Although this case is a little old, Eric and I think it still is worth discussing, as E-SIGN cases have been few and far between.

E-SIGN is the fundamental law upon which electronic financial transactions have been based. Prior to its enactment in 2000, there were a growing number of inconsistent state laws, some of which prescribed specific technology, determining when and how electronic signatures or electronic documents would be enforceable. There was also concern about how to amend thousands of state laws which require certain documents to be “in writing” and/or “signed.” The elegance of E-SIGN is in its simplicity and in its uniformity. E-SIGN overrides all of these state laws, by stating that a record cannot be denied effect solely because it is delivered electronically, and a signature cannot be denied effect solely due its electronic nature, so long as certain other requirements are met. E-SIGN also provides uniformity in its application, which allows businesses to conduct transactions across the country without having to comply with the laws of all 50 states.

The case itself involves a rather routine consumer transaction. Capital One Auto Finance obtained Blatt’s authorization over the telephone by having him listen to a recording of detailing the terms of his authorization, and then having him press “1” to agree to automatically debit monthly payments from his bank account. (E-SIGN permits an electronic signature by a “process,” such as a mouse click or pressing a digit on a telephone, to manifest assent). Two days later, Capital One sent a letter to Blatt via United States mail confirming the terms of the authorization.

That should have been where things ended. But for some reason, Blatt (or, more likely, his attorneys) decided to file a class action suit, claiming that Capital One violated the federal Electronic Funds Transfer Act (EFTA), 15 U.S.C. §1693 et seq., which governs proper authorization of electronic fund transfers. Blatt claims that: (1) Capital One did not obtain Blatt’s authorization to the recurring payments in writing, as EFTA requires; and (2) the letter capital One mailed to Blatt was insufficient to meet EFTA’s requirement that Capital One mail a copy of the authorization to him.

The relevant part of EFTA is found in Section 1693e(a): “A preauthorized electronic fund transfer from a consumer’s account may be authorized by the consumer only in writing, and a copy of such authorization shall be provided to the consumer when made. Regulation E  implements and contains official interpretations of EFTA. Regulation E allows for the consumer’s written authorization to be provided electronically, so long as the electronic authorization complies with E-SIGN.

This is where E-SIGN comes in. Blatt stipulated that his electronic signature was valid, but argued that his electronic consent to the recurring payments was invalid because Capital One failed to comply with a portion of E-SIGN requiring certain consumer disclosures. Section 7001(c) of E-SIGN states that “if a statute … requires that information relating to a transaction … be provided or made available to a consumer in writing, the use of an electronic record to provide or make available … such information satisfies the requirement that such information be in writing” if Capital One provided Blatt with certain disclosures. These disclosures generally address the consumer’s right to have the information be made available in paper form, and to withdraw consent to receiving the information electronically.

The Court quickly rejected this argument. The Court noted that the Section 7001(c) disclosure requirements may have applied to Blatt’s situation had Capital One provided Blatt with a copy of his authorization electronically, but this was not the case. Capital One obtained Blatt’s signature electronically, and then provided Blatt with confirmation of his authorization (the “information relating to the transaction” for purposes of ESIGN) in paper form, so the disclosures required by Section 7001(c) of E-SIGN were not required.

(Because the Court rejected this argument, the decision does not address the more interesting question of the consequences of failing to comply with E-SIGN’s disclosure provisions. Section 7001(c) is silent as to the consequences of failing to comply with the disclosure. Presumably, failure to comply would have prevented Capital One from relying on E-SIGN as the legal basis for satisfying the requirement of EFTA that the information be provided or made available in writing. But even if Capital One had failed to comply with E-SIGN, Capital One could still argue that one needs to look at EFTA to determine whether the circumstances constituted “a writing” for purposes of EFTA and, if not, the legal effect of such failure.)

Blatt’s next argument that Capital One did not provide him with “a copy of such authorization … when made” also failed. The Court held that the “when made” requirement does not require contemporaneous disclosures. Although the Court declined to establish a bright line definition of “when made,” the Court found that Capital One’s mailing the letter two days after authorization is sufficient.

Finally, the Court rejected Blatt’s argument that the words “a copy” means that the copy of the authorization called for by EFTA needs to be in the same format and restate verbatim the same words and phrases from Blatt’s telephone conversation. The Court found that EFTA does not require that the copy be provided in the same form in which the authorization was obtained, nor that the letter must recite the exact words used in the telephone conversation. That the copy of the authorization that Capital One mailed to Blatt contained the amount of the payments to Capital One, the recurring schedule of the payments, the date of which Blatt agreed to the terms electronically, and information on how to cancel or change his direct pay enrollment, was sufficient to meet Capital One’s duty under EFTA that Capital One provide Blatt a copy of his authorization.

Comments

One wonders why this case was brought in the first place. Since 2000, financial institutions have relied on E-SIGN to build systems to allow for telephonic and electronic payment systems and authorizations. Blatt’s attempts to read new requirements into the law failed. As the Court found, the plain language of E-SIGN and EFTA permits Capital One’s authorization process. But it is still nice to have a decision affirming that the statute means what it says. The Court’s ruling also prevents major disruption in payment systems, and confirms the validity of commonly used practices in the financial services industry.

Case Citation: Blatt v. Capital One Auto Finance, Inc., Case No. 2:15-CV-0015 (M.D. Tenn. Feb 17, 2017)

Related Posts:

• Email Exchange Creates Binding Settlement Agreement Per UETA
• Can a Copyright Be Assigned by Email?
• Online Insurance Application Constitutes “Writing” for Purposes of Waiving Insurance Coverage for Medical Benefits
• E-SIGN Prevents Enforcement of Emailed Contract Terms
• Can a Spider Enter Into a Binding Contract?
• When in Doubt, Spell It Out-The Hazards of Using E-Mail to Amend Contracts

The post E-SIGN and EFTA Permit Telephonic Consent to Automatic Debits with Mailed Confirmation–Blatt v. Capital One (Guest Blog Post) appeared first on Technology & Marketing Law Blog.

Photo credit: Trademark application // ShutterStock

In NetJets, the federal district court cancelled an incontestable, 18 year old registration for INTELLIJET for “computer software for managing aircraft leasing and sales” as void ab initio and as abandoned, even though:

* NetJets had used the mark as the name of its internal software since 1995;

* NetJets had spent over $20 million to upgrade its software;

* NetJets launched a “portal” in 2013 where clients could log in and see the INTELLIJET name displayed on the screen, but the mark was not displayed to non-customers who access the NetJets website;

* NetJets discussed the IntelliJet’s software functionality in newsletters to owners and in literature provided to passengers on its planes;

* NetJets brochures have mentioned the IntelliJets software;

* Several magazine articles about NetJets have mentioned the IntelliJets software;

* NetJets demonstrates the software for customers and potential customers.

The court determined that NetJets did not have enforceable rights in the INTELLIJET mark because it did not use the mark in commerce as the term “use in commerce” is defined in the federal Lanham Act.  Section 45 of the federal Lanham Act, 15 U.S.C. § 1127, defines “use in commerce,” in relevant part:

The term “use in commerce” means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.  For purposes of this Act, a mark shall be deemed to be in use in commerce – (1) on goods when – (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto; or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale; and (B) the goods are sold or transported in commerce …

Key factors in the court’s determination that the use of the INTELLIJET mark on NetJets’ software was not a “use in commerce” were:

* NetJets is not in the business of selling software;

* The IntelliJet software is simply the conduit through which NetJets provides a high level of service to its customers;

* NetJets does not promote the software as a separate product, but only as part and parcel of the services NetJets provides; and

* NetJets does not sell the IntelliJet software separately from the services that NetJets provides.

As a result, the court concluded that NetJets’ use of the INTELLIJET mark is not a “use in commerce” on the software, and cancelled the registration.

The decision is consistent with, and cites, the 2012 Federal Circuit decision in the long-running saga of Lens.com v. 1-800 Contacts. In Lens.com, the issue concerned a registration for the mark “LENS” for use in connection with “computer software featuring programs used for electronic ordering of contact lenses in the field of ophthalmology, optometry and opticianry.” 1-800 Contacts filed a cancellation petition, alleging that Lens.com fraudulently obtained or abandoned the registration of the LENS mark because Lens.com never sold or engaged in the trade of computer software. The Trademark Trial Appeal Board (TTAB) granted summary judgment to 1-800 Contacts on the claim of abandonment because Lens.com’s software was ”merely incidental, to its retail sale of contact lenses, and is not a ‘good in trade,’ i.e., “solicited or purchased in the marketplace for [its] intrinsic value.”” Lens.com, 686 F.3d at 1378. Lens.com appealed to the Federal Circuit, which affirmed the decision of the TTAB.

The decision seems formalistic, but Section 1(a)(2) of the Lanham Act, 15 U.S.C. Section 1051(a)(2), does require that the application contain “specification of…the goods in connection with which the mark is used…” Those who prepare trademark applications regularly are used to being specific and to the Patent and Trademark Office’s strict interpretation of the phrase. As a result of the NetJets and Lens.com decisions, and similar decisions in other courts, a trademark owner that uses software in its business should take care in determining whether to file a trademark application at all to cover the software, and what goods or services are covered in any trademark application that is filed. To be safe, especially in close situations, the trademark owner should consider filing separate applications to register the mark for the software and for the underlying services. This strategy would still provide for registration and protection of the mark for the services in the event that the registration of the mark for software is challenged or cancelled.

Case citation: NetJets Inc. v. IntelliJet Group, LLC, No. 2:12-CV-0059 (S.D. Ohio Dec. 19, 2013)

The post Is It Software? Is It a Service? It Matters for Trademark Registration Purposes appeared first on Technology & Marketing Law Blog.

Forcelli v. Gelco Corp., 2013 NY Slip Op 05437 (N.Y. App. Div. July 24, 2013)

E-Sign and UETA cases have been few and far between to date. Perhaps it is because the laws still are relatively new, having been passed only about fifteen years ago. I like to think it is because the laws are so clear. Either way, it is nice to see a court apply the logic of UETA in a straight-forward manner–such as a recent case where the court confirmed that an email message where the sending attorney “purposefully” added her name, rather than having the program automatically generate a signature, constituted a binding settlement agreement under New York CPLR 2104.

The facts in this case were not really in dispute, and they reflect a common settlement scenario. Both parties in a personal injury suit filed motions for summary judgment, and at the same time entered into settlement discussions. After some back and forth, the attorney for the defendants offered $230,000 to settle the case, and the plaintiffs’ counsel orally accepted the offer on behalf of the plaintiffs. The attorney for the defendants followed up with an email to the plaintiff’s counsel, stating the following:

Per our phone conversation today, May 3, 2011, you accepted my offer of $230,000 to settle this case. Please have your client executed [sic] the attached Medicare form as no settlement check can be issued without this form. You also agreed to prepare the release, please included [sic] the following names: Xerox Corporation, Gelco Corporation, Mitchell G. Maller and Sedgwick CMS. Please forward the release and dismissal for my review. Thanks Brenda Greene.

A few days later, the New York Supreme Court issued an order granting one defendants’ motion for summary judgment and granted the plaintiff’s motion for summary judgment against other defendants. Even though the signed release had been faxed to the attorney for the defendants, the attorney for the defendants whose motion was granted faxed and mailed a letter to the plaintiff’s counsel rejecting the release and stipulation of discontinuance, asserting that there was no binding settlement consummated under New York CPLR 2104, which states that “An agreement between parties or their attorneys relating to any matter in an action . . . is not binding upon a party unless it is in a writing subscribed by him or his attorney.” The Court granted the plaintiff’s motion to enforce the settlement agreement, and the defendant appealed.

