Attorney Evan Brown

January 11, 2023 Contracts, Licensing

Why are indemnification provisions important in technology contracts?

vicarious liability copyright

Indemnification provisions in technology agreements play a crucial role in protecting the parties involved in a technology transaction. These provisions are often included in agreements among technology vendors, customers, software developers, and other related parties to shift the risk of losses and legal liabilities from one party to another.

Picking up the tab

Indemnification is a legal concept that involves one party (the indemnitor) agreeing to compensate the other party (the indemnitee) for any losses or damages that may occur as a result of a specific event or occurrence. Similarly, a provision of this sort may provide that one party will “defend” the other party by retaining counsel and paying the costs of defense in court, as those costs are incurred. In technology agreements, indemnification provisions are often used to shift the risk of losses or damages that may result from a party’s breach of contract or negligence. Customers will often seek to insist that the vendor indemnify the customer in the event a third party files a lawsuit against the customer because the technology infringes that third party’s intellectual property rights.

The main purpose of indemnification provisions in technology agreements is to protect the parties involved from potential financial losses, legal liabilities, and other costs associated with legal disputes. For example, a contract may provide that if a software developer breaches a contract and causes a loss to the client, the indemnification provision would require the developer to compensate the client for any damages.

Key elements

Indemnification provisions in technology agreements typically contain several key elements, including the types of losses or damages that will be covered, the parties that are responsible for indemnifying the other party, and the time frame for indemnification to take place. It also often covers the notification requirements, the documentation and information that should be provided in case of losses or damages, and the limitation of liability.

Another key aspect of indemnification provisions is that they are often mutual, meaning that both parties are responsible for indemnifying each other in certain situations. This can help to ensure that both parties are protected in the event of a legal dispute, and it also helps to create a balance of risk between the parties.

Why bother?

Indemnification provisions in technology agreements play a vital role in protecting the parties involved from financial losses, legal liabilities, and other costs associated with legal disputes. It’s important for both parties to understand the concept of indemnification, the purpose of these provisions, and how they are typically used in technology agreements.

Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter at @internetcases.

December 20, 2022 Trademarks

Does tagging the wrong account in an Instagram post show actual confusion in trademark litigation?

In a recent trademark infringement case, the court considered whether Instagram users tagging photos of one product with the account of another company’s product was evidence of actual confusion. In this case, the court found that it was not evidence of actual confusion.

Plaintiff makes premium tequila sold in bottles and defendant makes inexpensive tequila-soda product sold in cans. Plaintiff sued defendant for trademark infringement and sought a preliminary injunction against defendant. To support its assertion that it was likely to succeed on the merits of the case, plaintiff argued there was actual confusion among the consuming public. For example, on Instagram, at least 30 people had tagged photos of plaintiff’s products with defendant’s account.

The court found that in these circumstances, particularly where a marketing survey also showed less than 10% of people were confused by the defendant’s mark, that the incorrect tagging did not show actual confusion.

Though the bar for showing actual confusion is low, the court noted that a showing of confusion requires more than a “fleeting mix-up of names” and that confusion must be caused by the trademark used and must “sway” consumer purchase.

In this case, the court found that defendant’s evidence regarding mistaken Instagram tags did not establish a likelihood of trademark confusion that would result in purchase decisions based on the mistaken belief that the defendant’s tequila-soda product was affiliated with the plaintiff. At best, in the court’s view, the plaintiff’s evidence demonstrated a “fleeting mix-up of names,” which was not evidence of actual confusion.

The court likened this case to the recent case of Reply All Corp. v. Gimlet Media, LLC, 843 F. App’x 392 (2d Cir. 2021), wherein “instances of general mistake or inadvertence—without more—[did] not suggest that those potential consumers in any way confused [plaintiff’s] and [defendant’s] products, let alone that there was confusion that could lead to a diversion of sales, damage to goodwill, or loss of control over reputation.”

Casa Tradición S.A. de C.V. v. Casa Azul Spirits, LLC, 2022 WL 17811396 (S.D. Texas, December 19, 2022)

November 14, 2022 Blockchain, Trademarks

Meta prevails in trademark infringement litigation over its logo

In the case of Dfinity Foundation v. Meta Platforms, Inc., the court considered whether the new logo that Meta adopted after its 2021 rebranding infringed upon Dfinity’s trademark. In the infringement litigation that Dfinity brought over the issue, Meta moved to dismiss. The court granted the motion.

Dfinity operates the Internet Computer – a public blockchain network that seeks to provide developers and entrepreneurs with a public compute platform for building websites, enterprise systems and internet services within an open environment. Key to Dfinity’s efforts are “dapps” or decentralized applications. In 2021, the United States Patent and Trademark Office granted Dfinity a registration for the following mark: dfinity

When Meta rebranded in 2021, Mark Zuckerberg indicated, among other things, that the company would work with creators and developers in a decentralized fashion. In connection with the rebranding, Meta adopted and sought registration of this logo: meta logo

Dfinity sued in federal court in California alleging, among other things, trademark infringement. It alleged that the similarities between the marks, coupled with the related services and customer bases, will cause confusion because “consumers will mistakenly believe that Meta and its services … are connected with, sponsored by, affiliated with, or related to Dfinity and the Internet Computer.”

Meta moved to dismiss. In granting the motion to dismiss, the court found that confusion between Meta’s logo and Dfinity’s logo was unlikely as a matter of law.

Similarity of the marks

Employing the “sight, sound, and meaning” test, the court found the marks were dissimilar: Dfinity’s shape was a traditional infinity sign, with the lines crossing at the horizontal and vertical midpoint, rendered in a precise multicolor format that Dfinity instructs users of the logo not to alter. In the court’s view, the Meta logo looks different – while it includes two loops and bears some resemblance to an infinity sign, the lines cross above the vertical midpoint and the two loops are squished into vertical oblong shapes. Meta did not claim color as a feature of its mark.

Relatedness of services

On the question of whether the services provided under the two marks were similar, the court remained neutral. It noted that Dfinity has targeted developers interested in using blockchain to “build websites, enterprise systems and internet services within an open environment.” At the same time, “Meta targets everyone, including developers, some of whom presumably are interested in building their products within, or at least compatible with, such an ‘open environment.'” Meta argued that its products are antithetical to that vision, and there is no indication that it is interested in expanding into the realm occupied by Dfinity and the Internet Computer. But the court found that given Meta’s metamorphosis over the last few years, such a move is not implausible on the pleadings, particularly in light of Zuckerberg’s statement at the launch of the Meta brand.

Sophistication of users

The court then evaluated the types of users that would encounter the Dfinity and Meta logos, and whether, given their level of sophistication, confusion would be likely. The court found that because of the high level of sophistication, it is less likely one would be confused: “That these sophisticated people, immersed in the intricacies of the tech world, would be duped by a logo, particularly one that is not similar in key respects . . . borders on implausible.”

Actual confusion

Next the court considered whether purported instances of actual confusion weighed in favor of Dfinity. In this situation, Dfinity had provided six tweets that purported to show that users were confused. But the court disagreed. First, it noted that because the tweets were in reply to a Dfinity tweet, they did not express how the users would experience an encounter with the mark “organically”. And second, the court found that the content of the tweets indicated the users actually knew the difference between the two enterprises.

Marketing channels

Having found that the parties’ services were not “totally unrelated” at this stage, the court also found that the parties’ marketing channels were similar, but that this factor did not weigh as heavily as the others previously discussed.

Meta’s intent

Though Dfinity alleged “willful and wonton disregard of Dfinity’s established and superior rights” in its trademark, it did not provide evidence of that. And given that the court found the marks to be dissimilar, the court also found that Meta’s intent did not support a finding of likelihood of confusion.

Dfinity Foundation v. Meta Platforms, Inc., 2022 WL 16857036 (N.D. California, November 10, 2022)

November 10, 2022 Uncategorized

No breach of contract claim against Twitter for account suspension

The issues in the case of Yuksel v. Twitter were whether Twitter, by terminating plaintiff’s account (1) breached its contract with plaintiff, and (2) violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Twitter moved to dismiss the breach of contract and RICO claims. The court granted the motion because Section 230 barred the claims and because plaintiff failed to plausibly allege the claims.

The gist of plaintiff’s claims centered on allegations that Twitter suspended plaintiff’s account due to deference to the Turkish government. He claims that by being cut from his 142,000 followers and by having 7 years’ worth of “intellectual content” destroyed, he was damaged to the tune of $142 million.

Section 230 immunity

The court held that Twitter was immune from plaintiff’s claims, under 47 U.S.C. §230(c)(1). That provision states that:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

If found that Twitter is a provider of an interactive computer service, and that plaintiff sought to hold Twitter liable for decisions regarding information provided by another information content provider. In this situation, that other information content provider was plaintiff himself. The court also found that plaintiff sought to treat Twitter as a publisher in connection with its decision to suspend his account. But the decision to suspend an account is within the scope of “traditional publishing functions”. Quoting the well-known case of Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1102 (9th Cir. 2009), the court noted that “removing content is something publishers do.”

Plaintiff tried to get around Section 230 immunity by asserting that his RICO claim fit into the statute’s carveout for federal criminal prosecution (Section 230 (e)(1) provides that “[n]othing in this section shall be construed to impair the enforcement of . . . any . . . Federal criminal statute.”) The court rejected this argument, concluding that the carveout from immunity extends only to criminal prosecutions and not civil actions based on criminal statutes.

Failure to state a claim

The court held that even without Section 230 immunity, the breach of contract and RICO claims would fail. Plaintiff had alleged breach of contract in the complaint, but in responding to the motion to dismiss stated that he did not claim breach of contract between himself and Twitter, but rather asked the court to find Twitter’s terms of service unenforceable because they permit the arbitrary and reckless deletion of user accounts. The court noted that it was constrained to not look beyond the complaint to allegations plaintiff made only in response to Twitter’s motion to dismiss.

On the RICO claim, the court found that plaintiff failed to identify the “enterprise” subject to the RICO claim, nor any purported “pattern,” “racketeering activity,” or “injury” to “business or property” caused by it. Moreover, according to the court, plaintiff’s conclusory allegations that Twitter was somehow in cahoots with foreign dictators failed to meet basic pleading standards in federal court.

Yuksel v. Twitter, Inc., 2022 WL 16748612 (N.D. California, November 7, 2022)

See also:

September 27, 2022 Contracts, Copyright

Company successfully defends against trade dress and copyright infringement claims over online software tool

trade dress

A federal court in Delaware dismissed most of the intellectual property infringement claims concerning a competing online room-planning software tool. The court held that plaintiff’s trade dress infringement and breach of contract claims failed, and that its copyright infringement claims failed, except for those allegations relating to the copying of computer code.

No trade dress protection where look and feel was functional

On the trade dress claim, plaintiff had identified fifteen elements that formed a cohesive “look and feel” of its software. And the court found – based on extensive use, wide advertisement and appearance in industry publications – that the trade dress had acquired secondary meaning. But the court found that the look and feel was merely functional and not subject to trade dress protection.

Copyright infringement – mixed bag

Similarly, the court dismissed the copyright infringement claim regarding the selection, arrangement and coordination of visual elements of the program. In the court’s view, these elements were merely functional and thus not subject to copyright protection. The court dismissed the copyright infringement claim as well concerning the tool’s graphics. On this point the court was even more bold – it found after a visual comparison of the works that they simply were not similar.

The court allowed the copyright infringement claim concerning the program’s code to move forward. It found that plaintiff had alleged both access and similarity. Plaintiff had also alleged that defendant repeatedly accessed the program to stress test the design, and that there were extensive similarities in the tools’ mechanics. These allegations were enough to survive a motion to dismiss.

Browsewrap not enough

Finally, the breach of contract claim failed, not on the basis of preemption as one might expect, but because the court found plaintiff had not sufficiently alleged that a contract had been formed. Plaintiff asserted that its website’s terms of service prohibited copying of the software, and that defendant’s employees should have been aware of those terms on a browsewrap theory – there was a link to the terms at the bottom of the page. But the court would not find that plaintiff alleged enough facts to plausibly allege that defendant’s employees manifested assent to those browsewrap terms.

Design With Friends, Inc. v. Target Corporation, 2022 WL 4448197 (D. Delaware, September 23, 2022)

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September 12, 2022 Right of Publicity

Court dismisses company executive’s name and likeness lawsuit over YouTube videos

name likeness

Strouse was the president and CEO of a company but departed with the company was sold. He did not approve of how the new company continued to use YouTube videos Strouse had made when he was with the company. So Strouse sued under Pennsylvania law for unauthorized use of his name and likeness. The company moved to dismiss the claim and the court granted the motion.

There are three elements to a claim for unauthorized use of name and likeness under Pennsylvania law:

a natural person’s name or likeness must have commercial value;
the accused party must make an unauthorized use of that name or likeness; and
the use is for commercial or advertising purposes.

The court found that Strouse’s claim failed on the first and second elements.

Although he claimed he suffered substantial damages due to the company’s supposed misappropriation, the court found he offered no explanation for how or why these damages occurred. He did not allege that his name had any special reputation or prestige such that mention of his name or use of his image in a video on the company’s website could confer an actionable benefit.

And the court found that Strouse’s pleadings did not establish that the company was using the videos without authorization. Strouse had made the videos as president and CEO of the company – he certainly authorized such use then. The acquiring company purchased the business’s assets, including the videos that were made.

Wurth Baer Supply Co. v. Strouse, 2022 WL 4125802 (M.D. Pennsylvania, September 9, 2022)

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August 8, 2022 Employment, Privacy

Can a company snoop on its employee’s personal email account?

Plaintiff was an administrative assistant at defendant company. When her supervisor got word that plaintiff had been asked to join a competing company started by some other former company employees, the supervisor allegedly logged onto plaintiff’s work computer and without authorization accessed plaintiff’s Gmail account to get more information confirming plaintiff’s plans. Plaintiff was later terminated.

So she sued under the federal Stored Communications Act (“SCA”) and the Federal Wiretap Act (under a part of that act often called the Electronic Communications Privacy Act (“ECPA”)). Defendant moved to dismiss both the claims. The court denied the motion to dismiss the SCA claim but dismissed the ECPA claim.

The SCA prohibits, among other things, the intentional unauthorized access of a “facility through which an electronic communication service is provided”—thereby obtaining access to an electronic communication while in electronic storage. 18 U.S.C. § 2701(a). A court may award actual damages, statutory damages, and punitive damages for violation of the SCA. If a plaintiff seeks statutory damages under the SCA, it must prove actual damages. But one need not prove actual damages to recover punitive damages. The ECPA prohibits, among other things, the “interception” of electronic communication. 18 U.S.C. § 2511(a). Courts have generally held that such “interception” must be contemporaneous with transmission.

The court held plaintiff could move forward with her SCA claim even though she had not pled actual damages. She had sufficiently pled that she should be awarded punitive damages. And the court tossed the ECPA claim because the facts as alleged showed that the email messages the employer allegedly accessed had already been delivered and therefore were not intercepted as the statute requires for liability.

Benz v. PHB Realty Co., 2022 WL 3098579 (D. Kansas, August 4, 2022)

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July 17, 2022 Section 230

Section 230 immunity did not protect Omegle in product liability lawsuit

Section 230

When plaintiff was 11 years old, she was connected to a man in his late thirties using Omegle (a “free online chat room that randomly pairs strangers from around the world for one-on-one chats”). Before the man was arrested some three years later, he forced plaintiff to send him pornographic videos of herself, made threats against her, and engaged in other inappropriate and unlawful conduct with plaintiff.

Plaintiff sued Omegle, alleging product liability and negligence relating to how Omegle was designed, and for failure to warn users of the site’s dangers. Omegle moved to dismiss these claims, claiming that it could not be liable because it was protected by 47 U.S.C. §230.

The court found that that Section 230 did not apply because plaintiff’s claims did not seek to treat Omegle as the publisher or speaker of content. The court observed that to meet the obligation plaintiff sought to impose on Omegle, Omegle would not have had to alter the content posted by its users. It would only have had to change its design and warnings.

And the court found that plaintiff’s claims did not rest on Omegle’s publication of third party content. In the same way that Snapchat did not avoid liability on the basis of Section 230 in Lemmon v. Snap, Inc., 995 F.3d 1085 (9th Cir. 2021), Omegle’s alleged liability was based on its “own acts,” namely, designing and operating the service in a certain way that connected sex offenders with minors, and failed to warn of such dangers.

A.M. v. Omegle.com, LLC, 2022 WL 2713721 (D. Oregon, July 13, 2022)

See also:

Omegle protected by Section 230 against claims for child pornography, sex trafficking and related claims

June 18, 2022 Computer Crime

Is it unlawful to access someone else’s Google Drive content that is not password protected?

Plaintiff set up a Google Drive so that he could collect photos and other content related to a local school board controversy. He thought it was private, but it was actually configured so that anyone using the URL could access the content. After the local controversy escalated, plaintiff’s son emailed some photos to an opponent, and one of those photos contained the Google Drive’s URL. That photo made its way into the hands of defendant, who, using the URL, allegedly reviewed, downloaded, deleted, added, reorganized, renamed, and publicly disclosed contents of the Google Drive.

Google Drive CFAA

So plaintiff sued under the Computer Fraud and Abuse Act, 18 U.S.C. §1030, (the “CFAA”). Defendant moved to dismiss, arguing, among other things, that plaintiff had failed to adequately plead that defendant’s access to the Google Drive was without authorization.

Defendant had argued that her access using the URL could not be considered unauthorized under the CFAA, in accordance with the holding of hiQ Labs, Inc. v. LinkedIn Corp., 31 F.4th 1180 (9th Cir. 2022). In that case, the Ninth Circuit reasoned that “the prohibition on unauthorized access is properly understood to apply only to private information – information delineated as private through use of a permission requirement of some sort.” Thus, for a website to fall under CFAA protections, it must have erected “limitations on access.” And if “anyone with a browser” could access the website, it had no limitations on access.

In this case, defendant merely used her web browser and the URL she obtained to access plaintiff’s Google Drive. The portion of the Google Drive was not password protected. And plaintiff had – though inadvertently – enabled the setting that allowed anyone with the URL to access the drive’s contents.

But in the court’s view, the Google Drive nonetheless had limitations that made defendant’s access unauthorized. The court differentiated the situation from one in which just “anyone with a web browser” might access the content, for example, via a web search. One needed to enter a 68-character URL to access the content. And the content was not indexed by any search engines. So the Google Drive was not “per se” public. And defendant’s access – as plaintiff had pled it – was not authorized.

Greenburg v. Wray, 2022 WL 2176499 (D. Ariz., June 16, 2022)

See also:

Can you violate the CFAA by deleting data on your own computer?

Company president may be liable for vicarious copyright infringement

vicarious liability copyright

Plaintiff sued a company and its president for copyright infringement, over some photos that the company published online. The individual defendant moved to dismiss the claim against him, arguing that the complaint (1) did not plead any facts concerning action that he took, (2) did not try to pierce the company’s corporate veil, and (3) contained no facts to establish that the company is the alter ego of the individual defendant. Plaintiff conceded it was neither pursuing an alter-ego theory nor seeking to pierce the corporate veil. Instead, plaintiff argued that the individual defendant was vicariously liable for the company’s infringement. The court denied the motion to dismiss.

The court looked first to Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), which provides that one infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. But then it cited to later Tenth Circuit cases (e.g., Diversey v. Schmidly, 738 F.3d 1196 (10th Cir. 2013)) which state the test for vicarious liability a bit differently. Under Diversey, “[v]icarious liability attaches when the defendant ‘has the right and ability to supervise the infringing activity’ and ‘has a direct financial interest in such activities.” There is no mention of declining to exercise the right to stop or limit the infringement under this test, as there is in Grokster.

The court found that the plaintiff’s claims for vicarious liability against the individual defendant survive because the complaint alleged that defendant was the owner and president of the company, had the ability to supervise and control content on the website, and received a financial benefit from the operation of the website. It rejected the individual defendant’s argument that the claim should fail because there were no allegations that he declined to exercise the right to stop or limit the infringement.

Great Bowery v. Best Little Sites, 2022 WL 2074253 (D. Utah June 9, 2022)

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