Technology & Marketing Law Blog

August 19, 2010

47 USC 230 Preempts Sponsorship/Endorsement Liability--Black v. Google

By Eric Goldman

Black v. Google, Inc., 2010 WL 3222147 (N.D. Cal. Aug. 13, 2010). The complaint.

The Blacks run a roofing company. They claim someone posted an anonymous defamatory comment on an unspecified Google website, and this "comment misrepresents their work and has devastated their businesses." They sued Google for several business torts (although, interestingly, not defamation). I posted the complaint back in May and tweeted:

Roofing contractor sues Google over negative business review. Hello 47 USC 230!

I believe the plaintiffs and 47 USC 230 are now properly introduced. The court efficiently gets to the heart of the matter: "A fair reading of Plaintiffs’ complaint demonstrates that they seek to impose liability on Defendant for content created by an anonymous third party...Based on these allegations, Defendant is immune from their suit."

The plaintiffs, working pro se, try to get around 230 by arguing that they seek to hold Google liable for its "programming." Neither the judge nor I are clear on what that means, but we're both clear that the allegation doesn't change the answer.

Next, the plaintiffs argue that Google endorsed or sponsored the allegedly tortious content. The court recognizes this for exactly what it is: "an end-around the prohibition on treating it as the publisher or speaker of it." The court continues: "Such a ploy, if countenanced, would eviscerate the immunity granted under § 230."

I heartily agree. I made this exact point when critiquing the FTC's Endorsement and Testimonial Guidelines, where the FTC sought to impose liability on advertisers for online content posted by independent third parties; and I made a similar point when critiquing the SEC's proposal to impose liability on issuers for linking to third party websites. This case is entirely clear that 230 preempts liability premised on endorsing or sponsoring third party online content. Hey, FTC and SEC, I hope you're paying attention! The courts may not back up your expansive liability theories.

Finally, the plaintiffs argue that Google lacked an adequate dispute resolution procedure. 230's immunity isn't predicated on having such a procedure, and the court treats this as a subspecies of the unsuccessful argument that notice of a problem disqualifies the service provider from 230's immunity.

Thus, an easy case leads to a quick dismissal with prejudice.

Posted by Eric at 08:59 AM | Content Regulation , Derivative Liability , Search Engines | TrackBack

August 18, 2010

The Problems With Google House Ads

By Eric Goldman

[Note: This blog post has taken me 7 months to write, so I'm glad to be sharing it finally. I am cross-posting it to Search Engine Land.]

Introduction

Many publishers run “house ads” to self-promote their own offerings. Google does too. However, Google differs from most publishers because it auctions ad space on its network. Thus, when Google runs house ads, it simultaneously conducts the auction that it is bidding in—an impermissible conflict of interest. This post explains when Google uses house ads, why I think Google house ads undercut the auction integrity, and what Google should do differently.

Google’s House Ads

I have seen Google house ad campaigns in at least three circumstances:

1) Occasionally, Google uses AdWords ads to explain problematic organic search results. Two prominent examples are the search results for “Jew,” which regularly displays an anti-Semitic organization as a top organic result, and “Michelle Obama,” which last year displayed an offensive image as a top organic result. In these situations, Google runs an AdWords ad that links to an explanation of its search algorithms.

2) Google promotes its own services to increase their visibility. In preparing this post, earlier this year I approached Google about its usage of house ads, and a Google spokesperson informed me that Google has “run search marketing campaigns on Google for search products like iGoogle, Google Maps, and mobile products as well as for specific issues in order to provide information to our users.” Barry Schwartz recently gave an example of an image house ad promoting image ads. The latter point may include defensive keyword purchases, such as when it displayed ads for some of the search terms it highlighted in Google’s Super Bowl commercial.

In some cases, Google’s house ads appear in ad spots unavailable to other advertisers, such as its promotion of Nexus One on its home page. Barry Schwartz has catalogued examples of Google’s home page advertisements. This post focuses on house ads in AdWords, but I will come back to these non-traditional ad spots in a bit.

3) As a type of public service announcement, Google runs house ads in AdWords during crises to promote a crisis response page—mostly recently, in response to the BP oil spill.

Why Google House Ads in AdWords Are Problematic

Google characterizes AdWords is an advertising auction system for advertisers to bid on keywords against each other. Google runs these auctions as the auctioneer—a term Google doesn’t use and presumably would avoid, but an appropriate descriptor of Google’s proclaimed role vis-à-vis advertisers. Because Google merely conducts the auctions for advertisers, Google argues that it does not set AdWords advertising prices; instead, the prices are set by the market (i.e., the collection of advertisers’ auction bids). Google’s positioning as an auction conductor has emerged as a central defense to the increasing antitrust attention being paid to Google’s remarkable share of the search advertising market.

However, Google’s positioning breaks down when Google buys house ads via AdWords. In those situations, Google is both running the auction and bidding in that auction as an advertiser. The conflicts of interest in this situation should be self-evident, but let’s look at them in more detail.

Google Can Win Every Auction It Enters.

When Google runs a house ad in AdWords, it does not cost Google anything out-of-pocket. However, those clicks aren’t necessarily “free” because Google’s ads have opportunity costs. Clicks on Google’s house ads may siphon away clicks from revenue-generating ads, which may reduce Google’s revenue from the bidded term.

Google’s spokesperson told me that Google’s house ads “are subject to internal marketing budgets.” I assume this means that a Google department running house ads must “pay” for its clicks by transferring money from its department budget to a different Google department. In theory, the scarcity of marketing budgets forces Google departments running house ads to internalize the opportunity cost, even if no cash changes hands.

However, I don’t believe this cures the defects in auction integrity for at least four reasons. First, Google’s behavior lacks any auditability or verifiability; as outsiders, we have no idea what Google is doing under the hood. Second, Google has access to better information to optimize its bidding than any other bidder. That information may not be functionally available to individual employees placing auction bids, but because of the first point (lack of auditability/verifiability), we as outsiders don’t know that either. Third, because all Google bids just involve internal funds transfers and no out-of-pocket cash payments, Google can easily increase departmental budgets to enable more aggressive bidding—after all, if no cash changes hands, it’s just funny money anyway. Fourth, actual ad placement depends on ad quality scores, and Google has acknowledged that it has “exceptionally high Quality Scores” which should automatically give it a bidding advantage over everyone else. And, once again, no one else can audit or verify Google’s self-designated ad quality scores.

As a result, Google’s advantages over other bidders should allow it to “win” its auctions whenever it decides to bid.

Google’s Bids Can Affect the Prices Paid by Its Advertisers.

As far as I know, Google has never publicly addressed how its house ads affect the prices paid by other bidders. In response to my inquiry, the Google spokesperson opaquely informed me that “Google's ads are not guaranteed to appear in any given spot. How this affects CPCs depends on the quality scores and bids of others in the auction.” I interpret this to mean that Google’s presence in the auction could affect the CPCs paid by other bidders. Let’s take a look at how this might happen.

Google auctions aren’t winner-take-all. Instead, Google runs a “second-price auction.” As Google describes it, each advertiser-bidder pays “the minimum amount necessary to maintain their position on the page,” which is the amount bid by the next-lowest bidder. To illustrate this, assume a keyword with the following bids:

Bidder 1 bids $1.25 per click
Bidder 2 bids $0.75 per click
Bidder 3 bids $0.50 per click

Pursuant to the second-price auction, Bidder 1 pays $0.75 per click (i.e., the amount that Bidder 2 bid). After all, if Bidder 1 had only bid $0.75 per click, it still would have shown up as the top bidder. Bidder 2 pays $0.50 per click, the amount required to stay in the second position.

[Note: my examples assume that the bidders have the same ad quality scores and that one bidder’s presence or behavior does not cause Google to recompute the ad quality scores of other bidders.]

Now, consider what happens when Google enters a bid in this auction.

Google bids more than $1.25 per click [the result is the same if Google bids $1.25 or $1M per click]
Bidder 1 bids $1.25 per click
Bidder 2 bids $0.75 per click
Bidder 3 bids $0.50 per click

I’ll just focus on Bidder 1, who was getting first position for $0.75 per click before Google’s entrance. Due to Google’s entry into the auction, Bidder 1 now pays the same per-click amount to show up in second position rather than first.

Bidder 1’s reduced position may change the commercial value of the consumers who investigate the links. That is, the consumer who clicks on the second ad may have a different profit potential than the person who clicks on the first ad. In some cases, clicks on lower-placed ads may be more profitable per click, so we don’t know a priori if this is good or bad for any particular advertiser.

We can anticipate that Bidder 1’s lower position will reduce the overall volume of clicks it gets at that price. A second position ad usually gets substantially fewer clicks than the first position ad. Further, if Google syndicates the house ad via AdSense, then Bidder 1’s ads may no longer be syndicated in AdSense (for example, if Google syndicates only 1 ad via AdSense). [Note: when Google house ads are syndicated, Google pays the AdSense publisher for clicks out-of-pocket—but presumably Google pays a wholesale discounted price, while all other advertisers must pay the 100% retail price.]

Naturally, some advertisers will seek to reclaim their prior ad position by increasing their bids. Indeed, Google’s AdWords tools will automatically encourage advertisers to pay more to generate more clicks. For advertisers using Google’s automated bidding tool (sometimes called the “Budget Optimizer”), Google may automatically increase an advertiser’s bid to increase click volume. Thus, Google’s entry into the auction could cause other bidders to increase their bid amounts in a variety of ways.

Let’s revisit my discussion about Google’s opportunity cost of clicks on house ads. If the other bidders’ prices stay the same and Google siphons away some clicks from them, Google’s ads have a clear opportunity cost. However, if Google’s entry into the auction prompts other bidders to pay more, some or all of that opportunity cost will be made up by increased revenue on the remaining clicks. It’s even possible that Google’s house ads could create net new profit. From an auction integrity standpoint, it’s unacceptable for Google’s entry into the auction to affect the prices bid or paid by other bidders (its advertisers), whether Google’s profits increase or decrease.

Alternatives for Google

Google’s spokesperson told me that “[l]ike hundreds of thousands of other businesses, we believe in the value of search marketing to connect with web users.” That makes sense to me, and I encourage Google to go for it—just not by bidding against its other advertisers. Google can benefit from keyword advertising other ways without undermining its auctions’ integrity.

First, Google can buy keyword ads from third parties. Apparently Google already does this regularly, including buying ads from Yahoo and Bing. See this comprehensive survey as well as this example.

Second, as Google already does on occasion, Google can create new ad units outside AdWords exclusively for house ads. Running ads in a separate ad unit would obviate the need for Google to compete with advertisers in an auction, although I imagine some advertisers still will be annoyed by any click siphoning.

Third, Google could refuse all advertiser bids on terms that Google chooses to use for house ads. Advertisers wouldn’t be thrilled if Google did this either, but it would maintain the auction integrity for those terms. This would be the most expeditious way for Google to handle objectionable organic search results, although creating a new unit outside AdWords would work as well.

Conclusion

I feel a little silly writing nearly 2,000 words explaining why auctioneers should not bid in the auctions they run. We all already knew that. Yet, Google apparently violates this basic rule every time it runs house ads in AdWords auctions. Google should fix this—and restore integrity to its AdWords auctions—by no longer competing with its advertisers in those auctions.

UPDATE: A Google spokesperson sent me this response:

"As we've always said, all search engines run ads to inform users about services that they provide. Google is no exception to this practice. We believe in the value of our advertising platform and use it in the same way that other advertisers do."

Posted by Eric at 10:07 AM | E-Commerce , Marketing , Search Engines | TrackBack

August 16, 2010

Creation of False Blog and LinkedIn Account Targeting Utah Resident Supports Personal Jurisdiction in Utah -- Buckles v. Brides Club, Inc.

[Post by Venkat]

Buckles v. Brides Club, Inc., Case No. 2:08-cv-00849 CW (D.Utah; Aug 11, 2010)

A federal district court in Utah recently concluded that several individuals who were allegedly involved in the creation of a false blog and LinkedIn account targeting a Utah resident are properly subject to personal jurisdiction in Utah. Internet personal jurisdiction cases are not very exciting in my opinion, but this case highlights some interesting issues worth discussing.

Background: Brides Club was formed initially by John Buckles, and employed John's two sons, Brad and Ash. In 2005, Brad purchased the company from John. Following the purchase, Ash continued to work for Bride's Club as an independent contractor. Ash oversaw many technical aspects of the company's operation, including "web site, e-mail marketing, [etc.]" In 2008, Ash's agreement with Bride's Club terminated.

Around the time Ash's contract terminated, Bride's Club started experiencing technical problems, including "problems with its blogs, Web photos, YouTube links, security breaches, and other such disruptions." Brad alleged that Ash caused these problems and "masqueraded as 'E Knight' to conceal that he was the one tampering with Bride's Club's Web site, links and accounts." Brad tried to resolve the issue informally with Ash, including trying to obtain the "needed answers regarding the accounts and passwords," but his efforts were unsuccessful. Ultimately, Brad took the self-help measures that culminated in the lawsuit.

The Alleged Wrongful Acts Underlying the Lawsuit: In 2008, an "impersonating" blog appeared on the internet - the blog was made to look like it was Ash's blog (by including pictures of Ash). One entry on the blog was titled:

Ash Buckles - Mastering the art of bringing [sic] hurtful to me.

The blog also contained a link to a fake LinkedIn account in Ash's name that stated Ash only "had six months of experience in the Internet industry." [In internet terms, how is this harmful . . . isn't six months equal to a lifetime?] The fake LinkedIn account also linked to three domain names (ashbucklesblog.com; ashbuckles.net; and ashbuckles.org) that were not registered by Ash. These domain names were registered in Bride's Club's name through private registration services.

According to the complaint, Brad did not engage in these acts alone. Although Brad admitted he "drafted the text of the blog" (allegedly out of frustration, to send a 'private' message to Ash), Brad testified that he was assisted by Ed Steenman, who registered the domain names and created the blog. (Steenman is a Washington-based advertising agent who owns Steenman Associates, Inc. and who had done some work for Brad.) Separately, one of the other defendants, Munish Sangar allegedly posted Ash's pictures on the impersonating blog. Brad testified that Sangar had no involvement in creating the blog or registering the domain names.

How Did the Blog Injure Ash: Ash testified that he worked in "online marketing [and] search engine optimization." Because the blog contained some nonsensical entries, Ash alleged that the very existence of the blog would hurt his credibility on the internet. Additionally:

Ash testified that in Internet marketing there are 'black hat' methods and 'white hat' methods of doing business. Creation of multiple domain names that direct a person to the same site can be viewed as a dishonorable means of boosting rankings and doing business. Finally, the timing of the blog posting also was allegedly damaging. It occurred seven days before Ash spoke 'at Word Camp Utah, which was published for broadcast around the world.' Consequently, anyone who searched the Internet following the conference for information about Ash and his professional abilities could have seen the impersonating Web site that contained nonsensical language and said Ash was unemployed and has only six months of experience in the Internet field.

Discussion:

Munish Sangar: The court easily dismissed Sangar for lack of personal jurisdiction. The sole evidence of Sangar's involvement was submitted through hearsay - i.e., Ash's and his wife's testimony that "Brad had said Sangar posted pictures of Ash" at Brad's request. The court finds this evidence insufficient to establish minimum contacts and dismisses Sangar.

Brad Buckles: Brad had an uphill battle on the jurisdictional front. He admittedly was involved in creating the fake blog and LinkedIn profile. His sole argument was that since the blog was created in Washington, it did not have any contacts with the State of Utah. The court runs through internet personal jurisdiction principles (including the Calder "effects test" and the sliding scale inquiry based on the level of interactiveness of a website) and notes that although the case involves a blog rather than a magazine or more old school publication, "the medium of communication is not the relevant question." Here, Brad created the profile, knew Ash was a Utah resident and this was sufficient to conclude that Brad undertook acts which were aimed at the State of Utah or the effects of which would reasonably be felt there. Brad also tried to argue that he wanted to "send a message" to Ash. Whatever he argued after the fact, the court rejected the notion that the blog and profile were intended to send a private message. The court concludes that "Brad's conduct was aimed at Utah" and he took action "with the knowledge that the brunt of the injury would be felt in Utah." No big surprise here.

Bride's Club: Bride's Club argued that it was a Nevada corporation and could not be haled into court in Utah. The court rejects this argument, concluding that Brad created the blog and profile, and as the president of a corporation who used corporate resources in undertaking the alleged wrongful acts, his acts could be imputed to Bride's Club. Accordingly, personal jurisdiction was proper over Bride's Club.

Steenman and Steenman Associates: Steenman - according to his own testimony - was involved with the blog. He also registered the three domain names and set up the "false LinkedIn account." For the same reasons that Brad was subject to personal jurisdiction in Utah, Steenman was as well. With respect to Steenman Associates, the court came to a different conclusion. The court determined that there was no evidence showing that Steenman was acting within the scope of his employment at Steenman Associates or furthering the interests of that company. Accordingly, the court dismisses Steenman Associates without prejudice.

[The defendants brought motions to dismiss on personal jurisdiction grounds only and the court's order does not evaluate the complaint on the merits. I don't see a great section 230 argument here, but I wondered whether one or more defendants would try to use section 230 - their efforts will probably be complicated by the contractual relationships in place, among other things.]
___

As I initially noted, the issue of personal jurisdiction over the internet has been hashed out to death, and I don't think the case is noteworthy for this reason. [It's also not noteworthy because it involves LinkedIn, although this is why it caught my eye.]

So, what was interesting about the case?

First, Brad committed a cardinal error by entrusting password and account information to a contractor that he did not seem to have a stable relationship with. When people conduct business over the internet, often they entrust their technical people or web designers with the task of registering domain names, setting up accounts, and generally controlling the back end of their site. This leaves you exposed from a practical standpoint. (Cf. the Zipatoni case.)

Second, the details of Bride's Club's revenue and lead generation activities are worth noting. In 2008, Bride's Club's total revenue was between $1.5 and $1.7 million. The court did not mention what its profit figures were, but it can be somewhat surprising that a small family owned internet business generated this level of revenue. (Obviously from a Fortune 500 perspective, the figure may not seem significant, but it's probably well above the level of the corner liquor store.) Bride's Club also generated 35-300 "bridal names" (leads) per week. That's a fair number of people who sign up or provide their contact information to receive information from Bride's Club (more than I would have guessed).

Ash's allegations of injury were also interesting. His basic claim was that as an SEO professional, having a blog out there with nonsensical entries and an unprofessional LinkedIn profile could damage him. At the end of the day, he'll obviously have to prove this up, by producing some credible people who testify that they would have purchased services but for the fact that they saw his bogus profile, and evidence that people actually viewed the blog, but it's a testament to the power of the internet in the reputation space that he could even make this argument credibly. The fake blog seems marginally defamatory, but Ash's allegation of harm is that be setting up a non-flattering profile of him on the internet, this harmed his reputation as an internet professional. I'm not sure he would have been able to make this argument five years ago.

Finally, I wonder if there's something to be gleaned from the court's analysis of whether Steenman (and Brad for that matter) were acting on behalf of their respective companies. In both instances, it was undisputed that the individuals had participated in the allegedly wrongful conduct personally, but their conduct was not automatically imputed to their companies. You hear a lot about social media policies and whether companies need them. I don't have a strong position on this yet (I think it's early to tell and use by companies and their employees seems to be constantly changing, so I'm not sure today's policy will serve you well tomorrow). That said, I wonder if a blanket policy that said "you will not create any accounts in the company's name or using the company's resources without email or written approval" would have helped here? I guess if such a policy existed and the President of the company (Bride's Club) used company resources to create the account, the policy probably would not have helped Bride's Club much, but if Brad was a lower level employee and a policy that was reasonably enforced was in place, I wonder if the court would have viewed things differently?

Self help can be a tempting alternative, but as this case illustrates, bypassing a straightforward resolution in favor of a counter-attack on the internet can lead to some rough consequences. This isn't the first case where two parties are battling it out and one party who likely has a legally cognizable injury takes the self-help route which ultimately results in greater liability for this party. It's unclear as to how this lawsuit will play out but it's likely that Brad has spent significantly more money than he would have spent initially resolving the issue through legal channels.

Some related blog posts:

* Keyword Ads and Other Marketing Supports Remote Jurisdiction--Market America v. Optihealth
* Connecticut Blogger Not Subject to Texas Jurisdiction--Healix Infusion v. Helix Health

Posted by Venkat at 09:27 AM | Content Regulation , Search Engines

August 06, 2010

Google Liberalizes Its European Trademark Policy

By Eric Goldman

After the ECJ's favorable opinion in the Google cases, I've been wondering if Google would liberalize its trademark policy in Europe. It took Google 4 months to parse the ECJ's inscrutable opinion and make a call, but it finally decided that the opinion was favorable enough to support liberalization.

After the changed European policy (starting Sept. 14), Google will have a virtually uniform world-wide policy not to block bids on trademarked keywords at the trademark owner's request. Google will block trademark references in ad copy at the trademark owner's request, but this will be subject to regional differences. In the US and (starting Sept. 14) UK, Ireland and Canada, Google will not block TM references in ad copy for resellers, complementary product sellers and information sites. In the EU and some related countries (EFTA), Google's new policy will be to review ads on an ad-by-ad basis as follows:

in response to a complaint from a trademark owner, we will do a limited investigation as to whether a trademarked keyword in combination with particular ad text is confusing as to the origin of the advertised goods and services. If we find that it is, we will remove the specific ad that is the subject of the complaint.

This language "confusing as to the origin of the advertised goods and services" comes from the Google ECJ opinion, but I'm still not sure exactly what satisfies this standard. Google will likely have to develop its own internal common law to figure out how it interprets the term.

Last year, Google liberalized its US trademark policy. That, combined with the 2nd Circuit's Rescuecom decision, helped spur a flurry of trademark lawsuits against Google (which Google has had some success beating back). Will Google's policy liberalization in Europe similarly prompt a deluge of new litigation?

Perhaps not, because Google is acting on the strength of an ECJ decision, plus additional helpful rulings in the Louis Vuitton case on remand to the French high court as well as a recent ECJ decision in Portakabin. In contrast, Google had no clear litigation success in the US to support its trademark policy liberalization; rather, it came on the heels of Google's 2nd Circuit loss in Rescuecom. In fact, I've been told that a number of trademark lawsuits were dropped in Europe after the Google ECJ decision, presumably because the plaintiffs figured they couldn't win.

At the same time, I can't imagine trademark owners will be happy with Google's new policy. Google has had more adverse rulings in Europe than it's seen in the US, and trademark owners in Europe have a broader array of "unfair competition" doctrines to lob at Google even if they feel constrained by the ECJ rulings. Further, trademark owners might disagree with Google's interpretation of its policy to block confusing ad text/keyword bids. All told, Google could be in for a turbulent ride in Europe.

My main Q is: how much new incremental revenue will this policy change unlock? It bears noting that after Google made its policy changes last year, it subsequently reported huge year-over-year revenue growth. How much of that growth was due to organic growth of Google's business, and how much of it was attributable to new advertising coming from the liberalized policy? I've never gotten a satisfactory answer to that Q. I wonder what will happen with the Europe change. Should we anticipate Google's European revenues are about to get turbocharged by all of the new advertising that was previously squelched by the former policy?

I also wonder if this change will put increased pressure on trademark owners to sue advertisers directly. Already those lawsuits are too numerous to count in the US; and the Google ECJ opinion (combined with the Portakabin opinion, a TM owner v. advertiser suit) put the onus on advertisers not to create confusion through their keyword advertising. Personally, I think most of those TM owner vs. keyword advertiser lawsuits are massive money pits, but far too many TM owners have pursued them nonetheless.

Posted by Eric at 10:41 AM | Search Engines , Trademark | TrackBack

August 04, 2010

Google Gets Complete Win in Rosetta Stone Case

By Eric Goldman

Rosetta Stone Ltd. v. Google Inc., 1:09-cv-00736-GBL-TCB (E.D. Va.). Opinion granting Google's motion to dismiss filed August 3, 2010, 2010 WL 3063152. Order granting Google's motion to dismiss the unjust enrichment claim filed August 2, 2010, 2010 WL 3063857.

Back in late April, many of us were eagerly awaiting the impending trial in Rosetta Stone v. Google, which was going to be the first trial in a trademark owner v. search engine keyword advertising case since the GEICO v. Google case in 2004. Then, just days before the scheduled trial, the judge granted Google's motions to end the case, which negated the scheduled trial. However, because the case had been moving too fast in the Rocket Docket, the judge made that ruling without providing any written explanation of why. For about 3 months, we've been wondering how good a win Google got.

The opinions are finally out, and we've learned that Google got a complete win, in that the judge endorsed Google's basic business structure. As I explore below, the specifics are a little sketchy (the judge obviously cut some analytical corners), but the opinion’s overall tenor is that the judge completely rejected Rosetta Stone's fundamental contention that Google was doing something wrong by making money off Rosetta Stone's trademarks. Because Rosetta Stone's core liability paradigm failed to convince the judge, all of opinion's detailed reasoning is less essential.

Unfortunately for Google, the opinion contains several minor doctrinal errors that could attract attention from an appellate court. That makes this ruling vulnerable on appeal. I could see why Rosetta Stone would choose to appeal the case to fix those errors--although even a Fourth Circuit reversal would be only marginally helpful to Rosetta Stone if the case gets remanded to the same judge, who clearly isn’t going to find for Rosetta Stone.

Irrespective of subsequent proceedings in this case, for now this opinion could prove extremely useful to Google in trying to finish off the half-dozen remaining trademark lawsuits against AdWords (and thwarting new cases). In particular, I expect Google will tout two of the key rulings in this opinion--summary judgment on the likelihood of consumer confusion, and Google's eligibility for the trademark functionality defense. If other judges accept either of these two rulings, Google might quickly clear its AdWords litigation docket.

A deeper look at some of the judge's discussion:

* the judge grants Google summary judgment on the likelihood of consumer confusion question. The court says "no reasonable trier of fact could find that Google's practice of auctioning Rosetta Stone's trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone's products." This is just the latest defense win on the factual question consumer confusion attributable to keyword advertising, joining such recent cases as College Network v. Moore and Fair Isaac v. Experian (both trademark owner v. advertiser lawsuits). As precedent builds that trademark owners aren't likely to win on the central consumer confusion question, we might see a categorical reduction in AdWords-related litigation.

* In reaching this conclusion, the court rejects several typical plaintiff arguments:
- on the question of Google's intent, the court rejects that an intent to profit is sufficient, even if Google liberalized its trademark policy to goose its revenues. Instead, the judge requires evidence of palming off by Google--which keyword ad sales clearly are not.
- on the question of actual confusion, Rosetta Stone offers the testimony of 5 allegedly confused individuals. The court says this de minimis confusion out of the 100M ad impressions delivered on searches for Rosetta Stone's trademarks. Further, those 5 testimonials apparently all relate to counterfeit Rosetta Stone purchases, and the court attributes those sales to confusing web vendors and not Google's role in the keyword advertising of those sites. Other consumer complaints in Rosetta Stone's logs weren't necessarily attributable to keyword advertising. Finally, the court rejects the plaintiff's survey on whether consumers thought Rosetta Stone "endorsed" the ads, saying endorsement confusion isn't the same as source confusion. I'm not sure about that distinction, but clearly the court wasn't interested in the survey.
- on the question of consumer sophistication, a language learning system is an expensive and complicated purchase, which makes consumers more cautious.
- the court says the parties didn't contest the other likelihood of consumer confusion factors, although it's unclear how many of those other uncontested factors favored Rosetta Stone. Thus, the court does a truncated multi-factor analysis, only looking at the 3 contested factors, saying they all weigh in favor of Google, and then finding this supports SJ for Google. I could see an appellate court wanting to look more closely at the other undiscussed factors.

* The court's most novel ruling is that Google's use of trademarks as keyword ad triggers qualifies for the trademark functionality doctrine. Typically, the functionality defense arises only in trade dress cases. The functionality defense in the keyword advertising context failed in the 9th Circuit's Playboy v. Netscape ruling, which this court surprisingly doesn't cite. The court says that the trademarked keyword triggers "have an essential indexing function because they enable Google to readily identify in its database relevant information in response to a web user's query." This is correct, of course, but doctrinally I think this conclusion better fits into a doctrinal conclusion that Google isn't using the trademark as a mark. (See more on this point in my Deregulating Relevancy article). Nevertheless, Google and other keyword advertising sellers will be thrilled if other courts accept the functionality defense. I expect most other courts will address the 9th Circuit's Netscape ruling before doing so.

* Google's keyword suggestion tool does not constitute inducement for contributory trademark infringement. The court says it's smart business practices, not inducement, for Google to upsell its advertisers. Per Tiffany v. eBay, Google also lacks the requisite scienter because it contractually prohibits counterfeiter ads, honors takedown notices, and has a Trust & Safety team looking for problems. Plus, like eBay, Google had no way of confirming if advertisers were selling legitimate or counterfeit goods.

* The court uses a goofy legal standard for vicarious trademark infringers, which it says can occur if "Google has joint ownership or controls the allegedly infringing advertisements appearing on its site." This standard is WRONG. Unlike vicarious copyright infringement, vicarious trademark infringement is rooted strictly in agency law. So the vicarious infringer normally requires a principal/agency-like control over the direct infringer's conduct. Here, the court devolves the vicarious trademark infringement test into a bastardized version of the vicarious copyright infringement test. This is a significant doctrinal error. Nevertheless, it proves to be harmless for Google because "Rosetta Stone has not shown that Google controls the appearance and content of the Sponsored Links and the use of the Rosetta Stone Marks in those Links."

* I'm no fan of the dilution doctrine, but this court's rejection of the dilution claim was bizarre. Google wins the dilution claim because it "does not sell language learning software," i.e., Google wasn't using the trademark as an identifier of its own products. Huh? The court also says blurring did not occur because Rosetta Stone's brand awareness grew during the period of time Google is selling keyword-triggered ads. Huh? This confuses correlation with causation. What would Rosetta Stone's brand awareness have been without the keyword ads? We have had very few rulings addressing keyword advertising and dilution (this uncited 2007 ruling is the only one that comes immediately to mind), so this conclusion on dilution could be a fairly influential ruling as well.

* In a separate opinion, the judge rejected Rosetta Stone's unjust enrichment claim on a motion to dismiss. It's a little odd to be dealing with a pending motion to dismiss when the case was on the brink of trial, but that's the consequence of racing too fast in the Rocket Docket. The court rejects the unjust enrichment claim for failure to satisfy the requisite claim elements--basically, because this is not a quasi-contract situation where Google made an implied promise to pay Rosetta Stone. As I mentioned earlier, the court otherwise rejected Rosetta Stone's basic contention that Google has money it doesn't deserve. Interestingly, the court also rejects the unjust enrichment on 47 USC 230 grounds, basically treating the unjust enrichment claim as an attempt to hold Google liable for third party conduct. I didn't totally follow the judge's reasoning, and frankly I'm not sure 230 is the right basis to squelch the unjust enrichment claim. Nevertheless, unjust enrichment claims are almost always junky/throwaway claims, so a 230 immunity would be an effective way to clean them up fast.

In a mostly unrelated development, today Google liberalized its AdWords trademark policy in Europe. I'll blog on that soon.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 11:55 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

July 30, 2010

Google Protected by 17 USC 512(d) for Links to Infringing Content; Perfect 10's Takedown Notices Were Mostly Insufficient

By Eric Goldman

Perfect 10, Inc. v. Google, Inc., 2:04-cv-09484-AHM-SH (C.D. Cal. July 26, 2010)

In 2007, the Ninth Circuit issued an important but befuddling ruling in Perfect 10 v. Amazon and Google. That ruling addressed Perfect 10's prima facie case of secondary copyright infringement against Google (and Amazon, which was using Google results) and remanded the case back to the district court for consideration of that issue as well as the underexplored 17 USC 512 safe harbors.

We've had a couple of blog-worthy rulings since then (on a motion to dismiss and A9's eligibility for the DMCA safe harbors), but it's taken 3 years to see where the court stands on Google's eligibility for the DMCA online safe harbors. The news is largely good for Google.

* Google's lack of user accounts for content loaded into web search and image search means that Google can't have a repeat infringer policy for those services. Google's Blogger practices satisfied the requirement to terminate repeat infringers.

* Google web search, image search, Blogger (to the extent the problem is user posted links) and search cache (also to the extent the problem is cached photos) are all eligible for protection under 17 USC 512(d) with minor exceptions I'll discuss in a moment. This is a noteworthy ruling because it's one of only a handful explicitly addressing 512(d), which provides a safe harbor for links to infringing content. Most of the online safe harbor rulings have involved 512(c), the safe harbor for hosting infringing content. To refresh my memory, I did a quick search in Westlaw, and I did not immediately recall a prior ruling where a service provider won a 512(d) defense. If so, then this is an important precedent. (Please email me to let me know what 512(d) cases I've forgotten).

