TechLaw

Close Doesn't Count in Cybersquatting

The Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d), is the federal law that gives trademark owners a civil claim against persons who act with a "bad faith intent to profit" from registering domain names that are identical or confusingly similar to protected marks. Remedies available to a prevailing trademark owner include an award of statutory damages of up to $100,000 per domain name, plus costs and attorneys' fees in some cases. Losing an ACPA case can ruin your day.

Congress softened the harshness of the ACPA by including a safe harbor for domain registrants who "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful," 15 U.S.C. 1125(d)(1(B)(ii). To date, courts have been very stingy with this defense. In Audi AG v. D'Amato, 469 F.3d 534 (6th Cir. 2006), the Sixth Circuit remarked that the safe harbor defense is available "only in the most unusual cases." In Virtual Works Inc. v. Volkswagen of Am. Inc., 238 F.3d 264 (4th Cir. 2001), the Fourth Circuit held that a domain registrant who acts even partially in bad faith is not entitled to the safe harbor. The intent of these cases is clear: cybersquatters won't be allowed to escape liability merely by professing a pure heart or mustering a decent argument that their use of the plaintiff's mark was fair or lawful.

The Ninth Circuit's decision yesterday in Lahoti v. Vericheck Inc., No. 08-35001 (9th Cir., Nov. 16, 2009), is in the same vein as Audi AG and Virtual Works. In Lahoti, the court said that the domain registrant was not entitled to claim the safe harbor defense because it was "unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case."

Wholly lawful. To my ear, "wholly lawful" is much more demanding than the language that Congress wrote, which is "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful." But three federal appellate panels clearly feel otherwise. "Wholly lawful" is a tough standard for anyone to meet, and it proved insurmountable for a garden-variety cybersquatter like Lahoti. The bill of particulars against him:

• Lahoti registered <vericheck.com>, a domain identical to the plaintiff's "Vericheck" Georgia state service mark.
• Lahoti published a collection of outbound links (some pointing to the plaintiff's competitors), not a legitimate offering of goods and services, at the <vericheck.com> domain name.
• Lahoti offered to sell the domain name to the plaintiff for $72,500.
• Lahoti had been adjudicated a cybersquatter in other judicial proceedings.

In most courts' estimation, the above factors are tell-tale signs of a dark, bad faith, cybersquatter heart. In fact, these factors would form the core of any decent "what not to do" list for domainers.

Now, as it turns out, the lower court made a couple legal errors when it ruled that the VeriCheck mark was a "distinctive" mark (and thereby protectable under the ACPA). The appellate court discussed at length how an arguably generic or descriptive mark might become "distinctive," and it sent the case back to the lower court for reconsideration.

So this was a close case as far as whether or not the plaintiff's mark is distinctive enough to support an ACPA claim. However, in this court's estimation, it wasn't a close case as far as whether Lahoti's behavior met the "wholly lawful" standard: 

As we see the record, there is no genuine appellate issue on Lahoti’s bad faith. He has made his cybersquatter bed and now cannot persuasively challenge the district court’s conclusion that he must lie in it. A different case might be presented if Lahoti had a genuine business marketing service for which the Vericheck name was an aid, but there was no credible evidence of that here, nothing but his self-serving affidavit.

A reasonable person in Lahoti’s position—that is, a reasonable person who had previously been declared a cybersquatter in a judicial proceeding—should have known that his actions might be unlawful. Lahoti has previously advanced, unsuccessfully, the same trademark defenses he argues here, including the claim that the mark at issue was only descriptive and that he is entitled to the safe harbor. Lahoti’s failed defenses in these other cases make it unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case.

The message I take from this language is that if you have been adjudicated a cybersquatter in a prior proceeding, or you are in the "domaining" or domain name speculation business, you had better knock down the trademark owner's claim to a protectable interest in the mark because you will never convince a court that your registration of the domain was "wholly lawful." Close doesn't count in cybersquatting.

GoDaddy Not Subject to Trademark Infringement Suit in Illinois

In the case of uBID Inc. v. The GoDaddy Group Inc., No. 09-cv-2123 (N.D. Ill., Nov. 5, 2009), a federal district court in Illinois ruled late last week that the Big Daddy of domain name registrars, Godaddy.com, is not subject to the jurisdiction of Illinois courts and need not defend a trademark infringement suit filed there. This is an interesting ruling, though "interesting" in the area of internet jurisdiction is a relative term to say the least.

