affect the market for new works. Interestingly, the court says that reproduction incident to a sale is what falls outside fair use, but it does not discuss reproduction that may occur in similar contexts such as lending or trading (that may be closer to fair use).

The court also says that ReDigi cannot take advantage of the first sale doctrine. The court starts out by saying that first sale only insulates ReDigi against distribution and does not protect against reproduction. (This is splitting hairs, I think. To the extent there is a first sale defense, any reproduction incidental to it could plausibly be considered fair use.) At any rate, here is the crux of the court’s conclusion on first sale:

the first sale defense is limited to material items, like records that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.

The court also cites to a 2001 report from the Copyright Office on the DMCA Act that rejected application of first sale to digital works.

Derivative Liability: The final issue was whether this all added up to liability for ReDigi.

First, the court says that ReDigi is directly liable. According to the court, ReDigi’s service was designed to only sell copyrighted work, and therefore, even though ReDigi wasn’t the one doing the copying and distributing, it could be held liable directly for the copying and distribution that takes place via its product.

Second, the court says that ReDigi is liable under vicarious and contributory theories. With respect to contributory liability, the court says that ReDigi was amply aware of the legally grey aspects of its business (its investment offering documents said as much). It also contributes materially by participating at many steps in the process. Finally, the service is not capable of non-infringing uses the court says. The court comes to the same conclusion on the vicarious infringement question, saying that ReDigi had “complete control” over its users activities and it financially benefited from every single sale.

Wow, this is a packed ruling! There is a lot to digest from this one, but a few quick notes.

First, the court footnotes a very interesting point (fn. 3): apparently ReDigi launched new software during the pendency of the litigation that would house material downloaded directly from iTunes and allow later purchasers to access it from the same location. The court declines to consider the legality of this service, but it certainly offers a possible path forward for services such as ReDigi. This also raises the question that if something like this could be accomplished and was plausibly non-infringing, at least from the standpoint of a reproduction right, does it really make sense to ding ReDigi because it accomplished the same thing through other means?

Second, where was the DRM? ReDigi offered iTunes files, but I missed the boat that iTunes decided to offer music that was not tied to a particular device that you had registered. As Eric noted in his post about Kirtsaeng, one of the reasons why the first sale win in that case may be pyrrhic is that digital media will be subject to the whims and fancies of DRM. It's interesting that a big category of digital content is offered without DRM. I wondered about what contractual restrictions were in place (both as between iTunes and the user and the copyright owner and iTunes). It's also strange that music is offered DRM-free (at a higher price), but then you can't legally transfer it anyway.

Third, there’s no discussion of the DMCA at all in this ruling. Maybe I'm missing something foundational, but I would have thought ReDigi would have at least tried to assert a defense based on DMCA safe harbors. The court would have probably rejected the defense (or took the muddled route the 9th Circuit took in the Fung case), but it was still interesting to see the DMCA not figure in the discussion at all.

The court downplayed any discussion of whether there was underlying infringements by ReDigi's users. I also found much of the court’s core conclusions overly formalistic, but then again, the copyright rules are formal in many respects, particularly the rules that govern sounds records and phonorecords. The court seems to do a fairly close reading of the statute and legislative background. It’s tough to fault the court’s order for its core conclusion that a transfer via ReDigi requires a reproduction, although there is room to disagree with it.

Finally, the court’s discussion on direct and indirect infringement was also not totally persuasive. Outside the P2P / inducement context, it’s rare to see a court find that a site or service should be held liable directly for the infringements that take place on its system. This is one example. The 9th Circuit opinion from Fung that we hope to post about soon is another example.

Either way, services have previously tried to crack the "how to transfer copyrighted tracks online" puzzle and have failed. (See, the MP3Tunes case.) As Eric highlights below, it may be safe to assume that there is no first sale right when it comes to digital goods. Surprisingly, even without contractual restrictions in place, you may be fairly limited in what you can do with digital music.
_____

Eric's Comments: I admire the pluck of entrepreneurs who launch businesses that face significant legal risk based on their basic architecture, but ReDigi's legal fate was predictable if unfortunate. The bottom line is that there's no digital first sale right, and I don't think the statutory language provides any colorable basis to argue in favor of it. So I think ReDigi has been legally doomed from the beginning. I wish there were a digital first sale doctrine, and I admire ReDigi's attempts to remanufacture some of the attributes of physical chattel for the digital world, but the judicial system is a poor place to make a last stand on something that contradicts the statutory language so clearly.

Venkat raises a good point about 512(c)--could ReDigi have found greater success positioning itself as an eBay/Amazon-style marketplace for user-to-user transactions of digital files? I can't imagine a 512(c) defense would succeed if the users never had the right to resell song files and ReDigi takes a cut of the transaction, but that defense would have been no less meritorious than the digital first sale argument.

In the end, this case provides a good cautionary tale for us as consumers. PAY LESS FOR DIGITAL SONGS AND MOVIES than you would pay for CDs and DVDs because the digital files are instrinsically worth less over their lifetimes. Protip: before buying a digital song or movie, I check eBay and Half.com to see how much it costs to buy the same CD or DVD used. Even with shipping, it's surprising how often the used good is cheaper than the digital file, and I get a better bargain by also preserving my first sale rights.

I commend reading James Grimmelmann's article--a delicious mix of fandom silliness and deep philosophical musings.

Just a reminder: in 2010, the High Tech Law Institute held a full-day academic symposium on the First Sale Doctrine, and it might be worth checking out some of the materials generated in connection with that event.
_____

Other coverage:

James Grimmelmann's article
Aaron Sanders
Wendy Davis/MediaPost

[image credit: Shutterstork/wongwean - "handdrawn music element"]

Posted by Venkat at 09:45 AM | Copyright , Derivative Liability , Licensing/Contracts

April 02, 2013

More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide (Forbes Cross-Post)

By Eric Goldman

I've repeatedly asserted that the trademark battles over keyword advertising are near the end. As further evidence of that, recently Google ($GOOG) liberalized its international trademark policy for advertising via AdWords. Previously, Google allowed trademark owners to block advertisers from bidding on their trademarks in Australia, Brazil, China, Hong Kong, Macau, New Zealand, South Korea, and Taiwan. Now, Google has reversed its policy in those countries, meaning that (as Google told me) "Google will no longer restrict advertisers from bidding against trademark keywords, worldwide." (Google had previously liberalized its trademark policy in most other countries in 2010). Google will maintain regional differences in restrictions on when trademark owners can block their trademarks from appearing in the ad copy.

I don't systematically track international AdWords trademark cases, but I'm not aware of any major Google victories in trademark cases in the affected countries. (Google did recently get a favorable AdWords-related ruling in Australia, although it wasn't specifically about trademarks). As a result, I don't think Google's policy change is supported by increased legal clarity in those countries. Google told me that it's "making this change so we can have a uniform policy on keyword advertising worldwide so users everywhere can get the most useful and relevant information in response to their searches." That sounds great, but do you really believe that?

While I'm sure Google's employees and lawyers will enjoy the simplicity of a more uniform worldwide policy, an obvious implication: the liberalized policy makes Google more money. I don't know how much new money Google will see under the new policy, and Google declined to answer my question about it. I doubt the incremental new revenues will be more than a rounding error on Google's $50B of annual revenues. Still, Google has been progressively liberalizing its trademark policy over the years, and each time Google reported strong year-over-year earnings growth. Coincidence?

Meanwhile, Google's policy change without clear legal support in the remaining jurisdictions strongly indicates that Google thinks the trademark risks no longer pose a major threat to it anywhere in the world. Once Google settled the Rosetta Stone litigation, Google effectively resolved all of the serious challenges to its trademark policy. Google's most recent policy change demonstrates its legal confidence that trademark owners can't make it block keywords. Kudos to Google for navigating this difficult issue over the past decade and reaching such a favorable (if expensive-to-achieve) outcome.

March 21, 2013

Griping Blogger Protected by Fair Use But Not Section 230--Ascend Health v. Wells

By Eric Goldman

Ascend Health Corp. v. Wells, 2013 WL 1010589 (E.D.N.C. March 14, 2013)

Brenda Wells gripes about University Behavioral Health of Denton ("UBH") at two blogs, which she promotes via Twitter, Facebook and YouTube. UBH and related parties sued Wells for, among other things, copyright infringement and defamation.

Copyright

Wells allegedly posted the followed copyrighted materials:

images of UBH’s facility; an image apparently of Ascend’s officers, including Kresch; an image of UBH’s logo; and, a still image of a man outdoors with other people in the background from a UBH promotional video

The court grants Wells' motion to dismiss on fair use grounds. The court says she used the images for criticism of UBH, and that makes her use transformative even though she didn't modify the images (cite to Sedgwick v. Delsman). Further, the images had no independent commercial value, so the reuse of the images for criticism didn't harm the market value of the images. It's great to see a blogger win a fair use defense on a motion to dismiss; the caselaw is split on this topic. Compare Righthaven v. Realty One with Katz v. Chevaldina.

Defamation

Among other defenses, Wells claimed that she was protected by 47 USC 230. Wells argued that she:

“simply . . . re-post[ed] content provided by a third party.” Specifically, she points to two statements on her blog which plaintiffs allege are defamatory. As to one statement, plaintiffs allege that Wells removed the name of the commentator, and with the other, plaintiffs allege it was purportedly authored by the mother of a former UBH patient. Therefore, Wells argues, because the statements were authored by others and published on her website, albeit with some edits, she cannot be held liable for those statements. (cites omitted)

While the court says that quoting third parties could potentially qualify for Section 230 (see, e.g., the uncited D'Alanzo case), the plaintiffs' allegations knock her out of the immunity:

Plaintiffs allege that Wells herself created some of the defamatory statements on her blog. Furthermore, as to the defamatory statements based on information provided by others, it is not evident the extent to which Wells may have made more than mere editorial changes to that information, and the court agrees with plaintiffs that discovery should bear this out. Section 230 immunity does not cover content which Wells created herself or other content, although originating with a third party, which Wells significantly altered.

Unfortunately, the court's discussion isn't adequately nuanced. It's true that significantly altered third party content can lose Section 230 immunity, but only if the editing actually changed the meaning of the edited content. My hope is that those facts will become clearer in discovery, and if the facts are favorable, perhaps the judge will reconsider the Section 230 analysis on summary judgment.

Blogs and Fair Reporting Privilege

The court also rejects Wells' fair reporting privilege argument because she's a blogger, not a "newspaper or other periodical":

Wells’s internet blogs are not akin to a newspaper or other periodical, even one published electronically. Postings on the blog are not published at regular intervals. They are not composed of articles, news items, or the like.

Sigh.

[Photo credit: to illustrate poor customer service, with complain message on keyboard // ShutterStock]

Posted by Eric at 08:49 AM | Copyright , Derivative Liability | TrackBack

February 25, 2013

Building Owner Can't Discover the Identity of Tenant Who Writes Bashing Yelp Review (Forbes Cross-Post)

By Eric Goldman

Brompton Building, LLC v. Yelp!, Inc., 2013 IL App (1st) 120547-U (Ill. App. Ct. Jan. 31, 2013)

Battles over online anonymity aren't new, and we've made a lot of progress clarifying the legal rules. Usually, when a plaintiff sues an unknown defendant (called a "Doe"), the court requires the plaintiff to show that its case has some merit before issuing a subpoena to identify the defendant (sometimes called an "unmasking subpoena"). This judicial review balances the plaintiffs' rights to pursue unknown defendants against the potentially significant consequences of unmasking, including the possibility that unmasked defendants will be punished outside the courtroom (such as an employer firing a critical employee). However, judicial review can mean that sometimes plaintiffs get stuck in court, as illustrated by a recent landlord/tenant dispute over a negative Yelp review.

What Happened?

The landlord, Brompton, sought a subpoena (pursuant to Illinois Supreme Court Rule 224) from Yelp ($YELP) to identify user "Diana Z.," who wrote a critical review of the landlord's former management company, Beal Properties. (Diana Z. doesn't appear to be the only Yelper unhappy with Beal--you'll need asbestos glasses to read its Yelp reviews). Diana Z.'s Yelp posting concludes sarcastically:

my interaction with Beal has made me a better person in the following ways:

I actually enjoy talking with my HR department.
I look forward to moving to a worse neighborhood....
Contracting herpes doesn't seem as horrible.

[Note: normally I'd link to the review so you could read it in all its glory, but it is offline (more on that in a moment). The full text is quoted in the opinion.]

Brompton specifically objected to Diana Z.'s assertions that Beal lied about the date it received her rent check (leading to a late fee) and that "Beal Properties is illegally charging tenants late fees for their rent." If untrue, these sound like the kinds of statements that could be defamatory. Yet, the court says that in the context of the entire review, the statements were Diana Z.'s opinion, not assertions of fact. The court also notes that Beal Properties, not Brompton, is probably the proper plaintiff. Because Brompton's case wasn't meritorious enough on its face, the appellate court denies Brompton's request for an unmasking subpoena. As a result, Brompton has hit a dead-end in any lawsuit against Diana Z.--unless it discovers the accountholder's identity some other way.

Implications

Opinion v. Fact. Diana Z.'s assertions are fairly detailed and specific. On their face, they look like factual assertions. Still, the court generously characterized them as opinions, making the statements non-actionable. I don't purport to understand the judicial line between fact and opinion, but courts increasingly are treating online statements as opinions, not facts. Indeed, we've seen numerous cases indicating that readers don't interpret online content literally (see, e.g., Seaton v. TripAdvisor, McKee v. Laurion; LeBlanc v. Skinner; Seldon v. Compass Restaurant; and Redmond v. Gawker). This is creating a type of Internet exceptionalism, where the medium makes a difference to the legal outcome. Overall, I think this trend is beneficial for consumer reviews, but it does create the possibility that fact-like statements are legally immune online.

The Court Protected the Absent Reviewer. Yelp didn't appear in this action (and, of course, Yelp didn't have to worry any legal liability due to 47 USC 230). I checked with Yelp, and they told me that their policy is to notify targeted users about subpoena requests and related efforts, like this pre-litigation action for discovery, Yelp did notify the user in this case. Nevertheless, Diana Z. didn't make an appearance in court either. As a result, Brompton's action faced no opposition--but it still lost. The result is a nice and mildly surprising victory for user privacy, even when users don't show up to advocate for their own interests.

Can Brompton Identify Diana Z.? Brompton may have struck out in court, but there are other ways to unmask anonymous online authors. For example, in the AutoAdmit case, the plaintiffs determined the identity of anonymous commenters by correlating their activities on other websites and learning their identity from those sites. (See, e.g., this discussion for some thoughts on how to do it). Or, in a case involving online comments to a newspaper, the plaintiff deduced the anonymous commenter's identity using linguistic analysis. Or, in this case, the review provided so many details that Brompton should be able to make an educated guess about the tenant's identity just by corroborating the review's details against its tenant roster. Extra efforts to identify Diana Z. may not be worth it in a case like this, but Brompton feels otherwise, it still has options despite the court loss.

Where is Diana Z.'s Review? The review no longer appears on Yelp. Presumably Diana Z. removed it (Yelp confirmed to me that it didn't remove the post for a terms-of-service violation), perhaps in a panic after learning about Brompton's action. So despite its court loss, Brompton effectively scuttled the critical Yelp review. While we might lament the plaintiff's inability to sue over online statements due to anonymity, this case--along with many others--reminds us that plaintiffs often achieve their goals irrespective of the judicial outcome.

[Photo Credit: Closeup of a common cold sore virus herpes // ShutterStock]

Posted by Eric at 08:36 AM | Content Regulation , Derivative Liability , Evidence/Discovery , Privacy/Security | TrackBack

February 24, 2013

Before Graduated Response, There Was BSA's "Define the Line" Program. What Happened to It? (Guest Blog Post)

By Guest Blogger Sruli Yellin

[Eric's introduction: with the imminent launch of the six strikes/graduated response program from the deceptively named Center for Copyright Information, I thought it might be worthwhile revisiting a prior effort by rightsowners to coopt Internet access providers to do their dirty work. My RA Sruli Yellin discusses:]

On October 28, 2004, the Business Software Alliance (“BSA”) launched its “Define the Line” (“DTL”) program. According to the press release (which you can find here), the program was designed to educate college students about the evils of pirating software. At the time DTL was launched, only 32% of students reported paying for their software according to a BSA/IPSOS study. BSA/IPSOS has not released an updated study.

Prof. Goldman previously covered the DTL campaign here and here.

So what happened to DTL?

The first of two universities to sign up for DTL was Marquette University. It took seven months for Marquette to sign up, and another month and half for the second school, Dickinson College, to join the ranks. As part of the initiative, the schools agreed to spread the word and distribute anti-piracy materials provided by BSA. The DTL program descriptions were incomplete and garbled, but unlike graduated response, there was never any explicit reference to downgrading or cutting off student Internet use for repeat violations.

Why would universities sign up for a BSA program? The bottom line, of course. According to Prof. Goldman, Marquette received $30M in software from a software company called USG for signing up. (The article he cites, like everything else BSA-related, is no longer online). In the BSA’s ideal world, it seems that every university in the nation would have signed up. But at $30M a pop, there was no chance of financially realizing that dream, nor would the benefits to BSA have outweighed the considerable cost.

As one might expect, a PR campaign with the goal of getting college students to spend money on anything aside from alcohol is doomed before it even starts. Schools involve government authorities in intra-campus issues only when absolutely necessary since all such incidents need to be reported in school statistics. If the IP policing is done in-house – through discipline boards and public safety officers – no stats need to be kept. So, when it came to illegal file-sharing, savvy students knew that private colleges would not want to throw their tuition-paying students to the wolves. At most, students might have to plead with campus IT to get their service back or, worse yet, have their parents make an irate phone call.

DTL was a complete failure as an initiative to educate college students. After the second college signed up, I couldn't find any more information about the program, and it appears the program gradually withered away. So what lessons does DTL provide with respect to the upcoming graduated response system?

First, it takes a long time to get institutions to implement a rightsowner-instituted anti-piracy campaign. While it took 7 months to get Marquette to sign up, it has been over 18 months since the major Internet access providers announced they would be implementing the graduated response system.

Second, what’s in it for the major telecom companies? Why would they risk alienating their paying customers, and why are they taking such overgenerous positions like exposing users with open wi-fi signals to sanctions? Like with DTL, I imagine the answer is in the bottom line.

There simply has to be a cash/cash equivalent component to the equation. Content owners are likely shouldering much of the cost of rolling out graduated response. In the UK, for instance, content owners have committed to shouldering 75% of the costs of implementing graduated response. Further, perhaps content owners are actually paying the telecom companies off. Though it’s unlikely that content owners could offer enough money to billion-dollar companies that they would risk alienating their users, with companies like Netflix and RedBox changing the landscape of content consumption, one cannot help but think that content owners have promised to sweeten the pot with deals designed to enable the telecom companies to compete. Whether they can buy their way to success this time remains to be seen.

[Photo Credit: Drawing a line in the sand // ShutterStock]

Posted by Eric at 12:05 PM | Copyright , Derivative Liability , Internet History | TrackBack

February 19, 2013

With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally (Forbes Cross-Post)

By Eric Goldman

Google's ($GOOG) keyword advertising program, AdWords, has been subject to constant legal challenges for the past decade. After an initial period of legal uncertainty, AdWords' legal fortunes recently have brightened in the United States and Europe. Earlier this month, AdWords notched another strong win in court, this time in Australia. Considering these developments as a whole, Google has effectively gotten a clean legal bill of health for its AdWords service around the globe. Google's impressive accomplishment also provides a useful cautionary tale about overregulating technological innovations.

Google's Australia Win

Six years ago, the Australian Competition & Consumer Commission (ACCC) sued Google for false advertising. The ACCC complained that AdWords advertisers bought keyword advertising on competitors' trademarks and displayed those trademarks in their ad copy, which alleged confused consumers. The ACCC sought to hold Google responsible for publishing these allegedly deceptive ads.

The High Court of Australia rejected the ACCC's arguments and ruled in favor of Google. The court says:

The technology which lies behind the display of a sponsored link merely assembles information provided by others for the purpose of displaying advertisements directed to users of the Google search engine in their capacity as consumers of products and services. In this sense, Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others....To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers.

There are two non-standard aspects of this ruling. First, the plaintiff was a government agency suing for false advertising, not the more typical situation of an unhappy trademark owner suing for trademark infringement. Second, the High Court interpreted a specific Australian statute regarding secondary liability. Still, despite these quirks, I think the ruling has broader implications. In the allocation of legal responsibility between Google and its advertisers, the High Court treats the advertisers as the legally significant decision-makers and treats Google as a tool for advertisers, i.e., a technology platform that advertisers use to publish their own ads. Once a court embraces that division of responsibility, the case resolution is obvious.

Global Acceptance of AdWords

Google's emphatic Australian complements recent developments in Europe and the United States. In the European Union, Google won a strategic victory at the European Court of Justice in 2010 based on the same paradigm adopted by the Australian High Court, i.e., AdWords is a tool, and the advertisers bear responsibility for how they use it. Although the ECJ opinion didn't completely resolve all of the open issues, the ruling has effectively ended European AdWords-related trademark litigation against Google.

In the United States, trademark owners have sued Google for AdWords many times (over 2 dozen times by my count). While Google has occasionally gotten dismissals in court, Google hasn't yet set broad precedent like the ECJ ruling. At the same time, despite Google's occasional preliminary losses against trademark owners, no trademark owner has won a final court judgment against Google. Google recently settled the Rosetta Stone lawsuit, which ended the last major legal challenge against AdWords in the United States. Only a couple of minor pending lawsuits are remaining to mop up. In other words, after the Rosetta Stone settlement, Google tacitly secured the legality of AdWords under U.S. trademark law.

The Development of Cyberlaw

"Cyberspace exceptionalism" is the approach of regulating the Internet differently than other media. In some cases, the Internet actually has bona fide technological differences that support different regulatory treatment; but more often, the differences between the Internet and other media are exaggerated or imagined.

With respect to keyword advertising, in 2009 I wrote:

Keyword triggering seems especially susceptible to cyberspace exceptionalism. After all, the triggering process is unfamiliar and poorly understood, which naturally leads to suspicion. Over time, consumers and judges will better understand keyword triggering technologies...

I think we've arrived at this destination. After a decade of legal battles, Google's campaign to legitimize AdWords--now nearly complete--has been a complete success.

How did Google triumph over the initial impulses to regulate keyword advertising? I'll point to three factors:

1) Efficacy. Keyword advertising has numerous advantages over other advertising options. It provides good ad targeting to advertisers, consumers often find keyword ads relevant to their interests, and (as I explain here) cost-per-click (CPC) keyword advertising nicely shares the risks of ad performance between advertisers and publishers. So one reason for the eventual acceptance of keyword advertising is that it is a better option than the advertising alternatives.

2) Venerability. Over the course of years, consumers--and judges--increasingly have had first-hand positive experiences with keyword advertising. Keyword advertising has evolved from an Internet novelty into an integral part of our daily lives.

3) Money. AdWords achieved venerability only because Google had the financial resources and fortitude to fight--and defeat--numerous and expensive legal battles across the globe.

To me, AdWords' evolution provides a good cautionary tale for regulators and judges dealing with emerging technologies. We should not overrespond to any initial negative emotional reactions to new technology. Instead, we should regulate emerging technologies (if at all) anticipating that consumer perceptions--and the technology itself--will evolve and improve over time.

In particular, regulators and judges should recognize that AdWords' venerability is an exceptional story, not the norm. Many other innovators and entrepreneurs won't have Google's financial staying power, meaning those innovations are vulnerable to being permanently damaged or killed by unchecked regulatory impulses before the innovation takes root.

Case Citation: Google Inc v. Australian Competition and Consumer Commission, [2013] HCA 1, S175/2012 (High Court of Australia Feb. 6, 2013). The case appeal page. Blog post on the intermediate court ruling.

[Photo credit: The Australian High Court building // ShutterStock]

Posted by Eric at 09:32 AM | Derivative Liability , Internet History , Marketing , Search Engines , Trademark | TrackBack

February 12, 2013

Yelp Defeats Legal Challenge to Its User Review Filter (Forbes Cross-Post)

By Eric Goldman

Demetriades v. Yelp, Case No.: BC484055 (Cal. Superior Ct. Jan. 25, 2013). Some supporting documents:

* Yelp's anti-SLAPP motion to strike
* Demetriades's opposition
* Yelp's reply

Yelp ($YELP) uses an automated review filter to suppress some user reviews of businesses. The review filter's criteria aren't publicly disclosed, and some businesses feel that legitimate positive reviews from happy customers are unfairly hidden. One business owner, an operator of three restaurants in Mammoth Lakes, California and a Yelp advertiser, got so frustrated with the review filter that he challenged Yelp's review filter in court. Recently, the court ruled decisively in favor of Yelp, confirming that Yelp isn't legally liable for filtering users' reviews as it sees fit.

The restaurant owner didn't attack the review filter directly. Instead, he complained about Yelp's marketing descriptions of its review filter, claiming that Yelp falsely advertises its trustworthiness when it uses characterizations such as "remarkable filtering process" and "most trustworthy." Yelp responded that the lawsuit was a "SLAPP"--a lawsuit designed to suppress socially beneficial speech--and therefore should be dismissed per California's anti-SLAPP law. (See this post for more discussion about anti-SLAPP laws). The court agreed with Yelp, finding that "statements regarding the filtering of reviews on a social media site such as yelp.com are matters of public interest." The court also concluded that Yelp's laudatory statements about its review filter were "puffery," not factual representations. Cf. Seaton v. TripAdvisor. As a result, if the anti-SLAPP dismissal survives a likely appeal, the restaurant owner will have to pay Yelp's legal defense costs.

This ruling complements a similar case, Levitt v. Yelp, which also led to a decisive Yelp win. In Levitt, the plaintiffs alleged (among other things) that Yelp should be liable for reordering users' reviews. In 2011, the court dismissed the complaint based on 47 USC 230, the federal law that says websites aren't liable for third party content. As I wrote then, the Levitt "ruling makes clear that Yelp can manage its database of user reviews however it wants." The newest ruling supports that conclusion.

In general, this case demonstrates that websites face limited legal exposure for automated content filtering decisions. As the Levitt case illustrated, content filtering decisions are generally protected by 47 USC 230. However, courts have been split about whether 47 USC 230 protects the website's marketing statements about its filter (I think Section 230 applies in those situations for reasons I explain in this article). Here, the restaurant owner didn't challenge the review filter directly--that lawsuit would have almost certainly failed on Section 230 grounds--but his attempted workaround of suing over Yelp's marketing language proved no more availing. The court's rejection of a lawsuit over marketing language as a "bypass" to Section 230's immunity should be good news to other websites that rely heavily on automated content filtering, including Facebook ($FB) (such as its newsfeed filters and its emerging Graph Search), Google's ($GOOG) search engine (see, e.g., this discussion), and Amazon's ($AMZN) recommendation engine.

Yelp sent me the following statement about the opinion:

Yelp has spent considerable time and effort to develop its review filter––a sophisticated tool intended to show the most reliable user reviews. The court rightly confirmed that Yelp’s discussion of the filter and our industry-leading efforts to combat unreliable reviews are protected speech about a matter of public concern, and noted that this action was spurred in part by negative reviews. There will always be businesses that think it may be easier to blame the messenger rather than respond directly to customer criticism, but this case reinforces our belief that the better option is constructive dialogue between consumers and businesses. We are happy to be a key part of that conversation.

[Photo Credit: Car filters // ShutterStock]

Posted by Eric at 08:30 AM | Content Regulation , Derivative Liability , Marketing | TrackBack

February 11, 2013

Conference Announcement: A 15 Year Retrospective of the Digital Millennium Copyright Act, SCU, March 15

By Eric Goldman

On March 15, 2013 at Santa Clara University, the High Tech Law Institute is hosting a conference entitled "A 15 Year Retrospective of the Digital Millennium Copyright Act." Our co-sponsors include the advisory committee to the Congressional Internet Caucus, the Electronic Frontier Foundation and Fenwick & West.

This event follows the basic formula from our popular 2011 conference, a 15 year retrospective of 47 USC 230. Like that conference, our goal is to appraise the DMCA's legacy and effect after 15 years in the field. To do so, we are bringing some key players from the DMCA's birth, such as Bruce Lehman (who wrote the influential Green and White Papers), Judge Whyte (who decided the precedent-setting RTC v. Netcom case) and Jay Monahan (who helped build eBay's VeRO program before the DMCA was on the books). We're also bringing in folks who are dealing with cutting-edge DMCA issues today. My hope is that we'll walk away from the event with a better perspective of how we got here, what worked/what didn't, and what lessons we can learn from the DMCA as we continue to build copyright policy in the digital millennium.

We anticipate spending the morning on 1201 and the afternoon on 512. My colleague Tyler Ochoa will talk about 1202 in the morning. At this point, I think it's unlikely we'll cover music streaming (114), computer repair (117) or vessel hull designs (1301 et seq), even though all of them are interesting. Some of our speakers who discuss the DMCA generally may touch on them. We hope to post a more specific hour-by-hour schedule in the next week or two.

As usual, we keep our registration prices low, and we have numerous discounted or free registration categories. We anticipate offering California CLE once we sort out the hour-by-hour schedule. We anticipate strong demand for the event, so register today to save your seat today.

If you're an academic and interested in coming to the DMCA conference, note that the next day (March 16) we're having an Internet Law academic work-in-progress conference. We're putting new speaking requests on a waitlist, but we have room for additional discussants.

Posted by Eric at 11:39 AM | Copyright , Derivative Liability | TrackBack

February 10, 2013

Newspaper Not Liable for Moderated Online Reader Comments--Gains v. Romkey (Catch-Up Post)

By Eric Goldman

Gains v. Romkey, 2012 IL App (3d) 110594-U (Ill. App. Ct. July 3, 2012)

[Note: I'm terribly behind in blogging 47 USC 230 cases, and on top of that, this case just showed up in my Westlaw alerts 7+ months after its issuance. Despite its staleness, I'm blogging it as part of my ongoing coverage of newspaper websites and user comments.]

This is yet another case holding that 47 USC 230 immunizes newspapers from reader comments to their online stories, in this case even though the newspapers moderated the reader comments. This is an unsurprising finding; as I've documented before, to date (as far as I know), newspapers have always won cases over online reader posts. Still, this ruling is in Illinois state courts, where the hideous Lansing v. Southwest Airlines ruling butchered 47 USC 230 just one month before this opinion. So, it's nice to see a sensible Section 230 ruling from an Illinois state court after the Lansing train wreck.

The plaintiffs didn't try much to get around Section 230. It appears their primary argument is that the (reams of) adverse precedent doesn't bind the Illinois state court, but this approach has absolutely no persuasive effect on the appellate court. This concluding paragraph from the opinion wraps the facts and legal analysis into one efficient package:

the undisputed facts show Moline Dispatch Publishing Company, LLC, provided online websites Quad Cities Online and The Small Newspaper Group, for the public to post their personal comments and views about particular news articles. The uncontested facts demonstrate that editors for the Moline Dispatch were assigned to moderate the comments submitted by others to the website in order to assure the comments were not abusive, obscene, profane, or otherwise offensive, as defined by the website's “Notice of Use” terms. However, other than screening these comments, the editors did not modify the comments prepared by third parties or contribute to the content whatsoever. Defendants merely disseminated the comments made by third parties. As such, under section (c) of the Act, defendants do not qualify as the speaker or publisher of information provided by a third party (47 U.S.C. § 230(c)(1)), but are merely the interactive computer service which enables access by multiple users, as defined under section (f)(2) of the Act (47 U.S.C. § 230(f)(2)). Thus, we conclude the trial court correctly found defendants were protected under the immunities provided in the CDA

An obvious point: Section 230 nominally protects web operators from incurring the cost of pre-screening user content, but here the newspaper voluntarily incurred that cost--and, by the plaintiff's inference, didn't screen properly. As we know, employee pre-screening is inconsequential to the Section 230 analysis, whether the pre-screening is done well or not.

* Yet Another Case Says Section 230 Immunizes Newspapers from User Comments--Hadley v. GateHouse Media [note: that opinion, from the Northern District of Illinois, came out just a week after the Gains opinion--what a difference in tracking new rulings between federal and state courts!]
* Another Newspaper Isn't Liable for User Website Comments Per 47 USC 230--Spreadbury v. Bitterroot Library
* Newspaper Isn't Liable for User Website Comment Per 47 USC 230--Delle v. Worcester T&G
* 47 USC 230 and Message Board Cases

[Photo credit: dog reading and holding a blank newspaper // ShutterStock]

Posted by Eric at 03:53 PM | Derivative Liability | TrackBack

February 09, 2013

What Should We Do About Revenge Porn Sites Like Texxxan? (Forbes Cross-Post)

Periodically, a new controversy springs up about a website that encourages users to post anti-social or distasteful content. A few years ago it was sites like JuicyCampus or People's Dirt that requested users to gossip about each other; followed by IsAnyoneUp? that linked user-submitted pornographic photos to the subject's Facebook page. The latest website to stir up a media frenzy is Texxxan.com, which encourages users to post "revenge porn," i.e., pornographic depictions of former lovers, ostensibly to get revenge on them.

The Texxxan Lawsuit Will Fail

Texas lawyers recently filed a class action lawsuit against Texxxan.com, its web host GoDaddy ($DADY), its uploaders and its subscribers. No matter how much the lawyers hype their lawsuit in the media, it's mostly dead on arrival. All of the defendants--other than the users actually submitting the revenge porn--are protected by 47 USC 230, the law that says websites aren't liable for third party content. Section 230 also explicitly protects website users, so the claims against the website subscribers are specious. In fact, Texas recently enacted a broad anti-SLAPP law designed to discourage anti-free speech lawsuits. If the courts determine that the revenge porn relates to a "matter of public concern" (not likely, but it is possible), the plaintiffs' lawyers will be writing checks to the improperly targeted defendants.

It's more complicated assessing the liability of the users who post revenge porn. We need to know more about how the defendants got the revenge porn and under what terms or understandings. (Obviously, that could lead to some salacious pillow-talk appearing in court records). Because the court will have to evaluate each submitted item's history on a one-by-one basis, the effort to organize a class action should fail for procedural problems (irrespective of its substantive merit or lack thereof).

Because the existing class action lawsuit is so weak, the Texxxan plaintiffs' best legal chance is to bring individual lawsuits against the defendants who did them wrong. Normally, when dealing with distasteful online content, plaintiffs have difficulty identifying the otherwise-anonymous defendants--a problem that encourages the plaintiffs to pursue easier-to-find defendants, like web hosts. In contrast, in this particular case, revenge porn plaintiffs often can find the defendants, because (we hope...) there's a limited number of people who have nude depictions of the plaintiff.

We Don't Need to Change the Law

Still, our current legal system isn't well-designed to redress user-submitted online pornography. And as a practical matter, even if the law were more effective, there will always be uncomfortably anti-social behavior online. So, what should we do differently?

Every time a distasteful content website flares up in the media, the pro-regulation crowd agitates for amendments to 47 USC 230. Personally, I find it hard to justify the non-consensual publication of pornography, but I am skeptical that 47 USC 230 needs fixing. First, we are already seeing troubling efforts to exploit the existing exceptions to Section 230, such as trademark lawsuits against consumer review websites and plaintiffs abusing copyright to create a "right to forget." Adding another exception will just create more possibilities for mischief. Second, all content regulation schemes are necessarily over- and under-inclusive. It's not surprising that Section 230 may leave some activity unaddressed; any other regulatory policy also would be imperfect. Third, while I have no love for distasteful content websites, I don't trust my powers to decide what's too distasteful or isn't--and I trust any regulators' ability to evaluate content even less.

