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 10, 2008
eBay Not Bound By Robinson-Patman Act--Windsor Auctions v. eBay
By Eric Goldman
Windsor Auctions, Inc. v. eBay, Inc., 2008 WL 2622791 (N.D. Cal. July 1, 2008)
The Robinson-Patman Act is a Depression-era law designed to reduce the ability of manufacturers to engage in price discrimination. At the time, large buyers (such as newly emerging chain retailers) were consolidating so much buying power that they were able to strongarm manufacturers into deals that were arguably unfair to the manufacturers and competitive but smaller retailers. The Robinson-Patman Act putatively tries to prevent these buyers from engaging in "predatory" buying prices by forcing the manufacturer to sell its goods at the same price to all similarly situated buyers. Prof. Paul Stancil published a nice summary of the law in Business Law Today in 2004.
I'm skeptical about the justifications for this law in the context of the Depression, but I'm crystal-clear about its validity today. In the modern age, the law has become farcically anachronistic, and I'm not sure I've ever met a single person who thinks the law is still a good idea. In practice, the Robinson-Patman Act is one of those obscure laws that typically arises only as a "gotcha" claim against defendants who don't know better or inadvertently run afoul of its technical provisions while engaged in normal commercial decision-making. There's certainly little evidence that the law actually improves competition or the marketplace.
In the case du jour, the plaintiff sells jewelry through eBay's live auction. (It looks like Live Auction is turning into quite the lawsuit trap for eBay; see my most recent blog post about it). Windsor sold nearly $1.5M in merchandise through the site in 2005 and 2006. Windsor thought sales would double in 2007 but instead realized that its sales were decreasing. Windsor alleges that eBay gave a competitive jewelry vendor, Molayem, better listing tools than provided to Windsor, and these tools allowed Molayem's listings to get more prominent placement in eBay's interfaces than Windsor's listings. Windsor claims that eBay's differential treatment between Windsor and Molayem violated, among other things, the Robinson-Patman Act.
The court dismisses the Robinson-Patman Act claim because eBay is not providing "commodities" under the act. The act, like many others, distinguishes between goods (covered) and services (not covered). At its core, eBay's relationship with its sellers is a service relationship of providing promotional/advertising services. Windsor tries to get around this by arguing that the software tools eBay provides its sellers ("Mr. Lister"/"Turbo Lister" and the "Batch Uploading Tool") and its documentation manuals are goods. This argument is not totally ridiculous; indeed, software is routinely treated as a "good" for purposes of UCC Article 2. However, even if true, the software is just a bit part of an overall service relationship, so the court rightly rejects the Robinson-Patman Act without leave to amend. However, the case isn't entirely over, as the court left open a claim for breach of the implied covenant of good faith and fair dealing.
I think this case is closely related to the search engine bias cases such as KinderStart v. Google. A website/search engine's decisions about what content to highlight (and, by implication, what not to showcase) can have dramatic effects on both consumers and vendors--to the tune of $1.5M in perceived foregone revenues in Windsor's case. The Robinson-Patman Act was a pretty feeble legal tool to challenge a website's interface decisions, but given the cash and emotions at stake, I'm sure plaintiffs will think creatively about other legal doctrines in their quest for recourse.
Posted by Eric at 03:00 PM | E-Commerce , Licensing/Contracts | 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 05, 2008
Keyword Metatags and Keyword-Triggered Ads Don't Create Initial Interest Confusion--Designer Skin v. S&L Vitamins
By Eric Goldman
Designer Skin, LLC v. S & L Vitamins, Inc., 2008 WL 2116646 (D. Ariz. May 20, 2008)
An Arizona district court has ruled that the surreptitious use of trademarks doesn't create a likelihood of initial interest confusion, granting summary judgment on the trademark claims to the defendant.
This case is another enforcement action brought by a manufacturer trying to keep its goods from leaking out of its restricted channel and being sold on the Internet. For other lawsuits along this line, see Australian Gold v. Hatfield, S&L Vitamins v. Australian Gold (yes, the same S&L...and the same lawyer) and Standard Process v. Banks. The plaintiff tries the typical arsenal of claims to control the independent online retailer, including trademark infringement and dilution, copyright infringement for displaying product shots, interference with contract and other related claims.
Trademark Infringement
With respect to trademark infringement, the plaintiff only complained about the surreptitious trademark uses in the keyword metatags and in keyword advertising, not any uses visible to consumers. The plaintiffs argued that these surreptitious uses created initial interest confusion (the discussion skips over the trademark use in commerce question). As I've said repeatedly, no one really knows what initial interest confusion means or how to develop a doctrinally rigorous test for measuring it, so every court makes up its own definition. This court's manufactured definition anchors initial interest confusion in "deception." This is consistent with the general Seventh Circuit articulation of initial interest confusion (although the 7th Circuit doesn't understand initial interest confusion any better than the other circuits), and the court cites to the 7th Circuit Dorr-Oliver case. However, the court partially breaks with some of the controlling Ninth Circuit jurisprudence, which in Brookfield rooted the doctrine in attention diversion, not deception.
By grounding initial interest confusion in deception, it makes the doctrine easy to apply in this case. S&L Vitamins didn't deceive consumers--it was selling legitimate goods and accurately describing this fact. The case has some odd discussion about the possible inherent deception if S&L Vitamins ranked well in the organic search results, but the court rejects this line of thinking, saying anyone confused by good search engine placement on a competitor's trademark will be the "naive few" because S&L operated under a distinguishable domain name. This is the right result but the wrong reasoning--for the right reasoning, see here.
Instead of thinking that keyword metatags and ads creates deception, the court sees them as information-enhancing, thus getting the point that the goal is to match interested consumers with willing vendors:
In contrast to the deceptive conduct that forms the basis of a finding of initial interest confusion, S & L Vitamins uses Designer Skin’s marks to truthfully inform internet searchers where they can find Designer Skin’s products. Rather than deceive customers into visiting their websites, this use truthfully informs customers of the contents of those sites. Indeed, in practical effect S & L Vitamins invites Designer Skin’s customers to purchase Designer Skin’s products. The fact that these customers will have the opportunity to purchase competing products when they arrive at S & L Vitamins’ sites is irrelevant. The customers searching for Designer Skin’s products find exactly what they are looking for when they arrive at these sites. S & L Vitamins is not deceiving consumers in any way.
Bingo! Summary judgment for S&L Vitamins.
Even though this IIC-qua-deception meme is generally consistent with 7th Circuit law, this result appears to be directly contrary to the uncited 7th Circuit Promatek v. Equitrac case, where the court waffled on whether keyword metatags were inherently deceptive, even when used by a legitimate provider of services for the trademarked good.
