Attorney Evan Brown

July 16, 2019 Copyright

Photographer’s copyright claim against officer of company over photos on website moves forward

Plaintiff, a professional photographer, sued defendant company and an individual who was its “registered agent and … officer, director, manager, and/or other genre of principal” for copyright infringement over two photographs that appeared on the defendant company’s website. The infringement claims against the individual defendant included one for vicarious infringement.

The individual defendant moved to dismiss the vicarious infringement claim. The court denied the motion.

One “infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). “In order to establish vicarious liability, a copyright owner must demonstrate that the entity to be held so liable: (1) possessed the right and ability to supervise the infringing activity; and (2) possessed an obvious and direct financial interest in the exploited copyrighted materials.” Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505, 513 (4th Cir. 2002).

In this case, plaintiff alleged that the individual defendant controlled nearly all decisions of the company and was the dominant influence in the company. In addition, plaintiff alleged that the individual defendant “had the right and ability to supervise and/or control the infringing conduct of the company, and/or stop the infringements once they began.” Finally, plaintiff alleged that the individual defendant had an obvious and direct financial interest in the infringing activities of the company since he was an officer, director, manager or other principal of/for the company. As a principal of the company, the individual defendant’s financial interests were intertwined with the company’s. Therefore, the individual defendant had a direct and obvious financial interest in the company.

So the court concluded that plaintiff had presented sufficient facts with regard to each element of the vicarious liability claim.

Oppenheimer v. Morgan, 2019 WL 2617080 (W.D.N.C., June 26, 2019)

June 12, 2019 Section 230

Section 230 protected Twitter from liability for deleting Senate candidate’s accounts

Plaintiff (an Arizona senate candidate) sued Twitter after it suspended four of plaintiff’s accounts. He brought claims for (1) violation of the First Amendment; (2) violation of federal election law; (3) breach of contract; (4) conversion, (5) antitrust; (6) negligent infliction of emotional distress; (7) tortious interference; and (8) promissory estoppel.

Twitter moved to dismiss on multiple grounds, including that Section 230(c)(1) of the Communications Decency Act (“CDA”), 47 U.S.C. § 230, rendered it immune from liability for each of plaintiff’s claims that sought to treat it as a publisher of third-party content.

The CDA protects from liability (1) any provider of an interactive computer service (2) whom a plaintiff seeks to treat as a publisher or speaker (3) of information provided by another information content provider.

The court granted the motion to dismiss, on Section 230 grounds, all of the claims except the antitrust claim (which it dismissed for other reasons). It held that Twitter is a provider of an interactive computer service. And plaintiff sought to treat Twitter as a publisher or speaker by trying to pin liability on it for deleting accounts, which is a quintessential activity of a publisher. The deleted accounts were comprised of information provided by another information content provider (i.e., not Twitter, but plaintiff himself).

Brittain v. Twitter, 2019 WL 2423375 (N.D. Cal. June 10, 2019)

June 11, 2019 Miscellaneous

Amazon faces liability for assuming a duty to act, by sending email warning of hoverboard fires

Online marketplaces should take note – sometimes trying to do the right thing will create more legal exposure.

Plaintiffs tragically lost their home and suffered injuries in a fire caused by a hoverboard they bought through Amazon. They sued Amazon. Their negligence claim arose under Tennessee tort law, arising from the principle set out in Restatement (Second) of Torts § 324A, which states:

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking if (a) his failure to exercise reasonable care increases the risk of such harm, or (b) he has undertaken to perform a duty owed by the other to the third person, or (c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

Plaintiffs claimed that defendant Amazon gratuitously undertook to warn the purchaser of the hoverboard (one of the plaintiffs) of the dangers posed by the hoverboard when it sent her an email outlining some of the dangers with hoverboards. Plaintiffs claimed that Amazon was negligent in that undertaking, and that the negligence caused plaintiffs harm.