The appellate court used a traditional contract analysis, finding that all material terms of the settlement were set forth in the email message and that there was manifestation of mutual assent. This left the court to analyze whether the email message could be considered “subscribed” under the New York statute and, thus, capable of enforcement. The court first discussed several other New York appellate decisions that concluded that email messages can be enforced as settlement agreements under CPLR 2104. Next, the appellate court looked to the legislative intent of the New York State Technology Law (the New York equivalent of UETA), which says

[This act] is intended to support and encourage electronic commerce and electronic government by allowing people to use electronic signatures and electronic records in lieu of handwritten signatures and paper documents

The court concluded that, given the widespread use of email as a form of written communication, it would be unreasonable to conclude that e-mail messages do not qualify under CPLR 2104 simply because they cannot be signed in the traditional pen and ink fashion.

Finally, the appellate court looked to Section 302(3) of the New York State Technology Law, which sets forth the familiar UETA definition that a “‘electronic signature’ shall mean an electronic sound, symbol or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.” The court concluded that the defendant’s attorney “purposefully” added her name to this particular email message, such that the e-mail message could be deemed a “subscribed” writing within the meaning of CPLR 2104 and thereby constitute an enforceable agreement.

Some additional thoughts:

• The practice point here is clear: If you do not want to be bound by email messages and negotiations, it is simple enough to add a disclaimer to your emails that negate any intent.

• More and more courts are accepting that electronic communications are analogous to physical communications, and that, given the ubiquity of electronic documentations, these should be no difference in legal effect. This was the original purpose of E-Sign and UETA, and the courts seems to be getting it.

Related Posts

* Multiple Listing Service Gets Favorable Appellate Ruling in Scraping Lawsuit

* Can A Copyright Be Assigned By Email?–Hermosilla v. Coca-Cola

* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract — CX Digital v. Smoking Everywhere

* Email That Says “Done .. thanks!” Doesn’t Transfer Copyrights – MVP Entertainment v. Frost

* Online Insurance Application Constitutes “Writing” for Purposes of Waiving Insurance Coverage for Medical Benefits–Barwick v. GEICO

* E-SIGN Prevents Enforcement of Emailed Contract Terms–Buckles v. Investordigs

* Campbell v General Dynamics (II)

[Photo credit: A hand comes right out of the laptop screen to shake hands // ShutterStock]

The post Email Exchange Creates Binding Settlement Agreement Per UETA–Forcelli v. Gelco appeared first on Technology & Marketing Law Blog.

Fteja v. Facebook, Inc., No. 11 Civ 918(RJH), 2012 WL 183896 (S.D.N.Y. Jan 24, 2012)

Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Civ. Ct. March 20, 2012)

For over a decade, I have been advising clients and teaching seminars about strategies for making sure online contracts are enforceable. It’s not rocket science. You just have to take traditional contract principles and apply them online. Yet, businesses (and courts) are still struggling with how to do this properly. Given that the consequences of not being able to enforce a contract can be disastrous for a business, you would think that they would take the time to get things right on their websites.

Two recent cases illustrate the problems that the courts are having in determining whether a contract was made in the first place. In one case, the court decided that it would enforce a contract that was accepted when the user clicked a “Sign Up” box, immediately below which was a hyperlink to the terms and conditions. In the other case, the court refused to enforce an agreement where the terms were accessible only after several clicks through some hard-to-find and less-than-obvious links.

Fjeta v. Facebook (See Eric’s blog post on this case)

In the Fjeta case, Fteja brought a lawsuit against Facebook, claiming that Facebook discriminated against him and disabled his account improperly because he is a Muslim. Although Facebook’s Terms of Use require that lawsuits be brought in a state or federal court located in Santa Clara County, California, Mr. Fteja brought the suit in the New York state courts. Facebook removed the suit to the federal district court in Manhattan, and then moved to transfer the case to California, arguing that the Terms of Use constitute a binding and enforceable contract.

One would expect that Facebook has a good sign-up process in place, although the process described by the court is different from the one currently in place on its website. According to the court, the user is asked to fill out several fields containing personal and contact information, then click a button that reads “Sign Up.” After clicking this initial “sign up” button, the user sees another page entitled “Security Check” that requires the user to re-enter a series of letters and numbers displayed on the page. Below the box where the user enters the information, the page displays a second “Sign Up” button similar to the button the user clicked on the initial page. The following sentence appears immediately below that button: “By clicking Sign Up, you are indicating that you have read and agree to the “Terms of Service.” The phrase “Terms of Service” is underlined and is linked to another page with the Terms.

[John’s Note: Facebook may have changed its Sign Up protocol in the interim. Now, the initial “Sign Up” button is immediately below the following sentence: “By clicking Sign Up, you agree to our Terms and that you have read and understand our Data Use Policy.” The phrases “Terms” and “Data Use Policy” are linked to the applicable provisions.]

Although this method of obtaining assent has been upheld in a number of cases, the hyperlink to the Terms of Use gave Judge Holwell reason to pause. Because the terms of use were not displayed on the same page as the “Sign Up” button, but were only available through the link, the judge likened Facebook’s Terms of Use to a “browsewrap” agreement, where the terms and conditions are posted on the website as a hyperlink at the bottom of the screen. But then he reasoned that the terms of use were still more like a “click-wrap” agreement, because the user had to “Sign Up” and affirmatively click the button to manifest agreement to the Terms of Use. Eventually, the judge concluded that the link to the terms of use is no different than having terms and conditions printed on the reverse side of a cruise ticket or a paper contract, found that Facebook’s terms were enforceable, and ordered the case transferred to California. But he took a long, meandering and unneccesary route to get there . . . he would have been better off sticking to traditional contract principles and following the analysis below.

Jerez v. JD Closeouts

This case involves a dispute over the purchase of 50,000 pairs of white tube socks. Mr. Jerez, a New York resident, apparantly was unhappy with his $7,146 purchase of the tube socks, and sought a refund in the New York courts. JD Closeouts argued that the suit should have been brought in Florida, because of the forum selection clause in its Terms of Sale. According to the decision, the website’s “Terms of Sale” containing the forum selection clause were found by clicking a link on its “About Us” page.