More importantly, this result also runs directly contrary to the 2006 10th Circuit Australian Gold case, which found that keyword metatags in a virtually identical situation (unauthorized seller of leaked legitimate goods) constituted initial interest confusion. The court acknowledges this conflict but dismisses the 10th Circuit case as "unpersuasive" because the mark usage is designed to attract consumers to the trademark owner's actual goods. From my perspective, this is more evidence that courts are not following the Australian Gold v. Hatfield precedent--the most obvious example being the 10th Circuit's own Ski Vail case, which took a big chunk out of the Hatfield precedent. I know plaintiffs love citing the Hatfield precedent, but it's becoming increasingly less credible to do so.
Trademark Dilution
Given the more rigorous requirements for fame post-TDRA, it seems like many manufacturers who tightly control their channel and restrict Internet sales may inherently have a problem establishing fame. Perhaps I'm not part of the target audience, but I had never heard of Designer Skin products before.
The court doesn't get into the fame issue, instead granting summary judgment to S&L based on the nominative use defense because all of S&L's trademark uses refer to the plaintiff's trademark. I'd have to do some research to confirm this, but I believe this is one of the first (if not the first) post-TDRA cases dismissing a dilution claim on nominative use grounds. Personally, I think S&L's usage neatly fits my characterization as a "commercial referential trademark use," but it's great to see a court get the point, whatever terms it uses to describe the behavior. The court also (correctly, IMO) says that a commercial referential trademark use effectively can't cause a likelihood of dilution because it's neither blurring (there's no new definition) nor tarnishing (it's an accurate reference).
Copyright Infringement
Designer Skin complained that S&L copied the photos posted to its website. S&L claims that it simply recreated the product shots independently. This factual dispute is enough to prevent SJ. Patry believes that 17 USC 113(c) should have protected S&L here, but as Rebecca explains very well, 113(c) may not be germane--Designer Skin admitted that S&L could recreate its own shots if it wants to (see FN9 of the opinion), so the only question is whether the photos actually displayed on S&L's site were independently created.
If S&L snatched the photos from Designer Skin's website, then the court says republishing those would not be a fair use. I think this is probably right, although it's rather silly from a social welfare perspective to make people recreate product shots when invariably they will look effectively the same, and certainly the manufacturer isn't going to stop producing product shots simply because legitimate downstream retailers "free ride" on that investment. Rebecca has more to say about the fair use discussion.
Other Claims
The court dismisses the interference with contract claim and S&L's unfair competition claim, but it preserved Designer Skin's unfair competition claim (which, as Rebecca rightly points out, should be preempted by copyright's preemption clause).
Conclusion
As I've said before, I don't understand why plaintiffs try to control their channel so tightly to preclude Internet sales. I mean, I get the fact that they are trying to increase profits by reducing retailer competition, but those efforts will pay off only in the short run at best. Time to develop a new business model! Meanwhile, courts are realizing that they are being asked to facilitate anti-competitive practices, and wisely they are balking. Thus, a case like this illustrates that a judge will find limits to the initial interest confusion doctrine (a doctrine that otherwise has no natural doctrinal limits) and interpose pro-competitive defenses to trademark dilution.
Posted by Eric at 10:49 AM | E-Commerce , Search Engines , Trademark | TrackBack
March 23, 2008
Adwords Ad Creates Initial Interest Confusion--Storus v. Aroa
By Eric Goldman
Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008).
(Sorry for my delay blogging this one).
A federal district court has held that displaying a competitor's trademark in Adwords ad copy constitutes impermissible initial interest confusion, leading to a summary judgment win for the trademark owner. This is one of the first competitor-vs.-competitor search advertising cases where the plaintiff has won the trademark claims. This case also has an interesting and rare discussion about the trademark implications of a retailer’s internal search engine.
Claims Against Aroa
Storus distributes money clips under the trademark "smart money clips." Storus was able to get a federal registration for the mark, which is interesting because I’d love to see the showing of secondary meaning. Given the registration, Aroa instead tries to knock out "smart" as a laudatory phrase, but the court isn't convinced. Thus, the court permits Storus to proceed with a pathetic descriptive mark.
Aroa sells competitive money clips. Through Adwords, it purchased the keyword "smart money clip" to display the following ad:
Smart Money Clip
www.steinhausenonline.com Elegant Steinhausen accessories. Perfect to add to any collection.
Per Google's standard formatting, the trademark shows up bold and underlined, which the court says overshadows Aroa’s display of its own trademarks in the ad copy. The court also invokes initial interest confusion (as part of the Ninth Circuit's inconsistently invoked "Internet trilogy" likelihood of consumer confusion analysis) and notes that "defendants offer no evidence to show a lack of actual initial interest confusion." Summary judgment for plaintiff.
Claims Against Skymall
Skymall is an online retailer of Aroa products. Storus alleges that Skymall included the term "smart money clip" on Aroa product pages, which meant that if a person searched for "smart money clip" in Skymall's internal search engine, Aroa's products would appear in the search results. Storus portrayed this as initial interest confusion, but the court wasn't persuaded enough to grant summary judgment. Instead, the court observes that "a page offering an Aroa money clip will appear as a search result solely because the consumer searches using the phrase “money clip,” irrespective of whether the consumer adds the word “smart” to the search term and irrespective of whether the page contains the word “smart.”" Isn't it amazing that a page containing the phrase "smart money clip" would also appear for a search on "money clip"?!
Implications
On the surface, this case looks problematic for the search advertising industry. Any time a search advertising practice is deemed infringing, it should promptly eliminate all similar ads from other advertisers, taking a chunk of revenues out of search engine pockets. Further, when advertisers are liable for trademark infringement, it increases the risk that search engines will be contributorily liable for those infringing ads.
Yet, Aroa’s practices here (displaying a competitor’s trademark in the ad copy) are already restricted by all of the search engine trademark policies. Therefore, this ruling shouldn’t reduce much ad revenue for search engines.
But that raises the obvious question: why didn't Storus just invoke these search engine policies to shut down Aroa? As Dennis Toeppen might have said, perhaps Storus' lawyer wanted a new boat, because this trademark lawsuit made absolutely no financial sense for Storus. The court determines that over 11 months Aroa got 1,374 clicks on its ads (from 36,164 ad impressions, yielding a 3.7% clickthrough rate--not bad). If we value each click at $1/click (a generous amount given that Aroa sells its money clip for $30), Storus could have acquired the "diverted" clicks for $1,374--an amount that is surely no more than 5% (and perhaps even less than 1%) of what Storus spent in this lawsuit. Smart business decision there, guys.
Doctrinally, this case is a textbook example of how the initial interest confusion doctrine is completely bogus. As I’ve said before, a defendant cannot mount an adequate defense against the initial interest confusion doctrine because the doctrine lacks any rigorous definition or normative support in the first place. The defense challenge is especially problematic where, as here, a court improperly puts the burden on the defendant to disprove that consumers experienced initial interest confusion. Exactly what proof would satisfy the court here? I can’t answer this and I bet the court couldn’t either, and I can go further and assert that evidence to disprove initial interest confusion simply does not exist at all.
This court also unfortunately buys into the tired and outdated syllogism that every click on Aroa’s ad was a “diverted” consumer. As I’ve explained here, this massively overstates the quantum of “diversion” (whatever that means) because we don’t know what consumers expected to find when they entered the search term “smart money clip.” The low general risk of diversion is even lower here because consumers saw Aroa’s trademarks in the ad copy, further reducing the risk that anyone was confused by the time they decided to click on the ad.
Other comments on this case:
* Thomas O'Toole
* Tech LawForum
* IP Law Observer
* Las Vegas Trademark Attorney
Posted by Eric at 10:05 PM | E-Commerce , Search Engines , Trademark | TrackBack
March 13, 2008
eBay Denied 230 Defense for Its Marketing Representations--Mazur v. eBay
By Eric Goldman
Mazur v. eBay Inc., 2008 WL 618988 (N.D. Cal. March 4, 2008)
I declared Monday "47 USC 230 Day" here at the Technology & Marketing Law Blog, but with this new case, I'm declaring it 47 USC 230 Week. This case explores one of the frontiers of 47 USC 230 jurisprudence--when can 230 preempt a claim that a website made false marketing representations? This issue has been lurking in numerous recent 47 USC 230, but it arises squarely here. Unfortunately, the legal analysis isn't clean or easy.
eBay offers its users the ability to engage in "live bidding" (i.e., bidding via the Internet on auctions taking place in physical space) through third party vendors. eBay's marketing materials described these vendors as "safe" and "carefully-screened, reputable international auction houses" and that the bidding was against "floor bidders" (i.e., people bidding on the physical floor of the auction). The plaintiff claims that instead shill bidders at the auctions caused her to overpay. eBay defends against the claims based on 230 because any falsity introduced into its statements was attributable to the actions of third party vendors.
Judge Patel found that 230 helped eBay in a number of respects:
* "to the extent plaintiff seeks to hold eBay liable for information provided by [a third party vendor], eBay is immune from liability".
* "plaintiff’s assertion that eBay knew of the seller’s illegal conduct and failed to prevent it is nevertheless under the ambit of section 230"
* "eBay’s assertion that the auction houses were screened is not actionable" because the screening is an editorial function [note: I'm not sure screening vendors for quality is really an editorial function in the traditional sense. Perhaps this particular issue would have been more appropriately handled under 230(c)(2)?]
At the same time, the court says that three other statements at issue--that live bidding is "safe," is conducted against "floor bidders" and involves "international" auction houses--are not preempted by 230. In doing so, the court distinguishes several cases, including:
* the Gentry case (involving eBay's liability for fake sports memorabilia) because eBay's communications there were distilled from user-supplied feedback
* the SexSearch case (where the site claimed its users were 18+ but a minor lied about her age) because the marketing claims "were merely a regurgitation of its users’ representations" whereas here, apparently eBay made no regurgitations
* the infoUSA case (where infoUSA said that it verified data in its database) and the Barnes case (where Yahoo failed to take down bogus user profiles) because each involved the accuracy of data, while this case involves the promise of safety. [Note: I think the court makes a rather fine distinction here. Clearly the word "safe" means something special to this judge: "eBay’s statement regarding safety affects and creates an expectation regarding the procedures and manner in which the auction is conducted and consequently goes beyond traditional editorial discretion."]
The court doesn't discuss the Accusearch case, which seemed like the most analogous case to me. That case involved a vendor's resale of illicit phone records that were procured by third parties via pretexting, and the court held that 230 didn't protect the vendor even though the underlying asset being sold was information from a third party. The Accusearch opinion doesn't directly hold the vendor responsible for marketing these illicit records as legitimate, but that would be a fair way to read the opinion. The court also could have cited (but didn't) the CafePress opinion, which also involved a 230 denial for a website selling tortious third party goods.
So, what does all of this mean? The bad news is that this case seems to open up a major bypass to 230 for plaintiffs. They don't need to sue a website for a third party-caused tort by asserting the prima facie tort against the website; instead, following the "logic" in this opinion, all a plaintiff needs to do is find that the website made a marketing representation somewhere that says or implies the tort wouldn't occur, and the claim for bad marketing should be outside 230's coverage. [Note: I understand that's not exactly what Patel said because she did reject the claims for eBay's marketing representation about screening. But the claim over "safety" fits this pattern neatly.]
On the other hand, I'm not sure this case reached the wrong result. Assume for a moment that per 230, eBay isn't liable for the marketing claim that its vendors are "safe." This seemingly would mean that eBay could freely make such claims, true or not, reap the economic benefits from consumer choices driven by those claims, and yet completely avoid liability. I don't think 230 should provide a free pass for commercial misrepresentation. eBay picks the words to describe its business; it should own those words.
In any case, as this case illustrates, I think it's fair to say that 230's preemption of marketing representations remains a major open area in 230 jurisprudence. If you're looking for a term paper project, this looks like a good one to me.
Even if 230 doesn't apply, eBay has other defenses against liability for the alleged marketing misrepresentations. The court rejects eBay's defense based on the release in the eBay user agreement, but it does dismiss the fraud claim (with leave to amend) because it lacked the requisite specificity.
The opinion also discusses one of the auction vendor's user agreements, which specified a highly expedited extrajudicial adjudication as the sole dispute resolution option. The court tosses the contractual adjudication procedure as unconscionable due to the contract's formatting and substantive unfairness. Along the way, the court casts some doubt on extrajudicial adjudication clauses that have "no witness" provisions. If you're interested in forming enforceable online user agreements, you should check out this opinion.
Posted by Eric at 09:40 AM | Derivative Liability , E-Commerce , Licensing/Contracts , Marketing | TrackBack
March 11, 2008
Iowa Offers Tax Breaks to "Web Search Portal Businesses"
By Eric Goldman
Iowa, showing its technological savvy, has passed a law providing some tax abatements for "web search portal businesses" that invest $200M in the state in 6 years. See HF 2233, enacted Feb. 28, 2008. Most industry participants would not use the term "web search portal business," but the statute provides a useful definition as an "entity whose business among other businesses is to provide a search portal to organize information; to access, search, and navigate the internet, including research and development to support capabilities to organize information; or to provide internet access, navigation, or search functionalities." Well, that helps narrow down the universe of qualifying companies.
Given the size of investment required, I'll give you three guesses who the Iowa legislature might have been thinking of. Give up? Check out this handy list of lobbyists for the bill and see if you spot any familiar names.
As the fiscal note indicates, they anticipate a whopping TWO buildings to be built pursuant to this abatement. Not that this is special interest legislation or anything... On that note, one of the Iowa senators blogs on the law. Why is he winking at me?
Posted by Eric at 08:13 PM | E-Commerce , Search Engines | TrackBack
March 02, 2008
Feb. 2008 Quick Links
By Eric Goldman
Advertising
* BusinessWeek: Monetizing social networking sites isn't as easy as everyone had hoped, clickthrough rates are through the floor (0.04%!), and ad proliferation on the sites is driving users away.
* Wilbur, Kenneth C. and Zhu, Yi, "Click Fraud" (January 2, 2008). This paper appears to argue that search engines can increase their profits by failing to disclose the true rate of click fraud on their network.
* In re Miva, Inc. Securities Litigation, 2008 WL 450037 (M.D. Fla. Feb. 15, 2008). This lawsuit alleges that Miva and some associated individuals understated or misreported Miva’s reliance on click fraud, spyware and third party distributors in its public statements and thus inflated the company's stock price. Last year, the court dismissed many of the allegations but let a couple survive. In this ruling, the court dismisses a few more defendants from some statements and lets the rest of the case proceed.
* Going-out-of-business sales are often just another scam. (HT ContractsProf). Note this is completely consistent with economists’ theoretical predictions of final-period behavior of trademark owners.
* Google's stock has lost $70B in market cap in 7 weeks. Oh darn. Clickz offers some theories about why Google's clicks are declining. Could lower rates of click fraud be part of it?
* Hal Varian, Google's Chief Economist, argues that Google's marketplace success is solely due to its "secret sauce" (i.e., the advantage of learning by doing) rather than any defects in the marketplace.
Spam
* Jaynes v. Virginia (Va. Sup. Ct. Feb. 29, 2008). By a 4-3 vote, the Virginia Supreme Court upheld Jeremy Jaynes' 9 year sentence for violating Virginia’s spam law.
* Silverstein v. Experienced Internet.com, 2008 U.S. App. LEXIS 3364 (9th Cir. 2008). Ninth Circuit dismissed a CAN-SPAM lawsuit for lack of jurisdiction when the defendants attest that they didn't send the message and aren't local.
Domain Names
* NSI has been sued for its practice of grabbing pre-registration domain names based on WHOIS searches. The complaint. Good luck defending those practices, NSI!
* Two more breathy articles about the economics of domaining from the New York Times and Network World.
47 USC 230
* Johnson v. Barras, 2007 CA 001600 B (DC Superior Ct Feb. 1, 2008). Court dismisses a lawsuit against a website for republishing a defamatory story per 47 USC 230.
* Yet another doomed lawsuit against MySpace for facilitating communications between an adult male and an underage female that led to sex. Sam Bayard's comments.
Pornography
* NY Lawyer (login required): "Defense Bar Sees Growing Practice in Internet Sex Crimes"
* A federal obscenity prosecution for publishing graphic short stories (without pictures) on the Internet? As Tim Wu says, "astonishing."
* The Utah legislature is considering entering the marketplace again, this time through a certification mark program for Internet access providers who are willing to combat porn. See HB407. Of course, the Utah legislature has had terrific success in the past creating successful new business opportunities that the marketplace has overlooked.
User-Generated Content
* Nick Carr: "What we've seen happen with self-regulating communities, both real and virtual, is that they go through a brief initial period during which their performance improves - a kind of honeymoon period, when people are on their best behavior and rascals are quickly exposed and put to rout - but then, at some point, their performance turns downward. They begin, naturally, to decay." Like, I think, Wikipedia.
* Slate on the top-heavy nature of contributions to Wikipedia and Digg.
* Christian Science Monitor: Teachers Strike Back at Students' Online Pranks.
* Sam Bayard on a motion to quash in the AutoAdmit case.
Reputation
* eBay no longer lets sellers leave negative/neutral feedback for buyers. This putatively stops sellers from retaliating against buyers who leave legitimate complaints, but it also skews the database towards only positive reviews, which ultimately undercuts its credibility.
* In India, where courtships remain very brief by US standards and grooms can be paid dowries by the bride's families, there is an emerging trend for brides to hire "wedding detectives" to ferret out the scoop on grooms and whether their representations are correct.
* Funny article on being a secret shopper for Consumer Reports.
* Dan Solove's book, The Future of Reputation, is now available online for free. Ethan's review of the book.
Patents
* Six years later, eBay finally buys it now: eBay v. MercExchange settles with eBay buying out some of MercExchange's patents and licensing others.
* Mike Masnick: "Psst! Patent Examiners Do Not Scale"
Copyright
* Mike Masnick: “Why We Should All Want Politicians Who Plagiarize.”
* Do Not Resuscitate...My Copyrights (funny).
Miscellaneous
* Citizen Media Law Project has a useful discussion on getting insurance for cyberlaw risks.
* People v. Fernino, 2008 WL 382348 (N.Y. City Crim. Ct. Feb. 13, 2008) (woman violated a no-contact order when sending a MySpace message to the person).
* Mike Masnick: "We Need A Broadband Competition Act, Not A Net Neutrality Act"
* A retrospective on some of the leading dot-coms from the 1990s.
Posted by Eric at 05:32 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | TrackBack
February 14, 2008
Classic Article on "Cybermediaries"
By Eric Goldman
Mitra B. Sarkar et al., Intermediaries and Cybermediaries: A Continuing Role for Mediating Players in the Electronic Marketplace, J. COMPUTER MEDIATED COMMUNICATIONS, 1995
I've been working on my Brand Spillovers paper, which in part addresses the trademark legal principles that govern intermediaries including retailers and search engines. The Sarkar article is one of the most prescient and clear-sighted articles assessing the role of online intermediaries. In particular, it provides a terrific checklist of ways that intermediaries can provide valuable services to consumers and producers, thus continuing to add value to the distribution chain even as transaction costs generally decrease due to electronic mediation. This article is even more remarkable because it was written in the mid-1990s, at the height of cyberspace exceptionalism and at the time when conventional wisdom was that the Internet was going to create widespread disintermediation. A refreshing read, even today.
Posted by Eric at 11:09 AM | Derivative Liability , E-Commerce , Internet History | TrackBack
December 14, 2007
Oct.-Nov. 2007 Quick Links, Part 2
By Eric Goldman
Marketing/Branding
* To stimulate demand for its services, the British postal service is pointing out that snail mail is a good way to use olfactory marketing. Try to keep up with THAT, spammers! But doesn't this give new meaning to the observation that “junk mail stinks”...?
* Dunlop Tires offered a free set of tires to people who would get a tattoo of the company's logo. This tops a past promotion where they gave free tires to anyone who got tire tracks shaved into their hair. As a promotion, tattoos have an obvious advantage over hair-shaving because hair grows back. See my comprehensive post on tattoo advertising.
* As the Internet increases price competition and reduces margins in the jewelry market, diamond manufacturers are trying to prop up prices by branding their diamonds.
* Another lawsuit over the scorching-hot Hannah Montana concert tour—this time, alleging that the Hannah Montana fansite overpromised priority access to tickets.
* Anthony v. Yahoo, which involved a claim that Yahoo misled consumers of its dating service, has settled for $4M.
* I enjoyed this YouTube Video, Mr. Spam Man. Brought to mind the Spam-Free-or-Die video, which is still funny today.
Copyright
* William Patry on crazy copyright rulings against the “segOne,” a device that allows retailers showing broadcast TV to their patrons to substitute in ads sold by them instead of the ads sold by the broadcasters.
* Textile Secrets International, Inc. v. Ya-Ya Brand, Inc. (C.D. Cal. Oct. 31, 2007). 17 USC 1202 (the restriction on modification/removal of “copyright management information”) has been rarely interpreted, so this is a noteworthy case on that basis alone. This case involved the removal of CMI in offline activities. The court concludes "Court nevertheless cannot find that [1202] was intended to apply to circumstances that have no relation to the Internet, electronic commerce, automated copyright protections or management systems, public registers, or other technological measures or processes as contemplated in the DMCA as a whole."
* The Copyright Office has (finally) updated its electronic copy of Title 17.
Blogging
* David Hoffman discusses some considerations when structuring a group blogging LLC's operating agreement.
* U.S. v. Citgo Petroleum Corp., 2007 WL 4116066 (S.D. Tex. Nov. 19, 2007). An attendee at a trial blogs some of her observations about the jury. Her reward? One of the litigants can depose her as having potentially relevant information about jury impartiality. See my first-hand experience with potentially being deposed due to a blog post.
E-Commerce
* College students are ordering tires, pool tables and Winchester rifles online.
* The Canadian taxing authorities have won a victory allowing them to order eBay’s US company to disclose vast amounts of transactional data that presumably will be cross-checked against Canadian PowerSeller tax returns.
Miscellaneous
* Express Media Group, LLC, v. Express Corp., No. C 06-03504 WHA (N.D. Cal., May 10, 2007). Martin Samson's summary: "Court finds defendant, who claimed to have purchased plaintiffs' Express.com domain for $150,000 from someone who purported to be, but was not, the domain's Administrative Contact, guilty of conversion and directs defendant to return the domain to plaintiffs."
* Fallout from the Oracle v. SAP case: SAP may sell TomorrowNow, and several TN executives have been axed.
* A good use for a geolocated cellphone-mediated information service: the location of the nearest public toilet.
* Declan rallies against a federal "Do Not Track" list.
* NYT: US News & World Reports is getting into the consumer review business by aggregating third party opinions. According to the NYT, "The magazine has searched the work of dozens of automotive reviewers at newspapers and magazines, assigned a numerical value to each review (a process U.S. News describes as complex, rigorous and top secret), and then aggregated those into final scores. The Web site offers a description of each vehicle, sprinkled with snippets of quotes from those reviewers, so that it reads as much like a Zagat's restaurant blurb as something you might find in Consumer Reports."
* Don'tcensorme.com: a website for commenters who believe that their comments have been deleted by moderators on hubris overload.
* BusinessWeek: 101 Best Web Freebies.
Posted by Eric at 08:20 AM | Copyright , Domain Names , E-Commerce , Marketing , Privacy/Security , Spam | TrackBack
December 13, 2007
Internet Doctor Gets Extra Jail Time for Using Website--US v. Hanny
By Eric Goldman
U.S. v. Hanny, 2007 WL 4322265 (8th Cir. Dec. 12, 2007)
Given its blatant illegality, I'm a little surprised that we don't hear more about busts of companies and individuals selling prescription drugs over the Internet. I did a quick search in Westlaw and it looks like there have been a few dozen cases, but they don't seem to get much mass-media attention. I also wonder if the enforcement actions have succeeded in actually reducing consumers' ability to order prescription drugs over the Internet. I don't see as many brazen spammed come-ons as I recall getting a few years ago, but I'm not sure how generalizable my experience is.
Today's case involves the criminal prosecution of Dr. Thomas Hanny, a Connecticut-licensed doctor who retired after 30 years as a surgeon. He then hopped on the dot-com bandwagon, writing Internet-mediated prescriptions first for Pharmacon and then, after Pharmacon was shut down by law enforcement, for Jive. Hanny initially had doubts about the propriety of this line of work and even went so far as to hire his own attorney (who also expressed doubts), but Hanny either felt the issue was colorable enough or decided to look the other way, going so far as to ignore a cease-and-desist letter from Missouri prosecutors. Collectively, these proved to be poor decisions that will cost Hanny 33 months of his liberty.
It's a little hard to feel sorry for Hanny renting out his doctor's license, especially given that he doubled down after the Pharmacon flameout by going to another dot-com and double doubled down by persisting after the Missouri C&D. On the other hand, Hanny did get screwed on the issue decided in this opinion by the Eighth Circuit.
The issue is the 2 level sentencing enhancement for "the distribution of any controlled substance 'through mass-marketing by means of an interactive computer service.'" The government did not appear to introduce any evidence that Pharmacon or Jive used spamming or other advertising methods to generate traffic to their websites. Instead, the government contended that the mere existence of an e-commerce website itself constitutes mass marketing. The Eighth Circuit signs off on this interpretation, invoking some moldy-oldy analogies when it says "A public, interactive website reachable by an ordinary web search engine is, at the least, a billboard on the information superhighway." [If it were up to me, any Cyberlaw opinion invoking a tired and misused billboard metaphor would itself be subject to a 2 level enhanced penalty]
My problem with this is that the court conflated retailing with marketing. Simply operating a retail store without marketing to generate traffic cannot qualify as "mass marketing" under any reasonable interpretation of that phrase. As a result of this confused interpretation, every Internet retailer automatically qualifies as engaging in "mass marketing" for purposes of the sentencing enhancement.
Posted by Eric at 10:50 AM | Content Regulation , E-Commerce , Marketing | TrackBack
December 10, 2007
Yale Reputation Economies Symposium Recap
By Eric Goldman
Reputation is a hot topic in Cyberlaw circles, so the Yale ISP conference on Reputation Economies in Cyberspace came at a propitious time. Some of my meta-observations from the talks.
1) We lack a uniformly accepted definition of reputation. During the conference, it was clear that most speakers were working with their own idiosyncratic definitions. Without a standardized definition, people can easily talk past each other.
2) Reputational systems are everywhere--FICO scores, letters of recommendation, Google PageRank, product review sites like Epinions, spam filters, employee evaluations, etc. I plan to catalog them in my next big paper. For now, Jonathan Zittrain gave two interesting examples: (1) British pubs are now taking patrons’ fingerprints and publishing a blacklist of rowdy pubgoers to other pubs, and (2) websites allow angry drivers to criticize bad drivers by license plate number.
3) We often treat reputation as a monolithic assessment (good or bad), but it is granular and contextual. Reputation systems need to reflect these nuances, and we’re seeing movement in that direction. For example, eBay is considering more granular feedback scores, which might entail different scores for product description accuracy and shipping speediness. However, increased granularity is subject to the accuracy/simplicity tradeoff—increased complexity improves accuracy but makes it more costly to participate in the system.
