by Lee Gesmer | Jul 10, 2018 | DMCA/CDA
The Communications Decency Act (CDA) is a federal law that protects online publishers from liability for the speech of others. The CDA gives online platforms the right to publish (or decline to publish) the ideas and opinions of users without the threat of being held liable for that content or forced to remove it.
However, people who are defamed online will sometimes go to extreme lengths to try to force online publishers to remove defamatory content posted by users. A notable First Circuit case that I wrote about recently illustrates how a lawyer attempted, unsuccessfully, to obtain copyright ownership of several defamatory posts and then force Ripoff Report to remove the posts. (See: The Copyright Workaround and Reputation Management: Small Justice v. Ripoff Report).
A California attorney tried something similar in Hassell v. Bird, a case decided by the California Supreme Court on July 2, 2018. In that case a lawyer (Dawn Hassell) sued a former client and the author of a Yelp review (Ava Bird) over a review that Hassell claimed was defamatory. Hassell got a default judgment holding that the review was defamatory along with an injunction ordering the review to be removed. She then delivered the injunction to Yelp (which was not a party in the suit) and demanded that it honor the injunction against Bird and remove the review. Yelp refused to do so. The case proceeded through appeals, ending up before the California Supreme Court.
The attorney’s strategy in this case was to purposefully not name Yelp as a defendant, since Yelp would easily have been dismissed from the case under the CDA. Instead, her strategy was to get an injunction against the defendant ordering her to remove the Yelp post, and then attempt to enforce that injunction against Yelp. Ava Bird assisted in the first part of this strategy by defaulting, although it appears she may not have been properly served.
The court addressed Hassell’s strategy, and answered the central issue in the case, as follows:
The question here is whether a different result should obtain because plaintiffs made the tactical decision not to name Yelp as a defendant. Put another way, we must decide whether plaintiffs’ litigation strategy allows them to accomplish indirectly what Congress has clearly forbidden them to achieve directly. We believe the answer is no . . . an order that treats an Internet intermediary ‘as the publisher or speaker of any information provided by another information content provider’ nevertheless falls within the parameters of [the CDA].
The court observed that even an injunction (as opposed to money damages) can impose a substantial burden on an online publisher:
An injunction like the removal order plaintiffs obtained can impose substantial burdens on an Internet intermediary. Even if it would be mechanically simple to implement such an order, compliance still could interfere with and undermine the viability of an online platform . . . furthermore, as this case illustrates, a seemingly straightforward removal order can generate substantial litigation over matters such as its validity or scope, or the manner in which it is implemented. The CDA allows these litigation burdens to be imposed upon the originators of online speech. But the unique position of Internet intermediaries convinced Congress to spare republishers of online content, in a situation such as the one here, from this sort of ongoing entanglement with the courts.
The court criticized Hassell’s strategy:
. . . plaintiffs’ maneuver, if accepted, could subvert a statutory scheme intended to promote online discourse and industry self-regulation. What plaintiffs did in attempting to deprive Yelp of immunity was creative, but it was not difficult. If plaintiffs’ approach were recognized as legitimate, in the future other plaintiffs could be expected to file lawsuits pressing a broad array of demands for injunctive relief against compliant or default-prone original sources of allegedly tortious online content. . . . Congress did not intend this result, any more than it intended that Internet intermediaries be bankrupted by damages imposed through lawsuits attacking what are, at their core, only decisions regarding the publication of third party content.
Yelp itself had the last laugh in this case, and it posted it on its blog:
The Hassell Law Group, which has always been a highly-rated business on Yelp and currently maintains five stars, has spent many years in the court system (and endured the resulting Streisand Effect) in an effort to force Yelp to silence a pair of outlier reviews. As we have observed before, litigation is never a good substitute for customer service and responsiveness, and had the law firm avoided the courtrooms and moved on, it would have saved time and money, and been able to focus more on the cases that truly matter the most — those of its clients.
