INTERNET LAW BLOG

To state a claim for unjust enrichment in New York, a plaintiff must establish that a) the defendant benefitted; b) the defendant benefited at the plaintiff’s expense; and c) that equity and good conscience require restitution.  Tasini v. AOL Inc., No. 11 Civ. 2472 (S.D.N.Y. March , 2012).  Ultimately, a court must be persuaded that it would be against equity and good conscience to allow a defendant to retain what the plaintiff seeks to recover. Id. at 9.

In Tasini, the Plaintiffs brought suit against the Defendants alleging, among other things, that the Huffington Post was unjustly enriched by its practice of soliciting and accepting unpaid written submissions for its website. Id. at 7.  The Plaintiffs further alleged that the Defendants unjustly denied them compensation for their independent promotion of the content.

 The Defendants moved to dismiss the suit claiming that the Plaintiffs failed to “demonstrate that equity and good conscience require restitution and, in the alternative, that the plaintiffs’ unjust enrichment claim is barred by the existence of an implied contract between the plaintiffs and the defendants.” Id. at 8.  The Defendants made clear to the Plaintiffs from the beginning that they would not be compensated for their voluntary contribution to the website.

The court noted that the essential inquiry in any action for unjust enrichment is whether it can be shown that equity and good conscience warrant restitution, which would therefore obviate the need for dismissal. See Id. at 9.  The court further noted that in evaluating whether equity requires restitution, New York courts look to whether the plaintiff has alleged an expectation of compensation that was denied.  Id. at 10. In this case, the Plaintiffs had full knowledge of the transaction and only expected to gain exposure from their contributions.  Ultimately, the court held that the complaint failed to plead an expectation of monetary compensation and the Plaintiffs therefore could not recover under their unjust enrichment theory.  Further, it was held that since the Plaintiffs contributed to The Huffington Post out of their own unprovoked desire, equity and good conscience did not support what was sought in this matter.

When bargaining, it is important that parties are clear about one another’s expectations.  Everything should be set in writing, if possible, before the transaction proceeds.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Businesses have long been able to protect their list of customers as a trade secret, keeping the information out of the hands of competitors. But should the list of customers in a business’ Twitter account be granted the same confidential protection?

The United States District Court for the Northern District considered this question in a recent case. PhoneDog v. Kravitz, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal. Nov. 8, 2011). The plaintiff, PhoneDog, used a variety of social media – including Twitter – to share reviews of mobile products and services with its readers. The defendant, Noah Kravitz (“Kravitz”), was a product reviewer and video blogger for PhoneDog. The company permitted Kravitz to use the Twitter account “@PhoneDog_Noah.” Kravitz used the account to disseminate information and promote PhoneDog services on behalf of the company. He generated approximately 17,000 Twitter followers during the course of his employment. Kravitz used a password to access the account.

PhoneDog claimed that all of its “@PhoneDog_Name” Twitter accounts, as well as the passwords to those accounts, were proprietary, confidential information. When Kravitz ended his employment with PhoneDog in October 2010, the company asked him to stop using the Twitter account. However, Kravitz instead changed the name (or “handle”) of the account to “@noahkravitz” and continued to use it. PhoneDog, alleging that Kravitz’s behavior caused it to suffer at least $340,000 in damages, brought suit against Kravitz for misappropriation of a trade secret and three other claims. Kravitz filed a motion to dismiss the claims.

A motion to dismiss allows a court to terminate a lawsuit that fails to state a claim upon which the plaintiff can receive relief from the court. When considering a motion to dismiss, a court must accept all of the plaintiff’s allegations as true and construe them in the light that is most favorable to the plaintiff. Bell Atl. Corp. v. Twombly¸550 U.S. 544, 570 (2007). Kravitz argued the claim should be dismissed because neither the identity of the account followers or the password to the account constituted trade secrets. Under the California Civil Code, a trade secret is defined as information that:

1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

California Civil Code, sec. 3426.1(d)

Kravitz claimed the list of followers was not secret because the information was publicly available on Twitter. He also claimed that the password was not a trade secret because the password itself did not derive any actual or potential independent economic value. Kravitz also argued that PhoneDog failed to allege any act by him that would be considered misappropriation. Under the California Civil Code, misappropriation is defined as the:

