Section 230 & Milgram v. Orbitz

Posted on November 8, 2011 by shams

Section 230 of the Communication Decency Act (“CDA”) provides substantial immunity from liability for providers and users of “interactive computer services.” However, the depth of immunity provided by the CDA has not been without controversy. Some recent and controversial decisions this past month involving Section 230 of the CDA include:

Yelp class action lawsuit dismissal – The US District Court recently dismissed a class action suit against Yelp alleging that it extorted advertising from businesses by manipulating reviews provided by third party members, amongst other allegations. The court found that Yelp was immune from liability under the CDA, regardless of motive, for filtering out user reviews that it claimed to be false or unreliable based on its review-filtering technology.

BLACK v. GOOGLE, INC. upheld – The US Court of Appeals, Ninth Circuit affirmed a decision from the district court finding Google immune from liability under the CDA for posting defamatory material provided by a third party (negative reviews) about a business that was posted on Google.com.

Cases in regards to Section 230 of the CDA help better define, as interpreted by the courts, the scope of immunity from liability that is granted to providers of “interactive computer services,” a concept very relevant to this course. One fairly recent Section 230 case that was brought to the Superior Court of New Jersey that sheds light on the applicability of the CDA to e-commerce sites was MILGRAM v. ORBITZ, which will be discussed in this blog post.

MILGRAM v. ORBITZ

Factual Background

TicketNetwork owns and operates an online marketplace named “TicketNetwork Exchange” where buyers can purchase event tickets directly from independent, 3rd-party ticket sellers who post and update their own self-acquired inventory of tickets. Orbitz owns and operates CheapTickets Exchange, a similar online ticket marketplace, and entered into an agreement with TicketNetwork for their ticket listings to be available on TicketNetwork Exchange. On May 26, 2009, an investigator for the Division of Consumer Affairs bought two Bruce Springsteen tickets from the TicketNetwork Exchange before they went on sale to the general public. After receiving the tickets, it was confirmed that the tickets were printed on June 1, 2009, which was after the date the investigator purchased them.

Allegations & CDA Immunity

The NJ State Attorney General and the NJ Division of Consumer Affairs filed suit against Orbitz and TicketNetwork alleging (1) violation of the NJ Consumer Fraud Act (“CFA”), a state law, specifically pointing out that the defendants did not and could not possess the tickets when sold even though a 3rd party was the seller and (2) violation of the NJ Advertising Regulations, another state law. The defendants moved to dismiss the complaint arguing that the state law claims were preempted by section 230(c)(1) of the CDA and that they were immune since a 3rd party posted the tickets and they were only providers of an “interactive computer service.” However, the plaintiff argued that the defendants are not immune under the CDA because (1) the claims treat them as “commercial actors,” which are not “speakers or publishers” as specified in the CDA, and (2) the defendants actively participated in selecting, editing and deleting content, which made them an “information content provider,” who are not immune under the CDA.

Court Opinions & Analysis

The court here discussed an important point regarding Section 230 of the CDA in that it must ask itself whether the alleged violations were derived from the defendants conduct as a “publisher or speaker.” The reason why this is important is that if the conduct of the defendant is not that of a “publisher or speaker,” then the immunity of liability granted by the CDA may not apply. This was not an approach taken in the Roommate.com case from class. This is in some ways bringing up the issue of whether e-commerce sites who publish these 3rd party postings are in fact “publishers or speakers” as written in the CDA. The plaintiff argued that the defendants were “commercial actors” and not “publishers or speakers” but the court rejected that label, in part as a result of referencing the discussion from the Roommate.com case where The Ninth Circuit concluded that the CDA covers “any activity that can be boiled down to deciding whether to exclude material that third parties seek to post online.” As a result, the court discussed an important concept which directly applies to e-commerce sites; stating that “the fact that the defendants charge ‘service’ or ‘administrative’ fees is irrelevant to the CDA analysis.” This could have implications for many other e-commerce style websites because by simply charging a fee for their service does not necessarily strip their immunity from liability under the CDA.

Following the rejection of the “commercial actor” arguments, the court went to determine if the defendants were considered an “information content provider,” a term that was heavily analyzed in the Roommate.com case. It must first be understood that Orbitz had the ability to manage content, including the URL’s and static content via a content management application. For example, they had the ability to insert links to tickets for specific events in order to highlight them on the site. In its analysis, the court relied, in part, on the Carafano case that was reviewed by The Ninth Circuit Court. In that case, the Ninth Circuit pointed out that the main question is whether the “essential published content” was provided by “another information content provider.” So although Orbitz may have published certain content on the site, such as providing links to events or modifying logos, the “essential published content,” which in this case refers to the Bruce Springsteen tickets for sale posting, was made by a third party and Orbitz was doing nothing more than exercising a publisher’s traditional editorial functions. Since there was no material, substantive contributions to the ticket listings, the defendants’ actions did not constitute “development, in whole or in part,” a phrase that is used to define what it is to be an “information content provider” under the CDA. This case is different from the Roommate.com case in that Roommate.com was found to develop, at least in part, the objectionable material because it provided illegal questions and required the users to answer them. In this case, the defendants are not supplying content to and are not forcing 3rd party publishers to post potentially illegal content, as was alleged with the Bruce Springsteen ticket postings. The defendant websites also did not encourage the posting of illegal content and warned the buyer in several places, including the footer, terms of service and notifications, that they were purchasing from a 3rd party broker. As a result of all this the defendants were not found to be “information content providers” and thus were immune from liability under the CDA.

