The first two rulings came in March. In the Bouck case, the court rejected Facebook’s Section 230 defense because Facebook’s generative AI allegedly contributed to the ad copy. In the Suddeth case, the court accepted Facebook’s Section 230 defense because the plaintiffs focused on algorithmic amplification.

Although the Bouck case initially overcame Section 230, in an under-the-radar ruling this week, the court nevertheless dismissed it as preempted by federal securities law. So the Bouck plaintiffs got a first-hand taste of the infamous Ninth Circuit switcheroo, which occurs when the plaintiffs get false hope that they might actually win because they got around Section 230, only to slam into other brick walls in their prima facie case.

The March Bouck Ruling

Section 230

Meta’s Section 230 defense turns on whether it was a co-creator of the ads sufficient to become an “information content provider.” The court says “What it means to “create” or “develop” content on the internet is not self-evident.” The court says there’s a fact dispute over whether Facebook’s contributions were material:

The alleged illegality stems from the advertisements’ content—i.e., the false statements made to Facebook and Instagram users that induced them to click on the ads. Plaintiffs have averred that Meta participated in the construction of the ads by literally generating, using artificial intelligence, the images and text in the advertisements. That degree of participation is not protected by section 230…. [cite to Forrest v. Meta]

The district court in Forrest accepted that optimizing the appearance of an ad to drive engagement was enough of a contribution to the ads’ illegality to preclude section 230 immunity. Here, in addition to averring facts which, if proven, would establish that Meta altered the ads’ appearance to maximize impressions, Plaintiffs have averred that Meta’s tools allowed the scammers to produce “AI-generated text and images” for use in the ads through its Advantage+ Creative tool.

The court says Carafano doesn’t help Facebook because:

Plaintiffs have averred that Meta created the offending information by generating some of the false statements that tricked them into the investment scheme….

Plaintiffs aver that the scammers used Meta’s Advantage+ Creative tool which, as explained, uses artificial intelligence to enhance whatever message the user inputs. If a user, for example, tells the tool that he is interested in an ad promising astronomical weekly investment returns, Advantage+ Creative will spin up a slew of ads that include the provided language and other language, images, and videos it decides will be effective in promoting the user’s chosen message….

Without question, Advantage+ Creative and the other tools in Meta’s advertising suite would not have come up with that language without the inspiration from the scammers, but that language is still the creation of Meta.

One way of reading this decision is that Section 230 has limited applicability to Generative AI outputs. If the model outputs something new (as opposed to verbatim replicating material in its index or provided by the user), then the newly created material isn’t covered by Section 230.

Aiding and Abetting Fraud

The court says Facebook’s ad review process should have detected that the ad looked scammy (see an example on the right): “Even a cursory look would warrant suspicion that the ad is fraudulent. Meta cannot, with a straight face, claim otherwise.” Facebook responded that the ad review was automated (i.e., no human performed the “cursory look” that the judge was contemplating), a response the judge calls “confounding” because “It was Meta’s decision to use technological review tools to screen ads, and it does not now get to claim it had no idea what was going on because it tasked some software program with doing the first pass.”

The judge is dabbling with some heady topics here in an unsatisfying and superficial way. At core, the judge–whether he intended to or not–is addressing the epistemological question of when a machine “knows” something. This is a crucial topic for the digital age, and it deserves more in-depth and thoughtful treatment than the judge provides here. Alternatively, the judge is accepting an argument that it’s “willful blindness” to turn over ad review to the machines. But nowadays machines do a lot of scanning and screening without humans in the loop, and it deserves some careful and thoughtful judicial review to determine if such delegation deserves to be condemned with a “willful blindness” style punishment. The judge didn’t do that either.

Contract Breach

The plaintiffs tried the oh-so-tired hack of claiming that TOS content policy restrictions should be treated as affirmative representations that the policies won’t be violated. Not this again. Sigh. The judge doesn’t take the bait (cite to Lloyd v. Facebook):

The provision of the ToS on which Plaintiffs rely does not expressly or impliedly impose a binding contractual obligation on Meta to do anything. It is much more naturally read as a creating a duty of its users not to pollute Meta’s platforms with scam investment ads….

To the extent the ToS even mentions Meta doing something to prevent fraud, it speaks only in aspirational terms…Meta, however, never promises to take concrete steps to effectuate that aspiration.

Negligence

“Plaintiffs have averred that Meta did more than just sit idle as fraudsters roamed freely on their platforms. Therefore, no “special relationship” need be pleaded for the case to move forward.”

Unruh Act

“Plaintiffs here aver that they were targeted because of their race or national origin, not that they were excluded from anything. Whatever moral condemnation that merits, it is not a violation of the Unruh Act.”

The court distinguishes Liapes because, in that case, the plaintiff complained she didn’t receive ads based on her protected classifications. Here, the plaintiffs got the ads: “Far from encountering an exclusionary practice, they encountered an inclusionary one—it is just that they wish they were not included.” The court rejects the plaintiffs’ attempt “to spin Liapes into a general prohibition on targeting based on protected characteristics.”

Case Citation: Bouck v. Meta Platforms, Inc., 2026 WL 810036 (N.D. Cal. March 24, 2026)

The March Suddeth Ruling

Because of its implications for Generative AI, the Bouck case has garnered some coverage. That coverage overshadowed a companion case, the Suddeth decision, issued by the same judge, on the same day, involving the same basic claim (Chinese stock pumping-and-dumping). Unlike the Bouck case, the judge dismissed the Suddeth case.

In Bouck, the plaintiffs claimed that Facebook helped the advertiser build and polish up the ads using Generative AI. In Suddeth, the plaintiffs claimed Facebook algorithmically amplified the ads. The court has little difficulty concluding that algorithmic amplification is governed by Section 230, citing Dyroff and Doe v. Grindr:

Their theory of algorithmic amplification is nothing more than an averment of facilitation. The core illegality—the choice to use Plaintiffs’ likeness and falsely represent that they endorsed certain investments—was exclusively undertaken by the scammers. Meta provided those scammers tools to disseminate that fraud that may well have played a role in the success of the ploy. However, as in both Dyroff and Grindr, Meta’s tools were content neutral on their own—it was the scammers who chose to manipulate those tools for illicit ends.

The judge distinguishes his own simultaneous ruling in Bouck:

[in Bouck,] the plaintiffs averred that Meta contributed materially to the development of the ads by offering generative-AI tools that developed the ultimate content of the fraudulent ads. Meta’s role in that scheme, therefore, allegedly went beyond offering neutral tools that promoted content developed exclusively by the scammers—Meta, at least according to the complaint, was a genuine co-conspirator in the creation of the offending content. Plaintiffs have failed to aver a similar level of complicity here.

The court summarizes: “Section 230 thus bars any claim which, at bottom, seeks to hold Meta liable for the damage done by the content of the fraudulent ads.”

Case Citation: Suddeth v. Meta Platforms, Inc., 2026 WL 810252 (N.D. Cal. March 24, 2026)

The June Bouck Ruling

We’re back to the classic Ninth Circuit switcheroo: the arguments that the plaintiffs used to get around Section 230 ensure the failure of the prima facie case. Here, the plaintiffs alleged state law claims to redress what is fundamentally a federal securities law claim. The court summarizes:

Meta…argues that the theory which helped Plaintiffs defeat the first motion to dismiss compels granting the second. If it is true that Meta contributed to the creation of the fraudulent ads, then this suit is necessarily based on the falsity of Meta’s statements. A suit in which a plaintiff claims the defendant made false statements which led the plaintiff to purchase securities when he otherwise would not have is quintessentially one sounding in the securities laws, even if the right of action comes from state law. SLUSA prevents precisely that type of suit from being maintained in any court, state or federal….

At bottom, Plaintiffs are trying to have it both ways. They assert Meta’s misrepresentations aided and abetted the core fraud by pushing them into scam investment groups while simultaneously maintaining that those misrepresentations were not material to their decision to purchase CLEU stock. Both cannot be true—either the misrepresentations mattered (in which case SLUSA applies) or they did not (in which case their claims fail on the merits).

This denouement will surely attract less attention than the March ruling.

The plaintiff could in theory overcome this ruling by bringing a federal securities act claim. However, I suspect the plaintiffs won’t due to the significant pleading challenges. Plus, it will be difficult or impossible to put Facebook on the hook for those claims.

Case Citation: Bouck v. Meta Platforms Inc., 2026 WL 1697630 (N.D. Cal. June 11, 2026)

The post Section 230 Doesn’t Apply to Generative AI Enhancements to Ad Copy (But the Plaintiffs Lose Anyway)–Bouck and Suddeth v. Meta appeared first on Technology & Marketing Law Blog.

On appeal, the Fifth Circuit embraces its characteristic chaos. First, it stayed the injunction without issuing an opinion. This is always terrible. Lifting the injunction changes the status quo without explaining why, making it virtually impossible to appeal. Courts should never do this. The injunction stay also potentially unleashed immediate action from AG/Senate candidate Paxton, who would love to bring another lawsuit against Google and Apple to try to distract Texas voters from his multitudinous political and personal flaws.