To overcome the accuracy/simplicity tradeoff and reduce collection costs, reputational data can be collected automatically. Bill McGeveran compared Facebook’s automatic collection of recommendations through Beacon with ratemyprofessor.com (a site I’ve critiqued before--1, 2, 3), where the communication costs discourage students from providing feedback unless they hold extreme views (i.e., love it/hate it).
Jonathan Zittrain suggested that people should be able to request that some information should not become part of their reputation. He gave robots.txt as an analogy; it is a voluntary standard that web publishers can use to keep content (that might have reputational implications) out of the search engines, which in turn significantly reduces its visibility. Although robots.txt is voluntary, it is widely followed. Jonathan thinks a similar voluntary system might be helpful for reputational data.
4) As noted by several speakers, reputation has economic value that can be converted into cash. For example, spammers have better delivery success—and thus make more money—if they can work with a high-reputation email address that is less likely to be blocked/filtered, and an seller with high feedback commands premium prices for his/her auctions. These payoffs create incentives for “bad guys” to capitalize on undeserved reputation, leading to the hijacking of high-feedback accounts and feedback-inflating activity (such the serial consummation of penny auctions) that can be used for a short but intense burst of fraud.
Bill McGeveran gave Facebook’s Beacon as another example of reputation’s selling power. In that case, Facebook and marketes are engaged in “reputational piggybacking” to get extra credit from the “recommending” user’s validation.
Because reputation has economic payoffs, we are tempted to provide property-like protections for reputation. Trademark law is an example of this in the commercial context. In contrast, with respect to individuals, damaged reputations can have significant non-economic harms that are not well-handled through property systems. Discussions about legal protection for reputations can get confusing when economic protectionism are conflated with these non-economic harms.
5) No reputational system will be perfectly accurate. Any system will have Type I and Type II errors. So how accurate must a reputational system be for it to be credible? We should assess this question by comparing a reputational system’s errors against the errors from alternative systems (or the absence of the system altogether).
A reputational system might be improved through more robust error correction mechanisms. Jonathan Zittrain gave the example of the Google News feature that allows a quoted individual to add comments right below the article. This reminded me a lot of Frank Pasquale’s asterisk proposal.
6) Reputational information is time-sensitive in that more recent reputational information is more useful to assessing reputation. Jonathan Zittrain proposed a concept of “reputational bankruptcy” where "old" information could be permanently suppressed because it is not useful to make future assessments. He analogized this to the time-based degrading of eBay’s feedback score, which segregates transactional information by date (i.e., 1 month, 6 month, all time).
More resources on this topic:
* notes from my talk
* my article on the intersection between online word of mouth and trademark law
* the collection of position papers from the event
* other recaps: the conference wiki, Jenny Ambrozek, James Grimmelmann, Aldon Hynes, Greg Lastowka, Andy Oram, Frank Pasquale (1, 2), Rebecca Tushnet (1, 2, 3, 4), Michael Zimmer
Posted by Eric at 10:27 PM | E-Commerce , Publicity/Privacy Rights , Spam , Trademark | TrackBack
December 05, 2007
eBay Sued for Failing to Take Down Listings--Hansson v. Brower
By Eric Goldman
Hansson Inc. v. Brower, 4:07-cv-05898-CW (N.D. Cal. complaint filed Nov. 21, 2007)
In my Cyberspace Law course, I teach students that they should not just consider the liability of the person who committed the allegedly tortious behavior, but they must always ask who else is liable for that behavior. We saw that principle illustrated recently in the ISC2 v. Degraphenreed case, where Google and Yahoo got pulled into a trademark lawsuit for hosting some content that allegedly infringed the plaintiff's trademark.
Today's case in point is Hansson v. Brower, a seemingly garden variety trademark enforcement action. Hansson makes dollhouse furniture and claims that Brower is selling competitive items under the Hansson name via eBay, so Hansson is suing Brower for trademark infringement, dilution and related causes of action. But Hansson goes further. Hansson claims it sent 8 takedown notices to eBay and that they were all ignored and that it sent a C&D letter and that too was ignored. So Hansson has added eBay as a defendant for contributory trademark infringement.
Some questions I have:
1) What happened to those 9 communications from Hansson to eBay? Did they all get lost in the mail? Did eBay make a policy choice that they should be rejected? Did eBay just muff them?
2) What is the appropriate legal standard for eBay's liability? This is a big open question mark in Cyberlaw. 230 doesn't apply by its terms to federal trademark claims, and 512 only applies to copyright. eBay might be able to claim the innocent printer/publisher defense in 15 USC 1114(2), although Hansson has alleged that eBay has the requisite scienter to negate "innocence." So at the moment, eBay's risk of contributory liability may be governed by the common law of contributory trademark liability, and we really don't have many good/illustrative precedents for how this applies to a platform like eBay's. We're closely watching the Tiffany v. eBay lawsuit in NY, which is an analogous lawsuit, but we don't have any useful precedent from that yet. So should eBay be liable if they actually received notice of infringement and failed to take down the noticed auctions? Perhaps.
3) Even so, was it wise to drag eBay into this otherwise ordinary enforcement lawsuit? As I explored with the ISC2 lawsuit, suing eBay ensures that a well-funded litigant with good lawyers will be on the defense side. I swapped emails with James Cai, attorney for Hansson, asking him why he named eBay, and he said the goal was to get eBay to intervene. I'm sure he'll get eBay's attention now, but he may get more of it than he wanted.
Posted by Eric at 02:28 PM | Derivative Liability , E-Commerce , Trademark | TrackBack
December 02, 2007
Taxonomies and Commercial Reputations
By Eric Goldman
This coming Saturday, the Information Society Project at Yale Law School is sponsoring a very attractive event entitled "Reputation Economies in Cyberspace." I'm especially excited about this event because I think my next big project will focus on reputation topics, so this should be a fantastic learning experience. I'm on the last panel, which is a precarious time because of the high preemption risk. As a result, I've picked a less-than-mainstream topic with a low preemption risk, although I may move into more mainstream topics depending on what gets discussed earlier in the day. Here's the short summary I provided to the conference organizers:
_____________
Taxonomies and Commercial Reputations
A “taxonomy” is a structure for organizing content. It provides the anchors that allow topically relevant content to be grouped together in a logical fashion. Among other benefits, taxonomies can provide a system for designating unique identifiers for marketplace offerings. These unique identifications are crucial for the development and management of commercial reputations. For reputational mechanisms to work properly, objective and subjective data about offerings need a place to be associated uniquely with the offering. Without this, the data has no place to attach, distorting the reputational mechanism.
Proprietary rights threaten the ability to optimally taxonomize marketplace offerings in at least two ways. First, taxonomy developers can assert a proprietary interest in their taxonomies. Second, trademark owners can use their proprietary rights to distort the taxonomy or content attached to it.