Thoughts on Section 230

Section 230 of the CDA provides a very important and sometimes controversial immunity from liability for websites that post contents from third parties. It is important in that it shields website operators from potentially illegal content being posted on their site by third parties. That shield has allowed for the promotion and continued development of the internet over the years. Of course the extent to which the operators are shielded depends on if they “develop in part” the posted material whereby they may be labeled as an “information content provider” and not immune under the CDA. The Roommate.com case from class brought to light that the courts may want to control illegalities of certain sites with respect to how content is provided by 3rd parties and brings up the concept that “if something is illegal to do in the physical world, then analogously, it should be illegal to do in the virtual world.” Recently there has been talk to repeal Section 230 or make amends to it, in particular to the online bullying issue that has been in the news. The concern again would be if it is illegal to do in the physical world, then should it be illegal to do in the virtual world? (although I’m not sure if bullying is illegal) And who should be liable if it is illegal in the virtual world? These are just some interesting questions to think about when looking at the implications of Section 230 of the CDA.

Yelp Dismissal News – http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202521024427&Yelp_Class_Action_Dismissal_Bolsters_Web_Publisher_Immunity

BLACK v. GOOGLE, Appeals Court – http://www.leagle.com/xmlResult.aspx?page=1&xmldoc=In FCO 20111101164.xml&docbase=CSLWAR3-2007-CURR&SizeDisp=7

BLACK v. GOOGLE, District Court – http://dockets.justia.com/docket/california/candce/3:2010cv02381/228100/

MILGRAM v. ORBITZ – http://faculty.law.wayne.edu/Weinberg/law-in-cyberspace/Milgram-v-Orbitz.pdf

 

 

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Liability for Defective Information

Posted on November 7, 2011 by lizzy

By: Meena Natarajan and Gregory Shapiro

Rosenberg v. Google

Case

Lauren Rosenberg, the Plaintiff, used Google maps application on her Blackberry to get walking directions in Salt Lake County. Google maps suggested walking directions through a rural highway that required her to cross State Route 224, which has no sidewalks or pedestrian crossings. Rosenberg followed the directions at night, and while crossing SR 224, was hit by an automobile negligently driven by the Patrick Harwood. She was seriously injured. The Blackberry mobile application for Google maps did not present the warning that usually accompanies walking directions on the Google maps website. The warning states that walking directions are Beta and the user needs to use caution. Rosenberg alleges that Google was negligent in its walking directions and sued both Patrick Harwood and Google for negligence.

Google brought a motion to dismiss Rosenberg’s claim under first amendment protections and the premise that it did not owe Rosenberg a duty, a requirement for claims of negligence to hold valid. The court ruled in its favor stating that Google did not owe Rosenberg a duty as Google had not entered a contractual or fiduciary relationship with Rosenberg, a special relationship did not exist between Google and Rosenberg, and further, that any relationship that did exist was highly attenuated as Google was a publisher and not a service provider, and therefore could not be held liable for information it made available to the public at large. The other factor that determines where there is a duty is whether the harm was foreseeable. The court ruled that Google could not possibly foresee that a user of its information would be negligent in not looking for cars while crossing the road and that this particular road was more likely to cause injury than any other route, and that Rosenberg was negligent.

Rosenberg v. Google case and it’s intersection with Cardozo  v. Ellie’s Book and Stationery, Inc.

Rosenberg contested Google’s motion to dismiss stating that the underlying premise upon which Google was making its claims was flawed – that Google was a publisher and not a service provider. Unlike in the Cardozo v. Ellie’s Book and Stationary, Inc case, whether Google was acting as a publisher or a service provider is less clear. Service providers are often held liable for defection information they provide and publishers have historically been held not responsible for the ideas contained in any material they offer. However, according to Rosenberg, Google does not provide walking directions to the public at large as the user has to input their unique location and request directions based on that location, and that Google uses its expertise in coming up with customized directions. Rosenberg states that this implies a one on one relationship and the use of discernment and expertise on Google’s part much like that with a service provider. However, the court ruled that as any one can input the same start and end point and that if they did so, they would get the same directions as Rosenberg was given, Google potentially is publishing to the public at large and that a one on one relationship does not exist between Rosenberg and Google. The court also states that to require Google to physically check each road and geography in its map for safety is an overwhelming burden to impose on Google, just like it would be for a publisher to go through and check all the information in the material it publishes for veracity or defamation etc, a task that they are not trained to conduct. Finally, the court also rules in favor of Google as the overall benefit to society that the information Google provides outweighs the harm that some individuals may suffer, and that imposing negligence on Google would diminish the duties and responsibilities of pedestrians.

Implications for online information providers

In the Cardozo v. Ellie’s Book and Stationary case, implied warranties do not hold when the publisher explicitly modifies or excludes the warranty. In maps, Google expressly states that walking directions are Beta and that the user needs to exercise caution is following those directions. However, the fact that this warning was missing in its mobile application for Blackberry means that Google did not modify any implied warranty for users who use maps solely on their mobile application and also, it may not be reasonable to require the user to remember that there was a warning on the website and to discern that it still holds at the time of use on the mobile application. How does information differences across platforms implicate the information provider in an online environment?

It is important to note that many online providers of information do not publish information in the same way that a book publisher publishes books. Given the interactivity online, the information that a user obtains is often times customized to the user based on what kind of information the user requests and inputs. This relationship mimics that of a service provider in offline environments. Although, the same information may be given to many people if they all input the same request, even service providers offline may provide the same information to a number of people based on the similarity of their requests. This raises the question of whether interactive websites that customize information for users act as publishers or service providers and consequently, what kind of legal protection is afforded to such providers.

Finally, given that online information providers most often provide information for free, there is no contract or explicit duty to the user. However, internet business models differ from book publishing in that they often involve paid advertising. What kind of a relationship does the user enter with an online information provider when increasingly, business model do not require end-users to pay for information?

Rosenberg v. Google case and it’s intersection with Aetna v. Jeppesen

Comparing Aetna v. Jeppesen to Rosenberg v. Google brings up some interesting issues that both cases share.