Here, the court refused to enforce the forum selection clause. After reviewing a number of cases enforcing and refusing to enforce online terms and conditions (including the Fjeta case above), the court found that this case was more like the situation in Specht v. Netscape Communications Corp., “where ‘submerged’ website provisions were found insufficient to bind the company’s customers.” The court found that in this case the existence of the forum selection clause was not “reasonably communicated” to the buyer through a printed contract, a confirming letter agreement incorporating the terms by reference, or a “click-through” acceptance of hyperlinked terms and conditions. Because the forum selection clause was buried and submerged on a webpage that could only be found by clicking on an inconspicuous link on the seller’s “About Us” page, the court refused to enforce the forum selection clause.

Analysis

Both courts seem to have reached the correct result. Facebook could have been a little safer by having the terms and conditions on the same page as the “Sign Up” button rather than a hyperlink. But the practice of disclosing the terms through a hyperlink is not uncommon, and so long as the hyperlink reasonably lets the purchaser know that there are terms and conditions that he or she should read, then courts will generally find an enforceable contract in this situation. The terms in the Jerez case were just too obscure and hard to find. Even a seasoned Internet contract attorney like me would not necessarily think to look on the “About Us’ page for terms and conditions if they are not otherwise mentioned on a website.

The judge in the Facebook case seemed to have a hard time classifying the contract as a “click-wrap,” a “browse-wrap,” or a hybrid. In actuality, he need not have spent so much time, because the same contract formation rules apply no matter the classification.

Several colleagues and I wrote a paper a few years ago entitled “Browse-Wrap Agreements: Validity of Implied Assent in Electronic Form Agreements” (59 Business Lawyer 279 (2003)), in which we set forth a four-part test for courts to use in determining whether a user has validly assented to the terms of a browse-wrap agreement: (1) the user is provided with adequate notice of the existence of the proposed terms; (2) the user has a meaningful opportunity to review the terms; (3) the User is provided with adequate notice that the taking of a specified action manifests assent to the terms; and (4) the user takes the action specified in the notice. Subsequently, we have determined that the test applies not only to browse-wrap agreements, but is applicable to determining valid assent for ALL agreements, whether on-line or in the physical world.

While the two court decisions discussed above did not cite our article or explicitly use our test, maybe they will do so in the future if the decisions are appealed. It would help cut through a lot of the confusion caused by trying to categorize a practice as a “click wrap” or a “browse wrap” or something else. There is simply no need to make a distinction for purposes of determining whether an enforceable contract has been created.

(Originally posted at the Business + Intellectual Property + Internet Law blog.)

The post Courts Struggling Needlessly With Online Contracting Practices (Guest Blog Post) appeared first on Technology & Marketing Law Blog.

Vergara Hermosilla v. The Coca Cola Company, No. 11-11317 (11th Cir. Nov. 3, 2011).

Can a copyright be assigned by an exchange of emails? Section 204(a) of the Copyright Act provides that a transfer of copyright ownership is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or by such owner’s duly authorized agent. The 11th Circuit has recently affirmed a lower court’s decision that an exchange of emails was sufficient to constitute a contract to assign a copyright. The court’s decision, however, does not seem to adequately address whether the email exchange satisfies the “writing” requirement in Section 204.

Background

The dispute arises out of Coca Cola’s worldwide marketing campaign for the 2010 FIFA World Cup soccer tournament. As part of its advertising campaign, Coca Cola enlisted recording artist K’Naan to create a new version of his song “Wavin’ Flag,” and called the new version the “Celebration Mix.” Coca Cola had certain lyrics in the “Celebration Mix” adapted and sung in different languages by local artists and K’Naan. In 2009, Coca Cola contacted Jose Puig, a representative of Universal Music Latin America, to produce a Spanish version of the Celebration Mix. The Spanish lyrics were to be sung by David Bisbal, a Spanish language singer. Puig was referred to the plaintiff, Rafael Vergara Hermosilla, in November 2009. Vergara adapted the Celebration Mix into Spanish, and subsequently delivered the Spanish lyrics to Puig in December 2009. A dispute later arose over Vergara’s compensation for the adaptation.

Puig and Vergara negotiated a settlement. After a phone conversation about the terms of the deal, Vergara wrote this email:

[B]ecause I am a man of my word and honor, that is not moved by economic motives, my only request is the my credits are respected as producer and adapter of the Spanish version (that every time the name of any composer of this version appears, my name appears as adapter), and obviously, the credits for the production that are detailed in the invoice sent for this production, which I have detailed below.

For the adaption, you may consider it a work for hire with no economic compensation to that respect. I believe what’s legal is a dollar.

I hope this leaves clear what my work was and what my good intentions were from the beginning.

The next day, Puig responded by email to Vergara to the effect that “You can count on the credits on the track. I am resending you the contract.”

Puig subsequently sent draft contracts confirming the assignment, but inadvertently omitted the provisions that would give Vergara the credits. So Vergara rejected what he characterized as his “proposal” and filed a lawsuit in the Southern District of Florida to enjoin Coca Cola from using the Spanish version of the Celebration Mix without giving him proper credit.

After initially enjoining Coca Cola in May 2010 from disseminating the Spanish version of the Celebration Mix without giving credit to Vergara as the adapter, in February 2011 the District Court granted a summary judgment in favor of Coca Cola. The district court found that the e-mail exchange constituted an assignment by Vergara of his copyright in the adapted lyrics. The court characterized the exchange of emails as an offer and acceptance, “and at that moment the deal was made irrevocable.” The court determined that Puig’s sending of formal contracts that did not reflect all of the terms of the earlier emails was not a “counteroffer which is labeled as an acceptance, but adds new terms” (which typically is not binding under Restatement (Second) of Contracts §59), but was an offer to modify an existing contract. Although Vergara rejected this offer, the court found that this did not impact the initial agreement to assign the copyright.