Then, a few days after staying the injunction, the Fifth Circuit issued a written opinion that, as usual, is untethered from US law. The opinion is also inappropriately brief and characteristically deficient on actual fact analysis. The published opinion is issued per curiam, which I suspect was intended to protect the authoring judge from accountabiilty for this turd.

The Fifth Circuit Opinion

Intermediate Scrutiny, Not Strict Scrutiny

The opinion says intermediate scrutiny applies because:

App store transactions are commercial in nature. After all, users browsing an app store can see a catalog of applications, obtain additional information, and download or purchase an application. App listings propose commercial transactions, regardless of whether any monetary payment is made. In fact, the “payment” for apps that are purportedly “free” is access to user data and private information….Detailed user data, including that of minors, is the lifeblood of the app store monetization ecosystem.

There are several problems with this:

• The fact that Google and Apple are for-profit entities and label themselves “stores” doesn’t automatically make everything they do “commercial speech.” Consider an analogy to Google search results. Some results are ads. Those are commercial speech. Some organic results are from commercial entitie hoping to catch customers. These may be commercial speech if they propose a transaction, but otherwise not. Some organic results are from non-commercial actors not looking to make any money at all. These are not commercial speech, even if Google is “monetizing” the page through the other ads elsewhere. Characterizing all Google search results as proposing a transaction would be a categorical error. I believe this opinion makes the same error for app store listings.
• In particular, many apps may not be commercial offerings at all. They could be apps from government entities, nonprofits, schools, religious organizations, or altruits who are giving their apps away for free with no strings attached. If a religious organization passes out leaflets on the street, they are not engaging in a commercial transaction of transferring leaflets.
• Many apps do not collect any private information from users, even if they are free-to-download. In those cases, there is no data “payment” at all. The opinion just made this fact up, using a factually unsupportable stereotype.
• The age authentication mandate is imposed on the app stores, but the opinion seems to be discussing the listings from the app developers. Is the app store carrying those listings “proposing a commercial transaction”? Part of the regulated activity is allowing users to access the app stores in the first place, before the user sees any listings. So the court has shifted the timing of the legally regulated activity to tell the story it wants to tell.

This passage is consistent with the prevailing Fifth Circuit opinion-drafting ethos, where it’s OK if the court doesn’t have the facts it wants because it can fill in the gaps with fiction.

In a footnote, the opinion says “SB2420 may not regulate speech at all, given that it does not target any substantive content but instead regulates commercial conduct with an incidental relationship to speech.” The so-called “commercial conduct” here would be the distribution of speech (the apps), but sure, let’s call that “an incidental relationship to speech.” Too bad the panel didn’t write that opinion.

The opinion cites the FSC v. Paxton opinion only twice, neither time to engage with the Supreme Court’s extensive discussion about why intermediate scrutiny was appropriate for age authentication mandates only if the mandates supported restrictions on content that is obscene as to minors–which is not the case. No one really believes the Supreme Court meant what it said in the FSC case (or any other case the Court is issuing nowadays), but the Fifth Circuit couldn’t even be bothered to engage with the opinion text.

Application of Intermediate Scrutiny

The opinion offers these conclusory statements without any further fact analysis:

Requiring age verification, parental consent, and app-related content ratings likely directly and materially advances Texas’s substantial interest in protecting children’s data, safety, and privacy in a digital world. Thus, there is likely a “reasonable fit” between SB2420’s methods and goals allowing parents to direct and supervise children’s downloads of apps and in-app purchases. That some works protected by the First Amendment may be the object of app downloads or in-app purchases does not categorically exempt them from ordinary regulations governing commercial transactions.

Restating a doctrine’s elements, without applying any of the facts to the elements, is the kind of rookie mistake that earns a C grade at best on a 1L final exam.

Disregarding Statutory Exclusions

The parental consent requirements exclude “emergency services and apps provided by an entity that develops standardized tests for use in postsecondary education.” The opinion disregards the favoritism towards these two categories because:

• the “emergency-services exception is not likely content-based but, instead, focuses on why the service is needed, not what is being communicated….Users do not need to create an account to access and use the emergency service app.” Huh? If the only type of permitted communication is content related to an emergency, how is that not content-based?
• the standardized test exclusion “which focuses on the identity of the speaker, does not necessarily reflect a content preference, but rather the reality that students often need to take tests….The speaker-based distinction appears to be content-neutral, not content-based, in discriminating among ideas or viewpoints.” The exception is for exams, which sounds pretty content-based to me. As a cheat, the opinion adds that the district court could just sever this provision if it’s unconstitutional.

No Vagueness

The opinion says the mandatory content rating scheme isn’t vague because the app stores can assume the apps set their ratings in good faith. The opinion says other challenged phrases are “plain and ordinary language [that] outlines its straightforward meaning” or have “well established and easily understood” meanings. Plus, there’s always the severability cheat.

Overbroad Injunction

The opinion says only the plaintiffs can receive the benefit of a court injunction, not any other regulated publishers.

Summation

The opinion rounds up its normative views:

The interests of Texas and the public interest coincide. Texas has a substantial, if not compelling, interest in protecting children, and parents need to have the necessary information to make informed choices affecting their children’s upbringing.

The need to protect children is intensified in the digital world, where app stores have violated existing consumer protection and child privacy laws for years, despite a federal consent decree. Absent SB2420, parents’ ability to protect their children is imperiled because app stores have encouraged minors to download applications and make in-app purchases without giving parents accurate content information or obtaining their informed consent. Any purported burden on app stores and developers is minimal because SB2420 requires only “commercially reasonable” verification methods and allows developers to use “widely adopted industry standards” in determining age ratings and those related to corresponding content.

Just about every word in this summation is wrong or misleading. Read my Segregate-and-Suppress paper for a fuller explanation of why.

Implications

Observation #1: Google and Apple didn’t challenge the law. They may be among the wealthiest companies that have ever existed in human history, but they let proxies and others carry their water and tell their story.

Observation #2: Despite the ongoing legal proceedings, and without even waiting to see the written opinion, Google and Apple immediately folded after the Fifth Circuit stayed the injunction. Both immediately complied with the law (Apple, Google).

Observation #3: The pliability of Google and Apple is nothing new. They have kowtowed to censors throughout the globe, so why not do so in the US too? The app stores have zero backbone when it comes to defending their editorial decision-making. As a reminder, the app stores didn’t challenge any of the many TikTok bans, even those that directly banned app stores from distributing TikTok.

Observation #4: Now that Apple and Google have rolled, what is the likelihood they will undo their implementation if the law gets overturned on further proceedings? I would rank the odds at zero. Once a censorship infrastructure is implemented, it rarely is ripped back out. This type of sticky interim compliance is a prime reason why censors can win, even if they pass unconstitutional laws.

Observation #5: The likelihood that regulated publishers will engage in interim compliance shows some problems with the Moody v. NetChoice opinion, which raised the bar on facial constitutional challenges. (This opinion observes, without doing any of the analytical work, that “It is highly unlikely that Plaintiffs have met this ‘rigorous standard'” for a facial challenge set by the Moody decision). If a publishers has to break the law and expose itself to the associated legal consequences to find out if a law is unconstitutional, we get a lot more censorship compliance and a lot fewer constitutional challenges.

Case Citation: Students Engaged in Advancing Texas v. Paxton, No. 25-51073 (5th Cir. June 4, 2026)