The lower court granted summary judgment in Amazon’s favor, but the Sixth Circuit reversed the summary judgment order. It held that when Amazon chose to send the email to the one plaintiff, and in so doing sought to warn her of the dangers posed by the hoverboard, it assumed a duty to warn. There remained genuine issues of material fact as to whether Amazon breached that duty and whether any breach caused plaintiffs’ harm.

For instance, there was a genuine issue of material fact regarding whether Amazon’s failure to include certain information in the email amounted to negligence. The email did not inform hoverboard purchasers of any of the actions Amazon had taken to evaluate the dangers posed by hoverboards, including the findings and results of its internal investigation. The email did not inform hoverboard purchasers that the reported safety issues included a risk of fire or explosion. And the email did not inform hoverboard purchasers that Amazon had ceased all hoverboard sales worldwide.

And there was a genuine issue of material fact regarding whether the plaintiff read the email, and thereby could have acted in reliance on it. Though plaintiff had no specific recollection of reading the email, she “had a habit” of reading emails sent to her email address. She also testified that she would not have let the hoverboard enter or remain in her home had she known, among other things, that there had been 17 complaints of fires or explosions in the United States that involved hoverboards purchased on Amazon, that Amazon anticipated additional complaints, particularly during the upcoming holiday season, or that Amazon had ceased all hoverboard sales worldwide.

Fox v. Amazon.com, Inc., 2019 WL 2417391 (6th Cir. June 10, 2019)

June 3, 2019 Trade Secrets

Question of who owns source code proceeds to trial in trade secrets case

Plaintiff sued its competitor in the mobile payment space for, among other things, trade secret misappropriation. Plaintiff claimed that defendant created its products using source code copied from plaintiff by two of plaintiff’s former employees who now work for defendant.

Defendant moved for summary judgment, arguing that plaintiff did not own the source code (and the trade secrets in it), because an independent contractor created the source code.

The court denied the motion for summary judgment. Plaintiff had provided evidence that the source code was written by a number of parties (including its own employees) and not just the independent contractor that defendant claimed owned the source code. The court held that plaintiff had presented evidence to raise genuine issues for trial as to who wrote what code.

Citcon, USA, LLC v. RiverPay Inc., 2019 WL 2327885 (N.D. Cal., May 31, 2019)

May 29, 2019 Cybersquatting

Coachella unsuccessful in domain name dispute, failing to prove bad faith use and registration

Disputed domain name: chellastore.com

The Complainant is the owner of the well-known Coachella festival. It owns a trademark registration, issued in 2016, for the mark CHELLA.

The Respondent asserted that he intended to use the disputed domain name to set up an online women’s clothing store but never did so. He claimed that growing up, his nickname was “Chelle” and that he modified that name to make it sound more feminine for use in connection with the store.

Coachella challenged the domain name registration. A single-member NAF panel denied the complaint. It found in favor of the Complainant on the first two UDRP elements, but did not find that the Respondent registered and used the disputed domain name in bad faith.

In the present case, the Panel found that, in contrast to the COACHELLA mark, the Complainant failed to show that its CHELLA mark was sufficiently well-known. All of the Complainant’s exhibits substantiating the well-known character of its mark related to its COACHELLA mark. Since the disputed domain name was considered to only be confusingly similar to Complainant’s CHELLA mark, the Panel found that future active use of the disputed domain name could thus be legitimate without interfering with the Complainant’s marks.

The Panel was also of the opinion that the Complainant did not sufficiently show the Respondent’s constructive knowledge of the COACHELLA or CHELLA marks to evidence bad faith registration of the disputed domain name. Considering that the term “Chella” is used as a personal name or to denote a town in Spain, the Panel found that it was plausible that the disputed domain name was registered in good faith by the Respondent, without any knowledge of or intention to target the Complainant’s marks. Finally, the Panel found that the Respondent had not violated any of the factors listed in Paragraph 4(b) of the UDRP or engaged in any other conduct that would constitute bad faith registration and use under the UDRP.

Coachella Music Festival, LLC v. John Mercado, FA1904001840140 (Forum, May 27, 2019)

This post originally appeared on UDRP Tracker.