In a brief aside, the district court also recognized that Section 204 of the Copyright Act requires a signed writing for a conveyance. However, the district court simply noted without discussion that “Courts have found emails to constitute signed writings.” (citing Lemel v. Mattel, Inc., 394 F.3rd 1355 (Fed. Cir. 2005) and the federal E-Sign Act).

11th Circuit Decision

The 11th Circuit opinion is relatively short and to the point. After reciting the facts, the 11th Circuit found that, under Florida law, “the record established without dispute that Vergara assigned his copyright interests to Universal.” The court used a traditional contract analysis to characterize Vergara’s e-mail as an offer and Puig’s e-mail as an unconditional acceptance, which together were effective to create a contract.

Discussion

Unfortunately, while the 11th Circuit found that the e-mail exchange constituted a binding contract under Florida law, the court did not address whether the e-mail exchange constituted a “writing” for purposes of Section 204 of the Copyright Act. Prior to the adoption of the E-Sign law, courts differed as to whether an e-mail exchange would satisfy the writing requirements of Section 204. Section 7001(a)(2) of the federal E-Sign Act, which was enacted in 2000, provides in relevant part that “a contract relating to [a transaction in or affecting interstate or foreign commerce] may not be denied legal effect, validly or enforceable solely because an electronic signature or an electronic record was used in its formation.”

Few courts have addressed what consitutes a “writing” for purposes of E-Sign. Earlier this year, the Arkansas Supreme Court found that a waiver of coverage in an online insurance application constitutes a “writing” for purposes of the Arkansas insurance law requirng such waivers to be in writing. In 2010, the federal district court in Colorado found that an e-mail summary of a settlement meeting could consitute a “writing” for purposes of the Colorado Statute of Frauds, but that the summary could not be enforced as a contract because it was written by an administrative assistant and was not “subscribed by the party to be charged.”

But does E-Sign apply to transactions involving transfers of copyrights? Professor Nimmer notes that “[n]othing about the ESIGN Act overtly mentions copyrights in particular or other federal enactments in general.” He further notes that E-Sign does purport to apply “to any transaction in or affecting interstate or foreign commerce,” with some exceptions. It remains to be seem, then whether courts will treat e-mail as having sufficient formalities to satisfy the writing requirement in Section 204 of the Copyright Act.

The 11th Circuit decision also ignored the fact that Vergara’s email characterized the adaptation as a “work made for hire.” Would the decision have come out any differently if analyzed under the “work made for hire” provisions? Probably not. Under Section 101 of the Copyright Act, certain works qualify as a work made for hire if “the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” The court did not discuss the question whether the adaptation qualified as one of these specially ordered works (at best it might be viewed as a part of an audio visual work, or as a translation, but probably not). Even if the adaptation did qualify as a work that could potentially be a “work made for hire,” does the exchange of emails constitute “a written instrument signed by them?” I find it harder to classify the exchange of e-mails as an “instrument’ within the meaning of the work made for hire definition. This may be why the 11th Circuit decided the issue on contract grounds, but it would have been nice to have some analysis of this issue.

_________

Comment from Venkat:

This is a great post by John that delves into the interplay between the federal ESIGN Act and the Copyright Act. I wonder whether an email disclaimer would have affected the analysis. There’s been a lot written on the efficacy and the desirability of email disclaimers in other contexts, but I wonder if an email disclaimer that said

Nothing in this email is intended as an offer and the author disclaims any intention to make an offer or create an enforceable agreement through any email messages. Any agreement with the author of this email must be in a signed paper document!

would have protected Hermosilla? I’m guessing the court would have said that Hermosilla’s unequivocal intent to reach an agreement trumped anything in an email disclaimer. It may not have been useful here, but it would be useful in other contexts, such as where people exchange email messages in an attempt to settle a dispute and one party tries to use an email along the way to say that the parties reached a settlement and tries to enforce a settlement on this basis. I’m not a fan of email disclaimers, but this type of a disclaimer may be worth exploring.

_________

Eric’s comments.

To me, the legal doctrine in this case seems pretty straightforward. If the parties formed a contract or did a proper contract amendment, the fact that the contract was made via email should satisfy the Section 204 “writing” requirement per E-SIGN/UETA. After all, Section 204 is a statute of fraud, and E-SIGN/UETA were designed to say that emails satisfy the statute of frauds. See, e.g., the many real estate cases reaching this result and John E. Theuman, Satisfaction of Statute of Frauds by E-Mail, 110 A.L.R.5th 27 (2003). I don’t see any reason why copyright law would be handled differently under E-SIGN or UETA. My analysis is the same for the “work for hire” statute of fraud.

For me, the harder part is whether the email exchange properly formed a contract/contract amendment and, if it did, if Coca-Cola (or its assignor) violated one of the contractual conditions such that their failure to perform negated the contract. If this situation didn’t have a whiff of the content creator changing his mind with venal intent, I think other courts might have been more sympathetic on that point.

The post Can A Copyright Be Assigned By Email?–Hermosilla v. Coca-Cola appeared first on Technology & Marketing Law Blog.

Barwick v. Government Employee Insurance Co., Inc., 2011 Ark. 128 (March 31, 2011) [link]

Although 47 states, the District of Columbia, Puerto Rico and the Virgin Islands have adopted the Uniform Electronic Transaction Act (UETA), we have had very few cases discussing or interpreting UETA. Here, we have a case where the court is asked whether a waiver in an online insurance application is a “writing” for purposes of a state insurance law that requires coverage waivers to be in writing.

The facts are fairly simple. In 2009, a woman (who subsequently married the plaintiff) purchased automobile insurance coverage online at GEICO’s website. In the online application, the woman rejected coverage for medical benefits as permitted under Arkansas law. The online form bore the woman’s electronic signature. In a discovery deposition, the woman also acknowledged that she completed the form on the website, that she did not select the coverage for medical benefits, and that she signed the application electronically.