The plaintiff's trademark infringement theory is a novel one, and the case is well-known in cyberlaw circles. The plaintiff alleged that Godaddy.com is unlawfully profiting from domain name registrations that infringe the plaintiff's UBID trademark -- because Godaddy.com sells advertising on web pages for parked domains. For example, if a person registers a domain name, like <ubidhigherthanme.com>, but does not immediately link the the domain name to a website under the registrant's control, Godaddy.com will temporarily associate the domain name with a web page under Godaddy.com's control and then sell advertising on that web page.

GoDaddy: Everywhere and Yet Nowhere at All (Except Arizona)

Godaddy.com, based in Arizona, is the leading ICANN-accredited registrar of domain names by a wide margin, with reportedly over 32 million domains registered. The court acknowledged that Godaddy.com received 3.19 percent of its revenues from Illinois, a not-inconsiderable sum. Add to that Godaddy.com's pervasive national advertising campaigns and sponsorships in the sport of auto-racing, including events that took place in Illinois. Yet the court found that all of this commercial activity was not enough to subject Godaddy.com to suit in Illinois.

In this court's view, it was important that Godaddy.com's national advertising campaign was not specifically directed to Illinois residents. "Without demonstration of an Illinois-specific focus, GoDaddy's sporadic contacts with Illinois as a result of its national advertising campaign to not support an exercise of general jurisdiction," the court said.

The idea of targeting came up again in the court's discussion of specific jurisdiction, where it ruled that the thousands of transactions (and domain registration contracts) processed by Godaddy.com's website with Illinois residents were not sufficient to create jurisdiction over Godaddy.com. The court seemed to weigh in Godaddy.com's favor the fact that these transactions were automated. Also in Godaddy.com's favor was the fact that Godaddy.com's automated contacts with Illinois residents were initiated by Illinois residents not by Godaddy.com. They were the product of "unilateral activity of a third person," the court wrote.

Asserting jurisdiction over Godaddy.com on the basis of these automated contacts would violate constitutional due process, the court held. It also rejected the Calder "effects test" as a basis for assertion jurisdiction here.

The court also mentioned favorably Godaddy.com's registration contract, which provides for jurisdiction in Arizona, though it didn't make too much of this fact.

I wonder if this ruling is an outlier or a turning point in how courts view jurisdiction over internet sites. If an entity as commercially large and pervasive as Godaddy.com is not subject to the jurisdiction of Illinois courts then, by this court's reasoning, Godaddy.com is not likely to subject to the general jurisdiction of any other forum -- save for Godaddy.com's home state of Arizona. Smaller domain name registrars (all of the others are smaller than Godaddy.com!) should also take comfort from the court's ruling.

Trademark owners alleging infringement tend to prevail on these sorts of jurisdiction challenges, inasmuch as the harm allegedly inflicted by the defendant's infringing activities is felt most keenly in the trademark owner's home jurisdiction. On this point too the court's ruling was somewhat surprising.

The Targeting Trend

Internet jurisdiction cases tend to be all over the map as far as reasoning as each court takes a whack at the novel issues presented, and they are "fact-intensive" as well, which is lawyer-speak meaning that the court's ruling is pretty well tied to the case before it. It is not terribly difficult to distinguish one case, or several cases, and build a good argument for ruling the other way. Myself, I could find a couple dozen cases where scant commercial activity was held to support the assertion of jurisdiction over an out-of-state defendant. That doesn't mean this judge was wrong in uBID v. Godaddy or that this ruling isn't a rational way to look at internet-based jurisdiction problems. It is entirely possible to see this case a part of the recent trend of "targeting" analysis in jurisdiction cases, which is scaling back expansive 1996-2000 era views on internet jurisdiction. In the end, though, I think it just means that the cases are all over the map.

(This doesn't have anything do to with jurisdiction, but I found it interesting that the court's opinion mentioned that Godaddy.com has filed a patent application for a domain registration system that examines the text of a domain name and then prevent advertisements from companies with similarly worded names from appearing on the parked page.)

Finally, a trivial tidbit. The judge in the uBID v. Godaddy case, Charles P. Kocoras, is the same judge who entered a $11.7 million default judgment against United Kingdom-based Spamhaus in a defamation case brought by a company claiming to have been wrongfully tagged by Spamhaus as a spammer. Spamhaus didn't challenge the court's jurisdiction in that case, and I bet they wish they did. Spamhaus's connections with Illinois seem awfully slight in comparison to Godaddy.com's connections. Spamhaus is still trying to get out from under that default judgment. The Seventh Circuit subsequently ruled that Spamhaus was entitled to a hearing on the size of the judgment, and that part of the case has been dragging on for the past two years. On Oct. 8, Judge Kocoras rejected Spamhaus's request for a jury trial on the damages question.

The bottom line for the uBID v. Godaddy case, however, is that if uBID wants to pursue Godaddy.com on trademark infringement claims, it is going to have to do so in Arizona.

Courts, Press Grappling with New Media, New Forms of Journalism

A few days ago several prominent federal judges and attorneys in the Ninth Circuit participated in a conference to discuss the legal system's evolving relationship with the news media and how new online communication technologies are affecting the administration of justice. BNA's Silicon Valley reporter, Joyce Cutler, was there, and she filed the following story for us. The discussion that took place reflected an acute awareness of the changes taking place in the news industry, the pervasiveness of digital devices and user-generated content, the public's growing desire for more information about the legal system, and the need on the part of the judicial system to resolve new policy questions raised by all of these phenomena. Reading through the story, I was struck by the extent to which each district and sometimes each judge is, by necessity, arriving at his or her own conclusion as to what technologies and public disclosures should be permitted in the courtroom. I thought Joyce's article should reach a wider audience, so I am sharing it here.

Courts, Press Grappling with New Media, New Forms of Journalism

SAN FRANCISCO -- At a time the news industry and even Congress are struggling to arrive at a definition of journalism, the judicial system finds itself faced with that same question and several others. Judges and lawyers, who have not yet fully digested the last wave of communications technologies such as television and radio, must now -- by necessity -- resolve a host of new policy issues raised by the next technological revolution: widespread, cheap and tiny information-capturing devices powered by social media.

UPDATE: A few days after this post was written, but before the panel discussion reported here, a federal district court in Georgia, in United States v. Shelnutt, ruled that twittering from inside a courtroom was "broadcasting" forbidden by Rule 53.

The decades-long debate over whether to increase public access to the courts through use of televised proceedings has thus been fused into a new debate over whether and how to allow live-blogging or real-time filing of 140-character Twitter updates in the courtroom, panelists said Nov. 4 at the Northern California federal courts media conference.

The conference, sponsored by the U.S. District Court for the Northern District of California and the Public Information and Community Outreach Committee (PICO) of the U.S. Court of Appeals for the Ninth Circuit, offered insights into what reporters, bloggers, scholars, and judges are grappling with as communication technologies evolve.

Many on the bench are "blissfully ignorant" of what is going on in the media industry and the processes of getting information out in other means than newspapers, Chief Judge Vaughn R. Walker said. "We need to explain what we do, explain our decisions, explain the entire process in a way that people can understand and can have access to."

The Ninth Circuit is unique among the federal circuits in having a public information committee.

Cell Phones In, Video and Still Cameras Out, Everything Else in Play

While most courts now allow cell phones into the courtroom, the rules are different from district to district, said Judge Susan Illston, in the Northern District. Rules on laptop computers, which allow real-time communication, vary "very much from courtroom to courtroom," Illston said.

Illston added that she has no prohibition about laptops in her courtroom "provided the keys aren't noisy" and disruptive.

Taking photographs is still prohibited across all federal courts.

The variation in rules can be problematic, said Peter Scheer, executive director of the First Amendment Coalition. The federal rule prohibiting broadcast television from courtrooms is so broad that it includes ordinary tape recording, he said. "But politically things are changing in Washington," and there is considerable sentiment to change the rule if the judiciary does not act, Scheer said. He predicted that the ban would be "greatly relaxed" within the next two years. "At the moment, unfortunately, people can't learn nearly as much about important cases as they should be able to," Scheer said.

Federal courts are still where they were 30 years ago when broadcast television at its zenith, he said. Legal blogs, including SCOTUSBLOG and Ninth Circuit Blog, follow the courts and show how quickly information can get to the public, said Melissa Griffin, who runs Sweet Melissa blog covering San Francisco politics and law.

