Craigslist’s Anti-Consumer Lawsuit Threatens to Break Internet Law–Craigslist v. 3Taps/Padmapper (Forbes Cross-Post)

By Eric Goldman

Craigslist, Inc. v. 3Taps, Inc., 2013 WL 1819999 (N.D. Cal. April 30, 2013)

Craigslist is one of the best examples of the Internet’s sharing economy.  Craigslist improves markets by helping buyers and sellers find each other.  Remarkably, it offers most of its matchmaking services for free, reducing transaction costs to matching buyers and sellers and expanding the zone of potential matchmaking.

Given all of the ways Craigslist makes our lives better, I find it disheartening when Craigslist takes steps that aren’t clearly in their users’ interests–especially when Craigslist initiates a lawsuit (as opposed to defending lawsuits brought against it).  Craigslist displays a mean streak as a plaintiff.  Worse, Craigslist demonstrates zero sensitivity to the potential adverse consequences to Internet law from its litigation.

Craigslist’s lawsuit against 3Taps, Padmapper and Lovely is one of Craigslist’s overreaching anti-consumer lawsuits.  Padmapper, for example, offered a service that enhanced the searchability of Craigslist’s listings—a valuable and user-friendly complement to Craigslist’s weak searchability.  Yet, Craigslist technologically attempted to shut down these useful-to-consumer services; when that failed, Craigslist went to court.

In late April, the court issued a ruling largely refusing to dismiss Craigslist’s lawsuit.  This ruling is not only bad for consumers, but it is bad for Internet Law—in the sense that Craigslist is creating legal precedent that other websites can use in the future for anti-competitive/anti-consumer purposes.  Some of the opinion’s most troublesome conclusions (note: for this ruling, all inferences were drawn in Craigslist’s favor):

* Craigslist properly stated a claim for violations of the Computer Fraud & Abuse Act because it sent the defendants “cease-and-desist” letters and IP address-blocked 3Taps (who allegedly supplied Craigslist data to the others).  This ruling bends basic legal principles.  Cease-and-desist letters are often the sender’s wish-lists, so it’s odd to see the court treat the letter’s requests as legally binding obligations.  Furthermore, the defendants other than 3Taps didn’t take data from Craigslist’s servers (3Taps did), yet somehow they are still facing potential liability for misusing Craigslist’s servers.  Does this mean Craigslist (and other server operators) can control data that is housed on its servers but it doesn’t own, even if the data isn’t gathered from its servers directly?  If followed in other cases, this ruling could have profound effects on data movement on the Internet.  (This is a good example of why I generally object to the Computer Fraud & Abuse Act as a server protection statute).

The court also survived the common law trespass to chattels claim on the bare unsupported assertion that the defendants had consumed some of its chattel’s capacity—exactly the kind of non-injury that the California Supreme Court rejected in Intel v. Hamidi because broad trespass to chattels doctrines threaten the Internet’s architecture (after all, we necessarily use other people’s computers as part of using the Internet).

* the court said that Craigslist successfully acquired an exclusive license to the copyright in users’ advertisements for a short period of time, and thus Craigslist could enforce that copyright interest.  It’s a terrible and anti-competitive practice for a classified advertising website to claim exclusive copyright interests in its advertisers’ ad copy.  Read literally, advertisers violate Craigslist’s copyright interests by displaying their ad copy at any other online publication.  Want to simultaneously post a photo of an item for sale on eBay and Craigslist?  Craigslist’s position is that you would infringe its copyright by doing so.  It’s like NBC saying that advertisers must prepare unique commercials that can’t run on ABC, CBS or Fox.  Could you imagine the TV networks trying such stunts with advertisers?

Further, advertisers want buyers for their goods and services, so generally it benefits advertisers for their advertising to reach as many buyers as possible.  Here, the court green-lights Craigslist’s efforts to restrict the widespread dissemination of its advertisers’ ads and circumscribe the potential buyers who see the ads.  This doesn’t benefit either the advertisers, the other publications that would republish the ads, or potential buyers who don’t get to see the ads.  The only “winner” in this scheme is Craigslist.

* the court says that Craigslist could claim a separate copyright interest in its taxonomy for ads, which is organized “‘first by geographic area, and then by category of product or service,’ with these categories organized in ‘a list designed and presented by craigslist.’”  Normally, copyright law does not protect a thin and obvious taxonomy based on geography and product categories, and the court’s willingness to do so here likely will encourage other anti-competitive efforts to protect taxonomies.

This ruling reminds me of the dreadful 2007 ruling in Ticketmaster v. RMG, where a court spanked a ticket broker for using automated means to jump the electronic buying queue and snap up scarce tickets to the inexplicably popular Hannah Montana/Miley Cyrus concert.  To reach the result it wanted, the court twisted and contorted a half-dozen Internet law doctrines, leaving a jurisprudential mess in its wake.  Similarly, even if subsequent opinions in the 3Taps case reach more sensible results, last month’s initial ruling paves the way for more problems for the entire Internet community.