INTERNET LAW BLOG

How Can The American Legal System Improve Its Approach To Policing And Regulating Digital Technology Without Unduly Stifling Innovation And Civil Liberties?                                                                                                                         

When the World Wide Web was created in 1990, even Tim Berners-Lee could not have predicted how much it would progress during the next twenty-five years. The Internet advanced rapidly and continues to advance rapidly to this day. The Internet is a place where individuals can communicate on a universal scale, where businesses can develop and grow, where economic development occurs, where people can act politically and create real change, and where somebody can share a photograph of what they prepared for dinner. With something so multi-dimensional and so far-reaching, it is no surprise that the Internet and the digital technology related to it is extremely complicated to regulate.

When addressing the issue of how to improve America’s regulation of digital technology, one must first speak to whether digital technology even needs to be regulated at all. The Internet serves as a level playing field. One individual has as much of a right to post on the Internet as any other individual. If one decides to compete with Google, he or she has every opportunity to try and create something that will compete. It initially appears that without regulation, the Internet would be truly open and free.

However, recent cases involving the FCC, Verizon and Comcast display a need for regulation. Internet Service Providers, such as Comcast, currently have a monopoly on the cable market. Because Internet is currently combined with cable access, companies like Comcast are able to charge additional fees to access certain areas of the Internet and have attempted to charge certain companies on the Internet additional fees. For example, Comcast stated that because more people access Netflix than a blog, that Comcast could charge Netflix additional fees. This action clearly hurts Netflix’s freedom to operate on the Internet and impairs the openness of the Internet.

The ability of an ISP to control the speed of certain websites and the amount of fees that certain websites must pay is a stifle on the civil liberties of these website owners. This ability opens the door for Comcast or Verizon to arbitrarily decide which websites they will allow and because of their monopolies on the market, ISPs would have an unseemly amount of control over the Internet. With the control of a monopoly over something so powerful and widespread, an abuse of power is almost guaranteed.

Another example of how regulation, better regulation at that, is needed is through the recent situation involving Instagram photographs. According to the Washington Post, Richard Prince, a controversial artist, printed out screenshots from other Instagrams, made slight adjustments, and sold the photographs in an art gallery for $90,000 each. Prince had the ability to profit so much from another person’s work without his or her permission because the Instagram copyright laws apply solely to the Instagram world. While Prince could have been successfully sued if he had taken the photographs and put them on his own Instagram, he cannot be successfully sued by using the photographs outside of Instagram.

Many individuals were unaware of their loss of possession of their photographs until Prince’s gallery, and many individuals think that this suppresses their liberties. One’s loss of ownership of his or her photographs appears to make it so that less people would post photographs and less people would share.

Even by just examining these two examples, it comes into light that many companies and individuals are attempting to and succeeding in profiting from information shared on the Internet, without actually having much ownership over it. While there are certain aspects of deregulation that seem principal, issues of property ownership and the fight for control of the Internet necessitate being addressed with regulation.

The current regulation on the Internet stifles civil liberties and stifles innovation in many ways. Website owners fear that they will be controlled with arbitrary fees by one authority. Many individuals fear that they cannot claim ownership to anything they discover or create if they put it on the Internet. This fear is detrimental because with a network so universally accessible, not sharing ideas could inhibit many types of beneficial progress that this world needs.

The Internet and its digital technology in America should be regulated like its government. As with America, one entity cannot control nor have the power to regulate something as significant and expansive as the Internet. As seen in the recent cases with Verizon and Comcast, allowing one organization to regulate the Internet leads to the opportunity to abuse power.

There should be three organizations, or “branches” used to regulate the Internet. Each group would have the ability to draft and create regulation, examine cases about the Internet and supposed infringement of rights and vote on both of these aspects. Each group is subject to checks and balances by the other groups. The organizations would work separately but together in their attempt to keep the Internet as deregulated as possible, but to create fair regulation where necessary. These three organizations, which currently do serve as the main authorities on Internet regulation should only be able to pass regulation through a system of debate and voting.

The FCC, ICANN, and the Internet Society are potential organizations that could serve as the main three groups that have the power to regulate the Internet within the United States. The ISOC also contains the groups, IAB, IESG, and the IETF among others within it.