* The parties divided Perfect 10's takedown notices into three groups:

- Group A. These were categorically defective because Perfect 10 sent them to the wrong google.com email address and they "uniformly do not identify specifically which copyrighted works were infringed."

- Group B. Apparently most of these notices referenced bogus URLs, but some URLs were legit, which gave Google enough information to locate the infringing links. There is a factual dispute about how long it took Google to respond to the legit notices; Perfect 10 alleges that it was up to 7 months, which probably won't qualify as an expeditious response. As a result, for the legitimate Group B takedown notices, Google could be on the hook for any that weren't honored expeditiously.

- Group C. The court describes this group of Perfect 10's takedown notices:

The Group C notices generally consist of a cover letter, a spreadsheet, and a hard drive or DVDs containing electronic files. Where P10 provided spreadsheets, the spreadsheets do not identify the infringing URL, but merely the top-level URL for the entire website. P10 evidently expected Google to comb through hundreds of nested electronic folders containing over 70,000 distinct files, including raw image files such as JPEG files and screen shots of Google search results, in order to find which link was allegedly infringing. In many cases, the file containing the allegedly infringing image does not even include a URL, or the URL was truncated. The spreadsheets also do not identify the copyrighted work that was allegedly infringed....P10 then expected Google to search through a separate electronic folder—attached only to the June 28, 2007 DMCA notice—containing all of the more than 15,000 images that appeared on P10's website as of June 2007, in order to identify the copyrighted work that was infringed. [citations omitted]

Per the Ninth Circuit's ccBill ruling, this paint-by-numbers approach to takedown notices does not work. The delivery of a big database of copyrighted works does not sufficiently identify the infringed works as required by 512(c)(3), nor does Google have to navigate multiple documents to piece together the 512(c)(3) elements. The court helpfully lays out how the 512(c)(3) information must be presented to count as a 512(c)(3) notice:

at a minimum, the essential elements of notification—the copyright owner’s attestations of ownership, nonlicensed use, and veracity of the notice; contact information for the complainant; identification of the copyrighted work; and identification of the infringing material (including the location of that material and if necessary, a specific link under section 512(d))—must be included in a single written communication.

* Google qualifies for 512(c) for hosting infringing copies in Blogger with the exception of up to 23 URLs that might have been covered by a legitimate Group B notice.

The implications of this ruling are pretty straightforward. Copyright owners who want service providers to intervene on their behalf should not get creative or lazy with their 512(c)(3) takedown notices. Over and over again, we've seen that the big service providers will respond quickly to properly drafted takedown notices; and we've seen judges become increasingly less tolerant of plaintiffs who couldn't bother to follow the statutory roadmap. So plaintiffs, please just follow the statute; it's pretty clear on what you need to do.

Overall, this case reminded me of the recent (uncited) Perfect 10 v. RapidShare ruling because that judge also implicitly showed little sympathy to Perfect 10. Perhaps the courts are finally prepared to put an end to Perfect 10's litigation madness. However, given there are a sliver of legitimate Group B notices, Perfect 10 still has a way to continue to make Google's life miserable.

More comments on the case from the EFF and Techdirt.

Posted by Eric at 09:23 AM | Copyright , Derivative Liability , Search Engines | TrackBack

July 27, 2010

Yet Another TM Owner Gives Up Against Google--Ezzo v. Google

By Eric Goldman

Jamil Ezzo has apparently given up his lawsuit against Google over AdWords. The dismissal. This was a silly lawsuit that never should have been brought (it was over the purported trademark "Locate Plastic Surgeon" for gosh sakes), and the only surprising thing is that the lawsuit lasted this long. The most noteworthy thing about this dismissal is that Google has successfully whittled the pending AdWords trademark cases down to five from a high water mark of a dozen--an impressive display of litigation skill and financial wherewithal.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 04:19 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 13, 2010

AOL's Disclosure of Search Data May Support Claims Under California Law

[Post by Venkat]

Does v. AOL LLC, Case No. C06-5866 SBA (N.D. Cal.; June 22, 2010)

Plaintiffs bringing a class action against AOL for improper disclosure of search data scored in an initial victory in the Northern District of California. The court denied AOL's motion for judgment on the pleadings, and allowed claims (under California consumer protection laws) to go forward.

Background: AOL "records and stores member search queries in a manner rendering it possible to connect the stored search queries with a particular member." In July 2006 AOL "packaged" (??) approximately 20 million search records into a database which it then inadvertently posted on its website "for the public to download." The database contained records of 685,000 AOL members that were stored in a two month period in 2006. The disclosed data includes sensitive information such as names, social security numbers, addresses, telephone numbers, credit card numbers, user names, passwords, and financial bank/account information.

Shortly after it posted the database, AOL pulled the database. However, by this time it had been downloaded and reposted on other websites. According to the complaint, "AOL's response to the disclosure has been to do nothing." AOL attempted to impose conditions on third parties who downloaded the database but it hadn't taken any action to restrict such use.

Plaintiffs sued alleging federal claims (under the Electronic Communications Privacy Act) and state claims (under section 1750 and California false advertising statutes).

Discussion: The case is in an atypical procedural setting, but one that may be helpful to plaintiffs. AOL initially moved to dismiss and have the case transferred to Virginia based on the venue clause in its Member Agreement. The district court agreed and initially dismissed the lawsuit so it could be re-filed in Virginia. The Ninth Circuit reversed (in 2009) and held that the venue provision in AOL's Member Agreement was unenforceable as to California residents bringing claims under "California consumer law." On remand AOL moved to dismiss one of the named plaintiffs who is not a California resident and dismiss the claims that did not arise under California consumer law. The district court granted that motion. Plaintiffs appealed and asked the district court to stay resolution of the California consumer law claims until the Ninth Circuit resolves the issue of whether the remaining claims were properly dismissed. [That's a lot of procedural wrangling!]

Standing to seek injunctive relief: The court denies plaintiffs' motion to stay. Moving on to the substantive claims, the complaint seeks an injunction, and AOL argued that plaintiffs lacked standing to seek injunctive relief. Injunctive relief would be available if there's some risk that the complained of conduct would continue to occur. The court finds that plaintiffs had the requisite standing because plaintiffs alleged that AOL engages in a practice of storing search queries and "has taken no steps to ensure that such information is not disclosed again."

California Consumer Legal Remedies Act: AOL argued that plaintiffs did not sufficiently plead injury under the CLRA. The court notes that the CLRA sets a "low but nonetheless palpable threshold of damage," but encompasses harm "other than pecuniary damages." Getting to plaintiffs' allegations, the court notes that AOL allegedly "held itself out to the market as being a leader in internet security and privacy and represented . . . that its service was 'safe, secure and private.'" The information disclosed by AOL includes highly-sensitive information, financial information, social security numbers. "Also disclosed was information regarding members' personal issues, including sexuality, mental illness, alcoholism, incest, rape, adultery, and domestic violence." [emphasis added] The court concludes that this is more than enough to allege injury under the CLRA.

AOL also argued that the CLRA claim sounded in fraud and must be pled with particularity. The court finds that plaintiffs satisfied this requirement, in specifying that "misrepresentations were made in AOL privacy policy and other statements posted on AOL's website, and that the representations were false in that they assured members that AOL would endeavor to maintain the privacy and security of their personal confidential information." AOL finally argued that plaintiffs failed to allege causation, but the court quickly dispenses of this argument, noting that where there are representations in a privacy policy regarding safeguarding personal data, a reasonable consumer would only sign up to disclose personal information in reliance of representations contained in the privacy policy. At the end of the day, plaintiffs' CLRA claims are allowed to move forward.

UCL and FAL: AOL's arguments around the unfair competition and false advertising laws were similar to its arguments against the CLRA claims. The court rejects these arguments. Finally, the court dismisses plaintiffs' claims under the "Consumer Records Act," which requires businesses to take "reasonable steps" to dispose of customer records when they are no longer "retained" by the business. The court (citing to the legislative history) notes that the statute was intended to prevent "dumpster diving," and was not intended to encompass the situation in the present case.

__

It's tough to assess what happened (and what will happen) at the pleading stage, but if AOL really disclosed those sensitive records and didn't take any steps to remedy the situation what was AOL thinking?

It's been blogged to death that breach of a privacy policy is not actionable in the typical consumer context. (See for example: "When Does a Privacy Policy Breach Support a Breach of Contract Claim? In re JetBlue;" "9th Circuit Affirms Rejection of Data Breach Claims Against Gap [citing cases].") What's different here? For one thing, there's a statute which has a pretty low threshold for damages, and plaintiffs are wisely avoiding the negligence route. To the extent these are paying customers, they also can argue disgorgement and get their money back (or a portion of it). Finally, they're arguing about the disclosure of information (intimate and personal details) where the harm lies in the disclosure and not the misuse of the data.

It was also interesting to see that the court focused on flowery language in AOL's privacy policy. The FTC did something similar in its informal investigation of Twitter. ("The FTC Dings Twitter's Security Practices -- What Does This Mean for Everyone Else?.")

The case is a reminder of the huge quantity of personal information that networks store about users. One can never be reminded of this often enough.

Other coverage: Wendy Davis (MediaPost): "AOL Suffers Blow In Lingering 'Data Valdez' Case."

_______

Eric's Comments: In retrospect, AOL's decision to release the dataset was, at best, a ill-considered decision (and one that already cost several AOL employees their jobs). However, AOL claimed to release the dataset for research purposes, and it remains one of the few public datasets of how actual users search. (For obvious reasons, I don't anticipate new ones being posted any time soon). While it's hard to praise AOL here, the lawsuit has problems of its own. For one, Venkat mentions the damages/harm problem. Also, the ECPA claim raises the disconcerting specter that search queries are private communications between searchers and search engines--a legal proposition with potentially far-reaching effects that I've never been able to wrap my head around. If you want more information on these issues, this case is one of several explored in Paul Ohm's paper on re-identification that I've praised repeatedly.

Posted by Venkat at 11:56 AM | Privacy/Security , Search Engines

July 07, 2010

Q2 2010 Quick Links Part 2

By Eric Goldman

Marketing and Advertising

* Good talk from FTC Chair Leibowitz: “we have great hopes for self-regulation….So long as self-regulation is making forward progress, the FTC is not interested in regulating” behavioral targeting.

* NYT on teaching middle schoolers how to interpret ads. We're going to need to teach kids how to consume information if we have any chance to survive infoglut.

* The LA Times and Chicago Tribune are integrating paid text links into story content.

* Search Engine Land: Google: Now Recommending Brands For Searches.

* Keeller v. Groupon Inc., No. 10 CH 8666 (Ill. Cir. Ct. Cook Cty. March 2, 2010). Groupon settles lawsuit over expired and unused coupons.

* NYT: Online coupons may not be as anonymous as people assume.

* An inside look at the MPAA's self-regulatory effort to police movie ads.

* Avi Goldfarb & Catherine Tucker, Privacy Regulation and Online Advertising.

* Microsoft sues for click laundering. Coverage at Search Engine Land and WSJ

* The FTC shut down Pricewert/3FN.net.

Contracts

* News.com: Second Life sued by its users for changing the terms of land “ownership.” Evans v. Linden Research complaint.

* Shell v. AFRA: website venue selection clause not binding just because web visitors viewed it.

* Omri Ben-Shahar & Carl E. Schneider, The Failure of Mandated Disclosure. This paper shows why mandatory disclosures fail in part because regulators think in terms of what consumers SHOULD want to know rather than what information consumers ACTUALLY want to know.

* WaPo: Reality TV secrets are hard to keep in the age of social media. My 2003 analysis of using contract law to keep reality TV secrets.

* Want to be on the TV show Survivor? Check out its contract first.

* Anderson v. Bell, No. 20100237 (Utah June 22, 2010): “electronic signatures may satisfy the Election Code’s requirements under section 20A-9-502 regarding unaffiliated candidates wishing to run for statewide office.” Tom O’Toole’s writeup.

Trademarks/Copyrights

* Jim Jansen: “Only 4% of sponsored ads were triggered by competitors’ trademarked terms. When it does happen, the results are pretty much what consumers are use to seeing, so there doesn't appear to be many negative consequences….Thus, competitive use of trademarked terms to trigger online ads does not appear to be a widespread phenomenon and is similar to the query suggestion feature that many search engines employ.”

* Michael Geist on the first Canadian keyword advertising ruling (a nice defense win).

* 2010 Joint Strategic Plan on Intellectual Property Enforcement.

* Qassas v. Daylight Donut Flour Company LLC, No. 09-663 (N.D. Okla. June 10, 2010). A company and its entrepreneur are liable for their web developer's infringements when creating the company's own website.

Miscellaneous

* Stephen Wu on Estate Planning for Online Assets

* Declan at News.com lauds Justice Stevens' Internet jurisprudence. We owe Justice Stevens many thanks for helping the Internet bloom.

* Anthony v. Yahoo!, Inc., 2010 WL 1552819 (9th Cir. April 20, 2010). Upholding Yahoo's settlement in a class action lawsuit over its online dating site. My original blog post on the case.

* Tom O'Toole reports on various stupid state efforts to regulate technology, inadvertently making the case that they are a terrible laboratory of experimentation.

* Vacation Club Services Inc. v. Rodriguez (M.D. Fla. April 22, 2010). No CFAA action against the buyer of data from a database the seller allegedly acquired in violation of the CFAA.

* Lawyers behaving badly on the Internet.

* 23 state AGs have contacted Topix about its takedown procedures, including its fee for expedited takedown review.

Posted by Eric at 03:18 PM | Copyright , E-Commerce , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark , Virtual Worlds | TrackBack

June 22, 2010

Three Gripers Get Disadvantageous Jurisdictional Appellate Rulings in Defamation Cases

By Eric Goldman

Three recent appellate rulings, coming within 8 days of each other, illustrate how hard it is for an online griper to stay out of his/her target's home court. None of these opinions are clearly wrong, but I wish courts could find better ways to ameliorate the terroram effects of litigation--especially remote litigation--on gripers.

Silver v. Brown, 2010 WL 2354123 (10th Cir. June 14, 2010)

David Silver is an investment banker at a small New Mexico investment bank, Santa Fe Capital Group. Brown, based in Florida, is CEO of GTI. GTI retained the investment bank to raise capital for it. The parties had a falling out. Brown then set up a gripe blog/website at DavidSilverSantaFe.com. The site is pretty standard for a gripesite, but allegedly Brown went out of his way to SEO the website and then offered not to launch the site if Silver refunded $6,000 that GTI had previously paid. Silver allegedly replied with legal threats, to which Brown allegedly promised to move the site offshore so it would be harder to take down. (The emails reprinted in the opinion indicate the parties used more colorful language). After the site launched, Silver made good on his threat to sue in New Mexico, but the district court dismissed for lack of jurisdiction.

The 10th Circuit reversed, citing the Calder v. Jones "Effects Test." The court says:

* Brown intended to damage Silver's reputation via the gripesite
* "Mr. Brown also expressly aimed his blog at New Mexico. It was about a New Mexico resident and a New Mexico company. The blog complained of Mr. Silver's and Santa Fe's actions in the failed business deal. Those actions occurred mainly in New Mexico. And the blog was widely available in New Mexico over the internet and all the various ways the internet may be accessed in this day and age."
* Brown knew the brunt of the injury would be felt in New Mexico.

I think this is mostly consistent with the Effects Test, but the court doesn't stop there. Instead, it expresses fear of all-powerful search engines and their effects on jurisdictional considerations:

sophisticated search engines do exist, and with their use it is becoming more and more irrelevant, for the purposes of our analysis, how many worldwide or nationwide internet connections there are, or how many men named David Silver exist in the world, because, with the use of these search engines, the people that are searching for information on this David Silver are the ones who are going to end up viewing Mr. Brown's blog. And Mr. Brown knows this, as evidenced by the concern for increased search engine optimization expressed in his e-mails. Consequently, it is clear that this is not a case of untargeted negligence that just happened to cause damage in New Mexico."

So what exactly did Brown do sealed the litigation's location in the target's home court? I can posit two alternative conclusions. Hypothesis A: he didn't do anything unusual--every griper would run afoul of this court's standard. Hypothesis B (and more likely): Brown crossed some invisible line by SEOing his site and threatening to move the site offshore (a point referenced later in the opinion). Advice to gripers: you might not want to say you're SEOing your site, but you might find ways to achieve the same result less explicitly.

Kauffman Racing Equip., L.L.C., v. Roberts, Slip Opinion No. 2010-Ohio-2551 (Ohio Sup. Ct. June 10, 2010)

This case is similar to the Silver v. Brown case. Kauffman makes high-performance aftermarket engines in its Ohio factory. Roberts, a Virginia resident, bought an aftermarket Pontiac engine. 8 months later, Roberts complained to Kauffman that the engine was defective. Kauffman offered to retrieve the engine and refund Roberts' purchase price if Kauffman had caused the defects. Instead, Kauffman claimed that the defects were due to Roberts' post-purchase modifications. Unsatisfied, starting in 2006, Roberts griped about Kauffman in forum posts at PerformanceYears.com and PontiacStreetPerformance.com and an item description on eBay Motors. From my perspective, the posts have a menacing/taunting attitude; you should check them out if you're curious why the court sided with its hometown employer. Kauffman subsequently sued Roberts in Ohio.

The court expressly bypasses the Zippo test because Roberts engaged in non-commercial activities and instead parses the state's long-arm statute. Kauffman alleged that five Ohioans read Roberts' posts. Thus, the court observes that "[d]espite the fact that Roberts’s publication of his comments did not emanate from Ohio, those comments were received in Ohio." As a backstop explanation, the court articulates a standard similar to the Calder v. Jones Effects Test, concluding that the state long-arm statute is satisfied "[w]hen defamatory statements regarding an Ohio plaintiff are made outside the state yet with the purpose of causing injury to the Ohio resident and there is a reasonable expectation that the purposefully inflicted injury will occur in Ohio," which the court apparently believes happened here.

The court then does a Constitutional due process analysis, notes Calder v. Jones, and says in language very similar to Silver v. Brown that "Roberts is not alleged to have engaged in untargeted negligence. Roberts’s Internet commentary reveals a blatant intent to harm KRE’s reputation" and Roberts knew Kauffman was in Ohio. The court summarizes all of the ways Roberts targeted his activities to Ohio:

The allegedly defamatory communications concerned KRE’s activities in Ohio. We are not dealing with a situation in which jurisdiction is premised on a single, isolated transaction. The posts detailed the transactions between Roberts and KRE. Moreover, the purchase of the engine block and subsequent transfers from Virginia to Ohio and back again served as the foundation from which this dispute arose. Roberts’s allegedly defamatory posts were predicated on his course of dealing with an Ohio resident corporation. At least five Ohio residents other than Kauffman read these postings. Finally, although KRE does business nationwide, its business reputation is centered in Ohio, because Ohio is the location of its sole base of operations. Roberts knew, and in fact intended, that the brunt of the harm caused be felt by KRE in Ohio. Thus, the focal point of the damage was Ohio, and Roberts’s actions therefore fulfill the requirement of causing a consequence in Ohio.

The dissent argues that the majority got the Calder v. Jones analysis wrong: "Roberts posted his comments on three general auto-racing websites and an auction site, none of which have any specific connection to Ohio or are more likely to be viewed by a resident of Ohio than by a resident of any other state. In fact, KRE could identify only five Ohio residents it believes actually viewed Roberts’s comments."

Thus, the dissent is concerned with the general applicability of the majority's rule to gripers: "While it is evident from Roberts’s Internet posts that he sought to discourage others from purchasing KRE’s products, any individual who posts a negative review of a product or service in a public forum arguably seeks the same objective. Subjecting all individuals to suit in Ohio who post Internet reviews — no matter how scathing — of purchases made from Ohio companies does not comport with the due process notions of 'fair play and substantial justice.'"

While I sympathize with the dissent's inclinations, I think the majority is closer to the current state of the law. Roberts appears to differ from an average online consumer who posts a negative product review in at least three ways. First, Roberts posted across multiple online fora, expanding the different audiences who would see the message. Second, Roberts appears to have sought out the focused community of folks interested in high-performance aftermarket Pontiac engines, and I suspect everyone knows everyone in that community--in which case, one high-profile community member calling out a key vendor is undoubtedly going to affect the entire community. Third, the specific wording of Roberts' posts suggested that he was on a vendetta/crusade.

Even so, the most remarkable thing about this case is that after four years of litigation and three court rulings, the litigation is still only in the preliminary stages. We now know where the case can be heard, but we have learned nothing about its substantive merits. Presumably, it will take more years of litigation to reach a final disposition. Given the associated financial expense and diversion of managerial attention, I can't believe that Kauffman's suit against Roberts is a rational profit-maximizing move.

Internet Solutions Corp. v. Marshall, 2010 WL 2400390 (Fla. Sup. Ct. June 17, 2010). The CMLP page.

Marshall, a Washington resident, operates tabathamarshall.com, a blog on consumer issues. In 2007, she made a critical post about VeriResume, an ISC operation. ISC sued her for defamation in its home court of Florida. The federal district court dismissed for lack of jurisdiction. On appeal, the Eleventh Circuit certified a question to the Florida Supreme Court. The Supreme Court restated the certified question to be:

DOES A NONRESIDENT COMMIT A TORTIOUS ACT WITHIN FLORIDA FOR PURPOSES OF SECTION 48.193(1)(b) WHEN HE OR SHE MAKES ALLEGEDLY DEFAMATORY STATEMENTS ABOUT A COMPANY WITH ITS PRINCIPAL PLACE OF BUSINESS IN FLORIDA BY POSTING THOSE STATEMENTS ON A WEBSITE, WHERE THE WEBSITE POSTS CONTAINING THE STATEMENTS ARE ACCESSIBLE AND ACCESSED IN FLORIDA?

As rephrased, the court answers the question "yes," saying "posting defamatory material on a website alone does not constitute the commission of a tortious act within Florida for purposes of section 48.193(1)(b), Florida Statutes. Rather, the material posted on the website about a Florida resident must not only be accessible in Florida, but also be accessed in Florida in order to constitute the commission of the tortious act of defamation within Florida under section 48.193(1)(b)."

Superficially, this answer makes sense. It's hard to say any legally significant activity occurred in Florida if no one in Florida read the content. But the court's answer only articulates a very low minimum baseline—one that will be satisfied in almost every case. Even relatively obscure web content is likely to be read by people in every state. It may be tricky for the plaintiff to make this showing, at least without evidentiary discovery, but the Florida Supreme Court's standard otherwise supports very few jurisdictional challenges.

Furthermore, the answer is incomplete. The Florida Supreme Court only interpreted the state long-arm statute, not the Constitutional due process overlay--which the court didn't address because that wasn't part of the certified question from the 11th Circuit. So effectively the court said that the state long-arm statute will be easily satisfied in online defamation cases and pushed all of the gatekeeping inquiry onto the Constitutional analysis.

Posted by Eric at 08:46 AM | Content Regulation , Search Engines | TrackBack

June 10, 2010

Google Can't Shake Cybersquatting Claim--Vulcan Golf v. Google

By Eric Goldman

Vulcan Golf, LLC v. Google Inc., 1:07-cv-03371 (N.D. Ill. June 9, 2010). My 2007 blog post when the complaint was filed. My 2008 blog post on the denial of a motion to dismiss. My 2008 blog post on denial of class certification.

A year ago I blogged about Solid Host v. NameCheap, a case that raised the specter of a "contributory cybersquatting" claim under the ACPA. This case also deals with a type of contributory cybersquatting. It might represent the vanguard of increased trademark owner efforts to proliferate ACPA cybersquatting claims against a wider range of defendants.

This long-running case involves Google's AdSense for Domains program, which the plaintiffs believe violates their trademark rights when the parked domains contain their trademarks or variations thereof. The case appears to be entering the home stretch. In late 2008, the plaintiffs were denied class certification, which substantially narrowed the scope of the lawsuit. All other defendants have now settled, leaving only Google's liability for resolution. This ruling addresses Google's unsuccessful attempt to knock out the ACPA claim on summary judgment. As a result, the ACPA claim is queued up for trial unless the parties settle.

Google's ACPA liability turns on whether it is an "authorized licensee" of the parked domains. If so, the ACPA is clear that a licensee of a cybersquat domain name can be on the hook. The court holds that if there is a license agreement that calls itself a license, then the ACPA applies to the agreement. However, the court will not infer a licensing agreement from some less explicit arrangement, i.e., presumably not from a parking arrangement where the ad provider (Google) does not expressly license the domain name. Therefore, it appears that where Google licensed the domain name from the parker (a seemingly unnecessary step for delivering ads to parked domains), Google put itself into the ACPA liability chain.

With the legal standard established, normally this should be an easy case to resolve on summary judgment. However, apparently Google and the plaintiffs can't agree on the accurate copy of the applicable agreements with domain parkers (specifically Dotster). If the parties can work out the confusion over documents, the ACPA claim is ripe for a settlement.

Posted by Eric at 07:05 AM | Derivative Liability , Domain Names , Licensing/Contracts , Search Engines , Trademark | TrackBack

June 08, 2010

Google Street View Litigation Mania--Seven Class Action Lawsuits and Counting

By Eric Goldman

It appears that virtually the entire plaintiff’s bar saw Google's blog post that it captured wi-fi payload data as part of its data collection for Google Street View. At least 7 class action lawsuits have been filed:

* Berlage v. Google (N.D. Cal. filed May 20)
* Carter v. Google (E.D. Pa. filed June 2)
* Colman v. Google (D.C. D.C. filed May 26)
* Galaxy Internet v. Google (D. Mass. filed May 25). I'm not sure about standing in this case because Galaxy Internet is an Internet access provider complaining that Google snooped on its customers' traffic.
* Keyes v. Google (D.C. D.C. filed May 28)
* Redstone v. Google (S.D. Ill. filed May 28, 2010)
* Van Valin v. Google (D. Ore. filed May 17). This is the first lawsuit filed, and it has already reached a ruling requiring Google to fork over the collected data.

Undoubtedly, all of these lawsuits (and any more still coming) will be consolidated into a single action. Let the jockeying for lead counsel position begin!

Looking at the group of complaints as a whole, I'm impressed with all of this previously undisclosed expertise with the ECPA, a notoriously tricky statute that I rank as one of the most indecipherable statutes of all time. With all of these newly identified ECPA experts, perhaps this will contribute to the birth of a new ECPA plaintiffs' bar?

It's remarkable that these lawyers were able to conclude to their satisfaction that their named plaintiffs in fact had their payload data captured in the process--presumably by confirming that payload data was actually being transmitted at the precise time the cars drove by. I'm not sure how I would research this issue sufficient to satisfy my Rule 11 obligation, but these attorneys surely didn't just assume Google captured their clients' payload data...did they?

Finally, it will be interesting to see how these cases will be affected by the countervailing legal trends requiring privacy breach victims to show some actual harm from the breach (see, e.g., Ruiz v. Gap). I'm not sure this showing will be required for the ECPA claims, but it could wreak havoc with the ancillary claims.

Posted by Eric at 06:27 AM | Privacy/Security , Search Engines | TrackBack

June 07, 2010

Another Trademark Owner Apparently Gives Up Lawsuit Against Google--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. U.S. Auto Parts Network, Inc., 5:10-cv-01713-JF (N.D. Cal. voluntary dismissal May 5, 2010)

In April, Google successfully transferred the Parts Geek keyword advertising lawsuit from New Jersey to its home court in Northern California. Then, in an abandonment reminiscent of Rescuecom's, Parts Geek quietly dropped the lawsuit last month against both US Auto Parts and Google. It's not clear if the venue transfer was fatal to the case, but it certainly didn't help Parts Geek's cause. There was an interesting competitive website scraping issue in the case as well; the dismissal means we won't learn more about the legality of that, either.

I have been waiting to blog on Google's successful dismissal of the Rosetta Stone case until I see the written opinion. That, plus this voluntary dismissal, means that Google has successfully whittled its docket of over a dozen trademark challenges to its AdWords program down to 6. Google has several nice intermediate wins with some of those other cases, including its venue transfer in the Flowbee case and its partial elimination of the Jurin case. After we see the Rosetta Stone written opinion, the remaining cases may be substantially undercut further.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:19 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 06, 2010

Google Sued for Click Fraud for the First Time in Years--123 Lock and Key v. Google

By Eric Goldman

123 Lock and Key LLC v. Google, Inc. (Wash. Superior Ct. complaint filed May 21, 2010)

After Google and Yahoo settled their click fraud lawsuits in 2006, click fraud litigation has been fairly rare. There is a major battle brewing against Facebook (In re Facebook PPC Advertising Litigation) and only a smattering of other cases, such as the lawsuit against CitySearch (Menagerie v. CitySearch). Given the number of advertisers it has and the volume of business it does, it's remarkable that Google has gone so long--4 years--without a new click fraud lawsuit.

This new lawsuit isn't likely to be causing Google to be shaking in its boots. First, the lawsuit was filed in a Washington state court, so I anticipate Google will remove it to federal court and then transfer the case to the Northern District of California per its user agreement. Google has had great success invoking the mandatory venue clause in its AdWords contract recently. I'm not sure if the plaintiff actually expects to keep the case in Washington state courts, but that seems highly unrealistic.

Second, the alleged facts in the complaint didn't exactly cause me to reach for the hankies. As 123 Lock tells the story, it happily advertised on Google from October 2009 to March 2010, getting 15 clicks a day and having an 80% conversion rate (clicks/phone calls). Note: phone calls is an odd measure of conversion, and I wonder how the calls were tracked to the clicks (i.e., was there a unique phone number only clicking consumers saw?). Then, in March 2010, 123 Lock says it started getting 100-150 clicks/day, sometimes in a flurry, and none of these clicks converted to phone calls. 123 Lock then says it presented "this irrefutable evidence, in far more detail, with far more facts, and with substantiating evidence, to Google," who heartlessly rejected the evidence. I'd love to see the "irrefutable" evidence in its glorious detail, because there are so many explanations other than click fraud that could apply.

Third, even if 123 Lock was truly a click fraud victim and Google still charged it for those bogus clicks, it's hard to imagine any damages large enough to justify the lawsuit given the volume of clicks we're talking about. Google's AdWords contract poses a formidable threat to most theories that could result in any real money.

Finally, this could be another opportunity for Google to turn the table on a plaintiff and countersue it for various claims--such as Google's move of suing advertisers for breach of the mandatory venue clause by initially suing it in the wrong jurisdiction (see, e.g., the Flowbee counterclaim). It would not surprise me if 123 Lock ends up writing a check to Google when the litigation dust clears.

ClickZ presents a more sympathetic view of the lawsuit in its story entitled "Suit Against Google Highlights Surge in Click Fraud".

Posted by Eric at 01:33 PM | Licensing/Contracts , Search Engines | TrackBack

May 19, 2010

How Much Does 1-800 Contacts Hate Competitive Keyword Advertising? $1.1M Worth!?

By Eric Goldman

Rader Fishman & Grauer PLLC v. 1-800 Contacts, Inc., 2:10-cv-00191-TS-DN (redacted complaint filed March 30, 2010; answer and counterclaim filed March 25, 2010; counterclaim answer filed April 19, 2010)

1-800 Contacts has been a repeated guest star on this blog, principally for their duplicitous attitudes towards keyword advertising. 1-800 Contacts has used competitive keyword advertising in the past and was part of a coalition that helped scuttle Utah's second attempt at regulating keyword advertising. On the other hand, 1-800 Contacts was a major player in Utah's third attempt to regulate keyword advertising, and it has been an aggressive plaintiff in numerous lawsuits against competitive keyword advertisers, including the infamous 1-800 Contacts v. WhenU case and numerous obscure lawsuits that no one is closely watching.

We get an inside look at 1-800 Contacts' litigation against competitive advertisers through the filings in Rader Fishman v. 1-800 Contacts. Rader Fishman was one of 1-800 Contacts' "go to" law firms until a key partner switched to a different law firm (Holland & Hart), and 1-800 Contacts made the switch with him. This left the small matter of 1-800 Contacts' outstanding bills, totaling over $650,000. An amount that size is enough to get a law firm to bring a collections action, even if malpractice counterclaims are inevitable.

What really catches my attention, however, is the fee agreement between Rader Fishman and 1-800 Contacts in the Lens.com enforcement action, one of numerous 1-800 Contacts' lawsuits against competitive keyword advertisers. Although the number is redacted in the complaint, 1-800 Contacts' answer (para. 33) reveals that the law firm agreed to cap fees in that litigation at $1.1M.

