August 27, 2008
7Search Sues McAfee For Red Flagging It
By Eric Goldman
7Search.com v. McAfee, Inc., 1:2008cv04831 (N.D. Ill. complaint filed Aug. 25, 2008). The Justia page.
I don't have a good sense of how many lawsuits have been filed against anti-spyware vendors for classifying third party software as "adware" or "spyware." I've blogged on a few (including Kaspersky, PC Tools and Symantec v. Hotbar), and Ben Edelman maintains a larger catalog of such lawsuits (not sure how up-to-date this is). However, I don't know if these lawsuits are relatively rare (as Ben's chart implies) or if they are multitudinous but most quietly fly under the radar screen.
If there aren't many unpublicized lawsuits, that may reflect that suing an anti-spyware vendor over its classification decisions almost never makes sense. First, many vendors have a private adjudicatory/appellate process that resolves many potential disputes without a lawsuit. Certainly, most vendors don't want to make errors, which undermines their own credibility, and most reputable vendors want to fix their mistakes. Second, lawsuits bring generally unwanted publicity to the plaintiff, calling extra attention to their alleged deficiencies and bringing out all of the gripers. Third, the costs of the lawsuit may be more than the value of any frustrated transactions. Finally, many of the lawsuits have low probabilities of legal success for the reasons I'll discuss in a moment. So there is good reason to believe classification-related lawsuits such as this one are rare. (I'm not saying that grumbles or C&Ds are rare; I'm just referring to formal lawsuits).
In this lawsuit, 7Search says that it was in the toolbar business but stopped offering downloads from its site in 2003. However, McAfee's SiteAdviser gives 7Search the big red X and says "Feedback from credible users suggests that downloads on this site may contain what some people would consider adware, spyware, or other potentially unwanted programs." 7Search claims that this statement is false because it isn't offering any downloads at all. 7Search thus alleges false advertising (Lanham 43(a)), deceptive trade practices, defamation and unfair competition.
The most obvious barrier to 7Search's lawsuit is 47 USC 230. Both (c)(1) and (c)(2) could be implicated. (c)(1) is less likely, but if in fact McAfee is republishing information from third parties (as suggested by the statement's reference to "credible users"), they may be able to claim (c)(1) for the republication. Either way, (c)(2)--the immunization for filtering decisions--is directly on point and potentially immediately fatal to the lawsuit. Zango's lawsuit against Kaspersky was soundly and quickly knocked out on 230(c)(2) grounds (though that is now on appeal to the Ninth Circuit), and a district court in Illinois gave broad deference to the Zango ruling in finding that Comcast could claim 230(c)(2) for email filtering decisions.
At the same time, 7Search alleges that McAfee's classifications were in bad faith. If so, then 230(c)(2) wouldn't apply even under the liberal Kaspersky or Comcast approaches, both of which required subjective good faith. We'll have to see how McAfee responds to determine if 7Search's allegation has any chance of getting traction.
There are two other possible holes in the potential 230 coverage for this lawsuit. First, courts have been inconsistent whether a false advertising 43(a) claim under the Lanham Act fits within the "IP" exclusion to 230. Second, most of 7Search's gripe goes to McAfee's statement that bad downloads are available--words chosen by McAfee to describe its filtering decision. It remains unclear if 230(c)(2) protects an intermediary's characterization of its filtering decision as much as it protects the filtering decision itself--just like 230(c)(1) may protect against liability for third party information but may not protect against marketing representations rendered untrue by third party content or actions.
In any case, I think this lawsuit and others over classification decisions raise interesting and important issues that I plan to explore in my Economics of Reputational Information project. We want skillful intermediaries to digest the overwhelming amount of information available in the marketplace and make reputational judgments that speed up our consumer decision-making. On that basis, we definitely don't want reputational judgments removed from marketplace actors and put into the hands of the judges. However, we also want the reputational intermediaries to make factually accurate judgments because their misjudgments also could distort marketplace decision-making.
Posted by Eric at 03:54 PM | Adware/Spyware , Derivative Liability , Marketing , Trademark | TrackBack
August 12, 2008
Google Denied Attorney's Fees in 230 Dismissal--Steele v. Mengelkoch
By Eric Goldman
Steele v. Mengelkoch, 2008 WL 2966529 (Minn..App. Ct. Aug. 5, 2008)
A professor at Bemidji State University wrote a story saying some putatively unflattering things about a local journalist, who didn't take kindly to the allegations and brought a lawsuit alleging defamation and related torts against a number of defendants, including seeking $50 BILLION from Google. (GOBOGH!) This opinion is unclear exactly how the plaintiff alleged that Google was involved in the defamation, but it wouldn't matter because we know that 47 USC 230 fully protects Google in all cases. The trial court knew this too, and granted a dismissal per 230. The trial court went further and sanctioned the pro se in pauperis defendant under the state law equivalent of Rule 11 by sua sponte ordering him to pay Google's attorney's fees of over $12k. As far as I know, this was the first time a judge issued Rule 11 sanction for filing a lawsuit preempted by 47 USC 230.
The appellate court glibly upholds the 230 dismissal, but it reverses Google's attorney's fees award on a technicality--Google didn't ask for the sanctions and the plaintiff didn't have the chance to withdraw the filing before being punished, which precluded Rule 11 sanctions in this case. However, even though this plaintiff dodged the bullet here, make no mistake--courts are getting tired of lawsuits that are plainly preempted by 230, and I expect judges to become increasingly willing to do more than just kick out a lawsuit quickly. Even if the sanction award didn't stick this time, it's only a matter of time before it will. Just one more reminder for plaintiffs to pick the right defendants to try to hold responsible for their alleged wrongs.
Posted by Eric at 04:37 PM | Derivative Liability | TrackBack
August 08, 2008
Affiliate Liability Extravaganza
By Eric Goldman
[Note: I recently published a version of this article at InformIT. Here's the pre-edited version I sent them.]
Introduction
This article discusses marketers’ liability for the actions of their marketing affiliates (what I refer to as “affiliate liability”). The affiliate liability issue has become red-hot recently because numerous plaintiffs have taken aggressive legal positions seeking to expand the boundaries of affiliate liability. In three recent rulings, courts have emphatically rejected these expansive liability arguments. Even so, it seems likely that plaintiffs will continue to look for ways to expand affiliate liability, and despite the favorable rulings, defendants often settle a lawsuit alleging affiliate liability rather than establish their rights in court.
Affiliate Marketing—Good and Bad
Marketers create affiliate programs to outsource marketing decisions to domain experts. For example, independent third parties may have better or cheaper access to subcommunities of potentially interested consumers than a marketer’s employees. An affiliate marketing program compensates these local experts for work and expertise involved to take the marketer’s message to those consumer communities. When it works properly, affiliate marketing programs can play an important role in the broad “invisible hand” economic phenomenon of allocating scarce resources to consumers who value them the most.
Affiliate marketing doesn’t always have this salutary effect. Affiliate marketing programs create payoffs to motivate affiliate behavior, and inevitably some affiliates will try to obtain the payoff without doing the desired activity. Thus, even if the marketer would prefer otherwise, some affiliates might do “whatever it takes” to get paid, including using false advertising or illegitimate marketing mechanisms. Further, the fact that the marketer outsources some choices to affiliates (a necessary part of any affiliate program) can lead to “diffuse responsibility” where the marketer and affiliates point fingers at each other if something goes wrong. Sometimes, when there are multiple tiers of affiliates, it can become effectively impossible to assign responsibility for the wrongdoing.
To bypass these legal entanglements, plaintiffs have sought ways to hold marketers vicariously (automatically) liable for their affiliates’ actions. However, these efforts “break” standard tort law by trying to treat independent contractors as if they are principal-agents without the requisite supervision or authority that typically triggers agency liability. As a result, overexpansive theories of affiliate liability cause marketers to internalize too many costs, curtailing potentially socially beneficial marketing activities or leading to overinvestment in socially wasteful liability minimization schemes.
Plaintiffs Gone Wild: Two Recent Efforts to Expand Affiliate Liability
There have been countless affiliate liability enforcement actions, but I’ll focus on two recent initiatives.
New York Sales Tax Law
State and local taxing jurisdictions have long coveted a way to impose sales tax collection responsibilities on non-resident Internet vendors. In general, these efforts have been stymied by the Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which requires a vendor to have a physical presence in the jurisdiction before the taxing entity can impose sales tax collection obligations on it.
New York, however, developed a nifty workaround. In April, it passed a law (Chapter 57, N.Y. Laws of 2008) declaring that a vendor’s marketing affiliates in New York constituted a physical presence in New York by the vendor. If so, New York can impose sales tax collection obligations on remote vendors due to their New York affiliates. As part of its crafty plan, New York tried to induce compliance with a carrot—if remote vendors voluntarily agreed to collect and pay sales tax from New York residents going forward, then New York would grant them amnesty for any back sales tax collection obligations.