There is a lot more to this case than I’ve covered here. If you are interested, I recommend Eric Goldman’s analysis of the nuanced concurring and dissenting opinions in his post, The California Supreme Court Didn’t Ruin Section 230 (Today)–Hassell v. Bird.
Hassell v. Bird (Cal. Sup. Ct. July 2, 2018)
by Lee Gesmer | Jul 2, 2018 | Contracts
Online agreements are nothing new to the Internet but companies are still struggling to implement them in a way that will assure their enforceability.
The latest company to fail this test is Uber Technologies. A June 2018 decision issued by the First Circuit Court of Appeals in Boston held an online agreement presented to the users of the Uber smartphone app in 2012 and early 2013 was not sufficiently conspicuous to be enforceable. The terms and conditions stated that users of the app could not participate in a class action and were required to resolve any dispute with Uber by means of binding arbitration. Because the First Circuit held that this agreement is not enforceable the plaintiffs in this case—who claim that Uber engaged in unfair and deceptive pricing —will now be free to proceed with a class action against Uber.
In deciding this case the First Circuit applied Massachusetts contract law, specifically the 2013 decision of the Massachusetts Appeals Court in Ajemian v. Yahoo!, Inc.
In Ajemian the state court established the following two-part test for the enforceability of an online agreement: the contract terms must (1) be “reasonably communicated” to the user and (2) accepted by the user.
In the Uber case the terms and conditions were available via a link that read “Terms of Service & Privacy Policy,” as shown in the following screen shot:
The hyperlink appears at the bottom of the left screen, and above the phone numbers in the right screen. Users of the app were not required to view the terms and agree to them, and therefore Uber’s agreement may best be viewed as a “browsewrap” agreement, where assent is given merely by using the site.*
*In contrast, a “clickwrap” agreement requires the user to click “I agree,” but not necessarily view the contract. A “scrollwrap” requires users to physically scroll through the agreement and click on a separate “I agree” button in order to assent to the terms and conditions of the website.
This was not enough for the First Circuit, which found that the hyperlink was not sufficiently conspicuous to form a contract between Uber and the users of its app.
In reaching this conclusion the court closely examined the design of the Uber app’s interface, noting that the “Terms of Service & Privacy Policy” hyperlink did not have the common appearance of a hyperlink which, according to the court, is commonly blue and underlined. This raised concerns as to whether a reasonable user would have been aware that the gray rectangular box was actually a hyperlink. Nor, the court concluded, was this hyperlink conspicuous when viewed in the context of all the other information presented on the screen: “If everything on the screen is written with conspicuous features, then nothing is conspicuous.”
This case is yet another warning to online companies to be careful when designing online agreements. This can be challenging, and as this case illustrates it is even more difficult when the user must agree to terms and conditions via the interface of a smartphone app.
It’s in the interest of the company designing an app to make registration as quick and easy as possible, and in this case Uber made the decision not to require prospective users to click any screen buttons to accept its terms or access and view the terms before completing the registration process. Instead they designed a smartphone screen that, at least in the eyes of the First Circuit, was inadequate to communicate the existence of these terms to users.
While this case was decided under Massachusetts law and courts in other states might view this issue differently (indeed, might even have reached a different outcome in this case), the decision is a warning that while browsewraps may be convenient they are vulnerable to enforcement challenges, and companies must be particularly careful when attempting to implement them on smartphones.
Cullinane v. Uber Technologies, Inc. (1st Cir. June 25, 2018).
by Lee Gesmer | Jun 29, 2018 | Copyright
The Supreme Court accepts appeals of very few copyright cases. In the last 20 years it has decided only 14 copyright cases, and most of those involved narrow, highly technical issues of copyright law.
However, the Copyright Act (which contains 150,000 words or 250 pages of single-spaced text), is mostly a law of technicalities.
One of these technicalities arises out of the fact that copyright registration is a precondition to filing a copyright infringement suit. However, the Copyright Act is not entirely clear on what this means: must a copyright plaintiff obtain registration from the Copyright Office (or, in rare cases, a denial, but in any case a decision on its application) before it may file suit for copyright infringement? Or, is it enough that the plaintiff has filed an application for infringement, permitting the suit to proceed while the application waits to be acted on by the Copyright Office, a process that typically takes about eight months?