Wait a minute...what??? How much for a keyword advertising enforcement action? Either the contact lens business is extraordinarily lucrative, or 1-800 Contacts made a really bad business call. As I have repeatedly said, trademark owners should view competitive keyword advertising lawsuits as an investment and measure their ROI accordingly. I haven't seen the numbers, but I'm super-skeptical that the value of the consumers "diverted" (whatever that means) by Lens.com's competitive keyword advertising is more than $1.1M--especially after 1-800 Contacts avails itself of the search engine trademark policies. Of course some or all of this difference could be made up by a damages award from Lens.com--if it wins and can collect--but even then I'm skeptical that the total expected value of this litigation was, or is, cost-justified.

Meanwhile, 1-800 Contacts could have taken the same $1.1M and poured it into advertising for itself. It could have invested the money to improve its products/services, which would enhance its overall competitiveness. 1-800 Contacts could have reduced its prices by $1.1M and stimulated more consumer demand. Heck, 1-800 Contacts could have used the $1.1M to select and switch to a more defensible trademark than its current crummy one. Instead, they've spent more than enough money to buy their outside lawyers a very, very nice new boat (...if the outstanding bills ever get paid...). And with $1.1M on the line for just one of several enforcement actions, it makes more sense why 1-800 Contacts flip-flopped on the Utah legislature and advanced protectionist legislation that would make its life easier--and cheaper.

Posted by Eric at 10:01 AM | Marketing , Search Engines , Trademark | TrackBack

May 18, 2010

A Jury Verdict That Competitive Keyword Advertising Isn't Trademark Infringement--College Network v. Moore

By Eric Goldman

College Network, Inc. v. Moore Educational Publishers, Inc., 2010 WL 1923763 (5th Cir. May 12, 2010). The jury verdict form from January 2009. The district court's final judgment from June 2009.

In December, I blogged about the Fair Isaac v. Experian case, which I thought was the first jury verdict on trademarked keyword advertising. I now stand corrected on two fronts.

First, although the decision came after the jury trial, the judge made a bench ruling that Experian had not committed trademark infringement by buying competitive keyword advertising. Rebecca has some additional updates on the case.

Second, I've since discovered an earlier case, College Network v. Moore Educational Publishers, which had a January 2009 jury finding that competitive keyword advertising doesn't constitute trademark infringement (see the qualifications below). This jury verdict appears to have gone unnoticed, as I could not find any press coverage of the district court proceedings. In fact, I learned about it only because the case was appealed and the Fifth Circuit upheld the dismissal of the trademark claims.

Unfortunately, the three documents linked in my intro paragraph don't completely explain the alleged trademark infringement. The Fifth Circuit ruling summarizes the situation by saying that the advertiser "had purchased the phrase 'The College Network' from Google and Yahoo as a search-engine keyword to summon MEP’s sponsored-link advertising." The advertiser responded that the trademark owner had bought the advertiser's trademarks as well (which would be consistent with keyword advertising plaintiffs' frequently duplicitous behavior), but this allegation wasn't pursued and appears to be immaterial.

Now the provisos on the jury ruling: the jury verdict probably was skewed by the trial court's ruling (pre-Rescuecom) that the advertiser did not make a use in commerce. So where the jury verdict form indicated that the advertiser didn't infringe the trademark, it's unclear if this was based on the jury's finding of no likelihood of confusion or a lack of use in commerce.

On appeal, the Fifth Circuit sidesteps the use in commerce question and says that "the evidence does not compel a finding of likelihood of confusion"--a conclusion that the court weakly explains as it rejects many of the trademark owner's arguments on procedural technicalities. However, in a footnote, the Fifth Circuit partially explains:

In any event, sufficient evidence supported the jury’s finding of no likelihood of confusion under the Fifth Circuit test. MEP and Moore presented extensive documentary evidence on the issue. The jury was permitted to view the keywordsearch process and visually compare the companies’ websites. TCN’s own expert testified as to lack of actual confusion. The evidence does not point so “strongly and overwhelmingly in favor” of TCN that a reasonable jury could not arrive at a contrary verdict.

I haven't parsed through the lower court proceedings to see how the trademark owner's expert (Otto Wheeler, presumably this gentleman) undercut his client's case, but the Fifth Circuit's characterization sure doesn't sound good. Perhaps there should be a motto among litigation experts similar to a doctor's ethical tenet: First, Do No Harm.

[UPDATE: I received a letter from Otto Wheeler saying that the Fifth Circuit opinion mistakenly identified him as the expert providing the unsuccessful opinions. He says he only opined on damages. Instead, he suggests Howie Jacobson, PhD provided the expert opinion which failed to impress the court.]

The trademark owner's loss is doubly ironic because the Fifth Circuit mostly upheld the lower court's conclusions that it owes the advertiser (and its principal) approximately $700k on a defamation counterclaim. Perhaps the advertiser would have sued the trademark owner for defamation no matter what, but a counterclaim was apropos once the trademark owner decided to dance in court. So once again, a trademark owner kicks off a keyword advertising fight only to end up writing a check to the defense. Smart move, guys.

Posted by Eric at 10:35 AM | Marketing , Search Engines , Trademark | TrackBack

May 10, 2010

Geographic Trademark Leads to Interesting (& Tortured) Injunction--Skydive Arizona v. Quattrocchi

By Eric Goldman

Skydive Arizona, Inc. v. Quattrocchi, 2010 WL 1743189 (D. Ariz. April 29, 2010).

A jury found that the defendants had committed trademark infringement, false advertising and cybersquatting and awarded $2.5M in damages, which the judge doubled. Unfortunately, the court's opinion does not precisely spell out what the defendants did wrong. This story gives a little background,and this site shows that the defendants are pretty unpopular. The opinion indicates there was testimony that the defendants had sold bogus gift certificates for the plaintiffs' offerings and had offered inferior services using the same name as plaintiffs'. The court also says "numerous websites operated by Defendants falsely claimed Defendants owned or operated skydiving centers in Arizona, Phoenix, Tempe, Scottsdale, Mesa, Glendale, Yuma, Flagstaff, Chandler, Peoria, and Tucson when Defendants neither owned nor operated any such facilities. Additionally, the Court found that Defendants engaged in unfair competition by using photographs of Plaintiff's business on their website."

The main trademark at issue appears to be "Skydive Arizona," one of those lousy trademarks that sits right at the border of descriptive and generic. See, e.g., the Boston Duck Tours case. With such a crummy trademark at issue, the court sliced injunctive relief carefully. On the question of Internet marketing, the court says:

Plaintiff also requests that this Court prohibit Defendants from using the “Skydive Arizona” trademark or other confusingly similar terms in links or keywords on their websites. The Court finds that such relief is appropriate, especially because Defendants' business primarily utilizes the internet, and will extend Plaintiff's request to include the phrases “Arizona Skydiving” and “Skydiving Arizona” as well. Persons searching for Plaintiff's business should not be erroneously led to Defendant's website due to these marks placement in a meta tag or other link on Defendant's websites. See, e.g., Bernina of America, Inc. v. Fashion Fabrics Intern., Inc., 57 U.S.P.Q.2d 1881, 1884 (N.D.Ill.2001) (preliminarily enjoining defendant from using plaintiff's trademark in meta tags); DeVry/Becker Educ. Dev. Corp. v. Totaltape, Inc., 2002 U.S. Dist. LEXIS 1230, *7-8 (N.D.Ill. Jan. 22, 2002) (enjoining use of plaintiff's trademark in internet links and keywords, and “in any other manner in connection with the internet that would cause consumers to believe erroneously that [defendant's] goods or services are somehow sponsored by, authorized by, licensed by, or in any other way associated with [plaintiff]”.). In taking this step, the Court is not unaware of Defendants' concerns that the generic nature of the words “skydive” and “Arizona” will unfairly prevent Defendants from practicing their business in Arizona. The injunction, however, is not a blanket prohibition against using these words on its website or in meta tags. It merely prohibits Defendants from using “Skydive Arizona,” “Arizona Skydiving,” “Skydiving Arizona,” and any other combination of those words that is confusingly similar to that mark. There is, for example, a difference between using those words in combination as proper nouns, and merely utilizing them individually or in the course of a sentence. The former, depending on the circumstances, is likely prohibited by this injunction, but the latter usage probably is not.

This translates into the following injunction:

from using the trademark “Skydive Arizona,” or any marks that are confusingly similar to or colorable imitations of that trademark, and from using “Skydiving Arizona,” and “Arizona Skydiving,” on or in connection with or as part of any website, including in meta tags, keywords in pay-for-placement or payfor-rank search engines, in source code or other computer code, for the retrieval of data or information or as search terms, in the domain names of any websites, in any titles, headings, statements, links or other text appearing on any page of any website in any location on any websites registered, owned, or used, directly or indirectly, by any of the Defendants

I find the fretting about metatags anachronistically amusing (in a cynical way), but I wonder about the specific contours of this injunction. For example, is it a violation for the defendants to broad-match "skydive" or "skydiving" and geographically restrict the ad to Arizona? It also appears that the site can include statements like "Skydiving in Arizona" or "If you're in Arizona and want to skydive, visit us." I appreciate that the judge recognized the speech restriction concerns of an overbroad injunction, but these types of language contortions are a good sign that the trademark may not have deserved the protection it apparently is getting.

The court also rejected some other overreaching plaintiff requests, such as that the defendants be barred from using the word "Arizona" in any domain name or website and limiting the defendants to operating only 1 skydiving-related website. The defendants also get to keep skydivinginarizona.com.

Posted by Eric at 02:09 PM | Domain Names , Search Engines , Trademark | TrackBack

April 23, 2010

Beverly Stayart Strikes Again! This Time, Stayart Sues Google

By Eric Goldman

Stayart v. Google, Inc., 2:10-cv-00336-LA (E.D. Wis. complaint filed April 20, 2010)

I've previously blogged about Beverly Stayart (a/k/a Bev Stayart) and her mockable lawsuit against Yahoo. She has repeatedly declared that she is the only Beverly Stayart / Bev Stayart in the world and that her name--due to the cachet she has built up from being a quality human being--is being used to peddle sex-related pharmaceuticals. She lost her first foray against Yahoo on 47 USC 230 grounds but nevertheless is trying again.

Now, she has launched another effort to defend her name—this time she is suing Google for similar concerns. (Like we couldn't see that coming!). She objects to the fact that Google Suggest prompts searchers on "bev stayart" to search for "bev stayart levitra." (para. 13). Anticipating a 47 USC 230 defense, she argues (para. 15) that Google Suggest represents first party editorial content that drops out of 230 coverage. The complaint also seems to raise the question of whether selling a personal name as a keyword trigger constitutes a publicity rights violation; but the complaint does not appear to evidence any understanding of broad matching, i.e., that a search for "bev stayart levitra" will deliver Levitra-related broad-matched ads for reasons having nothing to do with Bev Stayart. (See this recurring defect in paras. 90-109).

(Note: this prompted me to check out a search for "eric goldman levitra." My first result, from www.hosmersoda.com, looks pretty sploggy to me, but there's no way I'm going to click on these links!!!)

Some unsolicited advice for Bev Stayart: stop suing search engines, and stop running vanity searches on the search engines. Life is too short to fret about sploggers!

Two final notes: Bev's attorney is, once again, Gregory A. Stayart, her employer and presumably a family relation. Also, searches for "Bev Stayart" and "Beverly Stayart" are worth a look—I can’t recall other search results quite like that.

Posted by Eric at 09:29 AM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Spam | TrackBack

April 12, 2010

Google Successfully Transfers Another AdWords Case to California--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek, LLC v. U.S. Auto Parts Network, Inc., 2010 WL 1381005 (D.N.J. April 1, 2010)

Google has successfully transferred another trademark lawsuit over AdWords to its home court in California based on the mandatory venue clause in its AdWords contract. This is the latest success Google has had invoking its venue clause; similar recent victories include the TradeComet and Flowbee rulings. Indeed, the only case I can recall where Google has unsuccessfully invoked its AdWords venue selection clause is the Rosetta Stone case (see this transcript from Sept. 2009). (There may be other failed efforts, but I can't recall them). As a result, the Rosetta Stone case remains on the rocket docket with a trial scheduled for next month, but it appears some of Google's other litigation parties will be moving to California.

The most interesting thing about this particular ruling is that the court doesn't cite to either the TradeComet or Flowbee rulings in deciding for Google. Instead, the court anchors its decision in its putatively sui generis analysis of 3rd circuit caselaw.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:50 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 31, 2010

March 2010 Quick Links

By Eric Goldman

Internet Exceptionalism

* Stern v. Sony Corp., CV 09-7710 PA (C.D. Cal. Feb. 8 2010) "to the extent Plaintiff is suing Sony as a manufacturer of video games, and the provider of online services, Sony is not a ‘place of public accommodation’ and is therefore not liable for violating Title III of the ADA" Nice complement to the Estavillo case. My prior post on Internet exceptionalism.

Online Competition

* Microsoft’s head algorithms guru says that Google's search engine beat Microsoft because Microsoft ignored the long tail of search queries. If Google and Microsoft made different product design choices and the marketplace liked Google's choices better, doesn’t this make it hard for Microsoft to complain about Google’s "anti-competitive" practices? I wonder if this talk was pre-cleared by Microsoft’s antitrust counsel.

* SJ Mercury News: Google's most recent 10-K lists some new self-identified competitors, including Yelp, Kayak & WebMD. By identifying some vertical players as competitors, such as Kayak and WebMD, does Google lend credence to the arguments by TradeComet and myTriggers that Google does compete with vertical search engines?

* In re eBay Seller Antitrust Litigation, 2010 WL 760433 (N.D. Cal. March 4, 2010). eBay wins summary judgment in an antitrust challenge: "Despite the voluminous briefing permitted in connection with both of the instant motions-which includes hundreds of pages of supporting documents-Plaintiffs have not drawn the Court's attention to any actual proof of antitrust injury caused by eBay's alleged anticompetive acts-on an individual or a classwide level."

Online Pornography

* U.S. v. Beckett, 2010 WL 776049 (11th Cir. March 9, 2010). A man posed as a 17 year old girl on MySpace and AOL, engaged boys in discussions, induced them to send nude photos, and then coerced them to have sex with him to prevent his dissemination of the photos.

* Miller v. Mitchell, No. 09-2144 (3rd Cir. March 17, 2010). This is the case where the government prosecutor threatened to bring felony charges against girls for "sexting." The court upholds a preliminary injunction against requiring the girls to go through an education program in lieu of felony prosecution.

* U.S. v. Durdley, 2010 WL 916107 (N.D. Fla. March 11, 2010). No privacy expectations in a flash drive left in a public computer.

Online Security

* Cormac Herley of Microsoft Research, "So Long, And No Thanks for the Externalities: The Rational Rejection of Security Advice by Users." In my observations, users are actually intensely rational when it comes to privacy and security issues, and privacy and security advocates who don't fully account for this user behavior do so at their peril.

* Reuters takes a deep look at Innovation Marketing, a Russian scareware operation.

User-Generated Content

* Who does what on Wikipedia.

* Josh King explains why Avvo supports the proposed federal anti-SLAPP law.

* T.V. ex rel. B.V. v. Smith-Green Community School Corp., 2010 WL 935574 (N.D. Ind. March 11, 2010). Denying class formation for a lawsuit in response to a ridiculously harsh school suspension for a MySpace photo of ribald off-campus activity.

* Melton v. Boustred, 2010 WL 881919 (Cal. App. Ct. Mar 12, 2010). Boustred throws a ragin' party and advertises it via a MySpace open invitation. The plaintiffs show up and were beaten and stabbed at the party by unknown assailants. The court concludes that Boustred isn't liable for the physical injuries. Note to self: stay away from parties advertised via MySpace.

* Yelp Litigation Mania!
- Cats & Dogs Animal Hospital v. Yelp first amended complaint
- LaPausky v. Yelp complaint. A write-up.
- Levitt v. Yelp complaint.
- ClickZ: Ex-Yelper Helps Law Firms Go After Yelp

Anonymity

* Park West Galleries, Inc. v. Global Fine Art Registry, LLC, 2010 WL 742580 (E.D. Mich. Feb. 26, 2010). Using an online pseudonym can lengthen the defamation statute of limitations.

* White v. Baker, 2010 WL 1009758 (N.D. Ga. March 3, 2010). Mandatory reporting of Internet usernames by registered sex offenders violates the First Amendment.

Advertising and Marketing

* ClickZ: New Facebook Policies Clamp Down on 'Loose' Ad Copy.

* Coyote Pub., Inc. v. Miller, 2010 WL 816936 (9th Cir. March 11, 2010). Upholding the constitutionality of Nevada's restrictions on advertising prostitution.

Trademark

* WSJ: It's a crowded namespace for bands.

* 1-800Contacts, Inc. v. Memorial Eye, P.A., 2010 WL 988524 (D. Utah March 15, 2010). It was not objectively baseless for 1-800 Contacts to bring a trademark enforcement action over competitive keyword advertising.

* Rhea Drysdale tells how she busted the trademark application for "SEO."

* The Utah governor has signed SB 26, which (among other things) creates a bastardized version of ACPA. My initial comments on the proposed bill.

Copyright

* James Grimmelmann on Reed Elsevier v. Muchnick.

* Ben Sheffner has some updates in the Scribd lawsuits. My initial post on Scott v. Scribd.

* Ars Technica on an experiment to block users who are using ad blocking software from accessing its site.

General

* Hudson v. University of Puerto Rico, 2010 WL 1131462 (D. Minn. March 23, 2010). Passive blog does not confer general jurisdiction.

* Doe 1 v. AOL LLC (N.D. Cal. Feb. 1, 2010). "Plaintiffs' claims for violation of the ECPA (Count I), unjust enrichment (Count VI) and for public disclosure of private facts (Count VII) are subject to the forum selection clause because none are California consumer law claims." Prior blog post.

* Commonwealth v. Interactive Media Ent’mt and Gaming Ass’n, Inc., No. 2009-SC-000043-MR (Ky. Mar. 18, 2010). Challenge to Kentucky's seizure of 141 gambling-related domain names tossed on standing grounds. Prior blog post.

Posted by Eric at 08:42 AM | Content Regulation , Copyright , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark , Virtual Worlds | TrackBack

March 23, 2010

Google Gets Favorable ECJ Opinion, But Will It Prove to Be a Hollow Victory?

By Eric Goldman

The European Court of Justice issued its long-anticipated decision in the three Google AdWords cases (C-236/08, C-237-08 and C-238/08) referred to it by the French Cour de Cassation. The ruling only answers the questions posed to it by the Cour de Cassation, so in that sense it does not provide a blanket resolution of keyword advertising legitimacy in Europe. Nevertheless, all three answers by the ECJ are favorable to Google and other keyword advertising vendors—although, as I explore below, litigatable questions remain.

In broad strokes, the ECJ adopted Google’s position that it merely provides technology services to advertisers who make legally significant judgments using the technology. For example, the ECJ says that advertisers, not Google, make the requisite trademark “use,” and Google can qualify as a web host of its advertisers’ content—and thus is eligible for the associated safe harbor—if it remains sufficiently passive.

While these rulings improve Google’s legal position against trademark owners, the news isn’t uniformly good for the keyword advertising industry. The opinion identifies a number of potential legal pitfalls for keyword advertisers. We may learn more about these pitfalls from the other trademark owner-v.-advertiser cases pending before the ECJ. My understanding is that 5 such cases are pending, with one ruling coming on Thursday. Based on the language in this opinion, I think it’s probable that the subsequent ECJ rulings will show that keyword advertisers face significant legal exposure when buying competitive keyword advertising.

As a result, Google’s legal victory may prove to be a little hollow. Even if Google eventually earns a clean bill of health for itself, it could still see revenue contraction if advertisers are dissuaded by their legal exposure.

The ECJ Rulings

As typical with European legal opinions, this ruling (although briefer than many, including the Advocate General’s advisory opinion in the case) was unnecessarily long and written in inscrutable language. For example, the opinion refers to search engines selling keyword advertising as “referencing service providers” and keywords as “signs.” Huh? Further, like most European opinions, the opinion starts out with a lengthy but largely unenlightening recitation of facts and law. If you are looking to save a little time, skip ahead to paragraph 42.

Or, better yet, just start reading the opinion at the end. There, the court helpfully lays out its conclusions in three standalone paragraphs:

1. Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.

2. An internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign within the meaning of Article 5(1) and (2) of Directive 89/104 or of Article 9(1) of Regulation No 40/94.

3. Article 14 of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) must be interpreted as meaning that the rule laid down therein applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned.

A closer look at each of the three holdings.

Holding #1: Keyword Ad Copy Must Sufficiently Distinguish the Trademark Owner

This holding does not directly address Google’s liability; it only references the advertiser’s liability. The EU generally lacks a well-developed doctrine of secondary trademark liability. Therefore, even if an advertiser’s ad is problematic, that may not be imputable to the keyword vendor. (I discuss advertiser liability below).

In several places, the court’s language reinforces that keyword advertising systems do not create independent liability for their vendors. For example, in paras. 56-57, the court says that a “referencing service provider allows its clients to use signs which are identical with, or similar to, trade marks, without itself using those signs….The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign.”

Further, in paras. 94-95, the fact that other advertisers’ bids may increase the trademark owner’s price to display ads triggered by its own trademark (and Google’s consideration of ad quality) does not “constitute an adverse effect on the advertising function of the trade mark.” The court goes on to say (paras. 97-98):

when internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list. That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’. Having regard to those facts, it must be concluded that use of a sign identical with another person’s trade mark in a referencing service such as that at issue in the cases in the main proceedings is not liable to have an adverse effect on the advertising function of the trade mark.

As every SEO knows, nothing is “guaranteed” when it comes to search engine placement. Trademark owners usually show up well in organic search results for their trademark, but Google may have de-indexed or downgraded the trademark owner’s website. Further, personalized search results and universal search results can cause unexpected orderings. What happens to the court’s reasoning when the trademark owner doesn’t show up prominently in the organic results?

Holding #2: Search Engines Don’t Make a Legally Recognized “Use” of the Trademarks

In the Second Circuit ruling in Rescuecom v. Google, which held that Google made a “use in commerce” by selling trademarked keywords for keyword advertising. After that ruling, it was pretty clear that both buying and selling trademarked keywords constituted a “use in commerce” under US trademark law, shifting the litigation battle to likelihood of consumer confusion and the defenses.

Here, the court reaches the superficially opposite result, saying that advertisers, not Google, make the legally actionable “use in the course of trade.” These divergent results may just reflect differences in the statutory wording. Nevertheless, for enthusiasts of the “use in commerce” doctrine, its spirit apparently lives on in Europe!

Holding #3: Keyword Vending Can Qualify for E-commerce Directive

This was a doctrinally interesting conclusion. The E-commerce Directive was inspired by the Digital Millennium Copyright Act online safe harbors (17 USC 512), so it was oriented towards online copyright issues. For example, it has a safe harbor for caching that really only makes sense in the copyright context.

Here, the ECJ applies the E-commerce Directive to a trademark dispute, effectively treating Google as the web host of the advertiser’s ad content. While this is a promising interpretation, it leaves open some ambiguity about what will constitute disqualifying activity. The opinion makes it fairly clear that Google would have an “active role”—and therefore become disqualified for the safe harbor—if it helps the advertiser prepare the ad copy. However, Google can participate in its advertising campaigns in a variety of ways, such as suggesting bid amounts and keywords to purchase (through its keyword suggestion tool). Will these other participatory activities constitute a disqualifying “active role”?

Liability of Keyword Advertisers

The opinion highlights several potential liability risks for keyword advertisers. First, the opinion says that keyword advertisers can’t avoid liability by indicating that their products are “imitations” or “copies” in the ad copy. (Paragraph 102).

Second, regarding Holding #1, the opinion (paras. 83-85) raises concerns about ads triggered by keywords identical to a trademark where “normally informed and reasonably attentive internet users” cannot easily determine if the advertised goods originate with the trademark owner.

The precise wording of Holding #1 limits its applicability to a keyword that is identical to the trademark and to goods that are identical to the trademark owner’s goods. By inference, the language does not govern keywords that are similar to the trademark (does it exclude typographical error versions?) or goods such as complementary goods or replacement components. In addition, the standard seems to limit trademark coverage by class of goods—something that can be ambiguous when a single keyword is the trademark of multiple trademark owners in different classes. However, given the wording of the answer, I do not assume that these unaddressed circumstances will be found permissible when tested in future cases.

In the situations described in the holding, “the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark.” The court says that national courts have the power to adjudicate whether that source confusion actually occurred (para. 88), but the following ads appear to be presumptively problematic:

* “where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark” (para. 89).

* “where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor” (para. 90).

If this language is intended to cover ad copy that constitutes bait-and-switch or passing off, this language isn’t a big deal. However, this language appears to be broader, and I’m not entirely clear what advertisers can do to avoid these risks. A typical text ad has very limited space for subtle legal explanations, and Google’s trademark policies allow the trademark owner to prohibit the advertiser from referencing the trademark in the ad copy even for clarification purposes. For example, an advertiser purchasing the “smith” trademark as a keyword can be blocked from saying “compare our products to smith’s” in the ad copy. If the ad copy says “switch to us” or “we’re better than other brands,” will those types of implicit comparisons be enough to eliminate the ambiguity feared by the court? At minimum, the court’s language leaves plenty of room for trademark owner-vs.-advertiser lawsuits asserting ambiguous ad copy. Perhaps the pending ECJ AdWords cases will provide some further clarity.

What’s Next

I find EU governance structures generally baffling, so it’s impossible to anticipate all of the possible implications of this ruling. However, trademark owners steamed about this ruling have a wide range of options, including the following:

* they could seek a new directive, or seek to modify an existing directive, to expand keyword advertising vendor liability.
* to the extent possible (something I can’t easily evaluate), they can seek legislative changes at the national level to get back some of the ground lost in this ruling.
* they can continue to litigate the interstices of this ruling. For example, they can try to disqualify Google from the E-commerce Directive’s safe harbor by arguing that Google plays an active role in its advertisers’ decisions.
* they can seek to expand advertiser liability through any of these methods.
* they can litigate against advertisers one-by-one.
* as always, they can continue to send takedown notices or avail themselves of the search engine trademark policies.

Other good options may exist.

From Google’s perspective, I wonder if this opinion gives it enough comfort to liberalize its European trademark policy to match the rest of the world (i.e., allow trademark owners to block only certain ad copy references and not keyword purchases). For example, to retain its eligibility for the E-commerce Directive, Google still needs to follow a notice-and-takedown regime, although I wasn’t clear if Google’s takedown can just be the ad copy or has to be the keyword as well. Google did liberalized its UK and Ireland trademark policy after the Mr. Spicy ruling, which also concluded that Google did not make a legally actionable “use,” so perhaps Google will feel emboldened by Holding #2.

What Google SHOULD do is take a more proactive stance on the legality of the keyword advertising industry. It should propose legislation that protects both itself and its advertisers. It should also intervene in some of the trademark owner-vs.-advertiser cases that have the potential to establish disadvantageous legal rules for its advertisers. Google has been remarkably passive in terms of legal developments, playing defense only when threatened. I believe this is not a long-term winning strategy. Cf. the Battle of Hastings and how a determined and powerful opponent can eventually breach a shield wall. Google currently has to defend a wide array of battlegrounds, and a loss in any one of those venues could materially diminish its earning potential. To ensure the long-term viability of the keyword advertising industry, Google may need to go on the offense.

I don’t expect that this opinion will affect any US legal developments. For the most part, the opinion interprets governing EU directives and regulations. Because the words in those statutes are not the same as the words we use in the US, the opinion is not readily exportable to US law.

Nevertheless, this opinion could be the vanguard of an emerging legal trend to put the trademark compliance legal burden on keyword advertisers and not keyword vendors. We have not yet reached that conclusion in the United States, but it’s entirely sensible to me that the keyword vendors should not be trademark arbiters, and my hope is that US judges will get there eventually. For more on why I believe we should deregulate keyword ad sales, see this article.

Posted by Eric at 10:25 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 22, 2010

Search Engine Legal Developments to Watch in 2010

By Eric Goldman

I recently spoke on a panel about search engines and the law at SMX West. I previewed four major trends in search engine law to watch in 2010:

1) Competition issues. Antitrust/competition law has become a big part of the search engine industry. There are two main flash points: Google’s high percentage of the search advertising business and Google’s black box algorithm for organic search results. Both facets are troubling to competitors and regulators, but they are creating extra friction with “vertical search engines” that portray themselves as competition for Google.

Recent antitrust/competition battles:

* Google-DoubleClick acquisition scrutiny
* Google-Yahoo search syndication deal killed by DOJ
* >a href="http://blog.ericgoldman.org/archives/2009/07/microsoftyahoo.htm">Microsoft-Yahoo deal
* DOJ and Microsoft opposition to Google Book Search settlement
* Person, KinderStart and Langdon civil lawsuits against Google

Present battles:

a) EU complaints from a UK price comparison site, Foundem, a French legal search engine called ejustice.fr, and Microsoft's Ciao! from Bing. Wired: “Google says the companies accuse it of wielding its dominance as a search engine to squelch competition by preventing people from finding their vertical search engines.”

b) US actions: TradeComet and myTriggers. Do these lawsuits have Microsoft ties? In a blog post “Competition Authorities and Search,” Microsoft came out of the closet and admitted it was harassing Google on antitrust issues.

The underlying battle: who should decide what content and ads that searchers see? Two main options: search engines or regulators. Seems like an easy call to me. See my Search Engine Bias article. An under-addressed issue: the role of 47 USC 230(c)(2) in search engines' filtering decisions.

2) keyword advertising lawsuits against Google. 8 lawsuits are pending. The Rosetta Stone case scheduled for trial in May. There are no known US legislative initiatives, especially now that the Utah legislature has adjourned for the year. We are all anxiously awaiting the issuance of the ECJ opinion tomorrow at 1:30 am CA time (I'll blog it as fast as I can).

3) Search engines and copyright. Pending US cases include Viacom v. YouTube, Perfect 10 v. Google and the Google Book Search settlement. Plus, Google's tussles with AP, News Corp. and other news organizations.

4) Search engine compliance with foreign laws, including the Google-China flap and the Google Videos conviction in Italy. This has stirred the pot in Congress again. The latest: Sen. Durbin’s is threatening to force Web companies to join the Global Network Initiative and stop dealing with repressive regimes…which is a resurrection of Chris Smith’s Global Online Freedom Act. Hypocrisy alert! In light of point #1, will the US itself be put on the list of repressive regimes? Plus, as we’ve seen, Google’s single-handed efforts to take down the Chinese government haven’t worked so well.

Posted by Eric at 10:15 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Search Engines , Trademark | TrackBack

March 16, 2010

Stratton Faxon v. Google Dismissed

By Eric Goldman

Stratton Faxon v. Google, Inc., NNH-CV-09-5031219S (Conn. Superior Ct. dismissed March 8, 2010)

Stratton Faxon v. Google was always an oddball case in the constellation of trademark owner challenges to Google AdWords. First, the plaintiff--a law firm that woke up one day in 2009 and discovered competitive keyword advertising--didn't allege trademark infringement but instead took an unusual and questionable legal path. Second, the case was filed in state court, not federal court, which made the case much more difficult to track than cases in federal court.

These oddities are now irrelevant. The court issued a "motion for judgment" on March 8 granting a motion brought by Google to dismiss the case. I haven't seen any of the underlying motions, but the net effect is that the case is closed.

However, the case may not be over. In my prior email exchanges with Stratton Faxon, they indicated that they may refile in federal court. So we'll see if this case resurrects itself.

Combined with Rescuecom giving up, Google has now whittled its pending AdWords challenges down to 8 pending cases. Furthermore, the Utah legislature has adjourned for the year without banning Google's cash cow again. In the world of Google's legal affairs, these two developments qualify as good news! Next stop: the ECJ's opinion addressing Google's trademark liability in the EU, expected one week from today.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 05:33 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 09, 2010

TradeComet v. Google Dismissed Based on Venue Selection Clause

By Eric Goldman

TradeComet.com LLC v. Google, Inc., 2010 U.S. Dist. LEXIS 20154 (SDNY March 5, 2010)

The judge has (finally) dismissed TradeComet's antitrust lawsuit against Google based on the venue selection clause in Google's AdWords contract.

The result isn't very surprising. It is consistent with recent similar rulings, such as the uncited Miller v. Facebook and Flowbee v. Google rulings. The latter ruling recently dismissed an advertiser lawsuit against Google (in that case, trademark instead of antitrust) based on the AdWords venue selection clause. The court said that TradeComet's antitrust concerns are sufficiently related to the AdWords relationship to be included within its mandatory venue selection clause.

The most interesting point is that the court upheld Google's agreement despite the fact it contains a "we can change this agreement whenever we want" provision. I've argued before that those provisions are toxic, but B2B contracts can get a little more slack than B2C contracts.