Perhaps most importantly, distasteful content websites routinely fail on their own accord, often quite quickly. JuicyCampus? Gone. People's Dirt? Gone. IsAnyoneUp? Gone (but coming back?). Even Texxxan already put its content behind a paywall, rendering the content largely invisible. My guess it that Texxxan.com is already on an irreversible path towards a complete winddown. These shutdowns aren't an accident. Inevitably, the website operators face enormous pressure from the media coverage, the public's opprobrium, the threats of vendors (especially payment service providers or ad networks) to cut off or reduce service, and yes, even the legal risks. As a result, distasteful content websites have comparatively short shelf lives. As attributed to Lao Tzu (and repeated in the movie Blade Runner), "the flame that burns twice as bright, burns half as long." If the marketplace is going to drum these websites out of business organically, without any new laws, perhaps the existing regulatory policy is working OK.

Furthermore, many distasteful content websites exist principally because of Google ($GOOG) indexing. As Google evolves its algorithm, I hope it will eventually reduce the visibility of these low-value websites--which in turn will reduce the websites' financial potential. The ordinary evolution of Google's algorithm is far more likely to suppress distasteful content website entrepreneurship than any new law would.

The Future of Revenge Porn

Let's face it: between sexting and sex tapes, far more private pornography is being generated than at any point in human history. Whereas having nude/sexual depictions of a person used to be a rarity, for future generations (and perhaps current ones) such depictions are going to be normal--perhaps even ubiquitous.

When we reach that point, there will be substantially less "scandal" or taint associated with the unauthorized posting of nude/sexual depictions. After all, many other folks will have made similar depictions. The public dissemination of such depictions might still violate the privacy expectations of the depicted individuals, but it will not be seen as unusual.

This points the way to the long-term "solution" to the revenge porn "problem": we as a society will necessarily have to adjust our social norms about the dissemination of nude or sexual depictions to reflect their ubiquity. In fact, we're likely to develop a type of "blindness" to such content, just like today it's bad etiquette to check out a colleague's house value on Zillow ($Z)--or, at least, we don't discuss the prices publicly, even if we've checked them out. If we can wait until our social mores about online nude/sexual depictions adjust, we won't need any new laws to facilitate that adjustment.

Still, for individuals who would prefer not to be a revenge porn victim or otherwise have intimate depictions of themselves publicly disclosed, the advice will be simple: don't take nude photos or videos. Even if you never share them with anyone, these depictions seem to have a surprising capacity to leak out (for example, there are numerous stories of IT technicians or criminal hackers obtaining photos and videos). If you decide to take nude photos or videos, never share them with anyone else. Effectively, when you do, you are gambling that person will not betray your trust for the rest of their lives. The reality is that most people aren't that trustworthy; or even if they are, it's hard to know that in advance.

UPDATE: Prof. Mary Anne Franks (University of Miami) offers numerous criticisms of this post, including explaining why “Prof. Goldman’s piece, and revenge porn defenses generally, goes beyond garden-variety victim-blaming.”

Posted by Eric at 10:48 AM | Content Regulation , Derivative Liability | TrackBack

January 29, 2013

Google and Yahoo Defeat Trademark Lawsuit Over Keyword Ads--Clara Ison v. Google

By Eric Goldman

Clara Ison v. Google, 1-10-CV-163032 (Cal. Superior Ct. January 22, 2013), The fourth amended complaint. The case docket.

I try to track every trademark lawsuit regarding Google AdWords. Thus, I am embarrassed to admit that I just learned about a trademark lawsuit filed in 2010 that flew completely under my radar. In my (limited) defense, the lawsuit was in state court, where I can't track cases nearly as easily as I can track them in federal court.

The plaintiff is a California psychologist. She sued Google and Yahoo for selling her name as triggers for keyword advertising and, I believe, for other issues (her complaint isn't a model of clarity). She only made state law claims, which helped keep the case out of federal court. Her complaint was cloned from the American Airlines v. Google complaint (I recognize the false drama in Para. 36, the claim that the "Plaintiff does not bring this lawsuit lightly"). Somehow, she got to a fourth amended complaint, but the court rejected her request to file a fifth amended complaint.

Earlier this month, the court granted Google and Yahoo's motion for summary judgment because Ison didn't show secondary meaning in her name. Apparently, expert Hal Poret did a survey showing the lack of secondary meaning among the target consumers, and Ison didn't have enough counter-evidence to create a triable issue.

For reasons that aren't clear from the papers I saw, Ison apparently didn't allege a publicity rights violation. I don't think selling keyword advertising on a person's name should constitute a publicity rights violation, but that issue has completely vexed Wisconsin judges in the Habush v. Cannon lawsuit. At minimum, publicity rights claims don't need secondary meaning, so it would have avoided the most immediate problem that scuttled her lawsuit.

Some related posts:

* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid–Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

The two other pending AdWords trademark lawsuits (that I know about!):

* CYBERsitter v. Google [Latest post]
* Home Decor Center v. Google

[Photo Credit: satellite dish antennas under sky // ShutterStock]

Posted by Eric at 11:37 AM | Derivative Liability , Search Engines , Trademark | TrackBack

January 25, 2013

17 USC 512(f) Is Dead--Lenz v. Universal Music

By Eric Goldman

Lenz v. Universal Music Corp., 2013 WL 271673 (N.D. Cal. Jan. 24, 2013).

This is the long-running case involving a YouTube video of a baby dancing to a Prince song. Universal Music overzealously took the video down for 6 weeks in 2007 via a 512(c)(3) notice. The video now has 1.2M+ views, so it's since become a cultural icon. The video has spawned 6 years of litigation over Universal's wrongful takedown notice--litigation that is going nowhere fast and unfortunately will yield nothing useful when it's done.

Judge Fogel rejected the summary judgment motions of both parties, sending this case to trial on Universal's scienter when sending the takedown notice. Judge Fogel summarizes the permissible arguments each party can make:

Lenz is free to argue that a reasonable actor in Universal’s position would have understood that fair use was “self-evident,” and that this circumstance is evidence of Universal’s alleged willful blindness. Universal likewise is free to argue that whatever the alleged shortcomings of its review process might have been, it did not act with the subjective intent required by §512(f).

Framed that way, Universal almost certainly wins in light of the Ninth Circuit's 2004 Rossi case. Universal made a boneheaded move sending the takedown notice, but even with her many sympathetic facts, Lenz is unlikely to persuade a jury that Universal had the subjective bad faith required by Rossi.

Even if Lenz persuades the jury otherwise, Judge Fogel's latest ruling makes it clear that there's no meaningful financial payday at the end of this road. Lenz will get $1,275, the value of EFF's Marcia Hoffman's pre-lawsuit legal advice, plus possibly other damages of no consequence. Judge Fogel gives the example that "Lenz must have incurred at least minimal expenses for electricity to power her computer, internet and telephone bills, and the like." In other words, those other damages are probably worth another nickel. With such a small dollar value at issue, and the cost of a jury trial so high, this case really ought to settle now. There's nothing left for anything to prove, and the transaction costs of reaching the inevitable denouement aren't worth it to either side.

The 2004 Rossi case, requiring subjective bad faith on the part of the takedown notice sender, eviscerated 512(f) as a cause of action, but this case--with its cramped definition of damages--has killed off 512(f) as a cause of action. Except in those rare cases where 512(f) supports equitable relief (and that does happen occasionally--see, e.g., Design Furnishings v. Zen Path), there are very few circumstances where it makes economic sense to bring a 512(f) lawsuit. What a shame.

512(f) is dead for another reason. The statute contemplates that copyright owners would communicate their preferences to service providers exclusively via 512(c)(3) takedown notices, but many copyright owners have developed other ways to kill user-generated content (UGC) files without sending 512(c)(3) notices. Indeed, as this case notes in FN1, Universal now has a deal with YouTube to kill files directly, no takedown notice required--and therefore, 512(f) doesn't regulate Universal's communications to YouTube. That's increasingly true of other major copyright owners.

The in-the-field move away from 512(c)(3) notices is just one example of how industry conditions have changed over the past 15 years that affect the DMCA without any legislative change. There are many others. We are holding a conference on March 15 at SCU, a "15 Year Retrospective on the DMCA," to discuss this and many other changes. It will be a terrific discussion, so please come!

Prior Blog Coverage

* Disclosure of the Substance of Privileged Communications via Email, Blog, and Chat Results in Waiver -- Lenz v. Universal
* Rare Ruling on Damages for Sending Bogus Copyright Takedown Notice--Lenz v. Universal
* Fair Use - It's the Law (for what it's worth)--Lenz v. Universal

[Photo Credit: Road Closed Sign // ShutterStock]

Posted by Eric at 09:08 AM | Copyright , Derivative Liability | TrackBack

January 20, 2013

47 USC 230 Protects Online White Pages for Publishing Incorrect Phone Number--Nasser v. WhitePages

By Eric Goldman

Nasser v. WhitePages, Inc., 2012 WL 6858438 (W.D. Va. magistrate report and recommendations December 20, 2012). The judge approved the magistrate report on January 14, 2013.

[Note: Venkat represented WhitePages, but he had no role in preparing this blog post.]

Among other alleged mistakes, WhitePages allegedly published Nasser's phone number incorrectly as its listing for Comcast Phone of Virginia, resulting in a deluge of unwanted phone calls. WhitePages obtained the data from Verizon and further syndicated the data downstream. This case is quite similar to the 230 defense victory in Prickett v. infoUSA from 2006.

As the court notes, "an interactive service provider who solicits, pays for, edits, and generally maintains active control over the content of its website may continue to assert immunity from liability," though the court follows it up (citing the 2009 Nemet ruling) with the ambiguous statement that encouraging inaccurate or defamatory posts could negate Section 230. The magistrate concludes that WhitePages easily fit within the immunity. Nasser's attempt at a Barnes-style promissory estoppel workaround fails because Virginia law doesn't recognize the promissory estoppel doctrine.

See my recent recap of other pro se plaintiffs drummed out of court by 47 USC 230.

[Photo credit: Hand pointing an advertisement in a phone book // ShutterStock]

Posted by Eric at 07:54 AM | Derivative Liability | TrackBack

January 16, 2013

Court Definitively Rejects AFP's Argument That Posting a Photo to Twitter Grants AFP a License to Freely Use It -- AFP v. Morel

[Post by Venkat Balasubramani]

AFP v. Morel, 10 Civ. 02730 (S.D.N.Y. Jan. 14, 2013)

The court *finally* issued its ruling on the parties’ cross motions for summary judgment in AFP v. Morel, the Haiti photo case. Previous posts here and here.

The facts are interesting and highly relevant to the fast-paced world we operate in. I recommend reading them, if for no other reason than as a cautionary tale. In a nutshell, Morel took photos of the Haiti earthquake, uploaded them to Twitpic and posted to Twitter. Someone else took Morel's photos and uploaded the same photos to their own account. An AFP staffer found the photos on the second individual's Twitter account, communicated with him, and thought AFP obtained a license. AFP then distributed the photos to Getty and other downstream third parties. Morel was understandably unhappy and started firing off takedown letters and requests. This prompted a preemptive lawsuit by AFP. (Joe Mullin has an excellent recap at Ars and he delves into the messy factual backdrop: "News flash for the media: you can't sell photos grabbed from Twitter.")

Highlights from the court’s ruling:

AFP can’t claim the benefit of any license in the Twitter or Twitpic terms: although this may not be the most consequential aspect of this case, this is one that people will focus on, particularly in light of the Instagram TOS controversy. AFP tried to argue that the Twitter terms of service allowed it to freely use content posted to Twitter (& Twitpic). The court previously said nein, and the court again (different judge) definitively closes the door on this argument. There are lots of quotable bits of the discussion, but this one is pretty cut and dry:

These statements [that you “retain your rights to any Content”] would have no meaning if the Twitter TOS allowed third parties to remove the content from Twitter and license it to others without the consent of the copyright holder.

The court also notes that Twitter's Guidelines:

further underscore that Twitter TOS were not intended to confer a benefit on the world-at-large to remove content from Twitter and commercially distribute it: the Guidelines are replete with suggestions that content should not be disassociated from the Tweets in which they occur.

[emphasis added] AFP raised a related argument that a broad license was necessary; otherwise, Twitter users would be infringing en masse. The court doesn't buy this argument either, and this was a pretty wacky argument from AFP. I’m surprised they pressed on with this. They didn't raise any other defenses to liability, so they (along with the Post) are out of luck.

Other defenses to liability: Getty, one of AFP’s co-defendants, raised two other defenses to liability: (1) it was entitled to a DMCA safe harbor, and (2) it did not act volitionally. I have to admit I was a lot more skeptical of these arguments at the outset, but reading the opinion made me change my mind. At minimum, they are “in the ballpark.”

On the DMCA issue, the court asks this strange question of whether the service provider seeking DMCA protection is “doing something useful for a person or company” or providing “a commodity . . . in the form of human effort.” The court raises the related query of whether "an entity that is directly licensing copyrighted material online is . . . a 'service provider' [under the DMCA]." The court intimates that an entity claiming DMCA protection must do something other than merely making content available to third parties. I’m not sure where the court distilled all of this from, but ultimately the court says that there’s a factual dispute as to whether Getty was “actively involved” in the licensing (i.e., was the process totally automated) and whether Getty received a financial benefit directly attributable to the allegedly infringing activity.

Getty loses summary judgment on its no-volitional conduct defense for a related reason. The court says that under Second Circuit law, the volitional conduct defense only extends to the right of reproduction, and here Getty allegedly engaged in distribution. The court also says that there’s a factual dispute as to the extent of involvement by Getty employees in the licensing process.

Neither of these defenses are totally foreclosed to Getty, although I'm skeptical that they will carry the day.

Secondary liability: The court says that there’s enough evidence in the record to create a dispute as to whether AFP and Getty can be held liable for contributory infringement. AFP and Getty both tried to say that they were passive participants at best, and merely passed on the photos, but the court says the available evidence indicates a factual dispute about the extent of their involvement. The court also says that they can possibly be held liable merely for making available Morel's photos to third parties.

Morel can also assert a claim for vicarious liability against Getty (for some reason he didn't bring this claim until too late against AFP). The court says that there’s a factual dispute as to whether Getty benefits directly from the allegedly infringing materials and also whether it acted quickly enough to remove the photos from its system (its failure to do so may give rise to vicarious liability). Defendants argued that the DMCA codifies vicarious liability standards, and Morel's path to derivative liability should be through the DMCA, but the court rejects this argument in a footnote (citing the Second Circuit's ruling in Viacom).

DMCA CMI Claims: Morel made an argument that AFP’s distribution of the photos with incorrect attribution equaled a claim for removal or alteration of copyright management information or the knowing distribution of material with incorrect information. There were predictable factual disputes around how AFP obtained the photos and whether it knew that the photos were Morel’s when it distributed the photos with incorrect attribution. The DMCA claim requires proof of state of mind, and the court says this can't be resolved at the summary judgment stage. AFP also tried to argue that the credit information was not “copyright management” information because this information is not intended to provide information about ownership, but the court rejects this argument, taking a broad view of what can constitute "copyright management" information (e.g., adding 'AFP' or 'Getty' in the caption may form the basis of a CMI claim). Ultimately, factual issues preclude judgment in favor of Getty and AFP on Morel’s DMCA CMI claims.

Statutory Damages: Finally, the parties dispute the scope of statutory damages. Morel says he is entitled to a separate award per work/per downstream subscriber. If Getty or AFP are held derivatively liable for the acts of downstream subscribers, Morel says each such subscriber should result in a separate damage award. This would get really ugly for Getty and AFP. In contrast, they argued that Morel is only entitled to one work per defendant (and jointly liable defendants are only hit with a single award). The court sides with Getty and AFP, saying that they’re only liable once per work and the award against them is not multiplied based on their subscribers. The parties have the same dispute about the scope of DMCA CMI damages, and the court again sides with AFP and Getty. Just one award for each instances of removal of CMI.

Yowza. This is an action-packed ruling that covers a ton of different issues. Tough to do justice in a single blog post. Good fun for copyright geeks, people who like issue spotting, and law profs who can repurpose this for a law school exam question!

It’s nice to see confirmation that AFP’s license argument is silly. We've always known this, but it’s good to get further judicial affirmation, particularly in light of the Instagram terms of service dust-up. Service providers may include broad license grants in their terms of service, but it takes a lot to say that the service provider can exploit content or IP outside the ecosystem. It takes even more to say that a third party who is a stranger to the relationship can do so. The court's interpretation of Twitter's guidelines and terms is sure to give users some comfort that, when a service such as Twitter says "you own your content," this at least means that third parties cannot come along and exploit it freely.

Getty’s DMCA safe harbor argument is an interesting one. A purely automated system that takes in photos (or content) and licenses it out theoretically should be entitled to DMCA protection (or at least should be considered a service provider). The court cites to other examples of service providers (YouTube; Photobucket) but distinguishes them by saying they are doing something in addition to merely acting as a licensing engine. I wasn't terribly persuaded--YouTube is making available user generated videos to the public; it just happens to make them available for free. The court seemed uncomfortable with the notion that a turnkey online service could take in content and license it out and yet fall under the DMCA's definition of service provider. The court could have just focused on the question of whether the material was stored at the direction of a user; if this answer is yes, moved on to other aspects of the DMCA test (that amply allow Morel to argue that Getty is not entitled to DMCA protection). For some reason, the court went off the rails on to a discussion about the precise type of service that must be provided as a threshold matter. I also suspect the facts in this case will make the DMCA safe harbor argument ultimately difficult. The court's discussion about what is or is not a "service provider" under the DMCA may have been superfluous in light of factual disputes around Getty's involvement.

[It’s also worth noting that this isn't a case against the typical online service provider. Much of Getty and AFP’s operations may be conducted online, but there are still humans ultimately pushing the levers. (At least this is my impression from the facts.) This makes me think we shouldn't read too much into this as a DMCA safe harbor case or a case that deals with derivative liability for purely online service providers (e.g., YouTube).]

The CMI ruling is interesting. This isn't the first case to adopt a broad definition of "copyright management information," but courts seem fairly willing to take this approach. (Tip to photographers and content creators: watermarks are your friends.)

The damages ruling is a breath of fresh air for the defendants. I think the law is somewhat mixed and the court could have gone either way (and have treated individual Getty subscribers as supporting additional awards), but it’s the one saving grace to the ruling from Getty's and AFP’s standpoint. From a doctrinal standpoint, it's fairly interesting as well. The court was swayed by what it described as the "absurd" outcome under Morel's suggested damages framework. I don't know that the court's ruling leaves Morel totally out in the cold. He still could claim actual damages and ask the jury to sock AFP and the other defendants, pointing to the revenues they generated. AFP and Getty aren't the most sympathetic defendants in a copyright case, among other things due to their own zealous and sometimes overly aggressive enforcement efforts. Statute of limitations issues notwithstanding, he could also go after other Getty customers. This would get thorny for Getty.

End result: AFP should have looped in the co-defendants and written a check from day one. After furiously litigating the case for almost two years, it's definitely going to be writing a check to Morel. Maybe the real argument was around the extent of damages available to Morel, and the court's ruling on this issue will clear up some grey areas around what he can obtain. Either way, there are a ton of interesting issues addressed in the order, but the simple takeaway is something we already knew: stuff that's posted online is not necessarily fair game for recycling, especially not photos (and particularly if you're a corporate defendant who argues for aggressive enforcement when your own rights are allegedly infringed). A service provider's broad terms of service with its users is unlikely to be of much help to any recyclers.

Posted by Venkat at 09:37 AM | Copyright , Derivative Liability , Licensing/Contracts

January 11, 2013

Top Ten Internet Law Developments of 2012 (Forbes Cross-Post)

By Eric Goldman

I'm pleased to share my list of top 10 developments of 2012:

#10: The Push Towards Anti-Class Action Arbitration Clauses. In 2011, the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that businesses may be able to adopt mandatory arbitration clauses that ban customer class-action lawsuits. The ruling was hardly crystal-clear, but in its wake, many websites adopted such clauses. Nevertheless, as the Zappos decision points out, these clauses must be adopted according to the laws governing contract formation and amendment, or they will fail in court.

#9: General Patraeus/Paula Broadwell Imbroglio. On the surface, it's just your typical Washington DC sex scandal. However, it had several interesting cyberlaw angles, including the attempts to hide digital conversations and Ms. Broadwell's alleged cyberharassment of Jill Kelley. My biggest takeaway: If the CIA Director can't keep the FBI from reading his email, what chance do you or I have?

#8: Do-Not-Track Meltdown. Everyone hoped that industry would come up with a do-not-track (DNT) standard rather than kicking the issue to Congress or the FTC. Then, it all went to heck. Microsoft announced it would turn on DNT by default in its browser, which prompted Internet publishers to threaten to ignore Microsoft's DNT signal. Meanwhile, Internet publishers and others adopted a narrow definition of "do-not-track," arguing it meant no-tracking for advertising purposes, but tracking for other purposes was still OK. The effort then devolved into acrimonious recriminations and left open the possibility that government regulators will fill the gap--to everyone's detriment. (For what it's worth, I take a very dim view of technological do-not-track efforts for reasons I explain here).

#7: Social Media Exceptionalism. In 2012, regulators eagerly sought to "fix" social media through regulation, but their efforts will fail because no one can precisely define social media as a subset of Internet activity. For example, California's recent attempt to curb employers' attempts to obtain employees' social media passwords led to the astounding definition that "social media" means all digital data, whether online or off.

#6: Megaupload. The US government proudly touted its takedown of Megaupload as a victory for Internet copyright enforcement. Unfortunately, it appears that takedown involved an enforcement action where it appears the US government repeatedly ignored or broke the law.

#5: Software Patents/Smartphone Wars. The smartphone industry has ushered in a glorious era of innovation, but it's also highlighted how patents can hinder, not spur, innovation. Smartphone players have spent (wasted?) billions of dollars on patents with the hope that they can operate without restriction from other players' patents, and many tens of millions of dollars have been spent (wasted?) on legal fees as the players sue each other for patent infringement and defend against interlopers with weak/bogus patents hoping for a little taste of the action. See my essay on software patents:

#4: Europe Hates Silicon Valley. I'm surprised whenever I read about a new European ruling that's adverse to a Silicon Valley company, because at this point I assume that everything Silicon Valley companies do in Europe is already illegal. Google, Facebook and other Silicon Valley players are under constant legal attack in Europe on countless fronts. Everyone might be happier if the Silicon Valley players just got out of Europe altogether.

#3: Google and Antitrust. The FTC largely dropped its antitrust investigation against Google, and dropped it completely with respect to Google's search engine practices. (Technically the denouement rolled out on January 3, 2013, but I'm still counting it as a 2012 development). This is an important development for several reasons. First, the FTC--which makes its living by bringing enforcement actions--admitted it had no reason to complain about Google's search engine practices. Second, the scuttlebutt all throughout the investigated suggested that the FTC was committed to busting Google, and Google turned that situation around 180 degrees. Third, not intervening into the operation of Google's search algorithm is a logical decision, but one still worth celebrating. This was a great resolution for Google, a complete rejection of the concerns raised by Microsoft and other Google-haters, and due to the FTC's non-involvement, ultimately a big win for Google's users.

#2: ITU/WCIT's Attempted Internet Takeover. I really didn't understand what happened in Dubai at the ITU/WCIT meeting. All I know is that nothing good could have happened there, so preserving the status quo is a win, as ironic as that sounds.

However, there has been some teeth-gnashing that the meeting exposed looming fault lines between pro-censorship and anti-censorship governments. I don't understand that angst for at least two reasons. First, all governments are pro-censorship, and that certainly includes the United States. Indeed, the US has exhibited some awkward duality as it rails against foreign attempts to censor the Internet even as both Congress and the Obama Administration exhibit a never-ending pursuit of controlling the Internet themselves.

Second, the Internet has already fractured into multiple "Internets." The Internet in the United States increasingly bears little resemblance to the Internet in foreign countries, both because local regulators simply block certain websites and because websites localize their services to accommodate local regulation. Plus, it's been proven that countries can simply "unplug" from the Internet. Thus, we don't have a single unified Internet; we have many partially-overlapping Internets. I will say more about this in a future post.

#1: SOPA's Failure. The failure of SOPA/PIPA is not the watershed event for our republican democracy that we wished it would be. Citizen-driven rejection of special-interest Internet legislation will not happen very often. But as a David-and-Goliath story--the uncoordinated and oft-ignored Internet user community rising up against a well-oiled and undefeated copyright lobby--it doesn't get any bigger than SOPA. Also, we learned something really important: American voters will acquiesce to a lot of bad and self-interested decisions by their elected officials, but voters will grab the torches and pitchforks if they think the Internet is threatened.

Honorable Mentions

Some other developments of note:

* despite the Fourth Circuit's rekindling of the Rosetta Stone case before it settled, the decade-long keyword advertising litigation battles against Google are basically over with a big win for Google and other keyword advertising vendors. I also think we'll see trademark owner-vs-advertiser lawsuits tapering off too.

* app cloning is a big business, and we're seeing increasing lawsuits in the area, including the EA v. Zynga and TripleTown cases.

* the application of the Computer Fraud & Abuse Act is being dialed back in the employment context (see the Nosal and WEC cases).

* Oracle v. Google gave us one of the cleanest rulings to date that software APIs are not copyrightable. The case was also interesting for the judge's investigation into the paid advocacy efforts of both Oracle and Google.

* the images of Marilyn Monroe and Albert Einstein are moving closer to the public domain.

* the IB v. Facebook ruling could be a watershed decision in spurring class action lawyers to make a buck in the name of "protecting the kids" in court.

* Web publishers can improve their defamation defenses by hyperlinking to original sources.

Most Interesting Cases

I read a lot of cases in 2012, and some of the most interesting cases I saw this year:

* Erickson v. Blake. Music composers can create copyrightable compositions by equating the digits of the number "pi" (π) to musical notes, but they can't stop others from creating their own musical compositions based on pi's digits.

* Bland v. Roberts. Two government employees "liked" their boss' opponent in an upcoming election; after the boss won reelection, the employees allegedly got fired for their divided loyalties. The court (mistakenly, in my opinion) said that "liking" an item on Facebook isn't constitutionally protected speech.

* Scott v. WorldStarHipHop. A classmate posted a video of Scott fighting with an ex-girlfriend. Scott obtained the copyright to the video from his classmate and, as the new copyright owner, sent copyright takedown notices in an effort to scrub the video from the Internet. This copyright acquisition scheme basically converts copyright law into a "right to forget." In 2013, expect to see even more plaintiffs acquire copyright ownership as a way to suppress/control unflattering content about them.

* In re Heartland Payment Systems. This is a settlement of a data security breach class action lawsuit with 130M class members. The parties spent $1.5M to encourage class members to tender damage claims and another $270k to process the tendered claims. A total of 290 claims were tendered, of which 11 were valid, with a maximum payout per valid claim of $175. So the parties incurred $1.75M in transaction costs to award about $2k in damages. Interesting.

* Augstein v. Leslie. If you post a YouTube video promising $1M for the return of your laptop, you could actually owe $1M if someone returns your laptop.

* Olson v. LaBrie. Facebook should bring families closer together, but in one family, photo tagging plus a snarky comment prompted a lawsuit for a restraining order.

Lists from Previous Years

Previous top 10 lists from 2011, 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

[Photo Credit: Top Ten Key // ShutterStock]

Posted by Eric at 07:25 AM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines , Trademark , Trespass to Chattels | TrackBack

January 10, 2013

Q4 2012 Quick Links, Part 3 (47 USC 230 and more)

By Eric Goldman

47 USC 230/Review Websites

* Sulla v. Horowitz, 2012 WL 4758163 (D. Hawai'i Oct. 4, 2012): "§ 230 does not provide this court with exclusive jurisdiction over defamation claims arising from statements made via the internet....While a plaintiff cannot avoid removal by failing to plead necessary federal questions, id., § 230 is clearly in the nature of a defense. Section 230 therefore does not provide this court with federal question jurisdiction."

* What does the Internet look like without 47 USC 230? BBC: Google liable for defamatory search results in Australia.

* Shrader v. Beann, 2012 WL 5951617 (10th Cir. November 29, 2012). Summarily affirming the District Court's 47 USC 230 ruling. Prior blog post.

* EFF: Washington State Drops Defense of Unconstitutional Sex Trafficking Law. Prior blog post.

* Amerigas v. Opinion Corp. (PissedConsumer) settles. Prior blog post.

* RedOrbit: “Online Physician Reviews Skewed By Too Few Posts Says Study.” The long-term detrimental consequences of Medical Justice’s efforts to suppress patients’ reviews of doctors. Fortunately, this will be fixed over time.

* Politico: Yelp pushes for federal anti-SLAPP laws

* British ASA Skytrax ruling: "to justify the claims of authenticity made in the ad, Skytrax needed to demonstrate that they took all reasonable steps to ensure that reviews were checked, trusted and made by "real" people with "real" opinions"

* Yelp is flagging businesses that it suspects of trying to buy reviews. NY Times coverage. I wonder if any competitors will try to game this by falsely trying to buy reviews in their competition's name?

* Company Doe v Tenenbaum. Restricting CPSC from publishing a report to SaferProducts.gov.

Miscellaneous

* What happened at the ITU/WCIT meeting in Dubai? Nothing good, but fortunately, nothing. NY Times and CNET News.com.

* Wired: Google Throws Open Doors to Its Top-Secret Data Center

* WSJ on online price discrimination. Surprisingly, the article doesn't address whether Staples was trying to harmonize prices between its offline and online stores and what opportunities Staples' pricing scheme presents to Staples' online competitors.

* Wired: Noncompetes Are Lame — Let’s Set the Creators Free

* NY Times: Did a Facebook post by Reed Hastings violate Regulation FD?

* AdWeek: People have a love/hate relationship with Facebook.

* Pew: How Teens Do Research in the Digital World:

Three-quarters of AP and NWP teachers say that the internet and digital search tools have had a “mostly positive” impact on their students’ research habits, but 87% say these technologies are creating an “easily distracted generation with short attention spans” and 64% say today’s digital technologies “do more to distract students than to help them academically.”///a significant portion of the teachers surveyed here report spending class time discussing with students how search engines work, how to assess the reliability of the information they find online, and how to improve their search skills. They also spend time constructing assignments that point students toward the best online resources and encourage the use of sources other than search engines

* Bay Citizen: PACER federal court record fees exceed system costs.

* Ewert v. eBay appealed to 9th Circuit.

* Are record labels playing games with YouTube viewer counts?

Posted by Eric at 09:16 AM | Derivative Liability | TrackBack

January 02, 2013

Section 230 Still Keeping the Pro Se Plaintiffs at Bay--Klayman v. Facebook, and More

By Eric Goldman

I'm personally committed to blogging every Section 230 case I see, but I fell off the wagon in the second half of 2012. So what better way to usher out 2012 and ring in the new year than to recap some Section 230 wins from the past 6 months? The following four cases all involve pro se litigants whose unmeritorous cases got unceremoniously swept out of court, just like Baby New Year walks Father Time out the door. In 2013, I resolve to give continued thanks to Section 230 for keeping the court system relatively free of junk lawsuits like these:

Klayman v. Zuckerberg, 2012 WL 6725588 (D.D.C. December 28, 2012). Klayman is a lawyer-plaintiff. For reasons that are unclear to me, pro se lawyer-plaintiffs fail in court at about the same rate (or worse) as the typical pro se. I find this hard to comprehend; after all, shouldn't lawyers have a better sense which legal claims are worth pursuing than the average individual litigant? Presumably, the only more knowledgeable litigants are judge-plaintiffs; I don't see many of those cases, but these usually also fail in a pretty embarrassing way. This sounds like a good area for further research.

Larry Klayman is notorious enough to have his own Wikipedia page. I'm not sure how to gauge his accomplishments because the Wikipedia page only highlights his failed lawsuits--the word "unsuccessful" shows up four times on the page, not including this lawsuit.

The case involves a user-created Facebook page titled 'Third Palestinian Intifada.'" It's not clear from the opinion how this page harmed Klayman, but I guess it doesn't take much to provoke a lawyer to sue. While typing the complaint, Klayman's finger apparently got stuck on the "zero" key. He demanded $1,000,000,000.00--that's right, $1 billion--because Facebook didn't take down the page fast enough.

The court runs through the typical three-factor Section 230 analysis:

1) ICS? Facebook provides an interactive computer service because it maintains "a website that gives its users the ability to create, upload, and share various types of information, potentially with hundreds of millions of other users."

2) Publisher/Speaker Claim? Klaynan sued Facebook for assault (!) and negligence. The court says:

the defendants' alleged conduct ascribed to them the status of publishers of information, whether by "using" the website to post certain content (i.e., publishing), id. ¶ 17, "allow[ing]" certain content to be posted to the website (i.e., deciding whether to publish), id. ¶¶ 17, 19, or by "refus[ing] . . . to remove these postings," id. ¶ 19. The defendants' potential liability is thus "derive[d] from [their] status or conduct as a publisher or speaker."

Klayman belatedly attempted the Barnes promise-based workaround to Section 230 and gets mocked:

It begs credulity that the plaintiff, a "highly visible and well known lawyer," Compl. ¶ 11, would not have included a claim for breach of contract if he contemplated such a claim as a viable possibility.

3) Were the defendants the ICPs? [note: normally this is phrased as whether the content came from third party content providers, but I think this restyling is OK in this case.] The court says:

Nowhere in his complaint or in his opposition brief does the plaintiff allege that the defendants contributed to the content of the Facebook page at issue. Rather, as described above, the plaintiff focuses on the role that the defendants played in publishing the Facebook page. [FN3] The plaintiff's own allegations are inconsistent with a finding that the defendants acted as information content providers with respect to the offensive material at issue.

FN3 is interesting. Klayman argued that Facebook collects data about its users and then personalizes their site views based on this data. The court says that even if that's true, it would just represent another form of editorial control immunized by Section 230.

Having satisfied the three elements of a successful Section 230 immunity, the court grants Facebook's motion to dismiss. This is a good outcome for Facebook, but I'm not clear why Facebook didn't make an anti-SLAPP motion under D.C.'s anti-SLAPP law. That way, Klayman would have to write Facebook a tuition check for his Section 230 schooling. Even without anti-SLAPP protection, I hope Facebook seeks Rule 11 sanctions against Klayman. We haven't seen too many courts grant Rule 11 motions in Section 230 cases (I wish they did) but Klayman's lawsuit broke absolutely no new legal ground and was doomed from inception.

A Facebook spokesperson told me: "We are pleased with the court's ruling dismissing all claims with prejudice."

Merritt v. Lexis Nexis, 2012 WL 6725882 (E.D. Mich. October 23, 2012). Merritt claimed Lexis-Nexis published false information about him. The court never explicitly says the information comes from third parties, but that's the logical inference given Lexis-Nexis' business model. The court says that Lexis-Nexis qualifies for Section 230's immunity (citing the memorable Gaston case). The court then says Merritt's claims fall "squarely" in Section 230's immunity.

Nieman v. Versuslaw, Inc., 2012 WL 3201931 (C.D.Ill. August 3, 2012). See also the magistrate's report, 2012 WL 3201935 (C.D.Ill. June 13, 2012). I've held off blogging this case because the University and I have received threats from Nieman (lucky us!). So just the facts on this one.

The court summarizes Nieman's arguments:

Between January 2009 and the date of filing this action, Plaintiff applied for one or more positions of employment. Plaintiff believes that the potential employers have performed Internet browser searches by way of Google.com, Yahoo.com, or Bing.com, and found documents related to litigation against his former employer Nationwide. Plaintiff also believes that the potential employers have used this information to disqualify him from candidacy for the applied position or have shared this information with others who have done so. In other words, Plaintiff alleges he “has been effectively ‘blacklisted’ as to employment opportunities due to the ease at which these references appear pursuant to a simple name search, and due to the unlawful acts of third parties who then use such information to unlawfully disqualify” his candidacy.

He sued Microsoft, Versuslaw, Yahoo!, Google, and Joseph W. Acton for, among other claims:

* violations of Illinois' human rights law. The court rejects the claim, saying the complaint only alleged "Defendants provided access to public information that potential employers used to deny Plaintiff employment," and that doesn't suffice.

