Trade Secrets Archives - Technology & Marketing Law Blog

The DTSA Ex Parte Seizure Provision Was Always Bad Policy–Janssen v. Evenus

Eric Goldman — Sat, 28 Oct 2023 15:44:31 +0000

In 2016, Congress enacted the Defend Trade Secret Act (DTSA). Among other provisions, it created a brand-new remedy, the ex parte seizure order, that allows trade secret owners to grab allegedly stolen trade secret items before they are spirited away from judicial process. The paradigmatic example on Congress’ mind was something out of the movies: the thief is making their hasty escape to the airport and legal safety, but the US marshals save the day by interdicting the thief just before they board the plane. In the real world, this happens never. Also, the ex parte seizure’s procedures cannot move quickly enough to stop an airport escape, so the provision could never actually redress its archetypical use case.

Trade secret owners have always had the ability to seek an ex parte TRO that could include item seizure to prevent dissipation or spoliation, so the ex parte seizure provision partially overlapped existing protections. However, as we know, courts routinely and predictably make errors when ruling on ex parte motions, so any additional legislative embrace of ex parte procedures is always fraught with peril.

In general, courts have taken seriously Congress’ instructions that a DTSA ex parte seizure is only appropriate in “extraordinary circumstances.” As a result, courts have rarely granted it (and it probably wasn’t needed or applicable even in those rare cases). Indeed, any time a trade secret owner requests a DTSA ex parte seizure, I assume that the plaintiffs are playing the legal system.

* * *

The case that prompts these musings involves the maker of “Yondelis,” a chemotherapy drug. The manufacturer patented the drug but keeps the “data, specifications, and methods for manufacturing the drug confidential.” A generic manufacturer sought FDA approval, and the Yondelis manufacturer sued them for patent infringement.

During discovery for the patent case, the Yondelis manufacturer found evidence suggesting trade secret theft, so it added a DTSA claim against the generic manufacturer. The Yondelis manufacturer further became convinced that the generic manufacturer was spoliating evidence. Thus, the Yondelis manufacturer sought a DTSA ex parte seizure order against the generic manufacturer.

You probably already spotted the problems with the Yondelis manufacturer’s seizure request, but let’s go through it explicitly.

The parties are already in litigation. The generic manufacturer is already under a litigation hold. Violating that hold will lead to adverse consequences in the litigation as well as possible criminal punishment. Plus, the parties are already engaging in disputes over discovery. With that context, it is usually unreasonable for one litigant to blindside its opponent with an ex parte demand.

Even if that weren’t true, there are existing mechanisms for discovery that the Yondelis manufacturer could use, including (if applicable) ex parte requests under the FRCP. The DTSA ex parte seizure provision wasn’t designed to be used when there’s already an existing lawsuit between the players. Most importantly, this plaintiff is asking the court to seize important items from its competitive rival–without giving the rival a chance to object (the whole point of an EX PARTE seizure). What could possibly go wrong with that?

The generic manufacturer may or may not have done nefarious things, but the facts in evidence in this opinion confirm that the Yondelis manufacturer is making some shady moves in court.

Fortunately, the district court rejected the DTSA ex parte seizure request. And then, a shocking twist in the movie’s third act: the Yondelis manufacturer appealed the seizure request denial.

First, in general, TRO denials aren’t appealable. They are only supposed to preserve the status quo until the court can review the case in an orderly fashion. The ex parte seizure isn’t a TRO per se, but it serves the same function with the same rationales.

Second, the DTSA seizure proceedings are ex parte to keep them secret and avoid potential dissipation or spoliation. But if you’re appealing the denial, then it’s no longer a secret to the target, who now can dissipate/spoliate if they are so inclined to commit illegal acts, meaning the need for an ex parte remedy has completely evaporated. Maybe the trade secret owner is playing a clever game of 4D chess, but in a 2D world none of this makes sense.

In an anodyne opinion, the appeals court says DTSA ex parte seizure requests aren’t appealable. According to Westlaw, this is the first time an appellate court has interpreted the DTSA ex parte seizure provision (18 USC 1836(b)(2)). Given the paucity of use cases for the seizure provision, it could possibly be the last appellate analysis we’ll get for the foreseeable future.

Regardless of the DTSA’s overall merits, the ex parte seizure provision never should have been included in the law, as confirmed by the data points from the past 7 years. For that reason, I believe the ex parte seizure provision remains a discredit to those who advocated for it.

Case Citation: Janssen Products LP v. Evenus Pharmaceutical Laboratories, Inc., 2023 WL 7036466 (3d Cir. Oct. 17, 2023)

Prior Blog Posts on the DTSA Ex Parte Seizure Provision

* This quick links re. All Star Recruiting Locums v. Ivy Staffing Solutions
* This quick links re. Magnesium Machine, LLC v. Terves LLC, where the allegedly misappropriated trade secret was 3 words long.
* Is the DTSA Ex Parte Seizure Provision Constitutional?
* This quick links re. Blue Star Land Services LLC v. Coleman)
* The DTSA’s Ex Parte Seizure Order: The “Ex” Stands for “Extraordinary” (Guest Blog Post)
* Another Court Rejects DTSA Ex Parte Seizure–Brunswick Rail v Sultanov
* Court Benchslaps Trade Secret Plaintiff and Counsel For Bad Faith Litigation–RBC Bearings v. Caliber
* Trade Secret Owner Penalized For ‘Specious’ Misappropriation Lawsuit–BTS v. Exclusive Perspectives
* The New ‘Defend Trade Secrets Act’ Is The Biggest IP Development In Years
* Do We Need A New Judicial Fast Lane To Combat Trade Secret Theft?
* Congress Is Considering A New Federal Trade Secret Law. Why?
* Ex Parte Seizures and the Defend Trade Secrets Act

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Competitive Keyword Ad Lawsuit Fails…Despite 236 Potentially Confused Customers–Lerner & Rowe v. Brown Engstrand

Eric Goldman — Mon, 22 May 2023 14:46:47 +0000

This case involves two rival personal injury law firms in Arizona, one of which engaged in competitive keyword advertising against the other. The court dismisses the lawsuit on summary judgment.

The court focuses on the likelihood of consumer confusion. The court starts with a general observation: “Although it might at first seem that one firm’s purchase of another firm’s trademark as a Google keyword would constitute infringement, courts generally have not adopted that view,” citing Network Automation. The plaintiff invoked initial interest confusion, but per Network Automation, the court merges IIC back into the standard multi-factor test. Also per Network Automation, the court prioritizes four of the standard likelihood-of-confusion factors: mark strength, actual confusion, purchaser care, and whether the search results are labeled as ads.

On the question of actual confusion, the defendant’s log of inbound phone calls is the key piece of evidence:

Defendants maintained call logs for four years which show that callers to Defendants’ phone number mentioned Lerner & Rowe 236 times. Each log entry includes the date of the call and the caller’s name, as well as a column labeled “[w]hat they said referred by.” Plaintiff contends that many of the responses in this column show actual confusion, including: “Referred by L&R (they had a conflict)”; “referred by L&R”; “googled – L&R”; “Internet – Lerner & Rowe”; “thought he called L&R”; “Lerner/Rowe/TV”; and “Wanted L&R.”

The court says the call logs are ambiguous. Even if the notes suggested the prospective client initially was looking for the plaintiff, they may have understood the (lack of) relationship between the rival firms or perhaps they became interested in the rival after seeing the comparative ad. The court says it needs more information to understand the call logs.

The court doesn’t dig into that question further. Instead, the court says that any actual confusion evidenced by the call logs was de minimis as a matter of law. “Isolated incidents” don’t show actual confusion; “there must be actual confusion among significant numbers of consumers.” The ads in question generated about 109k ad impressions and generated 7,400 clicks, an impressive 6.8% clickthrough rate. Assuming each of the 236 references to Lerner & Rowe in the call logs is a confused consumer, the court says that means only about 0.2% of exposed consumers experienced actual confusion:

This tiny percentage cannot reasonably be said to constitute an “appreciable” or “significant” number of consumers confused by Defendants’ advertising strategy. Nor can it be said to show that Defendants’ marketing strategy made confusion likely.

The court summarizes its conclusion on the multi-factor analysis:

The three relevant screenshots produced by Plaintiff show clear labeling of Defendants’ entry, using Defendants’ name and prominently labelled as an “Ad,” and with no use of Plaintiff’s trademark or confusingly similar language or content. Reasonably savvy Internet users with a strong incentive to select the right lawyer would not be confused by these clearly labeled ads into believing that Defendants were Plaintiff. Plaintiff produces no survey evidence showing a likelihood of confusion, and its evidence that, at most, 0.215% of all consumers exposed to Defendants’ ads were in fact confused by them is simply not enough to show a likelihood. Two-tenths of one percent is not an appreciable or significant portion of consumers exposed to Defendants’ keyword-generated ads. Plaintiff does have a strong mark, but no reasonable jury viewing Plaintiff’s thin evidence could find that potential clients viewing Defendants’ clearly labeled ads are likely to be confused into thinking Defendants were in fact Plaintiff.

