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March 5, 2009 Section 230

Made in onto ABC World News Tonight

The Sheriff of Cook County (that means Chicago) has sued Craigslist claiming that the site is a public nuisance. [Here’s the Complaint. ABC News interviewed me this afternoon to get my comments on the case. I enjoyed talking about it for about 20 minutes on camera. As these things usually go, most of my flashes of insight comments ended up on the proverbial cutting room floor, but one complete sentence made it onto ABC World News tonight. Click here to see the segment.

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Professor Goldman has this rundown of the case.

February 23, 2009 Contracts, Litigation

Clickwrap binding despite claim of no opportunity to read terms

Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009)

A federal court in Texas held the clickwrap agreement between United Parcel Service and one of its customers was binding. After plaintiff Via Viente sued UPS in Texas, UPS moved to transfer venue to the Northern District of Georgia, citing to a forum selection clause in a license agreement governing Via Viente’s use of a UPS-provided software program that allowed Via Viente to print labels and manage product shipments.

Via Viente argued that the clickwrap agreement (and by extension the forum selection clause) was not binding because a UPS technician installed the application on a Via Viente computer, and therefore Via Viente never had a chance to agree to the terms. The court rejected that argument for the following three reasons:

  • Via Viente was a sophisticated company and “should have been aware that terms of service were forthcoming” after having signed the general Carrier Agreement with UPS that required the use of the software;
  • It was “difficult to believe” that Via Viente would have left the UPS technician installing the software unsupervised. Moreover, it was not UPS’s practice to install the software unsupervised;
  • Via Viente had kept the benefit of the bargain (convenience and “palatable” shipping costs) so it would have been inequitable to allow it to disavow provisions it did not like.

After finding the clickwrap agreement to be binding, the court went on to find the forum selection clause enforceable, and transferred the matter to the Northern District of Georgia.

EULA photo courtesy Flickr user johntrainor under this Creative Commons license.

February 20, 2009 Contracts, Copyright

Open source software and the covenant-condition dichotomy

[Note: This is a short essay I have written in conjunction with an upcoming presentation I will give at John Marshall Law School here in Chicago next week. I invite your feedback in the comments to this post. For formatting purposes, footnotes (which are mainly to case citations) have been omitted.]

Some of the peculiarities of open source software, like the requirement of author attribution, create intriguing questions about how an open source license should be enforced in the event of its violation. Though software distributed under a “free” or open source model has existed in some form for more than a quarter century, only in the past couple of years have some of the basic questions concerning the import of terms in an open source license been litigated. The Federal Circuit’s recent decision in Jacobsen v. Katzer addressed the question of whether the owner of the copyright in software distributed under an open source license may successfully pursue a claim of infringement against a party using the software in violation of the license. Answering that question in the affirmative, the court relied upon the distinction between conditions and covenants in an open source license. This essay examines that distinction’s effect on how an open source license may be enforced.

The Framework for the Analysis: Breach or Infringement?

Because software licenses (both open source and proprietary) are in the nature of a contract, one must look to principles of contract law when examining how the licenses apply. Which cause of action will be appropriate for a violation of the terms of a license depends on the legal relations between the parties. Has the licensee committed copyright infringement by its violation of the license? Or is there merely an action for breach of contract? Since the remedies available for breach of contract versus copyright infringement can differ greatly (i.e., expectation damages versus potential statutory damages, costs and attorney’s fees plus injunctive relief), an evaluation of the right way to proceed is important.

The licensor of software generally waives its right to sue the licensee for copyright infringement. Stated another way, “a licensee cannot be liable for infringing the copyright rights conveyed to it.” For a licensee to have infringed the copyright in the licensor’s software, the licensee must exercise a copyright right not granted to the licensee. We characterize this kind of use as being outside the scope of a license.

Covenants and Conditions in Software Licenses

The authority to exercise the copyright rights in software (like the right to distribute the source code and make derivate works), is established in the licensee through the operation of the license. The grant of authority is an “operative fact,” one that changes the legal relations of the parties. Drawing a familiar term from the lexicon of contract law, the authority for another to use software is a condition precedent – the operative fact that must exist prior to the existence of the legal relation of licensor and valid licensee. If this condition is not satisfied, the licensee’s authority to use the software is not there. Use of the software by another party in the absence of this authority will be an exercise of a right not granted, and, as already noted, a use of the software outside the scope of a license.

