Month: September 2011

September 29, 2011 Antitrust, Copyright

Ninth Circuit: Apple did not engage in copyright misuse by restricting OS X to Apple hardware

Apple Inc. v. Psystar Corp., — F.3d —, 2011 WL 4470623 (9th Cir. September 28, 2011) [PDF]

Back in 2008, Apple sued Psystar for copyright infringement arising from Psystar’s manufacture and distribution of computers preloaded with copies of Mac OS X. Psystar lost at the trial court level, with the judge rejecting its argument that Apple engaged in anti-competitive, “copyright misuse” by requiring in its OS X software license agreement that the operating system be used only on Apple hardware. Psystar sought review of this ruling. On appeal, the Ninth Circuit affirmed.

Copyright misuse is a defense (not an independent cause of action) that one sued for infringement can raise. Courts will find that a plaintiff has engaged in copyright misuse if the enforcement of the plaintiff’s copyright will restrain the development of competing products. In this case, Psystar claimed that Apple’s enforcement of its software license restrained the development of competing hardware.

The court rejected that argument because Apple’s enforcement of its software license agreement, requiring that the software be used only on Apple hardware, did not restrict Psystar from developing its own software. The court found that:

Apple’s [software license agreement] does not restrict competitor’s [sic.] to develop their own software, nor does it preclude customers from using non-Apple components with Apple computers. Instead, Apple’s [software license agreement] merely restricts the use of Apple’s own software to its own hardware. . . . Psystar produces its own computer hardware and it is free to develop its own computer software.

This case solidifies Apple’s approach to enforcing a controlled, closed ecosystem for the distribution of software used for Macs and iDevices. Now that a federal court has found that Apple is not playing unfairly by keeping its users from loading Apple software onto non-Apple hardware, the company can likewise maintain the technological controls that ensure only approved applications are used in connection with the operating systems. Marketplaces for third-party hardware running Apple software would greatly lower the entry barrier for hackers and enthusiasts to play outside of the rules. But this decision from the Ninth Circuit keeps those rules firmly in place.

September 29, 2011 Employment, Privacy

Employer did not violate employee’s privacy by accessing personal laptop

Sitton v. Print Direction, Inc., — S.E.2d —, 2011 WL 4469712 (Ga.App. September 28, 2011)

A Georgia court held that an employee using a personal laptop to conduct business for a competitor did not have an invasion of privacy claim when his employer busted him at work using the laptop to send email.

Plaintiff-employee worked for a printing company. His wife also owned a printing business. On the side, plaintiff would broker printing jobs, sending them to his wife’s company. He would bring his own laptop to work and use that to conduct business for his wife’s company while at work for his employer.

One day, the boss came into plaintiff’s office (apparently when plaintiff was not in the room) and saw that the computer screen on plaintiff’s computer showed a non-work related email account, with messages concerning the brokering of print jobs to the wife’s company. The boss printed out the email messages.

Plaintiff sued, claiming, among other things, common law invasion of privacy and violation of a provision of the Georgia Computer Systems Protection Act. The case went to trial, and plaintiff lost. In fact, he ended up having to pay almost $40,000 to his employer on counterclaims for breach of loyalty. Plaintiff sought review of the trial court’s decision. On appeal, the court affirmed.

The appellate court affirmed the trial court’s finding that the boss’s access to plaintiff’s computer did not constitute common law invasion of privacy based upon an intrusion upon plaintiff’s seclusion or solitude, or into his private affairs. The court held that the boss’s activity was “reasonable in light of the situation” because:

  • He was acting in order to obtain evidence in connection with an investigation of improper employee behavior,
  • The company’s interests were at stake, and
  • He had “every reason” to suspect that plaintiff was conducting a competing business on the side, as in fact he was.

To bolster this holding, the court cited from a Georgia Supreme Court case that said, “[T]here are some shocks, inconveniences and annoyances which members of society in the nature of things must absorb without the right of redress.”

September 27, 2011 First Amendment

Online threats made by blogger were not protected by the First Amendment

State v. Turner, 2011 WL 4424754 (Conn. Super. September 6, 2011)

A Connecticut state court held that prosecuting a blogger for posting content online encouraging others to use violence did not violate the blogger’s First Amendment right to free speech.