* * *

Blog Posts on Segregate-and-Suppress Obligations

• How Often Do Consumers Balk at Doing Online Age Authentication?
• Court Enjoins Another Arkansas Segregate-and-Suppress Law–NetChoice v. Griffin
• Too Many Courts Are Letting States Take Wrecking Balls to the Internet (Roundup)
• Texas Judge Enjoins App Store Authentication Law–CCIA and SEAT v. Paxton
• Courts Enjoin Internet Censorship Laws in Louisana and Arkansas
• Challenge to Maryland’s “Kid Code” Survives Motion to Dismiss–NetChoice v. Brown
• My Testimony Against Mandatory Online Age Authentication
• Read the Published Version of My Paper Against Mandatory Online Age Authentication
• Prof. Goldman’s Statement on the Supreme Court’s Demolition of the Internet in Free Speech Coalition v. Paxton
• Court Permanently Enjoins Ohio’s Segregate-and-Suppress/Parental Consent Law–NetChoice v. Yost
• Arkansas’ Social Media Safety Act Permanently Enjoined—NetChoice v. Griffin
• Why I Emphatically Oppose Online Age Verification Mandates
• California’s Age-Appropriate Design Code (AADC) Is Completely Unconstitutional (Multiple Ways)–NetChoice v. Bonta
• Another Conflict Between Privacy Laws and Age Authentication–Murphy v. Confirm ID
• Recapping Three Social Media Addiction Opinions from Fall (Catch-Up Post)
• District Court Blocks More of Texas’ Segregate-and-Suppress Law (HB 18)–SEAT v. Paxton
• Comments on the Free Speech Coalition v. Paxton SCOTUS Oral Arguments on Mandatory Online Age “Verification”
• California’s “Protecting Our Kids from Social Media Addiction Act” Is Partially Unconstitutional…But Other Parts Are Green-Lighted–NetChoice v. Bonta
• Section 230 Defeats Underage User’s Lawsuit Against Grindr–Doll v. Pelphrey
• Five Decisions Illustrate How Section 230 Is Fading Fast
• Internet Law Professors Submit a SCOTUS Amicus Brief on Online Age Authentication–Free Speech Coalition v. Paxton
• Court Enjoins the Utah “Minor Protection in Social Media Act”–NetChoice v. Reyes
• Another Texas Online Censorship Law Partially Enjoined–CCIA v. Paxton
• When It Comes to Section 230, the Ninth Circuit is a Chaos Agent–Estate of Bride v. YOLO
• Court Dismisses School Districts’ Lawsuits Over Social Media “Addiction”–In re Social Media Cases
• Ninth Circuit Strikes Down Key Part of the CA Age-Appropriate Design Code (the Rest is TBD)–NetChoice v. Bonta
• Mississippi’s Age-Authentication Law Declared Unconstitutional–NetChoice v. Fitch
• Indiana’s Anti-Online Porn Law “Is Not Close” to Constitutional–Free Speech Coalition v. Rokita
• Fifth Circuit Once Again Disregards Supreme Court Precedent and Mangles Section 230–Free Speech Coalition v. Paxton
• Snapchat Isn’t Liable for Offline Sexual Abuse–VV v. Meta
• 2023 Quick Links: Censorship
• Court Enjoins Ohio’s Law Requiring Parental Approval for Children’s Social Media Accounts–NetChoice v. Yost
• Many Fifth Circuit Judges Hope to Eviscerate Section 230–Doe v. Snap
• Louisiana’s Age Authentication Mandate Avoids Constitutional Scrutiny Using a Legislative Drafting Trick–Free Speech Coalition v. LeBlanc
• Section 230 Once Again Applies to Claims Over Offline Sexual Abuse–Doe v. Grindr
• Comments on the Ruling Declaring California’s Age-Appropriate Design Code (AADC) Unconstitutional–NetChoice v. Bonta
• Two Separate Courts Reiterate That Online Age Authentication Mandates Are Unconstitutional
• Minnesota’s Attempt to Copy California’s Constitutionally Defective Age Appropriate Design Code is an Utter Fail (Guest Blog Post)
• Do Mandatory Age Verification Laws Conflict with Biometric Privacy Laws?–Kuklinski v. Binance
• Why I Think California’s Age-Appropriate Design Code (AADC) Is Unconstitutional
• An Interview Regarding AB 2273/the California Age-Appropriate Design Code (AADC)
• Op-Ed: The Plan to Blow Up the Internet, Ostensibly to Protect Kids Online (Regarding AB 2273)
• A Short Explainer of Why California’s Social Media Addiction Bill (AB 2408) Is Terrible
• A Short Explainer of How California’s Age-Appropriate Design Code Bill (AB2273) Would Break the Internet
• Is the California Legislature Addicted to Performative Election-Year Stunts That Threaten the Internet? (Comments on AB2408)
• Omegle Denied Section 230 Dismissal–AM v. Omegle
• Snapchat Isn’t Liable for a Teacher’s Sexual Predation–Doe v. Snap
• Will California Eliminate Anonymous Web Browsing? (Comments on CA AB 2273, The Age-Appropriate Design Code Act)
• Minnesota Wants to Ban Under-18s From User-Generated Content Services
• California’s Latest Effort To Keep Some Ads From Reaching Kids Is Misguided And Unconstitutional (Forbes Cross-Post)
• Backpage Gets Important 47 USC 230 Win Against Washington Law Trying to Combat Online Prostitution Ads (Forbes Cross-Post & More)
• Backpage Gets TRO Against Washington Law Attempting to Bypass Section 230–Backpage v. McKenna
• MySpace Wins Another 47 USC 230 Case Over Sexual Assaults of Users–Doe II v. MySpace
• MySpace Gets 230 Win in Fifth Circuit–Doe v. MySpace
• Website Isn’t Liable When Users Lie About Their Ages–Doe v. SexSearch

The post Fifth Circuit Keeps Doing Fifth Circuit Things 📉–SEAT v. Paxton appeared first on Technology & Marketing Law Blog.

On March 9, 2026, Judge Chesney granted a preliminary injunction in the case of Amazon v. Perplexity, concluding Amazon was likely to succeed on its CFAA and California Penal Code section 502 theories.

If you’re familiar with the CFAA, the outcome of the preliminary injunction opinion was what you might expect.

But it is underwhelming in some new and interesting ways. It is, in my opinion, a shockingly poor effort to grapple with CFAA applicability to agentic AI technology after Van Buren.

If you’re unfamiliar, agentic AI is simply the name for AI that actually does work for you instead of answering questions. An agent can take a loose goal, break it into steps, use tools, gather information, make decisions, and come back with the task done. That makes it useful for the work people hate but still need judgment to finish, such as research, product comparisons, customer support, and multi-step coordination.

One valuable use case for agentic AI is shopping. Not only can Agentic AI tell you what the highest rated toaster on Amazon is for under $100, it can actually buy it for you.

You can tell agentic AI:

Buy a toaster on Amazon for under $100. Prioritize name brands, Amazon Prime shipping, and wide slots for bagels. Do not buy based solely on Amazon rating. Consider only models with at least 1,000 reviews, a rating of 4.7 or higher, and no obvious fake-review pattern. Cross-check at least two independent review sources or testing sites for confirmation that the quality is among the best at this price point. Choose a 2-slice toaster unless a 4-slice model is clearly better.

If one option is clearly superior under these criteria, add it to my cart and proceed to purchase. If not, add the best by these measures and I will review and purchase.

The thing about instructions like these is that they totally kill many of the ways online e-commerce sites make money. Amazon doesn’t just make money from selling you stuff and sending it to you. They also make money from product placement, ads, upselling, and a million other ways of nudging you into buying more stuff.

Amazon wants their search bar to be the way that you buy things online. But if the interface for your shopping becomes the AI labs’ platforms, that’s a big deal for e-commerce sites. It’s an existential threat to some e-commerce platforms and a major margins headwind for giants like Amazon and Walmart.

Those are the stakes.

* * *

The injunction in this case arose from Amazon’s challenge to Perplexity’s Comet browser and shopping agent. Perplexity built a tool that allows software to shop for users on Amazon through their logged-in accounts. Amazon sent a cease-and-desist letter. But Comet didn’t stop.

Created by ChatGPT Dec. 2025

The court focused on a familiar question for CFAA folks, which is that Amazon allegedly revoked authorization, Perplexity’s agents continued accessing Amazon’s systems through user accounts, and therefore Amazon was likely to succeed under theories derived from CFAA and California computer-access law.

From a pure CFAA perspective, the allegations were straightforward. Monopolist platform discovers a kind of automation that people who use the Internet enjoy, labels it “unauthorized,” cites to Power Ventures, points to investigative costs, and gets its injunction. It has happened before and it will happen again.

But the genuinely novel issue was totally ignored in the opinion. Perplexity’s Comet is an AI agent. And agentic AI is not merely collecting data. It is acting as the user’s delegated representative in an ongoing workflow.

The opinion makes zero effort to analyze:

• whether an AI agent should be treated like a browser,
• whether it should be treated like a human assistant using delegated credentials,
• whether agency-law concepts matter,
• whether user autonomy creates an independent authorization interest distinct from Power Ventures,
• whether there is a meaningful distinction between scraping data and performing user-directed actions.

Instead, the court seems to jump directly to the conclusion that Amazon retains ultimate authority to exclude the intermediary.

(In partial defense of the court, they hint that they may have discussed this at oral arguments. But there’s no analysis of agentic AI in the opinion itself).

From an agentic-AI perspective, it’s straightforward to ask:

If I can personally log into Amazon and buy a toaster, why can’t I save time and have software do it for me?

Because Power Ventures is dumb and Amazon says so, that’s why.

The Power Ventures framing has always allowed platforms to control their platforms, even when the user wants a certain tool to interact with them, if the integration includes a logged-in component. If there is a password at any part of the flow, most courts find that the CFAA can be used to crush any unwanted integration, no matter how benign or socially useful it is. Log-in plus cease-and-desist has almost always been a CFAA violation.

That’s why Power Ventures matters so much. If Power Ventures controls, Amazon gets to frame Comet as just another unwanted logged-in integration. If it doesn’t, the case becomes about whether users can delegate ordinary account activity to software.

That is also what makes this such an interesting test case for Power Ventures. Amazon wants to put Comet in the Power Ventures box, and legally, that is exactly where a plaintiff wants to be. But the factual analogy is imperfect. Power Ventures was not merely helping users operate Facebook. It built a competing service, collected Facebook users’ information, imported that information into its own platform, and used users’ networks to market itself. Comet’s better factual description is simpler, because the user is still shopping. The user just has delegated parts of the shopping flow to software.

If Power Ventures means that a platform can veto any third-party agent, then the CFAA becomes a platform-control statute for the agentic web. Maybe that is where the Ninth Circuit ultimately lands. But if that’s the case, the CFAA is going to be an increasingly unpopular law.