Neat trick, but…a small problem: affiliates are independent contractors of the vendor, so this effort to treat them as legally related entities surely doesn’t comply with the Constitution. I suspect a court will confirm this flaw because both Amazon and Overstock.com have sued New York over the law. At the same time, to minimize its risk, Overstock has also tossed all of its New York affiliates overboard. One might question the wisdom of the New York legislators prompting marketers to cut off opportunities for New York online entrepreneurs.
Trademark Owners Claiming Marketers Are Liable for their Affiliates’ Marketing
Another trend: trademark owners are trying to hold a marketer liable for the alleged trademark infringement committed by its affiliates, such as when affiliates purchase the third party trademark as a keyword trigger for search engine ads. Plaintiffs have alleged affiliate liability in at least three lawsuits in the past couple of months:
* DSW v. Zappos.com (S.D. Ohio complaint filed May 12, 2008). For more, see SEOmoz.
* NameSafe v. LifeLock (M.D. Tenn. complaint filed June 26, 2008). For more, see Techdirt and News.com.
* Rosetta Stone v. Rocket Languages (C.D. Cal. complaint dated July 2, 2008). For more, see the WSJ Law Blog.
Courts Weigh In—and Plaintiffs’ Expansive Theories Don’t Fare Well
The efforts to extend liability in the sales tax and trademark contexts are novel, and it’s hard to predict the final outcome because we have limited direct precedent to consult. However, looking at some recent rulings in other contexts, there is good reason to believe that both legal theories go way too far.
CAN-SPAM
Unlike many other areas of the law, CAN-SPAM (15 USC 7705 and 7706) specifically authorizes affiliate liability in the statute. The Federal Trade Commission (FTC) has routinely invoked this provision in its pursuit of marketers promoted by affiliate-initiated spam (for one of the more recent examples, see the FTC’s press release on one of its porn spam busts and settlements). Further, typically when the FTC targets a marketer on an affiliate liability theory, the marketer rolls over and settles rather than fight.
But…a small problem: the FTC’s expansive interpretation of the affiliate liability statute—the basis it has used to procure these settlements from marketers—may not actually reflect the law. In an outcome that didn’t get nearly the press it deserved, in an lawsuit against Impulse Media earlier this year, the FTC took its affiliate liability theories to a jury and lost. This is a huge verdict because (1) the FTC rarely loses in court, and (2) perhaps more importantly, when average citizens evaluate the FTC’s expansive affiliate liability theories, they may balk.
Oddly, the FTC didn’t take no for an answer. It subsequently asked the judge to enjoin Impulse Media even though Impulse Media won the jury verdict. Talk about chutzpah! Not surprisingly, the court declined the request. US v. Impulse Media, 2008 WL 1968307 (W.D. Wash. May 1, 2008).
In another lawsuit, ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008; unsealed April 29, 2008), a civil plaintiff, ASIS (a serial anti-spam litigant), invoked the CAN-SPAM affiliate liability provision in its anti-spam lawsuit against 20 defendants. One defendant never showed; 18 defendants settled up (as mentioned, the typical response); and only one defendant—Azoogle—persisted in court.
Azoogle is a lead generation company for upstream marketers, and it relies on downstream affiliates to help it generate leads for its clients. Some of those downstream affiliates generate leads via spam. In this ruling, the court rejects Azoogle’s liability for spam sent by its marketing affiliates:
Although ASIS has pointed to significant evidence that Azoogle, during the relevant time period, did little to investigate the third party vendors it engaged, there is no evidence in the record from which a jury could conclude that Azoogle, in contracting with Seamless Media, made a deliberate choice not to know that Seamless Media would engage third parties to send out spam on Azoogle's behalf. The evidence cited by ASIS to establish knowledge on Azoogle's part is entirely speculative. Even assuming it is true that the Emails were sent by a single individual and that the lead was typed into a web site that was copied from Azoogle's lowrateadvisors site, this is insufficient to show that Azoogle consciously avoided knowing that the Emails would be sent. Further, while ASIS relies primarily on the allegation that Azoogle failed to adequately investigate its third-party vendors, ASIS has pointed to no evidence that if Azoogle had investigated Seamless Media prior to entering into the Insertion Order, it would have learned facts sufficient to show that Seamless Media was likely to engage in CAN-SPAM violations. There is no evidence in the record that would put Azoogle on notice that Seamless Media, or Seamless Media's vendors, obtained leads from spammers. Indeed, the only evidence on this subject is that Seamless Media had a good reputation at the time, and was obliged by its contract with Azoogle to follow the law.
Adware
Another recent affiliate liability decision is the remarkable ruling in People v. Direct Revenue LLC, 2008 WL 1849855 (N.Y. Sup. Ct. March 12, 2008), another case that did not get the attention it deserved. Disclosure note: I helped file an amicus brief in this case.
In 2006, the NY Attorney General’s office (NYAG) made the apparent decision that adware vendor DirectRevenue needed to be shut down by any means necessary, and it launched a multi-front attack on DirectRevenue. It publicly posted a website with information about DirectRevenue that had no apparent purpose other than to denigrate DirectRevenue’s reputation. It bullied DirectRevenue’s advertisers, ultimately procuring, and then releasing a hyperbolic press release about, an insignificant settlement that spooked potential advertisers away from DirectRevenue. And finally, it sued DirectRevenue directly.
The NYAG’s actions had their desired effect. Perhaps due in part to the NYAG’s campaign to close DirectRevenue down, DirectRevenue did in fact go out of business. Congratulations to the NYAG for achieving its apparent goal.
But…a small problem: the NYAG’s assessment of DirectRevenue’s legitimacy may have, in fact, been itself lawless, because the court emphatically rejected all of NYAG’s legal theories. This might be amusingly ironic if the NYAG’s anti-DirectRevenue campaign wasn’t such a chilling and crushing misuse of governmental powers.
The opinion is worth reading in its entirety, especially where the court affirms the EULA formation and limits extraterritorial liability. However, apropos to this post, the court rejected DirectRevenue’s liability for allegedly illegitimate software installations made by its affiliates, saying “petitioner has not shown that respondent should be held liable for the actions of those third parties under a theory of agency or ratification, or otherwise.” The court explains:
Dismissal is required with respect to the 22 [installations by] third parties, who petitioner concedes were independent contractors rather than agents of Direct Revenue. A principal is generally not liable for the acts of an independent contractor because of the lack of control over how the contractor's work is performed (Chainani v. Bd. of Educ., 87 N.Y.2d 370, 380-81 [1995]). Neither may the principal be charged with the conduct of even more remote subcontractors (People v. Synergy6, Inc., Index No 404027/03 [Sup Ct N.Y. Co 2006][unpublished disposition][Attorney General's action for deceptive practices and false advertising under GBL dismissed as against email marketing company where fraudulent emails were sent by company retained by agent]). Although exceptions exist, such as where the contractor was negligently retained or supervised (Saini v. Tonju Assocs., 299 A.D.2d 244, 245 [1st Dept 2002]) or where the principal has ratified the wrongful acts (Kormanyos v. Champlain Valley Fed. Sav. and Loan Assoc. of Plattsburgh, 182 A.D.2d 1036, 1038 [3d Dept 1992]), the record here does not support any grounds for departure from the usual rule.
As noted, under the SDA, Direct Revenue contractually required its distributors to obtain consent of consumers consistent with the terms of the EULA. The SDA also forbade the distributors from holding themselves out as respondent's agents. Respondent was not authorized or obligated to control their work, particularly since many of them additionally acted as distributors for various other advertisers. Although in Sotelo v. Direct Revenue, 384 Supp2d 1219 (ND Ill 2005) the court upheld a cause of action against respondent for negligent supervision of distributors, the issue arose on a motion to dismiss and the court thus restricted its inquiry to the four corners of the complaint. Notably, the court stated that it was precluded at that procedural juncture from considering respondent's evidence that the distributors were independent contractors, evidence which, as here, included the SDA.
…
The theory that respondents ratified the alleged third party misconduct also fails. The allegations that respondent had general and/or constructive knowledge of some distributors' wrongful practices are insufficient to impose liability (see, Synergy6, supra; Del Signore v. Pyramid Sec. Servs., Inc., 147 A.D.2d 759, 760-61 [3d Dept 1989][mere knowledge of litigation and complaints against security company for undue force by guards insufficient to impose liability upon hiring firm]; see also Hamilton v. Beretta USA Corp., 96 N.Y.2d 222, 237 [2001]). Moreover, it is conceded that in those few instances in which respondent obtained actual knowledge of a distributor's misconduct, it took significant steps to modify its procedures. A finding of ratification cannot be found upon such facts, notwithstanding that respondent may have benefited financially from its relationship with the distributors before remedial measures were implemented (see Synergy6, supra).
