January 2008

Technology Law Update

In this issue:

1. No Trespass to Chattels Where Automated Data Service Remotely Searched Computer Files of Alleged P2P Music File-Sharer, but Neither Damaged Nor Impaired the Computer
2. Printouts of Copyrighted Web Site Pages for Use as Exhibits in a Judicial Proceeding Deemed Fair Use
3. In Amended Opinion, Ninth Circuit  Rules That Defendant Bears the Burden of Proving  Copyright Fair Use in Preliminary Injunction Stage of Infringement Action
4. Failure to Produce Written Agreement Transferring Software Copyright Does Not Deprive Transferee of Standing to Bring Infringement Suit Against Third-Party Infringer
5. Registered Trademark Owner’s Remedies Not Limited by the Type of Goods Specified in Its Registration
6. Domain Name Consisting of Prefix “e” Before Famous Mark Constitutes Dilution Under Pre-FTDA Amendment “Moseley” Standard
7. Election of Statutory Damages for Use of Counterfeit Marks Under Section 1117(c) of Lanham Act Precludes an Award of Attorney’s Fees Under Section 1117(b)
8. Summary Judgment Standard Applicable to Subpoena to Internet Service Provider Seeking Identity of Anonymous Blogger
9. Texas Courts Would Likely Adopt Single Publication Rule for Internet Publications
10. Claims That Numerical Rankings of Attorney Rating Web Site Are Inaccurate and Misleading Barred by the First Amendment
11. Adult Social Networking Site Settles FTC Consumer Charges over Sexually Graphic Pop-Up Ads
12. Following “Ehavioral” Forum on Privacy Issues, FTC Staff Issues Proposed Behavioral Advertising Principles
13. Corrections Officer’s Termination Due to Inflammatory Internet Posting Justified Where Officer’s Free Speech Interests Are Outweighed by Police Department’s Legitimate Concerns of Disruption
14. Employee Has Reasonable Expectation of Privacy in Non-Networked Workplace Computer Not Governed by Usage Policy and Housed in Locked, Private Office
15. Company’s Monitoring of E-Mails Sent to Bankrupt Entity Whose Assets It Purchased Does Not Violate Federal Electronic Privacy Laws
16. “Knowing” or “Willful” Violation of TCPA Does Not Require Showing That Defendant Knew That Its Conduct Violated the Law
17. Representative Association Lacks Standing to Bring Assigned Claims for Unsolicited Faxes Under TCPA
18. Comprehension of Underlying Source Code and Algorithm Unnecessary to Make Out Prima Facie Case of Trade Secret Misappropriation
19. Forum Selection Clause Contained in Web Site Clickwrap Agreement Is Enforceable, Despite Being Part of a Contract of Adhesion
20. Arbitration Clause Containing Class Action Waiver Not Unconscionable Under Pennsylvania Law
21. Class Arbitration Waiver in Electronics Sales Contract Not Unconscionable Under New Jersey or Texas Law
22. Common Law Tort of Conversion Does Not Apply to Electronic Records and Data Under Massachusetts Law
23. Software Licensee Not Subject to Minnesota Long-Arm Jurisdiction Based upon Purchase of Software and Communications Concerning Technical Support
24. Opinions and Developments of Note

1. No Trespass to Chattels Where Automated Data Service Remotely Searched Computer Files of Alleged P2P Music File-Sharer, but Neither Damaged Nor Impaired the Computer

   An automated data service, which remotely searched certain computer files of an alleged peer-to-peer music file sharer at the behest of the plaintiff copyright owner, did not commit trespass to chattels where the search did not damage or impair the defendant’s computer.  Atlantic Recording Corp. v. Serrano, No. 07-1824, 2007 U.S. Dist. LEXIS 95203 (S.D. Cal. Dec. 28, 2007). The court dismissed the defendant’s entire counterclaim, including his trespass to chattels claims.  The court held that because the defendant’s counterclaim did not allege any computer damage or interference, it failed to state a necessary element of trespass to chattels.  The court rejected the defendant’s argument that his damages were akin to those experienced by a commercial Web site subjected to an automated attack, finding that the “defendant did not operate a Web-based business and it appears unlikely that automated data collection services threaten to overwhelm his personal computer.”

   Opinion http://www.thelen.com/tlu/AtlanticRecordingVSerrano.pdf

    

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2. Printouts of Copyrighted Web Site Pages for Use as Exhibits in a Judicial Proceeding Deemed Fair Use

   The reproduction of pages from a copyrighted Web site for use as evidence in a judicial proceeding is fair use, despite a statement on the Web site that forbade any copying without prior permission and the payment of a license fee.  Shell v. DeVries, No. 07-1086, 2007 U.S. App. LEXIS 28317 (10th Cir. Dec. 6, 2007). The appeals court affirmed the dismissal of the plaintiff’s copyright claim, finding that the defendant’s limited, non-commercial use of the plaintiff’s work for use in a court proceeding was protected by the fair use defense.  The court declined to hold that the use of copyrighted materials for use in judicial proceedings was per se fair use, although the court acknowledged the Ninth Circuit’s 1982 ruling in Jartech, Inc. v. Clancy that held the use of copyrighted materials in court proceedings constitutes fair use as long as users do not reproduce the work for its “intrinsic purpose,” that is, where judicial proceedings are one of the intended markets of the copyrighted work.

   Opinion http://www.thelen.com/tlu/ShellVDeVries.pdf

    

   Editor’s Note: The same plaintiff was also involved in litigation with the Internet Archive, the entity that operates the “Wayback Machine,” an automated Web crawler that archives Web sites.  See http://brownraysman.typepad.com/technology_law_update/march_2007.html#http://www.thelen.com/tlu/InternetarchiveVShell.pdf. The case eventually settled, with both parties agreeing to a Stipulation of Dismissal. The use of copyrighted material in a judicial proceeding also arose recently in another, non-Internet related case, in which a district court ruled that the use of excerpts of a party’s copyrighted book during a probate court proceeding constituted fair use.  See Sturgis v. Hurst, No. 07-11301, 2007 U.S. Dist. LEXIS 88902 (E.D. Mich. Dec. 4, 2007). http://www.thelen.com/tlu/SturgisVHurst.pdf

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3. In Amended Opinion, Ninth Circuit  Rules That Defendant Bears the Burden of Proving  Copyright Fair Use in Preliminary Injunction Stage of Infringement Action

   Once a moving party has carried its burden of showing a likelihood of success on the merits during the preliminary injunction stage, the burden shifts to the non-moving party to show a likelihood that its affirmative defense of fair use will succeed.  Perfect 10, Inc. v. Amazon.com, Inc., No. 06-55405, 2007 U.S. App. LEXIS 27843 (9th Cir. Dec. 3, 2007) (amended opinion). The Ninth Circuit amended its opinion issued in May 2007 to revise its treatment of the fair use issue, overturning the lower court’s prior ruling that because the plaintiff has the burden of showing a likelihood of success on the merits, that it also had the burden of demonstrating a likelihood of overcoming the defendant’s fair use defense.  The court concluded that once the plaintiff showed a likelihood of success on the merits at the preliminary injunction stage, the burden shifted to the defendant to show a likelihood that its fair use defense will succeed.  The court also found that this same principle applies to the defendant’s burden concerning its affirmative defense based upon Section 512 of the Digital Millennium Copyright Act (DMCA).   Ultimately, the appeals court reiterated its prior ruling that the defendant search engine is likely to succeed in proving its fair use defense and, accordingly, the court vacated the preliminary injunction with respect to the creation and storage of "thumbnail" versions of the plaintiff’s copyrighted images on the search engine’s own servers in conjunction with its image search function.

   Opinion http://www.thelen.com/tlu/Perfect10VAmazonDec07.pdf

    

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4. Failure to Produce Written Agreement Transferring Software Copyright Does Not Deprive Transferee of Standing to Bring Infringement Suit Against Third-Party Infringer

   A plaintiff’s failure to produce a written copyright transfer agreement does not deprive it of standing to bring an infringement action against a third-party infringer, absent some dispute between the transferee and transferor over the assignment of the copyright. Software for Moving, Inc. v. La Rosa Del Monte Express, Inc., No. 07-1839, 2007 U.S. Dist. LEXIS 90958 (N.D. Ill. Dec. 7, 2007). The court denied the defendant’s motion to dismiss under Section 204(a) of the Copyright Act, which states that a transfer of copyright ownership, other than by operation of law, is not valid unless evidenced by a writing.  The court found that Section 204(a) is designed to resolve disputes between copyright owners and transferees in circumstances such as bankruptcy proceedings or work-for-hire situations, and cannot be used by an alleged third-party infringer to avoid a copyright infringement suit.  Since there is no quarrel between the plaintiff and its transferor over the assignment of the software copyright, the court held that the defendant lacks standing to invoke Section 204(a) as a basis for a motion to dismiss.

   Opinion http://www.thelen.com/tlu/SoftwareforMovingVLaRosa.pdf

    

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5. Registered Trademark Owner’s Remedies Not Limited by the Type of Goods Specified in Its Registration

   A trademark owner’s remedies are not limited by the types of goods specified in its registration, and the owner may bring an infringement action if another’s use of the mark on different goods or services is likely to cause consumer confusion with the owner’s use of its mark in connection with goods or services described in its trademark registration.  Applied Information Sciences Corp. v. eBay, Inc., No. 05-56123, 2007 U.S. App. LEXIS 29871 (9th Cir. Dec. 28, 2007). The appeals court affirmed the lower court’s grant of summary judgment to the defendant, although on slightly different grounds.  In questioning the lower court’s reasoning, the appeals court clarified that the scope of trademark validity and the scope of relief are not coextensive and that the Lanham Act does not require that the alleged infringer’s confusing use involves the same goods or services listed in the registration.  The court concluded that the defendant was entitled to summary judgment, however, since the mark holder failed to produce any evidence tending to show a likelihood of confusion.

   Opinion http://www.thelen.com/tlu/AppliedInformationSciencesVeBay.pdf

    

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6. Domain Name Consisting of Prefix “e” Before Famous Mark Constitutes Dilution Under Pre-FTDA Amendment “Moseley” Standard

   The use of a domain name consisting of the prefix “e” before a famous mark weakens the ability of the mark holder to identify its goods and services and constitutes dilution under the federal Trademark Dilution Act as per the pre-amendment actual dilution standard enunciated by the U.S. Supreme Court in Moseley v. V. Secret Catalogue.  Visa Int’l Service Assoc. v. JSL Corp., No. 2:01-CV-00294, 2007 U.S. Dist. LEXIS 95334 (D. Nev. Dec. 27, 2007). The court granted summary judgment to the plaintiff on its dilution claim and ordered the defendant to deactivate its Web site.  The court concluded that “e” is a commonly used domain name prefix denoting the online version of a business, and that “evisa.com” dilutes the plaintiff’s famous “Visa” mark, and “presents a serious impediment to customers trying to locate the Visa Web site.”

   Opinion http://www.thelen.com/tlu/VisaIntlVJSLCorp.pdf

    

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7. Election of Statutory Damages for Use of Counterfeit Marks Under Section 1117(c) of Lanham Act Precludes an Award of Attorney’s Fees Under Section 1117(b)

   An election of statutory damages under Lanham Act section 1117(c) for the use of a counterfeit mark precludes an award of attorney’s fees under section 1117(b), which grants a prevailing plaintiff seeking actual damages an award of treble damages plus reasonable attorney’s fees.  K and N Engineering, Inc. v. Bulat, No. 06-55393, 2007 U.S. App. LEXIS 29220 (9th Cir. Dec. 18, 2007). The appeals court reversed the lower court’s award of attorney’s fees to the plaintiff.  The court reasoned that the counterfeit statutory damage provisions of section 1117(c) makes no allowances for attorney’s fees, and that the attorney’s fees provision of section 1117(b) applies only in cases where a plaintiff seeks actual damages under section 1117(a).

   Opinion http://www.thelen.com/tlu/KandNEngineeringVBulat.pdf

    

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8. Summary Judgment Standard Applicable to Subpoena to Internet Service Provider Seeking Identity of Anonymous Blogger

   A party seeking to obtain discovery of the identity of an anonymous blogger via a subpoena to the blogger’s e-mail service provider must first demonstrate that its claim would survive a motion for summary judgment.  In Re: Does 1-10, No. 06-07-00123-CV, 2007 Tex. App. LEXIS 9652 (Tex. Ct. App. Dec. 12, 2007). The appellate court granted the defendant’s petition for a writ of mandamus compelling the lower court to withdraw its order directing the defendant’s ISP to reveal the defendant’s identity.  In remanding the case, the Texas appellate court held, in an issue of first impression, that the correct standard in evaluating efforts to discover the identity of an anonymous speaker is the summary judgment standard enunciated by the Delaware Supreme Court in Doe v. Cahill, 884 A.2d 451 (2005).  The court concluded that requiring a party to demonstrate that its claim would survive a motion for summary judgment would allow a court to “examine facts and evidence before concluding that a defendant's constitutional rights must surrender to a plaintiff's discovery needs.”

   Opinion http://www.6thcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=9055

    

   Editor’s Note: The court also rejected the plaintiff’s reliance on the Cable Communications Policy Act of 1984 (CCPA), 47 U.S.C. §551, as statutory authority to serve a subpoena on the defendant’s ISP. According to the court, the CCPA generally prohibits the disclosure of subscriber information, but provides a safe haven for a cable operator’s disclosure of a subscriber’s identity when made pursuant to a court order.  However, the court clarified that the CCPA cannot be the “procedural vehicle for obtaining such a court order” from a cable operator, as litigants must employ some other state or federal procedural device for obtaining information from third parties.

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9. Texas Courts Would Likely Adopt Single Publication Rule for Internet Publications

   Texas courts would likely follow the majority approach and adopt the single publication rule to defamation claims involving publicly available Internet publications.  Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., No. 06-11283, 2007 U.S. App. LEXIS 29738 (5th Cir. Dec. 21, 2007). The federal appeals court affirmed the district court’s dismissal of defamation claims under Texas law on statute of limitation grounds, where the claims arose from a print article that was subsequently posted to a newspaper Web site. The court rejected the plaintiff’s arguments that Texas would adopt the continuous publication rule, reasoning that the continued availability of an article on a Web site should not result in republication, despite the newspaper’s ability to remove the article.  However, the court did not decide whether a newspaper’s initial posting of a print article to its Web site constituted a republication because, even if it did, in this case, the plaintiff’s claims would still have been time-barred.

   Opinion http://www.thelen.com/tlu/NationwideBiWeeklyVBeloCorp.pdf

    

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10. Claims That Numerical Rankings of Attorney Rating Web Site Are Inaccurate and Misleading Barred by the First Amendment

    State consumer law claims against an attorney rating Web site that provides automated  numerical rankings are barred by the First Amendment as protectable opinion because neither the nature of the information provided nor the language used on the Web site would lead a reasonable person to believe the ratings are statements of actual fact.  Browne v. Avvo, Inc., No. 07-0920 (W.D. Wash. Dec. 18, 2007). The court dismissed the plaintiff’s complaint, finding that the defendant’s ratings site is protected speech.  The court stated that while some may disagree with the Web site’s automated evaluations of underlying objective facts about the ranked attorneys, the numerical rating itself cannot be proven true or false.  The court also found that the plaintiff’s claims under the Washington Consumer Protection Act were deficient because the Web site’s publication of ratings is not “trade or commerce” and cannot form the basis of a claim, regardless of whether the Web site is supported by advertising.

    Opinion http://www.thelen.com/tlu/BrowneVAvvo.pdf

     

    Editor's Note:  This case is also of interest for the court’s rather amusing discussion of the value of attorney ratings. See discussion on the Technology Law Update blog. http://brownraysman.typepad.com/technology_law_update/2008/01/judge-gets-pers.html

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11. Adult Social Networking Site Settles FTC Consumer Charges over Sexually Graphic Pop-Up Ads

    An online social networking site charged by the FTC for driving traffic to its Web sites by serving sexually graphic pop-up ads to unwitting consumers has agreed to stop displaying graphic ads unless the consumers actively seek out such content or have consented to view such content.  FTC v. Various, Inc., FTC File No. 072-3000 (N.D. Cal. stipulated final order filed Dec. 6, 2007). The FTC alleged that the practice of displaying graphic pop-up ads without consumer consent was an unfair practice under the FTC Act.  Under the settlement, the defendant agreed to amend its practices, takes steps to ensure its affiliates comply with such restrictions, and establish an Internet-based mechanism for consumers to submit complaints.

    Press Release http://www.ftc.gov/opa/2007/12/afriendfinder.shtm

     

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12. Following “Ehavioral” Forum on Privacy Issues, FTC Staff Issues Proposed Behavioral Advertising Principles

    The FTC staff issued a set of proposed principles to encourage development of self-regulation for online behavioral advertising and address consumer privacy concerns over personal data collected by social networking and other Web sites.  Online Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles: Statement of the Bureau of Consumer Protection Proposing Governing Principles For Online Behavioral Advertising and Requesting Comment (Dec. 20, 2007). As defined by the FTC, behavioral advertising is the tracking of a consumer’s online activities (e.g. search queries, Web pages visited, and the content viewed) in order to deliver advertising targeted to the individual consumer’s interests.  To address consumer privacy and security needs raised by behavioral advertising, the FTC staff proposed, among other things, that Web sites where data is collected for behavioral advertising should provide a clear notice of their practices; offer consumers the ability to opt-out; and provide reasonable security for the collected data, retaining it only as long as is necessary for legitimate business or law enforcement purposes. In a statement released with the proposal, the FTC staff also stated that it seeks comment on whether the use of “sensitive data” should be prohibited or used only after obtaining a consumer’s affirmative consent.

    Text of FTC Staff Statement http://www.ftc.gov/os/2007/12/P859900stmt.pdf

     

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13. Corrections Officer’s Termination Due to Inflammatory Internet Posting Justified Where Officer’s Free Speech Interests Are Outweighed by Police Department’s Legitimate Concerns of Disruption

    A corrections officer’s termination due to defamatory comments made about the sheriff’s department on an officer association Web site was justified where the officer’s speech went beyond “topics of value in the civil discourse” and the sheriff’s department presented reasonable concerns about potential disruption to its operations.  Curran v. Cousins, No. 07-1686, 2007 U.S. App. LEXIS 28029 (1st Cir. Dec. 5, 2007). The appeals court affirmed the lower court’s dismissal of the officer’s First Amendment retaliation claims stemming from his termination following his Internet postings.  The court found that some of the officer’s defamatory postings about his superiors went “far beyond providing information in which there was a legitimate public interest,” and as such, his free speech interests as a public employee were outweighed by the Department’s legitimate interests in preventing disruptions to its law enforcement mission.  The court concluded that there was a substantial risk of disruption to the Department apparent from the “escalation” of the officer’s Web site postings, justifying giving “significant weight” to the public employer’s reasonable predictions of disruptions due to the postings.

    Opinion http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=07-1686.01A

     

    Editor’s Note: The result in this case is in contrast to another recent case in which a Michigan appellate court upheld an administrative judge’s decision to overturn the suspension of a police officer who refused an official order to cease operating a Web site dedicated to criticism of his superiors and provided a forum for other officers to express grievances.  City of Detroit v. Detroit Police Officers Assoc., No. 268278, 2007 Mich. App. LEXIS 2734 (Mich. Ct. App. Dec. 4, 2007) (unpublished). http://www.thelen.com/tlu/DetroitVDetroitPoliceOfficersAssoc.pdf In contrast to the Curran Web site in the above litigation, the court noted that it appeared that the Detroit police officer’s Web site “as a whole was not conducted in such an abusive manner as to lose protection…” and that “it would be speculative to infer…that the operation of the website…undermined public confidence in the police department.”

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14. Employee Has Reasonable Expectation of Privacy in Non-Networked Workplace Computer Not Governed by Usage Policy and Housed in Locked, Private Office

    An employee has an reasonable expectation of privacy in his locked, non-shared office space and workplace computer housed therein in the absence of an employer’s policy regarding use of the computer or the employer’s access to it.  State v. Young, No. 06-5798, 2007 Fla. App. LEXIS 20515 (Fla. Ct. App. Dec. 26, 2007). The appellate court affirmed the trial court’s suppression of evidence stemming from the warrantless government search of the employee’s office and computer that uncovered proscribed images.   The court commented that whether an employer has retained control over a workplace computer sufficient to maintain common authority over the device such that it could consent to a search “depends on the operational realties of the workplace.”  The court held that the employee had a reasonable expectation of privacy beyond that of ordinary employees because, among other things, his computer was housed in a private, locked office; it was not networked to other computers; and, unlike similar cases, the employer had no IT department with administrative access to company computers and no written employee manual informing employees of possible computer monitoring.

    Opinion http://opinions.1dca.org/written/opinions2007/12-26-07/06-5798.pdf

     

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15. Company’s Monitoring of E-Mails Sent to Bankrupt Entity Whose Assets It Purchased Does Not Violate Federal Electronic Privacy Laws

    A company did not violate federal electronic privacy laws when it monitored e-mail traffic directed to servers formerly owned by a bankrupt entity and obtained by the company as part of an asset purchase, because the monitoring did not constitute an “interception” within the meaning of the Electronic Communications Privacy Act (ECPA).  Ideal Aerosmith, Inc. v. Acutronic USA, Inc., No. 07-1029 (W.D. Pa. Dec. 13, 2007). The court granted the defendant company’s motion to dismiss the plaintiff’s ECPA claims, ruling that the defendant used no “device” to “intercept” the e-mails within the meaning of the ECPA, but was merely, as owner of the bankrupt company’s system, a direct party to the communications.  The court found that it was irrelevant to the ECPA claim that the company was not the intended recipient of the e-mails, including those directed to the plaintiff, a current competitor of the company that had briefly operated the bankrupt entity as a debtor-in-possession prior to the sale of the assets to the defendant company. The court also concluded that even if the monitoring of the e-mails constituted an “interception,” the defendant is exempt from ECPA liability since it was the “provider of wire or electronic service whose facilities are used in the transmission,” and has the right under the statute to monitor e-mails sent to former employees of the bankrupt entity. The court declined to dismiss the plaintiff’s trade secret, unfair competition and civil conspiracy claims based upon the monitoring of e-mails containing the plaintiff competitor’s trade secrets, however, ruling among other things that under Pennsylvania law, a cause of action may arise from mistaken acquisition of trade secrets.

    Opinion http://www.thelen.com/tlu/IdealAerosmithVAcutronic.pdf

     

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16. “Knowing” or “Willful” Violation of TCPA Does Not Require Showing That Defendant Knew That Its Conduct Violated the Law

    To establish a knowing or willful violation under Section 227(b) of the Telephone Consumer Protection Act (TCPA), a prerequisite for an award of treble damages for the making of prerecorded voice-message telemarketing calls to an individual’s residence, a plaintiff need not prove that the defendant knew that such conduct violated the law but only that the defendant knew the underlying facts of the conduct. Charvat v. Ryan, No. 2006-1647, 2007 Ohio LEXIS 3353 (Ohio Dec. 27, 2007). The court reversed the appellate court’s ruling denying the plaintiff’s request for treble damages and remanded the case to the trial court.  The court found that the knowledge requisite to a “knowing” violation of the statute is factual knowledge, and proof of intent to violate the law is not necessary.   The court concluded that to establish a “knowing” violation a plaintiff need only prove that the defendant knew that it acted or failed to act in a manner that violated the statute, and that once such a showing is made, the court may, but need not, award treble damages.

    Opinion http://www.sconet.state.oh.us/rod/newpdf/0/2007/2007-ohio-6833.pdf

     

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17. Representative Association Lacks Standing to Bring Assigned Claims for Unsolicited Faxes Under TCPA

    A representative association that accepts assignments of "junk fax" claims under the Telephone Consumer Protection Act (TCPA) lacks standing to assert the assignors’ claims.  U.S. Fax Law Center, Inc. v. T2 Technologies, Inc., No. 06CA0432, 2007 Colo. App. LEXIS 2378 (Colo. Ct. App. Dec. 13, 2007). In upholding the dismissal of the plaintiff's consolidated suits for lack of standing, the court found that Congress expressly provided that federal courts apply substantive state law in determining which parties may bring TCPA claims in federal court. The court concluded that under Colorado law, TCPA claims for statutory damages are not assignable because they are “penal in nature,” and generally, the right to recover a penalty is not assignable in the absence of express statutory authority to the contrary.  The court determined that the monetary recovery sought by the plaintiffs was a penalty because it required no proof of actual damages, and it would constitute “a recovery far in excess of any actual damages that plaintiff’s assignor may have sustained.”

    Opinion http://65.45.99.70/opinions/opinion.cfm?opinionid=6420&courtid=1

     

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18. Comprehension of Underlying Source Code and Algorithm Unnecessary to Make Out Prima Facie Case of Trade Secret Misappropriation

    A software licensor that should have known that the third-party software it included in its product improperly contained plaintiff’s trade secrets may be liable for trade secret misappropriation, even if the licensor could not understand or decipher the object code embodying the trade secret.  ClearOne Communications, Inc. v. Chiang, No. 2:07-cv-37, 2007 U.S. Dist. LEXIS 91693 (D. Utah Dec. 13, 2007). The court denied the licensor’s motion to dismiss the plaintiff’s trade secret claims, rejecting the licensor’s argument that it could not be liable for trade secret misappropriation because it could not read the object code.  The court ruled that there is no requirement of comprehension of a trade secret to state a claim for misappropriation under the Utah version of the Uniform Trade Secrets Act. The court also noted that the Act prohibits not only the disclosure of a trade secret, but also the use of a trade secret, where the defendant had “reason to know” that it was obtained by improper means.

    Opinion http://www.thelen.com/tlu/ClearOneVChiang.pdf

     

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19. Forum Selection Clause Contained in Web Site Clickwrap Agreement Is Enforceable, Despite Being Part of a Contract of Adhesion

    A clickwrap agreement on a foreign bride service Web Site that contained a forum selection clause mandating a Kentucky forum is not unconscionable and is enforceable against a Tennessee litigant, despite the fact that the agreement is a contract of adhesion.  Woodruff v. Anastasia Int’l, Inc., No. E2007-00874, 2007 Tenn. App. LEXIS 781 (Tenn. Ct. App. Dec. 19, 2007). The appellate court affirmed the lower court’s dismissal of the plaintiff’s complaint, holding that the forum selection clause in the online agreement was valid and enforceable. The court found that despite the agreement being a contract of adhesion, the plaintiff presented no evidence that the forum selection clause was oppressive and that it is “reasonable to expect that a corporation that has customers in many states may want to limit where it is subject to suit.”

    Opinion http://www.tsc.state.tn.us/OPINIONS/TCA/PDF/074/WoodruffOPN.pdf

     

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20. Arbitration Clause Containing Class Action Waiver Not Unconscionable Under Pennsylvania Law

    A class action waiver contained in an arbitration clause in a consumer financial services contract is enforceable under Pennsylvania law, because it is neither procedurally nor substantively unconscionable.  O’Shea v. Direct Financial Solutions, LLC, No. 07-1881, 2007 U.S. Dist. LEXIS 90079 (E.D. Pa. Dec. 6, 2007). The court granted the defendant’s motion to compel arbitration, finding that the clause, while part of an adhesion contract, was not procedurally unconscionable because it was not presented in confusing language or hidden within a document.  The court held that it was of no legal consequence that the consumer is limited to arbitration while the company retains its right to elect litigation of disputes, because “lack of mutuality does not invalidate an arbitration agreement” under Pennsylvania law.  The court also found that the class action waiver was not substantively unconscionable because the estimated damages per consumer in the instant matter are substantially greater than other cases where small damage amounts within a potential class of consumers prevented Pennsylvania courts from enforcing such waivers.

    Opinion http://www.thelen.com/tlu/OSheaVDirectFinancialSolutions.pdf

     

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21. Class Arbitration Waiver in Electronics Sales Contract Not Unconscionable Under New Jersey or Texas Law

    A class arbitration waiver contained in an arbitration clause in a consumer electronics sales contract is enforceable under Texas law and does not contravene fundamental New Jersey public policy.  Davis v. Dell, Inc., No. 07-630, 2007 U.S. Dist. LEXIS 94767 (D. N.J. Dec. 28, 2007). The district court granted the defendant’s motion to compel arbitration and stay the plaintiff’s proposed class action litigation, ultimately applying Texas law in finding that the class action waiver was enforceable despite being part of a contract of adhesion.  In deciding to uphold the Texas choice of law provision in the sales contact, the New Jersey district court determined that the class action waiver was not against fundamental New Jersey public policy.  The court concluded that the class action waiver was not unconscionable because, among other things, the potential recovery amount was not so low that it precluded rational consumers from pursuing recovery; the fraud alleged is not the type that would go unnoticed by consumers; and enforcement of the class-arbitration waiver would not be “so unconscionable that no decent, fair-minded person would view the results without being possessed of a profound sense of injustice.”

    Opinion http://www.thelen.com/tlu/DavisVDell.pdf

     

    Editor’s Note: An Illinois district court also found that a bar on class actions contained in an arbitration clause does not render it unconscionable, commenting that the Seventh Circuit has never held that class actions bars in arbitration agreements are unconscionable. Deaton v. Overstock.com, Inc., No. 07-643, 2007 U.S. Dist. LEXIS 94436 (S.D. Ill. Dec. 27, 2007). http://www.thelen.com/tlu/DeatonVOverstock.pdf The court granted the defendant’s motion to dismiss, finding that the arbitration clause contained in the defendant’s Web site terms of service was enforceable, rejecting the plaintiff’s argument that arbitration is prohibitively expensive and would prevent her from vindicating her rights.

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22. Common Law Tort of Conversion Does Not Apply to Electronic Records and Data Under Massachusetts Law

    Electronic banking records containing cardholder data are not subject to a claim of conversion under Massachusetts law.  In Re TJX Companies Retail Security Breach Litig., No. 07-10162 (D. Mass. Dec. 18, 2007). The court denied the plaintiffs’ motion to amend the complaint to include a claim for conversion based upon a retailer’s alleged failure to safeguard cardholder information that facilitated a data security breach.  The court rejected the plaintiffs’ argument that conversion can be based on the misappropriation of electronic records, stating that Massachusetts law traditionally does not recognize a cause of action for the conversion of intangible records. The court declined to follow the recent New York decision in Thyroff v. Nationwide Mutual Ins., 8 N.Y.3d 283 (2007), which found certain electronic records could be subject to a conversion claim, commenting that assuming it adopted Thyroff, the data in this case “may very well fall outside the scope of conversion even as delineated by Thyroff.”

    Opinion http://www.thelen.com/tlu/InReTJXDec18.pdf

     

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23. Software Licensee Not Subject to Minnesota Long-Arm Jurisdiction Based upon Purchase of Software and Communications Concerning Technical Support

    A Texas-based licensee that purchased software from a Minnesota company and communicated with the company via telephone and e-mail regarding technical support issues is not subject to personal jurisdiction under Minnesota’s long-arm statute.  RMC Publications, Inc. v. Doulos PM Training, No. 07-cv-1138, 2007 U.S. Dist. LEXIS 89144 (D. Minn. Dec. 4, 2007). The court granted the defendant’s motion to transfer the case to a Texas district court.  The court found that purchasing copies of and licenses to the plaintiff’s software, and communicating long distance for the purpose of technical support are insufficient contacts to support personal jurisdiction over the defendant in Minnesota.  The court also rejected the plaintiff’s argument that personal jurisdiction is proper under “effects test” articulated by the Supreme Court, concluding that “monetary damages suffered by a corporation in one state as a result of activities in a different state is not nearly so tied to the forum state and thus is not a basis for personal jurisdiction.”

    Opinion http://www.thelen.com/tlu/RMCPublicationsVDoulosPMTraining.pdf

     

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24. Opinions and Developments of Note

Criminal Defendant Has Fifth Amendment Privilege Against Revealing Encryption Password Protecting Allegedly Proscribed Images on His Computer In re Boucher, No. 2:06-mj-91, 2007 U.S. Dist. LEXIS 87951 (D. Vt. Nov. 29, 2007) http://www.thelen.com/tlu/InReBoucher.pdf No Reasonable Expectation of Privacy in Computer Files That Were "Shared" and Remotely Accessed over a Monitored Military Computer Network United States v. King, No. 07-11808, 2007 U.S. App. LEXIS 28912 (11th Cir. Dec. 14, 2007) http://www.thelen.com/tlu/USVKing.pdf No Misconduct Where Juror Briefly Accessed Defense Counsel's Web Site Containing Promotional Materials but No Facts or Legal Analysis about the Ongoing Trial People v. Owen, No. D048090, 2007 Cal. App. Unpub. LEXIS 9859 (Cal. Ct. App. Dec. 6, 2007) (unpublished) http://www.courtinfo.ca.gov/opinions/nonpub/D048090A.PDF Information Posted on Government Web Site after Prior Public Release and Discussion During Congressional Hearing Not a "Disclosure" under Federal Privacy Act Mudd v. U.S. Army, No. 2:05-cv-137, 2007 U.S. Dist. LEXIS 90695 (M.D. Fla. Dec. 10, 2007) http://www.thelen.com/tlu/MuddVUSArmy.pdf Court Invalidates Maine Law Restricting Sale of Prescription Data on First Amendment Grounds IMS Health Corp. v. Rowe, No. 07-127, 2008 U.S. Dist. LEXIS 309 (D. Me. Jan. 2, 2008) (amended opinion) http://www.thelen.com/tlu/IMSHealthVRowe.pdf Class Certification Denied in TCPA Action Where an Individualized Inquiry into the Circumstances of Each Fax Recipient's "Prior Invitation or Permission" Is Necessary Cicero v. U.S. Four, Inc., No. 07AP-310, 2007 Ohio App. LEXIS 5777 (Ohio Ct. App. Dec. 11, 2007) http://www.sconet.state.oh.us/rod/newpdf/10/2007/2007-ohio-6600.pdf Mirror Imaging of Plaintiff's Home Computer Warranted Where Computer Allegedly "Crashed" and Purportedly Contained Clearly Relevant Evidence Orrell v. Motorcarparts of America, Inc., No. 3:06CV418, 2007 U.S. Dist. LEXIS 89524 (W.D. N.C. Dec. 5, 2007) http://www.thelen.com/tlu/OrrellVMotorcarpartsOfAmerica.pdf Unauthorized Use of Nebraska Physician's Copyrighted Web Site Photos to Draw Patients Is Intentional Act Aimed at Forum, Warranting Exercise of Nebraska Long-Arm Jurisdiction Against Out-of-State Physician Denenberg v. Djordjevic, No. 8:07cv-150, 2007 U.S. Dist. LEXIS 92911 (D. Neb. Dec. 18, 2007) http://www.thelen.com/tlu/DenenbergVDjordjevic.pdf One-Time Internet Auction Site Sale Insufficient to Confer Long-Arm Jurisdiction Against Out-of-State Seller Malone v. Berry, No. 07AP-128, 2007 Ohio App. LEXIS 5754 (Ohio Ct. App. Dec. 6, 2007) http://www.sconet.state.oh.us/rod/newpdf/10/2007/2007-ohio-6501.pdf Electronic Transmission of Fraudulent SEC Documents Through EDGAR Web Site Establishes Venue in Virginia District Where EDGAR Computer Servers Are Located United States v. Johnson, No. 06-5181, 2007 U.S. App. LEXIS 28914 (4th Cir. Dec. 14, 2007) http://www.thelen.com/tlu/USVJohnson.pdf New York Court Lacks Personal Jurisdiction over Foreign National Based upon Alleged Effects of Threatened Enforcement of a British Libel Judgment Against New York Author Ehrenfeld v. Mahfouz, No. 174, 2007 NY Slip Op 9961 (N.Y. Dec. 20, 2007) http://www.nycourts.gov/ctapps/decisions/dec07/174opn07.pdf XM Radio Settles Copyright Infringement Suit with Universal Music Group over XM Inno News Coverage http://arstechnica.com/news.ars/post/20071217-universal-xm-settle-suit-over-receivers-ability-to-record.html Court Rules Against TorrentSpy in Copyright Infringement Suit, Stating Fair Trial Impossible Based upon Destruction of Evidence Columbia Pictures v. Bunnell, No. 2:06-cv-01093 (C.D. Cal. Dec. 13, 2007) http://www.thelen.com/tlu/ColumbiaPicturesVBunnellDec07.pdf Google Liable in France for Hosting Infringing Blog Blog http://copyrightfrance.blogspot.com/2007/12/google-liable-for-hosting-blog.html FTC Approves Google-DoubleClick Merger News Coverage http://www.internetnews.com/bus-news/article.php/3717866 back to table of contents

The monthly Technology Law Update is prepared in the New York office of
Thelen Reid Brown Raysman & Steiner LLP
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