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August 30, 2007 Copyright

Copyright infringement threshold set at 70%

Bensbargains.net, LLC v. XPBargains.com, No. 06-1445, 2007 WL 2385092 (S.D. Cal. August 16, 2007).

Before we get into this case, I’d like to thank all the long time readers of Internet Cases. Some of you have been with me since the beginning way back in January 2005. Hard to believe, but this is the 300th post to this weblog. Onward and upward!

And now for an interesting copyright decision from California.

Ben Chui searches the web for good deals on products — from pens to mountain bikes — and posts his findings on his website bensbargains.net. In October 2005, Chui noticed that a competing website, XPBargains.com began featuring a lot of the same deals. Chui sued for copyright infringement in the U.S. District Court for the Southern District of California.

XPBargains.com moved for summary judgment. The court granted the motion in part and denied it in part. Although it was largely a win for XPBargains.com, the game ain’t over.

There were two main issues in the case. The first related to whether Chui owned a copyright in the selection and arrangement of the deals he selected. The second important issue was whether XPBargains’s conduct amounted to actionable copying.

On the first issue, whether the collection of deals was copyrightable, the court found that there was Feist originality because the “compilation [was] not an inclusive list of all deals for all products.” Instead, Chui used “his individual judgment to select among multiple deals for various product.”

As for actionable copying, the court held that some of XPBargains’s postings were similar enough to Chui’s selections to raise a triable issue. Interestingly, the court set that threshold at 70%. (It’s unusual for a court to be so mathematical.) For those instances where the number of identical selections appeared on both Chui’s site and XPBargains.com, the court held that the question of infringement could continue to trial.

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

August 28, 2007 Privacy

No recovery for credit monitoring costs after data breach

Pisciotta v. Old National Bancorp, No. 06-3817, — F.3d —-, (7th Cir. August 23, 2007)

Defendant Old National Bank had a website through which it gathered numerous fields of confidential information about its customers, and it stored that information in a database. After a hacker compromised the system and gained access to the confidential customer information, two of the bank’s customers filed suit in an Indiana federal court, alleging breach of contract and negligence. They sought recovery not of any actual loss suffered from the security breach (e.g., amounts drained from the accounts), but instead sought to be reimbursed for future credit monitoring services.

The bank answered the complaint and moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). The court granted the motion, holding that the alleged damages were not cognizable under Indiana law. The plaintiffs sought review with the Seventh Circuit Court of Appeals, which affirmed the dismissal of the action.

The court observed that there was essentially no authority providing guidance on how the issue should be resolved under Indiana law. (The district court sitting in diversity was required to apply the law of the state in which it sits — Indiana.) Part of the analysis, however, relied on a recently enacted Indiana statute dealing with data breaches. Under that statute [I.C. 24-4.9 et seq.], under certain circumstances, if a bank becomes aware of a compromise in its security, it must notify its customers. The only cause of action available under the statute lies with the government, as the attorney general is authorized to pursue civil actions against non-compliant banks. Private individuals are not entitled to recovery under the statute.

The lack of any affirmative right to recover the costs of prospective credit monitoring services in the statute contributed to the court’s decision to hold that none should be available at common law. Given the absence of any state authority directly addressing the point, the federal court declined to implement such a “substantial innovation” on a question of state law.

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

August 24, 2007 Section 230

SexSearch.com afforded Section 230 protection in a case with an unconventional plaintiff

Doe v. SexSearch.com, No. 07-604, — F.Supp. —-, (N.D. Ohio August 22, 2007)

Hat tip to Michael Erdman of the new Online Liability Blog for his comprehensive post on this week’s decision by the U.S. District Court for the Northern District of Ohio in an interesting case involving Section 230 immunity.

The facts of the case are pretty wacky, and the alignment of the parties is not what you’d expect. Anonymous plaintiff Doe sued SexSearch.com for, among other things, breach of contract, fraud and breach of warranty after he was arrested for illegal sexual conduct with a minor he met through the SexSearch.com website. The girl’s profile stated she was 18 when in reality she was only 14.

SexSearch filed a 12(b)(6) motion to dismiss, asserting immunity under the Communications Decency Act at 47 U.S.C. § 230. Section 230 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,” and that “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” The court granted the motion to dismiss.

There are a couple of particularly interesting points in the court’s decision, although the outcome is not surprising, considering the generally favorable treatment Section 230 has gotten over the past decade or so, starting with the 4th Circuit’s decision in Zeran v. America Online, Inc., 129 F.3d 327, 330-31 (4th Cir.1997).

In this case, the plaintiff argued that SexSearch, and not the author of the profile, was the actual information content provider because SexSearch “reserved the right, and [did] in fact, modify the content of profiles when they [did] not meet the profile guidelines and as such they [were] responsible in whole or part for the creation or development of the information.” The court rejected this argument, because while SexSearch may have reserved the right to modify the content, the complaint did not allege that SexSearch modified the content in question.

Another interesting point in the case was the court’s confirmation that Section 230 applies not only to tort claims, but other causes of action as well. The plaintiff had argued that Section 230 immunized service providers only from causes of action for defamation. Citing to a number of cases, however, in which Section 230 had immunized defendants for causes of action such as breach of contract, negligence and violation of state commercial e-mail laws, the court looked to the plain language of the statute, which provides that “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.

Case appears below (or click through if it doesn’t show up in the RSS feed):

August 23, 2007 Copyright

Open source license bars claim for copyright infringement

Jacobsen v. Katzer, No. 06-1905, 2007 WL 2358628 (N.D. Cal. August 17, 2007).

Plaintiff Jacobsen wrote some decoder definition files and made them available under an open source license used by the Java Model Railroad Interface Project. This open source license granted broad rights to members of the general public to do certain things with the software, including

— the right to distribute and create derivative works from the software, provided that the licensee give proper credit to the JMRI Project original creators.

— the right to make or give away verbatim copies of the source form without restriction provided that the licensee duplicate all of the original copyright notices and associated disclaimers.

— the right to distribute the copyrighted work “in a more-or-less customary fashion, plus [have] the right to make reasonable modifications.”

— the right to “distribute [the material] in aggregate with other (possibly commercial) programs as part of a larger (possibly commercial) software distribution provided that [the licensee] not advertise [the material] as a product of [the licensee’s] own.”

Jacobsen sued defendant Katzer for copyright infringement, claiming that without permission or consent, Jacobson made copies of the software, distributed copies to the public, or created derivative works. He also moved for a preliminary injunction. The court denied the motion.

The opinion explains the distinction between causes of action for infringement on one hand, and and breach of contract on the other, when a licensee violates some term of the agreement. In general, the court observed, a non-exclusive license, like the one in this case, is a waiver of the right to sue for infringement. So long as the licensee’s use of the work is within the scope of the license (say, only to distribute and not make copies), any other violation of a condition of the agreement, (like providing attribution), would allow only for a breach of contract action.

In this case, the court looked to the open source license at issue and found that

[T]he scope of the nonexclusive license is, therefore, intentionally broad. The condition that the user insert a prominent notice of attribution does not limit the scope of the license. Rather, Defendants’ alleged violation of the conditions of the license may have constituted a breach of the nonexclusive license, but does not create liability for copyright infringement where it would not otherwise exist.

Accordingly, the Court found that Jacobsen’s claim properly sounded in contract and therefore had not met his burden of demonstrating likelihood of success on the merit of his copyright claim.

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

August 22, 2007 Miscellaneous

Damages available under Computer Fraud and Abuse Act, even though no “interruption of service”

Frees, Inc. v. McMillian, No. 05-1979, 2007 WL 2264457 (W.D. La. August 6, 2007)

Plaintiff Frees, Inc. filed suit against two of its former employees, McMillan and Pierceall for, among other things, violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. 1030. Frees alleged that McMillian and Pierceall loaded Frees proprietary data onto their new employer’s computers, which they then used to develop and market products in competition with Frees. Frees also alleged that McMillian deleted data from the Frees computers before he left its employment. This alleged conduct resulted in Frees expending more than $16,000 to various consultants and forensics investigators. Frees did not suffer any interruption of service.

McMillan and Pierceall moved for partial summary judgment. They argued that Frees had not alleged “loss” as defined under the CFAA, and in the alternative, that Frees could not recover lost profits absent an interruption of service. The court denied the motion.

“Loss” under the CFAA

Frees had argued that the “loss” it suffered was the fees it paid the consultants and forensics investigators it had to hire because of the deletion of data from its computer systems. The defendants argued that these expenditures were not cognizable as “loss” under the statute. The court rejected that argument, citing to a number of cases from around the country holding that the costs associated with investigating possible damage to a computer system are considered “loss.” Citing to E.F. Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 585 (1st Cir.2001) the court observed that a finding of “loss” is not lessened simply because no damage occurred.

No interruption of service

The defendants contended that lost revenues were not compensable damages in the case because there was not an interruption of computer service. They argued that the phrase “any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service” was not only a jurisdictional threshold, but also a limitation on the types of recoverable damages. 18 U.S.C. § 1030(e)(11). Frees rejected that contention, arguing that a plaintiff is entitled to recover ordinary “compensatory damages” once the jurisdictional threshold has been met.

Recognizing that the federal circuits are split on this issue, the court sided with Frees. The court found that the terms “damage” and “loss,” appearing in the CFAA, are terms of art used to define a jurisdictional threshold. They do not control or limit what damages are available in a civil action if the substantive and threshold standards are not met. Rather, the court found, Congress used the terms “compensatory damages” and “economic damages” in the CFAA to define the scope of recovery.

August 21, 2007 Cybersquatting

TRO issued against domainer’s use of “mylennar.com”

Lennar Pacific Properties Management, Inc. v. Dauben, Inc., No. 07-1411, 2007 WL 2340487 (N.D.Tex. August 16, 2007)

Companies sometimes find that opportunistic purchasers of domain names (often referred to as “domainers”), will purchase a domain name quite similar to that of the company, and establish a site at the URL loaded with revenue-generating sponsored ads. To accomplish these purposes, domainers seem to prefer the services of companies like HitFarm and Domain Sponsor. A web user types in the confusingly similar URL and is bombarded with pop-up ads and sponsored links to goods and services, often competitive to the company whose name or trademark is being appropriated in the URL.

The Lennar Corporation, an established home builder, noticed that a company called Dauben, Inc., d/b/a “Texas International Property Associates,” set up a HitFarm site at mylennar.com. Dauben’s page purported to feature “resources and information on Floor plans and Building construction.” It also contained a link titled “Home building,” which when clicked on, took the user to another page of sponsored links to homebuilders competitive to Lennar.


Lennar filed suit for trademark infringement in Texas federal court, and sought injunctive relief. The court granted the motion for temporary restraining order, prohibiting the defendant from using, canceling or transferring the domain name to any person or entity other than Lennar, and from using any domain name that incorporated or was confusingly similar to the Lennar mark.

The court held (1) there was a substantial likelihood of Lennar’s success on the merits of the trademark claim; (2) there was a substantial threat that Lennar would suffer irreparable injury if the injunction was denied; (3) the threatened injury outweighed any damage that the injunction might cause Dauben; and (4) granting the injunction would not disserve the public interest.

It looks like this Texas International Property Associates has targeted other companies in the past, and has come up empty handed. See, e.g., this WIPO opinion, in which Fry’s Electronics wrestled to get the typo-squatted domain name “fyrselectronics.com”.

Decision appears below (click through if it’s not showing up in the RSS feed):

August 20, 2007 Trademarks

“I’M” not like “i’m” in the trademark sense

Finding Internet video player and instant messaging software “extraordinarily different,” court denies preliminary injunction in trademark case.

Instant Media, Inc. v. Microsoft Corp., No. 07-2639, 2007 WL 2318948 (N.D.Cal. August 13, 2007)

Plaintiff Instant Media sued Microsoft for trademark infringement, and later moved for a preliminary injunction. Instant Media had a registration for the word mark I’M for use in connection with its downloadable media player called I’M. Microsoft used the mark “i’m” in connection with philanthropic services closely tied to its Windows Live Messenger service.

The court denied the motion for preliminary injunction, finding that Instant Media would not likely succeed on its infringement claim. It applied a subset of the Ninth Circuit’s Sleekcraft factors known as the “Internet trinity,” comparing (1) the similarity of the marks, (2) the relatedness of the products, and (3) the parties’ simultaneous use of the Internet as a marketing channel.

Similarity of the Marks

As for the first factor of the Internet trinity, the court considered the sight, sound and meaning of the two marks. It held that in terms of sight, Microsoft’s mark, consisting of lowercase letters “i’m” appearing in a stylized format with a speech balloon and rendered in pale green and blue, was sufficiently different from Instant Media’s registered “I’M” word mark. The court determined that the sound of the two marks was ambiguous, so Instant Media had not established that the marks sound the same. The court also sided with Microsoft on the third subpart of this analysis — meaning — holding that, given “I’M” could mean Instant Media, instant messenger or the contraction “I am,” Instant Media had not demonstrated that the two marks shared the same meaning.

Relatedness of the Products

The court then turned to the second factor of the Internet trinity, the relatedness of the services. Citing to Jupiter Hosting Inc. v. Jupitermedia Corp., 76 U.S.P.Q.2d 1042 (N.D. Cal. 2004), Instant Media had essentially argued that the two products were necessarily related under this factor, because they were both “free downloadable Internet applications intended for computer users at large.”

The Jupiter Hosting case had relied on GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199 (9th Cir. 2000) in which the Ninth Circuit observed that in the Internet context, “even services that are not identical are capable of confusing the public.” The GoTo.com case recognized, however, that “[o]ur ever-growing dependence on the Web may force us eventually to evolve into increasingly sophisticated users of the medium.”

The court declared that such an age of increasing sophistication had arrived:

GoTo.com was decided seven years ago-aeons in Internet terms-and the moment of our evolution into “increasingly sophisticated users of the medium” is upon us. While it may have been plausible in 2000 to suggest that consumers could not easily discriminate between content-delivery programs such as the I’M player or iTunes on the one hand and instant messaging programs such as WLM or AIM on the other, in 2007, where iPods and instant messaging are household concepts, this Court cannot say that, as a matter of law, “it is irrelevant whether the parties’ Internet related services are different.”

Applying this standard, the court held that Microsoft’s instant messaging software and Insight Media’s video player were “extraordinarily different within the context of the Internet.”

Simultaneous Use of the Internet as Marketing Channel

This third factor of the “Internet trinity” was the only one that weighed in Instant Media’s favor. Although Microsoft argued that the marketing channels were different, in that it did not advertise on television (and Instant Media did), the court held there was no real dispute that both parties used the Internet to market their products.

August 17, 2007 Contracts

California court invalidates Alienware arbitration provision in online terms and conditions

Oestreicher v. Alienware Corp., —F.Supp.2d—-, 2007 WL 2302490 (N.D. Cal. Aug. 10, 2007)

Plaintiff Oestreicher bought a laptop on the Alienware website. Six months later the computer overheated and was irretrievably broken. Oestreicher filed a class action suit against Alienware in California state court, and Alienware removed the case to the U.S. District Court for the Northern District of California. Alienware then moved to compel arbitration, citing to the terms and conditions of purchase, which had been presented to Oestreicher in the form of a “click-wrap” agreement during check-out.

The court denied the motion to compel arbitration. The first two-thirds of the opinion addressed the question of whether California or Florida law should govern the enforceability of the arbitration provision. Disregarding the express provisions of the agreement providing for application of Florida law “without regard to conflicts of laws principles,” the court decided that California law should apply. It held that enforcement of the provision requiring arbitration (and the attendant waiver of the right to pursue a class action) violated a fundamental policy of the state of California. Furthermore, California had a materially greater interest in the litigation, based on the fact that California residents were invoking consumer protection laws to seek recovery for allegedly defective products shipped into California.

Applying California law, the court determined that the class action waiver was unconscionable and unenforceable. It was procedurally unconscionable because it was a take-it-or-leave-it contract of adhesion. It was substantively unconscionable because the dispute implicated by the class action waiver involved a small amount of damages and Oestreicher had alleged Alienware carried out a scheme to deliberately cheat large numbers of customers out of individually small sums of money.

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

August 17, 2007 Trademarks

A look at the American Airlines v. Google suit

Eric Goldman takes an in-depth look at the newly-filed American Airlines v. Google sponsored listings suit. From the professor’s post:

This complaint pleads the usual claims for this type of action, including direct, contributory and vicarious trademark infringement…; a false advertising claim that the “sponsored link” language communicates a false impression of actual sponsorship; dilution; various “soft” state claims (unfair competition; misappropriation and others); and tortious interference with contract because Google allegedly knew that American’s distributors weren’t supposed to buy American’s trademarks as keywords.

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