June 14, 2008 Computer Crime

Company may be liable under Computer Fraud and Abuse Act for targeting and directing competitor’s employee to violate the Act

Binary Semantics Limited v. Minitab, Inc., No. 07-1750, 2008 WL 763575 (M.D. Pa. March 20, 2008)

Plaintiff Binary Semantics Limited is a company with expertise in promoting and selling software in India. Defendant Minitab, Inc. is a software development company that for several years had an agreement with Binary whereby Binary would promote and sell Minitab’s software in India. Minitab eventually decided that it would eliminate Binary’s services and sell directly in the Indian market.

Minitab allegedly contacted several of Binary’s employees and induced them to turn over some of Binary’s trade secrets and other information that would help Minitab hold its own in India. One of these Binary employees was a woman named Asha.

Asha

After Asha turned over the information to Minitab, Binary filed suit against Minitab, some of Minitab’s employees, and Asha, alleging, among many other things, violation of the Computer Fraud and Abuse Act, 18 U.S.C. §1030 (“CFAA”). Minitab moved to dismiss the CFAA claim pursuant to FRCP 12(b)(6), arguing that none of its employees had violated the Act, but that Binary’s own employee, Asha, had. The court denied the motion to dismiss as to the CFAA claim.

Binary was required to plead four elements under the CFAA: (1) that Minitab accessed a protected computer, (2) without authorization or by exceeding such authorization as was granted, (3) knowingly and with intent to defraud, and (4) as a result furthered the intended fraud and obtained something of value.

In denying the motion to dismiss, the court found that Binary’s allegations were sufficient to state a claim against Minitab, even though it was actually Asha’s conduct that allegedly brought about the offense. Specifically, the complaint alleged that Minitab targeted Asha and that Asha did indeed access a protected computer. Further, the information retrieved eventually made its way to Minitab.

It was not a situation where Minitab merely received the information from a protected computer. Rather, the complaint sufficiently alleged that the unauthorized access was an action undertaken at the direction of Minitab. Therefore, Minitab could be held liable for the conduct.

June 12, 2008 Defamation

California’s anti-SLAPP statute not applied to request for subpoena

Request for subpoena to unmask anonymous defendants in prospective Internet defamation case did not set forth “cause of action” or initiate judicial proceedings.

Tendler v. www.jewishsurvivors.blogspot.com, No. H031130, 2008 WL 2352497 (Cal.App. 6th Dist. June 10, 2008)

Some people (anonymously) set up several blogs on Google’s Blogger, and posted some nasty things about Rabbi Tendler. Rabbi Tendler got an Ohio state court to issue subpoenas to Google, requiring Google to turn over the IP addresses used to create the offending blog posts. Google refused to comply with the Ohio subpoenas, so Rabbi Tendler requested a California court issue subpoenas (which Google would more likely respond to) based on the Ohio subpoenas.

The Electronic Frontier Foundation and Public Citizen stepped in on behalf of the anonymous bloggers (the “Does”) and moved to quash the subpoenas. The following week, the Does filed an anti-SLAPP motion under California Code of Civil Procedure section 425.16, seeking to “strike [the] proceeding” and recover attorney’s fees.

Section 425.16, the anti-SLAPP statute, provides, in relevant part that “[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” A prevailing defendant under this statute can recover his or her attorney’s fees.

The trial court granted the anti-SLAPP motion and awarded about $20,000 in attorney’s fees to the Does. Rabbi Tendler sought review with the California Court of Appeal. The appellate court reversed.

The court looked to the plain meaning of the statute, observing that section 425.16 requires that the cause of action to be stricken must be contained in a complaint, cross-complaint, petition or similar pleading initiating a judicial proceeding. The request for subpoena in this case was not any of those sorts of pleadings, and it did not initiate a judicial proceeding.

The Does looked for support from the decision of Krinsky v. Doe 6, 159 Cal.App.4th 1154 (2008). The court refused, however, to find Krinsky to be instructive. In that case, the court held that a motion to quash a subpoena to discover the identity of an anonymous defendant in an Internet defamation case should be granted unless the party seeking discovery makes a prima facie showing on at least one of his or her claims. The Does (or should we say their EFF and Public Citizen attorneys) argued that this means a request for subpoena is tantamount to a cause of action. But this court held otherwise. Krinsky sets the standard for a motion to quash, but does not set the requirements for the request itself.

June 12, 2008 Trademarks

No initial interest confusion in metatag and sponsored listing case

Designer Skin, LLC v. S & L Vitamins, Inc., No. 05-3699, 2008 WL 2116646 (D. Ariz. May 20, 2008)

It’s always a bit nerve wracking to write about decisions when I know that counsel of record is probably going to be reading the post. That’s the situation with the recent Designer Skin v. S & L Vitamins case. Law blogger Ron Coleman (whom I consider a friend though we’ve never met) is defense counsel in the case, and he has been a longtime supporter of Internet Cases with encouragement back when I started in 2005, and with frequent links to here from his blog Likelihood of Confusion.

Ron’s good reputation is in apparent proportion to his lawyering skills, as his client S & L Vitamins was largely victorious in summary judgment proceedings in a trademark infringement matter before the U.S. District Court in Arizona. The case exemplifies a modern issue concerning the use of trademarks on the Internet.

Plaintiff Designer Skin sells indoor tanning products. Designer Skin is pretty selective about who it allows to resell its goods. Defendant S & L Vitamins – a web-based reseller – is not on Designer Skin’s list of permitted resellers. But S & L sells the products anyway. And it gets traffic to its website in part by using Designer Skin’s trademark in metatags, in page HTML, and as a keyword to trigger sponsored search results.

Designer Skin sued S & L asserting a number of causes of action, including trademark infringement. The parties cross moved for summary judgment. One main issue was whether S & L’s conduct resulted in “initial interest confusion” a la Brookfield Comm. Inc. v. West Coast Entertainment Group, 174 F.3d 1036 (9th Cir. 1999). The court ruled in favor of S & L, holding that Designer Skin’s arguments for initial interest confusion failed as a matter of law.

The court ascertained that Designer Skin was arguing initial interest confusion based on (1) S & L’s use of Designer Skin’s marks in metatags, HTML and as keywords, (2) higher placed search results (presumably because of the metatags and use of the mark in HTML), and (3) the appearance of Designer Skin’s marks on S & L’s web pages.

The first argument – said the court – misstated the law. The mere fact that S & L used the marks in this way was not enough for initial interest confusion. Missing was the notion of “bait and switch”. The court emphasized that “[d]eception . . . is essential to a finding of initial interest confusion.” When web users clicked on links to S & L’s pages which indicated Designer Skin products were being sold, they were taken to pages which, not deceivingly, sold Designer Skin products.

The second argument for initial interest confusion failed essentially because it wasn’t plausible. Even if Designer Skin had presented evidence (which the court found it hadn’t) that S & L was showing up higher in search results for “Designer Skin,” only “the naive few” would be deceived. And fooling any less than an appreciable number of users would not be enough for the claim to survive.

As for the third argument, the court found it impossible for initial interest confusion to arise based on what appeared on the site. A searcher could not be tricked into initially visiting a site by the look of the site itself – by that time he or she would already be there.

In short, the court held that because there was no deception on the part of S & L, there could be no initial interest confusion. S & L was using Designer Skin’s marks to truthfully inform searchers what they could find at the S & L site – authentic Designer Skin products.

June 11, 2008 Miscellaneous

Internet law seminar this Friday in Chicago

This Friday (6/13/08) starting at 2pm at the Chicago Bar Association building [map], there will be an interesting 3-hour seminar titled “Management and Enforcement of Digital Rights on the Web.” The CBA’s Cyberlaw and Data Privacy Committee (which I’ll be chairing next year) is a co-sponsor of this event.

Topics include:

  • Trademarks online
  • Copyright online
  • Online terms and conditions
  • Conducting investigations online

Great faculty lined up:

The cost is $80 for CBA members and $140 for nonmembers.

Hope to see you there.

June 10, 2008 Section 230

A look back at Doe v. MySpace

Court of Appeals upholds Section 230 immunity for MySpace. Social networking provider not subject to suit for negligence for failing to implement technological measures to weed out underage users.

Doe v. MySpace, Inc., — F.3d —-, 2008 WL 2068064 (5th Cir. May 16, 2008).

I’ve been pretty busy the past few weeks with work and speaking engagements, and I also slipped in a little vacation awhile back. So I’m doing some catching up, looking over a number of interesting decisions from the past few weeks. While I was on the beach in Florida with my family, the Fifth Circuit issued this intriguing opinion in a case that has gotten quite a bit of publicity since it was filed back in 2006. Here’s the story.

When Julie Doe was 13, she lied about her age and set up a profile on MySpace. A year later, she met — first online, then offline — a 19 year-old named Solis. That Solis allegedly assaulted Doe.

MySpace Section 230 graphic

Julie and her mother filed suit against MySpace alleging, among other things, negligence. The plaintiffs claimed that MySpace should have done more to prevent Doe and Solis from meeting.

The case bounced around Texas and New York state court, then to New York federal court, then back to Texas where it ended up in the U.S. District Court for the Western District of Texas. Last year, the district court dismissed the case, holding that the Communications Decency Act at 47 U.S.C. 230 immunized MySpace from liability.

The Does sought review with the Fifth Circuit. On appeal, the 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.” The Does had argued that Section 230 should not bar the negligence claim, as the allegations dealt not with MySpace’s publication of information, but with the site’s failure to implement appropriate security.

Agreeing with the lower court, the appellate court rejected what it called disingenuous artful pleading by the plaintiffs. It found that the allegations were “merely another way of claiming that MySpace was liable for publishing the communications and they [spoke] to MySpace’s role as a publisher of online third-party-generated content.”

June 9, 2008 Copyright, Uncategorized

Ben Stein’s “Expelled” film permitted to use clip from Lennon’s “Imagine”

Judge Stein of the U.S. District Court for the Southern District of New York ruled last week that use of portions of the song “Imagine” in the film “EXPELLED: No Intelligence Allowed” were protected as fair use. Plaintiffs Yoko Ono and record label EMI sued Defendants (the producers of the film) for copyright infringement seeking an injunction to stop the use. After hearing oral arguments and viewing the movie, the Court found that the Plaintiffs failed to meet the burden of showing irreparable harm since “on the basis of the current record, defendants are likely to prevail on their affirmative defense of fair use.”

“Expelled”, a full-length movie on intelligent design narrated by Ben Stein uses a 15-second clip of the song with the words “nothing to kill or die for, and no religion too” transposed on the screen over black and white archive sequences (including a military march and a close up of Stalin). Immediately preceding the excerpt several speakers express the hope that science will diminish religion. In a voiceover, Stein notes the speaker “would like you to think he’s being original but he’s merely lifting a page out of John Lennon’s songbook.”

According the one producer, “the film undertakes to inspire viewers to participate in the scientific, political, cultural, and religious debates surrounding [intelligent design].” Defendants obtained permission to include every song in the movie except Imagine. Defendants timed the films release to coincide with state “Academic Freedom” bills (which permit teachers to criticize the theory of evolution.)

The Court first determined that Plaintiffs established a prima facie case of copyright infringement by showing (1) ownership of a valid copyright and (2) unauthorized copying. Accordingly, absent the injunction there is a presumption of irreparable harm. Turning next to Defendants defense of fair use, the Court held that (quoting Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 and U.S. Const. art. I, § 8, cl. 8), that “some opportunity for fair use of copyrighted materials [is] necessary to fulfill copyright’s very purpose, ‘[t]o promote the Progress of Science and useful Arts. . . ‘.”

Taking the fair use factors into consideration, the Court held that: (1) the use of Imagine is not merely exploitative, and since the movie stimulates debate, the commercial purpose of “Expelled” weighs weakly against fair use (Defendants’ use is transformative and for purposes of criticism and commentary, i.e., “what the filmmakers see as the naïveté of John Lennon’s views [in that] ‘Imagine’ is a secular anthem caught in a loop of history recycling the same arguments from years past through to the present,” thus “it is not necessary that defendants [transform] the music or lyrics of the song”, nor that Defendant’s could have made the film without the clip, moreover, the failure to seek permission did not weigh against fair use (2) the film comments on the song, and does not exploit its creative virtues, (3) “both quantitatively and qualitatively, the portion of ‘Imagine’ that defendants copy is reasonable in light of their purpose for doing so [, and thus] weighs in favor of fair use”, and (4) there is absolutely no evidence that the film’s use will usurp the market for “Imagine.”

Balancing the potential hardships to the parties if an injunction were issued, the evidence favored Defendants, especially since Plaintiffs were not likely to lose any licensing revenue. Unless Yoko and EMI expel this decision on appeal, they will not Win Ben Stein’s Money.

Case is: Lennon v. Premise Media, No. 08-3813

May 26, 2008 Contracts, DMCA

Resale on eBay o.k. under First Sale Doctrine?

Last week the U.S. District Court in Seattle denied Defendant Autodesk’s motion to dismiss Plaintiff Vernor’s case, and held that under the circumstances, the sale of AutoCAD on eBay was protected by the First Sale Doctrine.

Vernor makes a living reselling goods on eBay. He found himself in hot water after trying to sell four copies of Autodesk’s AutoCAD on eBay, and sought a declaratory judgment from the Court that he was entitled to sell these copies of AutoCAD.

In 2005, Vernor bought a copy of AutoCAD at a garage sale. He then listed it on an eBay auction. When Autodesk found out about Vernor’s eBay auction, it sent eBay a notice and takedown request alleging that copyright infringement would occur if Vernor were allowed to sell its product. Vernor filed a counter-notice claiming his proposed sale was lawful. eBay reinstated the auction, and the sale was completed. Fast forward to 2007 when Vernor bought four copies of AutoCAD for sale on eBay. He was able to sell three copies after going through similar notice and takedown / reply correspondence as in 2005. When he tried to sell the fourth copy, eBay suspended his account for one month for alleged “repeat infringement.” He sued for a declaration that his proposed sale was lawful, and that Autodesk’s actions were unfair competition.

Vernor acquired his copies of AutoCAD from CTA who had acquired them from Autodesk as part of a settlement. Each copy contained a Software License Agreement which contained a “nonexclusive, nontransferable license to use the enclosed program … [including prohibiting] transfer … to any other person without Autodesk’s prior written consent.”

Contrary to Autodesk’s assertion, the Court held that Vernor did make out a valid cause of action, and that there is an actual case / controversy between the parties per the Declaratory Judgment Act. Moreover, the Court also held that “If It Applies, the First Sale Doctrine Immunizes Mr. Vernor” since “[t]he first sale doctrine permits a person who owns a lawfully-made copy of a copyrighted work to sell or otherwise dispose of the copy.” The Court also cited with approval Quality King Distribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135, 152 (1998) which noted that “[w]hen a copyright holder chooses to sell a copy of his work, however, he ‘exhaust[s] his exclusive statutory right to control its distribution’.” The Court noted by way of example that “the first sale doctrine permits a consumer who buys a lawfully made DVD …to resell the copy, but not to duplicate the copy.”

Autodesk claims (as would arguably all software companies) that since it licensed AutoCAD, there was no sale, and thus Vernor is not an “owner” and the First Sale Doctrine does not apply. The Court points out the key question: “whether Autodesk’s transfer of AutoCAD packages to CTA was a sale or a mere transfer of possession pursuant to a license.” If it was a sale, Autodesk would be limited to a breach of contract claim against CTA. The Court notes that there is no bright-line rule as to what constitutes a sale versus a transfer, but that “[i]n comparing the transactions found to be sales in Wise with those that were not, the critical factor is whether the transferee kept the copy acquired from the copyright holder.” (emphasis added). Thus in this case, since CTA, and subsequently Vernor kept the copies of AutoCAD, there was a sale. The Court noted in a footnote that: “[e]ven if Autodesk could revive its “exhausted” distribution rights by reclaiming title to software copies it sold, Autodesk did not reclaim title. It merely required CTA to destroy its copies.” This might mean that software vendors will amend license language to avoid this issue in the future, along with more aggressively policing possession of their software requiring licensees to return copies of software so as to avoid First Sale issues (or that they could provide limited-term renewable licenses which contain a DRM-type “auto-destroy” feature – similar to the way iTunes limits via license the number of machines its customers can upload a song to).

The Court does note a series of decisions which run counter to the reasoning in United States v. Wise, 550 F.2d 1180, 1187 (9th Cir. 1977), but ultimately follows Wise in finding that “the transfer of AutoCAD packages from Autodesk to CTA was a sale with contractual restrictions on use and transfer of the software. Mr. Vernor may thus invoke the first sale doctrine, and his resale of the AutoCAD packages is not a copyright violation.” The Court also notes that other jurisdictions may have reached a different conclusion. This case has important implications for consumers and the software industry, and given the noted Circuit split, might not ride off into the sunset just yet.

William Patry provides an informative commentary here.

Case is: CASE NO. C07-1189RAJ (U.S. Dist Court of Washington at Seattle)

May 17, 2008 Computer Crime

What’s the story on the MySpace suicide indictment?

The media has given a lot of attention to the indictment by a federal grand jury in Los Angeles of the mother who allegedly set up a bogus MySpace account to harass one of her daughter’s 13 year old friends. That friend later hung herself in the closet, purportedly because of the harassment.

But what’s the basis of the indictment? It’s not for homicide, nor even harassment. It’s for criminal violation of the Computer Fraud and Abuse Act, 18 U.S.C. 1030, a subject which we’ve covered a number of times here on Internet Cases. In so many words, the defendant is accused of accessing MySpace’s servers without authorization, namely, in violation of the site’s terms of service.

Orin Kerr covers the governmnet’s theory in detail over at the Volokh Conspiracy, and also spells out why he thinks the case should fail.

May 16, 2008 Copyright, Uncategorized

Court reconsiders “making available” in file-sharing case

A U.S. District Court judge in Minnesota presiding over the case of Capitol Records Inc. v. Jammie Thomas has issued an Order breathing new life into the Defendant’s case.

Thomas was found liable for copyright infringement for activities over the KaZaA network, and had moved for either a new trial or lowering of damages on the ground that the amount of the jury award ($220,000 for 24 songs at $9,250 each) was excessive and a violation of due process. The Court’s Order however, stated that it was “contemplating granting a new trial for a different reason”, because Jury Instruction No. 15 which stated that that “[t]he act of making copyrighted sound recordings available for electronic distribution on a peer‐to‐peer network, without license from the copyright owners, violates the copyright owners’ exclusive right of distribution, regardless of whether actual distribution has been shown” was contrary to prevailing case law. Specifically, the Court noted that binding Eighth Circuit precedent from National Car Rental System, Inc. v. Computer Associates Int’l, Inc., required that “[i]nfringement of [the distribution right] requires an actual dissemination of either copies or phonorecords…”

The order notes that this precedent appears to require “actual dissemination” but that neither party brought this to the Court’s attention. The Order goes on to state that “at least one authority relied upon by Plaintiffs…Atlantic Recording Corp. v. Howell [blogged here], has since been vacated, and, on reconsideration, that court has now held that making sound recordings available for distribution is not actionable under the Copyright Act and that ‘actual distribution’ is required.” The Court invited amicus briefs on the issue, and will hear arguments in the case on July 1, 2008.

Case is: Civil File No. 06‐1497 (MJD/RLE)

Scroll to top