* * *

Defense counsel engaged in some impressively crafty lawyering to get the court to accept the 109k ad impressions as the denominator in its formula. (The defense team included lawyers from Jaburg & Wilk, Wilenchik & Bartness, and the Law Office of Robert W Shely). The math does have some problems. First, the numerator is individual people, while the denominator is ad impressions. If prospective clients saw the ads more than once, the denominator overstates the number of individual people. Second, we don’t know anything about the 102k prospective clients who didn’t click on the ads. Maybe they didn’t click on the ads because they were confused? Third, if the court used 7,400 clickthroughs as the numerator (which is still not precise, because a single prospective client might have clicked multiple time), the rate of actual confusion increases to 3.2%. While this is still a low rate if we’re measuring net consumer confusion in a consumer survey, it would have been a lot more compelling if the court had expressly rejected this higher ratio.

(On that front, this case brought to mind the uncited 10th Circuit 1-800 Contacts v. Lens.com opinion, which held that a 1.5% clickthrough rate proved that there was NOT legally sufficient initial interest confusion because it was well below the standard 10-15% net confusion threshold courts normally require. Here, the court could have said that the 6.8% clickthrough rate–overcounting every consumer click as confused–similarly disproved consumer confusion).

It’s unusual to see a court dismiss the probative implications of potentially hundreds of confused consumers. While this is a startling good defense ruling from a trademark law standpoint, I could see a state bar arguing that ads violate ethics rules if they produce hundreds of potentially misdirected prospective clients. Before the state bar could reach that conclusion, they would have to do more work to validate that the 236 entries are indeed misdirected, something this court punted on. When that work is done, perhaps the actual number of confused consumers becomes small enough to obviate the concerns.

For more on competitive keyword ads by lawyers, see this article.

Case citation: Lerner & Rowe PC v. Brown Engstrand & Shely LLC, No. CV-21-01540-PHX-DGC (D. Ariz. May 18, 2023)

More Posts About Keyword Advertising

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2H 2022 Quick Links, Part 3 (Copyrights and More)

Eric Goldman — Tue, 03 Jan 2023 15:08:53 +0000

Copyright

* Wallster, Inc. v. Redbubble, Inc., 2022 U.S. Dist. LEXIS 198181 (C.D. Cal. Oct. 21, 2022):

this Court rejects Wallshoppe’s argument that recklessness is enough to meet the knowledge requirement for contributory copyright infringement…

Wallshoppe alleges Defendant has a “general awareness” that certain designs uploaded to its website may be copyrighted and that a “significant percentage of those that [Defendant] partners with to sell products are not ‘authentic sellers.'” However, Wallshoppe does not allege Defendant knew of the specific acts of infringement at issue here—Sienna Lewis selling products featuring the Palm Design on Defendant’s website. Allegations of “general awareness” are not enough.

* Whiddon v. Buzzfeed, Inc., 2022 WL 16555584 (S.D.N.Y. Oct. 31, 2022):

When an individual’s decision to disseminate an Instagram post is the “very thing the article [is] reporting on,” the use of the Instagram post and its copyrighted material in the reporting has been deemed sufficiently transformative to support a fair use defense.

Moreover, reproductions of a social media post are clearly used for the purposes of reporting on the post where, as here, the reproductions include the accompanying elements of the social media application, such as the frame of the Instagram application and standard Instagram hyperlinks. The focus of the article is Ms. Mitchell’s decision to disseminate the Photographs of her accident, and the resulting critique of that decision. Buzzfeed’s use of screenshots, which include all the elements of the Post, such as the Instagram branding and Ms. Mitchell’s caption, make absolutely clear that the focus of its reporting is on the Post and the controversy.

* UMG Recordings, Inc. v. Grande Communications Networks LLC (November 3, 2022). Jury awards nearly $50M in damages against Internet access provider for user-caused copyright infringement.

* Grumpy Cat Limited v. The Individuals, Corporations, Limited Liability Companies, Partnerships, and Unincorporated Associations Identified on Schedule A Hereto:

Some of the accused products likely infringe plaintiff’s trademarks or copyrights, but the court is not persuaded that the accused products depicted in every submitted screenshot infringe. For example, [15] at 10 and [15] at 126 depict cartoon cats that are not the trademarked image and do not use the term Grumpy Cat. Plaintiff’s submission does not explain how such images could reasonably be considered derivative of any copyrighted work (which are merely listed and not described). Not every frowning cartoon cat infringes; or at least plaintiff has failed to persuade that its intellectual property reaches that far

* Evox Productions, LLC v. Verizon Media, Inc., 2022 WL 17430309 (9th Cir. Dec. 6, 2022). It could be copyright infringement to continue serving photos from servers after the license expired.

* Hayden v. 2K Games, Inc., No. 1:17CV2635 (N.D. Ohio. Sept. 20, 2022). Tattoos are “published” when completed.

* From the Copyright Office:

The Copyright Office “does not recommend adopting additional copyright-like rights for press publishers in the United States. We have concluded that ancillary copyright protections have not been shown to be necessary in light of publishers’ existing rights, and would likely be ineffective so long as publishers depend on news aggregators for discoverability. Moreover, to the extent that any ancillary copyright protections would lack traditional copyright limitations and exceptions, they would raise significant policy and Constitutional concerns….

Any change to U.S. copyright law that would meaningfully improve press publishers’ ability to block or seek remuneration for news aggregators’ use of their works would necessarily avoid or narrow limitations on copyright that have critical policy and Constitutional dimensions. Additionally, we note that this Study revealed little demand for additional copyright-related rights for press publishers. Most commenters identified changes to competition (antitrust) policy as a more effective means to improve the position of press publishers in dealing with news aggregators”

* White v. UMG Recordings, Inc., 2022 WL 17744001 (SDNY Aug. 16, 2022). 512(f) plaintiff alleged claims sufficient to survive a motion to dismiss.

* Wright v. Edwards, 2022 WL 17820247 (E.D.N.Y. July 18, 2022). Even on a default judgment, a 512(f) plaintiff can’t win because it lacked “an allegation of such reliance by Etsy—or indeed that, after the takedown of the listing, the allegedly infringing listing was restored.”

* Melissa Eckhause, Fighting Image Piracy or Copyright Trolling? An Empirical Study of Photography Copyright Infringement Lawsuits

* Techdirt: Study Shows Anti-Piracy Ads Often Made People Pirate More.

* TorrentFreak: Pornhub reduced DMCA takedown notices 98% by requiring mandatory uploader verification.

* Hollywood Reporter: 12 Notorious Movies and TV Shows That Have Never Been Released.

And More

* Thaler v. Vidal, 2021-2347 (Fed. Cir. August 5, 2022): “the Patent Act requires an ‘inventor’ to be a natural person…only a natural person can be an inventor, so AI cannot be.”

* All Star Recruiting Locums, LLC v. Ivy Staffing Solutions, LLC, 2022 WL 2340997 (S.D. Fla. April 8, 2022)

Plaintiff also requests that this Court issue an ex parte order seizing Defendants’ computers, computer hard drives, cellular phones, and other memory devices that could contain its confidential information. As Plaintiff correctly argues, the DTSA authorizes this course of action in “exceptional circumstances.” However, I find that Plaintiff has failed to demonstrate that such exceptional circumstances are present here. Specifically, Plaintiff has failed to demonstrate that Defendants are unlikely to comply with this Court’s order, even considering what Plaintiff calls Defendants’ “deceptive behavior” Indeed, many of the allegations present in this case seem to be present in most trade secret cases and calling these circumstances “exceptional” would make the exception swallow the rule. Therefore, I find that ordering Defendants to return Plaintiff’s confidential information and requiring them to file an affidavit affirming their compliance thereafter will sufficiently secure compliance with this Court’s order.

For background on the “exceptional” requirement in the DTSA ex parte seizure provision, see this paper.

* “Rapper Cardi B didn’t violate a man’s right of publicity by transposing his back tattoo onto a model for the racy cover of her 2016 mixtape, a California federal jury said.”

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A Closer Look at a Troubling Anti-Scraping Ruling from Spring–Compulife Software v. Newman (Guest Blog Post)

Eric Goldman — Mon, 14 Sep 2020 20:18:37 +0000

by guest blogger Kieran McCarthy

Compulife Software, Inc. v. Newman is the first circuit court case in more than half a decade to expand liability for web scrapers under state and federal law.

