Is merely making files available on the internet a “distribution” under the Copyright Act?

Suppose an online provider allows third parties to upload digital files (which, in this context, would be “phonorecords” for copyright purposes). If no one else obtains one of those files, whether by streaming or download, has there been a distribution? In other words, is merely making available a copyrighted work an exercise of the right to distribute under the Copyright Act? The recent case of SA Music v. Amazon addresses this question. The court said no.

making available

The Copyright Act lists the exclusive rights a copyright holder enjoys. One of those rights is to “distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending”

Making available copyrighted works on Amazon

Plaintiffs held the rights in some well-known 20th century songs (such as “I’ve Got the World on a String”). They sued Amazon over the presence of unauthorized copies of those musical works on Amazon’s music service. Plaintiffs asserted that merely making those files available online was an unauthorized distribution under the Copyright Act. Amazon moved to dismiss for failure to state a claim. The court granted the motion.

The statutory text favored Amazon

Amazon had contended that the Copyright Act (at 17 U.S.C. § 106(3)) did not contemplate plaintiffs’ “making available” theory of liability. The court agreed with Amazon’s position, finding there was no distribution of the works at issue. It held that the statute makes clear that a violation of exclusive distribution rights requires actual dissemination of the work.

SA Music, LLC v. Amazon.com, Inc., 2020 WL 3128534 (W.D. Wash. June 12, 2020)

See also: Court reconsiders “making available” in file-sharing case

Evan Brown is an intellectual property and technology attorney. 

Have a question?

Send an email to ebrown@internetcases.com to request a time to talk. Or call (630) 362-7237. 

Section 230 did not protect online car sharing platform

Plaintiff Turo operates an online and mobile peer-to-peer car sharing marketplace. It allows car owners to rent their cars to other Turo users. It filed a declaratory judgment action against the City of Los Angeles, asking the court to determine the service was not being run in violation of applicable law.

Section 230

The city filed counterclaims against Turo alleging (1) violation of local airport commerce regulations; (2) trespass; (3) aiding and abetting trespass; (4) unjust enrichment; and (5) unlawful and unfair business practices under California statute.

Should Section 230 apply?

Turo moved to dismiss. It argued that the City’s counterclaims sought to hold Turo liable for content published by users on Turo’s platform. In Turo’s mind, that should make it immune under Section 230. 

Section 230(c) provides, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Turo argued that the city’s claims were barred by Section 230 because they sought to hold Turo liable for its users’ actions. Those users published rental listings and selected LAX as the designated pickup point for car rentals. According to Turo, because the content of the rental listings were provided by third-party users, and because the city’s claims sought to hold Turo liable as an interactive computer service responsible for that content, Section 230 should apply.

No immunity, based on what the platform did

The court rejected Turo’s arguments that Section 230 immunized Turo from liability arising from the city’s counterclaims.

It held that Section 230 did not provide immunity because the city sought to hold Turo liable for its role facilitating online rental car transactions, not as the publisher or speaker of its users’ listings.

Citing to Force v. Facebook, Inc., 934 F.3d 53 (2d Cir. 2019), the court observed that “Section 230(c)(1) limits liability based on the function the defendant performs, not its identity.”

And the court compared the situation to the one in HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676 (9th Cir. 2019). In that case, Section 230 did not immunize companies providing peer-to-peer home rental platform services from a government ordinance that required homeowners to register their properties with the city before listing them on a home sharing platform.

The court explained that Section 230 immunity did not apply because the government plaintiff did not seek to hold the platform companies liable for the content of the bookings posted by their users, but only for their actions of processing transactions for unregistered properties.

Turo v. City of Los Angeles, 2020 WL 3422262 (C.D. Cal., June 19, 2020)

Evan Brown is an intellectual property and technology attorney advising companies on issues relating to the internet and new technologies.

Have a question? Email Evan to set up a time to talk: ebrown@internetcases.com. Or call (630) 362-7237.

