Attorney Evan Brown

August 25, 2006 Copyright, Electronic Discovery, Litigation

Evidence-destroying defendant severely sanctioned in P2P file-sharing case

In the case of Arista Records v. Tschirhart, the U.S. District Court for the Western District of Texas has shown little mercy on a defendant accused by record companies of illegal file-sharing.

Knowing that a court order was in place requiring her to turn over her hard drive to be copied, the defendant allegedly used “wiping” software in an attempt to destroy all evidence of her illegal P2P file sharing. In response, the plaintiff record companies moved, pursuant to Fed. R. Civ. P. 37(b), for the most severe form of sanctions against the defendant – entry of default against her. The court granted the plaintiffs’ motion, and provided them with 30 days to submit a proposed order spelling out their damages.

Given that the record companies’ expert opined that the defendant had downloaded over 200 sound recordings during 2005, those requested damages will probably be substantial. Statutory damages under the Copyright Act can go as high as $150,000 per work infringed, in the most egregious cases.

In reaching its decision to enter default against the defendant, the court exercised its inherent power to do so, making a note of its obligation to act with “restraint and discretion.” It found that the defendant had acted in bad faith. That bad faith was exacerbated – and the default was further warranted – by the fact that the defendant herself was responsible for the destruction of evidence, that the deletion of the files destroyed the strongest evidence relevant to the plaintiff’s infringement claims, and that less drastic sanctions would not be appropriate.

Not only was the sanction intended to dissuade the plaintiff from destroying evidence in the future, it was intended to make an example out of her. Merely awarding the plaintiffs their attorney’s fees or giving the jury an adverse inference instruction at trial would not have been enough to remedy the situation. Given the defendant’s “blatant contempt” for the court and a “fundamental disregard for the judicial process,” only default would be an adequate punishment and deterrent to others considering similar conduct.

[Hat tip to Techdirt for posting on this case.]

Arista Records, LLC, v. Tschirhart, No. 05-372 (W.D. Tex., August 23, 2006).

August 24, 2006 Anonymity

Federal court adopts Cahill standard for unmasking anonymous defendants

Plaintiffs seeking to unmask an anonymous defendant will often need the court’s assistance in the discovery process. Most ISPs or website owners will not turn over the name and contact information associated with a particular IP address without having received a subpoena or a court order requiring it to do so.

In federal litigation, the need to serve a subpoena so early on in the case puts a plaintiff in a Catch-22 situation: Rule 26(d) says that discovery cannot occur without the parties having first conferred as required by Rule 26(f). But how can the parties confer if the plaintiff cannot first conduct some discovery to find out who the defendants are? The process of asking the court for leave to serve subpoenas before the Rule 26(f) conference can set the stage for an interesting balancing act.

Courts have recognized the conflicting interests at stake. There is a well-established constitutional right to speak anonymously. McIntyre v. Ohio Elections Com’n., 514 U.S. 334 (1995). But that right is not absolute. An aggreived plaintiff has the right to seek redress from one who has done harm by, for example, defaming the plaintiff online. A court that indiscriminately allows an anonymous speaker to be identified without a sufficient showing that the complained-of speech is prohibited runs the risk of violating the anonymous poster’s First Amendment right.

In light of the conflicting interests at stake, courts have implemented varying approaches to ensure that those interests are properly balanced. The cases establish a certain threshold of a showing that a plaintiff has to make before discovery can occur. For example, in the case of Columbia Ins. Co. v. Seescandy.com, 185 F.R.D. 573 (N.D. Cal. 1999), a trademark infringement plaintiff was required to support its claim with facts sufficient to defeat a motion to dismiss before it could obtain the identity of an anonymous defendant. A New Jersey state court in a case called Dendrite Int’l, Inc. v. Doe, 775 A.2d 756 (N.J. Super. Ct., App. Div. 2001), applied the same standard.

Other courts have set the bar higher. In Doe v. Cahill, 884 A.2d 451, (Del. 2005), the Delaware Supreme Court held that an anonymous blog commenter could not be identified in a defamation suit where the plaintiff had not come forth with evidence to support a motion for summary judgment. In the recent case of Best Western v. Doe, the U.S. District Court for the District of Arizona adopted the Cahill standard.