What’s especially disappointing is that courts continue to pretend that there are not difficult policy questions to consider with these new technologies. It is particularly true in this case, because it was a preliminary injunction proceeding, and the court was required to consider the broader public interest question. Perplexity argued that an injunction would disserve the public interest in consumer choice and innovation.

The court’s response was as thin and fragile as overcooked spaghetti. It said that the public has an interest in preventing unauthorized access to computers, and that was that.

The platform says it’s not allowed, therefore it’s not allowed, and it’s in the public’s interest for it not to be allowed.

See how easily we resolved issues with agentic AI?

Reasoning like this makes the CFAA one giant circle of enforcing platform preferences.

To be clear, there’s an argument for Amazon’s position, too. Platforms have real interests in account security, fraud prevention, bot detection, and knowing whether an automated system is moving through logged-in user accounts. But that’s only a small part of the story.

The anti-competitive implications here are super-obvious. Perplexity’s stated theory of the case is that Amazon does not like a user tool that routes around Amazon’s preferred shopping and advertising experience. AI agents “don’t have eyeballs” for the ads Amazon “bombards” users with. Even if you think that line is a bit cute, the underlying point is real. Intermediaries often threaten incumbents precisely because they reduce friction, reorder presentation, or weaken monetization levers the incumbent would rather preserve. Search engines did that. Price-comparison tools do that. Browser extensions do that. API clients and integrations do that. AI agents will absolutely do that in a way that the platforms are not yet prepared to deal with.

Stated plainly, the public interest section just isn’t serious here. A court need not become an antitrust tribunal every time someone says “innovation” or “consumer choice.” But this fact pattern is different from the fact pattern in Power Ventures. A court has a duty to at least think about that.

—

The other interesting part of this case is it’s another test of the definition of technological harm after Van Buren.

Knowing that the Power Ventures question was always going to be a tough climb, Perplexity also asked some of the other tough CFAA questions that Van Buren didn’t bother to answer. The order recognizes that Van Buren at least raises a question about whether “loss” should be limited to technological harms, and it notes the Ninth Circuit’s comment in hiQ about Van Buren requiring such harms. Then it basically shrugs and says, in substance, “this is going to be resolved in Amazon’s favor,” without any explanation or analysis of whether that’s the correct outcome.

To me, the technological harm question would be the easiest way to separate Power Ventures from benign or socially useful integrations. A few courts have agreed, but many do not.

And whether I like it or not, the Section 502 piece of the opinion is even more “chalk” than the CFAA ruling. California cases have long treated response and investigatory expenses as cognizable losses under Section 502. This also dates back to Power Ventures and beyond. So if defendants already face an uphill fight arguing that CFAA investigative costs must be tethered to technological harm notwithstanding Van Buren’s “technological harms” language, that argument is harder still under Section 502, where Van Buren is not controlling and the California text is friendlier to verification costs.

Regardless, it is hard to imagine that Power Ventures will survive agentic AI forever. Sooner or later, courts will be forced to acknowledge that people should be allowed to delegate to software tasks that they are legally allowed to do themselves, especially as software gets better and better at doing those tasks. But for now, Power Ventures stays intact. Until courts grapple with the power with what agentic AI actually does, the CFAA will remain what large platforms want it to be. Not just a law against hacking, but a legal cudgel against unwanted interoperability or user preferences.

The real task is for courts to acknowledge that platforms don’t need unchecked authority to kill all forms of automation on their platforms, but should instead distinguish malicious automation from disclosed, user-directed software that functions as the user’s chosen interface. I think we’ll get there eventually, but this opinion makes me think it’ll be some time before we do.

The post When Can Amazon Block an Agentic AI Service?–Amazon v. Perplexity (Guest Blog Post) appeared first on Technology & Marketing Law Blog.

The court starts out: “Plaintiff’s pursuit of a preliminary injunction in this “Schedule A” patent infringement suit fizzled out after plaintiff abandoned its appeal of my order denying that relief.” The bond amount was $10k. One of the restrained defendants sought damages out of the bond.

The defendant claimed $94k of damages due to the TRO. The court said the evidence supporting the $94k wasn’t adequate.

As a plan B, the defendant sought the $10k bond. A subsequent defense affidavit cured some of the court’s initial evidentiary objections.

The plaintiff objected to the defendant’s evidence as “self-serving.” Say what?? Every litigant provides self-serving evidence–including the plaintiff’s “self-serving” allegations when it requested–and received–the improperly granted TRO. By design, the adversarial system of adjudication expects each side to tell their best story and discredit the other side’s best story. That system breaks down when proceedings are ex parte, like the TRO the court ordered, because the plaintiff’s self-serving statements can go unchecked. So it’s WILD for a SAD Scheme plaintiff to object that a *defendant’s* filing is self-serving. As the Genie said in Aladdin:

With the defendant’s additional evidence, the court awards the $10k bond to the defendant. While that amount probably doesn’t fully compensate the defendant for its losses, the defendant still got more justice than most SAD Scheme defendants get.

I’m blogging this incident because it raises an obvious question: how do, and should, courts determine the amount of bonds that SAD Scheme plaintiffs must post to support their TRO requests? I am not aware of any bond-setting formula that courts have adopted to calculate optimal bond rates. (If you are aware of any literature on this point, I’d appreciate the referral). As a result, courts seemingly set completely arbitrary bond amounts. Of course, the defense can’t request higher bond amounts in ex parte proceedings, so the court has no idea how much harm any defendant could suffer from the TRO.

In my study of SAD Scheme judicial standing orders, I noted that “As of December 29, 2025, the web pages of Judges Alonso, Durkin, and Valderrama (all N.D. Ill.) specify a presumptive bond amount of $1,000 per SAD Scheme defendant.” As the dollars at issue in this case suggests, that amount is almost certainly too little, perhaps by one or even two orders of magnitude.

Judges have the discretion to set higher bond amounts in SAD Scheme cases. To avoid outcomes like this case, I hope they will assert that discretion more aggressively. As a fallback plan, they should be more open to scrutinizing the plaintiff’s possible bad faith in requesting the TRO, so that a too-small bond amount doesn’t improperly cap the defendant’s damages.

Case Citation: Bright Head, LLC v. Schedule A Defendants, 1:24-cv-13410 (N.D. Ill. April 6, 2026). #StopTheSADScheme

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In a split opinion, a majority says this TOS formation failed:

Zeus chose to bury the page containing that agreement behind a hyperlink that itself was written in small, gray text that Tejon did not have to click. This text was located beneath large, red action buttons that Tejon did have to click. Was the hyperlink text enough to put Tejon on notice that clicking on the large, red buttons would subject him to binding arbitration? We find that it was not.

* * *

As usual, the majority starts with the wrap taxonomy. The majority says that there are only two wrap options: clickwrap or browsewrap. I wish there were zero nodes on the wrap taxonomy, but if we’re going to have a taxonomy, two nodes is too few to capture the diversity of TOS formation practices. Importantly, the majority doesn’t leave room to categorize the screen as a “sign-in-wrap,” which is how I think it would be how other circuits characterize it.

With only two choices, the majority says this TOS formation process is a “browsewrap.” (The dissent says the “parties agree that Zeus’s subscription page is a browsewrap agreement,” so the problem may lie in Florida/11th Circuit law forcing the binary choice). Once that wrap characterization is made, it’s pretty well accepted that browsewraps aren’t enforceable. In practice, the majority closely followed the Berman opinion from California, which was a sign-in-wrap opinion, and the majority had many other sign-in-wrap precedents to consider if it went looking. #EndTheWrapTaxonomy.

Despite the wrap tangent, the majority proceeds with the standard approach of reviewing whether the TOS disclosure was sufficiently conspicuous. The majority says no.

• “Zeus placed [the hyperlink] beneath two large, red action buttons that were prominently featured at the center of the page.”
• “Zeus’s terms of service hyperlink is printed in a small font on the bottom half of the page. It is easy to overlook given the larger font sizes and bolder colors of other elements on the page.”
• “all the text below the red action buttons, including the hyperlinked terms, appears in a dim, gray color.” The “dim” color phrase reminds me of the Chabolla reference to “timid” fonts.
• The underlined text was indistinguishable from the other text, and “Zeus’s hyperlink is not highlighted in a different color and is not in all capital letters.” CAPITAL LETTERS…SERIOUSLY?
• “Zeus’s terms of service notice simply does not say anything about arbitration. It would have been simple enough for Zeus to state plainly that clicking on one of the red buttons would subject any dispute between the user and Zeus to binding arbitration….Zeus chose instead to place the provision on a separate terms of service page. Having made that choice, it was required to design its website to ensure that a reasonable user would know to click to view the terms of service page, and it failed to do so.” Ugh, I’ve complained many times about this problem with layered notice. A court can always second-guess that the layered notice should have included the thing that is being contested by the plaintiff. This makes layered notices impossible because the top layer has to reference every possibly challengable term, which is all of them.