* publicity rights. The court says:

First, the exemption from liability for using a person's identity for a non-commercial purpose, including in a news or public affairs account is applicable here. Plaintiff's prior litigation is a matter of public record and public interest. Moreover, Plaintiff's identity is not being used for a “commercial purpose” as defined by the Right of Publicity Act because his name is used only to find documents related to his case, which are part of the public record. His name is not being held out or used to entice anyone to buy a product. Under Plaintiff's theory, every person who is involved in litigation who has public court documents that can be accessed for a fee on the Internet by doing a browser search or found by using Westlaw, Lexis, Versuslaw, or any other legal research site can state a claim under the Right of Publicity Act. This cannot be the case.

* 42 USC 1981. The court says he didn't allege any discrimination on improper bases.

* Lanham Act. Nieman alleged "Defendants Versuslaw and Acton are attempting to associate Plaintiff with their for-profit website. Plaintiff accuses Defendants Google, Yahoo, and Microsoft of actively participating in “these unlawful acts ... by way of their paid search ranking and/or AdWords mechanisms.”"

Citing Stayart v. Yahoo, the court says Nieman doesn't have standing because he lacks the requisite commercial interest in his name.

* Unjust enrichment. "Defendants are not “retaining a benefit” to Plaintiff's detriment just because they are selling electronic access to public information and Plaintiff does not like the information contained in those public documents."

The court also grants Microsoft and Yahoo's First Amendment and 47 USC 230 defenses. Regarding the First Amendment, the court says "all of Plaintiff's allegations rest on the premise that Defendants' websites provide links to information that is in the public record. Plaintiff cannot show he is plausibly entitled to relief." Regarding 47 USC 230, the court says that it agrees with the magistrate report that Section 230 applies, but the judge expresses uncertainty about the immunity for the trademark and publicity rights claims because they are IP claims; and also about the RICO claim as a federal crime (the court doesn't cite the several cases rejecting its line of reasoning on that point).

Getachew v. Google, Inc., 2012 WL 3217611 (10th Cir. August 9, 2012). This case is quite similar to the Nieman case. The court recaps:

Mr. Getachew alleges that when all or part of his name is entered into Google's Internet search engine, the search results yield negative information about him. For example, Mr. Getachew was previously a plaintiff in an employment action, and he alleges that the summary judgment order in that case is available when part of his name is entered into Google's search engine. He also alleges that another Google search result links his name to a "[g]raduate position available in evolutionary systems biology."

All of this, he alleges, hurt his employment prospects. The district court said that his discrimination and Title VII claims were "frivolous" and his state law claims against Google were immunized by 47 USC 230. The appeals court upholds these conclusions. With respect to 47 USC 230, the court says "Google is immune from Mr. Getachew's state-law claims under 47 U.S.C. § 230(c)(1). Under that provision, Google cannot be held liable for search results that yield content created by a third party."

[Photo Credit: Dust Bunny // ShutterStock]

Posted by Eric at 07:38 AM | Content Regulation , Derivative Liability , Privacy/Security , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 27, 2012

Court Dismisses Class Action Against Apple Over Its App Developers’ Information Collection Practices – Pirozzi v. Apple

[Post by Venkat Balasubramani with comments from Eric]

Pirozzi v. Apple, 2012 WL 6652453 (N.D. Cal.; Dec. 20, 2012)

This is one of several putative class actions over the information collection practices of apps. I previously covered how the lawsuit against Path survived: “Class Action Against Path Over Cellphone Address Book Access Keeps Going”. Judge Koh also whittled down the lawsuit against Apple over its iPhone app privacy practices: “Judge Koh Whittles Down iPhone App Privacy Lawsuit.” This lawsuit seems to overlap with both and is dismissed, albeit with leave to amend.

Plaintiff brought claims under California’s unfair competition law, for false advertising, for violations of the Consumer Legal Remedies Act, for negligence and unjust enrichment. Although it's unclear what apps she is complaining about, the following apps are mentioned in the complaint: Path, Angry Birds, Cut-the-Rope, Twitter, Facebook, LinkedIn, Gowalla,Foodspotting, Instagram, Foursquare, Beluga, Yelp!, Hipster and Kik Messenger.

Standing: The court dismisses on the basis of standing, but there were two interesting aspects to the standing discussion.

First, plaintiff cited to a bunch of somewhat persuasive marketing copy about how Apple had adequate restrictions in place regarding the collection of information by app developers. However, it was unclear as to how exactly plaintiff was induced to make a purchase in reliance of these alleged promises. The court finds that the pleadings are unduly vague about what plaintiff was induced to purchase (or download) and what statements induced the purchases or downloads.

Second, the court also notes that the pleading suffers from deficiencies regarding harm. If information was improperly collected by app developers, so what? Citing to Hernandez v. Path and Krottner v. Starbucks, the court says that future risk of identity theft is insufficient to allege harm. This leaves economic harm, and here plaintiff’s allegations were again unduly vague. In a short sentence, the court notes that the “personal information as inherently valuable” argument will be unlikely to carry the day. Still, the court grants leave to amend.

Sidenote: WSJ recently published a story about merchants offering varying prices to individuals based on targeting. I wonder if this will surface in a future standing argument. I'm guessing it will.

Section 230: I am sure Prof. Goldman will have more to say about the Section 230 issue, but here’s my take. To the extent plaintiff tries to hold Apple liable for any harm effected via apps, this will run squarely into Section 230. Apple’s only role in making the apps available is a publisher or distributor. (See for example, Green v. AOL, where claims based on transmission of a virus via chatroom was held to be immunized by Section 230.) There is, of course, the promissory estoppel (contractual) carveout to Section 230 as recognized in Barnes v. Yahoo!. The claims allowed by the 9th Circuit in Barnes were fairly narrow, and it’s unclear as to whether any alleged contractual representations by Apple should open the door to things like CLRA claims. At least some of plaintiff’s claims should have been dismissed under Section 230 (the negligence and negligent misrepresentation claims). As to the statutory claims centered around misrepresentation, I suspect they are a bit trickier. Although the misrepresentation claims may have problems on the merits on their own, the applicability of Section 230 to those claims is a bit tougher in my estimation.

Issues on the Merits: The court also points out a few other issues with the pleadings:

1. Any claims alleging misrepresentation (unfair competition; false advertising; consumer legal remedies act) sound in fraud and therefore have to be pled with particularity. Plaintiff fails to do so.
2. Her CLRA claims are unclear as to whether they are directed at the services (the apps or the app store) or the goods (the devices). The court dismisses but with leave to amend. Applicability of the CLRA to the app store is less than clear, and the plaintiff has obvious problems alleging CLRA claims with respect to the devices (which on their own, functioned as promised).
3. The negligence claims fails. As articulated in Judge Koh’s ruling: there is no duty to protect someone’s information vis a vis third parties, absent a special relationship. (Again, this would have been a good candidate to nuke on Section 230 grounds.)
4. The court also says that the unjust enrichment claim fails because plaintiff does not identify how exactly Apple has been enriched by the information collection practices of the app developers.
__

In theory, plaintiff should have a hard time holding Apple liable for the information collection practices of its developers. The fact that the apps in question are free should make it particularly difficult. Because the apps are free, it's difficult to demonstrate economic harm based on download of the apps, and plaintiff is left to argue informational harm, which hasn't gained much traction in courts (absent misuse of the data that results in economic harm). With respect to misrepresentations that induced plaintiff to purchase any devices, plaintiff's qualm isn't really with the devices--it's with the app store. I don't know that the law permits you to argue you are entitled to a refund of the price of your device just because a rogue app or two happened to be out there.

On the other hand, there's some troubling marketing copy that ended up out there. It may have been wise for Apple to issue disclaimers regarding its inability to control the conduct of app developers who use its platform. As to whether it could stretch the case out, it's tough to tell, but the absence of that language would certainly have made the lawsuit an easier battle for Apple.

Eric's Comments

The plaintiffs allege that Apple offers a certification program for apps in its app store, so I understand in concept how Apple might be responsible for failed certifications. Still, I get nervous every time I see plaintiffs use a defendant's marketing representations or site disclosures as a way of getting around what should fundamentally be a 47 USC 230 immunity. The doctrinal interplays between first-party marketing representations and liability for third-party conduct under 47 USC 230 remains a legally chaotic one, and I hope the judge understands the problems with Section 230 workarounds and is appropriately sensitive to that issue.

The opinion only references 47 USC 230(c)(1), even though this seems more like a 230(c)(2) case. The plaintiffs are suing Apple for doing a poor job of filtering apps out of its app store, and that's exactly what 230(c)(2) covers.

Posted by Venkat at 11:56 AM | Content Regulation , Derivative Liability , E-Commerce , Privacy/Security

December 12, 2012

Bit-Torrent Copyright Litigation Updates, and a Potentially Significant Decision on Joinder

[Post by Venkat Balasubramani]

We don’t track the numerous mass file sharing cases going on around the country. There are too many of them, and it’s not easy to glean any sort of a clear trend. But here are a few that came across the transom recently.

Well Go USA, Inc. v. Filesharing Swarm, 12 cv 00963 (S.D. Tx. Sept. 25, 2012): the court first deals with whether a subpoena is properly issued under 17 USC section 512(h). Following RIAA v. Verizon, the court says that these subpoenas are only available to obtain information from ISPs that actually store—rather than act as conduits for the access of—the files in question. The court grants limited discovery (subject to a protective order). Finally, the court expresses concerns as to whether the defendants are all properly joined. The court allows the defendants to be part of the lawsuit at this stage but allows defendants to present arguments (after service) as to why joinder is not proper.

AF Holdings v. Doe & Botson, 12-CV-02048-EJD (N.D. Cal. Oct. 3, 2012): this case squarely addresses a person’s liability for infringements effected via an open wi-fi connection (the order mentions that plaintiff is trying to hold Botson liable for “failing to secure his internet connection,” so I read this as a case involving open wi-fi, rather than a case where someone was provided a password and engaged in infringing acts). Either way, the court says that a claim of negligence is preempted by the Copyright Act. For good measure, the court also says in the alternative that the claim is barred by Section 230, and that there’s no special relationship between the plaintiff and defendant so there’s no duty, and no underlying basis for a negligence claim.

Aerosoft GMBH v. Does, 12-21489-CIV-SEITZ/SIMONTON (S.D. Fl. Oct. 23, 2012): this is a case where the court granted limited discovery (as in the Well Go USA case). Defendants then brought motions to quash, arguing that joinder was improper. The court says that there is mixed authority on the issue but ultimately finds that Bit-torrent swarm joinder is not proper. Plaintiffs argued that the various pieces of the file shared by defendants could have been used to aggregate a whole copy, but the court says this argument is “deceptive in its allure.” While the trackers may all fit together to form the whole file, there’s no allegation or evidence that defendants actually participated in the same transaction. The court also says that each user didn’t choose to engage with the other users. The court quashes all subpoenas that seek information regarding doe defendants (except for the first named defendant).

Discount Video Center, Inc., et al. v. Does, 12-10805-NMG; 12-10532-GAO; 12-10758-GAO (D. Mass. Nov. 16, 2012): I'm not sure exactly what happened in this case (three different cases--two brought by Patrick Collins and one by Discount Video Center). The court basically loses patience with counsel for plaintiff and concludes that plaintiffs have no intention of litigating these cases:

Plaintiff Patrick Collins, Inc. has sued at least 11,570 John Doe Defendants in litigation around the country without ever serving a single defendant.

They are just looking to identify and send letters to Doe defendants. In fact, the court is not even sure that plaintiffs have any plan to identify the defendants ("[plaintiffs] have not proposed a discovery plan aimed at identifying the infringers they have sued"). The court has some choice words for plaintiffs' counsel (e.g., the "course of action [plaintiffs intends to pursue] . . . suggests an improper effort to engage in judge shopping and evidences a disregard for the Court's limited public resources"). End result: requests for early discovery denied; plaintiffs ordered to show cause as to why the lawsuits should not be dismissed for failure to effect timely service.

Third Degree Films v. Does 1-47, 12-10761-WGY (D. Mass. Oct. 2, 2012): Judge Young, who had previously rejected an improper joinder argument raised by Doe defendants, revisits the issue. The court finds that joinder is proper under Rule 20(a)(2)(B) because there’s a logical relationship between the claims brought against the various defendants. There is also evidentiary overlap, and an “aggregate of operative facts.” However, the court says it has discretion under Rule 20 to implement “protective measures,” and it exercises that discretion:

This Court is concerned that the joinder mechanism is being manipulated to facilitate a low-cost, low-risk revenue model for the adult film companies . . . . Third Degree and like companies file a single cookie-cutter complaint alleging copyright infringement against tens, hundreds or thousands of individuals based on their IP addresses, paying only a single $350.00 filing fee, and likely employing a contingency fee structure . . . . The company relies on the combined threat of substantial statutory damages and the embarrassment of being publicly named as illegally downloading a pornographic film . . . to assume that at least some of the defendants will settle for perhaps $2,000 or $3,000 – which result comes at minimal cost to the company. . . . [O]ur federal court system provides litigants with some of the finest tools available to assist in resolving disputes; the courts should not, however, permit those tools to be used as a bludgeon.

The court is careful to say that it’s not aware of any bad conduct on the part of Third Degree, but that it is uncomfortable with the overall structure of these lawsuits and settlements. The court severs Does 2-47 from the lawsuit and requires Third Degree to file individual complaints against them.

As mentioned initially, it’s pretty difficult to discern any sort of a trend from this litigation. That said, judges are expressing discomfort with the litigation tactics being used against Bit-torrent defendants. Maybe a few bad apples are ruining it for the rest of the litigants? Who knows. (Someone should map out the jurisdictions where judges have ordered the copyright plaintiffs to proceed individually. This would be useful for both sides, and sounds like a great project for a law student to undertake.)

Judge Young’s opinion is particularly significant because it’s a reversal of his previous position. It’s also a thorough opinion. The fact that it relies on the court’s discretionary power under Rule 20 (rather than the question of whether joinder is appropriate in the first instance) is interesting as well. That discretion is more insulated from appellate review.

Finally, see this article from Timothy B. Lee at Ars: "Porn trolling firm dogged by identity theft allegations." Ouch.

Previous posts:

Court Nukes Another Mass Defendant File-Sharing Lawsuit -- Digiprotect v. Does
Copyright Doe Defendant Can’t Quash Disclosure Subpoena Anonymously—Hard Drive Productions v. Does

[image credit: Shutterstock/Kentoh - "social networking online"]

Posted by Venkat at 04:26 PM | Copyright , Derivative Liability

December 05, 2012

Amazon Not Liable for Affiliates' Allegedly Bad Acts--Routt v. Amazon

By Eric Goldman

Routt v. Amazon.com, Inc., C12-1307JLR (W.D. Wash. Nov. 30, 2012)

Sandy Routt is an artist (check out SandysBeachGifts.com if you care). She claims that Amazon affiliates (called "associates" in Amazon's vernacular) displayed her copyrighted photos (product shots) of her products on their websites and then bait-and-switched potentially interested buyers to alternative offerings. Instead of suing the affiliates, Routt sues Amazon.com for the affiliates' behavior, alleging copyright infringement, trademark infringement and violations of the state consumer protection law (the CPA). Amazon defeated the claims on a 12(b)(6) motion to dismiss, though the court gives Routt a chance to replead.

Vicarious Liability. The court dismissed her various vicarious liability claims because, in all cases, Routt didn't adequately allege that Amazon had sufficient control over its affiliates' activities. The court cites Amazon's self-protective language in its affiliate agreement and Routt's overall too-general pleadings. Routt argued that Amazon's contract requires affiliates to comply with IP law and says it can terminate affiliates who violate that provision. However, the Ninth Circuit rejected the salience of those facts to vicarious liability claims in Perfect 10 v. Amazon. The court also says it's persuaded by the analogous Sellify v. Amazon ruling, also rejecting Amazon's liability for its affiliates' conduct.

Direct Copyright Infringement. The court says Routt only alleged copying by affiliates, not by Amazon.

CPA. Routt claimed that Amazon was part of a far-reaching "scam" whereby its affiliates would engage in bait-and-switch and Amazon would profit. The court says that Routt didn't marshal adequate facts in the complaint to support this theory.

Contributory Infringement. The court says that Routt's pleadings were too conclusory.

Implications. Over the years, we've seen aggressive legal arguments from plaintiffs--usually exhorted with the utmost conviction of their veracity--that advertisers should be accountable for their affiliates' actions. Among the worst offenders are the FTC and state AGs' offices, but plenty of plaintiffs have breathed fire on this theory too. However, when those theories have been tested in court, they have generally failed miserably. I don't know why it's so hard to understand that an advertiser shouldn't be liable for the conduct of its independent contractors, but the overreaching legal arguments just won't quit. How many advertiser wins in court will it take to convince plaintiffs to move on?

* FTC Online Endorsement Guidelines Strike Again - FTC Dings Legacy Learning Over Allegedly Misleading Affiliate Reviews
* Important Ninth Circuit Ruling on Keyword Advertising, Plus Recaps of the Past 4 Months of Keyword Ad Decisions
* Amazon Isn't Liable for Rogue Affiliate's Keyword Ad Buys--Sellify v. Amazon
* Affiliate Liability Talk Notes from SMX West
* Affiliate Liability Extravaganza

and see the many cases cited in these last two posts

[Photo credit: "a circle of fingers point to the center" // Shutterstock]

Posted by Eric at 12:04 PM | Copyright , Derivative Liability , Trademark | TrackBack

November 20, 2012

Expert Report on the Value of Consumer Review Websites and 47 USC 230

By Eric Goldman

[Eric's note: most expert reports in litigation never see the light of day. Naturally, this collides with my blogger's ethos of leaving no thought unpublished. As a result, after preparing this expert report regarding the social value of consumer review websites, I successfully sought permission to share this publicly--admittedly, an unusual request. I'm happy to share this with you, for what it's worth. These remarks are along the lines of my vaporware paper on the unexpected benefits of 47 USC 230 that I hope to finish some day.

Hope you have a happy Thanksgiving. It's a perfect day to give thanks for 47 USC 230!]

____

October 23, 2012

Maria Crimi Speth
Jaburg & Wilk, P.C.
3200 North Central Avenue, Suite 2000
Phoenix, Arizona 85012

Re: Xcentric Ventures, LLC v. Brewington, et al., Case No. CV2008-008275

Dear Ms. Speth:

You have asked me to opine about the social and economic impacts of consumer review websites.

Overall Conclusion: Assisted by 47 U.S.C. § 230, consumer review websites improve the American marketplace’s efficiency.

Main Points:

1) 47 U.S.C. § 230 treats the Internet as a unique medium.
2) 47 U.S.C. § 230 enables consumer reviews—a class of content unique to the Internet.
3) Consumer reviews improve the marketplace’s operation.
4) By strengthening America’s marketplace, 47 U.S.C. § 230 improves our country’s competitive position compared to other countries.

Explanation:

47 U.S.C. § 230 treats the Internet as a unique medium. Congress enacted 47 U.S.C. § 230 in 1996, at the height of “Internet exceptionalism”—the belief that the Internet was a unique medium compared to other media. Thus, the law represents an unusual example of legislative restraint. Fearing that Congress, state legislatures or the courts would develop rules that prevent the Internet from reaching its full potential, Congress immunized online intermediaries from liability for publishing third party content—even in situations where offline intermediaries would face liability for publishing the exact same content.

47 U.S.C. § 230 enables consumer reviews—a class of content unique to the Internet. Treating the Internet as a unique medium has led to the advent of consumer reviews, a whole new class of content we never saw in the offline world. Consumer opinions about goods and services in the marketplace have been shared for millennia, principally as oral “word of mouth.” However, prior to the Internet, consumers could not easily share their opinions with larger audiences. In contrast, the Internet allows consumers to share their opinions with a mass audience at virtually no cost. Humankind has never seen a phenomenon like this before.

While consumers value other consumers’ reviews generally, they especially value comprehensive and curated databases of other consumers’ reviews. However, if websites faced liability for gathering and curating consumer reviews, they would be reluctant to undertake those efforts. 47 U.S.C. § 230 provides them a legal immunity for these generation, curation and publication efforts. The result has been a proliferation of consumer review websites.

Thus, 47 U.S.C. § 230 helps create an unprecedented class of published content—consumer reviews—by providing legal immunity to consumer review websites for generating, curating and publishing those reviews.

Consumer reviews improve the marketplace’s operation. The marketplace’s “invisible hand”—the mechanism that rewards good producers and punishes bad producers—depends on well-informed consumers. Consumer reviews educate other consumers about which producers deserve their dollars. Plus, vendors become more responsive to consumers’ demands, knowing they will be publicly accountable for how well they meet consumers’ needs. Consumer reviews thus improve our marketplace’s operation.

By strengthening America’s marketplace, 47 U.S.C. § 230 improves our country’s competitive position compared to other countries. No other country provides as generous a legal immunity for consumer review websites as 47 U.S.C. § 230. Instead, in other countries, businesses typically can “veto” consumer reviews they don’t like; and naturally, they will only veto critical reviews. Compared to their foreign counterparts, American consumers have more access to consumer reviews—especially negative consumer reviews—to guide their marketplace choices. Over time, as consumer reviews improve the “invisible hand” of American consumers, the American marketplace will become more efficient than foreign marketplaces. Ultimately, 47 U.S.C. § 230 will help make the American economy stronger than foreign economies.

Qualifications/Basis of Opinion:

I am a tenured full-time professor at Santa Clara University School of Law, located in the Silicon Valley, California. I have been on the full-time faculty since 2006. I also direct our law school’s High Tech Law Institute. I teach and write in the areas of Internet Law, Intellectual Property and Advertising & Marketing Law. I am frequently quoted in the press (over 1,200 times in the past decade) and make public presentations (over 240 in the past decade) on those topics. In 2011, the California State Bar's IP Section named me the "IP Vanguard" award winner (in the academic/public policy category), and in 2012, Managing IP magazine named me to a shortlist of "IP Thought Leaders" in North America.

I worked at a major Silicon Valley law firm, Cooley Godward, from 1994-2000. I began practicing Internet Law in 1994. From 2000-2002, I was General Counsel of Epinions.com, a consumer review website. I first started teaching Internet Law (then called “Cyberspace Law”) in Spring 1996. I electronically publish a casebook, Internet Law Cases & Materials, which I use in my course and other professors have adopted as well.

I started blogging on Internet Law topics in 2005. Currently, I blog at two self-operated blogs plus a Forbes.com blog. I have alerts set up to notify me of new judicial rulings interpreting 47 U.S.C. § 230, and I blog almost all of those rulings. One of my blogs, the Technology & Marketing Law Blog, has been named to the ABA Journal’s “Blawg 100” list for the past three years.

In 2011, I organized a major conference on 47 U.S.C. § 230—one of the few academic conferences that focused solely on the statute. Speakers included both of the statute’s initial co-sponsors (Sen. Ron Wyden and former-Rep. Chris Cox), the plaintiff in the leading 47 U.S.C. § 230 case (Ken Zeran of Zeran v. America Online) and many other experts.

My CV (attached) provides more detail about my background, education, training and experience.

About My Relationship with Ripoff Report: I have repeatedly written and spoken about the Ripoff Report, including numerous blog posts (both favorable and unfavorable) about its lawsuits. I intend to continue writing and speaking about Ripoff Report as part of my academic endeavors. To minimize future conflicts-of-interest, I volunteered to provide my expert testimony in this case pro bono. Xcentric Ventures will reimburse any out-of-pocket costs I incur in connection with my expert testimony, but otherwise I am not being paid by Xcentric Ventures or anyone else for my expert testimony.

Sincerely,

Eric Goldman
c/o Santa Clara University School of Law
500 El Camino Real
Santa Clara, CA 95053
(408) 554-4369
egoldman@gmail.com

Attachment: Eric Goldman Curriculum Vitae

[Photo Credit: white-gloved hand on a black background // ShutterStock]

Posted by Eric at 02:30 PM | Derivative Liability , E-Commerce | TrackBack

November 19, 2012

AmeriGas Gives Up Its Lawsuit Against PissedConsumer

By Eric Goldman

AmeriGas and Opinion Corp. (PissedConsumer) have settled their case. Law360 report. My prior blog post on a preliminary ruling in this case.

I blog about settlements only occasionally, but I thought this settlement was interesting for two reasons. First, this is one of the bad 47 USC 230 rulings where judges hyper-conservatively reject motions to dismiss. As it turns out, the overly cautious ruling was inconsequential.

Second, I have some additional information about the settlement that hasn't been reported elsewhere. I think sometimes potential future plaintiffs interpret settlements as a win for the prior plaintiff, but the plaintiff in this case simply gave up. Ron Coleman, PissedConsumer's counsel, emailed me the following statement:

"There is no confidential settlement or agreement (or even a confidentiality agreement) other than the "stipulation" of dismissal. No money changed hands. No changes were made to content on PissedConsumer.com in any way, manner or form. The "terms" are as stated in the stipulation: The parties bear their own fees and costs and agree to cease litigating."

This might be helpful information for future plaintiffs trying to decide whether or not to sue consumer review websites.

[Photo Credit: Hand waving with a white flag to surrender // Shutterstock]

Posted by Eric at 03:15 PM | Derivative Liability , Trademark | TrackBack

November 12, 2012

Intellectual Property on the Internet: A Brief Comparison of the Current Situation in Europe and the United States (Guest Blog Post)

by Guest Blogger Pablo García Mexía, J.D., Ph.D
[Visiting Professor of Internet Law, The College of William & Mary. English translation by Morgan G. Fletcher, B.A. Cornell, William & Mary Law School, Class of 2014. The original Spanish version of this article was published in the weekly column La Ley en la Red, that the author writes for Spain´s newspaper ABC.es. I wish to thank Professor Eric Goldman for his kind invitation to write this guest post in his excellent blog.]

[Eric's note: I thought this was an interesting response to my hot topics presentation from a European perspective, so I'm delighted to share it here.]

The situation in the United States regarding intellectual property on the Internet provides a magnificent perspective to evaluate the schools of thought currently evolving in both Europe and Spain.

Thanks to the generosity of Eric Goldman of Santa Clara University in California, I have had the opportunity to immerse myself in this action. Goldman is one of the foremost authorities on Internet law in the United States, and he typically delivers an annual lecture discussing the primary developments and occurrences in the area that have transpired in the preceding months. Its text is available on the Internet.

For our purposes, the main points of his work can be categorized into two overarching themes.

The first refers to what Goldman describes as "perennial questions," which is in turn divided into three categories: the utilization of keywords in online publications (for example, the Adwords system on Google); the liability of intermediaries, such as Amazon, for the commercialization of products on its platform that infringe on intellectual property rights; and the liability of intermediaries that store content (e.g., YouTube).

In response to the matter of keywords, Goldman suggests a liberal approach that allows the use of keywords in trademarks and registered, commercial trade names, citing as support both recent doctrine and case law proffered in the May 2012 Trademark Trial and Appeal Board decision of STK v. BackRack. The main reasoning lies in the fact that, although the majority of Internet users search for a keyword that contains a registered trademark, or the registered product itself (i.e., "Kleenex," without going any further), a lot of other users would like to be shown similar products on an equal basis. In spite of all of this, Goldman does highlight the reality that there are several unresolved important cases on this subject, four of which pertain to Google and another which is currently being reviewed by the Supreme Court of Wisconsin.

With regards to Amazon, Professor Goldman cited a 2012 ruling from the California Court of Appeals that absolved a company of liability for third party commercialization of counterfeit goods, even though they had received notification of this alleged infraction from the trademark holder. Rightly, Goldman draws the conclusion that simple notification on the part of the intellectual property rights owner is not sufficient to convey liability to sites such as Amazon; however, the ruling also introduces the possibility that companies such as Amazon may reject abusive claims from the holders of such rights.

Finally, with respect to content storage, Goldman highlights an August 2012 ruling from a federal court that excludes the viewing of videos embedded in hyperlinks from consideration as copyright infringement, effectively ruling out all liability for the owners of the site in question.

Eric Goldman refers to the aforementioned second section as "Post-SOPA Battlefields." Three points stand out from this section: the criminal prosecution of the founders of MegaUpload by the U.S. Department of Justice; the seizure of domain names by the U.S. Immigration and Customs Enforcement (as was the case with Spain´s Rojadirecta); and international treaties such as ACTA. The first two fully address a critical issue in Internet law: the downloading of protected content, specifically through hyperlinks that make it possible to access such content without having to download or save them to your own server. The third, regarding ACTA, is a theme that has already been addressed in other installments of La Ley en la Red, to which I now refer.

From the presentation, I have distilled my own thoughts about three conclusions from--and for--Europe.

The first arises from the fact that the "perennial questions" to which Goldman alludes all commonly reference intermediaries in the information society, whether they are access providers or content providers; in other words, whether they are Movistar or Facebook. What confirms this is that, in the U.S., the issue of intermediaries plays a crucial role among legal questions relating to the Internet, particularly in all matters concerning potential liability for allegedly illegal acts committed by their users.

One of the main conclusions that after years studying these themes I have been able to extract is that this same thing happens in Europe, in the sense that intermediary liability is one of the undisputed "star themes" of European Internet law, especially if one takes into account its absolute uniqueness; regardless of the peer principles utilized in such dispute resolution--which have a more or less general anchor--the underlying conflicts here arise and develop only on the Internet.

The second big conclusion can be drawn from the liberal trend, expressed by Goldman, pertaining to the use of keywords for online advertising, the activities of e-commerce platforms such as Amazon, and the legality of streaming videos through embedded links. In the U.S., thanks to the liberal interpretation of applicable regulations, a growing openness with respect to online business activities is being achieved.

It is interesting to observe this increasingly open interpretation, which has also been picked up in Europe with respect to one of the same issues--that of keywords. Judgments of the European Court of Justice released in March 2010, specifically the Louis Vuitton and Viaticum et Luteciel cases, point in the direction of excluding strict liability for Google under circumstances similar to the aforementioned American cases, and instead subjecting that company to general guidelines of electronic commerce liability provided by European legislation.

This begs the question as to why such a propensity for openness in Europe does not extend to the commercial activities of Amazon or other similar websites. One already dated judgment from the District Court of Rotterdam, Netwise v. NTS (Dec., 2002), reaches the opposite result in similar facts regarding eBay, as the Court urged the copyright holder to act against the popular online auction site.

However, those more recent and authoritative cases adjudicated by the European Court of Justice could easily assert their influence over these assumptions because, as also argued by the said Court, it is not Amazon or Google who, as entities, to infringe on intellectual property, but instead those users who utilize protected names or trademarks without authorization.

More questionable is the assumption relating to embedded links. In Europe, the use of these by third linking websites has always been considered, especially by legal doctrine, as a breach of copyright, because, by definition, with this type of link it is not possible to dispel any confusion over the authorship of the content. In this sense, the jurisprudence cited by Goldman is certainly groundbreaking, even, I dare say, if it were to catch on in his own country.

The third and final conclusion pertains to the United States' involvement in multiple, some international, judicial fronts to combat Internet piracy. One battle scene that Goldman opines to be of little use is SOPA, characterizing it as the failed Stop Online Piracy Act that tried to push through some members of the American legislature and that, in his own view, “will happen without any legislation”.

This criteria offered by the professor from Santa Clara seems more concordant with the European point of view. In this vein, it is enough to cite the ruling of the European Court of Justice in Promusicae v. Telefonica (Jan. 2008). Not to mention ACTA, whose ratification on the part of the European Union and its member states is now more than in doubt, for these same reasons.

After all, even though the European Union and its Member States have also become "entangled" on multiple judicial antipiracy fronts, it is certain that for the most part, the views that have been taken have always been more moderate in their defense of intellectual property, especially when it conflicts with fundamental rights such as privacy and freedom of expression.

Posted by Eric at 09:25 AM | Copyright , Derivative Liability , Trademark | TrackBack

November 05, 2012

With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue (Forbes Cross-Post)

By Eric Goldman

After 3+ years of litigation, Google ($GOOG) and Rosetta Stone ($RST) settled Rosetta Stone's trademark lawsuit over Google AdWords. The settlement terms are confidential, but a joint statement published in Reuters says that the parties will "meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet." This does not clarify if Google will do anything more than it's currently doing, or if Google will do something special for Rosetta Stone. It's possible neither happened. The statement also doesn't indicate if money changed hands.

As a result, it's hard to determine who "won" this litigation. But even if the settlement terms favored Rosetta Stone (and I wonder about that), I would be surprised if those results justified three years of litigation costs. Rosetta Stone might have cash to burn, but most litigants who threaten Google's cash cow will not. I continue to believe that trademark lawsuits against Google for AdWords is categorically a losing proposition for the plaintiff. Trademark owners, beware.

Irrespective of the specific settlement terms, ending this case is a strategic win for Google because it takes out the last "major" US trademark owner challenger to AdWords. Combined with the recent dismissal of the Jurin lawsuit, Google is now down to two pending US trademark lawsuits over AdWords: CYBERsitter and Home Decor Center. Despite CYBERsitter's recent intermediate "win," I don't think either of the two remaining lawsuits are dangerous to Google. As a result, Google is tantalizingly close to successfully running the table on all of the US trademark challenges to its AdWords practices. When this happens, Google will have legitimized the billions of dollars of revenues it makes by selling trademarked keywords in AdWords.

Otherwise, with this case ending by settlement, the Rosetta Stone lawsuit did little to shape trademark law. The district court's opinion was a complete win for Google, but the Fourth Circuit reversed the district court on several key points but didn't provide much useful precedent. Most of the key legal issues remain unresolved, but if Google knocks out the CYBERsitter and Home Decor Center lawsuits, no one else may emerge to test Google's practices.

The case library (see also the Joint Appendix material):

Posted by Eric at 09:02 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 26, 2012

Google Gets Unwanted Ruling in AdWords Trademark Lawsuit--CYBERsitter v. Google

By Eric Goldman

CYBERsitter LLC v. Google, Inc., 2012 WL 5873650 (C.D. Cal. Oct. 24, 2012)

This is one of three remaining trademark lawsuits against Google for AdWords. The other two pending suits are Rosetta Stone and Home Decor Center; Google just won the Jurin case. In this ruling, Google suffers a preliminary loss in the CYBERsitter case on a couple of key points. I still think Google will eventually win this case one way or another, but it's still a bummer ruling for Google. It also is a signal that Google may have an uphill battle with this judge.

Venue Selection Clause

CYBERsitter had been an AdWords advertiser until 2010. Google invoked the venue selection clause in its AdWords agreement to pull the case from Los Angeles to the Silicon Valley. The court rejects Google's request, saying that a trademark owner's lawsuit against Google is outside the AdWords agreement's scope, i.e., a trademark lawsuit has nothing to do with the basic ad network-advertiser relationship. While I see the court's point, this ruling does conflict with the uncited Flowbee and Parts Geek decisions and possibly others, like the uncited TradeComet decision.

47 USC 230

Google tried to clean up some of CYBERsitter's claims via 47 USC 230. Being generous to the judge, the opinion here is garbled. Here's what I think happened:

* the state false advertising claim survived because Google might have "developed" the ad.
* the state law claims for "trademark infringement, contributory infringement, unfair competition, and unjust enrichment" are struck down "to the extent that Plaintiff’s state law claims attempt to hold Defendant liable for infringing content of the advertisements at issue" because CYBERsitter didn't plead that Google made a "material contribution" to the ads. I don't really understand how Google might have "developed" the ads for false advertising purposes but failed to make a "material contribution." I don't understand why the judge uses different vernacular for these claims, either.
* the state trademark claim nevertheless survives to the extent that it tries to treat Google as a direct infringer for selling trademarked keywords.
* the contributory infringement also survives for reasons I don't understand, given that some of it appears to be based on the ad content, which the court had already said Section 230 preempted.
* the 17200 claim survives predicated on the trademark and false advertising claims.

I wonder how many of these rulings would survive on appeal. The court is right that Section 230 applies to third party content and not first party actions, but I'm not sure the court fully understood how to apply that distinction. At minimum, the judge seemed to bend over backwards to preserve the plaintiff's claim. It also matters that Google sought a 12(b)(6) motion to dismiss, so all inferences had to be against Google. I'm keeping my fingers crossed that the judge will modulate his scrutiny of the plaintiff's arguments at the summary judgment stage.

Posted by Eric at 08:45 AM | Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack

October 25, 2012

Google Defeats Trademark Challenge to Its AdWords Service--Jurin v. Google (Forbes Cross-Post)

By Eric Goldman

Jurin v. Google, Inc., 2012 WL 5011007 (E.D. Cal. October 17, 2012).

Google ($GOOG) makes billions of dollars a year selling AdWords ads triggered by third party trademarks. Over the past decade, trademark owners have brought about 20 lawsuits against Google challenging these ad sales. These lawsuits have ranged from high-stakes class action lawsuits (the FPX lawsuit) to well-funded challenges by big trademark owners (e.g., the Rosetta Stone ($RST) and American Airlines lawsuits) to poorly funded lawsuits by no-name trademark owners like the case I discuss in this post. In a remarkable litigation tour-de-force, Google has never definitively lost any of these cases in court (though it has occasionally lost intermediate rulings). At the same time, Google hasn't definitively won any of its cases in court either. This makes Google's recent wi in an AdWords trademark case noteworthy.

Daniel Jurin owns the trademark "Styrotrim" for building materials. The first time he sued Google, he lost his lawyer and voluntarily dismissed the lawsuit, which led to a $6,000 sanction against him. Jurin found a new attorney and tried again, and even got a surprising intermediate win on his "false association" claim. However, Jurin lost his second lawyer--and his litigation mojo. As a result, Jurin didn't contest Google's summary judgment motion, giving Google an easy courtroom win. With minimal analysis, the court says that Jurin didn't provide any evidence of actionable consumer confusion, false advertising or sufficient fame to support a trademark dilution claim.

It's hard to get too excited about a Google win where the opponent stopped showing up. Still, for Google, this is a rare final ruling in its favor. Google got a partial win in the GEICO case in 2005, leading to a settlement. Google also got a complete win in the Rosetta Stone case at the district court, but the appellate court reversed that win. Assuming Jurin won't appeal this ruling (after all, he effectively abandoned the case), this may be the first time Google won an final judicial decision upholding the legitimacy of its AdWords trademarked keyword ads sales.

Jurin's fizzling out also reminds us that suing Google for trademark infringement remains a bad business decision. Google will spend whatever it takes to defend its cash cow--far more than it's worth to any individual trademark owner, especially a small player like Styrotrim, to sue Google. Recently, we've seen a couple of ill-advised new trademark lawsuits by other small-time players (CYBERsitter and Home Decor Center). Google will win those cases, probably because those plaintiffs will give up--just like many other trademark owners (including American Blinds, Ascentive, Ezzo, Rescuecom, Parts Geek, Soaring Helmet and others) have voluntarily done after tangling with Google.

The most dangerous pending AdWords-related trademark lawsuit is the Rosetta Stone case. Despite the Fourth Circuit's revitalization of the case, I believe Google will win that lawsuit (or settle on favorable terms). As a result, I predict that Google will soon finish the job of establishing a clean bill-of-health on the legitimacy of selling third party trademarks to trigger keyword advertisements. Microsoft ($MSFT), Yahoo ($YHOO) and other sellers of trademark-keyed ads (such as Twitter) should all benefit from that outcome too.

For more on the policy considerations underlying trademark challenges to AdWords, see my papers Deregulating Relevancy in Internet Trademark Law and Brand Spillovers. Also see my recent Forbes post, Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown.

Posted by Eric at 03:48 PM | Derivative Liability , Internet History , Search Engines , Trademark | TrackBack

October 17, 2012

$1 Billion Pro Se Privacy Lawsuit Against Google Fails--Shah v. MyLife

By Eric Goldman

Shah v. MyLife.Com, Inc., 2012 WL 4863696 (D. Or. September 21, 2012) (magistrate's report and recommendations). On October 11, 2012, the judge approved the magistrate's report only on subject matter and personal jurisdiction grounds. The initial complaint.

This year, I have seen a spike in the number of pro se lawsuits against Google and other Internet companies basically claiming that it's illegal for to publish the plaintiff's name or other personal information online. We might characterize these lawsuits as an attempt to synthetically manufacture a "right to forget," or we could just put them into the crazy bucket. I've seen so many of these lawsuits that I haven't had a chance to blog them all; I'm still sitting on at least two interesting rulings from summer (the Getachew and Nieman cases) that I hope to blog eventually.

Shah's complaint is so sparse and ambiguous that it's hard to know exactly what the beef is about. The magistrate judge tries to summarize that Shah sued:

MyLife.com, Inc., and Google, Inc., and several of their officers, as well as “XYZ Corporation(s) and John Does(s),” for a minimum of $1 billion damages because they listed her and her “family members' names, ages and places in which they live” on the internet without permission and “are in a business of selling private information to third parties.”

A billion dollars would be nice. Sign me up for that!

In response to this framing of Shah's complaint, the magistrate dismisses the complaint for lacking federal subject-matter jurisdiction. The magistrate says:

Plaintiff alleges only that defendants have violated the “commerce laws of the United States of America and our fundamental right of privacy.” Complaint, ¶ 4. This allegation is nothing “more than an unadorned, the-defendant-unlawfully-harmed-me accusation” which is insufficient to state any claim, let alone a federal claim.

In a portion of the magistrate report not adopted by the supervising judge, the magistrate says the complaint also fails under 47 USC 230:

Although she does not allege the source of that private information, it is reasonable to infer that defendants obtained it from third parties. Thus, the two corporate defendants, as well as their agents, cannot be sued for simply republishing information provided by third parties, including any claim under state law for invasion of privacy by an internet posting of personal information obtained from another party.

Even if the ruling isn't surprising or all that enlightening, the lawsuit nevertheless deserves instant classic status based on this gem of an allegation in the complaint:

"Person's privacy is a priceless pristine pearl not for public purchase or procurement."

Wow. Just wow.

Photo credit: Raywoo / Shutterstock

The case also demonstrates why I remain so adamantly opposed to any new privacy rules, such as a "right to forget," that contain private causes of action. I've already explained that we should not cheer privacy class action suits, but in addition, we should also fear the volume of meritless pro se complaints that will inevitably follow. Already, even when there's no legitimate basis whatsoever (and in some cases a $350 filing fee hurdle), we're seeing a groundswell of "right to forget" pro se complaints. Can you imagine the volume of complaints, and the associated adjudication and defense costs, if the pro se litigants' arguments could assert a legitimate legal doctrine? The lawsuits likely wouldn't be any more meritorious, but the costs of weeding them out would go up substantially. Even if the new cause of action might protect the interests of some legitimate plaintiffs, these costs would make it a bad deal for society overall.

Posted by Eric at 09:20 AM | Derivative Liability , Privacy/Security | TrackBack

September 28, 2012

"Notes and Questions" About the UMG v. Shelter Capital Case (Excerpt from my Internet Law Reader)

By Eric Goldman

As I previously mentioned, I have posted my Internet Law reader as a $7.50 download. In connection with adding the UMG v. Shelter Capital case, I completely redid the "Notes and Questions" section following the edited case. I'm teaching the materials now in my Internet Law class, and I thought you might be interested in seeing an excerpt of the reader's discussion about the case and 17 USC 512 generally:
___

NOTES AND QUESTIONS

Viacom v. YouTube. After this ruling, the Second Circuit issued its opinion in Viacom v. YouTube, dealing with similar facts. Viacom Intern., Inc. v. YouTube, Inc., 676 F.3d 19 (2d Cir. 2012). The opinion is mostly consistent with the Ninth Circuit’s UMG opinion, but it expressly disagreed with the Ninth Circuit regarding the safe harbor’s meaning of “right and ability to control”—saying the concept “involve[s] a service provider exerting substantial influence on the activities of users, without necessarily—or even frequently—acquiring knowledge of specific infringing activity.” This standard is vague and opaque, leaving lots of room for future arguments. The Second Circuit also more expressly acknowledged that a service provider’s willful blindness could defeat the safe harbor; but as with the “right and ability to control” phrase, the opinion didn’t define what behavior constitutes willful blindness.

In light of the Viacom v. YouTube ruling, the Ninth Circuit asked the litigants in UMG v. Shelter Capital to submit briefs on whether it should modify the opinion you just read. As of August 2, 2012, the Ninth Circuit had not amended its opinion, but that remains a possibility as of press time.

The Viacom v. YouTube litigation is especially puzzling because the litigants have so much incentive to work together rather than fight each other. Indeed, Viacom has acknowledged that it has no objections to YouTube’s practices since May 2008, when YouTube deployed more aggressive technology filters. Indeed, Viacom currently heavily uses YouTube to promote its offerings. So what’s the problem that needs to be resolved in court?

Takedown Notices. Why didn’t UMG just send Veoh proper takedown notices instead of suing it in court? If UMG had sent proper takedown notices, what do you think Veoh would have done with them?

Red Flags of Infringement. What, exactly, constitutes a “red flag” of infringement? If a website provides a tool letting users report problems with content, and one user flags another user’s content item as infringing, does the website have a “red flag” of infringement—and if so, of what?

The Challenges of Determining Infringement. Viacom’s marketing team and affiliates uploaded videos to YouTube for their marketing benefit. In some cases, Viacom deliberately altered clips to look like an unauthorized upload to make it look more interesting to viewers. The Viacom legal team would complain about clips posted by Viacom’s marketing team because they wouldn’t realize the uploads were authorized. If Viacom’s legal team doesn’t know that some clips were authorized by its own marketing department, how is YouTube supposed to know?

Also, Viacom routinely acquiesced to leaving up user-posted video clips, but it constantly changed its acquiescence policy—and never disclosed the policy to YouTube. If Viacom is constantly changing its mind about which user postings it objects to, how is YouTube supposed to know?

Also, Viacom TWICE withdrew clips from its complaint which it subsequently determined weren’t infringing. If Viacom’s litigators can’t figure out which clips are infringing well enough to file an accurate complaint—when they have full access to Viacom’s information and its lawyers are under Rule 11’s investigatory duty—how is YouTube supposed to figure it out?

Willful Blindness. The UMG court hints that a service provider’s willful blindness would disqualify it from the statute. What types of actions on a service provider’s part might satisfy the Ninth Circuit that the service provider engaged in willful blindness? Note the statute and caselaw already cover other scienter standards, including “actual knowledge,” “red flags” and “inducement.” What’s left for “willful blindness” to address?

Copyright Owner Over-Claiming. Does it strike you as odd that UMG took the position that Veoh couldn’t advertise the availability of material from 50 Cent, Avril Lavigne and Britney Spears, even though UMG did not completely control those artists’ catalogs?

Wordsmithing. Does it strike you as odd that the court effectively concludes that the phrase “right and ability to control” means something different depending on whether it’s being used in the common law test for vicarious copyright infringement or in the safe harbor statute?

Investor Liability. Why weren’t the investors automatically protected by the corporate veil? If you were a potential investor in a new user-generated content website, would this ruling deter you from making the investment? See Michael A. Carrier, Copyright and Innovation: The Untold Story, 2012 WISC. L. REV. ___ (forthcoming).

Discovery Implications. Imagine that you are a copyright owner’s counsel. In light of this opinion, what kinds of onerous discovery requests might you legitimately make of a service provider defendant? What kinds of onerous discovery requests might you legitimately make of the service provider’s investors?

Denouement. In this opinion, the Ninth Circuit declares that Veoh properly complied with the legal expectations of Congress. This is great news for Veoh, right? Yes, except that Voeh’s litigation costs for this and other cases (such as Io v. Veoh) drained its bank account, forcing Veoh to shut down—meaning its investors lost their investment, its employees lost their jobs, and users who uploaded videos to Veoh had those videos taken offline. So the case produces an anomaly: the courts gave Veoh a clean bill of health, but getting that clean bill of health killed Veoh.

Indeed, Google has disclosed that it spent $100 million on litigation costs in Viacom v. YouTube up to the point it filed its summary judgment motions. Obviously, it has spent more—much more—on legal fees since making those filings. Google can afford to spend over $100M defending YouTube, but smaller market players—like Veoh—can’t.

What implications might these facts (i.e., Veoh is legal but dead) have for the proper design of immunities and safe harbors? Compare the litigation costs associated with the 47 U.S.C. § 230 immunity discussed later in the casebook.

Posted by Eric at 09:57 AM | Copyright , Derivative Liability | TrackBack

September 24, 2012

Latest "Hot Topics in Internet Law" Talk Slides

By Eric Goldman

Earlier this month, I spoke at the "IP and the Internet" conference sponsored by the California State Bar's IP Section on the perennial favorite topic, "Hot Topics in Internet Law." My talk slides. Given the conference's theme, I focused the talk on cyberlaw IP-related topics rather than the broader universe of cyberlaw topics.

Some related posts:

* "Hot Topics in Internet Law" Talk Slides (June 2012, to SFIPLA)
* "Recent and Future Developments in Trademark Law" Talk Slides (July 2011, to SVIPLA)
* "Hot Topics in UGC Liability" Talk Slides (June 2011, SCU event)
* "Trends in Internet Law" Talk Slides (Nov. 2010, to the IP Institute by the CA State Bar's IP Section)

Posted by Eric at 01:11 PM | Copyright , Derivative Liability , Trademark | TrackBack

September 21, 2012

Cafepress Suffers Potentially Significant Trademark Loss for Users' Uploaded Designs (Forbes Cross-Post)

Cafepress.com ($PRSS) provides a popular user-to-user marketplace websites that allows users to upload logos or slogans and sell items bearing those logos or slogans, which Cafepress.com manufactures on demand (a so-called “print-on-demand” service). Like any other user-generated content website, there’s always a chance that users will upload material that infringes third party copyrights and trademarks. A recent adverse court ruling against Cafepress.com raises some troublesome questions about Cafepress.com’s--and other print-on-demand vendors'--potential trademark liability exposure for its users’ uploads.

The case involves a trademark for the word phrase “Born to Rock,” which the plaintiff initially registered for electric guitars and subsequently registered for T-shirts. These trademark registrations (especially the latter) may be problematic. First, many other folks have used the phrase "Born to Rock" for quite some time (including Cafepress.com users), so the plaintiff may have problems showing that it is the first commercial user of the phrase or that consumers associate the phrase only with it. Second, the phrase is capable of many different meanings that have nothing to do with electric guitars or the plaintiff. For example, take a look at some of the T-shirt designs the plaintiff complained about:

It's quite a reach for the plaintiff to think its trademark registrations should apply to "Born to be a rock star" or "Born to Rock" associated with rocking chairs.

Background to the Litigation

The plaintiff repeatedly sent trademark takedown demands to Cafepress.com. To Cafepress.com’s credit, it did not simply accede to the plaintiff’s overreaching demands. While Cafepress.com removed some users’ items in response to the plaintiff’s complaints, it refused the takedown demands for other items. Unsatisfied with Cafepress.com’s response, the plaintiff sued for trademark infringement.

Cafepress.com moved for summary judgment on two grounds: (1) it didn’t make a “use in commerce” of the plaintiff’s trademark, and (2) the “descriptive fair use” doctrine. In doing so, Cafepress.com didn’t press two other potentially strong arguments: (a) that the plaintiff’s trademark was invalid, and (b) consumers weren’t confused in the marketplace. Cafepress.com should be able to raise these arguments later. The opinion doesn’t reference another possible trademark defense for Cafepress.com, the “innocent printer” defense (15 U.S.C. 1114(2)(A)), though that may be a stretch due to the other marketplace services (such as payment processing) that Cafepress.com provides to its users.

“Use in Commerce”

The court rejected Cafepress.com’s argument that it doesn’t make a “use in commerce” as required by the trademark statute. This is not a particularly surprising result. After the 2009 Second Circuit ruling in the Rescuecom case, almost all online activity that has some commerciality to it qualifies as a “use in commerce.” In this case, the judge thought Cafepress.com made a use in commerce (emphatically so, calling Cafepress.com's argument “facetious”) because Cafepress.com manufactures and delivers the purchased items containing the allegedly infringing designs.

Descriptive Fair Use

Cafepress.com argued that the T-shirt references to “Born to Rock” weren’t intended to communicate a relationship with the trademark owner, and thus were not being used “as a trademark.” Normally this argument would apply to the trademark owner’s threshold right to sue at all, but “non-trademark use” is also an element of the defense of descriptive fair use (which allows the reuse of descriptive phrases for their lexical meaning). The court says that it cannot categorically declare merchandised items referencing “Born to Rock” as not making a trademark use, because a jury may find some of the T-shirts—such as those with guitar depictions—are plausibly associated with the trademark owner.

(Many trademark geeks will gnash their teeth about the obvious doctrinal problems with the judge’s ruling, including the fact that a plaintiff can’t satisfy its prima facie elements with a true non-trademark use, the shifted burden of proof between the prima facie case and an affirmative defense, and the judge’s introduction of consumer confusion into the descriptive fair use question).

Implications of the Ruling

Lack of a “Fast Lane” Defense. Trademark law often lacks a “fast lane” for ending unmeritorious trademark cases. In these situations, trademark defendants with winning cases validate their decisions only after incurring substantial time and expense. In my opinion, the lack of a fast lane is a defect of trademark law that ought to be fixed. For more on this, see this essay.

Here, Cafepress.com sought a relatively quick win on two legal theories. The court rejected that effort, saying that at minimum the case needs to go before a jury. That means that even if Cafepress.com wins this case (which I think it should), Cafepress.com will spend a lot of money to do so—much more than the profits it has made and will make from “Born to Rock” items.

Further, because the “use in commerce” and “non-trademark use” fast-lanes didn't work, Cafepress.com likely can’t quickly and cheaply defeat future claims by other trademark owners. This may have some bearing on its policies going forward (see below).

Contrast With Tre Milano v. Amazon.com. I recently blogged about a California appeals court case, Tre Milano v. Amazon.com ($AMZN), where Amazon defeated trademark claims based on user-vended items because Amazon was a “transactional intermediary.” Although Cafepress.com is also a “marketplace” for user-to-user sales, Cafepress.com differs from Amazon in a key respect: Cafepress.com manufactures the items on demand. This factual difference means Cafepress.com faces potentially greater trademark liability than Amazon.

What Will Cafepress.com Do?

Even if Cafepress.com ultimately wins this case, this ruling puts Cafepress.com—and all other websites in the print-on-demand space, such as Zazzle—in an awkward position. This ruling treats Cafepress.com as directly liable for user-caused trademark infringement. If that's the law, then Cafepress.com can’t simply intervene only when it receives trademark takedown notices; it could be liable even if it never receives a takedown notice. Plus, even if Cafepress.com defeats that liability with respect to specific trademark owners (because, for example, their trademarks turn out to be invalid), Cafepress.com may not be able to vindicate its decisions cost-effectively. Thus, Cafepress.com's legal defense costs may be going up.

Despite this ruling, Cafepress.com could still wait for, and then respond more aggressively to, trademark takedown notices. For example, in respond to this plaintiff's demands, it could have categorically wiped out all of the "Born to Rock" designs, even those that probably weren't infringing. While more aggressive takedowns would placate most trademark owners in most circumstances, it's not clear this would completely solve the legal problem (it depends on whether takedown notices are a precondition to Cafepress.com's liability), and overinclusive takedown responses would reduce Cafepress.com's revenues.

A third alternative would be to more aggressively pre-screen users' items for trademark concerns. This is also unattractive. Aggressive pre-screening is costly and not scalable; it’s error-prone (likely to find false positives and false negatives); Cafepress.com sellers won't like the delays and false positives; and it could exacerbate Cafepress.com’s legal liability for the false negatives. Thus, from my perspective, this ruling leaves Cafepress.com with all-around bad options.

I approached Cafepress.com for an official statement, and they sent the following:

CafePress recognizes that the court believes that there are factual disputes that precluded summary judgment in CafePress' favor. CafePress is confident that when the court and the jury hear the full record that they will see that there is no infringing content in this case, and will find in CafePress' favor. CafePress is a print on demand site where its users create all of the content that they or their purchasers select to be placed on items of merchandise. CafePress does not create the content or select the products on which the content is applied. CafePress stands up for the rights of its users to make lawful, non-infringing and fair uses of material and engage in free speech and express. CafePress intends to vigorously defend its position and its users' right of free speech in their content posted on the CafePress website.

Case cite: Born to Rock Design Inc. v. CaféPress.com, Inc., 2012 WL 3954518 (S.D.N.Y. Sept. 7, 2012). Also see Born to Rock Design's initial complaint.

My prior legal coverage of Cafepress.com-related litigation:

* Angie's List's Telephone and Fax Information Services May Be Immunized by Section 230--Courtney v. Vereb (2012)

* Online Booksellers Get 47 USC 230 Immunity for Publisher-Supplied Marketing Collateral--Parisi v. Sinclair (2011)

* Life May Be "Rad," But This Trademark Lawsuit Isn't--Williams v. CafePress.com (2010). This case held that Cafepress.com didn't face liability for taking down a user's design in response to a trademark takedown demand. The case also illustrates that Cafepress.com continues to struggle with (unreasonable?) trademark demands over thin trademarks--in that case, "Life's Rad."

* Print-on-Demand "Publisher" Isn't Liable for Book Contents--Sandler v. Calcagni (2008)

* Connecticut Blogger Not Subject to Texas Jurisdiction--Healix Infusion v. Helix Health (2008)

* Griper Selling Anti-Walmart Items Through CafePress Doesn't Infringe or Dilute--Smith v. Wal-Mart (2008)

* CaféPress Denied 230 Motion to Dismiss--Curran v. Amazon (2008)

My 2007 IP Survey course exam used a problem involving Zazzle and personalized postage stamps. See the exam and sample answer.

Posted by Eric at 08:48 AM | Derivative Liability , E-Commerce , Trademark | TrackBack

September 18, 2012

Court Says No Negligence Claim for Third Party Infringement via Open Wi-Fi Connection – AF Holdings v. Doe

[Post by Venkat Balasubramani]

AF Holdings, LLC v. Doe, C 12 2049 (PJH) (N.D. Cal.; Sept. 4, 2012)

I blogged about a case where a P2P infringement plaintiff argued that a defendant should be held liable for failing to secure their internet connection. (“No Negligence Claim for Infringement via Shared Internet Connection (Preempted by Copyright Act) – Liberty Media v. Tabora.”) A recent case presented the argument of whether you have a duty to secure your Wi-Fi connection (and police infringers) even more squarely. The court held that someone can’t be held liable for contributory infringement based on a negligence theory.

AF Holdings sued Doe and Hatfield. It did not assert any claims of direct infringement against Hatfield. Instead, it argued that Hatfield “had a duty to secure his internet connection,” and his breach of that duty meant that he could be held liable for the infringements of others.

The court rejects this argument, saying that AF is trying to hold Hatfield liable for his nonfeasance and this theory is only available where the parties have a “special relationship.” There’s no special relationship between AF and Hatfield and thus no duty.

The court also says that a negligence claim is preempted. Copyright preemption analysis requires an “extra element” in order for a claim to not be preempted. (The claim must have an extra element that’s not present in a copyright infringement claim.) The court summarily says that there’s no extra element because AF is ultimately seeking to prevent the exercise of one of its rights under the Copyright Act (copying and sharing). Casting this as a negligence claim does not save it from preemption.

The court also discusses Section 230 immunity. Strangely, AF argues that Section 230 shouldn’t apply because the negligence cause of action is not aimed at “offensive material.” The court sidesteps the Section 230 question in light of its other finding that there’s no duty and the claims are preempted.

___

Not particularly exciting, but this case presented the "negligence for failing to secure Wi-Fi" theory more straightforwardly than the prior case I blogged, so I thought the rejection of this argument was worth noting. It would have been nice for the court to have discussed the standards for derivative liability for infringement generally, and how negligence would lower this bar (and potentially open the floodgates), but this only received a passing mention from the court.

Posted by Venkat at 09:42 AM | Content Regulation , Copyright , Derivative Liability

September 04, 2012

Another Case Says No Liability for Linking to Allegedly Defamatory Content, Plus a Recap (Guest Blog Post)

Vazquez v. Buhl, 2012 WL 3641581 (Conn. Super. July 17, 2012)

[Eric's Note: Sam Bayard is an associate at Davis Wright Tremaine LLP in New York. I got to know him during his stint at the Citizen Media Law Project. A few months ago, we had exchanged emails regarding cases applying Section 230 to linking to defamatory content, and we found that the topic was a little more confusing than either of us expected. As a result, I've asked him to blog about the recent Vazquez v. Buhl decision and to summarize the overall state of play here. The views expressed in this post are his own and do not necessarily reflect those of others at the firm or its clients.]

Eric’s recent post on Directory Assistants, Inc. v. Supermedia, LLC, 2012 WL 3329615 (E.D. Va. May 30, 2012), reminded me that I owe him a guest post on a topic we’ve been discussing on EFF’s Section 230 list: the law on linking to allegedly defamatory content. Then, Eric forwarded me a recent case that addresses the issue head on and comes out the right way.

In Vazquez v. Buhl, the plaintiff sued Teri Buhl, a financial reporter, for posting allegedly defamatory statements on her website. He also sued NBCUniversal for publishing an article on CNBC.com called "The Sex and Money Scandal Rocking Hedge Fund Land." The CNBC.com article referred to Buhl as a "veteran financial reporter" who "knows her way around the Connecticut hedge fund beat" and provided a link to her webiste, adding "I don't want to steal Buhl's thunder, so click on her report for the big reveal." The complaint alleged that NBCUniversal "published, distributed, endorsed and promoted Buhl's defamatory statement by validating Buhl's credibility."

NBCUniversal filed a motion to strike the Complaint based on (Section 230 , and Judge David R. Tobin of the Superior Court of Connecticut granted the motion. The court focused its analysis on whether NBCUniversal was a "content provider" with respect to Buhl's statements, citing Roommates.com for the proposition that a website becomes a content provider "if it contributes materially to the alleged illegality of the content." (N.B. Another defense-side win citing Roommates.com.) The court was not convinced that NBCUniversal did anything of the kind, running through Section 230 case law holding that a defendant does not become a content provider by selecting or making minor alterations to content or by adding headings or other introductory material so long as that content is not itself defamatory (the latter relying on Shiamili v. Real Estate Group of New York, Inc., 17 N.Y.3d 281 (2011)).

In the end, the court easily concluded that merely providing a positive introduction and link did not make NBCUniversal an information content provider with respect to Buhl's content:

In the present matter, NBCUniversal included an introduction to and hyperlink to Buhl's allegedly defamatory statements. The plaintiff has not alleged in his complaint that the [CNBC.com] article or NBCUniversal's statements were defamatory, just that the defamatory statements were made available by hyperlink. Although NBCUniversal added an introduction leading readers to the defamatory statements, [it] did not materially create or develop any of the allegedly defamatory statements. Even though NBC Universal's actions might have increased readership of the defamatory statements, its actions do not amount to either the creation or development of the allegedly defamatory statement which it did not author or even edit.

Vazquez, 2012 WL 3641581, at *4. This is the right conclusion under the plain language of the statute, and it is encouraging to see a court deal squarely with such a ubiquitous practice that is so vital to Internet publishing and communication.

Hopefully, Vazquez and Directory Assistants, though lower court decisions, will help bring much needed to clarity to the law on linking to allegedly defamatory content. As Eric wrote in his post, protection for linking is so “completely obvious and intuitive” that it is hard to believe that there’s not more case law out there on the topic. Unfortunately relatively few decisions directly address the point and several cases treat it in a fairly oblique or terse manner. Nevertheless, the bottom line is that linking to allegedly defamatory content shouldn’t give rise to liability. The two reasons courts commonly cite are (1) Section 230; and (2) linking does not constitute a “publication” or “republication” of the allegedly defamatory content. Below I provide a round-up of the cases, expanding a little on those mentioned at the end of Eric’s post.

Section 230 Cases

Section 230 definitely is the first line of defense for any defamation or other tort claim based on linking. As noted, the plain language of the statute covers linking to third-party content, i.e. “information provided by another information content provider.” One reservation you hear voiced from time-to-time is that the linker has somehow crossed the line by actively choosing the content rather than passively receiving content like most websites that publish user comments. This objection is a non-starter: scores of cases recognize that Section 230 protects the exercise of traditional editorial functions, which include selecting what gets published and what does not. So the “passive” versus “active” distinction is not terribly meaningful. And then there’s Barrett v. Rosenthal, 51 Cal.Rptr.3d 55 (Cal. 2006), a well-respected opinion from the California Supreme Court that specifically rejects this distinction, see id. at 75-77, though the case did not directly address linking.

Another California state case, McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008) (see specifically Section B(3)(c)), is more on point factually. There, the plaintiff alleged that the defendant sent an email with links to a website containing allegedly defamatory material. Although the court’s reasoning is neither extensive nor particularly clear, it dismissed the claim based on Section 230, citing Barrett. Shrader v. Biddinger, 2012 WL 976032 (D. Colo. February 17, 2012), is also directly on point. (See Eric’s post on Shrader.) In that case, someone named Stewart had a business disagreement with the plaintiff Shrader. Stewart emailed critical comments about Shrader to Biddinger, who posted the email on a forum called Wave59. One of the principals of Wave 59, named Beann, emailed several people directing them (presumably through a link) to Biddinger’s posting. The court granted Beann’s and Wave 59’s motion to dismiss based on Section 230. With respect to Beann’s email, the court wrote:

Plaintiff also asserts that Beann contacted third parties, directing them to the posting on the bulletin board. Beann denies this allegation and asserts that even if this claim had factual support, that sort of conduct, in and of itself, is also protected under the CDA. This court agrees that even if Beann “directed” users of the board to Exhibit H, such conduct does not diminish the protections of the CDA’s immunity.

Slip Op. at 16 (citing Blumenthal v. Drudge, 992 F. Supp. 44, 51-52 (D.D.C. 1998)). The citation to Drudge does not make a whole lot of sense under the circumstances, but the court at least reaches the conclusion that simply directing users to a third-party posting is covered by Section 230.

A couple of other Section 230 cases should be mentioned. In Parker v. Google, 422 F. Supp. 2d 492, 500-01 (E.D. Pa. 2006), aff’d, 242 Fed. Appx. 833 (3d Cir. 2007), the district court held and the Third Circuit agreed that Google could not be held liable for providing links to websites with allegedly defamatory comments about the plaintiff. Also of note is Deer Consumer Products, Inc. v. Little, 2011 NY Slip Op 51691(U) (N.Y. Sup. Ct., N.Y. Cty., Aug. 31, 2011), where the plaintiff, a seller of home appliances, sued Alfred Little and Seeking Alpha, Ltd. (“SAL”) for defamation over allegedly defamatory “reports” written by Little that appeared on SAL’s website, seekingalpha.com. SAL moved to dismiss and the court granted the motion. Most of the decision is plain-vanilla Section 230 fare, relating to reports authored by Little and posted on SAL’s website. But the statement of facts indicates that “[t]he remaining two ‘reports’ in issue were not published on SAL’s website; they were accessible through the website by clicking on a link (to a third-party website) in a reader’s comment . . . .” The court never mentions or analyzes these linked-to “reports” again, but the court’s holding that Section 230 barred the plaintiff’s claims in their entirety surely should encompass the linking allegations.

Republication Cases

If for some reason Section 230 does not provide a defense, whether because of a reluctant judge or uncooperative facts (such as linking to your own content), a defendant has a good chance of prevailing on the argument that simply providing a link is not publication or republication of the underlying content. The best case is, alas, from Canada. In Crookes v. Newton, 2011 SCC 47 (Canadian Sup. Ct. 2011), the Supreme Court of Canada held that providing a hyperlink to allegedly defamatory material is not a “publication” of that material giving rise to defamation liability. Slip Op. at 15, 19, 33-34. The plaintiff, Wayne Crookes, brought a series of lawsuits against several individuals he claimed were responsible for defamatory articles published on a number of websites. Id. at 15. John Newton published an article on his website about these cases called “Free Speech in Canada,” and the article contained hyperlinks to other websites, which in turn contained information about Crookes. Crookes sued Newton claiming that two of the hyperlinks led to defamatory material. Id. After a thorough analysis of the common law relating to publication, the Court determined that a hyperlink should not be deemed a publication of the linked-to material. Id. at 23-24.

The Supreme Court of Canada relied on two old New York cases in reaching this conclusion. One is Klein v. Biben, 296 N.Y. 638 (1946), in which the New York Court of Appeals ruled that an article that stated “For more details about [the plaintiff], see the Washington News Letter in the American Hebrew, May 12, 1944” was not a republication of the May 12 article. The second is McFadden v. Anthony, 117 N.Y.S.2d 520 (N.Y. Sup. Ct., N.Y. Cty. 1952), where a New York trial court held that a radio broadcast did not publish or republish an allegedly defamatory magazine article simply by calling attention to the article when the allegedly defamatory statements were not repeated. In Crookes, The Supreme Court of Canada also relied on policy analysis, doing a great job of encapsulating the problem with holding internet users liable for linking:

The Internet cannot, in short, provide access to information without hyperlinks. Limiting their usefulness by subjecting them to the traditional publication rule would have the effect of seriously restricting the flow of information and, as a result, freedom of expression.

Slip Op. at 29.

Moving back to the United States, the Third Circuit recently ruled in In re Philadelphia Newspapers, LLC, No. 11-3257 (3d Cir. July 26, 2012), that publishing a link and favorable reference to a webpage which in turn linked to allegedly defamatory articles did not constitute a republication of those articles. Slip Op. at 25-27. The court’s reasoning draws heavily on cases applying the single publication rule and holding that linking to an article does not republish the article for purposes of the statute of limitations. See Salyer v. Southern Poverty Law Center, 701 F. Supp. 2d 912 (W.D. Ky. 2009); Churchill v. State of N.J., 876 A.2d 311 (N.J. Super. Ct. 2005); Sundance Image Technology, Inc. v. Cone Editions Press, Ltd., No. 02 CV 2258 JM (AJB), 2007 WL 935703 (S.D.Cal. March 7, 2007).

One final case is worth mentioning, In re Gemtronics, Inc., Docket No. 9330, Initial Decision (F.T.C. A.L.J. Sept. 16, 2009), though it is not a defamation case and linking plays a rather small role in the decision. In that case, an administrative law judge found that the defendant was not liable under Sections 5(a) and 12 of the Federal Trade Commission Act for allegedly false advertising appearing on a website that he did not operate or control, but to which he had provided links to (among other things). See Slip Op. at 26, 53.

* * *

Hopefully having these cases collected together here will prove helpful to the reader. In all likelihood, I’ve missed a case or two—so please get in touch with me if you’ve got some more. And if anyone's got a PDF copy of Vazquez v. Buhl, please send that along too..

Posted by Eric at 09:07 AM | Content Regulation , Derivative Liability | TrackBack

August 29, 2012

Ranking of "Dirtiest Hotels" Based on User Ratings is "Unverifiable Rhetorical Hyperbole"--Seaton v. TripAdvisor (Partial Forbes Cross-Post)

By Eric Goldman

[This is another situation where I'm posting the first draft of this post here and linking to the Forbes version, which reads a little differently. As always, I welcome feedback about which version you liked better.]

Seaton v. TripAdvisor, LLC, 3:11-cv-549 (E.D. Tenn. August 22, 2012)

TripAdvisor compiles its user ratings into an annual ranking of the top 10 "dirtiest hotels." Not surprisingly, hotels making the list don't feel very honored. The 2011 loser, the Grand Resort in Pigeon Forge, Tennessee, sued TripAdvisor for defamation and related claims. Concluding that the "dirtiest hotels" ranking constituted non-actionable opinion, the court dismissed the case on a 12(b)(6) motion to dismiss.

This opinion necessarily gets into the messy distinction between objective facts and subjective opinions. (James Grimmelmann recently explored this ground in some detail, although I wasn't completely satisfied with his treatment). The underlying user ratings clearly are the users' opinions; these ratings may be coupled with objective statements that could be actionable (the court gives an example where a user says the hotel's bathtub was caked with a half-inch of dirt). TripAdvisor then layers its own content onto the user ratings. For example, it said that 87% of its users recommended against staying there, another statement of fact.

But what about just the rankings themselves? I believe TripAdvisor made an objective statement that of its ranked hotels, Grand Resort had the lowest numerical score for cleanliness. Grand Hotel doesn't seem to be contesting TripAdvisor's numerical computations. It seems that Grand Hotel is contesting TripAdvisor's choice of the word "dirtiest," perhaps enhanced by the numerical ranking which lends a veneer of objective precision to the list. The court rejects this line of thinking, saying "neither the fact that Defendant numbers its opinions one through ten, nor that it supports its opinions with data, converts its opinions to objective statements of fact."

The court then says that reasonable consumers would not interpret these types of rankings as facts:

TripAdvisor’s list is of the genre of hyperbole that is omnipresent. From law schools to restaurants, from judges to hospitals, everything is ranked, graded, ordered and critiqued. Undoubtedly, some will accept the array of “Best” and “Worst” rankings as impenetrable maxims. Certainly, some attempt to obfuscate the distinction between fact and opinion as part of their course of business. For those that read “eat here,” “sleep there” or “go to this law school” and are unable to distinguish measured analysis of objective facts from sensational “carnival barking,” compliance will be both steadfast and assured. Nevertheless, the standard, fortunately, is what a “reasonable person” would believe. A reasonable person would not confuse a ranking system, which uses consumer reviews as its litmus, for an objective assertion of fact. It does not appear to the Court that a reasonable person could believe that TripAdvisor’s article reflected anything more than the opinions of TripAdvisor’s millions of online users.

That's not to say that the judge is a fan of consumer reviews:

though TripAdvisor’s method of arriving at its conclusions, unverified online user reviews, is a poor evaluative metric, it is not a system sufficiently erroneous so as to be labeled ‘defamatory” under the legal meaning of the term.

Two general observations about this ruling:

1) This is a great ruling for user-generated content (UGC) sites that compile various rankings of user subjective views. So long as they make it clear that user opinions are the source material, it seems like UGC sites can go quite far in packaging user ratings and providing lists of top/bottom performers without fearing defamation liability for that distillation.

2) In particular, this ruling is a great complement to 47 USC 230, which otherwise immunizes websites for user content. In light of terrible language in the initial Ninth Circuit Roommates.com opinion, we feared that websites would shy away from gathering and providing structured data from users. Those fears partially ameliorated after the Ninth Circuit wiped away its initial ruling, but nevertheless, plaintiffs have continued to hammer websites for their characterizations of user content. This ruling bridges the gap: even if Section 230's immunity isn't available for a website's distillation of structured data provided by users, the website should still be able to avoid defamation liability because its compilation isn't a "fact."

Posted by Eric at 09:15 AM | Content Regulation , Derivative Liability | TrackBack

August 26, 2012

Amazon.com's Anti-Counterfeiting Efforts Blessed by California Appellate Court (Forbes Cross-Post)

By Eric Goldman

A California appellate court has blessed Amazon.com's ($AMZN) efforts to police counterfeit goods sold by its third party merchants. This is especially good news for Amazon because the leading precedent on the topic had blessed eBay's ($EBAY) more aggressive anti-counterfeiting efforts, so it wasn't clear Amazon would be equally protected even if it had less aggressive practices. Nevertheless, the news is not all good for Amazon. The opinion indicates that Amazon is having some difficulty keeping counterfeits off its site. If Amazon can't fix that, it could face both continued legal hassles and a consumer backlash.

The opinion tells a poignant story about a manufacturer's problems with counterfeiting. The manufacturer, Tre Milano, makes the "InStyler Rotating Hot Iron Hair Straightener." Tre Milano claims that the item has been a marketplace success, and that it's a popular item to counterfeit. Putting aside the lost revenues to Tre Milano, counterfeit versions of the InStyler can create other problems: they pose significant safety hazards to consumers, and unwitting buyers of the defective or poorly constructed counterfeit items are unfairly panning InStyler in consumer reviews.

Tre Milano has an active anti-counterfeiting program that includes buying goods to check if they are counterfeit and sending takedown notices to eBay and Amazon. It had an ongoing dialogue with Amazon. For example, the court says "From May 1, 2010 to April 28, 2011, Tre Milano sent 311 NOCI’s to Amazon." (NOCIs are "notices of claimed infringement," a type of takedown notice). To Tre Milano's chagrin, Amazon sometimes didn't honor its takedown notices when Tre Milano didn't confirm that it had done a test buy.

In this sense, Tre Milano and Amazon reached a typical impasse. Tre Milano has incentives to send takedown notices when sellers are setting low prices--maybe because they are counterfeiters, or maybe because they are overly aggressive discounters of legitimate goods or selling legitimate used goods. Either way, Tre Milano is fine with kicking those legitimate sellers out of the market as a collateral consequence of chasing counterfeiters. Meanwhile, Amazon doesn't want to kick legitimate merchants off its network simply based on self-interested allegations of bad behavior; this would sour its merchant relations and cost Amazon its cut of their sales. So Tre Milano doesn't care too much if its takedown notices are accurate, while Amazon cares a lot about the notice's accuracy.

The legal rules matter a lot to who bears the risk of errors in Tre Milano's takedown notices. If the law says Amazon has to assume Tre Milano's takedown notices are accurate (or bear liability for getting that wrong), then Tre Milano can send notices freely and Amazon will toss a lot of legitimate3 merchants overboard. In contrast, if the law says that Tre Milano has to verify the counterfeiting allegations before Amazon has to honor its takedown notices, then Tre Milano has to do more prep work and some counterfeit sellers will avoid the ax.

The court concludes that Amazon can ignore Tre Milano's unverified takedown notices because Amazon is a "transactional intermediary," not the actual seller of counterfeit goods. The court applies the same legal standards set by the Second Circuit in Tiffany v. eBay, even though (1) Amazon may have done less to police against counterfeits than eBay's practices endorsed by the Second Circuit, (2) Amazon acted as the payment service provider for its merchant sales, a service eBay didn't provide, and (3) Amazon didn't always remove items in response to takedown notices (in contrast, eBay always acted on Tiffany's takedown notices; the lawsuit was over Tiffany's demand that eBay should be even more proactive).

Obviously this ruling is good news for Amazon, but I think it's also good news for other e-commerce websites enabling third-party merchants to sell to consumers. Manufacturers routinely make unreasonable demands on e-commerce websites to do more to police against counterfeits. Here, the court rejected Tre Milano's demands on Amazon, and those demands were not nearly as unreasonable as many other demands that manufacturers make. Thus, this opinion sends a strong signal to manufacturers that they should tone down their anti-counterfeiting demands on e-commerce websites; and it gives some encouragement to e-commerce websites to stand up to overly aggressive manufacturer demands.

Even so, e-commerce websites can't simply ignore counterfeit sales on their websites, even if made by third party sellers. Doing too little anti-counterfeiting work can result in low judicial sympathy if challenged in court, and worse, it can undermine buyers' trust in the e-commerce site. In some cases, buyers are completely OK with counterfeit goods (such as luxury branded goods, where consumers may like the design or status and don't need an authentic good to achieve that goal), but buyers are not likely to be OK with counterfeit electronic goods like the InStyler due to the safety and quality issues. Even though Amazon may have dodged the legal bullet here, it's hardly comforting for Amazon consumers to know that Amazon hasn't figured out a reliable way to screen out sales of counterfeit InStylers.

Case cite: Tre Milano, LLC v. Amazon.com, Inc., 2012 WL 3594380 (Cal. App. Ct. August 22, 2012). Like so many California appellate court opinions, this was designed "not published" for no good reason, so it is not citable or binding precedent. For legal geeks: this opinion never explains why the lawsuit remained in state court despite Tre Milano's allegations of a Lanham Act violation.

Posted by Eric at 08:04 AM | Derivative Liability , E-Commerce , Trademark | TrackBack

August 22, 2012

Why Did Google Flip-Flop On Cracking Down On "Rogue" Websites? Some Troubling Possibilities (Forbes Cross-Post)

By Eric Goldman

Earlier this month, Google announced that it may downgrade search results for a website if Google receives a high volume of "valid" takedown notices against the website. Google's move has confused many Google-watchers, largely because the exact implementation details are important but aren't being disclosed.

However, I'm confused for a more fundamental reason. Google staunchly opposed the Stop Online Piracy Act (SOPA), yet Google's move partially implements SOPA anyway--and makes one of the analytical errors that made SOPA so objectionable. (See my prior blog post on other recent efforts to recreate SOPA). This post tries to figure out why Google flip-flopped on SOPA.

The Analytical Error

Theoretically, both SOPA and Google's algorithmic change are intended to curb "rogue" websites. Unfortunately, any definition of rogue websites creates false positives by including websites that will mature into legitimate players over time. For example, YouTube circa 2005 might have looked like a rogue website at the time, but few folks would characterize it that way now. Or, a site like Pinterest (with its legally questionable "sideloading") might initially look like a rogue website until its lawyers clean things up.

In 1998, Congress enacted a safe harbor scheme to balance the interests of copyright owners and providers of user-generated content (UGC) websites. The basic deal: copyright owners send takedown notices for specific items of user-posted infringing content, legitimate UGC websites honor those takedown notices, and the websites avoid copyright liability for their users' content. This scheme, while imperfect, has worked well enough to help the UGC ecosystem flourish.

SOPA threatened to undermine this balance. Instead of sending takedown notices for individual content items, copyright owners could send cutoff notices to the website's service providers that, if honored, would marginalize the entire website. Thus, SOPA's remedy didn't fit the problem: the problem is individual infringing items, but the remedy equally affects both legitimate and illegitimate content items.

Google's algorithmic change creates the same problem-remedy mismatch as SOPA. Based on complaints about individual content items, Google's algorithm may ultimately downgrade the entire website--even if all of the takedown notices are legitimate. (Thus, I'm not even addressing the many illegitimate takedown notices competitors will send Google to try to game its algorithm). By applying the penalty site-wide as opposed to individual content items, the search results for legitimate content items at that downgraded website also will be marginalized. Thus, Google's algorithm replicates one of the SOPA's most objectionable aspects.

Why Did Google Flip-Flop on SOPA?

After fighting SOPA, why did Google choose to partially implement it voluntarily? Some hypotheses:

1) The move helps searchers find more relevant results. This could be plausible if, for example, rogue websites are highly correlated with other problems for searchers, such as malware, that aren't adequately screened by Google's 200+ other algorithmic signals. Google's blog post didn't tell that story, though. Instead, Google offered only a weak explanation of how searchers might benefit from the move by seeing more "legitimate" content sources, and Google hasn't acknowledged the countervailing risk that legitimate content may be downgraded in searchers' results--an outcome that unquestionably hurts searchers in their quest for the most relevant results. Indeed, Google's algorithmic change, on a net basis, could degrade search results relevancy for searchers. Techdirt explores this issue more.

2) Google felt this move would help reduce its legal risk. However, Google already qualifies for Congress' 1998 safe harbor (17 U.S.C. 512(d)), and the voluntary algorithmic change doesn't directly improve its legal posture.

3) Google hopes the change will improve its relationship with Hollywood, which in turn could have ancillary benefits like unlocking more content deals. Given how many folks in Hollywood believe Google is the devil, I doubt an algorithmic change will change that.

4) Google hopes the move staves off more draconian Congressional regulation.

5) Google is acting at the Obama administration's behest to curry political favor for other Google policy initiatives.

6) Google philosophically believes rogue websites are bad and its algorithm doesn't do enough to screen them out.

I could make arguments supporting each of these hypotheses, but I remain troubled that Google hasn't persuaded us that its change is in searchers' best interests. Usually Google's good intent for its algorithmic changes is apparent, but earlier this year I had similar questions about Google's motives with "Google Search Plus Your World," which promoted Google+ in search results compared to other social media services. Google offered a very weak explanation that the Search Plus Your World change was in searchers' best interests, yet Google also was promoting its proprietary offering more prominently than its competitors' offerings. Regardless of Google's intent, the Search Plus Your World integration created potential anti-competitive effects.

Along those lines, let me offer one last hypothesis for Google's current move: Google flip-flopped on SOPA because the algorithmic change reduces the exposure of new disruptive marketplace entrants that compete against Google's other UGC properties. In effect, by (fatally?) downgrading their rankings, Google can keep websites like YouTube circa 2005 and the next nascent Pinterest from growing into bona fide competitors to Google's franchise. If this hypothesis is true, perhaps Google initially resisted the algorithmic change because it knew that the move didn't benefit searchers, but Google finally acceded to the copyright owners' requests when it dawned on Google that the move would help it suppress potential new competitors.

Conclusion

Don't get me wrong: for years, I have vociferously supported Google's right to use whatever ranking algorithm it thinks best serves searchers (see, e.g., my articles on search engine bias from 2006 and 2011). However, this is the second time this year (after Google+'s integration) I've had to ask if Google is really trying to benefit searchers, or if it's doing something else--such as acting like an incumbent trying to shut the door behind it. Even if Google's motives for the algorithmic change are, in fact, legitimate, the potential anti-competitive implications of this move are hard to overlook.

Posted by Eric at 09:46 AM | Copyright , Derivative Liability , Search Engines | TrackBack

August 16, 2012

Section 230 Immunizes Links to Defamatory Third Party Content--Directory Assistants v. Supermedia

By Eric Goldman

Directory Assistants, Inc. v. Supermedia, LLC, 2012 WL 3329615 (E.D. Va. May 30, 2012)

[For some reason, this case just appeared in my Westlaw alerts today. Even at this late date, it's worth sharing. I have a lot of other cases stuck in my blogging queue, including other Section 230 cases. Eventually I'll clean up the backlog.]

Unknown parties posted negative reviews of Directory Assistants to various review sites, including RipOffReport.com, Scamlnformer.com, InsiderPages.com, JudysBooks.com, and YellowPages.com. Directory Assistants claims the reviews are defamatory. Supermedia, which apparently partially competes with Directory Assistants, allegedly sent prospective customers emails with links to those reviews. Directory Assistants sued Supermedia for circulating those links.

In this ruling, the court dismisses (on a 12(b)(6) motion to dismiss) Directory Assistants' suit against Supermedia on 47 USC 230 grounds. After incorrectly saying that Section 230 precedent only focuses on the immunity's applicability to providers of interactive computer services rather than users (thereby missing numerous cases, most obviously the California Supreme Court's opinion in Barrett v. Rosenthal), the court articulates its legal standard:

a user of an interactive computer service who finds and forwards via e-mail that content posted online in an interactive computer service by others is immune from liability

Supermedia easily met that standard. Directory Assistants tried to argue that discovery was required to determine if the linked-to sites qualify as "interactive computer services," but the court rejects the request because it's well-known that websites like Ripoff Report republish user-generated content. However, the court seems to have misread or misapplied the statute's reference to "interactive computer service." It shouldn't matter to the Section 230 inquiry if it was Ripoff Report or its users authored the linked-to reports; either way, a third party linking to that content isn't liable. Indeed, Section 230 applies even if the "republisher" publishes the full text of the third party content rather than linking to it (e.g., Barrett v. Rosenthal, Batzel v. Smith, Mitan v. A. Neumann & Associates, Phan v. Pham and D'Alonzo v. Truscello). The court got to the right place, but it made the inquiry more byzantine than it should be.

Directory Assistants also argued that discovery was required to determine if Supermedia constituted a "user." Because the court missed all of the Section 230 jurisprudence interpreting "user," the court makes up its own definition, citing the dictionary. The court synthesizes its analysis:

Defendants were users in that they put RipOffReport and other websites into action or service, and availed themselves of and utilized these websites by compiling their posts by copying links to commentary posted on them....The action of compiling information from a website and e-mailing that information to others clearly constitutes use of that website and its services. There are no allegations that Defendants created the posts or altered them. Indeed, the content of the posts was not even contained in the email.

Having reached the sensible conclusion that Section 230 immunized Supermedia for linking to third party content, the court could have (and should have) stopped there. Instead, the court concludes:

there is no authority in the statute or case law that makes a user responsible for the creation or development of posts on a website that is an interactive computer service....Nowhere has Plaintiff pleaded that Defendants actually wrote, created, or developed the allegedly defamatory content. Rather, as alleged in the Complaint, Defendants were downstream users of content created by other people and posted on these websites. Defendants' involvement was passive in nature—compiling links to the posts and sending those links via e-mail. If, on the other hand, Plaintiff had some evidence that Defendants had a hand in creating the allegedly defamatory posts, it may have had a case.

OK, fine, but then...

Congress has granted anonymous posters on these websites a license to libel people and companies because the people and companies who provide the fora for this content, and the subsequent users of it, are immune from common law defamation suits. This license is clearly subject to tremendous abuse, and the Court has serious misgivings about this Circuit's broad interpretation of § 230 immunity. The prospect of blanket immunity for those who intentionally redistribute defamatory statements could have widespread and potentially catastrophic consequences for individuals and entities alike. Nevertheless, under the CDA the Court's hands are tied.

The judge earns points for his candor, and more points for faithfully applying a statute he is troubled by. But he loses points for whining about defamation when it wasn't confirmed that the reviews were actually defamatory, more points for failing to acknowledge the beneficial aspects of this ruling (linking is a net win for society, even if sometimes the linked content isn't credible), and even more points for stating his concerns in unnecessarily hyperbolic terms ("widespread and potentially catastrophic consequences"). Because he got to the right result, I won't take any further points off for the major research gaffe (missing the caselaw interpreting "user") and the apparent statutory misreading that Section 230's immunity depends whether the linked-to site is itself user-generated.

Section 230 immunity for linking to third party sites seems completely obvious and intuitive, yet surprisingly, this is one of only a handful of cases actually reaching that conclusion. The only other two cases I know of (if I've forgotten anything, please email!):

* Shrader v. Biddinger, 2012 WL 976032 (D. Colo. February 17, 2012). Directly on point, and missed in this judge's "research."
* McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008) (see Sec. B(3)(C)). This case also holds that linking is immunized by Section 230, but not in a very understandable way.

Also, in Parker v. Google, Inc., No. 06-3074 (3d Cir. July 10, 2007), it's not clear if the court is saying that Google's links to third party websites is immunized by Section 230 or just Google's snippets (or both).

Some other cases saying that linking to bad content isn't actionable, even without reference to Section 230:

* In re Gemtronics, Inc., Docket No. 9330, Initial Decision (F.T.C. A.L.J. Sept. 16, 2009)
* Crookes v. Newton, 2011 SCC 47 (Canadian Sup. Ct. 2011)

But compare my post, SEC's Proposed Guidance on Hyperlinking Contravenes 47 USC 230

Posted by Eric at 02:32 PM | Derivative Liability | TrackBack

August 15, 2012

Six-Month Retrospective of SOPA's Demise [Forbes Cross-Post, A Month Late!] + SOPA/PROTECT-IP/OPEN Linkwrap #3

By Eric Goldman

[This post is composed of three parts. The first part, all 2,700 words of it, is a cross-post from Forbes last month assessing where we stood 6 months after January 18, 2012. Sorry it's taken me so long to repost it. The second part is my third (and possibly final) linkwrap of SOPA/PIPA/OPEN links. I collected most of these links in January and have been slowly accreting more over the past 7 months. As you can imagine, a linkwrap doesn't improve with age. At this point, they are mostly for historical value, but you might enjoy the stroll down memory lane nonetheless. The third part is a comprehensive index of our SOPA-related posts on the blog.]
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Part 1: Celebrating (?) the Six-Month Anniversary of SOPA's Demise (Forbes Cross-Post)

Six months ago--January 18, 2012--was a major day in the Internet's history. Some of the most heavily trafficked websites went dark or rallied their users against proposed legislation called the Stop Online Piracy Act (SOPA) and its sister bill the Protect IP Act (PIPA). The resulting outcry effectively killed the legislation that day. But with 6 months of perspective, plus plenty of new developments, it's clear there may not be much to celebrate about the developments of January 18.

What Happened on January 18

January 18 witnessed some unprecedented political developments. In response to massive voter feedback to Congress, a remarkable 19 United States Senators (nearly 20% of all senators) either changed their position on PIPA (from supporting to opposing) or newly announced a position on PIPA by coming out opposed to it. I'm not aware of any other single day in American history when so many senators publicly changed their opinion on a pending bill in response to voter advocacy.

Even more remarkably, this meant consumers had squarely defeated a determined copyright owner lobby led by the MPAA, although they were hardly alone. (Trademark owners also supported the proposals, but they were less visible in the process). For decades, individual consumers have had virtually no voice in American copyright policy. Generally the process has been:

1) Copyright owners give lots of money to members of Congress.

2) Copyright owners then redeem this patronage by getting broad Congressional support for their legislative wish-lists.

3) The technology community, and other repeat-player groups that depend on third party copyrighted materials (like libraries), fight vigorously to make minor changes to the copyright owners' wish-list.

4) Congress passes the lightly modified proposal and then, feel self-satisfied, pats itself on the back for having engaged all of the relevant constituencies in a vigorous multi-stakeholder legislative process.

This cycle has played itself out a few dozen times over the decades, and SOPA/PIPA were well on their way to following this pattern--until January 18.

And then, an upset outcome. David defeated Goliath. The amateur boxer knocked out the undefeated heavyweight boxing champion. Copyright owners had never outright lost a legislative battle they choose to fight. Yet, on January 18, they did. And they lost that battle to consumers--the constituency who isn't even at the bargaining table. In the words of Vizzini from the Princess Bride: "Inconceivable!"

How January 18 Was a Turning Point

The defeat of SOPA/PIPA immediately shook the corridors of power and continues to ripple through policy circles. Two examples:

ACTA's Demise. The Anti-Counterfeiting Trade Agreement (ACTA) is a trade agreement putatively designed to encourage trans-border cooperation to fight counterfeiting. Unfortunately, ACTA did more than that, potentially upsetting existing delicate balances between IP owners and consumers. Worse, ACTA was negotiated virtually entirely out of the public eye. While industry insiders (such as the copyright lobby) had prominent seats at the table, consumers got very limited disclosures of the drafts and no meaningful opportunity to comment on the proposals. Thus, for consumers, ACTA had potentially unacceptable substantive terms and was developed via an unquestionably unacceptable process.

President Obama signed the agreement without getting Congressional approval, despite significant protests. Other countries started signing ACTA. ACTA looked like a fait accompli.

salajean / Shutterstock.com

Then, partially inspired by the SOPA/PIPA protests in the United States, European consumers started protesting ACTA. Their voices were heard. The European Parliament overwhelmingly rejected ACTA, which most likely takes all of Europe out of ACTA--which, in turn, largely moots ACTA. There are still wranglings and shenanigans involving ACTA, so it's too early to declare it dead. Still, the most likely outcome is that European consumers' protests scuttled an otherwise unstoppable international trade agreement on IP issues--just like US consumers derailed SOPA/PIPA. Could SOPA have been the first spark to ignite effective consumer input into future IP policy-making worldwide?

No Legislator Wants to Be "SOPAed." Back in the United States, politicians are walking on eggshells. Multiple Washington DC insiders have told me that no legislator wants to be "SOPAed," presumably a verb for having massive consumer protests melting the legislator's phones. To avoid the risk of being SOPAed, I'm hearing that some legislators are changing their proposals--presumably to tone them down--before they even are introduced. So even without lifting another finger, consumers may be beneficially influencing the legislative process.

How January 18 Didn't Make a Difference at All

For all of that good news, I believe the better analysis is that the events of January 18 made no real difference. Some examples supporting my conclusion:

SOPA's Death = Status Quo. I can imagine some backroom Hollywood strategist shaking his head, thinking to himself/herself, "Those [insert pejorative expletive] shut down the Internet and melted the phone lines in Washington DC, and what did they get? NOTHING." For all of the work that went into the anti-SOPA/PIPA campaign, the reality is that its demise just preserved the status quo. As the maxim goes, it's a lot easier to kill legislation than to get it passed. And it's hardly easy to kill proposed copyright legislation; it took a favorable confluence of multiple things going right just to kill SOPA/PIPA. But in the end, all of that enormous effort didn't change anything.

Congress Is Making the Same Systematic Mistakes. Procedurally, the advocates of SOPA/PIPA made several mistakes. First, the substantive proposals massively overreached. Legislators' fear of being SOPAed reduces the chance that error will recur, at least in the short run.

Second, SOPA/PIPA would have created some serious technical problems that the legislators simply did not understand. In response to this glaring lack of knowledge, Rep. Chaffetz suggested that Congress should "bring in the nerds" to advise Congress on the technical implications of its proposals. Despite that suggestion, Congress continues to regulate the Internet without adequate guidance from "the nerds." For example, despite protests from many expert technologists, the House passed a cyber-security bill (CISPA).

Third, SOPA/PIPA were drafted largely in secret by a few legislators and a coterie of industry lobbyists who have bought access to the legislative process; once this cabal was satisfied, the bills were introduced and then fast-tracked for passage. Yet, amazingly, Rep. Lamar Smith--a key figure in the SOPA battles--announced he was introducing a bill (the IP Attache Act) resurrecting a small part of SOPA after preparing the bill behind closed doors, and then intended to fast-track the bill. (The amount of overlap between SOPA and the IP Attache Act is complicated;this BNA report tries to unpack the issue). As Techdirt's Mike Masnick asked rhetorically, "Dear Lamar Smith & House Judiciary: Have You Learned Nothing from SOPA?" So for all of the whispertalk that legislators are running scared of being SOPAed, at least some legislators still think it's OK to procedurally navigate controversial bills in a way that (deliberately?) suppresses the public's ability to participate in the process.

Plaintiffs Are Getting SOPA's Remedies (or Better) in Court. As I indicated, SOPA/PIPA's demise preserved the status quo--but the status quo isn't so great for consumers. Without any new legislation, IP owners are already getting extraordinary remedies in court that compare favorably to the remedies contemplated by SOPA/PIPA. My co-blogger Venkat Balasubramani and I have cataloged some of these cases. Typically these cases involve foreign defendants who don't show up, meaning that the court only hears one side of the story (the plaintiff's) and basically gives the plaintiffs whatever they ask for. In many cases, this includes court orders that purport to bind third party service providers (who also aren't in court to defend their interests), even though Federal Rules of Civil Procedure Rule 65 doesn't allow judges to tell non-litigants what to do.

In my "favorite" example, involving a Chinese website allegedly selling counterfeit cigarettes, the court ordered Western Union (who wasn't in court and wasn't a defendant) to interdict all money buyers were sending to the website and put it into a special account for an unspecified period of time. In other words, buyers--who may not have realized they were buying counterfeit goods--weren't getting their ordered cigarettes but also weren't getting their money back. Compare an alternative approach, where the court could have told Western Union to reject the payments and simply return the money to the buyers. Without buyers or Western Union appearing in court to defend their interests, the court overly catered to the plaintiffs' interests. So much for due process.

Until judges start pushing back on plaintiff demands in these cases where defendants no-show, and until judges become more circumspect about their ability to reach non-litigants under Rule 65, who needs SOPA/PIPA? IP owners can synthetically achieve the same or better results without a new statute.

The Obama Administration is Implementing SOPA Even Though Congress Didn't Approve It. Even though Congress did not approve SOPA/PIPA, the Obama administration repeatedly has been tone-deaf to consumer concerns about SOPA and its underlying policies. Three examples of the Obama administration's efforts to create SOPA-like outcomes through its executive branch powers:

* Megaupload prosecution. On January 19, the day after SOPA/PIPA melted down and the copyright lobby was publicly grumbling that their years of campaign contributions weren't buying the patronage they expected, the Obama administration's Department of Justice loudly announced the criminal prosecution of a foreign cyberlocker--one of the types of websites that SOPA/PIPA nominally targeted. In effect, copyright owners convinced the US government (at taxpayer expense!) to enforce SOPA-like remedies even without SOPA on the books. Worse, as we've seen in the past 6 months, the Megaupload prosecution is deeply troubled, and the DOJ has not looked good at any step in the prosecution. Personally, I believe that the prosecution was lawless from inception, a point I explained more fully on my blog.

* Domain name seizures. For a couple of years, the Department of Homeland Security's Immigration and Customs Enforcement (ICE) division has been seizing (without any judicial oversight) hundreds and hundreds of domain names it thinks are used for infringing conduct. The bad news: ICE's legal authority for such domain name grabs is dubious at best. (PIPA and SOPA would have codified the government authority for these ex parte domain name seizures). Worse news: ICE has been acting on unverified claims from self-interested copyright owners. We learned, for example, that ICE seized Dajaz1's domain name based on an unverified report from the RIAA; and when ICE asked for supporting verification (after it had already seized the domain name), the RIAA didn't produce anything for an entire year--at which point ICE simply gave Dajaz1 its domain name back, without an apology or an explanation. The worst news: ICE's Dajaz1-related court proceedings were conducted in secret, meaning Dajaz1 could not see the court file or respond to it because, as near as we can, the file sat in a clerk's desk drawer rather than in the normal place where files are stored. Secret judicial proceedings where the defendant has no ability to see the charges or respond to them? That sounds more like a Kafka book than the country I know and love.

* "Voluntary" industry initiatives. Obama's "IP Czar," Victoria Espinel, has been actively negotiating "voluntary" industry agreements that replicate some of SOPA's key features.

First, Espinel helped broker a "voluntary" agreement where Internet access providers agreed to implement a "graduated response" program. Effectively, the access providers will build a system to process copyright owners' claims (which usually will be automatically generated) of copyright infringement via peer-to-peer file sharing. Each notice against a user will count as a "strike." When users get too many strikes, the Internet access provider will progressively subject the user to more stringent discipline, including potentially terminating the user's Internet access account completely. Users can protest the strikes, but only via a kangaroo court which is not designed to let users win. Corynne McSherry and I previously explained the anti-consumer aspects of the graduated response deal.

The fact that Internet access providers agreed to this deal is fascinating. They were already legally immunized from copyright infringement liability for users' conduct in 17 U.S.C. Sec. 512(a); they agreed to implement a technical system at a not-inconsiderable expense to them; and the ultimate remedy of firing their customers will cost them money too. One has to wonder just how hard the Obama administration leaned on Internet access providers to do something so clearly contrary to their interests; and one further has to wonder why the Obama administration would favor something designed to stack the deck against consumers. Perhaps not including adequate consumer representation at the table had something to do with that.

Second, Espinel brokered a deal where advertiser and ad agency industry groups "voluntarily" encouraged their members to adopt policies against displaying ads on websites that facilitate infringement--another key component of SOPA. This was a little easier sale than the graduated response deal. One of the recommended policy terms is that advertisers shouldn't pay publishers who run their ads alongside infringing content. Well, naturally, the advertisers weren't opposed to anything that would let them get advertising they don't have to pay for. More troubling is the apparent intent to develop a blacklist of allegedly infringing websites that advertisers should cut off. It remains to be seen if the private blacklist will offer an appropriate level of public accountability, transparency and due process.

In a related development, Espinel is also pressuring Yahoo, Google, AOL, and Microsoft to cut off allegedly infringing websites from their ad networks.

The graduated response system hasn't come online yet, and it remains to be seen just how vigorously advertisers will undertake their implied promise to police publishers who are engaged in infringing activity. So it's not clear if these government-brokered voluntary agreements will amount to much. But the fact that the Obama administration is going around to industry groups asking them to do what SOPA would have required or coerced them to do is a good sign that the Obama administration plans to implement SOPA if Congress won't.

One more data point showing that the Obama administration hasn't internalized the messages of January 18. Its trade reps, especially US Trade Representative Ron Kirk, have mishandled the latest trade agreement negotiations for the Trans-Pacific Partnership (TPP), committing the same sins that poisoned ACTA. Just like ACTA, all of the negotiations have taken place in backrooms, with no consumer representation but plenty of industry lobbyists around the table. Furthermore, the process has been not transparent at all (despite Kirk's twisted insistence otherwise, using a "day is night" definition of transparency). Drafts have not been made available to the public, so outsiders can only speculate what's even being discussed. As the EFF asked, "Is the TPP--Framed as a '21st Century Agreement'--the Best Way to Build a 21st Century Society?" More than anything, January 18 was about consumers rejecting backroom policy-making designed to bypass democratic governance. Yet, that's exactly what the Obama administration keeps doing, over and over again.

Conclusion

Franklin D. Roosevelt once said:

[L]et us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and Senators and Congressmen and Government officials but the voters of this country.

For one day, on January 18, we reminded our government of this fact. But the burden is on us--the voters--to make our voices heard again and again. One day isn't enough. If you don't like what you see from the system we have, you do have the power--and, I would argue, the responsibility--to remind your elected officials of your displeasure. In response to my unhappiness with some of my elected representatives' stances on SOPA and copyright issues, I've changed my votes in June--and my vote for President is up-for-grabs in November based in part on the candidates' stances on IP (an especially salient issue given how many times the Obama administration has sold out consumers on IP issues). If you believe the system needs fixing, I hope you'll send that message to the folks who are supposed to be working for you.

If You Want More

In April, I gave a talk that amplifies these themes. Watch the 75 minute video. The associated PowerPoint slides.

UPDATE: In July, I gave another version of the talk at a bar association event in Wisconsin. Stream or download.
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Part 2: Linkwrap

Problems with SOPA/PIPA

* Pinterest is a good example of an important new start-up that would never survive under SOPA/PIPA because a single copyright owner could shut down its service providers. (FWIW, Pintererst is also a good example of how the social networking space remains dynamic and competitive despite Facebook’s headstart).

* Techdirt: Website Censored By Feds Takes Up Lamar Smith's Challenge: Here's Your 'Hypothetical'

* Sen. Wyden: "If members of Congress better understood the central role that the Internet plays in their constituents’ lives – the hub through which Americans work, communicate, share, learn, create and enjoy entertainment – they would understand why their constituents fought so hard to protect it."

* Jack Balkin explains the freedom-of-speech problems with SOPA

* Gartner: Collective Punishment: SOPA and Protect-IP are Threats to NSTIC and Federated Identity

* Techdirt: The Sky is Rising.

What Happened and Lessons Learned

* Eriq Gardner: Why Hollywood Is Losing the Public Relations War on Piracy. He cites three mistakes:

Mistake #1: Much of the legislation was negotiated behind closed doors.
Mistake #2: The legislation has been defended on broad generalities and dubious statistics.
Mistake #3: Hollywood has ceded the high ground on being an innovator and defender of speech.

* The Wrap: Sunk! How Hollywood Lost the PR Battle Over SOPA

* Talking Points Memo: a timeline of how the opposition against SOPA/PIPA succeeded

* Hollywood Reporter: The SOPA War: A Frantic Call, an Aborted Summit, and Dramatic New Details on How Hollywood Lost

* News.com: How Republican opposition derailed SOPA and Protect IP

* EFF recaps some of the consequences of January 18, the Great Internet Blackout, a historical day in many ways.

* Larry Downes: Who Really Stopped SOPA, and Why?:

to imagine that the millions of Internet users who took to the virtual streets over the last few months were simply responding to the clarion call of technology companies misses the real point–dangerously so....The bitroots movement wasn’t led by Google. It wasn’t led by anyone. Even to look for its leaders is to miss the point.... it’s already clear that the losers in the PIPA/SOPA fight have learned nothing from the profound activation of Internet users....The only place to really engage your new adversaries is where the live—online, in chat rooms and user forums and social networks, on Twitter and Facebook and Tumblr and Reddit and whatever comes next. If you want to understand what went so horribly wrong with your business-as-usual efforts, you’ll need to take up residence in the digital realm and learn its new rules of engagement.

* Macworld: Who was really behind the SOPA protests?

* HBR: The Real SOPA Battle: Innovators vs. Goliath

* Yochai Benkler: Seven Lessons from SOPA/PIPA/Megaupload and Four Proposals on Where We Go From Here

* Lesley Harris' lessons from the SOPA experience:

1) the online revolt against SOPA and PIPA was not a command and control operation
2) The dramatic online mobilization carries lasting implications for Internet policy.
3) A more cautious approach requires a more open process.
4) Ignorance about how the Internet works is no longer an option. [Eric's comments: I miss the Office of Technology Assessment]
5) Overreaching Internet related legislation is no longer a successful strategy.
6) The Internet community is borderless, and the whole world will be watching.

* Guardian: The online copyright war: the day the internet hit back at big media

* Chris Dodd of MPAA talks about his lessons learned--none of which involve actually improving the products and services offered to consumers.

* Hollywood Reporter: Sundance 2012: MPAA's Chris Dodd Calls Piracy Defeat a 'Watershed Event'

* NY Times: Hollywood is running scared. Snippets:
- “The grass roots they can generate is, frankly, concerning,” Cary Sherman, chairman and chief executive of the Recording Industry Association of America, said of the Internet community.
- the Web’s anti-SOPA message is “sexier” than the facts offered up by Hollywood.
- “Downloading stuff on the Internet for free is cool,” said a person close to Viacom, who spoke on the condition of anonymity so as not to jeopardize his relationship with the company. “Our message isn’t cool.”

Related: Politico: Hollywood to make over piracy message for D.C.

* Nice post by Sen. McCaskill about rethinking PIPA.

Related: A politician actually read the law professor letter against PIPA (which 100 law professors, including me, signed)--and was actually persuaded!

Other Angles

* Content owners are cutting off their donations to Obama over SOPA/PIPA. One Hollywood insider said "he and his fellow moguls won’t give any more money if they keep getting taken for granted," i.e., if Obama takes the money and doesn't deliver the results Hollywood demands.

Related: MPAA's Dodd threatens Obama's financial support due to SOPA. But where can Hollywood turn? All of the Republican presidential candidates opposed SOPA too. It must be unsettling for Hollywood to feel like it has no friends in Washington DC. Now they know how we've felt for decades!

* What reaches more people: a Wikipedia blackout, or a tweet from Kim Kardashian?

* EFF: Dear Hollywood: An Open Letter to the Hardworking Men and Women in the Entertainment Industries

* NY Times: On TV, Antipiracy Coverage May Include a Disclosure

* Hollywood is apparently telling DC lobby firms to drop Facebook as a client.

* In realpolitik terms, the OPEN Act is also dead.

What’s Next

* David Post on SOPA and the future.

* Eriq Gardner: SOPA Defeat Is Not the End Of Hollywood's Ramped-Up Fight Against Piracy

Related: Crazy Cary Sherman NYT Editorial on SOPA. Techdirt response. Ars Technica response.

Also related: Boing Boing on Hollywood's unwillingness to let SOPA go.

More related: Hollywood Reporter: MPAA Chief Christopher Dodd Says SOPA War Isn't Over

* EFF: No more back room deals -- Users must have a voice in governing the Internet.

My take: it's not enough to bring the tech companies to the negotiating table (although that must happen too). Tech companies might inadvertently advance the interests of the Internet user community, but at best that's a happy coincidence. Policymakers need to hear from Internet users--the ones whose content will be removed; or the legitimate Megaupload users who had their data destroyed as a collateral damage of clumsily seizing the assets of a tech company.

* Ars Technica previews the rightsowners' policy wishlist. The only thing missing is a new pony. "Despite a reputation for working in smoke-filled rooms, rightsholders have generally been quite upfront about their enforcement goals. For a few years it involved suing everyone in sight, then it moved to graduated response, and now it means roping in all key Internet players."

* Mark McKenna: Don’t Stop at SOPA

* News.com: White House calls for new law targeting 'offshore' Web sites

* Techdirt: Congress Keeps Pushing Bad Copyright Bills: Senator Stabenow Wants To Expand Treasury/ICE To Go After 'Pirates'

* Reuters: "the Justice Department asked Congress for $5 million to hire 14 new employees, including nine attorneys, to focus on intellectual property crimes"

* Wired: Uncle Sam: If It Ends in .Com, It’s .Seizable

* Operation in Our Sites strikes again, this type cracking down on sites to stream the Super Bowl.

* ICANN: “Thought Paper on Domain Seizures and Takedowns”

* Press release: "ANA, 4A’s Provide Best Practices to Prevent Marketers’ Ads from Appearing on ‘Rogue’ Sites that Infringe Intellectual Property Rights." More: "Addressing online piracy and counterfeiting has been a strong priority for both the White House Office of the Intellectual Property Enforcement Coordinator (IPEC) and the Congressional International Anti-Piracy Caucus. They have urged ANA, the 4A’s, IAB and other industry groups to play an active role in this fight"

Adweek discusses efforts to build a private blacklist that could also be used by domain name registrars and payment service providers. Is that better, or worse, than a government-operated blacklist???

More on this point: Some ad networks plan to use technology to block ads from showing up on sites dedicated to infringement.

* News.com: White House pressures AOL, Google over pirate sites

* Ars Technica: Did the Secret Service take down JotForm because of a user-generated form? Techdirt’s coverage.

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Part 3: Index of Prior Posts

* Can Korean Copyright Owners Sue Australian Defendants in California? Judges Disagree--DFSB Kollective v. Bourne
* Trademark Trolling by SEO Consultant Provides Cautionary Anti-SOPA Tale (and Other Lessons)--Premier Pool Management v. Lusk
* Hermès Obtains (Ex Parte) $100M Award Against Alleged Counterfeiters--Hermès v. Does
* Comments on the Megaupload Prosecution (a Long-Delayed Linkwrap)
* Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont
* SOPA/PROTECT-IP/OPEN Linkwrap #2
* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 12:53 PM | Copyright , Derivative Liability , Trademark | TrackBack

August 14, 2012

No Liability for Takedown Notice that Results in Termination of Facebook Page -- Lown Cos. v. Piggy Paint

[Post by Venkat Balasubramani, with comments from Eric]

Lown Companies v. Piggy Paint, LLC, 1:11-cv-911 (W.D. Mich.; Aug. 9, 2012)

Lown and Piggy Paint are squabbling over “piggy paint” trademarks. Lown has a registration for “PIGGY POLISH,” and alleges that defendants’ “PIGGY PAINT NATURAL AS MUD” brand infringes on Lown’s mark. The court doesn’t explain the reasons for this, but the marks in question are for nail polish products. Pigs and nail polish don’t have a natural association in my mind from a branding standpoint, but I’m no branding expert. [Eric's observation: I'm not sure Venkat is an expert in nail polish, either.]

In response to the trademark infringement claims asserted by Lown, Piggy Paint asserted counterclaims based on Lown’s complaint to Facebook that apparently resulted in the “removal” of Piggy Paint’s Facebook page. Interestingly, Piggy Paint’s Facebook page had some 19,000 fans. The court describes Lown’s complaint as having requested removal of Piggy Paint’s page on the grounds of “copyright infringement.”

Tortious Interference: The court says that Piggy Paint’s counterclaim allegations do not state a tortious interference claim:

Piggy Paint has not shown any valid business expectancy. Although Piggy Paint alleges that it had 19,000 fans of the page, Piggy Paint has not and cannot show that the removal of the facebook page – which did not offer any means of placing orders or doing business – resulted in the loss of any business.

The court also says that there’s no malice on the part of Lown because it acted with “a desire to protect its own mark.”

Conversion: The court also says that there’s no conversion claim. Piggy Paint’s conversion argument was convoluted, and based on the theory that Lown wrongfully “exercised control over [Piggy Paint’s] mark . . . by removing [Piggy Paint’s] page from Facebook.” The obvious problem with this argument is that Facebook and not Lown was the one who removed the page.
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Not to belittle the products or brands involved, but how in the heck did Piggy Paint amass 19,000 Facebook fans? Anyway, this dispute is a great reminder that brand pages and anything similar on a third party platform are not assets you should ever (ever) bank on. (Twitter caused a media dustup when it suspended then reinstated the account of a British reporter based on a complaint from NBC.) Facebook has its own processes for when and how it responds to complaints, but regardless of whether its reaction was over protective or under protective of rights, it is insulated and can’t be held liable. (See the Complexions case, among others.)

It’s not easy to hold the party who sends the takedown notice liable, either. The court rightly treats the Facebook page as something that doesn’t support a tortious interference claim. The Phonedog case, which is still pending, came to a different conclusion, although the facts were slightly different and the case dealt with Twitter followers. (A part of the ongoing struggle in the courts as to how to treat social media assets. See also Eagle v. Morgan, Maremont v. SF Design Group, and the OMGFacts case.)

Interestingly, the court notes that Lown sent a "copyright" takedown notice. This raises the question of whether Piggy Paint could have asserted a claim under Section 512(f) for sending a wrongful takedown notice. Even assuming that Piggy Paint could have argued that the takedown notice should be covered under Section 512(f), given the high bar for liability under Section 512(f), a mistaken takedown notice would be unlikely to support liability.

In any event, damages would likely be difficult to prove, and plaintiffs don't often win these types of cases. See the Ground Zero museum case, the Pandora jewelry case, among others linked below. Ordonez v. Icon Sky is a rare case where damages were awarded for a takedown request that disrupted someone's web presence. This case and Ordonez may have reached different results because this case was contested and did not involve a default judgment. Another possibility is that the judge gave short shrift to the potential for commerce on a Facebook "fan" page as opposed to a more traditional web presence; or that the Ordonez case involved a model, whose web presence would ostensibly be more important to booking gigs and generating revenue. Either way, this case's result is probably in the mainstream and the Ordonez result seems like an outlier regarding damages for disruption of a web presence.

Other coverage:

Tom O'Toole: Court Says Facebook 'Fans' Don't Translate Into Protected Expectation of Business

Eric's Comments

This is a breezy opinion that isn't likely to persuade other judges. However, the core ruling on the tortious interference claim goes right to the heart of the battle over social media accounts. As Venkat notes, the judge says:

Although Piggy Paint alleges that it had 19,000 "fans" of the page, Piggy Paint has not and cannot show that the removal of the facebook page — which did not offer any means of placing orders or doing business — resulted in the loss of any business

Let's assume this is true and Piggy Paint can't prove any actual lost sales from the page's takedown. Even so, the Facebook page was clearly a major part of Piggy Paint's relationship with its customer base, and the page takedown unquestionably disrupts that relationship and Piggy Paint's ability to keep in touch with its audience. At minimum, the judge was quite tone-deaf to the practical implications of this page's takedown. But if disrupting a communication channel between a business and its fans isn't a legal problem, then a lot of the other social media account battles should fail as well. For example, this thinking moots the Phonedog case because the continued patronage of the account's followers is the only real asset at issue.

Venkat is also right that businesses are constantly at peril that their cyberspace presence on third party websites will simply vanish. For more on this, see my article on 47 USC 230(c)(2) and online account termination. In particular, I'm nervous about all of the businesses heavily investing in their Facebook pages. Don't go crying to the lawyers if those pages go POOF.

Posted by Venkat at 10:51 AM | Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Trademark

August 11, 2012

Breastfeeding Mom Can Sue Video Producer Despite Signing a Blanket Release--Sahoury v. Meredith

By Eric Goldman

Sahoury v. Meredith Corp., 2:11-cv-05180-KSH-PS (D. N.J. Aug. 2, 2012)

Sahoury consented to being video-recorded while breastfeeding for inclusion in an instructional video. She claims that the video producers orally agreed to two conditions: (1) the instructional video would only be shown on cable TV and the Parents magazine website, and (2) the video would not reveal the full name of Sahoury or her baby. However, she signed a blanket written release that didn't reference either promise. She says the release was presented to her after the taping, as she was in a rush to leave. Sahoury alleges that the producers broke both oral promises by posting the video to YouTube with her full name. She then alleges that rogue actors downloaded the video from YouTube and spliced the video of her breastfeeding into pornographic videos featuring a model who looked like her; and the rogue video referenced her full name and was distributed widely, ruining her vanity search results. To combat this, she hired a reputation management service.

Frustrated by the video producers' lack of pursuit against this rogue distribution, Sahoury sued the video producers. In this ruling, the court largely upholds her lawsuit against a motion to dismiss, mostly based on Sahoury's argument that she relied on the oral promises made by the producers. However, the court dismisses her publicity rights claim because using her name in connection with a freely available instructional video doesn't have enough commerciality.

From a legal drafting standpoint, it's interesting that the signed blanket release wasn't dispositive. The release might still work later in the case, but it didn't knock out the case on a motion to dismiss. She basically gets around the release by arguing procedural defects (presented after the video was shot, as she had to leave quickly to get her kid) and the contrary oral promises. Naturally, video/photo producers should never make oral promises to the depicted people that contradict the written releases. Here, it opens the door for the judge's outrage about Sahoury's treatment.

Putting aside the legal issues for a moment, I'm confused because Sahoury's allegations all rest on a questionable factual premise. It appears she thinks that she could avoid being reidentified if only her first name was used, but obviously this is wrong. As we've seen repeatedly, she could be easily reidentified by third parties in the comments or elsewhere online--especially as facial recognition technology improves. And, the ability of pornographers to extract and remix the video was equally possible if the video was on YouTube, on Parents.com or only shown on cable. In other words, by consenting to the production and distribution of a widely available video showing her breast-feeding, she was vulnerable to the porn splicing no matter what. Finally, as we saw in the Bev Stayart cases, a person's name can be splogged into web pages with adult content even if the person has done nothing supporting that association. So from my perspective, Sahoury never had a chance of achieving her putative objectives.

In light of where she is now, what can she do? (beyond reputation management and suing the initial video producers). She could try to go after the rogue video remixer and the various porn sites distributing the video. She would have to rely on privacy claims, as she doesn't own the video's copyright (more on that in a moment). Further privacy litigation against these third parties isn't likely to be productive. The rogue video remixer and porn sites aren't likely to be easy targets--they could be overseas, they are almost certainly judgment-proof, and there are just too many targets--and the privacy claims will be partially undercut by the wide public release of the initial video.

Similarly, legal efforts against search engines to de-index the porn sites linking to her name aren't any more productive. Bev Stayart has shown this is a losing proposition, and 47 USC 230 would also apply to any privacy-based claims.

In contrast to privacy claims, copyright infringement would provide Sahoury with a real cudgel. This is why we're seeing the troubling hack (most recently blogged in Scott v. WorldStarHipHop) of a photo/video subject acquiring the copyright to the visual depiction of them and then turning into a copyright plaintiff. Something like that would be a logical approach for Sahoury here. She can settle up with the initial video producers, get the copyright to the video or at least the portion with her in it, and then send copyright takedown notices not only to the republishing websites but to the search engines as well. I can't really applaud this approach, as it relies on the unwarranted power of copyrights over other legal claims.

Posted by Eric at 10:47 AM | Copyright , Derivative Liability , Licensing/Contracts , Publicity/Privacy Rights , Search Engines | TrackBack

August 06, 2012

Online Marketplace Isn't Liable for Bad Conduct by Merchants It Certifies--Englert v. Alibaba

[Post by Venkat Balasubramani]

Englert v. Alibaba, 11CV1560 RWS (E.D. Miss.; Apr. 27, 2012)

Englert and other plaintiffs purchased products found on alibaba.com. The products included “ExtenZe male enhancement, Vimax,VigRX Plus, Energy Wristband (Power Balance), and Razor Blades Fusion Power." Plaintiffs alleged that the products were counterfeit, or tampered with (some were seized by customs officials prior to delivery). The products were sold by third parties but displayed in a location on alibaba.com that allows third party merchants to display their products or services. Sounds like an easy Section 230 case for Alibaba, so where does it fit in? Alibaba, for a fee, allowed third party suppliers to list themselves as “Gold Suppliers”. As explained by its website:

A Gold Supplier is a paid membership for suppliers on the Alibaba website who have a serious interest in doing business with buyers worldwide . . . Gold Suppliers must complete an authentication and verification process by a third-party security service provider.

Alibaba’s website, however, stated that Alibaba:

disclaimed any warranty, express or implied, and liability whatsoever for any loss howsoever arising from or in reliance upon any information, action, or omission of any of its members on its websites.

Alibaba also had (an apparently leakproof) terms of service which explained that Alibaba is an intermediary, that it’s not responsible for the quality of any products or services, or any information provided by sellers.

The court dismisses plaintiffs’ claims for fraud, negligent misrepresentation, and breach of contract (plaintiffs didn’t contest Alibaba’s request to dismiss the breach of contract claims). The court says that plaintiffs’ claims do not allege any false statements on the part of Alibaba based on conferral of “Gold Supplier” status. The statements only refer to the sellers themselves (e.g., that they have a serious interest in doing business). Plaintiffs argued that this amounted to an implied representation that the products or services offered by “Gold Supplier” sellers are authentic, but the court doesn’t buy this argument. Moreover, the court looks to the terms of service and says that any understanding on the plaintiffs’ part that “Gold Supplier” status means that the underlying products or services would be of a particular quality is undermined by the unequivocal disclaimer of warranties and release of liability in the terms. Plaintiffs thus cannot allege that they relied on any statements from Alibaba, even to the extent the statements are false.

Alibaba kept its endorsement of third party sellers relatively narrow, and included robust disclaimers or warranties in its terms of use, thus nullifying the legal effect of its endorsement. It's a case worth noting from this standpoint, particularly for anyone who operates a marketplace or another ecosystem where an endorsement or rating system becomes important. Not particularly the best result for customers, who may or may not have thought that there was something special about "Gold Suppliers" vs. ordinary suppliers, but the court says in any event that a disclaimer in a leakproof terms of service trumps.

eBay Gets 47 USC 230 Dismissal of Products Liability Claim--Inman v. Technicolor
eBay Denied 230(c)(2) Defense Over Counterfeit Coin Policing
eBay Denied 230 Defense for Its Marketing Representations--Mazur v. eBay

Related:

Jeff Dotty, Choose Your Words Wisely: Affirmative Representations as a Limit on Section 230 Immunity, 6 Wash J.L. Tech. & Arts 259 (2011)

Posted by Venkat at 03:51 PM | Derivative Liability , E-Commerce , Licensing/Contracts , Marketing

August 02, 2012

Video Embedding Site Isn't a Contributory Copyright Infringer, But Sideloading Could Be Direct Infringement--Flava Works v. myVidster

By Eric Goldman

Flava Works, Inc. v. Gunter, No. 11-3190 (7th Cir. Aug. 2, 2012). Prior blog post on district court ruling.

myVidster is a "social bookmarking" website that allows users to link to videos hosted elsewhere on the Internet and thereby embed the videos in myVidster's user interface. Today, myVidster scored a big win at the Seventh Circuit, which held that it had not committed contributory infringement by allowing users to embed infringing videos via myVidster. It's hard to state just how amazing this ruling was for myVidster, because myVidster's principal, Gunter, often refused to honor takedown notices (on the dicey premise that anything posted somewhere elsewhere on the Internet was freely linkable) and thus presumptively failed to qualify for the 17 USC 512(d) safe harbor. Normally, when a website fails to honor takedown notices, judges come down hard on the website—just like the district court did in this case.

While the opinion offers good news for myVidster and possibly other linking websites, it does raise a concern about sideloading, i.e., grabbing a remote file that a user links to and making an archive copy of that file for further delivery. The opinion, without much elaboration and without using the term, breezily characterizes sideloading as direct infringement by the website for grabbing and republishing the remote file. This is almost certainly bad news for Pinterest, which (I believe) routinely engages in sideloading without a lot of explanation to its users, presumably premised on the idea that storing the remotely linked files is authorized by the user and thus qualifies for the 512(c) safe harbor. It remains to be seen what will happen if Pinterest's sideloading is directly challenged and Pinterest is around to defend its interests, but this ruling provides a warning that judges may not see it the way Pinterest does.

Judge Posner drafted this opinion, which means that (as usual for him) it reads like a barely edited first-draft. As usual for Seventh Circuit opinions, it makes a number of questionable and undefended offline analogies, makes assumptions about factual questions that could/should be remanded to the district court, barely engages with or cites to other legal precedent, raises and addresses issues that the litigants never raised, and is filled with gratuitous digressions (e.g., an uncomfortable discussion that gay ethnic pornography might be illegal, a contention neither party advanced; and an odd discussion about the reputational capital benefits of sharing content). If I were Flava Works, I would be hopping mad about the manifest procedural defects in the opinion (and motivated to seek en banc review). As a result of the opinion’s characteristic affectations, parsing this opinion is needlessly difficult, so I can only do so much to deconstruct the legal principles in it.

The main ruling is that the folks uploading infringing videos are direct infringers, but myVidster isn't contributorily liable for letting users link to those infringing videos. Posner unhelpfully rejects the standard Gershwin definition of contributory infringement; instead, he idiosyncratically defines it as “personal conduct that encourages or assists the infringement.” (In my opinion, the last thing we need is further proliferation of definitional standards for secondary infringement!). myVidster wasn't responsible for any infringing activity mostly because it didn't copy or distribute the infringing videos or help users copy or distribute the infringing videos.

Posner sidesteps the concerns from amici Google and Facebook about possible “tertiary” liability, saying myVidster didn’t commit contributory liability and that ends the inquiry. And because the opinion doesn’t find any secondary infringement, it says the 512(d) safe harbor for linking to infringing content is not needed. That turns out to be good news for myVidster because it had a low chance of succeeding with a 512 defense. myVidster avoided an inducement claim because it didn’t “invite” its users to link to infringing files.

Posner does separately address the 106 public performance right, but I found the opinion about that especially inscrutable. I'm hoping someone else can help me understand what Posner was trying to say and, in particular, why he discussed Fonovisa (an offline swap meet case) when discussing the performance right. Although the opinion cited the Ninth Circuit’s Perfect 10 v. Amazon ruling, I also don’t understand why Posner did not discuss the Ninth Circuit’s thoughtful and highly relevant discussion about public display and the difference between embedding content via links and hosting it. The only thing that is clear to me is that Posner thought that linking to infringing content is just like citing to someone else's content, and thus myVidster was too remote from any infringing activity to be responsible for it.

[Rebecca provided this helpful distillation of Posner's public performance discussion: "the site hosting the unlawfully copied videos is publicly performing them, but the watcher is not, and therefore assisting the watcher (without hosting the video) does not assist copyright infringement." If that's where he was going, it would have been interesting to see Posner analogize to and distinguish the Cablevision case.]

The district court's ruling against myVidster reflected, in part, Posner's own opinion in Aimster, which basically threw a P2P file-sharing service under the bus. I personally think Aimster was one of numerous P2P exceptionalist cases and therefore only has precedential value in the P2P file-sharing context. Here, Posner distinguishes his own Aimster opinion in a way that strongly supports that interpretation, even though he doesn't explicitly acknowledge that implication.

In particular, he invokes the troublesome methodology of determining a service's liability based on the percentage of infringing activity taking place on it, saying most (all?) files on Aimster were infringing but that wasn’t the case for myVidster. Comparing infringement rates is a realpolitik approach, but one fraught with peril because (a) those ratios can and do change over time, and (b) they are notoriously difficult to measure properly. Worse, here it appears Posner (or possibly his clerks) did his own ad hoc empirical assessment of myVidster’s infringement rates--on July 4, no less. Your honor, like the American public you serve, you deserve to enjoy the holiday! If the outcome will turn on the current percentage of infringing activity—which it shouldn’t—that question should be remanded to the district court for further fact-finding, not by having a septuagenarian surfing for gay erotica (on court computers?) on a national holiday.

Posner also doesn’t renounce his ill-considered discussion Aimster about the service’s name, where he castigated it for using the –ster suffix just like Napster. Of course, myVidster also uses the –ster suffix, but to no legal consequence this time. Another reason to relegate Aimster to the P2P exceptionalist branch.

While the secondary infringement ruling is favorable to myVidster, the opinion indicates that myVidster could be enjoined from allowing users to archive the linked videos as part of a paid membership service. myVidster had already discontinued that premium service, so the opinion doesn’t spend much time discussing it. Nevertheless, the opinion flatly says that the archiving videos from other sites qualifies as direct infringement, not secondary infringement, even if it’s presumptively initiated by the users themselves as one of the benefits of a premium membership. I think it’s erroneous to treat sideloading as direct infringement when it’s done at a user’s direction, but chalk that up as another thing this opinion got wrong.

This opinion is not an instant classic. This opinion touches on so many important questions in secondary copyright jurisprudence—e.g., the 512(d) safe harbor, liability for tertiary infringement, the legitimacy of UGC linking sites that often link to infringing files stored somewhere else, sideloading and more. Unfortunately, because the opinion’s drafting is a train wreck, I’m skeptical it will be all that important or influential. As a result, it’s a big win for myVidster and less helpful for everyone else.

Nomenclature watch: I believe this is the first appellate opinion to use the term “pay wall” (or “paywall”). The only other opinion I found using either term in Westlaw or Lexis was the district court opinion in this case.

UPDATE: Mike Masnick sees more good news in the opinion than I do.

Posted by Eric at 11:52 AM | Copyright , Derivative Liability | TrackBack

July 31, 2012

Backpage Gets Important 47 USC 230 Win Against Washington Law Trying to Combat Online Prostitution Ads (Forbes Cross-Post & More)

By Eric Goldman

[I've added some bonus content to the end of this Forbes cross-post]

In 1996, Congress enacted a powerful statutory immunity for user-generated content, located at 47 U.S.C. 230 ("Section 230"). Section 230 says that websites aren't liable for third party content except in three specific situations: intellectual property, communications privacy and federal criminal prosecutions. Over the past 16 years, courts have interpreted Section 230's immunity broadly, giving online providers a robust and predictable way to avoid liability for what their users say and do. As a result, Section 230 has become the foundation for the entire user-generated content industry--and all of the social welfare that goes along with it.

Despite these enormous social benefits, not everyone loves Section 230. With unfortunate frequency, state legislators consider enacting laws that conflict with Section 230's immunity.

Recently, the Washington state legislature enacted one such law in an overzealous effort to shut down online child prostitution. Even worse, the statute indirectly provided a roadmap for other legislatures to enact other laws that could eviscerate Section 230. Last week, in Backpage and Internet Archive v. McKenna, 2012 WL 3064543 (W.D. Wash. July 27, 2012), a federal judge rejected the Washington legislature's efforts, turning the case into a major victory for Section 230 and user-generated content.

Background

As part of a nationwide effort to combat "sex trafficking" and online prostitution, various regulators have tried to shut down online classified ads for "escorts" and other adult services. For many years, Craigslist was the leader for that kind of advertising, and in 2009 the Cook County (Illinois) Sheriff sued Craigslist for facilitating prostitution. A federal judge quickly rejected that lawsuit based on Section 230 because the sheriff was trying to hold Craigslist liable for third party advertisements. (Section 230 jurisprudence is clear that third party advertisements are just as protected by the immunity as other types of editorial content from third parties).

Despite that decisive ruling and the strong likelihood that Craigslist's activities were completely legal, attorneys generals from dozens of states kept hounding Craigslist for offering an "adult services" category. Eventually, despite having won in court, Craigslist gave up and shut down its adult services category.

While that gave the various anti-prostitution regulators a seeming victory, Craigslist's exit from the industry didn't change the underlying marketplace demand or supply for prostitution. As a result, the "escort" ads simply migrated elsewhere--largely to Backpage.com, affiliated with the Village Voice. As the ads migrated, so did the regulators' attention, and Backpage soon experienced the same regulatory fire that had been directed at Craigslist.

In 2011, Backpage won a lawsuit brought by a child prostitution victim on Section 230 grounds. Combined with Craigslist's Section 230, it was clear that any regulator seeking to shut down prostitution ads on Backpage--or any other web publication--would have to overcome Section 230 somehow.

The Washington state legislature thought it found such a workaround. Instead of holding Backpage liable for third party advertisements, SB 6251 imposes an age verification obligation on anyone that publishes online prostitution ads. Websites are criminally liable if they "know" they are publishing prostitution ads that depict underage models, but the statute says the websites have a criminal level of "knowledge" unless they can provide documentary proof that the depicted model is an adult. Thus, simply reviewing the ad and making a visual judgment of the model's age wouldn't satisfy the statute. This way, the statute criminalizes the website's failure to do its verification and record-keeping obligations instead of holding the website liable for the third party advertisements.

The Court's Ruling

In a thorough and thoughtful 39-page ruling, the judge preliminarily enjoins Washington from enforcing the law. (Previously, the judge had issued a temporary restraining order).

The judge said SB 6251 conflicts with Section 230 because (1) it imposes liability based on third party content, and (2) it gives websites a disincentive to monitor their website (in an effort to avoid the requisite "knowledge" that leads to criminal liability), something Congress was trying to encourage websites to do. Thus, by basing liability on a website's "knowledge" regarding third party content, the statute easily sets up the conflict with Section 230.

Washington tried to argue that Section 230 doesn't preempt state criminal prosecutions. While Section 230 expressly excludes federal prosecutions, the judge says it clearly immunizes websites from state criminal prosecutions based on third party content. See also the uncited Voicenet v. Corbett.

The judge enjoined the law on two other grounds as well. First, the judge says that the law probably violates the First Amendment, suggesting (among other reasons) that imposing a content pre-screening obligation on online publishers may cause too much self-censorship. The judge also questions why the legislature couldn't pursue a less restrictive statutory option of holding the advertisers, rather than third party publishers, liable for the advertisements.

Second, the judge says the law probably violates the Dormant Commerce Clause, a Constitutional doctrine that says only Congress, and not the states, can regulate interstate commerce. Personally, I think every state law purporting to regulate the Internet violates the Dormant Commerce Clause, but courts haven't reached that definitive conclusion yet. Nevertheless, this judge comes close, saying "the Internet is likely a unique aspect of commerce that demands national treatment." Thus, he correctly concludes that Washington's attempt to control Internet behavior in Washington would nevertheless cause Internet companies and users interacting wholly outside of Washington to change their behavior, something the Dormant Clause doesn't permit.

Implications

Perhaps we might consider age verification for prostitution ads an acceptable obligation in the abstract, but consider the implications. Other state legislatures could try to impose other types of verification and record-keeping obligations on user-generated content websites. For example, statutes could obligate websites to verify users' identities or geographic locations before allowing the users to publish content, or a statute could require websites to undertake specific obligations (or impose a general obligation) to verify factual assertions in content submitted by users. The statutes could then further impute bad knowledge to the website if they don't satisfy their verification and record-keeping obligations.

Following this basic regulatory structure, statutes like these could undo Section 230's basic immunity structure. They could make websites undertake costly and unwanted verification and record-keeping efforts, which could make it cost-prohibitive for user-generated content websites--especially new entrants to the market. The statutes could slow down and chill user contributions to the discourse. As I was quoted elsewhere in discussing this case, "imagine Twitter without real-time posting." Finally, the statutes could allow government prosecutors and private plaintiffs to hold websites liable for user content for erroneous verifications, resulting in crippling liability exposure. This ruling shuts down all of these potential statutory workarounds.

Unfortunately, a single federal district court ruling is hardly the last word on the topic (indeed, the Washington attorney general office's press release makes it clear they aren't finished with the matter). First, Washington might choose to appeal the ruling, although the opinion is solidly constructed and should fare well in the Ninth Circuit.

Second, state legislators will keep passing laws that conflict with Section 230. After all, state legislatures routinely and knowingly enact laws that obviously violate U.S. Supreme Court precedent, rationalizing that it's the legislators' job to pass laws and it's the judicial system's job to decide if those laws are constitutional. However, I don't see an easy way for state legislatures to work around the First Amendment and Dormant Commerce Clause deficiencies identified in this opinion, even if they could somehow work around the Section 230 conflict.

Third, the anti-online prostitution forces could rally to try to amend Section 230. Over the years, many special interest groups have talked about amending Section 230, but those efforts have rarely gone anywhere. I'd be surprised if this issue could lead to succeed where the other issues haven't. Amending Section 230 to address online prostitution would be a spectacularly bad idea for reasons I explained here.

For now, this opinion helps preserve the vitality of Section 230. That's something to celebrate.

Bonus: In a separate move, three Washington teenagers recently sued Backpage for facilitating child sex trafficking. See the News Tribune story. I'm still looking for a copy of the complaint, but on the surface it sounds just like the M.A. suit against Backpage, and I don't see it being any more successful at getting around the 47 USC 230 immunity.

UPDATE: Here is the complaint. J.S. v. Village Voice Media Holdings, LLC (Wash. Superior Ct. complaint filed July 27, 2012).

Bonus #2: The case library:

* Backpage Reply Supporting Preliminary Injunction
* Internet Archive's Reply Supporting Preliminary Injunction
* Washington's Opposition to Preliminary Injunction
* Attorney General's Opposition to Preliminary Injunction
* Motion granting Internet Archive's intervention
* TRO ruling. Blog post.
* Backpage's TRO motion
* Complaint
* Washington SB 6251 bill page and bill text

Posted by Eric at 09:08 AM | Content Regulation , Derivative Liability , Marketing | TrackBack

July 25, 2012

Franchisor Isn't Liable Under the TCPA for Franchisees' Text Message Campaign – Thomas v. Taco Bell

[Post by Venkat Balasubramani with comments from Eric]

Thomas v. Taco Bell Corp., SACV 09-01097-CJC(ANx) (C.D. Cal.; June 25, 2012)

Thomas allegedly received unauthorized text messages as part of an advertising campaign for Taco Bell's Nachos BellGrande ("[a] large platter of crisp, freshly prepared tortilla chips covered with hearty beans, seasoned ground beef, warm nacho cheese sauce, diced ripe tomatoes, and reduced fat sour cream"--I'm sure they taste as glorious as they sound).

The text messages in question were organized by the “Taco Bell Local Owners Advertising” association, an Illinois entity comprised of 12 owners of Taco Bell stores in the Chicago area. The Association retained ESW Partners, an advertising agency, who then contracted with ipsh!net, who actually sent the messages. Taco Bell Corp., the national franchisor, had some influence over the Association’s activities through a seat on the Association’s Board of Directors, and control of the pursestrings (the funds that were used by the Association for advertising were controlled by a division of the national franchisor). While the Association was free to conduct its own separate advertising, where funds from Taco Bell (the franchisor) were used to pay for a campaign, approval from Taco Bell was required. In this case, a division of Taco Bell ended up paying for the advertising campaign.

She sued several different entities in the chain alleging violations of the TCPA, but amended the complaint to name only two defendants: Taco Bell (the national franchisor) and the Association. The Association was dismissed on jurisdictional grounds. Another defendant was dismissed earlier on jurisdictional grounds as well. The key question was whether Taco Bell (the franchisor) could be on the hook for any alleged TCPA violations.

The court says that the TCPA imposes liability on someone who actually “makes” a call that violates the statute. While Thomas argued that the TCPA also imposes liability on someone on whose behalf the call was made (i.e., any party that “receives benefit from the text message”) but the court says that the language and intent of the TCPA does not envision derivative liability on such a broad standard. In the absence of a specific basis of vicarious liability, traditional (agency) standards govern. A principal-agent relationship, the court says, “means more than passive permission; it involves request, instruction, or command.”

The court says that Thomas’s evidence falls short in this regard. Thomas did not present any evidence that Taco Bell (the franchisor)

directed or supervised the manner and means of the text message campaign conducted by the Association, and its two agents, ESW and ipsh!. She presented no evidence . . . that Taco Bell created or developed the text message. Nor did she present any evidence . . . that Taco Bell played any role in the decision to distribute the message by way of a blast text.

Thomas argued that the existence of a policy under which Taco Bell would pay for the Association’s advertising demonstrated that Taco Bell controlled the advertising, but the court says that approval of the campaign is different from control over “the manner of marketing”. Thomas also argued that the presence of a Taco Bell employee on the Association’s Board of Directors and the fact that the employee cast a vote to approve this campaign also reflected the requisite control. The court says this is insufficient to create the type of agency relationship required for derivative liability under the TCPA. Thomas tried to marshal some other evidence in support of agency liability, but the court says this is all anecdotal and doesn’t reflect Taco Bell’s control over the means of marketing.

This could be somewhat of a blockbuster ruling under the TCPA. The big TCPA case out of the Ninth Circuit didn’t rule on derivative liability but made it painfully easy to sue anyone who sent an unsolicited text. (See Satterfield v. Simon & Schuster.) Incidentally, ipsh!, the entity that sent the messages in this case, was also involved in Satterfield and was actually a defendant in that case, but the Ninth Circuit did not delve into the relationship between ipsh! and Simon & Schuster from the standpoint of legal liability.

In the context of unsolicited text messages, Satterfield has been a boon for plaintiffs, and they have taken full advantage of the resulting litigation bonanza. We've blogged a bunch about TCPA cases, but this post from Tom O'Toole talks about a hockey team being sued for sending text messages ... to its fans!