The lower state court granted summary judgment to GEICO and dismissed the husband’s claim for medical benefits. On appeal, the husband argued that the electronic application containing his wife’s electronic signature did not meet the requirement that a rejection of coverage be “in writing” under the terms of Arkansas Code Annotated Section 23-89-203 (Repl. 2004). The husband argued that because a general statute does not apply when a specific one governs the subject matter, the insurance statute requirement that the waiver of coverage be “in writing”, takes precedence over the more general provisions in the UETA. He also argued that pressing a computer button did not constitute a “writing” for purposes of waiving coverage.

The Arkansas Supreme Court reviewed the history of UETA and noted that Arkansas had adopted UETA in 2001 to facilitate electronic transactions. The court found that the online application was an “electronic record” under UETA. The Court also found that there was no conflict between the insurance statute and UETA, and that the two provisions can be read “harmoniously” to mean that an electronic record can fulfill the requirement of written rejection for coverage. As a result, the Arkansas Supreme Court affirmed the lower court’s grant of summary judgment to GEICO.

A few thoughts:

• The court’s analysis is straightforward and correct. One would think that the legal issue is obvious, but there have been very few cases interpreting UETA to date (perhaps because the statute is so simple?). UETA was drafted so that the state legislators did not have to amend the numerous statutory requirements for “writings” in each statute. Instead, UETA provides a global approach that a record or signature may not be denied legal effect or enforceability solely because it is in electronic form, and a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation. But it’s nice to now have a case to point to when a client questions the validity of online agreements.

• GEICO also argued that the plaintiff should be estopped from questioning the validity of the electronic waiver of coverage, because he is also seeking to benefit from the insurance policy obtained throughout the online application. Because the court dismissed the appeal on the UETA grounds, it did not need to address the estoppel argument.

• There do not seem to be any evidence issues in this case. The woman in question did not deny that she completed the online application and affixed an electronic signature. She also gave a deposition testimony that she completed the form on the website, that she and did not select coverage for medical benefits, and that she signed the application electronically. Query whether or not the court would have denied summary judgment if any of these facts had been in dispute.

• Unlike the court in Colorado last year, the Arkansas Supreme court correctly determined that EUTA, and not the federal Electronics Signatures In Global and National Commerce Act (commonly known as “E-Sign”), applies to this case. E-Sign has a peculiar “reverse preemption”. E-Sign governs in the absence of a state law or in states that made modifications to UETA that are inconsistent with E-Sign. In effect, Congress forces a state to adopt UETA in a uniform manner, by providing that the state version of UETA controls over E-Sign if UETA is adopted without modification. Here, Arkansas appears to have adopted UETA without any significant modifications, so UETA’s provisions should govern questions of contract formation and enforceability in Arkansas.

See also this brief post on a Federal Circuit UETA case.

The post Online Insurance Application Constitutes “Writing” for Purposes of Waiving Insurance Coverage for Medical Benefits–Barwick v. GEICO appeared first on Technology & Marketing Law Blog.

*John Ottaviani is a partner in the firm of Edwards Angell Palmer & Dodge, LLP, and is an occasional guest blogger. The opinions expressed are his own, and are not attributable to his Firm, to Eric Goldman or to any other organization.

Doninger v. Niehoff, No.09-1452-cv (L) (2d Cir. Apr. 25, 2011)

Maybe it’s just a sign of the times. Why would anyone spend four years and who knows how much money making a federal case over a high school’s refusal to permit a girl to run for Senior Class Secretary in response to her off-campus blog post in which she called school officials “douchebags”? If the Internet had been around when we were in high school and I did something like that, my parents would have ensured that my consequences would have been swift and immediate, and most likely physically painful.

Background

The basic facts are not too complicated, although there are differing accounts as to some of the facts. In the Spring of 2007, Ms. Doninger (then a junior at Lewis S. Mills High School in Burlington, Connecticut) and other Student Council members were planning an annual battle-of-the-bands concert called “Jamfest.” Several days before the event, the students were told that the concert would either have to be moved to the smaller cafeteria or rescheduled, due to the unavailability of the teacher responsible for operating the school’s sound and lighting equipment in the auditorium.

Acting like typical teenagers with no impulse control, the students (including Ms. Doninger) accessed a personal e-mail account from the school’s computer lab (in violation of a written school policy) and sent a mass e-mail alerting parents, students and others that the concert could not be held in the school auditorium and urging them to contact the administration and ask that the students be allowed to use the auditorium.

Some facts are in dispute about what happened later that day when the school’s principal met with Ms. Doninger. The principal claimed that she told Ms. Doninger that the e-mail was inaccurate, that the student’s could hold the concert in the auditorium at a later date if they did not want to use the smaller cafeteria, and that Ms. Doninger’s conduct was unbecoming of a class officer. Ms. Doninger’s version is that the principal cancelled the concert, with the possibility of rescheduling later “if [the students] play [their] cards right,” and that the principal said nothing about her responsibilities as a class officer.

What is undisputed is that Ms. Doninger went home that night and posted an entry on her LiveJournal blog in which she advised that “jamfest is cancelled due to douchebags in central office …” and urged parents and students to contact the superintendent and principal “to piss her off more.”

A few weeks later, when Ms. Doninger met with her principal to accept her nomination for Senior Class Secretary, the principal asked her to withdraw her candidacy because her behavior violated the principles governing student officers set out in the school’s student handbook. The principal refused to let Ms. Doninger’s name appear on the ballot, to let her speak at a school assembly regarding the election, or to let students wear T-shirts promoting Ms. Doninger’s candidacy. Apparently, Ms. Doninger still won the election with a plurality of the votes cast, but she was not allowed to serve. Ms. Doninger was not otherwise disciplined or suspended from school at any time.