It is my understanding that the NYAG has filed a notice of appeal in this case to preserve its options, but it is still deciding if it will pursue the appeal.
Unfortunately, I’m not aware of the Synergy6 opinion being available electronically, which is a shame because it’s an interesting and relatively early rejection of the NYAG’s expansive affiliate liability doctrines. Due to that ruling (which involved email marketing instead of adware), the NYAG already had good reason to suspect that its predicate theories were dubious, which makes its decision to pursue those theories against DirectRevenue even more lamentable.
Conclusion
This post highlights two seemingly inconsistent trends. Trend #1 is that plaintiffs (private actors or government agencies) are taking very expansive positions on affiliate liability. Trend #2 is that when tested, expansive affiliate liability theories are failing in the courts. These two trends seem to be in conflict with each other. My hope is that trend #2 becomes so strong that it overrides trend #1, i.e., plaintiffs and government actors get the message that they have gone too far.
Unfortunately, in the interim, many defendants will capitulate and settle an expansive affiliate liability claim—even if it’s lawless—because it’s the cheapest path to resolution or because the precedent isn’t strong enough to ensure victory. Perhaps some defendants will realize that the trend is in their favor and will fight back accordingly. More judicial clarity about the line between permissible and impermissible behavior would benefit everyone.
It is also possible that the legal ambiguities of affiliate liability will be resolved by statute. However, despite the defendants’ string of court victories, I see the chances of legislative intervention to curtail expansive affiliate liability doctrines as nil. If anything, it’s more likely that future legislation will codify liability expansion.
For a rare in-depth analysis of affiliate liability, see Jean Noonan and Michael Goodman, Third-party liability for federal law violations in direct-to-consumer marketing: telemarketing, fax, and e-mail 63 Bus. Law. 585-596 (2008) [ABA subscription required to download].
Posted by Eric at 08:04 AM | Adware/Spyware , Derivative Liability , Marketing , Spam , Trademark | TrackBack
August 04, 2008
"DVR as a Service" Isn't Copyright Infringement--Cartoon Network v. CSC Holdings
By Eric Goldman
The Cartoon Network LP v. CSC Holdings, Inc., No. 07-1480-cv(L) & 07-1511-cv(CON) (2d Cir. Aug. 4, 2008)
The Second Circuit has issued an interesting and potentially important ruling that Cablevision's DVR as a service does not infringe copyright law. This ruling reverses the district court's summary judgment for the plaintiff and opens the way for Cablevision to roll out its DVR service offering in the Second Circuit.
The good news is that the opinion eliminates the odd regulatory distinctions between DVRs as a device and DVR as a service. The bad news is that to reach this conclusion, the Second Circuit has to override a lot of adverse precedent, and I'm not sure that other circuits will find this panel's arguments entirely convincing. As a result, it will be interesting to see if Cablevision interprets this opinion as a greenlight for a national rollout.
Thus, while the opinion is good news for DVR service offerings, the opinion leaves open a lot of questions that will have to be answered in the future. I think it's safe to say that this opinion is hardly the last stop in our journey.
Buffering Isn't Infringement
Cablevision's DVR service splits a broadcast feed into two streams, including a "buffer" copy that goes to a router where it is stored for no more than 1.2 seconds as the router looks to see if any consumers have asked for the program to be recorded for them. If yes, the data goes into their private storage areas; if no, the stream is discarded. The court holds that this buffer copy isn't fixed because it's not embodied "for more than a transitory duration."
To reach this conclusion, the court has to fight against a lot of precedent, especially the MAI v. Peak holding that a copy into RAM is fixed, even though that copy may be embodied for even less time than the buffer copy at issue here. The court says that MAI v. Peak stands for the proposition that these short-duration RAM copies can be fixed but are not automatically fixed. The court says that in MAI (without citing any actual facts from the MAI case), the software surely was resident in RAM for "at least several minutes" while in this case the copies exist for only 1.2 seconds, and this factual difference explains the different conclusion regarding fixations.
There is a major slippery slope problem with this conclusion. Is 3 seconds fixed? 10 seconds? I could keep going, and the court deftly side-steps this problem. Nevertheless, this holding offers some promise for certain types of web activity. First, this ruling might excuse copies made by scrapers/robots who download copyrighted pages to extract unprotectable information on the page. This case suggests that the copies made to download the page and perhaps to process it are not fixed, at least so long as they are flushed really quickly (1.2 seconds or less would be good). Second, this case seems to provide another defense to the otherwise problematic argument that web browsing is infringement; so long as the user hits the back button (and kills any local cache) really fast, no fixation of the web page. The opinion deliberately limits itself to Cablevision's system of overwriting the data, so that may limits its overall applicability, but this case creates a new category of copies that are embodied in a medium but are not fixed, and this offers some hope for defendants.
Users, Not Cablevision, Make the Other Copies
Even if the buffer copies aren't fixed (and therefore cannot support an infringement claim), Cablevision still stores a copy of the broadcasted works in its storage area, where users can download the programs. There's no fixation problem with these, so plaintiffs challenge these copies as both impermissible copies and public performances. The court rejects these arguments, concluding that Cablevision is a sufficiently passive entity that the users and not Cablevision are doing the legally significant activity. Thus, Cablevision is at most exposed to contributory liability for these user activities. Because the plaintiffs had waived allegations of contributory infringement, Cablevision gets summary judgment.
To reach this conclusion, the court ignores Cablevision's active role in setting up its systems and providing ongoing services, including selecting which broadcast channels are DVRable in its system. Instead, the court sees this fact pattern as identical to DVR as a device, where the DVR manufacturer isn't directly liable for how the DVR is used. This is consistent with the uncited Field v. Google case, but it conflicts with numerous copyright cases where the service provider's hosting of files gives the provider more legal responsibility over the system usage than a device maker would have. Similarly, the court distinguishes the coursepack cases on the basis that a human employee of the copyshop presses the "copy" button, because here the system works automatically without manual intervention from Cablevision.
Note, of course, that the court didn't discuss contributory liability, which also raises the ugly and risky question of whether Cablevision users are directly infringing by using the DVR as a service. I think there is helpful language in the Sony Betamax case about DVRing as a fair use, but I doubt anyone wants to see that battle relitigated.
Similarly, with respect to the argument that the distribution of the files from Cablevision's storage area is a public performance, the court says that Cablevision isn't "transmitting" as required by the statute because the user is making the legally significant action.
Further, Cablevision's delivery of the file isn't "to the public" as required by the statute. This latter conclusion is totally fine with me as a matter of common sense interpretation of those words, but it runs contrary to numerous messy and analytically questionable precedents regarding the central serving of copyrighted works to private spaces, such as Redd Horne and On Command. The court deftly tries to evade those, but after 2 readings I still can't figure out what the court said. Maybe the third time will be the charm. I think it has something do with the fact that Cablevision encoded each file delivery to its consumers so that each file delivery could be consumed only by a single playback machine. Let me know if you can figure out what the court was saying here and how it might apply to anyone else. Because the ruling seems to let Cablevision freely broadcast third party content to potentially all of its subscribers without constituting a public performance, I think there may be some exploitable holes here.
One more open question: this opinion makes me wonder if the MP3.com opinion from SDNY is still good law. I'd need to go back through that opinion, but as I recall, a lot turned on the fact that MP3.com tried to act as a proxy for its users. Here, the court treats such proxy activities as passive, and perhaps that analysis would fit the MP3.com facts as well.
Conclusion
I'm excited about this opinion because it eliminates some of the legal anomalies between DVR as a device and DVR as a service. In many situations, DVR as a service will be a better consumer experience, and it is unquestionably better for the environment, so I'm happy that this opinion tries to get copyright law out of the way to enable this result. At the same time, the appellate court set up enough conflicts with other precedent, and sufficiently caveated its opinions to address the narrow facts in Cablevision, that I expect this case resolved nothing definitively. That will have to wait the many cases in our future.
Even so, I remain amused (in a cynical way, not a funny way) that the broadcasters are still fighting against giving consumers what they really want, which is to consume their content at the time and place of the consumer's own choosing. Eventually, broadcasters are going to have to bite the bullet and post their content onto the Internet for viewers to enjoy at their convenience. There always will be consumers who want to consume the content upon first release, but after that, content that's unavailable to consumers is just wasting away instead of continuing to make money for the broadcasters.
