June 03, 2008
May 2008 Quick Links, Part 2
By Eric Goldman
Copyright
* Google says it isn't settling the Viacom lawsuit (I don't believe it).
* Interesting juxtaposition: (1) Chronicle of Higher Education: How It Does It: The RIAA Explains How It Catches Alleged Music Pirates and (2) BusinessWeek ran a lengthy retrospective on Tanya Andersen's battle against the RIAA, including her beefs against the RIAA’s investigation and enforcement tactics.
* A music warez trader was convicted by a jury of criminal copyright infringement.
Online Contracts
* Juanda Lowder Daniel. Virtually mature: examining the policy of minors' incapacity to contract through the cyberscope. 43 Gonz. L. Rev. 239-269 (2007/08). This article addresses the very important issue of contracting capacity of minors. See my most recent post on that topic.
* Adelman v. Sparks Network (Cal. App. Ct. May 20, 2008). The Jdate online dating service allegedly failed to include required language (such as notice of a mandatory cooling-off period) in its user agreement. The court dismisses the plaintiff's lawsuit nonetheless because he was a happy customer who didn't suffer any damage.
* Tom O'Toole surveys some recent online contract cases. He offers the following conclusions: (1) Contract Terms Should Be Available for Review, (2) Clickable Buttons/Links Should Clearly Signal Assent, and (3) Humans Are Not Helpful.
* I realize this point would be better explored in a full blog post, and I suspect this point has been made in the academic literature (if so, I'd appreciate some cites so I can pass them along). The issue: how might the endowment effect explain consumer antipathy towards EULAs? Wikipedia says the endowment effect means that "people value a good or service more once their property right to it has been established." This observation occurred to me when I attended a ridiculously stacked panel at the ION Game Conference on "user rights" in virtual worlds. Many of the gripes/grumbles related to very common EULA provisions that simply overrode default law. It occurred to me that maybe part of the problem was that consumers assume the defaults are appropriate rights allocations granting them the "property" right, in which case they suffer a greater psychological loss when those defaults are varied than if different defaults were set. One obvious policy consequence: as part of the considerations when setting defaults, policy makers should include the psychological costs of varying the defaults. If the interaction between EULAs and the endowment effect hasn't been written about, it would make an excellent paper topic.
Other Topics
* A military court has said that distributing a hyperlink to child porn does not constitute criminal distribution of child porn. Tom O'Toole explains the situation.
* A.B. v. State, 2008 WL 2031388 (Ind. May 13, 2008). It seems like the digital age recipe for guaranteed trouble: 8th grader + hatred towards a school principal + MySpace. How many judicial cases are we going to see with this combination? This one involves some mean-spirited and profanity-laced comments about her principal made by a 14 year old girl on a private MySpace page accessible only by 26 students. The principal saw it only because one of the students gave a printout to the principal. The court concludes that posting to a private MySpace page doesn't satisfy the criminal standards of "intent to harass, annoy, or alarm" via the Internet.
* Doe v. Friendfinder Network, Inc., 2008 WL 2001745 (D.N.H. May 8, 2008). The court denied the plaintiff's motion for reconsideration on Friendfinder's 230 eligibility for the statement "Sorry, this member has removed his/her profile."
* Another "where are they now?" retrospective on dot com boom companies, ironically running in the Industry Standard (which wiped out in the dot com bust itself).
Posted by Eric at 11:56 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Licensing/Contracts , Privacy/Security , Virtual Worlds | TrackBack
May 19, 2008
Content Generation and the Law
By Eric Goldman
Last week I participated on a panel at the ION Game Conference in Seattle to discuss UGC in virtual worlds and online games. You can see a reasonably faithful transcript of the discussion here. Here's a recap of the main points I made:
The Interface Between Content Generation and the Law: Game providers should think about how to generate both more UGC and the right kind of UGC. There are three main sources of law governing the UGC content generation choices:
* the site's EULA. Most EULAs give providers maximum flexibility to manage UGC as they see fit, but if I were researching the issue, I'd start with the EULA to see how the provider may have restricted itself.
* 47 USC 230. Many people operate under the outdated myth that a site must choose to be either a publisher or a passive conduit. Fortunately, the law facilitates heterogeneous approaches to UGC. Per 230, a VW isn't liable for third party content with limited exceptions. Ownership doesn't matter; editing doesn't matter, prescreening/policing doesn't matter. Most VW providers remain unaware of 230's power and import. Due to 230, providers have the choice of various UGC generation strategies, all of which have the same legal treatment.
* 17 USC 512. 512 doesn't go as far as 230 at enabling different content generation approaches, but it still provides some insulation from liability for user-caused copyright infringement.
In addition to these sources, many sites develop their own adjudicatory systems, including ways for users to report problems with other users, expedited takedown procedures (such as VeRO), and customer support representatives (CSRs) as private adjudicators.
How to Increase UGC: Obviously, users can be motivated through incentives/disincentives (carrots and sticks). For example, at Epinions, we used both cash and credit. There is also value in supporting and empowering a site's meta-community (the offsite interaction of power users).
Working with Power Users. I'm often amazed at just how much work users will do for a site for free if you just ask them/empower them. However, in asking users to do more work, sites should be cognizant of the amorphous boundary between independent contractors and employees. Recall the class action lawsuits against AOL and About.com over their volunteer labor force.
Site Responses to UGC Problems: I talked about the problem of "rule proliferation": in response to a new test case involving user behavior, a site often promulgates a new restrictive rule. This may happen infrequently, but even if it happens only 1X/week, that adds up to 50+ new rules/year. The collective effect is a burgeoning body of code and common law that eventually becomes unwieldy and unmanageable. To avoid this code creep, sites should promulgate new common law reluctantly.
What Works with UGC/What Doesn't: Sites should try to address two partially contradictory forces. Most users want to do the right thing, so sites should make it easy for them to do so. At the same time, sites need to build systems that are robust enough to squash the inevitable vandals and bad actors.
If you want a little more on the topic of this panel, I also did an interview for ION's pre-conference newsletter.
Posted by Eric at 12:01 PM | Content Regulation , Copyright , Derivative Liability , Virtual Worlds | TrackBack
April 22, 2008
March 2008 Quick Links, Part II
By Eric Goldman
Copyright
* A lot of action on whether “making available” a file in a P2P share directory is copyright infringement, including Elektra v. Barker and London-Sire v. Doe. Patry summarizes the action.
* Ticketmaster L.L.C. v. RMG Technologies, Inc., 2008 WL 649788 (C.D. Cal. March 10, 2008). Copyright misuse is not an independent cause of action; it's only a defense. HT Evan Brown.
* A student asked me a good Q that I couldn't answer. Given that copyright work transfers are subject to the risk of a non-waivable termination of transfer 35-40 years after the transfer, how do companies account for that risk on their financial statements?
* A man whose Youtube video was taken down by lawyers for Van Morrison strikes back with a new video: "The Lawyers Pulled My Video Down."
Trademark
* The Utah governor signed SB 151, the repeal of the Utah Trademark Protection Act.
* Wilson v. Yahoo! UK Ltd., No. 1HC 710/07, Feb. 20, 2008. A UK court says that buying the broad-matched keyword "spicy" does not constitute an actionable use in commerce of the trademark "Mr. Spicy." In response, Google liberalized its keyword policy in the UK and Ireland to match its US and Canada policy.
