Court holds browsewrap agreement not enforceable

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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.

Communications Decency Act shields Backpage from liability for violation of federal sex trafficking law

backpage

Three Jane Doe plaintiffs, who alleged they were victims of sex trafficking, filed suit against online classified ad provider Backpage.com (“Backpage”), asserting that Backpage violated the federal Trafficking Victims Protection Reauthorization Act (“TVPRA”) by structuring its website to facilitate sex trafficking and implementing rules and processes designed to actually encourage sex trafficking.

The district court dismissed the TVPRA claims for failure to state a claim, holding that the Communications Decency Act, at 47 U.S.C. §230, provided immunity from the claims. Plaintiffs sought review with the First Circuit. On appeal, the court affirmed the lower court’s dismissal.

Section 230 principally shields website operators from being “treated as the publisher or speaker” of material posted by users of the site. In this case, the court held that plaintiffs’ claims were barred because the TVPRA claims “necessarily require[d] that the defendant be treated as the publisher or speaker of content provide by another.” Since the plaintiffs were trafficked by means of the third party advertisements on Backpage, there was no harm to them but for the content of the postings.

The court rejected plaintiffs’ attempts to characterize Backpage’s actions as “an affirmative course of conduct” distinct from the exercise of the “traditional publishing or editorial functions” of a website owner. The choice of what words or phrases to be displayed on the site, the decision not to reduce misinformation by changing its policies, and the decisions in structuring its website and posting requirements, in the court’s view, were traditional publisher functions entitled to Section 230 protection.

Does v. Backpage.com, LLC, No. 15-1724 (1st Cir., March 14, 2016)

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.

See also:
Seventh Circuit sides with Backpage in free speech suit against sheriff

Website operator was too involved with development of content to be immune under Section 230

Defendant started up a website to — in her own words — provide a place for others to have a dialogue and post information about their experiences at Plaintiff’s youth drug rehab facilities. Plaintiff found the content of Defendant’s website offensive, and sued for defamation and intentional interference with prospective economic advantage. Defendant filed a motion to strike under California’s Anti-SLAPP law. The court denied the motion.

In denying the Anti-SLAPP motion, the court found, among other things, that Plaintiff had established a probability of prevailing on most of its claims. This chance of prevailing withstood Defendant’s argument that she was shielded from liability by the Communications Decency Act.

This Act provides 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.” 47 U.S.C. § 230(c)(1).

Defendant acknowledged that her defense was relevant only to the extent that she was alleging that comments by third parties on her website were defamatory.

She quoted Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2008) to assert that “the exclusion of ‘publisher’ liability necessarily precludes liability for exercising the usual prerogative of publishers to choose among proffered material and to edit the material published while retaining its basic form and message.” She argued that she was entitled to Section 230 immunity because she was an exempt publisher — she either simply posted others’ statements or made minor edits to those statements before posting.

The court did not agree with Defendant’s characterization of her publishing activities.

It found that her posts would not lead a visitor to believe that she was quoting third parties. Rather, in the court’s view, Defendant adopted the statements of others and used them to create her comments on the website. She posted her own articles, and summarized the statements of others.

Moreover, Defendant did more than simply post whatever information third parties provided. She elicited statements through two surveys that contained specific questions to gather information about specific issues. The court found this to disqualify Defendant from Section 230 immunity under the holding of Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008) (wherein the website operator was not immune under the Communications Decency Act because it created discriminatory questions and choice of answers).

Diamond Ranch Academy, Inc. v. Filer, 2016 WL 633351 (D. Utah, February 17, 2016)

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.

On avoiding anxiety-inducing words in online terms of service

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Are “worldwide” “perpetual” rights really necessary?

Designer/developer Robert Nealan wrote a post questioning whether self-hosted blogging is dead. The piece is interesting as a commentary on the current state of blogging in general — a state that has changed a lot in the past decade or more, primarily due to the influences of outside social platforms, namely, Twitter, and more recently, as Robert notes and critiques, Medium.

The piece is a refreshing singing of praise for self-hosted blogs (like the one you’re reading). But another, no less important element of the post is an undercurrent shaped by a not-unjustified freak out of sorts over what third party platforms’ online terms of service say about their claim of rights in the users’ intellectual property. When we look to the terms of service for some of these platforms (and even more so if we actually think about what those terms say), we recognize that platforms quite often over-aggressively grab onto rights to do things with the content the user posts. So much depends on how these terms of service are written.

Lawyers can learn a lot from the commentary like that Robert Nealan has posted. As an object lesson and example, he takes issue with Svbtle’s terms, particularly the following:

Marketing. As a paid customer, you give Svbtle a perpetual world-wide license to use your company’s assets and logos, unless Svbtle agrees in writing otherwise. These assets and logos will be used purely for marketing and sales efforts, such as being displayed on the home page.

Good practice here would might consider adopting the ethos of certain “by design” concepts we see in the privacy and data security world. Think of “privacy by design” or “security by design” — the idea that a technology developer (e.g., someone building an app) should build the system in a way that it does not keep data around for longer than what is needed, and certainly for no longer than what the developer promises its users it will.

The same could be applied here — and it seems even simpler — for platforms to adopt principles establishing they will only exercise rights in relation to users’ intellectual property for only as long as they meaningfully need to do so. Let’s call it “Appropriate Rights by Design“. Words like “perpetual” and “world-wide” can be frightening. A platform hosting users’ content probably doesn’t need such extensive rights. If that’s the case, then the platform shouldn’t grab those rights. Those terms can be a red-herring. Robert Nealan took comfort in his piece in Medium’s terms which say that users of Medium “own the rights to the content [they] post on Medium,” and that Medium “[doesn’t claim ownership over any of it.” Funny thing is, a platform that grabs a world-wide, perpetual license could truthfully say the very same thing. So by not grabbing more rights than necessary, i.e., applying principles of Appropriate Rights by Design,  platforms will avoid having users latch on to scary words unnecessarily. For as long as this happens, it’s likely users will continue to have anxiety about moving to a third-party hosted platform, and in the same way, keep a light shining on what’s good about self-hosted blogs and other platforms.

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 fady habib under this Creative Commons license.

Right of publicity case against Shaquille O’Neal over a photo he tweeted and posted to Instagram moves forward

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A federal court has held that a plaintiff has successfully pled a claim of “appropriation” (essentially, right of publicity claim) against former NBA star Shaquille O’Neal, for Shaq’s use of plaintiff’s photo on Twitter and Instagram. The case is useful inasmuch as it shows how courts will consider social media as providing a benefit to its user.

Shaq acquired a photo of plaintiff, who suffers from a condition that affects his hair, skin and teeth, then placed a photo of himself making a contorted face next to the photo, apparently to imitate the way plaintiff appeared. Given that Shaq has millions of followers, this garnered many, many likes and comments. (I of course won’t republish the image here, but if you really want to see it, just do a Google Image search using the parties’ last names.)

Plaintiff sued under several theories, including intentional infliction of emotional distress, appropriation, and unjust enrichment. Shaq moved to dismiss most of the claims. The court did throw out some of the claims (e.g., negligence — plaintiff has pled Shaq acted intentionally). On the appropriation claim, the court, applying Michigan law, held that Shaq had made use of the plaintiff’s name or likeness for his own purposes and benefit. The court rejected Shaq’s argument that plaintiff lacked any pecuniary interest in his identify, holding that the tort of appropriation under Michigan law “is not limited to commercial appropriation” and “applies also when the defendant makes use of the plaintiff’s name or likeness for his own purposes and benefit, even though the use is not a commercial one, and even though the benefit sought to be obtained is not a pecuniary one.”

The court went on to clarify that even if the tort of appropriation under Michigan law did require a plaintiff to demonstrate a significant commercial or pecuniary interest in his identity, plaintiff’s case still survived the motion to dismiss. “[A] plaintiff need not be a national celebrity to demonstrate significant commercial value.”

Binion v. O’Neal, No. NO. 15-60869, 2016 WL 111344 (S.D. Fla., Jan. 11, 2016).

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.

ABA Journal again includes internetcases on its list of top 100 law blogs

Blawg100WebBadgeEditors of the ABA Journal have again selected internetcases as one of the 100 best law blogs. This is the second time the American Bar Association has honored the blog, having also placed it on the list of top law blogs of 2011.

The internetcases blog is included in the “9th Annual Blawg 100,” a list of the magazine’s 100 favorite legal blogs. The ABA Journal says the list recognizes “the very best law blogs, known for their untiring ability to craft high-quality, engaging posts.”

Chicago attorney Evan Brown authors the blog, which focuses on issues involving the internet, technology, intellectual property, social media, privacy, and new media. Evan created the blog in 2005 and draws from his many years of legal experience and his work as a domain name panelist for the World Intellectual Property Organization, deciding cases under the Uniform Domain Name Dispute Resolution Policy (UDRP). Evan is a partner in the Chicago-based law firm Much Shelist P.C., and is an adjunct professor at Chicago-Kent College of Law and John Marshall Law School, both in Chicago. Evan also provides analysis on cybersquatting cases at the blog UDRP Tracker.

The ABA Journal is read by half of the nation’s 1 million lawyers every month. It covers the trends, people and finances of the legal profession from Wall Street to Main Street to Pennsylvania Avenue. The ABA is the largest voluntary professional association in the world. With more than 400,000 members, the ABA provides law school accreditation, continuing legal education, information about the law, programs to assist lawyers and judges in their work, and initiatives to improve the legal system for the public.

Seventh Circuit sides with Backpage in free speech suit against sheriff

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Backpage is an infamous classified ads website that provides an online forum for users to post ads relating to adult services. The sheriff of Cook County, Illinois (i.e. Chicago) sent letters to the major credit card companies urging them to prohibit users from using the companies’ services to purchase Backpage ads (whether those ads were legal or not). Backpage sued the sheriff, arguing the communications with the credit card companies were a free speech violation.

The lower court denied Backpage’s motion for preliminary injunction. Backpage sought review with the Seventh Circuit. On appeal, the court reversed and remanded.

The appellate court held that while the sheriff has a First Amendment right to express his views about Backpage, a public official who tries to shut down an avenue of expression of ideas and opinions through “actual or threatened imposition of government power or sanction” is violating the First Amendment.

Judge Posner, writing for the court, mentioned the sheriff’s past failure to shut down Craigslist’s adult section through litigation (See Dart v. Craigslist, Inc. 665 F.Supp.2d 961 (N.D.Ill.2009)):

The suit against Craigslist having failed, the sheriff decided to proceed against Backpage not by litigation but instead by suffocation, depriving the company of ad revenues by scaring off its payments-service providers. The analogy is to killing a person by cutting off his oxygen supply rather than by shooting him. Still, if all the sheriff were doing to crush Backpage was done in his capacity as a private citizen rather than as a government official (and a powerful government official at that), he would be within his rights. But he is using the power of his office to threaten legal sanctions against the credit-card companies for facilitating future speech, and by doing so he is violating the First Amendment unless there is no constitutionally protected speech in the ads on Backpage’s website—and no one is claiming that.

The court went on to find that the sheriff’s communications made the credit card companies “victims of government coercion,” in that the letters threatened Backpage with criminal culpability when, à la Dart v. Craigslist and 47 U.S.C. 230, it was unclear whether Backpage was in violation of the law for providing the forum for the ads.

Backpage.com, LLC v. Dart, — F.3d —, 2015 WL 7717221 (7th Cir. Nov. 30, 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.

Digital locker service not liable for copyright infringement based on user download of unlicensed ebook

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A boon for cloud service providers: Court decision protects locker service from infringement over user’s storage and downloading of unlicensed copy of ebook.

Plaintiff-author granted a license to defendant-digital locker service, authorizing users of defendant’s services to store and download sample copies of plaintiff’s ebook. Plaintiff later terminated the license. On two separate occasions, one of defendant’s customers — who had acquired a sample copy of the ebook during the license period — downloaded her sample copy from defendant’s locker storage service and onto her e-reader device. Plaintiff filed suit, claiming these post-license termination customer downloads amounted to direct and contributory infringement by the file locker service.

Both parties moved for summary judgment. The court granted defendant’s motion and denied plaintiff’s motion.

As to the question of direct infringement, the court relied heavily on Cartoon Network v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008) to hold that a lack of evidence of defendant’s “volitional conduct” in distributing and reproducing the downloaded copies precluded a claim for direct infringement. Quoting from Capitol Records v. ReDigi, 934 F.Supp.2d 640 (S.D.N.Y. 2013), the court found that defendant “did not have a ‘fundamental and deliberate role,” such that it was transformed ‘from a passive provider of a space in which infringing activities happened to occur to an active participant in the process of copyright infringement.’”

Plaintiff’s contributory infringement claim failed under the “substantial noninfringing uses” test (the “Sony-Betamax Rule”) set out in Sony v. Universal, 464 U.S. 417 (1984). The court held that defendant could not be held liable for contributory infringement because its digital locker systems was capable of substantial non-infringing uses, and indeed was used for commercially significant noninfringing uses.

Smith v. BarnesandNoble.com, No. 2015 WL 6681145 (S.D.N.Y. Nov. 2, 2015)

Evan Brown is a Chicago attorney helping clients in matters dealing with copyright, technology, the internet and new media. Call him at (630) 362-7237, send email to ebrown [at] internetcases dot com, or follow him on Twitter @internetcases

Photo courtesy of Flickr user Alex Thomson 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.

California court okays lawsuit against mugshot posting website

The Court of Appeal of California has held that defendant website operator – who posted arrestees’ mugshots and names, and generated revenue from advertisements using arrestees’ names and by accepting money to take the photos down – was not entitled to have the lawsuit against it dismissed. Defendant’s profiting from the photos and their takedown was not in connection with an issue of public interest, and therefore did not entitle defendant to the relief afforded by an anti-SLAPP motion.

Plaintiff filed a class action lawsuit against defendant website operator, arguing that the website’s practice of accepting money to take down mugshots it posted violated California laws against misappropriation of likeness, and constituted unfair and unlawful business practices.

Defendant moved to dismiss, arguing plaintiff’s claims comprised a “strategic lawsuit against public participation” (or “SLAPP”). California has an anti-SLAPP statute that allows defendants to move to strike any cause of action “arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue …, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.”

The court held that the posting of mugshots was in furtherance of defendant’s free speech rights and was in connection with a public issue. But the actual complained-of conduct – the generating of revenue through advertisements, and from fees generated for taking the photos down – was not protected activity under the anti-SLAPP statute.

Because the claims did not arise from the part of defendant’s conduct that would be considered “protected activity” under the anti-SLAPP statute, but instead arose from other, non-protected activity (making money off of people’s names and photos), the anti-SLAPP statute did not protect defendant. Unless the parties settle, the case will proceed.

Rogers v. Justmugshots.Com, Corp., 2015 WL 5838403, (Not Reported in Cal.Rptr.3d) (October 7, 2015)

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

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