November 18, 2008
October 2008 Quick Links, Part 2
By Eric Goldman
Spam
* Kramer v. Perez. An Iowa court awards $236M in damages in a spam case. Venkat's comments.
* After the government lost its jury trial against Impulse Media, the court denied Impulse Media attorneys fees.
Contracts
* AT&T put its own emailed notice of amended contract terms into its spam folder. Whoops! Due to spam filters and other automated blocks, it is becoming almost impossible for websites to communicate with their users by email.
* An estimate of the massive "tax" imposed on consumers by reading privacy policies. Of course the financial drain is overstated because many people make a rational decision not to read every privacy policy, plus not every person has to read a privacy policy for marketplace responses to be effective.
* The Blizzard v. MDY WOWGlider case has reached a stipulated damages amount of $6M.
* Pulaski & Middleman, LLC v. Google Inc., 5:2008cv03888 (N.D. Cal. complaint filed August 14, 2008). The Justia page. Yet another me-too lawsuit against Google over serving ads to parked domains and error pages.
* An Israeli GPL enforcement action settled.
Trademarks/Domain Names
* Kentucky v. 141 Domain Names. Is a domain name property? Yes. See the Sex.com case. Can a plaintiff seize a domain name pursuant to a favorable judgment? Yes. Is it appropriate for Kentucky to seize domain names for gambling websites available in Kentucky? Of course not, because this would effectuate an extraterritorial reach by curtailing non-Kentucky residents from making possibly legal uses of the domain name. More recently, the seizure was stayed.
* Speaking of inappropriate seizures, the Feds are trying to seize the trademarks of the Mongols motorcycle group. DOJ press release. LA Times article.
* Best Western Intern., Inc. v. Doe, 2008 WL 4630313 (D. Ariz. Oct. 20, 2008). Prior blog post in this case. The judge is losing patience: "These filings are wasteful in the extreme. The Court is not a forum for the parties to expend every possible dollar seeking to litigate every conceivable issue, no matter how insubstantial. The Court will no longer tolerate the excesses of this case."
* The Verizon v. Navigation Catalyst Systems domainer lawsuit settled.
* 50 Cent brings yet another questionable lawsuit. (1, 2).
Advertising
* Goddard v. Google Inc., 2008 WL 4542792 (N.D. Cal. Oct. 10, 2008). The case against Google for deceptive mobile phone ads will stay in federal court.
* Eyeblaster, Inc. v. Federal Insurance Co., 2008 WL 4539497 (D. Minn. Oct. 7, 2008). This is a collateral lawsuit to Sefton v. Eyeblaster alleging that Eyeblaster distributed spyware. Eyeblaster tendered the claim to its insurer. This court holds that the CGL policy doesn't apply because the claim relates to software problems, not physical damage to the users' computers. Further the E&O policy doesn't apply because Sefton alleges that Eyeblaster intentionally installed the spyware, bumping Eyeblaster into one of the policy's exclusions.
* Are consumers becoming more tolerant of pop-up ads? For more on consumer acceptance of new advertising formats, see here.
* A big damages award in NetQuote v. Byrd.
Posted by Eric at 06:42 AM | Adware/Spyware , Domain Names , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Spam , Trademark | TrackBack
November 11, 2008
Lambotte's Click Fraud Lawsuit Against IAC Survives Motion to Dismiss
By Eric Goldman
Lambotte v. IAC/InterActiveCorp, 2008 WL 4829882 (C.D. Cal. Nov. 4, 2008). Initial blog post on the filing of the first complaint.
Lambotte filed this putative class action lawsuit against IAC in May based on alleged click fraud. In July, the court granted summary judgment to dismiss portions of the lawsuit. Lambotte and two new named plaintiffs then filed an amended complaint in September. IAC moved to dismiss. This ruling largely rejects that motion.
The plaintiffs argued that the contract says that IAC would charge for clicks by "users," and reasonable advertisers would assume that "users" are "potential clients" for the advertiser, not bogus clickers. The judge is rightly skeptical of this argument, saying that the plaintiffs' definitions "may not be the most reasonable interpretations." At the same time, California law has a liberal parol evidence rule, so the judge gives the plaintiffs a chance to introduce evidence to support their aggressive definitions. I would be surprised if this claim ultimately prevails, but the plaintiffs can try.
The plaintiffs also argue that the implied covenant of good faith and fair dealing effectively requires IAC to prevent click fraud, and thus IAC breached that obligation. The court, citing In re Yahoo, says that this allegation survives a motion to dismiss.
As with In re Yahoo, this ruling is a win for the plaintiffs because they get to keep litigating the case. However, there remains some basic problems with the plaintiffs' allegations that should ultimately doom the lawsuit. If in fact the plaintiffs do lose the lawsuit, it's unfortunate that everyone had to incur the extra adjudication costs. More likely, if the lawsuit can survive another few rounds, IAC probably cuts a check to end the threat regardless of substantive legal merit.
Posted by Eric at 02:24 PM | Licensing/Contracts , Marketing , Search Engines | TrackBack
October 23, 2008
Stockholder Derivative Action Against Yahoo Based on Click Fraud Rebuffed--Brodsky v. Yahoo
By Eric Goldman
Brodsky v. Yahoo! Inc., 2008 WL 4531815 (N.D. Cal. Oct. 7, 2008). The Justia page. Previous blog coverage.
You may recall this stockholder derivative lawsuit against Yahoo alleging that Yahoo hyped its stock prices by overstating its ad business' progress and by inflating revenues through artifices like relaxed anti-click fraud standards. The court has dismissed the complaint with leave to amend, principally on the basis that the plaintiffs have not been specific enough with their allegations. Most of the opinion is rather technical legalese, but I thought the discussion about the click fraud allegations were interesting enough that I've quoted them in their entirety:
Plaintiffs also assert that Defendants made false statements about Yahoo!'s revenues over the Class Period. Plaintiffs allege that Defendants manipulated their click fraud filters and delayed refunds fraudulently to boost revenues. As a result, Defendants' financial statements were overstated by $387 million over the Class Period.
Plaintiffs arrive at the $387 million figure by citing three magazine articles and two press releases. CAC ¶¶ 204-208. Some of these sources estimate that click fraud accounted for ten percent of all pay-per-click revenue in the search industry while other sources estimate the fraud rate as high as thirty-five percent. Plaintiffs adopt the ten percent rate and allege that $387 million of Yahoo!'s $3.878 billion in sponsored search revenue was attributable to click fraud.
Plaintiffs point to the statements by CW 3, CW 6, CW 8, CW 9, CW 10, CW 11 and CW 12 to support the click fraud allegations. For the complaint to survive the pleadings stage, Plaintiffs must describe these CWs' roles in Yahoo!'s revenue recognition process, or whether these CWs had any first-hand knowledge of Defendants' accounting decisions. See In re U.S. Aggregates, Inc. Sec. Litig., 235 F.Supp.2d 1063, 1074 (N.D.Cal.2002) (accounting fraud claim not corroborated by CW statements where “none of the confidential witnesses have any first-hand knowledge of [defendant's] accounting decisions”).