May 13, 2019 Computer Crime, Contracts

Sony’s EULA did not protect it from liability under CFAA and for trespass to chattel

Plaintiff filed a class action lawsuit against Sony after Sony issued a software update that bricked plaintiff’s Sony Dash. Sony moved to dismiss for failure to state a claim. The court granted the motion on a number of claims but allowed the Computer Fraud and Abuse Act (CFAA) and trespass to chattel claims to move forward.

CFAA Claim

Sony had argued that the CFAA claim should fail because plaintiff had not alleged the software update was “without authorization,” given the language of the end user license agreement, which read:

From time to time, Sony … may automatically update or otherwise modify the Software, for example, but not limited to for purposes of error correction, improvement of features, and enhancement of security features. Such updates or modifications may change or delete the nature of features or other aspects of the Software, including but not limited to features you may rely upon. You hereby agree that such updates and modifications may occur at Sony’s sole discretion, and that Sony may condition continued use of the Software upon your complete installation or acceptance of such updates or modifications.

Specifically, Sony argued that the EULA authorized Sony to “modify” the software at any time, and warned that such modifications may change or delete the nature of features or other aspects of the software, including features the consumer may rely upon. A court addressed a similar argument in In re Apple, 596 F.Supp.2d 1288 (N.D. Cal. 2008). In that case, Apple, as defendant, relied on the following language to argue that it acted “with authorization” for purposes of the CFAA when bricking iPhones that had been unlocked to access third-party applications:

IF YOU HAVE MODIFIED YOUR IPHONE’S SOFTWARE, APPLYING THIS SOFTWARE UPDATE MAY RESULT IN YOUR IPHONE BECOMING PERMANENTLY INOPERABLE

In that case, the court concluded that usage of the term “may” (as in “may result” in damage) created too much ambiguity surrounding Apple’s warning and found plaintiff’s allegations as to its CFAA claim sufficient to defeat Apple’s motion to dismiss.

Here, Sony had used the same ambiguous “may” (as in “may change or delete the nature of features”) and even more uncertain language than in In re Apple. Unlike in In re Apple, Sony did not explicitly warn that a subsequent software update could render the Dash “permanently inoperable.” The EULA did not say that Sony could delete all features. Instead, it vaguely warned consumers that Sony “may change or delete the nature of features” that a consumer “may rely upon.” This sentence was also prefaced by the following: “From time to time, Sony … may automatically update or otherwise modify the Software, for example, but not limited to for purposes of error correction, improvement of features, and enhancement of security features.”

The court found that this preface implied that automatic software updates would improve or enhance the Dash – not destroy its functionality. The court could not say at this stage that by using the Dash and thus implicitly agreeing to the EULA, plaintiff authorized Sony to render his device inoperable. Accordingly, the court found that plaintiff plausibly pled that Sony acted “without authorization” in bricking the Dash.

Tresspass to Chattel

Under New Jersey law, “[a] cognizable claim for trespass to chattel occurs ‘when personal property, in the actual use of the owner, is injured or taken by a trespasser, so that the owner is deprived of the use of it.’” Arcand v. Brother Int’l Corp., 673 F. Supp. 2d 282, 312 (D.N.J. 2009) (quoting Luse v. Jones, 39 N.J.L. 707, 709 (N.J. 1877)). “[P]hysical contact with the chattel, for instance, where a person kicks another’s car bumper, is not required.” Id. “All that is required … is interference with the chattel as a direct or indirect result of an act done by the actor.” Id.

In this case, Sony’s software update bricked plaintiff’s Dash. The court found that contrary to Sony’s assertions, plaintiff had not consented to Sony rendering his device wholly nonfunctional by agreeing to the EULA.

Sony had also argued that plaintiff never owned the software used by the Dash (in accordance with the EULA) and therefore Sony could not be liable for altering that software in the update. But the court saw it otherwise — whether plaintiff owned the software, Sony, at a minimum, indirectly injured plaintiff’s physical Dash by rendering it completely nonfunctional through the software update. The court again looked to In re Apple wherein that court found that the plaintiffs plausibly pled trespass to chattel by alleging that Apple released a software update that rendered the plaintiffs’ iPhones permanently inoperable. On these facts, the court found that plaintiff had plausibly pled his trespass to chattel claim.

Grisafi v. Sony Electronics Inc., 2019 WL 1930756 (D.N.J. April 30, 2019)

May 9, 2019 Copyright

Affirmative defense asserting that Copyright Act is unconstituational survives motion to strike

Plaintiff sued defendant search engine for copyright infringement alleging that defendant wrongfully reposted a picture plaintiff had taken. Defendant’s answer included a number of affirmative defenses. Plaintiff moved to strike the affirmative defenses. The court struck some of them but allowed at least a couple of them to survive.

Unclean hands – Defendant apparently perceived some trollish behavior on the part of the plaintiff. Defendant alleged that, in light of plaintiff’s practice of taking photographs of no actual value, for which there is no market, and seeding them on the internet for the purpose of attempting to extort revenue through litigation, that the claims for equitable relief should be barred by unclean hands. Plaintiff objected, claiming that it was scandalous to characterize plaintiff’s enforcement efforts this way. The court found, though, that the defense was adequately pled and not scandalous. “While the … defense is unfavorable to Plaintiff, it does not ‘cast a cruelly derogatory light on’ Plaintiff as necessary for the Court to conclude that the defense is scandalous.”

Unconstitutionality of portions of Copyright Act – Defendant also asserted that 17 U.S.C. §§ 102 and 410, statues dealing with copyright protections, are unconstitutional as applied to pictures based on technological advancements in photography. Plaintiff responded by pointing out that the Supreme Court since 1884 has found copyright protection for photographs to be constitutional, and argued that defendant presented no cognizable legal argument to suggest that Congress exceeded its constitutional powers by enacting the Copyright Act. Perhaps surprisingly, the court rejected plaintiff’s argument. It noted that the defense was not insufficient, redundant, immaterial, impertinent, or scandalous, but that defendant was arguing that the law, or at least the application of the law, should be changed, and defendant presented grounds for its argument.

Miller v. 4Internet, LLC, 2019 WL 1937567 (D.Nev. April 30, 2019)

Fact that others had access to defendant’s wi-fi was no reason to quash subpoena in copyright case

In a suit against John Doe defendant for copyright infringement arising from defendant’s alleged distribution of plaintiff’s movies via BitTorrent, plaintiff sent a subpoena to Comcast – defendant’s ISP – seeking defendant’s identify.

Defendant moved to quash the subpoena, contending that being the target of the civil action was an undue burden, because there was a substantial likelihood that plaintiff would be unable to establish that defendant was actually the person responsible for the alleged infringement. Defendant also included a letter from his neighbor describing how that neighbor and others had used defendant’s wireless network.

The court denied the motion to quash. It held that even though defendant may turn out to be innocent, at this stage plaintiff was merely seeking to uncover his identity. The fact that other people had access to defendant’s unsecured wi-fi was immaterial.

Strike 3 Holdings, LLC v. Doe, 2019 WL 1865919 (N.D.Cal. April 25, 2019)

March 7, 2019 Anonymity

Court allows blockchain platform to send subpoena seeking info about hacker

Plaintiff provides a blockchain asset trading platform and claimed that a hacker broke in and transferred 330,000 Tether and 100 Ether to a Bittrex account. Though Bittrex told plaintiff it had identified the relevant Bittrex account holder, it would not disclose the identity to plaintiff without a court order.

So plaintiff filed suit against the John Doe hacker for conversion, violation of the federal Computer Fraud and Abuse Act, and under Washington state law. Since it could not serve the complaint on the Doe defendant without knowing his identity, plaintiff sought permission from the court to take early discovery from Bittrex. The court granted the motion.

The court permitted plaintiff to send a subpoena to Bittrex requesting the name of the Doe defendant. Federal Rule of Civil Procedure 26(d) bars parties from seeking “discovery from any source before the parties have conferred as required by Rule 26(f), except in a proceeding exempted from initial disclosure under Rule 26(a)(1)(B), or when authorized by these rules, by stipulation, or by court order.” Fed. R. Civ. P. 26(d)(1). In determining whether to permit expedited discovery, the court required plaintiff to demonstrate that “good cause” existed to deviate from the standard pretrial schedule.

In the Ninth Circuit, a court evaluating whether a plaintiff establishes good cause to learn the identity of Doe defendants through early discovery examines whether the plaintiff (1) identifies the Doe defendant with sufficient specificity that the Court can determine that the defendant is a real person who can be sued in federal court, (2) recounts the steps taken to locate and identify the defendant, (3) demonstrates that the action can withstand a motion to dismiss, and (4) proves that the discovery is likely to lead to identifying information that will permit service of process. This test is often associated with the case of Columbia Ins. Co. v. seescandy.com, 185 F.R.D. 573, 578–80 (N.D. Cal. 1999).

In this case, the court found that good cause supported plaintiff’s request for leave to take expedited discovery to ascertain sufficient identifying information about the Doe defendant. Plaintiff had provided evidence that appeared to trace the allegedly stolen funds to an account on Bittrex, and plaintiff’s conversation with Bittrex indicated that Doe’s identity as the account holder was likely already known or ascertainable. The court also found that plaintiff’s request seeking identifying information related to Doe was reasonably likely to lead to the production of information that would permit plaintiff to serve process.

ZG TOP Technology Co., Ltd. v. John Doe, 2019 WL 917418 (W.D. Wash., February 25, 2019)

Installing earlier software version that lacked license check feature triggered DMCA anticircumvention liability

EGS and DDS were in a dispute over the use of DDS’s software. [You can read about the copyright infringement claims here.] DDS claimed EGS had failed to pay license fees for its software. So DDS installed an update that would confirm the current license, and if the license was not up to date, would lock the program. In response, EGS elected to use a previously-licensed and older version of the software that did not contain the license check feature. Because of this, DDS claimed that EGS violated the anticircumvention provisions of the Digital Millennium Copyright Act.

EGS moved to dismiss the DMCA anticircumvention claim. The court denied the motion.

The DMCA provides, in relevant part, that “[n]o person shall circumvent a technological measure that effectively controls access to a work protected under this title.” It goes on to state that “to ‘circumvent a technological measure’ means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.” It also explains that “a technological measure ‘effectively controls access to a work’ if the measure, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.”

EGS had argued in part that it did not violate the anticircumvention provisions because its conduct was like the defendant in the case of I.M.S. Inquiry Management Systems, Ltd. v. Berkshire Info. Systems, Inc., 307 F. Supp. 2d 521 (S.D.N.Y. 2004). In that case, the defendant used a legitimate username and password to gain access to the protected work.

The court acknowledged that like the situation in I.M.S., EGS did not do anything to change or manipulate the DDS software. However, as the court noted, the fact remained that EGS allegedly removed the software and reinstalled a prior version. For that reason, I.M.S. and the similar case of Navistar, Inc. v. New Baltimore Garage, Inc., 2012 WL 4338816 (N.D. Ill. Sept. 20, 2012), were not to the contrary.

First, those cases acknowledged that removing a technological measure suffices to state a claim under the DMCA. Second, EGS had leaned heavily on the fact that DDS analogized its license check to a password protection system, and that the district courts in I.M.S. and Navistar reasoned that “using a password to access a copyrighted work, even without authorization, does not constitute circumvention under the DMCA …” But implicit in those courts’ reasoning was a recognition that the licensee already knew the password and thus had the key to the castle.

In this case, to the contrary, EGS had no way to go through the license check and access the current software except by removing it entirely. Accordingly, the court found that a more apt analogy was that EGS circumvented “the deployed technological measure in the measure’s gatekeeping capacity” by uprooting the locked gate.

Eclipse Gaming Systems, LLC v. Antonucci, 2019 WL 3988687 (N.D. Ill. Jan. 31, 2019)