1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means;

2) disclosure or use of a trade secret of another without express or implied consent by a person who:

a) used improper means to acquire the knowledge of the trade secret;

b) at the time of disclosure of use, knew or had reason to know that his or her knowledge of the trade secret was:

i.) derived from or through a person who had utilized improper means to acquire it;

ii.) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

iii.) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use

c) before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake

California Civil Code sec. 3426.1(b)

The Court found that Kravitz failed to show any basis for a dismissal of the misappropriation claims. The Court determined that PhoneDog described the subject matter of the trade secret with sufficient particularity and that Kravitz had refused to stop using the password and account despite the company’s requests. Additionally, the Court found that determining whether Kravitz’s behavior constituted misappropriation required consideration of evidence, and thus the claim could not be dismissed.

The future decisions in cases such as this will be very significant for businesses who use Twitter or similar social networking tools as a means of collecting a group of potential customers and establishing a professional relationship between them. It is yet another example of how traditional trade secret law will need to adapt to a world where the relationship between businesses and customers continues to operate more and more online and thus in a less confidential setting.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

What state law claims are preempted by the federal law embodied in the Copyright Act?  This question was recently addressed in Stadt v. Fox News Network LLC, 719 F.Supp.2d 312 (S.D.N.Y. 2010).

In that case, Kenneth Stadt (“Stadt”), a video owner, filed a lawsuit against Fox News Network (“Fox”), a cable television network, for among other things, copyright infringement and breach of contract.  Stadt was the exclusive owner of a video that he registered with the United States Copyright Office that depicts a famous couple on vacation (“Video”).  Stadt and Fox entered into a written License Agreement (“Agreement”) in which Fox was given the sole right to air the Video on its network within a one month period.  See Id. at 316.

Stadt alleged that Fox promised to stop using the Video upon expiration of the License, and in exchange for that promise Stadt allowed Fox to broadcast the Video with a “Fox Business Exclusive” credit on the screen. However, Stadt claimed that Fox continued to make use of the Video and credit after the Agreement expired.  Fox moved to dismiss all the claims except the copyright claim, stating that “the claims are preempted by section 301 of Title 17 of the United States Code (the Copyright Act), fail to state a claim as a matter of law, or both.” Id. at 315.

The Court relied on Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004) to determine when the Copyright Act shall preempt state law. Id. at 317.  In Briarpatch, the Second Circuit held that the Copyright Act exclusively governs a claim when:

(1) the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act . . .; and

(2) the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law….

See Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004).

The Briarpatch Court further stated that the first prong of this test is called the “subject matter requirement,” and the second prong is called the “general scope requirement.”  The general scope requirement is satisfied only when the state-created right may be abridged by an act that would, by itself, infringe one of the exclusive rights provided by federal copyright law.  The state law claim must not include any extra elements that make it qualitatively different from a copyright infringement claim.  Additionally, the Briarpatch Court explained that to determine whether a claim is qualitatively different, it will look at “what [the] plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.” Stadt, 719 F.Supp.2d at 317-18 (citing Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004)).

The Stadt Court stated that it takes a ‘restrictive view’ of what qualifies as an extra element sufficient to shield the claim from copyright preemption.  Nevertheless, ‘a state law claim is qualitatively different if it requires such elements as breach of fiduciary duty, or possession and control of chattels.” Stadt, 719 F.Supp.2d at 318.

To establish breach of contract in New York, a plaintiff must 1) confirm the existence of an agreement; 2) show that plaintiff has adequately performed pursuant to that contract; 3) show that the accused has breached the contract; and 4) show that there are damages.  See Id. 

The Stadt Court found that the “subject matter” requirement for federal preemption to apply was met because the subject matter of Stadt’s breach of contract claim related to the continued use of a video that was governed by the Copyright Act.  However, the “general scope” requirement was not satisfied because Stadt’s claim that Fox continued to make use of the credit following expiration of the Agreement added an “extra element that render[ed Stadt’s] breach of contract claim qualitatively different from a claim for copyright infringement.” Hence, that additional aspect of the claim was not governed by the Copyright Act.  Id. at 320-21.  In other words, the additional allegation of continued use of the credit went beyond what the Copyright Act governs and therefore survives preemption.  See Id. at 321.  Ultimately, the Stadt Court denied Fox’s motion to dismiss the breach of contract claim since only part of the claim was preempted by the Copyright Act.  See Id. at 324.