Having won yet another ruling that its AdWords venue selection clause requires lawsuits to be brought in Google's home court, it reiterates again that Google almost certainly breached its own contract by bringing a collections lawsuit against myTriggers in myTriggers' home court. Google will most likely pay for that mistake by losing its ability to pull the case back into California, even though the case has morphed into a major antitrust showdown.

Posted by Eric at 02:39 PM | Search Engines | TrackBack

March 05, 2010

Rescuecom Abandons Its Litigation Against Google

By Eric Goldman

Today, Rescuecom issued a press release declaring victory in its litigation against Google. But it's an odd definition of "victory" given that Rescuecom has apparently voluntarily abandoned its 6 year litigation effort without any new concessions from Google. The dismissal notice.

This development reminds me a lot of the American Blinds v. Google denouement, where American Blinds also simply gave up and dropped its multi-year lawsuit without any concessions from Google. Note to future plaintiffs: if you're going to threaten Google's $20B/year cash cow, chances are pretty good that they have the resources to outlast you.

Why did Rescuecom give up? According to Rescuecom's press release, "Google has recently confirmed to Rescuecom that it has removed Rescuecom’s trademark from its Keyword Suggestion Tool." That, plus the fact that Google blocks trademark references in ad copy, means that Rescuecom feels it has "obtained two of the three things we initially sought in our complaint against Google." And if two out of three is good enough for Meat Loaf, apparently it's good enough for Rescuecom. At minimum, having low standards makes it a lot easier to declare victory when you give up.

However, this explanation is pretty hollow. Although the press release treats Google's removal of Rescuecom from the keyword suggestion tool as a new development, it appears that Google made this change IN 2005. Wendy Davis reports:

[Rescuecom CEO] Milman says he only learned last week that Google had stopped suggesting Rescuecom as a keyword. "Who knows what would have happened if they had told us back in 2005 that they had taken our name out of their keyword tool?" he said.

Hmm...I think I know the answer to that question! Then again, if getting out of the keyword suggestion tool really was one of Rescuecom's Big Three objectives all along, maybe they might have asked Google about it in 2005...or 2006...or 2007...or, well, you get the point. Spin it however they want, it's hard for Rescuecom to look good while dropping a lawsuit based on a 5 year old fact.

Nevertheless, I'm interested in knowing more about this removal. Does Google have a way for trademark owners to "opt out" of having their trademarks in its keyword suggestion tool? I would expect that option to become very popular if it were well-known. If anyone has information about how trademark owners can make an election with Google, please share it.

Given the completely disingenuous nature of declaring victory based on getting out of the keyword suggestion tool, there may be a better--and more self-interested reason--for Rescuecom to give up. Rescuecom is defending a trademark lawsuit brought by Best Buy over Rescuecom's competitive AdWords purchases of the "geek squad" trademark. Rescuecom was caught in the duplicitous position of making plaintiff-side arguments against Google while making highly contradictory defense-side arguments against Best Buy. As a result, every positive step in its Google case had the potential to degrade its position in the Best Buy case. By abandoning the Google fight, Rescuecom avoids this difficult dilemma.

As an odd byproduct of this development, Google and Rescuecom are now aligned in advancing the arguments that competitive keyword advertising in AdWords is legitimate. Isn't there a passage in the Bible about the lion and the lamb lying down together?

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 10:45 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 04, 2010

Google Dismisses Some Claims in Jurin v. Google and Gets Some Attorneys' Fees

By Eric Goldman

Jurin v. Google, Inc., 2010 U.S. Dist. LEXIS 18208 (E.D. Cal. March 1, 2010)

Jurin v. Google is one of the 10 outstanding trademark-based claims against Google's AdWords programs--in this case, over advertiser purchases of Jurin's trademark "styrotrim." This particular lawsuit took a sizable hit, as Google successfully got a quick dismissal of several claims. As an added perk, the judge awarded Google $6k in legal fees for harassing litigation behavior.

The court dismisses Jurin's Lanham Act false designation of origin claim because Google never represents that it produces Styrotrim. The court says "Even if one accept as true the allegation that a 'Sponsored link' might confuse a consumer, it is hardly likely that with several different sponsored links appearing on a page that a consumer might believe each one is the true 'producer' or 'origin' of the Styrotrim product." This conclusion is consistent with the uncited Heartbrand Beef v. Lobel's case.

The court dismisses the Lanham Act false advertising claim because Google isn't a competitor of Styrotrim.

The court then dismisses a host of claims (Negligent Interference with Contractual Relations and Prospective Economic Advantage, Intentional Interference with Contractual Relations and Prospective Economic Advantage and Unjust Enrichment) on 47 USC 230 grounds. Jurin argued that Google creates content through its keyword selection tool. The court rejects this, saying that Google is just a provider of advertising space and the keyword selection tool "merely helps third parties to refine their content"--an editorial process protected by 230. The court also says that Google just provides "neutral tools" and "Defendant’s Adwords program simply allows competitors to post their digital fliers where they might be most readily received in the cyber-marketplace."

This is an interesting ruling on at least two fronts. First, I can't recall another conclusion that Google's keyword selection tool is covered by 230 (there may be others, I just can't think of them). Google's keyword selection tool has been problematic because some judges interpret it as Google steering advertisers towards third party trademarks for its own profit (see, e.g., the problems it caused in the Rescuecom case). Here, Google gets a nice judicial affirmation of the tool.

Second, the court echoes Google's mantra that it doesn't sell "keywords" but it just sells "advertising space." I have been to countless dog-and-ponies where Google lawyers have made this pitch to the audience, and it's consistently fallen flat IMO. It may be technically true that Google sells ad space and not keywords, but the reality is that Google takes money for keywords, and I think most judges would embrace substance over form. But in this case, the judge parrots Google's arguments nicely. Again my memory could be failing, but I think this is the first time a court has referenced Google as a space seller rather than a keyword seller.

[Note: I'm still working on another recent 230 ruling in the Subway v. Quiznos lawsuit--more on that soon.]

Finally, the court awards Google $6k in costs incurred the first time Jurin sued Google, which Jurin voluntarily dismissed when he lost his attorney. The court says that the claims are basically the same, so refiling harassed Google. I predict Google's likelihood of getting the $6k is about as high as the sun rising in the West tomorrow.

Despite Google's success, Jurin's trademark claims--the main issue in the lawsuit--are still on the table (Google didn't try to knock those out on the 12(b)(6)). However, the writing is on the wall for this lawsuit, and some of the language from this opinion bodes very well for Google when the court turns its attention to the trademark claims.

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 08:13 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 02, 2010

February 2010 Quick Links

By Eric Goldman

Copyright

* Mavericks Recording Co. v. Harper (5th Cir. Feb. 25, 2010). 17 USC 402(d) precludes an innocent infringement defense in P2P downloading case when the record companies place proper copyright notices on their works. This is consistent with language from BMG v. Gonzalez in the Seventh Circuit.

* Perfect 10 and Amazon settle on confidential terms; Perfect 10 v. Google will keep going. Previous blog coverage of this case (1, 2, 3, 4, 5).

* Veoh won in court (1, 2, 3) but still got knocked out of the marketplace.

* Project DoD, Inc. v. Federici, 2010 WL 559115 (D. Me. Feb. 11, 2010). In a 512(f) lawsuit I blogged about in December, the judge upheld the magistrate report dismissing for lack of personal jurisdiction because the plaintiff had moved and no longer had ties to Maine.

* MCS Music America, Inc. v. YAHOO Inc., 2010 WL 500430 (M.D. Tenn. Feb. 5, 2010). MCS sued Yahoo over infringement of its songs, and the court says that it can only get statutory damages for each song infringed. This means that if Yahoo performed 8 different covers of the song, MCS is only entitled to statutory damages for one infringed work.

Trademark

* Monex Deposit Co. v. Gilliam, 2010 WL 325570 (C.D. Cal. Jan, 25, 2010). The courts says a gripe site called "MonexFraud.com" may cause initial interest confusion of the Monex trademark. Are you kidding me?

* Typographically erroneous phone numbers always struck me as a much greater problem than "typosquatters."

Contracts

* Jacobsen v. Katzer settles.

* Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC (3rd Cir. Jan. 25, 2010). 3rd Circuit upholds consequential damages waiver in B2B Internet connectivity contract. Prior blog discussion.

Blogging/Social Networking Sites

* Cats & Dogs Animal Hospital v. Yelp (C.D. Cal. complaint filed Feb. 24, 2010). The plaintiffs allege that Yelp violates California B&P 17200 by using a pay-for-play scheme.

* Rick Frenkel speaks about his Troll Tracker blogging days.

* In re Perry, 2010 WL 374770 (Bankr. S.D. Tex. Feb. 3, 2010). Emailing links to a third party's defamatory blog constituted "publication" of the blog for defamation purposes. The court doesn't discuss 47 USC 230 at all!

* Cunningham v. West Virginia, 2010 WL 415257 (S.D. W.Va. Jan. 26, 2010). MySpace does not impermissibly discriminate against sex offenders.

* Evans v. Bayer, 2010 WL 521119(S.D. Fla. Feb 12, 2010). A student's off-campus creation of a Facebook Group called "Ms. Sarah Phelps is the worst teacher I've ever met" may not be an appropriate grounds for school discipline.

* Snowball fight leads to a rampage at Macy's? Blame Facebook!

* Marshall v. City of Savannah, 2010 WL 537852 (11th Cir. Feb. 17, 2010). A probationary firefighter posted an official fire department photo on her MySpace page. After a reprimand, the employment relationship deteriorated and she was fired. The 11th Circuit affirms the dismissal of her discrimination and retaliation claims.

* BoingBoing gets an anti-SLAPP win--including its attorneys' fees--in a defamation lawsuit over one of its blog posts. The anti-SLAPP ruling.

* Berkery v. Estate of Stuart, 2010 WL 610631 (N.J. Super. A.D. Feb. 23, 2010). "The investigative function an author performs is not substantively different from an investigative journalist. The dispositive element is not the form of the investigative process. In an era marked by a diminution of the classic newsmedia and the print investigative journalist and the proliferation of investigative reporting in media such as cable television, documentary journalism-both televisions and movies-internet reporting and blogging, the need for protection remains the same. Whether Hornblum was writing a book, news article, a screenplay or a blog, the substance of his body of work remains the same."

Search Engines

* After some innuendo about Microsoft’s role in harassing Google on antitrust/competition issues, Microsoft effectively admits as much. Also see this Wall Street Journal article on the Microsoft-Google tussles.

* Search Engine Land: Google AdSense Using Search History In Contextual Matching

* Munger v. State, 2010 WL 537641(N.C. App. Feb. 16, 2010). Rejecting a taxpayer challenge against a NC law designed to provide financial incentives for Google to build a facility there.

* Lengthy Wired article on Google's algorithm.

* Nature: Chinese researchers don’t want to lose access to Google. My blog post on this topic.

* Business Insider: In Case You Had Any Doubts About Where Google's Revenue Comes From

Advertising

* Thomas O'Toole: Does "No Contract" Really Mean No Contract?

* MediaPost: Start-Up Links 65 Million IP Addresses To Users, Readies Targeting Platform. This is not going to end well.

* More troubling words for online advertisers from FTC BCP Director David Vladeck.

* Zelotes v. Rousseau (Conn. Grievance Committee). Attorneys participating in an Internet lead generation system that allocated leads geographically didn't violate the attorney Rules of Professional Conduct.

Online Crimes

* F.T.C. v. Pricewert LLC, 2010 WL 329913 (N.D. Cal. Jan. 20, 2010). FTC gets a default injunction against an Internet access provider that allegedly provided connectivity for activities such as child pornography, botnets, spyware, and viruses.

* US v. Little. The Eleventh Circuit disagrees with the Ninth Circuit regarding the appropriate geographic scope to measure the obscenity of Internet material.

* 3 Google executives were convicted in Italy of criminal privacy violations for a user-uploaded video to Google Video. NYT article. Google's response. A refresher on the Felix Somm conviction from 1998.

* Online ticket sellers are getting the smackdown. Criminal prosecutions of online ticket brokers who allegedly played dirty in jumping the queue. The FTC cracks down on Ticketmaster and warns other online ticket sellers.

Posted by Eric at 05:04 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

February 22, 2010

Google AdWords Contract Upheld Again, Causing a Venue Transfer in Flowbee v. Google

By Eric Goldman

Flowbee International, Inc. v. Google, Inc., 4:10-cv-00668-LB (S.D. Tex. Feb. 8, 2010). My post on Flowbee’s initial complaint.

Google has successfully transferred Flowbee v. Google from Texas to California by invoking the venue selection clause in its AdWords contract. The result is noteworthy for three reasons.

First, it’s yet another case upholding Google’s AdWords contract. Similar precedents include the CLRB Hanson, Feldman and Person cases.

Second, the court said the scope of the venue selection clause covered Flowbee’s tort claim for trademark infringement. This was not a guaranteed conclusion. Clearly, the clause governs Flowbee’s AdWords purchases, but it does not automatically govern Flowbee’s beefs with other advertisers’ AdWords purchases under their independent contracts with Google. Compare Miller v. Facebook with Yahoo v. American Airlines. This court, bound by the Fifth Circuit ruling in the Yahoo case, nevertheless distinguished it because the Yahoo clause specified that business partners “submit” to exclusive jurisdiction, while the Google clause used the words “litigated exclusively.”

Third, Google surely is happy to have this case out of a lousy venue (Southern District of Texas) and into its home court. If only it could transfer the other AdWords cases too!

Having successfully transferred the case, Google then filed its answer and a counterclaim that Flowbee breached the mandatory venue clause by suing Google in Southern District of Texas. This is at least the second time Google has tried this type of contract breach claim (I blogged on the same tactic in the John Beck Amazing Profits case), so Google’s turn-the-tables move isn’t really news even though it prompted a TechCrunch post.

However, Google’s contract breach counterclaim highlights how Google got caught in flagrante delicto in its collections suit against myTriggers by bringing that suit in Ohio state court. In Flowbee, Google takes the position that bringing a suit in the wrong venue is an actionable contract breach. I’m not exactly sure how Google would respond if myTriggers countersued Google for breaching its AdWords contract by suing myTriggers in Ohio rather than California. I don’t think myTriggers could claim any damages from Google’s breach, nor do I expect myTriggers would complain about the breach because it’s probably thrilled to have trapped Google in an undesirable forum. However, Google is walking an arguably duplicitous line.

As TechCrunch post points out, Google’s answer contains some “whoops” references to Rosetta Stone instead of Flowbee. By inference, Google probably cloned-and-revised its Rosetta Stone answer for the Flowbee litigation. My tip for clean living: Whenever I clone-and-revise a document to use for a different party, the very first thing I do is a global search-and-replace to change party names.

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case). Check the status.
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:26 AM | Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

February 18, 2010

Google Hit With Another Antitrust Lawsuit. Does It Have Microsoft Ties? Google v. myTriggers

By Eric Goldman

Google, Inc v. myTriggers.com, Inc., 09 CV 14836 (Franklin County Ct. of Common Pleas, Ohio). Google filed its first amended complaint on January 20, 2010. myTriggers filed an answer with counterclaims on February 2, 2010. See both pleadings here.

About a year ago, Google was sued by an obscure company called TradeComet for various antitrust violations. TradeComet’s lawsuit wasn’t the first private antitrust claim against Google; other scrappy claims had arisen over the years. However, none of them were serious challenges or went anywhere.

The TradeComet complaint looked equally low-merit, so I would have probably ignored it except that TradeComet’s counsel was the NYC-based Cadwalader Wickersham & Taft—which also does antitrust work for Microsoft. Those two facts could be completely unrelated, but it’s possible that they aren’t. First, I can’t imagine Cadwalader would jeopardize a lucrative relationship with a Fortune 50 company to take on a low-merit lawsuit for a no-name company. Therefore, either Cadwalader viewed the various antitrust issues as so unrelated that no legal or business conflicts were created—a risky judgment given Microsoft’s sensitivity about both Google and antitrust—or Microsoft approved/acquiesced to Cadwalader’s representation of TradeComet. Second, Microsoft has been engaged in a multi-year, multi-front effort to harass Google on antitrust issues, and Cadwalader’s involvement would be consistent with that campaign.

I checked PACER today, and the TradeComet lawsuit is going nowhere fast. Google filed a motion to dismiss in March 2009, prompting an exchange of memos in April, and the last (non-substantive) PACER entry was in August. It appears that everyone is waiting for the judge to rule on Google’s motion to dismiss from almost a year ago.

Meanwhile, an intriguing and unexpected new antitrust battlefront has opened up. myTriggers is run by NexTag alums and, IMO, has an even worse brand name than TradeComet. Do a search for “mytriggers” and see if you can avoid juvenile giggles. myTriggers’ properties include three shopbots/shopping comparison websites: mytriggers.com, comparisonsearches.com and shopbig.com. A quick review of these websites revealed no obvious reason why I would choose them over better-known shopbots.

As a result, I could see why these sites might have trouble generating organic traffic. Therefore, I wasn’t surprised to learn that myTriggers was a heavy AdWords advertiser. myTriggers said that Google had extended it a $250,000 line of credit, and it incurred $200k in AdWords charges for December 2007. Meanwhile, myTriggers clearly enjoyed its acquired traffic. It did three multi-million rounds of financing (the 2005 initial capitalization and rounds in 2006 and 2007) and leased a big datacenter in March 2008. But just as it was finalizing the lease, the bottom dropped out on myTriggers. Google implemented a change to myTriggers’ quality score, which (according to myTriggers) boosted its minimum bids 10-100X. It’s never good for margins when the price on a key input goes up 10X or more, and myTriggers subsequently fired almost all of its employees and effectively exited the market.

This left the pesky matter of Google’s unpaid bill—to the tune of about $335k, according to Google. I’m not sure how many of myTriggers’ millions haven’t been spent, but clearly Google thought it was worth chasing this money. It hired a (presumably cheap) local Ohio counsel and filed one of the shortest complaints I can recall seeing (2 sentences!) in myTriggers’ local state courthouse—even though the AdWords contract appears to say that contract-related litigation *must* be adjudicated in Google’s home court. Other than the risk that myTriggers didn’t have the money, Google appears to have treated this as a routine and unexciting collections matter.

This is where the story gets weird. Rather than plead poverty to Google or mount a generic but low-cost contract defense, myTriggers retained THREE law firms and also brought a counterclaim under Ohio’s state antitrust law, the Valentine Act. The three law firms are: (1) local Columbus counsel, presumably initially retained to handle the collections matter, (2) a Cincinnati firm that includes Stanley Chesley, Ohio bar #852 (!), a litigator of some renown who has enough gravitas to impress most judges; and (3) the same four-person DC-based antitrust team from Cadwalader that also represents TradeComet.

I am struggling to make sense of myTriggers’ litigation choices. Assuming myTriggers even has the money, writing a $335k check to Google (and I bet Google would have taken less!) is almost assuredly cheaper than paying three law firms to mount an antitrust assault on a $20B/year behemoth. Assuming that myTriggers wants to maximize profits, then either (1) myTriggers thinks its odds are good enough that it will win AND make enough money to pay the 7 lawyers on the counterclaim's signature page plus their teams, or (2) the law firms struck an unbelievably sweet deal on fees.

Either way, how did Columbus-based myTriggers connect with the DC-based Cadwalader team? Did myTriggers independently call up Cadwalader? The TradeComet lawsuit got some press, but that was a year ago. If myTriggers really thought it had a case, it might have preemptively sued Google rather than waiting for Google to sue it. Did myTriggers get connected to Chesley for some reason, who then recommended bringing in Cadwalader? Did Cadwalader reach out to myTriggers? If so, I would like to know more how this happened and how this matter pertains to Cadwalader’s relationship to Microsoft. I’m also confused about the relative roles of Chesley and Cadwalader. It’s not immediately obvious why myTriggers would need both Chesley and Cadwalader or be willing to fund both.

Whatever the case, I suspect the antitrust claims caught Google flat-footed. A simple and low-stakes collections matter has blown up into a potentially significant lawsuit in an undesirable forum. Google chose Ohio state court for the collections matter despite its AdWords contract, so now it will have a tough time extricating itself from that court. But I suspect it would rather have an antitrust case in federal court, not state court—often (but not always) federal judges are more sophisticated than state judges and less susceptible to hometown bias. And I’m sure Google would rather fight antitrust claims on one of the coasts than in the Rust Belt, especially if myTriggers argues that Google’s evilness cost Ohioans jobs. Google probably didn’t mean to offer battle in this venue, but someone did a really good job of seizing the opportunity and forcing Google to fight the battle in a suboptimal setting.

Although myTriggers’ counterclaim is noticeably less well-drafted than the TradeComet complaint, the substance of myTriggers’ antitrust counterclaim is similar to the TradeComet allegations. The basic argument is the same: myTriggers argues that it’s a competitor to Google and that Google raised ad prices on a competitor to squelch it. As a result, I think this counterclaim is about as meritorious as TradeComet’s—in other words, not so much.

That said, the counterclaim had a couple of interesting factual allegations. First, in paragraph 12 of the counterclaim, myTriggers alleges that Google cuts special deals with selected shopbots so that their ads are not subject to the same quality scores as other advertisers. (Compare paragraph 101 of the TradeComet complaint, which wasn’t as clear that Google made these adjustments by agreement). I would love to see one of the Google-shopbot agreements containing such a clause. Could this just reflect some aspect of Google’s standard algorithm that automatically preferences shopbots without any agreement? Or could the NexTag alums know something we don't?

Second, Paragraphs 14-16 allege that Google manually maintains a “whitelist” that means that “neither Google nor its ‘search partners’ will eliminate the company from the market,” and a shopbot not placed on the whitelist “is forever blacklisted by Google and its ‘search partners.’” The TradeComet complaint doesn’t have a directly analogous allegation, and I have no idea what this means. If you have any thoughts or theories, I would welcome them. These allegations should be subject to the Ohio equivalent to Rule 11, so myTriggers should have some evidence in its possession to back this up. I would love to see that evidence.

Posted by Eric at 01:23 PM | Licensing/Contracts , Marketing , Search Engines | TrackBack

February 12, 2010

Ripoff Report Sues Blogger, Loses on Jurisdictional Grounds--Xcentric Ventures v. Bird

By Eric Goldman

Xcentric Ventures, LLC v. Bird, 2010 WL 447759 (D. Ariz. Feb. 3, 2010). See the initial complaint.

I usually find personal jurisdiction rulings mind-numbingly uninteresting, so I try my best to avoid them. However, some personal jurisdiction cases are exceptional, and this is one of them. It involves one of this blog's favorite litigants, the Ripoff Report, as a defamation plaintiff against a well-respected lawyer-blogger, Sarah Bird, COO and GC of SEOmoz.

The case involves Sarah's Jan. 2008 blog post on the SEOmoz blog entitled "The Anatomy of a RipOff Report Lawsuit." As you may know, many SEOs HATE Ripoff Report because of Ripoff Report's frustratingly high ranking in Google search results, which might be more attributable to Ripoff Report's venerability than its content quality. To cater to her audience's interest/fascination with Ripoff Report, Sarah undertook the Herculean effort of trying to catalog all of the Ripoff Report litigation she could find and narrate some of the litigation dynamics. It's a project I would not have undertaken because I know how long a project like that takes, but I was grateful she did the work and shared it with the rest of us. The post was a useful public service for researchers like me.

Perhaps not surprisingly given the overwhelming volume of information required to prepare her report, Sarah's post contained at least one factual error, which she subsequently admitted. The post also prompted a conversation between Sarah and Thomas Duffy, the Ripoff Report's former general counsel (a position now held by David Gingras). Sarah reported on their conversation in a follow-on post.

In my opinion, that should have been the end of it. Sarah undertook a near-impossible research task, made some errors, hashed out some issues with Ripoff Report and posted a follow-up. Instead, feeling that the article still encourages third party plaintiffs to bring false claims, Ripoff Report sued Sarah for defamation and "aiding and abetting" tortious acts by others.

This is not the first time that the Ripoff Report has gone on the defamation offensive. For example, I wrote about their lawsuit against the Phoenix New Times for an important work of investigative journalism they published. See my April 2008 blog post on that lawsuit and Thomas Duffy's response. So it isn't surprising that Ripoff Report sued Bird, but I still think it's an unfortunate turn of events.

It is also a lawsuit that could backfire. Every defamation lawsuit Ripoff Report brings could establish adverse legal precedent that increases the potential exposure of their own contributors--some of whom probably are not as careful as Sarah. In my opinion, this risk is doubly troublesome because contributors can't remove their reports from Ripoff Report, even if the contributor believes that taking down the content would reduce their liability.

In today's case, the court rejected the Ripoff Report's lawsuit against Bird due to her lack of personal jurisdiction in the Ripoff Report's home court of Arizona. Ripoff Report tried to establish jurisdiction using the Calder "Effects Test." The court, trying to read ambiguous 9th Circuit precedent interpreting that test, says:

mere knowledge of an individual's residence, combined with intentional posting of defamatory statements on the internet (which, taken together, makes it foreseeable an individual will be harmed in a certain forum location) does not amount to “express aiming.” Although what else is required is unclear, the express aiming requirement appears to demand a showing that there is at least some additional connection between the defamatory act and the forum.

Applying this standard, the court concludes "the Plaintiffs in this case have alleged no connection between the allegedly defamatory article and the forum other than that the article was about Plaintiffs and Defendants knew Plaintiffs resided in Arizona." Therefore, personal jurisdiction didn't attach.

It's clear from this opinion that the judge didn’t know what to do with the prevailing Ninth Circuit precedents. Surprise—another area where the Ninth Circuit has horked Internet law. As a result, the court's assessment of Ninth Circuit law is not completely free from doubt. However, it is also clear that this judge doesn't want to hear this case. In a footnote, the court notes the policy concerns about an expansive interpretation of the Calder Effects Test:

The ability to hale an internet user into a distant forum based on an allegation of intentional defamation could be used to chill free speech. It is true that a rule to the contrary could effectively deprive individuals who cannot afford to litigate outside their forum of a remedy for internet-based defamation....The harm caused by internet-based defamation can be quite severe and widespread, and conventional wisdom might be that one should have the right to remedy that harm without having to litigate in a distant forum. These concerns are mitigated, however, by the relative ease of modern air travel. It is also important to remember that at the pleading stage a plaintiff need only make a prima facie case of defamation. Requiring plaintiffs to bear the burden of traveling is consistent with requiring plaintiffs to bear the burden of proof at trial, and with the goal served by personal jurisdiction rules of preventing defendants from being unreasonably haled into a distant, and potentially biased, forum.

So true! Yet, judges rarely dismiss cases on jurisdictional grounds, so it's not clear how many other judges would embrace these sentiments.

I reached out to David Gingras, and he informed me that Ripoff Report is planning to appeal this ruling. There may be some legal ground to reevaluate the district court's reading of Ninth Circuit law, but going to the Ninth Circuit has some peril for Ripoff Report too (remember Kozinski's harrassthem.com example?). Stay tuned.

Posted by Eric at 01:02 PM | Content Regulation , Search Engines | TrackBack

February 01, 2010

Google Street View Lawsuit Revived, But Only on Trespass Grounds--Boring v. Google

By Eric Goldman

Boring v. Google Inc., 2010 WL 318281 (3rd Cir. Jan. 28, 2010).

You may recall the book project A Day in the Life of America [Amazon affiliates link], which published what 200 photojournalists saw on May 2, 1986. The book provided a great snapshot of Americana, both sensational and banal. As a dataset, Google's Street View reminds me a lot of that book. The Google camera cars automatically capture whatever they see, which in some cases can lead to unintentionally amusing results. See, for example, this list of 20 crimes captured on Google Street View and the Huffington Post's list of "Craziest Google Street View Shots OF ALL TIME."

Inevitably, some people are going to be unhappy with whatever Google's camera cars indiscriminately captured and published. The plaintiffs in this case, Aaron and Christine Boring, are Pennsylvania homeowners with a reclusive streak. The Google camera car drove down the Borings' private driveway (allegedly ignoring the Borings' signage), took pictures of their house and published the photos through Google Street View.

The Borings were not satisfied with exercising Google's opt-out mechanism and instead made a federal case out of Google's transgressions. However, the district court was not impressed and kicked the Borings out of court.

The Borings appealed to the Third Circuit, which rewarded them with a small window of opportunity. The district court had rejected the Borings' trespass claims because they had not adequately alleged damage from the trespass. The appellate court reversed this point, saying a real property owner does not need to allege damage in order to state a valid trespass claim. As the court says, "Here, the Borings have alleged that Google entered upon their property without permission. If proven, that is a trespass, pure and simple." I'm not a real property expert, but this sounds right to me. The district court cited an 1899 case in support of its ruling, but the appellate court said that precedent was inapplicable.

Thus, the trespass claim survives a 12(b)(6) motion to dismiss, and the case gets sent back to the district court. While the appellate court expressly didn't tell the judge what to do, it's pretty clear that the appellate court doubts that the Borings will be able to assert any cognizable damage. As the court says, "it may well be that, when it comes to proving damages from the alleged trespass, the Borings are left to collect one dollar and whatever sense of vindication that may bring." My guess is that's the best possible outcome for the Borings.

In my opinion, the court's rejection of the Borings' privacy claims is the more interesting cyberlaw development. The court sensibly concludes that any violation suffered by the Borings would not highly offend a reasonable person. In other words, the Borings overreacted in a way the law does not recognize.

Given that the Borings weren't depicted in the photos, the court's ruling suggests that publishing online photos of private property categorically can't qualify as a privacy violation, whether the photos are taken on public or private property. The court's ruling, however, leaves open the possibility that depicting people in the photos might still be actionable--a question not before the court.

While the case has been revived, it's entirely clear to me that the Borings will not find much success on remand. Nevertheless, to save the litigation costs, Google ought to write a small check to settle the case, and the Borings would be prudent to take it rather than wait for the inevitable judicial denouement. To avoid further unwanted intrusions, they should use their settlement money to buy a gate for their driveway.

Posted by Eric at 06:43 AM | Publicity/Privacy Rights , Search Engines | TrackBack

January 31, 2010

January 2010 Quick Links

By Eric Goldman

Copyright

* An English translation of Google's December loss in France on a Google Book Search lawsuit.

* Ed Felten reports on a survey of files available via BitTorrent. Acknowledging some methodological limits, he estimates ~99% were likely copyright infringing.

* Elsevier B.V. v. UnitedHealth Group, Inc., 2010 WL 150167 (S.D.N.Y. Jan 14, 2010). Denying copyright statutory damages and attorneys' fees to unregistered foreign works is constitutional because the Berne Convention (which Elsevier argued prohibits the statutory formalities) is not self-executing.

* Techdirt: Singapore Court Rules That Online DVR Is Infringing...While Noting How Copyright Law Isn't Really Set Up For This

* Techdirt: If Banning The Internet For Sex Offenders Is Unfair, Is Banning The Internet For Copyright Infringers Fair?

* The Copyright Office issued new regulations on the deposit of online-only works: “The regulation establishes that online–only works are exempt from mandatory deposit until a demand for deposit of copies or phonorecords of such works is issued by the Copyright Office.”

Trademark/Publicity Rights

* American Airlines v. Yahoo settled. Previous coverage:
- Yahoo Subpoenas Expedia in American Airlines Lawsuit
- Fifth Circuit Denies Yahoo's Jurisdictional Appeal in American Airlines Case
- American Airlines v. Yahoo Venue Transfer Denied
- Yahoo Countersues American Airlines for Declaratory Judgment
- American Airlines Sues Yahoo for Selling Keyword Advertising

* Duplicity alert! Rescuecom is in court defending its keyword ads triggered by competitor Best Buy's TMs.

* Bev Stayart sues Yahoo again over publicity rights. My September 2009 blog post on her prior loss against Yahoo.

Pornography

* Clark v. Commonwealth, 2009 WL 5125009 (Ky. App. Ct. Dec. 30, 2009). Upholding a conviction when "Clark knowingly used a computer for the purpose of getting a minor, or a peace officer whom Clark believed was a minor, to take a sexually explicit photograph of herself."

* Am. Booksellers Found. for Free Expression v. Cordray, Slip Opinion No. 2010-Ohio-149 (Jan. 27, 2010). Ohio's Supreme Court partially upholds its state law restricting Internet distribution of harmful to juveniles material to juveniles when the communications are to recipients known or believed to be juveniles.

Spam

* United States v. Zein (E.D. Mich. 2009). Posting an ad on Craigslist constituted a "mass marketing" activity sufficient to trigger a 2 level sentencing enhancement.

* Comcast and e360 settled their lawsuit. Previous blog coverage.

Blogs/Social Networking Sites

* Sieber v. Brownstone Publishing Company, 2007 CA 002549 B (D.C. Superior Ct. Dec. 23, 2009). A building contractor sued Angie's List and other people over consumer reviews. My prior mention of the case. After 2 years of litigation, a DC trial judge dismissed all defendants on summary judgment and awarded one defendant-counterclaimant $18k+. The entire text of the memo opinion:

MEMORANDUM OPINION AND ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT OF ALL DEFENDANTS, DENYING PLAINTIFFS' MOTIONS FOR SUMMARY JUDGMENT, and GRANTING POOLE'S MOTION FOR SUMMARY JUDGMENT ON HIS COUNTERCLAIM signed by Judge Long, efiled, eserved, and docketed in chambers on December 23, 2009. It is ORDERED that the Motions for Summary Judgment of Brownstone Publishing Co., the Washington Post Company, John Kelly, and John W. Poole are granted; and it is FURTHER ORDERED that the Motions for Summary Judgment filed on behalf of the plaintiffs are denied; and it is FURTHER ORDERED that judgment shall be entered in favor of all defendants against the plaintiffs as to all claims in the Second Amended Complaint; and it is FURTHER ORDERED that judgment shall be entered in favor of defendant Poole and against plaintiff SCS Contracting Group LP as to Poole's Counterclaim against plaintiff SCS Contracting Group for $18,300 plus 6% (six percent) per annum interest, and a separate money judgment for this sum shall be docketed. Court Jacket not in chambers.

* FINRA Regulatory Notice 10-06: Guidance on Blogs and Social Networking Web Sites.

* Duer v. Henderson, 2009-Ohio-6815 (Ohio App. Ct. Dec. 23, 2009). A web publication telling a ghost story and describing the location of purportedly paranormal phenomenon on private property is not liable for any resulting trespass to real property.

* The “moldy tweet” lawsuit was dismissed.

* Two lawsuits holding that bloggers aren't subject to jurisdiction in the plaintiff's home court:
- Silver v. Brown, 2009 WL 5220297 (D. N.M. Nov. 30, 2009).
- Workman Sec. Corp. v. Phillip Roy Financial Services, LLC, 2010 WL 155525 (D. Minn. Jan 11, 2010)

* BBC: France ponders a right-to-forget law.

E-commerce

* Appliance Zone, LLC v. NexTag Inc., No:4-09-cv-0089-SEB-WGH (S.D. Indiana Dec. 22, 2009). Upholding NextTag's clickthrough-formed advertiser agreement. Mehmet Munur’s comments.

* Edward A. Zelinsky, “New York’s 'Amazon Law': Constitutional But Unwise.”

* Largo Cargo v. Google, a new complaint over allegedly mismanaged AdWord bids. This is the latest incarnation of the Almeida case. I think Largo Cargo’s complaint is still a no go.

* The NYT catalogs an impressive roster of futility for US dot coms trying to compete in China.

Miscellaneous

* Gmail will consult the user's prior emails to pick an ad if a particular email doesn't lend itself to a good ad.

* Illustrating the divergence between the open source community and the Wikipedia community, APC reports that 75% of Linux code is now written by paid developers.

* Oddee: 15 Funny Facebook Fails.

* I expect to be in the Netherlands May 23-30. Let me know if you would like to meet up there.

Posted by Eric at 01:19 PM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark | TrackBack

January 29, 2010

Terri Chen Replaces Rose Hagan as Google's Chief Trademark Counsel

By Eric Goldman

I previously mentioned that Rose Hagan, Google's longtime chief trademark counsel, was retiring. (Her last day was Wednesday). Rose's next ventures include art and jewelry. Terri Yun-Lin Chen, a current trademark counsel at Google, has taken over Rose's spot. Terri has a bachelors and JD from UC Berkeley, and she practiced IP litigation at Wilson Sonsini before joining Google over 3 years ago.

Before retiring, Rose led Google's trademark functions for 7+ years. During that time, Google went from near-zero revenue to building a $20B+/year business selling keyword advertising, of which an unknown amount is derived from the sale of third party trademarks. While not everything has gone smoothly for Google--most obviously there are 10 pending lawsuits over Google's trademark policies--Google's massive keyword advertising success and its ability to avoid a business-threatening/ending trademark lawsuit are both remarkable achievements that have made a lot of people a lot of money. Also remarkable is Google's rapid ascendancy to become one of the world's most recognized and cherished brands. Kudos to Rose on her role in these accomplishments. She leaves big shoes for Terri to fill.

Posted by Eric at 12:58 PM | Search Engines , Trademark | TrackBack

January 22, 2010

Google and China: Some General Thoughts

By Eric Goldman

I have deferred blogging on the Google/China imbroglio for a few reasons. First, heavyweights such as Jonathan Zittrain have tracked International online censorship and online security issues more closely than I have. Second, after Google’s provocative blog post, I wanted to see the facts develop rather than rely solely on Google’s assertions. The spin doctors are now moving in, so the useful development of the factual record will be slowing down.

Third, and perhaps most importantly, the Google/China situation is really complex and multi-faceted, and it’s been difficult keeping all of the issues straight. Some issues raised by Google’s announcement include:

* cybersecurity, both corporate and personal
* political and industrial espionage
* suppression of political speech, especially of dissidents
* censorship of search engine results and the likelihood that censorial efforts can succeed on the Internet
* “cyber-imperialism,” i.e., exporting US norms about Internet law to other countries
* economic protectionism and whether US companies compete with local Chinese companies on a level playing field
* geopolitical and trade relationships between two world nuclear superpowers

Heady stuff! It would make a good summer blockbuster movie.

Although most folks have lauded Google for its principled stand against China’s censorship, I’m not 100% clear that Google’s decision is entirely selfless. First, as has been noted frequently, Google has not been making inroads against local search leader Baidu. Further, the deck may be stacked against Google in changing that situation, due perhaps to economic protectionism from the Chinese government. Second, in a point that has gotten less attention, some members of Congress (most notably Rep. Christopher Smith) have repeatedly jawboned Google and other Internet companies to curtail their support of the Chinese government (see, e.g., the Global Online Freedom Act). Google might have rationally concluded that voluntarily cutting China loose could abate Congress’ interest in regulating its international operations, which might ultimately avoid profit-degrading domestic regulations.

On that point, I fear that we may hold duplicitous expectations when US Internet companies go global. If a US Internet company wants to successfully compete in a foreign market, it must open a local office and build a localized versions of their services reflecting local legal requirements. Inevitably, these localized versions will be more speech restrictive than the US version of the service. Foreign laws don’t have the First Amendment, 47 USC 230 or (in most cases) even a weak safe harbor like 17 USC 512, plus local cultural norms may tolerate unpopular speech less than we do. So what should a US service provider do when trying to expand internationally? It has a few options, none of them particularly attractive:

* It can skip unreasonably censorious markets altogether, like Google proposes to do in China.
* It can comply with local laws, even though that runs counter to US laws and norms.
* It can ignore local laws, which is typically not a successful plan. In extreme cases, it can lead to local company executives going to jail.
* It can try to change the local country’s laws to be more like ours, either through direct advocacy or by asking the US government to pressure the local government. We routinely use trade negotiations to do this; for example, we have successfully exported our copyright laws this way. But countries usually aren’t thrilled to have the US tell them what their laws should be.

Now, I don’t support China’s efforts to censor search results or suppress political dissent. I understand the arguments that free speech is such a basic human right, like freedom from torture, that we simply won’t tolerate any other local choice. However, we already implicitly accept that Internet companies routinely engage in some types of legally compelled or motivated speech restrictions in other countries when they localize their services—perhaps not to the degree exercised by China, but nevertheless more than we would allow in the US. (I note that China might factually dispute this claim because it claims to have an “open” Internet, although the reports I’ve seen suggest this claim is embarrassingly disingenuous). I recognize that I’m making a slippery slope argument about what government-mandated censorship we’ll tolerate from US Internet companies, but I think we should acknowledge the slippery slope before we categorically reject search engines’ efforts to comply with China’s rules.

If Google ultimately exits China, it would leave Baidu as the search engine market kingpin. This raises another issue I haven’t seen fully discussed. I’m going to assume for a moment that Google is a superior search engine to Baidu. (I’ve never used Baidu, so I have never actually compared the two). Knocking Google out of the Chinese market does two things. First, per my assumption, it takes the better information resource away from Chinese consumers. Second, by reducing competitive pressures on Baidu, quasi-monopolist Baidu is more likely to reduce R&D and service improvements.

If my predicate assumptions are correct, in the long run US consumers will have a consistently superior search tool compared to Chinese consumers. (I also assume China will keep interfering with Chinese consumers’ access to Google.com and that superior market entrants won’t overtake Baidu). Over time, China may hinder its overall long-term global competitiveness due to an inferior information infrastructure. Perhaps this assertion is overly stylized, but I think effective information resources—such as good search engines—are necessary to maintain healthy economic markets and to enable cutting-edge R&D. Thus, the Chinese government should view losing Google as a Chinese search engine competitor as a long-term detriment.

One final procedural point. Google sparked a global verbal spat between two nuclear superpowers through a single blog post. Talk about the power of blogging! Google’s decision to post a confrontational blog post may have helped get the US administration on board but simultaneously reduced Google’s ability to negotiate with the Chinese government. I’m no expert in diplomacy or Chinese cultural norms, but my reading of Google’s post is that its double-barreled accusations of government-sponsored hacking (which Google has not conclusively proved) and censorship left the Chinese government with few options to save face. Thus, Google effectively forced the Chinese government to take a hard line and reject most proposed compromises. I trust Google knew what it was doing and decided that was the right course of action, but in my opinion Google’s approach has pre-determined the final outcome.

Posted by Eric at 11:58 AM | Content Regulation , Search Engines | TrackBack

January 21, 2010

Keyword Ad and Product Shots Case Survives Motion to Dismiss--FragranceNet v. FragranceX

By Eric Goldman

FragranceNet.com, Inc. v. FragranceX.com, Inc., 2010 WL 174159 (E.D.N.Y. Jan. 14, 2010)

I previously blogged about this case in 2007. That ruling was one of several in New York that, following the Rescuecom v. Google district court ruling, held that buying a competitor's trademarks as keywords did not constitute a trademark use in commerce. As a result, the court granted a motion to dismiss.

Looking back even further, the case has been hanging around for almost 4 years. The first complaint was filed May 2006 and the plaintiff is now on its third amended complaint. This longevity is remarkable in its own right--just how much is this case worth to either litigant to justify four years of litigation costs and yet still be wrassling over motions to dismiss? The defendant tries to dismiss the complaint yet again, but this time the motion to dismiss fails, and the court directed the defendant to answer the complaint.

Copyright in Product Shots

FragranceNet claims that FragranceX copied 900+ product shots from FragranceNet's website and republished them verbatim on the FragranceX website. FragranceX responded that product shots aren't copyrightable. For more on the copyrightability of product shots, see my post on Designer Skin v. S&L Vitamins and the several other times I've addressed the topic.

I am not a fan of copyright protection for product shots. At best, I see them as subject to a very thin copyright that protects against only verbatim republication (although FragranceNet alleges FragranceX did just that). Even then, fair use should provide a wide range of permissible secondary uses. However, I also don't see how the defense thought it could win a motion to dismiss that product shots are not copyrightable at all. The defense had to overcome the presumption that photos generally are copyrightable--a presumption which was significantly reinforced in this case because FragranceNet made a successful and timely registration of the photos with the Copyright Office. FragranceNet further alleged in the complaint that the product shots were taken with creativity. Busting the product shot copyrights may be possible with an evidentiary record, but not beforehand.

Trademark Claims over Metatags and Keyword Ads

FragranceNet also claims that FragranceX put its trademarks in the metatags (good grief, another plaintiff who needs to internalize that Google ignores keyword metatags) and bought them as AdWords keywords. FragranceX responds by alleging problems with FragranceNet's acquisition of trademark interests from a third party, but these attacks fail on a motion to dismiss. (For true legal geeks, there is a brief and uncommon discussion of anti-champerty laws).

Although not discussed/cited in this case, I note that last month FragranceNet defeated a motion to dismiss in a different lawsuit attacking the FragranceNet mark as generic. Especially in light of the Hotels.com and Mattress.com Federal Circuit opinions, I expect both that defendant and this one will pursue genericness in future proceedings.

Posted by Eric at 12:11 PM | Copyright , Marketing , Search Engines , Trademark | TrackBack

January 18, 2010

File Names Can Help Predict File Content in Child Porn Prosecution--US v. Beatty

By Eric Goldman

United States v. Beatty, 2009 WL 5220643 (W.D. Pa. Dec. 31, 2009)

This is a child porn prosecution. Using Phex P2P software, an undercover investigator accessed the Gnutella network and conducted searches using search terms known to be used by child pornographers. The investigator identified IP address 76.188.64.82 with 11 files with troubling titles such as:

* r@ygold-pedo-13yo brother fucks 11yo sister and sperm inside 61943812.mpg
* (Pthc) 14yo Isabel-(Rape and Fuck) (R@ygold).mpg
* Little young girl hardfucked by me-7 yrs R@ygold illegal pedo sex.mpg
* (Hussyfan) (pthc) (r@ygold ) (babyshivid) Jessica 11y o get fucktgood.mpg

The investigator then matched hash tag fingerprints of the 11 files with child porn files in a database maintained by the Wyoming Internet Crimes Against Children (ICAC) Task Force. Subsequently, the investigator connected Beatty to the IP address. Based on this information, the government got a search warrant for Beatty's home, found hundreds of incriminating files on his home computer, and got incriminating statements in an interview.

Beatty challenged the government's right to search his home computer. The judge and the litigants agree that the government can legally conduct remote warrantless searches of P2P share directories, but the government apparently argued that they were free by extension to look through Beatty's entire computer. The judge rejected such a broad position, saying:

even if the Defendant suffered no Fourth Amendment intrusion by virtue of Trooper Pearson's conduct in remotely accessing certain shared computer files, the Defendant nevertheless retained a reasonable expectation of privacy in his computer and his home such that he possesses "standing" to challenge the merits of the subject search

This shifts the inquiry to the officers' probable cause for the warrant. Apparently, the investigator did not download the files to review them or attach the files as evidence when requesting the search warrant. I'm not sure why the investigator didn't do either step other than to avoid the toxicity of child porn generally. As a result, Beatty challenged the warrant because the warrant-approving magistrate did not see the files directly or get an affidavit from the investigator stating what he saw in the files. However, the magistrate did have the file names and the matching hash tags. Beatty challenged both.

The judge and the litigants agree that file names do not dispositively predict the actual file's content. As we know, file names can be inaccurate for a variety of reasons: plain error, semantic ambiguity, an effort to surreptitiously install malware, and as a way of increasing the content's perceived illicit value (see, e.g., the discussion in the uncited Perfect 10 v. ccBill case about websites with names like "illegal.net" and "stolencelebritypics.com"). The court correctly concludes that "common knowledge dictates that actual file content cannot be definitively determined from the file name alone."

Nevertheless, the court says that file names have some predictive value:

one can also envision circumstances where the file name is so explicit and detailed in its description as to permit at least a reasonable inference as to what the actual file is likely to show. Many, if not most, of the files at issue here had titles that contained highly graphic references to specific sexual acts-including ejaculation, sexual intercourse, oral sex, and anal sex-involving children ranging in age from 7 to 13 years. Several of the files also reference terms such as "child_sex," "pedofilia," "illegal pedo sex," "incest," or "Lolita." The unmistakable inference which arises from such highly descriptive file names, is that the content includes material pertaining to the sexual exploitation of children-i.e., evidence of criminal activity, if not outright contraband. Given the number of files in question and the pointed references in their titles to specific sexual acts involving young children-described in the most coarse and vulgar terms, this inference is a strong one.

I'm reminded of the admonishments that airport security is not a joking matter, so don't make jokes about having a bomb while going through the airport security line. (I've seen a few airports, including the New Orleans airport, post reminders about this). Similarly, child porn is so toxic that no one in their right mind would falsely use a file title suggesting the file is child porn.

The judge also credits the file titles because accurate file titles enable searches by others. So, if you want to distribute child porn in a searchable way (a seemingly illogical proposition because, as this case illustrates, doing so puts you on a fast track to Club Fed), then you need to use keywords that match search terms. The court says:

As a matter of common sense, the very fact that individuals utilize search terms with P2P software to produce results (i.e., file names ) consistent with their chosen search terms suggests a substantial degree of correlation between file names and file content; if file names were, as a general rule, completely random and bearing no relation whatsoever to their content, then there would be no point in conducting a search in the first place and the whole purpose of peer-to-peer file sharing would be frustrated because there would be no meaningful method for locating the sought-after file content.

I agree with this only superficially. It's true that searchable metadata must have some relationship to the underlying content to make a successful match, but community outsiders might think the metadata looks inaccurate or even completely random. Consider how Napster users used alternative spellings to route around the court-ordered blocks on various names. Now, go one step further: if a group of Napster users agree (in an offsite discussion forum) to tag Britney Spears' songs using "Lolita" (a not wholly inappropriate appellation given some of the videos she made before the age of majority), then a block on searches for "Britney Spears" will eliminate an obvious matchmaking route but will fail to stop matchmaking completely. Indeed, subcommunities can develop multiple synonyms that are opaque to outsiders. For more on this, look at the Urban Dictionary to see how slang can have multiple meanings, and note my article on how a single search term can have dozens of possible meanings. As a result, the search matchmaking process may be more complicated--and the value of "accurate" file descriptors is lower--than the court contemplates.

In any case, it wasn't clear how much traction Beatty expected from reducing the predictive value of file names. Ultimately, the search warrant was issued based on the combination of the file names with the fingerprint matches. It's not like the investigator or the judge had no idea what the files might contain--they had a hash value fingerprint matching a known child porn file. (Beatty unsuccessfully argued that the underlying fingerprinted files should not be credited as known child porn ) Then again, there is no reason why law enforcement isn't routinely preserving copies of suspect files they think are child porn and describing the file contents (or submitting the files) when seeking search warrants, easy steps that would have largely mooted Beatty's challenges.

Posted by Eric at 10:23 AM | Content Regulation , Internet History , Privacy/Security , Search Engines | TrackBack

January 11, 2010

Top Cyberlaw Developments of 2009 (Eric's List)

By Eric Goldman

Guest blogger John Ottaviani recently dropped by to offer his perspectives on 2009’s top Cyberlaw developments. While I like his list a lot, I independently developed my own top 10 list that has a different emphasis. You might enjoy the contrasts. My list:

#10: Louis Vuitton v. Akanoc. After the judge ordered a web host to stand trial, a jury awarded the trademark owner $32 million due to the web host’s contributions to trademark infringement by its customers. This case stands out for the big damages award and as a rare example where an online provider was held liable under a contributory trademark liability theory. Many trademark practitioners are scratching their heads trying to figure out the import of this case, however. Does this case represent a dangerous new frontier of online liability? Was this a bad jury verdict fueled by poor defense lawyering? Or was this an appropriate outcome because the web host actually engaged in bad behavior that distinguishes it from most “legitimate” web hosts? 2010 may help us understand if this case is part of a new trend or an aberration.

#9: Gordon v. Virtumundo. We’ve seen a lot of silly anti-spam litigation, including the emergence of an entirely new group of entrepreneurs called “spam litigation entrepreneurs” who try to make a living on anti-spam lawsuits. These folks have a true love-hate relationship with spam; they hate it so much that they devote their lives to fighting it, but they love getting spam because each one is a potential revenue source. In general, judges hate spam a lot too, so over the years we have seen a number of doctrinally unsupportable results where judges bent the law to make sure spammers lost.

However, the judicial pendulum has swung in the opposite direction, and in Gordon v. Virtumundo, the Ninth Circuit destroyed a serial anti-spam plaintiff’s entrepreneurial business in a doctrinally questionable but strongly worded opinion. In short order, a number of other spam litigation entrepreneurs have seen their lawsuits shut down with emphasis. Due to this ruling, the era of anti-spammers partying in courts may be on the wane.

#8: Zango v. Kaspersky. The question raised in this issue is simple to state but hard to answer: who should decide what constitutes spam, spyware or a virus? Vendors of software designed to curb these threats would like unfettered discretion to make their classifications; businesses who are classified as a threat would like judges to overturn adverse decisions. As it turns out, in a relatively obscure provision (47 USC 230(c)(2)), in 1996 Congress said that software vendors get to make classifications decisions and unhappy businesses can’t complain about them. In June, the Ninth Circuit upheld Kaspersky’s decision to classify Zango’s software as a threat and rejected Zango’s efforts to take the classification decision out of Kaspersky’s hands. This ruling gives enormous freedom to vendors of anti-spam/anti-spyware/anti-virus software to do their best to keep us safe.

#7: Columbia Pictures v. Fung. This case came out just before the Christmas holiday, so it got lost in the holiday hoopla a bit, but it’s a case of potentially significant import. First, it held that the specific torrent sites at issue induced copyright infringement. Second, the court denied the torrent sites’ eligibility for the DMCA online safe harbors. In part, the court said that an inducing website was categorically disqualified from the DMCA online safe harbors. Like the Akanoc case, it’s not entirely clear if this result was a legal aberration or an appropriate reaction to the defendants’ poor choices. Either way, it is possible that more “legitimate” websites may change their behavior to minimize their exposure based on the legal precedents in this case. If they do, this case could have a major impact on UGC websites.

#6: Lori Drew’s acquittal. Megan Maier’s suicide remains a heartbreaking tragedy, but unfortunately, overzealous prosecutors compounded the tragedy by prosecuting Lori Drew using bogus legal doctrines. The tragic facts got a jury to convict Drew of some misdemeanor crimes. Fortunately, the judge recognized the legal errors of the prosecution’s theory and the jury’s conclusions and granted Drew an acquittal despite the jury findings. The judge finally got to the right result as a matter of Cyberlaw, but the case remains a chilling testament to prosecutorial power.

#5: Harris v. Blockbuster. The rule is really clear. Service providers can't amend online user agreements in the provider’s sole discretion without notice. As the Ninth Circuit informed us in 2007, those contracts don’t fare well in court. So although these provisions are in just about every online user agreement, they don’t work--as Blockbuster found out the hard way.

As part of the litigation detritus from the Facebook Beacon experiment, users sued Blockbuster for sharing their rental transactions with Facebook and all of their friends, allegedly in violation of the Video Privacy Protection Act. Blockbuster tried to bust the class action by invoking the contract’s arbitration clause. Instead, because Blockbuster had the impermissible amendment provision in its user agreement, the court said the contract was illusory and refused to send the case to arbitration.

This case should signal the end of the ridiculous amendment clauses. We’ll see how long it takes the lawyers to give the provisions up.

#4: Battles Over the First Sale Doctrine. We have seen numerous legal battles this year over the First Sale defenses in both copyright and trademark law.

Copyright owners try to engage in price discrimination by carving up the world into geographic territories with different prices for the same product. If they can use copyright law to keep the cheap products from entering the other geographic market, this keeps the product from effectively price-competing with itself.

This year, two cases involved European textbooks which were functionally equivalent to the textbooks being sold in the United States at higher prices. Entrepreneurs were buying the cheap European texts, shipping them to the US and then selling them online. The entrepreneurs invoked the First Sale doctrine, which says that copyright law can’t prohibit the legitimate purchaser of a tangible copyrighted item from reselling the item to whomever they want at whatever price they want.

However, copyright law has another provision that allows copyright owners to block the importation of copyrighted works into the United States. In the 1998 Quality King case, the US Supreme Court said that the First Sale doctrine trumped the importation right when the goods were manufactured in the US, sold overseas, and then imported back to the US. However, in Pearson v. Liu and John Wiley & Sons v. Kirtsaeng, the judges said that the importation right trumps the First Sale doctrine when the goods were initially manufactured overseas. This issue is ripe for further adjudication, though. A similar importation case, Costco v. Omega, is pending before the US Supreme Court, which is deciding whether or not it wants to hear the case. If it does, we may get clearer instructions about the interplay between the First Sale doctrine and the copyright importation right.

Copyright’s First Sale doctrine was also at issue in Vernor v. Autodesk, where the purchaser of a software disk wanted to resell the disk on eBay despite restrictions in the software licensing agreement barring such resales. The court held that the First Sale doctrine applied and allowed the resale. There are other cases percolating through the court system involving the resale of tangible media contained copyrighted material despite contractual restrictions on resale, so this issue remains a hot one.

Trademark owners also try to prevent competition with their products that leak out of their official channels of distribution. eBay has been the site of a couple battles over the First Sale doctrine in trademark law. In Mary Kay v. Weber, the court held that the trademark First Sale doctrine may not permit the eBay resale of expired cosmetics by a Mary Kay independent beauty consultant. In Beltronics v. Midwest, a trademark owner shut down the eBay resale of radar detectors that had leaked out of the manufacturer’s channel and were being sold (at a cheaper price) without the manufacturer’s warranty.

Clearly, the First Sale doctrine matters a lot to eBay and other consumer-to-consumer e-commerce websites. With a possible pending Supreme Court case and lots of IP owners looking to stifle competition from goods they have already profited from, expect the First Sale doctrines to get lots of attention in 2010.

#3: 47 USC 230. In my opinion, 47 USC 230 is the most important Cyberlaw statute, so new 230 developments will make my top 10 list for the foreseeable future. This year, there were three federal appellate court rulings interpreting 47 USC 230(c)(1):

* in Barnes v. Yahoo, the Ninth Circuit held that 230 protected a website’s negligent delay in removing user content. However, if the website had promised removal to the user, the user could have a viable claim for promissory estoppel that would not be preempted by 230.
* in FTC v. Accusearch, the Tenth Circuit held that a website’s resale of pretexted phone records—even if those records were supplied by third party suppliers—did not qualify for 47 USC 230 protection because of their illegality.
* in Nemet Chevrolet v. ConsumerAffairs.com, the Fourth Circuit held that a consumer review website was not liable for user-supplied reviews, even when the website worked with the user to submit the review, and despite the plaintiff’s unsubstantiated claims that the website had fabricated the reviews itself.

Really, the big 47 USC 230 news in 2009 is the absence of big news. Specifically, 2009 reinforced that the Ninth Circuit’s 2008 Roommates.com decision—one of the most significant defense losses under 47 USC 230—did not rip open a major hole in the statutory protection of websites. Of the 13 cases that I have seen that have cited the Roommates.com en banc opinion, eleven have cited the case in favor of the defense. (See the list here). The two exceptions are the Accusearch case, mentioned above, and the New England Patriots’ lawsuit against StubHub over season ticket resales, an odd opinion that may not have much influence. Therefore, despite our fears about Roommates.com, the 47 USC 230 immunity remained healthy and vibrant in 2009. For more on this topic, see my special recap of 47 USC 230's year-in-review for 2009.

#2: Keyword Advertising Battles. Keyword advertising battles are another perennial topic on these year-in-review lists. A multi-billion dollar a year industry has sprung up around the sale of keyword-triggered advertising, including some keywords that may be third party trademarks, and trademark owners don’t like it at all. This has led to a multi-front battle between trademark owners, keyword advertising sellers (such as Google), and keyword advertising buyers.

One of the biggest Cyberlaw cases of the year was the Second Circuit’s ruling in Rescuecom v. Google. In the district court in 2006, Google won an easy victory against a trademark owner because the court said that Google did not make the requisite “use in commerce” of the trademark. The Second Circuit reversed the district court, sending the case back for further proceedings. The reversal does not ensure Google’s defeat; Google will now litigate other legal doctrines and might very well win on one of those. However, the Second Circuit’s opinion largely spells the end of any “use in commerce” defense by either keyword advertising sellers or buyers.

Because of the “use in commerce” defense’s demise, keyword advertising cases will now likely turn on whether the advertisements create a likelihood of consumer confusion. One case, Hearts on Fire v. Blue Nile, offered up a new and complicated test for gauging consumer confusion. If other courts adopt this test, keyword advertising cases will get even more expensive and complicated—highlighting how important it was that the Rescuecom case eliminated an easy way to end these lawsuits early.

Meanwhile, despite the fact that keyword advertising battles have been taking place for at least a decade, we have not heard what a jury thinks about the practice—until the November jury ruling in Fair Isaac v. Experian. In that case, the jury found for the defense that the keyword-triggered ads did not create the requisite likelihood of consumer confusion. It remains to be seen if other juries reach the same conclusion. If they do, keyword advertising lawsuits should slowly fade away over time because the trademark owners can’t win in the end.

As for now, keyword litigation is going strong and hardly fading away. In Spring, Google made two changes to its trademark policies where it voluntarily agrees to take down certain types of ads at the trademark owner’s request. In May, Google extended its more liberal US-based policy to nearly 200 other countries, replacing the more restrictive policies it had in place there. Shortly thereafter, Google modified its US policy to do less for trademark owners in situations involving product resales, review websites and sales of complementary/replacement parts. Trademark owners were none too pleased with these changes. In response to these changes and the door opened by the Second Circuit Rescuecom decision, Google got hit with about a dozen new lawsuits, including some class action lawsuits, of which I believe 10 are currently still active.

Finally, all of the wrangling in court and over voluntary trademark policies could be mooted by legislative action, and for the third time, the Utah state legislature considered resolving the keyword advertising issue itself. A law regulating keyword advertising passed the Utah house but died in the Utah senate. Expect the pro-regulatory forces to round up the troops for a fourth try in 2010.

#1: FTC Endorsement Guidelines for Bloggers. The Obama administration has breathed new life into a pro-regulatory FTC, and the FTC sure is interested in all things Internet. The FTC has been nosing around Internet privacy and Internet marketing practices pretty carefully, and I expect 2010 to bring more FTC pronouncements designed to tackle the Internet.

But nothing stirred up a hornet’s nest of confusion and anger in 2009 like the FTC’s Endorsement and Testimonials Guidelines. I think it’s fair to say that the FTC’s guidelines rollout was a complete failure. As usual, the FTC’s guidelines were mealy-mouthed and filled with conditional statements (the FTC hates to lay out bright line rules that might constrain their future discretion). However, the FTC’s general gist was clear: bloggers should disclose when they receive financial or other consideration for their blog posts.

Unfortunately, this general principle leaves open some fairly fundamental questions, like when is disclosure required in situations less clear than straight cash-for-posting, and where should disclosure be made, especially in space-constrained media like Twitter. Needless to say, unhappy bloggers can be very noisy, so blogger response to the FTC’s announcement was loud and vituperative. The FTC tried to backpedal a little by saying that it did not intend to pursue individual bloggers, but this announcement only reinforced that bloggers do not understand what the FTC wants from them.

Meanwhile, the FTC’s proposed guidelines also took an interesting position about an advertiser’s liability for rogue blogger’s posts. This position is generally consistent with government enforcement agencies’ views that commercial players can be legally responsible for content they endorse or link to (see, e.g., my comments on the SEC’s liability-for-linking policy), but this position runs directly contrary to 47 USC 230’s provisions that say A isn’t liable for B’s online content. As a result, I believe that part of the FTC’s proposed guidelines violate 47 USC 230 and would not survive a court challenge.

Overall, the firestorm over the FTC’s Endorsement and Testimonials guidelines is a small part of a larger effort to regulatorily separate advertising from content. The Internet has collapsed those distinctions, perhaps irreparably, so regulators may be trying to accomplish the impossible. Nevertheless, the FTC seems determined to prop up the distinction, and I expect 2010 will bring more FTC efforts on this front.

* * * * *

While that concludes my top 10 list, there were a number of other interesting developments in 2009 that are worth a brief note:

* Moreno v. Hanford Sentinel. A woman trashed her hometown in an obscure but public MySpace posting and learned there is no “do-over” for Internet content publication. My vote for the most factually interesting Cyberlaw case of 2009.

* Google’s keyword metatag announcement. Courts generally treat the inclusion of third party trademarks in keyword metatags as per se trademark infringement. But Google has confirmed that it ignores keyword metatags. Will courts get the message?

* Google Book Search settlement. If the Google Book Search settlement ever gets approved, it may reshape the book industry, redefine libraries, and make all kinds of other socially significant changes. But the list of opponents to the settlement is long and growing. Professor James Grimmelmann of New York Law School is our community’s maven for all things “GBS.”

* Kindle book deletion. The Kindle store sold e-books it didn’t have the right to sell, so it took them back. Users learned of a key factual difference between physical books and e-books—the vendor can remotely make e-books go poof.

* States’ efforts to impose sales tax efforts based on marketing affiliates. For years, states have been looking for ways to make online retailers collect sales tax for them. They are generally stopped by Supreme Court precedent, but in 2008 New York finally figured out a workaround. The New York statute said that marketing affiliates were like traveling salespeople and thus created the physical nexus required for a state to impose sales tax collection obligations. The New York statute survived its first legal challenge, which opened the floodgates of other states passing similar laws hoping to get their piece of the action. Meanwhile, online retailers aren’t just rolling over; instead, they are threatening to cut off (or actually cutting off) marketing affiliates in states that enact these laws—thus potentially costing the states income tax from the marketing affiliates’ revenue, and creating the potential for the entire affiliate industry to be torn apart.

* Maine kids privacy law. Maine thought it could pass a law banning marketing to kids. It was wrong. The state had to withdraw the law and go back to the drawing board.

* UMG v. Veoh. Veoh won another nice DMCA online safe harbor victory.

* US v. Kilbride. The Ninth Circuit says that online obscenity prosecutions need to evaluate national attitudes towards obscene content, not local community standards.

* Kentucky domain name seizure. Kentucky tried to grab 141 domain names that enabled Kentucky residents to engage in illegal gambling. But those domain names also serviced customers for whom the gambling was completely legal, so the Kentucky courts are rethinking the grab.

* FTC v. Sears. As another example of the new pro-regulatory winds blowing through the FTC, the FTC cracked down on Sears for installing spyware on users’ computers that looked at the users’ hard drives, even though Sears paid the users for the installation and disclosed the spyware’s snooping in the user agreement (though in an inconspicuous manner). This case has made a lot of lawyers concerned that adverse disclosures in user agreements won’t satisfy the FTC.

* Facebook the Drama Queen. Ah, Facebook. Love it. Hate it. Facebook is a pretty nifty site and part of my daily routine, but boy, they sure do have a knack for stirring up trouble.

- In February, they made a relatively modest change to their user agreement that caused people to freak out.
- In response to this, Facebook took the provocative step towards user self-governance. Facebook let users vote on some choices and promised to be bound by the results, but with an asterisk: Facebook decided what options users could vote on, and Facebook would honor those choices only if a prohibitively large number of users exercised their franchise. Still, it was a nice gesture towards cyberspace community self-governance.
- In summer, they tried to settle their Beacon litigation, but that also reminded folks of how much Beacon irritated them in the first place.
- Summer also brought allegations of click fraud on Facebook, and lawsuits followed.
- Finally, in Thanksgiving, Facebook rolled out some changes to its privacy options that it pitched as giving users more choices, but it also took away some choices and defaulted users into some options that surprised them.

Given this track record, is it unrealistic to expect more Facebook drama in 2010?

* Estavillo v. Sony. Speaking of self-governance, virtual world enthusiasts would love to establish the legal proposition that virtual worlds are legally equivalent to governments and therefore obligated to restrain their actions just like governments are. One virtual world enthusiast sued Sony for kicking him off the network, claiming that Sony was legally governed as a “company town” and therefore lacked the discretion to kick him off. WRONG (and it wasn’t even close).

* Wikipedia's policy change. In August, the English-language Wikipedia announced that it was going to tighten up its editorial policies, and people Freaked Out. (In fact, I have predicted that Wikipedia cannot avoid increased editorial restrictions over time, so this change should not have been surprising). However, it turns out that everyone got it wrong, and Wikipedia’s editorial changes are far less dramatic (and consequential) than initially reported. I will post a separate recap on Wikipedia shortly.

If you would like a stroll down memory lane, you can see my previous top 10 lists from 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 10:46 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark , Virtual Worlds | TrackBack

December 26, 2009

November-December 2009 Quick Links, Part 1

By Eric Goldman

Trademarks/Domain Names

* Yahoo and Mary Kay settled Mary Kay's trademark lawsuit over Yahoo's email shortcuts.

* uBID Inc. v. The GoDaddy Group Inc., No. 09-cv-2123 (N.D. Ill. Nov. 5, 2009). uBid’s anti-domain name parking lawsuit failed on jurisdictional grounds. Tom O'Toole explains why this is an unusual jurisdictional ruling.

* Trademark Blog: “Sellify, operator of ONEQUALITY.COM, sues Amazon over Amazon affiliates' alleged misuse of ONEQUALITY.COM as Google keywords.”

* In an unenlightening memo opinion, Second Circuit affirms the Cintas v. Unite Here opinion involving union activists’ web activities using a target company’s trademark. My initial blog post on the case.

* Bloomberg: Buyers of counterfeit luxury goods understand they are getting counterfeits, and many of them upgrade to the real thing eventually.

* Transamerica v. Moniker Online Services, 2009 WL 4715853 (S.D. Fla. Dec. 4, 2009). Domain name registrar does not qualify for ACPA's registrar safe harbor when: "Transamerica alleges that Oversee and the Moniker Defendants, together with the ostensible registrants-the John Doe Defendants-are the de facto registrants of the domain names in question. Transamerica claims that Moniker was not merely acting as a registrant in providing registration services to the John Doe Defendants for the infringing domain names, but instead was part of a scheme to profit from the use of the infringing names. As Transamerica points out, Moniker receives a fee each time an internet user clicks on one of the links attached to the infringing domain sites; such payment establishes at least partial ownership in the domain name." Troubling ruling.

* SafeWorks, LLC v. Spydercrane.com, LLC (W.D. Wash. Dec. 7, 2009). A trademark owner's preemptive registration of domain names containing typographical errors of the registrant's trademarks does not infringe a third party trademarks.

Marketing and Advertising

* In re Gemtronics (FTC ALJ decision Sept 16, 2009). A dietary supplement seller wasn't liable for comments on a website that it didn't own or control but (among other things) it had linked to. While this is great, I still believe the FTC needs to rethink its entire liability scheme of online content endorsement or adoption due to 47 USC 230. See 1, 2.

* Avvo settles Florida bar lawsuit and gets Florida to admit that client testimonials on Avvo aren't lawyer advertising. Rebecca explains why an analogous South Carolina regulation violates 47 USC 230.

* After the FDA spooked pharmaceutical companies to stop engaging in search advertising, the FDA held hearings on Internet pharmaceutical marketing. The Arnold & Porter recap. Ironically, BusinessWeek ran a story wondering if pharmaceutical ads reduce consumer demand.

* The FTC cracks down on online negative option/"continuity plan" offerings.

* In re Miva Inc. Securities Litigation, 2009 WL 3821146 (M.D. Fla. Nov. 16, 2009). The court dismissed a securities class action lawsuit over Miva's/FindWhat's investor disclosures relating to click fraud and spyware. My initial blog post on the case.

* NYT: False advertising litigation is a growth industry.

Search Engines

* A Milwaukee lawyer has alleged that another lawyer buying keyword advertising triggered by his name violates his publicity rights. I’ve posted the complaint to Scribd.

* Google is now personalizing search results for everyone, not just logged-in users. In 2006, I wrote about how universal personalization would affect SEO and concerns about search engine bias. Danny Sullivan believes Google’s change deserves "extraordinary attention."

* Google took out an ad from itself to explain why its image search results for Michelle Obama contained an offensive result. This is after it first tried to remove the image on the pretext that the website was hosting malware.

* Danny Sullivan asks some good questions about Google's integration of Twitter into its search database.

* BusinessWeek: Matt Cutts, Google’s search engine anti-spam superstar, talks about his job. He doesn't sound like the most fun person to travel with

* Rose Hagan, Google's chief trademark counsel, is retiring after 7 years at Google. She leaves behind big shoes to fill.

Posted by Eric at 02:59 PM | Adware/Spyware , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 18, 2009

Top Cyberlaw Developments of 2009

By John E. Ottaviani

(Thanks to Eric for letting me post this list here!)

[Eric's note: some of you may recall John, a regular blog guest contributor from 2005-07. It's great to have another contribution from him.]

Eric will post his own list later, but I thought we could start off the holiday season with one person’s view of the top Cyberlaw developments of 2009. It was an interesting year. While intellectual property issues continue to dominate, and we continue to see plaintiffs and their attorneys running smack into Section 230 of the Communications Decency Act, we’ve also seen developments in the areas of Constitutional law, criminal law, and state and federal regulation. So, let’s recap 2009. Unlike David Letterman’s lists, this list is in no particular order of importance.

1. File Sharing Decisions.

After years of lawsuits against file sharers, we finally have two trial decisions. Both held against the peer-to-peer file sharers. Jammie Thomas managed to turn a 2007 verdict of $222,000 (which was later thrown out due to a mistrial) into a 2009 verdict of $1.29 Million. Her motion to reduce the award is pending.

Joel Tenenbaum received more favorable treatment and was subjected to only a $675,000 jury verdict after he admitted liability and his fair use defense was rejected by Judge Gertner. His motion to appeal/reduce the award is due to be filed in early January. Judge Gertner wrote a compelling decision urging Congress to modify the strict liability consequences of new technologies such as peer-to -peer file sharing. In her decision rejecting the fair use defense, Judge Gertner implored Congress “to amend the [Copyright Act] to reflect the realities of file sharing. There is something wrong with a law that routinely threatens teenagers and students with astronomical penalties for an activity whose implications they may not have fully understood. The injury to the copyright holder may be real, and even substantial, but, under the statute, the record companies do not even have to prove actual damages.” We’ll see if Congress listens.

2. Rise of Copyright First Sale Doctrine.

There were several decisions that turned on applications of the copyright “first sale” doctrine to new online situations. Section 209(a) of the Copyright Act permits the owner of a lawfully made copy of a work to sell or dispose of that copy without the consent of the copyright owner.

First, the held that resales of the AutoCAD software were permitted under the first sale limitations in Section 109(a). The court found that although the underlying documents were styled as “licenses,” the fact that the licensee was entitled to perpetual possession of the copies was the key fact.

We also had two cases (John Wiley & Sons; Pearson Education v. Liu) dealing with the importation of copyrighted works (mostly textbooks) printed abroad and then imported into the United States for sale. Two courts said these transactions are not protected by the first sale doctrine because of the importation provision in Section 602. The courts so far have been following dicta in the Supreme Court’s 1998 Quality King case that goods manufactured overseas and then imported are not protected by the first sale right, despite their reluctance to do so. We may get a resolution of this issue in 2010. The U.S. Supreme Court has invited the Solicitor General to file a brief in the Costco Wholesale Corporation v. Omega, which is on a petition for certiorari to the Ninth Circuit Court of Appeals.

A third entry is Apple v. Psystar. Psystar specialized in creating copies of Apple’s Macintosh OS-X operating System and loading them onto Mac “clones.” The court rejected the first-sale doctrine defense because Psystar’s copies of the Macintosh OS-X operating system were not “lawfully made” within the meaning of Section 109. The parties subsequently settled all claims except for copyright infringement, and Apple obtained a permanent injunction against Psystar.

3. Demise of “Use in Commerce” Defense in Keyword Cases.

In Rescuecom v. Google, the Second Circuit reversed the district court and said that Google’s sale of trademarked keywords as ad triggers constitute a “use in commerce.” This probably is the end of the “use in commerce” defense in keyword advertising cases, which will now turn more on likelihood of confusion (or initial interest confusion) factors.

4. Internet Gambling.

Internet gambling continues to be regulated by a tangle of federal laws ill-adapted for the purpose. Some of the laws date back to the 1961 adoption of the federal Wire Act. This is an areas where Congress should really clean things up, especially with criminal liability sometimes at stake.

Proponents of online gambling took a couple of hits in 2009. In Interactive Media Entertainment and Gaming Association v. Holder, the Third Circuit upheld challenges to the Unlawful Intent Gambling Enforcement Act (UIGEA) on Constitutional grounds. The UIGEA does not prohibit Internet gambling, but does prohibit gambling businesses from accepting financial payments in connection with bets that are illegal under any federal or state law. (This Act has effectively forced legitimate offshore gambling sites to stop taking bets from the United States). The Third Circuit held that the phrase “unlawful Internet gambling” is not vague, and that there is no Constitutionally protected privacy right to gamble in one’s home.

Earlier in the year, the Department of Justice ordered four banks to freeze over $34 million in payments owed to about 27,000 poker players. Although the legality of online poker in the United States is a gray area, the DOJ takes the position that online poker games are prohibited by the federal Wire Act. The DOJ position runs counter to several court decisions that have refused to apply the Wire Act to non-sports related Internet gambling. After the funds were seized, the affected poker sites reportedly reimbursed the players the money that was seized.

5. State Attempts to Regulate the Internet.

This trend, a favorite target of Eric’s ire, continued in 2009. Some more notable attempts include Maine’s passage of a little COPPA Act, banning the use of personal information about minors for marketing purposes (which the Maine Attorney General then refused to enforce), Kentucky’s seizing of domain names associated with alleged gambling websites (the legality of which is pending before the Kentucky Supreme Court), and Utah and other state’s attempts to put sex offender information online or require sex offenders to register websites to which they belong and their passwords.

6. Attempts to Criminalize Breaches of Terms of Use.

Lori Drew created a fake MySpace profile to humiliate a 13-year-old neighbor girl and was subsequently blamed for the girl’s suicide death. Drew was convicted of three misdemeanor counts of unauthorized access to computers under the federal Computer Fraud and Abuse Act for violating MySpace’s terms of service. In United States v. Drew, the court dismissed Lori Drew’s conviction, concluding that MySpace’s terms of service were Constitutionally vague. The result is not surprising, because terms of service are not generally written with criminal prosecution in mind. The MySpace terms at issue prohibited a wide variety of conduct but did not explain what activities would make a user’s access “unauthorized”. The user’s conduct was reprehensible, but not criminal.

7. Online Endorsements.

In October, for the first time since 1980, the Federal Trade commission updated its guidelines for advertisers on how to keep their endorsements and testimonial advertisements in line with the FTC laws. The new guidelines explicitly target online endorsements by bloggers and others who receive cash or in-kind payments to review a product. Bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. While the new guidelines caused a stir among bloggers, they seem to be a reasonable extension of the FTC’s disclosure guidelines in other contexts

8. DMCA Take-Down Notices.

In UMG Recordings v. Veoh Networks, we received some further guidance on what constitutes a proper take-down notice. Here, the court said the copyright owner has the burden of identifying “potentially infringing materials.” A letter merely listing recording artists whose works were allegedly infringing did not give the Internet Service Provider actual knowledge of infringement because the letter does not comply with the DMCA requirements. The court also said that the ISP was not on general notice of copyright infringement just because the website allows users to post music files, which are frequently infringing content.

9. Section 230 of the Communications Decency Act.

There are too many cases to list here, and I am sure Eric has done (or will do) his own exhaustive compilation. The courts clearly expanded the scope of the Section 230 defense in various Craigslist cases (no liability for advertisements for guns or prostitution).

Barnes v. Yahoo showed us that service providers should not make statements and then not follow though. In that case, the plaintiff’s ex-boyfirend created fake personal ads for her on Yahoo and impersonated her in various online forums. She asked Yahoo to take the information down,. A Yahoo employee told her that Yahoo would take the profile down, but Yahoo did not do so until after the complaint was filed.. The Ninth Circuit upheld Yahoo’s Section 230 defenses for claims that Yahoo had an obligation to take the fake profiles down, and that Yahoo did not try to remove some objectionable material. But the court did permit the plaintiff’s claim to go forward that Yahoo had breached its oral contract with her to take the material down, which the Court held amounted to a modification of the “baseline” Section 230 rule.

10. Right to Privacy.

When someone publishes something on a MySpace website without her full name, and then deletes the post, does she have an expectation of privacy? In Moreno v. Hanford Sentinel, Inc., the California Court of Appeals said no. Here, the plaintiff posted an essay that was derogatory of her home town on her MySpace page and then deleted it six days later. In the meantime, the principal at the local high school saw the posting and submitted the poem to a local paper, where the editor (a friend of the principal) published the poem in the Letters to the Editor column and signed the plaintiff’s full name to it. The author and her family received death threats and her father had to close a 20-year old family business. However, the California Court of Appeals ruled that the principal did not invade the author’s privacy by handing the posting to the editor, and further held that the editor did not violate the author’s rights when it published her full name. (The case was remanded in order to address a claim of intentional infliction of emotional stress.)

Let’s hope 2010 brings even more exciting Cyberlaw developments. We have the potential for two Supreme Court rulings, in the Costco case (discussed above) and the Bilski case, which may address the validity of business method patents.

Posted by John Ottaviani at 07:04 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Licensing/Contracts , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 08, 2009

Record Label Sues Google and Microsoft for Linking to Infringing Music--Blues Destiny v. Google

By Eric Goldman

Blues Destiny Records LLC v. Google, Inc., 3:09-cv-00538-WS-EMT (N.D. Fla. complaint filed Dec. 7, 2009) [warning: 1.5MB PDF]

Blues Destiny Records, a small Blues music label, doesn't like RapidShare, a website that allows users to publish files, because users are posting its copyrighted music there. It also doesn't like that people who search for the label's artists in Google and Microsoft get search results that link to sites that link to allegedly infringing copyrighted copies on RapidShare. The complaint was ambiguously worded in describing whether Google and Microsoft directly link to RapidShare or only indirectly link to sites that link to RapidShare, but my own searches indicated that Google's search results did not take searchers directly to RapidShare. So I believe the information flows are something like this:

Uploading user => RapidShare => site linking to RapidShare => search engine => searcher/downloading user, who goes to linking site and then follows the link to RapidShare to complete the allegedly illegal download

As is typical for lawsuits of this nature, the copyright owner didn't sue either the uploading or downloading users. The copyright owner also didn't sue the individuals who posted the links that take people to RapidShare. Instead, the copyright owner brings a frontal 17 USC 512 assault by suing RapidShare (theoretically eligible for 512(c) for hosting the infringing files) and the search engines, who are putatively covered by 512(d) for linking to infringing files (although this claim appears to be even more attenuated if the search engines actually were 2 links away from the download).

The copyright owner appears to have initially struggled with sending proper 512(c)(3) notices, but it got there (or close enough) eventually. The complaint acknowledges that Microsoft disabled the links after receiving some type of notice. As a result, I'm not sure how Microsoft could be liable if they expeditiously removed the links after receiving the copyright owner's notices. Google apparently has not taken down the links (because I can still find them) after seventeen increasingly exasperated requests from the copyright owner, but Google's delayed response/non-response could be due to the copyright owner's imprecision about whether Google was actually linking directly to infringing RapidShare files or only to websites that had allegedly illegal links on them.

As for RapidShare, I didn't see a registration of agent for 512 service of notice, so they may not be claiming 512(c) protection. Then again, the complaint says they are a German/Swiss operation, so they may be impossible to serve and sue in the US, and RapidShare may not have felt any need to satisfy a US law formality.

There have been other lawsuits against websites for linking to infringing content, but plaintiffs usually try to avoid suing power players like Google and Microsoft--both well-funded defendants who aren't likely to roll over on this issue. One of the major exceptions is the Perfect 10 v. Amazon and Google lawsuit, which also involved Google's links to infringing files (in that case, infringing copies of pornographic photos). That lawsuit led to an important but confusing Ninth Circuit ruling from 2007, which left open Google's secondary liability for its links as well as Google's eligibility for a 512 safe harbor for those links. Given the ambiguities of that opinion, the plaintiff's action here isn't clearly wrong as a doctrine matter. However, in my opinion, it is nevertheless ill-advised and unlikely to succeed.

Posted by Eric at 03:47 PM | Copyright , Derivative Liability , Search Engines | TrackBack

December 02, 2009

Case Western “Signifiers in Cyberspace” Conference Recap

By Eric Goldman

In mid-November, I attended a conference at Case Western Reserve University School of Law in Cleveland, Ohio entitled “Signifiers in Cyberspace: Domain Names & Online Trademarks.” My notes:

David Fewer spoke about Canada’s WHOIS policy. The old Canadian registry policy published registrant information without restriction. Then, the registry proposed a new policy not to publish personal information in the WHOIS database for individual registrants and for organizations that can show harm from publication. To reveal registrant information in those situations, a warrant would be required. That policy got amended to allow warrantless access for cybercrime enforcement, registered IP infringement and ID theft. Fewer argued that the amended policy violates Canadian privacy laws (PIPEDA) because consumers are not given adequate disclosures, the exclusions from the privacy policy are arbitrary, and consumers aren’t given the required option not to participate.

Corynne McSherry of EFF discussed how TM owners are bypassing direct challenges against gripers and instead putting pressure on domain name registrars. She focused on the Yes Man spoof website of the New York Times, which included a parody ad of the De Beers diamond manufacturer. Humorless De Beers sought relief from Joker.com, the parodist’s registrar. EFF has responded to De Beers that the parody is legitimate because it has no commercial aspect, it’s nominative use, and the First Amendment applies. The EFF is also encouraging Joker.com to ignore De Beers because it (as the registrar) can’t be liable for the registered domain name. So why is Joker.com even entertaining De Beers’ complaint? Corynne notes the registrar’s revenue from any single domain name registration is less than legal cost of investigating and responding. Corynne discussed how parodists and gripers can minimize their legal risk (I blogged on these recommendations in May).

I remain very interested in situations where domain name registrars apply their own takedown policies to their customers. For example, I’ve previously mentioned GoDaddy’s “itchy trigger finger” when it comes to intervening with its registrants. I suspect there is significant heterogeneity among registrars’ interventionist tendencies. I think this is an area worth exploring. If you have other examples of domain name registrar intervention in its customers' content, please share them.

Stacey Dogan spoke about the aftermath of the Rescuecom ruling. Stacey is disappointed that courts aren't adopting her arguments to use the “trademark use in commerce” doctrine to insulate intermediaries (she calls it her “biggest failure in life”). She described three post-Rescuecom uncertainties: (1) what acts by intermediaries constitute TM infringement? (2) on what doctrinal basis? (direct v. contributory), and (3) what remedies do the intermediaries face?

Stacey thinks courts need to be more precise about the nexus between defendant behavior and TM owner harm. This should lead to better distinctions between direct and contributory infringement.

She offered a taxonomy of claims against intermediaries:

* General confusion = when the intermediary creates confusion through the blurring of ads and editorial content. Stacey thinks these aren’t TM issues. But if commingling is the problem, then the remedy should be an injunction requiring the intermediary to label the ads.

* Strict liability = when the search engine is automatically on the hook for its involvement with the ads. Stacey says courts should reject this approach due to the search engines' lack of proximate causation for consumer confusion. If a search engine faces any liability, it should be solely on the basis of contributory infringement (with its higher scienter bar).

* Failure to act = when the search engine fails to respond to TM owner’s takedown notice. She said we don’t see this in search engine cases [a point I disagree with given that the TM owner vs. search engine lawsuits all represent a failing of the search engines’ voluntary TM policies]; instead, she was thinking of the Tiffany case. Stacey thinks the failure of act prong is where the legal action should be. She wants courts to map out appropriate scienter levels. General knowledge of infringement isn’t enough, and courts should let defendants make reasonable judgments about whether the advertiser will qualify for any trademark defenses. If the advertiser is obviously infringing, and intermediary gets notice and fails to act, she thinks contributory liability could be appropriate.

Graeme Dinwoodie believes the ECJ will not follow the Advocate General’s opinion in the Google case. He explored two parallels between the AG’s opinion and Rescuecom: Both get away from trademark use of commerce, and both consider underlying policy values. Graeme thinks search engine defendants should move away from disputing the lack of harm to the trademark owner; instead, he thinks they will get more traction by showing the countervailing benefits of their advertising. For example, he thinks they should be showing how keyword advertising can facilitate investment and innovation.

Jeffrey Samuels shared his perspectives as a panelist in 200 UDRP proceedings. Since the UDRP’s implementation, there have been about 25,000 UDRP decisions. 40% are US registrations. 75% involve .com. 75% are defaults.

The UDRP isn’t designed to solve all domain name disputes. He gave an example of a domain name registration containing a celebrity child’s name. The UDRP isn't helpful because a 2 week old kid doesn’t have protectable trademark rights.

“The UDRP is hardly a model of clarity.” All cases are fact-dependent. If a UDRP proceeding has unusual facts, he recommends requesting a 3 member panel--these proceedings get more carefully evaluated opinions and minimize the effects of any one panelist’s idiosyncratic views.

Some issues that regularly arise in UDRP proceedings:

* What the TM owner has to do to establish its rights. The majority view is that a registration anywhere in the world suffices. Common law rights generally require presenting sufficient evidence validating the rights.
* There remains a split of authority on “sucks” sites.
* In the early days, panelists used to run through the multi-factor likelihood of confusion factors. That’s rarely done today. Now, most panelists just make sight and sound comparison.

Karl Auerbach discussed two interrelated issues: (1) ICANN lacks any political authority for its “Internet governance” role, and (2) technology does not require that ICANN monopolize DNS root services. He argues that we would benefit from competition among DNS root services. His argument reminds me a bit of the net neutrality debate. We can hypothesize many possible net neutrality problems, but most of them go away with vigorous competition. Similarly, ICANN’s often-ridiculous shenanigans would be less vexing in the face of bona fide competition for DNS root services.

Dan Hunter spoke about a new paper he’s writing with Mark McKenna. Their target is the fundamental trademark principle that trademark law protects against consumer confusion. They think consumer confusion is an imperfect proxy for our normative goal of protecting consumers. Some confusion is endemic in a complex society; and some methods of communication, like humor, require confusion to work. Therefore, they want to move away from trying to block consumer confusion and instead refocus trademark law on reducing errors in consumer decision-making. This seems like a fruitful endeavor, but they are also taking a swipe against the consumer search cost justification for trademark law, a move I didn't follow.

Bill McGeveran recapped his recent work on social networking sites and gave a preview of his next article. His target is fake online profiles such as the Tony La Russa fake Twitter account. He expects to see more pressure to create IP rights in personal identities.

I spoke about trademarks and behavioral targeting, and in particular the competition among marketers for consumer preference information. For example, I believe the anti-deep packet inspection pushback wasn’t based solely on privacy concerns. Instead, destination websites fear that an IAP will disintermediate them and use its prime access to consumer preference information to steer customers to competitors. (See this blog post for more on that point). My (very brief) slides.

Posted by Eric at 07:16 AM | Derivative Liability , Domain Names , Internet History , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

November 24, 2009

Teeth Whitening System Brings "Sue the World" Lawsuit Against Ad Agency, Competitor and Search Engines--Dazzlesmile v. Azoogle

By Eric Goldman

Dazzlesmile, LLC v. Epic Advertising, Inc., 2:09-cv-01043-PMW (D. Utah complaint filed Nov. 23, 2009)

Dazzlesmile sells a teeth whitening system. Presumably these systems generate fat profits, because Dazzlesmile has brought an expensive "sue-the-world" lawsuit against its ad agency, its competitor and the search engines.

Azoogle/Epic

The lawsuit against Azoogle/Epic is partially based on a miscalibrated cost-per-acquisition (CPA) deal. Azoogle sold Dazzlesmile on a CPA deal which pays Azoogle $43 for making a $4 sale with negative-option continuing revenue streams, i.e., the consumer has to cancel after the free trial period or he/she automatically gets shipped and charged for more whitening stuff. If the ongoing revenue stream is great enough, it can make sense to pay out big upfront commissions to get the sale. However, this payment structure creates lots of mischief possibilities.

In this case, Dazzlesmile alleges that its competitor engaged in "CPA fraud" by placing thousands of orders, coincidentally generating over $100k of commissions to Azoogle in one week. Dazzlesmile also complains that its products were being promoted by spam, fake blogs and other problematic ads in contravention to Azoogle's promises. Finally, Dazzlesmile complains that a rogue affiliate packaged two different systems into the same ad, causing consumers to order both products and then renege when they realized Dazzlesmile's terms.

The odd thing about this complaint is that Dazzlesmile tries to portray itself as the white-knight advertiser that wants to do right by consumers, while the evil Azoogle kept tempting Dazzlesmile to cut corners and take undeserved money from consumers. I understand the value of this positioning, but I find it a little hard to believe. You kind of know what to expect when you're dealing with Azoogle, and I'd be surprised if Dazzlesmile is a fully innocent naïf.

Competitor Lawsuits

Dazzlesmile also claims that its competitor slapped counterfeit "Dazzlesmile" labels on a different teeth whitening system. It further claims that Azoogle and the competitor conspired to use Dazzlesmile's advertising copy in Azoogle's network to direct teeth whitening customers to the competitor. It also claims these defendants used the Dazzlesmile trademark in a host of inappropriate ways, including in spam, as keyword ad triggers, in domain names, and in astroturfed content. Dazzlesmile claims it has received 10,000 misdirected customer support inquiries from duped customers.

Lawsuits Against the Search Engines

Dazzlesmile drags Google, Yahoo and Microsoft into the lawsuit for selling keyword advertisements despite Dazzlesmile's cease & desist letter to stop doing so. Oddly, the complaint pleads the search engine's liability as "vicarious liability," which should be DOA. Vicarious trademark infringement requires an agency relationship between the search engines and the advertisers, which the complaint doesn't (and can't) plead. If it's a non-IP form of vicarious liability, then it's preempted by 47 USC 230. So I predict Dazzlesmile will have to amend its complaint against the search engines to allege some other legal theory, or the search engines will exit this particular matter quickly.

Interestingly, the complaint alleges ripoffs of both its copyrightable ad copy and its trade secret protectable marketing plans, but the complaint does not allege either copyright infringement or trade secret misappropriation.

Conclusion

Dazzlesmile's complaint, if completely accurate, tells a story filled with legal wrongs, but I'm not sure I found it all that convincing. I will have to see the defendants' responses before I can begin to form any conclusions about its overall merit.

It does point out one troublesome spot as a good practice pointer. I know a lot of advertisers think they prefer CPA pricing over CPC or CPM pricing because they are more clearly paying for results, but this case provides a good illustration that a miscalibrated CPA price is no better at reducing unwanted spending than a miscalibrated CPC or CPM. At minimum, I’m surprised that Dazzlesmile apparently didn't include some provision in the CPA formula allowing it to avoid payment for chargebacks or immediately returned products. If you're an advertiser doing CPA deals, make sure you have robust enough exclusions to the CPA obligations so that you are truly paying for bona fide results.

AdWords Lawsuit Roster

The updated roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 06:05 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

November 06, 2009

Google AdWords Litigation Keeps Rolling In--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. US Auto Parts Network Inc.,3:2009cv05578 (D.N.J. complaint filed Nov. 2, 2009) [warning: 3MB PDF]. The Justia page.

In my world, we have an honor code among geeks--thou shalt not harm other geeks. As you can imagine, then, I was a little sad to see geek-on-geek litigation like this one, where auto parts geeks are suing computer geeks. Can't we geeks all get along?

Parts Geek is an online retailer of auto parts. US Auto Parts Network is a competitor who has bought keyword ads triggered by Parts Geek's trademarks. (However, when I searched this morning for Parts Geek, I didn't see any US Auto Parts' ads). In response, Parts Geek is suing its competitor as well as Google for the keyword advertising.

With respect to Google's involvement, the complaint doesn't break any new ground. I'm pretty sure it's largely a rip of another complaint, but I can't remember which one(s). According to my count, this lawsuit brings Google back up to 9 AdWords lawsuits.

In contrast, there are a couple of interesting facets of the claims against US Auto Parts. First, Parts Geek alleges (para. 42) that US Auto Parts set up a blog entitled "Auto Parts Geek" to divert traffic. Can you imagine a more perfect descriptive fair use situation? I think this will become my new favorite example.

Second, Parts Geek makes a Computer Fraud & Abuse Act claim because US Auto Parts allegedly crawled Parts Geek's site to extract "proprietary data and pricing." The CFAA claim seemed like an afterthought tacked onto allegations that focused almost exclusively on the trademark issues, and it wasn't as fleshed out or robust as we normally see in anti-crawling lawsuits (i.e., no claims for breach of contract, trespass to chattels, copyright infringement or violations of a state computer crimes law). Nevertheless, I'm always interested in anti-crawling lawsuits, especially ones with anti-competitive angles like efforts to keep competitor A from learning competitor B's prices. Further, Parts Geek claims that US Auto Parts' access to its website was delimited by a "terms of use" which, from my limited review of the Parts Geek site, appears to be at best a very obscure "browsewrap." The CFAA is more tolerant of obscure disclosures than contract law is, and this CFAA claim is hardly unusual, but I'm nonetheless troubled by the implications of treating obscure browsewraps as effective anti-crawling mechanisms.

The roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google
* Parts Geek v. US Auto Parts

Posted by Eric at 07:17 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 29, 2009

Court: Prosecutors Can't Rummage Around in a Defendant's Gmail Account -- U.S. v. Cioffi

[Post by Venkat]

The government is prosecuting a couple of Bear Stearns hedge fund managers for securities fraud and related offenses. I came across a story that prosecutors obtained evidence from the gmail account of one of the defendants which prosecutors recently disclosed. ("E-Mails Seen as a Flash Point in Bear Stearns Fund Managers' Fraud Trial") In some ways I think this illustrates one of the pitfalls of using a service such as gmail. Gmail stores your data forever - or at least doesn't give you a ton of control over when it is deleted - so it's much easier for prosecutors to obtain this evidence. If you stored the data on your own servers, you may be able to get by with deleting the data pursuant to a regular document retention/destruction policy. And more importantly, there's a much higher likelihood of you knowing when the data has been or is about to be seized. (It's more difficult to obtain email from a service provider in a civil case.)