Notice that the majority doesn’t engage with the transaction context, another key part of the Ninth Circuit Chabolla/Godun tests. In general, the Ninth Circuit presumes that consumers signing up for a subscription will expect terms to govern their ongoing relationship. The majority doesn’t consider that possibility.

The majority summarizes:

None of the things that we have discussed—location on the page, font size, contrasting color, capital letters, underlining, informational content, and so forth—is individually required to pass a conspicuousness assessment. The point of these design elements is to place a reasonably prudent internet user on notice of the agreement at issue. The internet site owner may utilize some combination of these elements, or perhaps something else entirely, to bring attention to the agreement. Even better, the owner could use a clickwrap agreement. But Zeus chose to do none of this.

Judge Branch, a TAFS judge, dissented. She says the “hyperlink was centrally positioned directly beneath the action buttons, where the user’s attention is easily drawn; colored in light gray to contrast with the black background; underlined; appeared the same size as most of the text on the page; and set apart from a block of text below. A reasonably prudent person would not have missed it.”

(As usual, there was zero empirical support from either the majority or dissent for any assessment of what a reasonable consumer would think).

* * *

This ruling brings to mind the lament of Judge Bybee in the Chabolla decision: “Our decision today will drive websites to the only safe harbors available to them, the clickwrap or scrollwrap agreements.” You’ve been warned (repeatedly).

Case Citation: Tejon v. Zeus Networks, LLC, Case No. 24-11114 (11th Cir. May 1, 2026)

BONUS: U.S. v. Blocker, No. 25-1536 (7th Cir. May 5, 2026)

the fact that a contract is lengthy and poorly understood does not justify reading it with a thumb on the scale. The language of this contract unambiguously permits Dropbox to scan all files at its option and reveal the contents for five specified purposes—and Blocker does not deny that, having discovered child porn, one or more of these purposes applies.

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The court contextualizes the case:

Intellectual property lawsuits like this one have flooded the Northern District of Illinois. In a typical case, the IP holder files trademark or copyright infringement claims against multiple foreign merchants selling goods on e-commerce platforms like Amazon or Etsy. The plaintiff joins the defendants in a single lawsuit, identifying them in a sealed document attached to the complaint as “Schedule A,” a practice that gives this increasingly common and controversial form of litigation its name. Before defendants are served, a Schedule A plaintiff seeks an emergency temporary restraining order, prejudgment restraint on the defendants’ assets, and electronic service of process, all ex parte. Often, defendants never respond or stop participating in litigation, so the district court must enter default and award statutory damages to the plaintiff with little or no information about the extent of the infringement.

This case follows much of the typical Schedule A playbook. Since 2017, China-based Huajie has sold clothing under the “bellelily” trademark on the website www.bellelily.com. In 2021, Leyibei, also based in China, began selling similar clothing on its similarly named website, www.bellelliy.com. (The “I” and an “L” are transposed in the two names.)

The panel clearly knows about the SAD Scheme, even though it hasn’t heard many appeals yet. For example, the judges already know that SAD Scheme cases are “flooding” the court system and are “controversial.”

Note that this case involves two Chinese litigants fighting in U.S. courts. That is a thing nowadays. Apparently, the Chinese vendors have adopted the philosophy “if you can’t beat ’em, join ’em.” The SAD Scheme gives them another tool to attack their competition. On the plus side, I guess the U.S. is exporting its litigation norms to foreigners. On the minus side, foreign competitor-on-competitor litigation sometimes has nothing to do with protecting U.S. consumers from harmful “counterfeits.” As the stereotype goes, the Chinese are skilled at copying U.S. innovations, and I guess the copiable innovations include the SAD Scheme.

Unlike many SAD Scheme cases, the defendant initially showed up to contest this lawsuit. However, by the time the rightsowner requested summary judgment, the defendant stopped participating.

As a result, the defendant defaulted, and the rightsowner submitted a proposed final judgment. The rightsowner’s proposed order was “barebones” and didn’t justify the rightsowner’s damages request. As a result, the lower court judge issued a final judgment that said the defendant’s infringement was willful and approved an injunction. However, instead of the rightsowner’s requested damages of $2M for willful trademark counterfeiting and $100k for cybersquatting, the district court–without explaining the decision–only awarded the mininum damages for each claim, i.e., $1k each claim, for a total of $2k. DOINK.

The rightsowner appealed the district court’s minimum damages award to the Seventh Circuit. The defendant didn’t show up to contest the appeal, so the rightsowner’s advocacy was completely unrebutted. And yet…the rightsowner still found a way to lose. DOINK AGAIN.

The per curiam opinion summarizes: “it may be better practice for district courts to briefly explain their reasoning in cases like this, but we decline to give Huajie a second bite at the apple.”

The opinion explains:

Huajie failed to offer evidence or arguments in favor of maximum damages, so the district court did not err by failing to offer a robust explanation of its ruling. Huajie argues that the district court should have circled back to its motion for summary judgment to search for support for its damages award. But it was Huajie’s job to make its case for maximum damages on default to the district court, not the court’s job to search through the record for support…

After the district court entered default, Huajie needed to offer evidence and arguments in support of the damages award. But…its proposed order, unaccompanied by any contemporaneously filed motion for entry of default judgment, lacked any rationale to support the maximum award. Although Huajie sought maximum statutory damages in its earlier motion for summary judgment—arguing that only a substantial award could compensate it for its losses and deter future misconduct—it failed to direct the court to those earlier arguments. So Huajie invited the consequence of which it now complains…

we affirm on a basis obvious from the record: nothing immediately available to the district court was adequate to support a $2 million award.

Because Huajie failed to establish its entitlement to the considerable damages it requested, we uphold the district court’s award of minimum statutory damages. We also take this opportunity to remind litigants that the race is not over after the entry of default. A plaintiff with a default in hand still must support a request for damages with evidence and argument.

Judge Pryor dissents in an opinion that recaps a lot of the same material as the per curiam opinion, suggesting that Judge Pryor hoped to write the majority opinion. She says there’s not enough substance in the district court’s judgment to permit the appellate court to evaluate if the district court judge exercised his discretion properly:

The [district court’s] order does not explain how and why the district court landed on its statutory damages award for willful trademark infringement ($1,000) or cybersquatting ($1,000), and nothing else in the record provides any hints. There’s simply no indication the district court exercised its discretion…

a district court must provide some explanation to support its exercise of discretion in fashioning an award of damages to satisfy due process and facilitate appellate review, even in Schedule A litigation regarding statutory damages

For that reason, Judge Pryor would have remanded the case so the lower court judge could explain the damages amounts.

Created by ChatGPT April 2026

I hear the point raised by Judge Pryor. Judicial rulings without explanations leave everyone scratching their head and stymie appellate review. For example, you may recall the avoidable drama created when the Fifth Circuit lifted the stay on Texas’ Social Media Censorship Act without issuing an opinion, making it virtually impossible to challenge at the Supreme Court. (The Supreme Court eventually eviscerated that law). However, in this case, the per curiam opinion persuasively explained that “Huajie invited the consequence of which it now complains” and doesn’t deserve a second bite at the apple.

When the dust settled, the rightsowner walks away with a whopping $2k in damages from this defendant, which is surely a substantial financial loss in light of the appeal costs. However, it also got an injunction, which may or may not be valuable.

* * *

It’s a bummer the Seventh Circuit once again didn’t substantively address the overall viability of the SAD Scheme. As I’ve repeatedly complained, the merits of SAD Scheme cases will rarely reach the appellate courts. The appellate courts’ silence helps the scheme persist.

At the heart of this appeal are two interrelated issues:

1) The rightsowner cut corners on its advocacy, not supporting its proposed final judgment with a rationale that the judge could rely on, and

2) The lower court judge (Judge Seeger, a savvy judge about SAD Scheme abuses) cut corners on issuing the final judgment. This might be the result of the extreme workloads that SAD Scheme cases impose on judges and/or the rightowner’s weak advocacy.

In my opinion, it’s always noteworthy when a plaintiff loses unopposed cases, because they are almost certain to win if they simply make a proper showing of their legal rights. Each time I wonder how they blew the layup.

Case Citation: Shenzhen Huajie Technology Co., Ltd. v. Shenzhen Leyibei Technology Co., Ltd., No. 25-2659 (7th Cir. April 29, 2026). The rightsowner’s lawyers were Adam Edward Urbanczyk and Brian M. Swift of AU LLC.

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This case is a different lawsuit against Classpass, this time over unredeemable Classpass credits. Despite the unmistakable message from the Ninth Circuit that TOS formation screens should be reviewed exactingly, Judge Orrick of the N.D. Cal. district seems to be living in the past. He surprisingly holds that Classpass successfully formed its TOS and sends the case to arbitration. Why did Classpass succeed here when it failed last year at the Ninth Circuit? (If you expect a logical and sensible answer to that question, you must be new to the blog).

* * *

The named plaintiff, Blackburn, navigated through three relevant TOS formation screens. The opinion never precisely identifies which one successfully formed the TOS. It seems like all three did?

(The TOS contained an arbitration clause that everyone agrees applies to this lawsuit if the TOS was properly formed).