* Vulcan Golf, LLC v. Google Inc., 2008 WL 818346 (N.D. Ill. March 20, 2008). This is another interesting development that I just didn't have time to blog (see my earlier post when the lawsuit was filed). In a lengthy opinion, the district court rejected most of the significant motions to dismiss, saying that she wanted to let the case develop. Ironically, she also complained about the workload in the case--perhaps this is obvious, but granting some motions to dismiss would help clear your docket queue! Unfortunately, most of the opinion isn't insightful because so many issues were reserved for further development. Perhaps the most interesting discussion relates to the "use in commerce" question, and the court rejected a motion to dismiss on that basis: "The plaintiffs have alleged that Sedo and the other Parking Defendants transacted in and improperly profited from domain names that are deceptively similar to the plaintiffs' trademarks. Such statements sufficiently allege the "use" of a domain name to allow the infringement claims against Sedo and Oversee to move forward on this issue." Some other commentary on the case: Sarah Bird and David Fish.
* American Airlines loves Google (except for the part where it's suing Google). HT Search Engine Land.
State Regulation of the Internet
* Some state legislators are becoming privacy entrepreneurs about behavioral targeting. Venkat does a recap. But Zachary Rodgers points out that some of the operative provisions track NAI's self-regulatory guidelines. More angst about deep packet inspection by IAPs.
* Ewert v. eBay, Inc., 5:07-cv-02198-RMW (N.D. Cal. March 31, 2008). eBay isn't an "auctioneer" or an "auction company" as defined by California's Auction Act.
* The Tennessee legislature is considering a goofy response to the Hannah Montana ticket furor.
* Ken Magill at Direct wrote an article entitled "Psychotic Law Clowns in Utah at it Again." A highlight: "Whenever I think of Utah's state legislature, I envision a room full of Jack-in-the-Boxes straight out of a never-made Twilight Zone episode. Every fall, when it's time for the next legislative session, their cranks begin to turn, a chorus of "Pop Goes the Weasel" begins, and on the note for "pop" the lids fly open and dozens of psychotic clown heads spring out of the boxes chanting: "New Internet Law! New Internet Law!""
Other Stuff
* The Economist: The Battle for Wikipedia's Soul. "To create a new article on Wikipedia and be sure that it will survive, you need to be able to write a "deletionist-proof" entry and ensure that you have enough online backing (such as Google matches) to convince the increasingly picky Wikipedia people of its importance. This raises the threshold for writing articles so high that very few people actually do it. Many who are excited about contributing to the site end up on the "Missing Wikipedians" page: a constantly updated list of those who have decided to stop contributing. It serves as a reminder that frustration at having work removed prompts many people to abandon the project." See a similar article in the NY Times Review of Books.
* FTC busts Goal Financial for inadequate security practices.
* The DOJ is busting people who click on a link that purportedly offered child porn, prosecuting them for attempted downloading of child porn.
* Orin Kerr, "Criminal Law in Virtual Worlds," University of Chicago Legal Forum (forthcoming). Orin sensibly argues against virtual world exceptionalism with respect to criminalizing activities in virtual worlds.
Posted by Eric at 10:09 AM | Content Regulation , Copyright , Domain Names , Marketing , Privacy/Security , Trademark , Virtual Worlds | TrackBack
January 30, 2008
State of the Net Conference Recap
By Eric Goldman
Today I attended the State of the Net conference, sponsored by the Congressional Internet Caucus Advisory Committee. This event has become the "go-to" event for Internet policy wonks. Well over 300 people attended, including many well-known folks. If you deal with Internet policy, you should be at this conference.
A few notes from the event:
The morning keynote was delivered by Mary Bono Mack, who delivered one of the most true believer IP-maximalist talks I've heard in a long time. It was almost cartoonish. Based on the fire-and-brimstone talk, I imagine she would support just about any expansion of IP rights proposed to her. In response to a Q&A, she said that she had been previously misquoted and that she doesn't support a perpetual copyright duration. But she thought the Eldred opinion vindicated Congress' previous term extension as a reasonable policy; she must have read a very different opinion than the one I read. See Anne Broache's writeup of Mary's talk.
I've now heard a few different suggestions that server-level filtering by IAPs would drop them out of 512(a) coverage. (Today, Gigi Sohn raised this issue). This arises in response to AT&T's proposal to filter for copyrighted material, but it's also a subtext of the net neutrality discussion. I'm not sure if this is an accurate reading of 512(a), though. 512(a) says it applies only if the "the transmission, routing, provision of connections, or storage is carried out through an automatic technical process without selection of the material by the service provider." (Emphasis added). What does it mean for a service provider to select material? In context, I think the statutory language means that the user, instead of the service provider, selects the particular file moving over the IAP's network. I don't see how this exclusion was meant to cover automated filtering. In contrast, if the language is read to apply to filtering; would any type of filtering, including spam and virus filtering, knock out IAPs from 512(a)? If so, then no one could ever qualify for 512(a). It's not beyond Congress to draft a safe harbor that describes a null set of activity (see, e.g., 512(d)), but I suspect the courts will be more flexible in their reading than this.
The always-entertaining Federal Trade Commissioner Jon Leibowitz spoke about social networking sites. He implied that if Facebook hadn't backed down on Beacon, he was going to encourage the FTC to investigate it. He also wondered how online speech could receive the same level of protection as offline speech, and specifically referenced Marsh v. Alabama (the company town case) in suggesting that some online sites might be analogized to essential facilities. I'm not really sure what to make of this, as every court that has reviewed these state action arguments as applied to private online sites have rejected them squarely. But I'm sure virtual world exceptionalists will be thrilled to know that an FTC Commissioner might be sold on weighting player rights over provider rights.
At the post-event technology exhibition, I had the most remarkable demo from a woman at Quova, the geolocation company that claims 97% accuracy to the state level and 95% accuracy to the city level. I don't feel comfortable repeating some of the things she said because I haven't been able to validate them, but suffice it to say that all of you privacy advocates who freaked out about ChoicePoint may have a new company to freak out about. Among the questions that I'd like to see answered about Quova:
* what websites supply them with IP address data based on their users' activities? If it's the companies she named, then I'm pretty confident that at least some big Internet brands have been regularly violating their privacy policies.
* what government agencies are Quova's customers? And what are they doing with the data?
* what kinds of subpoenas is Quova getting from private plaintiffs, and how are they handling those subpoenas? Based on what I heard, it sounded like plaintiffs have been wasting their time tendering subpoenas to individual websites when Quova may offer some interesting one-stop-shopping.
If you have any insights into any of these Qs, I'd welcome your thoughts.
Posted by Eric at 11:14 PM | Copyright , Privacy/Security , Virtual Worlds | TrackBack
December 13, 2007
Oct.-Nov. 2007 Quick Links, Part 1
By Eric Goldman
I was so jammed at the beginning of November that I didn't have time to post my quick links from October. Never fear; that omission is being corrected with a double shot of quick links covering October and November:
Wikipedia
* Slashdot: Has Wikipedia peaked? If true, I'm not surprised.
* The new status symbol of the digital age? A personal Wikipedia page. FWIW, my personal Wikipedia page was crunched and rolled into a general criticism of Wikipedia page. I found this ironic given that the Wikipedians had already caucused about the merits of my page and decided not to kill it; and then a single Wikipedian swept through and ignored that decision. Sounds like the process worked really well there, guys.
* The newest fork from Wikipedia: Veropedia.
Google
* Webmasters give preference to the Googlebot over other search engine robots in robots.txt files.
* Searchers prefer Google results in a blind taste test. But...searchers also prefer search results when they are branded Google!
* For years, people have speculated that Google advertisers get extra bounce in organic search results. Search Engine Guide lays out the case.
* Carl Person isn't giving up in his (unquestionably futile) fight against Google. The latest: he's appealed his case to the Ninth Circuit. HT Links & Law.
Adware/Spyware
* FTC Commissioner Leibowitz thinks bigger civil fines would help shut down more spyware operators. Then again, it seems like the market is doing that job for them; another adware vendor, DirectRevenue, has gone under.
* Zango has appealed Zango v. Kaspersky to the Ninth Circuit. I wasn't a fan of this lawsuit from the outset, so pursuing the case sounds like a mistake to me.
Virtual Worlds
* Herman Miller (maker of the famous Aeron chairs--I had one at Epinions) is combating the makers of fake virtual Aeron chairs in Second Life.
* Bragg v. Linden Lab has settled. The case involved a claim that Linden Lab improperly impounded some virtual assets.
* Wired: "Cheaters in multiplayer online games beware: Game developers are turning to advanced financial fraud-detection software to keep you from crooking your way to online riches."
47 USC 230
* Roskowski v. Corvallis Police Officers' Ass'n, 2007 WL 2963633 (9th Cir. Oct. 10, 2007). A summary opinion upholding a dismissal based on 47 USC 230. See my blog post on the district court ruling. Michael Erhman's comments.
* The US Supreme Court denied certiorari in Perfect 10 v. ccBill.
* The AutoAdmit plaintiffs filed an amended complaint that dropped Ciolli as a defendant and reworked the substantive allegations. Coverage: Above the Law, Concurring Opinions (1, 2), WSJ Law Blog.
* A former student informed me that a judge on the show Boston Legal (the Nov. 13 episode, "Attack of the Xenophobes," episode 74) applied 47 USC 230--correctly!--to dismiss a lawsuit against YouTube for a defamatory video. See the episode recap.
Online Contracts
* Adsit Co. v. Gustin (Ind. Ct. App. Oct. 16, 2007). Daughter-in-law gives credit card number to mom-in-law to complete online transaction. Court holds that mom-in-law acted as daughter-in-law’s agent and thus bound the daughter-in-law to the vendor’s clickthrough agreement. Accord: the Hofer and Abramson cases.
* Whitnum v. Yahoo, Inc., 2007 WL 2609825 (NY Supreme Court, Sept. 5, 2007). Woman sought damages because Yahoo shut down her website the same day she got a good publicity hit. Yahoo pointed to the liability limits in its user agreement, and the court found that those limits supported a motion to dismiss. Given the ubiquity of similar provisions in web hosting contracts, this case nicely illustrates that web hosting customers really don’t have any recourse if their vendor just shuts them down. This is also why I find 17 USC 512(g) (the DMCA limit on liability if a web host honors a counter-notification) so baffling—web hosts don’t need any help from the statutory safe harbor when they have already eliminated the risk through their contracts.
Posted by Eric at 02:05 PM | Adware/Spyware , Derivative Liability , Licensing/Contracts , Search Engines , Virtual Worlds | TrackBack
October 22, 2007
AOIR Regulating Virtual Worlds Panel, and My Notes on Investment Expectations in Virtual Worlds
By Eric Goldman
Last week at AOIR's annual meeting (AOIR 8.0) in Vancouver, Greg Lastowka, James Grimmelmann, Tyler Ochoa and I presented on the topic of regulation of virtual worlds. My notes from the presentations are below. See Mark Bell's recap too.
Greg Lastowka, Rules of Play
Greg discussed how game rules can increase the fullness and beauty of life. Yet, legal rules may be too rational. For example, a traditional economic analysis would encourage the development of markets for virtual property, regardless of any EULA restrictions, because these markets would facilitate Pareto exchanges (i.e., both parties better off; no one worse off). However, lawyers can't understand peoples' need to live in beauty or how gameplay can facilitate this.
My comment to Greg: how much are rules of play exogenous to the players (i.e., imposed from the top down by the VW providers) and how much are just codifications of rules that the community of players demand on a bottoms-up basis. At Epinions, our users demanded that we vigilantly police the conduct of other players, in many cases forcing us to impose more rules or police them more vigorously than we would have done if the choice was solely ours.
James Grimmelmann
James talked about the metaphysics of virtual objects/experiences. The VW provider has the power to determine people's perceptions within the world. For example, if the VW provider deletes an object, everyone agrees that the object ceases to exist in the world.
Also, the VW software is proprietary, so there's no check on a provider's autocracy. Even if the software creation was open sourced, it still wouldn't solve the normative determination of what's fair to do to players.
James thinks that virtual worlds need healthy virtual governance--specifically, that there should be a public sphere within virtual worlds as a way for players to discuss the providers' autocratic decisions.
I made two comments: (1) is there anything unusual about the metaphysics in virtual worlds? It seems to me that we have many shared hallucinations in realspace (like when our government lies to us, and we accept the lie rather than listen to our inner skepticism). (2) If the risk of provider exercise of arbitrary autocratic power is a problem, couldn't providers outsource an auditing function to third parties? For example, accounting firms audit the financial statements of companies.
Tyler asked what's so good about liberty and fairness? I think he was driving at the fact that VWs could in fact involve benevolent dictators, and this could lead to better outcomes than we could accomplish in the real world.
There was a good Q for James that if virtual property is real, does that mean that cybertorts committed in the virtual world equally "real"? For example, is hate speech in a virtual world just as tangible as virtual property?
Tyler Ochoa, Who Owns Avatars?
Tyler acknowledged that the first response to this topic is that avatar ownership should be determined by the EULA. He made his arguments why the default ownership of avatars matters:
1) EULAs may not be binding (see, e.g., the Bragg decision, which put Second Life's EULA in serious jeopardy)
2) some things can't be assigned by contract, such as the 17 USC 203 termination of transfer right. (So, in 35 years, someone might come back and demand the copyrights to their avatar!)
3) the default copyright rules may determine the applicability/enforceability of contract rules
He noted the numerous aspects of an avatar that may be protected, including the avatar's appearance, capabilities, behavior and communications.
He thinks the more that a provider gives choices to consumers to configure avatars, the more that the avatar looks like the creation of a user. As a result, he advocated that avatars should be thought of as a contribution to a collective work (although, depending on the facts, they could be a derivative work, a compilation or a joint work). He explained why this solved some of the problems about avatar ownership.
I asked Tyler whether the more appropriate model would be for providers to treat avatars as a specially commissioned work for hire as part of an audiovisual work. This would require providers to characterize the avatar as a work for hire in their EULA, but this seems like a complete solution for providers (maybe not for users!).
In his talk, Tyler asked about the appropriate remedies if a hacker deleted someone's avatar. This seems like a problem outside of copyright law, but tangible property law could in theory apply. See, e.g., Kremen v. Cohen.
Tyler also asked what remedies users would have if their avatars were included in a derivative work (like a movie based on the VW). Again, copyright may or may not provide an adequate remedy, but it made me wonder if users have a publicity right in their avatar. I haven't researched it, but I assume that the ROP can cover pseudonyms, nicknames, etc. If so, it seems like a derivative work may need permission from avatar alter egos irrespective of the copyright disposition.