However, although framed after the government, it is necessary that these three groups do not become political. The Internet cannot become another political venture where if liberals make up the majority of the organizations that the Internet will be censored more so for conservatives and vice versa. Politicizing the Internet would stifle civil liberties and the right to speak freely.

One requirement of these groups is to keep regulation on the Internet as transparent and comprehensible as possible. With the world at almost every single individual’s fingertips, it is essential that each individual be aware of the legal framework surrounding the Internet and have the ability to access these laws whenever necessary. It is crucial that these organizations look at the rules involving certain Apps such as Instagram to see if their rules are worthy to be laws applicable on all other forms of media or outside of media. It is imperative that ownership of one’s ideas and property be sustained in certain ways so that innovation and invention can continue to flourish.

The American legal system can improve its approach to policing and regulating digital technology by creating an actual system, with checks and balances. This system is essential for increasing the clarity of Internet regulation and allowing access and transparency to Internet law.

These groups, with the authority to regulate, should attempt to keep the Internet as deregulated as possible, but should create law where the ability of one organization to control or infringe on one’s rights is probable. It is clear because of the recent attempts by monopolies to control the Internet and the success of some in gaining the rights to other’s creations that a comprehensible organization needs to be created to ensure the fairness of the Internet. A three- organization system with checks and balances would hopefully allow minimal regulation to be created so that stifling innovation and civil liberties is avoided.

The Second Circuit should be rendering its decision later this year. 

• a false statement concerning another person or entity;
• publication or communication of that statement to a third person;
• intent:
  • malice (intent or reckless disregard) concerning the fact that the statement was untrue if it was about a public figure, or
  • negligence by the party making the statement concerning the fact that the statement was untrue if it was about a non-public figure; and
• harm caused to the person or entity who is the subject of the statement (unless a limited exception applies in which harm is presumed).

Can you hyperlink yourself into a lawsuit? Do you need to fact check every article you reference in an Internet posting?

In In re Philadelphia Newspapers v. Vahan H. Gureghian. 11-3257, 2012 WL 3038578 (3d Cir. July 26, 2012), the Philadelphia Inquirer (“Defendant”) wrote an online column about the Plaintiff that included links to a website. The website contained alleged defamatory material about the Plaintiff. Defendant did not author the alleged defamatory material, which was published more than a year ago. Plaintiff sued Defendant for defamation because Defendant provided those links within his column.

In an attempt to avoid tolling the 1-year statute of limitations (“Statute of Limitations”) that applies to defamation claims, Plaintiff argued that the links amounted to republication. The reason is that republication of a defamatory statement can begin a new Statute of Limitations. As a result, a violation of the original Statute of Limitations would not have barred Plaintiff from filing suit against the Defendant. 

In its analysis, the Court considered two important legal doctrines: the “single publication rule” and the “doctrine of republication.”  

Single Publication Rule

For a plaintiff to succeed in a defamation suit, the defendant must have published the defamatory material. Under the “single publication rule” a defendant is considered to have published the material only if he or she is the original publisher. The “single publication rule” enables only the original printing of the defamatory material – and not the circulation of the material –  to trigger the Statute of Limitations. Otherwise, the Statute of Limitations would start over every time one re-circulated defamatory material.  This could result in an effectively meaningless Statute of Limitations because it would potentially never end.

Doctrine of Republication

The “single publication rule” is limited by the “doctrine of republication.” The “doctrine of republication” states that “republishing” material will restart the Statute of Limitations. This raises the important question: when does a “republishing” occur? The Court analyzed this issue as follows:

An exception to the single publication rule is the doctrine of republication. Republishing material (for example, the second edition of a book), editing and reissuing material, or placing it in a new form that includes the allegedly defamatory material, resets the statute of limitations. Restatement (Second) of Torts § 577(A); Davis v. Mitan (In re Davis), 347 B.R. 607, 611 (W.D. Ky. 2006). Traditional principles of republication thus require the retransmission of the allegedly defamatory material itself for the doctrine to apply. However, courts addressing the doctrine in the context of Internet publications generally distinguish between linking, adding unrelated content, or making technical changes to an already published website (which they hold is not republication), and adding substantive material related to the allegedly defamatory material to an already published website (which they hold is republication). See Davis, 347 B.R. at 611-12.