Interestingly, the defendant whose email was disclosed by the government as evidence in the Bear Stearns case prevailed in a motion to suppress the gmail evidence. (US v. Cioffi, et al., Case No. 08-CR-415 (FB) (E.D.N.Y.; Oct. 26, 2009).) (Access a copy of the ruling at Scribd [pdf] here; see the WSJ story here ("In Setback for Bear Stearns Case, Judge Suppresses Email").)

Facts: The government initially obtained an email sent through non-company email accounts between Cioffi and Tannin (the two defendants) talking about how the "subprime market looks pretty ugly . . . ." The government used this email to support its allegations that Tannin used his personal (gmail) account to commit or further the crimes. The government's affidavit argued it needed to search the gmail account, but offered certain limitations on the access - for example, the search would be limited to emails created on or before the day prior to the defendant's retention of counsel, in order to avoid interception of privileged communications. The affidavit also noted that "the nature of electronically stored data" required the authorities (rather than Google) to search through the email account.

The magistrate judge issued the warrant, but did not attach the affidavit to the warrant. The government went to Google, which initially wrote to the government that "it was no longer able to extract the information requested in [the warrant] because Tannin's account had been deleted." Several months later, "on the eve of trial," Google advised that it had located a copy of the account and delivered a copy of its contents to the government. (??)

The Court's Ruling: The critical issue in front of the court was whether the warrant was sufficiently particular as to minimize unnecessary invasions into the suspect's privacy. The court noted at the outset that Tannin had "a reasonable expectation of privacy in the contents of his personal email account." The government did not dispute this point. (This doesn't seem to be a settled issue, as noted in the case mentioned below.) Turning to particularity, the court notes that searches of documents, data, computers, and email accounts raise tricky issues as to what level of particularity is required. A couple of different approaches have been used to avoid a general search by the government: (1) providing keywords or other search parameters in advance; or (2) having a third party conduct the search and segregate responsive information from non-responsive information.

The court noted that an overly broad warrant may be cured by incorporation of an affidavit that would constrain the agents' search, but Second Circuit cases have been less receptive lately to this approach. (In the context of a digital search, it would seem that this wouldn't work as well as it would with respect to physical objects. Exposure to data that doesn't fall within the search warrant would compromise the suspect's privacy and would undermine the whole point of particularity in this context.) Regardless of whether the affidavit could have cured the warrant's particularity problem, the affidavit was not actually attached to the warrant, so this argument was not in play.

The court ultimately concludes that the warrant did not comply with the Fourth Amendment. The government sought to invoke exceptions in order to have the evidence admitted notwithstanding these issues, but the court rejected both of these attempts. With respect to the good faith exception, the court was emphatic:

[t]his case . . . is not about search terms or firewalls. It is, rather, about the fundamental and venerable prohibition on general warrants. Since 'it is obvious that a general warrant authorizing the seizure of evidence without mentioning a particular crime or criminal activity to which the evidence must relate is void under the Fourth Amendment . . . no reasonably well trained officer could believe otherwise.'

As to inevitable discovery - the second exception - the court's ruling is also interesting. The court seemed to say that the government could only satisfy particularity after having seen the emails procured by the overbroad warrant: "the government's timing still presents a problem: [h]aving seen the November 23rd email, the government is now in a position to obtain a warrant with perfect particularity. There is, in other words, no way to purge the taint of its unconstitutionally overbroad search."

***

I can't tell if the government just dropped the ball here or whether there's something more to it. One view is that if the government had a narrow warrant application and the magistrate judge issued a narrow warrant, the government could have probably obtained the information they ultimately sought? On the other hand, the court is rightly skeptical that the government could have obtained the emails at issue by providing a set of keywords to Google. After all, wasn't this the argument the government used to justify the fact that the search needed to be conducted by the government, rather than by Google or by a third party? The court's rejection of the government's inevitable discovery argument seems significant. My practice does not stray into the realm of criminal cases so take that with a grain of salt. I'm curious to see what people like Orin Kerr and Scott Greenfield have to say. (Congrats to Professor Kerr, whose "Searches and Seizures in a Digital World" article is cited by the court. He has also posted extensively on a recent Ninth Circuit decision that bears on these issues: United States v. Comprehensive Drug Testing, Inc., 579 F.3d 989 (9th Cir. 2009).)

Interestingly, Professor Kerr notes a recent decision from federal court in Oregon where the court held that email was not covered by the Fourth Amendment. [Clarification: see this post for a clarification.] Pointing to the Google terms of service, the court held that most users expect their emails to be shared with Google employees and other third parties, and the account-holder was thus not entitled to notice before the government obtained a warrant to search someone's gmail account. I think (but I'm not sure) the account-holder still has the ability to challenge the search after-the-fact, as did the defendant in Tannin. Either way, the ruling seems noteworthy, and raises issues around process where the government subpoenas your email records from the service provider. When do you as the account-holder receive notice of a government search? Does Google have a consistent policy on this?

I'm still sticking with my instinct that using a third party service such as gmail raises the risk that your emails end up in the hands of prosecutors. I'm also curious about Google's policies for dealing with these sorts of issues.

Added: You can check out Professor Kerr's post on this ruling here. His conclusion: "the basic Fourth Amendment holding was likely right," but the court should have applied the good faith exception. He also posts a clarification to his earlier post about the Oregon decision, which I linked to above: court's conclusion only speaks to notice to subscribers, which the court concludes is not required under the Fourth Amendment.

Posted by Venkat at 09:14 AM | Privacy/Security , Search Engines

October 23, 2009

Google AdWords Litigation Updates--Google Adds One Lawsuit and Ends Another

By Eric Goldman

It's been a little quiet on the Google AdWords trademark litigation front in the past couple of months, so it's timely to check in on the situation.

Jurin v. Google, Inc., 2:09-at-01695 (E.D. Cal. complaint filed Oct. 22, 2009)

You may recall Daniel Jurin, who claims ownership in the trademark "styrotrim" (a type of building exterior covering). In June, he sued Google for trademark infringement and related claims as part of the spate of lawsuits filed after Google changed its trademark policies in May. Then, less than 2 months later, he voluntarily dismissed the lawsuit after having parting ways with his attorneys. I figured losing his attorney would spell the end of Jurin's quest, but no! Breaking a two month dry spell in new Google AdWords lawsuits (the last being Flowbee in mid-August), Jurin has found a new attorney, Paul Bartleson, and has decided to tangle with the tiger once again. Welcome back to the party!

It appears that Jurin had to cast a pretty wide net to find a substitute attorney. Paul's website says for the past 19 years he "has focused almost exclusively on Bankruptcy matters," and his LinkedIn page says he is "also an entrepreneur and business development consultant in a business that teachers leadership, values and relationship skills, while capitalizing on the wealth building potential of the internet." Huh? Not sure what that means, but could this lawsuit be an example of their "wealth building" prowess???

The complaint itself doesn't break any new ground. It's fairly internally redundant, and the narrative appears to conflate paid ads with organic listings fairly freely (while ironically complaining that Google confuses ads and organic results).

Soaring Helmet Corp. v. Bill Me Inc., 2:2009cv00789 (W.D. Wash. voluntarily dismissed Oct. 15, 2009)

In an unpublicized move, Soaring Helmet voluntarily dismissed Google from its trademark lawsuit against Bill Me last week. Even with Google out of the picture, the trademark owner v. advertiser lawsuit appears to be going strong. My initial blog post on that lawsuit.

Rosetta Stone v. Google

A month ago, Rosetta Stone's lawsuit largely survived Google's 12(b)(6) motion to dismiss. In a non-substantive opinion, the court tossed out the false endorsement and conspiracy claims but left the remainder intact.

Google v. John Beck Amazing Profits

In mid-September, Google voluntarily dismissed its declaratory judgment action trying to wrest the John Beck v. Google lawsuit venue out of Texas. This dismissal does not appear to have affected the original John Beck v. Google case, nor did it succeed in affecting venue.

The roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google
* Flowbee v. Google

Posted by Eric at 09:54 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 17, 2009

Q3 2009 Quick Links, Part 3

By Eric Goldman

Copyright

* AP v. All Headline News settles. My initial blog post. The settlement order.

* The Turnitin case has settled. My blog post on the district court ruling.

* Corbis Corp. v. Starr, No. 3:07CV3741 (N.D. Ohio Sept. 2, 2009).. Company that retained web developer could be liable for copyright infringing photos included in the developed website. David Johnson's coverage.

* Creative Commons commissioned a study of what people think qualifies as “commercial” or “non-commercial” activity. While this is relevant to how CC drafts its various license flavors, these words also have significant import to many facets of the law, including copyright (such as the fair use test) and trademark (such as the definition of “use in commerce”). The executive summary:

Both creators and users generally consider uses that earn users money or involve online advertising to be commercial, while uses by organizations, by individuals, or for charitable purposes are less commercial but not decidedly noncommercial. Similarly, uses by for-profit companies are typically considered more commercial. Perceptions of the many use cases studied suggest that with the exception of uses that earn users money or involve advertising – at least until specific case scenarios are presented that disrupt those generalized views of commerciality – there is more uncertainty than clarity around whether specific uses of online content are commercial or noncommercial.

eBooks

* Advocates for the blind sue Arizona State University for distributing electronic textbooks via the Kindle.

* Rebecca on the relationship between the Kindle 1984 debacle and the Google Book Search settlement. See also this Slate article.

Search Engines

* Train2Game v. Google, [2009] EWHC 1765 (QB): UK opinion that Google isn't liable for its search results snippets.

* CEO Bartz said Yahoo was never a search company. What??? Danny Sullivan calls her out for her "revisionist history."

* Greg Linden: Google AdWords Now Personalized.

* ThirdVoice redux: Google launches SideWiki. Let the legal games begin! (See, e.g., this BusinessWeek article). I’d be more worked up if Google had a more successful track record with non-search offerings, especially user-generated content projects. Lively, anyone?

Marketing

* Some craziness in Maine, when the legislature tried to restrict marketing to kids. PUBLIC Law, Chapter 230 LD 1183, item 1, 124th Maine State Legislature. The Maine AG said she won't enforce it, and subsequently the law was given a timeout so the Maine legislature can rethink the error of its ways.

* eBay is changing to a per-click model for paying affiliates, where the per-click amount is reset daily based on actual value delivered by the affiliate.

* Ethical Quandary: Faxed attorney newsletter doesn’t violate TCPA.

Posted by Eric at 04:47 PM | Copyright , Derivative Liability , Internet History , Marketing , Search Engines | TrackBack

October 15, 2009

Q3 2009 Quick Links, Part 2

By Eric Goldman

Trademark

* Venkat: Twitter makes the dictionary.

* Federal Circuit says Hotels.com is generic.

* Steve Madden sues eBay for trademark infringement. Marty's coverage. Justia page. I found the fifth cause of action, "trademark delusion," a surprisingly apt malapropism.

* Yahoo! Inc. v. Ashantiplc Limited. Yahoo is suing over Flicker.com.

* Lots of action involving Mary Kay.

- Mary Kay sued Yahoo for its shortcuts being triggered by the Mary Kay trademark. The Justia page.

- Mary Kay brought another lawsuit to shut down aftermarket resales.

- The Mary Kay v. Weber case has reached a conclusion. See my initial blog post on the case. In March, Mary Kay won a jury verdict against Weber. In August, the district court judge denied Weber post-trial relief. Mary Kay v. Weber, 2009 WL 2569070 (N.D. Tex. Aug. 14, 2009). On Sept. 29, the judge awarded Mary Kay $1.1M, computed as “the defendants' pre-tax net profit for the years 2005 through 2008.”

* I hate greeting card IP cases...especially when they involve Paris Hilton. See the Ninth Circuit opinion.

* Rebecca on a complicated trademark and false advertising case involving cell phone reflashing.

* Third Educ. Group, Inc. v. Phelps, 2009 WL 2029758 (E.D. Wis. July 10, 2009). An oblique nod to a co-blogging situation:

It is possible to have a situation in which a voluntary association develops out of a preexisting creation of an individual (take, for example, a blog created, named, and operated entirely by a single individual that then expands into a voluntary association as it includes more collaborative members but continues to utilize the original name). Under such circumstances, the founding individual might register the name of the voluntary association as a trademark solely in his own name and then license it to the voluntary association because he has used the trademark separate from the voluntary association. However, that did not occur here.

* CollegeSource, Inc. v. AcademyOne, Inc., 2009 WL 2705426 (S.D. Cal. Aug. 24, 2009): "Plaintiff argues for personal jurisdiction on the grounds that Defendant purchased two of Plaintiff's trademarks from internet search engines, so that those engines would display Defendant's advertisements when Plaintiff's word marks were searched….Defendant's uncontroverted affidavit avers that its Adwords were selected by the search engines and were purchased before Defendant knew Plaintiff was located in California.…Accordingly, even if Defendant intentionally infringed Plaintiff's marks, there is no showing that act was “expressly aimed at the forum state” or that it caused “harm that the defendant knows is likely to be suffered in the forum state.”"

* GMA Accessories, Inc. v. BOP, 2009 WL 2634771 (S.D.N.Y. Aug. 25, 2009). A really interesting and confusing lawsuit that says (I think) that electronic usage of third party trademarks does not qualify as a use in commerce and may not constitute contributory trademark infringement, with obvious implications for the search engine keyword advertising cases:

Electric Wonderland's second alleged meritorious defense is that it did not use the CHARLOTTE or CHARLOTTE SOLNICKI marks....Electric Wonderland's President described its business as follows:

Electric Wonderland brokers and/or processes orders from wholesale purchasers for fulfillment by clients of Electric Wonderland. Electric Wonderland does not directly sell its clients [sic] products, does not fulfill orders, does not acquire or maintain any inventory for sale, and does not purchase products from its clients for resale. Electric Wonderland does receive commissions on sales it brokers....

According to the Flack Declaration, these were the services Electric Wonderland provided to Charlotte Solnicki. (Flack Decl. P 3.) "Electric Wonderland did not directly sell Charlotte Solnicki products, did not fulfill orders, did not acquire or maintain any inventory of such products for sale, and did not purchase such products from Charlotte Solnicki for resale." (Flack Decl. P 3.) If this were the extent of Electric Wonderland's role, a fact-finder could find that Electric Wonderland did not "use" the CHARLOTTE or CHARLOTTE SOLNICKI marks, because it did not place the marks on any goods. Likewise, a reasonable fact-finder could determine that Electric Wonderland never used the marks to sell or advertise any of the services Electric Wonderland rendered. Thus, Electric Wonderland would not be liable for direct trademark infringement.

...Electric Wonderland's president claims that "[a]t no time while Charlotte Solnicki was a client of Electric Wonderland was Electric Wonderland aware of GMA's 'Charlotte' products nor of any possibility that the Charlotte Solnicki products were potentially infringing any third party's trademark rights." (Flack Decl. P 5.) If true, a reasonable fact-finder could find that Electric Wonderland neither knew, nor had reason to know of the alleged infringement during the period in question.

In addition, the Second Circuit has not decided whether contributory infringement applies to entities like Electric Wonderland, which provide services instead of products....Thus, Electric Wonderland, as a matter of law, may have a complete defense to contributory infringement liability, a matter which this Court need not decide at this juncture.

* Dan Burk and Brett McDonnell, Trademarks and the Boundaries of the Firm. Interesting discussion (among other things) on how an entrepreneur's/employee's personal reputation and corporate reputation can be interlinked.

Domain Names

* The Eleventh Circuit affirmed the defense win in the domain name case of Southern Grouts & Mortars v. 3M, 2009 WL 2182605 (11th Cir. July 23, 2009). See my initial blog post on the case.

* John Levine: What are TLDs Good For? Bringing to mind the famous Edwin Starr song (I think the answer is the same!).

* ICANN claims it has killed domain name tasting.

Posted by Eric at 09:53 AM | Derivative Liability , Domain Names , E-Commerce , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

September 24, 2009

Person v. Google Appeal Rejected

By Eric Goldman

Person v. Google, 2009 WL 3059092 (9th Cir. Sept. 24, 2009)

In June 2007, I wrote:

"Person is a lawyer and a former candidate for NY Attorney General. He sued Google for antitrust violations based on its AdWords practices. The first court rejected his suit for improper venue. Person tried again in Google's home court, and Judge Fogel dismissed the lawsuit a second time (with leave to amend) in March. Person didn't give up, but this time Judge Fogel closed the door for good, dismissing the lawsuit a third time--this time with prejudice--because Person didn't cure the defects with his allegations of the relevant market. So this lawsuit should be over unless Person decides to take it to the Ninth Circuit."

Winning points for persistence but simultaneously losing points for questionable legal judgment, Person did in fact appeal the case to the Ninth Circuit. However, he unsurprisingly didn't make any greater headway on his case. In a non-precedential memorandum opinion, the Ninth Circuit needed only 2 paragraphs to breezily brush Person's appeal aside. As I also said in my 2007 post, "While this particular lawsuit was misguided from inception, I doubt this is the last time Google will face antitrust challenges."

Posted by Eric at 01:48 PM | Search Engines | TrackBack

September 22, 2009

Google Confirms That Keyword Metatags Don't Matter

By Eric Goldman

Few Internet technologies have horked cyberlaw as much as keyword metatags. Back in the 1990s, some search engines indexed keyword metatags, which encouraged some websites to stuff their keyword metatags as a way of gaming the rankings. Judges took a dim view of this practice, largely because the surreptitious nature of keyword metatags seemed inherently sinister, regardless of their efficacy. In the interim, search engines wizened up. Some search engines stopped indexing keyword metatags, and others greatly diminished the credit they assigned to keyword metatags. As a result, for the better part of this century, keyword metatags have had either zero or de minimis effect on search engine placement.

However, the anti-keyword metatag legal doctrines developed in the 1990s have persisted, even as the technology changed. Although occasionally judges have gotten it right (see, e.g., Standard Process v. Banks). most courts still treat the presence of a third party trademark in keyword metatags as essentially a per se trademark infringement--even if the keyword metatags didn't (and couldn't) change the search results ordering or any consumer's behavior. For a quick sense of the ridiculous state of keyword metatag jurisprudence, take a look at my recent blog posts on the topic.

The current state of nature has put keyword metatag defendants in a bind. On the one hand, the law treats the inclusion of third party trademarks as per se trademark infringement. On the other hand, everyone in the industry knows they are irrelevant but search engines have been less than forthcoming about the components of their search engine algorithms, leaving scanty citable material to support that proposition. And judges, deciding between the weight of a dozen years of anti-keyword metatag legal precedence and not-from-the-horse's-mouth assessments of keyword metatag efficacy, not surprisingly continue to stick with the outdated legal precedent.

This makes Google's announcement yesterday so exciting. Google's star techie Matt Cutts says in plain language that Google's core search algorithm ignores keyword metatags. This isn't news in the sense that we've known this about Google for years, but I believe this is Google's first public confirmation of keyword metatag's irrelevancy. Matt's short video clip goes so far to tell trademark owners to quit suing over keyword metatags. Amen!

I've long believed that trademark law shouldn't intervene even if search engines index keyword metatags because merely appearing in the search engine results for a third party trademark (without more) should be legally immaterial. Even if you don't agree with me on that proposition, I trust most everyone can agree that trademark law should ignore keyword metatags if search engines do. Now that we have confirmation that the dominant search engine disregards keyword metatags, let's hope judges do the same.

Posted by Eric at 10:02 AM | Internet History , Search Engines , Trademark | TrackBack

September 16, 2009

Ninth Circuit Groaner About Metatags--Art Attacks v. MGA

By Eric Goldman

Art Attacks Ink LLC v. MGA Entertainment, Inc., CV-04-01035-RMB (9th Cir. Sept. 16, 2009)

What is it about metatags that cause legal folks to believe they have magical search powers? It's a meme that the legal community just can't seem to shake. To wit: In a case involving the alleged ripoff of a small-time local artist by "Bratz" manufacturer MGA, the Ninth Circuit had to determine if MGA would have ever learned of the plaintiff's "Spoiled Brats" art collection. In determining if MGA could have had "access" to the Spoiled Brats design (a prerequisite to copyright infringement), the court says:

"Art Attacks also maintained an internet website as of 1996, during the early years of widespread internet use. The website displayed images of various Art Attacks airbrush designs, including animals, celebrities, cars, animals, and the Spoiled Brats. The website took two minutes to load. Users could click through the main Art Attacks website to a linked Spoiled Brats-specific page to obtain a mail-in order form. The website also lacked Spoiled Brats “meta tags,” invisible pieces of data that are embedded in websites and act as flags to internet search engines....As a result, a potential viewer who typed “Spoiled Brats” into a search field would likely not encounter the Art Attacks page." (emphasis added)

What??? Putting aside the fact that the metatags were ignored by many of the search engines even at the relevant time (back in the late 1990s), this is a backwards way of assessing site visibility for the search term "Spoiled Brats." So what if the term Spoiled Brats wasn't in the metatags if the term was on the page? Yet another reason why I wouldn't rely on Ninth Circuit opinions for accurate descriptions of SEO practices.

One last point: although MGA beat this particular allegation that its Bratz dolls were ripoffs, the appellate victory is a little hollow because MGA wasn't so fortunate in its litigation with Mattel.

Posted by Eric at 03:44 PM | Copyright , Search Engines , Trademark | TrackBack

September 08, 2009

Yahoo's Search Results Snippets Aren't False Endorsement--Stayart v. Yahoo

By Eric Goldman

Stayart v. Yahoo! Inc., 2009 WL 2840478 (E.D. Wis. Aug. 28, 2009)

Earlier this year, I blogged about Beverly Stayart's quixotic lawsuit against Yahoo and others for showing search results snippets that contained her name adjacent to spammy porn and adult content links. Last month, the court efficiently dismissed her federal Lanham Act "false endorsement" claims and then dismissed the remainder of her lawsuit on procedural grounds, allowing Stayart to refile those claims in state court if she chooses. (She shouldn't but she probably will). The court rejected Stayart's Lanham Act false endorsement claim on three different grounds.

Commerciality

The court says that Stayart has not made adequate efforts to commercialize her name sufficient to give her standing for a Lanham Act claim. I agree with the court's factual assessment. Although Stayart alleged that she has been an active participant in online communities, she hasn't done anything to commercialize her name. Stated differently, if Stayart has standing under the Lanham Act's false endorsement provisions, then just about everyone in the world would.

Confusion

The court rejects any likelihood of consumer confusion. I don't particularly like the court's reasoning, which seems to be that since Stayart has lived a squeaky clean life, no one would believe that she could be associated with the seedier activity promoted in the spammy links. This reasoning seems completely inconsistent with the nature of gossip. Nevertheless, the court is completely right when it says "No one who accessed these [spammy] links could reasonably conclude that Bev Stayart endorsed the products at issue." I think this is true because the spammy links lack internal credibility enough for anyone to believe them at all.

With respect to Various, the defendant whose adult website was advertised at some of the spammy links, Stayart argued initial interest confusion because people interested in her might be induced to click on the spammy links. The court rejects the argument by saying "The type of person looking for information about Bev Stayart would not be fooled into using an online adult-oriented dating website." I'm not sure why the court thinks this is true; people have all sorts of “hidden interests.” Nevertheless, I'd like to think no prudent person would be fooled into clicking on spammy porn links in a search engine, even if it referenced Stayart's name.

47 USC 230

The court's discussion up to this point has some odd reasoning, but the 47 USC 230 discussion is quite bizarre. The court's conclusion is that "Yahoo! should be entitled to immunity because it acted as an interactive computer service, even though Stayart’s claims are nominal intellectual property claims....Immunizing Yahoo! from Stayart’s claims would not limit the laws pertaining to intellectual property because Stayart does not state a valid intellectual property claim."

What? Is the court saying that it doesn't need to discuss 230 because Stayart failed to state a valid IP claim, or is the court saying that Yahoo qualifies for the 230 immunity because doing so would be consistent with 230's policies--even if the court has to ignore 230's statutory exclusion for IP claims? The court could have found a role for 230 by concluding that the Lanham Act false endorsement claim wasn't really an IP claim at all, any more than a Lanham Act false advertising claim is an IP claim, but I don't think the court said that.

So I'm not sure what the 230 references means, and I personally think the court would have been better off not discussing 230 at all. (As Rebecca writes, the whole 230 digression was "obviously useless.") At minimum, I don’t think it would be accurate to say that this court found a 230 defense to a federal IP claim. As a result, I’m filing this case in the bucket of “not very interesting” 230 cases.

Note: we already knew that 230 protects search engines from liability for their search results snippets when IP claims aren’t involved. See, e.g., Maughan v. Google and Murawski v. Pataki. A British court also reached the same result on common law grounds. See the Metropolitan International Schools case.

Conclusion

The court denies Various' 230 defense because its association with the banner ad was unclear. Having dismissed the federal Lanham Act claims completely, the court then declines supplemental jurisdiction over the state law claims. The court also rejects Stayart's guffaw-inducing request for sanctions against the defendants for having the temerity of moving to dismiss her complaint.

I'm glad to see Stayart's lawsuit quickly dismissed. It was a ridiculous lawsuit from inception. At the same time, the court's corner-cutting leaves me lamenting the absence of better doctrines to deter junk lawsuits like this in the first place. It's actually can be tricky to say that any trademark complaint is "wrong" given how much doctrinal contortions some courts have indulged in--even when lawsuits like this are so clearly wrong.

More comments on the case: Rebecca Tushnet, Mike Masnick (who has had first-hand dealings with Stayart) and Ars Technica

Posted by Eric at 03:05 PM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

August 26, 2009

Yahoo Subpoenas Expedia in American Airlines Lawsuit

By Eric Goldman

Yahoo and American Airlines are still tussling over Yahoo's sale of American Airlines' trademarks as keyword triggers (see background at 1, 2, 3). According to Yahoo, American Airlines is arguing that online travel agencies such as Expedia are directly infringing American Airlines' trademarks by buying keywords from Yahoo, which would make Yahoo a secondary infringer by facilitating Expedia's direct infringement.

From my perspective, American Airlines' direct infringement argument looks questionable because Expedia and others should be fully protected by the First Sale/trademark exhaustion doctrine for advertising that it sells American Airlines' branded services--just like any other retailer is free to advertise the trademarks of the manufacturers it vends. However, perhaps American Airlines restricts Expedia's advertising by contract and is taking the position that Expedia exceeded the contract and such a contract breach constitutes trademark infringement. American Airlines is also arguing that Yahoo is tortiously interfering with the American Airlines-Expedia contract, so that seems possible. Even then, it's not clear to me that if Expedia exceeds the contract by buying trademarked keywords, the contract breach would qualify as trademark infringement. The analysis should go back to default trademark law, which should excuse Expedia's purchases under the trademark exhaustion doctrine.

ASIDE AND REQUEST FOR HELP: I have done a fair amount of digging trying to find cases that apply the trademark exhaustion doctrine to the legitimate resale of third party services. I have only been able to find the trademark exhaustion doctrine applied to the resale of physical goods/chattels, not the resale of services, but it seems like the doctrine should apply to both. The travel business is a great example. Travel agents routinely advertise to consumers that they resell travel packages that include a flight on, say, American Airlines. I have been struggling to find any cases or other supportive sources indicating that such advertisements by travel agents are protected by trademark exhaustion. Presumably, in some cases, the advertising and resale is expressly permitted by a contract with the upstream service provider (such as in a consolidation contract between the travel agent consolidator and the airline), but I'm sure there are plenty of cases where there is no contract at all. Any tips/referrals/suggestions on cases applying trademark exhaustion to the legitimate resale of services would be very much appreciated. END OF ASIDE

So, American Airlines is pointing the finger at Expedia as the direct infringer. [Even though, conspicuously, American Airlines isn't suing Expedia, for reasons I explore in my Brand Spillovers paper]. Naturally, Yahoo wants to know more about Expedia's possible exposure as a direct infringer so that Yahoo's defense can include disproving the direct infringement. Therefore, Yahoo sent a subpoena to Expedia requesting all kinds of goodies, such as the American Airlines-Expedia contract, consumer conversion rates from sponsored link ads, and other information about consumer behavior on Expedia.

Not surprisingly, Expedia responded "no thanks" to Yahoo's request. I can think of at least three reasons why. First, Expedia would rather not spend any time and money on someone else's lawsuit. Second, some of the information Yahoo is asking for could have significant competitive advantage to Yahoo. Yahoo partially competes with Expedia via its Yahoo Travel service, plus Yahoo's knowledge of the profitability of its referred customers could affect Yahoo's management of the travel category auctions. Third, some evidence could prompt American Airlines to close the litigation circle by suing Expedia directly.

In response to Expedia's nyet, Yahoo is seeking a motion to compel Expedia's response to its subpoena. Typically, these discovery disputes result in a split-the-baby outcome (either via a settlement or ordered by a judge) where Yahoo gets less than it asked but Expedia also forks over some info. We'll see. Meanwhile, Yahoo's effort is consistent with a trend I first spotted in connection with the Rhino Sports case--advertiser behavior regarding keywords has significant value in litigation discovery and for competitive purposes, so I expect to see more subpoenas like this over time.

Posted by Eric at 09:37 AM | Derivative Liability , E-Commerce , Marketing , Search Engines , Trademark | TrackBack

August 14, 2009

Flowbee Latest Trademark Owner to Sue Google--Flowbee v. Google

By Eric Goldman

Flowbee International, Inc. v. Google, Inc., 2:09-cv-00199 (S.D Tex. complaint filed Aug. 13, 2009) [NB: the complaint is split into 2 PDFs totaling 8+ MB]

After the Jurin and Ascentive lawsuits against Google dissolved, the Google lawsuit tally is once again on the rise. Flowbee is the latest trademark owner to line up against Google. This brings the total number of AdWords lawsuits against Google back up to 8.

I can't do a redline comparison to see how much of this complaint is a clone-and-revise, but I definitely recognized a lot of language from American Airlines' complaints against Google and Yahoo. Most conspicuously, this complaint ripped off the stock Gibson Dunn apology (in Para. 6) that Flowbee "does not bring this lawsuit lightly." It appears that this catchphrase has become the equivalent of the American flag lapel pin for politicians--you have to wear it or else you are clearly anti-American. Similarly, it seems like the emerging trend is that if you don't declare your heavy heart for suing the beloved Google, by negative inference you clearly must be engaged in litigation frivolity. I wonder how Gibson Dunn feels that another law firm is invoking its catchphrase.

I can't recall if language in Para. 63 is just copied from the Gibson Dunn complaint, but this complaint says "A statistically significant number of consumers are likely to believe falsely that it was Flowbee who 'sponsored' the links that appear above or alongside the PageRank search engine results." This, of course, remains one of the most crucial unresolved empirical questions underlying all of the AdWords-related lawsuits: exactly what do consumers think is the reason they are seeing specific keyword-triggered ads? For now, I'm more interested in a procedural question: I would love to know the exact steps Flowbee and its lawyers took to satisfy themselves of this factual statement before asserting it.

If it had not sued, Flowbee would have automatically been governed by the Firepond class action lawsuit (representing all Texas trademark owners) if that case ever gets class certification. As a result, Flowbee could have just free-rode on that lawsuit. I wonder just how much Flowbee is losing from competitive keyword ads to justify the costs of bringing its own standalone action.

The current roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and now Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google
* Flowbee v. Google

Posted by Eric at 10:01 AM | Derivative Liability , Search Engines , Trademark | TrackBack

August 12, 2009

2009 Cyberspace Law Syllabus and Some Comments

By Eric Goldman

I have posted my syllabus for this semester's Cyberspace Law course. This blog post describes the changes from my 2008 course reader. For more on my pedagogical approaches to the course, see my Teaching Cyberlaw article.

Trademark

* Deleted the Tiffany v. eBay case. This is a really rich and fascinating case, but it is really long and I ran out of time to cover it last year. Also, it will be mooted in the not-too-distant future by a Second Circuit opinion.

* Replaced the Playboy v. Netscape and FragranceNet keyword advertising cases with Hearts on Fire v. Blue Nile. The Hearts on Fire case isn't a perfect teaching case, but it discusses use in commerce, likelihood of consumer confusion/initial interest confusion, and a bit of the policy issues. I suspect a number of my Cyberlaw colleagues are teaching the Rescuecom case, but I chose not to. First, it is doctrinally narrow. Second, it is a confusing opinion. Third, I tried to teach it as a last-minute substitution in my IP survey course last semester and was not satisfied with the results. Finally, it involves the less common fact pattern of keyword sales rather than keyword purchases. So I decided that this year the Hearts on Fire case could cover all the necessary issues adequately.

An interesting note: this is the first time in 15 years that I am not teaching a Playboy case in Cyberlaw. Frankly, I had expected to teach at least one Playboy case in Cyberlaw forevermore!