One of the main issues that arises in the Aetna v. Jeppesen case is the issue of negligence versus strict liability.  Negligence requires that the defendant actually do something (or doesn’t do something specific) in error that harms the plaintiff.  Strict liability, on the other hand, does not require the the defendant do something wrong, but points to the fact that the defendant’s actions themselves were risky and although they were not necessarily the cause of the harm that the defendant suffered, they should still be held responsible in some way.  Strict liability is a way for the defendant to say “I’ve been harmed, and even though no one is directly to blame, I still deserve retribution, and since the plaintiff was a part of the harm, they should be the ones to give me that retribution.” in Aetna v. Jeppesen, the US District Court for the District of Nevada had previously ruled that Jeppesen would pay for 80% of the retributive cost while Bonanza would pay 20% of the retributive cost.  This was because the court had ruled that Jeppesen (the makers of the airport chart) was negligent and Bonanza (the airline who trained their pilots) was strictly liable. This basically said that Jeppesen’s charts were mostly at fault for the crash of the airplane because the airport charts were defective and they were to blame for that defect, but Bonanza, by not warning their pilots about the possible defect, were also partially (albeit minorly) responsible for the crash.  The outcome of this case was that the United States Court of Appeals, Ninth Circuit ruled that this was actually not reasonable.

In comparing this to Rosenberg v. Google, Rosenberg sued Google on four counts, with 3 of them having to do with negligence or strict liability.  The first was General Negligence, the second was Strict Liability – Defective Design, and the third was Strict Liability – Failure to Warn.

In terms of general negligence, in order for that to hold true, Google would have had to owe Rosenberg a “duty” that would “rise to a negligence claim” that owed the defendant the duty of care or be somehow defined as an obligation of some sort.  Rosenberg claimed that Google negligently provided a service to her as customer (and therefore had a “duty” to her) – however, the court stated that since “Google provided the same information to Rosenberg that is available to limitless other users of the Google Maps service… [there] does not warrant… any heightened duty on Google.”  Basically, Google and Rosenberg did not have a “special, fiduciary, or contractual relationship… that would give rise to a duty of protection” and therefore Google does not owe Rosenberg anything in terms of that issue.  In comparison to the Aetna v. Jeppesen case, this is similar in that the 9th Circuit decided that the pilots of Bonanza were not completely free from negligence because they were misled by the differences in scale on the map they were using.  In my opinion, the court implied that the pilots did indeed have a “heightened duty” to pay attention to the maps and the possible differences that might have existed.  The issue of “duty” in relationships occurs in both of these cases, just in different ways:  Rosenberg and Google’s relationship was in question and Bonanza’s Pilots and the Jeppesen’s Maps relationship was in question – both dealing with the issue of a duty that needed to exist in order for negligence to play a role in the outcome.  Although the court did not specify just how much “negligence” was to be put on the pilots of Bonanza, they stated that they did indeed share some negligence and were not only “strictly liable” as was previously decided.

In terms of the strict liability – defective design and the strict liability – failure to warn issues, Rosenberg actually consented to dismissal of these claims because they were based on product liability.  The reason these were not applicable in this case, but were applicable in the Aetna v. Jeppesen case was that in Aetna, the “product” that was in question was a aeronautical chart that was used for the landing of plane, while in Rosenberg, the product in question was an online map for walking somewhere – two very different products with very different ownership groups, as well as very different customers.  As in the Cardozo v. True case (see above), where product liability was exemplified in the way that publishers of books were not liable for the material inside their books but only for the physical books themselves and Google was liable for the maps it published (but issues of social benefit outweighed its liability), Jeppesen was  told by the court that their mapping products were in fact to be treated as products for strict liability purposes.  According to the Pamela Samuelson paper “Liability for Defective Electronic Information,” the court decided that the aeronautical charts were “highly technical tools” because they resembled compasses, and like compasses, were “mass produced for commercial purposes.”  The reason the charts are not treated like Google’s maps is that Customers of Jeppsen (the pilots) needed to rely on the charts as well as “Jeppsen’s expertise as much as consumer’s might rely on any other manufacturers’ expertise” in order to properly and safely do their job and receive the full benefit of the product.  All in all, Jeppesen’s aeronautical maps were held to a product strict liability claim because they failed in their design goal of graphically representing information that was needed to be readily understandable for its customer.

Further questions to consider:  Does Google provide “products” that would be held liable to a strict liability-product claim?  What other relationships contain “duty” that is strong enough to be considered for a negligent claim?

References:

Pamela Samuelson (1993) Liability for defective electronic information, Legally Speaking, ACM, Vol 36 (1) – http://people.ischool.berkeley.edu/~pam/papers/acm_vol36_1_1993.pdf

Rosenberg v. Google, Memorandum Decision – http://www.onpointnews.com/docs/GoogleMaps_opin.pdf

Rosenberg v. Google, Plaintiff’s memorandum in opposition to defendant’s motion to dismiss – http://www.onpointnews.com/docs/GoogleMaps_MTD2.pdf

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Oracle vs Google on Android copyright

Posted on November 1, 2011 by Yu-Hsiang Chen

by Sean Chen and Sebastian Benthall

Background

Oracle is suing Google over intellectual property used in the Android mobile operating system.  Specifically, it is suing for patent and copyright infringement around the use of Java, a programming language and related virtual machine developed by Oracle.  The case will go to trial in 2012 unless the two parties settle.

A virtual machine is a program that simulates a computer and its operating system for the use of some programming language.  Java’s virtual machine is widely used for server applications.  The virtualization makes it easy to run a server application on many different operating systems.

In order to support developed in Java of Android applications, Google developed their own Java virtual machine, Dalvik.  Google claims that Dalvik uses no code from Oracle and is substantially different in architecture, despite providing the necessary environment for Java programs to run.

The Case

Oracle claims that, instead of being a wholly independent clean-room implementation of a Java VM, Google knowingly, repeatedly, and directly infringed on both copyrights and patents related to Java technology. Oracle claimed Dalvik violates seven U.S. patents (numbers 6,125,447, 6,192,476, 5,966,702, 7,426,720, RE38,104, 6,910,205, and 6,061,520). In addition, it also states that Dalvik copied a dozen files and 37 instances of API specification which violate the coptright of Java technology.

Several of the patent claims have been dismissed already, but the copyright claims have not yet been dismissed by the judge, despite Google’s efforts.

For this blog post, we will focus on the copyright infringment claims.  Specifically at stake is the Dalvik API, or application programming interface, which is the interface that developers can use e to write programs that take advantage of the Dalvik virtual machine.  Oracle is claiming to have copyright over the API, while Google has argued that the API is a method of operation.

ReadWriteWeb summarizes Google’s argument:

Google invoked a doctrine in the law described by the French phrase scenes a faire, which refers to any concept that can only be expressed in one way, perhaps using a catchy phrase. In such an instance, the law prohibits copyright of that catchy phrase – you can’t give anyone a monopoly on the expression of an idea if there’s no other way to express it. Google then invoked a second element of the law called the merger doctrine, in an effort to extend scenes a faire to the principle of infringement. If an idea can’t be copyrighted, expression of that idea can’t infringe anyone’s rights, the company argued.

Google wants these arguments to apply to the API.  However, the judge has rejected the blanket defense against the applicability of copyright to API’s, saying that Google must provide justification for this defense piece by piece.

The case has not yet gone to trial.

Discussion

What is API

Judge Alsup wrote, “The term API is slippery. It has been used by the parties and in the industry as shorthand to refer to many related concepts, ranging from individual methods to code implementations to entire class libraries and specifications. … The documentation for an API is referred to as the ‘API’, and the specifications entailed by that documentation are called the ‘API.’”

The judge also has noted that both Google and Oracle have conflated the API as implemented by the software with the API specification, which is documentation.  Google identifies “the API” with the implementation in order to support its method of operation defense (see below).  Oracle, on the other hand, argued that Java phraseology in “the API”–meaning, the specification–constituted trademark infringement by Google.  The judge denied both arguments.

Method of Operation

Google tried to argue that the API is a method of operation, which is foreclosed from copyright protection by 17 U.S.C. § 102(b). Section 102(b) states: “In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”

In the case of Lotus v. Borland, Borland literally copied the menu command hierarchy of Lotus 1-2-3. But since the menu command “provides the means by which users control and operate Lotus 1-2-3.” And “Without the menu command hierarchy, users would not be able to access and control, or indeed make use of, Lotus 1-2-3’s functional capabilities.” As a result, the Court of Appeals stated that Borland did not infringe the copyright of Lotus.

Google tried to make the point that it was a similar case, since API is a way to call a method within a software code. But as described in previous section, the API is not only the trigger of that method, but also includes the documentation and the specification.

The documentation and specification are not a “method of operation” since users can access the method or make the code function, without the use of documentation and specification. Therefore, judge Alsup wrote, “Google’s argument that APIs are unprotectable methods of operation attacks a straw man. … It is not the APIs but rather the specifications for 37 API packages that are accused. Even if Google can show that APIs are methods of operation not subject to copyright protection, that would not defeat Oracle’s infringement claim concerning the accused specifications.” The judge has only agreed with Google that the names of classes, methods, and files aren’t copyrightable: All the rest of Oracle’s copyright violation claims stand.

Analytic Dissection

In rejecting Google’s attempt to defend whole categories of its API with a blanket argument, Judge Alsups ruling is similar to the ruling in Apple vs. Microsoft that holds that in copyright infringement cases, the court must use analytic dissection to determine which features are protected by copyright.  The copyright infringement will not be judged on the API as a whole.

Idea-expression divide and scenes a faire

Perhaps this case will depend on the application of the idea-expression divide and scenes a faire doctrines to API specifications.

In the software industry, the term “API” is often used ambiguously to refer to both the implementation and documentation of the software interface.  This may indicate that the concepts are so closely related as to be indistinguishable.  If aspects of an API specification are ruled to be “as a practical matter indispensable, or at least standard, in the treatment of a given [idea]” that specification may be ruled unprotected by copyright.

Reference

Duncan, Geoff.  “Could a lawsuit derail Android? Understanding Oracle’s threat to Google“ http://www.digitaltrends.com/computing/can-oracles-court-challenge-derail-android/

Oracle America, INC. v Google, INC.
http://stadium.weblogsinc.com/engadget/files/oracle-google.pdf

Fulton, Scott. “Judge: Neither Google Nor Oracle Has Defined an ‘API’”
http://www.readwriteweb.com/hack/2011/09/judge-neither-google-nor-oracl.php

 

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Snap-On v. O’Neill

Posted on October 31, 2011 by Gaurav

by Gaurav Shetti and Philip Foeckler

In this case the plaintiff alleges unlawful access in violation of the CFAA. This case provides further insights into different legal arguments and interpretations regarding the CFAA, and best practices for EULA’s, through comparison with the Facebook v. Power Ventures reading, another case addressing allegedly unauthorized scraping of data.

Background

Plaintiff Snap-on provides electronic parts catalogues for clients in the automotive and heavy equipment industries. Customer gives raw data to the Snap-on and they in-turn create a searchable database with linked data and images. In 2007, one of the Snap-on’s clients, Mitsubishi, decided to move on the parts catalogue from Snap-on to O’Neil, a direct competitor of Snap-On and requested a copy of the database content. Snap-On demanded a one-time payment in exchange for the content, which Mitsubishi refused. In 2009 Mitsubishi gave O’Neill access to run a scraper tool on the catalog, causing Snap-On’s web site to crash twice,  despite efforts by Snap-On to block access.

The Case

In July of the same year Snap-on sued O’Neil alleging Computer Fraud and Abuse Act, trespass to chattels, unjust enrichment, breach of contract, copyright infringement, and misappropriation of trade secrets. (We will discuss the allegations that are most relevant in relation to the Facebook v. Power Venture case).

Under the licensing agreement which was signed between Mitsubishi and Snap-on, Mitsubishi would provide snap-on with details about the parts and snap-on would convert these details to a searcheable database. Snap-on would then license the finished system to Mitsubishi under this agreement. It also signed a web-hosting agreement with Mitsubishi to make the contents of this electronic data available through a website.

