INTERNET LAW BLOG

Commentary: International Websites: The Internet has been amazing tool; enabling even the smallest voice to reach people throughout the world. It has, in fact, breathed new life into many small businesses who now can reach millions of potential customers in mere keystrokes. Many companies elect not to, or do not think to, limit the reach of their website. As a result, it may be accessible to the international public, and the Company could be deemed to be offering its goods or services to customers throughout the world. Again, this may be beneficial from a business standpoint, but it presents some legal vulnerabilities. Quite simply, different countries have different rules and standards by which a website must operate.

By offering its goods or services to other countries’ residents, a foreign court could claim that it has jurisdiction over a US-based company. So, even if the company has lawfully established the website in the United States, and is complying with the Federal and State laws here but the website is accessible to residents in another country, that company could still be vulnerable to legal attack for failure to adhere to that country’s (or their state or provincial) laws.

The difference in international website standards was recently highlighted in the Beijing Olympics. A lot of press came out of the Olympic Games for China’s censorship of certain Internet content. There, the government merely banned access to certain websites. However, other countries may not be so proactive, and may instead allow access to the website but hold the website operator liable for illegalities on the site or in connection with the sale. The vulnerability regarding the international scope of websites also takes a prominent role in regard to the different definitions of “obscenity.” Other countries have different standards as to what is “obscene” as compared to the United States. Therefore, what might be acceptable here, and what might even be considered to be artwork here, may be banned as pornography elsewhere. Another example is that the European Union tends to generally have stricter rules when it comes to privacy regulations.

Unfortunately, this vulnerability is complicated in that there may be different standards in each locality in addition to those differing national standards. This is a challenge even within the United States. For instance, the Internet is not generally regulated at the Federal level. Rather, each state can have its own rules and regulations relating to the operation of an e-commerce company. For instance, California has an entire regime of laws relating to privacy protections and disclaimers that need to be on a website. Regardless from where a website is based, if it is marketing to California residents, it will arguably need to comply with those laws.

Accordingly, if a website is simply launched and offers services to everyone, there are numerous legal vulnerabilities given all of the levels of legal regulation to which it may be exposed. One of the best ways to manage this risk is to limit in some way the people to whom the company is offering its goods or services. This can be included in the website terms and conditions or other legal disclaimers, where a company can specifically require the user to indicate that they are a resident of a certain country or state. Moreover, a company could establish protocols to be sure that orders are not accepted from residents of certain states and territories. Therefore, a company can limit the reach of its offerings to those states and countries that it has evaluated with legal counsel to ensure that the website and its goods and services will not run afoul of the laws of those areas.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Internet Law: Supreme Court Caselaw: In a recent decision, the United States Supreme Court upheld a law aimed at regulating child pornography in the age of the Internet. U.S. v. Williams examined a facial attack against the PROTECT Act of 2003, which prohibits not only the possession or transmission of a pornographic image depicting a minor, but also any advertisement, distribution or solicitation which reflects the belief, or which is intended to cause another to believe that, such an image is being distributed. In other words, the Act reaches beyond actual child pornography to also apply to the distribution or solicitation of material that an individual mistakenly believes to be child pornography. The Court rejected the plaintiff’s argument that the statute was vague and overbroad in scope and thus contradictory to deep rooted First Amendment principles.

This holding follows cases invalidating, or otherwise holding as unconstitutional, Internet laws aimed at preventing child pornography. In upholding the statute, the Court essentially held that the doctrine of mistake trumps the First Amendment. The mistake doctrine is a criminal law principle under which a mistake about the facts is no defense. In the context of the Williams decision, the doctrine is relevant in that the PROTECT Act applies not only when actual child pornography is actually being distributed, but also when a party is either distributing material with the mistaken belief that it is child pornography or attempting to persuade another party to purchase material by fraudulently advertising it as child pornography. The Williams Court reasoned that offers to engage in illegal transactions, when those transactions would not technically be deemed unlawful, are outside the protection of the First Amendment. As such, First Amendment protection will turn on whether an individual traffics in material that he believes to be unprotected, and not on whether that material is actually protected.

Notably, the PROTECT Act is the third legislative effort to regulate child pornography at the federal level. The first two efforts by Congress were the Communications Decency Act of 1996, which was partially overturned by the Supreme Court in 1997, and the Child Online Protection Act (COPA), which was struck down by the U.S. Circuit Court of Appeals for the Third Circuit in 2008. In both instances, the Court upheld legal challenges to the statutes on the ground that they were unconstitutionally overbroad. Similar to the PROTECT Act, the reach of COPA went beyond actual child pornography, prohibiting material that merely appeared to be or conveyed the impression that it was child pornography.

With the Williams decision, the Supreme Court has taken a harder line. The PROTECT Act seeks to punish not only those individuals who deal in actual child pornography, but also the individuals who support the production, distribution and possession of such material. The effect of the decision will depend on how stringently trial courts enforce the Act, which will turn on the evidentiary standard that prosecutors must overcome in proving that a defendant intended to distribute material that he believed to be, or that he wanted others to believe was, actual child pornography. For example, if a defendant distributes pornography depicting an individual who appears to be 14 years old, but is really 20 years old, a court may nonetheless deem the defendant to have violated the Act. Again, such determinations will depend on the approach that the trial courts take in enforcing the Act.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

New Jersey Legislation: The New Jersey legislature recently enacted a statute which removes the maximum price limitation on sales of tickets for admission to various places of entertainment. Under the law, a “place of entertainment” is defined as any privately or publicly owned and operated entertainment facility, such as a theatre, stadium, museum, arena, racetrack or other place where performances, concerts, exhibits, games or contests are held.

Prior to the passage of the law, individuals were restricted from reselling tickets for admission to places of entertainment in excess of 20% of the ticket price or $3.00, whichever was greater, plus lawful taxes. Registered ticket brokers and season ticket holders were allowed to resell tickets at a premium, but only up to 50% of the price they paid to acquire the ticket, plus lawful taxes. The newly enacted law lifts all caps on the price for the resale or purchase of a ticket sold by a person other than a registered ticket broker, as long as the sale is made through an Internet website. The law also removes the prior statutory provision requiring that the face of each ticket include language indicating the maximum premium at which that ticket may be resold.

The legislative intent behind the law is to level the playing field for New Jersey citizens seeking to dispose of extra tickets that would otherwise remain unused, thus allowing for the public to lawfully sell tickets on eBay, Craigslist and other similar websites. The effect, however, will likely be to open, or re-open, a large area of commerce for professional “scalpers” or other professional bona fide online ticket resellers. Indeed, it may very well result in professional ticket resellers buying up so many blocks of tickets that the average member of the public will have trouble obtaining them directly from the box office where the performance is being held. On the positive side, however, the legislature noted that the previous price restrictions that were in place prior to the passage of this law put New Jersey residents at an unfair disadvantage when competing with sellers from other states who are not restricted by price caps on tickets resold via the Internet. This law would presumably help overcome that disadvantage.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Commentary: Many companies operate under the misconception that if they have hired and paid freelancers for their work, the company has that paid them has all of the rights to it. Quite simply, this is not necessarily true.

Simply paying someone for their services does not mean that you own the rights and proceeds of that work. Admittedly, it is quite counter-intuitive: you provided your consultant with the idea; they provided services; and you paid for it. You would think this would provide you with all rights in that work. However, the law generally requires that there be a written agreement, signed by the person giving up their rights. It should provide that the services are being performed as a “work-for-hire” and that the contractor is giving up and assigning their rights to it. If you do not specifically provide this in a signed agreement, the contractor could later claim rights to their work; could claim that they are a joint copyright holder; or otherwise cause problems as you try to promote your products or services.

