Attorney Evan Brown

January 18, 2022 Litigation, Trademarks, Unfair Competition

Old social media posts violated trade dress infringement injunction

The parties in the case of H.I.S.C., Inc. v. Franmar are competitors, each making garden broom products. In earlier litigation, the defendant filed a counterclaim against plaintiff for trade dress infringement, and successfully obtained an injunction against plaintiff, prohibiting plaintiff from advertising brooms designed in a certain way. Defendant asked the court to find plaintiff in contempt for, among other reasons, certain social media posts that plaintiff posted before the injunction, but that still remained after the injunction was entered. The court agreed that the continuing existence of such posts was improper and found plaintiff in contempt for having violated the injunction.

The court noted that the injunction prohibited “[a]dvertising, soliciting, marketing, selling, offering for sale or otherwise using in the United States the [applicable product trade dress] in connection with any garden broom products.” It observed that “[o]n the Internet and in social media, a post from days, weeks, months, or even years ago can still serve to advertise a product today.” The court cited to Ariix, LLC v. NutriSearch Corp., 985 F.3d 1107, 1116 n.5, in which that court noted that one prominent influencer receives $300,000 to $500,000 for a single Instagram post endorsing a company’s product – a sum surely including both the post itself and an agreement to continue allowing the post to be visible to consumers for a substantial duration of time. Interestingly, the court found that the nature of a social media post may be different from a television or radio advertisement that has a fixed air date and time. Accordingly, the court found that it was inappropriate for social media posts published before the injunction to stay online.

H.I.S.C., Inc. v. Franmar Int’l Importers, Ltd., 2022 WL 104730 (S.D. Cal. January 11, 2022)

See also:

January 14, 2022 Privacy

Can a party recover statutory damages under the Stored Communications Act without proving actual damages?

The Stored Communications Act (18 USC 2701 et seq.) is among the most powerful tools relating to email privacy. It is a federal statute that prohibits, in certain circumstances, one from intentionally accessing without authorization, or exceeding authorized access to, a facility through which an electronic communication service is provided. The statute provides criminal penalties and an aggrieved party can bring a civil suit for damages in certain cases.

The statute contains a provision that addresses the amount of money damages a successful plaintiff can recover. Section 2707(c) provides the following:

Damages. The court may assess as damages in a civil action under this section the sum of the actual damages suffered by the plaintiff and any profits made by the violator as a result of the violation, but in no case shall a person entitled to recover receive less than the sum of $1,000. If the violation is willful or intentional, the court may assess punitive damages. In the case of a successful action to enforce liability under this section, the court may assess the costs of the action, together with reasonable attorney fees determined by the court.

Note the phrase “but in no case shall a person entitled to recover receive less than the sum of $1,000.” Does that mean every plaintiff that successfully proves the defendant’s liability is entitled to at least $1,000, regardless of whether there was any actual damage that occurred? The Fifth Circuit Court of Appeals recently addressed that question in the case of Domain Protection, L.L.C. v. Sea Wasp, L.L.C. It held that one must show at least some actual damages before being entitled to the minimum of $1,000.

The court looked to the Supreme Court’s approach in addressing nearly identical language in another statute, wherein SCOTUS concluded that “person entitled to recover” refers back to the party that suffers “actual damages.” Doe v. Chao, 540 U.S. 614, 620, 124 S.Ct. 1204, 157 L.Ed.2d 1122 (2004). And it noted that two other circuits have held that this reasoning should apply to the same terms in the Stored Communications Act: Vista Mktg., LLC v. Burkett, 812 F.3d 954, 964–75 (11th Cir. 2016) and Van Alstyne v. Elec. Scriptorium, Ltd., 560 F.3d 199, 204–208 (4th Cir. 2009). The court “endorse[d] the reasoning of those opinions and [saw] no need to repeat it.”