Blackburn created her Classpass account in 2019 by navigating this screen and choosing the option to continue with her Facebook credentials (the 2019 Sign Up Screen):

A few days later, in the next screen, she acquired her subscription membership through Classpass’ refer-a-friend program (which entitled her to additional credits) (the 2019 Checkout Screen):

In 2023, Blackburn reactivated her Classpass membership by navigating this screen (the 2023 Reactivation Checkout Screen):

Everyone seems to accept the court’s characterization that all three screens are “sign-in-wraps.” That turns us over to the now-familiar three-part test for evaluating sign-in-wrap formation.

Element 1: Reasonably Conspicuous Notice

Blackburn challenged the 2019 Login Screen’s visibility on three grounds:

• It was part of a 5-screen signup sequence. The court responds “the screens are not cluttered and follow a logical flow.”
• The TOS offer was the smallest font size on the screen. The court says it was the same size as other fonts on the screen.
• The TOS offer language was below the “Continue with Facebook” button she clicked. The court says “the “Terms of Use” is bolded, underlined, and in traditional hyperlink blue. That offsets any real concern that a reasonably prudent Internet user would not know or be aware that those hyperlinks existed just below the “Continue with Facebook” button.”

The court is also OK with the 2019 Checkout Screen visibility. The court acknowledges the TOS offer language in grey font, but says the:

text is still visually set apart from the other font that appears on the screen, despite the fact that it does not appear in blue font….

the hyperlinks are denoted by a bolded light grey font and underline, sufficiently contrasting the white background. Further, the “large text block[]” to which Blackburn refers is actually a two-sentence paragraph separated in space by the one-sentence paragraph denoting the Terms of Use, which makes the presentation of the Terms of Use hyperlink even more noticeable

The court is similarly OK with the 2023 Reactivation Checkout Screen visibility:

The text referring to the Terms of Use is once again just above the commitment button, written in light grey, but bolded font, and while not denoted in traditional hyperlink blue, is set apart from the rest of the text on the screen such that its presence draws the eye. The primary difference between the 2023 Reactivation Checkout Screen and the 2019 Checkout Screen, as Blackburn points out, is that the 2023 Reactivation Checkout Screen includes a black and bolded pronouncement to the user that “you’ll automatically be charged for a full-priced monthly credit plan subscription” and includes, in blue and underlined hyperlinked font, access to information about which Fees may apply. Those decisions to add additional notice of specific terms do not take away from ClassPass’s efforts to make the Terms of Use conspicuous by setting them apart in bolded, underlined font, in a separate paragraph with font color that contrasts the white background.

Element 2: Transaction Context

The Ninth Circuit punted on this factor in Chabolla (wrongly, IMO, because it’s clearly intended to create a long-term subscription), so this court does too. This court adds: “unlike in Chabolla, Blackburn took the additional step and created a ClassPass account by logging in with her Facebook account.”

Element 3: Manifestation of Assent

“Blackburn clicked a button after being presented with a hyperlink to the Terms of Use.”

The court distinguishes Chabolla:

in Chabolla, there was no indication that a user was ever signing up. Here, at the top of the 2019 Sign Up Screen there is a heading that unambiguously reads in bold lettering: Sign up

Blackburn pointed out that in the 2019 Signup Screen, the disclosures inconsistently and ambiguously refer to both “the” TOS and “our” TOS. The court responds that the argument “makes no sense. If a user is signing up through a preexisting Facebook account, that user must have necessarily already agreed to be bound to any Terms of Use or other terms of Facebook. It is not ambiguous to a reasonable Internet user signing up for an account or membership with ClassPass, even by way of Facebook, that any newly presented Terms of Use are those of ClassPass, not Facebook.”

With respect to the 2023 Reactivation Checkout Screen, Blackburn pointed out that the TOS offer language referred to “the” button but there were two buttons below it. The court responds:

“the” in the context of the 2023 Reactivation Screen must mean “either,” because a user attempting to access the 45 free Credits can only click one button to do so, or as the 2023 Reactivation Screen denotes, “the button.”

Normally, “the” connotes a singular reference. Here, the court reads it to connote plural references.  ¯\_(ツ)_/¯

In a footnote, the court says: “I do agree with Blackburn that the 2019 Checkout Screen’s language (“By clicking the Redeem now button, I agree to the Offer Terms and Terms of Use . . .”) is curious because it leaves out whether a user who chooses to pay using G Pay is likewise bound. But a reasonable Internet user would likely understand that payment using either method would bind the user to the visibly hyperlinked Terms of Use and it is clear that Blackburn manifested assent via the 2019 Sign Up Screen and 2023 Reactivation Screen in any event.”

Implications

I view the Chabolla and Godun opinions as companion cases. They came out just a couple of months apart, and they both took highly skeptical approaches to online TOS formation. Remarkably, this court doesn’t cite Godun even once. That is a conspicuous omission.

To me, this ruling is another reminder of how TOS formation analysis has descended into Calvinball. As Judge Bybee warned in dissent in the 9th Circuit Chabolla case: “minor differences between websites will yield opposite results….That sows great uncertainty in this area.” Here, comparing this lawsuit to Chabolla, we have the exact same defendant and similar formation processes from around the same historical time period, yet Classpass gets TOS formation when the Ninth Circuit denied it last year. The outcome appears to flip based on tiny differences.

I will also note how many of the court’s assessments turn fundamentally on consumer expectations, except the court doesn’t cite a shred of empirical evidence about what consumers think. The missing empiricism plays a major role in the Calvinball phenomenon.

If the court had been inclined to do so, it could have picked apart each screen and found deficiencies in each. After all, that’s what the Ninth Circuit did in its Chabolla case. Some examples:

• In the 2019 Signup Screen, the TOS offer language refers to “sign up with Facebook” and the button says “continue with Facebook.” Plus, there is a second “sign up” button lower on the screen that the court ignores even though it matches the TOS offer language. All of this may sound ticky-tack, but…in the Chabolla case, the court rejected a screen where the TOS offer said “I agree to” and the button said “redeem now,” and in the Godun case, one of the screens failed because the TOS offer said “I agree” and the button said “connect now.”
• In the 2019 Checkout Screen, the TOS offer language is stacked below a large paragraph of offer terms, and it appears to be a slightly smaller or lighter font than those. The court could say that reasonable consumers would spot it anyway, but that’s an empirical question without empirical support. Many other courts would have treated the text block as so monolithic that no sentence stood out.
• The 2023 Reactivation Confirmation Screen had the text block problem plus (as the court discussed) the imprecision of a reference to “the” button when there were two button options.

To be fair, I don’t necessarily support courts doing this degree of ticky-tack pixel policing. However, that level of exactitude drove the Chabolla and Godun decisions.

The screenshots at issue all predate the Chabolla and Godun decisions. Today, there’s no excuse for weak sign-in-wraps like this. I expect you to do better. The courts will expect that too.

As Judge Bybee said in dissent in Chabolla, “Our decision today will drive websites to the only safe harbors available to them, the clickwrap or scrollwrap agreements.” Want to opt-out of the TOS formation Calvinball? Take the certainty of clickwraps over the chaos of sign-in-wraps.

Case Citation: Blackburn v. Classpass USA Inc., 2026 WL 962734 (N.D. Cal. April 9, 2026)

The post Remember When the Ninth Circuit Rejected Classpass’ TOS Formation? About That…–Blackburn v. Classpass appeared first on Technology & Marketing Law Blog.

If this were a framed original of the trading card, the First Sale doctrine should apply. If it were a counterfeit version of the trading card, it would be an obvious legal violation. But this appears to be a photo of the trading card that’s printed. No reasonable buyer would believe this is the original trading card.

Upper Deck nevertheless seeks to enforce its IP rights in the print, both in the Michael Jordan imagery (it received via a license) and its hologram mark (the black shape in the upper left of the print–see the outline from the trademark registration). I believe the original card has actual holographic imagery in the mark’s location to reinforce the original’s authenticity. (Holograms are harder and more expensive to mimic, so they are routinely used as an anti-counterfeiting or security device). So when the reproduction lacks the holographic component of the mark, what does that signify? To me, it’s a strong signal to consumers that the copy isn’t being presented as authentic. Does that demonstrated lack of authenticity have any relevance to the trademark considerations? Unfortunately, the court doesn’t address that issue.

Trademark Dilution

The court says the hologram trademark isn’t sufficiently famous to qualify for dilution protection.

Trademark Infringement

• Mark strength. Even though the hologram mark isn’t famous, it’s a strong mark.
• Proximity of goods. Both offer sports memorabilia.
• Mark similarity. Identical.
• Actual confusion. The court presumes actual confusion from the mark’s identicality, with a bonus gratuitous shoutout to initial interest confusion because why not?
• Marketing channels. Both sell on the Internet.
• Purchaser care. An authentic Michael Jordan trading card depicted in the image above would sell for upwards of $1M. Pixels sells the reprint for $70. Purchasers will note the differences.
• Intent. “the mere existence of [Pixels’] notice-and-takedown policy does not indicate that Pixels has knowledge about the infringing use of the Upper Deck Hologram Mark in particular….Upper Deck has not indicated it attempted to take advantage of Pixels’ notice-and-takedown procedure to notify Pixels’ DMCA agent as to Pixels’ infringing use of the Upper Deck Hologram Mark.” How hard would it have been for Upper Deck to send takedown notices?
• Product line expansion. No evidence.

The court summarizes that 5 factors favor Upper Deck, 2 favor Pixels, and one is neutral. That’s enough to defeat Pixels’ summary judgment motion.

False Advertising

The opinion shifts to Upper Deck’s licensed interests in Michael Jordan’s depiction.

Standing. “a reasonable jury could find that Pixels’ use of Jordan’s likeness in its own similar products could result in a loss of sales of Upper Deck’s products and threatens Upper Deck’s commercial interests.”

False Advertising. I guess Pixels’ advertising claim is that Pixels has the right to market Michael Jordan trading cards when Upper Deck has the exclusive rights? The court says Upper Deck showed enough to survive summary judgment.

False Association. The false association analysis triggers a new round of Sleekcraft factor review, this time focused on Michael Jordan’s trademarks. The result is even more favorable to Upper Deck, so it again defeats Pixels’ summary judgment motion.

Publicity Rights

Pixels challenged Upper Deck’s exclusive right to the Michael Jordan personality. The court says the evidence provided by Upper Deck survives the summary judgment motion.

First Amendment Defense

A Rogers defense goes nowhere. Upper Deck presented “evidence that Pixels used Jordan’s Marks and/or the Upper Deck Hologram Mark in Pixels’ products featuring pictures and photographs displaying Jordan’s likeness. The pictures and photographs of Jordan displayed in Pixels’ products at issue in this action are source-identifying insofar as they contain Jordan’s Marks.”

Section 230

Pixels sought to clean up some of the state law IP and unfair competition law claims per Section 230.

In a footnote, the court acknowledges that Section 230’s IP exception applies to the federal Lanham Act claims but doesn’t apply to state IP claims.

The court summarizes: “while advertising and curating content on websites constitute publishing conduct that can be immunized under Subsection (c)(1), the sale and distribution of physical products does not.” Thus:

Pixels is entitled to Section 230 immunity where Upper Deck seeks to hold it accountable for the advertisement of allegedly infringing goods, or for creating website tools that allow users to search and view allegedly infringing goods based on images uploaded by third parties. However, Pixels is not entitled to Section 230 immunity to Upper Deck’s California state law claims where Upper Deck seeks to hold Pixels accountable for manufacturing and selling the allegedly infringing products listed for sale on its website (e.g., contracting with vendors to manufacture and ship illicit products)

As applied: “Pixels does not create the illicit images of products uploaded and displayed on its site, and Pixels’ website search engine and content filtering tools do not contribute to the creation of those products.” However, Section 230 doesn’t apply to “Pixels’ involvement in offline manufacturing or selling physical prints containing infringing images (e.g., hiring and coordinating with print and shipping vendors, facilitating product returns, offering a money-back guarantee).” It seems pretty straightforward that Section 230 wouldn’t apply to offline activities, no?

* * *

This case raises many complex issues. In addition to the hologram mark issue, this case raises questions about the scope of merchandising rights, the permissibility of displaying historical items such as old sports trading cards, print-on-demand manufacturers’ liability for vendor uploads, and more. The court mostly sidesteps all of these legal complexities. Instead, the opinion narrowly focuses on more technical aspects, such as whether the hologram mark’s shape could be infringed even when it’s being accurately displayed in historical context.

The court’s rejection of most of Pixels.com’s summary judgment motion seems to position Upper Deck’s claims for a trial, unless the parties can figure out a settlement beforehand.

Case Citation: The Upper Deck Co. v. Pixels.com LLC, 2026 WL 776227 (S.D. Cal. March 19, 2026). This is an amended version of the opinion issued on March 6. As the court explains in the first footnote, the prior opinion had errors that the court needed to correct.

Related posts

* DMCA 512(c) Helps Redbubble Defeats Copyright Lawsuit–Wallshoppe v. Redbubble
* Print-on-Demand Service Defeats Fish Illustrator’s Copyright Claim–Tomelleri v. Sunfrog
* Print-on-Demand Services Face More Legal Woes–Canvasfish v. Pixels
* Atari’s Lawsuit Against a Print-on-Demand Service Fizzles Out–Atari v. Printify
* Ninth Circuit Highlights the Messy Law of Contributory Trademark Infringement Online–YYGM v. RedBubble
* RedBubble Gets Another Favorable Ruling–YZ Productions v. RedBubble
* IP Lawsuits Against Print-on-Demand Vendors Continue to Vex the Courts–OSU v. Redbubble & More
* Another Tough Ruling for Print-on-Demand Vendors–Sid Avery v. Pixels
* Print-on-Demand Vendor Doesn’t Qualify for DMCA Safe Harbor–Feingold v. RageOn
* CreateSpace Isn’t Liable for Publishing Allegedly Infringing Uploaded Book–King v. Amazon
* More Evidence That Print-on-Demand Vendors May Be Doomed–Greg Young Publishing v. Zazzle
* Section 230 Doesn’t Protect Print-on-Demand Vendor–Atari v. Sunfrog
* Online Marketplace Defeats Trademark Suit Because It’s Not the “Seller”–OSU v. Redbubble
* Zazzle Loses Copyright Jury Verdict, and That’s Bad News for Print-on-Demand Publishers–Greg Young Publishing v. Zazzle
* Trademark Injunction Issued Against Print-on-Demand Website–Harley Davidson v. SunFrog
* DMCA Safe Harbor Doesn’t Protect Zazzle’s Printing of Physical Items–Greg Young Publishing v. Zazzle
* CafePress May Not Qualify For 512 Safe Harbor – Gardner v. CafePress
* Cafepress Suffers Potentially Significant Trademark Loss for Users’ Uploaded Designs
* Life May Be “Rad,” But This Trademark Lawsuit Isn’t–Williams v. CafePress.com
* Print-on-Demand “Publisher” Isn’t Liable for Book Contents–Sandler v. Calcagni
* Griper Selling Anti-Walmart Items Through CafePress Doesn’t Infringe or Dilute–Smith v. Wal-Mart
* CaféPress Denied 230 Motion to Dismiss–Curran v. Amazon

The post What Does a Hologram Trademark Signify When the Hologram Isn’t There?–Upper Deck v. Pixels appeared first on Technology & Marketing Law Blog.

In 2024, Photobucket emailed its legacy users, asking if they wanted Photobucket to keep or delete their accounts. Users who clicked on the email’s links–included to delete their accounts–were presented with a new TOS formation process that included a consent to use the photos to derive users’ biometric information for AI purposes. “If users did not opt out of the Biometric Policy within 45 days of July 22, 2024, Photobucket claims the right to sell, lease, trade, or otherwise profit from the users’ biometric information.” (Photobucket claims it hasn’t actually pursued this AI option). The new TOS also contained an arbitration provision that wasn’t in some prior TOS versions. Photobucket invokes the arbitration clause against the plaintiffs’ lawsuit.

Article III Standing. The court says the plaintiffs only have Article III standing for equitable relief, not damages. This narrows the case substantially.

Pierce

Pierce agreed to Photobucket’s 2008 TOS and last logged into Photobucket in 2014. The 2008 TOS informed Pierce that his “continued use” of Photobucket would constitute acceptance to any TOS modifications. Since he didn’t use the site after 2014, he didn’t assent-by-use to the 2024 TOS:

a reasonable person would not understand his failure to take his photos off of
Photobucket, after not logging in for nearly ten years, to constitute “continued use” and thus acceptance of any revised terms.

In other words, a user’s maintenance of a legacy account isn’t “continued use” of the service.

Ms. Hughes

Ms. Hughes agreed to Photobucket’s 2006 TOS and last logged into Photobucket no later than 2011. The 2006 TOS said:

By using the Services you agree to the Terms of Service set forth below as they may be updated from time to time by Photobucket.com, Inc. (“Photobucket.com”). Photobucket.com may modify or terminate the Services from time to time, for any reason, and without notice, including the right to terminate with or without notice, without liability to you, any other user or any third party, provided that when Photobucket.com does so, it will update these Terms of Service. You are advised to periodically check the website for changes in the Terms of Service.

The court says this TOS “told Ms. Hughes that she was “advised to periodically check the website for changes in the Terms of Service.” The 2006 Terms “necessarily inform[ ] how a reasonably prudent user would interact” with Photobucket’s website.”

But…the TOS applicable to Pierce said “It is therefore important that you review this Agreement regularly to ensure you are updated as to any changes.” The court disregarded that language for Pierce. Can you find a difference between the disclosures to Pierce and Hughes? Beyond the (seemingly immaterial) language differences, the court’s different conclusions might be explained by (1) Pierce was governed by Colorado law, Hughes by CA law; or (2) Hughes admitted getting emails telling her about the coming changes, though she didn’t pay attention to them. I don’t find those distinctions persuasive, so I can’t meaningfully distinguish Pierce’s situation from Ms. Hughes’.

The court says Hughes is bound to the 2024 TOS:

the 2006 Terms told Ms. Hughes that she had an obligation to periodically check Photobucket’s website for updates to the Terms. The 2024 Terms and arbitration provision constitute an update to the Terms that Ms. Hughes had an obligation to stay apprised of. Ms. Hughes assented to the 2024 Terms because they informed her that failure to opt out within 45 days of the effective date would constitute acceptance, and Ms. Hughes did not opt out

Whoa. The court is saying that even though Hughes functionally abandoned Photobucket in 2011, a “reasonably prudent user” would have kept checking Photobucket’s TOS 13 years later just in case the terms had changed. Wild.

Because Ms. Hughes “agreed” to the 2024 TOS, she also “agreed” to its jury trial waiver.

However, the arbitration clause excludes IP claims. The plaintiffs alleged 1202(b) claims, which the court says are IP claims and thus not covered by the arbitration provision. This claim stays in court.

Cumming

The parties can’t agree when Cumming created her Photobucket account or when she last used it, but everyone agrees that she agreed to the 2013 TOS and didn’t use the site later than 2013. That TOS version said “so long as you’ve used the Site after the change, regardless of any separate notice, you agree to the current posted version of the Terms.” Similar to the court’s discussion of Pierce, the court says “a reasonable person in Ms. Cumming’s position would not understand her failure to take photos off of Photobucket to mean that she “used” Photobucket after 2010 or 2013 and thus assented to the 2024 Terms.”

Mr. Hughes

He didn’t have a Photobucket account, but Ms. Hughes uploaded photos of him. The court says he’s not a third-party beneficiary of any TOS and not bound by the arbitration clause.

Court Stay

The court stays the litigation until after the arbitration, even though the court held that 3 of the 4 named plaintiffs were not bound by the arbitration and the fourth plaintiff had a claim not subject to arbitration. Because the court will not be bound by the arbitrator’s decisions for the non-arbitrated plaintiffs and claims, I didn’t understand why the court held everything else up. A slightly lucky break for Photobucket, because it avoids the cost of defending the litigation and arbitration simultaneously.

Implications

Here’s where things stand when the dust settled:

• damages are out of the case
• part of one plaintiff’s case is sent to arbitration
• when that’s complete, the court will address the remainder of that plaintiff’s case plus the other three plaintiffs’ cases

A messy outcome…perhaps messy enough to motivate the parties to settle? Without the availability of damages, this case became less interesting to the plaintiffs. Alternatively, I could also see the plaintiffs appealing this ruling.

Though Photobucket nominally got the outcome it wanted (the case sent to arbitration), it does not come out of this ruling looking very good. Some of the lowlights:

• its inital TOS amendment provisions sucked. It had various versions of “you need to come back to the site to check for possibly amended terms,” which has rarely fared well in court. Frankly, it’s shocking to see the judge find this “keep checking the TOS 13 years later” provision worked against Ms. Hughes. I don’t think that’s what a reasonable consumer would do. (As usual, the court cited no empirical basis for its assessment of what a reasonable consumer would do or think).
• the fact that Photobucket’s TOS amendment language kept changing over time. The language differences ensure more litigation work when it’s challenged.
• the fact that Photobucket kept changing its governing law clause. Another decision that increased its defense costs and the risk of inconsistent outcomes.
• the fact that Photobucket couldn’t definitively establish the dates of the users’ account creation or usage.
• its 2017 implosion. How did it misjudge the market so badly?
• its 2024 pivot to potentially engage in AI mining. I guess if you’ve already killed your business, why not try to salvage what’s left of the carcass?
• the attempt to bind legacy users via a TOS that users had to click through even if they wanted to exit Photobucket. Gauche.
• the arbitration provision’s exclusion for IP. Plaintiffs are weaponizing 1202, so IP carveouts have become dangerous. Reminder: every part of the arbitration provision should be carefully vetted for potential plaintiff weaponization.

The result was a messy outcome with different plaintiffs for getting different outcomes. Not what Photobucket was aiming for.

The obvious question: was there a better way for Photobucket to force all legacy users onto its new AI-friendly terms? This judge seemed to believe that the right incantation would let Photobucket put the onus on users to check for TOS amendments, but most judges won’t permit this. Could Photobucket have forced users to the new terms through its emailed notifications? The Ninth Circuit just permitted this, so maybe? The reality is that it’s difficult or impossible to universally bind all legacy users to new terms if they aren’t coming back to the website. I don’t have any clever hacks or tricks to work around this.

Case Citation: Pierce v. Photobucket Inc., 2026 WL 672764 (D. Colo. March 10, 2026). CourtListener page.

Other posts about Photobucket

• Photobucket Qualifies for the 512(c) Safe Harbor (Again)–Wolk v. Kodak
• Photo Hosting Site Gets DMCA 512 Safe Harbor–Wolk v. Photobucket

The post Photobucket’s Attempted TOS Amendment Mostly Fails–Pierce v. Photobucket appeared first on Technology & Marketing Law Blog.

However, the defendants challenged the copyright registrations, saying they incorporated third-party works. The plaintiff claimed it had the copyright owner’s permission to include those images in its works [though I didn’t see any indication that it was an exclusive license required to enforce them…? this was unclear], but the defendants claimed that the plaintiff’s evidence and timeline didn’t cohere. The court initially sided with the plaintiff, but the plaintiff later voluntarily dismissed the case entirely.

The defendants sought damages out of the bond supporting the TRO. The court says “Langmi does not dispute that Defendants were wrongfully enjoined or restrained, nor does it identify any reasons for requiring Langmi not to pay in this case,” which seems pretty dispositive.

Nevertheless, the court becomes a stickler about the defendants’ arguments on various procedural grounds, so the judge makes a series of judgment calls against the defendant and concludes that the plaintiff did not litigate in bad faith. As a result, the court limits the defendants to the $10k bond–even though the defendants showed $47k of lost profits while the TRO was in effect. Raising more procedural objections, the court also rejected the defendants’ requests for attorneys’ fees due to the plaintiff’s litigation misconduct. I imagine the defendants could request a 505 attorneys’ fee shift, but I’m skeptical this judge would grant that either given its discretionary nature.

This case highlights some common aspects of SAD Scheme cases:

• Although the SAD Scheme is pitched as a tool against Chinese defendants, increasingly we are seeing Chinese plaintiffs embrace the SAD Scheme. I guess the Chinese are learning all of the wrong lessons about how the US legal system works.
• This court set too low a bond. I’m not aware of scientific guidance about how courts should set appropriate bond levels, so this could be an area that would benefit from more academic rigor. But because the court didn’t properly structure the bond initially, it left the defendants with uncompensated damages.
• SAD Scheme plaintiffs often back down when defendants fight back. The plaintiff dropped from 36 to 8 defendants, and then, when challenged further, the plaintiff dropped the case entirely. This plaintiff pliability is often a sign that the plaintiff assumed they would get away with doing inadequate homework (as this defendant did, getting the TRO initially) because judges won’t spot all of the holes in the plaintiffs’ cases.
• Judges all too often hold defendants to stricter procedural standards than they hold plaintiffs. It seems like SAD Scheme plaintiffs can say whatever they want to get a TRO and some judges shrug their shoulders about the multitudinous corner-cutting along the way. But when defendants ask a judge to hold the SAD Scheme plaintiff accountable, all of the sudden the rule of law barrier reappers and judges repeatedly make all inferences against the defendants.

All told, the plaintiff got a TRO it almost certainly didn’t deserve, caused tens of thousands of dollars of damages to the defendants, and is only liable for paying out of its inadequate bond. Grr.

Case Citation: Shenzhen Langmi Technology Co., Ltd. v. Schedule A Defendants, 2026 WL 569072 (N.D. Ill. Feb. 26, 2026)

BONUS: In a non-precedential opinion, the Seventh Circuit rejects SAD Scheme personal jurisdiction merely based on the defendant’s product being available in Illinois, without the plaintiff doing a test buy or providing other evidence of the defendant’s sales in Illinois:

In the context of Schedule A litigation, the defendant’s operation of an online store accessible in the forum state, combined with sales in the forum state, has been found sufficient to subject that defendant to personal jurisdiction….

there’s no evidence in the record of Illinois purchases. The evidence upon which the district court relied shows only that it was possible to order the defendants’ products and have them shipped to Illinois, not that such sales took place. Those records consist of screenshots of Walmart’s website showing the checkout page with the infringing product, a Chicago shipping address, and the estimated total, but not a completed purchase….

Therefore, the district court clearly erred in finding that the defendants sold products to Illinois customers. Nor was that error harmless. Without those sales, the court’s basis for personal jurisdiction is merely that the defendants operated a website accessible in the United States. And, as we explained in Curry, more is required to establish personal jurisdiction

Liu v. Monthly, No. 25-2074 (7th Cir. March 9, 2026)

BONUS 2: Liu v. Schedule A Defendants, No. 4:25-cv-01220, 2026 BL 78756 (E.D. Tex. Mar. 09, 2026): “Federal courts thus lack authority to freeze defendants’ assets for future satisfaction of a potential judgment awarding damages for utility-patent infringement.”

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