The big question this case raises is whether this is just an instance of a plaintiff not having the right defendant available on the other side of the v., or whether it somehow changes things as far as plaintiffs’ attempts to hold advertisers—rather than their marketing agencies—liable. I would think it’s more of the former. Here, the plaintiffs sued multiple entities and at one point amended the complaint to name only the parent entity and the association. I'm not 100% clear as to why the plaintiff did not name ipsh. (It's possible plaintiffs settled with ipsh or there's some other explanation, other than the obvious issue of personal jurisdiction, for why the franchisor and association ended up being the only defendants.)

Interestingly, plaintiffs have been stymied consistently in trying to smack defendants with affiliate liability in lawsuits under CAN-SPAM. (See the cases mentioned in this post.) Might we see a similar dynamic play out in future TCPA lawsuits? (See also Anderson v. Domino's Pizza, Inc., et al., for a similar result under state law in a text spam case brought in Washington.)

FWIW, I predict this one will be appealed.
_________

Eric's Comments

Even though Ipsh wasn't in the courtroom, the ruling throws Ipsh under the bus, saying that Ipsh pushed the button on the campaign and therefore would be the prime mover behind any TCPA violation. If the campaign violated the TCPA, Ipsh would have been legally liable--perhaps along with other defendants, but possibly as the only defendant left holding the bag. Ipsh can try to put into place an airtight indemnity agreement with its customers (though those are rarer than unicorns), but this ruling can't be a confidence-booster about the vitality of its text-messaging business line. I further wonder if this ruling will spook the marketing services companies providing email campaign outsourcing? They are governed by a different statute, but they too are the ones who "push the button."

Meanwhile, assuming the facts are true, I don't understand how this text-messaging campaign got greenlighted given the obvious legal risks. Sure, it would be great to reach texting young adults who have the munchies via their most precious device, but text-messaging campaigns are always fraught with legal peril. When you add in the Grande legal costs of defending the resulting lawsuits--and the plaintiff lawyers love these kinds of lawsuits--the per-text-message costs of reaching 17,000 consumers never had a chance of being profitable no matter what the conversion rate of such ads. Plus, this isn't Taco Bell's first ride at the text-messaging litigation rodeo.

To me, the message is clear: text-messaging ad campaigns are lawsuit bait. Until the law becomes clearer and more favorable, marketers should permanently retire text-messages from their marketing campaign toolkits.

Posted by Venkat at 09:45 AM | Content Regulation , Derivative Liability , Marketing , Privacy/Security , Spam

July 21, 2012

Offering P2P File-Sharing Software for Downloading May Be Copyright Inducement--David v. CBS Interactive

By Eric Goldman

David v. CBS Interactive Inc., CV 11-9437 DSF (C.D. Cal. July 13, 2012). The complaint.

When the Grokster Supreme Court opinion came out in 2005, there was a lot of confusion about the relationship between copyright "inducement" and contributory/vicarious infringement. Did the Supreme Court announce a new basis of derivative liability, or was inducement just a subset of contributory infringement? We haven't gotten a crystal-clear answer over the years, but this case provides a resounding one: the court says the defendants in this case may be liable for inducing infringement even though they aren't liable for contributory or vicarious infringement. Because this case demonstrates that inducement can completely bypass the existing derivative liability scheme, it's troubling.

The entire lawsuit is crazy. CBS now owns Download.com, a CNET property. Download.com distributed P2P file-sharing software along with a lot of other software. Users who downloaded P2P file-sharing software then used it in unknown ways, but presumably some of them used it to infringe. This sets up a "tertiary liability" claim against Download.com, where the software users are (in theory) the infringers, the P2P software manufacturers are the secondary infringers, and Download.com is a tertiary infringer by supporting the secondary infringer who supports the direct infringer. In case you were wondering, as far as I can tell, Section 512 doesn't apply because Download.com wasn't hosting the software at a user's direction (their editors chose which software to host) and Download.com wasn't linking to third party websites to complete the downloads (the software was delivered off Download.com's servers).

The court understood the problems with tertiary liability. Relying heavily on Perfect 10 v. Amazon, the court grants the motion to dismiss the contributory and vicarious copyright infringement claims.

On contributory infringement, the court says that Download.com lacked specific knowledge of users' infringing acts. Download.com's general knowledge that users could infringe with P2P file-sharing software wasn't enough; and the fact that Download.com gave examples of software use to download copyright-protected files didn't change this element (more on this in a bit). The court further rejects that Download.com made a material contribution to the infringements because Download.com didn't offer any infringing files from its website, "Defendants could not take simple steps to stop the infringement" because stopping further software downloads wouldn't cut off infringement by the software already downloaded, and "courts have yet to find contributory liability based on a tertiary actor’s conduct."

On vicarious infringement, the court says:

Defendants control whether infringing third parties can access the P2P software through their site, but do not have the right to stop users from using the software to download copyrighted material illegally. Similar to the search engine in Perfect-10 Amazon, Defendants exercise control over their index and search results, curating the programs available through their services. This does not equate to control over direct infringement.

This result is consistent with courts' rejection of other tertiary liability claims. See, e.g., Elsevier v. Chitika and UMG v. Veoh (the ruling involving Veoh's investors).

OK, so far so good--no tertiary contributory or vicarious infringement. But then the court held that the plaintiffs nevertheless properly alleged an inducement claim based on the following allegations:

Plaintiffs allege that Defendants distributed several P2P programs, and reviewed the programs in relation to other P2P programs known for copyright infringement, such as Napster and Limewire....Plaintiffs also allege that Defendants posted videos to their websites demonstrating how to use specific P2P programs by searching for songs by copyrighted artists, and posted articles and how-to guides that included references to Napster, Limewire, and downloading copyrighted material.

Notice the inference here: Napster and LimeWire were "known for copyright infringement," so merely comparing a software program to those "bad" actors is verboten? Seriously? The defendants point out the possible free speech implications, but the court doesn't care:

Defendants here are alleged to have distributed specific P2P software, while simultaneously providing explicit commentary on that software’s effectiveness in infringing copyright. Such behavior moves beyond opinion into the realm of conduct and does not directly implicate any First Amendment issues.

The court then sends a strong--and harsh--message to Download.com that it may want to settle:

This is not a particularly close or challenging case for inducement based on the facts alleged. Here, Defendants are alleged to have taken the unusual and ill-advised steps of distributing software programs that are capable of widespread copyright infringement while simultaneously demonstrating how to infringe copyrights using that software and evaluating the various programs as to their effectiveness in copying copyrighted material....It would not be difficult to avoid liability by either (1) only providing editorial content without distributing the software or (2) distributing the software without demonstrating or advocating its use for violating copyrights. The Court is confident that most reasonable parties could find their way to accomplish their general goals without running afoul of inducement liability.

As far as I can recall, this is the first time an inducement claim has survived when the contributory and vicarious infringement claims were expressly rejected. Am I'm forgetting any case? I believe Arista v. LimeWire and Columbia v. Fung, two flagship inducement defense losses, never completely rejected the contributory or vicarious infringement claims even though their outcomes also turned on inducement.

This case illustrates an ongoing lesson that a defendant's advertising/marketing can affect the copyright analysis. Inducement allegations often focus on marketing copy, so it's essential that any player dealing with sensitive copyright issues run all marketing copy by competent counsel. This case further extends inducement to "editorial" content. As the court says, the principle is easy enough to comply with; indeed, I thought by now everyone knows that you should never provide examples demonstrating how to download files under copyright protection--just use public domain examples instead. If Download.com didn't run a tight enough ship, this judge appears to be eager to throw Download.com under the bus.

I would be more troubled by this ruling if I thought it had any applicability outside the P2P file-sharing context, but I doubt it. Instead, I see this case as yet another P2P exceptionalism case, where copyright law goes into a weird distortion field any time it gets near P2P file-sharing. Basically, P2P file-sharing software has developed such a toxic brand that judges treat anyone who touches it as evil. That's wrong as a matter of the facts--P2P file-sharing software can be used for both social beneficial and infringing activities--and should be wrong as a matter of law.

Still, any time inducement succeeds on a standalone basis, it just encourages more tertiary liability-style lawsuits both in and outside the P2P file-sharing software context. Just what we need.

Posted by Eric at 11:20 AM | Copyright , Derivative Liability , Marketing | TrackBack

July 15, 2012

Yet Another Case Says Section 230 Immunizes Newspapers from User Comments--Hadley v. GateHouse Media

By Eric Goldman

Hadley v. GateHouse Media Freeport Holdings, Inc., 2012 WL 2866463 (N.D.Ill. July 10, 2012)

One of the safest bets in Section 230 jurisprudence is that a traditional media publisher won't be liable for user comments to its website. Last year I posted some research on Section 230 cases and message boards, and I showed that traditional media publishers easily won all of the cases I knew about.

This case adds to the canon. In a brief opinion, the court easily finds that the Stephenson County, Illinois Journal-Standard isn't liable for a comment by pseudonymous user "Fuboy" implying that Hadley (apparently a local politician) had committed sex crimes. Hadley half-heartedly argued that because Fuboy's identity was unknown, it could have been a Journal-Standard employee. This argument is a truism, yet it can work with judges who are dislike Section 230 and want some reason to deny the motion to dismiss (see, e.g., Vo v. PissedConsumer and my discussion about this topic). However, this judge was properly unswayed, saying that, at most, the allegation would be "sheer speculation." Without any reason to bypass Section 230, the court grants the 12b6 motion to dismiss.

Related Section 230 cases (all easy defense wins):

* Spreadbury v. Bitterroot Library
* Delle v. Worcester Telegram & Gazette Corp.
* Miles v. Raycom Media
* Collins v. Purdue University

Posted by Eric at 07:12 AM | Derivative Liability | TrackBack

July 10, 2012

No Negligence Claim for Infringement via Shared Internet Connection (Preempted by Copyright Act) – Liberty Media v. Tabora

[Post by Venkat Balasubramani]

Liberty Media Holdings, LLC v. Tabora & Whetstone, 12 Civ. 2234 (LAK) (S.D.N.Y.; July 9, 2012)

A question that was floating around in the blogosphere was whether you can be sued for maintaining an open wi-fi connection where a third party engages in file-sharing using your connection. A district court judge in New York answered that question in the negative. (This case involved a shared internet connection, rather than open wi-fi, but this shouldn't change the result.)

Liberty Media sued Whetstone and Tabora, who were roommates. Liberty alleged that Whetstone “regularly pirat[ed] copyrighted content.” Liberty alleged that Tabora “knowingly participated and . . . declined to put a stop to Whetstone’s [alleged infringement,] despite having had the ability to have done so.” Although Liberty asserted claims for direct and contributory infringement against both defendants, it also asserted a claim for negligence aginst Tabora.

The court says that the negligence claim against Tabora is preempted by the Copyright Act:

[t]he right that Liberty seeks to vindicate by its state law negligence claim – the imposition on one who knowingly contributes to a direct infringement by another – already is protected by the Copyright Act under the doctrine of contributory infringement.

I initially read the order as dismissing the claims for direct infringement based on the fact that the pleadings didn't adequately state a claim for direct infringement against Tabora, but Marc Randazza (GC for Liberty Media) pointed out via email that the court dismissed the claims for direct infringement (with leave to amend) due to a discrepancy in the title of the work at issue. Although the court doesn’t squarely address Liberty’s claim for direct infringement against Tabora, it dismisses the complaint against Tabora in its entirety. This can be read to mean that the mere provision of an internet connection isn’t sufficient to satisfy the test for contributory infringement. This makes sense, as standing alone, it would be a pretty expansive theory of infringement to argue that merely making available an internet connection is sufficient to trigger liability for the acts of those using the connection.

See also: this post from EFF (Corynne McSherry) as to why this theory is unlikely to gain much traction and shouldn't even be viewed as debatable. The post also mentions a Section 230 barrier which the court did not need to reach in this case. (EFF also filed an amicus brief in this case, which you can access here.)

[Note: I corrected the last paragraph and added a parenthetical to the first paragraph.]

Posted by Venkat at 02:59 PM | Copyright , Derivative Liability

July 09, 2012

Google Sued Again for AdWords Trademark Infringement--Home Decor Center v. Google

By Eric Goldman

Home Decor Center v. Google, CV12-05706 (C.D. Cal. notice of removal filed July 2, 2012)

After the 4th Circuit's Rosetta Stone v. Google ruling, I wrote:

Just like Google got hit with over a dozen lawsuits in the wake of Google's Second Circuit "loss" in the Rescuecom case, I imagine a bunch of low-merit suits will follow this ruling too.

The floodgates haven't opened yet, but we're seeing more litigation against Google now than we did in the year prior to the Rosetta Stone ruling.

This lawsuit initially was filed in California state court in late May but just showed up on my radar when Google and Home Depot removed it to federal court. As with several other recent keyword lawsuits against Google, the plaintiff's real beef is with its competitor--in this case, Home Depot, who allegedly ran confusing ads promoting "HomeDecorators.com" but referencing "Home Decor Center" in its ad copy.

The complaint allegations aren't very clear (typical), but Exhibit A (especially pages 18-19 of the PDF) does show some oddities. For example, page 19 indicates that a search for "homedecorcentet.com" (note the typo) triggered an ad with a title of "HomeDecorCenter.com" and the remaining ad copy references and links to HomeDecorator.com. Page 18 is harder to read but shows a similar result. Especially given the typo, this type of ad probably isn't the result of some odd algorithmic ad generator, so I'm curious to learn more about how this happened. I believe the plaintiff could have stopped these ad copy references by filing a trademark complaint with Google, so I'm also curious how Google addressed the plaintiff's cease-and-desist (the complaint says nothing changed).

Of course, "Home Decor Center" is a very descriptive trademark. Indeed, just this January, they filed for trademark registration on the supplemental register. So even if all of the plaintiffs' allegations are true, among the many possibilities is that Home Depot and Google concluded that the plaintiff hasn't achieved secondary meaning or that descriptive fair use applies. As I've commented before, the trademark owners with the most marginal trademarks are often the most highly litigious. (See, e.g., one of my poster children for ridiculous trademark lawsuits, 1-800 Contacts).

Are more lawsuits like this in the works for Google? Almost certainly. Will lawsuits like this pose a problem for Google? No. I think both the CYBERsitter and Home Decor Center fit the "low merit" categorization I initially projected. In fact, it wouldn't surprise me if both plaintiffs voluntarily drop Google so they can conserve their resources to fight their real target, their competitor.

Minor personnel note: Gary Bostwick is handling this case for Google instead of Google's typical AdWords defense attorney, Margret Caruso.

Roster of pending AdWords trademark suits against Google:

* Jurin v. Google. [latest post]
* Rosetta Stone v. Google [latest post]
* CYBERsitter v. Google
* Home Decor Center v. Google

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

July 05, 2012

H1 2012 Quick Links, Part 2 (Copyright)

By Eric Goldman

* The scandal continues: Techdirt reports the Dajaz1 seizure was held up for months because the government was waiting for the RIAA to provide supporting evidence that never materialized. Wait, ICE seized an asset (that is used for free expression) based on unverified assertions…and then held onto it for A YEAR? Techdirt then reports: RIAA Tries To Downplay Its Role In The Feds' Unjustifiable Censorship Of Dajaz1. I cannot believe that no one has lost their job over this scandal yet. Shame on the Obama administration.

* Techdirt: Feds Tie Themselves In Legal Knots Arguing For Domain Forfeiture In Rojadirecta Case.

* The Supreme Court granted certiorari in Kirtsaeng v. John Wiley & Sons, Inc. Prior blog post.

Related: an appropriate denouement to Costco v. Omega: the court awards Costco nearly $400,000 in legal fees under the Copyright Act’s fee shifting provision. Prior blog post.

* Authors Guild v. Google, Inc., 2012 WL 1951790 (S.D.N.Y. May 31, 2012). Class certified in Google Book Search case. James Grimmelmann’s coverage.

* Brownmark Films v. Comedy Partners (7th Cir. June 7, 2012). Fair use parody supported early dismissal of copyright infringement claim. A case that never should have been brought.

* The Ninth Circuit asked for additional briefs in the UMG v. Shelter Capital case in light of Viacom v. YouTube. The parties’ briefs.

* The jury foreman’s remarks about Oracle v. Google (hint: it wasn’t a close call). Prior blog post.

* Is the long-running Perfect 10 v. Google case finally over? Prior blog post.

* Coverage of Cambridge University Press v. Becker (the Georgia State coursepack case) from James Grimmelmann and Inside Higher Ed.

* Graham v. Sotheby’s: California's resale royalties law violates the dormant commerce clause. This case has been appealed to the Ninth Circuit.

* Some pro se appeals: Ouellette to the Ninth Circuit (prior blog post) and Obodai to the Second Circuit (prior blog post). I suspect we’ll see not-for-publication memorandum opinions dismissing the appeals in both cases.

* Graduated Response coming into effect in July (but did it actually start July 1?). Prior blog post.

Relatedly, the Center for Copyright Information has launched its website. It probably would be more accurate to call it “The Center for Biased Copyright Maximalist Information.” Gigi Sohn explains why she joined the board. The EFF says we should "press reset" on the whole project. News.com coverage.

* Rebecca on the Big Brother/Glass Houses “reality” TV copyright lawsuit, CBS Broadcasting, Inc. v. American Broadcasting Companies, Inc., 2:12-cv-04073-GAF-JEM (C.D. Cal. June 21, 2012).

* Righthaven v. Democratic Underground:

1. That Counterclaimants Democratic Underground and David Allen have committed no volitional act giving rise to a claim for direct copyright infringement. Counterclaimants neither posted the excerpt nor encouraged the posting. Nor did they have any knowledge of the posting until after this suit was filed. See Religious Tech. Ctr. v. Netcom On-line Commnc’n Servs., 907F. Supp. 1361 (N.D. Cal. 1995) (direct copyright infringement requires “some element of volition or causation which is lacking where a defendant’s system is merely used to create a copy by a third party”); see also CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004) and Cartoon Network LP v. CSC Holdings, Inc, 536 F.3d 121 (2d Cir. 2008).

2. That the act of posting this five-sentence excerpt of a fifty sentence news article on a political discussion forum is a fair use pursuant to 17 U.S.C. § 107, and that the fair use doctrine provides a complete defense to the claim of copyright infringement from which this suit arose. Judgment on the Counterclaim is accordingly entered in favor of Democratic Underground and against Counter Defendant Stephens Media, LLC.

For this case, Managing IP recognized Fenwick & West and Electronic Frontier Foundation for the US Copyright Case of the Year. The judge also awarded another $131k fee shift against Righthaven

* More Righthaven:

- a judge transferred all of Righthaven's copyright interests to a receiver for auction
- two more Righthaven appeals dismissed.
- Righthaven v. Allec. Righthaven's copyright assignment agreement with Stevo Designs also failed to give Righthaven standing to sue.
- Steve Gibson of Righthaven threw outside counsel Mangano under the bus and claimed he can't act as Righthaven's lawyer in court (even though Gibson has made appearances as a lawyer for Righthaven before). Let the mocking of Gibson continue. It would be shocking if all of the Righthaven-associated attorneys emerge with their licenses unscathed.

* Stevo Design v SBR Marketing. Costa Rica website didn't infringe copyrights in US when plaintiff doesn't identify a single US user. Compare the DFSB litigation.

* Bell v Steele. (No 3) [2012] FCA 246 (16 March 2012). A successful threats action over a copyright demand letter in Australia.

* Maximized Living, Inc. v. Google, Inc., 2012 WL 1439034 (N.D. Cal. March 30, 2012). Defeating a 17 USC 512(h) subpoena doesn’t warrant a 17 USC 505 fee shift. The judge adopted the magistrate report, 2012 WL 1438988 (N.D. Cal. April 25, 2012). Prior blog post.

* MP3Tunes files for bankruptcy. CNET News.com. Techdirt. NY Times. Prior blog post.

* James Grimmelmann recaps Teller's copyright lawsuit over a magic illusion.

* LA Times on “mockbusters”—quickly and cheaply produced knockoff movies that “draft” off Hollywood blockbusters.

* NYT on rampant copying of gameplay among apps.

* If you buy a DVD that includes a code to download the movie, can the download code be sold separately? eBay says no. I don’t see how the First Sale doctrine helps buyers here. But then again, I don’t think copyright law lets people resell “used” CDs/DVDs if they’ve ripped the files to their computers.

* Raw Films, Ltd. v. John Does 1-15, 2012 WL 1019067 (E.D. Pa. March 26, 2012). Participating in a BitTorrent swarm means the lawsuit "arise out of the same series of transactions or occurrences and because common questions of law or fact seem to be raised with respect to all Doe defendants by virtue of the use of BitTorrent to transmit the same copy of the plaintiff's Work."

* Ars Technica: A debrief of Paramount executive Alfred Perry's law school speaking tour about online copyright.

* Overlaps between MPAA and the US government.

* NYT: Documentary Filmmaker Wins Against I.R.S., Which Saw Her as a Hobbyist. See Storey v. C.I.R., T.C. Memo. 2012-115 (U.S. Tax Ct. April 19, 2012).

* After creating a key online copyright precedent in their litigation against each other, CoStar and LoopNet are merging.

Posted by Eric at 10:22 AM | Copyright , Derivative Liability | TrackBack

July 02, 2012

Angie's List's Telephone and Fax Information Services May Be Immunized by Section 230--Courtney v. Vereb

By Eric Goldman

Courtney v. Vereb, 2012 WL 2405313 (E.D. La. June 25, 2012)

Courtney and Vereb are both psychiatric professionals. Vereb posted allegedly defamatory comments about Courtney to Angie's List in 2009. Courtney says he discovered the comments in December 2011 and contacted Angie's List, who told him that he should reply in the comments. In February 2012, Angie's List changed course and removed the comments for violating its policy that competitors can't opine about each other. Courtney then sued Vereb and Angie's List.

The court easily grants Angie's List's motion to dismiss based on Section 230. Although it's not a surprise, I believe this is the first time Angie's List has qualified for Section 230 immunity. (Admittedly, I don't fully understand what happened in Sieber v. Brownstone Publishing).

To get around Section 230, the plaintiff tried two arguments. First, he argued that Angie's List also distributed consumer reviews via phone and fax. The court rejects the argument:

This argument is creative, but unsupported by the case law; Plaintiff did not provide, and the Court has been unable to locate, cases in which a website which offers users the option of receiving hard copies of online information via telephone or fax was deemed to be “not merely just an ‘interactive computer service.’ “...The Court finds that excluding websites which offer this type of additional service from the protection of the CDA would be contrary to the policy behind the statute, which was “to promote the continued development of the internet” by allowing it to expand “unfettered by federal or state regulation.”

Wait, a memory game about Section 230 precedent? CHALLENGE ACCEPTED!

I also couldn't find any Section 230 cases regarding the distribution of content via fax or telephone (I'm not sure how the latter is done--by doing text-to-speech or by having an employee read the review?). However, I can point to at least two cases where a court said Section 230's immunity didn't apply to hard-copy publication of third party content that was received in electronic format (Parisi v. Sinclair dicta in n.3 and Curran v. Amazon). The court didn't cite to either.

Even though the court didn't explore this issue in any depth, I believe 47 USC 230 applies to telephone-based information services (e.g., 900 numbers) and possibly even content publishers that distribute via fax. The statutory language doesn't limit itself to websites; it covers "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server." The automated telephone or fax servers should satisfy the "computer server" requirement. With the growth in computer-like client devices, such as smartphones, does an automated fax or telephone service (especially text-to-speech) mean that those devices are engaged in "computer access"? It might.

The ruling on Section 230's applicability to fax and telephone information services is indeed novel and perhaps unpredecented. However, I doubt this case is the definitive final word on that topic.

Courtney's second anti-Section 230 argument is that Angie's List "requests that individuals, as part of their report generation process, provide additional content about the professional against whom they are report," which turns Angie's List into a first-party developer of the content. I didn't understand this allegation, but it seems to be a Roommates.com type attack on the immunity. Perhaps it means Angie's List tries to get users to provide structured objective data to complement their unstructured consumer review. The court rejects the argument:

Plaintiff fails to provide, and the Court has been unable to locate, binding case law establishing that a website's use of a questionnaire renders it a “content provider” of information provided in response to same.

Obviously the court cut some corners by saying it couldn't find *binding* caselaw about Section 230 and questionnaires. I believe that's a true statement given the paucity of Fifth Circuit Section 230 cases (I believe Doe v. MySpace is the only one?), but the court could have gotten into Carafano, Roommates.com and many related cases if it wanted to. The fact the court sidestepped that obvious issue by invoking the requirement of binding precedent tells us the judge just wanted this case off his docket.

I've mentioned before that doctors seem unusually litigious about consumer reviews, and this case provides more support for that proposition. For more on that topic, see my post Doctors' Online Reputation Management and Patient Reviews (Talk Notes from ASAPS Annual Meeting).

Posted by Eric at 09:41 AM | Derivative Liability | TrackBack

June 22, 2012

Another Bad Ruling for PissedConsumer on Trademark and 47 USC 230 Claims--Amerigas v. Opinion Corp.

By Eric Goldman

Amerigas Propane, LP v. Opinion Corp., 2012 WL 2327788 (E.D. Pa. June 19, 2012)

You may recall PissedConsumer, the site that solicits user gripes, SEOs the crud out of them, and then offers the griped business pay-to-play to downgrade the visibility of those reviews. Its litigation docket is heating up, and I've recently blogged on two prior rulings (Ascentive and Vo).

In a thoughtful but perhaps overly cautious opinion by Judge Buckwalter (a celebrated name in cyberlaw for his pro-free speech 1990s opinions in the CDA and COPA lawsuits), PissedConsumer couldn't get a motion to dismiss on Amerigas' trademark claims, and it couldn't get dismissal of other claims on 47 USC 230 grounds. The judge signals that Amerigas is likely to lose its claims later, but it gives both parties the opportunity to lavish money on their lawyers before the judge reaches the obvious denouement.

Trademark Claims

PissedConsumer makes a number of references to the trademarks of the businesses it reviews, including using the trademark in as a third level domain (i.e., a subdomain), including the trademark in its metatags and showing keyword-triggered ads. In its motion to dismiss, PissedConsumer took a number of whacks at the trademark claims:

Trademark use. The court says Amerigas properly alleged trademark use because "the Complaint alleges that Defendant uses Plaintiff’s “AMERIGAS” trademark in its website’s text, subdomain name, and metadata in connection with the sale of advertisements to Plaintiff’s competitors" and "for a fee, Defendant will allow businesses to address the complaints posted about them on the website."

I think this is a correct synthesis of current precedent (especially after Rescuecom), but it misses the broader context that we're talking about a review site selling ads to support its editorial content. I hammer this point in my Online Word of Mouth paper, where I argue that a more aggressive policing of the trademark use doctrine would create necessary breathing room for online word of mouth. Sadly, post-Rescuecom, we've seen little judicial interest in tightening the trademark use doctrine, creating the risk that review websites have to work much harder to fend off trademark attacks.

Nominative Fair Use. Unlike some of my trademark scholar peers, I'm not a big fan of nominative fair use as a protection for review websites because it's so hard to win on motions to dismiss (and isn't guaranteed on summary judgment, either). This case illustrates that point nicely. The judge says that it would be "premature" to rule on nominative fair use on a motion to dismiss. The judge wants to see more about the likelihood of consumer confusion; and while it's likely a "gripe site" (in the court's words) would prove that it had to use the plaintiff's trademarks in order to refer to the plaintiff, the court wants to see more about whether PissedConsumer took only what was necessary and accurately reflected the relationship between Amerigas and PissedConsumer.

Likelihood of Consumer Confusion. PissedConsumer won the Ascentive case in part for lack of consumer confusion. However, that was in response to Ascentive's preliminary injunction motion (when the burden is higher for the TM owner), not on a motion to dismiss. As a result, the judge says that he needs to give the plaintiff the opportunity for discovery. Even so, the judge says the Ascentive opinion was "well-written and very persuasive" and the judge expresses skepticism about Amerigas' chances of success:

This Court also finds it difficult to believe that a person searching online for Plaintiff’s products would be confused into thinking that a site called “PissedConsumer”—which contains an abundance negative reviews, offers no propane products of its own, and links to the websites of Plaintiff’s competitors—was in some way affiliated with or endorsed by Plaintiff

And later the judge says "Plaintiff may face a tall task in demonstrating that Defendant’s use of its mark is confusing."

Based on the judge's statements plus the Ascentive precedent, it seems pretty clear that Amerigas isn't going to win the trademark claim. This is exactly why a defense or doctrinal limit that succeeds on a motion to dismiss is so important. The judge has basically ordered the parties to spend tens or hundreds of thousands of dollars on discovery, all with the strong possibility of reaching the conclusion that Amerigas isn't going to win--a conclusion that's pretty clear right now. I'm sorry to keep rehashing the trademark use debate, but the trademark use doctrine could have given the judge an easy way of saving everyone a lot of time, money and heartache.

Along the way, the judge makes an odd statement: "If the unhappy purchasers of Plaintiff’s products are posting complaints on http://amerigas.pissedconsumer.com, Plaintiff’s competitors may be more likely to advertise on Defendant’s website, and Plaintiff may be more inclined to pay for Defendant’s reputation management services.

This is essentially an empirical claim, and I've never seen any empirical evidence supporting it (or, for that matter, refuting it). I'd be grateful for any thoughts.

Initial Interest Confusion. I keep trying to declare the initial interest confusion doctrine dead, but judges aren't cooperating! The judge says that initial interest confusion is still a viable theory in the Third Circuit (he's correct as a matter of precedent), and thus Amerigas can keep arguing it. Unfortunately, like the likelihood of consumer confusion, the judge does hint that it's probably going to fail later; the judge says "it may ultimately be difficult to establish initial interest confusion in this case." Once again, lots of wasted time and money ahead!

Contributory Infringement. In a small piece of good news for PissedConsumer, the judge says Amerigas properly failed to allege that advertisers were actually committing trademark infringement or that PissedConsumer knew of their infringing activity. Thus, Amerigas hadn't stated a proper claim for contributory infringement.

Along the way, the judge makes the following odd but interesting statement: "Plaintiff has not cited to—and the Court is unable to locate—any authority to support the proposition that use of a trademark in a hyperlink constitutes per se infringement."

47 USC 230

PissedConsumer asserted Section 230 against claims of unfair competition, tortious interference and unjust enrichment. To some extent, those state law claims just extend the trademark claim, e.g., Amerigas argued that it was unfair competition for PissedConsumer to merchandise the trademark as part of PissedConsumer's overall scheme. However, the court rejects the Section 230 immunity based on two alleged facts: that PissedConsumer allegedly authored some of the reviews in question, and that PissedConsumer allegedly controlled the ads on its site. The latter fact should be entirely irrelevant for Section 230 purposes, and it's almost certainly not true as a factual matter if PissedConsumer is a Google AdSense publisher. The former fact is just like the uncited Vo case, where the court similarly accepted the plaintiff's unsupported claim that PissedConsumer wrote the reviews to survive the motion to dismiss. I explained why that's not a good result in my blog post on the Vo case.

The judge says that PissedConsumer may reassert the Section 230 immunity later in the case, but a Section 230 immunity post-discovery is way less valuable than a Section 230 immunity on a motion to dismiss.

Implications

Judge Buckwalter's opinion is solidly constructed in the sense that it fairly applies existing law to the alleged facts. As taxpayers, we got our money's worth from this opinion. Nevertheless, it's clear Judge Buckwalter and other judges lack inadequate doctrinal tools to kill doomed cases early. In the end, this case is really about Amerigas trying to shut down negative reviews of its business. I don't like PissedConsumer's business model any more than you do, and they are not the best "face" for free speech online, but PissedConsumer is a platform for letting consumers have their say, and opinions that expose them to legal risk jeopardize important social values. See my Regulation of Reputational Information essay. In this respect, I could imagine other judges finding more doctrinal flexibilities to address the realpolitik of this situation. I can't blame Judge Buckwalter for failing to do so, but the result is unfortunate nevertheless.

Posted by Eric at 10:03 AM | Derivative Liability , Trademark | TrackBack

June 20, 2012

CYBERsitter Sues Google for AdWords Trademark Infringement

By Eric Goldman

CYBERsitter LLC v. Google, Inc., CV12-5293 (C.D. Cal. complaint filed June 18, 2012)

CYBERsitter competes with Net Nanny and ContentWatch (apparently both owned by the same entity, ContentWatch) in the Internet filtering software niche. CYBERsitter claims ContentWatch ran keyword ads triggered on its trademark with ad copy like:

CYBERsitter | Net Nanny.com
Protect Your Children with #1 rated CYBERsitter Software. Just $29.99

The complaint version I saw didn't include any screenshots of the ads in question, so we're missing some key info. Most obviously, the complaint implies, but doesn't specify, that the ads linked to netnanny.com. The complaint does alllege that netnanny.com doesn't sell CYBERsitter's competitive product.

Without the linked URLs, we can't assess the likelihood that these ads were placed by ContentWatch's affiliates instead of ContentWatch itself. I have a hunch these are affiliate-placed ads. That would make a big difference because ContentWatch probably isn't liable for ad buys by its affiliates. See 1-800 Contacts v. Lens.com.

Either way, I suspect CYBERsitter and ContentWatch can work out their differences. As I've documented many, many times, the money at issue in these competitive keyword ad buys usually comes nowhere close to the costs of litigation (just one of many examples), so the most economically rational thing for both parties to do is strike a settlement (even if imperfect) rather than shoveling cash over to the lawyers.

Now, about CYBERsitter naming Google as a defendant. This is the first time Google has been sued for trademark infringement over its AdWords product in over a year, so it's the first such lawsuit since the Fourth Circuit's Rosetta Stone v. Google opinion. Frankly, I expected more lawsuits would be filed against Google after the Rosetta Stone opinion, just like the Rescuecom opinion opened up the floodgates in 2009. Perhaps this filing is just the leading edge of a litigation tsunami, but I'm not feeling that way. This complaint doesn't explicitly make any gestures towards the Rosetta Stone opinion, and it felt to me like an idiosyncratic one-off.

Indeed, from my vantage, the Google piece doesn't look very well-prepared. CYBERsitter doesn't allege that it filed a trademark complaint with Google, which would have automatically blocked the CYBERsitter references in the ad copy it's complaining about, nor does CYBERsitter claim that it gave Google notice of the problem in any other way (C&D, etc.). Based solely on the complaint's allegations, CYBERsitter can't show that Google knew there was a problem at all. If CYBERsitter didn't give Google a chance to fix the problem pre-litigation, I doubt a judge will be very supportive of CYBERsitter.

Furthermore, while ContentWatch might be pliable, especially if its affiliates went rogue on it, Google will fight this case with everything it has. I've never understood why plaintiffs choose to bring into their lawsuits a Big Dog that mints money when their beef is just with a competitor. The Wealthy Big Dog will fight to the death and has the resources and determination to overwhelm the little guy, or at least wound the little guy seriously (like leaving CYBERsitter with fewer trademarks than it started the litigation with--see, e.g., American Blinds). Given the sheer irrationality of bringing Google into a garden-variety competitor dispute, I'm laying odds that CYBERsitter will simply drop Google from the lawsuit without getting any concessions from Google--just like Rescuecom and American Blinds and Parts Geek and numerous other challengers have done.

Process note: while preparing the post, earlier today, I emailed both CYBERsitter's lawyer and ContentWatch's PR person for comments about this lawsuit. I haven't gotten a response from either, but I'll update the post if I do.

[Update: CYBERsitter's lawyer declined comment to me but provided some perspectives to the National Law Journal.]

Related suits: The roster of currently pending trademark lawsuits against Google regarding AdWords (I am resetting this roster to eliminate all of the post-Rescuecom cases that Google has resolved):

* Jurin v. Google. Jurin appears to be proceeding pro se again, so his odds of success keep going down.
* Rosetta Stone v. Google [latest post]
* CYBERsitter v. Google

Note #1: the FPX class action lawsuit voluntarily dismissed with prejudice shortly after Google defeated class certification.
Note #2: Google and Yahoo were dismissed from the Pathak case May 25, 2011 for Pathak's failure to serve them.
Note #3: for now, it looks like Google is out of the Groupion v. Groupon lawsuit because Groupion lost its substantive case against Groupon.