CW 3 worked as an Engineering Manager for Overture until Yahoo! acquired Overture in 2003. After the acquisition, CW 3 worked in the Business Information Systems group at the Overture facility until October, 2004. CAC ¶ 22. CW 3 claims that “Yahoo! decided in late 2004 to ‘relax’ the business rules and filters in the click-fraud detection system.” CAC ¶ 22(d). “CW 3 estimates revenues generated from the relaxation in rules represented approximately 25% of Overture's operating revenue.” CAC ¶ 22(f). CW 3 learned of this rule relaxation from Yahoo!'s Loss Prevention manager. CAC ¶ 22(d). CW 6 was a sales representative for Yahoo! and had regular communication with customers who complained about click fraud. Id. CW 6 noted that “15% of the revenues generated in his/her group was created via click fraud and irrelevant clicks from poor content match.” CAC ¶ 25.
The Court has no basis to determine whether CW 5's or 6's estimates of Yahoo!' s revenues satisfy the pleading requirement under the PSLRA. For CW 5's or 6's statements to carry any weight at the pleadings stage in this action, Plaintiffs must describe their roles in Yahoo!'s revenue recognition process, or whether they had any first-hand knowledge of Defendants' accounting decisions. Also, because CW 3 was not a Yahoo! employee for most of the Class Period, the Court cannot rely on his statements to support claims of false revenue reporting for the entire Class Period.
CW 8 was a Manager of the Overture Loss Prevention organization until February, 2006. CW 8 noted that “there was an effort inside Yahoo! to relax the click-fraud detection standards.” CAC ¶ 27. CW 8 met with Defendant Decker some time after Yahoo! was sued in 2005 for click fraud, and the two discussed click fraud. Id. Through CW 8's statement, Plaintiffs successfully allege that Defendant Decker had general knowledge of the click fraud problem, but Plaintiffs have not shown how CW 8 knows about an effort to relax Yahoo!'s click fraud detection standards, or how CW 8 knows that this effort translated into misstated revenues. Similarly, Plaintiffs have not shown whether CW 8 had any firsthand knowledge of Defendants' accounting decisions. Therefore, CW 8's statements do not support Plaintiffs' allegations of revenue fraud.
*8 CW 9 worked for Yahoo! in the Customer Solutions group from December, 2003 to February, 2007. CAC ¶ 28. Defendant Decker fired CW 9 in 2007, after the Class Period, for mishandling a customer complaint that might have been related to click fraud. Id. CW 10, Engineering Director for Yahoo! until January, 2005, gave Defendant Decker access to the revenue reporting system at the Overture Pasadena facility. CAC ¶ 29. CW 10 observed that Yahoo!'s ability to filter out non-billable clicks was impacted by not having adequate resources, such as enough computer servers. Id . CW 11 worked for Overture and then Yahoo! as an advertising account manager until December, 2004. CAC ¶ 30. CW 11 described “click tsunamis” at Yahoo!, when a search brought up results that led to thousands of unwanted clicks. Id. Advertisers were charged for these clicks, but rarely realized sales from them. Id . Plaintiffs have not shown whether CW 9, CW 10 or CW 11 had a role in Yahoo!'s revenue recognition process, or whether they had any first-hand knowledge of Defendants' accounting decisions. Therefore, their statements do not support revenue fraud allegations either.
CW 12 worked for Yahoo! as an Operations Sales Manager until October, 2006. CAC ¶ 31. At weekly customer service meetings, CW 12 learned that “Yahoo!'s revenues began to decline ‘month by month’ beginning in 4Q 05.” CAC ¶ 31(g). CW 12 attended weekly Customer Service meetings where she learned that “because Yahoo! was not meeting its traffic forecasts, the Company was not attaining its revenue forecasts associated with those clicks in 4Q 05.” Id . CW 12 also recounted that the “running joke at Yahoo! Search Marketing was that there was a ‘dial’ on the click-fraud detection system which Yahoo! turned down at the end of the quarter to allow more billable click activity to be passed on to customers.” CAC ¶ 31(l). Hearing at a meeting that revenue forecasts will not be reached is not equivalent to knowing that Yahoo! misstated its revenues. Similarly, recounting jokes about altering the click fraud dial does not satisfy PSLRA's pleading requirements. See Limantour v. Cray, Inc., 432 F.Supp.3d 1129, 1141 (W.D.Wash.2006) (rejecting confidential witness statements based on “gossip and innuendo”). Therefore, CW 12's statements do not meet the PSLRA's heightened standards to prove revenue fraud either. In sum, Plaintiffs fail to plead with particularity their allegations that Yahoo! issued false financial statements.
It's nice to see the judge recognized there's a difference between click fraud rates in the abstract (whatever those mean) and the rate of actual overcharging experienced by advertisers, which is almost certainly lower. It's also good to see that the judge isn't blindly accepting the scuttlebutt from former employees, many of whom probably have worthless options or a down stock portfolio. In any case, it will be interesting to see if the plaintiffs can produce any witnesses who can testify about the rate of Yahoo's click fraud overcharging sufficient to satisfy legal standards.
Posted by Eric at 11:30 AM | Licensing/Contracts , Search Engines | TrackBack
October 14, 2008
September 2008 Quick Links, Part 3
By Eric Goldman
eBay
* Universal Grading Service v. eBay, Inc. More fallout from the National Numismatic v. eBay case--another lawsuit alleging antitrust and defamation because eBay designated some coin rating services as preferred and impliedly devalued others.
* Windsor Auctions v. eBay has been refiled in a new jurisdiction.
* Mehmet v. Paypal, Inc., 2008 WL 3495541 (N.D. Cal. Aug. 12, 2008). Upholding the consequential damages waiver in PayPal’s user agreement.
* A company's failure in the marketplace can drive up the value of its collectibles on eBay.
* Stelor Productions, Inc. v. Google, Inc., 2008 WL 4218107 (S.D. Fla. Sept. 15, 2008). In the lawsuit alleging that Google causes reverse confusion of Googles.com [warning: annoying music ahead], the plaintiff doesn't get to depose Sergey or Larry yet. Rose Hagan, Google’s long-time chief trademark counsel, is the lucky substitute.
* Lots of rhetoric in the Google/Yahoo ad syndication deal. Google’s advocacy website. Google Chief Economist Hal Varian explains why the deal won’t raise ad prices in the auction. Randall Stross weighs in.
* Google has changed course and now allows religious groups to advertise on the keyword “abortion.”
* Kubit v. Google Groups, 2:2008cv00738 (M.D. Fla. complaint filed Sept. 29, 2008):
I then would like to sue Google Groups for not removing the posts when I repeatedly asked them to for 2 years. I believe I am entitled to at least a small amount of compensation for the emotional distress and lost business income that has resulted from them allowing these posts to remain on their Google Groups, even though I offered them VERY solid proof that I do not have HIV. If they had stopped the posts when they first occurred, they would not have proliferated to hundreds of websites. I became suicidal for a period of time after the posts started. I incurred a lot of emotional pain and fear because of the posts and had to seek psychiatric and psychological help to get my life back together. I still suffer from fears of dating, living a public business life and trusting others.
Yes, this is a pro se complaint. Yes, it is preempted by 47 USC 230.
Marketing/Advertising
* NebuAd is dead (1, 2). Even so, the lure of intermediaries aggregating deep data about consumers for commercial purposes will never die.
* Is Gator/Claria dead?
* The EU passed a non-binding resolution against sexual stereotypes in advertising.
* Celebrity branded merchandise run amok.
Miscellaneous
* Valleywag: "The 5 most laughable terms of service on the Net." For more laughs, see Mark Lemley’s Terms of Use paper.
* Murakowski v. University of Delaware, 2008 WL 4104087 (D. Del. Sept. 4, 2008). This reminded me a lot of the Jake Baker case from the mid-1990s.
* The Virginia Supreme Court reversed itself on the Jaynes anti-spam prosecution, and Jaynes walks. Does Virginia routinely pass unconstitutional laws?
* Becker v. Toca, 2008 WL 4443050 (E.D. La. Sept. 26, 2008). Ex-wife's alleged delivery of "Infostealer" program to grab passwords from ex-husband could violate the ECPA, SCA and CFAA.
* Interesting article on ESPN’s exclusive distribution and bundling agreements with Internet access providers.
* Silly? Horrifying? A sign of the apocalypse?
Posted by Eric at 06:17 PM | Adware/Spyware , Content Regulation , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Spam | TrackBack
September 30, 2008
Licensing a Work, and When Licensing Doesn't Work--Reuters v. GMU
A timely Exhibit A in the argument that contract law is being used as a back-door wedge in expanding copyright.
By Ethan Ackerman
Just as Bruce Boyden seriously asks, "is the case for contracts somehow expanding copyright rights vastly overstated?" along comes a fairly conclusive 'No' in the form of Reuters v. GMU.
James Grimmelmann has an excellent summary of the Virginia-filed breach-of-contract case, noting that a George Mason University History professor developed an open-source Firefox extension called Zotero that worked with Thompson/Reuters' EndNote software. Apparently the development involved some reverse-engineering of the EndNote files or software structure. It's this act that leads to the suit, as reverse-engineering is prohibited by the EndNote site license that GMU held.
Mike Madison also notes the case and parses out the timing of the suit, filed in anticipation of a significant interoperability feature coming in an update to the Zotero software. He also sees much potential for mischief in Reuters' demands for an injunction that would apply to other Zotero users who imported data files from EndNote. Professor Madison's spot-on conclusion: "Reuters is transparent in its effort to use a software license to suppress a competitor in a product market."
Professor Michael Froomkin sees some interesting lawyering and one actual non-trivial legal question in the choice of filing a suit against a university over actions by its professors. To what extent can a state university bind its employee professors? Professor Froomkin points out that the professor in question is probably not a party to the site license agreement, and likely agreed to no such terms, so any privity comes from the fact that the professor is an employee of the university. My own brief searching on the web leads me to suspect the same thing. An academic site license end-user likely clicks on, at most, a much-reduced terms-of-service along the lines of this U.Georgia page before installing the software.
Further developing the 'privity-of-contract-through-employment-status' theory, does it matter that the development of this software by the professor was most likely outside the scope of his employment? I ask, only partially tongue-in-cheek, will this complex 'copyright-or-not, enforceable-terms-or-not, enforceable-license-or-not, injunction-or-not' case turn on the professorial field of the Zotero developer? Would it have been different if this were a computer science professor? A grad student?
So if this is a state law contract case, why all the Copyright Act talk anyway? Reverse engineering can be a fair use of a copyrighted work, something even the Federal Circuit will admit. Bringing an infringement suit against a reverse engineering that focused on something (the data file formatting) with such a thin copyright seems like a quick way to an adverse ruling. Professor Grimmelman, noting the utter inadequacy of the possible trademark claim pleading as well, suspects incompetence. Professor Madison, however, suspects an intentional end-run around reverse engineering fair use law by intentionally asserting only state-law contract claims, copying the proceedings in Bowers v. Baystate Technologies. Both see problems with the injunctive relief sought.
My only gloss on this case, otherwise excellently dissected by Profs. Grimmelmann, Froomkin and Madison, is to point out this is a great answer to Prof. Boyden's initial question about contract law being used as an expanding wedge for rights holders. This case is not even the only recent case tackling the issue, and several other recent cases would have had to face it if courts hadn't mooted the issue by finding a sale rather than a work made available subject to license.
So in summary, yes, there's an open, ongoing and unsettled problem with parties attempting to reverse, by contract clause, an issue that is addressed and settled by federal copyright law.
Posted by Ethan Ackerman at 12:05 PM | Copyright , Licensing/Contracts | TrackBack
September 09, 2008
August 2008 Quick Links, Part 2
By Eric Goldman
Net Neutrality
* The FCC gets on Comcast’s case for deceptively blocking BitTorrent connections without disclosure. While I don’t know anyone who has defended Comcast’s behavior here, at the same time there is an undercurrent of concern about the FCC’s authority to regulate Internet activities. Could this be the FCC camel's nose in the Internet's tent? We will learn more about the FCC's authority because Comcast has appealed the FCC's decision.
* A topic I haven't seen discussed very much: how the doctrine of trespass to chattels intersects with net neutrality principles. The only article I found in a 60 second search on the topic was a couple of paragraphs in J. Gregory Sidak, A Consumer-Welfare Approach to Network Neutrality Regulation of the Internet, 2 J. Competition L. & Econ. 349 (2006).
Contracts
* Jacobsen v. Katzer (Fed. Cir. Aug. 13, 2008). This ruling has been hailed as a validation of open source licenses, but I’m not sure what to make of this opinion. If the opinion merely says that breach of a copyright license can support copyright infringement, that’s no big deal. However, among other conspicuous omissions, the court does not discuss how the licensor formed a contract in this case. Thus, if the court’s conclusion is that copyright owners can impose conditions on licensees’ enjoyment of their copyright without properly forming a contract, then this opinion could undo the entire scheme of online contract formation. For example, it could support a conclusion that browsewrap-style “contracts”/terms of use should be enforceable as conditions on the accessing of copyrighted web pages. See, e.g., Ticketmaster v. RMG.
* Interactive Retail Management, Inc. v. Microsoft Online, L.P., 2008 WL 3851691 (Fla. App. Ct. Aug. 20, 2008). This is a click fraud case I hadn't heard about previously. Microsoft won at the trial court on jurisdiction grounds. This court revives the lawsuit for more jurisdictional investigation.
* Jeff Neuburger on a Wisconsin case saying that the UCC governs contract formation via email instead of UETA.
* Request for your guidance. Wikipedia has some photos that simultaneously say they are released under both a Creative Commons license and the GFDL. See, e.g., this photo. The license terms are irreconcilably inconsistent. If someone wants to use such a photo, now what?
Competition Restrictions
* Edwards v. Arthur Andersen (CA Sup. Ct. Aug. 6, 2008). The Ninth Circuit was wrong to create a narrow restraint exception to B&P 16600, the California statute voiding non-compete clauses.
* XPEL Technologies Corp. v. American Filter Film Distributors, 2008 WL 3540345 (W.D. Tex. Aug. 11, 2008). Rebecca on an odd case involving (once again) the DMCA anti-circumvention provisions as an anti-competition tool.
Miscellaneous
* Two interesting studies recently about people’s response to spam. Despite the animosity, a quarter of consumers have responded to cellphone spam and 30% say they have made purchases in response to spam. For more complementary statistics and my attempt to explain this seeming dichotomy, see here.
* The First Circuit issued an interesting DMCA 1201 case that I haven’t seen discussed. The BNA summary: “District court properly granted summary judgment to plaintiff cable television service provider on claim that defendants violated Digital Millennium Copyright Act by selling low-frequency signal filters, within plaintiff's service area, that were capable of bypassing plaintiff's pay-per-view billing mechanism, since plaintiff's pay-per-view delivery and billing system is technological measure that effectively controls access to copyrighted works, and digital cable filter allows subscribers to "avoid" or "bypass" that technological measure (CoxCom Inc. v. Chaffee, 1st Cir., 8/4/08)”
* AP v. Moreover settles. My initial post on the lawsuit.
* Funny YouTube video: "Here Comes Another Bubble," set to the tune of Billy Joel's "We Didn't Start the Fire"
Posted by Eric at 08:49 AM | Content Regulation , Copyright , Licensing/Contracts , Marketing , Search Engines , Spam | TrackBack
September 08, 2008
August 2008 Quick Links, Part 1
By Eric Goldman
eBay
* Mazur v. eBay Inc., 2008 WL 2951351 (N.D. Cal. July 25, 2008). See my previous blog post on the case. Some commentators are excited about this ruling because it rejects eBay's motion to dismiss a RICO claim.
* Missing Link, Inc. v. eBay, Inc., 2008 WL 3496865 (N.D. Cal. Aug. 12, 2008). This is a lawsuit by eBay sellers complaining that eBay didn’t immediately index their listings in its search engine and eBay raised the price on “Good Until Cancelled” listings. This is the second time the court has dismissed some claims, but even so some claims have also survived the motion to dismiss process.
* As expected, Tiffany appealed the eBay ruling. My initial post.
* Vulcan Golf, LLC v. Google Inc., 2008 WL 2959951 (N.D. Ill. July 31, 2008). The court dismisses a few claims made in the plaintiff's third amended complaint. My post on the initial complaint.
* JIT Packaging v. Google (E.D. Ill. complaint filed Aug. 11, 2008) A third lawsuit against Google over the placement of AdWords ads on parked domains and other putatively undesirable pages.
* A heavily redacted version of the Google/Yahoo agreement. The SEC examiner who let the agreement go through with this many redactions was asleep at the wheel!
47 USC 230
* Bauer v. Glatzer (N.J Superior Ct. July 21, 2008). Wikimedia easily wins a lawsuit against it alleging that a Wikipedia entry was defamatory.
* Capital Corp. Merchant Banking, Inc. v. Corporate Colocation, Inc., 2008 WL 4058014 (M.D. Fla. Aug 27, 2008). 47 USC 230 defense denied against allegations that "Leonard Norwich posted defamatory statements about [the plaintiff] on three websites and Francesca Norwich allowed Leonard to use “a computer registered in her name” to make the defamatory statements." The denial makes sense for Leonard but seems clearly erroneous with respect to Francesca.
* Vanginderen v. Cornell (S.D. Cal. June 3, 2008). CMLP page. This isn't specifically a 230 case but it's still relevant. Interesting lawsuit against Cornell and related entities for electronically posting a school newspaper story from 1983 that was allegedly defamatory. The court dismisses the lawsuit on an anti-SLAPP motion.
Blogging
* A Las Vegas nightclub loses its cool and sues a blogger for, among other things, including its logo in the blog post.
* As part of the fallout from the Troll Tracker blog, Dennis Crouch, of PatentlyO fame, has received a subpoena for communications related to his blog. Dennis' comments and LegalWatch. In a related lawsuit, Frenkel (a/k/a Mr. Troll Tracker) was dismissed from a lawsuit again. Ward v. Cisco Systems, Inc., 2008 WL 4079286 (W.D. Ark. Aug 28, 2008)
Content Restrictions
* Kings English, Inc. v. Shurtleff, 2008 WL 3285898 (D. Utah Aug. 8, 2008). The judge denied the plaintiffs’ motion to reconsider its highly unfavorable prior ruling. My initial post on the lawsuit.
* Reisinger v. Perez (E.D. Wis. complaint filed Aug. 18, 2008), First amendment lawsuit against the City of Sheboygan for intimidating a woman into removing a website link to the city's police department.
* National Federation for the Blind v. Target has settled, with Target paying $6M and redesigning its site.
Posted by Eric at 09:47 PM | Content Regulation , Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack
September 02, 2008
eBay Cracks Down on Cookie Stuffing--eBay v. Digital Point Solutions
By Eric Goldman
eBay, Inc. v. Digital Point Solutions, No. 5:08-cv-04052-PVT (N.D. Cal. complaint filed Aug. 25, 2008)
It is exceedingly rare for marketers to sue affiliates who are trying to game their affiliate programs. I'm sure there have been other lawsuits, but frankly I'm drawing a blank. (The only relevant precedent that came to mind was Google's tepid enforcement actions in 2004/2005 against click frauders--see Google v. Auction Experts and US v. Bradley). [Update: A reader reminded me of Land's End v. Remy, which is an on-point precedent.] The more typical remedy when commission fraud is taking place is to cancel any unpaid commissions and write off the rest as a cost of doing business (or an uncollectible painful lesson). But if someone gamed the system big--I mean, really big--maybe it would be worth hiring fancy and very high-priced counsel to go see what they might be able to retrieve...
eBay isn't saying how much it got taken for by the defendants in the case. The complaint was conspicuously silent on that juicy detail. However, the amount appears to be enough that eBay hired the premium law firm O'Melveny & Myers for a glorified collections effort. Either that, or eBay has decided to send a remarkably expensive message to other potential fraudsters.
The complaint alleges that the defendants engaged in a cookie stuffing campaign to hijack commissions through Commission Junction. Cookie stuffing occurs when a fraudster places a cookie on a third party computer that will cause the fraudster to get paid a commission that the fraudster didn't earn legitimately by doing the things that the marketer wanted to pay for. In this case, eBay alleges that the defendants used a clever technical exploit to put cookies on users' computers even though the users had not seen the requisite ads. The complaint also alleges that the defendants deployed some tricks to cover their tracks, like deliberately not cookie-ing computers in San Jose and Santa Barbara, the homes of eBay and Commission Junction respectively, to keep employees of those companies from spotting the marauding cookies.
If in fact the defendants engaged in cookie stuffing, I hope eBay nails them. However, I must say that some of eBay's legal arguments made me nervous. eBay's alleged causes of action include:
* CFAA (18 USC 1030). The allegation is that presenting a bogus cookie to eBay's servers was a misuse of the servers. Hmm...
* fraud. Similarly, the allegation is that the defendants caused web users to make a misrepresentation to eBay's servers by presenting a bogus cookie. Hmm again...
* CA Penal Code 502. There are very few cases interpreting 502, which isn't necessarily a bad thing because the statute is so broadly over-inclusive that everyone violates it routinely. Here, it looks like the lawyers weren't quite sure how to fit cookie stuffing into the statute. Take a look at para. 60 and let me know if you agree that this is an odd pleading.
* a civil RICO conspiracy claim. Given that eBay is being sued for RICO claims in the Mazur case (and, I'm sure, others), I would think eBay would want to avoid building new legal precedent that could be applied against them in other cases.
Reading the list of causes of action, I was surprised that there wasn't a more squarely applicable cause of action that governed cookie stuffing (however, I will confess, none came to mind as I drafted this post). Maybe this is due to the fact that eBay rather than Commission Junction is the plaintiff. If there isn't a better cause of action, then perhaps there is a hole in the law. However, I'm keeping my fingers crossed that a judge won't bastardize existing legal doctrines to plug it.
Posted by Eric at 09:23 AM | Licensing/Contracts , Marketing , Privacy/Security | 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 03, 2008
May 2008 Quick Links, Part 2
By Eric Goldman
Copyright
* Google says it isn't settling the Viacom lawsuit (I don't believe it).
* Interesting juxtaposition: (1) Chronicle of Higher Education: How It Does It: The RIAA Explains How It Catches Alleged Music Pirates and (2) BusinessWeek ran a lengthy retrospective on Tanya Andersen's battle against the RIAA, including her beefs against the RIAA’s investigation and enforcement tactics.
* A music warez trader was convicted by a jury of criminal copyright infringement.
Online Contracts
* Juanda Lowder Daniel. Virtually mature: examining the policy of minors' incapacity to contract through the cyberscope. 43 Gonz. L. Rev. 239-269 (2007/08). This article addresses the very important issue of contracting capacity of minors. See my most recent post on that topic.
* Adelman v. Sparks Network (Cal. App. Ct. May 20, 2008). The Jdate online dating service allegedly failed to include required language (such as notice of a mandatory cooling-off period) in its user agreement. The court dismisses the plaintiff's lawsuit nonetheless because he was a happy customer who didn't suffer any damage.
* Tom O'Toole surveys some recent online contract cases. He offers the following conclusions: (1) Contract Terms Should Be Available for Review, (2) Clickable Buttons/Links Should Clearly Signal Assent, and (3) Humans Are Not Helpful.
* I realize this point would be better explored in a full blog post, and I suspect this point has been made in the academic literature (if so, I'd appreciate some cites so I can pass them along). The issue: how might the endowment effect explain consumer antipathy towards EULAs? Wikipedia says the endowment effect means that "people value a good or service more once their property right to it has been established." This observation occurred to me when I attended a ridiculously stacked panel at the ION Game Conference on "user rights" in virtual worlds. Many of the gripes/grumbles related to very common EULA provisions that simply overrode default law. It occurred to me that maybe part of the problem was that consumers assume the defaults are appropriate rights allocations granting them the "property" right, in which case they suffer a greater psychological loss when those defaults are varied than if different defaults were set. One obvious policy consequence: as part of the considerations when setting defaults, policy makers should include the psychological costs of varying the defaults. If the interaction between EULAs and the endowment effect hasn't been written about, it would make an excellent paper topic.
Other Topics
* A military court has said that distributing a hyperlink to child porn does not constitute criminal distribution of child porn. Tom O'Toole explains the situation.
* A.B. v. State, 2008 WL 2031388 (Ind. May 13, 2008). It seems like the digital age recipe for guaranteed trouble: 8th grader + hatred towards a school principal + MySpace. How many judicial cases are we going to see with this combination? This one involves some mean-spirited and profanity-laced comments about her principal made by a 14 year old girl on a private MySpace page accessible only by 26 students. The principal saw it only because one of the students gave a printout to the principal. The court concludes that posting to a private MySpace page doesn't satisfy the criminal standards of "intent to harass, annoy, or alarm" via the Internet.
* Doe v. Friendfinder Network, Inc., 2008 WL 2001745 (D.N.H. May 8, 2008). The court denied the plaintiff's motion for reconsideration on Friendfinder's 230 eligibility for the statement "Sorry, this member has removed his/her profile."
* Another "where are they now?" retrospective on dot com boom companies, ironically running in the Industry Standard (which wiped out in the dot com bust itself).
Posted by Eric at 11:56 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Licensing/Contracts , Privacy/Security , Virtual Worlds | TrackBack
May 28, 2008
Citysearch Sued for Click Fraud--Lambotte v. IAC
By Eric Goldman
Lambotte v. IAC/InterActiveCorp. (Cal. Superior Ct. complaint dated May 27, 2008) [warning: 1.9MB file]
Ever since the Google and Yahoo click fraud settlements in 2006, it's been fairly quiet on the click fraud front. See my most recent click fraud recap from February 2008.
This lawsuit launches an interesting new battlefront in the click fraud war. Instead of going after yet another search engine (of which there are only so many to sue!), the plaintiffs are suing a web publisher for running its own PPC ad program--something many web publishers have done. This means lots of new potential defendants for class action lawyers. Ca-ching!
The allegations are fairly straightforward. Citysearch sells PPC ads as part of a package of services for small business owners. It promises to proactively screen out invalid clicks in its contract/documentation, but the plaintiffs believe Citysearch isn't doing that job well. The plaintiffs claim this failure constitutes breach of contract, negligence and 17200 unfair practices.
The plaintiffs repeatedly hammer on the allegation that Citysearch compensates its salespeople based on the number of clicks delivered for their advertisers, which provides an incentve for salespeople to boost clicks fraudulently. At first, the argument really resonated with me--how slimy to incent salespeople to manufacture clicks! But then I realized that simply commissioning salespeople for advertiser revenue--a very, very common practice in the ad sales industry--would have the same effect; just like commission-driven salespeople would have incentives to manufacture pageviews for any advertiser paying on a CPM basis. So the argument sounds scary but on further reflection it's really not all that meaningful.
I also found the named plaintiff's story of click fraud surprisingly flat. The named plaintiff gives an example of how he got ~10X the number of clicks after he tried to cancel his advertising, putatively because the salesperson manufactured clicks either to boost the perceived performance or to drain the advertising account before it cancelled.
However, there are a number of potential problems with this story. First, the total number of clicks at issue is small overall (the first measuring period only involves 9 clicks total), undercutting the statistical reliability of any inferences from the dataset.
Second, the measuring periods for this click comparison are very odd--the first period is Dec. 11-25, and the second period is Dec. 26-31--basically, right before and right after Christmas. I did a search on Tom Lambotte and this LinkedIn profile says he runs www.theSanDiegoMacTutor.com, described as "Professional Help, Training & Consulting for your Apple/Mac Needs." [Note: I have emailed the plaintiff's law firm's PR guy to confirm if this is the same Tom Lambotte, but I haven't gotten a response to my inquiry.] Anyone else troubled by comparing pre-Christmas clicks with post-Christmas clicks...especially if the guy provides installation and support for Apple computer products? It seems possible that a bunch of potential customers got shiny new Apple toys for Christmas and then looked for someone to help install them. At minimum, we know that shopper traffic doesn't abate after Christmas and in some cases can increase following the holiday, so the clickthrough patterns might simply reflect normal seasonality.
Third, I don't know how long it takes Google to fully index new pages to an existing high PR website, but another possible explanation is that the new Citysearch pages promoting Lambotte got fully indexed after 2 weeks, spiking traffic to the pages and increasing the absolute volume of conversion from the page.
To be clear, even if the named plaintiff's situation can be satisfactorily explained by alternatives other than click fraud, that doesn't mean the lawsuit will or should fail. On the other hand, generally a class action lawyer will try to showcase highly compelling stories in the complaint. If this is the best story they've got so far, that's pretty weak.
More on this lawsuit from News.com.
Posted by Eric at 01:40 PM | Licensing/Contracts | TrackBack
May 26, 2008
Search Engine Advertiser Litigation Updates
By Eric Goldman
Recently, there were intermediate rulings in two long-standing cases by search engine advertisers against search engines.
CLRB Hanson Industries, LLC v. Google Inc., 2008 WL 2079200 (N.D. Cal. May 14, 2008)
This lawsuit involves the Google AdWords feature that allows advertisers to set "daily budgets." Google doesn't enforce the daily budgets strictly; instead, it gives itself the permission to deliver up to 20% overage in any day and credit the overage against future performance. The lawsuit was initially filed in August 2005. In August 2007, the judge issued an important preliminary ruling that had three main holdings:
1) Google's AdWords contract was a binding contract.
2) Much of the breach of contract claim was dismissed, but the judge left open claims by advertisers of less than 1 month, advertisers who ended their campaign in a partial month, and advertisers who paused their campaign.
3) The false advertising claim was left open.
Because the August 2007 substantially limited the remedies available to advertisers, I expected that ruling to prompt the parties to settle. But here we are in May 2008, and the parties are still going at it. This month's ruling was largely procedural in that it attempted to clean up any lingering confusion over the August 2007 ruling. As a result, it really doesn't break much new ground; instead, the opinion largely reiterates the main rulings from the August 2007 opinion. Rebecca has more thoughts on the false advertising aspects.
In re Yahoo! Litigation, 2008 WL 1882786 (C.D. Cal. April 21, 2008)
This lawsuit got a lot of press when it was first filed in May 2006 as an example of "syndication fraud." See my initial post. It relates to Yahoo's display of ads on pages promoted by adware and on typosquatted and domain name parking pages. The advertisers believed these pages had lower quality traffic than other pages, and this disrupted their expectations.
In the past two years, the case has gone through various procedural shenanigans. This ruling addresses Yahoo's motion to dismiss the second amended complaint on a number of grounds.
Yahoo invoked a clause in its advertising agreement barring class litigation against it. Under prevailing California law, these clauses are probably unenforceable in consumer contracts; but there hasn't been a lot of litigation over these clauses in business-to-business contexts, especially because it's hard to argue unconscionability in B2B contexts. The court punts the issue on Yahoo's motion to dismiss, saying that it needs more facts about the parties' respective positions, which makes this issue more appropriate for resolution on summary judgment. Tom O'Toole has more to say about this issue.
Yahoo also tries to dismiss the breach of contract claim over its alleged promise of targeted ad placement, but the court refuses to dismiss because California law freely allows extrinsic evidence to explain unambiguous contractual terms. However, though the court didn't dismiss the claim, I think the plaintiffs will have difficulty prevailing on this contract breach claim because, as the court implicitly concludes, the plain language of the contract weighs heavily against their arguments.
Yahoo made several other efforts to dismiss clams, and the court rejects all but one of them (it dismissed the claim of civil conspiracy). Because so much of the lawsuit survived, this motion to dismiss ruling appears to be largely a win for the plaintiffs. However, I still think this remains a low-merit lawsuit because it's disingenuous for advertisers to complain when they got everything they paid for. Further, two years later, this lawsuit now seems strangely anachronistic given that the Great Adware Wars of the mid-2000s are over.
Posted by Eric at 08:57 PM | Licensing/Contracts , Marketing , Search Engines | TrackBack
May 23, 2008
Lori Drew Prosecuted for CFAA Violations--Some Comments, and a Practice Pointer
By Eric Goldman
Before I get started, let me first say that my heart goes out to Megan Meier's family. They have suffered a devastating tragedy, and I cannot possibly fathom the pain they must feel. As a result, I feel a little awkward blogging on the situation because I fear my words could be misinterpreted as some sign of disrespect or lack of empathy towards the family. I definitely don't intend that.
I have also passed on blogging about Megan Meier's suicide because, until recently, I didn’t think it raised a real cyberspace issue. Assuming the publicized facts are true, MySpace played a crucial role in mediating the communications between Drew and Meier, but Drew's ruse could have been perpetrated using a variety of communication media. Indeed, for millennia (and well before the Internet), people have been sending false messages to each other as part of some manipulative effort (Les Liaisons Dangereuses comes to mind, but we could find countless other examples). The fact that Drew chose MySpace for her scheme has always struck me as uninteresting at best. I recognize that perhaps MySpace made it easier for Drew to pull off her ruse, and perhaps Meier attached more credibility to MySpace messages than she would have attached to messages delivered in other media. But given that people can do serious harm to other people using many different types of communications media, I think it's a mistake to treat this tragedy as a source of profound insight into the nature of cyberbullying or the evils of cyberspace.
Despite this, we know that a high-profile situation like this will spur overreactions. Of most interest for this blog post is last week's federal indictment of Lori Drew for crimes predicated (at their core) on violations of the Computer Fraud and Abuse Act (CFAA). See the indictment. The CFAA violation putatively occurred because MySpace's user agreement required users to:
* provide accurate registration information
* not use information obtained from MySpace to harass or abuse others
* not solicit information from kids
* not promote false/misleading information
* not promote abusive or threatening conduct
* not post photos of third parties without their consent
Allegedly, Lori Drew breached the user agreement by failing to follow these provisions; and by breaching the user agreement, she made an unauthorized criminal use of MySpace's servers.
In the civil context, plaintiffs frequently use the CFAA to attack a defendant's server usage in violation of a site's user agreement. However, as far as I (and Orin) know, this is the first time the DOJ has tried to treat a user's breach of a site's user agreement as a CFAA crime. Not only is this theory potentially unsupported by the law (see, e.g., Orin Kerr and Dan Solove), but it puts almost all of us at risk of federal prosecution (see, e.g., Wired and the AP). Implicitly, the DOJ is saying that breaching a user agreement to provide false registration to a website or post a third party's photo without permission can be a federal crime. If you have never done any of these activities, please email me so I can send you some angel wings. For the rest of us, the DOJ seems to think that we should avoid the Big House only out of their sheer grace.
Also, though Drew's actions may have been heinous, her alleged breaches of the MySpace user agreement were, to be as charitable as possible, chickenscratch. Most websites like MySpace include contractual restrictions like the ones at issue simply to preserve their ability to kick off troublesome users at their discretion--not to put every non-conforming user at risk of looking down the barrel of an FBI agent's .45.
As a result, the DOJ prosecutors appear to be trying to make the MySpace user agreement do more work than it was designed to do. In that respect, I see this case as part of a broader trend where government enforcement agencies are misreading and misusing website user agreements. Consider two other very recent examples of government folks attaching undue emphasis to restrictions in website user agreements:
* the New Jersey Attorney General's office apparently misread restrictions in JuicyCampus' user agreement to think they should constitute affirmative marketing representations
* Joe Lieberman thinks YouTube should wipe terrorist videos off its site because its community guidelines discourage users from posting violent videos
This disturbing trend prompts me to offer a practice pointer to those of you who draft user agreements. Many user agreements—including MySpace’s—have gotten bloated with lengthy lists of restrictive rules (a manifestation of the rule proliferation phenomenon I blogged about here). It's pretty clear to me that government enforcement actors, either because of their fundamental misunderstanding of contract law or for their own self-aggrandizement, will treat these restrictions as expectations that the conduct won't occur on the site. But because most websites don't proactively enforce the restrictions they announce, this sets up a mismatch between rules and actual behavior—a mismatch that enforcers appear all too happy to exploit.
Therefore, I think it is better practice for contract-drafters to rely more heavily on general restrictive clauses in website user agreement (e.g., "we can kick you off at our convenience") than on overly detailed/specific but underenforced lists of restrictions. I know this stance runs contrary to the prevailing sentiment among most Cyberlawyers, who seem to believe that for every bad user behavior, it's easy enough to add a new contract prohibition that putatively eliminates the problem. But if the contracts are being misread, rule proliferation may be doing more long-term harm than good.
Posted by Eric at 05:49 PM | Content Regulation , Licensing/Contracts , Privacy/Security | TrackBack
May 07, 2008
April 2008 Quick Links
By Eric Goldman
Anti-Gaming
* Even though Ticketmaster won its lawsuit, Minnesota overreacted to the Hannah Montana ticket crush by banning software to circumvent an online ticket allocation process. See Sec. 609.806. Check out the hyperbole in this press release! What's next? Are legislators going to make SEO a crime?
* Google modified its relevancy algorithm 450 times in 2007. And yet courts still cite to Brookfield for how search engines operate!
* The UK cracks down on shill marketing online. ClickZ: "Under the new [UK] Consumer Protection from Unfair Trading regulations, it will be illegal to "Falsely claim or create the impression that the trader is not acting for purposes relating to his/her trade, business, craft or profession," or to "falsely represent oneself as a consumer."" See also AdAge.
IP
* Speaking of SEO....the latest pathetic attempt to grab a generic term and trademark it? "SEO." Sarah Bird is on the job.
* Do student notes of a professor's lecture constitute copyright infringement? We may find out.
* Atlantic v. Howell. More on the "making available" theory of copyright infringement.
* Sarah Bird on registering copyrights in websites and blogs.
* A for-profit T-shirt listing the names of deceased Iraq soldiers sparks a publicity rights lawsuit.
General
* Bowen v. YouTube, Inc., 2008 WL 1757578 (W.D. Wash. April 15, 2008). The court upheld the forum selection clause in YouTube's user agreement.
* eBay is ending its promotion of third party live auctions. Maybe because of this loss?
* Rebecca blogs on SuccessFactors, Inc. v. Softscape, Inc., 2008 WL 906420 (N.D. Cal.), an odd case involving the Computer Fraud & Abuse Act and an "attack PowerPoint" allegedly sent by a competitor to its prospective customers.
* Kate Kaye writes about the new Internet industry lobby group, the "State Privacy and Security Coalition," designed to fight laws like the Utah Trademark Protection Act.
* Kevin Werbach, The Centripetal Network: How the Internet Holds Itself Together, and the Forces Tearing it Apart, UC Davis Law Review, Forthcoming. An interesting paper applying "network formation" theory to show how the Internet came together as a unified network and how those unifying forces are under constant stress.
Posted by Eric at 08:52 PM | Content Regulation , Copyright , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack
April 21, 2008
March 2008 Quick Links, Part I
By Eric Goldman
It's a sign of my busy March/April that I am just now posting these...
Reputation/47 USC 230
* I have a lot to say about the JuicyCampus story (AP, MSNBC, Chronicle of Higher Education). Unfortunately, I ran out of time to write a full blog post on the subject. For now, some quick thoughts about this interesting and complex situation:
- Taken to its logical conclusion, 47 USC 230 naturally enables sites to do absolutely nothing to restrict harmful speech. (I'm not saying that accurately describes JuicyCampus--I don't have enough facts to make that claim). However, that's not an unexpected failure of the statute--it's the natural consequence of the statute's design. Any concerns about the costs of unrestricted speech fora need to compared with the costs of more regulated systems. It's not clear that one result is automatically better than the other, and certainly there are costs implicit in all solutions. Sam Bayard explores this issue more.
- Sites that lack credible information will face marketplace responses regardless of any legal rules. In JuicyCampus' case, the marketplace responses include consumers deeming the site not credible, plus intermediaries (in this case, universities) may simply block access by its core users.
- Any possible legal action by the New Jersey Attorney General over JuicyCampus' facilitation of harmful speech should be unambiguously preempted by 47 USC 230--even after Roommates.com.
- The attempted legal bypass to 47 USC 230--trying to convert a negative covenant from the users in the user agreement into an actionable affirmative marketing representation by JuicyCampus--is analytically corrupt. It's also not the law, and it's been rejected in several 230 cases (Noah v. AOL comes immediately to mind). Rebecca has more to say on this issue.
- If negative behavioral covenants by users in a user agreement are actionable affirmative marketing representations that such behavior isn't occurring, then the Internet is a target-rich ecosystem because I imagine that just about every Internet company is eligible for enforcement actions.
- Isn't it typical of an enforcement action to go after the target's vendors (in this case, JuicyCampus' ad networks) and watch them instantly fold?
- This issue reminds us that a website can't promise its users anonymity if it allows anyone else (such as an ad server) to serve up portions of its page and thereby have the ability to collect the same server log data.
* Ciolli v. Iravani: The AutoAdmit lawsuits spill over into a new battleground. As I said when I first blogged on the case, this is a "very messy situation" that has only gotten messier.
* Nemet v. ConsumerAffairs.com. Another lawsuit against an online consumer review site for publishing allegedly defamatory negative critiques.
* Steinbuch v. Cutler, 2008 WL 596747 (8th Cir. Mar. 6, 2008). Steinbuch's lawsuit against Hyperion, the publisher of the Washingtonienne book, can continue in Arkansas. His other claims must proceed in Washington DC if at all.
* Washington Post: Due to the speed at which gossip moves over the Internet, "compared with the pre-Internet era, politicians are less likely than ever to survive a sex scandal with their careers intact."
* H. Brian Holland, In Defense of Online Intermediary Immunity: Facilitating Communities of Modified Exceptionalism, 56 U. Kan. L. Rev. 369 (2008). Prof. Holland wrote a paper I had been meaning to write! He explains how 47 USC 230 enables online communities to use a variety of self-governance structures, while a different liability regime would give communities fewer choices and thereby inhibit community formation and management.
Search Engines
* A Canadian web network called Geosign received $160M of VC money but the company was rendered worthless overnight when Google changed its policies and cut off traffic. Domainers beware!
* New book worth checking out: WEB SEARCH: MULTIDISCIPLINARY PERSPECTIVES (Amanda Spink & Michael Zimmer, eds.) (Springer 2008). A nice cross-section of essays on search engine issues from multiple disciplines.
* Need some original content to improve your SEO? You can automatically generate it through splogging, or you can pay actual humans a small amount of money to write short articles. If the cost is low enough and the SEO credit for truly original content is high enough, the latter may end up being a better economic deal.
Spam
* The FTC has lost a jury trial against Impulse Media on its theory that Impulse Media is liable for the spam sent by its affiliates. This is a pretty important decision because (1) the FTC/DOJ rarely lose at trial, (2) their expansive theories about liability for affiliate behavior may be legally incorrect, and (3) the FTC has strong-armed numerous defendants into settlements based on its theory, and future defendants now be willing to fight back.
* On that topic, Cyberheat won an early round in litigation with the FTC over its affiliate practices but has now settled up with the FTC. The settlement gives some guidance about the FTC's thoughts of how marketers should police affiliates, but the Impulse Media jury loss may undermine the teaching of this settlement.
Posted by Eric at 08:32 AM | Derivative Liability , Licensing/Contracts , Marketing , Search Engines , Spam | TrackBack
March 24, 2008
Clickthrough Agreement Binding Against Minors--A.V. v. iParadigms
By Eric Goldman
A.V. v. iParadigms, 2008 U.S. Dist. LEXIS 19715 (E.D. Va., March 11, 2008),
I previously blogged that the judge was going to dismiss this case. The judge finally issued an opinion explaining his reasoning, and it's quite an interesting read.
At issue is iParadigms' Turnitin plagiarism detection service. It works as follows: a professor adopts the Turnitin service for a class. Students then submit class papers directly to the Turnitin database. Turnitin compares the submitted papers against its database, which includes Internet content, previously submitted student papers, and various commercial databases. Turnitin then provides the professor with an "Originality Report" assessing the likelihood that the paper was original to the student and not copied from one of the sources in the database. At the same time, Turnitin adds each student-submitted paper to its proprietary database so those papers create matches if submitted again.
Personally, I've never used the Turnitin service. I'm lucky enough that when I've taught "paper courses," I've been able to work closely enough with each student that a plagiarized paper would be useless. However, not every professor or teacher can interact with students enough to make these individualized assessments, and there are plenty of courses where students basically dump a paper onto professors in a relatively impersonal exchange. In those cases, I could see why Turnitin is an important or even essential tool to combat student efforts to game the grading system.
Even so, I remain troubled by some aspects of the Turnitin service. Most of my concerns relate to the implicit coercion of students to use Turnitin. Some students may not be aware that the professor will require Turnitin use at the beginning of the semester when (in theory) objecting students could freely drop the course, in which case the student is effectively required to use Turnitin to pass the class regardless of student consent. Even more problematically, students might be required to take a Turnitin-mediated course--such as when the course is a mandatory prerequisite and there aren't multiple professors teaching the course, or when students are assigned to a course without any choice (such as in high school). In those cases, students are forced to participate in the Turnitin scheme whether they want to do so or not. This isn't the biggest travesty in the world, but I'm not sure it's fair either.
The plaintiffs in this case--a group of four high schoolers--mount a solid attack on the Turnitin system for copyright infringement based on Turnitin keeping copies of their papers and occasionally republishing the papers to other professors when the papers trigger matches in future Originality Reports. iParadigms defends based on its mandatory clickthrough agreement, which every student must agree to as part of the submission process. The clickthrough was properly formed, so there's no question that it superficially demonstrates mutual assent.
However, student consent is illusory in at least two ways. First, as I mentioned, many students don't have a meaningful choice about consenting to the clickthrough agreement because they will fail their courses if they don't submit. The students attack this as duress, and the court correctly notes that Turnitin is not the source of duress; instead, the schools are the source, and the court tells the students to take it up with them. While the court is right that duress doesn't apply directly here, I could have seen other courts using the school-supplied duress as part of an unconscionability attack on the contract.
Second, the plaintiffs were minors, and well-settled law is that incomplete contracts with minors are voidable. The court sidesteps this issue by saying that the students had received the complete benefit of the Turnitin contract relationship when their papers were cleared by the Originality Report, and therefore they could not "return" the benefits conferred on them by Turnitin.
This is a ruling of potentially large significance. I've long believed that courts would struggle with dismissing claims by minors against websites because of the voidability issue, which seemingly left a large class action hole against all websites with minors as users. That hole may still exist--it depends on whether the contract is complete or not, and in many cases both parties will have incomplete obligations in a standard website EULA. Despite this, it's clear that this judge wasn't going to entertain any bypass that threatened the integrity of the Turnitin service, and I wouldn't be surprised if many other courts would reach the same conclusion in other circumstances.
The court dismisses the copyright infringement claim on the alternative ground that Turnitin's copying is fair use:
* storing the copy of the paper for plaigarism purposes is highly transformative
* the court twists the nature of work factor to weigh in favor of Turnitin, saying that Turnitin doesn't use the papers for their creative meaning
* the court also twists the amount/substantiality of the portion taken to weigh in favor of Turnitin. Even though Turnitin takes 100% of the work, it doesn't really publish the entire work (except in the occasional cases where a professor requests a copy after a match in the Originality Report) to others but simply flags the match.
* the court dismisses the effect on the market value of the work. Most student papers have no commercial value. The papers would have commercial value if resold to the term paper websites, but the plaintiffs conceded that they wouldn't authorize this usage because that would be cheating.
While I can't really quibble with the conclusion that Turnitin's use is fair, especially given the laudable objective of plagiarism suppression, other judges would have reached the opposite conclusion because Turnitin forces students to put their papers into a database that iParadigms mines for its profit.
In any case, this fair use ruling may augur well for search engine fair use cases, most obviously Google's book search and Google News--both of which pump third party copyrighted works into a for-profit database but republish only a limited portion.
The opinion also has some interesting discussion about iParadigms' counterclaims against the students. iParadigms initiated a very aggressive counterattack against the students (the words "scorched earth" came to mind). I guess iParadigms wanted to send the message--don't screw with us, because we'll make your life heck. I don't think iParadigms expected to get any meaningful payoff from their counterclaims, but they got nothing. In some sense they are lucky that it wasn't worse; I could see some judges taking such umbrage at iParadigms' tactics that they could have backfired.
iParadigms sought indemnity from the students based on a clause in its usage policy. The problem is that the usage policy wasn't presented as a mandatory clickthrough (whoops!) and the court refuses to extend the Register.com v. Verio bailout here.
One of the students obtained false credentials to log into the system at one point, but the court