Eric Goldman, a professor at the Santa Clara University Law School, said blogging is "both a complement and a substitute for what law professors have done in the past." Goldman blogs about cases involving the internet and intellectual property. "Really, the point is if we have an open courtroom where people are allowed in, they're all potential bloggers and there is no security through obscurity any more. Those days are over. That information will leak out one way or another, and you'll have to approach the information accordingly," Goldman said. "Kick out the Blackberries, that's fine. I will take my notepad and my pen and I will blog about it after the trial or after the courtroom. The point isn't just how you kick out the technology from the courtroom. That strikes me as really a non sequitur. The real issue is the control of information in the courtroom," Goldman said.

Shrinking Media Presence in Courtroom

Given the current-day realities of the newspaper industry, "we have fewer and fewer people covering the courts, and so the idea that your local newspaper is going to have a reporter in the courtroom covering a proceeding, those days are gone," said Kelli Sager, a partner with Davis Wright Tremaine in Los Angeles and a member of the Ninth Circuit PICO Committee.

The court has to be more proactive about making information available quickly, said Sager, noting that PICO is working on more alternatives to increase availability of information. But, she cautioned, "there is going to be a period of time when we just have less coverage of the courts by the media unless we make it easier."

Even with the decline in newspapers, mainstream media is still the primary presence in the courtroom, Scheer said.

Illston, who is overseeing the Barry Bonds prosecution involving allegations that he lied to a grand jury about steroid use, said that her court worked to ensure the process was "as media friendly as it could be." The court wired audio and video into the ceremonial courtroom down the hall so people could listen and see the proceedings. "The advantage of course there is you're in private effectively so if you want to clatter on your computer that's OK, if you want to be noisy, that's OK, if you even want to second-guess the court's rulings, that's OK as long as you don't put it in your articles," Illston said.

The same system has been used in the Ninth Circuit for high-profile oral arguments. The "nightmare vision" was if more people want to come in than there is space, raising a host of issues, including who is a journalist, she said.

"Those are really tough questions today," Illston said.

Is It Necessary to Define Who is a Journalist?

Access is an issue when police departments provide press passes that allow journalists to cross police lines because not all reporters need to be on the scene of a disaster, Griffin noted. And the distinction of who is a journalist is arbitrary, she said. The problem of defining a journalist arises "when you have to ration space," said Scheer, noting the problems that arose when Scooter Libby was on trial in the case over who leaked CIA operative Valerie Plame's name to the media.

In the Libby case, the court allocated a journalist seat for a blogger, Sager said. "There is no recognized, neutral credentialing authority," Scheer said, "and there are many kinds of people using different kinds of technology who call themselves and are generally viewed as journalists than was the case a few years ago."

"The courts don't want to be in the business and shouldn't be in the business of drawing lines and deciding who is a journalist and who is not," Scheer said. "I would let people decide for themselves whether they're journalists, and the only question is whether they are willing to abide by the basic rules" of the court, Scheer said.

"Credentialing is not the answer," Jennifer Granick, civil liberties director for the Electronic Frontier Foundation, said. "First of all, I don't think credentialing can be constitutionally done." Also, Granick said, courts and lawyers do not have much interest in the job of credentialing journalists.

Blogger Griffin remarked that one possibility might be to credential journalists based on circulation or whether they are regularly engaged in the activity.

"It's going to evolve. It has to evolve. Sadly, the courts are being put in the unfortunate situation," Griffin said. "They may have to be on the forefront of this because of the ability to make reasoned inferences based on multiple pieces of information that other organizations may not be able to do. The court may find itself stuck doing this but I think ultimately there's going to have to be a third way of doing this because it's getting more and more complicated."

A proposed federal shield law (S. 448, awaiting action in the Senate Judiciary Committee) defines journalists as those who are regularly engaged in gathering and disseminating information to the public regardless of whether they are getting paid. This definition covres freelancers and online journalists.

Sager said that her "perfect solution" is to stream the information over the internet or on CSPN and make it available to everyone. "Then you don't have to fight about those issues about who's a journalist and who's not," she said.

News Media Influence on Jurors

Electronic communication has also changed the way the judge admonishes the jury about rules of evidence, said Illston. The warning not to read anything in the newspaper "is now the beginning of a very long paragraph of things they're not supposed to be doing" that includes telling them not to blog or Twitter or search the internet to research the case, Illston said.

"Really, it's an effort to sequester without sequestering the jury," Illston said. "And what we do then is to rely on their good faith in doing what we ordered them to do. And mostly it works."

Judge Jeremy Fogel of the Northern District said that he spends about 10 minutes on the list of prohibited activities, including blogging, e-mailing, Facebook entries, and Twitter. "I think the problem is things are moving so fast that there's so many ways for people to get information that we just can't anticipate all the problems we're going to have," Fogel said.

Judge Howard Matz, of the Central District of California, remarked that no juror in fact reaches a decision in vacuum. "There is no simple solution to immunizing jurors from extraneous influences," Matz said. Without explaining to jurors very specific information about what fairness in a jury trial requires, "I think we're going to have decisions badly warped. This has already begun to happen with jurors twittering about their ongoing experiences. And not necessarily about the evidence but about the dress of the lawyers or whether a particular lawyer is 'hot,' " Matz said.

Judicial Response to Public Access Issues

Four years ago, the Northern District published General Order No. 58, a local rule that defines an electronic device and establishes limitations on their use. The is rule is now "completely obsolete," Fogel said. Having been written before the iPhone, before Twitter and Facebook, the rule "has nothing to do with the world we in which we live," Fogel said.

"Technology has expanded and exploded so fast that while [Order No. 58] is an interesting artifact, it really doesn't mean anything," Fogel said.

Granick praised the Public Access to Court Electronic Records (PACER) system as really making a difference and allowing individuals to follow other people's cases. The downside of PACER, she added, is it is behind a pay wall and has fragmented search that does not allow for tracking of cases by subject matter. Granick commented -- and the panel agreed -- that more documents are filed under seal than ever before out of caution about the material available in the record and fears about what information would be reported upon.

Fogel said that his court, which is based in his San Jose, Calif., regularly deals with disputes involving valuable intellectual property. "If somebody reports on something they're not supposed to report, it can lead to stock price manipulation, the loss of proprietary rights that could cost people hundreds of millions of dollars," he said. "So the stakes are high. And my concern isn't keeping the media out because I'd like the media to be in. It's a question of how to think about the problems in a way that doesn't overly restrict but nonetheless protects the interests of people," Fogel said.

By Joyce E. Cutler

Ninth Circuit: Obscenity in E-Mail Messages Judged by National Community Standards

The U.S. Court of Appeals for the Ninth Circuit decided United States v. Kilbride a couple days ago, producing an opinion that interpreted criminal provisions in the CAN-SPAM Act and also discussed at length whether in a prosecution for transmission of allegedly obscene e-mail messages the contemporary community standard should be a local or national one.

Community Standards and E-Mail Communications

In a nutshell, the defendants used spam to promote adult websites.

The court ruled that the appropriate standard for e-mailed obscenity is a national community standard, due in large part to the fact that e-mail senders lack the ability to control which communities will receive their messages. The court reached this result by threading through the five opinions written in the U.S. Supreme Court's decision in Ashcroft v. ACLU, 535 U.S. 564 (2002), a case involving the constitutionality of a federal statute prohibiting the commercial online transmission of indecent speech. The problem, of course, is that subjecting e-mail speech to the community standards of the least tolerant community in the country may have an unconstitutional chilling effect on protected speech.

The Ninth Circuit wrote that, in light of Ashcroft, the application of a local community standard to e-mail speech was unconstitutional. However, the Ninth Circuit added, the application of a national community standard may also present constitutional problems. What? In a footnote, the court remarked that the application of local community standards "raises grave constitutional doubts" whereas the application of national community standards "does not raise grave constitutional doubts." Just to make sure that the reader understood that the court was not putting a stamp of approval on a national community standard, the court added that a First Amendment challenge to a national community standard will not necessarily be found meritless. Figure that one out, First Amendment lawyers.

(Personally, and this is probably an embarrassing confession of ignorance, but I have trouble understanding how a juror can determine what a "national community standard" looks like. Presumably, different communities have different sensibilities about artistic expression and obscene speech. How does a person deduce a national standard from a collection of varying local standards? Take an average? That can't be right. It's like asking, "What color is a rainbow?" A rainbow can't be reduced to a single color, can it. Same thing with community standards.)

Along the way, the court rejected the government's argument that e-mail speech is not entitled to the same First Amendment protection as the Internet communications at issue in Reno v. ACLU, 521 U.S. 844 (1997). "[F]or purposes of the First Amendment concerns raised by Defendants, Defendants' email communications are analogous to other Internet communications," the Ninth Circuit wrote.

Meaning of `Materially Falsifies' in CAN-SPAM Act

To carry out their spam operations, the defendants created several nonsense domain names, fake originating e-mail addresses, and fictitious names for e-mail senders. They also supplied false information when they registered their domain names. They argued on appeal that the definition of "materially falsified" in the criminal liability portion of the CAN-SPAM Act, 18 U.S.C. 1037(a)(4), was unconstitutionally vague -- raising both facial and as-applied challenges.

The court rebuffed these challenges. However, as it did so, the court remarked that domain name registrants who use private registration services that conceal the registrant's true identity have materially falsified their registration information. The court wrote:

[P]rivate registration is a service that allows registration of a domain name in a manner that conceals the actual registrant’s identity from the public absent a subpoena. We fail to perceive any vagueness on this point. Based on the plain meaning of the relevant terms discussed above, private registration for the purpose of concealing the actual registrant’s identity would constitute “material falsification.” Defendants assert that many innocent people who privately register without the requisite intent may be subject to investigation for violation of § 1037 until their intent can be determined, allowing for abuse by enforcement authorities. This may be so, but it does not make the statute unconstitutionally vague.

It is important to note that the CAN-SPAM Act requires proof "material falsification" plus an intent to send unlawful spam messages. Nevertheless, this court's belief that use of privacy-enhancing domain registration services -- a very common practice -- is a "material falsification" that helps create criminal liability is something e-mail senders should be aware of.

Technology Puts Debt Collectors on Uncertain Legal Ground

According to a Government Accountability Office report (GAO-09-748) released today, modern communications technologies have blurred the former clarity of key provisions in the Fair Debt Collection Practices Act.

The first problem is that the FDCPA was written in 1977, before the advent of the commercial Internet, e-mail, voice mail, mobile phones and fax machines. (For my older readers, 1977 was the year Rocky won the Best Picture Oscar and Lindsay Wagoner won an Emmy for her work in The Bionic Woman. Days of bread and circuses for sure.)

Meanwhile, back at the Forum, Congress created the second problem. Congress designed the FDCPA to be frozen in time, by failing to give the Federal Trade Commission rulemaking authority to implement the act. What this means for debt collectors is that their ability to lawfully dun debtors via something other than a landline -- such as a fax machine, voice mail, e-mail, or mobile phone -- is substantially in doubt.

This is a big problem for debt collectors because, as we all know, the landline -- the leading communications technology of 1977 -- is the least likely place to reach anyone nowadays. One commenter to the GAO, the National Association of Retail Collection Attorneys, remarked that "conflicting court decisions have made regulatory compliance a guessing game, rather than a predictable endeavor."

Here are a few technology-related concerns mentioned in the GAO report:

Voice-mail and answering machines. Leaving a collection message on these devices is legally risky, because someone other than the debtor may overhear the message, causing an FDCPA violation.

Mobile phones. A debtor may be in a different timezone than the one suggested by the debtor's mobile phone area code. And the debtor's mobile service provider may charge for connecting the debt collector's call. This means that attempts to collect a debt via a mobile phone call could violate the FDCPA's rules on imposing telephone charges on consumers and on calling outside the lawful hours of 8 a.m. and 9 p.m.

Caller identification devices. The display of the debt collector's phone number on a caller identification device could be a violation of the FDCPA if someone other than the debtor sees the number. On the other hand, blocking caller identification information could be a violation of the FTC Act's prohibition on making a false or misleading statement.

E-mail messages and fax machines. These communications technologies are believed to create too high a risk that someone other than the debtor may read the transmission, in violation of the FDCPA's ban on disclosure to third parties.

Predictive dialers. Effective, perhaps, but these raise the risk of violating the FDCPA's prohibition on causing a phone to ring repeatedly with the intent to annoy or harass the debtor.

Another problem identified by the GAO is the post-1977 emergence of a debt collection industry where consumer debts and personal information are packaged and sold as "debt portfolios" among debt buyers and other intermediaries, creating doubt about the FDCPA's application to these new entities. Also creating business problems for debt collectors, many of whom did not directly deal with the original debtor, is the fact that they frequently lack good information about the collection history, prior consumer complaints, and the outcome of bankruptcy proceedings.