In the Best Western case, the plaintiff filed suit against several John Doe defendants alleging a number of causes of action, including breach of contract, unfair competition and defamation. The alleged offending content had been posted to a message board online. The plaintiff asked the court to allow it to serve subpoenas on the Internet service providers of the unknown anonymous posters before the required Rule 26(f) conference. The court denied the motion.

In its analysis, the court covered the number of First Amendment concerns at stake. It noted that although the constitution protects anonymous speech on the Internet, the prospect of a civil subpoena to destroy that anonymity places that right in jeopardy. Nonetheless, the court observed, the right to speak anonymously is not absolute, and such discovery will be permitted in the appropriate circumstances.

And the appropriate circumstances are when a plaintiff can produce sufficient evidence as it has to establish a prima facie case of the claims asserted in the complaint. The court held that it “must examine facts and evidence before concluding that a defendant’s constitutional rights must surrender to a plaintiff’s discovery needs. The summary judgment standard will ensure that the Court receives such facts and evidence.” The court went on to note that the plaintiff’s complaint – devoid of specific facts supporting its claims – provided an example of why the summary judgment standard is appropriate.

Best Western Int’l v. Doe, (Slip Op.) 2006 WL 2091695 (D.Ariz. July 25, 2006).

August 22, 2006 Defamation

An interesting application of Section 230 and a long arm statute

Plaintiff Whitney Information Network sued the owners of the infamous Ripoffreport.com and other sites over some negative postings about Whitney appearing online. In July 2005, the U.S. District Court for the Middle District of Florida dismissed Whitney’s complaint, holding that the defendants were immune from defamation liability under provisions of the Communications Decency Act found at 47 U.S.C. §230. [Read more about that decision.]

Apparently recognizing the challenges presented by Section 230, which provides that “[n]o 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,” Whitney filed an amended complaint. This time it alleged that the defendants played an active role in generating the complained-of content by revising benign third party postings to add words like “ripoff,” “dishonest,” and “scam.”

The defendants moved to dismiss, arguing a lack of personal jurisdiction for Whitney’s failure to satisfy the requirements of Florida’s long arm statute (Fla. Stat. §48.193). That statute provides, among other things, that a Florida court can exercise personal jurisdiction over an out of state defendant if that defendant commits a tortious act within the state. This can be done, for example, through electronic communications into the state. Wendt v. Horowitz, 822 So.2d 1252 (Fla. 2002).

The defendants did not dispute that the amended complaint successfully alleged active participation on their part in generating the alleged defamatory content. But in connection with their motion to dismiss, they submitted a couple of affidavits, including one from a technological consultant named Smith, which they claimed controverted the plaintiff’s allegations supporting jurisdiction.

These affidavits tended to support the defendants’ argument that they were not responsible for modifying any postings made to their sites. If they were merely the provider of the interactive computer service, and not the actual content provider, so they argued, Section 230 immunized them from tort liability. Without tort liability, there could not be any tortious conduct directed to the state. No tortious conduct directed to the state, no personal jurisdiction under the long arm statute.

The district court bought this clever argument, holding that the affidavits put the burden back on the plaintiff to come forward with more evidence supporting the exercise of personal jurisdiction. In the district court’s mind, the plaintiffs failed to meet that burden, so it dismissed the case.

But the Eleventh Circuit disagreed. It reversed and remanded the lower court’s dismissal, holding that the defendants’ affidavits, with which they tried to make themselves something other than content providers, were insufficient to shift the burden in the first place.

For example, although Smith (the technological consultant) stated that none of the postings’ IP addresses were associated with the defendants’ computers, he conceded that he was unable to obtain IP addresses for three of the complained-of postings. The defendants were trying to show that they were not responsible for tampering with any of the content. But the court saw through that argument, observing also that it was unclear whether the defendants’ own IP addresses would have shown up had they merely modified any of the postings, rather than create them.

For these reasons, the appellate court held that the defendants had not successfully rebutted the plaintiff’s allegations supporting the exercise of jurisdiction pursuant to the Florida long arm statute. It remanded for further proceedings on the question of whether the exercise of personal jurisdiction would comport with constitutional due process.

Whitney Information Network, Inc. v. Xcentric Ventures, LLC (Slip Op.) 2006 WL 2243041 (August 1, 2006).

August 3, 2006 Employment

Employee fired for claiming copyright in website can get unemployment benefits

Update: This decision was reversed by the North Carolina Supreme Court at Binney v. Banner Therapy Products, Inc., — S.E.2d —-, 2008 WL 2370887 (N.C., June 12, 2008).