Ms. Doninger’s mother filed a complaint in 2007 in Connecticut state court, alleging violations of Ms. Doninger’s Constitutional rights and state law. The school officials removed the case to federal court. Ms. Doninger then filed a motion for a preliminary injunction asking the court to void the election for Senior Class Secretary and to require a new election. The request for the injunction was denied (514 F. Supp. 2d 199 (D. Conn. 2007)), and the denial was affirmed on appeal (527 F.3d 41). After Ms. Doninger graduated from high school, the request for the injunction was moot, but she amended the complaint to seek damages for the alleged violation of her Constitutional rights. In January 2009, the district court denied Ms. Doninger’s motion for summary judgment and granted the school’s motion in part. (594 F. Supp. 2d 211 (D. Conn. 2009)). [See Eric’s note of the case]. After motions for reconsideration were denied, both parties appealed to the Second Circuit again.

Decision

The Second Circuit decision exonerated the school officials on all counts. In particular, the Second Circuit: (1) affirmed the District Court’s holding that the school officials had qualified immunity for the claim that Ms. Doninger’s First Amendment rights were violated when the principal prohibited her from running for Senior Class Secretary; (2) reversed the District Court’s holding that the school officials were not entitled to qualified immunity for the claim that Ms. Doninger’s First Amendment rights were violated when they prohibited her from displaying a “Team Avery” t-shirt in the election assembly: (3) affirmed the District Court’s dismissal of Ms. Doninger’s Equal Protection claim that other student officers were not similarly punished; and (4) affirmed the District Court’s dismissal of Ms. Doninger’s claims based on the Connecticut Constitution.

The Second Circuit spent a good part of the decision discussing the First Amendment issues and the Tinker-Fraser-Hazelwood trilogy of U.S. Supreme Court cases governing student expression. The Second Circuit expressly refused to adopt a rule (urged by Ms. Doninger) that students are completely insulated from discipline for speech-related activity occurring away from school property, no matter its relation to school affairs or its likelihood of having effects in school. But then the Second Circuit avoided deciding whether Ms. Doninger’s First Amendment rights were violated when she was prevented from running for Senior Class Secretary, by finding that the school officials were entitled to “qualified immunity” from the claims.

Under a qualified immunity analysis, a court conducts a two-part inquiry: (1) whether the facts, when viewed in the light most favorable to the plaintiff, show that the official’s conduct violated a Constitutional right; and (2) whether the right at issue was clearly established at the time of the official’s alleged misconduct. If it is objectively reasonable for an official to believe that his or her conduct did not violate such a right, then the official is protected by qualified immunity. The Second Circuit did not reach a conclusion as to whether the school officials violated Ms. Doninger’s Constitutional rights. Rather, the court concluded that any First Amendment right Ms. Doninger may have had “was not clearly established” given the uncertainty in the legal decisions in this area to date, and that the school officials acted reasonably in the circumstances and were thus entitled to qualified immunity from the claims.

Discussion

Overall, the Second Circuit appears to have reached the proper conclusion here. The court emphasized that the discipline was relatively minor, and that Ms. Doninger’s conduct violated several written school policies to which she had agreed. Ms. Doninger did not simply make the comments orally, on in text messages sent to her friends with some expectation that the school officails would not see them. Rather, she posted her comments on a public website and then made sure school officals would see them by inciting readers to contact the school officials. Unlike some other school discipline cases involving off campus postings or communications (see here and here), the principal here did not overreact. Ms. Doninger was not suspended, and the students were given the choice as to whether to hold the concert on the original date but in the cafeteria, or on a new date in the auditorium. Ms. Doninger was sanctioned because her conduct was viewed as inappropriate for a class officer in that school.

Unfortunately, by avoiding any conclusions on the Constitutional issues, the Second Circuit’s decision did not provide any new practical guidance for the difficult issue as to when a student’s off-campus speech so affects or disrupts school activities that the student can be disciplined in school for the speech. (For example, see Eric’s post from last year where Third Circuit panels reached opposite conclusions on similar facts). Hopefully, the court’s emphatic beatdown of Ms. Doninger’s claims will end this particular dispute, although her attorney has stated that he would take an appeal to the U.S. Supreme Court.

I’m a big defender of the First Amendment, but this case appears to be another example of what we were taught in law school that “bad facts make bad law.” There is no significant freedom of speech issue here, just a refusal by a student and her parent to accept consequences for the student’s bad behavior. Ms. Doninger graduated in 2008, and is now attending college. It’s time to move on.

For additional information and other points of view, some other links:

* Citizen’s Media Law Project

* Student Press Law Center press release

The post Student Loses First Amendment Fight To Call School Officials “Douchebags” After Four Years Of Litigation–Doninger v. Niehoff (Guest Blog Post) appeared first on Technology & Marketing Law Blog.

Buckles Management, LLC v. Investordigs, LLC, No. 10-cv-00508-LTB-BNB (D. Colo. July 23, 2010).

It has been about 10 years now since Congress adopted the federal Electronic Signatures in Global and National Commerce Act (commonly known as “E-Sign”). Cases interpreting E-Sign have been relatively rare. A Colorado federal court judge last week purported to decide whether an e-mail could constitute an enforceable contract under E-Sign, and concluded that the e-mail in question could not be enforced as a contract. Unfortunately, the Court (and the parties briefing the motion) did not realize that this was not an E-Sign case. The Court should have analyzed the case under the Colorado Uniform Electronic Transactions Act. Had it done so, the result may have been different.

Background

The case involves a failed business relationship that is all too typical. An investor provides money, consulting services, and commercial space to a struggling company, without any legal documents to evidence such terms as whether the transaction is a loan or an investment, etc… When the business relationship falls apart, the parties meet to discuss how to end their relationship. After the meeting, a few e-mails are circulated to memorialize the terms discussed. Attorneys are asked to draft documents, but nothing is ever signed; and the parties disagree as to whether or not there was a final agreement.

The investors filed a lawsuit, asserting claims for enforcement of the purported settlement agreement, breach of loan, breach of a lease agreement, unjust enrichment and accounting. In response, the company and individual defendants asserted counterclaims for breach of contract, unjust enrichment, negligent misrepresentation, breach of fiduciary duty and fraud and false misrepresentation.