The two most recent circuit court opinions that addressed web scraping–hiQ Labs, Inc. v. LinkedIn Corp. a decision from the Ninth Circuit in 2019, and Sandvig v. Barr, a 2020 case out of the DC Circuit—both significantly limited the scope of liability for web scraping under federal law. Both of those cases reviewed the scope of liability for web scraping under the Computer Fraud and Abuse Act (“CFAA”). Compulife, an opinion from the Eleventh Circuit, by contrast, analyzed liability for web scraping in the context of copyright and trade secrets.

Almost certainly unintentionally, the court in Compulife takes the key holding of hiQ Labs, Inc. v. LinkedIn Corp., examines it in the context of trade secrets, and then flips it on its head. Whereas the court in hiQ Labs held that “accessing … publicly available data will not constitute access without authorization under the CFAA.” the court in Compulife says almost exactly the opposite. Namely, that scraping publicly accessible information, in large enough quantities, might indeed be a form of misappropriation of trade secrets.

At a high level, the Compulife court reached two main conclusions:

That, “after an [copyright] infringement plaintiff has demonstrated that he holds a valid copyright and that the defendant engaged in factual copying, the defendant bears the burden of proving—as part of the filtration analysis—that the elements he copied from a copyrighted work are unprotectable,” (emphasis in original) and;
Even if individual, discrete forms of data that are available to the public are not trade secrets, large amounts of them, in aggregate, might be trade secrets. Take enough of them, through copying or web scraping, and that conduct might be considered theft or misappropriation of trade secrets.

The copyright holding likely has limited implications for future web-scraping cases; the trade secrets holding, if followed by other courts, could have significant ramifications.

At a more granular level, this is a complicated case with complicated facts—and the end result is, perhaps unsurprisingly, complicated new legal precedent. For those seeking to litigate against web scrapers, the court’s reasoning will fuel new types of arguments in copyright and trade secrets claims. For those seeking to defend it, the highly fact-specific components may serve as a basis to try to limit the general applicability of the Court’s holding.

Facts

As is often the case in web scraping litigation, the dispute involves two business rivals. In this instance, the rivals are Florida companies whose principal business is to provide insurance quotes.

The facts of this case, at the highest level, are as follows:

Compulife maintains a database of insurance-premium information—called the “Transformative Database”—to which it sells access. The Transformative Database is valuable because it contains up-to-date information on many life insurers’ premium-rate tables and thus allows for simultaneous comparison of rates from dozens of providers. Most of Compulife’s customers are insurance agents who buy access to the database so that they can more easily provide reliable cost estimates to prospective policy purchasers. Although the Transformative Database is based on publicly available information—namely, individual insurers’ rate tables—it can’t be replicated without a specialized method and formula known only within Compulife.

The defendants in this case operate a website called “BeyondQuotes,” a competitor of Compulife’s service. At one point, the owners of this site hired a hacker to take Compulife’s data. Compulife claimed that the defendants didn’t even bother to produce their own quotes but simply reproduced Compulife’s data. That hack and resulting copying and competition led Compulife to file two separate lawsuits against the owners of BeyondQuotes. The two lawsuits were then consolidated at trial and remained so on appeal.

Procedural Background

It is worth noting that this case does not include alleged violations of the Computer Fraud and Abuse Act (“CFAA”), the most commonly applied federal law to web scraping. Indeed, plaintiff refrained from pursuing many of the common claims that often appear in web scraping litigation, such as trespass to chattels, conversion, tortious interference with a contract, and unjust enrichment.

Instead plaintiff’s case focused on four claims: 1) copyright infringement; 2) trade-secret misappropriation; 3) false advertising, and 4) violation of Florida’s Computer Abuse and Data Recovery Act (Florida’s state-law equivalent of the CFAA).

The case went to trial before a magistrate judge and plaintiff lost on all four claims.

Plaintiff then appealed to the Eleventh Circuit. On appeal, the Eleventh Circuit vacated the judgment on the copyright and trade secrets claims, upheld the judgment on the false advertising and Florida anti-hacking law claims, and remanded with instructions to make new findings of fact and conclusions of law on the copyright and trade secrets claims.

Copyright Claim

The copyright claim hinged on the Court’s “filtration” analysis to determine whether there was substantial similarity between the copyrighted work and the elements copied by the defendants.

The trial court determined that that the plaintiff failed to prove substantial similarity. The Eleventh Circuit decided this was an error, not because the magistrate got the facts wrong, but because the trial court placed the burden on the defendant—rather than the plaintiff, as is standard and customary—to prove that “the elements he copied from a copyrighted work are unprotectable.”

Ultimately, the Court felt that “placing the burden to prove protectability on the infringement plaintiff would unfairly require him to prove a negative.”

The Eleventh Circuit felt that defendants would be in a better position to provide evidence of unprotectability:

If, for instance, the defendant believes that some part of the copyrighted work is in the public domain, he must narrow the inquiry by indicating where in the public domain that portion of the work can be found. Similarly, if he thinks that what he copied amounts to usual industry practice, he must indicate the standards that dictate that technique. The plaintiff then faces the manageable task of “respond[ing],” to the appropriately narrowed issue. Placing the burden on the defendant, therefore, isn’t just consistent with our own precedent and leading scholarly commentary, but also fairer and more efficient (citations omitted).

For scrapers, it may seem scary to learn that there is now burden-shifting in the filtration analysis of copyright law (at least in the Eleventh Circuit). But there are a few key facts here that might lead us to believe that the applicability of this precedent could be limited. First, this is a case where the plaintiff had a registered copyright in its database. That’s not that common.

Second, because the database was the core of its business model, the plaintiff was unusually protective of its database. It was so protective of the database that it added a digital watermark to it, which appeared on the defendant’s website. So unique and special was the plaintiff’s database, that the court called it the “Transformative Database.”

Most databases aren’t copyrighted. Most aren’t that transformative. Most instances of copying aren’t quite so brazen as the defendants’ here. These were all material considerations driving the outcome. As such, most plaintiffs are unlikely to share the facts that drove this result and may not be able to successfully rely on this case as precedent (though I’m sure plenty will try).

Trade Secrets Claim

Unlike the narrow applicability of the copyright claim holding, the Compulife Court’s holding with respect to trade secret claims is more broad-reaching and thus more likely to be revisited often and, particularly due to its view on public data, invite scrutiny.

What’s controversial is its holding that publicly available data, when taken in aggregate, can be trade secrets misappropriation. This seems like a bizarre and counter-intuitive holding. How can publicly available data be a trade secret?

The trial court concluded that the Transformative Database was a trade secret, but that the defendant hadn’t misappropriated it. The trial court decided that since the trade secret was publicly available, the defendants had no duty not to use it.

The Eleventh Circuit then piggybacked on the more questionable part of the trial court’s opinion and then vacated what seemed like the more logical part.

Some would argue that having a trade secret that is freely accessible to the public runs counter to a basic understanding of trade secrets law. To maintain a trade secret, you have to take reasonable precautions to maintain its secrecy. A freely-accessible-to-the-public trade secret would thus seem like an oxymoron.

Under the Florida Uniform Trade Secrets Act (“FUTSA”), the only elements of trade secret misappropriation are 1) possession of a trade secret and 2) misappropriation. Since the defendants won at trial, they didn’t appeal the magistrate’s conclusion that the database was a trade secret. Plaintiff got the conclusion it wanted on the first element of the FUTSA claim, but appealed on the second element, misappropriation. Since there was no dispute that the database was a trade secret and that the defendants had come into possession of parts of it, the only remaining question on appeal was whether it had been misappropriated. This may have led the appellate court to layer one dubious holding on top of another.

Which brings us to how the Eleventh Circuit came to its final decision. In deciding that the trade secret had been misappropriated, the Eleventh Circuit focused on plaintiff’s allegation that the trade secret had been acquired through “improper means.”

According to the Court:

As used in FUTSA, “[i]mproper means” is defined to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Id. § 688.002(1). In the law of trade secrets more generally, “theft, wiretapping, or even aerial reconnaissance” can constitute improper means, but “independent invention, accidental disclosure, or . . . reverse engineering” cannot. Actions may be “improper” for trade-secret purposes even if not independently unlawful. (Citations omitted)

The Court then goes on to compare the facts this case to those in E. I. duPont deNemours & Co. v. Christopher, a 50-year-old trade secrets case from the 5th Circuit. 431 F.2d 1012, 1014 (5th Cir. 1970). In that case, the defendant took pictures of a methanol plant from an airplane and later used them to reverse-engineer the plant’s design. Though flying an airplane in public airspace isn’t illegal and taking pictures isn’t illegal, the court in Christopher decided that flying over a competitor’s building to take pictures to learn about their business was, in fact, grounds for a cause of action.

