YouTube Defeats Lawsuit Over Cryptocurrency Scam–Ripple v. YouTube

Ripple Labs developed a cryptocurrency called XRP. Scammers phished verified YouTube accounts and then used the hijacked accounts to post YouTube videos–seemingly from Ripple–inducing consumers to transfer their XRP, where they were stolen. YouTube allegedly responded to takedown notices slowly. Ripple Labs and its CEO Brad Garlinghouse (of the Yahoo Peanut Butter manifesto infamy) then sued YouTube for contributory trademark infringement, publicity rights violations, and 17200. The court dismisses the claims.

Contributory Trademark Infringement. The court says that the complaint doesn’t adequately distinguish between Ripple’s trademark NOCIs and publicity rights NOCIs. That should be easy enough to fix in an amended complaint.

The court also says YouTube’s alleged delays in responding–“a week, several weeks, around two months”–was shorter than other courts had found actionable. Cite to Spy Phones v. Google. Undoubtedly, two months of delay, or even several weeks, would be far too long to retain eligibility for the DMCA safe harbor. Apparently, the additional turnaround time reflects structural differences between online marketplaces and YouTube. The court explains:

it might be reasonable to hold eBay to a tight time period to discontinue its services to someone selling fake Tiffany or Louis Vuitton products: eBay and its vendors have a business relationship, and eBay can terminate a vendor easily. eBay also derives revenue from the relationship. And if eBay delays an investigation and a takedown, there might be fact issues about whether it purposefully or unjustifiably did so, presumably for self-serving reasons….

An online social-media platform’s delay in investigating and removing scams like the one here is not obviously analogous to the marketplace’s delay. Investigating a scam — involving phishing and hijacked user credentials — is (at minimum) different and likely more complicated. For one, YouTube does not control a hacker in the same way that a marketplace controls a vendor’s ability to sell on the platform. Also, YouTube’s investigation involves legitimate YouTube users and a persistent, evolving scam creating “more victims by the day.” Its investigation differs in scope from the marketplace’s investigation of its vendor. The impact of notice (or in the language of the cases, “contemporary knowledge” of infringement) is different too. When a marketplace knows about infringing products, it can terminate the infringing vendor. The only thing that matters is notice of the trademark infringement. But when YouTube learns about hacked content that includes trademarked content, the scope of its inquiry also is about protection of data and its users and eliminating the scam.

Moreover, YouTube does not provide services to or profit from a hacker in the same way that a marketplace provides services to and profits from a vendor. In some ways, it too is a victim of the hijacking. Its revenues from ads are not obviously equivalent to revenues resulting from a business contract between a marketplace and a vendor.

Section 230. Section 230 eliminates the publicity rights and 17200 claims because they are based on the scam videos uploaded by third parties. The plaintiffs claimed that YouTube contributed to the scam because it had verified the YouTube channels. The court said the scam turned on the videos, not the verification. The court also dismissed a frivolous argument that showing the number of video views constituted content development.

Interestingly, the court doesn’t address Section 230’s applicability to publicity rights claims; it just silently assumes that Section 230 applies. This makes sense because the court is governed by the 9th Circuit’s ccBill case, which says that Section 230 applies to state IP claims–like publicity rights. See also the Hepp case.

Case citation: Ripple Labs Inc v. YouTube LLC, 2020 WL 6822891 (N.D. Cal. Nov. 20, 2020). The complaint.