Domain Protection, L.L.C. v. Sea Wasp, L.L.C., — F.4th —, 2022 WL 123408 (5th Cir. January 13, 2022)

January 12, 2022 Computer Crime, Section 230

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

Section 230 sex trafficking

Omegle is a notorious website where you can be randomly placed in a chat room (using video, audio and text) with strangers on the internet. Back in March 2020, 11-year-old C.H. was using Omegle and got paired with a pedophile who intimidated her into disrobing on camera while he captured video. When C.H.’s parents found out, they sued Omegle alleging a number of theories:

possession of child pornography in violation of 18 U.S.C. § 2252A;
violation of the Federal Trafficking Victims Protection Act, 18 U.S.C. §§ 1591 and 1595;
violation of the Video Privacy Protection Act, 18 U.S.C. § 2710;
intrusion upon seclusion;
negligence;
intentional infliction of emotional distress;
ratification/vicarious liability; and
public nuisance

The court granted Omegle’s motion to dismiss all eight claims, holding that each of the claims was barred by the immunity provided under 47 U.S.C. § 230. Citing to Doe v. Reddit, Inc., 2021 WL 5860904 (C.D. Cal. Oct. 7, 2021) and Roca Labs, Inc. v. Consumer Op. Corp., 140 F. Supp. 3d 1311 (M.D. Fla. 2015), the court observed that a defendant seeking to enjoy the immunity provided by Section 230 must establish that: (1) defendant is a service provider or user of an interactive computer service; (2) the causes of action treat defendant as a publisher or speaker of information; and (3) a different information content provider provided the information.

Omegle met Section 230’s definition of “interactive computer service”

The court found Omegle to be an interactive computer service provider because there were no factual allegations suggesting that Omegle authored, published or generated its own information to warrant classifying it as an information content provider. Nor were there any factual allegations that Omegle materially contributed to the unlawfulness of the content at issue by developing or augmenting it. Omegle users were not required to provide or verify user information before being placed in a chatroom with another user. And some users, such as hackers and “cappers”, could circumvent other users’ anonymity using the data they themselves collected from those other users.

Plaintiffs’ claims sought to treat Omegle as a publisher or speaker of information

The court found that each of the claims for possession of child pornography, sex trafficking, violation of the Video Privacy Protection Act, intrusion upon seclusion and intentional infliction of emotional distress sought redress for damages caused by the unknown pedophile’s conduct. Specifically, in the court’s view, no well-pleaded facts suggested that Omegle had actual knowledge of the sex trafficking venture involving C.H. or that Omegle had an active participation in the venture. As for the claims of intentional infliction of emotional distress, ratification/vicarious liability and public nuisance, the court similarly concluded that plaintiffs’ theories of liability were rooted in Omegle’s creation and maintenance of the site. The court observed that plaintiffs’ claims recognized the distinction between Omegle as an interactive computer service provider and its users, but nonetheless treated Omegle as the publisher responsible for the conduct at issue. The court found this was corroborated by the “ratification/vicarious liability” claim, in which plaintiffs maintained that child sex trafficking was so pervasive on and known to Omegle that it should have been vicariously liable for the damages caused by such criminal activity. And, in the court’s view, through the negligence and public nuisance claims, plaintiffs alleged that Omegle knew or should have known about the dangers that the platform posed to minor children, and that Omegle failed to ensure that minor children did not fall prey to child predators that may use the website.

The information at issue was provided by a third party

On this third element, the court found that Omegle merely provided the forum where harmful conduct took place. The content giving rise to the harm – the video and the intimidation – were undertaken by the unknown pedophile, not Omegle.

Special note: Section 230 and the sex trafficking claim

Section 230 (e)(5) limits an interactive computer service provider’s immunity in certain circumstances involving claims of sex trafficking. In this case, however, like the court did in the case of Doe v. Kik Interactive, Inc., 482 F. Supp. 3d 1242 (S.D. Fla. 2020), the court held that Omegle’s Section 230 immunity remained intact, because the plaintiffs’ allegations were premised upon general, constructive knowledge of past sex trafficking incidents. The complaint failed to sufficiently allege Omegle’s actual knowledge or overt participation in the underlying incidents between C.H. and the unknown pedophile.