Posted by Eric at 05:44 PM | Copyright , Derivative Liability | TrackBack
August 01, 2008
Domainer Loses Cybersquatting Lawsuit--Verizon v. Navigation Catalyst
By Eric Goldman
Verizon California, Inc. v. Navigation Catalyst Systems, Inc., 2008 WL 2651163 (C.D. Cal. June 30, 2008). The Justia page. A page with some of the early filings.
[Sorry for the delay blogging this--it just showed up on my radar screen]
This is an extremely interesting and potentially precedent-setting case regarding domaining and domain name tasting. The court condemns both practices, leading to a preliminary injunction against the domainer and its registrar based on the Anti-Cybersquatting Consumer Protection Act (ACPA). As far as I can recall, this is the first time that a domainer has lost an ACPA lawsuit in court, and it provides an important data point confirming that domaining can be cybersquatting (a previously unresolved issue). I also believe that this is the first time a domain name registrar has lost an ACPA lawsuit. Although the court wasn't asked to assess damages (it was just an injunction request), it's clear from the strongly worded opinion that Verizon will get paid if the case gets that far. As a result, this is a major loss for domainers and might very well force them to change their practices.
The defendants are Navigation Catalyst, a domainer, and Basic Fusion, its registrar. Navigation Catalyst engaged in some common domainer practices, including:
* high volume automated domain name tasting. Many of the registered domains have nothing to do with anyone's trademark, but some were typographical error versions of Verizon's trademarks (allegedly, nearly 1400 were variations of Verizon's trademarks)
* trademark "scrubbing" of domain names during the tasting period (both an automated blacklist and a manual review)
* disabling ads on any challenged domains and offering to transfer those domain names to the trademark owner
Despite the scrubbing, Navigation Catalyst registered and kept 126 domain names that Verizon alleges infringe its trademark. Navigation Catalyst also tasted nearly 1300 other challenged domains, and as the court points out, made some money from those domains during the tasting period.
Navigation Catalyst's main defense is that it merely reserved the domains during the tasting period instead of "registering" them (the ACPA statutory requirement) because they hadn't paid for the domains prior to the end of the grace period. Not surprisingly, the court is completely unimpressed with this sophistry.
Further, the court determines that domain tasting is a bad faith intent to profit under the ACPA:
It is clear that their intent was to profit from the poor typing abilities of consumers trying to reach Plaintiffs' sites: what other value could there be in a name like ve3rizon.com? Further, the sites associated with these names often contained links to products directly competitive with Plaintiffs' cellphone and internet businesses, potentially diverting consumers who would otherwise have purchased goods or services from Plaintiffs away from Plaintiffs.
Finally, the defendants tried to argue that Verizon had unclean hands because of Verizon's monetization of wildcard traffic in its FIOS service. Despite some pretty apparent duplicity on Verizon's part, this argument also fell on deaf ears.
While this is a big loss for the domainer, it's a shocking ruling against the registrar. After all, the ACPA specifically limits injunctions against domain name registrars (see 15 USC 1114(2)(d)(i)(II)), and the court did not discuss this section at all or otherwise why an injunction against the registrar was appropriate. I suspect the registrar should be able to get the court to clarify or reconsider its ruling if it asks.
It will be interesting to see how this ruling affects the domainer industry. There is absolutely no good news for them in this ruling. This court rejected the standard risk-management that domainers claim protect them from cybersquatting liability. Further, the big win will only encourage Verizon--already one of the most aggressive plaintiffs against domainers--to keep suing, and it might spur other trademark owners to join the party. Although a single ruling like this often doesn't change an industry overnight, I wouldn't be surprised if we look back in a couple of years and point to this ruling as the beginning of the end of standard domaining practices circa 2007-08.
Posted by Eric at 10:10 PM | Derivative Liability , Domain Names , Trademark | TrackBack
July 19, 2008
American Airlines and Google Settle Keyword Advertising Lawsuit
By Eric Goldman
American Airlines and Google have settled American Airlines' trademark lawsuit over Google's sale of keyword advertising. The settlement terms are confidential. See the unenlightening stipulation and the judge's dismissal order. The Justia page. The Bloomberg News story.
Because the terms are confidential, we don't know who "won" this lawsuit (other than the lawyers, of course). I did a search this morning for "American Airlines" and American Airlines had the only keyword ad. No third party ads showed, which as I recall is different than past results, but it's possible that American Airlines has run third party advertisers off the term one-by-one rather than getting Google to block the term for them. I also did a search this morning for "aa.com" and got one third party ad for lowfares.com. A search for "AADVANTAGE" showed two third party ads, one for an AAdvantage credit card (probably authorized) and the other for firstclassflyer.com (probably not).
Based on this data, my initial hypothesis is that Google did not make any special concessions to American Airlines to block keyword ads on their trademarks. Perhaps Google made other concessions. Or perhaps American Airlines completely wasted its time and money. If so, it wouldn't be the first time that a company with the word "American" in its trademark took on Google and got nothing.
This settlement is presumably a disappointment to trademark diehards who were cheered by a well-financed and well-recognized trademark owner taking on the mighty Google. Now, this case isn't going to break any new ground in the Fifth Circuit. Combined with Utah's repeal of the Utah Trademark Protection Act, the only major threat to Google's keyword ad practices in the United State still pending is the Rescuecom appeal in the Second Circuit, which I must confess I remain nervous about.
Posted by Eric at 09:05 AM | Derivative Liability , Trademark | TrackBack
July 18, 2008
Print-on-Demand "Publisher" Isn't Liable for Book Contents--Sandler v. Calcagni
By Eric Goldman
Sandler v. Calcagni, 2008 WL 2761892 (D. Me. July 16, 2008). The Justia page.
I've previously blogged about the probable inapplicability of 47 USC 230 to CafePress and its competitors because of their offline publication onto physical media. This case, which doesn't reference 230 at all, gives hope to these "print-on-demand" vendors that they will nevertheless get some insulation from user-created problems even without statutory immunization.
The facts of the underlying dispute (which are a little cryptic because the opinion is partially redacted) sound like the makings of a Hollywood movie. Stop me if you've seen this one before. In this case, two high school cheerleaders in Maine start out as friends but have a falling-out in October 2003 that takes a very nasty turn. By November, both girls are suspended from school, and each of them complains of harassment by the other to the school, the police and elsewhere. (As Rodney King said, can't we all just get along?) Then, in November 2003, someone spraypaints swastikas in between Ms. Sandler's house and the high school in an apparent anti-semitic attack on Ms. Sandler. Although she denies doing the spraypainting, Ms. Calcagni was convicted of criminal mischief and entered a consent degree with the AG's office in a civil hate crime prosecution.
Believing that Ms. Calcagni was wronged, her parents launched a media campaign to set the record straight. The campaign included a book detailing their side of the story, which they shopped around to publishers. Finding no takers among traditional publishers, they decide to self-publish the book through BookSurge, a typical print-on-demand site. See more about the book here, including a review that describes the book as "sloppy journalism." They order 760 copies from BookSurge, which they give away and try to sell in local bookstores in Maine. Another 80 copies are sold online through Amazon and BookSurge.
From my outsider's perspective, it seems obvious that the Sandler and Calcagni families are locked in a cataclysmic downward spiral that will make some lawyers rich and will leave a lot of other people very unhappy for many years. It's already been 5 years since the fateful turn of events, and the parties don't appear to be close to being done with each other. The latest iteration in the multi-front war is Sandler's lawsuit against numerous people involved with the book publication, claiming defamation, privacy invasion and related torts. I suspect that this lawsuit between Sandler and Calcagni will fester in the courts for years, but I'm only interested in the court's ruling yesterday on BookSurge's request to exit the lawsuit early.
If BookSurge was a traditional publisher, providing editorial and marketing services, BookSurge should face defamation liability as a primary publisher. However, BookSurge was a printing house that took an uploaded PDF and converted it into a physical book. In this sense, BookSurge might be analogized to a copyshop that reproduces accurate copies of customers' materials. BookSurge adds a little more value than a pure robotic copier; for example, it helps match self-publishers with book retailers like Amazon.com (and it wouldn't surprise me if BookSurge gets some money for making that match). Nevertheless, I think it's fair to say that, overall, BookSurge is passive in the printing process.
Due to BookSurge's passivity, BookSurge lacks the requisite degree of scienter to hold it as a "publisher" for purposes of defamation or the privacy invasions. As the court says:
Because BookSurge does not undertake to edit, review or fact-check any of its publications, it has no means or way of knowing whether defamatory material is contained within the works that it publishes. BookSurge maintained no editorial control over the works published. The responsibilities of BookSurge, which are known to the authors of the works, indicate that it is not an active participant in the creation of any defamation.
Some of Sandler's claims of public disclosure of private facts also failed because she herself disclosed the same facts on her MySpace page. As a result, BookSurge is dismissed from the lawsuit.
