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November 2, 2007 Contracts, Fraud/Misrepresentation

Internet marketer not fraudulent in predicting success of future advertising campaign

Hallmark Institute of Photography, Inc. v. CollegeBound Network, LLC, — F.Supp.2d —-, 2007 WL 3145433 (D. Mass. October 29, 2007).

CollegeBound LLC is an Internet marketing company that gathers “leads” for its customers. These “leads” are people who visit CollegeBound’s websites, express interest in the services provided by CollegeBound’s customers, and provide their contact information. CollegeBound then sells this lead information to its customers on a “cost per lead” basis. The customers then follow up with their own marketing efforts.

One of CollegeBound’s customers was Hallmark Institute of Photography. It signed written agreements with CollegeBound whereby it agreed to pay more than $30 for each lead that CollegeBound provided. When the parties were negotiating the deal, CollegeBound allegedly orally represented that between three and seven percent of the leads would enroll for Hallmark’s photography courses.

Although CollegeBound gathered leads and sent them on to Hallmark, less than one percent of them applied. Hallmark was disappointed in this result, and sued CollegeBound for breach of contract and for fraud and misrepresentation. CollegeBound moved to dismiss, and the court granted the motion.

On the breach of contract claim, the court held that the parol evidence rule precluded it from considering any extrinsic evidence. The alleged representations were made orally, and not included in the written agreement. Although the contract did not contain an “integration clause,” the court found that the agreement was fully integrated, where essentially all the important terms were included, and there was no indication the parties intended there be any additional terms. Since the agreement was not ambiguous, the court could not consider any evidence outside the document’s four corners.

As for the fraud and misrepresentation claims, the court held that CollegeBound’s statements were of a “fundamentally predictive nature,” and “concerned a matter of opinion, estimate or judgment which was not susceptible of actual knowledge at the time of [their] utterance.” For these reasons, the court found that Hallmark could not have reasonably relied on the statements. So the claims failed as a matter of law.

October 18, 2007 DMCA

Court finds CAPTCHA likely protectible under DMCA

Ticketmaster L.L.C. v. RMG Technologies, Inc., — F.Supp.2d —-, 2007 WL 2988403 (C. D. Cal. Oct. 15, 2007)

RMG Technologies developed an application that allowed its users to automatically access Ticketmaster.com to search for tickets and buy them up by the dozens. Ticketmaster sued RMG, alleging, among other things, copyright infringement, breach of contract, and violation of the anticircumvention provisions of the Digital Millennium Copyright Act found at 17 U.S.C. 1201.

Ticketmaster moved for preliminary injunction on several of the counts in the complaint, and the court granted the motion. It held that Ticketmaster was likely to succeed on its claims of copyright infringement, in that RMG’s access to the Ticketmaster website exceeded the scope of the license to do so granted by the site’s browsewrap agreement. The court also held that under Grokster, Ticketmaster was also likely to succeed in showing that RMG was indirectly liable for inducing infringement through the promotion of the application.

On the DMCA claim, Ticketmaster claimed that by providing the ability for users to get around the CAPTCHAs that have to be solved in order to purchase tickets, RMG trafficked in technology that circumvents a technological measure used to prevent access to a work protected by copyright. (CAPTCHAs are the little challenge-response tests that appear frequently on websites requiring login or authentication, used to help ensure that it’s really a human and not a bot trying to access the website.)

One of RMG’s primary arguments against the preliminary injunction on DMCA grounds was that the CAPTCHAs were not “technological measures” used to circumvent the access protection, but were merely images. The court rejected this argument, looking to the language of the DMCA which provides, in relevant part, that “a technological measure ‘effectively controls access to a work’ if the measure, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.”

In this case, the court found that CAPTCHAS meet these criteria, because in their ordinary course of operation, they require the application of information before access to the work being protected is allowed.

Opinion appears below, or click through if it’s not showing up in the RSS feed:

October 9, 2007 Contracts

Court shuts down BoardFirst.com for violation of Web site terms of service

Southwest Airlines Co. v. BoardFirst, LLC, No. 06-0891 (N.D. Tex. September 12, 2007)

Southwest Airlines does not have differentiated seating — one cannot get a better seat by paying more. Passengers are allowed to board based on a group classification they are assigned on a first come, first served basis. Passengers in the “A” group get to board first, while passengers in the “C” group go last. One can check in to be assigned to a group up to 24 hours before a flight by visiting Southwest’s Web site.

Boardfirst.com was a web-based company that Southwest passengers could pay to log in for them in hopes of obtaining “A” group passes. Southwest objected to this practice, however, and filed suit in a Texas federal court against Boardfirst alleging violation of the Southwest Web site’s terms of service. Southwest then moved for summary judgment on its breach of contract claim, and the court granted the motion.

The first issue before the court was whether the “browsewrap” terms of service on the Southwest Web site, visible upon clicking a hyperlink at the bottom of the home page, constituted a valid contract between Southwest and BoardFirst. Those terms of service, among other things, prohibited using the Southwest site for anything other than personal, non-commercial purposes.

The court held that a valid contract existed. Finding that the situation resembled the one in the case of Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004), the court held that the evidence showed BoardFirst had actual knowledge of the terms, which expressly prohibited use of the site for commercial purposes.

Next the court determined that BoardFirst had breached the terms of service by using the site for commercial purposes. It rejected BoardFirst’s argument that BoardFirst was an agent of the ticket purchasers and therefore not a prohibited third party accessing the site. The court also rejected BoardFirst’s argument that prohibiting “commercial” use of the website would mean that every access of the site — ostensibly resulting in Southwest’s commercial advantage — would constitute a breach of the terms of service.

September 28, 2007 Trademarks

Ninth Circuit rejects “disparagement of trademark” claim

The Freecycle Network, Inc. v. Oey, — F.3d —-, 2007 WL 2781902 (9th Cir. September 26, 2007)

“Freecycling” is a collaborative online effort of people working to share and trade items they no longer want. The Freecycle Network is at the forefront of these efforts, providing a website that facilitates the exchange of information and the subsequent exchange of stuff. Read more about the organization in the group’s Wikipedia entry.

freecycle.jpg

Tim Oey was one of the early forces of the Freecycle Network. At first he encouraged the group to take seriously what rights it may have in the word “freecycle.” Some time later he changed his mind, and began advocating online, through message boards and other fora, that the term should be left to the public domain. The Freecyle Network disagreed with this approach, and ultimately sued Oey for infringement and “defamation of trademark” under Section 43(a) of the Lanham Act.

The district court entered a preliminary injunction against Oey. But Oey sought review with the Ninth Circuit, which reversed.

The court provided three reasons why the Freecycling Network’s claim for trademark infringement failed. First, Oey’s conduct did not constitute a “use” of the mark in commerce, as the record in the case did not indicate they were made to promote any competing service or reap any commercial benefit whatsoever. Rather, Oey simply expressed an opinion that the plaintiff lacked trademark rights in the term “freecycle” and encouraged like-minded individuals to continue to use the term in its generic sense and to inform the USPTO of their opinions.

Second, even if Oey’s statements could somehow have been construed to be a “use in commerce,” that use was not likely to cause confusion, mistake, or deceive anyone as to the connection of Oey’s services (or any other) with those of the plaintiff.

Finally, Oey’s statements did not satisfy the requirements for false advertising, misrepresentation, or unfair competition under § 1125(a)(1)(B). There was no evidence that Oey’s statements were made in “commercial advertising or promotion.” And, even if such evidence existed, § 43(a) creates liability only for product disparagement — i.e., misrepresentation of “the nature, characteristics, qualities, or geographic origin” of “another person’s goods, services, or commercial activities.” In this case, the plaintiff did not allege or show that Oey made any statements disparaging its goods or services. Instead, he merely talked about the nature of the mark itself. Indeed, many of his remarks were aimed at ensuring the ongoing success of the plaintiff’s organization and its services.

As for the claim of “trademark disparagement,” the court held that no such cause of action existed under the Lanham Act. It further held that even if trademark disparagement were a viable claim under the law, Oey’s conduct did not satisfy the elements of such a tort that the Freecycling Network asserted. The statements were not “false.” At worst, Oey offered an erroneous legal opinion (by a layperson) that the Freecycle Network lacked trademark rights in the term “Freecycle.” But under the Lanham Act, statements of opinion are not generally actionable.

View the opinion below (or click through if it’s not showing up in the RSS feed):

September 21, 2007 Uncategorized

Third Circuit affirms Dimeo v. Max — Section 230 immunity applies to forum board operator

DiMeo v. Max, No. 06-3171 2007 WL 2717865 (3rd Cir. September 19, 2007) (Not precedential)

Last year plaintiff DiMeo sued Tucker Max for defamation over some postings to the message board on Max’s site. Max successfully moved to dismiss the case, arguing that the Communications Decency Act at 47 U.S.C. §230 provided immunity against the defamation claim. [Read about the lower court’s decision.] DiMeo appealed the dismissal to the Third Circuit, but the appellate court affirmed.

Section 230 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.” 47 U.S.C. § 230(c)(1). “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. § 230(e)(3).

The court found that Max’s website was an interactive computer service because it enabled computer access by multiple users to a computer server. Although DiMeo alleged that Max was a publisher of the comments on the website, he did not allege that Max authored the comments, or that he was an information content provider. So the court determined that the website posts were information furnished by third party information content providers and the requirements of § 230 immunity were satisfied.

The court compared this case to an earlier Third Circuit decision, Green v. America Online, 318 F.3d 465, 471 (3d Cir.2003) in which it used §230 to find America Online immune from tort liability stemming from anonymous messages posted in chat rooms.

And although DiMeo argued on appeal that Max was in fact an information content provider because he solicited and encouraged members of the messageboard community to engage in defamatory conduct or was otherwise partially responsible for the conduct, the court found that the complaint was devoid of any such allegations.

Opinion appears below (or click through if the embedded content is not showing up in the RSS feed).

September 21, 2007 Copyright

Scandal over use of Creative Commons photo on Flickr results in lawsuit

The details on this are still sketchy, but according to this article, the mother of a Texas minor has sued in state court over Virgin Mobile’s use of a Creative Commons attribution-only licensed photo found on Flickr. From what I can tell, Virgin Mobile found the photo on Flickr, cropped it, did a horizontal flip, and added the moniker “Dump Your Pen Friend.” A guy in Australia noticed the Creative Commons work in the add, posted a picture of it on Flickr [here], where the subject of the photo noticed it. [This story unfolds in the comments for the picture.]

I’m sure that more details will emerge and we’ll get a better picture of what’s going on here. There’s one nagging question that in my mind needs answering. Why is the plaintiff suing Creative Commons? Apparently the claims in the lawsuit are state-based right of publicity claims. How, by merely providing a licensing mechanism for the copyright in a photo, could Creative Commons be liable for anything in this situation?

Hat tip to Michael Geistfor alerting me to this story.

September 18, 2007 Uncategorized

New source of business for litigators introduced at TechCrunch40

Docstoc is a new “online community and professional network” introduced this week at TechCrunch40 “geared around user generated, professional documents.” The idea is that business people will be able to find documents like nondisclosure agreements online, presumably avoiding lawyers as the middlepeople.

It’s a clever idea. Scribd (which I use from time to time here on Internet Cases) is already doing something similar, but is not geared toward professional documents. So Welcome Docstoc! With more people relying on poorly drafted documents not tailored for their particular situation, there will be more business disputes. That means more work for those whose livelihoods depend on that kind of misunderstanding and discord.

September 17, 2007 Copyright

Do ad blocking plugins cause copyright and terms of use problems?

CNet News has run this interesting article which raises questions about whether ad blocking software may face legal challenges from website publishers and advertising providers. What we’re talking about here are browser plugins that the user chooses to install, that allow web pages to be viewed sans the advertisements. Website publishers that rely on ad revenue (as well as upstream providers of advertising services, read: Google) may be concerned about such practices for obvious reasons.

The article speculates that if this kind of software were to face legal scrutiny, the plaintiffs would argue copyright infringement and violation of the sites’ terms of service, which may prohibit the use of this kind of software.

But who exactly would the plaintiffs sue? The individual users? The makers of the software? Maybe both, and depending on the defendant, the theories may be different.

Going after millions of users would seem impracticable, and the damages calculations in each of those situations would be problematic. What we could see, if we see anything at all on the lawsuit front, are challenges against the makers of these browser plugins.

This will require some creative theory-making. It does not seem like the software providers are the ones doing the actual “infringing” (i.e., aren’t the ones changing the appearance of a page thereby making an unauthorized derivative work). So I suppose the advertising side would put forward some type of inducement theory of secondary copyright infringement liability. Grokster will come in handy in those cases. And for the breach of contract aspect, perhaps we’ll see theories of tortious interference.

Maybe it’s a tempest in a teapot, and nothing will happen. But there could be a lot of money at stake, and that aspect could provide a strong catalyst. On the other hand, doesn’t it seem like the individual user has a clear right to determine what content is delivered?

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