Christina Binney was one of the founders of Banner Therapy Products, and worked as the company’s treasurer. She was also responsible for Banner’s computers, and designed its catalog and website. In April 2003, she was fired for taking her computer’s hard drive home over the weekend, and because she had named herself in copyright notices appearing in the company’s catalogs and on its website.

She sought unemployment benefits, and the North Carolina Employment Security Commission (“ESC”), denied her claim. The ESC determined that the denial of benefits was proper because Binney had been terminated for employment-related misconduct.

Binney appealed the ESC’s determination to a North Carolina trial court, but that court affirmed the denial of benefits. She tried again with the state’s appellate court, which reversed the denial of benefits. The appellate court held that given Binney’s position and responsibilities in the company, and the reasonableness of her conclusions as to ownership of copyright, her actions did not rise to the level of misconduct that warranted a denial of benefits.

In determining that it was okay for Binney to have taken her hard drive home for the weekend, the court emphasized the she was the one primarily responsible for the company’s computer equipment. There was no formal policy to prohibit her from removing the hard drive, and there was no evidence that her use of the drive over the weekend to prepare for a meeting on Monday morning was improper. Moreover, there was no evidence that the removal of the hard drive inconvenienced Banner in any way.

As for whether it was misconduct for Binney to have claimed ownership in the company’s catalog and website which she created, the court observed that there was no evidence that Binney acted in bad faith. She had created the original version of the catalog before the company was incorporated, and, relying on legal research she had conducted herself, she believed she owned rights in subsequent versions as derivative works. Without any evidence that Binney’s belief about her copyright ownership was not genuine, and without any evidence that Banner incurred any detriment, the court held that Banner failed to meet its burden of demonstrating misconduct sufficient to warrant a denial of benefits.

Binney v. Banner Therapy Products, — S.E.2d —, 2006 WL 2022223 (N.C.App., July 18, 2006).

August 2, 2006 Antitrust, First Amendment

Suit over drop in search engine placement dismissed

(This case came out a couple of weeks ago and has been written about quite a bit, but here’s my take on it anyway.)

Plaintiff Kinderstart.com LLC, the operator of an online directory and search engine for information about the care of young children, filed suit against Google after a “cataclysmic fall” in the number of visitors that the Kinderstart site received. It claimed that Google wrongfully blocked search results for Kinderstart, and intentionally lowered the site’s number in Google’s PageRank system. In an unpublished and noncitable opinion, the United States District Court for the Northern District of California dismissed Kinderstart’s complaint, and granted leave to amend.

Kinderstart alleged a number of causes of action, including violation of the First Amendment right to free speech and unlawful monopolistic behavior in violation of the Sherman Act. The court held that Kinderstart failed to allege facts sufficient to entitle it to relief.

In dismissing the First Amendment claim, the court held that Google is not a state actor. Although the Ninth Circuit employs a number of tests to determine whether state action exists, Google did not meet any of those tests. Kinderstart did not show that Google performed a public function, nor did it show that Google was involved in any joint action with the government. The complaint did not sufficiently allege that Google was in any way compelled or coerced by the government, or that there was any nexus or entwinement between Google’s actions and the government’s actions. No facts in the complaint pointed to any “symbiotic relationship” – a necessary element in a special Ninth Circuit test for state action – between Google’s conduct and the financial success of any governmental entity.

The court also rejected Kinderstart’s First Amendment argument that by making the search engine “freely available to anyone with an Internet connection,” Google had created a private space dedicated to public use in which the alleged restrictions violated free speech. On this point, Kinderstart’s own allegations of Google’s vast monetization – to the tune of $3.1 billion in 2005 – contradicted assertions that the sole function of Google is to promote open and free communication.

Another of Kinderstart’s claims was that by blocking links to the Kinderstart site in its search results, Google had engaged in anticompetitive behavior that is prohibited under Section 2 of the Sherman Act (15 U.S.C. §2). To succeed on this claim, Kinderstart would have had to allege a specific intent on Google’s part to destroy competition, conduct directed toward accomplishing that purpose, a dangerous possibility of succeeding at destroying competition, and resulting antitrust injury.

The court held that Kinderstart failed to allege enough facts to support this claim. There was no sufficient allegation that Google had denied access to an essential facility or refused to deal. Kinderstart did not explain how Google’s alleged conduct demonstrated the required intent for a Sherman Act violation. Moreover, noting that there generally is “no duty to aid competitors,” the court concluded that Google’s alleged removal of a competing search engine from its results was merely legitimate competitive action.

Kinderstart.com, LLC v. Google, Inc., No. 06-2057, (N.D. Cal., July 17, 2006) (Not selected for official publication).

July 26, 2006 Computer Crime

New law to criminalize trickery by adult website owners

According to this News.com article, President Bush is expected to sign the Child Protection Safety Act (also known as the Walsh Act), touted as “the most extensive rewriting of federal laws relating to child pornography, sex offender registration and child exploitation in a decade.”

The comprehensive legisltation will establish, among other things, a national sex offender registry, and will provide funding for pilot programs to implement GPS technology in tracking convicted sex offenders.

Of particular importance to website owners is a provision in the act that would make it a crime to “knowingly embed[] words or digital images into the source code of a website with the intent to deceive a person into viewing material constituting obscenity.” Moreover, the act would prohibit adding content to a site with “the intent to deceive a minor into viewing material harmful to minors on the Internet.”

July 25, 2006 Privacy

Eleventh Circuit almost lets Section 230 preempt right of publicity claim

In the recent case of Almeida v. Amazon.com, Inc., the Eleventh Circuit Court of Appeals came close to issuing an interesting ruling in a case involving immunity under the Communications Decency Act, at 47 U.S.C. §230. At issue was whether Section 230 provided immunity to Amazon.com in a suit brought against it alleging violation of the plaintiff’s right to publicity.

A photograph of plaintiff Almeida appeared on the cover of a book that Amazon.com offered for sale online. Almeida filed suit claiming, among other things, that she had not authorized the use of the photograph in the way it appeared on the cover of the book. Accordingly, Almeida argued, Amazon.com had violated Florida’s right of publicity statute, Fla. Stat. §540.08.

The district court granted summary judgment in favor of Amazon.com, holding that Section 230 preempted the state right of publicity claim. On review, the appellate court affirmed summary judgment, but disagreed that Section 230 applied.

The lower court had decided on its own (without Amazon.com making the argument) that Section 230 preempted the right of publicity claim. As any loyal reader of this weblog knows, Section 230 provides, in relevant part, 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.

Because Almeida was pursuing a claim against Amazon.com for information (the photo) provided by a third party, the district court held that Amazon.com could not be the “publisher or speaker” of that information, and therefore not liable.

The district court did not consider, however, 47 U.S.C. §230(e)(2), which states that “[n]othing in this section shall be construed to limit or expand any law pertaining to intellectual property.” Almeida argued on appeal that her right of publicity claim was one sounding in intellectual property, and thus should have been unaffected by Section 230 immunity.

And the appellate court came oh-so-close to agreeing with Almeida on this point. But it found a way around having to answer the question of whether Section 230 provides immunity for right of publicity claims: Almeida’s claim would have failed anyway. Because it was clear from the complaint that Amazon did not use Almeida’s image for “trade, commercial, or advertising purposes,” there was no violation of the right of publicity as defined by the Florida statute.

Almeida v. Amazon.com, Inc., (Slip Op.) — F.3d —-, 2006 WL 1984448 (11th Cir., July 18, 2006).

This content originally posted by Evan Brown to InternetCases.com.

July 24, 2006 Cybersquatting

Sometimes “may” means “must”

Virginia federal court reads publication requirement for in rem jurisdiction under ACPA.

Investools, Inc. recently filed an in rem domain name proceeding against a Canadian entity that registered the domain names investtools.com and investtool.com. In rem domain name proceedings are provided for under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. 1125(d), and are a handy way for a trademark owner to acquire a domain name from a cybersquatter when the cybersquatter can’t be found e.g., is located outside the U.S. [More on in rem proceedings.]

The ACPA requires that a plaintiff demonstrate four things to establish in rem jurisdiction over a domain name.

— First, the plaintiff must show that subject matter jurisdiction is proper in the district where the action is brought. Since the ACPA provides for jurisdiction in the judicial district in which the domain name registry is located, actions involving .com domain names will be proper in the Eastern District of Virginia for at least as long as Verisign is located there.

— Second, a plaintiff must establish that it is unable to obtain in personam jurisdiction over the defendant where the suit is brought. This is usually pretty easy to do where the registrant is a foreign entity with no ties to the U.S.

— Third, the plaintiff must show that it has perfected service of process as described by the ACPA. Under 15 U.S.C. §1125(d)(2)(A)(ii)(II), this involves:

(aa) sending a notice of the alleged violation and intent to proceed under this paragraph to the registrant of the domain name at the postal and e-mail address provided by the registrant to the registrar; and

(bb) publishing notice of the action as the court may direct promptly after filing the action.

(It is on this third point that the court made the important ruling in this case. We’ll come back to take a closer look at that after laying out the fourth element.)

— Fourth, a plaintiff must establish the elements of trademark infringement or trademark dilution.

In this case, the court held that Investools had satisfied the first, second and fourth elements for establishing in rem jurisdiction. It would not award summary judgment, however, because of a failure to meet the two-step third element.

Although Investools had sent notice by mailing and emailing the complaint to the listed registrant, it had not published notice of the action as provided for in (bb).

And why should it have? Nothing in the case indicates the court had directed that any publication occur. Apparently, the plaintiff was supposed to have interpreted the case of Cable News Network L.P., L.L.L.P., v. CNNews.com, 177 F.Supp.2d 506 (E.D.Va. 2001) to stand for some permanent order that publication is required in every in rem case.

One could reasonably disagree with the court’s determination that (bb) requires filing in every case. A perfectly sensible interpretation would be that it is required only in those particular actions where the court specifically directs it. But that is not the way the Eastern District of Virginia reads it, and it looks like an in rem plaintiff must publish notice of the action regardless of whether it’s specifically ordered to do so.

Investools, Inc. v. investtools.com, (Slip Op.) 2006 WL 2037577 (July 17, 2006).

July 19, 2006 Miscellaneous

Chicago event: Internet/IP seminar with speech by Commissioner of Patents

There is an exciting intellectual property law event coming up Chicago on the afternoon of July 27, 2006, and the registration deadline (July 21) is quickly approaching.

The Intellectual Property Law Association of Chicago (“IPLAC”) will be hosting an afternoon seminar with three panels addressing copyright, trademark and patent law. The program will end with a keynote address by Commissioner for Patents John Doll.

I will be moderating a panel discussion on copyright. The panel will consist of University of Chicago Professor Doug Lichtman, Northwestern professor Clint Francis, and Sachnoff & Weaver attorney John Hines.

Registration fee is $25 if you’re not an IPLAC member. Here is a link to a registration form. I encourage you to attend.

July 12, 2006 Uncategorized

eBay not a “consumer reporting agency”

Plaintiff McCready was a seller on eBay who had some dissatisfied customers. They voiced that dissatisfaction by leaving negative feedback about McCready in eBay’s Feedback Forum. Instead of working to “make good on his sales,” McCready embarked on “retaliatory litigation” against a number of individuals and entities, including eBay.

McCready filed lawsuits in different fora around the Midwest, including one in the U.S. District Court for the Central District of Illinois. He alleged, among other things, that eBay violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §1681 et seq., by providing false and misleading information in the Feedback Forum. The district court dismissed the claim, and McCready sought review. On appeal, the Seventh Circuit affirmed.

To succeed on the FCRA claim, McCready would have had to show that eBay is a “consumer reporting agency” as provided by the statute. He failed to do so, however, because he could not show that the Feedback Forum is a “consumer report.” By definition, a “consumer reporting agency” provides “consumer reports,” and without showing that the Feedback Forum is a “consumer report,” eBay could not be considered a “consumer reporting agency.”

The court held that “given the broad statutory purpose of preserving individuals’ privacy,” a “consumer” under the FCRA must be an identifiable person. The Feedback Forum, however, is arranged by usernames, so anonymity – to the extent eBay sellers so desire – remains intact. Any information about the person behind an eBay username would not be about an “identifiable person” as required by the FCRA.

Citing to the case of Ippolito v. WNS, Inc., 864 F.2d 440 (7th Cir. 1988), the court further held that the FCRA applies only to information that is to be used for consumer purposes, not commercial, business or professional purposes. The Feedback Forum assists eBay shoppers in deciding whether to purchase goods from a particular seller, and that is an “inherently commercial” activity. Without the required consumer purpose, the Feedback Forum could not rise to the level of a “consumer report.”

McCready v. eBay, Inc., — F.3d. —, (7th Cir. July 10, 2006).