I think this ruling bodes well for sites like CafePress to the extent they can't claim 47 USC 230. In many cases, they effectively act as a "contract printer" for users by taking user-submitted content and printing it. Admittedly, the printing media might be non-traditional (t-shirts, coffee mugs, etc.) but I think the reasoning should apply the same. However, it remains less clear if CafePress' other involvement in the sales--taking payment, shipping the items directly to buyers--will make the analysis more cloudy. Further, this case doesn't do much to help insulate CafePress and its ilk when the underlying claim is strict liability, such as copyright infringement.
UPDATE: For another example of women who just can't seem to get along, see Devereaux v. Rodriguez, 2008 WL 2756476 (Cal. App. Ct. July 16, 2008)
Posted by Eric at 10:54 AM | Derivative Liability | TrackBack
July 17, 2008
GoDaddy Gets 230 Defense for Web Hosting--Kruska v. Perverted Justice Foundation
By Eric Goldman
Kruska v. Perverted Justice Foundation Inc., 2008 WL 2705377 (D. Ariz. July 9, 2008). The CMLP page with lots of source material.
GoDaddy allegedly hosted some third party websites that said some not-nice things about Kruska (calling her a convicted child abuser, a convicted child molester and a pedophile). Kruska brought a pro se lawsuit against (among other defendants) GoDaddy for hosting the websites. This is squarely in 47 USC 230's sweet spot, and the court notes that "this immunity has proved nearly limitless." Claims dismissed.
More unusual is the court's decision to dismiss a 43(a) Lanham Act claim per 230. The opinion isn't very clear in its discussion (and maybe I missed them in my quick review, but I don't see a 43(a) claim in the two complaints posted on the CMLP page), but I infer her claim is that GoDaddy puts its logo on pages hosted by it and therefore is confusing consumers about the source of the page. The court might have simply dismissed Kruska's claim for lack of standing, but instead refers to 230 in dismissing this claim. I don't believe Kruska was claiming trademarks in her own name (not that it would have improved her odds), but a federal trademark infringement claim is clearly not preempted by 230. Otherwise, I think it's an open question about whether the false advertising parts of 43(a) are preempted by 230. See my slides recapping some of the developments through April. See also Rebecca's blog post trying to sort through the 43(a)/230 interplay in a different case.
As I've now said repeatedly, the interaction between 230 and a website's marketing activities is increasingly unclear and maybe reaching a point of incoherence, and this case certainly doesn't reduce our befuddlement.
Posted by Eric at 02:42 PM | Derivative Liability , Trademark | TrackBack
July 16, 2008
eBay Denied 230(c)(2) Defense Over Counterfeit Coin Policing
By Eric Goldman
National Numismatic Certification, LLC. v. eBay, Inc., 2008 WL 2704404 (M.D. Fla. July 8, 2008)
This is the fourth time in a week that I'm blogging about an eBay lawsuit (see the Windsor Auctions, Tiffany and StubHub postings). There must be something in the water.
I'm a little confused by the facts in this case (the opinion isn't a model of clarity), but let me see if I can boil it down. In 2007, eBay decided to clean up its coins category by adopting a policy that sellers could designate their coins as "certified" only if they used one of four approved rating services. (Sellers can still advertise a designation under other rating services under some conditions but can't use the word "certified"). If a seller violates this rule, then eBay will take down its listing and send an email with the subject line "eBay Listing Removed: Counterfeit Currency and Stamps." Needless to say, some of the rival coin rating services are miffed because eBay sellers now won't want to use their services; and the rival services think that sellers will infer from the subject line that using these alternative services mean that their coins are counterfeit, which also isn't good for repeat business. This prompted the rival services to sue eBay and others for trade libel (and conspiracy thereof) and unfair/deceptive trade practices.
The court dismisses the case with leave to amend, but it refuses to dismiss eBay based on 47 USC 230(c)(2), the comparatively lightly litigated immunization for filtering decisions (most cases interpret 230(c)(1)). Putatively the statute could apply here because eBay adopted its certified coin policy and endorsed specific rating services to hinder the sale of counterfeit coins, so eBay's policy filters out seller-supplied advertising of unwanted products. However, the court rejects eBay's 230(c)(2) defense for two reasons:
1) The statute requires eBay to make "good faith" decisions. eBay says it acted in good faith, but the plaintiffs allege otherwise. The court says this can't be resolved on a motion to dismiss.
2) The statute enumerates a list of appropriate bases for filtering, including a determination that the filtered content is "otherwise objectionable." eBay says ads for counterfeited coins are objectionable. The court, applying the statutory interpretation principle of "ejusdem generis," says that the term "objectionable" has to be read in the context of the previous adjectives in the list, which relate to porn and "bad" content. As a result, eBay's efforts to stretch the word "objectionable" to cover counterfeit coin ads goes too far.
I think the court got it wrong on both fronts. Most frustratingly, the court didn't cite to the directly relevant precedent that it should have had little trouble finding. In a footnote, it says the only 230 case it found interpreting "objectionable" was the Langdon case, which was also a defense win on a motion to dismiss, but that case didn't sway this judge because the holding fit well with the statutorily enumerated basis of filtering for "harassing" content. Unfortunately, though, the court overlooked two other directly relevant 230(c)(2) opinions:
* the Zango v. Kaspersky lawsuit, where the court reached opposite conclusions on both the "good faith" and "objectionable" standards and granted a motion to dismiss. The Zango case is on appeal to the Ninth Circuit, and Zango made a big point in its briefs about ejusdem generis. I assume their lawyers will submit this case to the Ninth Circuit for its supplemental consideration.
* the e360Insight v. Comcast case, which agreed with the Zango case that any good faith requirement in the statute was subjective, not objective, and also granted the motion to dismiss on that basis.
Based on these two cases, the court could have (and IMO should have) required the plaintiffs to allege that eBay had no subjective basis to believe that the targeted listings were objectionable, which plaintiffs typically can't do (at least, not in compliance with Rule 11) without discovery. So this should have been an easy dismissal for eBay.
While I think the court muffed it, I would also note that eBay's decision to implicitly call a mischaracterized coin auction as violative of its "counterfeit" policy is a little confusing to me. There was probably a better way to word its communication to sellers. As a result, I think this ruling dovetails nicely with the Mazur case, where a different court also found that 230 didn't protect eBay for the words it selected to describe third party behavior. Once again, this case reminds us that a website may own the words it chooses even if they characterize or describe third party behavior.
Posted by Eric at 04:31 PM | Derivative Liability , E-Commerce | TrackBack
July 15, 2008
StubHub Denied 230 in Hannah Montana Ticket Scalping Case--Hill v. StubHub
By Eric Goldman
Hill v. StubHub, 07 CVS 11310 (N.C. Superior Ct. July 14, 2008) [note: I believe this is in NC's special "business court"]
I don't even have a tweener daughter (yet), but as a legal scholar, I am beginning to hate Hannah Montana due to the bogus legal developments that her concert tour is leaving in its wake. Ex A: the abysmal Ticketmaster v. RMG case, where the court bastardized Cyberlaw at least a half-dozen times to smack the ticket sniper. Ex B: the spate of silly state laws restricting the gaming of online ticket sellers' algorithms, such as the Minnesota law.
Ex C is today's case, Hill v. StubHub. Mrs. Hill bought 4 tickets to a Hannah Montana concert through StubHub at grossly inflated prices. Plaintiffs allege that they can't tell if the tickets were sold by a StubHub user or by StubHub for its own account, but they allege that StubHub is the seller for purposes of designating StubHub as the ICP in the 230 analysis. Plaintiffs thus claim that StubHub violated the criminal NC anti-scalping law and that this violation supports a variety of civil causes of action. StubHub moved to dismiss per 230, implicitly on the basis that a user, and not StubHub, sold the tickets and set the price (although the opinion is too inscrutable to be sure about this). Because there is a factual dispute about who provided the allegedly illegally priced tickets, the court denies the 230 motion and allows the matter to be investigated through discovery.
While denying StubHub's motion to dismiss may or may not be the right result, it's a rare outcome for any plaintiff to defeat a 230 dismissal motion--which is often a good thing to prevent unnecessary and wasteful discovery in cases where the plaintiff has no chance anyway. After discovery in this case, let's see if the judge got to the right result here.
HT: Mack Sperling, who is a colleague of plaintiff's counsel and posts some source material in the case.