What does this have to do with web scraping?

Here’s what the Court said:

Although Compulife has plainly given the world implicit permission to access as many quotes as is humanly possible, a robot can collect more quotes than any human practicably could. So, while manually accessing quotes from Compulife’s database is unlikely ever to constitute improper means, using a bot to collect an otherwise infeasible amount of data may well be—in the same way that using aerial photography may be improper when a secret is exposed to view from above.

This is a dangerous precedent for future web scraping defendants. It reads like a potential indictment of the entire enterprise of web scraping. It seems to suggest that, in the context of accessing publicly available data, it may be illegal for a computer to access what is perfectly legal for a human to access. And that taking publicly available data, in large enough quantities, could be considered the theft or misappropriation of a trade secret.

The only question then, is how much data is too much data? The Eleventh Circuit conveniently punted the question back to the magistrate.

Consider how broadly the magistrate judge’s reasoning would sweep. Even if Compulife had implemented a technological limit on how many quotes one person could obtain, and even if the defendants had taken all the data, rather than a subset of it, each quote would still be available to the public and therefore not entitled to protection individually. On the magistrate judge’s logic, Compulife couldn’t recover even in that circumstance, because even there—in the magistrate judge’s words—“any member of the public [could] visit the website of a Compulife customer to obtain a quote” with “no restriction” on the subsequent use of the quote….

The magistrate judge treated the wrong question as decisive—namely, whether the quotes taken were individually protectable. He left undecided the truly determinative questions: (1) whether the block of data that the defendants took was large enough to constitute appropriation of the Transformative Database itself, and (2) whether the means they employed were improper. Having found that the Transformative Database was protectable generally, the magistrate judge was not free simply to observe that the portions taken were not individually protectable trade secrets.

We express no opinion as to whether enough of the Transformative Database was taken to amount to an acquisition of the trade secret, nor do we opine as to whether the means were improper such that the acquisition or use of the quotes could amount to misappropriation. We merely clarify that the simple fact that the quotes taken were publicly available does not automatically resolve the question in the defendants’ favor. These issues must be addressed on remand.

The Court treats this is as a slippery slope. But of course the slippery slope goes in both directions. Just as a bright-line rule permitting the scraping of publicly available data potentially leaves plaintiffs without much recourse in the event of a large taking, a fuzzy, ill-defined standard that casts doubt on the propriety of web scraping without further clarification leaves scrapers open to sweeping allegations of trade secret misappropriation. And since the determination of how much scraping is too much scraping is a question of fact, defendants may struggle to dispatch with those allegations short of trial.

Conclusions

This case is a significant departure from most prior circuit court opinions on web scraping. It doesn’t involve the CFAA, it seems narrowly tailored to the facts of the case, and it hinges on novel, creative, and expansive interpretations of intellectual property law. And since it’s the first circuit court opinion in a half a decade to expand, rather than limit, the scope of liability for web scrapers, it’s unlikely we’ve seen the last of it.

Case citation: Compulife Software Inc. v. Newman, Nos. 18-12004, 18-12007. (11th Cir. May 20, 2020)

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Q2 2020 Quick Links (Everything)

Eric Goldman — Sun, 19 Jul 2020 14:17:39 +0000

Copyright

* Sony Music Entertainment v. Cox Communications, Inc., 2020 WL 3121306 (E.D. Va. June 2, 2020). Each downloaded song file generally can support its own statutory damage, but “compilations” only get one statutory damages award, and no double-counting of statutory damages for overlapping copyrights in the same file.

* Mourabit v. Klein, 19-2142-c (2d Cir. June 8, 2020). Makeup artistry is within copyright’s scope for preemption purposes “because it is essentially a painting that is displayed on a person’s face.” The makeup artist challenged the fixation of the makeup design when on someone’s skin. The court sidesteps this issue, saying “regardless whether the Makeup Artistry was ‘fixed’ in Lewis’s face for copyright purposes, it was clearly ‘fixed’ in the Photograph.”

* LMNOPI v. XYZ Films, 18-CV-5610 (LDH) (VMS) (E.D.N.Y. March 30, 2020). Depiction of a mural in a documentary film was de minimis:

Plaintiffs’ description of the Mural as it appears in the Film is grossly overstated. According to the complaint, the Mural is “presented in a full-screen shot, in perfect focus, and unobstructed to the viewer for several seconds.” A review of the opening scene, however, reveals a work that is far less observable than Plaintiffs contend.4 During its brief cameo, the Mural appears one time for a total of approximately three-and-a-half seconds of a film that runs 93 minutes. The Mural is at all times in the background. Obscuring the view of at least one-third of the Mural rests a red pickup truck. In addition, throughout the entirety of the three-and-a-half-second scene, an actress prominently positioned in the foreground runs about further obscuring the Mural. And, contrary to Plaintiffs’ allegation that Defendants’ intentionally avoided depicting other murals in the neighborhood, the Mural appears among several other murals during the Film’s opening sequence. In addition, the focus of the scene in which the Mural appears is undeniably a female actress — not the Mural. The Mural is never referenced in the Film and is completely irrelevant to the Film’s plot.

* Wall Street Journal: “Google Hides News, Tricked by Fake Claims.” In our Copyright’s Memory Hole article, Jessica & I explain how & why copyright has been improperly weaponized for privacy & reputation management purposes.

* NY Times: “the Omegaverse case reveals how easily intellectual property law can be weaponized by authors seeking to take down their rivals.” As Mitch Stoltz says, “There’s not much accountability.” You mean, the accountability that 512(f) was supposed to provide?

Other IP

* Seguros R. Vasquez, Inc. v. Aguirre (D. Md. 2020): “Vasquez alleges that the trademark infringement arises from the use of that term in the text of the Google advertisement that appears in response to a search based on that keyword. The use of a trademark in a Google advertisement, not just as a keyword search term, plainly can support a Lanham Act trademark infringement claim.”

Re false advertising: “Where Vasquez alleges, with the benefit of confirmatory screen shots, that the Aguirres have misidentified their own business, passing themselves off as Vasquez, a leading insurance provider in the Spanish-speaking community, the Court finds no merit in the argument that the alleged misrepresentations are not material and thus not likely to influence consumers.”

* Sexual MD Solutions, LLC v. Wolff, 2020 WL 2197868 (S.D. Fla. May 6, 2020):

Similarly, the defendants’ purchase of keywords, such as “GAINSWave” to drive internet traffic to the Rocket’s website is not a misappropriation of the plaintiff’s trade secrets because anyone can purchase keywords. At the evidentiary hearing, Mr. White acknowledged that any medical provider seeking to treat ED would purchase PPC keywords such as “Viagra” or “Cialis.” The purchase of PPC keywords — including the purchase of the keyword “GAINSWave” — is not a trade secret. It is commonly known that businesses purchase keywords on search engines to become more visible on internet search results. Dustin Wolff testified that he “ha[d] been doing PPC for over ten years.” The plaintiff has not identified any PPC keywords which the defendants would not have known, but for their relationship with the plaintiff.

In a FN, the court added: “the plaintiff has not cited to any cases where a defendant’s use of PPC keywords commonly known in the industry was a misappropriation of trade secrets.”

* Bedi, Suneal and Reibstein, David (2020) “Measuring Trademark Dilution by Tarnishment,” Indiana Law Journal: Vol. 95 : Iss. 3 , Article 2: “tarnishment is not resulting from a one-time exposure. Rather, it takes several exposures to have a significant effect on the target trademark/brand.”

* Search Engine Land: Google to allow removal of counterfeit goods from search results

Content Issues

* In the Matter of Seizure of: Any and all funds held in Republic Bank of Arizona Accounts, 2019 WL 8892585 (D. Ariz. Dec. 20, 2019). This is a Backpage-related prosecutions of Larkin and Lacey and, in particular, whether it was legitimate for the government to make a civil asset forfeiture of proceeds from Backpage. The court questions whether Backpage could qualify for Section 230 protection:

The affidavit asserts, rather, that Backpage employees, with Claimants’ knowledge and as a matter of policy, actively worked to facilitate prostitution by concealing it from law enforcement through Backpage’s “moderation” policy. As an example, the affidavit asserts that Ferrer received an email from law enforcement expressing concern about ads containing the term “amber alert.” Ferrer acknowledged that the term might be “some kind of bizarre new code word for an under aged person.” He then instructed Backpage employees to remove the term “amber alert” from subsequent ads, but he did not instinct them to block the ads themselves or to report them. Id. In so doing, Backpage is alleged to have willfully assisted in concealing child prostitution from law enforcement. Had Backpage done nothing, law enforcement could have monitored its site for ads using the term “amber alert.” Had it deleted ads containing the term, it would have denied sex traffickers a forum for their operations. What it is accused of doing instead, however, is editing the ads with the purpose of concealing the illegal activity. This activity is illegal in itself, and therefore it is outside the CDA’s grant of immunity. Claimants, through their control of Backpage, are accused of being “directly involved in the alleged illegality, and thus is not immune.”

* In re Bitconnect Securities Litigation, 2019 WL 9104318 (S.D. Fla. Aug. 23, 2019)

Defendant YouTube is alleged to have profited significantly from the exposure of its users to videos advertising Defendants’ purported Ponzi scheme. While YouTube may have had a moral or ethical responsibility to protect its users from Defendants’ allegedly fraudulent schemes, Plaintiffs’ claim that it had a legal duty to do so is preempted by the CDA.

* Smith v. Lackey, 2020 WL 2306317 (NV. Sup. Ct. May 7, 2020). Facebook comment from third party can qualify for anti-SLAPP protection.

* Perlman v. Vox Media, Inc.,2020 WL 3474143 (Del. Sup. Ct. June 24, 2020): “These other speakers include commenters on Vox websites. Federal law “protects websites from liability under state or local law for material posted on their websites by someone else”—website comments sections are the prototypical example.

* Wolfgang Schulz and Matthias C. Kettemann, Setting Rules for 2.7 Billion: A (First Look) Into Facebook’s Norm-Making System (Jan. 2020)

– “US courts make use of the strong protection provided by Sec. 230 CDA, which largely immunizes intermediaries. To this day, no US court has managed to rule that an online communication platform should be liable to a ‘must-carry’ claim.”
– “The stated frames of reference are enriched in our observation by a shared understanding that the company is creating a new normative order for more than two billion users, which had never been attempted before.”
– “Facebook Public Policy team members confidently participate in creating a separate and unique private normative order for public communication and regulate ‘novel’ questions. They do not directly link this order to any national or international legal order or refer to international human rights commitments”

* Technology Review: Covid hoaxes are using a loophole to stay alive—even after content is deleted

* Olson v. Sardi, 2020 WL 2079150 (Cal. App. Ct. April 30, 2020). Yelp review protected by California’s anti-SLAPP law.

* Christopher Cox: Policing the Internet: A Bad Idea in 1996 — and Today

* Daniel A. Horwitz, The Need for a Federal Anti-SLAPP Law, N.Y.U. J. Legis. & Pub. Pol’y Quorum (2020).

* Wall Street Journal: News Outlets Are Liable for Others’ Facebook Comments, Australian Court Rules

* OneZero: Inside Twitter’s Decision to Fact-Check Trump’s Tweets

* Wall Street Journal: Facebook Executives Shut Down Efforts to Make the Site Less Divisive

* Marketing Land: Google to prohibit demographic, zip code targeting for housing, employment, credit ads

Other

* Financial Times: Virtual rate cut forces Nintendo gamers into riskier assets

* Lauren Scholz on why you should stop using the analogy that data is like the new oil.

* Balderas v. Tiny Lab Productions, 2020 WL 2065275 (D.N.M. April 29, 2020): in a COPPA case, “the fact that the Ad Networks were able to send child-directed ads does not allow the reasonable inference that they ‘knew’ that the app users were children.” However, Google may have had the requisite knowledge based on these allegations: “Google reviews the content of apps submitted to its Designed for Families program with a particular eye toward whether the apps are relevant for children; Tiny Lab’s apps, replete with characteristics revealing their child-directed content, were submitted to and accepted by Google into that program; and, after being contacted by concerned researchers, Google reviewed the content of Tiny Lab’s apps with the specific goal of determining whether they were primarily directed to children.” An apparent example of the Moderator’s Dilemma.

* EBIN New York, Inc. v. Ham, 2020 WL 2790427 (N.J. App. Div. May 29, 2020): “Coco’s use of a “NY” hashtag on its social media advertising, which appears to promote Coco sales to its own customers in New York, has no relevance to whether there is specific jurisdiction over Coco in New Jersey. The proximity of the two states is beside the point. There is no proof that Coco has used a New Jersey hashtag in its marketing.”

* Miller v. 4Internet, 2:18-cv-02097-JAD-VCF (D. Nev. July 10, 2020)

4Internet does not allege that the information that Higbee and H&A accessed is the kind for which “authorization” is required and either has been given, has not been given, or has been exceeded. 4Internet does not allege that its website was username and password protected or otherwise secured to limit and control who could access the information Higbee and H&A accessed. Rather, just like the LinkedIn profiles at issue in hiQ Labs, 4Internet alleges that the information on its website is accessible and used by visitors from across the country. The Ninth Circuit held in hiQ Labs that, “[w]ith regard to such information, the ‘breaking and entering’ analogue invoked so frequently during congressional consideration [of the CFAA] has no application, and the concept of ‘without authorization’ is inapt.”45 4Internet’s counterclaim amounts not to breaking and entering, but to a violation of its website’s terms of use, which the Ninth Circuit has repeatedly stated “cannot [alone] establish liability under the CFAA.”

* Motherboard: Facebook Helped the FBI Hack a Child Predator

* Commonwealth v. Bonia, 97 Mass. App. Ct. 1122 (June 8, 2020): “The defendant argues that the short length, ephemeral nature, and other characteristics of the Snapchat videos render testimony about the videos so unreliable that it cannot support a conviction as a matter of law. We disagree.”

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Court Partially Enforces Amazon’s Non-Compete Against Employee Who Joined Google–Amazon v. Moyer

Venkat Balasubramani — Wed, 30 Oct 2019 16:07:04 +0000

Moyer was employed at Amazon as its Director of Sales for AWS’ “global financial services” and signed a non-compete. He left Amazon and joined Google as its VP of “Healthcare, Google Cloud”. Amazon sought to enforce the non-compete lawsuit in state court. Moyer removed to federal court. Chief Judge Martinez grants Amazon’s request in part.

The non-compete Moyer signed before joining Amazon contained the following provision:

During employment and for 18 months after the Separation Date, Employee will not, directly or indirectly, whether on Employee’s own behalf or on behalf of any other entity (for example, as an employee, agent, partner, or consultant), engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information.

[emphasis added]

The court initially says that a restriction of some sort is necessary to protect Amazon’s goodwill. However, the court notes that the information Amazon is seeking to protect is the “know how” Moyer has accumulated. Moyer is not accused of taking any confidential documents with him to Google. Nor does Amazon allege Moyer would imminently disclose to Google any confidential information. As Amazon alleges, the problem is that Moyer has gleaned information about Amazon’s “roadmap” for its AWS products, and Moyer may use this to his advantage while at Google.

Turning to the scope of the agreement itself, the court says it’s clearly unreasonable:

Amazon maintains that Moyer received confidential information about almost all AWS’s product roadmaps and sales strategies. Resultantly, Moyer would be precluded from working for any competitor providing cloud services anywhere around the globe. But such a scope would be a general restriction on competition, not a reasonable restriction on unfair competition.

The court struggles as to whether it should reform the agreement. It notes that Amazon could have tailored the provision to suit Moyer’s facts more carefully. On the other hand, Moyer is not some retail-store worker who had a non-compete shoved down his throat.

The court imposes the following prohibitions on Moyer:

he is prohibited from contacting any existing AWS customers
he is prohibited from contacting potential or former AWS customers for the financial services sector
he cannot participate in internal cloud strategy as it relates to financial services

Amazon, Microsoft, and Google have been locked in several high profile non-compete disputes. Often these disputes involve a restriction that is enforceable in one jurisdiction but not another. As Eric points out, the restriction here would not pass muster under California law.

It’s unclear whether to read this as a win for Amazon or for Moyer (and Google). As I read through the case again and took a quick look at Amazon’s filings, I come down on the side of Moyer.* The fact that he was allowed to continue to work at Google is itself a win, but the court does not limit his activities outside the particular industry he focused on while at Amazon. Perhaps he may be somewhat affected in that he’s unable to leverage his contacts in the financial service industry, but you don’t get the sense that moves the needle.

Note: Washington recently passed non-compete legislation that made it more difficult to enforce non-competes in certain circumstances. See GeekWire’s coverage here: “Washington state legislators pass law restricting non-compete agreements”. Most importantly, it included a salary floor under which non-competes are not enforceable. At a quick glance, it does not appear that this legislation would have altered the result in this case.

[Disclosure: I worked on a non-compete case against Amazon a few years ago.]

Eric’s Comment: Amazon’s non-compete would be flatly void in California. Furthermore, a California court would not enforce it even if it purported to be governed by Washington law. If Moyer were moving to Google’s HQ in Mountain View, Amazon should not have been able to invoke it. Amazon could still sue in California over trade secret misappropriation and possibly even the inevitable disclosure doctrine (which is dubious in CA and dicey in the DTSA), but the court implies that the trade secret claim is super-weak without the non-compete. Fortunately for Moyer/Google, it looks like the injunction probably won’t materially limit his ability to do his job despite the non-compete. Still, I’d favor a nationwide categorical ban on non-compete clauses and let trade secret law do the work here–if there are actually any trade secrets at issue.

Case citation: Amazon v. Moyer, 2019 US Dist LEXIS 184512 (W.D. Wash. Oct. 24, 2019)

‘Blatant Sales Pitch’ on LinkedIn Likely Violates Non-solicitation Clause–Mobile Mini v. Vevea

Ex-Employee’s Continued Use of Twitter Account May Be Conversion–Farm Journal v. Johnson

Is the DTSA Ex Parte Seizure Provision Constitutional?

The post Court Partially Enforces Amazon’s Non-Compete Against Employee Who Joined Google–Amazon v. Moyer appeared first on Technology & Marketing Law Blog.

1H 2019 Quick Links, Part 1 (Copyright & More)

Eric Goldman — Wed, 03 Jul 2019 15:03:56 +0000

Copyright

* Long v. Dorset, 2019 WL 861424 (N.D. Cal. Feb. 22, 2019). Dorset allegedly locked Long out of his Facebook page. Access was restored in 5 business days. The court says that’s expeditious enough for DMCA notice-and-takedown purposes:

Plaintiff’s proposed rule—that expeditiousness can never be decided at a motion to dismiss—would undermine the DMCA’s purpose. Under plaintiff’s rule, courts could never apply the safe harbors at the motion to dismiss stage because a question of fact would always exist as to whether the service provider acted expeditiously as required by the safe harbors. That result does not respect the balance that Congress sought to strike between “protecting intellectual property interests” and encouraging internet innovation because it “permits the specter of liability”—through the costs imposed by extensive (and unnecessary) discovery—“to chill innovation.” And it certainly does not help limit or “‘clarif[y] the liability faced by service providers who [unwittingly] transmit potentially infringing material over their networks.

That is not to say that the issue of expeditiousness is always ripe for decision at the motion to dismiss stage. Often the opposite will be true. For example, the parties might dispute how long it took for defendant to respond to the notice. Or the complaint may allege circumstances giving rise to the inference that a response time of a specific number of days or weeks was not expeditious.

But that is not the case here. Under the facts allege here, the court finds that Facebook’s five-business-day response satisfies the DMCA’s expeditious requirement. Plaintiff sought the removal of over a hundred allegedly infringing images and also sought the restoration of his administrator status. Facebook promptly responded to plaintiff’s initial email and, over the next several days, continued to exchange emails with plaintiff to resolve the issue. A total of five business days after it first received notice of the alleged infringement, Facebook resolved plaintiff’s complaint. Based on those allegations, the court finds that the DMCA’s safe harbors apply to plaintiff’s copyright claims against Facebook because Facebook “satisfied the ‘responds expeditiously to remove’ requirement.

The court also finds Section 230 applies because “The FAC is devoid of allegations showing that Facebook was “directly involved” with developing or posting the infringing material.”

* Strike 3 Holdings, Inc. v. Doe, 2019 WL 2022452 (E.D.N.Y. March 21, 2019)

whatever else Strike 3 will do with the information it secures if it prevails on these motions, it is likely that one thing it will not do is use the information to litigate the action in court. Strike 3 has filed 276 cases in this district since 2017. Of those, 133 remain pending, many with unresolved motions for expedited discovery. Of the 143 cases that have been resolved, Strike 3 reports that it settled 49 and voluntarily dismissed 94 – 28 due to the alleged infringers’ hardship, 50 due to Strike 3’s inability to satisfy itself that Doe (the service subscriber named as the defendant) was in fact the alleged infringer, and 16 for other reasons …

It is thus apparent that Strike 3 is deliberately asserting claims in a scattershot fashion against a broad array of individuals simply because it is confident that many of them will be liable – even if almost as many of them are not.

* Stardock Systems, Inc. v. Reiche, 2018 WL 7348858 (N.D. Cal. Dec. 27, 2018)

Plaintiff’s argument is based on the “flawed premise” that the issuance of a notice of infringement under the DMCA is the equivalent of an injunction requiring the removal of allegedly infringement material. It is not. Contrary to Plaintiff’s assertion, Defendants cannot “unilaterally” block Origins or any other content from distribution by issuing a DMCA notice. Such notice simply serves to provide knowledge of alleged infringement to service providers. Critically, receipt of a notice of claimed infringement does not mandate that a service provider remove or disable access to allegedly infringing material.

* Rodriguez v. Serna, 2019 WL 2340958 (D.N.M. June 3, 2019):

Plaintiff alleged that Defendant Ricky Serna sent a takedown notice to her web provider that photos on her website were copyrighted, when he knew they were not.

Under the DMCA, “[a]ny person who knowingly materially misrepresents under this section– (1) that material or activity is infringing …shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer, by any copyright owner or copyright owner’s authorized licensee, or by a service provider, who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material.” 17 U.S.C. § 512(f). Moreover, the DMCA requires that a “notification of copyright infringement” include a statement that the complaining party has a “good faith belief that use of the material in the manner complained of is not authorized by the copyright owner.” 17 U.S.C. § 512(c)(3)(A)(v). “The purpose of Section 512(f) is to prevent the abuse of takedown notices.” Lenz v. Universal Music Corp., 572 F. Supp. 2d 1150, 1156 (N.D. Cal. 2008).

Here, Plaintiff has plausibly pled that the takedown notice was issued in bad faith and a knowingly material misrepresentation, as Defendant plausibly issued it in retaliation for Plaintiff’s prior speech. Plaintiff alleges she published on her website content critical of NNMC and certain administrators. Plaintiff alleges that Defendant Serna submitted a takedown notice and attested that the photos were copyrighted, when they were not. Plaintiff’s service provider, Weebly, Inc., determined that Defendant Serna’s claims were false and restored the website. Defendant Serna stated that her website “tweeted hatred.” He stated that “this small group of angry and viscous [sic] people are capable of violence.” Based on this prior alleged conflict, Plaintiff plausibly alleged that Defendant Serna knew that the photos were not copyrighted, and knowingly misrepresented the photos were copyrighted to be vindictive or retaliate against Plaintiff for her statements.

* Johnson v. New Destiny Christian Center Church Inc., 2019 WL 1014245 (M.D. Fla. March 4, 2019)

The evidence before the Court uniformly supports Defendant’s good faith defense. And critically here, Plaintiff has not supplied a factual basis on which to find the opposite: that Defendants, in pursuing Takedown Notifications, made a knowing material misrepresentation. As it stands, Defendants’ affidavits supply that before PWM sent YouTube takedown requests, Plaintiff’s videos were analyzed to determine whether they constituted fair use. Each time, PWM concluded that Plaintiff’s videos did not constitute fair use and were infringing copyrighted material. …

Thus, the Court finds that PWM’s sending of Takedown Notifications “did not evince bad faith or entail the making of a material misrepresentation.” Defendants’ Motion is therefore granted as to Plaintiff’s § 512(f) claim.

* Michael Grecco Productions, Inc. v. Alamy, Inc., 2019 WL 1129432 (E.D.N.Y. March 12, 2019). Putting your own watermark while infringing someone else’s photos could violate 17 USC 1202(a).

* Unsurprisingly, paranoia and trolling has taken root in the songwriting industry in the aftermath of the Blurred Lines ruling.

* Variety: Conan O’Brien: Why I Decided to Settle a Lawsuit Over Alleged Joke Stealing

* Vice: How Etsy Sellers and Big Business Make Money on Public Domain Art

* NY Times: Athletes Don’t Own Their Tattoos. That’s a Problem for Video Game Developers.

* TorrentFreak: Reddit’s /r/Piracy is Deleting Almost 10 Years of History to Avoid Ban. Regulation causes the Internet to keep shrinking.

* TorrentFreak: Former “Copyright Alert System” Portal Now Links to Mattress Review Site

* The Verge: YouTubers and Record Labels Are Fighting, and Record Labels Keep Winning

* Quill Ink Books Ltd. v. ABCD Graphics & Design, Inc., 5:18-cv-00920 (W.D. Okla.): “The fact that the DMCA notice was sent to one online distributor of Plaintiff’s that is located in Oklahoma, and even that distributor does not direct its sales to Oklahoma, is not sufficient to locate the “brunt” of Plaintiff’s alleged injury in Oklahoma, much less to establish that Defendant Soto had knowledge that the brunt of Plaintiff’s alleged injury would be felt in Oklahoma.”

Trade Secrets

* Washington Post: How Donald Trump silenced the people who could expose his business failures

* Washington State Governor Signs Law Severely Limiting Non-Competes

* WSJ: Interns’ Job Prospects Constrained by Noncompete Agreements

Patents

* Daniel Nazer: Theranos: How a broken patent system sustained its decade-long deception

The post 1H 2019 Quick Links, Part 1 (Copyright & More) appeared first on Technology & Marketing Law Blog.

Ex-Employee’s Continued Use of Twitter Account May Be Conversion–Farm Journal v. Johnson

Venkat Balasubramani — Tue, 30 Apr 2019 13:35:42 +0000

This is another ownership dispute over a Twitter account. We last blogged this topic several years ago, and none of the disputes we’ve seen have resulted in any definitive rulings.

Plaintiff publishes trade publications in the agricultural sector, including “The Packer” and “Produce Retailer”. Defendant Gregory Johnson served as editorial director for these publications. He left to join the “Produce Blue Book” as its new “Director of Media Development.” The Produce Blue Book competes with the plaintiff’s titles. Before his last day, Johnson changed his Twitter account handle from @gregofthepacker to @gregofthebluebook. He’s also allegedly downloaded some 11,000 files from plaintiff’s network to his personal Dropbox account.

Plaintiff sued, asserting claims based on misappropriation of the trade secrets and alleged conversion of the twitter account.

The court rejects the challenge to the trade secrets claims. Johnson argued that his employment agreement did not have a survival clause, so he could treat any confidential information as non-confidential upon termination of his employment, but the court rejects this argument. Among other things, the alleged download of files occurred while Johnson was still technically employed by plaintiff. The court also finds that the allegations adequately amount to a breach of the duty of loyalty.

The court also finds that plaintiff states a claim for conversion of the Twitter account. Plaintiff alleges that it owns the account, it is the only one entitled to use it, and defendants interfered with plaintiff’s ability to use the account. This is sufficient. As to Johnson’s new employer, the court says that plaintiff need not allege that new employer actually stole the account; it’s sufficient to state that the new employer used the property (the account) and refused to give it up. The same facts support a replevin claim.

Finally, the court also refuses to dismiss the claims for unfair competition and conspiracy. The unfair competition claim is supported in part by the allegation of unauthorized use of plaintiff’s Twitter account and confusion regarding possible affiliation between the Blue Book and Plaintiff. This last conclusion seems flimsy, given that it’s based on content that remains linked through the former The Packer account which is now publicly affiliated with The Blue Book, but the court doesn’t delve into the details.

Dropbox and similar services should really have a prominent warning that asks departing employees whether on the eve of their departure they really want to copy thousands of files from their employer’s network to their personal devices:

ARE YOU SURE you want to create a bullet-proof record of a breach of confidentiality claim for your employer that they can use if they decide to sue you?!?! Disclaimer: we cannot provide you with legal advice, but this seems like a bad idea.

It appears that the employment agreement between Johnson and plaintiff actually mentioned the Twitter account, but surprisingly it did not actually say that plaintiff owned all of the content and the account itself. The agreement could have also said that, upon termination of employment, the employee should turn over passwords to any official Twitter accounts (which would ideally be specified).

The account profile seems to be a mix of the employee’s and the employer’s name–similar to what you see with respect to many news stations. The court doesn’t talk about whether any personal content was posted by Johnson on the account, but that could of course complicate plaintiff’s effort to get the account back. Many states enacted social media privacy legislation restricting when employers could demand passwords from current or future employees. Washington passed one in 2013. Neither Kansas nor Missouri have such a law on the books. One of the main issues with such laws is the difficulty in defining what constitutes an employer account versus a personal one. The court’s order in this case doesn’t place the account in question clearly into one category or another, but my sense is that it’s a company-focused account.

Some plaintiffs have used trade secrets and confidential information as a way to argue that the social media account (and its followers) should remain with the employer. That seems like a way to shoehorn an argument into a context that does not cleanly fit, and the plaintiff does not take that route here.

Case Citation: Farm Journal v. Johnson, 2019 WL 1795945 (W.D. Mo. Apr. 24, 2019)

Do Employers Own LinkedIn Groups Created By Employees?–CDM v. Sims

Another Set of Parties Duel Over Social Media Contacts — Eagle v. Sawabeh

Ex-Employer’s Hijacking of a LinkedIn Account Is a Publicity Rights Violation–Eagle v. Morgan

Employer Fails to State Stored Communications Act Claims Absent Allegations That Employees Interfered With Company Accounts – Castle Megastore v. Wilson

Facebook Posts and Twitter Invites Don’t Violate Non-Solicitation Clause — Pre-Paid Legal v. Cahill

Washington State’s Proposed Employer Social Media Law: The Legislature Should Take a Cautious Approach — SB 5211

Employee/Ex-Employer Lawsuit Over Twitter Account Settles – Phonedog v. Kravitz

Social Media Producer’s Counterclaims Based on Website Ownership Rejected – Ardis Health v. Nankivell

Battle Over LinkedIn Account Between Employer and Employee Largely Gutted–Eagle v. Morgan

Big Problems in California’s New Law Restricting Employers’ Access to Employees’ Online Accounts (Forbes Cross-Post)

Fight Over Access to Log-in Credentials for Blog Does not Trigger Copyright Preemption – Insynq v. Mann

The post Ex-Employee’s Continued Use of Twitter Account May Be Conversion–Farm Journal v. Johnson appeared first on Technology & Marketing Law Blog.

2H 2018 Quick Links, Part 6 (IP, E-Commerce, Censorship, & More)

Eric Goldman — Sun, 13 Jan 2019 18:04:57 +0000

Intellectual Property

* Daniel v. FanDuel (Ind. Oct. 24, 2018): “online fantasy sports operators that condition entry to contests on payment and distribute cash prizes do not violate the Indiana right of publicity statute when those organizations use the names, pictures, and statistics of players without their consent because the use falls within the meaning of “material that has newsworthy value,” an exception under the statute.”

* Washington Post: ‘Everyone signed one’: Trump is aggressive in his use of nondisclosure agreements, even in government

* Massachusetts Finally Passes Non-Compete Bill After Nearly a Decade

* Stephen D. Levandoski, Note, To Seize the Initiative: Assessing Constitutional Due Process Challenges to the Defend Trade Secret Act’s Ex Parte Seizure Provision, 93 N.Y.U. L. Rev. 864 (2018):

In an effort to protect innovation and increase trade secret enforcement, Congress passed the Defend Trade Secrets Act in 2016. The law contains an ex parte seizure provision that provides for the seizure of property in order to prevent the theft or transmission of a trade secret. This Note is the first to argue that the ex parte seizure provision raises serious constitutional due process concerns. It proceeds by framing the seizure provision within its historical and legislative context, identifying infirmities in the provision through the lens of due process, and addressing larger practical and policy implications. The potentially widespread and lasting effects of the seizure provision on employee mobility, innovation, and competition underscore the importance of eliminating the provision or severely limiting its scope.

* Whose injera is it anyway? Apparently the Dutch have patented many aspects of teff, creating all kinds of problems for Ethiopia.

E-Commerce

* Allstate New Jersey Insurance Co v. Amazon.com, 2018 WL 3546197 (D.N.J. July 24, 2018).

Plaintiff mainly argues 1) that under New Jersey law, someone within the distribution chain is a “product seller,” and Amazon, a party within the distribution chain, is thus a “product seller”; and 2) public policy supports holding Amazon liable as a “product seller.” Although it is a close question, Plaintiff’s arguments fail because it has not demonstrated that New Jersey courts would, in fact, extend the definition of “product seller” to a party involved in the distribution chain as Amazon was here. Public policy arguments likewise do not establish that a New Jersey strict liability law is meant to capture Amazon’s actions under the extant facts. Thus, for the reasons that follow, Amazon—in this instance—cannot be held liable as a “product seller” under the PLA …

Amazon may have technically been a part of the chain of distribution, but it never exercised control over the product sufficient to make it a “product seller” under the PLA.

* In 2012, I asked “Will the Floodgates Open Up for ADA Claims Against Websites?” I think we’ve gotten our answer: 800+ lawsuits filed in 2017

* Inside Higher Ed: Fifty colleges sued in barrage of ADA lawsuits over web accessibility

* Sarah Jeong on the rough-and-tumble competitive gaming of Kindle Unlimited

* The Verge: A deep look at the brutal world of competitive gaming among Amazon merchants

* Quartz: Secret Amazon brands are quietly taking over Amazon.com

* WSJ: Just Bought a New Puppy? It Might Be a Rental

Censorship

* Leuthy v. LePage, 2018 WL 4134628 (D. Me. Aug. 29, 2018):

With regard to their First Amendment free speech rights, again based on the Plaintiffs’ allegations, the Facebook users who post messages expressing disagreement with the Governor via the “Paul LePage, Maine’s Governor” page are akin to citizens who might attend a public meeting hosted by him or who organize rallies at Blaine House in that they seek to engage the Governor on issues pertinent to his official duties and to express their viewpoints in a forum and context associated with him and those duties. The cases the Governor cites involving political rallies by incumbent elected officials are distinguishable. In those cases, the prospect of interruption and interference is real. A protester yelling and attempting to drown out the speaking elected official can easily interfere with and even halt the elected official’s speech. See Johanns, 544 U.S. at 574 (Souter, J., dissenting) (“To govern, government has to say something, and a First Amendment heckler’s veto of any forced contribution to raising the government’s voice in the ‘marketplace of ideas’ would be out of the question.”). In contrast, a Facebook post, which is textual and visible alongside posts by the Governor, his supporters, and others, does not prohibit the Governor from posting whatever and whenever he wants. His words are conveyed and received with the precision and clarity he intends. Based on the allegations in the Complaint, which the Court must accept, the Plaintiffs stated sufficient facts to plausibly allege that the conduct in this case is the Governor’s deletion of posts and banning of citizens from the “Paul LePage, Maine’s Governor” page, and that this conduct does not constitute government speech…..

The Governor does not dispute the Plaintiffs’ claims that his deletion of their posts and banning of them from his page constituted viewpoint discrimination. Given this and the Court’s conclusion that forum analysis does apply, the Court finds that the Plaintiffs plausibly stated a claim for violation of their free speech rights under the First Amendment. …

Based on the allegations in the Plaintiffs’ Complaint, the Court sees the speech as the Plaintiffs’ posts that the Governor deleted, as well as the future speech that they wish to engage in, within the forum of the “Paul LePage, Maine’s Governor” Facebook page. Based on the allegations in the Complaint, the Court is unconvinced that the Governor adopts as his own speech each undeleted post made by someone else on the page. The Court also disagrees with the related notions that allowing a post to remain on a social media page amounts to “listening” or that the Plaintiffs are asserting “a right to be heard.” The Court understands the Plaintiffs to be asserting a right to speak; whether their speech is heard and/or whether the Governor is listening are separate questions. …

The Governor cites no authority for the view that alternative channels for petition render a claim for violation of the Petition Clause nonviable, and the Court found none. The Governor does not analogize the Plaintiffs’ communications via “Paul LePage, Maine’s Governor” to frivolous litigation or to petitions to the President that contain intentional or reckless falsehoods.

* Garcia v. Good For Life by 81, Inc., 2018 BL 250095 (S.D.N.Y. July 12, 2018)

Provisions that prohibit a party from contacting the media can “prevent the spread of information about FLSA actions to other workers (both employees of Defendants and others) who can then use that information to vindicate their statutory rights.” Amaro v. Barbuto, LLC, 2017 WL 476730 (S.D.N.Y. Feb. 2, 2017) (removing a provision that prevented plaintiff from revealing to any “outlet, including newspapers, television stations, and radio stations, inter alia, the fact or existence of this Settlement Agreement, and . . . any aspect of any of the operations and activities of [defendants] as alleged by [plaintiff] in the Action” from the settlement agreement). These provisions impermissibly undermine the FLSA’s remedial purposes by restricting workers from using the media to “publicize both the wrongdoing of the employer and the possibility of success more generally.” Access to the media is particularly important because the plaintiffs in this case are low-wage employees, some of whom do not speak English well – precisely the people who require the protection of the FLSA. The media plays a key role in connecting individuals today – including low-wage, non-English speaking workers living far from their original homes – to matters of interest to them. Those communities may “have much to gain from the diffusion of information about their employment rights” through the media. Barring plaintiffs from contacting the media is thus not a trivial infringement on their ability to spread the word “to other workers” who may then be able to “vindicate their statutory rights.”

* Report of the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression

* “China is building a digital dictatorship to exert control over its 1.4 billion citizens. For some, “social credit” will bring privileges — for others, punishment.”

Miscellaneous

* Betz v. Aidnest, 2018 WL 5307375 (D.D.C. Oct. 26, 2018): “the fact that Aidnest directly targets consumers in the District via its online presence (website, Facebook page, and Twitter account) is insufficient under (a)(4)(i) or (a)(4)(ii), because use of online or web-based resources by District of Columbia residents does not constitute “purposeful availment” by a defendant for the purpose of the minimum contacts test; rather, it is an “unavoidable side-effect of modern internet technology.””

* Minnesota v. Decker, 2018 WL 3748685 (Minn. Aug. 8, 2018). Conviction affirmed for texting a dick pic to a minor. Prior blog post.

* Techdirt: The View From Somewhere: The Press Needs To Be Anti-Partisan, Not Bi-Partisan

* Harpers: Toward an ethical archive of the web

* Phys.org: Red-light cameras don’t reduce traffic accidents or improve public safety: analysis

* NY Times: Five Times the Internet Was Actually Fun in 2018

The post 2H 2018 Quick Links, Part 6 (IP, E-Commerce, Censorship, & More) appeared first on Technology & Marketing Law Blog.

Is the DTSA Ex Parte Seizure Provision Constitutional?

Eric Goldman — Mon, 12 Nov 2018 19:07:52 +0000

The Defend Trade Secrets Act (DTSA) has been law for 2 1/2 years. At this point, it’s pretty clear the DTSA ex parte seizure provision never belonged in the statute. Courts have ordered only a few ex parte seizures, and I think none of those actually met the statutory requirements. Furthermore, the Federal Judicial Center guidance to judges proved that trade secret owners could never legitimately use the ex parte seizure procedure for the situations Congress contemplated.

In my pre-passage essay against the ex parte seizure provision, I expressly didn’t address the DTSA ex parte seizure provision’s constitutionality. An NYU Law student, Stephen Levandoski, filled that gap with his note, To Seize the Initiative: Assessing Constitutional Due Process Challenges to the Defend Trade Secrets Act’s Ex Parte Seizure Provision. The note carefully doesn’t flatly declare the provision unconstitutional, but makes its doubts clear:

the Note demonstrates the high risk of error and defendant harm in a novel and uncertain technological landscape–put simply, physical seizures represent a crude and outmoded response to a twenty-first century challenge. It argues that the ex parte seizure provision is unlikely to survive due process scrutiny.

The note emphasizes the potential collateral damage to innocent third parties from ex parte seizures:

the DTSA on its face recognizes the potential impact of seizures on third parties, so it cannot be the mere failure to acknowledge the risk that creates a due process issue. Rather, the fundamental premises of ex parte adjudication create a framework in which the ultimate decider is ill equipped to quantify and comparatively assess these risks. The legislative history of the DTSA itself reflected concerns about the management and seizure of third-party data. One witness testifying before the House Judiciary Committee called attention to the fact that data stored on technological systems often belongs to customers, and that that data is often not physically isolated from other data. While supporters may counter that the provision specifically provides for the court to weigh the extent of deleterious impact to third-party customers, absent testimony from the defendant, it is impossible to determine whether the collateral effects will be felt by five firms or one thousand. While the severely limited ability of the courts to assess collateral harms in an ex parte hearing may not represent an intrinsic and irreparable flaw in the statute’s constitutionality, it strongly suggests the practical and legal challenges making any type of ex parte procedure both operable and compliant with due process requirements. No matter the wording of the statute, or its exact requirements, there is likely to be a danger that the courts lack the technological expertise to weigh the potential risks and government marshals lack the skills to effectuate the seizure without causing further collateral harms.

The DTSA ex parte seizure provision illustrates a larger problem: legislators redressing plaintiff concerns at the cost of giving defendants due process. I think another example is the CASE Act, proposing to create a copyright small claims court without the typical due process protections provided in state or federal court. Instead of ensuring actual due process, these legislative workarounds deploy the atmospherics of due process elsewhere to compensate for a core due process deficiency. Due process doesn’t work that way; we can’t fix its absence in one part by enhancing the protections in other parts. Instead, we should categorically resist any legislation that does not provide complete due process to defendants; any attempted cutbacks to full due process should be extraordinary, and limited to situations where it’s unequivocally impossible to provide justice to plaintiffs any other way. This is such a basic principle that I’m exasperated it needs to be articulated. Sadly, in our post-constitutional political environment, I guess we can’t take anything for granted.

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