When Mitsubishi approached snap-on for a copy of its parts in electronic format, the parties disputed Mitsubishi’s ownership in the information stored on Snap-on’s database. (The database was not a finished product).

Discussion

Who can Can Authorize Access?

The key question on the Computer Fraud and Abuse Act claim was whether O’Neil’s access of the website was “without authorization”.  In this case the parties dispute whether Mitsubishi had authority to grant any access to the defendant in the first place, rather than whether the defendant had lost its access rights because of its actions. O’Neill argued that it was authorized by Mitsubishi to access data allegedly owned by Mitsubishi. Snap-On argued that its license agreement prohibits Mitsubishi from authorizing access to third-parties.

Unlike in the case of Facebook multiple contractual agreements were in play, which led the court to conclude that there was a genuine dispute of material facts. The web hosting agreement made Mitsubishi solely responsible for “authorizing security” but at the same time the license agreement limited the access to “individuals associated with dealers”.

One take-away from this case is that companies should be extremely consistent and clear when defining and communicating access authorization. One can argue that if Snap-On had included the access authorization provisions from the license agreement in its web hosting agreement that it may have been able to move for a summary judgement in its favor at this stage in the legal process. Instead, it had provided O’Neill a slim opening to move for summary judgement in the defendants favor.

Breach of Contract

While the plaintiff and defendant did not have a direct license agreement, Snap-On claims that O’Neill entered into and breached its EULA each time that O’Neill accessed the the website.

In the Facebook case the same claim was made, but on the grounds of the user having entered a “click-wrap” agreement when setting up the account. The user/defendant  was required to take an affirmative action in order to agree to the EULA and setup the account.

In the Snap-On case the user was not required to select a check box or click a button. Instead the EULA was hosted on the website and had to be discovered by the user/defendant.  Snap-On therefore did seek to enforce a “browse-wrap” agreement, which meant that courts have focused on establishing “whether the… user has actual or constructive knowledge of a site’s terms and conditions prior to using the site”.

After a thorough discussion of preceding cases the court found that it was reasonable to expect O’Neill to be aware of the EULA, since below the “enter” button, used to login, it was stated clearly and prominently that “the use of and access to the information on this site is subject to the terms and conditions set out in our legal statement [green button with arrow].

However, the EULA did not serve Snap-On well, because it also stated that “if the users signed a written license agreement… the written agreement will continue in effect and its terms will control over any inconsistent terms of this Agreement”. Since the court had already established a genuine dispute of material fact about Mitsubishi’s authorization to, this genuine dispute was now extended to the EULA.

So in thend, although the court did hold the browse-click valid, it had to conduct a much more complicated analysis than in the Facebook case. Considering the FTC had even considered “click-wrap” questionable in the Sears  reading, exclusively relying on “browse-wrap” may expose one to unnecessary doubts  as to whether the user was sufficiently informed of the EULA conditions. More importantly, the coordination of legal agreements could have been managed in a more consistent and cohesive manner, as the court denied summary judgement.

Trespass of Chattels

Both Snap-On and Facebook alleged that they incurred damages or loss, as they were either subject to the scraping or were blocking the scraping. However, their allegations were grounded in two different statutes.

Snap-On alleged “Trespass of Chattels” because it had experienced “network traffic spikes that crashed the system”. Because the court had already found that there was genuine dispute of material fact whether O’Neill had authorized access, it solely “ analyzed whether Snap-On showed adequate impairment or deprivation.”

Facebook’s costs were presumably less severe than those of Snap-On – in fact they were never enumerated. However,  the court found that “Section 502 sets no threshold level of damage or loss that must be reached to impart standing to bring suit. Under the plain language of the statute, any amount of damage or loss may be sufficient.”

While the courts found in favor of both Snap-On and Facebook it should be noted that the burden of proof was significantly higher for tresspass of Chattels and that “other courts have been more reticent to find a trespass where the intangible damage is speculative and minimal”. In the case of Snap-On, it had clearly enumerated and documented its costs, and defendants own employees had advised that “normal server traffic does not… load…and…request images n the numbers we are”.

Copyright Infringement

Snap-on argued that the “database structure” is entitled  to copyright protection and Snap-on owned the copyrights in the structure. The court went through the Feist analysis. In Feist, the court held that a “factual compilation is eligible for copyright if it features an original selection or arrangement of facts, but the copyright is limited to the particular selection or arrangement. In no event may copyright extend to the facts themselves. O’Neil argued that the “arrangement” or the database structure was obvious and was thus not entitled to copyright protection.

The court agreed with Snap-on asserting that factual disputes preclude summary judgement on copyrightability and ownership.

Case and References:

Snap-On Business Solutions, Inc. vs. O’Neil & Associates, Inc.
Feist v. Rural
FACEBOOK, INC. v. POWER VENTURES, INC., Dist. Court, ND California 2009
FACEBOOK, INC. v. POWER VENTURES, INC., Dist. Court, ND California 2010
In the Matter of Sears Holdings Management Corporation (Order)
In the Matter of Sears Holdings Management Corporation (Complaint)

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Patent Trolls

Posted on October 26, 2011 by Arthur Che

Popular Mechanics has a nice recap this week on patent trolls and non-practicing entities. A recent study led by Boston University law professor James Bessen (Go Terriers!) found that organizations have lost half a trillion dollars from their bottom lines between 1990-2010 defending against patent litigation. The trolls themselves only gained about 9% of that wealth, and most of the money has been lost in the litigation process.

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Hot News : BARCLAYS CAPITAL INC v. THEFLYONTHEWALL COM INC

Posted on October 24, 2011 by Natarajan Chakrapani

By: Natarajan Chakrapani & Kuldeep Kapade

Similar to the Reading (NBA vs Motorola Inc.) for the class , The case in question presents the claim of the plaintiffs (Barclays) of alleged hot news misappropriation of their financial recommendations by the defendant , Fly ,a financial news aggregator.

Background and Context

Wall Street Firms(“The Firms”) like Barclays, Morgan Stanley produce stock market recommendations for their clients (usually large institutional investors)  in the form of paid reports , and aim to engage and advise them in Securities trading.Their expectation is that the said stock recommendations will encourage the client to purchase stocks through them. The commissions earned during such transactions makes the research behind the recommendation worthwhile for the Firms. It goes without saying that the publication of such reports covering stock recommendations  impacts their value.

The release of the reports to the clients generally happens before the Stock market opens for business and is timed to give them an informational edge in making prudent financial decisions before the market catches up to trends suggested by the recommendations.

The Firms deal with their clients/partners in the dissemination of reports in secure ways with various non disclosure  agreements disallowing them to share the recommendations with others. The Firms also prohibit employees from leaking out any information and have adequate surveillance mechanisms internally and externally to “plug” any such “leaks”. However, the success rate of such measures is not known.

The Defendant,FlyontheWall(“Fly”) is essentially a news aggregator who generates news feed regarding financial information including various recommendations from the Firms and earn their revenue from subscription services.They generate the news feeds , before the market opens for Subscribers to help them make early calls on the trades .

 

The raison d’etre of the given case revolves around the publication of such feeds , ostensibly  containing the confidential recommendations as researched by the Firms , by Fly, before the opening of the Markets.

The Case

The Firms challenged Fly on Two grounds : one on copyrights infringements based on their verbatim copying of recommendations from reports , providing a one line digest of each recommendation to its subscribers in its news feed. The second claim is on the “hot news” misappropriation under New York State Law, where the Firms object to the publication of their recommendations by Fly ahead of the opening of markets. The Firms indicate that such practices by the defendant clearly hurt their financial interests that they have with their paid clients in being able to afford them the informational advantage. The Plaintiffs also claim that the loss in revenue impacts the incentives for the Research they conduct to glean such financial insights, dealing a direct blow to its primary business model.

 

The case of copyrights was easily proved , since Fly accepted that it “lifted” recommendations from various sources (not necessarily legally authorized, like leaked information from employees at the Firm) in order to generate its feed.

Also , the Firms were able to  contend that they satisfied all 5 elements of the Tort as identified in NBA,, 105 F.3d at 845, although the Firms did not explicitly refer to that case.

 

Hence ,with this establishment of  tort of “Hot News” (with the precedent as set in INS vs AP: 248 U.S. 215 (1918)) , in Mar/Apr 2005 , the court entered an injunction from reporting a recommendation until either (a) half an hour after the market opens, if the report containing the recommendation was released before 9:30 a.m EST., or (b) two hours after release, if the report was released after 9:30 a.m EST.This time period represented roughly the midpoint between what Fly and the Firms, respectively, requested.

 

This made Fly change their information gathering strategy, and they subsequently started relying on public sources(like Bloomberg , Blast IMs) to gather recommendations. They also tried contesting the Injunction by claiming it caused irreparable harm to its business due to the loss of subscriptions , but those were rejected on the grounds of lack of evidence.

 

Fly thereupon moved for a stay of the injunction and an expedited appeal.

 

On appeal, Fly argues principally that (1) the district court erred in finding that the plaintiffs established “hot news” misappropriation under New York law, specifically in that the plaintiffs failed to prove time-sensitivity, free-riding, direct competition, and reduced incentives; (2) that the district court’s injunction violates Fly’s free-speech rights under the First Amendment; (3) that the district court’s finding of “hot news” misappropriation violates the Copyright Clause of the Constitution and the Copyright Act; (4) that the district court failed to apply the proper standard in granting injunctive relief; and (5) that the injunction is unreasonably overbroad.

The court then analysed the eligibiity of the “hot news” misappropriation claim. It reasoned that the reports satisfy the “subject matter requirement”, being  a tangible form of expression and coming under the ambit of the Copyright Act. It also fell under the general scope of copyright , which “affords a copyright owner the exclusive right to: (1) reproduce the copyrighted work; (2) prepare derivative works; (3) distribute copies of the work by sale or otherwise; and, with respect to certain artistic works, (4) perform the work publicly; and (5) display the work publicly.

The claim here being the Defendant was reproducing recommendations verbatim from such copyrightable reports.

However,Under NBA, the narrow version of hot news misappropriation that survives copyright preemption has the following elements:

(i) a plaintiff generates or gathers information at a cost; (ii) the information is time-sensitive; (iii) a defendant’s use of the information constitutes free riding on the plaintiff’s efforts; (iv) the defendant is in direct competition with a product or service offered by the plaintiffs; and (v) the ability of other parties to free-ride on the efforts of the plaintiff or others would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.

In this case , the courts noted that the defendant was publishing recommendations from the various Firms and correctly citing them as their source; hence it was not misappropriating or passing them as its own idea.

Moreover , Fly does not produce any of its own recommendations. It merely aggregates recommendations from various firms and publishes it for anyone interested in them. Since recommendations are essentially opinions advocated by the Firms spurring on their client to make a trade  , they are not copyrightable. They are subjective opinions , which have an objective impact on the trends on the stock market. Hence , their news-worthiness renders them credible to be reported and known to people.

Also, the aggregate subscription product endorsed by Fly is different and not in direct competition with the Firms business model which aims to promote only their own recommendations to clients . Since this is a failure of the direct competition test of NBA (test (iv) above)  Subsequently, the “hot news” misappropriation tort was rejected and the decision regarding the permanent injunction was reversed.

 

The courts have to make sure that the hot news claims are narrowly defined so as to prevent its preemption by copyright Law and also to allow freedom of expression regarding news that needs to reach the citizens.

References:

http://www.citmedialaw.org/blog/2010/barclays-v-theflyonthewallcom-hot-news-doctrine-alive-and-kicking-will-news-aggregators-be

NBA vs Motorola Inc:  http://www.law.cornell.edu/copyright/cases/105_F3d_841.htm

Barclays vs Fly case notes:  http://caselaw.findlaw.com/us-2nd-circuit/1571485.html

INS vs AP :  http://supct.law.cornell.edu/cgi-bin/sup-choice.cgi?248+215

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Do we really need COPPA?

Posted on October 19, 2011 by Michael Hintze

Interesting article on COPPA, have a read:

Do We Really Need to Protect Children From the Internet?

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Software Licensing and Consumer Protection

Posted on October 18, 2011 by David Lester

by Kiran Chandramohanan and Dave Lester

During our Monday class, we were introduced to different descriptions of how users enter contracts for software, through clickwrap, browsewrap, and shrinkwrap licenses. What are terms that a user agreement and license can and can not specify? What are limitations that exist to protect consumers? How do various courts view the enforceability of shrinkwrap licenses and forum selection clauses in software contract?

In this blogpost we discuss two cases – Domenic Tricome v. Ebay, Inc., and Brower v. Gateway. These cases introduce us to examples of forum selection, as well as the limitations of remedies clause, and provide contrasting examples to those read for class to highlight contrasting ways that courts have ruled on these issues. We also discuss the initiatives made in the direction of formulating an uniform framework for software contracts.

Enforceability of Forum Selection Clause: Comparing eBay Case and AOL Case

Domenic Tricome v. Ebay, Inc. is an example case where the judgement went in favor of the software/service provider. Any user intending to use eBay’s services for selling or buying products in the online marketplace are required to go through a registration process asking them to accept eBay’s User Agreement and Privacy Policy. This agreement includes a forum selection clause restricting all User – eBay disputes to be resolved through a court action filed in Santa Clara County, California. Ebay terminated plaintiff, Domenic Tricome’s user account resulting in a civil action by Tricome against eBay in Eastern District Court of Pennsylvania. In turn, eBay cited the forum selection clause and moved to dismiss or transfer the case to California.

The plaintiff argued that the forum selection clause is unenforceable as the agreement is a standard form contract which is procedurally and/or substantively unconscionable. The court cited various cases and stated that failure to negotiate a forum selection clause during the agreement or even a failure to read the terms of an agreement is not a defense, not sufficient to render an otherwise valid forum selection clause invalid. The court considered two checks to examine the unacceptability of a forum selection clause:

1. Whether the party challenging the agreement had any meaningful choice regarding acceptance of its provisions.

  • Here the plaintiff was an experienced businessman – had opportunity to read the user agreement and accept or reject the conditions stated. He accepted the agreement without any external or undue pressure from eBay’s side.

2. Whether the forum selection clause is so unduly one-sided so as to shock the conscience amounting to being substantively unconscionable.

  • Court ruled in favor of eBay in this aspect and concluded it legitimate for a global company like eBay to desire to concentrate its legal defense in a particular forum and didn’t find a shocking motive here.

Its interesting to contrast the eBay case with AOL Case we read this week from a consumer protection standpoint. In AOL Case, the judgement was in favor of the end user whereas in eBay case the ruling went in favor of the software service provider. Understanding the two cases and many other similar cases is important in identifying the options available for consumers in proceeding with software contract based litigations in their choice of forums.

Unconscionability and Limitation of Remedies

When a user enters an agreement or accept a license, a contract is enforceable unless it conflicts with certain limitations, including unconscionablity. In Brower v. Gateway, consumers who purchased computers and software through Gateway’s direct-sales system were sold products that included a shrink-wrap license that specified an arbitration clause, in which claims less than $50,000 in damages required advanced fees of $4,000. These fees were described by the plaintiff as excessive, because the ability to take Gateway to court cost more than the computer products purchased. The plaintiff’s claim of unconscionability fell under New York law, where “unconscionability is generally predicated on the presence of both the procedural and substantive elements.”

The court ruled that the procedural element of unconscionability did not apply, because the agreement did not include “hidden” or “tucked away” language, but instead was only four pages and clear of its terms. The substantive element of unconscionability did, however, apply due to the excessive costs specified by the contract. Although NY State law typically requires that unconscionability require both elements, the court determined that the substantive element was sufficient alone, and ruled that the plaintiff and defendant seek a remedy.

The Supreme Court of Washington ruled that unconscionability did not apply in the Mortenson v. Timberline case. Unlike New York State, which typically requires both elements, Washington recognizes two types of unconscionablity: substantive, and procedural. The difference between how unconscionability is understood by the Supreme Courts of Washington State and New York State can be confusing, and is part of a larger inconsistency in how individual states legally interpret software license agreements.

Quest for an uniform legal framework for software contracts

The Uniform Computer Information Transactions Act (UCITA) proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999 and the “Principles of the Law of Software Contracts” drafted by the American Law Institute (ALI) in 2009 are two definitive steps in setting up an uniform legal framework for software contracts. The UCITA proposes a set of uniform guidelines governing the areas of software licensing, online access and other transactions in computer information. It intends to be the Uniform Commercial Code for information technology transactions. Till date, the act has been passed in two states – Virginia and Maryland and it was defeated in other states. Similarly The Principles of the Law of Software Contracts also recognizes the pressing need for harmonization and clarification in software contracts as a commercial subject matter. Still both these proposals invited wide criticism – UCITA has been opposed for tilting the buyer seller equation unfairly to software vendor’s side by enabling them to disclaim liability on product quality and relaxed limitation of remedies when compared against existing laws and available legal interpretations. The ALI proposal raised concerns from software companies alleging that principles like vendor obligation  to buyer on product quality can stifle innovation and raise software costs.

The advent of digital revolution and ensuing proliferation of transactions in computer information products has presented a formidable challenge in terms of ensuring equitable judicial interpretation for litigations involving software contracts containing shrink-wrap licenses and forum selection clauses. There is a clear lack of uniform legal framework against which such legal scenarios can be interpreted, thereby avoiding legal unpredictability and ambiguity. The laws currently interpreted for resolving software contract litigations range from Uniform Commercial Code – Article 2 and common contract law to copyright and intellectual property laws. There is still no clear legal directions on prevalent issues like consumer obligations and rights with a software license contract, limitation of remedies, integration of the contract, consumer choice in selecting forums for litigation etc. There has been no consensus generated in stakeholder communities around the harmonization initiatives like UCITA and ALI proposal.

References

Domenic Tricome v. Ebay, Inc. : http://www.paed.uscourts.gov/documents/opinions/09d1283p.pdf
Brower vs Gateway 2000 http://scholar.google.com/scholar_case?case=14948729709721602284&hl=en&as_sdt=2&as_vis=1&oi=scholarr
Recent Developments in Shrinkwrap, Clickwrap and Browsewrap Licenses in the United States:  http://www.murdoch.edu.au/elaw/issues/v9n3/kunkel93nf.html
Principles of the Law of Software Contracts: Some Highlights:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1554546
ALI Principles of the Law of Software Contracts: http://lawprofessors.typepad.com/contractsprof_blog/2009/06/ali-principles-of-the-law-of-software-contracts.html
UCITA : http://www.ucitaonline.com/
Opponents blast proposed U.S. software law: http://articles.cnn.com/1999-07-12/tech/9907_12_ucita.idg_1_ucita-uniform-state-laws-nccusl-new-law/2?_s=PM:TECH
New Software Contract Principles Prompt Worries: http://www.pcworld.com/businesscenter/article/169010/new_software_contract_principles_prompt_worries.html

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Additional background on shrinkwrap/clickwrap/browsewrap and copyright preemption issues

Posted on October 18, 2011 by Deirdre Mulligan

This article is very accessible and provides some additional depth on the issues discussed in Monday’s class.
http://www.chtlj.org/volumes/v26#v026.i1.Abruzzi.pdf

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Redesigning and Reclaiming Terms Of Service

Posted on October 16, 2011 by Bryan Rea

By Allie Wang and Bryan Rea

http://www.thedaily.com/page/2011/09/06/090611-tech-technews-itunes-redesign-1-2/
http://www.iagreeto.org/
http://smallprint.netzoo.net/reag/

Does anyone really read the Terms of Service (TOS) or End User License Agreements (EULA) that come with software purchases? Can they really be enforced? If “notice and consent have outlived their usefulness”, as David Vladeck of the FTC says, what is the alternative? With the Sears vs. FTC case and the ProCD vs. Zeidenberg, we have two conflicting interpretations of enforceability. In the Sears case, the FTC argued that, even though the TOS were up front about what was being collected, it was deceptive because the information was buried deep in the TOS and a reasonable person might not truly understand the full extent of the monitoring that was occurring. In ProCD vs. Zeidenberg, the court ruled that as long as a the TOS were reasonable and the purchaser was notified that such TOS existed, even if the purchaser could not possibly have read the terms before purchasing, she has still entered into a contract. Regardless of which is the right interpretation, it is clear that redesigning TOS and EULAs to more accurately inform consumers of the agreements they are entering into would be a good thing.

We found two projects that attempt to change the dynamics of TOS and EULAs to actually benefit the consumer. In the case of Apple’s iTunes, design student Gregg Bernstein created a better user interface for navigating and presenting the information in the TOS and is more explicit about getting consent than today’s clickwrap licenses. In the case of ReasonableAgreement.org, the same questionable tactics that businesses employ to get users to agree to abusive TOS are used to return rights back to consumers.

Bernstein, a graduate student at the Savannah College of Art and Design, revamped Apple’s iTunes click-through TOS, eliminating confusing legal jargon and the unfriendly font in favor of a user-friendly interface. With the help of a law professor, he pared down the original 4,137-word to a mere 381 words. The remaining words were then logically organized into sections for better readability, with numerals, bullet points, and indentations. Users are required to type their initials to agree to TOS on each page, eliminating one of the common problems with clickwrap licenses. The redesign allows the user to see everything she’s agreeing to at a glance and breaks up the agreement into much more manageable chunks. Bernstein has since contacted the legal department at Apple, Adobe, Amazon, Google and Microsoft, but so far has not received any feedback on potentially redesigning TOS for these major tech companies.

The other solution we found is a bit kitschier and comes from ReasonableAgreement.org They created an anti-EULA that reads:

“By [accepting this material | accepting this payment | accepting this business-card | viewing this t-shirt | reading this sticker] you agree on behalf of your employer to release me from all obligations and waivers arising from any and all NON-NEGOTIATED agreements, licenses, terms-of-service, shrinkwrap, clickwrap, browserwrap…”

The organization encourages users to print out stickers, buy the t-shirt or otherwise make use of this anti-EULA in the same slightly deceptive way that businesses get consumers to agree to things they would not normally agree to if they a.) understood the rights they were waiving and b.) were not presumptively agreeing to the terms simply by buying the software. Their hope is that by using this anti-EULA in places where consumers typically sign away their rights, they can tip the balance of power back to users. It is doubtful that the anti-EULA would stand up in court but that’s the point. As they say on the website, “It’s no more enforceable than any of the other dumb-ass, abusive agreements out there but this one works for you. It’s time to stop agreeing. It’s time to come up with some real, reasonable agreements.”

The FTC has a mandate to protect consumers from “deceptive acts and practices” and both Bernstein’s redesigned TOS and ReasonableAgreement.org anti-EULA attempt to overcome the deceptive nature of these agreements. We’ve seen with the Sears case that long, obtuse, and overreaching TOS can be invalidated which means we need a better alternative. The Reasonable Agreement example uses deception to its advantage while Bernstein’s redesign tries to to minimize the deceptive nature of the agreement. The anti-EULA would most likely fail the FTC’s test for deception however Bernstein’s redesign should pass and become a model for what reasonable terms of service look like in the future.

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