Posted by Eric at 10:14 AM | Derivative Liability | TrackBack
July 14, 2008
Tiffany v. eBay District Court Opinion Analysis
By Eric Goldman
Tiffany (NJ) Inc. v. eBay Inc., No 04 Civ. 4607 (RJS) (S.D.N.Y. July 14, 2008)
It took most of the day, but I've finally read through the 66 page book in the Tiffany v. eBay case, and this post supplements my brief announcement post with a more thorough critique. Overall, the opinion is very thoughtful. If you have the time, it's worth reading in its entirety. If you deal with websites that are potentially liable for user-caused trademark infringements, you should definitely read the case to get a roadmap of eBay’s multitudinous infringement suppression practices that the court endorses. But if you don't have the time to read the whole case, this post focuses on some of the best parts.
eBay's Counterfeit Suppression Efforts Endorsed
Most noteworthy is that the judge endorsed eBay's various efforts to reduce the sale of counterfeit goods on its site and provide extrajudicial recourse to brand owners like Tiffany. Back in the 1990s, some caselaw suggested that affirmative efforts to suppress user activity might exacerbate liability, so the preferred strategy was to remain "passive" with respect to users. eBay chose a different approach. It proactively attempted to reduce the incidence of counterfeiting on the site through its VeRO program, its fraud engine, manual review efforts to seek out auctions that looked like they might be counterfeit goods. Further, eBay continues to innovate new ways to curb bad users or help brand owners.
A ruling like this validates eBay's investments. The judge fully acknowledged and appreciated that eBay didn't just stand on the sidelines and let Tiffany take it up with its users. Kudos to eBay's management and in-house legal department for navigating the liability issues in a way that clearly impressed the judge.
One small cautionary note. The judge rejected eBay's argument that it was just an online advertising venue. Instead, because of the many value-added services that eBay provides to its sellers, the judge thought that the offline swap meet analogy was more apt. The determination was inconsequential in this case, although I'm sure eBay wishes the reference wasn't there. However, it's a good reminder that this "we're just a venue" argument can be a tough sell to judges. Google, if you're listening, this doesn't bode well for your argument that you just sell ad "space" instead of selling trademarked keywords.
Tiffany's Arguments Rejected
This ruling is a stinging rejection of some of Tiffany's core arguments. First, the court found that Tiffany didn't invest enough in its policing efforts, referring to Tiffany’s investment as "relatively modest." I've argued before that this case is really just a Coasean battle over transaction cost allocation (i.e., once the judge sets the entitlements, the parties can negotiate from there), and Tiffany's arguments to persuade the judge that eBay should bear more costs clearly failed (meaning that eBay gets the legal entitlement). Indeed, the court goes so far to say "even if it were true that eBay is best situated to staunch the tide of trademark infringement to which Tiffany and countless other rights owners are subjected, that is not the law."
Second, it was really interesting to see the court's treatment of Tiffany's demand to eBay that eBay should filter out any auctions containing 5 or more Tiffany items of the same type because such an auction is an obvious red flag of suspect users. Tiffany's approach is very common among IP owners--they manufacture an artificial rule and then demand fidelity to the rule at peril of litigation. (As another recent example of this phenomenon, recall the dustup over the AP's unilateral declaration of the permissible amount of quoting of AP articles. Where did that rule come from?). Many times websites kowtow to these demands to avoid litigation, but here the court shreds Tiffany for creating a baseless rule and then treating eBay as the villain for "breaching" the rule--especially because Tiffany kept on changing the rules and softened its adamancy. Tip to IP owners--if you are going to manufacture a rule about how people can engage with your IP from whole cloth, don't be surprised if judges won’t rubberstamp it. If anything, they may think you're overreaching.
Notice-and-Takedown Scheme for User-Caused Trademark Infringements
Historically, the standards for contributory trademark infringement due to user activity have been underdeveloped. Copyright is covered by the DMCA (512) and non-IP claims are covered by the CDA 47 USC 230, but trademark law lacks an analogous statute. Further, there have been very few cases on the topic, and possibly applicable statutory provisions, such as the 1114 printer/publisher partial defense, are also underlitigated in the online context. Due to the dearth of statutory and caselaw material, Cyberlaw specialists have not had a good sense of the rules applicable to secondary trademark infringement online.
This case fills an important gap in our precedent. In the context of this case, it squarely anchors website liability for user-caused trademark infringements in a notice-and-takedown regime not dissimilar to the RTC v. Netcom copyright ruling from 1995 (which provided the basis for the DMCA notice-and-takedown system). Because it's not statutory, this court doesn't prescribe the specific contours of a sufficient takedown notice. At the same time, it rejects any generalized knowledge of future infringements as being sufficient--and most specifically, it declares as insufficient a trademark owner's C&D letter demanding that the website prospectively police its premises to prospectively prevent any future infringements. (Cite to, and endorsement, of the Ninth Circuit's 1999 Lockheed v. NSI case). It also says that failing to prospectively look for infringement does not equal willfully turning a blind eye.
While this is good news, I remain uncertain how generalizable this ruling is. So much of the court's discussion is deeply linked to eBay's specific situation--both the fact that it allows users to sell legitimate Tiffany goods, as well as the many efforts that eBay made to prospectively accommodate the interests of IP owners, which eBay can afford to do but many other websites can't. Personally, I think a notice-and-takedown scheme is the most probable solution to a website's liability for user-caused trademark infringements, and I hope this ruling moves us more clearly in that direction. However, we'll have to see how much future courts limits this case's holdings to eBay's unique attributes.
An interesting side note: the judge blessed eBay's tiered efforts to punish users whose listings were the subject of a NOCI. In some cases, eBay had a one-strike rule; but in other cases, especially when dealing with a known and trusted user who might be trying to earn a livelihood through the site, eBay had a three-strikes rule. The court endorses this practice, and specifically says that it was OK for eBay not to adopt a universal one-strike rule.
The Nominative Use Defense
With respect to Tiffany's trademark infringement claim, the court largely skipped over the use in commerce and likelihood of consumer confusion discussion and instead focused on the nominative use defense. Per the nominative use defense, eBay is free to tell the world that legitimate Tiffany goods are available through eBay. From my perspective, eBay made a quintessential "commercial referential trademark use" that I have elsewhere argued is outside the scope of trademark law. The court doesn't use that term; in fact, it sloppily uses the term "descriptive use" which superficially made it look like it was confusing this doctrine with the statutory descriptive fair use. Nevertheless, it fully and clearly gets the point that Tiffany was trying to suppress legitimate competitive after-market sales by circumscribing the use of the term "Tiffany," and the court adopts the nominative use defense to give eBay the necessary breathing room.
While the court is right about this, the court does not acknowledge the limitations of the nominative use defense. Just last month, a online retailer reselling legitimate goods lost the nominative use defense because of an implied endorsement. See the uncited Standard Process v. Total Health Discount. I think this court got it right and the Standard Process case got it wrong, but I wonder which path future courts will follow.
eBay's Keyword Advertising Blessed
eBay has received some notoriety for its Google AdSense spam, where it automatically manufactures lots of AdSense ad copy using all kinds of nouns, including third party trademarks, and buys the noun/trademark as the triggering keyword. eBay did this with the Tiffany trademark. Because this court is in the Second Circuit, this judge joins the prevailing caselaw that buying "Tiffany" as the keyword trigger for ads doesn't constitute a trademark use in commerce. However, before eBay disabled the Tiffany term, eBay's spam ads also displayed the term "Tiffany" in the ad copy, and the court (following the directly-on-point Hamzik opinion) says that the ad copy display of the trademark constitute a trademark use in commerce. Nevertheless, because eBay actually sells legitimate Tiffany goods, the ad copy display qualifies as a nominative use. This conclusion directly conflicts with the Standard Process v. Total Health Discount case.
eBay Didn't Engage in False Advertising
Tiffany argued that eBay falsely advertised by implying that it offered legitimate Tiffany goods when, in fact, many goods were infringing. The court rejects this argument, although I fear the court may have cut some corners here. First, the court says that eBay is protected by the nominative use defense. I'd have to do some research, but I can’t recall another case where nominative use was a defense to false advertising. Also the court says that if eBay's advertising is false, it's the users' fault, not eBay's. While I agree with this sentiment, Judge Patel partially rejected this argument in the uncited Mazur v. eBay case.
No Dilution
The court says that a junior user cannot commit blurring when it's making a referential use to the trademark owner. Further, eBay can't be tarnishing the trademark by helping sell counterfeit goods when it takes down all counterfeit auctions it knows of.
The Future
I've read a number of press reports today indicating that Tiffany is likely to appeal to the Second Circuit. Given the amount of time and money they have already invested in this litigation, that's a logical decision. However, I thought this opinion was almost uniformly thoughtful, thorough, well-written and well-researched, with usually multiple alternative bases for its conclusions. It looks like the judge intentionally wrote it to be as appeal-proof as possible. Clearly Tiffany will have an uphill battle on appeal.
If Tiffany loses on appeal, I wouldn't be a bit surprised if the battle moves to Congress. I suspect the various pro-IP bar associations will be itching to mobilize the troops over this ruling.
Other Perspectives
* Michael Kwun at the EFF
* Wendy Seltzer
* Jason Schultz
(Wendy and Jason are ex-EFFers. Looks like a lot of EFF folks are interested in this case!)
Posted by Eric at 06:55 PM | Derivative Liability , Trademark | TrackBack
eBay Wins Huge Ruling in Tiffany Case
By Eric Goldman
Tiffany (NJ) Inc. v. eBay Inc., No 04 Civ. 4607 (RJS) (SDNY July 14, 2008)
In a 66 page ruling that I haven't had time to digest, the judge appears to have completely accepted eBay's arguments in the Tiffany v. eBay lawsuit over sales of counterfeit Tiffany goods on eBay, issuing a clean sweep for eBay and dismissing the case in its entirety. The most interesting parts from the introduction:
* "the Court finds that eBay’s use of Tiffany’s trademarks in its advertising, on its homepage, and in sponsored links purchased through Yahoo! and Google, is a protected, nominative fair use of the marks."
* on the contributory liability question, the court reiterates that the standard is "whether eBay continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers." eBay's response to take down notices satisfied this standard. "The law does not impose liability for contributory trademark infringement on eBay for its refusal to take such preemptive steps in light of eBay’s “reasonable anticipation” or generalized knowledge that counterfeit goods might be sold on its website. Quite simply, the law demands more specific knowledge as to which items are infringing and which seller is listing those items before requiring eBay to take action." The court brushed aside Tiffany's complaints about the policing costs it had to bear.
* The court rejects dilution because Tiffany hasn't shown a likelihood of dilution; and even if it did, eBay's use would be protected as a nominative use.
I need to read this ruling with more care, especially the judge's interesting reliance on the shaky nominative use doctrine. I'll try to update this post after I do. For now, this is a major win for eBay specifically, but it's also a win generally for online service providers who have been receiving trademark takedown notices and haven't known what to do about them. Unfortunately, a nice clean win like this also invites a challenge, and I'd be surprised if this ruling were the end of it. Instead, the battleground might just shift to the Second Circuit or Congress.
UPDATE: I have posted a comprehensive critique of the case here.
Posted by Eric at 10:11 AM | Derivative Liability , Trademark | TrackBack
July 01, 2008
June 2008 Quick Links
By Eric Goldman
Trademarks/Domain Names
* Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, 2008 WL 22043807 (10th Cir. May 29, 2008). CMLP writeup. Nice 10th Circuit win for a gripe site against trademark infringement and cybersquatting. This case, plus the SKI VAIL case, indicate that the 10th circuit is making progress undoing the harm it created in the Australian Gold v. Hatfield case.
* Georgia has a new anti-phishing law (16-9-109.1) that acts as a para-trademark law. See my comments on the analogous California anti-phishing law.
* After initiating a trademark lawsuit against a consumer review site and soundly losing in court, Lifestyle Lift paid $17,500 to settle its own lawsuit and avoid claims for legal fees under Rule 11 and the Lanham Act.
* Marty reports on a German case saying that white-text-on-a-white-background is a trademark use.
* Update on the battle over the trademark registration for "SEO."
* Will TLD proliferation lead to a new open era in domain name administration, or will the resulting anarchy just reinforce that top search engine placement is the really important online real estate? It seems like the currently limited number of TLDs has some benefits from a bounded rationality standpoint, and those benefits will be lost in a cacophony of unknown TLDs.
Patents
* My colleague Colleen Chien has posted "Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission" (forthcoming William & Mary Law Review). She empirically demonstrates that the ITC mostly involves disputes between two domestic litigants, making it a redundant battleground with federal district court but nevertheless an attractive venue for plaintiffs due to a number of procedural advantages. She makes a number of recommendations to eliminate the litigation gamesmanship offered by having parallel venues. Check it out.
Search Engines
* Udi Manber, chief algorithm keeper for Google, reiterates why it's silly for lawyers and judges to put too much legal emphasis on the relative placement of search engine results, saying "it's definitely the case that if you do the same search on a different cluster, you may get slightly different results at a given time. It's also the case that if you do the same search on different days you may get different results, because some of the results are things we indexed five minutes ago."
(Over)Regulation
* In response to an enforcement effort by the NY AG's office, several Internet access providers have blocked access to newsgroups that are putatively sources of child pornography. See the NYT story and the NY AG press release. In practice, this means wholesale takedowns of newsgroups that may have nothing to do with child porn. For example, Verizon is killing all USENET hierarchies except comp.*, misc.*, news.*, rec.*, sci.*, soc.*, and talk.*. Wired suggests this is the death of online intermediary freedom as conceptualized in 47 USC 230. Of course, 230 never protected intermediaries from criminal exposure for child porn, and this isn't the first time that an access provider has knuckled under to the NY AG's office. See the BuffNet enforcement action from 2001.
* Ohm, Paul. The myth of the superuser: fear, risk, and harm online. 41 UC Davis L. Rev. 1327-1402 (2008). A neat article on how regulators manufacture a fake bogeyman, the unbeatable "superuser," as a justification for expansive regulatory power.
* No evidence that data breach disclosure laws actually help reduce identity theft. Surprised?
* The FTC wants civil enforcement authority for spyware actions. Haven't they heard that the adware battle is already over...and they won?
Contracts
* Mark Radcliffe expresses concern about the ALI's proposed software licensing project on open source licenses.
* Sarah Bird on a messy contract lawsuit involving an SEO contractor.
Anonymity
* Tendler v. www.jewishsurvivors.blogspot.com, 2008 WL 2352497 (Cal. App. Ct. June 10, 2008). A subpoena request to identify a blogger doesn't support an anti-SLAPP cause of action.
* In the AutoAdmit lawsuit, Doe 21's motions to squash the subpoena and proceed anonymously were both denied. David Hoffman provides an update on the case.
Event Tickets
* Chicago has moved against eBay for reselling tickets in violation of its amusement tax law.
* The Ticketmaster v. RMG case ended with a default judgment granting a permanent injunction and $18.2M in damages.
General
* Vanity Fair: How the Web Was Won.
* Paul Levy blogs about a plaintiff's effort to bypass 230 by suing the authors of complaints about the vendor and then joining the consumer complaint site as a necessary party as a cost-increasing tactic.
* BusinessWeek on emerging technological tools to protect workers' attention against unwanted/untimely interruptions.
* Text message-savvy kids educate the North Carolina DMV about the meaning of the term "WTF," which was used on a license plate example on the DMV's website.
* I have one free pass to OMMA Behavioral in San Francisco July 21. First person to send me an email asking for the pass gets it.
Posted by Eric at 12:32 PM | Adware/Spyware , Content Regulation , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Search Engines , Trademark | TrackBack
June 25, 2008
Consumer Complaint Site Defeats Lawsuit By Unhappy Vendor--Nemet v. ConsumerAffairs.com
By Eric Goldman
[Note: I'm back from my vacation. For a short recap of my experience, see my FAQs about my trip to the Hulahula River in the Arctic National Wildlife Refuge.]
Nemet Chevrolet Ltd. v. ConsumerAffairs.com, Inc., 2008 WL 2557380 (E.D. Va. June 18, 2008). The CMLP page with links to source documents.
ConsumerAffairs.com is a consumer review site with a twist. It describes itself as:
a private, non-govermental [sic] entity that empowers consumers by providing a forum for their complaints and a means for them to be contacted by lawyers if their complaints have legal merit. Your complaints and comments may be published, shared with the news media and reviewed by attorneys at no cost to you.
A Legal Times article written when this lawsuit was first initiated raises some questions about ConsumerAffairs.com's architecture. First, it suggests that the domain name capitalizes on consumers who might mistakenly assume that the site is affiliated with a governmental consumer affairs office. Second, the article questions the ties between the site and the Horwitz plaintiff's class action law firm, which mines the consumer-submitted complaints looking for potential class action claims and named plaintiffs. But regardless of these attributes, for my purposes ConsumerAffairs.com is a garden-variety consumer review site. Consumers submits their gripes and ConsumerAffairs.com publishes them. As a natural consequence, some vendors will be unhappy with the things consumers are saying about them.
This lawsuit's unhappy vendor is Nemet Chevrolet, a Jamaica, NY auto dealer who has been the target of several consumer-submitted complaints on ConsumerAffairs.com. See, e.g., this page. Nemet sued ConsumerAffairs.com twice but each time voluntarily dismissed the lawsuit for jurisdictional concerns. Finally, satisfied it found jurisdiction over ConsumerAffairs.com, it brought out the big guns--specifically, DC powerhouse law firm Patton Boggs. As the Legal Times article quotes Nemet, "I knew I had to do something, and I got a very, very powerful law firm." Sadly for Nemet, its very, very powerful law firm's complaint still got quickly crunched by a 12b6 motion to dismiss.