Decision

The decision in question arises from defendants’ Motion for Summary Judgment, where they maintain that the Colorado Statute of Frauds, which provides that any agreement not to be performed within one year must be in writing and subscribed by the party to be charged, renders the settlement agreement unenforceable. In response, the plaintiffs argued that the parties exchanged a writing that contained the material terms of the agreement sufficient to satisfy the Statute of Frauds. Specifically, the plaintiffs relied on an e-mail, containing a list of the purported agreed-upon settlement terms, sent from the e-mail account of one defendant (who was a principal of the corporate defendant) to another employee at the company, who in turn forwarded the e-mail to four or five other people (including one of the plaintiffs) with the message “thanks to everyone for participating today.”

The court’s basic framework for analyzing the issue seems correct:

• May an e-mail exchange satisfy the Colorado Statute of Frauds writing requirement?

• If so, does this particular e-mail constitute a “writing subscribed by the party to be charged” within the meaning of the Colorado Statute of Frauds?

• If so, does this e-mail adequately describe the terms of an enforceable contract?

The court embarked on a discussion as to whether the e-mail satisfied the Colorado Statute of Frauds. Initially, the court got the analysis right, and concluded that under Colorado law, an e-mail exchange may satisfy the “writing” requirement of the Statute of Frauds.

With respect to whether the e-mail constituted a writing “subscribed by the party to be charged” under the Colorado Statute of Frauds, here the court got off track, with the help of counsel for the parties. The plaintiffs argued that the e-mail contained an “electronic signature” under E-Sign. Section 106(5) of E-Sign defines an “electronic signature” as “an electronic sound, symbol or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” The defendants argued that E-Sign did not apply because the settlement agreement did not affect interstate or foreign commerce. The court concluded that E-Sign did apply, but that the e-mail was actually sent by an administrative employee who did not have authority to bind either the corporate defendant or its individual principal. As a result, the court concluded that the signature was not “executed or adopted by [the principal of the defendant] with the intent to sign the record,” so it was not a proper electronic signature under E-Sign. The court concluded that if there was no proper “electronic signature,” then the e-mail was not “subscribed by the party to be charged” under the Colorado Statute of Frauds.

Analysis

Unfortunately, the court and the parties missed the fact that the case is governed by the Colorado Uniform Electronic Transactions Act (“UETA”), not the E-Sign Act. E-Sign has a peculiar “reverse preemption.” Those who have been around long enough recall that in the late 1990’s states were adopting electronic transaction laws, but in a non-uniform manner. In 1999, the National Conference of Commissioners on Uniform State Laws issued its final draft of the UETA, but states continued to enact UETA in a non-uniform manner. These non-uniform enactments were in part responsible for Congress passing E-Sign in 2000. In effect, Congress forced states to adopt UETA in a uniform manner by providing that the state version of UETA would control over E-Sign if UETA were adopted without modification. In most cases, then, if a state has adopted UETA substantially in final form, the state’s version of UETA is controlling over E-Sign. (To date, 47 states, plus the DIstrict of Columbia, Puerto Rico and the U.S. Virgin islands, have adopted UETA).

Would the analysis have been any different under UETA? It might be, because UETA is more comprehensive than E-Sign, including areas not covered by E-Sign.

Under Section 24-71.3-107 of the Colorado UETA, a contract may not be denied legal enforceability solely because an electronic record was used in its formation. So the court was correct in concluding that an e-mail exchange may satisfy the Statute of Frauds “writing” requirement.

But what about the e-mail exchange in this case? The Colorado definition of “electronic signature” is the same as the E-Sign definition. But Section 109 of UETA also allows for signatures to be “attributable” to a person where the person may not have “signed” the record himself (for example, a human agent with authority signs the record). The court concluded that the e-mail was not signed by the indiividual principal of Investordigs, but by an administrative employee. Under Section 24-71.3-109 of the Colorado UETA, whether the e-mail sent by the administrative employee could be attributed to the defendant “may be shown in any manner”. Thus, there is room for the investor to argue that the e-mail was sent on behalf of the principal of the company or that the administrative employee was acting as an agent of the principal. Unless there are additional facts not appearing in the court’s opinion, this would seem to be a classic issue of material fact, sufficient to defeat summary judgment. It is not clear from the record why the plaintiffs did not make this argument.

If the case does not settle, then it is likely that this decision will be remanded on appeal for findings of further fact consistent with the application of UETA, not E-Sign. It may be that, in the end, the investors will not be able to enforce the settlement agreement if they cannot attribute the e-mails to the company itself or the principal, or if the terms are not sufficiently definite to warrant enforcement. But, for the sake of argument, what if the employee was charged with taking notes for the meeting or was otherwise instructed by the principal to send out the e-mails containing the terms? Then it may be that the plaintiffs will be able to resurrect their claims.

The post E-SIGN Prevents Enforcement of Emailed Contract Terms–Buckles v. Investordigs appeared first on Technology & Marketing Law Blog.

(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.

The post Top Cyberlaw Developments of 2009 appeared first on Technology & Marketing Law Blog.

The Free Software Foundation posted the “last call” draft of version 3 of the GPL on its website yesterday for comment.

The General Public License (GPL) is one of the most widely used open source licenses. Version 1 was released in 1981, and Version 2 in 1991.

I have not had time to review the new draft yet. According to FSF’s press release, changes in this draft from the third discussion draft adress the following issues:

—GPLv3 is now compatible with version 2.0 of the Apache License.

—Distributors who make discriminatory patent deals after March 28 may not convey software under GPLv3. Apparently, Novell is not prohibited from distributing software under GPLv3 because the patent protection they arranged with Microsoft last November can be turned against Microsoft to the community’s benefit.

—Terms have been added clarifying how one can contract for private modification of free software, or for a data center to run it.

—A reference to a US consumer protection statute has been replaced by explicit criteria, for greater clarity outside the US.

There is a 29 day comment period for this draft. The final GPL v3 will then be approved by FSF’s board of directors on or about June 29, 2007.

The post “Last Call” Draft of GPL3 is Posted appeared first on Technology & Marketing Law Blog.