The federal circuit courts have been divided on this issue. Some circuits hold that it is sufficient to have simply filed a registration application as a precondition to filing suit; other courts have held that a would-be copyright plaintiff must wait until the Copyright Office has acted on the registration request, the so-called “registration approach.”
Why does this matter? One reason is the statute of limitations – copyright owners face a three year statute of limitations, and an owner who files an application late in this three year period risks losing the right to enforce the copyright in an infringement action because of the time needed to review an application.
Another reason may be if the copyright plaintiff is seeking a preliminary injunction and can’t wait eight months for a standard registration to be issued.
While the Copyright Office does allow expedited applications (or “special handling”), the fee for this is $800 per application (versus $35 for a normal registration, so long as the applicant can wait eight months), an expense and delay most copyright plaintiffs are reluctant to incur, particularly when many copyright suits involve more than just one work, in which case the $800/work cost can become exorbitant.
The Court of Appeals for the Eleventh Circuit had this issue presented to it in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. In a decision issued in May 2017 the court highlighted the circuit split over this issue, noting that the Tenth Circuit requires that the registration be acted upon, while the Fifth and Ninth Circuits require only that the application have been filed. The remaining circuits either have not opined on this issue or have given unclear (and in the case of the Seventh Circuit conflicting) guidance.
In Fourth Estate the Eleventh Circuit sided with the Tenth Circuit, holding that the law requires that the Register of Copyrights have acted on the application before a copyright owner can file an infringement action.
The copyright holder appealed to the Supreme Court, and on June 28, 2018, the Supreme Court accepted certiorari in this case. Therefore, it will likely decide this issue during the 2018-2019 Term.
The issue is not one of constitutional magnitude — rather, it is a question of reading and interpreting the Copyright Act as written and enacted by Congress, along with whatever legislative history the parties can locate that bears on Congress’ intent. The law is sufficiently ambiguous (as reflected in the circuit split) that the Supreme Court could come out either way.
It will be helpful to have this issue resolved either way, since it is common for copyright plaintiffs to have not registered their works when they first consult an attorney. The attorney is then forced to determine whether a case can be filed in their circuit while registration is pending (as noted, most circuits haven’t decided this issue, making the decision more difficult), or whether the case cannot be filed until registration is completed. The attorney must then factor in the urgency of the legal claim and decide whether to advise the client to pay the additional expense required to expedite the registration. All-in-all, an unnecessarily complicated set of decisions.
If you’re interested in following this case as briefs are filed with the Supreme Court you can do so on the SCOTUSblog page dedicated to this case. The parties’ petitions for certiorari, as well as the Solicitor General’s brief on behalf of the United States urging the Court to accept review of this case and expressing its support for the holding of the Eleventh Circuit, are already available on SCOTUSblog.
Update: The Supreme Court ruled that registration is a prerequisite to filing a copyright case. Decision here.
by Lee Gesmer | May 10, 2018 | Copyright
It’s rare to see a court conclude that a copyright owner has engaged in copyright misuse, but that’s the position in which Disney Enterprises, Inc. finds itself in its copyright case against Redbox Automated Retail, Inc.
The case is convoluted, since it involves both contract and unusual copyright law issues.
Disney sells “combo packs,” which include video disks containing Disney movies and a piece of paper containing an alphanumeric download code. The download code can be used to stream the movies online. The cover of the combo pack boxes state that the “codes are not for sale or transfer.”
Redbox began purchasing Disney combo packs and, disregarding the warning on the boxes, disassembled the packages and sold the download codes in its kiosks.
Disney filed suit and asked the court for a preliminary injunction ordering Redbox to cease reselling the download codes. The court denied Disney’s motion (link to February 2018 opinion).
There were a number of issues the court needed to parse to decide Disney’s motion. The first was whether Redbox violated a contract based on the warning on the exterior of the boxes. Based on Ninth Circuit and California law the court concluded that the warning did not constitute a “shrink-wrap license,” since it failed to warn purchasers that by opening the box they would be bound to a contract: “Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent.”
Thus far this is classic shrink-wrap law. The legal consequence is that purchasers were entitled to transfer (sell, give away) the disks and the download code under the copyright “first sale” doctrine.* Bottom line, Disney did not prevail on its argument that Redbox violated a license when it purchased the combo packs and sold the download codes.
*Likely, in the future Disney will correct its “box-top license” to make it legally enforceable, but it didn’t help it in this case.
There was, however, a second license that Disney could point to. The online terms of use between Disney and combo pack purchasers (an entirely independent online license) permitted consumers to download movies only if they still owned the physical disks from the combo pack sold with the download code. In other words, the online license purported to penalize consumers for exercising their first sale rights in the contents of the combo packs by denying them the right to use the download code.
Disney argued that Redbox was encouraging end users who purchased download codes from Redbox to download movies in violation of this online agreement. Disney argued that the end users were direct infringers (since, if they no longer had the disks, they had no right to download movies), and Redbox was a contributory infringer, since it enabled them to do so by selling them the codes.
This would have been a winning argument, except that Redbox asserted that by imposing this requirement Disney was engaging in “copyright misuse.” Specifically, Disney was using its copyright in the movies (its right to control downloads) to prevent consumers from exercising their first sale rights in the media contained in the combo packs.
The court bought this argument, reasoning as follows:
- Under U.S. copyright law, purchasers of the combo packs were free to resell (or give away) the contents of the packs under the “first sale” doctrine.
- Disney’s download services license agreement with purchasers wrongly attempted to prevent this legal conduct. In other words, it forced them to agree that they would not exercise their rights under the first sale doctrine, rights they held as owners of the combo packs.
- The court concluded that “this improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.”
The court rejected Disney’s argument that the doctrine of copyright misuse is limited to situations in which a copyright holder attempts to use its copyright to to obtain some power over other, non-copyrighted goods or services.
There is another twist to this case. Most of the discussion leading up to this decision (both in court filings and in the copyright community), centered around the question of whether the download codes are subject to the first sale doctrine in the first instance. Is an alphanumeric download code a “copy” subject to first sale? Redbox argued that it was, and that this was yet another reason that Disney could not control the transfer or sale of the code once it had been purchased.
The court sided with Disney on this issue, holding that the sale of a download code was not the sale of a copy that would be subject to first sale: “Disney appears to have sold something akin to an option to create a physical copy at some point in the future. Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case.” However, this conclusion was trumped by the court’s ruling that Disney had engaged in copyright misuse.
This case is ongoing, and I expect that the district court’s preliminary injunction ruling will be the subject of an eventual appeal by Disney.
Update: As I noted above, one option open to Disney was to revise its “box-top license” to make it legally enforceable. Disney did just this when it released Black Panther, and it brought a new motion for preliminary injunction with respect to sales of this movie. This time it prevailed. The district court issued a new decision on August 29, 2018, holding that Redbox may not sell or transfer the combo pack codes for Black Panther.
by Lee Gesmer | May 3, 2018 | Copyright
The Court of Appeals for the Federal Circuit’s second decision in the long-running Oracle v. Google copyright case is astonishing, since it is the first time a federal appeals court has reversed a jury verdict on copyright fair use. But, it’s not surprising – the CAFC telegraphed its views on Google’s fair use defense in its first decision, which held that Oracle’s Java declaring code was copyright-protected (“Google overstates what activities can be deemed transformative under a correct application of the law”).
Like its 2014 decision, the 2018 decision (decided by the same 3-judge panel) rejecting Google’s fair use defense has triggered a flood of articles analyzing, supporting or criticizing the decision.
Rather than rehash what other commentators have said about this case, here are what I see as the practical take-aways.
First, and most importantly: it ain’t over until it’s over. Google is almost certain to seek Supreme Court review (it did, unsuccessfully, after the 2014 decision – all the more reason to try again, now that it’s facing a trial on damages).
While the Supreme Court takes only a small percentage of cases, there’s a reasonable chance it will take this one. A significant factor will be whether the Solicitor General’s office argues in favor of appeal. It didn’t in 2014, arguing that the CAFC’s decision on copyrightability was correct, that the Java “declaring code” fell within the definition of a computer program —“a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result” — and not the exclusion for a “method of operation” or “system.”
However, the Solicitor General was more receptive to Google’s fair use argument: “legitimate concerns with interoperability and lock-in effects are better addressed through the fair use doctrine ….”
What position it will take on fair use on an appeal from the current decision remains to be seen. However, if I were Google I’d rather be seeking the Solicitor General’s support from an Obama Department of Justice than a Trump DOJ.
That said, the Supreme Court hasn’t decided a copyright fair use case in almost 25 years. It has never decided a software copyright case (although it tried in Lotus v. Borland, where it tied 4-4). This case is a good candidate for Supreme Court review, with or without the Solicitor General’s support, either on the copyrightability issue (the 2014 decision), fair use (the 2018 decision) or both. If nothing else, the Supreme Court could reverse the CAFC on the narrow ground that there were facts on which the jury could have found fair use, and therefore the CAFC went too far in usurping the role of the jury.
Second, this case was decided by the Court of Appeals for the Federal Circuit, supposedly applying Ninth Circuit copyright law. The case is not binding on any other circuit, not even the Ninth Circuit, from which it arose. It’s no secret that the CAFC is not viewed as an influential court on matters of copyright law. In fact, it gets very few copyright appeals (it’s primary role is that of an appeals court for patent cases, and even its performance in that context is controversial). Therefore, the case may have less practical impact than would have been the case if it were decided by the Ninth Circuit or the Second Circuit, the two most influential federal appeal courts on copyright matters.
This is not to say it is unimportant – at least for now, it will have persuasive force for courts adjudging the copyrightability of APIs and fair use in the context of API reproduction.
Third, every fair use case stands on its own set of facts, and therefore it’s difficult to apply precedent in this area of copyright law. This is particularly true with respect to software copyright law. This is both a negative and a positive for companies in a position similar to Google – negative in that uncertainty makes it difficult to chart a liability-free course through the shoals of fair use; positive in that future litigants can distinguish this case, which is based on facts that are highly specific. However, few companies can afford the enormous costs that Google has incurred in the defense of this case, so on balance the decision is a negative for companies seeking to copy an API without the copyright holder’s permission.
The bottom line: if a client asked me whether it could use an API such as Java without permission, I would tell them they could not, since they face a double legal hurdle: first, whatever federal court they find themselves in may follow the CAFC’s 2014 decision, and hold that they’ve violated the copyright owner’s exclusive rights of reproduction and distribution, at the very least. Even the First Circuit, which decided Lotus v. Borland in favor of Lotus on the grounds that the user commands in Lotus 1-2-3 were a “method of operation” is not necessarily safe for defendants. It’s been too long (over 25 years) and an API like Java is too different from the command structure in Lotus for a defendant like Google to feel secure in the First Circuit.
Second, the outcome of a fair use defense is always uncertain – that is baked into the very nature of copyright fair use. If the client is copying the API to achieve interoperability or to move an API to a new hardware platform, it may have a better argument than Google had with Java and Android (Google’s defense failed on both of these issues), but fair use is so unpredictable that in most cases it would be borderline negligence for an attorney to tell a client to rely on it as a defense.
On many occasions I have said that I would love to hear what Google’s copyright counsel advised Google when Google said it wanted to copy parts of the Java API and include it in Google’s Android smart phone operating system. It would be an understatement to say that this would have been very risky advice. Perhaps Google was advised that this course of action involved a big legal risk, and it concluded that the risk was justified. Regardless, unless Google can persuade the Supreme Court to reverse the CAFC, it faces a jury trial that could exceed $20 billion in damages.