Nemet's claims for defamation and tortious interference were preempted by 47 USC 230. This is really a textbook application of 230--the complaint even specifies that the posts were written by third party consumers. Thus, the only issue on the court's mind is whether 230 supports a 12b6 (it correctly determines that it does). Nemet tries to get around 230 by alleging in its briefs and supporting documents that ConsumerAffairs.com created the content at issue and wrote headlines and other supporting materials, but the court refuses to consider these allegations because they weren't in the complaint. Some courts might have entertained a leave to amend the complaint to let these allegations in, but this court clearly wasn't interested.
The court also dismisses the Lanham Act unfair competition and false advertising claims for lack of standing because Nemet and ConsumerAffairs.com aren't competitors. Alternatively, even if there was standing, the court would dismiss both claims:
* the unfair competition claim [this is ambiguous but I think it actually is treating it as a trademark infringement claim, even though the complaint didn't allege infringement] because an auto dealer and a consumer complaint site are so dissimilar that there is no possibility of likelihood of consumer confusion. The court's discussion is rather garbled here, so I'm not exactly sure what the court was doing or saying. However, if the court was thinking of this as a trademark infingement claim, then its ruling is clearly out of sync with other uncited cases (such as the SMJ case), and trademark infringement claims are not really susceptible to dismissal on a 12b6.
* the false advertising claim because consumer complaints aren't advertising as contemplated by the statute.
I have some questions about the rigor of this court's legal analysis, but I also think the court's message is clear and unmistakable: if a vendor has a problem with a consumer review or complaint online, TAKE IT UP WITH THE CONSUMER AND LEAVE THE INTERMEDIARY OUT OF IT.
UPDATE: Rebecca does a better job sorting out the Lanham Act analysis than I did. WRT to the false advertising claim possibly being preempted by 230, this is one of the big blind spots of 230 that will be explored in future cases. See, e.g., the Mazur case.
Posted by Eric at 11:23 PM | Derivative Liability , Marketing | TrackBack
June 09, 2008
Rights in Copies vs. Copyright
Prince's entanglement with Radiohead, YouTube, and a video bootlegger leads to much debate over just what's in copyright law and a YouTube nightmare scenario.
By Ethan Ackerman
Copyright bloggers were privileged to a few laughs recently when Prince's music label, NRG, requested a DMCA take-down of a bootleg YouTube video of his live performance of Radiohead's hit song, Creep. NRG was asserting rights over a song it didn't write, and a video it didn't make. At first blush, unless he had secured a performance license, Prince may have been the only person infringing copyright laws. Bloggers snickered at the irony, and the EFF even helpfully highlighted the lack of checks in the DMCA process that allowed this to happen.
The snickers quickly turned to head-scratching the more bloggers thought about it. A post by Sam Bayard, at the excellent Harvard-based Citizen's Media Law Project blog, exemplified these difficulties and second thoughts. Sam Baynard pointed out that another provision of Title 17, the anti-bootlegging statutes, might apply. Eric Goldman pointed out on the same post that maybe NRG could have made a recording itself that was being copied - and so the Copyright Act would apply.
The anti-bootlegging statute in Title 17, 17 USC 1101, squarely addresses unauthorized recordings of live musical performances. This provision was included in the 1990s to comply with trade treaty obligations (Article 14 of TRIPS.) As Sam points out however, it's not immediately clear that a DMCA take-down notice is appropriate for an alleged sec. 1101 violation. After all, the DMCA is for "for infringement of copyright."
What exactly is "infringement of copyright" for DMCA purposes? While it's clearly not appropriate to use the DMCA notice-and-take-down provisions for things like "infringement of trademark" or "infringement of publicity rights," is a section 1101 anti-bootlegging violation an "infringement of copyright?"
No, it's not. While the definitions section has no entry, and no other portion of the Copyright Act says exactly what is "an infringement of copyright," 17 USC 501 provides a helpful starting point in noting who is an infringer - "anyone who violates any of the exclusive rights of the copyright owner as provided by section 106..."
But the anti-bootlegging rights aren't in Section 106 of the Copyright Act - they're not even in the Copyright Act at all. At best, section 1101's anti-bootlegging rights are in the same title (Title 17) as the Copyright Act. They weren't added to the Copyright Act, but were listed after it, much like the semiconductor chip mask works and boat hull protection acts. This distinction between "Acts" and "Titles" of US Code is often missed by attorneys (and judges) who haven't worked extensively with legislation, but it matters. To see just how much this distinction matters, read a post by former professor (and former Legislative Counsel) William Patry, to whom it matters a lot.
As Professor Patry detailed, the anti-bootlegging statute was enacted outside the Copyright Act, without limitations that the Copyrights Clause would require, and covering some subject matter that wouldn't be subject to the Copyright Act at all. While some might argue over whether the anti-bootlegging statutes are themselves unconstitutional, they clearly aren't part of the Copyright Act, and clearly aren't addressed by the DMCA.
If there's clearly an applicable law (17 USC 1101), and a clearly unauthorized recording, who cares where definitions are, which Title's in which Act and vice versa?
While everyone should care about laws being used correctly, in this case YouTube likely cares - a lot. Remedies for a Section 1101 violation are literally identical to those for a copyright violation - injunctions, damages, impoundment, fees, etc. Additionally, the scope of any secondary liability for a section 1101 violation is unclear - there are no mounds of case law on secondary liability like there are in copyright infringement cases. Piling things on even more for YouTube, while the DMCA notice-and-take-down process doesn't apply, neither does its handy, litigation-preventing safe-harbor.
Posted by Ethan Ackerman at 11:24 AM | Copyright , Derivative Liability | TrackBack
June 04, 2008
Google Sued for Running Ads for "Fraudulent Mobile Subscription Services"--Goddard v. Google
By Eric Goldman
Goddard v. Google, Inc., Case No. 108CV111658 (Cal. Super. Ct. complaint dated April 30, 2008). Google's notice of removal to federal court C08 02738 (N.D. Cal. removal notice dated May 30, 2008). [warning: 1.5MB file. Google's notice contains a copy of the original complaint.]
Cyberlaw is filled with examples of plaintiffs suing the wrong defendant for perceived transgressions committed by someone else. Today's misdirected lawsuit involves "fraudulent mobile subscription services," which are optional third party services for cellphones (such as ringtones) that are charged on a periodic basis. The plaintiffs in this putative class action lawsuit feel like they got fleeced by providers of these subscription services. If they did, I hope they get appropriate redress from the wrongdoing vendors. But instead of suing the allegedly fraudulent vendors, the plaintiffs think Google should cover the losses for the sole reason that Google ran ads for the services. The argument goes as follows:
* Google has an express policy requiring mobile service providers to disclose certain info to consumers about their practices
* Google deliberately does not enforce this policy (or inadequately enforces it) to enjoy undeserved cash
* As a result, Google should stand behind all of the losses committed by its advertisers
There are some obvious problems with this argument. First, it's a gross example of cyberspace exceptionalism. An analogy might be that dead-trees newspapers should stand behind any losses suffered by readers who transact with newspaper advertisers. Sounds ridiculous? It does to me, whether the publisher is online or off.
Second, this argument ought to be clearly, squarely and soundly trumped by 47 USC 230. eBay has won on this exact point when plaintiffs have tried to hold it liable for accepting advertising (in the form of listings) for fraudulent products (at minimum, the Gentry case involving fake sports memorabilia seems apropos). The recent Doe v. MySpace case is also analogous, because the plaintiffs were trying to hold MySpace liable under a "premises liability" theory for tortious activity that took place outside of its premises. Either way, if Google's sole role in the process was publishing third party ads, it's not liable per 230.
It's not clear if the plaintiffs know about 230 or think it applies to this case, but they made two arguments that could be used to argue around 230. First, they allege that Google helped write the ad copy. I'm still not sure if this allegation actually is enough to hold Google liable for downstream fraud, but unless Google actually wrote the copy itself, it's not liable for third party ads even if it helped edit them or prescreened them (see Ramey v. Darkside Productions).
Second, they try to argue that Google's contract with its advertisers describing minimum standards for mobile service vendors running Google ads is an express marketing representation that binds Google for any breaches by the advertiser. By anchoring the claim in false advertising, the allegation might be designed to take advantage of the Mazur v. eBay exclusion to 230. However, treating contractual restrictions with a third party as affirmative representations to consumers is the exact same analytical error made by the New Jersey Attorney General's office in the JuicyCampus investigation, and the error is no less baffling here. I remain surprised that bright lawyers so fundamentally misunderstand the interaction between contract and false advertising law.
There's one more twist to this