Defendant was charged under a Connecticut statute prohibiting individuals from “inciting injury to persons or property.” Angry about a bill in the state General Assembly that would have removed financial oversight of Catholic parishes from priests and bishops, defendant posted the following statements to his blog:

  • [T]he Founding Fathers gave us the tools necessary to resolve [this] tyranny: The Second Amendment
  • [My organization] advocates Catholics in Connecticut take up arms and put down this tyranny by force. To that end, THIS WEDNESDAY NIGHT ON [my radio show], we will be releasing the home addresses of the Senator and Assemblyman who introduced bill 1098 as well as the home address of [a state ethics officer].
  • These beastly government officials should be made an example of as a warning to others in government: Obey the Constitution or die.
  • If any state attorney, police department or court thinks they’re going to get uppity with us about this, I suspect we have enough bullets to put them down too

Defendant challenged the application of the state statute as unconstitutional. The court disagreed, finding there to be “little dispute that the defendant’s message explicitly advocate[ed] using violence.” Moreover, the court found the threatened violence to be “imminent and likely.” The blog content said that the home address of the legislators and government officials would be released the following day.

Though the court did not find that a substantial number of persons would actually take up arms, it did note, in a nod to 9/11, “the devastation that religious fanaticism can produce in this country.” As such, there was a sufficient basis to say that defendant’s vitriolic language had a substantial capacity to propel action to kill or injure a person.

September 21, 2011 Copyright

Court denies anonymous motion to quash subpoena in BitTorrent copyright case

First Time Videos v. Does 1-18, 2011 WL 4079177 (S.D. Indiana, September 13, 2011)

Plaintiff owns the copyright in an adult film that a swarm of anonymous “Doe” BitTorrent users allegedly traded. So plaintiff filed suit for infringement in the U.S. District Court for the Southern District of Indiana and issued subpoenas to the internet service providers associated with the IP addresses of the unknown Doe defendants.

After one of the Doe defendant’s ISP, Insight Communications, put her on notice that the ISP was about to turn over her account information to plaintiff’s lawyer, Doe filed a motion to quash the subpoena. The court denied the motion.

Doe had raised several common arguments in support of the motion to quash. But the court rejected each of these:

  • Plaintiff had no protectable privacy interest in her ISP account information because that was held by a third party, namely, the ISP. Moreover, the court found that a subscriber has no privacy interest when there is an allegation of copyright infringement. (It would have been nice had the court put the words “valid” or “prima facie” before the word “allegation,” but alas, it did not.)
  • Responding to the subpoena was not unduly burdensome to Doe. The burden, if any, in responding to the plaintiff’s subpoena, would fall onto the ISP, not the anonymous defendant.
  • The fact that Doe denied involvement with trading porn files did not matter at this stage in the litigation. The court held that the question of liability for copyright infringement should be determined when the parties are properly brought into the suit.

So the court concluded that the anonymous Doe BitTorrent user should be identified.

September 14, 2011 Governance

ISP’s alleged throttling of BitTorrent and Skype violates Computer Fraud and Abuse Act

Fink v. Time Warner Cable, 2011 WL 3962607 (S.D.N.Y. September 7, 2011)

Plaintiffs sued Time Warner (the provider of Road Runner High Speed Online internet access), alleging, among other things, that Time Warner’s alleged “throttling” of plaintiffs’ internet communications violated the Computer Fraud and Abuse Act, 18 USC 1030 (“CFAA”). Specifically, plaintiffs alleged that without their authorization, Time Warner sent forged reset packets which frustrated plaintiffs’ peer-to-peer communications (e.g., BitTorrent and other P2P mechanisms) as well as their use of Skype.

Time Warner moved to dismiss the CFAA claims. The court granted the motion as to claims that required plaintiffs to  plead “loss” as defined by the statute. As for those claims that required only allegations of “access” and “damage,” the court denied the motion to dismiss and let the case move forward.

Plaintiffs brought three claims under the CFAA, one under each of subparts (A), (B) and (C) of 18 USC 1030(a)(5). This part of the statute provides liability for anyone who:

(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer;

(B) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or

(C) intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage and loss.

No CFAA loss

The CFAA defines “loss” as “any reasonable cost to any victim, including the
cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.”

In this case, plaintiffs alleged that the loss they suffered arose from their payments for high-speed internet services allegedly not received, costs to prevent Time Warner’s throttling practice and the costs of obtaining information elsewhere when they were unable to use their computers for file transfers and VoIP communications. Plaintiffs also pled losses relating to time and effort in assessing “damage” to each computer for which transmissions were interrupted. 

The court found these alleged losses to be outside the scope of those contemplated by the CFAA. Plaintiffs did not allege that they needed to restore data,a program, a system, or information to its condition prior to Time Warner’s conduct. The court held that Plaintiffs had failed to adequately plead this element of a CFAA claim. So it dismissed the claim plaintiffs had brought under 18 USC 1030(a)(5)(C).

“Damage” and “access” adequately pled

Plaintiffs’ failure to adequately plead loss was not the end of the case. Since subparts (A) and (B) of  18 USC 1030(a)(5) do not require one to plead “loss,” but do require pleading “damage” and “access,” the court turned its attention to see if those elements were adequately pled. It found that they were.

The CFAA defines “damage” as “any impairment to the integrity or availability of data, a system, or information.” Plaintiffs alleged that Time Warner impaired their ability to obtain data and utilize their computer systems by knowingly transmitting “reset packets to [their] computers with the intention of impeding or preventing [their] peer-to-peer transmissions” and that damage was caused because the reset packets “compromis[ed] the internal software of [their]computers and impair[ed] their ability to receive and transmit data.” The plaintiffs also alleged that the throttling process prevented data exchange and inhibited certain use of their computers. In addition, plaintiffs identified the specific types of information that had its availability “impeded” and identified a particular program, Skype, that was rendered unusable by the alleged throttling. 

As for “access,” the court looked to the plain meaning, dictionary definition of the word for guidance (since the term is not defined in the CFAA). Plaintiffs had alleged that Time Warner accessed their computers in violation of the statute by knowingly transmitting reset packets to plaintiff’s computers and otherwise accessed their computers to impede data receipt and transmission.” Giving the term “access” a broad meaning, the court found these allegations to satisfy the CFAA requirement.

September 13, 2011 First Amendment, Right of Publicity

Video game maker scores First Amendment win in right of publicity case

Hart v. Electronic Arts, Inc. — F.Supp.2d —, 2011 WL 4005350 (D.N.J. September 9, 2011)

Former Rutgers quarterback Ryan Hart sued Electronic Arts (“EA”), the maker of the very popular video game NCAA Football, alleging misappropriation of his right of publicity under New Jersey law.

EA moved to dismiss. Treating the filing as one for summary judgment, the court granted the motion. It held that EA’s right to free expression under the First Amendment outweighed Hart’s right of publicity.

The court recognized the tension between Hart’s right of publicity and EA’s free speech interest in seeking to incorporate Hart’s characteristics and other information about him into the game. The resolution of this tension is an unsettled area of the law — and the court no doubt recognized this. So in what appears to be an effort to reduce the likelihood that the appellate court will reverse, the judge applied two different tests, finding that EA’s First Amendment interests prevailed under both of them.

Hart’s claims

Hart claimed that the game misappropriated his right of publicity by, among other things, giving a virtual player of the game Hart’s physical attributes (including appearance, height and weight), the same jersey number, the same home state, and with wearing a helmet visor and left wrist band. Hart claimed the virtual player shared other features with him as well, such as speed and agility rating, and passing accuracy and arm strength.

Transformative test

The court first applied the “transformative test” to balance the right of publicity and First Amendment interests. This test borrows heavily from copyright law’s fair use analysis, and looks to the extra elements in the subsequent work. A court will look at:

whether the celebrity likeness is one of the “raw materials” from which an original work is synthesized, or whether the depiction or imitation of the celebrity is the very sum and substance of the work in question

In this case, the game included numerous creative elements apart from Hart’s image, such as virtual stadiums, athletes, coaches, fans, sound effects, music and commentary. Moreover, and perhaps more importantly, the court emphasized that EA created a mechanism in the game “by which the virual player may be altered, as well as the multiple permutations available for each virtual player image.”

The Rogers test

The Rogers test borrows from the trademark context to aid a court in determining whether First Amendment interests will trump a right of publicity claim. In applying this test, a court will make two queries: (a) whether the challenged work is wholly unrelated to the underlying work (or person asserting the claim), and (b) whether the use of the plaintiff’s name is a disguised commercial advertisement. In this case, the court found that one could not reasonably argue that Hart’s image was wholly unrelated to the game (it was college football, after all). But the use of Hart’s image was not a “disguised commercial advertisement.” Instead, the use of his image was part of an expressive act by EA that might draw upon public familiarity with Hart’s college football career but did not explicitly state that he endorsed or contributed to the creation of the game.

September 12, 2011 Employment, Trade Secrets

Former employer’s trade secret claim under inevitable disclosure doctrine moves forward

Copying of employer computer files central to trade secrets claim

Mobile Mark, Inc. v. Pakosz, 2011 WL 3898032 (N.D.Ill. September 6, 2011)

Defendant used to work for plaintiff. Before he left that organization to work for a competitor, he allegedly accessed plaintiff’s computer system and copied proprietary information to a laptop that plaintiff had loaned him. He then allegedly transferred the proprietary data to a number of external storage devices, and then installed and repeatedly ran a “Window Washer” program on the laptop to delete files and other data in order to conceal his activities.

Plaintiff sued, putting forth several claims, including a claim of misappropriation of trade secrets under the Illinois Trade Secrets Act, 765 ILCS 1065/2. Defendant moved to dismiss. The court denied the motion.

One of the bases for plaintiff’s trade secret misappropriation claim was that defendant, by going to work for a competitor, would inevitably disclose the proprietary information he had obtained while working for plaintiff. Looking to Illinois law, the court noted that “[i]nevitable disclosure is not assumed when an employee has general information in his head as a result of working for a company.” But “where evidence exists that the employee copied the employer’s confidential information, it leads to the conclusion of inevitable disclosure.”

September 7, 2011 Uncategorized

NLRB’s Facebook firing decision had little to do with Facebook

Hispanics United of Buffalo, Case No. 3-CA-27872 (NLRB, September 2, 2011)

Folks are talking about the decision handed down by an Adminstrative Law Judge (ALJ) at the National Labor Relations Board (NLRB) last week, finding that a nonprofit employer violated federal law by terminating five employees over a Facebook status update and comments thereto. It is an inherently intriguing case because, as Eric Meyer points out, this is the first time the NLRB has actually issued a ruling that employees were wrongfully fired over Facebook content.

But if you read the decision [PDF], you will see that the NLRB’s decision does not turn on the fact that the communications among the terminated employees took place on Facebook. I am no expert in NLRB matters, but from what I can tell, the ALJ’s analysis is a straightforward look at whether the posting and comments were “concerted activity” which is protected by the National Labor Relations Act.

Here’s a skeletal outline of the analysis:

  • It is an unfair labor practice for employers to, among other things, restrain employees from engaging in “concerted activities for the purpose of . . . mutual aid or protection.”
  • “Concerted activities” are those engaged in with or on the authority of other employees, not solely by one employee alone, though a single employee’s activities to enlist the support of other employees is protected.
  • For there to be a violation, an empolyer must know that the activities were concerted.

In this case, the ALJ found that the terminated employees, by communicating on Facebook, were taking a first step towards taking group action to defend themselves against the accusations they could reasonably believe [another employee] was going to make to management.” The termination prevented them from taking further group action, and the fact that they were fired as a batch tended to show that the employer knew the activity was concerted. So this was thus an unfair labor practice.

If anything, the fact that the communications were on Facebook — during non-work hours and on the employees’ own computers — fortified the claim that the termination was improper. An employer can argue that employee misconduct during the course of otherwise protected activity can be “so opprobrius as to lose protection.” Among the factors the NLRB is to consider in this “opprobriousness” test is the place of the discussion. The communications on Facebook, although maybe not good for the employer’s PR, were separate from work hours and facilities, so as to help disqualify them from being “misconduct.”

September 6, 2011 Contracts

Website terms and conditions were unenforceable because of fraud

Duick v. Toyota Motor Sales, U.S.A., Inc., 2011 WL 3834740 (Cal.App. 2 Dist. August 31, 2011)

Someone signed plaintiff up through a Toyota website to take part in a “Personality Evaluation.” She got an email with a link to a website, and on the second page that she had to click through, she was presented with the well-known check box next to the words “I have read and agree to the terms and conditions.”

Later plaintiff started getting creepy emails from an unknown male calling himself “Sebastian Bowler” who indicated that he was on a cross-country road trip to come and visit plaintiff. He even listed plaintiff’s physical address. One of the emails had a link to Bowler’s MySpace page, which revealed he “enjoyed drinking alcohol to excess.” A few days later plaintiff got another email from someone purporting to be the manager of the hotel in which Bowler had trashed a room, and attempted to bill plaintiff for the damage.

As one would expect, plaintiff was disturbed by these messages. She finally got an email with a link to a video that said Bowler was a fictional character and that the emails were part of an elaborate prank, all to advertise the Toyota Matrix.

Plaintiff sued Toyota for, among other things, infliction of emotional distress. Toyota moved to dismiss the lawsuit, arguing that the online terms and conditions contained an arbitration provision, so the case did not belong in court but before an arbitrator. The court rejected this argument, finding that the terms and conditions were void, because plaintiff’s agreement to them was procured by “fraud in the inception or execution.”

The court found that the terms and conditions led plaintiff to believe that she was going to participate in a personality evaluation and nothing more. A reasonable reader in plaintiff’s position would not have known that she was signing up to be the target of a prank. For example, the terms and conditions were under the heading “Personality Evaluation Terms and Conditions” and made vague and opaque references to terms such as “interactive experience” and a “digital experience.” Simply stated, plaintiff, through no fault of her own, did not know what she was getting herself into.

For these reasons, the court held that the terms and conditions were void, and all the provisions contained in those terms and conditions, including the purported agreement to arbitrate any disputes, did not bind the parties.

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