Eric Goldman, Investment Decisions on a Shaky Virtual Foundation
Here are my notes from my talk. I am thinking about writing this up into a short essay, so I would gratefully welcome any comments.
_______________________________________________
Investment Decisions on a Shaky Virtual Foundation
There has been lots of discussion in literature about who owns virtual property. However, I’m more interested in *how* virtual property comes into existence in the first place because it gets created in a seemingly poor environment for investment decisions.
Obviously, some virtual property is generated as part of the ordinary course of gameplay. We generally don’t need to worry about the incentives to create this property; the gameplay provides the needed incentive. And I believe we don’t need to protect the investment “expectations” for this property—because the gameplay provides the motivation, there are no *investment* expectations to protect. (There may still be unhappy users who feel screwed by gameplay or providers’ monkeying with the gameplay, but this seems wholly internal to the game itself).
In other cases, virtual property will be protected by default IP laws (such as copyrightable works created within the context of Second Life). These investment decisions are no different than the creation of any other IP.
Despite these two motivations, there is still plenty of other investments made on spec or with the hope of a return, and these investments can be wiped away in a moment. There can be in-world reasons, like inflation, exploits or in-game theft. More importantly, the VW’s user agreement may give the provider unlimited ability to moot the agreement, such as by kicking the user off the site or stripping the user of assets.
The most obvious example is Second Life, where there is no gameplay per se but still plenty of real-world investment capital being invested. Second Life's EULA makes it clear that all of this investment could be wiped away at its discretion. From its user agreement:
Sec. 1.4: You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, in any general or specific case, and that Linden Lab will have no liability to you based on its exercise of such right.
Sec. 2.6: Linden Lab has the right at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you. In the event that Linden Lab suspends or terminates your Account or this Agreement, you understand and agree that you shall receive no refund or exchange for any unused time on a subscription, any license or subscription fees, any content or data associated with your Account, or for anything else.
Sec. 5.3: When using the Service, you may accumulate Content, Currency, objects, items, scripts, equipment, or other value or status indicators that reside as data on Linden Lab's servers. THESE DATA, AND ANY OTHER DATA, ACCOUNT HISTORY AND ACCOUNT NAMES RESIDING ON LINDEN LAB'S SERVERS, MAY BE DELETED, ALTERED, MOVED OR TRANSFERRED AT ANY TIME FOR ANY REASON IN LINDEN LAB'S SOLE DISCRETION.
So investment decisions in Second Life are made on the foundation that Second Life can moot those investments at any time for any reason. This should substantially shorten the time horizon for investment return, or at least increase the discount rate of future cash flows substantially. Yet, users still make substantial/sizable investments in Second Life and other VWs with similar policies. Why?
Hypothesis #1: Users are making irrational investment decisions because (1) they don’t know the rules governing their investments, and/or (2) they apply too low a discount rate
Evidence: <1% of users read user agreements; consumers may make mistaken inferences from the user agreements (i.e., majority of users think that the existence of a privacy policy automatically means their data must be protected-see Annenberg studies and http://www.law.berkeley.edu/clinics/samuelson/techade_report_final.pdf)
Possible policy implications: (1) improve user education, (2) match legal terms to reflect consumer expectations, (3) caveat emptor
Hypothesis #2: People are making rational investment decisions because (1) they are applying appropriate discount rate and expect short-term payoffs, or (2) they are trusting appropriate exercise of provider discretion based on market forces/brand/reputation
Possible policy implications: do nothing—market is working fine. But what if people are underinvesting due to investment uncertainty? (1) Market gives providers incentives to provide greater certainty if profitable, or (2) regulatory intervention is necessary to stabilize markets.
This got me thinking about alternative situations where people make investment decisions predicated on contracts that may be terminated for convenience. In general, US law tolerates this construct and does not establish limits on, in fact, exercising contractual rights of termination for convenience. See, e.g., United Airlines Inc. v. Good Taste (Alaska Sup. Ct. 1999). Catering company gets 3 year contract to cater United Airlines flights from Alaska, but 90 day termination for convenience clause. To perform the contract, the catering company invests $1M that (apparently) was designed to be amortized over the 3 year term. Instead, United terminates for convenience after 1 year. Catering company is unable to avoid this termination and, presumably, loses some of its investment. Indeed, in most cases involving termination for convenience, parties make some investments to perform, and contract law normally stays on the sidelines.
But in the case of franchises and distributor protection laws, we restrict a vendor’s ability to terminate for convenience even if both parties agree to a termination for convenience clause (the provider must terminate for cause or pay damages). Analogies to VW investors:
• both require upfront investment predicated on long-term support from the vendor
• vendors have substantially more leverage over contracting party—in VW context, presented on take-it-or-leave-it basis.
But noticeable differences:
• franchisors/vendors get long-lasting benefit from work of franchisees/distributors—get marketing investments/building of customer base. No direct equivalent in VWs
• franchises are heavily regulated investment decisions
More generally, does it still make sense to restrict contract freedom among franchise/distributor contracts? Or is this just an archaic paternalism?
In the case of VWs, no reason to restrict contract freedom without evidence of a problem.
• no evidence of market failure. Investments still growing rapidly
• We can rely on existing consumer protection laws (such as false advertising) provide substantial protection for any VW provider deception
Posted by Eric at 12:07 PM | Licensing/Contracts , Virtual Worlds | TrackBack
September 07, 2007
August 2007 Quick Links, Part II
By Eric Goldman
* e360 Insight v. Spamhaus Project, 2007 U.S. App. LEXIS 20725 (7th Cir. Aug. 30, 2007). An email marketing company was listed on Spamhaus' ROSKO and sued for defamation and other torts in Illinois. Spamhaus took the position that US courts have no authority to render a judgment on a UK-based operation. The district court ultimately awarded $11.7M in damages and various equitable relief. The Seventh Circuit affirmed the default judgment but vacated the damages and equitable relief, sending those back to the district court to reevaluate the appropriate remedies. I understand that Spamhaus wanted to make a philosophical point by not fighting the lawsuit in the US, but had they overlooked their philosophical objections, they should have won a quick victory per 47 USC 230(c)(2).
* Perfect 10 has appealed its Ninth Circuit 230 loss in ccBill to the US Supreme Court.
* Search Engine Land had a good overview/recap article on geolocation technology. It provides a clear and easy-to-read explanation why the folks who think online businesses can just stay out of a state that enacts dumb regulations are full of crud.
* Pisciotta v. Old National Bancorp, No. 06-3817 (7th Cir. Aug. 23, 2007). Another court (this time, the Seventh Circuit) says that consumer fretting about possible future identity theft isn't enough harm to support a lawsuit. See the analogous JetBlue, Acxiom and Key cases.
* Wikipedia Scanner--an automated tool to determine who is editing Wikipedia pages. Katie Hafner's NYT article on the matter. David Hoffman does a little sleuthing on law firm edits.
* NYT: In the 1990s, a lot of people sought to build an infrastructure for micropayments. Consumers resisted them, but today those efforts seem a little silly--AdSense advertising can generate the same financial benefits for a web publisher without the overhead. Meanwhile, the credit card systems are being stretched to cover micro-transactions because merchants are aggregating a consumer's orders and processing them in bulk (rather than processing each one individually) as a way to reduce the transaction costs.
* NYT: "As video games have surged in popularity in recent years, politicians around the country have tried to outlaw the sale of some violent games to children. So far all such efforts have failed."
* AP: Chinese animated cops will be patrolling the Information Superhighway beat.
* Tired of negative reviews on Yelp, a San Francisco restaurant put up a sign saying "no Yelpers." I wonder if a sign like that lessens or exacerbates negative publicity.
* NYT: Book authors obsessively check Amazon sales rankings and try to game them.
* Facebook accidentally posted some of its source code to a public website. Surely an interesting development for ConnectU's discovery team!
* Another Internet company hires its own in-house economist--this time, virtual world Eve Online.
* A nice retrospective on the Cleveland Free-net, which at one point was a prominent component of the Cyberspace community.
* I have one free guest pass to the CLE International New Media Law conference in SF on Oct. 1-2. Free to the first person who sends me an email request. [SORRY--TAKEN!]
Posted by Eric at 09:48 AM | Content Regulation , Derivative Liability , E-Commerce , General , Internet History , Privacy/Security , Virtual Worlds | TrackBack
August 01, 2007
July 2007 Quick Links, Part II
By Eric Goldman
Virtual Worlds
* After a remarkable run as media darlings, Second Life is now experiencing some of the inevitable backlash. Case in point: Wired's "How Madison Avenue Is Wasting Millions on a Deserted Second Life." In this respect, Second Life reminds me a little of Keen.com--both provide fantastic platforms for monetizing user-generated content, but that powerful economic platform is likely to take root primarily in the sin businesses (porn, gambling, etc.). (FWIW, Keen.com appears to have cleaned up the dial-a-porn and is now focused exclusively on dial-a-horoscopes). As a result, it will be interesting to see what happens to Second Life's numbers in response to their anti-gambling crackdown. Meanwhile, lawyers--the classic late adopters--are gushing about Second Life's potential as a business generator--an interesting counter-perspective to the Wired article.
* World Copyright Law Report: "Some residents have been using a rogue version of a program called CopyBot to make a copy of anything in the Second Life world, thus threatening to undermine the whole basis of the Second Life economy."
Wikipedia
* More marketers wake up to the value of inserting links into Wikipedia despite Wikipedia's nofollow tag. See my earlier explanation of this. Meanwhile, a Wikipedia administrator talks about what Wikipedians consider white hat practices for marketers.
* Willing to cite to Wikipedia in your legal briefs? Need some custom-tailored authority to support your argument? Edit Wikipedia to say what you want!
* Mike Godwin has become Wikimedia’s GC. You may recall that Mike and I bet about Wikipedia’s future; it appears he has raised the stakes on that bet substantially!
User Generated Content
* "GC's Client from Hell": Whole Food's CEO John Mackey pseudonymously posted about his company's stock and his competitor's stock on Yahoo Finance. The WSJ article has some of the juiciest postings. The NYT on CEO "sock puppetry."
* A restaurant owner used consumer reviews from Yelp as part of deciding to fire employees.
* Interesting interview with the pseudonymous founder of a pay-for-Diggs business.
Blogs
* The ABA Journal has entered the crowded field of blawg directories with one of their own.
* Blawgworld 2007: 77 blawgers chose their favorite posts, which were compiled into an e-book. The compilation turns out to be a great way to get noisy blawgers to promote their brilliant contributions to the e-book, which generates traffic and link love for the publisher, which in turn creates a nice delivery vehicle for sponsored content/advertising.
Miscellaneous
* Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC, 2007 U.S. Dist. LEXIS 52932 (D. N.J. July 23, 2007). IAP terminates customer based on complaints that customer was a spammer. Court holds that the consequential damages waiver applies, effectively negating customer's alleged damages. Rejecting the customer's argument that the termination was in bad faith, the court says: "Plaintiff’s arguments about the accuracy of the spamming complaints do not change the Court’s determination because regardless of the ultimate accuracy or veracity of the spamming complaints, defendant was entitled to rely on those complaints so long as it did so in good faith, and plaintiff has not demonstrated any bad faith by defendant." HT: Technology Law Update.
* Consumer Law & Policy Blog: "companies in two recently filed federal cases explicitly invoke [the recent Supreme Court decision in] Leegin as a justification for terminating the eBay auctions of competitors that charge lower prices online."
* Declan on whether anti-spyware vendors are screening for "fedware" (government keystroke loggers designed to capture data before it's encrypted).
Fun
* More proof that technology can save lives: During a power outage at a hospital, doctors were able to complete a surgery using the light of open cellphones.
* I’m a new fan of Oddee. Some recent posts (it helps to think about sexual connotations when interpreting the photos):
- "15 Unfortunately Placed Ads."
- "Most Unfortunate Logos Ever"
- "Unfortunate Business Names.”
Posted by Eric at 11:06 AM | Adware/Spyware , E-Commerce , General , Internet History , Marketing , Spam , Virtual Worlds | TrackBack
April 18, 2007
Judge Kozinski Talks About Cyberlaw
By Eric Goldman
Last October, Judge Alex Kozinski of the Ninth Circuit chatted with me in my Cyberspace Law course for 75 minutes. If you listen to the recording, you'll hear Judge Kozinski's humorous thoughts on receiving gifts when he speaks (he auctions them on eBay), selling on eBay (he's very proud of his feedback rating), blogging (he hates bloggers--told me that right to my face at breakfast after I told him I was a blogger) and being a judicial male "superhottie," as well as a less spirited discussion about the law of virtual worlds and the Sex.com case (it's hard to pin down sitting judges on substantive legal doctrines). Hope you enjoy the interview.
Posted by Eric at 04:05 PM | Domain Names , Publicity/Privacy Rights , Virtual Worlds | TrackBack
February 02, 2007
January 2007 Quick Links
By Eric Goldman
* Marketers (including Microsoft) are paying authors to write Wikipedia entries. Surprised?!
* Also on the topic of Wikipedia and marketers, Wikipedia has tagged all of their pages NOFOLLOW so that there's no way a marketer or website can get PageRank credit from inserting a link in Wikipedia. A reporter emailed me to ask "Do you think this move staves off the potential demise you have predicted?" My response: "No. This was actually raised in the comments to my initial post on the topic in Dec. 2005. Two points: (1) People who recycle Wikipedia content on their own site (such as Answers.com) may not use the nofollow attribute, so there still may be a PageRank payoff by inserting links on Wikipedia pages. (2) More importantly, marketers may want Wikipedia traffic directly (rather than the indirect boost in search engines). Wikipedia is already highly placed in the search engines, so it is a big traffic source in its own right."
* Speaking of my prediction of Wikipedia’s future, NPR picked up on it.
* Now that MyBlogLog is owned by Yahoo and thus increasing its traffic, Greg Linden reports that it's getting spammed.
* I previously reported that ICANN was thinking about retiring some TLDs. The first casualty? .um (for US Minor Outlying Islands, such as the Midway and Johnston Atolls), which got chucked because the registry operator didn't want to continue operating it and there were no registrations in the TLD.
* "The Search Tax: Are Search Engines Leeches?" This article discusses the role of search engines as intermediaries between consumers and marketers, able to charge marketers for access to consumers (hence, the "tax" reference). The article also discusses the value of buying trademarked keywords:
What's difficult for marketers to swallow, however, is the clear evidence the search engines (and affiliate marketers with good organic rank on brand terms) have the power to insert themselves between the consumer and the brand, even when consumers clearly have an interest in the brand (as indicated by their search query containing the brand or trademark).
Marketers' temptation may be to refuse to pay for brand keywords, sticking instead to the generic keywords that are also clearly aimed at any given target audience. In every case we've tested (and I have tested many and will likely test many more), that would be a mistake, even when the marketer has high organic rank on his brand. The results of every test we've executed indicate the incremental gain received when paying for traffic on a brand term has a very high net ROI (define) because: [1] Significant additional screen real estate on the SERP is gained. [2] The total control over title and description allows for greater offer control. [3] Top positions on one's brand usually aren't very expensive due to the engines' relevance algorithms. [4] The ability to control and tune the landing page results in a conversion rate percentage in many cases is higher for the combined pages than for one alone.
* We might consider the contrast between the prior post and this one: "Should Google Pay Off Brand Owners With Cut Of Keyword Sales?"
* Brand advertisers resist using Google because Google doesn't allow third party ad serving technology. But compare a BusinessWeek article reporting that big brands are buying up CPC inventory and pricing out small- and medium-sized advertisers.
* Google revised its algorithm to eliminate most of the famous Googlebombs (like "miserable failure"). Danny's recap. Google hasn't specified details, but I'm assuming that Google has somehow reduced the weight given to anchor text.
* A search engine marketer predicts the death of SEO with the emergence of personalized search. I agree! (HT: Greg Linden).
* eBay is blocking the auction of virtual assets due to the "legal complexities" of such sales. Because of its differentiated EULA, Second Life virtual assets can still be auctioned. The News.com article suggests that these transactions will move from eBay to other trading fora. Even so, this might inhibit the liquidity of these secondary market transactions, which could reduce the return of virtual asset speculators.
* According to Jakob Nielsen, about 1/2 of online giftcard recipients either junked their email notification or didn't trust it (i.e., thought it was phishing).
* HER, Inc. v. Re/Max First Choice, LLC, 2007 WL 43747 (SD Ohio Jan. 5, 2007). Competitor 1 registers domain names containing Competitor 2's trademarks, Competitor 2's principals' names and the principals' home address and phone number. The domains roll over to Competitor 1's website. Competitor 1 then sends a couple of gripe spam to Competitor 2's employees from some of the registered domain names bashing Competitor 2's business practices. The court isn't sympathetic, granting a PI based on ACPA and trademark infringement. While this type of competitor-bashing isn't permissible (and, frankly, registering domain names with the target people's home address and phone number is bizarre), Competitor 1 should have been able to find ways to deliver the same content without running afoul of the law.
* Google has lost an appeal at the OHIM in Europe over the rights to use the trademark "Gmail" for its email services.
* Does a "lactivist's" t-shirt saying "the other white milk" infringe the Pork Board's trademark in "the other white meat"? No, and what a dumb question!
* The RipOffReport.com has appeared on this blog several times (see here and here, among others). The Phoenix New Times (the local Phoenix alternative weekly) runs a lengthy and interesting story about the Ripoff Report and its principal, Ed Magedson. Worth reading.
Posted by Eric at 02:08 PM | Domain Names , E-Commerce , Licensing/Contracts , Marketing , Search Engines , Spam , Trademark , Virtual Worlds | TrackBack
October 30, 2006
Sex.com -- An Update
By Eric Goldman
Judge Alex Kozinski recently guest lectured in my Cyberspace Law course, which prompted me to reread Kozinski's opinion in the Kremen v. Cohen Sex.com case. Because that opinion came out in 2003, it made me curious--what's happened to the lawsuit and the domain name since then?
Before getting into specifics, a quick recap. The Sex.com story has been oft-told, yet it's such a classic tale that it bears repeating. In early 1994, an enterprising Gary Kremen registered Sex.com with Network Solutions back when registrants could register domain names for free with just an email. In Oct. 1995, an interloper, Stephen Cohen, "stole" the domain name by submitting forged transfer papers to NSI. When Kremen discovered the transfer and demanded that NSI fix its mistake, NSI shrugged its shoulders and said to Kremen that he would have to go to court to resecure the domain name. Kremen did exactly that, sparking a decade-long legal battle over perhaps the most valuable domain name of all time. In the interim, Cohen allegedly reaped enormous profits (at least $40M, maybe hundreds of millions) from Sex.com during the time he possessed it.
The legal battle can be organized into 3 different fronts.
Kremen against Stephen Cohen
Kremen's first attack was against the interloper, Cohen. Kremen won a $65M judgment (which included a $25M punitive damages award) against Cohen in 2001. However, as I stress in my Cyberspace Law course, winning a judgment is a win only if it's enforceable. In this case, Cohen did everything possible to frustrate collection by fleeing the country (to Mexico, then Monte Carlo, and back to Mexico) and using clever machinations to move his money offshore and out of reach. Kremen was able to execute against 2 homes of Cohen's, including a house in upscale Rancho Santa Fe outside of San Diego that Kremen still uses as a personal residence. Meanwhile, based on Cohen's repeated acts in contravention of the judge's orders, the judge issued a contempt order and arrest warrant for Cohen.
After Kremen unsuccessfully offered $50,000 to bounty hunters to find Cohen, there was a break in the case in October 2005. Cohen was located in Tijuana, arrested by the Mexican police and extradited to the US. The judge has demanded that Cohen spill the beans about the location of the money, and Cohen refuses to do so. As a result, Cohen still sits in jail on the contempt order.
Kremen against Network Solutions
When it looked like Cohen wasn't going to pay up, Kremen went after Network Solutions as the domain name registrar, alleging breach of contract and conversion. The district court rejected the claims, but on appeal, Judge Kozinski reversed the conversion claim dismissal, concluding that California law permits intangible assets to be converted. The case was remanded to district court, but NSI settled the case in 2004. The settlement amount was confidential, but reports have put the amount at $20M.
Reading through the opinion again, I was struck by how Kozinksi's arguments could be used to support a conversion claim for other types of intangible assets, such as virtual world assets. I probed Kozinski on this very point in my class, and in his mind there's a distinction between assets taken within the game rules and outside the game rules.
I think this is right, but it may depend on the defendant. In the Kremen v. NSI case, the defendant was the service provider; but this was a truly unique situation where the customer (Kremen) and the service provider (NSI) didn't have a valid contract for the domain name registration because domain names were free. Thus, there was no consideration from Kremen for the domain name registration contract. In contrast, there is typically an airtight contract between the VW user and the service provider, and that contract will likely contain provisions that protect the service provider from any liability for asset conversion. I don't think Kozinski's reasoning could be read to extend conversion liability to the service provider in the face of such a contract. However, some other interloper who takes a virtual world asset outside of game rules could face conversion liability under the Ninth Circuit rule.
One more point about this case. When Kozinski's Ninth Circuit decision was issued, a number of commentators hailed it as a landmark case on protection of cyberproperty. It might ultimately be that, but I did a citation count and there are actually a surprisingly small number of cases citing to it so far (and none of particular note). So I personally think the Ninth Circuit decision is so fact-specific (service provider conversion of an intangible asset without any governing contract) that it's unlikely to be a true watershed decision.
Kremen against ARIN
The Sex.com battle has quietly spilled onto a third front. As part of Kremen's 2001 judgment against Cohen, the court imposed a constructive trust on all of Cohen's assets, including a large block of IP addresses assigned by ARIN. ARIN has refused to transfer the block as Kremen has asked, instead directing Kremen to follow ARIN's internal transfer policies, which Kremen apparently refuses to do. So in April 2006, Kremen sued ARIN for antitrust violations, conversion, unfair business practices and breach of fiduciary duties. See the complaint in Kremen v. American Registry for Internet Numbers (N.D. Cal.).
This is a case worth watching. ARIN is a relatively obscure and insular group, and over the years I have heard lots of frustration about their IP address block allocations and restrictions on transfer. This lawsuit has the potential to challenge these practices and change the process for IP address block allocations.
The Status Today
In Jan. 2006, Kremen sold the domain name to a low-profile pornography company, Escom, for $12M-14M. As a result, Kremen has received, so far, over $30M and 2 properties for the domain name, plus a pending $65M judgment (now over $80M including interest) against Cohen, plus any ongoing revenues he generated during the time he possessed the domain name. Talk about a lucrative domain name!
Earlier this month, Escom announced a strategic partnership with Playboy Enterprises, with the practical consequence that Sex.com has turned into a marketing portal for Playboy's content. Given the apparent value of this domain name, I'm sure we haven't heard the last word on its exploitation.
If you are interested in more of this story, Kieren McCarthy is publishing a book, Sex.com, in Britain in 2007.
UPDATE: Violet Blue writes an entertaining recap.
Posted by Eric at 05:44 PM | Domain Names , Internet History , Licensing/Contracts , Virtual Worlds | TrackBack
March 03, 2006
NCSoft Sued in South Korea for ID Theft
By Eric Goldman
NCSoft has been sued in South Korea for allowing users to improperly register Lineage/Lineage 2 accounts in other people's official Korean ID number (I'm inferring this is similar to a social security number). More than 3,500 people have joined the class action so far, although the affected number is in the hundreds of thousands.
Based on this report, my understanding is that an organized crime ring stole a large number of Korean IDs from a third party shopping website, used those IDs to create Lineage accounts, used Chinese gold farmers to manufacture in-world wealth, and then converted that to physical-world wealth.
Assuming this is true, I don't immediately understand how NCSoft could be liable to the people whose IDs were stolen. It's not clear that NCSoft played any role in the initial ID theft, and so far the news reports indicate that the people whose IDs were stolen have not suffered any damage. If NCSoft had no role in the initial theft and the people whose IDs were stolen suffered no damages, I'm having a hard time seeing how this is NCSoft's problem. Certainly, in the US, I can't see how the plaintiffs in this situation could state a valid cause of action.
As a result, this lawsuit smells fishy. The organizers run a case auction service that matches victims with lawyers for all types of lawsuits. (From their website: "Case Auction is a bidding system of which clients find out lawyers to handle his/her case through the auction.") Could this lawsuit just be a traffic driver for the website?
Alternatively, lawyers just may be trying to capitalize on consumer outrage. I'm inferring from news reports that NCSoft collected the ID number unnecessarily and consumers are ticked about the security breach and its possible implications (even if no damages were caused here). If the analogy is that an online service provider collected social security numbers are part of their authentication process, I see why some people would want answers about the necessity of such data collection. This article recaps some of the controversy.
Thanks to Matt Goeden for pointing this out. More coverage at Terra Nova.
Posted by Eric at 01:14 PM | Derivative Liability , Privacy/Security , Virtual Worlds
December 14, 2005
City of Heroes Lawsuits Settled
By Eric Goldman
A complex but interesting legal fight between Marvel and NCSoft, about City of Heroes players generating characters that look like Marvel-owned characters, has come to an end. The press release announcing the settlement.
Settlement terms were not disclosed, except that no money changed hands and NCSoft isn't changing its character creation engine. Based on the tone of the press release, I suspect that NCSoft will make stronger warnings to players about respecting IP; NCSoft may have also agreed to be a little quicker on the trigger taking down potentially infringing characters (all of this is speculation--I have no inside knowledge).
In any case, this looks like a terrific victory for NCSoft. Maybe NCSoft got some helpful leverage in the settlement negotiations when it went on the offensive and won a key motion in August.
From a policy standpoint, I'm glad to see this lawsuit settled without a definitive legal conclusion. Although the rulings to date largely went NCSoft's way, the risk of getting an adverse or confused judicial ruling was high enough that it's best to leave this issue open for another day.
Thanks to Greg Lastowka for calling my attention to this.
UPDATE: News.com article with some good quotes.
UPDATE 2: News.com now reports that NCSoft had a little "swagger" when refusing to describe the settlement.
Posted by Eric at 04:53 PM | Copyright , Derivative Liability , Trademark , Virtual Worlds
September 16, 2005
City of Heroes Lawsuit--New Ruling on False DMCA Takedown Notices
By Eric Goldman
Marvel Enterprises v. NCSoft Corp., CV 04-9253-RGK (C.D. Cal. Aug. 23, 2005).
Given the interest in this case, I'm surprised that this ruling appears to have been overlooked (I found it through BNA [subscription required]). In late August, there was an interesting new ruling in the City of Heroes lawsuit, with another good win for NCSoft.
NCSoft, the game operator, sued Marvel under 17 USC 512(f) for sending bogus takedown notices. The takedown notices specified 2 character names, but did not specify what servers those characters resided in. Accordingly, NCSoft removed those characters across all of its servers, leading to some very bummed users whose characters were killed off. In response, NCSoft alleged the following facts:
* Marvel sent takedown notices on characters that Marvel itself created or that had already been removed
* Marvel knowingly sent notices to have NCSoft remove identically-named characters across multiple servers, even though some of those characters were legitimate
* the consequences were material because NCSoft added terms to its block list and deleted innocent players' characters
* these caused damages of lost goodwill, lost subscriptions and investigation expenses.
These facts were enough to survive a motion to dismiss. We'll see if the plaintiff can prove the requisite facts, but this ruling is a pretty significant development. Many of us have hoped for stronger consequences to inhibit copyright owners from sending poorly-conceived takedown notices, and this ruling gives extra teeth to the 512(f) cause of action.
One other odd argument re. 512(f)--Marvel claimed that to qualify as a 512 service provider (for purposes of bringing a 512(f) claim), the service provider must be "passive" and "innocent." This is just a specious argument, as the text of 512(k)(1) is entirely clear on this point (it defines a service provider as "a provider of online services"). Fortunately, the court emphatically rejected this arugment.
NCSoft has also gone on the offensive by claiming that Marvel infringed its trademark in "City of Heroes" based on Marvel's use of the term "City of Heroes" in some promotional copy on some comic books. The trademark claims survived a motion to dismiss. I'm a little worried about how far NCSoft is trying to stretch its trademark against a slogan use by Marvel, but I support the aggressive response by NCSoft generally. Marvel is quickly learning that there are potential unexpected costs of enforcing its IP rights, and those include counterclaims.
Finally, in an ironic twist, Marvel sought protection under California's anti-SLAPP laws. For reasons too complicated to explain here (as all anti-SLAPP rulings tend to be), the court rejected this effort.
Posted by Eric at 05:44 PM | Copyright , Derivative Liability , Trademark , Virtual Worlds | Comments (3)
July 18, 2005
Virtual Worlds Paper
I have posted the published version of my virtual worlds paper, Speech Showdowns at the Virtual Corral, to SSRN. The abstract:
"This Essay considers the rights of virtual world providers to terminate their customers or otherwise control their worlds. The Essay argues that virtual worlds are not meaningfully different from other online environments and therefore do not warrant virtual world-specific legal rules. The Essay also explains why society benefits by letting virtual world providers decide how much control they want to exercise over their environments."
The first draft of this paper already sparked some conversation in the virtual world community, a fair amount of it critical. See Terra Nova and Second Life Herald. I'm grateful to the commenters for their feedback; I made a number of changes directly in response to the comments.
Posted by Eric at 09:18 AM | Virtual Worlds
May 24, 2005
Compartmentalization v. Immersion in Virtual Worlds
Over the weekend, I heard an interesting presentation by Helene Michel, a business school professor from France. She described the experience with Vacheland.com, a simulation where visitors can manage a virtual farm. The project was initiated by a public agency to increase awareness of farm issues and to help address negative perceptions due to mad cow disease. The thinking was the participants' attitudes would be positively affected by their experiences managing the virtual farm.
On one level, the project is a success, with 320,000 people tending a virtual farm and an active community developing to discuss the game and figure out how to optimize participation.
However, on the more important level, the simulation failed to accomplish its goals. Many participants compartmentalized the experience, distinguishing between their virtual cow/farm and their attitudes towards real cows and farms. The paper has some great quotes explaining that participants clearly segregated the experience in their minds.
This, of course, strikes at the heart of any arguments that virtual worlds are unique/special/different because they are "immersive." In Vacheland, despite the richness of the simulation, there was no blurring of reality and fantasy. Instead, Vacheland occupied a distinct place in the participant's life. If this conclusion holds true in other simulated environments, then we will have to carefully scrutinize any arguments that virtual worlds warrant unique legal treatment because of their immersive quality.
Posted by Eric at 01:05 PM | Virtual Worlds | Comments (3)
March 12, 2005
Copy of Marvel v. NCSoft Ruling
CE Petit has posted a copy of the court’s March 9 opinion in Marvel Enterprises v. NCSoft Corporation (CV 04-9253-RGK). The opinion is rather unremarkable—mostly it deals with motions to dismiss, so the standard for upholding the pleadings is pretty generous. The court does dismiss the contributory and vicarious trademark infringement claims on the basis that Marvel did not allege that the game users were using the character names in connection with goods and services in interstate commerce. I’m surprised Marvel couldn’t find some facts to support this pleading. Given the extensive trading of virtual world characters and items on eBay and elsewhere, I would think Marvel could find something.
Posted by Eric at 03:29 PM | Copyright , Derivative Liability , Trademark , Virtual Worlds
March 11, 2005
Ruling in Marvel v. NCSoft
NCSoft has won some favorable rulings in its lawsuit with Marvel. Marvel sued NCSoft because users could use NCSoft’s software in its City of Heroes MMORPG to generate characters that looked like Marvel characters. From the news/press reports, it appears that the judge struck the direct and contributory trademark claims but left open the direct and contributory copyright claims. I couldn’t find a copy of the ruling either in Westlaw or on the Central District of CA site. If anyone has a copy, I’d be grateful to get it.
UPDATE: See my follow up post.
Posted by Eric at 03:39 PM | Copyright , Derivative Liability , Trademark , Virtual Worlds
February 18, 2005
More on Termination of Virtual World Accounts
Greg Lastowka of Terra Nova blogged on my previous post about termination of virtual worlds accounts. If you’re not familiar with Terra Nova, it is the leading blog on virtual world issues. Good comments over there too. Check out the discussion.
Posted by Eric at 10:00 AM | Licensing/Contracts , Virtual Worlds
February 13, 2005
Termination of Accounts in Virtual Worlds
I attended Santa Clara’s Rules & Borders conference on Friday, and the subject of virtual worlds came up extensively. One issue in particular is continuing to vex me. Some virtual world participants invest significant time and money in their online characters—earning (or otherwise obtaining) virtual money or items, gaining experience/levels, creating or customizing online “property” (such as houses or widgets that are for sale in the virtual economy) and forming social networks. In some cases, participants purchase items, cash or characters with real cash either directly from the provider or in a secondary market like eBay. All of these “investments” can be lost or diminished if a virtual world provider terminates the individual’s account or otherwise changes the rules or environment of the world.
Intuitively, it seems problematic that participants can lose their investments. On the other hand, most (all?) EULAs says a provider can terminate accounts or change rules at any time. Let’s assume that the EULA is properly formed as a contract (i.e., there are mutual manifestations of assent). With a EULA like this, there seems to be a conundrum: the participant has invested time/money in a world in which the fundamental ground rules appear to provide no protection for those investments. Given the shaky foundation, why should we care if participants in fact lose those investments?
I’ve been trying to think of other circumstances where a customer’s investments in a vendor relationship are protected even if the contract clearly says that the vendor may terminate the contract for convenience. I have been able to think of only two examples of this:
· franchise agreements. Franchising programs involve the sale of a business and share a lot of similarities with other sales of securities. As a result, many state laws limit franchisors’ rights to terminate the franchise as a way to protect the franchisees’ investments in the business.
· distributor protection laws. Some states restrict a manufacturer’s rights to terminate distributors of their products. Like franchise laws, these distributor protection laws implicitly protect investments made by distributor in the distribution business.
There are, of course, other ways in which a contracting party’s termination rights may be limited beyond the contract terms, such as rescission rights for fraud or other remedies for marketing misrepresentations. In addition, there may be statutory limits on a vendor’s ability to fire a customer for illegitimate reasons (such as racial or gender discrimination).
One other analogy comes to mind, even though it’s not a classic vendor/customer relationship—the laws limiting employment termination at will. In some (increasingly rare) cases, laws limit an employer’s right to terminate an employee at will. While these laws do not explicitly protect an employee’s “investment” in the relationship, they do so implicitly (protecting out-of-pocket and opportunity costs incurred by the employee by joining the employer).
I am sure there are other situations that limit a vendor’s ability to terminate a customer for convenience. I’m opening comments on this post—if you can think of any, please speak up.
However, for now I’m struck by how rarely the law protects a customer’s investment in a contract relationship when the relationship says that the contract may be terminated for convenience. The general approach seems to be that customers who make those investments without a solid contract footing are making speculative investments.
The recent Second Circuit opinion in Hall v. Earthlink Networks provides a good case study. Hall opened up a personal Earthlink account (not to be used for business purposes). Earthlink’s backbone provider erroneously notified Earthlink that Hall’s account was sending spam, so Earthlink terminated the account and put the account on the spam watch list. Hall’s lawsuit for breach of contract and breach of implied covenant of good faith and fair dealing got zero traction (although, interestingly, the court didn’t even discuss the EULA to dismiss the complaint).
As the case illustrates, Hall was told not to use his email account for business purposes, did so anyways, had his economic expectations frustrated when Earthlink did exactly what it said it could do in its EULA, and walked away empty-handed in court. Is there any reason why should we treat virtual world participants any differently? If the EULA clearly says that all investments the participant makes are at their risk, I’m struggling to think of any reason why we should be sympathetic when, in fact, the participants lose those investments.
Posted by Eric at 11:03 AM | Licensing/Contracts , Virtual Worlds