Cruz campaign still facing copyright and breach of contract liability over songs used in political ads

Court denies motion to dismiss copyright and breach of contract claims over songs used in YouTube and TV political ads.

Months after Ted Cruz ended his presidential bid, his campaign, and the advertising company hired to create ads for the campaign, still face liability over two songs used in YouTube and television ads. A federal court in Washington state has denied the defendants’ motion to dismiss copyright infringement and breach of contract claims brought against them.

An employee of the Cruz campaign’s advertising company allegedly downloaded two songs from Audiosocket, and then used those songs in two separate campaign ads. Audiosocket and the copyright holders sued for infringement and breach of the licensing agreements under which the songs were provided.

The court rejected the defendants’ arguments. It held that the plaintiffs had adequately pled the existence of their copyright registrations, and that the claims for breach of the licensing agreement were not preempted by the Copyright Act. Because the licensing agreement expressly prohibited the songs to be used for political purposes, the breach of contract claims were not “equivalent” to a copyright infringement claim, and therefore not subject to preemption under 17 USC 301.

The case is a reminder of the risks that companies and organizations face when hiring outside vendors to procure and create content. The hiring party should seek, at minimum, to ensure that the vendor has obtained the appropriate rights in the content it will integrate into the deliverables provided under the arrangement. And the vendor should utilize appropriate internal protocols and form documents to help ensure that the content it provides to its customer does not infringe. That kind of diligence will help avoid unpleasant situations between vendor and customer that arise when third parties claim against both of them that intellectual property rights have been infringed.

Leopona, Inc. v. Cruz For President, 2016 WL 3670596 (W.D. Washington, July 11, 2016)

Court holds browsewrap agreement not enforceable

server_wrap

Plaintiff filed a consumer fraud class action lawsuit against defendant, the operator of an ecommerce website. Defendant moved to have the case heard by arbitration, arguing that the arbitration provision in its website’s terms of use required the dispute to be arbitrated instead of heard in court. The terms of use were in the form of a “browsewrap” agreement — viewable by a hyperlink displayed at the bottom of each page of defendant’s website.

The court denied the motion, finding that the hyperlink to the terms of use (containing the arbitration provision) was too inconspicuous to put a reasonably prudent internet consumer on inquiry notice. Since the agreement was not enforceable, plaintiffs were not bound by the arbitration provision. Defendant sought review with the California Court of Appeal. On appeal, the court affirmed the lower court.

It observed that for a browsewrap agreement to be enforceable, a court must infer that the end user assented to its terms. This may be more difficult to show than in situations involving “clickwrap” agreements, which require the user to affirmatively do something, such as check a box, to indicate his or her assent to the terms of use.

In this case, the court held that although an especially observant internet consumer could spot the defendant’s terms of use hyperlinks on some checkout flow pages without scrolling, that quality alone was not all that was required to establish the existence of an enforceable browsewrap agreement. Rather, as the Second Circuit observed in Specht v. Netscape, 306 F.3d 17 (2d Cir.2002), “[r]easonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility.”

Here, the defendant’s terms of use hyperlinks — their placement, color, size and other qualities relative to defendant’s website’s overall design — were simply too inconspicuous to meet that standard.

Long v. Provide Commerce, Inc., — Cal.Rptr.3d —, 2016 WL 1056555 (Cal Ct. App., March 17, 2016)

About the Author: Evan Brown is a Chicago attorney advising enterprises on important aspects of technology law, including software development, technology and content licensing, and general privacy issues.

Photo courtesy Flickr user Patrick Finnegan under this Creative Commons license.

Want your online agreements to be enforceable? Keep good transaction data.

Chicago internet attorney Evan Brown

A recent court decision underscores the importance of building online e-commerce platforms with the ability to reliably gather information about transactions. The case also says some troubling things about open source.

Plaintiff loaned money in exchange for the borrower assigning its accounts receivable to plaintiff. As part of plaintiff’s services, it provided a platform for its borrower to generate and send invoices to the borrower’s customers. The borrower began generating fake invoices, and one of its customers — the defendant in this case — refused to pay. There was a dispute over whether defendant had accepted or rejected the invoices using plaintiff’s invoice platform.

After a trial, the judge ruled in favor of defendant. The court found that the digital data showing whether defendant had accepted or rejected the invoices was unreliable. The court found credible the testimony of one of defendant’s employees that he never clicked “I agree” on the fraudulent invoices. And there was no good database evidence that he had.

Plaintiff sought review with the Court of Appeal of California. On appeal, the court affirmed, agreeing that the data was unreliable, and further commenting on the problematic use of open source software in plaintiff’s online invoice platform.

The court of appeal found that substantial evidence supported the lower court’s findings. Specifically, it agreed with the lower court’s findings that the defendant’s employee never clicked on the “I agree” button to accept the fraudulent invoices. The court also credited the lower court’s finding that the data was unreliable in part because plaintiff’s website was developed from open source code, and that the developer made untested changes to the software on a weekly basis.

The treatment of the open source aspect is perhaps unfortunate. One unfamiliar with open source would read the court’s opinion as an indictment against open source software’s fundamental reliability:

Open source code is problematic because anonymous people on the internet design it, and “holes” are not fixed by vendor updates. Notifications that there are issues with the code may not go out.

The lack of reliability of the data in this case was not due to the fundamental nature of open source. (We know that open source software, e.g., Linux, powers essential core features of the modern internet.) So it is unfortunate that future litigants may look to this case to argue against vendors who use open source solutions. Fortunately, the case is not citable as precendent (many California Court of Appeal cases are not citable). But the court’s negative treatment of the nature of open source is a troubling example of how a judge may be swayed by a technological red herring.

21st Capital Corp. v. Onodi Tooling & Engineering Co., 2015 WL 5943097 (Not officially published, California Court of Appeal, October 13, 2015)

Evan Brown is a Chicago attorney advising enterprises on important aspects of technology law, including software development, technology and content licensing, and general privacy issues.

Photo by Flickr user bookfinch under this Creative Commons license.

Court provides guidance on how to effectively communicate online terms of service

Are online terms of service provided via hyperlink in an email binding on the recipient of that email? The Second Circuit recently addressed that question, and the decision gives guidance on best practices for online providers.

Plaintiff booked a trip to the Galapagos Islands using defendant’s website. When she purchased her ticket, she got a booking information email, a confirmation invoice and a service voucher. (It is not clear how plaintiff got the confirmation invoice and the service voucher – the court’s opinion says they were sent as emails, but the PACER record does not show them as emails. In any event, plaintiff did not dispute that she received all three documents, nor did she dispute all three documents contained a hyperlink to defendant’s “terms and conditions” which were available online.)

One evening during the trip, a tour guide allegedly assaulted plaintiff. She sued defendant for negligently hiring and training that tour guide. Defendant moved to dismiss, pointing to language in the online terms and conditions that called for disputes to be heard in Canadian court. The district court dismissed the action, and plaintiff sought review with the Second Circuit. On appeal, the court affirmed. It held that defendant had reasonably communicated the forum selection clause to plaintiff by using hyperlinks and the appropriate language in the terms and conditions.

Each of the documents contained an underlined hyperlink, and accompanying language advising plaintiff to click on the hyperlink. The booking information email contained a standalone provision with the heading “TERMS AND CONDITIONS”. This section stated that “[a]ll . . . passengers must read, understand and agree to the following terms and conditions.” The hyperlink immediately followed. Both the confirmation invoice and the voucher contained a link to the terms and conditions, preceded by “[c]onfirmation of your reservation means that you have already read, agreed to and understood the terms and conditions. . . .”

The actual structure and language of the terms and conditions also served to reasonably communicate the forum selection clause. The second paragraph stated that the terms and conditions “affect your rights and designate the governing law and forum for the resolution of any and all disputes.” Later in the terms and conditions, a standalone section titled “APPLICABLE LAW” provided that all matters arising from the agreement were subject to Ontario and Canadian law and the exclusive jurisdiction of the Ontario and Canadian courts.

The decision validates the notion that an e-commerce provider can rely on establishing valid and binding contracts with its customers without having to actually transmit a copy of the terms and conditions that would apply to the transaction. Though the facts of this case dealt with email, there is no substantive reason why the best practices revealed by the court’s decision would not apply to providers of mobile apps and other online platforms.

Starkey v. G Adventures, Inc., — F.3d —, 2015 WL 4664237 (2nd Cir. August 7, 2015)

Evan Brown is an attorney in Chicago helping clients manage issues involving technology and new media.

1 2 3 4 12 13 14