Posted by Eric at 03:06 PM | Derivative Liability , Search Engines , Trademark | TrackBack

Section 230 Doesn't Protect Employer From Negligent Supervision Claim--Lansing v. Southwest Airlines. Warning: Ugly Opinion

By Eric Goldman

Lansing v. Southwest Airlines Co., 2012 IL App (1st) 101164 (Ill. Ct. App. June 8, 2012)

Overview

This is a bad opinion. The court reaches the correct result that 47 USC 230 doesn’t immunize an employer for an employee’s activities. However, in reaching that fairly obvious result, the opinion—completely gratuitously—denigrates Section 230 in ways that seem designed to shrink Section 230's footprint in other types of cases. Making the immunity more limited as binding Illinois law will lead to plenty of unnecessary and costly mischief with no countervailing benefit. As a result, this opinion would benefit from an appeal to the Illinois Supreme Court to clean up the doctrinal sloppiness, even if the Supreme Court affirms the substantive ruling.

Background

Although the court speaks in euphemisms, this long-running case (since 2007) apparently involves a love triangle. McGrew was a Southwest Airlines flight attendant. It seems that both McGrew and Lansing had competing interests in the same person. In efforts to allegedly thwart his rival, for over 2 years starting in 2004, the plaintiff alleges that McGrew:

used his access to defendant's resources to make harassing telephone calls and send over 1,000 harassing and threatening text messages or e-mails to plaintiff. According to plaintiff, McGrew threatened that, as a supervisor, he knew when people made reservations on his flights and would prevent plaintiff and his family members from flying by placing them on terrorism "no fly" lists with defendant and its affiliated airlines. Further, McGrew emphasized his position and authority with defendant, threatened to "haunt" and "completely ruin" plaintiff, and asserted that no one would believe any complaints plaintiff might lodge against McGrew. As time progressed, McGrew's messages and e-mails became increasingly violent, mentioned plaintiff's family members by name, and were transmitted directly to plaintiff's family members and professional colleagues.

Lansing alleges that he contacted Southwest five times in 2005 and 2006 regarding McGrew's behavior, but Southwest didn't terminate McGrew until August 2006.

Section 230 and Employment Law

The trial court dismissed Lansing's lawsuit against Southwest based on Section 230. While I appreciate the sentiments behind that ruling, it's probably wrong. I’ve consistently argued that Section 230 ordinarily shouldn't apply to lawsuits against employers for employees' activities. We have only one case where that argument worked--California's 2006 Delfino v. Agilent case--and that was an awkward opinion at best. (This opinion denigrates it as unpersuasive).

After all, the legal identity of employees and employers is usually co-extensive; which means that for Section 230's purpose, each employee's materials should be treated as first-party content of the employer. Now, employees sometimes do rogue things, but Section 230 doesn't need to police that; the substantive doctrines (such as negligent supervision) should have internal limits (scienter, causation, etc.) that restrict plaintiff overclaims for rogue employee behavior.

The Appellate Opinion

The appeals court starts off on a good note, saying Southwest Airlines meets the threshold consideration for the immunity's eligibility: "an employer like defendant qualifies as a provider or user of an ICS because defendant uses an information system or service that multiple users, like defendant's employees, use to access the Internet."

Then, in rejecting Southwest's argument that Section 230 should be interpreted broadly, the court gets into serious trouble:

We agree with the analysis of the Seventh Circuit that section 230(c) "as a whole cannot be understood" as granting blanket immunity to an ICS user or provider from any civil cause of action that involves content posted on or transmitted over the Internet by a third party. Craigslist, Inc., 519 F.3d at 669, 671. Neither section 230's title ("Protection for private blocking and screening of offensive material") nor subsection (c)'s caption ("Protection for 'Good Samaritan' blocking and screening of offensive material") suggests that section 230 provides immunity for a negligence action based upon the defendant's failure to supervise its employee.

Oh no. Not this again. Are courts really going to determine the scope of a seminal statutory immunity by reference to the titles/header? Ugh.

In support of this, the court partially responds to strawmen positions. I didn’t check Southwest Airline’s briefs, but generally no one asserts that Section 230 grants “blanket immunity to an ICS user or provider from any civil cause of action that involves content posted on or transmitted over the Internet by a third party.” That would be factually wrong. For example, Section 230 has three important statutory exclusions (IP, federal criminal prosecutions, ECPA and state law equivalents). But except for the statutory exclusions, Section 230 does, in fact, immunize intermediaries for “any civil cause of action that involves content posted on or transmitted over the Internet by a third party.” The caselaw is entirely clear on this—and even the 7th Circuit Craigslist case supports that realpolitik conclusion.

The court keeps digging its hole (and, to mix metaphors, hacking down strawmen):

The CDA was not enacted to be a complete shield for ICS users or providers against any and all state law torts that involve the use of the Internet. Such an overly broad interpretation of the CDA is inconsistent with the statutory purpose to encourage the restriction of objectionable or inappropriate online material.

The first sentence is another strawman. Of course Section 230 is not a “complete shield for ICS users or providers against any and all state law torts that involve the use of the Internet.” So what?

On the second sentence, the court totally whiffed on the “statutory purpose.” The judges should reread Section 230(b), where Congress explicitly lays out its policy objectives for Section 230. Section 230 (b) doesn't once mention the goal of restricting access to objectionable/inappropriate material online. Indeed, while Section 230(c)(2) does seek to advance that goal, Section 230(c)(1) doesn't have any language of the sort.

Sadly, this court got befuddled by the cruft in Easterbrook's Seventh Circuit opinions where Easterbrook tried to collapse 230(c)(1) and 230(c)(2). This was a wild statutory reading that I believe no other court has agreed with. But here's a state appellate court locking into its binding statutory interpretation a goal that Congress never actually expressed--and that conflicts with Congress' expressed policy goals. Great…

The court tops off this mess by concluding that the negligent supervision claim doesn't treat the employer as the publisher/speaker of the rogue employee's emails and texts. For example, the court says "holding defendant liable for its failure to supervise its employee after defendant had received notice of the employee's wrongful conduct does not treat defendant as if it were the publisher or speaker of the alleged e-mails and texts."

Superficially, that's true, but it misses the key point: negligence claims synthetically impose accountability for someone else's speech, and that's exactly what Section 230 is designed to preempt. Indeed, the seminal Zeran v. AOL case was a negligence case quite similar to this one: Zeran alleged that AOL was negligent in several respects, including failing to cut off the anonymous tortfeasor who was harassing Zeran. And the Ninth Circuit's Barnes v. Yahoo ruling--a case that Yahoo partially lost--thoughtfully reiterated that Section 230 preempted a tort claim for "negligent undertaking" (in that case, the failure to promptly withdraw content). The court unpersuasively tries to distinguish Barnes:

plaintiff's theory of liability is not based on defendant allowing McGrew access to the Internet to publish inappropriate and defamatory electronic messages and then failing to either monitor his messages or prevent them from being sent or somehow remove them. Rather, plaintiff, seeks to hold defendant liable for failing to investigate plaintiff's complaint about McGrew's wrongful conduct, reprimand him, and timely suspend or terminate his employment. Specifically, plaintiff alleged that he repeatedly notified defendant that McGrew was using his position of employment with defendant and defendant's equipment and resources to harass and threaten plaintiff and his family, friends, and professional colleagues. Clearly, the duty plaintiff alleges defendant violated is not derived from any behavior by defendant that is similar to publishing or speaking.

Replace the concept of “employment” with “user relationship” and you’ll see how the court’s logic is completely inconsistent with the precedent. Every plaintiff wants to argue that it’s not suing for a user’s posts but for the website’s negligent failure to terminate the user or remove the posts—and many plaintiffs have done exactly that to attack Section 230, with no success. I can’t list all of the "I'm just arguing negligence" cases completely, but start with cases like Doe v. MySpace from the Fifth Circuit and the related Doe II v. MySpace from California to see how the courts have recognized, and then emphatically rejected, a negligence claim as an impermissible backdoor bypass to Section 230’s publisher/speaker prong. (There are so many others, I’m just citing two cases off the top of my head).

Instead of screwing up the publisher/speaker prong, the court should have said that, for Section 230 purposes, an employee’s content is first-party content to the employer and therefore Section 230 doesn’t apply. See a related example in the context of a message board moderator: Cornelius v. DeLuca (holding a website operator liable for its agents’ acts). This is counterintuitive because McGrew was allegedly a rogue employee, in which case his emails and texts had nothing to do with advancing his employer's interests. Compare Maypark v. Securitas Security Services USA; Amira Jabbar v. Travel Services. Treating Lansing's allegations as true, it's logical to ask the question why Southwest didn't do more to rein in McGrew after Lansing complained, but this isn't a Section 230 issue because of the principal's presumptive responsibility for its agents' actions. Perhaps we'd be better off if Section 230 jurisprudence said categorically that employers can't claim Section 230 for employee activities because of their common identity. On the plus side, that would keep courts from doing a gratuitous Section 230 sideswipe like this court did.

Implications

This opinion is good law on the question of Section 230’s lack of applicability to employer’s liability for their employees’ activities. So long as other courts restrict their reading of this opinion to that specific holding, no damage has been done. But the rest of the discussion—gratuitous, poorly researched, hyperbolic dicta—is not good law and should never be cited favorably by another other court.

Worse, the opinion may falsely encourage plaintiffs to think they have a chance to end-run Section 230 in Illinois state court. It exacerbates the implicit encouragement that Judge Easterbrook gave Illinois plaintiffs with his sloppy Doe v. GTE opinion and the follow-on “I was right in Doe v. GTE, dammit!” opinion in the Craigslist case. But the reality is that Illinois plaintiffs haven’t succeeded in getting around Section 230 (see, e.g., Dart v. Craigslist, a particularly spectacular plaintiff failure), and they won't succeed in the future either, so plaintiffs will be wasting their time—and defendants’ time and money—chasing this fool’s gold. For keying up those unnecessary resource allocations, fie on this appellate panel for going where they didn’t need to go and weren't prepared to go properly.

This opinion reinforces the fears that some Section 230 enthusiasts have expressed over the years that defendants are over-asserting the immunity, creating the opportunity for a judge to undercut the immunity generally while disposing of the weak Section 230 argument. That’s exactly what happened here. Southwest Airlines’ hard-to-support Section 230 argument was so easy for the court to knock down, it felt emboldened to say more than it needed to—to the detriment of all of us.

Posted by Eric at 09:46 AM | Derivative Liability | TrackBack

June 19, 2012

First Post-Viacom 512(c) Opinion Doesn't Look Much Different--Obodai v. Demand Media

By Eric Goldman

Obodai v. Demand Media, Inc., 2012 WL 2189740 (SDNY June 13, 2012)

This is the first substantive ruling I've seen interpreting the Second Circuit's Viacom v. YouTube ruling. (The Viacom ruling was also discussed in the Ouellette case, but that was tangential to its main discussion). The good news is that the opinion looks pretty much like it would have looked before Viacom v. YouTube. The bad news is that the case was a layup victory against an outgunned pro se plaintiff (who is also unsuccessfully sued YouTube), so we don't really learn much we didn't know. The ugly news is that even at a comparatively svelte 17 pages, the opinion remains an unfortunately long read compared to brief and to-the-point Section 230 opinions.

Obodai claims that a Cracked.com user, "socialway," published 32 items to his Cracked.com profile that infringed Obodai's copyrights. Apparently Obodai never sent 512(c)(3) takedown notices. Nevertheless, after Obodai filed his complaint but before he served it, Cracked.com apparently found out about the complaint, treated it as a 512(c)(3) takedown notice, and removed the 32 files. Thus, Obodai came into the court with the virtually untenable legal position that he didn't send proper takedown notices but the service provider removed the files anyway. In the modern era, plaintiffs like this never win their lawsuits.

Still, Obodai tried many of the standard arguments to disqualify Cracked.com from the online safe harbor. These arguments go nowhere, and Cracked.com easily gets summary judgments. Some of the facts Obodai asserted that had no impact with the judge:

* Cracked.com ran keyword-triggered ads next to socialway's posts
* Cracked.com used "Tynt" to measure search engine traffic to its pages
* Cracked.com has received many other takedown notices
* Cracked.com permitted "unprotected syndication or distribution and display acts." The court interprets this to mean that "Cracked permitted users to post and share content" analogous to the activities in Viacom and Wolk.

All of these assertions result in a resounding "thud."

Obodai also tried to argue that Cracked.com engaged in willful blindness. Expect to see this argument addressed in every 512(c) case for at least the next 5 years. Obodai alleged:

* "defendant designated a copyright agent as a means of ensuring its willful blindness to infringement." The court replies that the statute contemplates designated agents, so this can't evidence willful blindness.
* a Cracked.com staff member infringed a third party copyright. The court replies that even if true, infringement of a third party's copyright has no bearing on the plaintiff's copyright claim.

Putting the details aside, this case doesn't really teach us much. For the past 14 years, the rule has been that responsible plaintiffs send proper 512(c)(3) takedown notices, and responsible service providers respond expeditiously. Obodai's failure to hold up his end of the bargain doomed his case.

Posted by Eric at 09:07 AM | Copyright , Derivative Liability | TrackBack

June 06, 2012

Backpage Gets TRO Against Washington Law Attempting to Bypass Section 230--Backpage v. McKenna

By Eric Goldman

Backpage.com, LLC v. McKenna, 2:12-cv-00954-RSM (W.D. Wash. June 5, 2012). The complaint. Backpage's TRO motion.

As part of states' ongoing crusade against online prostitution ads, earlier this year Washington enacted SB 6251, captioned "Regulating advertising of commercial sexual abuse of a minor." The bill page. The actual bill.

The law has two main provisions. First, it defines a new crime of "advertising commercial sexual abuse of a minor," which occurs when a person "knowingly publishes, disseminates, or displays, or causes directly or indirectly, to be published, disseminated, or displayed, any advertisement for a commercial sex act, which is to take place in the state of Washington and that includes the depiction of a minor." Second, the defendant can't claim ignorance of the depicted individual's age as a defense, but it sets up a safe harbor when the defendant "made a reasonable bona fide attempt to ascertain the true age of the minor depicted in the advertisement by requiring, prior to publication, dissemination, or display of the advertisement, production of a driver's license, marriage license, birth certificate, or other governmental or educational identification card or paper of the minor depicted in the advertisement." Thus, the law both targets the publication of prostitution ads and imposes a de facto age verification and record-keeping requirement for publications running such ads.

Although the statutory language doesn't say so explicitly, the law was intended to attack Backpage for not doing enough to screen out prostitution ads. Thus, the law seeks to bypass Backpage's obvious Section 230 immunity for the ads submitted by its users.

In response, Backpage sued the state to prevent enforcement of the law, scheduled to take effect this coming Thursday. It appears the state didn't contest the TRO request. Yesterday, the court granted Backpage's TRO in a short and mostly non-substantive ruling. The court wrote:

Backpage.com has shown a likelihood of success on the merits of its claim, pursuant to 42 U.S.C. § 1983 and the Declaratory Judgment Act, 28 U.S.C. § 2201, as well irreparable harm, the balance of equities tipping strongly in its favor, and injury to the public interest, justifying injunctive relief.

Getting an uncontested TRO may have been Backpage's easiest step. It will be interesting to see if this criminal statute has enough existing circumscriptions (such as its scienter pseudo-requirement) to survive the constitutional and federal preemption challenges, or if the court imposes some limitations into the statute to exclude intermediaries like Backpage, or if the court will just toss the legislation altogether (as I've argued before regarding all state-level attempts to regulate the Internet). The court scheduled the next hearing for June 15. Obviously this litigation will be worth watching.

June 04, 2012

"Hot Topics in Internet Law" Talk Slides

By Eric Goldman

This weekend I presented on "Hot Topics in Internet Law" at the San Francisco IP Law Association's Spring Seminar in Healdsburg. My talk slides. A few photos from the trip. As I've mentioned before, I find "hot topics" talks unusually challenging to prepare--they take much more time than normal talks, they are hard to organize, and they have a high risk of preemption by prior speakers. In addition to quick coverage of a number of topics, I focused on 5 broader topics (I only addressed 3 in the time I had):

* intermediary deputization
* consumer reviews
* social media account disputes
* trolling
* new gTLDs

Posted by Eric at 02:24 PM | Copyright , Derivative Liability , Domain Names , Publicity/Privacy Rights , Trade Secrets , Trademark | TrackBack

June 01, 2012

PissedConsumer Denied Section 230 Immunity and Can’t Shake Extortion Claim—Vo v. Opinion Corp.

By Eric Goldman

Vo Group v. Opinion Corp., 8758/11 (N.Y. Sup. Ct. May 22, 2012)

PissedConsumer is a consumer review site occupying the same market niche as Ripoff Report. It only wants negative consumer reviews of businesses (as signaled by its name), and its basic business model is to rank the negative consumer reviews highly in Google search results and then charge the businesses money to take the edge off that indexing. Vo Group claims it got snared in PissedConsumer’s scheme and allegedly chose not to pony up the requested cash ($5k) to PissedConsumer. Instead it sued PissedConsumer for a potpourri of claims. PissedConsumer moved to dismiss the lawsuit, and the resulting opinion is a mixed bag. Some highlights:

Defamation. Regarding Vo’s defamation claims, PissedConsumer defended on 47 USC 230. In one of the most important cyberlaw rulings of 2011, PissedConsumer won a 230 defense in the analogous Ascentive case, but the court doesn’t reach the same conclusion here:

at this stage of the litigation before any discovery has been conducted there are certainly allegations whether the initial defamatory content posted on the pissedconsumer website was attributed to the defendants themselves….Therefore the motion seeking to dismiss the initial statements is denied.

This adds to a long-simmering split in Section 230 jurisprudence: can a plaintiff defeat a motion to dismiss simply by alleging that the review website wrote the review in question? Some cases have said or implied yes (see, e.g., Children of America v. Magedson; Whitney v. Xcentric; HyCite v Badbusinessbureau; and I'm sure I'm forgetting others), while others have said no (see, e.g., Levitt v. Yelp). And of course, there was the Roommates.com train wreck on this very issue. If the answer is yes, the Section 230 immunity becomes substantially less effective; at minimum, it means the cases run longer, and plaintiffs can take expensive and disruptive discovery, even if the Section 230 immunity ultimately applies. In fact, given some courts’ wishy-washiness about Section 230 motions to dismiss, several experienced Section 230 litigators have told me that they sometimes skip a 230-based motion to dismiss and just push instead for a quick summary judgment.

Because it’s trivially easy for the plaintiff to allege that the review website wrote the review and therefore defeat an otherwise appropriate early Section 230 dismissal, I think courts need to screen the plaintiff’s allegations much more aggressively than this court did. See, e.g., Nemet Chevrolet v ConsumerAffairs, which didn't rely on 47 USC 230 but still rejected the unsupported assertion that the review site fabricated reviews. First, I think Twombly/Iqbal require the plaintiff to allege more than just the bare assertion that the website wrote the review. The plaintiff should have to provide concrete allegations of facts uncovered in its research supporting the claim, and it should not be enough simply to have a hunch. Compare Frontier Van Lines v. Valley Solutions, which said that the bare assertion of review website authorship didn't clear Iqbal, but the court didn't grant the motion to dismiss either. Second, courts should more aggressively police plaintiffs’ Rule 11 investigation obligation. In my opinion, if plaintiffs are just making up facts and defeating motions to dismiss based on these fictions, they should have to pay for the defendants’ resulting expenses.

We’ll find out if Vo has any juice behind its assertion later in the litigation. Perhaps the Section 230 motion will work better on summary judgment.

Bribery/Extortion. The court rejects the plaintiff’s commercial bribery claim, but it survives a RICO claim predicated on alleged extortion. The court says:

if PissedConsumer had the legal right to engage in the activities it was doing, then to request money in return for desisting from such activities cannot be considered extortion. [Eric’s note: the court doesn’t cite Coase, but this is quintessentially Coasean!] Since it has already been determined that some of PissedConsumer’s posts were possibly defamatory and hence fully unlawful, the $5,000 request cannot be viewed as merely nothing more than “hard bargaining” [Eric’s note: the court’s double negative makes that a hard sentence to parse]

In other words, just like the allegation that PissedConsumer authored the defamatory review defeated the Section 230 dismissal, it also helps the extortion-based RICO claim survive. This only reinforces how important is it/was for the court to gatekeep the plaintiff’s allegation that PissedConsumer wrote the review. Extortion charges are often leveled at Ripoff Report as well. Although I doubt Vo’s extortion claim will succeed in the end, I imagine other plaintiffs suing Ripoff Report and PissedConsumer will start sniffing around this RICO ruling for ways to keep their cases in court a little longer.

Trademark On the plus side, just like the Ascentive case, the court dismisses the trademark claims because the name PissedConsumer makes it clear to consumers what they are going to get. This extends the precedent that a trademark workaround to Section 230’s immunity for review websites may not exist.

Posted by Eric at 10:11 AM | Content Regulation , Derivative Liability , Trademark | TrackBack

May 30, 2012

Is SOPA's "Follow the Money" Meme Infecting Anti-Spam Litigation? – Project Honey Pot v. Does

[Post by Venkat Balasubramani]

Project Honey Pot v. Does, 11-cv15 (LMB/JFA) (E.D. Va.; May 21, 2012)

Project Honey Pot is a “spam-tracking network that ‘allows spammers, phishers, and other e-criminals to be tracked throughout their entire ‘spam life cycle’’.” It had, and maybe still has, great ambitions and was founded by Matthew Prince, of Unspam fame. As detailed by Eric in this blog post, Unspam is (or was) a for profit company that operated a "do not email kids" registry aimed at allowing people to comply with Utah's "don't email the kids" law: "Utah's 'Don't Email the Kids' Registry a 'Financial Failure.'" Prince also publicly defended Utah's ill-fated key word advertising law: "Keyword Advertising as Corporate Identity Theft—Sen. Eastman Defends New Utah Law Banning Keyword Advertising." (Prince is now CEO of CloudFlare, which offers, among other things, services that help you comply with EU's cookie regulations: "CloudFlare To Launch Service For Sites Dealing With Tortuous EU Cookie Law.")

Anyway, PHP filed and voluntarily dismissed a couple of lawsuits in Virginia without any apparent docket activity. This time around, it tried to go after banks who allegedly offered payment processing services to online pharmacies, along with two individual defendants.

The complaint alleged that one of the Doe plaintiffs attempted to buy a prescription drug through an online pharmacy. He paid for it by debit card but never received any medication in the mail. He didn’t suffer any out-of-pocket loss (the bank credited him the amount charged and changed his debit card number), but he alleged that since this transaction, he has received “voluminous spam email.” The complaint alleged claims under CAN-SPAM, the Virginia Computer Crimes Act, a slew of state law claims, as well as RICO claims.

Several banks filed motions to dismiss on the basis of personal jurisdiction. The court dismissed these defendants in December 2011, finding that the complaint raised speculative allegations regarding any conspiracy between the banks and the pharmacy operators. PHP dismissed one of the individual defendants, intimating that this defendant was a victim and not one of the perpetrators. The court dismissed the other defendant due to PHP's failure to effect service, and closed the file. (This is a simplified version of the procedural history; there are a few other details that are not relevant here, including the fact that PHP filed an appeal before the case was fully resolved.)

PHP filed a motion to alter or amend the judgment and reopen the action as to two of the banks. Apparently PHP’s counsel obtained a dataset of 900,000 transactions for “Glavmed” from a well-known security blogger, Brian Krebs. (See "SpamIt, Glavmed Pharmacy Networks Exposed.") The dataset included numerous records allegedly “tied to Virginia residents.” PHP also pursued third party discovery and obtained transaction records from 2006 through 2010. 63 of these transaction records identified the processing bank, and 51 of these identified transactions were allegedly tied to two of the defendant-banks.

The court denies PHP's motion to reopen the case, largely on the basis that PHP did not offer any justification for why it failed to come forward with the evidence earlier. The court also says that even if it considered this evidence, it would still dismiss the defendant-banks. PHP relied on the “conspiracy theory of personal jurisdiction.” Because the pharmacies deal with Virginia residents and since the banks deal with the pharmacies, in PHP’s view, this was sufficient for personal jurisdiction. The court says there are three flaws with this view. First, PHP cannot show that either of the banks in question have any “direct contacts” with Virginia. Second, PHP’s evidence:

still does not link the defendant banks with Virginia customers, [the individual defendants], or the single transaction at issue in this case.

Finally, the court says that even if PHP could show that the banks processed transactions for any merchants with Virginia customers, personal jurisdiction would not be proper due to the “extremely attenuated nature of the banks’ contacts with the forum.”

The court doesn’t reach the underlying merits of PHP’s claims against the banks, but the opinion is tinged with enough discussion of the banks’ “attenuated” connection with any underlying spam activity that you don’t get any warm fuzzies regarding PHP’s claims against the banks.

There are a couple of problems with PHP's theory on the merits. First, the Doe plaintiff didn’t suffer any financial injury. Standing issues aside, there is no such thing as a standalone legal claim for receiving spam emails. (Cf. Cherny v. Emigrant Bank.) It’s fairly well established that you can only sue under CAN-SPAM if you are the provider of Internet Access Services, and PHP’s factual allegations did not include any IAS-specific harms. (See Gordon v. Virtumundo.) I don't see the basis for any CAN-SPAM claims in this scenario. (It’s unclear exactly how “Project Honey Pot” fits into the picture. It all sounds very Righthavenesque.)

Even assuming PHP or Doe can sue the payment processors under CAN-SPAM, under what theory will it hold a payment processor liable? They payment processors did not send any emails. Nor were their products or services advertised via any emails. Courts have allowed parties to proceed against third parties in the chain in some trademark (Gucci v. Frontline; Akanoc) cases, but outside the context of affiliate liability, I'm not aware of any such cases in the spam context. (See also, the Perfect 10 v. Visa and Perfect 10 v. ccBill cases, dealing with payment processor liability in the copyright context, discussed by Eric in these posts: "Credit Card Providers Aren't Liable for Third Party Infringement--Perfect 10 v. Visa"; "Ninth Circuit Opinion in Perfect 10 v. CCBill.")

CAN-SPAM contains provisions governing third party (affiliate) liability, but the banks clearly did not fit within the statute. (See the Cyberheat case where the government was able to make a case for affiliate liability but had some damaging facts. A key distinction in this case is that the banks did not procure or initiate the emails in question.) Section 6 of CAN-SPAM discusses liability for third party service providers in certain limited scenarios, but the section authorizing civil actions by IASs does not list Section 6 under the list of sections that support a civil cause of action brought by an IAS. Any attempt to go after a third party in the chain based on a vague conspiracy theory (as opposed to satisfying CAN-SPAM’s standards for affiliate liability) would be an extension of liability that has no basis in the statute.

PHP's attempt to hold the banks liable is similar to the "follow the money" instincts underlying SOPA/PIPA. (Check out Eric's post on the OPEN Act for why he is not a fan of this approach: The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP.) PHP figures that if it obtains any sort of a favorable ruling against the banks, it can then wave this ruling around to try to get banks to terminate relationships with reported spammers. As the trademark and copyright rulings illustrate, trying to impose this type of liability against payment processors who provide services to alleged infringers or counterfeiters is far from easy. But while there is case law plaintiffs can rely on in those contexts, it seems like a long shot at best, with little or no basis in the statute, in the anti-spam context.

Maybe PHP has achieved some lucrative settlements behind the scenes, but this ruling makes me wonder what it's been doing. The whole thing has a quixotic feel to it.

Related posts:

Posted by Venkat at 10:06 AM | Derivative Liability , E-Commerce , Spam

May 17, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

May 15, 2012

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

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

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

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

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

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

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

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

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

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

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

Comments from Eric

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

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

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

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

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

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

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

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

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

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

May 14, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

UPDATE: The Katz v. Google lawsuit appears to be in the same genre.

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

May 10, 2012

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

By Eric Goldman

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

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

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

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

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

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

April 30, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

Source Materials

* Superseding indictment

* News.com: Some of the assets seized

Analysis of the Enforcement

* EFF: Megaupload Goes to Court: A Primer

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

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

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

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

Collateral Effects

* Phil Corwin on collateral effects

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

* TorrentFreak: RapidShare Publishes Anti-Piracy Manifesto for Cyberlockers

* RWW: Feds to Megaupload Users: Tough Luck

Revolving Doors/Patronage

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

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

General

* CMLP site on Megaupload

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

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

April 29, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

April 24, 2012

Internet Intermediary Law Slides from Stanford Guest Lecture

By Eric Goldman

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

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

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

April 13, 2012

"Social Media and Trademark Law" Talk Notes

By Eric Goldman

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

1. Overview

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

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

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

2. Namespace Disputes

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

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

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

D. Username litigation is rarely cost-justified!

3. Content Source Confusion

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

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

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

4. Brands Can't Control Social Media

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

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

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

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

April 06, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

April 05, 2012

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

By Eric Goldman

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

Overview

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

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

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

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

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

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

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

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

Analysis of the Court's Discussion

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

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

Knowledge of Infringing Activity

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

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

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

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

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

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

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

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

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

Right and Ability to Control

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

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

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

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

Stored at a User's Direction

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

Case Library

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

March 27, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

March 20, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

March 17, 2012

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

[Post by Venkat Balasubramani]

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

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

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

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

TCPA Provides for Derivative Liability:

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

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

Plaintiffs’ Prior Consent:

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

Were the Messages Sent Using an Auto-Dialer:

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

First Amendment Challenge:

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

Plaintiffs’ Cannot be Compelled to Arbitrate Their Claims:

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

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

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

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

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

Previous posts:

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

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

March 13, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

The court ends with an odd admonishment:

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

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

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

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

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

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

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

March 12, 2012

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

By Eric Goldman

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

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

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

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

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

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

March 10, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

Amen!

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

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

March 06, 2012

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

By Eric Goldman

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

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

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

The court sets the context for its opinion:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

March 01, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

February 13, 2012

Employee Wins Harassment Claim Based in Part on Co-Workers' Offsite Blog Posts--Espinoza v. Orange

By Eric Goldman

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

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

The county appealed on several grounds, including:

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

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

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

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

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

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

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

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

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

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

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

February 06, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

____

The case library:

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

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

January 29, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

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

Countdown: My Top 5 List of Developments in 2011

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

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

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

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

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

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

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

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

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

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

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

Other Interesting Developments.

Some other interesting developments this year:

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

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

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

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

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

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

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

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

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

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

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

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

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

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

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

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

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

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

Lists of Yore

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

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

January 22, 2012

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

By Eric Goldman

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

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

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

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

Photofinishing Liability

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

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

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

512(c) Safe Harbor

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

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

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

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

Secondary Infringement

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

Conclusion

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

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

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

January 15, 2012

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

By Eric Goldman

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

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

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

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

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

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

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

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

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

47 USC 230

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

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

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

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

Implications

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

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

Paul Levy's comments on the ruling.

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

January 10, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

Other blog coverage of thedirty cases:

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

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

January 07, 2012

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

[Post by Venkat Balasubramani]

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

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

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

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

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

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

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

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

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

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

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

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

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

January 06, 2012

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

By Eric Goldman with additional comments from David Gingras

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

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

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

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

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

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

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

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

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

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

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

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

________________

Comments by David Gingras

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

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

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

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

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

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

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

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

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

January 05, 2012

SOPA/PROTECT-IP/OPEN Linkwrap #2

By Eric Goldman

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

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

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

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

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

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

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

Some news items since my last linkwrap:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

January 02, 2012

Nov.-Dec. 2011 Quick Links, Part 1

By Eric Goldman

47 USC 230

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

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

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

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

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

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

Content Regulation

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

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

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

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

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

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

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

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

Search Engines

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

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

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

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

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

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

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

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

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

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

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

* Clive Thompson: Why Kids Can’t Search.

Social Networking Sites

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

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

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

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

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

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

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

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

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

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

* The truth about students using Facebook and their grades.

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

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

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

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This case raises a number of interesting issues.

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

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

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

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

December 29, 2011

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

By Eric Goldman

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

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

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

I needed asbestos glasses just to read that.

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

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

So true.

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

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

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

UPDATE: Paul Levy comments on the ruling.

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

December 27, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Other coverage of the case:

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

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

December 23, 2011

Academic Literature Recap, Q4 2011

By Eric Goldman

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

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

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

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

____________

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

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

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

Some notes about this article:

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

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

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

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

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

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

James Grimmelmann's comments about the paper.
____________

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

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

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

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

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

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

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

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

December 20, 2011

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

[Post by Venkat Balasubramani with updated comments from Eric]

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

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

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

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

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

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

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

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

Other coverage:

FTC Closes an Investigation Into a Blogging Promotion

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

Eric's Updated Comments

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

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

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

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

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

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

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

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

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

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

By Eric Goldman

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

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

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

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

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

Some other interesting points raised in the filings:

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

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

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

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

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

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

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

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

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

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

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

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

December 10, 2011

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

By Eric Goldman

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

Before I get further into substance, two process notes:

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

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

An Overview

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

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

What's Good

Substantively, some of the things I liked about OPEN:

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

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

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

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

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

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

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

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

What's Not Good

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

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

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

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

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

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

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

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

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

Why I’m Not Enthusiastic About OPEN

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

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

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

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

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

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

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

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

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

December 07, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

December 05, 2011

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

By Eric Goldman with comments from Venkat

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Comments from Venkat:

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

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

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

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

November 30, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

November 28, 2011

Dangerous Copyright Office Proposal to Undercut the DMCA Online Safe Harbors

By Eric Goldman

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

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

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

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

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

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

November 23, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

November 15, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

EFF Coverage

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

Proposed Copyright Bill Threatens Whistleblowing and Human Rights

Techdirt

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

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

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

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

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

Others

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

Future of Music Coalition, Coming Clean on SOPA

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

Public Knowledge, SOPA and Section 1201: A Frightening Combination

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

What You Can Do

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

Contact your legislator

Sign the petition at Whitehouse.gov

Sign the petition at Avaaz

If you qualify, sign the Educators' Letter to Congress

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

November 07, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

November 06, 2011

October 2011 Quick Links

By Eric Goldman

Copyright

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

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

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

* Permanent injunction issued against Zediva. Prior blog coverage.

* Supplemental briefing requested in Viacom v. YouTube:

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

Mark Lemley on Viacom v. YouTube.

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

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

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

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

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

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

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

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

Search Engines

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

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

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

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

Content Regulation

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

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

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

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

Miscellaneous

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

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

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

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

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

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

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

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

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

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

November 03, 2011

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

By Eric Goldman

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

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

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

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

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

November 02, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

October 26, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

UPDATE: Rebecca's comments.

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

October 12, 2011

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

By Eric Goldman

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

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

However, so far the case is working out fine for Google. Judge Ward (adopting Magistrate Judge Everingham's report verbatim) refused to certify the class, meaning that each advertiser will have to proceed against Google individually--or give up. Without the potential payoffs from a class adjudication, it's possible/probable that the plaintiffs' lawyers will lose interest in the case; NPE litigation may be more lucrative than continuing to pursue Google on an advertiser-by-advertiser basis. Even if the plaintiffs decide to push ahead with individual cases, Google's consequences of an adverse ruling go down substantially.

The ruling isn't all that surprising or groundbreaking. As I wrote in my initial blog post on the case in 2009, "the judge is very unlikely to certify the class." The opinion walks through various reasons why trademark lawsuits don't lend themselves to class adjudication, including:

* initial interest confusion must be examined with respect to each trademark. The court notes the different, and trademark-specific, analyses in GEICO v. Google and the Network Automation case. "Thus, Plaintiffs' common contention (i.e., that Google's policy of selling trademarks as keywords leads to initial interest confusion) is not capable of classwide resolution and, as such, does not meet Rule 23(a)(2)'s commonality requirement."

* each trademark's strength has to be individually evaluated. See the Vulcan Golf v. Google ruling.

* any affirmative defenses have to be evaluated on a trademark-by-trademark basis (another cite to Vulcan Golf).

* the request for equitable disgorgement was problematic u

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