Taxonomy Developers’ Rights
Taxonomy developers may be able to claim copyright in their taxonomies. See American Dental Association v. Delta Dental Plans Association, 126 F.3d 977 (7th Cir. 1997); but see Southco, Inc. v. Kanebridge Corp., 390 F.3d 276 (3d Cir. 2004); ATC Distribution Group, Inc. v. Whatever It Takes Transmissions & Parts, Inc., 402 F.3d 700 (6th Cir. 2005). Even if they cannot, online taxonomy developers can restrict access to their taxonomies through server protection doctrines (such as trespass to chattels, Computer Fraud & Abuse Act, computer tampering doctrines, etc.).
Excludable taxonomies create two problems. First, competitors need to recreate taxonomies. This leads to duplicative efforts that are socially wasteful, and implicitly it increases barriers to entry by new intermediaries. Second, and perhaps more importantly, it hinders consumers’ abilities to do apples-to-apples comparisons between marketplace offerings, because consumers must do extra research to determine if taxonomical nodes in two different taxonomies are the same offering. As a result, consumers miss valuable reputational information because they cannot find it.
There is a licensing market for taxonomical data in many (but not all) product verticals. These licensing programs can be expensive for new entrants. Some licensors provide unique identifiers that can enable consumers to make apples-to-apples comparisons, but in other cases, catalog standardization/normalization remains a challenge. Furthermore, if there are competitive licensors in a particular vertical and they use different identifiers, then consumers may face a cacophony of identifiers.
This could be solved through a comprehensive and non-excludable product taxonomy with unique identifiers for all marketplace offerings. The exemplar is the ISBN taxonomy, which has done a remarkable job of allowing consumers to find and compare books. Because this economy-wide taxonomy hasn’t developed via private efforts, and because any developer will likely assert proprietary interests in the taxonomy in ways that would hinder its functioning, government sponsorship may be necessary (and appropriate) to develop the uniform taxonomy.
Trademark Owners’ Rights
By definition, trademarks should act as unique identifiers for marketplace offerings. Presently, trademarks provide the main taxonomical structure for marketplace offerings in most industry verticals. However, the proprietary interests of trademark owners limit the utility of trademarks as a taxonomy in at least two ways.
First, trademark owners can use trademark law to limit the use of their trademarks as a taxonomical node. Retailers can generally use trademarks for the products they sell under the trademark exhaustion doctrine. However, other intermediaries (such as product review sites) have no such defense, and their usage may qualify as a trademark use in commerce, meaning that any trademark inquiry becomes messy and unpredictable. Furthermore, search engines provide consumers with access to unstructured databases and use user-initiated search keywords—which may be trademarked—as a type of “dynamic taxonomy,” and this has exposed search engines to potential trademark liability as well.
Second, trademark owners may also use trademark law to strip out content that has been anchored at the trademarked taxonomical node. For example, in a group of product reviews, trademark owners could attack negative reviews as violating their trademarks. Once again, those reviews might satisfy the trademark use in commerce doctrine, leading again to messy and uncertain analysis. Indeed, trademark owners have every incentive to use trademark law to produce “lopsided databases” where favorable opinions remain and unfavorable ones are excised.
Some solutions to address these problems include:
1) We should provide a legislative safe harbor allowing search engines to use trademarks to create dynamic taxonomies for unstructured databases.
2) We should use the innocent printer/publisher safe harbor (15 U.S.C. §1114(2)(A)-(C)) more extensively to curb efforts to produce lopsided databases.
3) We should categorically exclude all referential trademark uses (i.e., uses of a trademark for its referential value), even if made by commercial actors in commercial settings, from trademark scrutiny. I build this argument out here.
Posted by Eric at 08:03 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack
November 13, 2007
Geolocation and A Bordered Cyberspace
By Eric Goldman
I recently gave a talk on the general theme of the future of e-commerce, and I was allowed to take the topic in any direction. I decided to talk a little about the propagation of geolocation technology and its consequences for a borderless Internet. My notes from the talk:
______
A constant problem in Cyberlaw: the difficulties of authenticating users for age and geography. With respect to geography, in the mid-1990s, there was a strong belief that cyberspace was borderless. Examples:
* John Perry Barlow's 1996 Declaration of the Independence of Cyberspace
* 1997: ALA v. Pataki, where a state anti-Internet porn law (a baby CDA) was struck down as violating the dormant commerce clause. In that case, Judge Preska said: "Geography is a virtually meaningless construct on the Internet."
But there are ways to restore geographic borders to the purportedly borderless Internet:
1) Ask users to self-report. Users may want to self-report geography, especially in the e-commerce context where they want physical goods delivered or need to report their address to authorize a credit card purchase. But the law could force online actors to compel users to self-report geography and then act on the reported information. Examples:
* LICRA v. Yahoo. The French court envisioned that Yahoo could do 90% effective geographic authentication through a combination of IP address analysis and user self-reporting if Yahoo popped up windows asking users to self-report before being allowed to access the website.
* Alaska SB 140, an anti-adware law. To combat pop-up ads, the statute requires software vendors to display pop-up windows asking users to self-report geography.
A world with compelled requests for user self-reporting of geography would be a pop-up filled world constantly asking "where are you now? where are you now?" [see the analogous Verizon ad campaign] This makes user self-reporting undesirable, in addition to being unreliable.
2) IP address analysis. IP addresses are allocated on an International scheme. Yahoo used this scheme to display local ads, a fact noted in the LICRA court. IP address analysis can be more regional; for example, Google does geo-targeting on a more granular basis. Ex: if I search for "mercedes" in Google, I get local Mercedes dealers in the Bay Area. But IP address analysis is incomplete/imperfect.
So if the only geographic authentication tools were IP address analysis or user self-reporting, the Internet would remain more borderless than bordered. However...
3) Geolocation technology. In the future, Internet access devices will be coupled with GPS technology that will automatically report user geography. For example, many mobile phones already have GPS technology in them, and consumers use other mobile devices (e.g., Blackberries) that have geolocation technology. Inevitably, the boundaries between computers and these geolocated mobile access devices will dissolve, meaning that Internet access devices will be geolocated and will automatically self-report user geography as part of interacting with other online actors.
A geolocated Internet will have some benefits. Most obviously, ads can be geographically targeted in ways that can help consumers (i.e., a driver searching for gas can get ads from nearby gas stations). It will also enable other localized content where that matters (weather, directions, location of friends).
But a geolocated Internet will also enable governments to force online actors to "honor" the geographic information. Thus, states could legitimately enact state-specific laws and require online actors to customize their offerings for state residents. Governments could also use the geolocation information to created walled environments, including more highly filtered/screened content. We've already seen this in China and some other countries. In these situations, Internet users will have very different Internet experiences based on their geography. Thus, a geolocated Internet should contribute to the demise the Internet utopianism. Instead of bringing people together over a borderless network, a geolocated world reenables borders that will keep us further apart.