* Added Google's trademark policy. I'm a little surprised it never occurred to me before to include this in my reader.

* Updated my all-new keyword advertising slides from my May presentation.

Copyright

* Deleted the Perfect 10 v. ccBill and Perfect 10 v. Visa cases. I have been struggling with how to teach the Ninth Circuit's Perfect 10 troika of cases for the last couple of years. The troika was over 100 pages of reading that nevertheless left students befuddled after all that work. But I felt constrained because the troika is the most definitive statement of Ninth Circuit law, and it is insightful to see the cases evolve. Nevertheless, I decided that the Amazon case was the most doctrinally significant, so I kept that and ditched the other 2.

* Added Io v. Veoh. To make up for taking out the Perfect 10 cases, I've added this case, which I think is a very clear exposition of a DMCA online safe harbor case.

* Added Parker v. Yahoo. I think this will be a good case to tie together some copyright doctrinal threads as well as provide a nice compare/contrast with the Ticketmaster v. RMG case.

Trespass to Chattels

* Replaced the Computer Fraud & Abuse Act statute with the most recently amended version.

* Included a slide that synthesizes the various trespass to chattel doctrines into a summary format.

Contracts

* Added the Harris v. Blockbuster case. It's a short case that efficiently makes several powerful pedagogical points--including perhaps most importantly, the perils of robo-drafting by copying language from other people's agreements.

Blogs and Social Networking Sites

* Replaced my old materials on blog law and social networking sites law with my most recent talk on both from February.

* Added my Third Wave of Internet Exceptionalism article

* Added the Moreno v. Hanford Sentinel case as an end-of-the-semester review case. As I said when I first blogged on the case, I think "this is one of the most interesting cases I've seen in a while," and I'm really excited about teaching it. I think it will be an excellent issue-spotting opportunity for students as well as a powerful reminder of the power of published words (and how those words can unintentionally affect the people we love).

Change to the Grading Options

My other big change this year is that I am giving students the option to write a wiki entry on a cyberlaw topic as part of their grade. This was inspired by my forthcoming paper on Wikipedia (which you'll hear more about soon). In connection with that paper, I was researching alternative labor sources that could power Wikipedia, and students working as part of a class assignment was one option I explore in the paper (with some reservations). As part of "eating my own dog food" (a terrible idiom that seems to be prevalent in the Silicon Valley), I figured I should give it a try myself. As you can see, the wiki-drafting is optional, not mandatory, so I'll be interested to see how many students choose the option. I'll also be interested to see what happens when the students actually try to submit their work to Wikipedia. I have a mental image of a massive buzzsaw, but perhaps I'm being too cynical.

Posted by Eric at 09:36 AM | Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Search Engines , Trademark | TrackBack

August 03, 2009

Google Goes on Offensive in AdWords Trademark Lawsuit--Google v. John Beck Amazing Profits

By Eric Goldman

Google, Inc v. John Beck Amazing Profits, LLC, C09 03459 (N.D. Cal. complaint filed July 27, 2009). [Warning: 1.4MB file] The Justia page.

A couple of interesting developments in John Beck Amazing Profits v. Google, the putative nationwide trademark owner class action lawsuit against Google over AdWords.

First, as of last week, the plaintiff had not served the complaint on Google even though it's been on file for over 2 months. I'm not sure what's the hold-up, but in my limited experience, delays in serving an already-filed complaint are often a leading indicator of a troubled lawsuit.

Second, last week Google sued the individual named plaintiff in that case, John Beck Amazing Profits, for both a declaratory judgment that AdWords doesn't infringe plus a breach of contract claim that the lawsuit filing breached the AdWords contract provision requiring any AdWords-related lawsuit to be brought in California. Going on the offensive against a plaintiff is characteristic of Google's litigation strategy; Google often tries to turn the tables on its litigation opponents. In this case, a major goal for Google surely is to get the case out of the Eastern District of Texas, which has been a dangerous venue for patent defendants.

Although the declaratory judgment and counterclaim is consistent with Google’s standard practices, in this case Google is ripping a page out of Yahoo's playbook in its litigation with American Airlines. American Airlines sued Yahoo over selling trademarked keywords in a Texas federal court; Yahoo shot back with a in a California federal court to try to get the case in a more favorable venue. The “dueling lawsuits” have led to an ongoing jurisdictional tussle that has slowed down progress on the substantive merits of American Airlines' claim.

As I wrote in connection with Yahoo's efforts, it was not clear to me that a defendant can wrest jurisdictional control of a case through the declaratory judgment process. In Google's situation, it's even more complicated because John Beck Amazing Profits is just the named plaintiff in a class action lawsuit. The plaintiffs could easily replace John Beck Amazing Profits with another named plaintiff who isn't an AdWords advertiser and isn't subject to California jurisdiction. At that point, I'm not sure what happens to the class action. (And, even if Google succeeds in moving the nationwide case, it should have no bearing on the Firepond putative class action lawsuit, which only covers a class of Texas trademark owners). Moreover, even if Google wins the declaratory judgment, it would have no binding effect on other class members.

So other than a not-certain-to-work ploy to pull the nationwide class action out of a bad venue, the only other benefit I see from the litigation is to send a warning shot to any named plaintiff who might succeed John Beck Amazing Profits that Google will be coming after them too. Let's see how that message is received.

The current roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and now Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 03:51 PM | Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack

July 31, 2009

Google Not Liable for False Ads--Goddard v. Google

By Eric Goldman

Goddard v. Google, Inc., 5:08-cv-02738-JF (N.D. Cal. July 30, 2009)

I previously blogged on this case in December 2008. The case involves AdWords advertisements for allegedly fraudulent mobile subscription services. In an underappreciated opinion, Judge Fogel wrote the smartest 47 USC 230 opinion of 2008 dismissing the case with leave to amend. In that ruling, he said that plaintiffs could state a valid claim if "Plaintiff could establish Google's involvement in 'creating or developing' the AdWords, either 'in whole or in part.'"

It was pretty clear then that further efforts would be a waste of time. I wrote "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." But hope springs eternal among many plaintiff's lawyers, so naturally they tried anyway. Not surprisingly, their second attempt was futile, and Judge Fogel shuts the door by dismissing without leave to amend this time. Among other things, he is sensitive to the costs of fruitless litigation undercutting 230’s policy objectives. He writes "this Court’s conclusion that Plaintiff almost certainly will be unable to state a claim compels the additional conclusion that Google must be extricated from this lawsuit now lest the CDA’s ‘robust’ protections be eroded by further litigation." I hope other judges will embrace early ends to 230 cases for the same reason.

The Roommates.com Attack

To plead around 230, the plaintiffs allege that Google's keyword suggestion tool encourages advertisers to buy "free ringtone" as a keyword when advertisers are buying "ringtone." The plaintiffs then argue that Google should know that "free ringtone" is frequently used by shady players, and therefore suggesting the term to other advertisers kicks Google out of 230. This weak argument makes numerous unsupported inferences, and Judge Fogel easily rejects it. He says:

a plaintiff may not establish developer liability merely by alleging that the operator of a website should have known that the availability of certain tools might facilitate the posting of improper content. Substantially greater involvement is required, such as the situation in which the website “elicits the allegedly illegal content and makes aggressive use of it in conducting its business.” [cite to Roommates.com]

I'm not exactly sure what it means to make aggressive use of content, but I'm glad to see the Google's keyword suggestion tool isn't that.

The Barnes Attack

The plaintiffs also attack 230 using the promissory estoppel discussion from Barnes v. Yahoo. The basic argument is a familiar one in 230 jurisprudence. The plaintiffs allege that Google's AdWords contract had negative covenants restricting the advertisers' behavior, and this language in the Google-advertiser contract acted as a promise to consumers that the restricted advertiser behavior would not occur on Google's network. I have repeatedly criticized the illogic of these arguments, and fortunately it doesn't fly here. Judge Fogel guts it when he points out that "there is no allegation that Google ever promised Plaintiff or anyone else, in any form or manner, that it would enforce its Content Policy."

I'm sure we'll see many plaintiffs make this same bogus argument in future cases, and I hope other judges reach the same conclusion. At the same time, I think websites should prune their ever-expanding lists of negative behavioral covenants in their contracts to curb plaintiffs’ misdirected arguments and to avoid unintentionally criminalizing users (see the Lori Drew conviction).

Dismissal on 12(b)(6) Motion

A major gripe about the initial Ninth Circuit Barnes opinion was its loosely worded and poorly researched conclusion that 47 USC 230 was an affirmative defense that could not support a 12(b)(6) motion to dismiss. The plaintiffs argue that Judge Fogel shouldn’t dismiss the case now for that reason, even though the Ninth Circuit withdrew that portion of the opinion. Judge Fogel cites to several cases allowing a 47 USC 230 defense on a 12(b)(6) motion to dismiss before doing the same himself.

Posted by Eric at 10:59 AM | Derivative Liability , Marketing , Search Engines | TrackBack

July 30, 2009

Google Down to 7 AdWords Lawsuits--Ascentive v. Google Voluntarily Dismissed

By Eric Goldman

Ascentive v. Google, Inc., 2:09-cv-02871 (E.D. Pa. voluntary dismissal July 30, 2009)

The litigation count on Google's keyword ad lawsuits has started trending downward. For the second time in a week, a plaintiff has voluntarily dismissed its trademark lawsuit over Google AdWords. Last week Jurin dismissed his lawsuit voluntarily because he had a falling out with his attorney. Today Ascentive voluntarily dismissed its lawsuit, although I don't know why. (As usual, the filing is silent). You may recall that Ascentive's lawsuits raised some interesting issues about organic search in addition to the AdWords issues; apparently those will have to wait.

Ascentive's dismissal leaves 7 pending cases against Google over AdWords:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 02:07 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 29, 2009

Microsoft-Yahoo Alliance Comments

By Eric Goldman

Some comments on the proposed search alliance between Microsoft and Yahoo:

* I remember a time, long ago back in the mid-1990s, when Yahoo was the unquestioned leader in search.

* The beginning of the end is when Yahoo outsourced search to Google almost a decade ago (check out the old 2000 press release). We all know how that turned out. Yahoo lost control over one of its core assets, and Google proved to Yahoo's customers that Google could do a much better job.

* Yahoo is now in its weakened position in the search industry due to this choice from a decade ago. Google has been and will continue to be a formidable competitor, but Yahoo's current search problems are partially its own making.

* Outsourcing its search operations to Microsoft can't possibly work out better for Yahoo than the initial Google outsourcing. I can't conceive of a circumstance where Yahoo will exit the Microsoft deal stronger than it enters it. Obviously Yahoo sees value in being a mass-market media company, but without any proprietary differentiation in search, I wonder how successful that will be. To me, it looks like Yahoo has conceded one of its core assets to others.

* As a result, I assume that Yahoo necessarily is going to exit the search business one way or another. It will exit by outsourcing its search operations to someone else, or it will continue its ongoing slide to irrelevancy. Either way, it is not a viable long-term competitor against Google.

* Yahoo was unbelievably crazy for passing on Microsoft's acquisition proposal from a year-and-a-half ago. It looked like a foolish mistake at the time, and hindsight has definitely not improved that assessment! Danny Sullivan points out how badly Yahoo's assets have depreciated in value, saying "Microsoft is getting a huge bargain courtesy of the US Department Of Justice."

* Assuming that Yahoo is going to exit the search business one way or another, the DOJ has the following options:

- it could let Yahoo hand off the search reins to Google. The DOJ has already voted no on that option
- it could let Yahoo hand off the search reins to Microsoft. This makes Microsoft a much more potent competitor to Google
- it could veto the Microsoft-Yahoo deal and let the Google juggernaut continue to flatten a limp competitor

From a pro-competition standpoint, it seems fairly clear that option #2 is better than the first and the third options. So if the DOJ thinks it can help the search marketplace, then it should approve the deal as fast as possible.

* Despite this, I bet Googlers are wearing a big smile today. Grabbing the business from Yahoo would have been a more definitive win for Google, but this deal should be good news for Google for two reasons. First, it should provide ample fodder for Google to argue to the DOJ to call off the dogs and stop hassling it; after all, the combined Yahoo-Microsoft efforts will have significant marketplace presence of its own, and Microsoft is a well-funded and aggressive competitor. Second, Google should be licking its chops at the prospect of tangling with the alliance in search. I expect Google can steamroller even the combined operations, so getting some breathing room on the antitrust side while still continuing to roll up the competition would be very helpful for Google.

* I could see the DOJ slightly hesitating about the deal solely because the Google alternative will be...Microsoft. I'm sure the DOJ would much prefer a marketplace competitor to Google who didn't have so much antitrust baggage of its own!

* Although I think Google oversimplifies things by arguing that its competition is always a click away, I do think that the competition to Google isn't just Microsoft even if the alliance is completed. It's hard to know exactly who will provide a bona fide competitive offering to Google, but it could come from anywhere. For example, Twitter's real time search has lots of advantages over Google's real-time search (and will improve if Twitter can ever figure out its search algorithms). The search market is simply too big to ignore, and consumers will find and embrace solutions that offer real value.

UPDATE: Lots of folks are writing on this topic today. I liked Jason Calacanis' title: "Yahoo committed seppuku today."

Posted by Eric at 11:02 AM | Search Engines | TrackBack

July 23, 2009

Google Down to 8 AdWords Lawsuits--Jurin v. Google Voluntarily Dismissed

By Eric Goldman

Jurin v. Google, Inc., 2:09-cv-03934-GHK-E (C.D. Cal. voluntarily dismissed July 23, 2009)

Google's AdWords litigation docket has reversed direction, at least temporarily, as Jurin has voluntarily dismissed his lawsuit against Google. This dismissal came shortly after Jurin had a falling-out with his attorneys, which prompted his attorneys to ask to withdraw from the case. The voluntary dismissal means that Jurin is free to pursue his case elsewhere if he chooses, but I am fairly confident that this case won't be coming back.

Jurin's dismissal leaves 8 pending AdWords lawsuits against Google:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 07:47 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 13, 2009

Facebook Sued for Click Fraud--RootZoo v. Facebook

By Eric Goldman

RootZoo, Inc. v. Facebook, Inc., 5:09-cv-03043-HRL (N.D Cal. complaint filed July 7, 2009)

Facebook appears to have run into some trouble with click fraud recently. Last month, TechCrunch had a series of articles about Facebook click fraud. TechCrunch postulates the following story: competitors are clicking on each others' ads to reduce their ROI and drive each other off Facebook. To ensure that the click fraudders can see Facebook's microtargeted ads, the fraudsters are creating thousands of fake accounts with heterogeneous profile information. The fraudster's software eventually finds a target ad and clicks on it like crazy, so fast that the advertiser's page never loads. This is distorting the advertisers' server logs, causing a big discrepancy in reporting and making it impossible for advertisers to track down the click fraud. TechCrunch reports that it spoke with Facebook and Facebook claims the situation has been addressed. Of course, could Facebook say otherwise?

I'm not clear if it's related to the TechCrunch coverage or not, but last week a putative class action against Facebook was filed, alleging click fraud. The plaintiffs allege that they were charged for clicks that never occurred at alarming rates--in RootZoo's case, they claim they were charged for 804 clicks on a single day when their servers recorded about 300 clicks. Now, I'm never sure how much credit to assign to plaintiffs' allegations like this. First, advertisers always want more performance for less cash. Second, advertisers' tracking systems are not always reliable, so RootZoo's undercounting could be due to their system, not Facebook's. However, combined with the TechCrunch reports, it raises some concerns that something could have been amiss at Facebook (and maybe still is?).

That's not to say the plaintiffs will get a check out of Facebook. The plaintiffs face many hurdles, including potential difficulties establishing a class, the many challenges getting competent evidence, and Facebook's contract and all of the various protective provisions contained therein. So the plaintiffs have plenty of work ahead of them. Then again, so may Facebook.

Posted by Eric at 09:43 AM | Licensing/Contracts , Marketing , Search Engines | TrackBack

July 10, 2009

Ninth Lawsuit Against Google Over AdWords--Rosetta Stone v. Google

By Eric Goldman

Rosetta Stone Ltd. v. Google, Inc., 1:09-cv-00736-GBL-JFA (E.D. Va. complaint filed July 10, 2009)

[Note: some of you may wonder how my litigation count reached #9 when my last blog post in this series was at #7. I subsequently realized that I had forgotten to include Ezzo v. Google, a doomed-to-failed pro se lawsuit filed pre-Rescuecom. Indeed, I remain unclear precisely how many lawsuits are pending; the number could be greater than 9].

Kudos to Rosetta Stone for its fine PR work. It was able to get a number of major media outlets to cover its lawsuit against Google alleging trademark infringement and related claims for Google's AdWords practices, even though by my count this is merely the 9th pending lawsuit and these lawsuits are becoming a near-daily routine.

Obviously, I'm suffering a little ennui on this topic. Another trademark owner doesn't like Google's AdWords practices and decided to sue in court. And in other breaking news, the sun rose in the east and set in the west today.

How routine has this become? Rosetta Stone's law firm is Gibson Dunn, which includes Terence Ross on the team. Terence lost some of the early WhenU keyword ad cases including the once-seminal 1-800 Contacts v. WhenU ruling. He also sued and procured a settlement from Google on behalf of American Airlines. Gibson Dunn's team also has a pending lawsuit against Yahoo on behalf of American Airlines. I haven't put all of Gibson Dunn's complaints side-by-side, but I have observed over the years that they have mastered the skill of cloning-and-revising--right down to recycling a stock phrase that might become Terence Ross' signature line (and perhaps his trademark some day?) that the plaintiff "does not bring this lawsuit lightly." (Para. 6 of the complaint; compare Para. 6 of the AA v. Google and AA v. Yahoo complaints). I'm glad Gibson Dunn's clients don't sue lightly. I wish all lawyers could say the same of their clients. Then again, at the lofty fees I suspect their clients are paying for the firm's services, this statement is probably the one assertion in the complaint that no one--not even Google or the judge--could possibly dispute.

As a partially cloned-and-revised complaint, it shouldn't surprise you that this complaint doesn't break much new ground. See my deconstruction of the American Airlines v. Google complaint--because many of the provisions were recycled, my commentary of that complaint applies almost in toto. However, a couple of small points that did jump out at me from this complaint:

* Rosetta Stone has some really, really weak trademarks. "Global Traveler"??? "Language Library"??? "The fastest way to learn a language. Guaranteed"??? Are you serious?

* Among the keyword advertisers that Rosetta Stone complains about are retailers who sell both Rosetta Stone and other language products. Whoa. I'll be interested to see how Rosetta Stone gets around the First Sale doctrine for those advertisers.

Two concluding thoughts

* Is it time for these 9+ lawsuits to be consolidated in a multi-district litigation yet? From my perspective, that seems inevitable, but I'm not much of an expert on the procedural aspects of MDLs.

* Any predictions on whether another trademark lawsuit over AdWords will be filed in the month of July?

The other eight lawsuits I'm tracking:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google

Posted by Eric at 01:10 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 09, 2009

"Keyword Advertising Law" Talk (New and Improved!)

By Eric Goldman

I recently spoke on the state of keyword advertising law, which prompted me to rewrite my PowerPoint slides from scratch in light of the many recent developments. So, now available for your enjoyment:

* my talk slides
* an 80 minute free audio recording of my June presentation of this slide deck (plus Q&A) to the IAB Legal Affairs Committee. You can listen in QuickTime or download from iTunesU (for free; go to item 26)
* the CLE written material, a compilation of recent blog posts on the many lawsuits against Google and Google's two trademark policy changes. I would now add the Ezzo, Ascentive and Jurin cases to the written materials.

If this isn't enough for you, I am participating in two expensive (overpriced?) webinars on keyword advertising law in July:

* On July 10 (tomorrow!), "Keyword Advertising Do's and Don'ts," a 1 hour PLI webinar co-presented with Marty Schwimmer of the Trademark Blog.

* On July 22, "Trademark-Based Keyword Advertising: Potential Liability and Avenues for Relief," a 90 minute Pike & Fischer webinar co-presented with Rose Hagan of Google, Elisabeth Escobar of Marriott and John Slafsky of Wilson Sonsini.

Posted by Eric at 10:37 AM | Derivative Liability , Search Engines , Trademark | TrackBack

July 07, 2009

June 2009 Quick Links, Part 2

By Eric Goldman

State Regulation of the Internet

* iAWFUL, the Internet Advocates Watchlist for Ugly Laws

* Texas HB 2003. Part of the anti-cyber-harassment mania. Very broad statute with lots of room for prosecutorial mischief.

* BNA (BNA subscription required): "State Legislatures Consider Criminal, Civil Restrictions on Ticket Purchasing Software": "At least six state legislative bodies are considering bills this session that would place restrictions on the use of “ticket bots.""

* Because states are embracing the Amazon affiliate tax, the online affiliate industry is shrinking as we speak (1, 2, 3). But in one of his rare good moves, Schwarzenegger has vetoed CA's attempt to impose the Amazon tax.

* Clive Thompson in Wired: "By severing the link between location and geography, the internet turned everything upside down. Now mobile phones are inverting everything again, in the other direction — because your location becomes most important thing about you. So how is the return of geography going to change our lives?" My previous commentary on geolocation and the law.

Blogs/Social Networking Sites

* Yath v. Fairview Clinic, 2009 WL 1751767 (Minn. App. Ct. June 23, 2009). Posting illegitimately obtained health information to a MySpace page qualified as “publicity” for purposes of an invasion of privacy claim. The court says: “Yath's private information was posted on a public MySpace.com webpage for anyone to view. This Internet communication is materially similar in nature to a newspaper publication or a radio broadcast because upon release it is available to the public at large.” As a result, the publication qualified as “publicity” even if the material was posted for less than 48 hours and the plaintiff could only prove that a small number of folks actually saw it. Compare the Moreno v. Hanford Sentinel case, where republication of information the plaintiff voluntarily published on her MySpace page could not support an invasion of privacy claim.

Nevertheless, the defendants were excused because they had not created the MySpace page, even though they had supplied the information republished on the MySpace page.

* Richerson v. Beckon. Ninth Circuit upheld reassignment of teacher-mentor based on negative blog comments. My blog post on the district court opinion.

* Kaufman v. Islamic Soc. of Arlington, -2009 WL 1815641 (Tex. App. Ct. June 25, 2009). An online-only journalist qualified as a "member of the electronic or print media" for purposes of an interlocutory appeal statute.

* After von Brunn committed his hate crime outside the US Holocaust Museum, a bunch of his digital trails went dark as websites newly realized his vitriol was posted there.

* If you're looking for a paper topic, here's one: the use of MySpace, Facebook and other social networking sites in family law disputes, especially over child custody. I'm seeing cases every week where social networking site postings are being introduced to corroborate or contradict testimony about a parent's fitness.

Security

* FTC v. Pricewert. The FTC takes down an allegedly rogue Internet access provider. To the extent that the IAP is engaged in criminal activities, no problem; but it's less clear to me if the FTC can get a civil injunction under its Sec. 5 authority to stop the IAP from serving its putatively illegal customers. Such an action could be preempted by 47 USC 230. The FTC, in its brief, says the IAP fits into a Roommates.com exception, an argument presumably bolstered by their 10th Circuit win in FTC v. Accusearch.

* Johnson v. Microsoft Corp., 2009 WL 1794400 (W.D. Wash. June 23, 2009). This is a putative class action over Microsoft’s use of Windows Genuine Advantage (WGA) to validate copies of Windows XP. In this ruling, Microsoft gets SJ on the claim alleging that the contract prevented Microsoft from doing WGA validation. Especially interesting is the court’s conclusion that IP addresses are not personally identifiable information.

* Microsoft v. Lam. Microsoft brings a lawsuit against alleged click fraudders who caused Microsoft to issue $1.5M in credits to advertisers. The NYT article.

* EFF on the most recent amendments to the Computer Fraud & Abuse Act.

Miscellaneous

* Expedia tagged for $184M in damages for improperly marking up its service fees.

* In re Jamster Mktg. Litig., 2009 U.S. Dist. LEXIS 43592 (S.D. Cal. May 22, 2009). Wireless carriers aren’t liable under RICO and false advertising laws for various deceptive practices by wireless content providers.

* New unmeritorious patent lawsuit trend: lawsuits over patent markings for expired patents.

* NYT: Investing in Lawsuits, for a Share of the Awards

* Oddee: 15 geekiest license plates:

Posted by Eric at 09:18 PM | Content Regulation , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines | TrackBack

July 06, 2009

June 2009 Quick Links, Part 1

By Eric Goldman

Just a reminder that I post some items to Twitter that don’t make it into these monthly recaps. If you want even more, you can track a superset of my online activities at Friendfeed.

Search Engines

* All Things Digital had an interesting 3 part series on the role of humans in configuring Google's algorithms: Scott Huffman; Matt Cutts; Amit Singhal. My initial 2005 blog post on the topic.

* More evidence of the deleterious consequences of latency on users' enjoyment of search results pages.

* Google is stumping in favor of its book search settlement deal and putting on the "charm offensive."

* Wired on niche search engines competing around the edges of Google.

* Google has dropped its feature that allowed quoted sources to reply in Google News.

* First, kosher phones. Now, kosher search engines.

Trademark

* Wendy Davis on a trademark lawsuit against Craigslist for allegedly infringing ad copy supplied by one of its users.

* Rookie mistake: Tony LaRussa publicly announced a settlement deal in his trademark lawsuit against Twitter before the papers were signed. Guess what....NO DEAL! UPDATE: A deal was struck subsequently.

* Speaking of which...the WSJ on Twittersquatting.

* WSJ: Europe's High Court Tries On a Bunny Suit Made of Chocolate. The EU struggles with trademarkability of chocolate bunnies.

* Productive People, LLC v. Ives Design (D. Ariz. May 29, 2009). TRO against a domainer.

* Oddee: 10 of the Worst Restaurant Names ever.

Copyright

* Supreme Court declined certiorari in the Cartoon Network v. CSC case.

* Arista Records LLC v. Usenet.com, Inc., 2009 WL 1873589 (S.D.N.Y. June 30, 2009). Usenet service provider committed (1) direct copyright infringement (because it “actively engaged in the process so as to satisfy the “volitional-conduct” requirement for direct infringement”) as well as contributory infringement, vicarious infringement and inducement of infringement. This case was colored by defendants’ evidence spoliation and the lack of a viable 512 defense; in situations like this, courts smack down defendants hard. The court’s analysis would be troubling for many online service providers if this case isn’t an outlier. Mike Masnick has more on the import (or lack thereof) of this case.

* Brave New Films 501(C)(4) v. Weiner, 2009 WL 1622385 (N.D. Cal. Jun 10, 2009). BNF was denied summary judgment on its declaratory judgment request because (a) Savage never threatened BNF directly, and (b) ORTN, which did threaten BNF directly, isn't the copyright owner. My previous coverage of this case.

User Agreements

* In the Matter of Sears Holdings Management Corporation. The FTC busted Sears for installing tracking software/spyware, even though Sears (1) asked all users to expressly opt-in, (2) paid users $10 to install the software, and (3) made full disclosure of the thorough tracking function of the spyware in the user agreement, albeit late in the installation process and in a buried fashion.

* Universal Grading Service v. eBay Inc., No. 08-CV-3557 (E.D.N.Y. June 10, 2009). eBay venue selection clause upheld.

* McMillan v. Wells Fargo, 2009 WL 1686431 (N.D. Cal. June 12, 2009). Wells Fargo asks some customers to agree to four different documents with differing governing law/venue selection clauses, leading to massive judicial confusion about how to determine governing law and venue.

* I’m using EFF's new "TOSBack" tool to track changes to major online services' user agreements. For my commentary on an article by Becher/Zarsky predicting the development of tools like this, see my writeup.

Posted by Eric at 04:54 PM | Adware/Spyware , Copyright , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Search Engines , Trademark | 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 29, 2009

Sixth Lawsuit Filed Over Google AdWords, Plus an Assault on Google's Organic Search Results--Ascentive v. Google

By Eric Goldman

Ascentive, LLC v. Google, Inc., 2:09-cv-02871-JS (E.D. Pa. complaint filed June 25, 2009)

Guess who got sued again? Google now has 6 pending lawsuits challenging its AdWords service. The previous five are:

* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)
* Soaring Helmet v. Bill Me

The latest lawsuit has a different spin than the others. Ascentive makes software that it claims will improve the speed of its users' computers and combat spyware. Earlier this year, Ascentive had a run-in with StopBadware, which initially labeled Ascentive as a scamware-like offering that hyped the threats on users' computers to induce them to pay to upgrade their Ascentive software. (See the initial StopBadware alerts 1, 2). StopBadware has since reached a compromise with Ascentive and repealed its warning, a move that appears to have been fairly unpopular in some segments of the security community. (This post gives a sense of the sentiments towards Ascentive and StopBadware).

Around the same time, the Ascentive-Google relationship deteriorated, which Ascentive speculated was due to StopBadware's classification (Google's correspondence just cryptically cited "multiple policy disapprovals"). After Ascentive had spent over $645k as an AdWords customer in 2008, Google kicked Ascentive out of the AdWords program. A week later, Google completely dropped Ascentive's website from its search index. As a result, Ascentive was frozen out of both Google's organic search results and sponsored links, and not surprisingly, Ascentive suffered a "severe drop in online sales" from this double-whammy. Ascentive's entreaties to Google were rebuffed.

Ascentive makes two broad legal attacks on Google. First, as has become typical, Ascentive alleges that Google commits trademark infringement and related torts by selling competitive ads keyed to its trademark and by suggesting that advertisers buy Ascentive's trademarks in Google's keyword suggestion tool. Among other specific issues, Ascentive complains that Google didn't respond to its trademark appearing as a third-level domain in a competitor's ad copy or the inclusion of "Finally Fast" in ad copy (Ascentive's applicable trademark is "FinallyFast.com"). Overall, these complaints don't break much new ground compared to prior allegations against Google's AdWords program.

Second, Ascentive alleges a variety of legal violations because Google kicked Ascentive out of its organic search results index. This is a bit like KinderStart redux. The allegation that really caught my attention starts in Para. 83, which reads "Google's refusal to list Ascentive's website in its natural search result listings violates the Lanham Act" as a false designation of origin. Whoa! The complaint doesn't explain this allegation thoroughly, but the theory seems to be that consumers expect to see the trademark owner in organic search results for the trademark and therefore consumers will be actionably confused if the trademark owner doesn't appear there.

Framed that way, of course we know such a claim is DOA. Indeed, as exciting as it would be to see some meaty discussion on the topic of Google's liability (or lack thereof) for deciding who gets into its search index, I'm guessing Google will beat this prong of the complaint quickly and completely. One way Google could get there is through 47 USC 230(c)(2) (which I just blogged about last week), which completely protects Google's ranking decisions as a subspecies of filtering choices generally. However, to get there, a court will have to conclude that a false designation of origin claim isn't an "IP claim" which is excluded from 230's coverage. If it doesn't want to reach that doctrinal issue, the court has a wide smörgåsbord of other doctrinal choices to squash this claim.

Posted by Eric at 07:32 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 11, 2009

Google Sued Again for Trademark Infringement--Soaring Helmet v. Leatherup.com

By Eric Goldman

Soaring Helmet Corp. v. Bill Me Inc., 2:2009cv00789 (W.D. Wash. complaint filed June 9, 2009). The Justia page.

It's clearly open season on trademark infringement lawsuits against Google. The latest is a lawsuit by Soaring Helmet, manufacturers of "Vega" helmets. This case is similar to the recent Hearts on Fire v. Blue Nile case in that the manufacturer (Hearts on Fire/Soaring Helmet) complained that a retailer (Blue Nile/Leatherup.com) purchased the manufacturer's trademark and said/implied in its ad copy that it sold the manufacturer's goods even though it allegedly didn't carry the manufacturer's goods at all.

The main difference between this lawsuit and the Hearts on Fire lawsuit is that the manufacturer also dragged Google into the lawsuit--even though Google treated Soaring Helmet's initial cease-and-desist letter as a trademark opt-out and blocked subsequent references to Vega in Leatherup.com's ad copy. Thus, unless Soaring Helmet seeks to reach back to the ads displayed before its C&D, it appears Soaring Helmet is trying to hold both Google and Leatherup.com liability simply for showing ads triggered by Soaring Helmet's "Vega" trademark.

For those of you keeping score, this is the fourth time in a month that trademark owners have sued Google over its AdWords programs. The other three are:

* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)

A fifth pending AdWords trademark lawsuit is the Rescuecom case. I'm not aware of any others pending beyond these 5, but surely this action is making Google's outside counsel smile.

I note that the John Beck lawsuit is a putative class action covering all US trademark owners. I wonder if Google could consolidate this case with that...?

Posted by Eric at 07:16 AM | Derivative Liability , Search Engines , 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-