Covenants (also known as promises) in a license agreement can also affect the legal relations of the parties. Covenants are quite different from conditions precedent, however, because they refer to an intention related to a future event, not to an operative fact that must be present for authorization to exist. In the software licensing context, a covenant does not affect the authorization of the licensee to exercise the copyright rights in the software. In other words, a covenant in a software license does not define or alter the scope of the authorization.

So if a licensee merely violates a covenant of the software license agreement, the use is still within the scope of the license, and the licensor merely has a cause of action for breach of contract. But if the violation is a failure to satisfy a condition of the license, the use of the software is outside the scope (i.e., is the exercise of a right not granted). Under copyright law, exercise of rights without authorization is called infringement.

Appropriate Causes of Action in the Open Source Context

In a certain sense, the entire legitimacy of the open source model depends on the ability to successfully pursue an action for infringement of copyright. Since most open source software is distributed without the requirement for payment of a fee, a licensor would, for all practical purposes, be left remediless against unauthorized use of the software if the only avenue for recovery were for breach of contract. The appropriate measure of damages would be the amount of licensing fees that would have been collected. In the case of software distributed free of charge, that amount would be zero – not a strong deterrent to unauthorized use.

So for there to be any practical effect on how the source code is actually used, modified and distributed, the violator of an open source license must suffer liability for copyright infringement. This cause of action provides a much more robust (and therefore meaningful) set of remedies, including injunctive relief.

The Jacobsen v. Katzer Decision

Plaintiff Jacobsen wrote some software and made it available under an open source license known as the Artistic License. This open source license granted broad rights to members of the general public to do certain things with the software, including the right to distribute and create derivative works from the software and to use the software in a commercial product, provided that the licensee attribute the original creators.

Jacobsen sued defendant Katzer for copyright infringement, claiming that without permission or consent, Katzer copied the software into a commercial application without attributing the original creators. The district court denied Jacobsen’s motion for injunctive relief, finding that the terms allegedly violated were merely covenants and not conditions. The district court found the scope of the Artistic License to be “intentionally broad,” and that the requirement to insert a prominent notice of attribution did not affect the scope of the license. Therefore, the only viable cause of action was for breach of contract (for which injunctive relief was not appropriate).

Jacobsen sought review with the Federal Circuit. On appeal, the court vacated and remanded, holding that the Artistic License’s terms created conditions which Katzer failed to satisfy. The appellate court found that the license established conditions through the use of the term “provided that.” Further, the appellate court found that the district court’s interpretation did not credit the explicit restrictions found in the license that governed the right to modify and distribute the software. These restrictions successfully defined the scope of the license, and modification and distribution inconsistent with the requirements was unauthorized and therefore outside the scope. Such out-of-scope usage supported a claim for copyright infringement.

Reconciling Jacobsen

The Federal Circuit opinion in Jacobsen contains extensive praise of the open source model, noting that it “serves to advance the arts and sciences in a manner and at a pace that few could have imagined just a few decades ago.” The court went on to observe that through the collaboration inherent in open source software development, “software programs can often be written and debugged faster and at lower cost than if the copyright holder were required to do all the work independently.” One is tempted to speculate whether such a positive attitude to the concept of open source influenced the court’s decision, because there is other authority to support the proposition that an obligation to attribute does not define the scope of a license.

In Graham v. James, the Second Circuit held that the removal of a copyright notice (essentially a failure to attribute) was merely a breach of covenant and therefore did not support a claim for copyright infringement. It is difficult to ascertain how the licensor in Graham would have, in reality, viewed the use of his software without a copyright notice as being authorized (and therefore within the scope of the license). Perhaps the most plausible explanation for the contrary holding in Graham was the absence of a written agreement, and a presumption arising under New York law that the parties intend a covenant and not a condition.

Conclusion

The distinction between conditions and covenants is difficult to perceive. So much can depend on draftsmanship, as one can easily articulate the same set of circumstances to be rendered as a covenant, then a condition. The Artistic License in Jacobsen contained the magic “provided that” language. And it is a good thing it did, for the continued hope in the open source philosophy depended on the court deciding the way it did.

February 18, 2009 Copyright

Retrospective: Graham v. James

I’m speaking about open source at John Marshall Law School’s 53rd Annual Intellectual Property Law Conference on February 27. More info here (warning – PDF!).

To prepare, I’m going over some important cases dealing with copyright licensing in general, that is, cases that deal with copyright licensing but not open source. In case you’re interested, here’s a writeup I just did of the classic case of Graham v. James, 144 F.3d 229 (2d Cir. 1998):

Graham contracted with James for James to develop a custom file retrieval program for use in connection with a CD-ROM compilation that Graham published. The two had an oral agreement whereby Graham would pay $1,000 to James for each new version of the CD-ROM, plus $1 for each disc sold.

After Graham and James had a falling out, Graham continued to use the program James wrote in subsequent versions of the CD-ROM. Graham had removed a copyright notice from the program’s source code, and did not pay the promised royalties. The two ended up in litigation against each other with James accusing Graham of infringing the copyright in the program.

After a bench trial, the lower court found in favor of James on the copyright infringement claim. Graham sought review with the Second Circuit. On appeal, the court vacated the judgment and remanded.

There was no dispute that a license agreement had been formed. Graham argued that at best, James could recover for breach of contract for the removal of the copyright notice and the failure to pay royalties, but not copyright infringement. James presented a number of arguments in an attempt to show there was no license that authorized the use.

One argument that James made was that Graham breached the conditions of the license agreement (and thereby used the program outside the scope of the license) by removing the copyright notice and failing to pay royalties. The court rejected this argument, holding that such activities were mere breaches of contractual covenants between the parties and not a failure to satisfy conditions of the license agreement.

Citing to Nimmer, the court easily held that one does not have a cause of action for infringement when one fails to attribute the author. So there was no infringement resulting from that.

Under the circumstances, the nonpayment of royalties was not the failure of a condition for authorized use. Under New York law, there is a presumption that terms of a contract are covenants and not conditions. In this case, James turned over the program for use before any royalties were paid. Contract obligations that are to be performed after partial performance are not treated as conditions, but as promises (i.e., covenants).

Another argument James made (which the court also rejected) was that assuming, arguendo, the nonpayment of royalties and the failure to attribute were breaches of covenants and not failures to satisfy a condition of the license, the breach of the covenant was so material that the contract was terminated by rescission.

But rescission does not happen automatically upon a substantial breach. The nonbreaching party must “manifest his intention to rescind within a reasonable time.” In this case, the record did not show that James rescinded the license to Graham.

Since James failed to show the absence of a licensing agreement or a failure to satisfy a condition of the agreement, the court vacated the copyright infringement judgment.

February 17, 2009 Contracts, Copyright, Privacy, Right of Publicity

Shame on you, Facebook, for overreaching

Facebook, I hereby grant to you an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to use the following content: “Go jump in a lake.”

The past few days people have been talking about how scandalous it is that Facebook changed its terms of service to grab up a very broad license in content its users upload. I’m sure that Facebook is counting on this controversy to go wherever it is that memes go to die, to be forgotten just like most controversies-du-semaine. It probably will, but as the sentiment finds itself already on the decline, I’ll comment.

Here’s what the offending section of the Facebook terms of service now says, in relevant part:

You hereby grant Facebook an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to (a) use, copy, publish, stream, store, retain, publicly perform or display, transmit, scan, reformat, modify, edit, frame, translate, excerpt, adapt, create derivative works and distribute (through multiple tiers), any User Content you (i) Post on or in connection with the Facebook Service or the promotion thereof subject only to your privacy settings or (ii) enable a user to Post, including by offering a Share Link on your website and (b) to use your name, likeness and image for any purpose, including commercial or advertising, each of (a) and (b) on or in connection with the Facebook Service or the promotion thereof. You represent and warrant that you have all rights and permissions to grant the foregoing licenses.

I was pretty peeved when I learned that Facebook had modified its terms to get a broader license. But I was even more peeved when I read founder Mark Zuckerburg’s blog post from yesterday which tried to justify the changes. Of course Facebook must make sure it has the rights it needs in order to “show [users’ content and information] to the other people they’ve asked [it] to share it with.” But isn’t the right to share that content inherent in the very “asking”? Why be grabby?

Facebook is being content greedy. It’s commandeering more than it needs to run the service. An example Zuckerburg uses in the post concerns the text of a messages sent between friends. If one user deactivates his or her account, a copy of each message will still exist in the other friend’s inbox. Fine. I see the point. So get a license to store and display a copy of private messages. There’s no problem with that.

The bigger rub comes with photos and video users upload. Why does Facebook need a perpetual license for that? I don’t see any reason, whether from a technological or other practical standpoint, why photos and video could not or should not be deleted — and the license to Facebook terminated — when a user deactivates his or her account. YouTube doesn’t demand a license for content after it has been taken down by a user.

Zuckerburg’s post contains the following interesting statement: “In reality, we wouldn’t share your information in a way you wouldn’t want.” Okay Mark, let’s talk about reality. I don’t want you using information about me, like my name, for commercial purposes. That’s reality. Why then do you demand to have the right to use my name and other information for commercial purposes? Are you suggesting that the terms of service as now written don’t reflect reality? I know they were written by lawyers, but surely your legal counsel can’t be that removed from the real world.

I like Facebook, and through it I have reconnected with old friends and made some new ones. But those connections are what’s important, not the intermediary. I may delete my photos off of there but I’ll probably keep using it, at least for now. But I’ll likely post less content. Shame on you, Facebook, and shame on you Mark Zuckerburg, for putting up a post just filled with platitudes, all while ignoring the fact there’s no reason for your new overreaching. That kind of stunt will invigorate those who want an alternative to Facebook, and will accellerate the process of making Facebook tomorrow’s Friendster.

Greedy photo courtesy Flickr user Gribiche under this Creative Commons license.

February 13, 2009 Copyright, Litigation

RIAA’s need for discovery was not so urgent

Elektra Entertainment Group, Inc. v. Does 1-6, No. 08-444 (S.D. Ohio February 5, 2009)

The RIAA’s de-emphasis on lawsuits against individual file sharers may underlie the result in a recent case from a federal court in Ohio. The music industry plaintiffs had sought expedited discovery so they could learn which members in a household (either the mother or one of the children) was responsible for illegally trading files. Finding that the need for the discovery was not urgent, the court denied the record companies’ request.

Electra Entertainment and others sued one David Licata in 2007, accusing him of infringing the copyright in sound recordings back in 2005. Licata claimed he did not know who was responsible for trading the files (though AOL had identified Licata’s account as corresponding with the offending IP address). During discovery in that case, however, Licata identified the other members of his household.

Instead of suing one or more of these other members of the household, the recording industry plaintiffs filed another John Doe suit, leaving it to later to find out the identities of the particular individuals who were allegedly infringing. But instead of acting diligently to figure out who to go after, the record companies did nothing for about five months.

Last November, the court ordered the plaintiffs to show cause why the case should not be dismissed, since the defendants had not been served with process (after all, the record companies claimed they didn’t know who to sue). In response to that order, the plaintiffs sought leave under Fed. R. Civ. P. 26(d) to take expedited discovery. The court denied the motion, holding that there was not good cause shown to accelerate the normal discovery schedule.

The court looked to the long period of time — 152 days — that had passed from the suit being filed to the request for expedited discovery. That duration, coupled with the fact that the plaintiffs already knew the names of the other family members who were likely the proper defendants, undercut any argument that the need for discovery was urgent. Without such urgency (which usually exists when there is a risk that evidence will be destroyed or someone will be injured), there was no good cause to allow the depositions of the mother and children prior to the Fed. R. Civ. P. 26(f) conference.

[Hat tip to Ray Beckerman for alerting me to this decision.]

Photo courtesy Flickr user swanksalot under this Creative Commons license.

February 11, 2009 Copyright

Does the Kindle 2’s text-to-speech feature violate copyright law?

The executive director of the Author’s Guild apparently objects to a feature of Amazon’s new Kindle 2 that would permit the vision impaired to hear the book’s text read in a computer generated voice. The Wall Street Journal quoted Paul Aiken yesterday as saying “They don’t have the right to read a book out loud. That’s an audio right, which is derivative under copyright law.”

Does Aiken have a legitimate gripe? I say it depends on the technology. And the fact that there could be a difference based merely on a technological setup underscores how digital technology has sent some aspects of copyright fumbling towards absurdity.

Granted, one of the exclusive rights that a copyright owner has under the Copyright Act is the right to prepare derivative works. The Copyright Act defines a derivative work as a “work based upon one or more preexisting works, such as a . . . sound recording . . . in which a work may be recast, transformed, or adapted.” But is the sound being read aloud by the Kindle 2 truly a “work” that is protected by copyright? If it’s not a work to begin with, it can’t be a derivative work.

Copyright protection only attaches to works of authorship that are fixed in a tangible medium of expression. For a work to be “fixed,” it has to be embodied for more than a mere transitory duration.

Here’s where the Kindle 2’s technology could determine whether a copyrightable derivative work comes into existence. I’ve searched for some technical specifications on the Kindle 2 but haven’t found anything on this point (maybe someone in the comments can help) — if the text-to-speech functionality creates an entire file that is saved and played back, it looks more like a fixed, copyrightable work has come into existence. On the other hand, if the device creates the audio data on the fly, so to speak, and releases it into some sort of buffer that is continually overwritten, it looks less likely a copyrightable work has been created.

We can look to the Second Circuit’s Cablevision decision from last summer for guidance. (The real name and full cite to that case is Cartoon Network v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008)). In Cablevision, the court held that a buffer comprising just one second of an audiovisual work at a time did not embody the work for more than a mere transitory duration.

So do you see how this could relate to the Kindle 2? If just a little part of the underlying textual work is being converted to audio at a time, there is nothing derivative being embodied for more than a mere transitory duration. Though creating audio, it would seem not to implicate the “audio right” that Aiken of the Author’s Guild mentions.

February 6, 2009 Fraud/Misrepresentation, Trademarks

Trademark infringement and false designation claims not subject to heightened pleading standard

Court also foreshadows that if all they’re talking about is metatags, there won’t be much of a case.

Indiaweekly.com, LLC v. Nehaflix.com, Inc., 2009 WL 189867 (D. Conn. January 27, 2009)

In moving to dismiss claims brought against it for trademark infringement and false designation of origin under 15 U.S.C. Secs. 1114(1) and 1125(a), Indiaweekly.com, LLC claimed that the counterplaintiff Nehaflix.com had failed to allege sufficient facts to meet the standard of Fed. R. Civ. P. 9(b). That rule requires that “[i]n alleging fraud . . . a party must state with particularity the circumstances constituting fraud . . . .”

Bollywood mudflap

The U.S. District Court for the District of Connecticut rejected Indiaweekly.com’s assertion that such claims were subject to Rule 9’s heightened pleading standard. Nehaflix.com’s allegations that Indiaweekly.com placed Nehaflix’s trademark on Indiaweekly.com to draw in search traffic survived the motion to dismiss. It was plausible that potential Nehaflix customers, when searching for the term “Nehaflix” would, upon being directed to another site containing the term and selling competing goods, conclude that the two businesses were related when in fact they were not.

It is important to note that the court assumed for the sake of the motion to dismiss that the allegations that the Nehaflix mark “appeared” on Indiaweekly.com meant that the mark was visible when viewing the site and not merely in metatags. The court nodded to S&L Vitamins v. Australian Gold, Inc., 521 F.Supp.2d 188 (E.D.N.Y. 2007), which held that mere metatag use was not “use in commerce” for purposes of the Lanham Act.

Photo courtesy Flickr user Meanest Indian under this Creative Commons license.

February 5, 2009 Computer Crime, Employment

Probable cause existed to arrest employee for criminal data tampering

Deng v. Sears, Roebuck & Co., 552 F.3d 574 (7th Cir. January 5, 2009).

Employee Deng got a bad review from his employer Sears, Roebuck & Co. Disaffected, he took disability leave but continued to come into the office. On one of these visits, he deleted a bunch of data relating to work he had been doing. It cost Sears more than $40,000 to restore that data.

Sears called the police to report the data deletion, and Deng was arrested a year and a half later in Massachusetts (which is where he had fled). Deng was charged with violation of 720 ILCS 5/16D-3(a)(3), the Illinois law that prohibits tampering with computer files without the permission of the files’ owner. The criminal court dismissed the charges at the preliminary stage because a witness failed to appear.

Deng then filed a federal civil action against Sears for malicious prosecution. After his case was thrown out at the district court level, he sought review with the Seventh Circuit. On appeal, the court affirmed the dismissal of Deng’s suit. Among the things Deng was required to prove was that his arrest was made without probable cause. The court found that probable cause existed.

Deng had argued that he was authorized to delete the data, since statistical modelers like him were expected from time to time to free up disk space and get rid of unneeded data. One problem with this argument, however, was that Deng was on disability leave. Nothing in the record showed that the remaining Sears employees thought the data was no longer needed. After all, they spent significant sums to restore it. Moreover, because Deng was on disability leave, he had no authority to do anything with the data, let alone get rid of it. Finally, Deng’s fleeing after the troubles began was an indicator to authorities that he had done something wrong. Probable cause requires an objective analysis. Flight added to the impression that a crime had been committed.

Tennessee lawyer Jack Burgin also discusses this case at his blog Our Own Point of View.

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