Additionally, the Court cited Salyer v. Southern Poverty Law Center Inc., which held that a link is not a republication under similar facts. Salyer v. Southern Poverty Law Center Inc., 701 F.Supp.2d 912 (W.D.Ky.2009).  In Salyer, the defendant provided links to defamatory material and referenced that material several times in articles posted on its website. The Salyer court explained that, although a link calls attention to defamatory material, it does not present the defamatory material. A link is simply a means for accessing the referenced article, it is not a republication. Therefore the Salyer court held that the posting of links did not amount to republication.

In accordance with the Salyer precedent, the Philadelphia Newspapers Court held that links do not amount to republication. Therefore Plaintiff was barred by the Statute of Limitations from proceeding against the Defendant for defamation. The Court expressed the concern that, if it were to hold otherwise, the Statute of Limitations could be triggered endlessly because websites are constantly linked and updated. Allowing each link or technical change to restart the Statute of Limitations would effectively eliminate the Statute of Limitations.

The take away from this analysis is that under certain limited circumstances, linking or referencing defamatory material that you did not write may be grounds to restart the Statute of Limitations. While there are facts in which that will not be the case, it is wise to avoid linking to web pages contain defamatory statements, regardless of how long ago the statement was made.

Comments/Questions: gdn@gdnlaw.com
© 2013 Nissenbaum Law Group, LLC

Should a principal corporate officer be able to avail himself of the corporation’s liability shield which would protect his personal assets from suits arising from actions taken in his corporate capacity? When should a principal officer be held liable for the actions of a corporation based on the principle that the corporation is merely a façade in order to protect the officer from personal liability? These questions were addressed in the recent New York case, Deborah S. Carlone v. The Lion & The Bull Films, Inc. et al., 10 Civ. 6275 (S.D. N.Y. Apr 30, 2012).

The initial holding in that case was that the corporate defendant, L&B Films (“L&B” or “Defendant”), breached its contract with the plaintiff, Deborah Carlone (“Carlone” or “Plaintiff”). The factual basis of that holding was as follows. Plaintiff lent $115,000.00 to L&B for the purpose of making a motion picture.  The loan needed to be made rapidly, without the normal document review. As an incentive, L&B promised Carlone that the principal loan amount of $115,000.00 would be repaid within 30 days, along with an additional $185,000.00.

Plaintiff brought suit against the Defendant because she had not received any of the repayment. Carlone prevailed against L&B Films in her claim for breach of contract. Accordingly, she was awarded $300,000.00 plus prejudgment interest. Subsequently, Carlone sought to hold Mr. Luna, the principal officer, director and 50% shareholder of L&B, personally liable for the judgment by piercing the corporate veil.

New York law establishes two requirements for piercing the corporate veil and thus holding an individual liable for corporate action:

MAG Portfolio Consultant, GMBH v. Merlin Biomed Group LLC, 268 F .3d 58 (2d Cir. 2001).

Courts consider the following factors when determining whether it is appropriate to pierce the corporate veil:

William Passalcqua Builders, Inc. v. Resnick Developers South, Inc., 933 F. 2d 131, 139 (2d Cir. 1991).

The District Court applied the factors set forth above to the facts of this case. L&B Films was exceedingly undercapitalized, having only $50.00, when it was formed.  Other than the money it had
received from the Plaintiff, the corporation had no other assets nor did it conduct any other business during its existence. Additionally, it did not have corporate headquarters; it conducted business out of Luna’s residence. The sole officers of the corporation were Luna’s and his partner Mr. Pereyra. The meetings between them were informal; there were no formal board meetings at which minutes were kept. There was no evidence of any exercise of discretion by L&B that was independent of Luna’s discretion.  Furthermore, Luna used his control of L&B to effect the entering into the agreement with the Plaintiff.

On this basis, the Court held that it was proper to pierce the corporate veil in order to hold Luna personally liable for the award against L&B Films because Luna completely controlled and dominated the corporation.

Creating a corporate entity will not always protect you from being personally liable for corporate actions. It is important to keep Carlone factors in mind when conducting business through an entity.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC