Technology & Marketing Law Blog

July 03, 2009

Ninth Circuit Revives TCPA Claim--Satterfield v. Simon & Schuster

By Eric Goldman

Satterfield v. Simon & Schuster, Inc., No. 07-16356 (9th Circuit June 19, 2009)

Satterfield sued Simon & Schuster (and its mobile ad agency) for sending text messages to her cellphone without the requisite permission. The district court dismissed her lawsuit; but in this ruling, the Ninth Circuit revives it. Three aspects of this ruling make it noteworthy.

When is a Text Message a Telephone Call?

The court holds that a text message to a cellphone is a "call" for purposes of the Telephone Consumer Protection Act (TCPA). This isn't unprecedented. The FCC took this position in 2003, and in 2005, I blogged on the Joffe v. Acacia Mortgage case reaching the same conclusion. Nevertheless, as I pointed out in response to the Joffe case, it reminds us of the silliness of medium-specific anti-marketing restrictions when the media collapse into each other. See my Coasean Analysis of Marketing paper for more.

Poor Consent Language

Satterfield signed up for a free ringtone from Nextones. As part of the registration process, Satterfield affirmatively checked off a box next to the following language:

Yes! I would like to receive promotions from Nextones affiliates and brands. Please note, that by declining you may not be eligible for our FREE content.

This language is hardly a model of clarity. What are "Nextones brands"? What are "Nextones affiliates"? The court adopts a trademark-style definition for "brands" and a corporate governance-rooted definition for "affiliates." Interestingly, Nextones posted its own definition of affiliates elsewhere on its site to mean other companies who “sell mobile content such as ringtones and graphics.” As the court points out, "Simon & Schuster does not fall within Nextones’ own definition." Whoops.

Obviously, better drafting could have easily avoided this problem and probably would have had little effect on conversion rates. Say what you mean, and mean what you say!

For what it's worth, one of my past Cyberlaw exams involved an ambiguously drafted online checkbox consent, a problem partially based on a real-life situation encountered by Yahoo. See the exam and sample answer.

Complex Chain of Distribution

Satterfield's cellphone number/text message address fell into Simon & Schuster's hands through a complex chain of distribution as follows:

Satterfield gives # to Nextones =>
Nextones gives # to MIA, its "exclusive agent for licensing the numbers of Nextones subscribers" (huh?) =>
MIA gives # to ipsh!, which describes itself as "the world's award-winning, full-service mobile marketing and advertising agency" =>
ipsh! gives # to mBlox, an aggregator who "handled the actual transmission of the text messages to the wireless carriers" =>
Simon & Schuster contracts with ipsh! to run a text message campaign for Simon & Schuster's new Steven King novel Cell. (Ironic name? Maybe this lawsuit will spur Stephen King to write a sequel, Cellphone).

As you know, lawyers aren't very good at math, but according to my count, it looks like four different intermediaries "touched" Satterfield's number (Nextones, MIA, ipsh! and mBlox) before it was used by Simon & Schuster, the ultimate advertiser. With that many intermediaries, there are significant additional transaction costs to reach cellphone subscribers.

More importantly, this complex chain creates a sizable risk that one or more of the entities along the way would misinterpret or forget any restrictions on the customer's grant of permissions. Certainly, I can't figure out how Nextones/MIA thought this distribution chain fit within the checkbox consent it asked for and received. (Interestingly, neither Nextones nor MIA are defendants in the case).

I also cannot figure out how ipsh!/Simon & Schuster failed to detect this permissions problem in their diligence. They did diligence the source of the cellphone numbers...didn't they? They didn't just blindly assume that they could purchase a package of random cellphone numbers and party on...did they?

Posted by Eric at 09:51 AM | Marketing , Spam | TrackBack

July 01, 2009

Securities Fraud Case Premised on Click Fraud Allegations Dismissed--Brodsky v. Yahoo

By Eric Goldman

Brodsky v. Yahoo, Inc., 2009 WL 1766002 (N.D. Cal. June 18, 2009).

The legal battles over click fraud are pretty much played out, but some legacy cases are still working through the system. This lawsuit was a securities fraud action alleging that Yahoo inflated its stock price by, among other things, deliberately ignoring some click fraud activity to grab quick revenue. The lawsuit was dismissed in October of last year with leave to amend. Having tried again, the plaintiffs still didn't satisfy the judge, so the judge booted the case permanently. However, given the plaintiffs’ investments in this case, it would not surprise me if the plaintiffs appeal.

The actual opinion isn't all that remarkable. For the click fraud allegations, the plaintiffs rely principally on confidential witnesses who are former Yahoo employees. The cloak-and-dagger Deep Throat stuff is mildly interesting, but the court still wasn't convinced that these insiders had enough personal knowledge about Yahoo's revenue recognition practices (except for one witness, who didn't allege malfeasance). As I wrote in October, "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." This ruling seems to answer that with a big "negative."

Posted by Eric at 09:53 AM | Licensing/Contracts , Marketing , Search Engines | TrackBack

June 24, 2009

47 USC 230 and Consumer Protection Talk Notes

By Eric Goldman

Last week I made a very short presentation on 47 USC 230 and consumer protection at the ABA Antitrust Section’s Consumer Protection Conference. (I was scheduled for 6 minutes, but I think I took about 8). My talk notes:

47 USC 230 tries to divide online content into first party content and third party content. In its simplest form, 230 says that online actors can’t be liable for third party content unless (1) ECPA, (2) federal criminal enforcement, or (3) IP claims.

230 is the flagship example of cyberspace exceptionalism. As a result, its outcomes can challenge our traditional notions of tort law. This befuddles bright lawyers.

Despite 230, websites always remain liable for first party content.
* Ex 1: if they post their own content, they are liable
* Ex 2: if they make marketing representations, they are liable under standard doctrines like contract and false advertising law. Even so, some courts have been giving websites a pass for marketing representations which are rendered untrue by third party actions.
* Ex 3: Barnes v. Yahoo: website can by liable under promissory estoppel theory if it promises to remove third party content

Plaintiffs often try to argue that third party content becomes first party content.
* Ex 1: website contract may take ownership of user-supplied content
* Ex 2: SEC says that issuers endorse/adopt content that they link to
However, these arguments generally fail under 230. If content starts out as third party content, there is almost nothing the website can do that will convert the content into first party content. As a result, agency civil enforcement actions can unexpectedly run afoul of 230 when they collapse the distinctions between first party and third party content.

However, there is a possible workaround. In the Roommates.com case, the Ninth Circuit said that websites can lose their 230 protection in civil cases if they “encourage illegal content” or “require users to input illegal content.” The FTC is relying on this language in its recent Pricewert/3FN enforcement action against an Internet access provider who facilitated customers allegedly engaged in illegal activities. From my perspective, the Pricewert enforcement action could make sense in the following postures:
* if the FTC is bringing a criminal enforcement action, 230 is irrelevant
* if the FTC’s civil enforcement action is premised on Pricewert’s actual illegal behavior, 230 is irrelevant
* otherwise, if the civil enforcement action is premised on the illegal behavior of Pricewert’s customers, then this might fit into the Roommates.com exception if such an exception exists. However, I am troubled by such an exception, especially given that the enforcement action might also adversely affect Pricewert’s customers who only engaged in completely legal activity.

Two concluding observations:

1) 230’s basic division between first party content and third party content sounds great in theory but is tough to apply in practice.

2) In light of 230, enforcement agencies should rethink their expansive liability theories that basically assume that everyone should be responsible for a common set of online behavior (unless the agency is pursuing a criminal enforcement action).

Posted by Eric at 10:08 AM | Derivative Liability , Marketing | TrackBack

June 17, 2009

Twitter, Email and Brand Engagement

By Eric Goldman

Last week, in an interview with a reporter, I extolled the virtues of Twitter as a tool for brands to keep in touch with and engage their customers. The reporter responded by asking why brands would choose Twitter to engage customers instead of email, which companies have been using successfully for many years. I thought this question raised important issues about online marketing, so I thought it would be worth exploring the differences here.

Let's start with some basics. I am a big fan of email marketing. Like many of you, I have voluntarily signed up for numerous commercial email newsletters/announcement. I also get unrequested email from companies I've dealt with; I look at some of these, I ignore others, and occasionally I get so fed up that I blacklist the sender or report it as spam. I also get spam, LOTS of spam, but it doesn't bother me too much. Gmail has a good spam filter and it only takes a minute or two a day to sort, review and delete the spam.

However, as a recipient, email has some downsides. Most obviously, it is not always easy to unsubscribe. I remain amazed in this post-CAN-SPAM era by how often email unsubscriptions don't work. The link may be down, or my opt-out simply doesn't stick technologically, or the sender just ignores me. This is true even for senders who are involved in the legal industry and are spamming lawyers who love to bring lawsuits (never a wise move). If I were a litigious plaintiff, I would have no problem finding plenty of defendants.

Email also has the downside that the sender has my email address and may share it with others who are going to clutter up my in-box. With a good spam filter, this extra unwanted email isn't a huge problem, but the mere threat of subsequent email deluges can give me pause about whether or not I trust a website enough to give them my email address. (As you can appreciate, the website's privacy policy is a complete non-factor in my trust determination).

From the sender's standpoint, email is a huge pain. It is more heavily regulated than other marketing media, and complying with the regulations (such as providing a reliable opt-out mechanism) is costly and filled with litigation risks. Perhaps more importantly, email can be reported or killed as spam at several steps along the way, and the sender can be tagged as a spammer as well for all future messages. So, for example, a big website's email distribution of an announcement about a new user agreement or privacy policy--a completely legitimate communication between a site and its users--is almost certain to prompt a flurry of unsubscribes, emails from users who insist to their IAPs and email service providers that they are being spammed (even though they often just forgot about the relationship), and lots of bouncebacks from dead email addresses that may cause some IAPs/email service providers to blacklist the sender as a spammer. Plus, a bunch of users will never see the message at all because it goes into their spam folder. (Recall, for example, that AT&T spam-foldered its own contract amendment announcement). These are not exactly the hallmarks of an effective communication technology.

Contrast the user experience with Twitter. More than anything, Twitter is a no-risk opt-in communication tool for consumers to listen to marketers. I can follow a brand at Twitter any time, and more importantly, I can unfollow at any time too. Plus, there isn't any risk that the brand I'm following will ignore my unsubscribes or pass along my Twitter username to spammers. When I unfollow, the relationship is completely over on my terms.

From the brand's standpoint, Twitter has none of the baggage of email marketing. No spam folders to fear, no unsubscribes to manage, no CAN-SPAM. Sure, Twitter's tight character restriction mostly limits marketers to headlines, but frankly this isn't all that different from maximizing email subject lines to get email recipients to open the email.

Twitter has one other really important benefit for brands. Folks are often willing to retweet a message--even a commercial message--thereby sharing it to their entire follower base in ways that these same folks would never forward a commercial email to hundreds of their friends. And this type of word-of-mouth marketing is the holy grail of marketing because of the extra imprimatur of having the message validated by someone in the reader's social network. The retweeting phenomenon is a powerful traffic driver (I've been watching how it boosts my bit.ly stats), and marketers who aren't on Twitter are missing some upside. (Please, marketers, don't even consider shilling or astroturfing or any of those other silly stunts to generate faux word-of-mouth marketing; if you have a good offering, you really don't need to disrespect people that way).

I don't follow many commercial brands in Twitter, but I do want to mention three brands that have impressed me:

@LivingHarvest. I tried hempmilk for the first time recently, and I was fascinated to learn about the extensive anti-industrial hemp regulations that have hampered hempmilk from coming to market. LivingHarvest, a hempmilk manufacturer, is Twittering the status of various legislative efforts to enable industrial hemp farming. It's a fascinating political drama.

@UnitedAirlines. I am a frequent flyer on United Airlines, so I'm already on their email list. But they have totally gotten the point of Twitter. Not only have they been offering valuable freebies to their Twitter follower to boost their subscriber count (they are giving away discount certificates if you sign up before they hit 50,000 followers), but they also offer "Twares," blowout deals on remnant inventory. LOVE IT!

@AmazonMP3. Amazon offers one highly discounted MP3 download a day, and this Twitter account notifies me of the deal of the day. Great stuff. I've lost track of the number of times I've purchased albums this way.

Twitter practices like these build my trust as a loyal customer and pull cash out of my wallet in ways email marketing never did.

One final point: RSS offers many of the same benefits as Twitter in terms of reader empowerment, although it does not have the same retweeting upside. In particular, RSS is a true opt-in like Twitter. The website doesn't get my email address, and whenever I unsubscribe from the RSS feed in my RSS reader, it's over.

For example, as I recently mentioned, RSS is a great option for websites to allow users to learn about changes to user agreements and privacy policies on a true opt-in basis. In this respect, RSS is so much better than email. Consider, for example, DoubleClick's privacy policy, which offers users the opportunity to learn about privacy policy amendments by signing up to an email list. (DoubleClick will rarely have the email address already because it doesn't have direct privity with users). DoubleClick's option is a more enlightened practice than most similar web services, but still, no thanks. If I don't trust DoubleClick's privacy practices to begin with, I'm not going to give them my email address with the risk that they will spam the crap out of it and pass it along to others who will spam the crap out of it too. Of course DoubleClick promises not to do this, but the whole point is that those promises mean nothing to the people who don't trust DoubleClick to begin with. On the other hand, if DoubleClick offered an RSS feed to announce modifications to its privacy policy, then I could subscribe to its notifications with no spam risk at all.

I'm so enamored with RSS as a superior notification tool for announcing privacy policy and user agreement amendments that I will be recommending it to all of my clients as a supplement to other notification options. I hope you'll consider doing the same.

Posted by Eric at 07:03 AM | Marketing , Spam , Trademark | TrackBack

June 08, 2009

May 2009 Quick Links Part 1

By Eric Goldman

Just a reminder that I'm posting some quick links exclusively to my Twitter account.

Trademarks

* Texas International Property Associates v. Hoerbiger Holding AG, 2009 U.S. Dist. LEXIS 40409 (N.D. Tex. May 12, 2009). Domainer loses ACPA claim over typosquatted domain name. The PPC advertising constituted bad faith intent to profit. Ryan Gile recaps the action.

* GunBroker.com LLC v. Heckler & Koch Inc., No. 09-cv-00051 (M.D. Ga. complaint filed May 14, 2009). Interesting lawsuit by an online auction site for guns seeking a declaratory relief action against a trademark owner who deployed an enforcement agency, Continental Enterprises, to send a driftnet takedown letter that apparently targeted used gun resales or compatible goods. Ryan Gile has more.

* Miranda v. Guerroro, 2009 WL 1381250 (S.D. Fla. May 14, 2009). Miranda is “Paola Morena,” a Latin singer. Her former manager convinced her to do some nude photo shoots in an effort to get a Playboy gig. The Playboy gig didn't materialize, and the manager stopped representing Miranda/Morena. After Morena's career took off, the manager then allegedly threatened to publicly post the photos unless she paid him $70k. Morena rebuffed the request, so the manager allegedly followed through with his threats by launching a website paolamorena.com [I got a nasty Google malware warning when I tried to visit the site], calling it her “official” site and posting some of the photos. The court enjoined the manager under trademark law. I'm a little confused how Morena had protectable trademark rights in her name. Did she make any use in commerce in the United States? Did her name achieve secondary meaning? This could be another case where trademark law is being stretched to stop bad behavior.

* Eric Menhart, the self-purported owner of a trademark in the term Cyberlaw, has gotten his very own personal gripe site.

Advertising and Marketing

* How much can Behavioral Targeting Help Online Advertising? HT Greg Linden

* Yingling v. eBay, 5:2009cv01733 (N.D. Cal. complaint filed April 21, 2009). A class action lawsuit alleging that eBay Motors overcharged merchants.

* IAB has issued its Click Measurement Guidelines designed to answer the Q “What is a Click?” See if their 28 page report actually answers the Q.

* A confusingly written LA Times article reports that 4 South Korean dissident bloggers are being criminally prosecuted for artificially inflating impression counts in order to game rankings of most popular pages.

* Perennially funny: unfortunate product names.

Copyright

* Solicitor General recommends against granting cert in Cartoon Network v. CSC.

* AV v. iParadigms, April 16, 2009. The Fourth Circuit says that the Turnitin system is fair use. My initial blog post on the district court ruling.

Security

* News.com: Interview with FBI cybercrime agent working undercover.

* Oddee: problematic CAPTCHAs. Funny.

Google

* Everyone wants to talk about whether Google is a monopolist
- In early May, I heard Susan Athey, Microsoft's Chief Economist, give a lunchtime attack speech on Google at a George Mason event
- Google is circulating a document explaining why it's good for competition
- Google is blanketing DC with lobbyists too.
- And Google says it's actually small potatoes.
- Wired: Will Wolfram Alpha forestall antitrust inquiry into Google? As I've argued before, we continue to see new entrants into the search business all the time—it’s just too big a market to ignore.
- NYT weighs in too. And the Washington Post discusses how Microsoft and others are complaining about how many Google folks are going into the Obama administration.

* Danny Sullivan: State Of Search: Google Will Stay Strong Despite Bing & Yahoo

* Wired: Secret of Googlenomics: Data-Fueled Recipe Brews Profitability

Posted by Eric at 04:03 PM | Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark | TrackBack

June 03, 2009

An Insider's Look at Utah's Failed HB 450

By Eric Goldman

Perry Clegg is a Utah IP attorney and the 2009 chair of the Utah State Bar's Cyberlaw Section. A few months ago, he wrote an article entitled "Insight on Utah Senate's Sedation of HB 450," which provides his assessment of why HB 450--Utah's latest legislative attack on online advertising--failed to pass the Utah Senate this year.

The article implies that HB 450 failed in part due to in-fighting among various influential folks in Utah, perhaps caused by some bruised feelings/egos. With slicker and more inclusive politicking in the future, these influencers are poised to rally behind a similar future regulation.

As a result, the article provides some support for why I think Utah will attack online advertising a fourth time. Indeed, the article quotes a third party as saying that "the bill’s opponents should either propose a compromise solution or expect some form of this bill to pass next year. Senate leadership apparently believed that there were not enough votes to pass it this year, but that they could gather the votes to pass it by next year."

What I find most amazing is that there appears to be broad insider consensus that some type of Utah regulation of online advertising makes sense. As the article says, "the Utah legislature is generally behind HB 450’s policy but want to make sure they do their homework so the policy is implemented using the right language." In most other places around in the country, most policy-makers recognize the illogic and futility of trying to reshape global online advertising to meet state specifications. The pro-regulatory Utahns seem to see the world differently, and many of us who don't live in Utah simply cannot understand why the Utah legislature keeps picking a fight that it's almost certain to lose in the courts, even if legislation passes. I have no rational explanation for this.

In any case, I will be closely watching the Utah legislature in February 2010 to see what shenanigans they might be trying anew.

Posted by Eric at 02:35 PM | Marketing , Search Engines , Trademark | TrackBack

May 29, 2009

Another Lawsuit Over Google AdWords--Stratton Faxon v. Google

By Eric Goldman

Stratton Faxon v. Google, Inc. (New Haven Superior Ct. complaint filed May 27, 2009)

Today's lawsuit combines two trends:

Trend #1: Lawyers-as-plaintiffs suing Google for their own account. I don’t have a complete inventory of these lawsuits, but other examples include the Field, Feldman, Person and Bradley lawsuits. Ironically, I believe all of these lawsuits were shot down in inglorious flames--lawyers-as-plaintiffs often seem to do even worse than other plaintiffs.

Trend #2: Lawsuits over Google AdWords, Heck, two were filed earlier this month (the Firepond and John Beck lawsuits).

This lawsuit is brought by a Connecticut plaintiff-side law firm that discovered a rival law firm was keying AdWords ads to the law firm name. Trademark owners faced with this situation might normally contact the rival and ask them to stop (which the rival firm claims to have done as soon as it heard of the lawsuit) and take advantage of Google's trademark policy. But, if you're a plaintiff's lawyer, it sure is tempting to sue first and ask questions later…

And this lawsuit does raise a lot of questions, including:

* why didn't the plaintiff sue for trademark infringement? The plaintiff claimed interference with business relations and unfair competition, but both claims fundamentally sound in trademark law and would be preempted if there was a robust trademark preemption doctrine. Perhaps a trademark claim is coming.

* why didn't the plaintiff sue the advertiser instead of Google? Among other things, the plaintiff complains that its rival firm is mimicking other offline marketing efforts. If the problem is with the rival firm, wouldn't they be the more appropriate target?

* why did the plaintiff seek a prejudgment $50,000 lien against Google instead of just filing a complaint? Maybe Connecticut law has some quirks that encourage or require this procedural step. Otherwise, is the firm concerned that Google won't have $50,000 to pay off the plaintiff if it wins?

* did the plaintiff really just discover that its competitors are advertising on its name? The plaintiff was quoted as saying that the Firepond lawsuit prompted him to check the search results for the first time. What is this, 2002?

All of these questions make me wonder if this lawsuit is really intended to get some publicity and maybe prompt some calls from potential plaintiffs to form a new class action suit. Otherwise, Connecticut law may differ from California law, but under CA law this lawsuit would almost certainly be DOA. For example, even without relying on 47 USC 230, under CA law I don't see any possibility that the plaintiff could establish the requisite scienter to make the interference with business relations claim stick. For a good analogous example of a failed misdirected attempt to smack a search engine for unwanted advertising, see the Heartbrand Beef case, where Yahoo was excused (without relying on 230) from a false designation of origin claim for selling trademarked keywords.

Stated differently, lawsuits like this--from lawyers who are clearly new to our community--simultaneously make me feel really smart and really stupid. Their allegations are so unmoored from our normal legal discussions that either the lawyers know something I don't, or they have no idea what they are doing. I'll let you to form your own conclusion about this lawsuit.

Clearly, this lawsuit isn't a clone of the Firepond lawsuit, but I think it's fairly characterized as a spawn of it in that the Firepond lawsuit helped educate another plaintiff lawyer about the desirability of suing Google. I expect other plaintiffs’ lawyers are getting the same message as we speak.

In theory, if the plaintiff firm really wanted to tweak its rival, it might also complain to the bar regulators about impermissible advertising under rules about lawyer advertising. This prompted me to wonder: have any bar association opinions on the permissibility of buying trademarked search keywords? I am not aware of any, but I may be forgetting something. Please let me know if you've seen such an opinion.

Posted by Eric at 10:15 AM | Marketing , Search Engines , Trademark | TrackBack

May 20, 2009

EFF's Guide to Griping, Plus Some Recommendations of My Own

By Eric Goldman

The EFF has posted "Avoiding Gripes About Your Gripe (or Parody) Site," which includes 6 prophylactic recommendations to prospective gripers:

1) Be noncommercial — no ads, no links to commercial sites, no affiliate links, no Café Press T-shirt sales, no fundraising if you can help it.

2) Don't use the target's name alone in the domain name — adding "sucks" is good, but you can be creative.

3) Have a prominent disclaimer that explains that your target is neither affiliated with nor endorses your site.

4) Find a service provider with backbone.

5) If you borrow from the target's own materials, such as text or images from the target's own websites, be selective.

6) If a mark-owner challenges your use of a mark in a domain name, don't offer to sell it to the mark-owner without the assistance of legal counsel.

All excellent advice. I'd like to add a few suggestions of my own (all standard disclaimers apply--this is not legal advice, and you should consult your own attorney):

7) I would modify #1 to say don't have any outlinks from your gripe site, period. Courts sometimes engage in bizarre link-counting exercises to determine commerciality, including in some cases considering sites two or more links away. Keep it simple and skip outlinks altogether if you can.

8) I would modify #5 to recommend against using the target's logo at all unless it is absolutely essential to the gripe. Otherwise, courts can get hung up on the logo display even when if other aspects of a trademark claim are weak. See, e.g., BidZirk v. Smith and SMJ v. Lafayette Restaurants.

9) I would also modify #5 to say that if you recycle any graphics or photos from the target, consider presenting them as a thumbnail (with a link to the original source if necessary) rather than presenting them full-size. The thumbnail sizing may help with a fair use defense.

10) Never EVER include the target's trademarks in the site's keyword metatags. Some courts lose all sense of perspective the moment they see a trademark in the keyword metatag. Plus, the keyword metatag offers very little or no SEO benefit, and there are much more effective ways to spread the word about your site. It should be OK to include the trademark in the description metatag if the site description clearly communicates the griping nature of the website, but even then, be careful. Courts don't know how to evaluate description metatags either.

11) Think carefully before buying the target's trademark as a keyword for sponsored ads to promote your gripe site, Some courts are suspicious of keyword advertising and may unduly fixate on the ad triggering and not the underlying message.

12) Make sure every fact you say is 100% accurate and everything else is couched as your opinion. Plaintiffs will carefully read every word on your site text looking for anything that they can argue is inaccurate.

Posted by Eric at 11:13 AM | Copyright , Domain Names , Marketing , Trademark | TrackBack

May 03, 2009

April 2009 Quick Links

By Eric Goldman

[Just a reminder that I am posting some “quick links” exclusively to my Twitter account, so if you want to keep up with everything, follow me at Twitter or subscribe to the RSS feed.]

Marketing/Spam

* Zango is dead (and so is adware), Ken Smith, Zango's CTO, conducts a post mortem: What Zango Got Wrong and What Zango Got Right. Mike Masnick's post-mortem.

* The FDA's instructions about pharmaceutical search marketing have led to lots of confusion. See Search Engine Land and the NYT.

* NYT: "Never Mind What It Costs. Can I Get 70% Off?"

* Tsan Abrahamson on social media and marketing law.

* Asis Internet Servs. v. Consumerbargaingiveaways. A district court diverges from Mummagraphics and says CAN-SPAM does not preempt CA's anti-spam law even if there is no common law fraud.

* Jackson v. American Plaza Corp., No. 08-8980 (S.D.N.Y. April 28, 2009), A Craiglist advertiser isn't a third party beneficiary of Craigslist's contract for purposes of stopping another advertiser from breaching the contract (in this case, spamming the forum).

Defamation

* Gardner v. Martino (9th Cir. April 24, 2009). I'm not a fan of talk radio, and the 9th Circuit apparently isn't either. The court upheld an anti-SLAPP dismissal of a defamation claim against the radio talk show host because "The Tom Martino Show is a radio talk show program that contains many of the elements that would reduce the audience’s expectation of learning an objective fact: drama, hyperbolic language, an opinionated and arrogant host, and heated controversy." Accord DiMeo v. Max. As Marc Randazza notes, rulings like this pose a challenge for those who think contextually ridiculous statements should be treated as "cyberbullying" or "cyber-harassment." Cf. the Finkel v. Facebook case involving asinine but clearly meaningless chatter on a private Facebook page.

* Some big defamation losses reported by CMLP:
- Blogger hit with $1.8M damage award.
- $12.5M defamation judgment against a gripe site.

* CMLP has a page organizing all of its 47 USC 230 material.

Intellectual Property

* Publicly republishing a private email leads to a default judgment of copyright infringement.

* Bryant v. Europadisk, Ltd., 2009 WL 1059777 (S.D.N.Y. April 15, 2009). In 2000, musicians authorized distributors to distribute their [hard copy] recordings, which the defendants ultimately ripped and allowed Amazon and Rhapsody to deliver via downloading. The resulting lawsuit turned on the interpretation of the license agreement term “internet sites.” The court says the term "is not ambiguous and does not extend to websites selling digital copies of songs. At the time the parties entered into the agreements, The Orchard sold physical copies only. As its Vice President explained by affidavit testimony, digital downloads of music did not become a “viable business” until iTunes was launched in approximately April 2004, long after Media Right and Gloryvision entered into contract."

* Octomom is seeking trademark registrations.

Miscellaneous

* GeoCities is shutting down.

* eBay will referee customer disputes.

* Wilson Sonsini's VC financing term sheet generator.

* Oddee: 10 Most Bizarre [Online] Gaming Incidents

Posted by Eric at 06:31 AM | Adware/Spyware , Content Regulation , Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Spam , Trademark , Virtual Worlds | TrackBack

April 27, 2009

Catching Up on Three Keyword Advertising Cases--Hearts on Fire, Romeo & Juliette, AAA

By Eric Goldman

Three trademark owner v. advertiser rulings from the past month:

Hearts on Fire Co. v Blue Nile, Inc., 2009 WL 794482 (D. Mass. March 27, 2009). The Justia page.

This is an interesting and potentially very important keyword advertising case.

The plaintiff is a diamond manufacturer which sells its products under the "Hearts on Fire" brand. The plaintiff does not sell its diamonds directly to consumers. The defendant is an Internet retailer that does not sell the "Hearts on Fire" brand of diamonds. The plaintiff alleges that Blue Nile bought the keyword "hearts on fire" at WebCrawler and then displayed an ad that included the words "hearts on fire" in the ad copy.

In this ruling, Blue Nile tries to dismiss the trademark claims for lack of use in commerce. The ruling came out before the Rescuecom case, but it doesn't matter. (The court did not feel bound by the First Circuit's Venture Tape case, which did not address use in commerce in a metatags case). After canvassing the statute and the precedent, the court says "there is little question that the purchase of a trademarked keyword to trigger sponsored links constitutes a "use" within the meaning of the Lanham Act." Post-Rescuecom, this is even more likely to be true.

The court also discussed consumer confusion. Noting that "there is no suggestion that diverted consumers inadvertently believed they were purchasing Hearts on Fire diamonds at Blue Nile's website," the sole possible basis of consumer confusion is initial interest confusion. In an understatement, the court notes that doctrine is a "somewhat ill-defined concept."

Unfortunately, the court proffers its own definition of initial interest confusion (one of dozens of different definitions), and its definition is a regressive throwback to 1990s legal conceptions of search processes:

[a] classic example [of IIC] is where a consumer sets out in search of one trademarked good, but is then sidetracked en route to his or her original destination by a competitor's advertisement or offering. He or she is never confused as to the source or origin of the product he eventually purchases, but he may have arrived there through either misdirection or mere redirection. In effect, initial interest confusion involves the diversion of the consumer's attention from one trademarked good to a competing good, even if he is not confused about the source of the products he ultimately considers or buys

As I've repeatedly explained, this definition (and its emphasis on attention diversion) is analytically corrupt because it overassumes a linear search process. How do we know when a consumer is "sidetracked" or, in fact, discovers more helpful information? And how can a court determine this?

Despite this odd and unfortunate construction of initial interest confusion, the court acknowledges an alternative story that searchers might be able to distinguish between competitive offerings, which would preempt any initial interest confusion. The court hypothesizes that some keyword advertising listings might be akin:

to a menu--one that offers a variety of distinct products, all keyed to the consumer's initial search. Sponsored linking may achieve precisely this result, depending on the specific product search and its context. When a consumer searches for a trademarked item, she receives a search results list that includes links to both the trademarked product's website and a competitor's website. Where the distinction between these vendors is clear, she now has a simple choice between products, each of which is as easily accessible as the next. If the consumer ultimately selects a competitor's product, she has been diverted to a more attractive offer but she has not been confused or misled

So where does Blue Nile fit on this spectrum between attention usurper and menu-option? The court isn't willing to let Blue Nile off the hook because it advertised on a trademark for a product it does not sell, saying a "consumer who had just entered a search for Hearts on Fire diamonds might easily believe that the Defendant was one such authorized retailer when presented with Blue Nile's sponsored link, even if the accompanying text did not contain the trademarked phrase."

As a result, the court reserves this case for a full multi-factor likelihood of consumer confusion analysis—but not the normal multi-factor analysis. Instead, the court plans to look at a bunch of additional factors beyond the normal ones:

under the circumstances here, the likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context. This content and context includes: (1) the overall mechanics of web-browsing and internet navigation, in which a consumer can easily reverse course; (2) the mechanics of the specific consumer search at issue; (3) the content of the search results webpage that was displayed, including the content of the sponsored link itself; (4) downstream content on the Defendant's linked website likely to compound any confusion; (5) the web-savvy and sophistication of the Plaintiff's potential customers; (6) the specific context of a consumer who has deliberately searched for trademarked diamonds only to find a sponsored link to a diamond retailer; and, in light of the foregoing factors, (7) the duration of any resulting confusion.

This is a good news/bad news development. The good news is that this is a very productive inquiry for courts to make. It does not matter what judges or plaintiffs intuitively think will confuse consumers; it only matters what consumers think and how they process the information presented to them. The bad news is that I have no idea how the parties will provide credible evidence to support this inquiry, and a new and even more complex multi-factor test is destined to compound the existing judicial difficulties with the multi-factor likelihood of consumer confusion test.

Some implications of this case:

1) In the past, some language in First Circuit cases implied that the First Circuit did not recognize the initial interest confusion doctrine. This case offers more evidence that the initial interest confusion doctrine, like a virulent weed, has taken root (in some form or another) everywhere.

2) A ruling like this shows how courts are analytically tortured by keyword advertising cases.

3) Assuming that Blue Nile falsely advertised that it sold "Hearts on Fire" diamonds, isn't this a paradigmatic bait-&-switch? In other words, do we really need to go through these doctrinal contortions? On the other hand, if the Blue Nile ad copy had a clearer exposition that it sold diamonds but not Hearts on Fire branded diamonds, wouldn't that also be an easy case? Thus, the only difficulty is when Blue Nile keys its ads to Hearts on Fire but doesn't reference the trademark in the ad copy at all (which, for example, would be the result in any Google ads if Hearts on Fire blocks its trademark). Personally, I would love to see some empirical evidence about how consumers evaluate ads without any reference to the triggering brand. Meanwhile, for you SEMs, if you are not already doing so, you should be running your ad copy by your lawyers. Clear ad copy ought to reduce or eliminate the risk of lawsuits like this.

4) I will be interested to see if other courts embrace the court’s addition of new factors to the multi-factor consumer confusion test. If so, this could make these cases much more complicated and expensive, but it could also prevent quick plaintiff wins by trademark owners who have no evidence of consumer confusion/initial interest confusion/whatever.

Other opinions on the case: Wendy Davis, Ryan Gile and David Kelly at Finnegan,

Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, 2009 WL 750195 (S.D.N.Y. March 20, 2009). The Justia page.

The litigants are competing laser hair removal vendors. The plaintiff alleges that the defendant ran the following ad:

Romeo And Juliette Laser
Unlimited Laser Hair Removal
$599/Month. Free Consultations.
www.assaralaser.com
New York, NY

Clicking on the URL took consumers to a website where the second line allegedly read "romeo juliette laser Unlimited Laser Hair Removal-$599/Month. Free Consultations."

The defendant alleges that the offending website was operated by a third party, ReachLocal. The court doesn't describe the Assara-ReachLocal relationship in detail, but it does say that ReachLocal is a "third party that Assara hired to manage its advertisements."

In any case, the defendant also seeks dismissal based on a lack of use in commerce. Although this ruling was also pre-Rescuecom, it doesn't matter because the plaintiff's trademark was referenced in both the ad copy and the linked website, which easily satisfies the use in commerce requirement. See, e.g., the Hamzik case.

Ron Coleman has more to say on this case.

The American Automobile Association v. Darba Enterprises, 2009 WL 1066506 (N.D. Cal. April 21, 2009). The Justia page.

Normally I stay away from jurisdictional rulings. However, occasionally keyword advertising plays a key role in the jurisdictional analysis (see, e.g., the Optihealth Products case), and those cases can be a little more interesting.

The defendants operate "several websites that purport to match consumers seeking auto insurance quotes with third-party insurers." AAA complains that the defendants "displayed the AAA Marks without authorization for the purpose of tricking internet users into believing that the site was affiliated with AAA," bought keyword ads triggered by AAA marks, and displayed AAA marks in the ad copy. Further, AAA complains that consumers submitted the lead generation form expecting AAA to be included but the form did not actually get submitted to AAA for a quote.

The court has little problem establishing jurisdiction over the defendant. The court deems the site "commercial" and "interactive" for purposes of the Zippo jurisdictional test. There were also 2 California consumer complaints against the defendants, and the lead generation form had a zip code field to indicate when consumers were from California. "Moreover, by utilizing pay-per-click advertisements to ensure that its name would come up when internet users searched for "AAA insurance," defendant intended to lure internet users to its website, including California residents."

It’s difficult for advertisers on third party trademarks to avoid jurisdictional responsibility in the trademark owner’s home court, so this ruling is not very surprising. However, as discussed with the Hearts on Fire case, I hope the court rethinks its perceptions about advertisers “luring” consumers.

Posted by Eric at 09:56 AM | E-Commerce , Marketing , Search Engines , Trademark | TrackBack

April 14, 2009

GoDaddy Sued for Cybersquatting for Parked Domain Names--uBid v. GoDaddy

By Eric Goldman

uBid, Inc. v. GoDaddy Group, Inc., 1:09-cv-02123 (N.D. Ill. complaint filed April 6, 2009)

Domain name parking programs have generated some lawsuits, including the Vulcan Golf v. Google lawsuit (plus several "me-too" lawsuits following in its footsteps) and the recent Philbrick v. eNom decision. Here, uBid (the online auction site) goes after GoDaddy for its parked domain name program when the domain names include a uBid trademark. In a mild surprise, uBid only claims an Anti-Cybersquatting Consumer Protection Act violation; it does not claim trademark infringement or the various junky unfair competition claims that often accompany a trademark claim. Maybe those claims are coming in an amended complaint. I'm also interested in the fact that uBid only sued GoDaddy and not the other providers of domain name parking services (of which I believe there are many)--what did GoDaddy do (or not do) to deserve special attention?

Tom O'Toole handicaps uBid's ACPA claim and raises some questions about the lawsuit.

From my perspective, I remain baffled by lawsuits over domain name parking programs and other programs to associate domain names with ads. First, although I understand that it's mostly a fight over cash, these lawsuits have always struck me as a manifestation of domain name exceptionalism in that the law treats domain names as having magical search powers compared to other keywords. If displaying ads triggered by the uBid marks in the domain name is so bothersome to uBid, shouldn't it also be chasing advertisers who buy its trademark for ad triggered at the search engines?

Second, as I explain my Deregulating Relevancy article, there has been a longstanding battle between domain name registries, domain name registrars, toolbar providers, computer manufacturers and others to control the ad inventory of inactive domain names. Even if GoDaddy "turns off" its parking program, others may try to fill the void and monetize the exact same domain names. As a result, I'm still not clear exactly what uBid hopes to accomplish with this lawsuit (other than to take some cash out of GoDaddy's pocket if it wins).

Posted by Eric at 07:25 AM | Domain Names , Marketing , Search Engines , Trademark | TrackBack

April 10, 2009

Q1 2009 Quick Links, Part 2

By Eric Goldman

Trademarks/Domain Names

* The ridiculous Jones Day v. BlockShopper case settled. The settlement agreement. The ABA Journal and Legal Blog Watch stories. Commentary from CMLP, Paul Levy, Tom O'Toole.

* The trial court denouement of the S&L Vitamins v. Australian Gold did not turn well for the defense--$6M jury award. The S&L Vitamins v. Australian Gold and Designer Skins v. S&L Vitamins cases subsequently settled. According to Ronald Coleman: "This settles, for our clients S&L Vitamins, Inc., the Australian Gold case and the related appeal in the Designer Skin case. All money judgments are vacated and parties bear their own fees. Our client agrees to move on to another line of work, however."

* Twelve Inches Around Corp. v. Cisco Systems, Inc., 2009 WL 928077 (S.D.N.Y. March 12, 2009). 17 USC 512(f) does not cover trademark takedown notices.

* Suarez Corp. v. Earthwise, 2008 U.S. Dist. LEXIS 92931 (W.D. Wash. Nov. 14, 2008). Including a competitor's name in a web page disclaimer creates initial interest confusion when the competitor's name is indexed by the search engines. Compare Promatek v. Equitrac, the 2002 7th Circuit case ordering the defendant to include the plaintiff's name on its web page as a cure for initial interest confusion.

* CRS Recovery v. Laxton, 2008 WL 4408001 (N.D. Cal. Sept. 26, 2008). Another California-based court says that domain names are property that can be converted. I'm amazed that these cases are still being brought.

* North American Bushman, Inc. v. Saari, 2009 WL 211932 (M.D. Pa. Jan. 27, 2009) The parties entered into a settlement agreement that "Plaintiffs further agree not to use, and in addition, to offer up or destroy, any material that includes, but is not limited to, the names, photos, images, embroideries, of likeness of [Defendant] James Saari and any of the a above named trade names and trademarks of Defendants." The court holds that this provision wasn't breached when third party users posted comments referencing the defendants in UGC areas of websites operated by the other party.

* Advice Co. v. Novak, 2009 WL 210503 (N.D. Cal. Jan. 23, 2009). Justia page. Stupid lawsuit alert! Attorneypages.com believes Attorneyyellowpages.com infringes its trademark. Case dismissed for lack of personal jurisdiction. Participating in Google AdSense doesn't automatically create jurisdiction in CA.

* DSW v. Zappos, which involved allegations of trademark infringement based on Zappo's affiliates, settled.

* An update on Google's AdWords woes in France.

* Kiva Kitchen & Bath Inc. v. Capital Distributing Inc., 2009 WL 890591 (5th Cir. April 2, 2009). The Fifth Circuit upholds enhanced damages under ACPA. Good discussion of the purpose of damages in the ACPA.

* Toys R Us buys the domain toys.com for over $5M. Is any domain name worth $5M any more?

* A 2007 interview with "Pokey" of Pokey.org fame. This is one of my favorite domain name disputes from the 1990s. A very smart cyberlawyer (Ian Ballon), on behalf of the trademark owners of Pokey & Gumby, unexpectedly got into a public tangle with a 12 year old kid nicknamed "Pokey" over the domain name pokey.org. Debating 12 year old kids in the press never turns out well.

Advertising/Marketing

* Some new material on behavioral advertising: an FTC report and a CRS report.

* Latest NYT article on human billboards. See my prior blog post.

* Privacy advocates are freaking out about Google Android and its ability to deliver location-based information and ads. But location-based information and ad targeting is inevitable...and a good thing.

* Action over mobile marketing: Mobile Messenger settled a false advertising suit with Florida for $1M, and another settlement. Google's response.

* The class in the "Vista Capable" lawsuit was decertified.

* Tsan's post on the latest FTC efforts to rein in testimonials on social networking sites and blogs. Unfortunately for the FTC, some of its efforts may be preempted by 47 USC 230.

* eBay v. Digital Point Solutions, 2009 WL 481269 (N.D. Cal. Feb. 24, 2009). eBay loses an intermediate round in its cookie stuffing lawsuit against Digital Point Solutions.

* e360, a serial defendant in spam cases, sued Choicepoint for selling it email addresses that led to the suits. Apparently neither e360 nor Choicepoint got the memo that the days of email list brokering are dead.

* 10 Creative Bathroom Ads.

Search Engines

* Study: Google's search lead not matched by loyalty. A critical response.

* Is Google giving big brands extra credit in its organic search results rankings? Compare: media giants complaining they don't get enough weighting in organic results.

* Sign of improving consumer search skills: search queries are getting longer.

* Yahoo reserves the right to "auto-optimize" advertiser accounts by changing ads and advertiser bids automatically. This is not a popular move.

* Wired: The Plot to Kill Google.

Posted by Eric at 10:20 AM | Domain Names , Internet History , Marketing , Search Engines , Spam , Trademark | TrackBack

March 30, 2009

CLRB Hanson v. Google Preliminarily Settles for $20M

By Eric Goldman

CLRB Hanson Industries v. Google, 5:05-cv-03649-JW (settlement papers filed March 26, 2009). The new case filings:
* The settlement motion
* The settlement agreement
* The proposed court order granting the settlement

My previous blog coverage of the case:
* my initial post from August 2005
* the August 2007 determination that advertisers were bound by the AdWords contract
* the May 2008 initial refusal to grant summary judgment to Google
* the December 2008 second refusal to grant summary judgment to Google

The long-running CLRB Hanson v. Google case (also referred to as the Howard Stern case because he is a named plaintiff), over Google's alleged mishandling of budget caps set by its advertisers, has reached a proposed settlement. The settlement needs court approval, but I would be surprised if that didn't occur in due course. Individual advertisers could choose to opt out of the settlement and pursue individual claims, but I expect few will find it economically rational to do so. In the extreme case, the deal could unravel if more than 5% of advertisers opt out of the class, but I would be shocked if this happened. As a result, I expect this development to substantially resolve the case.

The stated settlement price tag is $20M of cash. Plaintiffs' counsel are likely to get $5.25M, the named plaintiffs are likely to get $20k each, and the $14.7M balance will go into a bank account. Google will provide AdWord credits for affected advertisers who are still advertising and have a balance due to Google, and Google will get cash back from the pot for any actual credits given to advertisers. It is unclear how much of the $14.7M Google will recoup this way. Or, advertisers can opt to receive cash instead for their putative harms. If less than $200k is left over after all this, the money will go to charity. If more than $200k is left over, the parties will go back to the judge to propose how to reallocate the remaining money to the class.

in my previous post on the case from December 2008, I wrote:

I suspect the case is still around because the parties can't work out a deal on the attorney's fees--which, if this situation is anything like the click fraud cases, almost certainly will dwarf any actual monetary relief received by the putatively injured advertisers. If the parties can work out the plaintiff attorneys' cut of the spoils, I'm confident this lawsuit will settle before trial

Seeing the size of this settlement, I'm not sure I called it right. Given the fairly narrow advertiser harms left open by the judge's prior rulings, I expected the advertiser relief to be nominal (certainly less than $15M). Furthermore, unlike prior advertiser v. search engine lawsuits where advertiser credits were use-it-or-lose-it, Google could be out much of the $20M no matter what. In the end, Google probably will pay a lot more cash than I expected it would have to.

While Google can easily afford the dough, the settlement is a big enough sum to potentially attract further class action lawyers seeking their piece of the Google fortune. Contrast this with Google's stance on patent lawsuits, where it has taken a hard line on settlements with the hope that its refusal to buy out lawsuits will discourage future weak patent claims from being asserted against it. However, the plaintiffs in this case had to work pretty hard--Google fought them for nearly 4 years--so it's possible that the actual economic return for the plaintiffs' lawyers for their four years of labor wasn't especially lucrative.

I have lost track of the many lawsuits against Google, but I believe this settlement ends the 2005-era advertiser v. Google class actions. There may still be some individual click fraud claims, and there are other advertising-related lawsuits still pending (such as the Vulcan Golf and related/copycat lawsuits). Let's hope this means that Google has improved its ability to keep advertisers happy.

Posted by Eric at 06:46 AM | Licensing/Contracts , Marketing , Search Engines | TrackBack

March 13, 2009

Utah HB 450 Dies in Utah Senate Without a Vote

By Eric Goldman

After barely passing the Utah House, Utah HB 450--Utah's third ill-fated attempt to regulate keyword advertising--died quietly last night when the Utah Senate failed to act on it before the Utah Legislature adjourned for the year. My understanding is that 1-800 Contacts, the bill's principal advocate, stopped pushing the bill in the Senate earlier this week when it became clear that it couldn't muster the votes.

On its face, this bill's failure appears to be good news. While the bill was less ill-conceived than Utah's past two anti-keyword advertising laws, it was still an ill-conceived anti-competitive law designed principally to advance the protectionist interests of a local Utah company. Laws like this should be rejected.

Nevertheless, I feel that there is no real good news here. If the law had died because the Utah Legislature had recognized the folly of thinking that it was uniquely well-positioned to improve keyword advertising, or had abandoned the quest because of its abysmal track record in regulating the Internet, we'd have good reason to celebrate. Unfortunately, I haven't seen any evidence of such an epiphany.

Instead, I *guarantee* that the Utah legislature will revisit the topic of regulating keyword advertising for a fourth time. (I'm reminded of the fable of Ulysses and the Sirens; trying to "fix" keyword advertising appears to be simply irresistible to the Utah Legislature). One reason is that there remains a lot of hostility towards keyword advertising in the Utah Legislature. For example, Rep. S. Clark was quoted last week as opposing HB 450 (indeed, he voted no) because:

"We should be going after the Googles that are creating this problem. They're the villains." .... "If we're going to use the strength and resources of the state to go after businesses, then we ought to go after the business that is causing the harm. … We ought to go after the Googles with the state's resources and reputation."

Nice. In addition to this ill-informed antipathy, companies like 1-800 Contacts and Overstock.com--both Utah-based web retailers with, at best, highly descriptive trademarks--are always interested in ways to reduce their competition. So, Utah's legislative hubris plus local company rent-seeking creates a toxic brew that ensures repeat surfacing of bad policy proposals. Let's reconvene here in February 2010 and see what the Utah bunch is cooking up for the 2010 legislative session. [UPDATE: Kate Kaye has a little more to say about the future.]

Meanwhile, even though 1-800 Contacts didn't get its statutory shortcut to control keyword ads on its trademarks, I expect 1-800 Contacts will keep bringing traditional trademark lawsuits against competitive retailers who buy competitive keyword advertising. 1-800 Contacts has already been busy on this front; I don't have a complete census of these lawsuits, but I pulled the following case list from PACER ()which is usually incomplete for a variety of reasons):

* 1-800 Contacts v. Lensworld.com, 2:2008cv00015 (filed 01/08/2008, closed 09/09/2008)
* 1-800 Contacts v. Drugstore.com, 2:2008cv00157 (filed 02/26/2008, closed 08/12/2008)
* 1-800 Contacts v. Lens.com Inc., 2:2007cv00591 (filed 08/13/2007)
* 1-800 Contacts v. Premier Holdings, 2:2007cv00946 (filed 12/06/2007, closed 05/16/2008)
* 1-800 Contacts v. Memorial Eye, 2:2008cv00983 (filed12/23/2008)
* 1-800 Contacts v. Lensfast, 2:2008cv00984 (filed 12/23/2008)
* 1-800 Contacts Inc v. Manila Industries Inc, 8:2007cv00102 (filed 01/26/2007, closed 04/07/2008) (note: the complaint wasn't on PACER, so I couldn't confirm that this was a keyword suit)

Given this level of activity, I doubt we've seen the last of these lawsuits (unless 1-800 Contacts has exhausted the universe of defendants).

One last point: I remain flabbergasted by the standards of acceptable conduct in the Utah Legislature. For example, as I mentioned before, I got a reliable tip (but I haven't been able to confirm otherwise) that one house representative mistakenly voted yes on HB 450. Whoops! Subsequently, the Salt Lake Tribune reminded us that Rep. Jennifer "Jen" Seelig--who voted yes on HB 450, in case that wasn't obvious--is a lobbyist-employee of 1-800 Contacts, the principal advocate for the bill. (This page describes her title as "Associate Director of Governmental Relations" for 1-800 Contacts). What??? Rep. Seelig explained that she doesn't lobby for 1-800 Contacts in the Utah Legislature, but I would think any representative with such obvious conflicts would necessarily abstain from voting on bills advocated by her employer. (Or perhaps there should be rules against legislators also being employed as lobbyists, but I digress...). Apparently not in the Utah Legislature. Utah residents, I just don't get it--why are you not demanding better practices from your elected representatives???

Posted by Eric at 10:27 AM | Marketing , Search Engines , Trademark | TrackBack

March 06, 2009

Utah House Barely Passes HB 450 (Maybe)--UPDATED

By Eric Goldman

The Utah legislature is continuing its embarrassing third attempt to regulate keyword advertising. Today, after making a ticky-tack amendment, the Utah House passed HB 450 and sent the bill to the Senate. However, the House was sharply divided, voting 38-36-1 to pass it. The law barely made it through due to the fierce last-minute lobbying efforts of 1-800 Contacts; Kate Kaye catches us up on some of 1-800 Contacts' maneuverings.

It's not clear if the Senate will approve the law; or if it will even act on the law before the legislature recesses on March 12. It's also possible that the governor would veto the law. However, for now, it is clear that the Utah legislature is still working hard to retain its status as the reigning jesters of Internet regulators.

UPDATE (12:30 Pacific): Perhaps I should have known better than to rely on the Utah legislative website. I got the following email from a tipster:

"So the bill passed by one vote but one rep realized she voted the wrong way....So she's putting a hold on it and they're going to try to reconsider the action, basically revote the thing, today or Monday."

WHAT??? I realize that mistakes can happen, but I would think that legislators would work really, really hard to vote the right way on bills. After all, isn't that the single most important thing we pay legislators to do? In light of this apparently crucial flub, it seems like the last line of my initial post was even more apropos than I realized.

UPDATE 2: Kate Kaye provides an update.

UPDATE 3 (6 pm Pacific): My latest understanding is that the misvoting representative lifted her hold, and the bill will move to the Senate.

Posted by Eric at 11:26 AM | Marketing , Search Engines , Trademark | TrackBack

March 04, 2009

Utah Trying to Regulate Keyword Advertising....Again!? Utah HB 450

By Eric Goldman

When I first heard that the Utah legislature is considering yet another law to regulate keyword advertising, I thought: Are you kidding me? After all, Utah has pursued these regulations twice with disastrous results. The first time, in 2004, Utah's attempt to regulate adware-mediated keyword advertising was declared unconstitutional, and Utah amended the law in 2005 to make it irrelevant. In 2007, Utah tried again, passing a law that restricted keyword advertising across-the-board. That law was a spectacular failure, garnering derision both within Utah--especially from angry Utah citizens shocked that their elected representatives passed a law that the state AG thought was unconstitutional and that was going to cost valuable taxpayer money to defend in court--and globally as everyone wondered if the Utah legislature was really that crazy. In 2008, the legislature tucked its tail between its legs and repealed the 2007 law.

With this track record, the Utah legislature wants to try regulating keyword advertising again...? Are you kidding me?

Then again, perhaps this latest foray really isn't all that surprising. My sources tell me that 1-800 Contacts is the prime mover behind this statute, and 1-800 Contacts has testified in support of the law. 1-800 Contacts has an hard-to-explain love/hate relationship with keyword advertising. 1-800 Contacts has been a repeat litigant against keyword advertising, including being the losing plaintiff in the landmark 1-800 Contacts v. WhenU case, and 1-800 Contacts has continued to bring other lawsuits against competitive retailers (such as the LensWorld case I blogged about a year ago). At the same time, 1-800 Contacts has been a buyer of trademarked keyword ads, and it was one of the companies that protested the 2007 law because it was concerned the law would limit its own advertising practices (although, at the last minute, 1-800 Contacts flip-flopped and tried to sneak in new restrictions on keyword advertising into the putative repeal of the 2007 law). Clearly, 1-800 Contacts has a complex attitude towards keyword advertising, although it might just be pure duplicity. Either way, with 1-800 Contacts’ flip in 2008 and its continued litigation against keyword advertising, it’s not unexpected that they might try to bend the ear of the apparently pliable Utah legislature.

The Proposed Law

The 2004-05 laws banned trademark-triggered pop-up ads triggered by adware. The 2007 law allowed trademark owners to register their marks with a newly created Utah administrative registry (which never got created) and prohibited keyword buyers and sellers from using registered marks as triggers for keyword advertising. HB 450, the proposed 2009 law, takes a very different approach than the 2007 law:

Fewer Defendants. The law only applies to keyword buyers (advertisers). Unlike the last two laws, keyword sellers such as search engines are immune from liability under this law. However, the law is expansive in other ways: the law expressly holds an advertiser liable for affiliates' keyword purchases (a currently open point in trademark law), and the law expressly references telephone directory assistance advertiser as being within its scope.

Opt Out. The law only applies after the trademark owner sends a takedown notice/cease & desist demand to the advertiser. Further, if the advertiser stops within 10 days of the takedown notice, it is not liable for any remedies under this law. (They might still be liable under other legal doctrines).

Limited Remedies. My reading of the law is that the only remedies against an advertiser are an injunction and attorneys fees--no damages. I'm not 100% sure about this because some states have laws that create damage claims outside the scope of any specific statute (I'm thinking of California B&P 17200). I don't know if Utah has a catchall provision like that.

Geographic Restrictions. One of the most deficient aspects of Utah's 2007 law was that it required advertisers throughout the country to check the new registry before buying keyword advertising on a third party trademark, even if the advertiser, the keyword seller and the trademark owner all had zero connection with Utah. This law tries much more clearly to restrict its reach to Utah. First, the law only applies to ads "in Utah," whatever that means. Second, the law only restricts keyword buys made from sellers that allow "an advertiser to limit the display of advertisements by geographic location." I'm not exactly sure what this means--after all, a site like eBay segregates its listing database by country; does that mean eBay gives advertisers geographic choices?--but it's clear that an advertiser purchasing ads from a seller that doesn't offer any geolocation choices isn't covered by the law. Third, the law doesn't apply if segregating Utah ad viewers from non-Utah ad viewers isn't "technologically feasible" or would impose "an undue financial burden." I'm not saying that this law will survive a dormant commerce clause challenge--personally, I think all state regulation of the Internet is inherently suspect--but the law certainly tried to limit its reach to Utah.

Narrow Scope. The law applies when "the delivery or display of an advertisement in Utah...is the product of a bad-faith attempt to profit from the registrant's mark by diverting a consumer from the registrant, the registrant's authorized licensees, or another source authorized by the registrant." The statute provides for a multi-factor evaluation of what constitutes a "bad faith diversion" by keyword advertising, with the first factor being that the ad "is likely to create an initial, misleading impression that the person is a legitimate source of the goods or services" (which itself is subject to another multi-factor evaluation). Personally, I don't think there is such a thing as bad faith diversion or initial misleading impressions with respect to truthful ad copy, so this ought to be a null set. Even so, the law lists a number of categorical exclusions from its coverage, including:

* advertiser belief that the ad is fair use. Note: the bill uses the term "fair use" several times, even though this term is not well-defined in trademark law. So it isn't clear to me if "fair use" meant descriptive fair use, nominative use, both, neither, or yet something else.
* the sale is permissible under the First Sale doctrine. This should exclude keyword buys by other parties in a trademark owner's distribution channel. However, as I recently blogged, courts are struggling with the First Sale doctrine's application to e-commerce.
* "(a) fair use of a mark in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark; (b) noncommercial use of a mark; and (c) all forms of news reporting and news commentary." This is an interesting set of exclusions; it looks like the drafter tried to (incompletely) mimic the federal dilution exclusions. However, the implicit redundancy with the other fair use aspect mentioned above also raises a question why (a) only applies to famous marks. That's either a drafting error or a significant limitation on that prong.

So What Does This Law Do?

From my reading, it appears that this law does not apply to gripe ads or trademark conflicts within a distribution channel. Therefore, I think the law really only applies to advertising on competitors' trademarks, and even then, only some of the ads.

Given the application to competitive keyword advertising and the focus on an injunction as a remedy, this law covers only limited circumstances that are not already addressed by the search engines' trademark policies, which provide an extrajudicial "injunction." Indeed, this law is nearly co-extensive with Yahoo's and Microsoft's trademark policies. On the other hand, the law would govern situations that Google isn't remediating with its trademark policy because it could force advertisers off keywords that Google would happily sell. Furthermore, the ambiguous application of the law to keyword buys from places other than search engines, such as telephone directory assistance services, may implicate some keyword sellers who don't currently have trademark policies.

Conclusion

If I'm right that this law simply codifies current search engine trademarks policies and extends them some, then this law isn't as problematic as Utah's last two efforts. But it also makes me wonder--what's the point? Doesn't Utah have more important problems to solve???

Even if the law is less troublesome than the last two, let's be clear: this is not a good proposal. As with Utah's past two efforts, this law has nothing to do with improving consumer welfare. Instead, it would allow companies to suppress competition by helping companies keep their competitors from gaining exposure among the company's potential customers; meaning that companies won't have to work as hard competing on price and quality. I understand why companies such as 1-800 Contacts, who has a pattern of trying to use legal tricks to suppress competitors, would find it attractive to ply their local legislators for some corporate welfare. But why any legislator would waste their time with such an unabashed anti-competitive, anti-consumer request is simply beyond me. As I have explained elsewhere, policy-makers should be helping consumers get relevant content, not enacting laws to take it away from them.

The bill is making its way through the Utah House, and my observation of Utah legislative proceedings is that bills can be amended substantially from beginning to end. So this bill could get better, or it could get much worse. Fortunately, a coalition of Internet companies is lobbying against the bill, and the bill barely survived its first committee hearing on an 8-6 vote. Thus, it's not guaranteed that this law will make it through. My hope is that the Utah legislators will recognize the law’s depravity and their own poor track record in the area and squelch this latest effort.

Posted by Eric at 09:55 PM | Adware/Spyware , Derivative Liability , Domain Names , Marketing , Search Engines , Trademark | TrackBack

February 26, 2009

McGeveran on Facebook Beacon and Social Media Marketing

By Eric Goldman

Bill McGeveran, a law professor at University of Minnesota, has posted Disclosure, Endorsement, and Identity in Social Marketing to SSRN. The paper walks through Facebook Beacon and marketers' other efforts to take advantage of online word of mouth through social media. It's a surprisingly complex endeavor to parse the various harms putatively experienced by consumers and applicable legal regulations protecting against those harms, and McGeveran's paper navigates through the morass in a sophisticated but easy-to-read way. Facebook Beacon may be over as a cause celebre, but for reasons that McGeveran explains, online word of mouth marketing will undoubtedly play a big role in our future.

The abstract:

"Social marketing" is among the newest advertising trends now emerging on the internet. Using online social networks such as Facebook or MySpace, marketers can send personalized promotional messages featuring an ordinary customer to that customer's friends. Because they reveal a customer's browsing and buying patterns, and because they feature implied endorsements, the messages raise significant concerns about disclosure of personal matters, information quality, and individuals' ability to control the commercial exploitation of their identity. Yet social marketing falls through the cracks between several different legal paradigms that might allow its regulation-spanning from privacy to trademark and unfair competition to consumer protection to the appropriation tort and rights of publicity. This Article examines potential concerns with social marketing and the various legal responses available. It demonstrates that none of the existing legal paradigms, which all evolved in response to particular problems, addresses the unique new challenges posed by social marketing. Even though policymakers ultimately may choose not to regulate social marketing at all, that decision cannot be made intelligently without first contemplating possible problems and solutions. The Article concludes by suggesting a legal response that draws from existing law and requires only small changes. In doing so, it provides an example for adapting existing law to new technology, and it argues that law should play a more active role in establishing best practices for emerging online trends.

Posted by Eric at 10:16 AM | Marketing , Publicity/Privacy Rights | TrackBack

February 24, 2009

Guerrilla Marketing Under False Pretenses Might Be Passing Off--Heartland v. Forest River

By Eric Goldman

Heartland Recreational Vehicles, LLC v. Forest River, Inc., 2009 WL 418079 (N.D. Ind. Feb. 18, 2009). The Justia page.

When deciding whether it should bring a lawsuit, a potential plaintiff needs to consider not only their likelihood of winning, but also the risk that the lawsuit will prompt some counterclaims or affirmative defenses that leave the plaintiff worse off than if it had never sued in the first place. We've seen several examples of plaintiffs who probably wished they hadn't started the litigation. See, e.g., American Blinds, Axact, and Buying for the Home. Sometimes it really is better to do nothing.

Today's lawsuit started with a patent infringement claim by Heartland, a manufacturer of travel trailers/RVs, against its competitor Forest River. Forest River strikes back against Heartland by arguing that Heartland engaged in a type of guerrilla marketing. Here's a recap (based on the facts recounted in the opinion):

Forest River brought RV dealers to lovely Mishawaka, Indiana (a suburb of South Bend) for a private trade show (which sounded like an event to wine-and-dine dealers of Forest River's RVs). Forest River put the 700+ attendees up at local hotels. Heartland apparently got wind of the shindig and prepared packets for these attendees containing comparative advertising and an invitation to visit Heartland's facility in beautiful Elkhart, Indiana (also part of the greater South Bend/Michiana metro area). Then, while the attendees were at one of Forest River's events, Heartland employees:

went to the front desks of the hotels and then falsely stated and represented to the hotel attendants that they were "from Forest River" and that they had "important" envelopes which needed to be delivered to the Forest River guests "for a Forest River dealer meeting the next day."

At least two hotel security cameras caught Heartland employees making these requests. (Say cheese!) Not wanting to reject a request putatively from a major customer, the hotel employees dutifully distributed Heartland's packets to the guests staying there. According to Forest River, Heartland's action caused "disruption and confusion among several of Forest River's guests because of the incongruity and surprising manner in which the envelopes were delivered ... [and] adversely affect[ed] Forest River's good will with its dealers and adversely affected Forest River's sales of its products."

Clearly Heartland isn't afraid of aggressive marketing. But was their stunt illegal?

The opinion does not suggest that Heartland's packets contained deceptive marketing materials. The court also does not say that Heartland misappropriated a trade secret or otherwise impermissibly learned about the attendees (although the opinion implies that Heartland might have gotten an illicit copy of the attendee list). Further, knowing that the dealer group was in town, Heartland can freely communicate with the attendees in a variety of ways--billboards, radio ads, even leafletters standing outside the various hotels

So the main crux of the problem is Heartland's apparent misrepresentation to the hotel employees to get them to distribute the packets to the hotel guests. Is such a misrepresentation actionable by the putatively harmed competitor? The court expresses doubt about the merits of Forest River's claim but does not dismiss it, saying:

Heartland's intentionally deceptive conduct in the hotel action plausibly had the natural and probable tendency and effect of which was to deceive the public so as to pass off its goods or business as for that of Forest River. Moreover, the Court will not condone Heartland's actions as simply healthy competition.

One possible lesson from this case is that it would make a lot of sense for Heartland and Forest River to collaborate on a greater Michiana RV trade show that would have given them shared access to the dealer group. This would have mitigated the risk of guerrilla marketing by one of the local competitors and allowed them to share expenses.

Another lesson is that the case reinforces the already well-established rule that marketers should not lie in marketing campaigns, either in the marketing message's substance or to get the marketing message delivered.

Finally. the case reminded me a little of the Toy Manufacturer's case (Toy Manufacturers of America, Inc. v. Helmsley-Spear, Inc., 960 F.Supp. 673 (SDNY 1997)), which suggests that certain kinds of time-and-space adjacencies for competitive activities are not permissible. For more discussion about the trademark implications of such adjacencies, see my Brand Spillovers article.

Posted by Eric at 09:57 AM | Marketing , Trademark | TrackBack

February 19, 2009

TradeComet Sues Google for Antitrust Violations

By Eric Goldman

TradeComet.com LLC v. Google, Inc., 09 CIV 1400 (SDNY complaint filed Feb. 17, 2009). The Justia page.

TradeComet, which operates the SourceTool.com website, has sued Google for a variety of antitrust violations. As is typically the case with lawsuits against Google, this lawsuit turned into a media event, and TradeComet's PR firm did a great job pushing this story into AP, NYT, CNET News.com, BusinessWeek and many others. Maybe SourceTool hoped to get some PageRank bounce from such broad media coverage? (sorry, no link love from me).

The lawsuit was filed by lawyers at Cadwalader Wickersham & Taft, one of the oldest and most prestigious law firms in the country, which is of some note because that firm has represented Microsoft in various dealings that would have some bearing on Google's market position (such as Microsoft's aborted takeover of Yahoo). Further, Cadwalader has had a particularly rough time in this market downturn, so perhaps they had some lawyers with idle hands...?

The complaint itself is the typical grumblings of an unhappy advertiser who wanted more traffic for less money. We've heard these complaints from advertisers many, many times before. Advertisers tend to be a particularly hard-to-please bunch. TradeComet tries to connect the dots that Google's price increase was due to Google's efforts to squelch SourceTool's competition with Google, which would be a more convincing argument if anyone actually believed that the two were bona fide competitors.

In terms of legal precedent, there are three cases of note here:

1) KinderStart v. Google. KinderStart was a vertical portal (in this respect, not dissimilar to SourceTool in marketplace juxtaposition with Google) that had its PageRank slashed and was de-indexed for a time. KinderStart brought a variety of claims against Google, including an antitrust claim alleging that the PageRank drop was designed to punish a competitor, but those claims went nowhere--and, in fact, the plaintiff's lawyer was ultimately sanctioned for making unsupportable claims in the complaint.

2) Person v. Google. This was a pro se lawsuit by a disgruntled Google advertiser who wasn't happy with his treatment by Google, so he brought an antitrust lawsuit against them. It wasn't a meritorious lawsuit from inception, but of particular interest is that in dismissing the case, Judge Fogel defined the relevant market for antitrust purposes as "Internet advertising," not "search advertising." There's no question Google is a dominant player in the search advertising market, but they are only a major player in the much larger Internet advertising market.

3) Langdon v. Google. This wasn't an antitrust case, but it stands for the proposition that search engines have the absolute right to reject ads in their discretion.

The combination of these three precedents shows that (A) most/all of TradeComet's complaints have been advanced before, and (B) they haven't gotten a favorable reception in court. Then again, all three of these rulings are from 2007, so it's possible that Google and the market have changed since then in ways that degrade Google's antitrust posture. Indeed, last year the DOJ said it was hours away from filing an antitrust lawsuit based on the Google-Yahoo deal, although I think it's easy to read too much into that situation. It is not uncommon for government enforcement agencies to take aggressive positions that may not reflect the law, and usually their targets back down rather than test those aggressive positions in court (just like Google did in the Yahoo transaction). So even if the DOJ took the position that the relevant market was search advertising, not Internet advertising, there is no guarantee that a court would have agreed with that position.

There is another troubling aspect of the TradeComet lawsuit. Google and other search engines have been repeatedly criticized for not doing enough to police their ads on a variety of dimensions, including allowing advertisers to hawk bogus products and distribute malware through their ads. We want--and expect--Google to police its advertisers. Google can do so in a variety of ways, including manual review of ads, but its pricing mechanisms and ad sorting algorithms (including its landing page quality score) provide an effective first-line of defense against ads that aren't useful to consumers. Therefore, it would be odd/dichotomous for antitrust law to conclude that Google's ad cleanup mechanisms are anti-competitive.

While I think this lawsuit is much more rehash/ennui than groundbreaking, there was one set of allegations that caught my eye. Check out Paragraphs 100 and 101, where TradeComet alleges that Google "relaxes its Landing Page Quality methodology for certain 'search partners'" such as Business.com. I'd sure like to know more about this allegation and the factual basis for it. If true, I imagine Google's advertiser community would be up in arms about this favoritism. However, I suspect that if Business.com and other search partners get seemingly premium ad placement, it's due to some consistently applied factor that measures an independent attribute that happens to correlate with attributes of Google's search partners.

Posted by Eric at 05:17 PM | Marketing , Search Engines | TrackBack

February 17, 2009

Affiliate Liability Talk Notes from SMX West

By Eric Goldman

Last week, I spoke for 10 minutes (actually, I took 12) at SMX West on the topic of advertiser liability for affiliates' actions. My talk notes:

General Principles

Issue: when are advertisers liable for their affiliates’ behavior?

General rule: a company isn’t automatically liable for the acts of independent contractors.

Main exception: principal-agency liability. Principals are automatically liable for agent’s behavior within scope of agency. Agency can be express, implied or apparent. Generally, to form an agency, principals must control the agent’s behavior; an agency isn't formed merely by telling an independent contractor the desired results.

Application of general rule: Unless affiliates are agents, advertisers aren’t liable for their behavior, and most affiliates aren’t agents.

CAN-SPAM

CAN-SPAM is a statutory exception to the general rule. State anti-spam laws may have similar statutory extensions.

15 USC 7705: Advertiser liability if advertiser (1) knew that affiliate is spamming, (2) is economic beneficiary of spam, and (3) doesn’t take reasonable steps to prevent or report.

Numerous advertisers have settled with the FTC based on the FTC’s theories of how to interpret this statute. However, the FTC's interpretations don’t have a great track record in court:

* U.S. v. Cyberheat, Inc., 2007 WL 686678 (D. Ariz. March 2, 2007). Government’s theory of strict liability for affiliate behavior rejected—liability requires advertisers’ knowledge and control of affiliate behavior.

* US v. Impulse Media. Government took Impulse Media’s liability for affiliate spam to a jury and lost.

Also, most civil plaintiffs have lost trying to hold advertisers liable for affiliate spam. See, e.g., Fenn v. Redmond Venture, Inc., 2004 UT App 355 (Utah Ct. App. Oct. 15, 2004); Hypertouch, Inc. v. Kennedy-Western University, No. 3:04-cv-05203-SI (N.D. Cal. Mar. 8, 2006); People v. Synergy6, Inc., Index No 404027/03 [Sup Ct N.Y. Co 2006]; ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008; unsealed April 29, 2008),

Other Types of Affiliate Liability

* Fraudulent ads prepared by affiliates. Florida's AG office has pursued mobile content ads, including those prepared by affiliates to promote the advertiser.

* Adware. The FTC and NYAG have taken expansive view of advertiser liability for running ads in adware. Indeed, based on these theories, the NYAG procured a settlement from Priceline, Travelocity, and Cingular Wireless in Jan. 2007 for $30-$35k each. But the NYAG’s expansive theories about affiliate installations of adware were soundly rejected in People v. Direct Revenue LLC, 2008 WL 1849855 (N.Y. Sup. Ct. March 12, 2008).

* Trademarks. In at least three cases, trademark owners have alleged that advertiser liable for trademark infringement due to affiliate behavior (such as affiliates bidding on trademark owner’s keywords). See DSW v. Zappos.com (S.D. Ohio complaint filed May 12, 2008); NameSafe v. LifeLock (M.D. Tenn. complaint filed June 26, 2008); Rosetta Stone v. Rocket Languages (C.D. Cal. complaint dated July 2, 2008). This is an unsettled area of trademark law. I think it should be analyzed as contributory trademark infringement, which probably would result in no liability for advertisers. As a point of comparison, advertisers are not liable for ads appearing on a site that infringes trademarks. See Fare Deals v. World Choice Travel.com case, 180 F. Supp. 2d 678 (D. Md. 2001),

Other Consequences of Affiliate Liability

Even if advertiser isn’t liable for affiliate’s behavior, advertiser-affiliate relationship may still create problems:

* NY sales tax collection obligation. NY Tax Law Section 1101(b)(8)(vi) enacted April 2008 says:

a person making sales of tangible personal property or services taxable under this article ("seller") shall be presumed to be soliciting business through an independent contractor or other representative if the seller enters into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller, if the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of an agreement with the seller is in excess of ten thousand dollars during the preceding four quarterly periods

Legal challenge to the statute: Amazon and Overstock v. NY, decided Jan. 12, 2009. The court upheld the statute against dormant commerce clause, due process and equal protection claims. I think this is a goofy ruling.

Implications of the NY Sales Tax law:

1) If upheld, other states undoubtedly will adopt the same model.

2) Web retailers will either double-down on affiliate programs or kill them (Overstock killed its NY affiliates).

3) This may be the effective death knell for retailer-sponsored online affiliate programs, which could have a significant consequence on the Internet advertising community.

* Competition with affiliates for AdWords/organic placement.

* Public opinion, including FTC shaming, adverse media coverage, and disgruntled consumers.

Best Practices for Advertisers

1) Advertisers' affiliate contracts should prohibit ads in spam, adware, etc. This has successfully cut off advertiser liability in several cases (Fenn, Hypertouch, Impulse Media, Synergy6)

2) Affiliate contract should restrict the affiliates' keyword ad practices. Note, however, the more the affiliate contract controls affiliate behavior, the greater the risk that a court will misinterpret the contract to form an agency relationship.

3) Escrowed/delayed payments are the best way to minimize affiliate fraud and manage contract compliance. It's rare for advertisers to bring lawsuits against affiliates (e.g., Land’s End v. Remy, eBay v. Digital Point Solutions). The best way to curb bad affiliates is to keep dollars out of their pockets.

4) Advertisers must actually police affiliate behavior

5) Especially in light of NY tax law, advertisers must do a cost-benefit analysis of affiliate programs. Are they net-profitable, after considering all of the costs? The answer may surprise you.

For more reading on this topic, see my lengthy article from last year, Affiliate Liability Extravaganza.

Posted by Eric at 10:07 AM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack

February 13, 2009

Yahoo's Sale of Competitive Keyword Ads Isn't False Designation of Origin--Heartbrand Beef v. Lobel's

By Eric Goldman

Heartbrand Beef, Inc. v. Lobel's of New York, LLC, 2009 WL 311087 (S.D.Tex. Feb. 5, 2009). The Justia page.

Heartbrand sells Akaushi beef, a special and very expensive Japanese variety of beef. Heartbrand brought an enforcement action against several defendants, including Yahoo for selling a retailer, Lobel's, the first ad position for the keyword "Akaushi." Lobel's sells very expensive beef but not Akaushi beef. Heartbrand alleged that Yahoo's display of the ad constituted Lanham Act false designation of origin and common law unfair competition. I suspect that other plaintiffs have alleged that the search engine makes a false designation of origin by presenting keyword ads, but I can't recall an actual ruling on this issue before.

From my perspective, the natural analytical approach would be to assume the advertiser makes the false designation of origin and then consider Yahoo's liability under some kind of "contributory" or "derivative" false designation claim (if such a thing exists). However, stated this way, the claim then should be preempted by 47 USC 230; other cases have concluded that 47 USC 230 preempts non-trademark portions of the Lanham Act. See, e.g., Kruska v. Perverted Justice Foundation Inc. But see Doe v. Friendfinder.

The court sidesteps this direct-v.-contributory issue entirely, even though it acknowledges that Heartbrand's claim doesn't make sense because "Yahoo! obviously does not fit into these classic models [of false designation of origin] because Yahoo! is not in the business of selling beef." Instead, the court rejects the false designation claim because (1) Yahoo doesn't make any "statement" (the advertiser does), and (2) even if Yahoo does make a statement, it's not designating the origin of Yahoo's offerings.

This case reminded me of the Overstock v. SmartBargains opinion from last August, where the Utah Supreme Court said that trademark-triggered competitive pop-up ads do not constitute common law unfair competition or tortious interference. (Note that in that case, the defendant was the ad buyer, not the ad seller, so there is a significant factual difference). In both the Overstock case and this one, the courts rejected plaintiffs' efforts to fit their claims in doctrines that are ancillary to the more traditional trademark infringement claim. In that respect, this case helps channel the lawsuits back to trademark infringement and might help curb claim sprawl.

Ryan Gile has also blogged on the case.

UPDATE: Rebecca weighs in.

Posted by Eric at 12:02 PM | Derivative Liability , E-Commerce , Marketing , Search Engines , Trademark | TrackBack

February 06, 2009

2008 Cyberlaw Year-in-Review

By Eric Goldman

It's a sign of my schedule that I'm just now getting to this, and this post will be more pithy than I initially conceived. This post recaps some of the Cyberlaw highlights from last year. Frankly, the two biggest stories of 2008 were the financial markets meltdown and the ascension of President Obama, neither of which have a lot of Cyberlaw angles. In light of those big developments, Cyberlaw in 2008 was comparatively quiet. However, there is still plenty of interesting developments to revisit.

Broad Themes

A few broad themes emerged last year:

* Ludicrous trademark claims. 2008 hardly had a monopoly on dumb trademark claims; those are perennial. But 2008 certainly saw some asinine entries, including putative Cyberlawyer Eric Menhart's claim to own a trademark in the term "Cyberlaw," Jones Day's efforts to claim that a web page referencing its name as the employer of some homebuyers violated its trademark rights, and putative Cyberlawyer John Dozier's claim that if his name is used as anchor text, the link must go to his website or it violates his trademark right.

* This was a good year for expansive readings and applications of user agreements. Some examples:
- the Lori Drew prosecution, where Lori was convicted of violating an agreement that someone else clicked through.
- Jacobsen v. Katzer, where a user of copyrighted material is bound by a contract that he/she never clicked through at all.
- AV v. iParadigms, where kids were not allowed to void a user agreement despite their status as minors (and despite the fact that some of them had no meaningful choice about whether or not to consent).
- JuicyCampus enforcement action, where the New Jersey Attorney General's office tried to treat a negative user behavioral restriction in a user agreement as an affirmative marketing representation that such user behavior would not occur on the site.

* One of the long-standing Cyberlaw memes is that websites must either be passive conduits to avoid liability or active editors to manage their liability, but if a website chooses the latter, the website is liable for any editorial mistakes. That is, if the website edits its site but misses something, it's fully liable for what it missed. This simply isn't true under 47 USC 230, which allows websites to choose to be passive, active or anything in between without varying liability. In the IP context, this passive v. active meme has had more traction, but 2008 saw two solid cases suggesting that if a website tries to police its premises and fails, courts will be sympathetic and excuse any omissions. Example #1: Tiffany v. eBay, where the court gave eBay extra credit for its VeRO program as a basis to excuse any counterfeit goods that slip through. Example #2: Io v. Veoh, where the court was more willing to excuse Veoh because it had undertaken extra policing efforts than was required for the 17 USC 512 safe harbor. Finally, although not an IP case, the court in Cisneros v. Yahoo also lauded search engines for their affirmative efforts to block gambling ads, which the court acknowledged was a hard challenge.

* Despite some adverse rulings early in the year, punctuated by the Ninth Circuit's en banc ruling in Roommates.com, the 47 USC 230 immunization is still extremely robust. We saw a number of expansive and pro-defense rulings per 230 throughout the year, including Craigslist, Doe v. MySpace, Cisneros v. Yahoo and Goddard v. Google. Perhaps more importantly, in the three 230 cases I've seen since Roommates.com that cited to the opinion, all three cited the opinion in ruling for the defense.

* Battles over keyword advertising are hardly over, even though Utah officially backed off its attempt to ban them. The ABA IP Section tried to get into the act, and American Airlines sued Google, settled, and then sued Yahoo.

Top 11 Cyberlaw Developments of 2008

#11: Utah Trademark Protection Act repealed. The Utah Trademark Protection Act had the potential to throw the entire keyword advertising business into turmoil. Instead, now that it's repealed, it just remains as a dramatic reminder of the Utah legislature's incompetence regarding Internet legislation.

# 9 and 10: Fair Housing Council v. Roommates.com and Goddard v. Google. The Roommates.com en banc opinion makes the list based mostly on its potential consequences, not its actual effect. It remains one of the most significant pro-plaintiff incursions into the solidly defense-favorable interpretations of 47 USC 230, but it's so riddled with contradictory and ambiguous language that no one really knows what to do with it. I think Judge Fogel's reading of the case in Goddard v. Google has the potential to become the defining interpretation of the case, and his solidly defense-favorable reading of the precedent in excusing Google for ads placed by its advertisers may only reinforce how little Roommates.com changed the law.

#8: AV v. iParadigms. This case was a terrific win for online fair use enthusiasts because the for-profit commercialization of a database of third party copyrighted works was still deemed fair use. The upholding of the contract against the minors forced to enter into it was also significant. Before this ruling, my assumption is that any plaintiff trying to form a class action lawsuit in the face of an adverse user agreement could always form the class on behalf of any minors who had the right to void the contract. This case seems to shut down that loophole in user agreement protection.

#7: Io v. Veoh. The 17 USC 512(c) safe harbor has been law for over a decade and has produced a couple dozen rulings, but few are cleaner and more decisive for the defense than this one. It was a textbook example of a court rejecting the many different arguments plaintiffs make to kick a defendant out of the safe harbor, and as mentioned before, it was a great validation for Veoh's decision to do more than 512 required.

#6: Jacobsen v. Katzer. From a doctrinal standpoint, this case raises really difficult questions about how a copyright consumer can be bound to terms that he/she never "assented" to. Even so, this case had huge implications because it effectively validated that open source licenses can be binding on licensees, giving much more legal credibility to the entire multi-billion open source software industry. However, an odd footnote: on remand, the district court denied an injunction for the plaintiff, raising more issues about what exactly the plaintiff won at the Federal Circuit.

#5: Tiffany v. eBay. A fantastic validation of eBay's practices against a very serious and sympathetic challenger who had plenty of evidence that counterfeit goods were being sold on eBay's site. The case also shows that courts can grow tired of IP owners simply making up their own rules about how online sites should protect them and then suing the sites for breaching these artificial rules.

#4: Mazur v. eBay. A more scary case to 47 USC 230 defense enthusiasts than the Roommates.com opinion. The court says that eBay isn't protected by 230 for some of the marketing representations it makes, even if those representations are rendered untrue by third parties. While this makes a lot of doctrinal sense, it is also a green light for plaintiffs to mine a website's marketing representations as a way to bypass the otherwise-fatal consequences of 230 on a lawsuit triggered by user behavior or content.

#3: Google Book Search settlement. This makes the list for two independent reasons. First, many folks were hoping the case would establish solid precedent on online fair use, and the settlement ended that hope. Second, the proposed Book Rights Registry has the potential to reshape a number of major industries, including the book publishing business, the book retailing industry and the library industry.

#2: the Lori Drew prosecution. I think this may have been the most polarizing Cyberlaw development of 2008, exposing deep divides in people's appetite for punishing bad conduct online. It's hard to assess the overall implications of her conviction because no one rallied to praise Lori Drew's choices, and her case is still a ways from a final legal outcome. However, the possible implications of the case were so complex that it took a special three part series for me to explore its nuances (1, 2, 3).

#1: Cartoon Network v. CSC (the "Cablevision" case). Boy, the more I think about this case, the more important it becomes. The case upends our assumption that if we see it online, it's fixed, creating a new class of unfixed electronic works. Also, the court treats the users, not the service, as making the requisite copies, which reinforces the possibility that online providers can be just "dumb technology providers" for copyright law purposes and reinvigorates the possible defense that a service provider's copying is just done as a proxy for its users. However, the Supreme Court's ambiguous response to the cert petition--not yes, not no, but a request to the Solicitor General for comments--leaves this decision in a precarious position.

Other Developments of Special Note

47 USC 230

* Doe v. MySpace. The Fifth Circuit soundly rejects the argument that MySpace had an obligation to police its “premises.”

* Craigslist. Judge Easterbrook's language in Doe v. GTE had given plaintiffs some hope that the Seventh Circuit would provide a friendly venue to plaintiffs trying to overcome 47 USC 230. Judge Easterbrook may still love his language (which he quoted extensively in the Craigslist ruling), but his practical and no-nonsense ruling for the defense squelches the hope that the Seventh Circuit will become a plaintiff's haven.

* New Jersey's enforcement action against JuicyCampus. State AG offices HATE 47 USC 230.

Affiliate Liability

* Impulse Media. A jury thumped the FTC's overly expansive views of affiliate liability for spam.

* NY v. Direct Revenue. A state judge emphatically rejected the NY AG's office's expansive views of affiliate liability for adware.

Trademarks/Domain Names

* American Airlines' lawsuits against Google and Yahoo. No one I know fully understands why American Airlines sued Google for selling its trademarks for keyword ads. No one I know understands what concessions Google gave to American Airlines to settle the case. And no one I know understands why American Airlines decided to sue Yahoo after procuring the Google settlement. It's all a big mystery.

* NSI's grabbing of domain names in response to WHOIS queries. Is there any better example of ICANN's failings to police domain name retailers than to have one retailer selling a scarce good grabbing the good exclusively (blocking attempted sales by all other retailers) when a customer merely inquires about it?

* Kentucky's attempted seizure of 141 gambling-related domain names. As I wrote before, "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."

* Eric Menhart, a lawyer who claims to practice Cyberlaw, doesn't know that Cyberlaw is a generic term.

* New gTLDs. Maybe I should reserve this development for 2009...if it happens.

Others

* McCain complains about 512(c)(3) notices taking down his YouTube videos. Surprise! 512(c)(3) notices are unforgiving. Sen. McCain, now that you've had a first-hand taste of their power, maybe you'd like to revisit the statute to see if it's producing the right incentives?

* FCC's bust of Comcast. The pro-regulatory forces were queued up to pounce on any examples where an IAP violated Net Neutrality principles, and Comcast's chicanery in forging reset packets was impossible for anyone to defend.

* NebuAd's flameout. Behavioral ad targeting is in our future unless regulators stop it. NebuAd won't be the winning provider of targeting services, but legislators will keep trying to regulate it further out of existence nonetheless.

Posted by Eric at 05:50 PM | Adware/Spyware , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark | TrackBack

February 05, 2009

Publisher Promising "Visitors" Owes "Visitors," Not "Unique Visitors"--WebMD v. RDA

By Eric Goldman

WebMD, LLC v. RDA Intern., Inc., 2009 WL 175036 (N.Y. Sup. Ct. Jan. 6, 2009)

It's been a while since I've blogged about a lawsuit between an Internet publisher and advertiser, so you may enjoy this one. RDA placed a series of advertising orders with WebMD, including one order where WebMD promised "36,000 visitors" to an RDA website. RDA eventually stiffed WebMD to the tune of $350k, which is enough outstanding cash to get WebMD into court for a collections action. Once there, RDA argued that WebMD failed to perform the contract because the contract required 36,000 unique visitors and WebMD only delivered 70-80% of this number.

Most of us in the Internet advertising business immediately scoff at RDA's argument. Everyone in our industry knows that "visitors" and "unique visitors" are two very different things, and that if the parties actually meant "unique visitors," they would have said so. The court efficiently reaches this conclusion as well, saying that the term "visitors" is unambiguous and "If defendant wished to be guaranteed “unique visitors” to the site, it should have specified such in the agreement." Even if the term were ambiguous, the court still isn't sympathetic, in part because the advertiser never complained about the invoices while the parties were still in a relationship. (And, as we know, advertisers will complain if they think the deal isn't performing to their expectations!!!)

Two practice pointers from the case. First, it's critical to precisely define the metric for computing payment in advertising contracts. Often, when I'm asked to look at Internet ad contracts, I'm sent the T&Cs but not the actual IO where the payment metric for the particular ad deal is specified. That's one of the most important aspects of an ad contract, so as a lawyer, we really need to get our hands on the IO business terms in addition to the T&Cs. Second, the opinion doesn't mention any clause in the WebMD contract that WebMD's numbers control for calculation purposes. (The clause might have been in the contract, but it wasn't referenced in the opinion). Even if the court won't enforce those clauses verbatim, they can still be extraordinarily helpful in tipping any ambiguities in favor of the publisher and against the advertiser when the parties dispute the numbers.

HT: Ken Adams, who thinks that "visitors" is ambiguous. His example shows how it could be in some contexts, but it's not ambiguous in this context. Ken, in turn, links to the ContractsProf post.

Posted by Eric at 05:55 PM | Licensing/Contracts , Marketing | TrackBack

January 22, 2009

Brand Spillovers Article Now Available

By Eric Goldman

I have finally posted my article, Brand Spillovers, to SSRN. It will be published in the Harvard Journal of Law & Technology later this year. I have blogged about this project several times over the past 4 years, but for most of you, this is your first public opportunity to read the article in full. Please take a look!

This article has been in the works nearly 5 years, so a few words about this project. It started with my Deregulating Relevancy article. While writing that in 2004, I had a few paragraphs regarding the analogies between retailer shelf adjacency and keyword triggering--a popular meme then, and one that still gets used a lot. I ultimately removed most of that discussion from the draft and set it aside to explore in a separate paper. I initially conceptualized the paper about the role of physical and temporal adjacencies in trademark law, and I presented on that topic at Law & Society Association in May 2005. (See my slides from 2005).

After several drafts, many presentations and lots of very helpful comments, the paper has evolved substantially. The paper now explores the analogy between shelf adjacencies and keyword triggering in careful detail, explaining why the analogy is legally and factually complicated but also useful. My hope is that the paper will become the key reference any time anyone in the future wants to make that analogy.

Also, the paper is one of the few articles that analyzes the unique role of retailers in trademark infringement lawsuits. My research suggests that retailers are universally ignored by trademark lawyers, judges and regulators, even though retailers do a lot of things with third party trademarks that look actionable. I've thought a lot about this over the past 5 years, and I keep coming back to the unavoidable conclusion that trademark plaintiffs seem to be erring by not suing more retailers even in manufacturer-vs-manufacturer lawsuits. The paper tries to explain why retailers get a free pass nonetheless, but if you have alternative explanations after reading my attempts, I would be extremely grateful.

Finally, this paper is noteworthy because it is the last stop in a multi-year project on how trademark law can damage the Internet. Other papers in the series include Deregulating Relevancy, Online Word of Mouth (which also was a branch-off of the Deregulating Relevancy article) and, to a lesser extent, a Coasean Analysis of Marketing. I'm still interested in Internet trademark law, but next few projects are going to focus on other topics. The next article in queue is a short essay detailing why Wikipedia will fail. After that, I will be focusing on my Economics of Reputational Information project, which I expect to be working on over the next couple of years, and a big stealth project.

In any case, the Brand Spillovers paper remains a draft, and I have limited opportunities to make changes. Accordingly, I gratefully welcome any comments you have.

The abstract:

This Article considers the spillover effects of trademarks—in particular, “brand spillovers,” which occur when consumer interest in a trademark increases the profits of third parties who do not own the trademark. Using techniques such as loss leaders and shelf space adjacency, retailers routinely create brand spillovers for their profit, and trademark law generally has not restricted these activities. Online intermediaries, such as search engines, also create and profit from brand spillovers by selling manufacturers’ trademarks for advertising purposes (“keyword triggering”). However, in contrast to retailer practices, keyword triggering has sparked a heated and irresolute battle over its legitimacy under trademark law. By drawing lessons from retailers’ experiences with brand spillovers and through an analysis of the ways intermediaries can add value to consumers, this Article offers a new way to resolve the keyword triggering debate. The Article proposes that all intermediaries—including both retailers and online intermediaries—should be permitted to use brand spillovers as part of their effort to reduce consumer search costs, even if the intermediaries profit from the brand spillovers along the way.

Posted by Eric at 09:57 AM | Derivative Liability , E-Commerce , Marketing , Search Engines , Trademark | TrackBack

January 20, 2009

Outdated Whois Information Might Lead to False Light Tort--Meyerkord v. Zipatoni

By Eric Goldman

Meyerkord v. The Zipatoni Co., 2008 WL 5455718 (Mo. App. Ct. Dec. 23, 2008)

It's a late entry, but this opinion may be a dark horse candidate for the most bizarre case of 2008.

Meyerkord was a Zipatoni employee and listed as the registrant on domain names at Zipatoni's Register.com account. Meyerkord left in 2003. In 2006, Zipatoni ran an astroturfing viral campaign for Sony to promote the Play Station Portable at the domain alliwantforxmasisapsp.com. A BusinessWeek story on the campaign and the Urban Dictionary entry.

Unfortunately for Sony--and Meyerkord--the campaign did not go well. Bloggers and others got suspicious of the overly colloquial site, unmasked the astroturfing and decided to "out" the people involved. They pulled up the Whois records, saw the outdated information that Meyerkord was the registrant, and mistakenly assumed he was involved in the campaign.

The case doesn't get into the specific treatment of Meyerkord, but it seems logical to assume that he was subject to a blogger firing squad circa 2006, i.e., shoot first and ask questions later (I'd like to think the blogosphere would be a little more circumspect circa 2009, but maybe not). For example, the Consumerist has its own category tag for alliwantforxmasisapsp, and it awarded Sony the "Lucky Golden Shit" award for best "flog" of 2006. In this post, the Consumerist "outs' Meyerkord and calls him a "douchebag" (which, for reasons my aging brain can't comprehend, has become the modern derogatory term of choice) until they modified the post, striking out his name and recanting "he is an innocent bystander in this sordid affair." Oops...a little late for that, don't you think, Consumerist?

In response to this rough justice from the blogosphere, Meyerkord sued Zipatoni for the privacy tort of false light. The lower court dismissed the complaint for failure to state a claim. In this ruling, the appellate court reverses the lower court and remands the case to allow Meyerkord to file an amended complaint if he can allege that Zipatoni acted with actual malice.

While I can see why the court was sympathetic to Meyerkord for being falsely associated with an astroturfing campaign, in my opinion, Zipatoni's real negligence was its failure to keep its domain name records updated FOR THREE YEARS! I feel silly mentioning the obvious and well-known practice pointer that you should keep your Whois records up-to-date; and especially remove any former employees from Whois records. Not only does outdated Whois information pose a major security risk, but it could allow former employees to assert ownership over the domain. Now, keeping them on the record may be tortious to the former employee as well. In any case, for having a former employee listed on its domain names for three years, Zipatoni deserves whatever punishment they get.

One more oddity: alliwantforxmasisapsp.com now is a promotional site for Haagen Dazs ice cream. Huh? I presume Haagen Dazs bought the residual traffic from all of the links bashing the domain, but (1) the association between PSP and Haagen Dazs doesn't make any sense, and (2) I would have thought a big brand like Haagen Dazs wouldn't want the implicit taint of benefiting from an astroturfed website.

Posted by Eric at 07:08 AM | Domain Names , Marketing , Publicity/Privacy Rights | TrackBack

January 08, 2009

December 2008 Quick Links, Part 2

By Eric Goldman

Social Networking Sites/Cyber-Bullying/Sexual Predation

* More on the Lori Drew conviction:
- Wired has a tough behind-the-scenes look at the Lori Drew jury deliberations.
- The jury instructions
- In case you missed it, my special three part series on implications of the Lori Drew conviction: Part 1, Part 2, and Part 3.

* Yet more fallout from the Lori Drew prosecution and conviction. Wired has a story on the cyberbullying litigation frenzy. The Washington Post has a recap on the proliferation of state anti-cyberbullying laws.

* U.S. v. Morris, 2008 WL 5101636 (7th Cir Dec. 5, 2008). Judge Posner talks about the difference between entrapment (not OK) and vigilantism (OK) in the context of a mom who created a fake MySpace persona to chat with an alleged sexual predator who had contacted her underage daughter.

* Facebook's policy on breast-feeding photos has sparked protests both online and off (1, 2, 3). It reminds me a bit of one of my first challenges as Epinions' general counsel. (search for Epinions).

Google

* Barry Schwartz: is Google getting desperate for ad revenue?

* The Register: "Google this week admitted that its staff will pick and choose what appears in its search results." However, I don't think the article supports this aggressive statement. Instead, it appears the article is getting excited about the fact that Google manually tweaks the algorithms when they produce goofy results--something we've known for years.

* Updates on Axact v. Student Network Resources, the case involving alleged copyright infringement of term papers. Axact allegedly has been trying to get its domain name registrars to release its domain names for transfer, and SNR is trying to cut them off. Apparently Google also balked at the instructions to kick the subject domain names out of its index, but SNR and Google resolved their differences enough to reach a stipulation. Finally, I've received numerous threats and requests from Axact to modify my original post, which has prompted me to make some minor changes.

Marketing

* IMS Health v. Ayotte. New Hampshire passed a law restricting the use of a doctor's past prescribing practices (i.e., behavioral information) for personalized/targeted sales calls. This opinion upholds the NH law against a First Amendment and dormant Commerce Clause challenge.

* Australian advertisers are cookie-ing users at high CPM sites so that they can show the users targeted ads when those users appear at lower CPM sites.

* Sony busted for COPPA violations.

* New advertising medium: school exams.

Miscellaneous

* Good article on the Sprint v. Cogent peering fight.

* And a good article showing limits to the Long Tail theory.

* U.S. v. Grober, 2008 WL 5395768 (D. N.J. Dec. 22, 2008). Grober pleaded guilty to uploading and downloading child porn over the Internet. The judge rejects the 19 1/2 year minimum sentence specified by the Sentencing Guidelines and instead sentences Grober to the 5 year statutory minimum. This opinion poignantly explains why this judge, like several others, rejects the Sentencing Guidelines in Internet child porn cases because the dictated sentences are too severe.

* BusinessWeek is still amazed that people actually--get this--provide their time and efforts over the Internet without getting paid!

* Lior Strahilevitz, Reputation Nation: Law in an Era of Ubiquitous Personal Information, 102 Nw. U. L. Rev. 1667 (2008). Lior explores the cross-elasticities of demand for types of reputational information and shows that if some information isn't available (due to, say, privacy laws), decision-makers will consult less credible or pernicious sources. For example, if a landlord can't get good credit information about a prospective tenant, the landlord may resort to discriminatory considerations (like race) to decide whether or not to rent to the tenant. Good article.

* I have previously written about New York v. Synergy6, Inc., 404027/03 (N.Y. Sup. Ct. Jan. 6, 2006), where the court soundly rejected the New York Attorney General's office regarding a marketer's liability for allegedly illegal emails sent by downstream affiilates (i.e., not in direct privity). I have not been able to find a copy of the opinion electronically, but over the holidays I found my hard copy and scanned it to a PDF. Check it out, especially in combination with the 2008 New York v. DirectRevenue opinion, which soundly rejected the NYAG's affiliate liability arguments in the adware context.

Posted by Eric at 07:44 AM | Content Regulation , Copyright , Domain Names , Marketing , Privacy/Security , Search Engines | TrackBack

January 07, 2009

December 2008 Quick Links, Part 1

By Eric Goldman

Copyright

* Stockwire Research Group, Inc. v. Lebed, 577 F .Supp. 2d 1262 (S.D. Fla. Sept. 18, 2008). $2.5M default judgment for violation of anti-circumvention provisions.

* The RIAA announced that it is shifting away from suing its customers to putting more pressure on Internet access providers to do their dirty work. Fred at EFF and Mike Masnick weigh in. But Mike wonders if the RIAA is really changing its practices?

* Capitol Records v. Thomas, No. 06-1497 (MJD/RLE) (D. Minn. Dec. 23, 2008). In the Jammie Thomas case, the judge refused to certify the "making available" theory for an interlocutory appeal.

Trademarks/Domain Names

* Nerds on Call (Indiana) v. Nerds on Call (California), 1:07-cv-00535-DFH-TAB (S.D. Ind. Dec. 22, 2008):

The court realizes that a simple internet search for "nerds on call" could return the Nerds/California site. If a person has lived in Indiana and used Nerds/Indiana's services before, the person might be confused momentarily. Given trademark law's explicit approval of concurrent uses of marks in different geographic areas or product markets, see 15 U.S.C.A. §1052(d), this momentary confusion on the internet is not a sign of intentional targeting. The internet is available worldwide. Use of a locally established trademark on a website may cause momentary confusion among consumers. The solution to that problem is not to require that all trademarks be given worldwide effect even if their non-web use is limited to a narrow geographic area. Instead, users of the web simply need to understand that a worldwide web search may turn up results from distant businesses.

* Saint Louis University v. Meyer, 2008 WL 5412263 (E.D. Mo. Dec. 24, 2008). SLU allegedly threatened to close the student newspaper, so the paper's faculty advisor registered a new non-profit organization with the secretary of state under the name "The University News, a Student Voice Serving Saint Louis University Since 1921" in case the students wanted to go independent. The university and the students worked out a deal, and the faculty advisor promptly dissolved the organization without ever having done anything with it. Still, the university sued the advisor for trademark infringement, dilution and other claims. In this ruling, the court rejects most of the claims because the advisor never made a "trademark use in commerce." Why was the university suing its own tenured faculty member for forming and then promptly dissolving a non-profit organization without ever using it? Makes no sense to me.

* 1-800 Contracts, Inc. v. Lens.com, Inc., 2008 WL 5191705 (D. Utah Dec. 10, 2008). In a trademark lawsuit over keyword purchases, Lens.com is hit with sanctions for discovery abuses.

* The EFF has collected amicus briefs in the Tiffany v. eBay appeal to the Second Circuit.

* WSJ on the growth in numerical SLDs.

* Paul Levy shines the spotlight on yet more questionable marketing practices by Lifestyle Lift.

Linking

* GateHouse v. New York Time. The CMLP page. Another silly anti-deep linking and headlines-as-copyright infringement lawsuit, this time between two media companies. Some of the claims are clearly off-base, like the trademark claims. Note to dilution plaintiffs: it is almost impossible by definition to be both a hyper-local business and a famous trademark. Also oxymoronic is the allegation that the sites are competitors when a competitor is prominently promoting the website and apparently passing PageRank. If you are my competitor and would like to pass me some PageRank, I would be happy to chat. The most novel part is the plaintiff's attempt to use the Creative Commons license as an affirmative contract to claim breach of contract. I can't recall a similar allegation in the past where the Creative Commons license was used as a sword instead of a shield. Finally, the complaint doesn't mention anywhere that the plaintiff's website apparently offers RSS feeds, which raises a bunch of problems for its arguments.

* McVey v. Day, 2008 WL 5395214 (Cal. App. Ct. Dec. 23, 2008). This is a dispute between rival members of the teacher's union. Among other activities, the defendant sent an email linking to a website that had allegedly defamatory statements about the plaintiff, but the website's statements were authored by third parties. In this ruling, the court grants the defendant's anti-SLAPP motion, saying that the defendant wasn't liable for the emailed links per 47 USC 230. This is another nice anti-SLAPP win for Internet content, following on December's Higher Balance case.

Some Personal Notes

* I'll be at AALS and plan to attend the blogger's get-together Thursday night. If you're going to be around, hope to see you there!

* If you're in the Sacramento area on January 13, come to this free event!

* Most of you know that I maintain my personal blog for posts that don’t really belong on this blog. But you may not know that I’ve also been Twittering with some regularity. Check it out!

* Good news: this blog is a finalist for Best Law Blog from Weblog Awards.

Posted by Eric at 09:48 AM | Copyright , Derivative Liability , Domain Names , Marketing , Search Engines , Trademark | TrackBack

January 02, 2009

OnlineNIC Loses One Lawsuit and Gets Sued in Another

By Eric Goldman

Two anti-domainer developments involving OnlineNIC occurred over the holidays.

Yahoo! Inc. v. OnlineNIC, Inc., 5:08-cv-05698-PVT (N.D. Cal. complaint filed Dec. 19, 2008)

Yahoo has sued domain name registrar OnlineNIC and some Does for cybersquatting, trademark infringement, trademark dilution and related causes of action. This lawsuit caught my eye because OnlineNIC is a registrar, and normally lawsuits against registrars are barred by 15 USC 1114(2)(d)(iii). However, that immunization does not apply if the registrar has a "bad faith intent to profit from such registration or maintenance of the domain name." Here, Yahoo alleges that OnlineNIC registered the domain names for itself (i.e., it was both the registrar and the registrant--see Para. 47) and used a variety of covers and fronts to mask that it was the true registrant. I also think many of Yahoo's allegations of "abusive" domain name tasting and domain name kiting support a bad faith argument if Yahoo chooses to go that route.

Verizon California, Inc. v. OnlineNIC Inc., 5:08-cv-02832-JF (N.D. Cal. Dec. 19, 2008)

The same day Yahoo sued OnlineNIC, Verizon won a "record" $33+M default judgment against OnlineNIC. The Verizon press release. It was a slow news week before Christmas, so Verizon got a lot of press coverage (see, e.g., WSJ, NYT, News.com) for its victory.

Although it's hard to divine much insight into future jurisprudential developments from a default judgment order, Judge Fogel's brief opinion does conclude that OnlineNIC violated the Anti-Cybersquatting Consumer Protection Act:

Defendant’s actions with respect to Verizon’s trademarks undoubtedly violated the ACPA. Defendant has registered hundreds of domain names that are designed to attract web users seeking to access Verizon’s legitimate websites. Moreover, Defendant has refused to alter its behavior, and its bad faith is further evidenced by its machinations to avoid detection through the use of fictitious business entities, shell corporations, and kiting of its domain names.

This builds on Verizon's early win against Navigation Catalyst that certain domaining practices can constitute impermissible cybersquatting.

Three Brief Observations

FIrst, Verizon's sizable award against OnlineNIC is a pretty empty public gesture. Good luck collecting that, Verizon. (InternetNews has more on the likelihood of collection). It's a little like Facebook's recent $873M default judgment against spammers using its private messaging system. As we used to say in the old days, these multi-million judgments plus a nickel will buy you a cup of coffee. (I recognize Starbucks is more like $5/cup, but you get the point). Yahoo shouldn't bank on any big paydays either, even if it wins.

Second, earlier this year, I suggested the Verizon v. Navigation Catalyst case could be a turning point in the legal battles over domaining, and the latest ruling might reinforce that. Even though Verizon's latest win has no real financial implication, it does help accrete the anti-domaining legal precedent. I expect to see nothing but bad legal news for abusive domaining in 2009.

Third, I can't avoid observing how interesting it is to see Yahoo and Verizon bringing plaintiff-side lawsuits over domaining. After all, Verizon sells ads on mis-typed domain names when its consumers use its browser (i.e., on its mobile devices), and Yahoo is still fighting a lawsuit over having placed ads on domaining sites.

Posted by Eric at 12:02 PM | Domain Names , Marketing , Search Engines | TrackBack

December 30, 2008

Doe v. SexSearch Affirmed by 6th Circuit, But Not on 230 Grounds

By Eric Goldman

Doe v. SexSearch.com, 2008 WL 5396830 (6th Cir. Dec. 30, 2008)

I previously summarized this case as follows:

Defendants operate a website that helps people hook up to have sex. Roe posted a profile saying that she was 18 and wanted sex. After Doe connected with Roe via the profile, they met offline at Roe's home and had "consensual" sex. But Roe was actually 14, and Doe was busted for felony statutory rape. Doe turned around and sued the website on 14 counts, which the court summarizes as claims that "(a) Defendants failed to discover Jane Roe lied about her age to join the website, or (b) the contract terms are unconscionable."

In August 2007, the district court dismissed the case. Frankly, I always thought this should be an easy case for the reason articulated by the district court judge: "Plaintiff clearly had the ability to confirm Jane Roe’s age when he met with her in person, before they had sex, yet failed to do so." But fitting the claim into legal doctrines is trickier, and the district court relied on both 47 USC 230 and substantive contract/marketing law to dismiss the case.

On appeal, the defendant fared no better, and the Sixth Circuit has little trouble dismissing the case. However, the Sixth Circuit disavows the district court's 47 USC 230 discussion:

we do not reach the question of whether the Communications Decency Act provides SexSearch with immunity from suit. We do not adopt the district court’s discussion of the Act, which would read § 230 more broadly than any previous Court of Appeals decision has read it, potentially abrogating all state- or common-law causes of action brought against interactive Internet services.

The court instead dissects the substantive contract and marketing law claims one-by-one (all 14 of them) to show why none of them were valid. The opinion is a pithy read, so if you're interested in seeing how an online contract survives a multi-front attack, check it out. I did get a chuckle out of the part when the court explains why the contract's dollar cap wasn't unconscionable: "Given the nature of the service, which encourages members to meet in person for sexual encounters, SexSearch’s potential liability is nearly limitless. For example, arrest, diseases of various sorts, and injuries caused by irate family members or others may be the result of such hedonistic sex. When selling such services, then, it is commercially reasonable for SexSearch to limit its liability to the price of the contract."

It's easy to see why the Sixth Circuit was troubled by the 230 issues in this case. This case involves a knotty question that has become a blog perennial: when is a website liable for its marketing representations that are rendered false by user content or actions? In this case, the website said in a variety of ways that users were over 18, but it never authenticated users' ages, and Roe affirmatively lied about her age. As I've mentioned before, this creates a legal conundrum--on the one hand, websites should be responsible for the marketing representations that they choose to make; but on the other hand, this can open up a bypass to 230 as plaintiffs use the marketing representations as a proxy to hold websites liable for third party content. I'm disappointed the Sixth Circuit didn't decide to tackle this issue head-on, but I understand why they chose to sidestep the issue and make clear that they weren't ratifying the district court's rationale.

I noticed that the court also doesn't mention Doe v. MySpace, the recent Fifth Circuit 230 opinion also involving online hook-ups leading to offline statutory rapes. That case turned on a negligence-style "premises liability" theory rather than a breach of contract/false marketing representation theory, but the Sixth Circuit could have tried to equate the two if it wanted (especially in its discussion about "failure to warn").

So, where does this ruling leave us? This ruling, along with the Goddard opinion from earlier this month, reinforces that plaintiffs trying the breach of contract/false marketing representations workaround to 47 USC 230 still have to establish their prima facie substantive case or they will be dismissed (in this case, on a 12b6 motion). Plus, numerous district court cases still hold that 47 USC 230 applies to false marketing representations, including the Mazur and Friendfinder cases from earlier this year. So I think the news remains very, very good for defendants. Nevertheless, I remain confused about the precise boundaries between 47 USC 230 and breach of contract/false marketing representations, and clarity will have to wait until 2009 (or beyond).

Unless something really big happens in the next 36 hours, I'll see you in 2009. Happy new year!

Posted by Eric at 09:53 AM | Derivative Liability , Licensing/Contracts , Marketing | TrackBack

December 22, 2008

Lawsuit Over Google Ads for Mobile Services Dismissed Per 230--Goddard v. Google

By Eric Goldman

Goddard v. Google, Inc., 2008 WL 5245490 (N.D. Cal. Dec. 17, 2008). My initial post when the complaint was filed. The Justia page.

Goddard sued Google because Google displayed third party AdWords ads for allegedly fraudulent mobile subscription services. On its face, this lawsuit appeared preempted by 47 USC 230 (consistent with other opinions granting 230 for third party ads, such as the recent Cisneros case), although the plaintiff included some allegations to try to get around 230. No such luck for them. This ruling kicks the lawsuit out on 230(c)(1) grounds with leave to amend (more on that in a moment).

I'm a big fan of Judge Fogel's opinions. He's a meticulous and thoughtful judge, and his opinions are always carefully constructed. In particular, this opinion is a terrific read for anyone who would like to see a cutting-edge 230 opinion. It discusses many of the major recent 230 cases (Roommates.com, Mazur, Doe v. MySpace, Craigslist, National Numismatic) and contextualizes them nicely. It's like a 230 year-in-review opinion. If you want a one-stop resource to see what's happened in 47 USC 230 jurisprudence in 2008, read this opinion.

Among other interesting aspects, this is the first opinion by a Ninth Circuit-bound district court judge that has a robust analysis of how Roommates.com applies to the case. (Roommates.com has been cited in a few other opinions, but usually in a very cursory fashion). Judge Fogel deftly wrestles with the multiple contradictory provisions of Roommates.com, noting that it is principally is a defendant-favorable ruling with only a thin layer of plaintiff-side opportunity. For example, Fogel reads the Roommates.com opinion very narrowly when he says "The [Roommates.com] court emphasized repeatedly that the website lost immunity only by forcing its users to provide the allegedly discriminatory information as a condition of access." The opinion did say that, but I'm not sure about the "only," and it said lots of other contradictory things as well.

The Unfair Competition Claim

The plaintiff argued that Google engaged in 17200 unfair competition by receiving funds from fraudulent ads. Though this may be a novel way of framing Google's involvement, it doesn't adequately mask the underlying argument that the defendant should lose 230 coverage because it received an economic benefit from third party tortious conduct--an argument that has been rejected many, many times before and doesn't fare any better here. The court reframes the argument as a premises liability argument and rejects it per Gentry and Doe v. MySpace.

Along the way, the court addresses the plaintiff's allegation in the complaint that Google helped draft the impermissible ad copy. The plaintiff didn't press this point after the complaint, and the court says (referencing its reading of Roommates.com) that "there is no suggestion in the current record that Google “encouraged” the [advertisers] to create the allegedly fraudulent content, or that the creation of such content was anything less than voluntary."

The court also addressed the plaintiff's argument that the claim was anchored in the federal anti-money laundering criminal statute and therefore should drop out of 230 per the exclusion for federal criminal law (230(e)(1)). The court correctly rejects this but doesn't cite precedent on this point, missing Doe v. Bates.

Breach of Contract/Negligence

The plaintiff's other main attack vector is that Google should be liable because it failed to enforce a provision in Google's AdWords contract with advertisers restricting fraudulent conduct. I've complained repeatedly about arguments trying to treat a vendor's contractual negative behavioral restriction as an affirmative representation by the vendor that such behavior won't occur on the website (my latest rant on this point). Fortunately, Judge Fogel has little difficulty rejecting this argument, correctly pointing to the Green v. AOL precedent involving the distribution of third party viruses in an AOL chatroom (the Noah v. AOL precedent would have been an appropriate additional citation).

To try to get around this, the plaintiff cites to the Mazur case, which said that eBay can be liable for its affirmative marketing representations even if they are rendered untrue by third party conduct. I've repeatedly expressed my concern that the Mazur case is a more scary ruling to defendants than Roommates.com, but this opinion slightly calms my fears. Judge Fogel correctly notes that Google never made affirmative marketing representations on this point and the negative behavioral restrictions in the AdWords contract weren't an affirmative marketing representation.

Google also argued that this line of claims are barred by 230(c)(2), the immunization for filtering decisions. Citing to National Numismatic v. eBay, Judge Fogel rejects the argument based on the statutory list of immunized harmful content, saying "the relevant portions of Google's Content Policy require that [advertisers] provide pricing and cancellation information regarding their services. These requirements relate to business norms of fair play and transparency and are beyond the scope of § 230(c)(2)." I'm not sure the 230(c)(2) argument was Google's strongest, but I would have loved to see Judge Fogel unpack this discussion and the implicit assumptions a little more.

Aiding and Abetting

Finally, the court rejects the attempted 230 pleadaround that Google aided and abetted the advertisers, saying "there are no allegations here that Google “developed” the offending ads in any respect." (Cite to Roommates.com).

Leave to Amend

Given that this case was filed after the Roommates.com en banc opinion, and therefore the plaintiff had the chance to structure the complaint based on a reading of the latest Ninth Circuit standard, it would have made sense to dismiss this complaint without leave to amend. Instead, Judge Fogel gives the plaintiff another chance and articulates his reading of allegations that should survive 230 preemption:

there may be instances in which an internet content provider will be considered “ ‘responsible’ at least ‘in part’ for [posted third-party content] because every [posting] is a collaborative effort” between the internet provider and the third-party content provider. Fair Housing Council, 521 F.3d at 1167. If Plaintiff could establish Google's involvement in “creating or developing” the AdWords, either “in whole or in part,” she might avoid the statutory immunity created by § 230. In light of that possibility, Plaintiff will be given an opportunity to amend her complaint in order to allege such involvement.

Reading between the lines, the writing is on the wall for this lawsuit. The plaintiff can't win, and it would be a mistake for the plaintiff to refile. The judge even says as much in a footnote to this quote, saying "at present it appears unlikely that Plaintiff can" make the requisite allegations. Nonetheless, I'd be shocked if the plaintiff didn't refile. If they do, I hope Judge Fogel vigilantly polices the boundaries of Rule 11 for any allegations the plaintiffs make but can't back up--just like he did in the KinderStart v. Google case.

A Final Point

By my count, this is the third post-Roommates.com case where Roommates.com has been cited in favor of the defendant in kicking the case out of court. (The other two are Best Western v. Furber and GW Equity). In contrast, I am not aware of any case yet citing Roommates.com in favor of a plaintiff. It's obviously early, but at this point the limited evidence suggests that Roommates.com was not a watershed change to 230 jurisprudence. On that basis, Roommates.com may not be as bad a substantive ruling as we had initially feared.

Posted by Eric at 07:48 AM | Derivative Liability , Marketing , Search Engines | TrackBack

December 19, 2008

Vulcan Golf v. Google Class Certification Denied

By Eric Goldman

Vulcan Golf, LLC v. Google Inc., 1:07-cv-03371 (N.D. Ill. Dec. 18, 2008). Previous blog posts: initial complaint filed, ruling on motion to dismiss

This is a complex lawsuit by trademark owners attacking domaining and the role of the Google AdSense for Domains program in funding domaining activity. When I first blogged on the case in 2007, I wrote:

the lawsuit could effectively fall apart if the judge rejects formation of a class. Trademark class action lawsuits are rare for good reason-- trademark owners must establish the validity of their marks, the famousness of their marks (for dilution) and the similarity between their marks and the defendants' usage. These are all intensely fact-specific questions; none of which seem susceptible to class adjudication

Yesterday, the court ruled on class certification, and perhaps not surprisingly, the court denied certification--giving Google and the other defendants an early Christmas gift. Happy holidays! This ruling doesn't completely squelch the lawsuit, but without class certification, the case becomes a whole lot less interesting to the plaintiff's lawyers. For that reason, it also wouldn't surprise me to see them appeal the class certification denial.

The ACPA and Trademark Infringement Claims

The court rejects class certification for the trademark infringement and Anti-Cybersquatting Consumer Protection Act claims because the individual questions of fact predominate over the common questions of law.

The court blanches at the thought of trying to determine the owners of the applicable trademarks. The plaintiffs said that TESS could answer any ownership questions, but the court rightly realizes that TESS is not a definitive and comprehensive source of trademark ownership information. As a result, the court says "Even if the court has to conduct hearings regarding ownership on even a tiny fraction of the potentially millions of registered and unregistered marks or personal names of the putative class members, such an undertaking would render proceeding as a class unmanageable."

The court also rejects the verifiability of trademark "distinctiveness." The plaintiffs argued that a trademark registration could suffice as evidence of distinctiveness, but the court rightly points out that registration only provides rebuttable evidence of distinctiveness. The court also points to problems with unregistered trademarks and personal name marks. The court thus concludes "were the class to be certified, the court would be required to engage in thousands (or more) of individual inquiries as to whether a class members’ mark is distinctive," which would be a "staggering" undertaking with respect to the unregistered and personal name marks.

The court also assesses the prospects for adjudicating various affirmative defenses, such as abandonment or fair use. The court says "the affirmative defenses related to the putative class members’ marks simply add another layer to an already fact-specific inquiry that the court must delve into with respect the putative class members’ marks or names."

The Unjust Enrichment Claim

The court bounces the unjust enrichment claim because unjust enrichment laws vary by state. The plaintiffs tried to say California law applies categorically due to Google's involvement, but the court correctly points out that there are plaintiffs and defendants who have nothing to do with California and therefore would not be appropriately governed by CA law. Once CA law is out of the picture, the court confronts the state-by-state variations in unjust enrichment law and concludes that those variations are enough to deny class certification.

Whether Class Action Relief is Superior to Other Methods

In addition to these legal problems, the court has some interesting discussion about the plaintiffs' desired remedy. The court expresses some frustration that the plaintiffs seem to vacillate between saying they want damages and saying they only want injunctive relief. If the plaintiffs only want injunctive relief, the court says that a class action lawsuit is inferior to the extrajudicial options to plaintiffs of pursuing a UDRP action and opting-out of Google's and the domainers' program (which the plaintiffs have already done to some degree). This is the first time I can recall a court favorably citing either the UDRP or a search engine trademark policy as a substitute for judicial action such that it curtails legal recourse. The court also notes the availability of direct non-consolidated actions against the defendants, including large statutory damages plus attorneys fees under ACPA, as another substitute for the class action.

Some Further Implications

First, this case reinforces the difficulty of establishing class action lawsuits to enforce trademark rights. They are possible, but so often the idiosyncrasies of each trademark preclude summary adjudication.

Second, this case might have some utility for the multitudinous other class action lawsuits against Google and the other search engines over their advertising practices, such as the CLRB Hanson case and the string of advertiser lawsuits against Google over AdSense placement on domainer sites. Although this ruling principally turns on the vagaries of trademark law and the other lawsuits typically involve contract interpretations, this court signaled some clear discomfort with class litigation where there are meaningful factual differences between the plaintiffs. To that extent, this case does not suggest favorable outcomes for class certification in those cases either.

Posted by Eric at 02:30 PM | Domain Names , Marketing , Search Engines , Trademark | TrackBack

December 17, 2008

Google's Latest Attempt to Kill the CLRB Hanson Lawsuit Fails

By Eric Goldman

CLRB Hanson Industries, LLC v. Google, Inc., NO. C 05-03649 JW (N.D. Cal. Dec. 16, 2008)

CLRB v. Google is the long-running lawsuit (3 1/2 years and counting) over Google's adherence to advertising limits that advertisers set in Google AdWords. I have blogged on the case several times, including:

* my initial post from August 2005
* the August 2007 determination that advertisers were bound by the AdWords contract
* the May 2008 initial refusal to grant summary judgment to Google

Over the course of the litigation, the court has substantially narrowed the scope of claimants who have a potentially viable claim against Google to just three groups: advertisers of less than 1 month, advertisers who ended their campaign in a partial month, and advertisers who paused their campaign. Seemingly undaunted by the May 2008 ruling denying summary judgment to squash these three groups, Google again sought summary judgment on narrower grounds. Maybe Google thought it had a real chance of winning this second attempt at summary judgment, but it smelled a little "hail mary" to me. Thus, perhaps not surprisingly, Judge Ware rejected the motion and reiterated that summary judgment isn't appropriate (at one point saying, with a hint of frustration, "Defendant appears to be attempting to re-litigate an issue decided in the May 14 Order").

As a result, it appears that at least some aspects of the case appear destined for a trial--which, as far as I can recall, would be the first US trial on Google's AdWords practices. Fortunately for Google, the class is so limited that Google's damages exposure should not break the bank even if it loses badly at trial. Normally cases with light damages would settle, but I suspect the case is still around because the parties can't work out a deal on the attorney's fees--which, if this situation is anything like the click fraud cases, almost certainly will dwarf any actual monetary relief received by the putatively injured advertisers. If the parties can work out the plaintiff attorneys' cut of the spoils, I'm confident this lawsuit will settle before trial.

Posted by Eric at 05:38 PM | Licensing/Contracts , Marketing , Search Engines | TrackBack

December 08, 2008

Keyword Ads and Other Marketing Supports Remote Jurisdiction--Market America v. Optihealth

By Eric Goldman

Market America v. Optihealth Products, Inc., 2008 WL 5069802 (M.D.N.C. Nov. 21, 2008)

This lawsuit involves the trademark "OPC-3." "OPC" is the generic term for "group of antioxidant bioflavonoids" that companies sell as dietary supplements. The plaintiff has obtained a trademark registration for "OPC-3." Numbers can become trademarks with enough marketing to educate consumers that they have secondary meaning, but I'm pretty suspicious of trademarks that consist of generic term + number. It's like "Bread 7" for bread.

The defendants sell OPCXtra, a competitive dietary supplement to OPC-3. The defendants deployed some aggressive marketing approaches (which reminded me of the Nowcom case), including registering the domain name opc3.com, purchasing keyword ads that apparently included opc3 and other plaintiff trademarks as keyword triggers, and including OPC-3 in the metatags (as usual, the court was imprecise about which type of metatag, but I infer it was a keyword metatag). In response, the plaintiff sued for trademark infringement, cybersquatting and other claims.

In this ruling, the court held that the NY-based defendant was subject to jurisdiction in the plaintiff's home court of North Carolina. That ruling, on its own, isn't all that interesting. The court found jurisdiction using the standard "minimum contacts" test, but even if it hadn't, trademark infringement lawsuits support jurisdiction based on the "Effects tests" and this circumstance (with its aggressive marketing) seems particularly well-suited to do so. Unfortunately, the court plotzed in excitement because the case involved the Internet and the analytical rigor suffered accordingly, but it got to the logical result.

More interesting is that to attack jurisdiction, the defendants argued that their metatags didn't constitute a trademark use in commerce. This is an odd attack on jurisdiction, though it would have been more logical for a 12b6 motion to dismiss. Consistent with courts outside the Second Circuit, the court rejects the defense because metatag usage qualifies as a trademark use in commerce. Frankly, even if the metatags didn't qualify as a trademark use in commerce, the keyword advertising is probably a use in commerce in all jurisdictions outside the Second Circuit, and the domain name registration presumably qualified as a use in commerce in every court (the domain resolved on comparative reference material with prominent ads for defendants' products). As a result, the no-use-in-commerce defense to jurisdiction seemed doomed from the get-go..

While I still don't understand why the defendants tried this substantive doctrinal attack on jurisdiction, the defendants did get some valuable information. The judge clearly signaled no interest in supporting the defendants' choices, so the defendants got a strong hint to settle up before things get worse.

Posted by Eric at 12:28 PM | Marketing , Search Engines , Trademark | TrackBack

November 25, 2008

Search Engines Aren't Liable for Gambling Ads Per 230--Cisneros v. Yahoo

By Eric Goldman

Cisneros v. Yahoo, CGC-04-433518 (Cal. Superior Ct. "Tentative Trial Decision" Nov. 6, 2008)

I am frequently asked if 47 USC 230 protects websites for claims based on the ads they run. My answer is emphatically "yes" unless the claim relates to IP, federal criminal law or the ECPA. The fact that the third party content is advertising is irrelevant to the immunization, and so is the fact that the website is being paid to display the allegedly tortious material. I have never organized the 230 jurisprudence to identify all of the cases that confirm immunization for third party ads, but two examples come to mind: (1) the eBay cases over listings, such as the Stoner and Gentry cases, and (2) Ramey v. Darkside Productions. Because it reinforces the lack of liability for third party ads, I should add that 230 protects websites for their own ads in some cases--see here.

However, Internet gambling can violate federal criminal law, and sites associated with third party Internet gambling could drop out of 47 USC 230 coverage accordingly. However, this exclusion only applies when it's a federal criminal agency bringing the enforcement action. Furthermore, when it relates to gambling ads, the criminal claim can be trickier, and the First Amendment can provide some protection for the ads. Nevertheless, I understood why the search engines settled up with the DOJ over gambling ads. They may have had powerful defenses, but 230 wasn't one of them, and it may have been cheaper/smarter to settle up than continue to fight.

In contrast, when a state agency or a private plaintiff complains about a website running third party gambling ads online, the law clearly says that the plaintiff should buzz off. A recent ruling in a long-running lawsuit (filed Aug. 2004; see John O's post from 2005) confirms that, proposing to dismiss a private plaintiffs' lawsuit against Google and Yahoo because it's preempted by 47 USC 230 (among other reasons).

The plaintiffs' 17200 unfair competition lawsuit had already taken some hits along the way, including a ruling that damages weren't available. This left only injunctive and declaratory relief on the table, but the injunctive relief claim was effectively mooted by the search engines' settlement with the DOJ (which, interestingly, the court does not directly discuss).

The plaintiffs persisted, alleging that some gambling ads slip past Google's and Yahoo's efforts to suppress the ads. The court expresses some sympathy for the filtering challenge, noting that "much like bacteria that mutate in order to survive antibiotics, would be on-line gambling operators change their tactics to escape detection, necessitating different enforcement techniques by the defendants." (This sounds like a good basis for a 47 USC 230(c)(2) dismissal, also not discussed by the court). The court gives props to the defendants' suppression efforts and refuses to promulgate a technology-based injunction telling the search engines how to run their business, saying "the defendants are doing as good a job as possible at removing on-line gambling links, and that job is far better than anything this court could come up with in an injunction."

The 230 discussion is pretty straightforward. One nice touch: the court explicitly talks about the plaintiffs' allegations that Google and Yahoo were "aiding and abetting" the illicit gambling. Citing the 7th Cir. Doe v. GTE ruling from 2003, the court correctly says that 230 trumps aiding and abetting claims, even if Google and Yahoo made money from the advertising. This is a good reminder that "aiding and abetting" or similar claims (like conspiracy) should not be a viable plead-around to 47 USC 230.

Posted by Eric at 01:49 PM | Content Regulation , Derivative Liability , Marketing , Search Engines | TrackBack

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 17, 2008

Yellow Pages Publisher Hit with $1.5M Fraud Judgment for Publishing False Ad--Knepper v. Brown

By Eric Goldman

Knepper v. Brown, CC 9903-02495 (Or. Sup. Ct. Oct. 9, 2008)

A woman got a botched liposuction job (which plaintiff's expert described as an "uncorrectable disaster") from Dr. Brown, a dermatologist. She sued the dermatologist and Dex, the publisher of his Yellow Pages' ad, for fraud based on Brown's ad. The court describes the ad and the interplay between the doctor and Dex as follows:

In 1996, Brown placed a second advertisement in Dex's Yellow Pages -- this time under the subheading "Surgery, Plastic and Reconstructive." The new advertisement stated that Brown performed liposuction, wrinkle treatments, and sclerotherapy. It also stated that Brown was "Board Certified" -- without specifying any area of certification.

The new advertisements were added at the urging of a Dex sales representative, Mueller. Brown's office manager, Newman, told Mueller that Brown was interested in attracting more liposuction patients. Mueller met with Newman to help her "mock up" a new advertisement. Mueller told Newman that the "plastic and reconstruction surgery" subheading in the Yellow Pages would be the best place to reach that target market. Mueller also told Newman that the advertisement should identify Brown as "board certified," because "patients were expecting a [board certified] plastic surgeon to do these techniques." Newman repeatedly told Mueller that she was concerned that such an advertisement would be misleading, because Brown's board certification was in dermatology, not plastic and reconstructive surgery. Mueller continued to push for a nonspecific "board certified" designation under the "Surgery, Plastic and Reconstructive" subheading, and Brown, who had the final say, acceded to Mueller's advice.

Brown (probably wisely) settled, leaving Dex as the only defendant. After a mistrial, the jury in the second trial awarded the plaintiffs $1.5M for the fraud claim against Dex. The Oregon Supreme Court upheld this judgment.

There are a number of interesting points to observe about this case:

1) I'm sure all of the lawyers reading this post are shaking their heads at the apparently rogue salesperson!

2) I understand why Dex thought it could win on the legal merits, but this looks like the kind of situation where a jury will pay the plaintiff regardless of the legal merits. Given that the doctor had settled, Dex was the only target for the jury to nail. And that's exactly what they did.

3) The dermatologist's use of the undefined phrase "board certified" is a good example of an implied false representation. It also seems like something the medical profession ought to regulate. For example, for most lawyers, there are very specific rules about how lawyers can describe themselves as "specialists."

4) Assume that Google sold the keyword "liposuction" to Brown and Brown's ad included the undefined phrase "board certified." What result? 47 USC 230 almost certainly would protect Google in that case. Of course, the Dex salesperson allegedly did far more in encouraging the falsity than Google would likely do. If an online publisher/ad network's salesperson was similarly aggressive at pushing a false representation, it may be possible that the 47 USC 230 shield would drop. Even so, this is a good example of how 47 USC 230 may privilege online publishers over offline publishers in a way that grants significant competitive advantages to online publishers.

Tom Seery at RealSelf has more to say on the case.

Posted by Eric at 05:31 PM | Derivative Liability , Marketing | 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 29, 2008

CAN-Spam-a-Friend?--Hoang v. Reunion.com

Hoang v. Reunion.com sidesteps an eagerly anticipated legal dispute over the legality of commercial address book scraping and 'send-to-a-friend' emails, and also highlights the damage that can cascade when a federal Circuit Court woefully misreads a statute.

By Ethan Ackerman

In July 2008, Violetta Hoang filed a class action lawsuit under California's state anti-spam laws against Reunion.com, a Los Angeles-based social network site. On October 6th, the court ruled for Reunion.com, granting its motion to dismiss, but allowing Hoang leave to re-file an amended complaint. While a less-than-3-months turnaround is admirable, this case stands as an apt reminder that haste makes waste.

What was sent?

A series of May 2008 solicitations from plaintiffs' acquaintances were the origin of this suit. More precisely, the series of emails were sent from Reunion.com mail servers but bore the names (and in some cases, addresses) of plaintiff's acquaintances in the 'From' line of the email. The emails also contained subject lines like "[Acquaintance] Wants to Connect with You." The emails were sent by Reunion.com servers because plaintiffs' acquaintances had registered with Reunion.com and at some point agreed to, or failed to opt out of, Reunion.com's address scraping practices. In the lawsuit, plaintiffs alleged that these emails were sent to plaintiffs not by plaintiff's acquaintances, as the email 'From' line and subject suggested, but by Reunion.com after Reunion.com had scraped the plaintiffs' addresses from acquaintances' address books when acquaintances became Reunion.com members. In short, pursuant to a possibly agreed-to Terms of Service, Reunion.com scraped its members' address books and then sent solicitations to the resulting addresses, but also took several steps to make it appear that the solicitation was from the member.

This email-scraping-and-dodgy-addressing practice sounds consistent with other accounts of Reunion.com's less than desirable (or legal) efforts to expand its member base. The site claims tens of millions of registered members, suggesting these email campaigns seem to work. The frequency of critical coverage over Reunion.com's various advertising and data-gathering methods also seems to suggest the tactics are as commonly objectionable as they are effective.

In February of this year, Eric highlighted a Wired article about address book scraping and other common web gathering processes. It's a very interesting area with a lot of thorny legal questions. This post, however, is just about the resulting spam.

But was it spam?

Claiming a violation of all three portions of California's anti-spam law, plaintiff's brought a claim against Reunion.com. Plaintiffs alleged Reunion.com used a falsified, misrepresented or forged 'From' line. Plaintiffs alleged that the subject lines Reunion.com used were misleading. Plaintiffs also alleged Reunion.com used a 3rd party domain name (yahoo.com) without Yahoo's permission.

[Author's aside: From the complaint, which describes several instances of 'From' line name forging, but only one instance of 'yahoo.com' appearing as part of a 'From' line, it sounds like Reunion.com's address book scraping likely picked up an email address that was stored in the name field of a member's address book, rather than some more nefarious domain name forging.]

Smells like spam, so what does the law say?

Rather than denying these accusations, Reunion.com chose to counter with a preemption defense. Reunion.com claimed that its practices were sanctioned by federal law and thus, even if actionable under California law, the federal CAN-SPAM Act preempted plaintiffs' claims.

The CAN-SPAM Act's preemption clause, 15 USC 7707 (b)1, does broadly preempt most state anti-spam laws - "This chapter supersedes any [State law] that expressly regulates the use of electronic mail to send commercial messages." This first sentence makes Reunion.com's preemption defense sound pretty plausible. But wait, as the late night infomercials say, there's more. The rest of the clause identifies a significant exception that preserves many of these state laws - "except to the extent that any such statute, regulation, or rule prohibits falsity or deception in [an email]."

So state law claims, like the plaintiffs', are preempted, except to the extent that the state law addresses falsity or deception, in which case the claims may proceed. Courts have been handling the preemption and preemption exception clauses of CAN-SPAM now for several years, and have had more or less no problem concluding that compliant state anti-spam laws can survive if they fit in CAN-SPAM's exception.

OK, so that's what CAN-SPAM says. Let's compare that to the California state law at issue. As identified above, the plaintiffs made three claims under the California law: a falsified 'From' line, a deceptive subject line, and the deceptive use of a 3rd party's domain name in an email header. All three claims address falsity and deception in an email's header, the core of CAN-SPAM's preemption exception. While Reunion.com might dispute the facts of each claim (not misleading, not false because authorized, etc.) it seems pretty clear that the claims can survive CAN SPAM's preemption test as written.

So if the law passes the CAN-SPAM test, whose preemption test is it failing?

The Reunion.com preemption defense cited two sources - the Mummagraphics holding and an FTC rule-making and policy paper on refer-a-friend email marketing.

The court accepts Reunion.com's first source, the prior Mummagraphics case, and doesn't rely on the FTC's policy paper for its holding. As a result, its discussion of the FTC guidance is a very brief discussion at the opinion's end in its discussion over whether to grant leave to amend.

A brief tangent

Before addressing the Mummagraphics precedent, I want to address the FTC rulemaking and policy paper too. Reunion.com asserts that the FTC rulemaking and policy paper permit, as a matter of law, its address book scraping and subsequent emailing. As a threshold matter, there's the fairly complex question of which portions of the FTC's Rulemaking and policy paper on refer-a-friend emails are actual Rulemakings with the force of law and which are policy guidance. Fun APA stuff. But even if the refer-a-friend portions are construed as a rulemaking, a brief read of the guidance reveals that there's, to put this politely, no sane way to conclude that the guidance makes Reunion.com's actions "as a matter of law, exempt from liability under CAN-SPAM." The guidance is page after page of non-exclusive, hedged discussions of what may make a sender liable. The FTC doesn't hand out any 'exemptions from liability' in the rules. Even this otherwise preemption-accepting court is suspicious of this assertion, stating

The FTC did not rule that a commercial entity whose message is the subject of a "forward-to-a-'friend'" email is, as a matter of law, exempt from liability under CAN-SPAM or that such entity could never be held liable, as a matter of federal law, for initiating an email containing false information. Rather, the FTC found that a determination as to whether such entity is exempt from liability under CAN-SPAM would require a "highly fact specific inquiry.

To further beat a dead horse, I'll just focus the issue a bit more. The guidance discusses when a commercially motivated refer-a-friend email is, and very infrequently isn't, subject to CAN-SPAM's provisions. It is page after page addressing when an email will be held to CAN-SPAM's standards, not on when an email will be held to, or preempted from, a state law's standards. While it may be possible that the FTC rules could categorize a given email as "not covered" by CAN-SPAM, that's not the same thing as preempted by CAN-SPAM. Buried deep within a hypothetical set of facts there might be a negative implied preemption argument that could be teased out of the FTC ruling, but Reunion.com isn't making that argument.

Back to the holding, then...

It's not that common in the development of case law that a significant intellectual error can be traced to one particular case, but that's the case here. This case errs because the court was too quick to rely on the erroneous 4th Circuit holding of Omega World v. Mummagraphics to dismiss.

The Mummagraphics court was faced with a similar suit alleging state and CAN-SPAM claims over emails with similar false and misleading subjects and headers, including subject lines falsely suggesting the recipient had requested the email, and "from:" addresses from unaffiliated domains that were not even in the actual transmission path.

A more critical argument against the Mummagraphics opinion could easily be made, but I'll simply opine that Judge Wilkerson of the Fourth Circuit sent spam jurisprudence down the wrong path in several key respects with this holding. While each of the errors will likely cause a lot of damage, several of them (e.g. the re-writing of the statute's 'materiality' standard, concluding that truthful email body text 'cures' header falsity) only have to do with claims under CAN-SPAM, and not on state law preemption. As a result, I'll focus on the error of Mummagraphics that causes so much headache for preemption claims - what constitutes a "falsity or deception" for purposes of determining preemption.

The statute says 'falsity and deception,' but this court thinks it should say fraud instead, so we now hold that it does...

The Mummagraphics court was faced with a claim under an Oklahoma statute that prohibited falsity and deception in email headers. While acknowledging that 'falsity' means just that - "erroneous, wrong," or "untrue", the court proceeded to construe the CAN-SPAM exception as preempting any state law using any standard less than "fraudulent".

This shift is no angels-on-the-head-of-a-pin difference. It's more analogous to the difference between murder and simple assault. Fraud requires misrepresentation and knowledge of falsity and intent to defraud and justifiable reliance and damage. Fraud is a significant enough legal claim that it has its own pleading standards in Federal court. In contrast, falsity or deception are just individual elements of fraud.

The Mummagraphics court dresses up this statutory re-writing by pointing to instances in CAN-SPAM where a heightened standard beyond 'falsity' is used, and argues that these other instances prove Congress intended a heightened standard. Unfortunately, this argument just proves the opposite. Far from being another instance of the same standard, the other language proves Congress knew how to state the particular standard it wanted. When 'falsity' was intended, as in 15 USC 7707(b)1, 'falsity' was used. When 'fraud' was intended, as in a mere paragraph later in 15 USC 7707(b)2, 'fraud' was used. When 'falsity' wasn't enough, but 'fraud' was too much, as in 15 USC 7701(a)1, 'materially false' was used. When Congress wanted to require actual knowledge, or a specific intent, as in 7704(a)2 and 7702(12), it used the terms "actual knowledge" and "intentionally."

Eh, so Mummagraphics was probably based on an erroneous conclusion, what's the harm?

The Mummagraphics opinion represents a Circuit-level opinion on federal law, so it is wholly binding in state and federal courts in the 4th Circuit and persuasive in all others. Additionally, it construes the scope of federal law, the CAN-SPAM Act, rather than just a particular state's law, so it is, if not controlling, at least pertinent in every case that raises a CAN-SPAM preemption defense. Not surprisingly, the opinion is having an effect. Several courts, even before Reunion.com, have relied on Mummagraphics' impossible to meet preemption standard to summarily dismiss cases raising state law anti-spam claims. State enforcers and legislatures are even starting to take notice and drafting amicus briefs and legislation to circumvent the results of the holding.

More comments about the opinion: Venkat and Tom O'Toole.
______

Eric's comments: Ethan makes a persuasive case that the statutory language in CAN-SPAM distinguished fraud from falsity. Nevertheless, I still support the Mummagraphics holding because I always thought it was unnecessary and counterproductive for Congress to let any state anti-spam statute survive preemption. From my vantage point, state anti-spam laws have done nothing useful to curb abusive spam. Instead, they have just littered the court system with junk cases, often from serial entrepreneurial litigants trying to punch lottery tickets. So if Mummagraphics provides defendants with a quick way to squelch unnecessary state law claims, I'm all for it.

I think Ethan is right that this case may misread Mummagraphics to extend the preemption even further than the 4th Circuit intended. Given my predisposition towards broad preemption, this is still a good outcome, but I am more troubled. In particular, I think the Reunion.com approach does not comfortably fit in the refer-a-friend bucket, and their efforts to leverage off the implicit social network connections bring to mind the worst aspects of the Facebook Beacon program. In this sense, the line between a true refer-a-friend program and a pretend referral that's just blatant marketing by grabbing email addresses reminds me a little of the first party/third party marketing representation distinction in 47 USC 230 jurisprudence. If the friend asks the site to send the email, it's a referral and not spam. If the friend provides the email address but doesn't endorse the message, it's governable by CAN-SPAM. This distinction is cloudy in 230 jurisprudence too, and it is giving the SEC fits too. Smells like a paper topic here.

On a personal note, mazel tov to Ethan and his wife on the arrival of their daughter Lily!
____________

10/30 UPDATE: Venkat's comments include a link to the plaintiffs' amended complaint. It takes a legally correct, tactically courageous approach. Rather than taking the Court up on its invitation to amend the pleadings to meet the various elements of a fraud standard, the plaintiffs' complaint reiterates its earlier falsity standard pleadings and then attempts to distinguish Mummagraphics, or at least limit the holding. The amended complaint distinguishes and notes that the Mummagraphics holding, for all its strong dicta about fraud and broad preemption, only held that CAN-SPAM would preempt a strict liability statute. The plaintiffs then proceed to show that the California statute is more than a strict liability statute, and even helpfully point to 9th Circuit precedent that distinguishes falsity from fraud for federal law purposes, clearly holding falsity as a lesser standard. I suspect Reunion.com could make the strong counter-argument that the Mummagraphics results matter more than the holding, because the Mummagraphics result, preemption, was of an almost identical statute that wasn't strict liability either. But making such an argument only invites closer scrutiny of Mummagraphics and highlights its error. Not only was Mummagraphics' stated holding (strict liability is preempted) inconsistent with the Mummagraphics result (a 'more-than-strict-liability' statute was preempted) but the holding was legally wrong in attempting to re-write the carefully negotiated preemption standard up from falsity to something higher. Before giving the benefit of the doubt to the Mummagraphics court in its re-writing, consider that the precise wording and standards in the preemption provisions of a federal spam law were one of its most-negotiated provisions. They changed from one Congress to the next, were different between various bills in the 108th congress, and were even switched between the different versions introduced and ultimately passed in the 108th Congress.

Posted by Ethan Ackerman at 03:55 PM | Marketing , Spam | 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.

Google

* 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.

* Funniest law firm names.

* 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

October 07, 2008

Email Ad Network Isn't Liable for Unsolicited Email--Ferron v. Echostar

By Eric Goldman

Ferron v. Echostar Satellite LLC, 2008 WL 4377309 (S.D. Ohio Sept. 24, 2008). The Justia page.

John Ferron is one of several "repeat" plaintiffs around the country suing over unsolicited email (perhaps not coincidentally, he's also an attorney). In this case, Ferron sued a variety of defendants associated with unsolicited email promoting dish satellite offerings for violations of Ohio's consumer protection law and the Electronic Mail Advertising Act (EMAA).

One of the defendants is Hydra, "a service that connects satellite dish service retailers with companies that advertise by email. The retailers create the advertisements. Hydra then stores the advertisements on its database. Other companies then access Hydra's database and send the advertisements to consumers by email." Hydra does not create the ad content or send the actual emails.

Ohio's consumer protection act has a defense for innocent publishers of ads. Even though the statute does not contemplate the existence of an email ad network, the court says that Hydra is only an "information disseminator" and therefore qualifies for the defense. It was also alleged that Hydra wasn't innocent because Ferron had sent it a copy of his complaint, but the court says that the complaint does not act as sufficient proof of a statutory violation.

The court declines to grant Hydra SJ on the EMAA claim, saying that while Hydra did not "transmit" the email, it could not tell if Hydra "caused" the email to be transmitted. Nevertheless, the court says that, per Mummagraphics, Ohio's EMAA is preempted by CAN-SPAM because it regulates conduct that is not sufficiently fraudulent or deceptive. As a result, Hydra gets SJ on the EMAA claim and is dismissed from the lawsuit.

From my perspective, this case is another example of the larger battle against unsolicited email using state law (such as the many state anti-spam laws). In my opinion, the heavy reliance on state law has led to enormous wasted motion, which is the direct and unfortunate consequence of (1) CAN-SPAM failing to completely preempt all state anti-spam laws, and (2) early opinions (mistakenly, IMO) holding that state anti-spam laws don't violate the dormant commerce clause even though most email senders cannot realistically "steer" their emails into or out of a state.

[This post has been amended in response to emails from John Ferron alleging that my prior post was defamatory.]

Posted by Eric at 04:32 PM | Marketing , Spam | TrackBack

September 29, 2008

Delayed Enforcement Blocks Domain Name Lawsuit--Southern Grouts v. 3M

By Eric Goldman

Southern Grouts & Mortars, Inc. v. 3M Co., 2008 WL 4346798 (S.D. Fla. Sept. 17, 2008)

I'm often baffled by lawsuits over domain names and keywords because they just don't seem to make any economic sense. This lawsuit is especially perplexing given the plaintiff's delays and the seeming impossibility of the plaintiff reaching a profitable outcome, even if it won in court. What was the plaintiff thinking?

Background

3M and SGM compete in the field of "quartz aggregate products for surface finishes." SGM has a federal trademark registration for "Diamond Brite." In 2000, 3M bought an unrelated business whose assets included a trademark in "Diamond Brite" and the domain name "diamondbrite.com." For a while, 3M redirected the domain name to the home page of the other business unit it owned. No later than July 2002, the domain name stopped resolving, but 3M continuously renewed its domain name registration. Ultimately, 3M migrated the new unit to its existing trademarks and let its acquired trademark in "Diamond Brite" lapse.

Meanwhile, in 2005, 3M did a 3 week trial buying "diamond brite" in Google AdWords, but the lawsuit only involves the domain name, not the AdWords purchase.

SGM contacted 3M three times about the diamondbrite.com domain name. No later than July 2002, SGM emailed 3M asking if it could acquire the domain name. In Feb. 2005, SGM sent a cease-and-desist letter, which 3M rejected. Then, in July 2007, SGM wrote to 3M again proposing an amicable solution, and 3M continued to resist. SGM then sued 3M in Sept. 2007.

Laches

From my perspective, this is an easy laches case. Taking 5 years to pursue the matter, with nothing resembling an ongoing dialogue, is simply too long. 3M wound down use of the domain name, so its economic expectations aren't disturbed like a typical laches case, but there is still the increased litigation costs due to the 5 year delay. The court rejects that either the AdWords purchase and the domain name renewals resetted the laches analysis.

Unfair Competition on the Merits

The court says that the mere possession of the diamondbrite.com domain name without any further use does not constitute a "use in commerce" sufficient to support Lanham Act violations. Along the way, the court distinguishes a veritable who's-who list of junky domain name cases from the turn of the century, including PACCAR, Brookfield, PETA v. Doughney, OBH and Planned Parenthood v. Bucci. The court distinguishes most on the fact that 3M didn't have an active website resolving to the domain name, but it goes further with the OBH and Bucci cases:

OBH and Planned Parenthood[] are both nearly a decade old. As with any widespread change in technology, there is a learning curve. Even if those cases were correct when decided, I decline to adopt the position today that internet users of any significant number would be frustrated or hindered by merely not arriving at the expected site the first time a web address (domain name) was typed in... With the advent of multiple, and increasingly powerful search engines, it is unlikely that a potential consumer of SGM's products would be turned away by not finding a website at diamondbrite.com. In any event, SGM has presented not a scintilla of evidence to show that consumers have been prevented from accessing SGM's own website, or prevented from obtaining any of SGM's goods or services. (emphasis added)

The bolded language, of course, is true and has been for a number of years, but it's nice to see a court expressly acknowledge that "technological facts" embedded in the precedent are now out-of-date. It's also nice to see the court clearly recognize the substitutability of the domain name system and search engines and to realize that consumers prefer search engines.

The court also rejects the precedent by pointing out that there cannot be likelihood of consumer confusion when the domain name owner doesn't resolve at all. As the court says, "The seven factors use to determine whether a likelihood of confusion exists become irrelevant if there is no “use” to compare the mark to." There is plenty of stupid precedent to the contrary (including those predicated on initial interest confusion, which the court expressly rejects), but this court nails it.

ACPA on the Merits

In my opinion, the ACPA claim is an easy defense win because 3M (and the predecessor company) had legitimate trademark interests in "Diamond Brite" prior to the domain name's registration. The court still courteously goes through the "bad faith" ACPA analysis before concluding that 3M had none. Along the way, the court soundly rejects a pretty silly argument that the domain name registration pointing to an unresolved domain name would divert consumers because frustrated consumers would do a Whois lookup query for the defunct domain, learn that 3M was the registrant and seek out 3M to transact with. Some arguments are better left unmade.

In the end, the court grants summary judgment to 3M and dismisses the lawsuit.

Lawsuit Futility

I understand how matters like this can sit on an in-house counsel's desk for years, only resurfacing every couple of years and prompting a "ping" to the other side. But I simply can't understand how, in 2007, after 5 years of irresolute progress, SGM thought the economic upside justified the expense of a lawsuit.

On the benefit side, a domain name like "diamondbrite.com" has some value, especially when it's associated with a product line bearing that name. But how much value? Assuming a lawsuit like this costs at least six figures, I can't imagine that the domain name is worth anywhere close to that. Indeed, any incremental selling power from the domain name could be cost-effectively replicated through a combination of SEO and SEM on the term "diamond brite." Better yet, SGM could have poured the money into product sales and marketing, which I'm confident has a substantially higher ROI than suing or gaming the search engines.

As further evidence of the weak value of the domain name, SGM did not cite any harm from not owning the domain name, and the matter only rose to the top of SGM's in-house personnel's desk 3 times in 5 years. Clearly, this is not a "must have" domain name,

On the expense side, these types of lawsuits are costly. In addition to the normal attorney's fees, SGM obtained at least one expert witness (and, to add insult to injury, the court bounced the expert's report), did some expensive discovery (including obtaining and reviewing 3M's portfolio of 13,000 domain name registrations) and tied up key internal personnel on the lawsuit (including testimony from the "head of information technology and the executive vice-president of SGM"). The cost of a lawsuit isn't measured just by out-of-pocket attorney expenses but by overall opportunity cost, and on that basis, this lawsuit tied up valuable resources.

Finally, the rational decision-maker multiplies the cost-benefit amount by the probability of winning, and it seemed clear to me that this lawsuit had bad odds from the get-go. The ACPA claim was destined to lose because on the high "bad faith" standards (it also makes me wonder why SGM didn't try the UDRP first) and the fact that 3M had clear legitimate rights at the beginning. The potential success of the unfair competition claim is naturally less clear, but even if SGM won this claim, they had almost no chance of recovering meaningful damages or attorney's fees. As a result, I can't see a scenario where this was a breakeven lawsuit from the beginning. Given the low odds of success, this just seems like a clearly futile waste of money from day 1.

[A personal note: I'm out for the rest of the week for the Jewish holiday and a trip to the heartland. I'll probably next see you again next week. L'shanah tovah tikatev v'taihatem!]

Posted by Eric at 09:53 AM | Domain Names , Marketing , Search Engines , Trademark | TrackBack

September 10, 2008

DMV.org Hit With SEO-Degrading Injunction--TrafficSchool.com v. eDriver

By Eric Goldman

TrafficSchool.com, Inc. v. eDriver, Inc., 2008 WL 4000805 (C.D. Cal. June 4, 2008). Permanent injunction entered Aug. 28, 2008.

[Note: I missed this case when it first came out. I recently learned about the case from Rebecca, and it's such an interesting case that it's worth blogging about at this comparatively late date. Also, just today the defendants signaled their intent to appeal, so the case is still very much alive and active.]

This case involves websites referring consumers to traffic schools and driver's education courses, a business that appears to be both lucrative and cutthroat. The plaintiffs allege that the operators of DMV.org, a referral site, engage in false advertising. The gist of the plaintiff's argument is that DMV.org falsely implies an affiliation with government DMVs, and therefore consumers believe that linked-to vendors are being recommended by a government agency. Naturally, the implicit government imprimatur on a traffic school or driver's ed course should significantly bolster consumer demand, so the plaintiffs feel disadvantaged in the marketplace. Oddly, both parties agreed that the plaintiffs' websites had better conversion than DMV.org.

70-80% of DMV.org's traffic comes from search engines due to favorable search engine indexing (in 2006, the site was the #2 organic Google link for "DMV") and aggressive search engine advertising. Consumers who reached DMV.org were shown text and graphics designed to enhance the site's credibility/authority and perhaps exacerbate visitors' perceptions that a government agency operated the site, although there was a small footer disclaimer. After the lawsuit, DMV.org was redesigned to reduce the possibility of consumer confusion about any government affiliation, but the court recounts anecdotes that consumers were confused both before and after the redesign. As a result, the court finds that the plaintiffs established a prima facie case of 43(a) false advertising.

However, the court determines that the plaintiffs have "unclean hands" because they too had registered and used various domain names containing "DMV" and had explored advertising on DMV.org. Due to their unclean hands, the court denies the plaintiffs any damages or attorney's fees.

The court does grant an injunction requiring DMV.org to display a mandatory "acknowledgement page" (we might call it an interstitial or landing page) telling consumers that the site is unrelated to any government agency and requiring them to affirmatively click through. See the page here. My hypothesis is that such an acknowledgement page wrecks DMV.org's search engine indexing by preventing the robots from seeing the page content (unless DMV.org uses grey hat/black hat techniques to present a different page to search engine robots). In partial support of that argument, when I searched today for "DMV" at Google, the site was 4th in the organic results--still excellent for such a popular term, but down from their #2 ranking in 2006. (Their continued good placement may be due to their PR7--which has been juiced by links from state government agencies that mistakenly thought it was an official site). Thus, an injunction requiring a mandatory acknowledgment page effectively will dramatically reduce the traffic--and the value--of an SEO-driven site. The defendants have also made post-injunction filings saying that a lot of visitors are backing away due to the acknowledgement page. Accordingly, the defendants are claiming that the injunction could be fatal to their business.

This suggests a possible lesson to learn from this case. The defendants had a great domain name (DMV.org) that they managed to build nicely, but they may have too aggressive about stoking consumer expectations about their affiliation with the government. The consequence of that aggressiveness is a potentially business-ending injunction, rendering the domain name nearly worthless. If the defendants hadn't played so close to the line, perhaps they would have lost some revenue but might have been able to maintain the domain name's value in the long run.

Today, the defendants filed a variety of motions indicating that they plan to appeal the ruling and asking the court to stay the injunction during the appeal. If the defendants can get the traffic-killing injunction lifted on appeal, I suspect they will consider it a win even if they have to write a check for damages.

Rebecca has more on the case.

Posted by Eric at 10:01 PM | Domain Names , Marketing , Search Engines | 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 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

August 28, 2008

SEC Proposes that Companies Should Be Liable for Content Linked from the Company's Website

By Eric Goldman

[Note: I haven't had a chance to blog the Veoh case--coming soon!]

The Securities and Exchange Commission (the SEC) is proposing an interesting policy with respect to a securities issuer linking to discussions about it. See pages 31-37 of this document. Effectively, the SEC is proposing that a securities issuer can be liable for any misstatements on linked pages if "the context of the hyperlink and the hyperlinked information together create a reasonable inference that the company has approved or endorsed the hyperlinked information." The SEC's discussion about linking also has some interesting and largely exceptionalist discussion about the ontological meaning of a link.

At minimum, the SEC's proposed position may create a fascinating doctrinal clash with 47 USC 230, which seems to preempt any liability for content on third party websites--even if the linker "endorses" the linked content, and even if the SEC says otherwise (unless the SEC makes it part of federal criminal law, which is excluded from 230's immunization). If anyone is interested in working with me to submit a comment to the SEC (due Nov. 5) to explain why 47 USC 230 may preclude the SEC's approach, let me know.

This proposal raises an even broader issue how 47 USC 230 overlays on securities laws generally. I can't really think of a defendant who has litigated 230 as a defense to securities fraud claims, but it seems like a tenable defense for any online securities marketing done by third parties--a result which might wreak havoc on existing secondary doctrines of civil liability for securities fraud. This looks like an excellent but complicated paper topic.

UPDATE: James Grimmelmann takes exception to my reference of the SEC's policies as exceptionalist. I didn't build out the concept in this brief blog post, but I am thinking about making it part of the comments to the SEC, so I'm planning to elaborate on why I think it's exceptionalist soon.

Posted by Eric at 06:10 PM | Derivative Liability , Marketing | TrackBack

August 27, 2008

7Search Sues McAfee For Red Flagging It

By Eric Goldman

7Search.com v. McAfee, Inc., 1:2008cv04831 (N.D. Ill. complaint filed Aug. 25, 2008). The Justia page.

I don't have a good sense of how many lawsuits have been filed against anti-spyware vendors for classifying third party software as "adware" or "spyware." I've blogged on a few (including Kaspersky, PC Tools and Symantec v. Hotbar), and Ben Edelman maintains a larger catalog of such lawsuits (not sure how up-to-date this is). However, I don't know if these lawsuits are relatively rare (as Ben's chart implies) or if they are multitudinous but most quietly fly under the radar screen.

If there aren't many unpublicized lawsuits, that may reflect that suing an anti-spyware vendor over its classification decisions almost never makes sense. First, many vendors have a private adjudicatory/appellate process that resolves many potential disputes without a lawsuit. Certainly, most vendors don't want to make errors, which undermines their own credibility, and most reputable vendors want to fix their mistakes. Second, lawsuits bring generally unwanted publicity to the plaintiff, calling extra attention to their alleged deficiencies and bringing out all of the gripers. Third, the costs of the lawsuit may be more than the value of any frustrated transactions. Finally, many of the lawsuits have low probabilities of legal success for the reasons I'll discuss in a moment. So there is good reason to believe classification-related lawsuits such as this one are rare. (I'm not saying that grumbles or C&Ds are rare; I'm just referring to formal lawsuits).

In this lawsuit, 7Search says that it was in the toolbar business but stopped offering downloads from its site in 2003. However, McAfee's SiteAdviser gives 7Search the big red X and says "Feedback from credible users suggests that downloads on this site may contain what some people would consider adware, spyware, or other potentially unwanted programs." 7Search claims that this statement is false because it isn't offering any downloads at all. 7Search thus alleges false advertising (Lanham 43(a)), deceptive trade practices, defamation and unfair competition.

The most obvious barrier to 7Search's lawsuit is 47 USC 230. Both (c)(1) and (c)(2) could be implicated. (c)(1) is less likely, but if in fact McAfee is republishing information from third parties (as suggested by the statement's reference to "credible users"), they may be able to claim (c)(1) for the republication. Either way, (c)(2)--the immunization for filtering decisions--is directly on point and potentially immediately fatal to the lawsuit. Zango's lawsuit against Kaspersky was soundly and quickly knocked out on 230(c)(2) grounds (though that is now on appeal to the Ninth Circuit), and a district court in Illinois gave broad deference to the Zango ruling in finding that Comcast could claim 230(c)(2) for email filtering decisions.

At the same time, 7Search alleges that McAfee's classifications were in bad faith. If so, then 230(c)(2) wouldn't apply even under the liberal Kaspersky or Comcast approaches, both of which required subjective good faith. We'll have to see how McAfee responds to determine if 7Search's allegation has any chance of getting traction.

There are two other possible holes in the potential 230 coverage for this lawsuit. First, courts have been inconsistent whether a false advertising 43(a) claim under the Lanham Act fits within the "IP" exclusion to 230. Second, most of 7Search's gripe goes to McAfee's statement that bad downloads are available--words chosen by McAfee to describe its filtering decision. It remains unclear if 230(c)(2) protects an intermediary's characterization of its filtering decision as much as it protects the filtering decision itself--just like 230(c)(1) may protect against liability for third party information but may not protect against marketing representations rendered untrue by third party content or actions.

In any case, I think this lawsuit and others over classification decisions raise interesting and important issues that I plan to explore in my Economics of Reputational Information project. We want skillful intermediaries to digest the overwhelming amount of information available in the marketplace and make reputational judgments that speed up our consumer decision-making. On that basis, we definitely don't want reputational judgments removed from marketplace actors and put into the hands of the judges. However, we also want the reputational intermediaries to make factually accurate judgments because their misjudgments also could distort marketplace decision-making.

Posted by Eric at 03:54 PM | Adware/Spyware , Derivative Liability , Marketing , Trademark | TrackBack

August 20, 2008

Competitive Pop-up Ads Aren't Unfair Competition or Tortious Interference--Overstock v. SmartBargains

By Eric Goldman

Overstock.com, Inc. v. SmartBargains, Inc., 2008 UT 55 (Utah Sup. Ct. Aug. 19, 2008)

In light of the death of adware and the fact that almost all of us have moved on, it is jarring to see adware opinions still emerging. This case, percolating in the courts four years, is quite a throwback.

In 2004, Overstock sued SmartBargains for buying adware-delivered pop-up ads that were triggered by user visits to Overstock.com. There have been a lot of keyword advertising cases since then, but this case is unusual because (for reasons not clear to me) Overstock did not make the more typical trademark infringement claim or even the less common trademark dilution claim.

Instead, Overstock asserted three causes of action: (1) violation of the initial Utah Spyware Control Act passed in 2004, (2) unfair competition, and (3) tortious interference with prospective business relations. The Spyware Control Act claim was mooted when the statute was deemed unconstitutional and further mooted when the legislature amended the law, so Overstock did not pursue that claim further. The district court also ruled against Overstock on the other 2, and Overstock appealed to the Utah Supreme Court. [for reasons that aren't clear to me, this case apparently bypassed the Utah appeals court.]

The Supreme Court had little difficulty disposing of the remaining claims. The pop-up ads didn't constitute unfair competition (in Utah, an anti-passing off claim) in this case because SmartBargains' pop-ups appeared in a separate window and displayed the SmartBargains' logo. The tortious interference claim gets tossed for exactly the right reason--competitive ads are a good thing, not bad. The court says "SmartBargains’ pop-ups indisputably exist to compete with Overstock. Competition is not an improper purpose, even though other byproducts of competition may exist." Case dismissed.

In one sense, this case isn't all that important. With respect to lawsuits over competitive online ads, most of the action relates to trademark infringement and particularly what constitutes a trademark use in commerce. But this case is important because it's fairly typical for plaintiffs in those lawsuits to add a laundry list of additional claims with the hope that something sticks. As this case shows, the laundry list claims are junky and easily disposed of, and a state supreme court ruling to that effect is a nice and useful precedent for defendants.

Even so, I wonder about the political ramifications of this ruling. Overstock's attitude towards keyword advertising has been erratic. On the one hand, it went to the Utah legislature to protest the Utah Trademark Protection Act because it apparently buys keyword ads on third party trademarks. On the other hand, it supported Utah's initial Spyware Control Act, it was the first to try to take advantage of the law, and it was willing to pursue this silly lawsuit for over 4 years. In response to this loss, will Overstock flip--just like its Utah Internet retailing peer 1-800 Contacts flipped--and go seek out a friendly and easily persuaded Utah state legislator to give it a tailor-made anti-keyword advertising statute? Stranger things have happened in Utah...

HT: Evan Brown

Posted by Eric at 07:15 AM | Adware/Spyware , Marketing , Trademark | TrackBack

August 08, 2008

Affiliate Liability Extravaganza

By Eric Goldman

[Note: I recently published a version of this article at InformIT. Here's the pre-edited version I sent them.]

Introduction

This article discusses marketers’ liability for the actions of their marketing affiliates (what I refer to as “affiliate liability”). The affiliate liability issue has become red-hot recently because numerous plaintiffs have taken aggressive legal positions seeking to expand the boundaries of affiliate liability. In three recent rulings, courts have emphatically rejected these expansive liability arguments. Even so, it seems likely that plaintiffs will continue to look for ways to expand affiliate liability, and despite the favorable rulings, defendants often settle a lawsuit alleging affiliate liability rather than establish their rights in court.

Affiliate Marketing—Good and Bad

Marketers create affiliate programs to outsource marketing decisions to domain experts. For example, independent third parties may have better or cheaper access to subcommunities of potentially interested consumers than a marketer’s employees. An affiliate marketing program compensates these local experts for work and expertise involved to take the marketer’s message to those consumer communities. When it works properly, affiliate marketing programs can play an important role in the broad “invisible hand” economic phenomenon of allocating scarce resources to consumers who value them the most.

Affiliate marketing doesn’t always have this salutary effect. Affiliate marketing programs create payoffs to motivate affiliate behavior, and inevitably some affiliates will try to obtain the payoff without doing the desired activity. Thus, even if the marketer would prefer otherwise, some affiliates might do “whatever it takes” to get paid, including using false advertising or illegitimate marketing mechanisms. Further, the fact that the marketer outsources some choices to affiliates (a necessary part of any affiliate program) can lead to “diffuse responsibility” where the marketer and affiliates point fingers at each other if something goes wrong. Sometimes, when there are multiple tiers of affiliates, it can become effectively impossible to assign responsibility for the wrongdoing.

To bypass these legal entanglements, plaintiffs have sought ways to hold marketers vicariously (automatically) liable for their affiliates’ actions. However, these efforts “break” standard tort law by trying to treat independent contractors as if they are principal-agents without the requisite supervision or authority that typically triggers agency liability. As a result, overexpansive theories of affiliate liability cause marketers to internalize too many costs, curtailing potentially socially beneficial marketing activities or leading to overinvestment in socially wasteful liability minimization schemes.

Plaintiffs Gone Wild: Two Recent Efforts to Expand Affiliate Liability

There have been countless affiliate liability enforcement actions, but I’ll focus on two recent initiatives.

New York Sales Tax Law

State and local taxing jurisdictions have long coveted a way to impose sales tax collection responsibilities on non-resident Internet vendors. In general, these efforts have been stymied by the Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which requires a vendor to have a physical presence in the jurisdiction before the taxing entity can impose sales tax collection obligations on it.

New York, however, developed a nifty workaround. In April, it passed a law (Chapter 57, N.Y. Laws of 2008) declaring that a vendor’s marketing affiliates in New York constituted a physical presence in New York by the vendor. If so, New York can impose sales tax collection obligations on remote vendors due to their New York affiliates. As part of its crafty plan, New York tried to induce compliance with a carrot—if remote vendors voluntarily agreed to collect and pay sales tax from New York residents going forward, then New York would grant them amnesty for any back sales tax collection obligations.

Neat trick, but…a small problem: affiliates are independent contractors of the vendor, so this effort to treat them as legally related entities surely doesn’t comply with the Constitution. I suspect a court will confirm this flaw because both Amazon and Overstock.com have sued New York over the law. At the same time, to minimize its risk, Overstock has also tossed all of its New York affiliates overboard. One might question the wisdom of the New York legislators prompting marketers to cut off opportunities for New York online entrepreneurs.

Trademark Owners Claiming Marketers Are Liable for their Affiliates’ Marketing

Another trend: trademark owners are trying to hold a marketer liable for the alleged trademark infringement committed by its affiliates, such as when affiliates purchase the third party trademark as a keyword trigger for search engine ads. Plaintiffs have alleged affiliate liability in at least three lawsuits in the past couple of months:

* DSW v. Zappos.com (S.D. Ohio complaint filed May 12, 2008). For more, see SEOmoz.

* NameSafe v. LifeLock (M.D. Tenn. complaint filed June 26, 2008). For more, see Techdirt and News.com.

* Rosetta Stone v. Rocket Languages (C.D. Cal. complaint dated July 2, 2008). For more, see the WSJ Law Blog.

Courts Weigh In—and Plaintiffs’ Expansive Theories Don’t Fare Well

The efforts to extend liability in the sales tax and trademark contexts are novel, and it’s hard to predict the final outcome because we have limited direct precedent to consult. However, looking at some recent rulings in other contexts, there is good reason to believe that both legal theories go way too far.

CAN-SPAM

Unlike many other areas of the law, CAN-SPAM (15 USC 7705 and 7706) specifically authorizes affiliate liability in the statute. The Federal Trade Commission (FTC) has routinely invoked this provision in its pursuit of marketers promoted by affiliate-initiated spam (for one of the more recent examples, see the FTC’s press release on one of its porn spam busts and settlements). Further, typically when the FTC targets a marketer on an affiliate liability theory, the marketer rolls over and settles rather than fight.

But…a small problem: the FTC’s expansive interpretation of the affiliate liability statute—the basis it has used to procure these settlements from marketers—may not actually reflect the law. In an outcome that didn’t get nearly the press it deserved, in an lawsuit against Impulse Media earlier this year, the FTC took its affiliate liability theories to a jury and lost. This is a huge verdict because (1) the FTC rarely loses in court, and (2) perhaps more importantly, when average citizens evaluate the FTC’s expansive affiliate liability theories, they may balk.

Oddly, the FTC didn’t take no for an answer. It subsequently asked the judge to enjoin Impulse Media even though Impulse Media won the jury verdict. Talk about chutzpah! Not surprisingly, the court declined the request. US v. Impulse Media, 2008 WL 1968307 (W.D. Wash. May 1, 2008).

In another lawsuit, ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008; unsealed April 29, 2008), a civil plaintiff, ASIS (a serial anti-spam litigant), invoked the CAN-SPAM affiliate liability provision in its anti-spam lawsuit against 20 defendants. One defendant never showed; 18 defendants settled up (as mentioned, the typical response); and only one defendant—Azoogle—persisted in court.

Azoogle is a lead generation company for upstream marketers, and it relies on downstream affiliates to help it generate leads for its clients. Some of those downstream affiliates generate leads via spam. In this ruling, the court rejects Azoogle’s liability for spam sent by its marketing affiliates:

Although ASIS has pointed to significant evidence that Azoogle, during the relevant time period, did little to investigate the third party vendors it engaged, there is no evidence in the record from which a jury could conclude that Azoogle, in contracting with Seamless Media, made a deliberate choice not to know that Seamless Media would engage third parties to send out spam on Azoogle's behalf. The evidence cited by ASIS to establish knowledge on Azoogle's part is entirely speculative. Even assuming it is true that the Emails were sent by a single individual and that the lead was typed into a web site that was copied from Azoogle's lowrateadvisors site, this is insufficient to show that Azoogle consciously avoided knowing that the Emails would be sent. Further, while ASIS relies primarily on the allegation that Azoogle failed to adequately investigate its third-party vendors, ASIS has pointed to no evidence that if Azoogle had investigated Seamless Media prior to entering into the Insertion Order, it would have learned facts sufficient to show that Seamless Media was likely to engage in CAN-SPAM violations. There is no evidence in the record that would put Azoogle on notice that Seamless Media, or Seamless Media's vendors, obtained leads from spammers. Indeed, the only evidence on this subject is that Seamless Media had a good reputation at the time, and was obliged by its contract with Azoogle to follow the law.

Adware

Another recent affiliate liability decision is the remarkable ruling in People v. Direct Revenue LLC, 2008 WL 1849855 (N.Y. Sup. Ct. March 12, 2008), another case that did not get the attention it deserved. Disclosure note: I helped file an amicus brief in this case.

In 2006, the NY Attorney General’s office (NYAG) made the apparent decision that adware vendor DirectRevenue needed to be shut down by any means necessary, and it launched a multi-front attack on DirectRevenue. It publicly posted a website with information about DirectRevenue that had no apparent purpose other than to denigrate DirectRevenue’s reputation. It bullied DirectRevenue’s advertisers, ultimately procuring, and then releasing a hyperbolic press release about, an insignificant settlement that spooked potential advertisers away from DirectRevenue. And finally, it sued DirectRevenue directly.

The NYAG’s actions had their desired effect. Perhaps due in part to the NYAG’s campaign to close DirectRevenue down, DirectRevenue did in fact go out of business. Congratulations to the NYAG for achieving its apparent goal.

But…a small problem: the NYAG’s assessment of DirectRevenue’s legitimacy may have, in fact, been itself lawless, because the court emphatically rejected all of NYAG’s legal theories. This might be amusingly ironic if the NYAG’s anti-DirectRevenue campaign wasn’t such a chilling and crushing misuse of governmental powers.

The opinion is worth reading in its entirety, especially where the court affirms the EULA formation and limits extraterritorial liability. However, apropos to this post, the court rejected DirectRevenue’s liability for allegedly illegitimate software installations made by its affiliates, saying “petitioner has not shown that respondent should be held liable for the actions of those third parties under a theory of agency or ratification, or otherwise.” The court explains:

Dismissal is required with respect to the 22 [installations by] third parties, who petitioner concedes were independent contractors rather than agents of Direct Revenue. A principal is generally not liable for the acts of an independent contractor because of the lack of control over how the contractor's work is performed (Chainani v. Bd. of Educ., 87 N.Y.2d 370, 380-81 [1995]). Neither may the principal be charged with the conduct of even more remote subcontractors (People v. Synergy6, Inc., Index No 404027/03 [Sup Ct N.Y. Co 2006][unpublished disposition][Attorney General's action for deceptive practices and false advertising under GBL dismissed as against email marketing company where fraudulent emails were sent by company retained by agent]). Although exceptions exist, such as where the contractor was negligently retained or supervised (Saini v. Tonju Assocs., 299 A.D.2d 244, 245 [1st Dept 2002]) or where the principal has ratified the wrongful acts (Kormanyos v. Champlain Valley Fed. Sav. and Loan Assoc. of Plattsburgh, 182 A.D.2d 1036, 1038 [3d Dept 1992]), the record here does not support any grounds for departure from the usual rule.

As noted, under the SDA, Direct Revenue contractually required its distributors to obtain consent of consumers consistent with the terms of the EULA. The SDA also forbade the distributors from holding themselves out as respondent's agents. Respondent was not authorized or obligated to control their work, particularly since many of them additionally acted as distributors for various other advertisers. Although in Sotelo v. Direct Revenue, 384 Supp2d 1219 (ND Ill 2005) the court upheld a cause of action against respondent for negligent supervision of distributors, the issue arose on a motion to dismiss and the court thus restricted its inquiry to the four corners of the complaint. Notably, the court stated that it was precluded at that procedural juncture from considering respondent's evidence that the distributors were independent contractors, evidence which, as here, included the SDA.

…

The theory that respondents ratified the alleged third party misconduct also fails. The allegations that respondent had general and/or constructive knowledge of some distributors' wrongful practices are insufficient to impose liability (see, Synergy6, supra; Del Signore v. Pyramid Sec. Servs., Inc., 147 A.D.2d 759, 760-61 [3d Dept 1989][mere knowledge of litigation and complaints against security company for undue force by guards insufficient to impose liability upon hiring firm]; see also Hamilton v. Beretta USA Corp., 96 N.Y.2d 222, 237 [2001]). Moreover, it is conceded that in those few instances in which respondent obtained actual knowledge of a distributor's misconduct, it took significant steps to modify its procedures. A finding of ratification cannot be found upon such facts, notwithstanding that respondent may have benefited financially from its relationship with the distributors before remedial measures were implemented (see Synergy6, supra).

It is my understanding that the NYAG has filed a notice of appeal in this case to preserve its options, but it is still deciding if it will pursue the appeal.

Unfortunately, I’m not aware of the Synergy6 opinion being available electronically, which is a shame because it’s an interesting and relatively early rejection of the NYAG’s expansive affiliate liability doctrines. Due to that ruling (which involved email marketing instead of adware), the NYAG already had good reason to suspect that its predicate theories were dubious, which makes its decision to pursue those theories against DirectRevenue even more lamentable.

Conclusion

This post highlights two seemingly inconsistent trends. Trend #1 is that plaintiffs (private actors or government agencies) are taking very expansive positions on affiliate liability. Trend #2 is that when tested, expansive affiliate liability theories are failing in the courts. These two trends seem to be in conflict with each other. My hope is that trend #2 becomes so strong that it overrides trend #1, i.e., plaintiffs and government actors get the message that they have gone too far.

Unfortunately, in the interim, many defendants will capitulate and settle an expansive affiliate liability claim—even if it’s lawless—because it’s the cheapest path to resolution or because the precedent isn’t strong enough to ensure victory. Perhaps some defendants will realize that the trend is in their favor and will fight back accordingly. More judicial clarity about the line between permissible and impermissible behavior would benefit everyone.

It is also possible that the legal ambiguities of affiliate liability will be resolved by statute. However, despite the defendants’ string of court victories, I see the chances of legislative intervention to curtail expansive affiliate liability doctrines as nil. If anything, it’s more likely that future legislation will codify liability expansion.

For a rare in-depth analysis of affiliate liability, see Jean Noonan and Michael Goodman, Third-party liability for federal law violations in direct-to-consumer marketing: telemarketing, fax, and e-mail 63 Bus. Law. 585-596 (2008) [ABA subscription required to download].

Posted by Eric at 08:04 AM | Adware/Spyware , Derivative Liability , Marketing , Spam , Trademark | TrackBack

August 07, 2008

July 2008 Quick Links, Part II (Non-IP Edition)

By Eric Goldman

Search Engines

* Google explains all of the ways that it reinterprets the actual search query provided by a consumer to deliver results for words the searcher didn't use. As I've said before, Google's intermediation makes it impossible for a judge to assume that a defendant's website was ranked based on the search terms selected by the searcher.

* In the vein of In re Yahoo, Google was hit with two class action lawsuits alleging that Google failed to disclose that AdWords ads were going to be placed on undesirable pages liked parked pages. See Levitte v. Google (complaint and Justia page) and RK West v. Google (complaint and Justia page).

* Google was denied attorneys fees in the long-running Parker v. Google case. Parker v. Google, Inc., 2008 WL 2600299 (E.D. Pa. June 30, 2008).

Wikipedia

* Defamation lawsuit against Wikimedia tossed per 230. I've been waiting for the actual ruling to do a complete writeup. If you see it, please pass it along.

* NYT: "Wikipedia Tries Approval System to Reduce Vandalism on Pages." Surprised?

Trespass to Chattels

* In the latest development in Oracle v. SAP/TomorrowNow, SAP has shut down TomorrowNow, the subsidiary that prompted the lawsuit from Oracle. The Second Amended Complaint expands the finger-pointing at SAP for supervising its subsidiary. Still unresolved: the size of SAP's check to Oracle, and possible jailtime for TomorrowNow folk.

* Thomas O'Toole: Illinois adds anti-scraping provision to its attorney discipline website to block Avvo's crawlers.

Marketing

* 50 Cent is back in court on another questionable legal theory (see our first deconstruction of his litigation tactics). This time, Taco Bell tried a quasi-ambush marketing stunt to get something for free that he thinks they should have paid for.

* Rebecca on the latest ruling in NetQuote v. Byrd, the "lead fraud" case. Also, the ruling has some interesting discussion about whether a competitor who clicks on a competitor's ads in AdSense is guilty of a tort of "click fraud." The court says not in this case.

* TRUSTe is converting from a non-profit to a for-profit company.

Porn

* ACLU v. Mukasey (I've lost track of the number of AGs who have been the named defendant in this lawsuit). The Third Circuit struck down COPA for the third time.

* PC Magazine: RIP Usenet, killed by the New York AG office's campaign against child porn traded on USENET.

Miscellaneous

* A bizarre article on "Internet trolling" in NYT Magazine. With its rambling and scattered discussion, I have no idea what the author defines as trolling. However, the article did bring to mind a much better 1994 article from Wired, The War Between alt.tasteless and rec.pets.cats.

* Steinbuch v. Cutler, 2008 WL 2622853 (E.D. Ark. July 1, 2008). The court denied a motion to transfer the long-running case to DC.

* If a caffeine-addicted blogger goes off about your business, it's risky to fight back.

* Mike Masnick: Keeping The Benevolent Dictators of Silicon Valley Honest

* Wed, Aug. 13, 1-2 Eastern time, David Donoghue, Evan Brown and I will be doing an ALI-ABA teleseminar about the latest developments in 47 USC 230. Details. Mention coupon code TSPV02EG and save $30.

Posted by Eric at 06:57 AM | Content Regulation , Internet History , Marketing , Search Engines | TrackBack

July 29, 2008

"But United is a major provider of Airline Tickets"

By Eric Goldman

I got the following postcard solicitation in the mail yesterday:

(Click on it to see a larger size).

There are a number of goofy things about this postcard, including the language that I am "now ON RECORD" (hooray for me!) and that I should respond promptly "so we may process you" (I hope that doesn't hurt!).

But the dominant visual image is the color logos of United (unfortunately shown as black and white in this scan), which are repeated in color on the other side of the postcard. In context, I think most readers are led to the unambiguous inference that United Airlines has some connection with this offer. That inference is putatively dispelled by the fine print disclaimer at the bottom, which says "not sponsored by United Airlines. But United is a major provider of Airline Tickets." Well, with that, at least there's one true statement in the postcard.

Posted by Eric at 11:37 AM | Marketing | TrackBack

July 24, 2008

Relevancy Trumps Creepiness, and Some Thoughts About Behavioral Targeting

By Eric Goldman

On Monday I spoke on a panel at OMMA Behavioral. See the MediaPost recaps (1, 2, 3, 4). The crowd was buzzing about Dave Morgan's earlier remarks (which I didn't hear) that behavioral targeting is "creepy," and throughout our panel discussion, any enthusiasm expressed about behavioral targeting was tempered by creepiness concerns.

I can understand this reaction, as least a little. When I was younger and first learned about the many tricks of marketer targeting, I was initially aghast by the seeming intrusion. They can't do that, I thought.

As regular readers know, I've outgrown those sentiments. Now, I really don't care what the machines know about me. And if the machines can figure out how to better cater to my interests and reduce the spam in my life, then I'm all for it.

At the same time, I think this latter observation suggests my real problem with behavioral targeting. There will always be some privacy diehards who will object to machine monitoring of their behavior on principle, but most people will be receptive (even after they get through the initial shock about behavioral tracking) if the targeting improves the user or consumer experience. Demonstrate to consumers that behavioral targeting gives them better results, and it's an easy sale. Relevancy trumps creepiness.

But I haven't seen any evidence that behavioral targeting has produced these payoffs (or, for that matter, any meaningful payoffs) for consumers yet. Current behavioral targeting practices might give marketers a little conversion lift compared to other targeting solutions (or not), but they have done little to change the overall fact that ads remain poorly targeted and crummy, and consumers still have plenty of incentives to treat ads as the pain to avoid through ad blindness or technology.

At this point, I'm still wondering if and when behavioral targeting will deliver on its theoretical promise. Sure, we can find excuses for the crummy user experiences today--the technology is still being developed, it's hard to get useful datasets (more on that in a moment)--but those excuses only go so far, and they will wear thin quickly. For behavioral targeting to really be a game-changer, it needs to deliver dramatically improved ad relevancy for consumers, and we're far from that ideal point.

I've argued before that for behavioral targeting to work, the marketer needs a comprehensive dataset about the consumer. Accordingly, a marketer--even an ad network--that relies solely on data collected from a consumer's interaction with web servers simply can't see enough data about the consumer to achieve a sufficient level of relevancy for the consumer. My paradigmatic example: no matter how much Amazon knows about my purchases from it and my browsing habits on its site, they still don't know if I bought a book from someone else unless I tell them (and I have no reason to tell Amazon what books I buy elsewhere).

This is why I'm so intrigued by the Internet access provider-level targeting exemplified by Phorm and NebuAd. In theory, they get access to much better datasets than web server-level targeters. If I browsed for a book on Amazon but I bought the book at barnesandnoble.com, the Internet access provider can know this while neither Amazon or B&N will know about my interactions with the other vendor.

For this reason, I've been quietly bemused by the legal fracas over Phorm and NebuAd's practices. Don't get me wrong--although the analysis is intensely fact-specific and I don't have all the facts, I have serious concerns about the legality of their practices. But from my perspective, the battles over the legality of Phorm and NebuAd are a smokescreen for the real issue, which is that marketers who have only server-level data don't want to compete against someone who has a better dataset than them. So expect plenty of continued fireworks over Phorm and NebuAd, but don't kid yourself that it's only the privacy advocates beating up on them.

Posted by Eric at 02:05 PM | Marketing , Privacy/Security | TrackBack

July 01, 2008

June 2008 Quick Links

By Eric Goldman

Trademarks/Domain Names

* Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, 2008 WL 22043807 (10th Cir. May 29, 2008). CMLP writeup. Nice 10th Circuit win for a gripe site against trademark infringement and cybersquatting. This case, plus the SKI VAIL case, indicate that the 10th circuit is making progress undoing the harm it created in the Australian Gold v. Hatfield case.

* Georgia has a new anti-phishing law (16-9-109.1) that acts as a para-trademark law. See my comments on the analogous California anti-phishing law.

* After initiating a trademark lawsuit against a consumer review site and soundly losing in court, Lifestyle Lift paid $17,500 to settle its own lawsuit and avoid claims for legal fees under Rule 11 and the Lanham Act.

* Marty reports on a German case saying that white-text-on-a-white-background is a trademark use.

* Update on the battle over the trademark registration for "SEO."

* Will TLD proliferation lead to a new open era in domain name administration, or will the resulting anarchy just reinforce that top search engine placement is the really important online real estate? It seems like the currently limited number of TLDs has some benefits from a bounded rationality standpoint, and those benefits will be lost in a cacophony of unknown TLDs.

Patents

* My colleague Colleen Chien has posted "Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission" (forthcoming William & Mary Law Review). She empirically demonstrates that the ITC mostly involves disputes between two domestic litigants, making it a redundant battleground with federal district court but nevertheless an attractive venue for plaintiffs due to a number of procedural advantages. She makes a number of recommendations to eliminate the litigation gamesmanship offered by having parallel venues. Check it out.

Search Engines

* Udi Manber, chief algorithm keeper for Google, reiterates why it's silly for lawyers and judges to put too much legal emphasis on the relative placement of search engine results, saying "it's definitely the case that if you do the same search on a different cluster, you may get slightly different results at a given time. It's also the case that if you do the same search on different days you may get different results, because some of the results are things we indexed five minutes ago."

(Over)Regulation

* In response to an enforcement effort by the NY AG's office, several Internet access providers have blocked access to newsgroups that are putatively sources of child pornography. See the NYT story and the NY AG press release. In practice, this means wholesale takedowns of newsgroups that may have nothing to do with child porn. For example, Verizon is killing all USENET hierarchies except comp.*, misc.*, news.*, rec.*, sci.*, soc.*, and talk.*. Wired suggests this is the death of online intermediary freedom as conceptualized in 47 USC 230. Of course, 230 never protected intermediaries from criminal exposure for child porn, and this isn't the first time that an access provider has knuckled under to the NY AG's office. See the BuffNet enforcement action from 2001.

* Ohm, Paul. The myth of the superuser: fear, risk, and harm online. 41 UC Davis L. Rev. 1327-1402 (2008). A neat article on how regulators manufacture a fake bogeyman, the unbeatable "superuser," as a justification for expansive regulatory power.

* No evidence that data breach disclosure laws actually help reduce identity theft. Surprised?

* The FTC wants civil enforcement authority for spyware actions. Haven't they heard that the adware battle is already over...and they won?

Contracts

* Mark Radcliffe expresses concern about the ALI's proposed software licensing project on open source licenses.

* Sarah Bird on a messy contract lawsuit involving an SEO contractor.

Anonymity

* Tendler v. www.jewishsurvivors.blogspot.com, 2008 WL 2352497 (Cal. App. Ct. June 10, 2008). A subpoena request to identify a blogger doesn't support an anti-SLAPP cause of action.

* In the AutoAdmit lawsuit, Doe 21's motions to squash the subpoena and proceed anonymously were both denied. David Hoffman provides an update on the case.

Event Tickets

* Chicago has moved against eBay for reselling tickets in violation of its amusement tax law.

* The Ticketmaster v. RMG case ended with a default judgment granting a permanent injunction and $18.2M in damages.

General

* Vanity Fair: How the Web Was Won.

* Paul Levy blogs about a plaintiff's effort to bypass 230 by suing the authors of complaints about the vendor and then joining the consumer complaint site as a necessary party as a cost-increasing tactic.

* BusinessWeek on emerging technological tools to protect workers' attention against unwanted/untimely interruptions.

* Text message-savvy kids educate the North Carolina DMV about the meaning of the term "WTF," which was used on a license plate example on the DMV's website.

* I have one free pass to OMMA Behavioral in San Francisco July 21. First person to send me an email asking for the pass gets it.

Posted by Eric at 12:32 PM | Adware/Spyware , Content Regulation , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

June 25, 2008

Consumer Complaint Site Defeats Lawsuit By Unhappy Vendor--Nemet v. ConsumerAffairs.com

By Eric Goldman

[Note: I'm back from my vacation. For a short recap of my experience, see my FAQs about my trip to the Hulahula River in the Arctic National Wildlife Refuge.]

Nemet Chevrolet Ltd. v. ConsumerAffairs.com, Inc., 2008 WL 2557380 (E.D. Va. June 18, 2008). The CMLP page with links to source documents.

ConsumerAffairs.com is a consumer review site with a twist. It describes itself as:

a private, non-govermental [sic] entity that empowers consumers by providing a forum for their complaints and a means for them to be contacted by lawyers if their complaints have legal merit. Your complaints and comments may be published, shared with the news media and reviewed by attorneys at no cost to you.

A Legal Times article written when this lawsuit was first initiated raises some questions about ConsumerAffairs.com's architecture. First, it suggests that the domain name capitalizes on consumers who might mistakenly assume that the site is affiliated with a governmental consumer affairs office. Second, the article questions the ties between the site and the Horwitz plaintiff's class action law firm, which mines the consumer-submitted complaints looking for potential class action claims and named plaintiffs. But regardless of these attributes, for my purposes ConsumerAffairs.com is a garden-variety consumer review site. Consumers submits their gripes and ConsumerAffairs.com publishes them. As a natural consequence, some vendors will be unhappy with the things consumers are saying about them.

This lawsuit's unhappy vendor is Nemet Chevrolet, a Jamaica, NY auto dealer who has been the target of several consumer-submitted complaints on ConsumerAffairs.com. See, e.g., this page. Nemet sued ConsumerAffairs.com twice but each time voluntarily dismissed the lawsuit for jurisdictional concerns. Finally, satisfied it found jurisdiction over ConsumerAffairs.com, it brought out the big guns--specifically, DC powerhouse law firm Patton Boggs. As the Legal Times article quotes Nemet, "I knew I had to do something, and I got a very, very powerful law firm." Sadly for Nemet, its very, very powerful law firm's complaint still got quickly crunched by a 12b6 motion to dismiss.

Nemet's claims for defamation and tortious interference were preempted by 47 USC 230. This is really a textbook application of 230--the complaint even specifies that the posts were written by third party consumers. Thus, the only issue on the court's mind is whether 230 supports a 12b6 (it correctly determines that it does). Nemet tries to get around 230 by alleging in its briefs and supporting documents that ConsumerAffairs.com created the content at issue and wrote headlines and other supporting materials, but the court refuses to consider these allegations because they weren't in the complaint. Some courts might have entertained a leave to amend the complaint to let these allegations in, but this court clearly wasn't interested.

The court also dismisses the Lanham Act unfair competition and false advertising claims for lack of standing because Nemet and ConsumerAffairs.com aren't competitors. Alternatively, even if there was standing, the court would dismiss both claims:

* the unfair competition claim [this is ambiguous but I think it actually is treating it as a trademark infringement claim, even though the complaint didn't allege infringement] because an auto dealer and a consumer complaint site are so dissimilar that there is no possibility of likelihood of consumer confusion. The court's discussion is rather garbled here, so I'm not exactly sure what the court was doing or saying. However, if the court was thinking of this as a trademark infingement claim, then its ruling is clearly out of sync with other uncited cases (such as the SMJ case), and trademark infringement claims are not really susceptible to dismissal on a 12b6.

* the false advertising claim because consumer complaints aren't advertising as contemplated by the statute.

I have some questions about the rigor of this court's legal analysis, but I also think the court's message is clear and unmistakable: if a vendor has a problem with a consumer review or complaint online, TAKE IT UP WITH THE CONSUMER AND LEAVE THE INTERMEDIARY OUT OF IT.

UPDATE: Rebecca does a better job sorting out the Lanham Act analysis than I did. WRT to the false advertising claim possibly being preempted by 230, this is one of the big blind spots of 230 that will be explored in future cases. See, e.g., the Mazur case.

Posted by Eric at 11:23 PM | Derivative Liability , Marketing | TrackBack

June 04, 2008

Google Sued for Running Ads for "Fraudulent Mobile Subscription Services"--Goddard v. Google

By Eric Goldman

Goddard v. Google, Inc., Case No. 108CV111658 (Cal. Super. Ct. complaint dated April 30, 2008). Google's notice of removal to federal court C08 02738 (N.D. Cal. removal notice dated May 30, 2008). [warning: 1.5MB file. Google's notice contains a copy of the original complaint.]

Cyberlaw is filled with examples of plaintiffs suing the wrong defendant for perceived transgressions committed by someone else. Today's misdirected lawsuit involves "fraudulent mobile subscription services," which are optional third party services for cellphones (such as ringtones) that are charged on a periodic basis. The plaintiffs in this putative class action lawsuit feel like they got fleeced by providers of these subscription services. If they did, I hope they get appropriate redress from the wrongdoing vendors. But instead of suing the allegedly fraudulent vendors, the plaintiffs think Google should cover the losses for the sole reason that Google ran ads for the services. The argument goes as follows:

* Google has an express policy requiring mobile service providers to disclose certain info to consumers about their practices
* Google deliberately does not enforce this policy (or inadequately enforces it) to enjoy undeserved cash
* As a result, Google should stand behind all of the losses committed by its advertisers

There are some obvious problems with this argument. First, it's a gross example of cyberspace exceptionalism. An analogy might be that dead-trees newspapers should stand behind any losses suffered by readers who transact with newspaper advertisers. Sounds ridiculous? It does to me, whether the publisher is online or off.

Second, this argument ought to be clearly, squarely and soundly trumped by 47 USC 230. eBay has won on this exact point when plaintiffs have tried to hold it liable for accepting advertising (in the form of listings) for fraudulent products (at minimum, the Gentry case involving fake sports memorabilia seems apropos). The recent Doe v. MySpace case is also analogous, because the plaintiffs were trying to hold MySpace liable under a "premises liability" theory for tortious activity that took place outside of its premises. Either way, if Google's sole role in the process was publishing third party ads, it's not liable per 230.

It's not clear if the plaintiffs know about 230 or think it applies to this case, but they made two arguments that could be used to argue around 230. First, they allege that Google helped write the ad copy. I'm still not sure if this allegation actually is enough to hold Google liable for downstream fraud, but unless Google actually wrote the copy itself, it's not liable for third party ads even if it helped edit them or prescreened them (see Ramey v. Darkside Productions).

Second, they try to argue that Google's contract with its advertisers describing minimum standards for mobile service vendors running Google ads is an express marketing representation that binds Google for any breaches by the advertiser. By anchoring the claim in false advertising, the allegation might be designed to take advantage of the Mazur v. eBay exclusion to 230. However, treating contractual restrictions with a third party as affirmative representations to consumers is the exact same analytical error made by the New Jersey Attorney General's office in the JuicyCampus investigation, and the error is no less baffling here. I remain surprised that bright lawyers so fundamentally misunderstand the interaction between contract and false advertising law.

There's one more twist to this lawsuit that merits discussion. As a predicate harm for some of its claims, the plaintiffs argue that their cellphones are computers under the Computer Fraud & Abuse Act (CFAA) and the vendor's confirmatory text messages (required to authorize the service) are unauthorized accesses of a protected computer under the CFAA. I'm not really sure what to make of this theory, but I'm pretty sure it's novel (not necessarily in a good way). I'm OK with treating at least some cellphones as computers under the statutory definition, although this would expand the CFAA's reach quite a bit, but I think it would be highly problematic to treat text messages to a cellphone as an unauthorized access. And even if we did that, I still don't see how Google is responsible for the violation.

(For kicks, there is an analogous claim that Google aided and abetted the vendors' trespass to chattel of the cellphones).

One more thing: this interpretation of the CFAA follows the DOJ's recent attempt to treat breaches of a website's user agreement as a criminal CFAA violation in the Lori Drew prosecution. Given these crazy expansive CFAA claims, it may be time to rethink that statute.

Posted by Eric at 08:20 AM | Derivative Liability , Marketing , Privacy/Security , Search Engines | 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 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 23, 2008

Online Advertising Conference Recap

By Eric Goldman

Last Friday, the High Tech Law Institute and the Berkeley Center for Law & Technology co-sponsored the Law & Business of Online Advertising conference. We had first-rate panelists and an enthusiastic audience of over 100 attendees. Rebecca blogged the event (tutorials, consumer issues, publisher issues, advertiser issues) and Sarah Bird posted her own recap. My understanding is that BCLT will post the audio from the conference to the conference website in the near future.

I'm going to focus my recap on just three of the talks.
_____

Joel Winston from the FTC (speaking for himself, not on behalf of the commission) spoke on the consumer issues panel. He said that consumers have a feeling of lack of control on the Internet. He thinks that consumers are generally aware of online tracking, but the tracking process is opaque, and consumers don't understand the future implications for use and disclosure of the tracked data. Surveys say that most consumers think tracking shouldn't be done at all or should be governed by an opt-in or opt-out process. Many people like targeted ads but they are worried about other uses of the data, such as security breaches, government misuse and secondary uses.

So consumers want transparency and control, and trust is the key. Adults are concerned about posting data online but kids will post very intimate details online. People don't understand the privacy tradeoffs, such as the connection between targeted ads and free content. And transparency isn't working when consumers don't read privacy policies. Self-regulation is the right approach, but the FTC will step in to protect consumers.

The FTC's behavioral principles:
* transparency and control
* reasonable security and limited data retention
* express consent for material changes to a privacy policy
* express consent to use sensitive data.
_____

Mark Cooper spoke about an interesting new paper he's working on. He starts with the premise that everyone hates "interruption marketing" such as TV ads: consumers hate TV ads (interruptive) and advertisers hate TV ads (can't measure efficacy). In contrast, he thinks newspaper ads are clearly better because they are easy to skip, easy to store and contain more useful information. [Eric's note: Mark is making a highly stylized argument. I explored the relative merits of different ad media in this paper.]

He thinks online advertising can improve on interruption marketing because the Internet is a two way conversation, not push marketing. He outlined 4 dimensions to measure the acceptability of advertising:

* influence. Online advertisers don't create audiences, they chase audiences created for them.

* intrusiveness. Online advertising isn't in the "middle of content." [Sounds like Mark has never experienced an unconsented adware install...and I'm not sure how he'd explain spam in one's in-box...] But he worries that data collection may be more intrusive than other media.

* ubiquity. I think he argued that online advertisers don't devote as much on-the-page real estate to ads as newspapers do. [Sounds like he's never been to a domainer's website...]

* efficiency (delivery of useful information). The cost of online advertising is less than TV, which expands the market for advertisers. This also facilitates the creation of hyper-niche content sites.

Despite some of the benefits of online advertising, he worries about how much information he needs to give up to get these improvements. He thinks behavioral targeting and tracking is inherently deceptive but in-session contextual advertising is OK, and maybe informed consent may be OK.

[Eric's comments:

* I'm not sure the four dimensions he uses are the right dimensions to measure advertising

* His arguments relied on a number of assumptions that aren't very robust, which limits the extensibility of his analysis.

* I think the statement that behavioral tracking is inherently deceptive must be overstated for rhetorical emphasis. Otherwise, I don't think that statement stands up to critical scrutiny.

* I argue (in great/excessive detail) that some types of behavioral targeting are both good and inevitable in this paper.]
_____

Rebecca Tushnet spoke on intermediary liability. She made two main points:

1) Intermediaries aren't good representatives of the speakers who they facilitate because the intermediaries are adverse to their users. Ex: the 512 notice-and-takedown provisions, Google's policy on TMs in ad copy.

2) There is pressure to move away from a robust interpretation of 47 USC 230. Ex: Roommates.com, the recent Adult Friendfinder case (which I hope to blog on soon) and the Quiznos case.

She thinks there may be merit to looking at the New York Times v. Sullivan case, which people sometimes forget is an advertising case (i.e., the plaintiff was trying to hold the newspaper liable for ad copy supplied by an advertiser). The newspaper wasn't liable in that case unless it had actual malice about the definition--a very high scienter bar. Perhaps the actual malice standard could be more widely used in the online context; among other benefits, notice alone wouldn't create liability.

Posted by Eric at 09:06 AM | Derivative Liability , Marketing , Privacy/Security | TrackBack

April 22, 2008

March 2008 Quick Links, Part II

By Eric Goldman

Copyright

* A lot of action on whether “making available” a file in a P2P share directory is copyright infringement, including Elektra v. Barker and London-Sire v. Doe. Patry summarizes the action.

* Ticketmaster L.L.C. v. RMG Technologies, Inc., 2008 WL 649788 (C.D. Cal. March 10, 2008). Copyright misuse is not an independent cause of action; it's only a defense. HT Evan Brown.

* A student asked me a good Q that I couldn't answer. Given that copyright work transfers are subject to the risk of a non-waivable termination of transfer 35-40 years after the transfer, how do companies account for that risk on their financial statements?

* A man whose Youtube video was taken down by lawyers for Van Morrison strikes back with a new video: "The Lawyers Pulled My Video Down."

Trademark

* The Utah governor signed SB 151, the repeal of the Utah Trademark Protection Act.

* Wilson v. Yahoo! UK Ltd., No. 1HC 710/07, Feb. 20, 2008. A UK court says that buying the broad-matched keyword "spicy" does not constitute an actionable use in commerce of the trademark "Mr. Spicy." In response, Google liberalized its keyword policy in the UK and Ireland to match its US and Canada policy.

* Vulcan Golf, LLC v. Google Inc., 2008 WL 818346 (N.D. Ill. March 20, 2008). This is another interesting development that I just didn't have time to blog (see my earlier post when the lawsuit was filed). In a lengthy opinion, the district court rejected most of the significant motions to dismiss, saying that she wanted to let the case develop. Ironically, she also complained about the workload in the case--perhaps this is obvious, but granting some motions to dismiss would help clear your docket queue! Unfortunately, most of the opinion isn't insightful because so many issues were reserved for further development. Perhaps the most interesting discussion relates to the "use in commerce" question, and the court rejected a motion to dismiss on that basis: "The plaintiffs have alleged that Sedo and the other Parking Defendants transacted in and improperly profited from domain names that are deceptively similar to the plaintiffs' trademarks. Such statements sufficiently allege the "use" of a domain name to allow the infringement claims against Sedo and Oversee to move forward on this issue." Some other commentary on the case: Sarah Bird and David Fish.

* American Airlines loves Google (except for the part where it's suing Google). HT Search Engine Land.

State Regulation of the Internet

* Some state legislators are becoming privacy entrepreneurs about behavioral targeting. Venkat does a recap. But Zachary Rodgers points out that some of the operative provisions track NAI's self-regulatory guidelines. More angst about deep packet inspection by IAPs.

* Ewert v. eBay, Inc., 5:07-cv-02198-RMW (N.D. Cal. March 31, 2008). eBay isn't an "auctioneer" or an "auction company" as defined by California's Auction Act.

* The Tennessee legislature is considering a goofy response to the Hannah Montana ticket furor.

* Ken Magill at Direct wrote an article entitled "Psychotic Law Clowns in Utah at it Again." A highlight: "Whenever I think of Utah's state legislature, I envision a room full of Jack-in-the-Boxes straight out of a never-made Twilight Zone episode. Every fall, when it's time for the next legislative session, their cranks begin to turn, a chorus of "Pop Goes the Weasel" begins, and on the note for "pop" the lids fly open and dozens of psychotic clown heads spring out of the boxes chanting: "New Internet Law! New Internet Law!""

Other Stuff

* The Economist: The Battle for Wikipedia's Soul. "To create a new article on Wikipedia and be sure that it will survive, you need to be able to write a "deletionist-proof" entry and ensure that you have enough online backing (such as Google matches) to convince the increasingly picky Wikipedia people of its importance. This raises the threshold for writing articles so high that very few people actually do it. Many who are excited about contributing to the site end up on the "Missing Wikipedians" page: a constantly updated list of those who have decided to stop contributing. It serves as a reminder that frustration at having work removed prompts many people to abandon the project." See a similar article in the NY Times Review of Books.

* FTC busts Goal Financial for inadequate security practices.

* The DOJ is busting people who click on a link that purportedly offered child porn, prosecuting them for attempted downloading of child porn.

* Orin Kerr, "Criminal Law in Virtual Worlds," University of Chicago Legal Forum (forthcoming). Orin sensibly argues against virtual world exceptionalism with respect to criminalizing activities in virtual worlds.

Posted by Eric at 10:09 AM | Content Regulation , Copyright , Domain Names , Marketing , Privacy/Security , Trademark , Virtual Worlds | 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 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 12, 2008

The Law & Business of Online Advertising Conference Announcement

By Eric Goldman

I'm pleased to announce that the High Tech Law Institute at Santa Clara Law School has teamed up with the Berkeley Center for Law and Technology to organize a one-day symposium on the Law and Business of Online Advertising, April 18, 2008 in Berkeley. We have a first-rate group of speakers and a nice diversity of important topics. Best of all, registration is free and CLE is available at a nominal cost. Here's the official notice:

With the explosive growth of online advertising, businesses and their counsel must be aware of new technologies, their legal implications, and evolving legal risks in the field. The Law and Business of Online Advertising brings together academics, practitioners, business leaders, and technology experts to discuss legal, policy, and technical developments in online marketing. This intensive event begins with two tutorials led by Professor Hal Varian (Chief Economist, Google) and Microsoft's Kim Howell on the economics and technology of online advertising, followed by panels exploring online advertising issues faced by consumers, publishers, and advertisers. In-house and outside legal counsel who represent or will represent businesses with online advertising should attend, as should those developing or implementing online advertising technologies. Registration is free. To register and view the schedule and speaker bios, please visit the Conference website.

I hope to see you there!

Posted by Eric at 05:28 PM | Marketing | TrackBack

March 04, 2008

Utah Quietly Killing the Trademark Protection Act [UPDATED]

By Eric Goldman

[See update below]

We're coming up on the one year anniversary of the Utah Trademark Protection Act, Utah's effort to kill/tax keyword advertising. It looks like the law may not survive until its first birthday, as the Utah legislature is in the process of amending the act. On Feb. 6, the Utah Senate passed SB 151 and sent it to the Utah House, where it is now pending. A quick perusal of SB 151 indicates that the amendments strike every instance of the term "electronic registration mark" (Utah's phrase for the new sui generis property right it created in the Trademark Protection Act). As I blogged before, the amendments instead focus on allowing trademark owners to electronically register their trademarks in a Utah database (more on this in a moment).

Thus, it looks like the Utah legislature will eliminate all of the new substantive provisions added in the Utah Trademark Protection Act--in other words, a complete 180. On the one hand, I applaud the Utah legislature for reaching the only logical conclusion available to it--that the Utah Trademark Protection Act was stupid and untenable, so wiping the slate clean was both the best social policy and the lowest cost option. On the other hand, I remain shocked that Utah residents tolerate legislators who screw up this big and waste valuable resources enacting ill-advised laws only to waste more resources reversing themselves. If a California legislator screwed up like this, he or she would be recalled faster than you can say "Rose Bird" or "Gray Davis." And I apologize if it's rude to say this, but I get asked this question a lot--when the legislature whiffs as bad as this, yes, we do think the Utah legislature is a (bad) joke.

As for the new electronic registry, I'm a little confused about what Utah is considering. If the database is simply an e-government initiative to cut down on paper filings and push registrants to make electronic filings, that sounds like a positive development but I'm not sure why it would require legislative authorization. But there is an intimation that this will generate new incremental revenues from trademark owners who seemingly will value listing in Utah's electronic database. The fiscal report indicates that the law should generate $50,000 of revenues, enough to compensate for $50,000 of database development costs. Perhaps Utah is planning to get into the worthless-registry business, an industry well-known to all trademark owners. After a trademark registers, the owner gets a blizzard of official-looking letters from companies offering to list the trademark in a proprietary but worthless registry. What better way to scare some cash out of unsophisticated trademark owners than an official solicitation on Utah state letterhead?

Even when the Utah Trademark Protection Act has been fully gutted and eliminated as a threat to the keyword advertising industry, I guarantee that the war is hardly over. Future state legislators are going to find regulating online advertising irresistible, and each of these legislative initiatives poses grave risks to our information economy. As a community, we need to undertake the Sisyphean effort of continuously monitoring our legislators and educating them about the harm they can do with misguided regulatory intervention.

UPDATE: Hold the phone! Perhaps this is not surprising, but the Utah legislature is doing more screwy stuff. When the dust clears, I'll post a new blog post trying to make sense of the madness.

UPDATE 2: It appears that Utah passed the law in the form I blogged about. See here and here. This presumably sends the bill to the governor for signature. I'll blog more about the last 24 hours shortly.

Posted by Eric at 11:14 AM | Derivative Liability , Marketing , Search Engines , Trademark | 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

* 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 12, 2008

Jan. 2008 Quick Links (Non-IP Edition)

By Eric Goldman

47 USC 230

* Doe v. SexSearch, the case absolving a website for age verification of its users, has been appealed.

* The Supreme Court denied cert in Parker v. Google. See 2008 WL 114262.

* NYT update on the Subway v. Quiznos lawsuit. I'm still waiting to see how the CCBill case affects the legal analysis.

Ripoff Report

* CMLP reported that Energy Automation Systems v. Xcentric Ventures has settled.

* A lot of people would love to take down the Ripoff Report. The latest (perhaps unexpected) opponents--the SEO crowd. See here, here and here. Definitely not a group I'd want to have gunning for me...

* Sarah Bird wrote the blog post I wanted to write: a recap of all of the litigation involving the Ripoff Report and its related entities. She updates a number of cases I've blogged about here.

Privacy

* The quest to find defendants in the AutoAdmit lawsuit has spilled over to unrelated websites whose URLs were posted to AutoAdmit, on the theory that AutoAdmit users were likely to have visited there prior to or after the links were posted. See the plaintiff's motion. This has proven to be a controversial move; see critiques from Mike Masnick and Sam Bayard.

* World Privacy Forum's Top Ten Opt Outs.

* The Privacy Rights Clearinghouse has compiled a master list of all the data breaches that have been announced.

Spam

* Venkat on 4 years of CAN-SPAM. I think the best we can say is that CAN-SPAM hasn't destroyed email as a communication tool, but I am skeptical that its significant transaction costs are outweighed by its benefits.

* Search Engine Land shows Wired that its wiki isn't spam-proof and then apologizes for it.

Marketing/Advertising

* Greg Linden predicts a dot-com crash in 2008 where a dry-up of investment capital will lead to marketing desperation: "Much like we saw after the 2000 crash, it is likely that those with little to lose will attempt scary new forms of advertising. The Web will become polluted with spyware, intrusiveness, and horrible annoyances. None of this will work, of course, and there will be lawsuits and new privacy legislation, but we will have to endure it while it lasts."

* Oddee has some vintage ads that couldn't be made today.

Blogging

* Examples of how blogging is actually increasing some companies' sales.

* Giving in to cyberspace exceptionalism, a divorce court judge ordered a husband to stop blogging about the wife. Fortunately, the judge soon realized his error and reversed course, basically throwing up his hands saying "I don't know what to do here." Garrido v. Krasnansky, No. F 466-12-06 (Vt. Fam. Ct. Jan. 14, 2008).

Miscellaneous

* Once again, Mike Masnick says what I was thinking better than I could: "Both Microsoft And Google Are Probably Best Off Shutting Up About Monopolies."

* Wired has a great article on scraping data from major Internet players, many of whom themselves use scraping-like methodologies to gather data: "But beneath all the kumbayas, there's an awkward dance going on, an unregulated give-and-take of information for which the rules are still being worked out. And in many cases, some of the big guys that have been the source of that data are finding they can't — or simply don't want to — allow everyone to access their information, Web2.0 dogma be damned."

* The FTC has cracked down (again) on a website for inadequate security. This time, the e-tailer "Life is good" promised that "all information is kept in a secure file" but a hacker got good stuff (credit card #s, etc.) anyway. The FTC pointed to several deficiencies, including (1) the retailer's failure to store the sensitive data in encrypted format, (2) inadequate efforts to identify and patch security holes, and (3) inadequate monitoring of intrusions.

* Krause v. Chippas, 2007 WL 4563471 (N.D. Tex. Dec. 28, 2007). Court says a website user was bound to the contract when "lead page" of website said "USE OF THIS SITE AND OR SERVICES OFFERED WITHIN THIS FUTURESCOM.COM SITE SIGNIFIES YOUR AGREEMENT TO THIS SERVICE AND USAGE AGREEMENT."

* An interesting British study explains the downsides of government-mandated disclosures to consumers. HT Rebecca.

* I participated in a 30 minute podcasted conversation on the Lawyer 2 Lawyer show on the topic of social networking sites.

* I have 2 copies left of my 2007 Cyberspace Law course reader. First 2 people to email me with a request and their mailing address get them. [UPDATE: Gone!]

Posted by Eric at 05:50 PM | Derivative Liability , Licensing/Contracts , Marketing , Privacy/Security , Spam | TrackBack

January 22, 2008

Wikipedia Revisited: the Wikipedia Community's Xenophobia

By Eric Goldman

Regular blog readers know that I have mixed emotions about Wikipedia. On the plus side:

* Wikipedia is a terrific and fascinating resource that I use multiple times a day (Wikipedia remains the #2 visited site in my Google personalized search history).

* I went to Epinions because I am an enthusiast of the "wisdom of the crowds"--that a dispersed community can generate better results than a single designated editorial source/expert. Wikipedia is the flagship website trying to translate that theory into action.

However, I have serious reservations about Wikipedia. On the minus side:

* With high PageRank and visibility, Wikipedia is a juicy target for spammers and vandals. As a result, at any particular time, it’s hard to know if the content on a page is reliable.

* Further, its unlimited editability limits Wikipedia's utility as an academic resource, and I do not cite it (nor do I not allow students to cite it) for the truth of the matter asserted.

* Spamming and vandalism challenges Wikipedia’s gatekeepers to preserve editorial integrity. So far, Wikipedians have done an admirable job combating these forces. However, the anti-spam/vandal fight has created a major second order problem. Specifically, the Wikipedia community has developed an exclusionary and insular culture that undercuts the community's ability to deliver on Wikipedia's mission in at least three ways:

1) Wikipedia Doesn't Reflect the Wisdom of the Crowds

Wikipedia is an editorially controlled content database. It may have more editors than traditional editorial publications, and those editors volunteer rather than work on payroll, but Wikipedia is effectively indistiguishable from other tightly-controlled editorial publications.

Due to this editorial control, Wikipedia does not internalize the “wisdom of the crowd” effect because the editors prevent the site from actually reflecting the crowds' input. Sure, the technological tools invite contributions from anyone, but the community members do not. Accordingly, most readers can make contributions that actually stick (i.e., aren’t quickly reverted) only by joining the community--a time-consuming process that suppresses contributions from people with domain expertise who don't care enough to jump through those hurdles. The community's xenophobia is completely understandable given the constant attacks from spammers and vandals, but it also blocks valuable contributions from improving the site.

Worse, Wikipedians routinely rely on their own judgments to make editorial decisions, even if they lack the requisite expertise. As a case study, let me describe (with some bemusement) the fate of my own Wikipedia page.

The page was first created in response to my initial prediction of Wikipedia's demise--IMO not the most noteworthy thing I've done in my career, but clearly interesting to dedicated Wikipedians. Subsequent Wikipedians wisely questioned the merit of having a Wikipedia entry only based on the "meta" nature of my prediction, and my page was nominated for deletion. Unfortunately, very few voting Wikipedians appeared to do any independent research to assess my notability (which isn't a hard thing to do in my case). Instead, they based their judgment on the internal credibility of the content already on the page plus a limited number of external links submitted by other Wikipedians. As a result, the Wikipedian votes were not based on any first-hand expertise or any meaningful infusion of outside knowledge. Even so, the community deadlocked on my notability, which preserved the status quo and kept my page up...until, a half-year later, a single Wikipedian swept through and killed the page anyway. Thus, the editorial process was suspect at every stage: (1) the initial decision to create a page about me based on an unimportant attribute, (2) the assessment of my notability by non-experts who did not conduct outside research, and (3) the post hoc decision of an individual Wikipedian to bypass the community vote.

2) Wikipedia's Brand Suffers From Its Exclusionary Responses

Wikipedia’s exclusionary nature does more than simply prevent good contributions from improving the site--it may degrade users' loyalty towards Wikipedia. Consider the following unsolicited email I received in response to my predictions of Wikipedia's future demise:

There's another angle you should look at, which may have just been recently emerging: Wikipedia pisses people off.

It doesn't piss off the regular person who just uses it as a reference, but it pisses of about 100% of everyone who sincerely tries to contribute. Everyone that I've met in real life who has tried to edit Wikipedia has had a bad experience editing Wikipedia, and many feel that the people who reverted their edits or deleted their pages were mean-spirited about it.

Wikipedia is a lot more like Microsoft or Wal-Mart, and a lot less like Google. If someone hacks into Microsoft's system, or Wal-Mart's system, then they're going to have friends that say, "Way to go dude!" If someone hacks into Google, they're going to have friends that say, "That's not cool, dude."

For some reason, Microsoft and Wal-Mart have a lot of ill will toward them. At the same time, Google has a lot of good will toward it. Microsoft and Wal-Mart have deep pockets to fend off the attackers, but if Microsoft or Wal-Mart were supported entirely by volunteers and donations, they'd both die immediately. Wikipedia is a Wal-Mart, and not a Google.

Eventually, as part of your prediction, Wikipedia will piss off enough people that it won't just be gamers or marketers corrupting Wikipedia. It will be people who have been slighted.

I'm not sure about the Walmart-Microsoft/Google analogy, but when Wikipedians brusquely squash people trying to contribute, the contributing individuals may think less of Wikipedia and decrease their willingness to support Wikipedia’s mission. Today, Wikipedia may be so popular that it can afford to lose a few friends; but fortunes inevitably change, and schadenfreude feelings can persist a long time.

3) Wikipedia Will Struggle to Replace Editors Who Turn Over

Hardcore Wikipedians inevitably will check out over time because of life changes, burnout or frustration with the community norms. However, the insular nature of the community makes it hard to join the community, so Wikipedia will struggle to replace departing Wikipedians. Worse, I think there is a tipping point of volunteer editors; below that number, the community will not replenish itself. Instead, the community will enter a death spiral as everyone independently decides to head for the door before becoming the last person standing. There is some limited evidence to suggest that Wikipedia might be slowly declining—the first stage in a possible downward spiral. We’ll have to see.

Is Xenophobia Unavoidable in Wiki Communities?

All of this leads me to a thorny theoretical question that I've been wrestling with. Is it inevitable that every mass-market wiki will form a community of xenophobic editors, or is there something unique about this particular wiki's culture that has caused it to do so? Because of the threats of spammers and vandals, it seems likely that any wiki will need some level of inherent paranoia among its guardians to survive. Arguably, Wikipedia has gotten this far and succeeded as well as it has only because it has vigilant guardians who don't trust outsiders. At the same time, this insularity sows the seeds for the community's destruction as the turnover problem reaches the tipping point that leads to the death spiral. So perhaps mass-market wikis are inherently doomed from the outset, no matter how high a pinnacle they reach along the way.

Posted by Eric at 12:00 PM | Marketing | TrackBack

January 15, 2008

Web 2.0 Marketing and the Law

By Eric Goldman

Today I participated in the Pike & Fischer teleconference on Web 2.0 legal issues (" Best Practices for Businesses Exploring…Exploiting…and Expanding in Web 2.0"). Among other things, I was asked, in 8 minutes or less, to provide some insightful best practices about using social networking sites for marketing purposes. The irony is that we as professors struggle all of our lives to say anything insightful ever, so being asked to do so in 8 minutes was quite a stretch for me. Here are the notes I prepped for my big moment in the sun:
________________

1) I’m not sure how much Web 2.0 marketing differs legally from Web 1.0 marketing. The same basic rules apply:

• The marketing content has to be true
• If required, the marketing needs the appropriate metadata
• The marketing must comply with media-specific rules for its dissemination

2) The main innovation of Web 2.0 marketing is leveraging off customers’ social networks.

The idea is that friends are more likely to find friends’ recommendations more influential than advertiser-supplied marketing.

Pimping out friendships isn’t entirely new. It’s the basic premise of multi-level marketing and in-home sales parties such as Amway and Tupperware.

Two examples of social network-based marketing.

First, word-of-mouth/buzz marketing, which increases awareness of a brand by getting bloggers and other consumers to start talking about the brand. Second, Facebook’s Beacon program, where a person’s purchases were disclosed to his/her friends as a type of implicit recommendation (i.e., if my friend is interested in X, maybe I should be too).

Social network-based marketing is surprisingly unregulated. There may be sponsorship disclosure rules or rules against trying to pass off marketing as editorial content. There may be privacy laws that govern the movement of consumer data in a Beacon-type situation. But in general, this area is lightly regulated.

Even if legal regulation doesn’t stand in the way of social network-based marketing, adverse consumer reactions might. People aren’t foolish, and they don’t like feeling deceived. When a marketer gets its hand caught in the cookie jar, the bad publicity and loss of consumer trust can put the marketer in a worse position. For example, I predict that Beacon, combined with some other missteps by Facebook, will suffer a long-term hit to their brand.

3) Although not unique to Web 2.0, three examples of ways that Web 2.0 marketing has created legal friction:

• If you’re dealing with kids, COPPA may apply. Xanga.com found this out the hard way when it was busted under COPPA for $1M because it allowed kids to self-report their age.
• Harvesting data from social networking sites can lead to trouble. ConnectU got into trouble by automatically collecting data from Facebook—even though Facebook users gave ConnectU their credentials to log in.
• Spamming is never good. theglobe.com basically got put out of business for using MySpace’s internal messaging tool to send spam.

Posted by Eric at 08:45 PM | Marketing | TrackBack

December 28, 2007

December 2007 Quick Links

By Eric Goldman

Marketing

* I've blogged about Various, which operates AdultFriendFinder.com, before. They made the news recently in two ways. First, they sold to Penthouse for half-a-billion dollars. Second, they settled with the FTC for "pelting" users with unwanted sexually graphic pop-up ads. Do you think these developments are linked in any way... ? Could it be that Various was willing to settle up with the FTC on any terms so that they could get a half-billion dollar check? In this respect, I'm reminded of the MySpace/Intermix $7.5M settlement with the NY Attorney General's office in a dubious enforcement action that was immediately followed by MySpace's sale to News Corp. for $580M. Hey government enforcement agencies--if you can spot hot dot-coms that are negotiating mergers and bring an enforcement action, you can name your price!

* Abrams v. Facebook, the lawsuit over Facebook sending text messages to old phone numbers, has settled. See Michael Erdman and the AP.

* Newsday circulation fraud case (involving inflated circulation numbers) nets $83M restitution, $15M criminal settlement, and nine criminal convictions.

* Texas AG Abbott is prosecuting two companies under COPPA. As far as I know, this is the first state-level enforcement action under COPPA.

* Florida AG Michael Palecki looks to be targeting online advertisers for ads placed by their affiliates.

* The Do-Not-Call registry has become an even less dynamic reflection of preferences.

Copyright

* The Second Circuit kicked out the settlement struck in Tasini's aftermath because it covered unregistered copyrights. Rebecca makes some good points.

* Perez Hilton drops YouTube because they took down one of his videos in response to a takedown notice. On the one hand, this shows that there can be marketplace mechanisms that give feedback to intermediaries based on the restrictiveness of their takedown policies. On the other hand, YouTube was a free service; what did you expect?

* Michael Savage, a radio personality, is suing a website for posting audio clips of his rants as part of the website's criticism of him. See the NYT and CMLP.

* A special master has been appointed in the Grokster case to determine the possible filtering options available to Streamcast. I'm actually amazed that this case is still going!

Reviews and Ratings

* WSJ: Restaurants are giving away free meals to online reviewers to try to get improved consumer ratings.

* BrokerCheck, a regulator-sponsored website for consumer gripes about securities brokers, deletes negative gripes if the complaint settles.

* Retail store signage ("shelf talkers") routinely overstate the Wine Spectator ratings assigned to wine on the shelves.

Best of Mike Masnick

Mike Masnick of Techdirt is a terrific blogger who is smart, prodigious and opinionated. This month he had some noteworthy posts (even by his standards), including:

* Some wise words about Fark's trademark application for NSFW.

* “Noncompete Agreements Are The DRM Of Human Capital.”

* "Anything Goes Wrong Online? Yell 'Net Neutrality' As Loud As Possible!"

Search Engines

* Google appears to have categorically wiped out PageRank for bloggers participating in PayPerPost.

* Danny's sensible remarks on the role of humans in Google's algorithmic search results.

* Search engines pay $31.5M to settle up for running gambling ads. A significant share of this settlement amount is actually public service ads, not cash. Note that enforcement of federal criminal gambling laws is one of the few exceptions to 47 USC 230; if this had been an enforcement of state anti-gambling criminal laws or a civil action, it should have been preempted.

General

* "Like the proverbial tree falling in a forest, the unauthorized use of a trademark that is never perceived by anyone cannot be said to create a likelihood of consumer confusion." Custom Manufacturing and Engineering Inc. v. Midway Services Inc. (11th Cir. Nov. 21, 2007). This statement was made in the context of a counterfeit component part, but it sounds like a good reason to reject liability for including trademarks in keyword metatags.

* Todd Hollis is suing DontDateHimGirl.com a second time. Last time the court sidestepped 230. This time, I hope the court will use 230 to terminate the lawsuit permanently.

* Mark Radcliffe's "2007 Top Ten Free and Open Source Software Legal Issues"

* A nice recap on "location-based mobile services," the delivery of services predicated on GPS devices in cellphones. UPDATE: It looks like mobile marketing/privacy is the topic du jour (or, at least, a topic worthy of end-of-the-year recaps). AP weighs in on the same topic.

* Kaspersky flags Windows Explorer as a virus and then reverses itself, calling this a false positive. Then again, many people consider Microsoft software "malicious code," so maybe the positive wasn't so false after all.

Posted by Eric at 09:39 AM | Adware/Spyware , Copyright , Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

December 19, 2007

Avvo Wins Big in Ratings Lawsuit--Browne v. Avvo

By Eric Goldman

Browne v. Avvo, C07-0920RSL (W.D. Wash. motion to dismiss granted Dec. 18, 2007)

The lawsuit against Avvo for lawyer ratings has been dismissed without leave to amend. This is a big win for Avvo.

The ruling turns on two legal conclusions. First, the judge says that Avvo's ratings, even if generated through automated algorithms, are opinions, not facts, and thus fully qualify for First Amendment protection. Second, the judge rejects the lawyers' claim under Washington consumer protection law because (A) the "editorial" rankings are not commercial enough to be regulated by the act, even when the publication of those rankings is supported by advertising (a conclusion I fully agree with, but many courts--especially in the trademark arena--would have inappropriately labeled the rankings a commercial activity), and (B) the lawyers' damages are too speculative because it's impossible to measure how many consumers will be misdirected by any rankings inaccuracies and how much value a lawyer would have derived from those misdirected consumers.

Along the way, the judge expresses a healthy skepticism (bordering on snideness) about lawyer rankings in general, calling the Lawdragon rankings "nonsense," pointing out that he had trashed a "Super Lawyer"-ranked lawyer who had engaged in "unreasonable and vexatious litigation tactics" in his courtroom (and who retained the ranking even after the trashing) and chiding "how ludicrous the rating of attorneys (and judges) has become." This judge fully understands ranking silliness and gives it no quarter. Right on, judge!

Lawyers being lawyers, it wouldn't surprise me to see the plaintiffs appeal the ruling. But the judge's opinion is solid and any appeal would likely be fruitless.

Other comments on the case:

* Mark Britton of Avvo tells the story from his perspective. The official Avvo press release.
* John Cook of the Seattle Post-Intelligencer
* WSJ Law Blog
* Denise Howell
* The complete CMLP page on the lawsuit

Posted by Eric at 10:23 AM | Derivative Liability , Marketing | 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 t