The preemption of state laws by the Copyright Act is an issue every claimant should be aware of when preparing causes of actions for a complaint involving intellectual property matters.  One should take heed of the two-step prong courts rely on in evaluating when claims meet the criteria for preemption.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Many Americans are able to go online, enter their address into Google and zoom-in on the ensuing map so closely that they can see an image of their own home. However, few Americans have asked whether Google is invading anyone’s privacy by providing this capability.

In 2010, that question was proposed to the United States Court of Appeals for the Third Circuit. Boring v. Google Inc., 362 Fed. Appx. 273 (3d Cir. Pa. 2010). In 2008, a couple residing in Pennsylvania (“the Borings”) sued Google, claiming that the company’s “Street View” feature on Google Maps invaded their privacy. The Street View program allows users to see panoramic views of locations throughout the United States. To collect the images, Google attaches panoramic digital cameras to passenger cars and drives around cities photographing areas along streets and roads. Individuals are able to report and request the removal of inappropriate images they find on Street View.

The Borings, who live on a private road, claimed that their privacy interest was disregarded by Google when the company took photos of their property and made those photos available to the public. In addition to alleging that Google invaded their privacy, the Borings also asserted claims for trespass, injunctive relief, negligence and conversion. In February 2009, the United States District Court for the Western District of Pennsylvania granted Google’s motion to dismiss all of the Borings’ claims. The plaintiffs appealed.

Under Pennsylvania law, there are four tort actions for invasion of privacy:

1) unreasonable intrusion upon the seclusion of another;

2) appropriation of another’s name or likeness;

3) unreasonable publicity given to another’s private life; and

4) publicity that unreasonably places the other in a false light before the public.

Burger v. Blair Med. Assocs., Inc.¸ 600 Pa. 194, 964 A.2d 374, 367-77 (Pa. 2009).

The Court followed the District Court’s interpretation of the Borings’ complaint as asserting claims for intrusion upon seclusion and publicity to private life. Plaintiffs stating a claim for intrusion upon seclusion must allege conduct that:

1) demonstrates an intentional intrusion upon the seclusion of their private concerns which was substantial and highly offensive to a reasonable person, and

2) avers sufficient facts to establish that the information disclosed would have caused mental suffering, shame or humiliation to a person of ordinary sensibilities.

Pro Golf Mtg., Inc. v. Tribune Review Newspaper Co., 570 Pa. 242, 809 A.2d 243, 247 (Pa. 2002).

The Court upheld the District Court’s decision and determined that the Borings’ claim for intrusion upon seclusion failed because the alleged conduct would not be highly offensive to a person of ordinary sensibilities. Boring at 280. “No person of ordinary sensibilities would be shamed, humiliated, or have suffered mentally as a result of a vehicle entering into his or her ungated driveway and photographing the view from there.” Id. at 279. The Court also referred to an example included in the Restatement (Second) of Torts that “knocking on the door of a private residence [is] an example of conduct that would not be highly offensive to a person of ordinary sensibilities.” Id. The Court reasoned that Google’s actions of photographing an external view of the Borings’ home was arguably less intrusive than knocking on a door. “The existence of that image…does not in itself rise to a level of an intrusion that could reasonably be called highly offensive.” Id.

The Court also agreed with the District Court’s decision that the Borings’ claim of publicizing private life failed. To state such a claim, a plaintiff must allege that the matter being publicized is:

1) publicity

2) given to private facts

3) which would be highly offensive to a reasonable person, and

4) is not something that is of legitimate concern to the public.

Harris v. Easton Pub. Co., 335 Pa. Super. 141, 483 A.2d 1377, 1384 (Pa. Super. Ct. 1984).

The Court determined that the Borings failed to allege sufficient facts to establish that the publicity given to them by Google’s actions would be highly offensive to a reasonable person. Boring at 280.

The Court’s decision suggests that attempts to sue Google for invasion of privacy over its use of residential images in its Google Map program are not likely to succeed. Courts could suggest that Google’s opt-out option provides a better route for residents who think that their privacy rights are being violated.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

In Urbont v. Sony Music Entertainment, No. 11 Civ. 4516 (S.D.N.Y. March 27, 2012), the federal District Court for the Southern District of New York was presented with the question of whether the discovery rule applies to causes of action under the Copyright Act.

The discovery rule allows parties to extend a statute of limitations because they did not have reason to know, nor did they know, that they had a potential cause of action.  In this case, application of the discovery rule would have extended the three (3) year statute of limitations under the Copyright Act for infringement.

The court determined that the discovery rule would not apply here because there was no evidence of material concealment of the fraud that led to the alleged infringement.  Instead, the plaintiff had complete access to all the information necessary to determine that an infringement had taken place, and he had simply not brought his cause of action within the applicable period.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

Appropriation art, which involves an artist purposefully copying the work of another, has become a popular art form. But is it legal? The United States District Court for the Southern District of New York recently faced that question and determined whether appropriators are entitled to use the defense of fair use against a claim of copyright infringement. Cariou v. Prince, 784 F.Supp. 2d 337 (S.D.N.Y. 2011).

The plaintiff in that case, professional photographer Patrick Cariou (“Cariou”), had spent time in Jamaica over the course of six years. After gaining the trust of the Rastafarians, he had been permitted to take their portraits. In 2000, Cariou published a book of his photographs. The book contained those portraits as well as landscape photos he had taken around Jamaica. He testified that he was the sole copyright holder of the images that appeared in his book.

The defendant, Richard Prince (“Prince”), was a well-known “appropriation artist” who had shown his work at several museums. Appropriation art deliberately copies images and presents them in a new version or context. During an exhibit at a hotel in St. Barts between December 2007 and February 2008, Prince showed a collage entitled “Canal Zone (2007)” which included 35 photographs that had been taken from Cariou’s book. Prince painted over some portions of the photos. Some were used in their entirety, while others were only partially used. Prince intended to use “Canal Zone (2007)” as a means of introducing characters he intended to use in a planned series of artworks. Cariou eventually claimed that Prince had infringed on his copyright, but Prince asserted that his works were protected by the defense of fair use.

Cariou possessed undisputed ownership of valid copyright in the photos, which courts have held to be a copyrightable subject matter for more than 100 years. Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53 (1884). The Court then considered whether Prince’s use of Cariou’s copyrighted work should be protected as a type of fair use. When determining whether a particular use of a copyrighted work qualifies as fair use, courts will consider four factors:

1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2) the nature of the copyrighted work; 

3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 

4) the effect of the use upon the potential market for or value of the copyrighted work.

17 U.S.C. §107.

First, the Court considered the purpose and character of Prince’s use of the photos. It found its transformative content to be “minimal at best,” its purpose to be “substantially commercial, and interpreted Prince’s failure to obtain permission (and the co-defendant Gagosian Gallery’s failure to inquire as to whether Prince had obtained permission) to constitute bad faith. Cariou at 350-1. Thus, it determined that the first prong weighed heavily against a finding of fair use. Second, the Court found that Cariou’s photos were highly original and creative (as opposed to factual or informational). Thus, the Court held that the use of such works without permission also weighs against fair use. Id. at 352.

Third, the Court considered the amount and substantiality of the portion of Cariou’s photos used in Prince’s works. It found that, in the majority of his works, Prince appropriated central figures that went to the very heart of Cariou’s works, and that this factor also weighed heavily against a finding of fair use. Id. Finally, the Court found the fourth factor to also weigh against fair use because Prince’s secondary use “unfairly damaged the original market for [Cariou’s] [p]hotos and, if widespread, would likely destroy any identifiable derivative market for [them].” Id. at 353. Because none of the four factors considered supported fair use, the Court found that the defendants were not entitled to fair use as a defense. Id.

Prince is appealing the Court’s decision. This case may have a significant impact in both the art and intellectual property industries.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC