October 2007
Technology Law Update October 2007
In this issue:
- Ninth Circuit Orders En Banc Review of Controversial Roomates.com CDA Immunity Opinion
- Federal Statute Removing Certain Copyrighted Works From Public Domain Subject To First Amendment Scrutiny
- Copyright Act Preempts State Piracy Statute Covering Sounds Recordings, But Not Consumer Protection 'Packaging' Statute
- P2P Defendant Entitled To Attorney Fee Award Following Stipulation Of Dismissal With Prejudice Resulting From "Inconclusive" Discovery Phase
- Airline Web Site Browsewrap Agreement Prohibiting Commercial Use Enforceable Against Third Party With Knowledge Of The Terms
- Valid Agreement To Arbitrate Inferred From E-mails And Faxes Exchanged Between The Parties
- Bare Allegations Of Gross Negligence Against Web Hosting Company Do Not Supersede Contractual Limitation On Liability
- Software License Agreement That Referred To Yet-To-Be Agreed Upon Functional Specifications Sufficiently Definite To Constitute A Binding Contract
- Computer Software Developed By University Professors In The Performance Of Their Duties Deemed 'Work For Hire', Absent Written Agreement To The Contrary
- Web Site Redirection Notice Containing Bad Link To Competitor's Site "Tantamount to Disparagement" Under ACPA
- Message Board Operator Immune Under CDA Section 230 For Allegedly Defamatory Comments Posted By Third-Parties
- Patent Development And Licensing Promotion Company Settles FTC Consumer Charges With $60 Million Fine
- Award Of Attorney Fees Likely Warranted For Frivolous Suit Based Upon Plaintiff's Internet Chat Room Statements
- Deletion Of Employer's Files From Company Laptop By Employee Not "Unauthorized Access" Under CFAA, But Constitutes "Unauthorized Damage" To A Computer
- Ex-Employee's Possession Of Employer's Computer Backup Tapes Not "Anything Of Value" Under CFAA, Absent Showing Of Access To The Data
- Statute Of Frauds Will Not Bar Enforcement Of An Oral Settlement Agreement Where Court Reporter Electronically Recorded Party's Assent
- 'Movieland' Spyware Distributors Settle FTC Consumer Charges With $500,000 Fine
- Business Method For Mandatory Arbitration Resolution That Depends Entirely On Mental Processes Not Patentable Subject Matter
- No Private Right Of Action Under TCPA For Technical Violations Of Fax Labeling Requirements
- Out-Of-State Entity That Directed Copyright Infringement Activities To Louisiana Forum Subject To Long-Arm Jurisdiction
- Opinions and Developments of Note
Ninth Circuit Orders En Banc Review of Controversial Roomates.com CDA Immunity Opinion
The Ninth Circuit has ordered an en banc review of the panel opinion a controversial case involving the application of Section 230 of the Communications Decency Act. Fair Housing Council of San Fernando Valley v. Roommates.com. LLC, No. 04-56916, 2007 U.S. App. LEXIS 23922 (9th Cir. Oct. 12, 2007) (granting rehearing en banc). In the opinion that was withdrawn, the panel ruled that the Roommates.com site was not entitled to immunity under Section 230 for alleged violations of the Fair Housing Act because it was an "information content provider" with respect to the housing listings posted by users. The court had focused on the "structured questionnaire" format of the listings, which asked information about roommate preferences, and commented: "By categorizing, channeling and limiting the distribution of users' profiles, Roommate provides an additional layer of information that it is 'responsible' at least 'in part' for creating or developing."
Opinion: http://www.thelen.com/tlu/FairHousingCouncilVRoomatesOct07.pdf
Editor's Note:: This is an important case, as the prior panel opinion was one of the few cases involving CDA immunity in which a court found that CDA immunity was not available. See further discussion of the opinion on the Technology Law Update blog.
Federal Statute Removing Certain Copyrighted Works From Public Domain Subject To First Amendment Scrutiny
A federal statute that implemented Section 514 of the Uruguay Round Agreement Acts (URAA) by removing certain works from the public domain altered the "traditional contours of copyright protection," thus subjecting the statute to First Amendment scrutiny. Golan v. Gonzales, No. 05-1259, 2007 U.S. App. LEXIS 21199 (10th Cir. Sept. 4, 2007). The appeals court upheld the district court ruling rejecting constitutional challenges to the Sonny Bono Copyright Term Extension Act, but remanded the case to the lower court to determine whether the URAA, which granted certain foreign works the same copyright extension as domestic works, runs afoul of the First Amendment. The court relied on the Supreme Court ruling in Eldred v. Ashcroft (2003), in concluding that once the works at issue entered the public domain and became free for anyone to copy, the plaintiffs in this case had vested First Amendment interest in the expressions and the URAA's interference with such rights was subject to First Amendment scrutiny.
Opinion: http://www.thelen.com/tlu/GolanvGonzales.pdf
Copyright Act Preempts State Piracy Statute Covering Sounds Recordings, But Not Consumer Protection 'Packaging' Statute
An Illinois criminal statute prohibiting the unauthorized sale for profit of sound recordings is preempted by the federal Copyright Act, but a state "packaging" statute, which requires the listing of the manufacturer on the cover of the recording, is a consumer protection law that survives preemption. People v. Williams, No. 04-cr-7437, 2007 Ill. App. LEXIS 995 (Ill. Ct. App. Sept. 10, 2007). The court reversed the defendant's conviction for selling pirated sound recordings, but upheld his conviction under the packaging statute. The court ruled that the state's prohibition of unauthorized reproduction and distribution of sound recordings was preempted by the Copyright Act, rejecting the state's argument that the statute's mens rea requirement was an "extra element" that saves the state law from preemption. However, the court found the packaging statute was a consumer protection statute "qualitatively different" from the Copyright Act, since a violation involves a deceptive label or cover, irrespective of the protections afforded to the copyright owner under federal law.
Opinion: http://www.thelen.com/tlu/WarshakVUS.pdf
P2P Defendant Entitled To Attorney Fee Award Following Stipulation Of Dismissal With Prejudice Resulting From "Inconclusive" Discovery Phase
An individual who defended allegations that she was liable for copyright infringement for engaging in improper peer-to-peer music file sharing is entitled to an award of attorney's fees as a prevailing party following a voluntary dismissal with prejudice of the plaintiffs' claims. Atlantic Recording Corp. v. Andersen, No. 05-933 (D. Or. Sept. 21, 2007). In granting the defendant's motion for attorney's fees, the magistrate rejected the plaintiffs' argument that such an award was not dictated by the factors delineated in the U.S. Supreme Court decision in Fogerty v. Fantasy, (1994), which suggest attorney's fees be awarded based upon "frivolousness, motivation, [and] objective unreasonableness." The court concluded that the plaintiffs did not "conduct themselves in an objectively reasonable manner" when evidence characterized as "inconclusive or ambiguous" came to light, and were not diligent in pursuing exculpatory evidence. The court also stated that during the discovery phase, the plaintiffs were "either unable to obtain, or chose not to produce, significant evidence to support their claims," forcing the defendant to incur substantial fees.
Opinion: http://www.thelen.com/tlu/AtlanticVAndersen.pdf
Airline Web Site Browsewrap Agreement Prohibiting Commercial Use Enforceable Against Third Party With Knowledge Of The Terms
An airline Web site's browsewrap agreement, which prohibited commercial use is enforceable against a company that repeatedly accessed the site to obtain preferred boarding passes for passengers, where the company had actual knowledge of the agreement's terms. Southwest Airlines Co. v. Boardfirst, L.L.C., No. 3:06-cv-0891 (N.D. Tex. Sept. 12, 2007). The court granted the airline's motion for summary judgment on its breach of contract claims and entered a permanent injunction barring the company from using the airline's site for commercial purposes. Given the company's repeated visits and receipt of several cease and desist letters, the court concluded that the company had actual knowledge of the Web site's terms of use and therefore was bound to the browsewrap agreement's contractual obligations. However, the court denied the airline's motion for summary judgment on its CFAA claims based upon the company's violation of the site's terms, finding that the airline failed to offer sufficient evidence that the company accessed its public Web site "without authorization."
Opinion: http://www.thelen.com/tlu/SouthwestVBoardfirst.pdf
Valid Agreement To Arbitrate Inferred From E-mails And Faxes Exchanged Between The Parties
Written e-mails and faxes exchanged between the parties demonstrating assent to proposed revisions to a software project agreement, including an arbitration clause, operated as a contract addendum and constituted an enforceable agreement to arbitrate. Orbis, Inc. v. ObjectWin Technology, Inc., No. 7:06CV00372, 2007 U.S. Dist. LEXIS 69597 (W.D. Va. Sept. 20, 2007). The court granted the defendant's motion to compel arbitration and stay the litigation. The court found that the plaintiff's e-mail and faxed communications expressing acceptance of the new terms demonstrated assent to the inclusion of the arbitration clause, rejecting the plaintiff's claims that his subsequent silence was a withdrawal of his acceptance of the contract revisions.
Opinion: http://www.thelen.com/tlu/OrbisVObjectWin.pdf
Bare Allegations Of Gross Negligence Against Web Hosting Company Do Not Supersede Contractual Limitation On Liability
Bare allegations of gross negligence and willful misconduct against a web hosting company that temporarily shut down the plaintiff's Web site do not supersede contractual limitations of liability contained in a clickwrap agreement. Whitnum v. Yahoo! Inc., No. 110987/06, 2007 N.Y. Misc. LEXIS 6247 (N.Y. Sup. Ct. Sept. 7, 2006). The court denied the plaintiff's motion to amend her complaint and dismissed the suit, finding that a valid clickwrap agreement that contained broad limitations of liability bars recovery by the plaintiff for claims relating to a temporary discontinuation of service. The court upheld the agreement's limitations of liability, finding that the plaintiff's proposed second amended complaint "is based upon mere speculation and fails to set forth a claim for either willful misconduct or gross negligence."
Opinion: http://www.thelen.com/tlu/WhitnumVYahoo.pdf
Software License Agreement That Referred To Yet-To-Be Agreed Upon Functional Specifications Sufficiently Definite To Constitute A Binding Contract
A software license agreement was sufficiently definite so as to constitute a binding contract despite the parties having never agreed to the functional specifications at the time of the contract's execution. RedPrairie Corp. v. Jerome's Furniture Warehouse, No. 05-C-1072, 2007 U.S. Dist. LEXIS 71680 (E.D. Wisc. Sept. 26, 2007). The court granted the software company's summary judgment motion confirming the existence and breach of the agreement, but found disputed issues of fact concerning the calculation of damages. The court found that although the functional specifications clarified and defined in greater detail the parties' respective obligations, the software license agreement was sufficiently definite as to, among other things, the scope of the licensing agreement, the costs and fees to be paid by the customer, and the rights and obligations of the parties. The court noted that if the customer were concerned about the uncertainty of the program's interface with its existing software, it had the option of not signing the agreement until it received and reviewed the functional specifications.
Opinion: http://www.thelen.com/tlu/RedPrairieVJeromesFurniture.pdf
Computer Software Developed By University Professors In The Performance Of Their Duties Deemed 'Work For Hire', Absent Written Agreement To The Contrary
Computer software developed by former university research professors and licensed by the university to an outside company is a work for hire because it was developed with university resources and was related to the performance of the plaintiff's research duties. Rouse v. Walter & Associates, No. 4:05-cv-00440, 2007 U.S. Dist. LEXIS 70215 (S.D. Iowa Sept. 20, 2007). In dismissing the plaintiff's copyright infringement claims against the company to which the university licensed the disputed software, the court concluded that the development of the software was within the scope of the professors' employment and that the plaintiffs failed to produce a written agreement between themselves and the university expressly stating that the plaintiffs would retain the copyright of the developed software. The court found, among other things, that the software was developed and tested on university computers, the professors were paid faculty members during the time the software was being developed, and the software assisted the professors in their long-term university research projects.
Opinion: http://www.thelen.com/tlu/RouseVWalter&Assoc.pdf
Web Site Redirection Notice Containing Bad Link To Competitor's Site "Tantamount to Disparagement" Under ACPA
A company which, pursuant to a court order enjoining its commercial use of an infringing domain name, placed a redirection notice on its Web site containing a bad link to its competitor's site committed an act that is "tantamount to disparagement" under the Anticybersquatting Protection Act (ACPA). Rotoworks Int'l Ltd. v. Grassworks USA, LLC, No. 07-5009, 2007 U.S. Dist. LEXIS 65281 (W.D. Ark. Sept. 4, 2007). In granting the plaintiff's motion to direct the transfer of the infringing domain name, the court found that the defendants acted in bad faith in refusing to transfer the domain name to the plaintiff since the defendants lost the right to use it for any commercial purpose. In evaluating the factors under the ACPA, the court found that the notice redirecting traffic from the infringing site to the plaintiff's site containing a bad link prompting an error message gave the appearance that the plaintiff's brand is defunct, an act "tantamount to disparagement." The court also rejected the defendants' argument that it needed the use of the infringing domain name to receive personal e-mails, finding such a use is not "necessary" or "bona fide" because the changing of e-mail addresses is such a common practice.
Opinion: http://www.thelen.com/tlu/RotoworksVGrassworks.pdf
Message Board Operator Immune Under CDA Section 230 For Allegedly Defamatory Comments Posted By Third-Parties
An operator of an Internet message board and Web site is immune under Section 230 of the Communications Decency Act (CDA) for a series of allegedly defamatory postings made by third-parties that disparaged the plaintiff following a New Year's Eve party gone awry. Dimeo v. Max, No. 06-3171, 2007 U.S. App. LEXIS 22467 (3rd Cir. Sept. 19, 2007). The appeals court upheld the dismissal of plaintiff's complaint and found that the defendant qualified for CDA immunity since his Web site was an interactive computer service and the posts alleged in the complaint constituted information provided by third parties. The court rejected the plaintiff's argument that the CDA was inapplicable because the defendant edited portions of the third-party content and selected material for publication.
Opinion: http://www.thelen.com/tlu/DimeoVMaxSept07.pdf
Editor's Note:: This case is of particular interest not only for its interesting facts (the defendant is the infamous Internet personality Tucker Max), but for the lower court's comment in dicta to the effect that Section 230 of the CDA applies to blogs.
Patent Development And Licensing Promotion Company Settles FTC Consumer Charges With $60 Million Fine
A group of entities and individuals charged by the FTC with civil contempt of a prior court order and for promoting a fraudulent patentability and marketability consultation practice to amateur inventors have agreed to a $60 million fine and a permanent injunction to settle the charges. FTC v. International Product Design, Inc., No. 1:97-cv-01114 (E.D. Va. settlement announced Sept. 6, 2007). According to the FTC's complaint, the companies promised to evaluate inventors' ideas, but its evaluations were always positive and not meaningful. The FTC alleged that the defendants took substantial fees and offered legal assistance to inventors seeking obtain licensing royalties for their inventions, but failed to disclose to consumers that none of its clients had successfully marketed an invention.
Press Release: http://www.ftc.gov/opa/2007/09/inventionswindle.shtm
Award Of Attorney Fees Likely Warranted For Frivolous Suit Based Upon Plaintiff's Internet Chat Room Statements
Internet chat room statements that expressed a party's desire to pursue frivolous claims and harass the opposing party likely support an award of attorney's fees against the plaintiff following the dismissal with prejudice of the underlying action. Donovan v. Whalen, No. 05-211, 2007 U.S. Dist. LEXIS 71180 (D. N.H. Sept. 24, 2007) (unpublished).. The court denied the defendant's motion for attorney's fees for procedural reasons because the Internet chat room evidence was unauthenticated, but granted the defendant leave to refile with admissible Internet evidence, properly presented by affidavit or otherwise. The court stated that if the chat room evidence were verified, it would support a finding of frivolousness such that the court could employ its inherent power, in rare cases, to award attorney's fees to the prevailing party when its opponent has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons."
Opinion: http://www.nhd.uscourts.gov/Isys/isysquery/2ba98d41-5a81-4790-8214-a88893b3e522/6/doc/07NH120.PDF
Deletion Of Employer's Files From Company Laptop By Employee Not "Unauthorized Access" Under CFAA, But Constitutes "Unauthorized Damage" To A Computer
A departing employee, who deleted his employer's files while still having full access to his employer's computers, did not "exceed authorized access" under the Computer Fraud and Abuse Act (CFAA), but is liable for "unauthorized damage" to a computer under the Act. B&B Microscopes v. Armogida, No. 06-492, 2007 U.S. Dist. LEXIS 70978 (W.D. Pa. Sept. 25, 2007). The court granted judgment to the employer on its CFAA and related state claims, concluding that the employee is liable under the CFAA for causing "unauthorized damage" to a protected computer for deleting the employer's business files. Notably, however, the court found that the employee could not be liable under the CFAA based upon a theory of "unauthorized access" because the defendant had authorization to use the company laptop. The court rejected the plaintiff's argument based, upon the Seventh Circuit opinion in International Airport Centers, L.L.C. v. Citrin, (7th Cir. 2006), that once an employee violates his duty of loyalty to his employer any authorized access is withdrawn.
Opinion: http://www.thelen.com/tlu/B&BMicroscopesVArmogida.pdf
Editor's Note:: The question of employee authorization under the CFAA has been addressed by a number of courts recently, with conflicting results on the issue of whether an employee breach of the duty of loyalty abrogates the employee's authorized access. This issue is discussed further on the Technology Law Update blog.
Ex-Employee's Possession Of Employer's Computer Backup Tapes Not "Anything Of Value" Under CFAA, Absent Showing Of Access To The Data
An ex-employee's temporary possession of his employer's computer backup tapes does not represent "anything of value" for purposes of a claim under the Computer Fraud and Abuse Act (CFAA), absent a showing of access to the information by the ex-employee. Triad Consultants, Inc. v. Wiggins, No. 07-1007, 2007 U.S. App. LEXIS 22226 (10th Cir. Sept. 17, 2007). In affirming the trial court's dismissal of the employer's CFAA claim, the court ruled that the employer failed to show that the ex-employee accessed a protected computer and obtained "anything of value," a statutory requirement. The court concluded that the value of the backup tapes lies in the information the tapes contained, not in the physical tapes themselves and because the employer alleged no facts showing that the ex-employee accessed the information, (i.e., by deletion or transfer to a competitor) its CFAA claim failed to assert the defendant obtained "anything of value."
Opinion: http://www.thelen.com/tlu/TriadConsultantsVWiggins.pdf
Statute Of Frauds Will Not Bar Enforcement Of An Oral Settlement Agreement Where Court Reporter Electronically Recorded Party's Assent
The statute of frauds does not prevent enforcement of an oral settlement agreement concerning the transfer of land that was acknowledged on the record in court and accurately memorialized in a written transcript providing the terms of the agreement and the oral assents of the parties. In re Marriage of Fusao Takusagawa, No. 95,508, 2007 Kan. App. LEXIS 926 (Kan. Ct. App. Sept. 7, 2006). The appeals court affirmed the lower court's decision to approve and enforce an oral separation agreement, holding that the statute of frauds does not apply to supervised settlements recited in open court. Among other reasons, the court found that that Kansas's adoption of the Uniform Electronic Transactions Act (UETA) "probably makes [the complaining party's] in-court statement the legal equivalent of a written signature for purposes of the statute of frauds." The court reasoned that the court reporter's electronic capture of the party's oral assent appeared to constitute an electronic signature under the law and would satisfy the statute of frauds.
Opinion: http://www.kscourts.org/kscases/ctapp/2007/20070907/95508.htm
'Movieland' Spyware Distributors Settle FTC Consumer Charges With $500,000 Fine
A group of entities and individuals charged by the FTC with placing deceptive spyware that spawned pop-up messages on consumer computers have agreed to pay a $500,000 fine and enter into a consent agreement that bars future downloads without consumer consent and prohibits misrepresentations to consumers concerning pop-up payment demands. FTC v. Digital Enterprises, Inc., d/b/a Movieland.com, No. CV06-4923 (C.D. Cal. settlement filed Sept. 11, 2007). According to the FTC's complaint, the defendants' Web sites caused a series of pop-up messages to appear on computer screens indicating consumers had signed up for a "free trial" that had expired, and demanded payment to make the messages disappear. The downloads, the FTC alleged, infected consumer computers with spyware that was difficult to remove, and featured pop-up messages that contained music and could not be silenced or minimized.
Press Release: http://www.ftc.gov/opa/2007/09/movieland.shtm
Business Method For Mandatory Arbitration Resolution That Depends Entirely On Mental Processes Not Patentable Subject Matter
A business method for mandatory arbitration resolution that depend entirely on the use of mental processes is not patentable subject matter, even if it has practical application. In Re Comiskey, No. 2006-1286, 2007 U.S. App. LEXIS 22414 (Fed. Cir. Sept. 20, 2007). The circuit court affirmed the Board Of Patent Appeals and Interferences' decision rejecting the applicant's claims, but remanded the matter back to the USPTO to determine whether the addition of a computer and modern communication devices to certain otherwise unpatentable mental processes would be obvious under the Patent Act. The court concluded that the business method that claimed a mental process untied to another category of patentable subject matter was unpatentable. However, the court recognized that some of the applicant's claims combined mental processes with a machine, the combination of which could produce patentable subject matter if such combination would have been non-obvious to a person of ordinary skill in the art.
Opinion: http://www.thelen.com/tlu/InReComiskey.pdf
No Private Right Of Action Under TCPA For Technical Violations Of Fax Labeling Requirements
There is no private cause of action under the Telephone Consumer Protection Act (TCPA) for technical violations of the statute in failing to clearly display the date, time and identification of the sender. Culbreath v. Golding Enterprises, L.L.C., No. 05AP-1230, 872 N.E.2d 284 (Ohio Sept. 5, 2007). The appeals court affirmed the lower court's dismissal of the plaintiff's remaining TCPA and state consumer protection law claims. The court concluded that while the TCPA provides a private right of action for the receipt of an unsolicited fax, the statute does not provide a private right of action to individuals for a fax sender's violations of the technical labeling requirements. The court also ruled that under the Ohio consumer protection statute, only individuals, not corporations, have standing to bring suit for receiving an unsolicited fax that is not shown to be unfair or deceptive.
Opinion: http://www.sconet.state.oh.us/rod/newpdf/0/2007/2007-Ohio-4278.pdf
Out-Of-State Entity That Directed Copyright Infringement Activities To Louisiana Forum Subject To Long-Arm Jurisdiction
An out-of-state entity that purposefully directed copyright infringement activities to a Louisiana entity is subject to specific personal jurisdiction under Louisiana law. Frees, Inc. v. McMillian, No. 05-1979, 2007 U.S. Dist. LEXIS 66814 (W.D. La. Sept. 7, 2007). In applying the "effects test" articulated by the U.S. Supreme Court in Calder v. Jones, the court denied the defendant's motion to dismiss for lack of personal jurisdiction, holding that copyright infringement is an intentional tort. The court found that in light of the "purposeful" activities of the plaintiff's former employees (i.e. unauthorized copyright of proprietary drawings and software for the benefit of their new employer), the former employees and their new employer were subject to the court's jurisdiction since their conduct was "calculated to injure the plaintiff in Louisiana."
Opinion: http://www.thelen.com/tlu/FreesVMcMillianSept07.pdf
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Additional Contract Terms Containing Arbitration Clause Unenforceable When Presented As A Hyperlink Buried In A Printed Invoice
Four-Year Federal "Catch-All" Statute Of Limitations Applies To TCPA Claims
Employee E-Mails Contained On Employer-Supplied Laptop Sent And Received Through Company Server Are Discoverable, Unless Privileged Or Are
Web-Based Generated
Google Wins Dismissal Of Patent Infringement Case, With Award Of Sanctions, Attorney's Fees
CDA Shields Search Engine From Liability For Information That Appears In A Search Query
"Trademark Disparagement" Not A Valid Claim Under Section 43(a) Of The Lanham Act
Under Illinois Law, Insurer Has A Duty To Defend An Insured For TCPA Claims Arising Under "Advertising Injury" Policy Clause
Studios May Proceed With Copyright Infringement Claims Against Unauthorized Movie Download Web Sites
Insurer Has No Duty To Defend Patent Infringement Claims Under The Insured's "Advertising Injury" Policy
Copying Of Web Site's Contents May Form Basis For Copyright Infringement Claim Despite Site's Other Unprotectable Elements
California Governor Vetoes Bill Obligating Retailers To Reimburse Banks For Data Breach Costs
Record Companies Win $220,000 Judgment Against Music File Sharer
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