Tuesday, September 25, 2012

Proposed Federal Anti-SLAPP Statute

As a California anti-SLAPP attorney, I found professor Eric Goldman's recent article on proposed federal anti-SLAPP legislation interesting.  I am not sure that federal legislation is desirable but I do agree with professor Goldman in that a statute which distinguishes between journalists and non-journalists makes no sense.  Effective anti-SLAPP statutes focus upon the nature of content, not classifications regarding the speaker.  As such, the "Free Press Act of 2012" will likely go nowhere. 

Thursday, September 13, 2012

Single Publication Rule Downs Chuck Yeager’s Right of Publicity Claims


This week the Federal Court of Appeals for the Ninth Circuit affirmed the lower court’s judgment against famous aviator Chuck Yeager in his suit against an online memorabilia seller.  The lower court found that Yeager’s January 2008 lawsuit regarding October 2003 website statements had run afoul of the two-year statute of limitations.

Yeager had alleged that certain statements on the defendants’ “Aviation Autographs” website violated his common law right to privacy and his statutory right of publicity.  Both claims are subject to a two-year statute of limitations. 

In order to get around the statute of limitations, Yeager had argued that the defendants had republished the statements by (1) continuing to host the statements; or (2) by republishing the statements each time defendants modified other content on the webpage.

The court rejected this argument, ruling that because of California’s use of the “single publication rule,” the statute of limitations regarding statements published on a website was not restarted by the continuing hosting of the web content, unless (1) the statement itself is substantively altered or added to; or (2) the website is directed to a new audience. 

The court noted that this outcome was consistent with previous cases, such as
(a) prior California decisions applying the single publication rule to publicity rights (Christoff v. Nestle USA);
(b) prior federal decisions applying the single publication rule to web hosted information (Oja v. United States Army Corps of Engineers); and
(c) the leading state court case regarding the single publication rule and websites that are updated with separate information (Firth v. State).

The Court reasoned that accepting Yeager’s arguments would unnecessarily “freeze” websites from updating and adding new content, forcing publishers either to use new websites or forgo publication whenever new information was available.  Application of the single publication rule facilitated “open, pervasive dissemination of information and ideas over the Internet.”

Conclusion:

Internet businesses should be mindful when considering an update or retargeting  problematic content, such as potentially defamatory posts or invasions of privacy like the Yeager “endorsements” at issue in this case.  Doing so may reset the clock on the powerful statute of limitation defense.  

On the flip side, potential plaintiffs need to act quickly regarding offending online content in order to preserve their right of recovery, or risk being barred from acting against stale offending content.

Yeager v. Bowlin, 9th Circuit Court of Appeals, Sept. 10, 2012

Friday, August 31, 2012

Settlement Rejected in Class Action over Facebook’s “Sponsored Stories”


Facebook and the attorneys in a class action suit over the use of user names and pictures in connection with “Sponsored Stories” are back at the negotiating table after their request for preliminary approval of a settlement was rejected by a federal judge in San Francisco.

On August 17, 2012, Judge Richard Seaborg of the Northern District of California rejected a proposed settlement in the putative class action case Fraley v. Facebook, Inc., N.D. Cal. Case No. C 11-1726.  The case addresses allegations that Facebook’s use of users’ names and photos in connection with the paid advertising known as “Sponsored Stories” created improper endorsements that violated the users’ publicity rights and was an unlawful, unfair, and fraudulent business practice under California law.  The proposed class could cover the 150 million or more Facebook users in the United States that had created profiles prior to January 27, 2011.

The Plaintiffs submitted a proposed settlement to the court in June 2012, in which Facebook would (1) make certain changes to its “Statement of Rights and Responsibilities” governing use of the site; (2) implement certain mechanisms to increase user control and awareness regarding use of their names and likenesses in “Sponsored Stories,”; (3) make a “cy pres” settlement payment of $10 million to certain internet privacy groups (rather than users); and (4) pay Plaintiffs’ attorney fees, up to a maximum of $10 million, upon application by the Plaintiffs. 

Despite the low threshold necessary for preliminary approval of putative class actions, Judge Seaborg rejected the settlement based on a combination of the following factors:

(1)  The adequacy of the recovery by class members.  By agreeing to a cy pres-only settlement rather than providing any monetary recovery for the class members, the Plaintiffs may have unfairly bargained away the $750 in statutory damages each violation of publicity rights would have incurred.  To remedy the problem, the court instructed Plaintiffs to address the likely size of the covered class, the minimum size of a settlement fund that could be distributed, and the legal argument to justify substituting cy pres relief instead of recovery by the class in light of the potential for statutory damages.

(2)  The amount of the cy pres payment.  The court took issue with the Plaintiffs failure to connect the amount of the cy pres payment to the damages suffered by the class.  Cy pres settlements are designed to provide for the interests of the class members in place of actual damages.  Again, the court instructed Plaintiffs to estimate the likely recovery at trial in light of the statutory damages and size of the class.  The court pointed out that the estimate of potential recovery made by Facebook and the total settlement costs to Facebook (including attorneys’ fees) may be relevant to the settlement value. 

(3) The adequacy of the injunctive relief.  The court raised issues regarding the specifics of Facebook’s remedial measures and the extent of Facebook’s discretion in implementing the features and revising its “Statement of Rights and Responsibilities.”  The Plaintiffs were also instructed to address the issues raised in the companion case regarding obtaining consent from minors.

(4) The amount of attorneys’ fees.  The court took issue with the “clear sailing” provision by which Facebook would not object to an attorneys’ fees motion for up to $10 million in fees and $300,000 in costs.  The court noted that the Plaintiffs attempted to justify this amount by valuing the injunctive relief at $103.2 million as an estimate of the value of future “Sponsored Stories” to Facebook.  However, according to the court, Facebook’s revenue from the advertising is not the same as the value received by the members of the class.  Instead, Plaintiffs must provide legal support for any valuation of the injunctive relief that they rely on to  justify the high attorneys’ fees.

The court also instructed the Plaintiffs to include an estimate of the number of class members that may not receive notice of the settlement via email and discussion of any other major issues that had been raised by third parties in any future proposed settlements. 

Conclusion

Judge Seaborg’s preliminary rejection of the settlement is grounded in concerns regarding the fairness of settling the statutory damage claims of millions of users for payments to third parties, uncertain future protections, and millions in fees for the attorneys that brought the claims. 

Online companies should take note that violations of their users’ privacy rights that carry statutory damages, like the endorsement/publicity rights at issue in this case, may result in extremely high damages figures that would result in catastrophic consequences in the event of adverse judgments.  Additionally, class action settlements need to be constructed with judicial scrutiny in mind, in order to prevent issues like those raised in this case and now faced by Facebook and the Plaintiffs’ attorneys as they return to the negotiating table.

-- Steven Gebelin

Monday, August 27, 2012

Summary Judgment in Trademark Infringement Cases

Trademark infringement cases require a fact intensive analysis.  As such, summary judgment is often disfavored.  The recent 9th Circuit reversal of a defense summary judgment ruling in the trademark infringement case of Rearden LLC v. Rearden Commerce, Inc. supports this conclusion.

Lanham Act trademark infringement claims require that the plaintiff prove its ownership interest in a contested mark by providing evidence of priority of use of the mark in commerce.  Plaintiffs can show use in commerce by establishing two elements:  the sale or use of goods/services in advertising; and services/goods are rendered in commerce. 

Actual sales need not occur.  The Court in Rearden found that the plaintiff created a material issue of fact merely from the offering of its services to one company.  The Court held that this could fulfill the use in commerce requirement. 

This case is very helpful for plaintiffs involved in trademark infringement litigation in the 9th Circuit.  It increases the chances of passing summary judgment which often leads to substantial settlement offers or a possible lucrative jury verdict. 

Friday, August 24, 2012

Many Twitter Followers Could Be Fake

Previously, I have written about the monetary value of Twitter followers with respect to litigation where plaintiffs bring various claims based upon an alleged theft of such followers.  Defendants in such trade secrets and interference with economic advantage cases may want to investigate the legitimacy and quality of the plaintiff's alleged Twitter follower list.  Many could be fake/robots, as discussed in this TechCrunch article.  If a significant number of Twitter followers are not actual consumers or businesses, then a plaintiff's ability to prove up damages under a number of theories may be significantly reduced or thrown out altogether by a judge or jury. 

Wednesday, August 22, 2012

Networks Sue BarryDriller.com for Copyright Infringement

Both Barry Diller's Aereo website and a similar streaming website called BarryDriller.com have been sued for copyright infringement by many major networks.  These sites allow streaming of local and broadcast television channels.  The networks claim that this is an infringement of their public performance right under the Copyright Act.  Copyright infringement attorneys will be paying close attention because a loss would severely reduce the scope of the public performance right in the digital distribution age. 

Taco Bell Not Liable Under TCPA For Franchisees' Text Message Campaign

As a lawyer who has handled mobile marketing and TCPA lawsuits, I was quite interested to read the recent summary judgment order in the case of Thomas v. Taco Bell.  The court held that Taco Bell was not liable for a text message marketing campaign conducted by its franchisees.  This appears to limit the scope of the TCPA which covers text messaging based marketing.  This is good news for franchisers who are often dragged into text messaging litigation because of their deep pockets. 

Friday, August 10, 2012

Important New P2P Copyright Infringement Ruling

As a copyright infringement attorney, I am always on the lookout for important Internet copyright infringement cases.  Eric Goldman recently commented on the case of David v. CBS Interactive, Inc.  In that case, a group of copyright holders sued CBS for vicarious and contributory copyright infringement relating to file sharing over P2P software offered for download on CBS's website www.download.com.  Plaintiffs also sued on an inducement theory.  CBS filed a Rule 12 motion to dismiss all claims.  The Court dismissed the vicarious and contributory infringement claims, however, the inducement claim survived. 

As Eric Goldman correctly points out, this ruling appears to create a new stand alone claim for inducement liability.  The Court's ruling was based upon the finding that CBS both offered the infringing software and marketed it in a way to induce users to commit copyright infringement.  The Court focused on the fact that CBS offered editorial instructions comparing the P2P software to known agents of infringement such as Limewire and Napster.  I think the lesson is clear, the marketing of file sharing software needs to be vetted by experienced Internet advertising attorneys.

Friday, June 22, 2012

Dilated Media, LLC Sues Yahoo! in Trade Secrets Litigation

Trade secrets litigators may wish to pay attention to a recent trade secrets lawsuit filed by a California Internet marketing company, Dilated Media, LLC, against Yahoo.  The suit concerns Yahoo allegedly allowing third party access to Dilated Media's user accounts hosted by Yahoo.  The accessed data allegedly contained Dilated's pay per click strategies and records.  This type of data is often protected under various state trade secrets statutes despite residing upon third party servers (in this case, Yahoo).  Dilated alleges that a deal to sell this valuable Internet marketing data was severely compromised, leading to a large price reduction for the eventual purchaser.  In Internet marketing litigation, it gets tricky to value such data - particularly without multiple good faith offers.  Nonetheless, if successful, Internet service providers like Yahoo may see an increase in claims and liability.

Friday, May 25, 2012

Internet litigators need to be aware of an often overlooked California domain name statute.  California Business and Professions Code section 17525 states that "It is unlawful for a person, with a bad faith intent to register, traffic in, or use a domain name, that is identical or confusingly similar to the personal name of another living person or deceased personality, without regard to the goods or services of the parties."

This statute may offer relief for plaintiffs where there is no federally registered trademark and thus, the Anti-Cybersquatting statute and Lanham Act are inapplicable.  Often that is the case when domain names for individual legal names are at issue.  Frequently, such registrations are used by tortfeasors to defame a particular individual on special purpose websites.  Bad faith factors are set forth in section 17526, some closely track UDRP and Anti-Cybersquatting standards.

Tuesday, May 22, 2012

Anti-SLAPP Motions in Federal Court

California business litigation attorneys need to be aware of the application of California's anti-SLAPP statute in federal court.  C.C.P. section 425.16 is a broad statute protecting written or oral statements in connection with a public issue or public debate.  It has been a wildly successful tool for defendants wishing to dismiss lawsuits at an early stage.  Successful defendants are entitled to attorneys fees and costs in California state court.

In the 9th Circuit, United States ex rel. Newsham v.Lockheed Missiles & Space Co., Inc., 190 F.3d 963 (9th Cir. 1999) held that California's anti-SLAPP statute is applicable to state law claims.  In state court, the ballgame is generally over after the granting of an anti-SLAPP motion as leave to amend is not provided.  In federal court, this is in contravention of Federal Rule of Civil Procedure 15 (a)'s policy of liberally granting plaintiffs leave to amend.  In Greensprings Baptist Christian Fellowship Trust v. Cilley, 629 F.3d 1064 (9th Cir. 2010), the 9th Circuit made statements indicating that California's anti-SLAPP statute does not prevent the granting of leave to amend subsequent to the granting of the special motion to strike.

The case of Verizon Delaware, Inc. v. Covad Communications Co., 377 F.3d 1081 (9th Cir.2004), leaves open the question of whether or not a defendant is entitled to attorneys fees if the plaintiff dismisses covered state law claims subsequent to the filing of the motion.  In superior court, the defendant is entittled to attorneys fees in this scenario.  Subsequent district court cases have found that a defendant recovers its attorneys fees only if the plaintiff later reasserts the same meritless state claims in an amended complaint.

Attorneys litigating anti-SLAPP issues in federal court need to be aware of the California statute's nuanced application and less than definitive caselaw. 

Monday, May 21, 2012

Social Networking and Litigation - A Dangerous Combo

As a trial lawyer specializing in internet and social media litigation, I have witnessed the destructive power of social networking to a claim or defense.  Litigants should steer clear of social networking except for marketing or CRM purposes.  Nothing can sink a case faster than a damaging admission fresh from a Facebook profile or Twitter feed.

Insurance companies and other sophisticated litigants frequently employ investigators and crawling technologies to access social networking pages and profiles.  Some may even use pre-texting techniques to access information that is privacy protected.  Such techniques may include friending or following an opposing party.  These pre-texting techniques may violate state bar ethical rules but, some courts have allowed this evidence to be introduced at trial or on summary judgment.  We have seen this type of evidence pop up frequently in trade secrets cases and other business torts such as interference with contractual relations.

There are a few best practices for litigants to follow with regard to social media behavior.  First, do not friend or follow any unknown individuals or entities.  Second, make sure privacy settings are set up to limit access by the general public.  Finally, never comment on any aspect of your lawsuit in any social media setting.  

Thursday, May 3, 2012

DMCA Safe Harbor Vulnerability

The Digital Millennium Copyright Act's safe harbor provision for Internet service providers may be experiencing some cracks.  In Viacom International Inc., et al v. YouTube Inc., et al., the 2nd Circuit ventured from traditional rubber stamp summary judgment granting of immunity.  Service provider actual knowledge of infringement is still required in order to void Section 512(c) immunity.  Nonetheless, the 2nd Circuit did not grant summary judgment for YouTube because it found the record created a factual issue regarding YouTube's knowledge of instances of infringement.  Basically, the Court found that there was sufficient evidence of YouTube's knowledge to take to a jury.  This cuts against the recent trend of unfettered robust content distributor immunity. 

This is an important decision for copyright litigation attorneys, especially those with Internet law expertise representing Internet service providers.  That is because courts that choose to adopt the 2nd Circuit's approach are likely to engage in a meaningful factual inquiry of whether or not content distributors such as YouTube possessed knowledge of specific infringements.  Therefore, more of these cases could find their way to juries which provides a much greater incentive for YouTube to settle claims brought by content owners such as Viacom. 

Thursday, March 1, 2012

Facebook v. Power Ventures: A Dangerous Precedent?

A recent Facebook summary judgment victory may spell doom for social network add-on services and any third party Internet marketer wishing to use Facebook's closed communications system to conduct commercial activities. Power Ventures created a browser add-on that allowed its users to monitor all social networking activities in one spot. Power tried to build its user base through Facebook invitations. Power attempted to gain users by offering a $100 reward for users who got Facebook friends to sign up via a Facebook event invitation.

Facebook alleged that Power's activities violated its terms of use by accessing its site without permission in violation of the CAN-SPAM Act, California Penal Code Section 502 and the Computer Fraud and Abuse Act ("CFAA").

The Court agreed with Facebook finding that: Power accessed Facebook without permission; that the event invitations were misleading because they had a Facebook email address in the header rather than a Power email address; and that Facebook suffered specific damage in combating Power's activities.

The decision should scare any Internet marketer conducting commercial activities on Facebook, especially the use of event invitations or any messaging on Facebook's closed network. Under this case, virtually all such commercial messaging activity on Facebook violates CAN-SPAM. That is because all event invitations automatically contain a Facebook email address. Also, third party add-on services accessing and scraping Facebook's site may be liable for criminal and civil penalties under CFAA and California Penal Code Section 502.

This decision is controversial and may be vulnerable on appeal. CAN-SPAM and the CFAA were created without contemplating the new marketing strategies and technologies born out of social networks like Facebook. Internet marketers must contact an experienced CAN-SPAM attorney prior to engaging in any marketing activities on Facebook or other social networks. Failure to do so may lead to a large monetary judgment and criminal penalties.

Wednesday, February 1, 2012

Social Media and California Trade Secrets Litigation

Most companies now utilize social media as a critical marketing vehicle. However, many times the job of managing a company's social media account is poorly defined. This can lead to problems when an employee or contractor charged with managing a social media campaign leaves. In fact, it is possible that social media followers may be treated as company trade secrets under common law or California's Uniform Trade Secrets Act ("CUTSA").

In the case of Phonedog v. Kravitz, Phonedog is suing its former employee/contractor Kravitz for allegedly converting a Phonedog Twitter feed to Kravitz's own personal use. Kravitz had previously set up the company's Twitter feed and tweeted regarding the company. Kravitz filed a motion to dismiss the lawsuit but a federal judge has decided Phonedog may proceed with its California trade secrets litigation. Phonedog is claiming, among other things, that the followers of the Twitter feed constitute company trade secrets with an independent economic value. Phonedog is claiming over $300,000 in damages.

In the wake of this lawsuit, companies like Phonedog should consult with a California trade secrets lawyer who can provide advice or representation in litigation. A fundamental step would be to insert terms into employment contracts and NDA's which make clear that social media content belongs to a company and that social media followers constitute trade secrets. That way, the company enjoys contractual protection even if the social media followers are determined to not constitute trade secrets.

This case presents interesting legal questions such as whether or not social media followers deserve the same protection as a confidential customer list. Also, what is the independent economic value of each such follower? Are all social media followers equally valuable or is there differentiation?