These and other problems led the GAO to call on Congress to update the FDCPA to take into account changes in the debt collection industry, to reflect changes in communications technologies, and to give the FTC rulemaking authority to implement any so-modified law. There is little good in the GAO's proposal for debtors. The clear thrust of the GAO's report is that the debt collection industry is having trouble effectively communicating with debtors, due in large part to fragmentation within the industry and due to the widespread adoption of communications technologies that have placed modern debt collection efforts on uncertain legal ground. And that Congress should do something about it. Eventual legislation might be an opportunity, however, for privacy rights advocates to insert consumer privacy protections into an area that, on the surface, seems to be rife with information processing and transfers and trade in sensitive personal information.

Fair Use on Display With Barnes & Noble's Nook E-Reader?

The jkOntheRun mobile device blog has an early story out on Barnes & Noble's new e-reader, the Nook. From their summary:

E-books can be loaned to other Nook owners, or those with any version of eReader software installed on a handset or computer. The loan period is 14 days, after which the e-book disappears on the lendee’s device. The original owner cannot access the e-book during the loan period.

Publishers can restrict their books from being loaned.

This is exciting news from the reader's perspective, but I can't help but wonder if this Nook feature will be the subject of copyright infringement litigation in the near future. "Digital lending" is considered an oxymoron among most copyright owners, though thankfully this is the kind of problem that $$$ often solves (and may have already solved in this case). Giving copyright owners the option of turning off the lending feature is similar to the way Amazon parried objections to the text-to-speech feature with its Kindle 2 e-reader. (BTW there is no text-to-speech option on the Nook.)

Craigslist Eludes Sheriff Dart, Thanks to CDA Section 230 Immunity

A federal district court in Chicago yesterday summarily dismissed Cook County Sheriff Thomas Dart's lawsuit alleging that online classified ad service Craigslist facilitated prostitution and created a public nuisance through the operation of the "adult" (formerly "erotic") services section of its website.

The court held that the sheriff's claim was barred by Section 230 of the Communications Decency Act. The court said that the sheriff's claim essentially sought to hold Craigslist liable as a publisher or speaker of third-party online content -- the kind of claim for which CDA Section 230 gives broad immunity to online publishers.

The case is Dart v. Craigslist Inc., No. 09-1385 (N.D. Ill., Oct. 20, 2009).

More later certainly.

Sixth Circuit Says Man Who Paid to Download Child Porn Probably Did So

From the Sixth Circuit yesterday, United States v. Frechette, No. 08-2191 (6th Cir., Oct. 8, 2009): government evidence that a suspect paid a one-month subscription fee to access a child porn website created probable cause to believe that he did in fact access the website and that evidence of crime could be found on the suspect's computer.

This ruling drew a dissent arguing that the majority's probable cause standard was too lax.

Jurisdiction Setback Apparently Won't Derail Privacy Action Against NebuAd

Plaintiffs in a privacy rights lawsuit against behavioral targeting technology provider NebuAd Inc. and six Internet service providers who shared their users' data with NebuAd have told the trial court they will press on even in the wake of the court's ruling that none of the ISP defendants are subject to suit in California. The court's Oct. 6 ruling left California-based NebuAd as the only defendant in the case, a complication because NebuAd liquidated its assets and went out of business in May 2009.

According to the court's opinion allowing NebuAd's current counsel to withdraw, also issued on Oct. 6, the plaintiffs believe that "NebuAd is not really going anywhere," and that NebuAd "is simply restarting with a new name," based out of the United Kingdom.

NebuAd's attorneys say they are owed $500,000 in legal fees by NebuAd and its insurers. The court permitted the attorneys to withdraw, but declined their additional request to stay the proceedings against NebuAd until new counsel could be retained.

The plaintiffs are alleging violations of the Electronic Communications Privacy Act, the California Computer Crime Law, the federal Computer Fraud and Abuse Act, and the California Invasion of Privacy Act.

The ISPs who were dismissed from the case are Bresnan Communications, CenturyTel Communications Inc., Embarq Inc., Knology Inc., WideOpen West Finance LLC, and Cable One. None of the ISPs is based in California. The trial court ruled that the ISPs' dealings with NebuAd was not a sufficient and constitutionally reasonable basis for a California court to assert jurisdiction over them.

The case is Valentine v. NebuAd Inc., No. 08-5113 (N.D. Cal.).

Business Models That Require Restrictive Consumer Contracts for Success

The MediaFire vs. SkipScreen spat, which involves a download website's attempt to use a terms of use agreement to prevent a third-party software developer from distributing an ad-skipping plugin, highlights a weakness in business models that can succeed only if consumers are coerced by contract into doing something they really don't want to do. The business is only as good as the contract.

The download site, MediaFire, has an acceptable use policy that forbids users from (1) using automated tools to accomplish the download, (2) "interfer[ing] with the normal use" of the MediaFire website, (3) and "reformat[ting] or refram[ing] any portion of any web page," thereby bypassing the advertisements. Consumers don't want to watch display advertisements while waiting for a download to begin. Enter SkipScreen, a Firefox browser plugin that solves this annoyance on behalf of the user. SkipScreen "auto-clicks" toward the true download link, bypassing the wait time in which MediaFire displays advertising to the user.

So, MediaFire has a contract with its users that the users really don't want to follow. And it has no contract at all with SkipScreen's developers. (Though it might be able to assert a "robot contract" claim, Register.com v. Verio, 126 F. Supp. 2d 238 (S.D.N.Y. 2000), or a trespass claim, eBay Inc. v. Bidder's Edge, 100 F. Supp. 2d 1058, 1073 (N.D. Cal. 2000), or a Computer Fraud and Abuse Act claim, EF Cultural v. Explorica, 274 F.3d 577 (1st Cir. 2001). Or even a tortious interference with contract claim. Or a trademark claim. Unfortunately, the possibilities are limitless.) SkipScreen is fighting back with the Electronic Frontier Foundation's help, so now MediaFire will have to go to court to enforce its alleged right to require users to view its advertising, which they apparently don't want to do.

A similar case that produced a recent decision is MetroPCS Inc. v. Virgin Mobile USA LP, No. 08-cv-1658 (N.D. Tex., Sept. 25, 2009). I say that the case is similar because, like the SkipScreen dispute, it involves a business, Virgin Mobile, that is supporting its business model with a terms of use agreement that users do not really want to honor. And it involves a third-party, MetroPCS, that offers Virgin Mobile customers a ready means to avoid the agreement's restrictions.

Virgin Mobile sells cell phone handsets and network service for the handset. Virgin Mobile actually loses $50 on each handset sale, a loss that it can only recoup if the user purchases network service for the length of the service contract. A use agreement on the product packaging and in a terms of service booklet inside the packaging purports to bind the user to the Virgin Mobile network for the life of the service contract, along with other restrictions on how the handset may be used.

MetroPCS disrupts the Virgin Mobile business model by offering a service that re-programs Virgin Mobile handsets so that they can operate on the MetroPCS network. Virgin Mobile sued to stop MetroPCS from luring away its customers in this fashion, raising trademark (the re-programmed handsets still carried Virgin Mobile branding) and breach of contract claims. The court's Sept. 25 opinion, which is inconclusive regarding the trademark claims, features a fascinating discussion about whether MetroPCS is making a trademark "use" of the Virgin Mobile handset by re-programming it and whether consumers are confused about what is going on with their handset. The court cited the telecom industry's controversial practice of locking-in consumers to a particular device as evidence that a cell phone handset and cell phone service are, for trademark law purposes, an integrated product offering. Meaning that a change of networks might constitute an infringing trademark "use" of the handset. MetroPCS argued that a cell phone handset is like a television set, where the hardware and the service network (broadcast, cable, satellite) are distinct offerings that the consumer is free to choose among. Judging from the tenor of the court's discussion, it didn't look like the court was buying the television set analogy. 

The court was unimpressed with Virgin Mobile's contract claims, however, and it rejected arguments that the terms set out on the product packaging and service booklet should be extended to parties that had no direct dealings with Virgin Mobile.

Just as in the MediaFire/SkipScreen dispute, Virgin Mobile seems to have created a business that requires coercing consumers into doing something they really don't want to do; namely, sticking with Virgin Mobile when there are less expensive network alternatives and the technological means to do something about it. Even if MediaFire and Virgin Mobile are entirely correct in their legal positions (and they may very well be), they are nevertheless swimming against the current of consumer expectations and desires. That seems like a very difficult business to sustain over the long term.