M.H. and J.H. v. Omegle.com, LLC, 2022 WL 93575 (M.D. Fla. January 10, 2022)

January 11, 2022 Cybersquatting

ACPA claim survives because mark was distinctive when domain name was re-registered

ACPA distinctive re-regiistered

Federal law has a statute that prohibits abusive domain name registration. The Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d) (ACPA) provides, among other things, that one is prohibited from registering, trafficking in or using, with a bad faith intent to profit, a domain name that is confusingly similar to another’s trademark that was distinctive when the domain name was registered.

In the recent case of Instructure, Inc. v. Canvas Technologies, the court considered whether the ACPA requires the mark to have been distinctive when the domain name was first registered, or whether it can still be protected by being distinctive when the domain name was re-registered. It held that the statute applies to distinctiveness at re-registration.

In this case, the disputed domain name was first registered in 1997, several years before plaintiff obtained trademark rights in its CANVAS mark. Defendant moved to dismiss plaintiff’s cybersquatting claim, arguing that the plaintiff did not have rights to a distinctive mark when the domain name was first registered, and that therefore the statute’s requirement was not met. Plaintiff showed, however, that the ownership of the domain name changed sometime in 2021 (i.e., it was re-registered).

Looking to the statute’s plain language, Congressional intent, public policy, and the trending weight of authority in other federal circuits, the court held that re-registration, or “registration again” is contemplated under the ACPA’s language. It denied defendant’s motion to dismiss the ACPA claim.

Instructure, Inc. v. Canvas Technologies, Inc., 2022 WL 43829 (D.Utah, January 5, 2022)

January 6, 2022 Cybersquatting

UDRP loss results from lack of communication with domain registrar

UDRP domain registrar
In a recent case under the Uniform Dispute Resolution Policy (UDRP), the administrative panel determined that a party who had owned the disputed domain name for more than 20 years was not entitled to recover it from another party who bought the domain name at auction. The complainant alleged that it let the domain name registration lapse because it could not communicate with the domain name registrar, which apparently recently had been acquired by another registrar. After purchasing the domain name at auction, the respondent redirected it to his travel-related website. (The parties disputed whether that redirection continued – in a supplemental filing, the complainant characterized the respondent’s redirecting of the disputed domain name to pay-per-click ads as “thumbing his nose” at the tribunal and the complainant.

The panel found the use of the generic words “simple” and “plan” in the domain name, in relation to a travel-related website operating in the way described by the respondent, was legitimate. The panel therefore found that, before any notice to the respondent of the dispute, the respondent had used the domain name in connection with a bona fide offering of travel-related services.

As for the question of the respondent’s registration and use of the domain name in bad faith, the panel found there was insufficient evidence to demonstrate that the respondent had any hand in preventing the complainant’s renewal of the domain name or that he should have known of the complainant’s mark at the time when he purchased the domain name at auction. Further, the complainant did not submit any evidence of its reputation in the countries where the respondent lives or conducts business. Thus, the panel concluded that the complainant had not shown, by a preponderance of the evidence, that the was targeting the complainant’s mark.

Simple Plan Inc. v. Michel Rog, FORUM Claim Number FA2111001973743 (January 4, 2022)

January 5, 2022 Computer Crime, Contracts

Court refuses to enjoin use of fake accounts to access DRM-protected information

Plaintiff manufacturer of medical equipment sued a company that services such equipment for hospitals and clinics. Plaintiff claimed, among other things, that defendant violated the Computer Fraud and Abuse Act and the anticircumvention provisions of the Digital Millennium Copyright Act by using fake accounts to access proprietary documents, information and software that plaintiff had protected with digital rights management (DRM) technology.

The court denied plaintiff’s motion for preliminary injunction – which sought to bar defendant from accessing the computer systems or circumventing the DRM. It held that plaintiff had not met an essential element required for injunctive relief, namely, that plaintiff would suffer irreparable harm if the injunction was not granted.

There were two main reasons for the court’s decision. First, the court found that the assertions of irreparable harm were mere conclusions not supported by concrete facts. Second, the court found that the obligations on the defendant imposed by the contracts it had with its hospital and clinic customers would constrain defendant from engaging in the harmful activity that plaintiff sought to stop. For example, plaintiff claimed that defendant would access patient data without authorization. But the court noted that defendant was bound by confidentiality agreements and the obligation to abide by applicable data protection law. And plaintiff was worried that continued unauthorized access would increase the chances that defendant would modify the equipment. But again, the court looked to the contracts between defendant and its customers, which obligated defendant to properly maintain the equipment (thus removing any incentive to do what plaintiff was seeking to prevent).

Philips North America LLC v. Advanced Imaging Services, Inc., 2021 WL 6052285 (E.D. Cal., December 21, 2021)

January 4, 2022 Contracts, Cryptocurrency, Fraud/Misrepresentation

Exploiting blockchain software defect supports unjust enrichment claim

blockchain unjust enrichment
Most court cases involving blockchain have to do with securities regulation or some other business aspect of what the parties are doing. The case of Shin v. ICON Foundation, however, deals with the technology side of blockchain. The U.S. District Court for the Northern District of California recently issued an opinion having to do with how the law should handle a person who exploits a software flaw to quickly (and, as other members of the community claim, unfairly) generate tokens.

Exploiting software flaw to generate tokens

Mark Shin was a member of the ICON Community – a group that includes users who create and transact in the ICX cryptocurrency. The ICON Network hosts the delegated proof of stake blockchain protocol. The process by which delegates are selected for the environment’s governance involves ICX users “staking” tokens. As an incentive to participate in the process, ICX holders receive rewards that can be redeemed for more ICX. The system does not give rewards, however, when a user “unstakes” his or her tokens.

When a new version of the ICON Network software was released, Shin discovered that he was immediately awarded one ICX token each time he would unstake a token. Exploiting this software defect, he staked and unstaked tokens until he generated new ICX valued at the time at approximately $9 million.

Bring in the lawyers

Other members of the community did not take kindly to Shin’s conduct, and took steps to mitigate the effect. Shin filed suit for conversion and trespass to chattel. And the members of the cryptocurrency community filed a counterclaim, asserting a number of theories against Shin, including a claim for unjust enrichment. Shin moved to dismiss the unjust enrichment claim, arguing that the community’s claim failed to state a claim upon which relief could be granted. In general, unjust enrichment occurs when a person has been unjustly conferred a benefit, including through fraud or mistake. Under California law (which applied in this case), the elements of unjust enrichment are (1) receipt of a benefit, and (2) unjust retention of the benefit at the expense of another.

Moving toward trial

In this case, the court disagreed with Shin’s arguments. It held that the members of the community had sufficiently pled a claim for unjust enrichment. It’s important to note that this opinion does not mean that Shin is liable for unjust enrichment – it only means that the facts as alleged, if they are proven true, support a viable legal claim. In other words, the opinion confirms that the law recognizes that Shin’s alleged conduct would be unjust enrichment. We will have to see whether Shin is actually found liable for unjust enrichment, either at the summary judgment stage or at trial.

Examining the elements of unjust enrichment, the court found that the alleged benefit to Shin was clear, and that the community members had adequately pled that Shin unjustly retained this benefit. The allegations supported the theory that Shin materially diluted the value of the tokens held by other members of the community, and that he “arrogated value to himself from the other members.” According to the members of the community, if Shin had not engaged in the alleged conduct, the present-day value of ICX would be even higher. (It will be interesting to see how that will be proven – perhaps one more knowledgeable than this author in crypto can weigh in.)

Shin v. ICON Foundation, 2021 WL 6117508 (N.D. Cal., December 27, 2021)

November 8, 2021 Contracts, Copyright

Copyright ownership transfers must be in writing

If you are hiring an independent contractor to create copyrightable subject matter, and you want to own the copyright in the resulting work product, be sure to have that contractor sign a written contract that specifically states that copyright ownership is being transferred. Even if you have paid the contractor for the work, and you both intend that ownership be transferred, the contractor will still own the copyright in the deliverables unless there is a writing, signed by the contractor, to the contrary. This is a key concern if your contractor has created subject matter that will be critical to your business – software, graphics, text, photos, any kind of protectable digital asset. If you do not secure ownership, the contractor may later object to how you are using the works differently than intended at the time of the contract, and claim infringement. Or the contractor could grant a license in the same work to another party, even one of your competitors.

The Copyright Act contains a couple of provisions that relate to this issue. The first one pertains to the definition of “work made for hire”. If an employee creates copyrightable subject matter within the scope of his or her employment, that is a work made for hire, and the employer owns the copyright. But note how that relates to employers and employees. Contractors are in a different category. There are other kinds of works that are “ordered or commissioned” that can be considered works made for hire, even if created by an independent contractor. But in any event, the Copyright Act says that these are works made for hire only “if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

Let’s say you have not established that the contractor’s work is a “work made for hire”. You could still have the contractor assign his or her rights in the deliverables. Again, the Copyright Act requires this to be in writing. You cannot just agree on a handshake that ownership of copyright has been transferred. The statute provides that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” Note that the contractor – the one making the assignment – has to sign the written document.

Paying attention to these issues on the front end of hiring an independent contractor will help ensure clear rights in the future, avoid future tangles and disagreements, and ultimately save time and money by avoiding costly dispute resolution.

Evan Brown is a technology and intellectual property attorney in Chicago. Twitter: @internetcases

October 6, 2021 Blockchain

How do we attribute value to an NFT?

How do we attribute value to an NFT? We can analyze this question from a number of perspectives. To start, we could draw a line of demarcation between categories of possessions that exist physically and those that exist intangibly. One intuitively understands how tangible things get value. This is often tied to the item’s usefulness. For example, a car has value because it transports. A knife is useful for cutting. A pen enables writing. We move out one level of abstraction and see that pieces of physical money (coins and bills) have value in how they are used to transact in goods and services.

Empty intangibility?

The value of intangible possessions requires more abstract thinking, but the reasonable person has no difficulty in grasping how that valuation works. One may possess a right or privilege even though he can’t hold it in his hands. Another may possess a digital good – think about premium skins in video games – but she cannot physically touch it. Understanding the value in these kinds of intangible things is not too challenging. So we can reject the notion that an NFT’s intangible nature means it has no value. But where do we go from here in exploring where an NFT’s value is derived?

Ain’t she a beauty?

Consider a digital work of art (as a .jpg, for example) that is transacted as an NFT. The underlying work of art – whether seen as bits on a screen or printed out as ink-on-paper – can hold the viewer in aesthetic arrest. But the NFT itself – data within the blockchain – does not so stimulate the human soul. It seems, therefore, that we have eliminated the notion that beauty or some similar concept gives value to an NFT.

There’s something about Mona Lisa

But let’s not yet move away from thinking about characteristics of works of art in seeking to answer our question about attributing value. The ability to hold its viewer in aesthetic arrest is only one way a physical piece of art can have value. Consider the Mona Lisa – the actual physical painting hanging on a wall this very moment at the Louvre in Paris. I could fly to Paris, take the Metro to the Louvre, buy a ticket and make my way to the hall where the Mona Lisa is displayed. I could look at it there and behold its beauty. But I could also behold that beauty by doing a Google Image search on my computer in the basement. Or I could go to Target and buy a Mona Lisa print to hang on my own wall. The fact that I could enjoy the Mona Lisa without going to Paris shows that the ability to induce aesthetic arrest does not come only from the original. One can get the same thrill from seeing a copy. Yet there remains a thrill one can get only by beholding the actual physical painting in Paris. There’s a “something more” arising from seeing the actual materials assembled as they were by da Vinci’s own hand. There is a value in being in the presence of and perceiving the actual corporeal stuff that da Vinci saw and manipulated.

There is only one original Mona Lisa. It is irreplaceable. That is, it is non-fungible. The original Mona Lisa in Paris connects us to da Vinci in time and space. When we are in the presence of the original Mona Lisa, we are in the presence of the actual stuff (wood, pigment) that da Vinci handled. That ability to give the viewer an experience of presence – one more than mere aesthetic arrest – contributes substantially to the painting’s value. So it must be, then, that these particular molecules comprising the original Mona Lisa, and one’s being in proximity to them, are what gives the original painting a special value? Well, no.

Love at the molecular level

The actual molecules comprising the Mona Lisa – the carbon in the poplar board, the material in the pigment, etc. – compared in terms of chemical structure and behavior – differ none from all the other like category molecules in the universe. The Mona Lisa’s molecules are not special in themselves, but instead are valuable because they were worked in accordance with da Vinci’s intention.

Being intentional

Here we may have reached a good place from which to jump back over to NFTs. We know that intangibleness does not disqualify NFTs from having value. And we know that NFTs do not induce an aesthetic experience. But they do carry some specialness due to their uniqueness. In a certain respect, Jack Dorsey’s NFT of the Very First Tweet carries the same flavor of specialness as the Mona Lisa in the Louvre, even though – unlike the Mona Lisa – the Very First Tweet NFT does not portray beauty. And, unlike the original Mona Lisa, the Very First Tweet NFT, being intangible, does not contain any particular molecules that Dorsey put there (because of course the bits stored that embody the tweet or the NFT are not tied to a particular memory substrate that he dealt with back in March 2006). But what does remain is the fact that the content of the Very First Tweet has now become inextricably (even if only symbolically) linked to the NFT because of Dorsey’s intention.

We have now arrived at a point where we can at least preliminarily posit some statements articulating how an NFT gets value: Value attaches to an NFT because of the uniqueness of its digital structure having come into existence as the particular effect of an act of its author’s intention. More simply: One may want an NFT because there is something abstractly intriguing about its creation and existence, even though there is nothing one can touch that corresponds with that intrigue.

Evan Brown is a technology and intellectual property attorney in Chicago. Follow him on Twitter at @internetcases. This content originally appeared at evan.law.

July 27, 2021 Unfair Competition

Online retailer’s use of photo of products it did not sell was not an unfair or deceptive act

Defendant online guitar retailer used on its website a photo of premium guitar necks – products that the online retailer did not sell. Plaintiff – the purveyor of the premium guitars found in the photo – sued defendant under the New Hampshire consumer protection act which makes unfair or deceptive acts in trade or commerce unlawful. The case went to trial. The court found in favor of defendant.

website photo deceptive practices

The court found three of plaintiff’s key witnesses not credible. Each of them had some sort of personal relationship with the plaintiff that in the court’s view tainted their testimony. One of them testified in a questionable way – he testified remotely via videoconferencing software and was “clearly reading from notes or a script during his direct examination.” And “[r]ather than looking directly into the camera when he answered questions, he consistently fixed his gaze on the left portion of his computer screen each time he began his answer.”

The photo played a minor part in defendant’s website. It was relatively small in comparison to the rest of the material in which it appeared. It took up approximately a third of an online document’s width and was not much bigger than a thumbnail-sized image. The image quality was low – the guitar necks were blurry and it was difficult to tell whether anything was written on the them, such as a logo.

The court found that plaintiff failed to prove that consumers would have understood defendant’s use of the photo to assert an affiliation between defendant and plaintiff. In the court’s mind, even if defendant had proven the assertion of an affiliation, plaintiff failed to prove that defendant acted with the intent required for the applicable statutory violation.

D’Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc., 2021 WL 3038640 (D.N.H., July 19, 2021)