Posted by Eric at 05:44 PM | Content Regulation , E-Commerce , Internet History | TrackBack
November 10, 2007
Google Resists Subpoena for Keyword Ad Purchases--Connor Sport Court v. Google
By Eric Goldman
Connor Sport Court International, Inc. v. Google Inc., CV-06-3066 PHX JAT // CV 07-80252 (N.D. Cal. motion to compel filed Oct. 31, 2007)
This summer, I reported on trademark litigation between Connor Sport Court and Rhino Court. The parties had settled the lawsuit, but then Connor complained that Rhino violated the settlement by buying keyword advertising triggered to Connor's trademarks. Connor then submitted a discovery request to Google seeking records of other people who had bought Connor's trademarks as keywords. As I noted at the time, the requested information had significant competitive value, and Google's delivery of the information could prompt a lot of other similar discovery requests to Google.
Initially, Google seemed inclined to give Connor the data it asked for, but apparently Google changed its mind. Instead, Google has refused to turn over any data related to third party purchases and didn't turn over much related to Rhino. Connor apparently still believes the requested information is worth pursuing, because it has now filed a motion to compel Google to comply with its discovery request.
Google might take the opportunity to clarify its policies regarding the disclosure of keyword ad purchases. Connor's brief claims that Google provided Rhino with information about a third party's ad purchase, including the ad copy, the maximum cost-per-click bid, the number of clicks and impressions, the average ad position and more. Is Google handing out this information merely based on a subpoena, or is Google going to make it harder for litigants to get access to this data? According to the filing, the hearing is scheduled for Dec. 7 at 9 am in San Jose.
Posted by Eric at 12:53 PM | E-Commerce , Marketing , Privacy/Security , Search Engines , Trademark | TrackBack
October 30, 2007
Vendor of Illicit Phone Records Not Protected by 230--FTC v. Accusearch
By Eric Goldman
Federal Trade Commission v. Accusearch, Inc., 06-CV-105-D (D. Wy. Sept. 28, 2007)
Accusearch (a/k/a Abika) offers for sale records of telephone calls made by telephone subscribers. Abika doesn't acquire the records itself directly from the phone companies; third parties do that. Even so, I believe the collection and resale of these phone records was illegal throughout the relevant time period. (Michael Erdman explores this more).
The FTC brings an action against Abika for unfair trade practices. Abika defends on 230. The FTC argued that Abika was the retailer; Abika argues that it is just an intermediary making matches between buyers and sellers of the records. The court rejects the 230 defense for two separate reasons:
* the statutory terms publisher/speaker are ambiguous, at least as applied to this case. Thus, the court turns to 230's legislative history to conclude that Congress didn't mean to protect these types of claims. The court says snarkily "It is ironic that a law intended to reflect a policy aimed at deterring 'stalking and harassment by means of computer' is now being urged as a basis for immunizing the sale of phone records used for exactly those purposes." (Fair enough, but see Zeran!)
* reselling the records meant that Abika "participated in the creation or development of the information" and thus became an information content provider itself.
Both of these arguments are pretty strained. The statutory references to "publisher" and "speaker" aren't entirely clear, but dozens of cases have interpreted them. It would have been nice to see the court consider those precedents before jumping to the legislative history as if the court is reading a 10 year old statute for the first time. As for the interpretation of "creation and development," I don't see how anyone can interpret those words to include retailing a record without any modifications at all.
Despite these analytical deficiencies, I think the court reached the right result. In my opinion, the retailer/intermediary distinction is the critical linchpin. It's pretty well accepted that an intermediary between buyers and sellers is fully eligible for 230 even if the purchase/sale involves illegal goods--see, e.g., Gentry v. eBay (fake sports memorabilia), Stoner v. eBay (bootlegged recordings). In those cases, eBay was the venue to publish the seller's advertisements to buyers. (See also Ramey v. Darkside Productions, another case holding that a publisher of third party ads wasn't liable for the ads, even if the publisher helped prepare the ads).
In contrast, I think a retailer who acts as the merchant of record of third party goods generally should be liable for selling those goods, even if the goods were acquired for resale from third parties. I don't see how 230 protects a retailer selling goods for its own account--I don't think the claim is appropriately styled as either a "publisher" or "speaker" claim at that point. But see Prickett v. infoUSA, where infoUSA resold data it obtained from third parties but was still eligible for 230.
Unfortunately, I think the court's biggest mistake is that it apparently forgot that it was addressing summary judgment motions, because the court made numerous factual inferences (some apparently contested) against Abika. So I think this ruling is best understood not as an SJ motion, but instead as a bench ruling where the court simply disbelieved that Abika was an eBay-like intermediary and instead concluded that a retailer can't claim 230 for reselling illegal goods for its own account. Rephrased this way, I think the court reached the right result.
For more on this case, see Michael Erdman's nice writeup.
Posted by Eric at 11:26 AM | Derivative Liability , E-Commerce , Marketing , Privacy/Security | TrackBack
October 21, 2007
Ticketmaster Wins Big Injunction in Hannah Montana Case, But Did the Public Interest Get Screwed?--Ticketmaster v. RMG
By Eric Goldman
Ticketmaster L.L.C. v. RMG Technologies, Inc., 2007 WL 2988403 (C.D. Cal. Oct. 16, 2007)
You may remember Ticketmaster's multi-year battle against Tickets.com over data aggregation and deep linking. Ticketmaster never got a solid win in that case, but here Ticketmaster successfully advances the same legal theories against someone gaming its allocation of tickets. Hannah Montana fans might cheer this ruling, but some of the court’s analysis makes this a troubling Cyberlaw development.
Introduction
This case involves what I'll call "ticket sniping"--the practice of quickly snapping up highly-sought-after tickets when they first go on sale and then reselling them at higher prices. When it comes to hot concerts--such as the upcoming Hannah Montana tour--Ticketmaster's price may be well below the prices people are willing to pay in the secondary market. Why don't event promoters use auctions or other dynamic pricing scheme to capture this upside on the first sale? I'm reminded of the odd pricing systems for IPOs--just like that market, perhaps Ticketmaster (as an intermediary) deliberately underprices below the market-clearing price to increase its profits.
In any case, initial ticket buyers from Ticketmaster can get an economic windfall, which naturally motivates people to game the initial first-come, first-served ticket allocation system. RMG was one such gamer. They developed software that helped its customers beat other buyers in the rush to get hot tickets. Ticketmaster sued RMG to stop their gaming activities; the court issues a preliminary injunction:
Copyright
The court says that RMG directly infringed Ticketmaster's copyright in its web pages by browsing them to test the operation of its software tool. Effectively, then, the court says that web browsing is copyright infringement. This isn't the first time a court intimated as much, but it's troubling every time we see it.
The court overlooks any implied license to browse because Ticketmaster's "browsewrap" on its home page (which says "Use of this website is subject to express Terms of Use which prohibit commercial use of this site. By continuing past this page, you agree to abide by these terms") acts as an express restriction on browsing, so any access in contravention of those terms constitutes copyright infringement.
One of the key Qs is how RMG's software differs from other search engine robots. The court skirts this Q, simply pointing to Perfect 10 v. Amazon as excusing the cache copies made by web users who fol