Trademark license: 3 key ideas

A trademark license is important. Let’s say that your company is going to enter into an arrangement whereby it is going to manufacture and sell another company’s products, or your company is going to integrate another company’s services into its own offering. These could take the form of reseller agreements or distribution agreements. 

A critical piece of that arrangement is a trademark license. Here are three key things to keep in mind when entering into a trademark license. 

What trademarks are being licensed?

The first thing to keep in mind is that you will need to actually specify which marks are being licensed. Are they word marks? Logos? You will want to be precise about that, and the agreement should specify clearly which marks are the subject of the agreement. The parties should also define standards for how the marks should appear. And the agreement should contain minimum standards for the quality or performance of the goods or services that will be provided. 

How will the marks be used under the trademark license?

The second thing to keep in mind when entering a trademark license is to determine how the marks are actually going to be used. Will they be affixed to the products? Are they going to be in product literature and marketing collateral? One must define the scope of the permitted use so that the parties have an understanding of the arrangement. 

Quality assurance provisions

The third thing to keep in mind when negotiating a trademark license is the quality assurance provisions. A party granting rights may lose those rights if it does not have a meaningful remedy to stop wrong use. This may occur if the trademarks under the license agreement  do appear as they should, or if the quality of the goods and services being provided does not meet certain standards.

Evan Brown is a technology and intellectual property attorney in Chicago. Need help? Call Evan at (630) 362-7237 or set up a time to talk by emailing him at ebrown@internetcases.com. 

See also: Six things business owners should know about trademarks

Click fraud might violate CFAA

Click fraud is a problem in online advertising and in situations where companies and advertisers use publishers to promote their content. A federal court in Delaware recently addressed this problem. 

Plaintiff job search engine sued one of its former “publishing partners” and its owners. Defendants sent out email messages with links to job search results. Plaintiff paid defendants on a “pay-per-click” basis – a certain amount each time someone clicked on one of the links.

The Alleged Click Fraud

Eventually plaintiff noted that “conversions” were low from defendants’ activities. That means there were a lot of clicks on links but not many actual job applicants. Plaintiff began to suspect defendants were artificially inflating the number of clicks – that is, committing click fraud. The contract between plaintiff and defendants prohibited this conduct.

After investigating, plaintiff learned one of its employees was allegedly working with defendants to engage in the click fraud scheme. Plaintiff sued defendants, asserting a number of claims, including one under the federal Computer Fraud and Abuse Act, 18 USC 1030 (“CFAA”).

Defendants moved to dismiss. The court denied the motion.

CFAA and Click Fraud

The CFAA imposes liability when a plaintiff pleads and proves that a defendant:

  • has accessed a protected computer (defined in the statute);
  • did so without authorization or by exceeding such authorization as was granted;
  • has done so knowingly and with intent to defraud; and
  • as a result has furthered the intended fraud and obtained anything of value.

Defendant argued that CFAA liability should not apply because there were no allegations of “hacking” in this case. The court rejected that argument.

The court looked to the case of CollegeSource, Inc. v. AcademyOne, Inc., 597 F. App’x 116 (3d Cir. 2015) to hold that if a defendant accesses the plaintiff’s computers and uses information in violation of a contractual agreement with the plaintiff, that could be enough to impose CFAA liability. And the court believed that is essentially what is alleged to have happened in this case: that defendants violated the terms of contractual agreements with plaintiff by causing illegitimate clicks to be directed to plaintiff’s computer servers.

Juju, Inc. v. Native Media, LLC, 2020 WL 3208800 (D. Del., June 15, 2020)

See also: Facebook hacking that causes emotional distress – does the CFAA provide recovery?

Executive order to clarify Section 230: a summary

Section 230 executive order

Late yesterday President Trump took steps to make good on his promise to regulate online platforms like Twitter and Facebook. He released a draft executive order to that end. You can read the actual draft executive order. Here is a summary of the key points. The draft order:

  • States that it is the policy of the U.S. to foster clear, nondiscriminatory ground rules promoting free and open debate on the Internet. It is the policy of the U.S. that the scope of Section 230 immunity should be clarified.
  • Argues that a platform becomes a “publisher or speaker” of content, and therefore not subject to Section 230 immunity, when it does not act in good faith to to restrict access to content (in accordance with Section 230(c)(2) that it considers to be “obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable.” The executive order argues that Section 230 “does not extend to deceptive or pretextual actions restricting online content or actions inconsistent with an online platform’s terms of service.”
  • Orders the Secretary of Commerce to petition the FCC, requesting that the FCC propose regulations to clarify the conditions around a platform’s “good faith” when restricting access or availability of content. In particuar, the requested rules would examine whether the action was, among other things, deceptive, pretextual, inconsistent with the provider’s terms of service, the product of unreasoned explanation, or without meaningful opportunity to be heard.
  • Directs each federal executive department and agency to review its advertising and marketing spending on online platforms. Each is to provide a report in 30 days on: amount spent, which platforms supported, any viewpoint-based restrictions of the platform, assessment whether the platform is appropriate, and statutory authority available to restrict advertising on platforms not deemed appropriate.
  • States that it is the policy of the U.S. that “large social media platforms, such as Twitter and Facebook, as the functional equivalent of a traditional public forum, should not infringe on protected speech”.
  • Re-establishes the White House “Tech Bias Reporting Tool” that allows Americans to report incidents of online censorship. These complaints are to be forwarded to the DoJ and the FTC.
  • Directs the FTC to “consider” taking action against entities covered by Section 230 who restrict speech in ways that do not align with those entities’ public representations about those practices.
  • Directs the FTC to develop a publicly-available report describing complaints of activity of Twitter and other “large internet platforms” that may violate the law in ways that implicate the policy that these are public fora and should not infringe on protected speech.
  • Establishes a working group with states’ attorneys general regarding enforcement of state statutes prohibiting online platforms from engaging in unfair and deceptive acts and practices. 
  • This working group is also to collect publicly available information for the creation and monitoring of user watch lists, based on their interactions with content and other users (likes, follows, time spent). This working group is also to monitor users based on their activity “off the platform”. (It is not clear whether that means “off the internet” or “on other online places”.)

Smartphone user gave consent by website registration to receive texts

consent by website registration

Plaintiff sued defendant alleging defendant sent unsolicited text messages that violated the Telephone Consumer Protection Act (TCPA). Defendant moved for summary judgment. The court granted the motion. It found that plaintiff expressly gave consent by website registration to receive the text messages when she signed up for defendant’s services. This was a significant win for defendant because the TCPA provides for stiff penalties. 

Consent by website registration

Plaintiff used her smartphone to sign up for defendant’s food delivery services. When she registered, she left checked a box opting in to receive text messages. She also provided her cell phone number.

Defense of express consent

Defendant raised the affirmative defense of express consent as an affirmative defense. Plaintiff claimed the signup process did not include a clear and conspicuous disclosure that she would receive text messages. The court rejected defendant’s arguments. It found that the website disclosure was clear and conspicuous.

Pre-checked box was okay

And the court rejected plaintiff’s argument that the pre-checked box opting in was no a valid electronic signature. The court recognized, among other things, that smartphones are a pervasive part of daily life, and a significant majority of American adults own smartphones. It also noted that it should consider the perspective of a reasonably prudent smartphone user. On these facts, the court found that the phone disclosure reasonably conveyed that registering an account with the phone communications box checked would indicate consent to phone communications regarding advertising.

Lundbom v. Schwans Home Service, Inc., 2020 WL 2736419 (D. Oregon, May 26, 2020)

See also: Browsewrap enforceable: hyperlinked terms on defendant’s website gave reasonable notice

About the author: Evan Brown is a technology and intellectual property attorney helping clients with a variety of online issues. Call him at (630) 362-7237 or send email to ebrown@internetcases.com. Follow on Twitter and Instagram

Statements of work: three key ideas

A statement of work – often called an “SOW” –  is an important part of a technology contract. Here are three things to keep in mind when you are drafting and negotiating one.

Accurately define the services

The first thing to keep in mind when negotiating an SOW is to accurately and comprehensively define the scope of services. This benefits both the customer and the vendor. The vendor will know the SOW sets out a finite task list. That will help avoid scope creep.  The customer can look at the statement of work and see whether the deliverables match the agreed-upon specifications.

Leave the legal language alone

The second thing to keep in mind when drafting an SOW is to focus on the technical, business and commercial issues, leaving the legal issues in the body of the agreement untouched. That way you don’t unwittingly affect the risk profile of the overall engagement.

statements of work

You will amend the statement  of work

The third thing to keep in mind is to recognize that you are likely going to amend the statement of work, or enter into subsequent statements of work. So you should use a good form  that will enable you to add on these subsequent documents. 

See also: Using new employer’s credentials to copy former employer’s technology did not violate Computer Fraud and Abuse Act

Independent contractor agreements: common mistakes to avoid

A lot of companies bring on independent contractors to develop content. They may be photographers, designers, writers, consultants, etc. who sign independent contractor agreements. Here are three common mistakes that you should not make if you are hiring an independent contractor.

Intellectual property ownership mistakes in independent contractor agreements

The first common mistake is to leave out language that ensures you as the hiring party own the intellectual property in the deliverables. Did you know that unless the contract specifically says otherwise, the independent contractor will retain ownership of the copyright in the deliverables? Many companies have been surprised to learn, after spending a lot of money on an independent contractor, that they do not own the rights in the content they thought they had paid for.

The agreement should have a work made for hire provision. And since the definition of work made for hire is specific, some things that the contractor may do will not qualify as work made for hire. So the agreement should also say that to the extent the deliverables are not work made for hire, the independent contractor assigns the intellectual property to the party that hired it.

independent contractor agreement

Confidential information mistakes

The second common mistake that you should avoid in engaging with an independent contractor is being vague or loose when it comes to confidentiality. The independent contractor could learn a lot about your business – its vendors, its customers, its plans, and how the company operates. The confidentiality provision should adequately restrict how the independent contractor discloses that information or uses it outside of the engagement with the company. If not, that information may lose its trade secret protection. Or the contractor could take the information it learns about your company and use it while working for one of your competitors.

Indemnification mistakes

A third common mistake that you should avoid in independent contractor agreements is being silent on defense and indemnification. If a third party sues you over something that the independent contractor has done, you would likely want to look to the independent contractor to pick up the costs of defense and pay the amount of any judgment that results. Say, for example, the independent contractor copies a photograph from somewhere else and then provides that to you as his or her original work. If the true owner of the copyright in that work sues you for using the photo, it is only fair that you can turn to the contractor for relief. The agreement should say that.

See also: Independent contractor’s email was key factor in finding he had apparent authority to bind principal

About the author: Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter and Instagram. Subscribe to his YouTube channel. 

Working without a signed contract – a good idea for vendors?

As a technology vendor, you may be eager to get that new customer relationship started. Don’t let that tempt you to get underway without taking care of the details first. Technology vendors should avoid working without a signed contract. Here are three reasons why.

Working without a signed contract makes it harder to deal with overly-needy customers.

Working without a signed contract makes it hard to deal with overly-needy customers. Say you have entered into an arrangement where you are going to provide support and maintenance services. You get into the relationship on a handshake basis, and after a few months, the continues making requests, never satisfied, and always wanting services performed “on the cheap”.  You finally recognize  this business relationship is not bearing fruit and that you need to walk away. If there is no written contract in place making clear the conditions under which you as the vendor can terminate the relationship, when you try to disengage from this customer, you might run into trouble. 

A situation like this happened recently in a case that came from Kansas (Straightline HDD Inc. v. Smart E-Solutions, Inc., 2020 WL 2296941 (Ct. App. Kansas, May 8, 2020). In that situation, the parties litigated for several years over the question of whether there was an implied contract for the defendant software reseller to continue to provide support to its customer (with whom it did not have a signed contract). 

The trial court found that defendant had to provide some value for the software customer. Fortunately, the appellate court overturned that on appeal, finding that there really was no implied contract, so the reseller was able to separate from that needy customer. In that situation, the reseller ultimately avoided liability. But it is unfortunate that the parties spent all those years and all those resources litigating the issue. If there had been a written contract in place from the beginning of the relationship, there would have been more clarity and there wouldn’t have been those issues to litigate. The parties could have handled the situation much more quickly and efficiently. 

Having no signed contract means missing out on protective contract provisions. 

A technology vendor should not want to start work before it has a signed written contract because that written contract that was not signed should protect the vendor. For example, you want to make sure that the agreement has the appropriate disclaimers of warranty. A vendor does not want to promise that the technology solution is going to solve all the world’s problems. There should be  certain express warranties, and that is all.

Another kind of provision that you  want to make sure is in the agreement is a limitation of liability. Let’s say you as the vendor are only getting a small amount of revenue from this engagement with the customer.  If the technology solution fails for some reason – maybe even through no fault of yours – and the customer suffers millions of dollars worth of damage or business loss or some other form of consequential damage, you want to  make sure that you are not on the hook for that just. It does not make sense for a vendor to enter into an arrangement where it is only going to get a little bit of revenue while at the same time putting the company on the line with the exposure to potentially large damages.

Going without a signed contract makes it more difficult to get paid.

A third reason for having that written contract in place before you start doing the work is so that you will get paid.  The contract should be clear on how much customer will pay, what the payment is for, and when the payment is due. If it does not, do not be surprised if your customer remembers differently about cost, deadlines and specifications. 

Working without a signed contract is not good for technology vendors.

See also:

Software development breach of contract lawsuit moves forward

About the author: Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter and Instagram, connect on LinkedIn and subscribe to his YouTube channel for videos on interesting topics about law and technology. 

Three ways trade secrets can be more powerful than copyright

Copyrights and patents and trademarks usually come to mind when thinking about intellectual property. But trade secrets are a critically important and very useful form of intellectual property and are often overlooked. Here are three ways that trade secrets can be more powerful than copyright.

Three ways trade secrets can be more powerful than copyright

1 – Trade secrets protect ideas and facts (while copyright does not).

Something qualifies as a trade secret if it (1) has economic value because it is secret, and (2) has been the subject of efforts to keep it secret. So a trade secret can be an intangible idea – like the knowledge of how to do something. Or it can be a set of facts, like a list of customers. Copyright wouldn’t protect either of these things – ideas or facts – because copyright covers creative expression. You can’t look to copyright to stop others from using ideas you have or lists of facts you compile. But trade secrets, on the other hand, might cover you.

2 – You don’t have to register trade secrets.

Let me try to clarify one thing really quickly – you don’t have to register copyrights either to own them. But you do have to register that copyright if you need to sue anyone for infringement. With trade secrets, there’s not even any such thing as registration. You have trade secrets from possessing valuable information that you have actually kept secret. That’s it.

3 – Trade secrets can last forever.

Copyright lasts a long time, but trade secrets can last even longer. When an employee of a company creates a copyrighted work, the rights last for 95 years. But there is no expiration date for trade secrets. For as long as a company keeps its valuable trade secret information secret, it’s protected by trade secrets law.

Other ways?

There are other ways trade secrets are more powerful than copyright. Can you think of any? Leave a comment here or take to Twitter (I’m @internetcases there). 

See also: 

Question of who owns source code proceeds to trial in trade secrets case
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