Moreover, although the law provides for greater protection to companies for work created by employees rather than independent contractors, nevertheless, we generally recommend that companies apply the same system described above their employees, as well. Again, this should be in a written agreement, signed by the employee which specifically refers to the fact that employee’s services are being provided to the company as a “work-for-hire.” This is often included within the employee’s employment agreement. However, if the employee did not sign an employment agreement, this still could be accomplished through a separate, stand-alone document.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Pennsylvania Caselaw:  In Parker v. Google, 2008 WL 2600299 (United States District Court for the Eastern District of Pennsylvania 2008), the Court was presented with a lawsuit filed by Gordon Roy Parker, a pro se (a person without a lawyer) against Google. In that case, Parker alleged copyright infringement, defamation, invasion of privacy and negligence relating to the fact that Google catalogues and utilizes digitally stored information that belongs to him. The Court dismissed those claims, in part, on the basis that “Google’s automatic archiving of postings and excerpting of websites did not include the necessary volitional element to constitute direct copyright infringement.” Id at 1. Further, many of the claims were barred by the Communications Decency Act which provides for immunity for websites that are merely a conduit for information or opinion of others.

For these and other reasons, the Court found that Parker had not stated viable causes of action against Google. The latter then moved for reimbursement of its attorneys’ fees based upon the frivolousness of the pleading and the language of the Copyright Act which provides for the option of an award of attorneys’ fees to the prevailing party.

The Court denied Google’s motion. Interestingly, its basis for the denial was that Internet law is so new and unsettled, that it would not be fair to punish a nonprevailing party with an order to reimburse his adversary’s attorneys fees. Indeed, the Court noted that the case was filed in 2004, and at that earlier time, “many facets of Internet law were even less settled than today.”

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Internet Law: In July of 2008, the Third Circuit Court of Appeals ruled that the Child Online Protection Act, 47 U.S.C. Section 231 (“COPA”) was unconstitutional. This was a crucial ruling that affects all websites that display adult content. Under COPA, such websites need to verify that the person accessing the content is not under seventeen years old. This is often done by requiring the user to submit credit card or other similar identifying information before he can access the site. The Court found that while it was laudable for Congress to pursue this goal of protecting children, the procedures set forth in COPA did so by constitutionally overbroad means that ironically, were largely ineffective.

In American Civil Liberties Union v. Mukasey, United States Court of Appeals for the Third Circuit, July 22, 2008 (No. 07-2539), the Court determined that since COPA involved a restriction of free speech, the First Amendment to the United States Constitution required that the Court use strict scrutiny in determining whether the restrictions imposed were constitutional. Because it was a content-based restriction on free speech, it was presumptively invalid and the Government had the burden of proof to show that it was constitutional.

While the Court determined that there was a compelling governmental interest in protecting minors from viewing adult content, the Court held that the statute was not narrowly tailored to achieve those ends. Some of the examples of the failure to narrowly tailor were:

(a) The statute concerns material “taken as a whole” that is prurient. That wording was too expansive.

(b) It applies to all individuals under seventeen, but that necessarily involved those that would not normally be accessing such websites, such as newborn babies.

(c) The definition of “web publisher” is so broad that it applies to those who post content for free where those who post prurient content is an exceedingly small part of their overall postings.

(d) The concern that the requirement that persons accessing sites with adult content provide credit card and other identifying information will discourage persons over seventeen years of age from engaging in legal activities protected by the First Amendment.

One of the notable aspects of the Court’s reasoning was that COPA was not only overbroad, but also ineffective. For example, the Court noted that the fact that COPA does not reach websites situated outside the United States means that simply moving the website’s servers to a foreign location can render the protections of the law ineffective. Moreover, the Court noted that there is a more effective alternative to requiring credit card and similar identification methods. Namely, the Court found that adults can implement adult site blocking software on their children’s computers. The Court suggested that this would be a constitutional, narrowly tailored solution to the problem of minors viewing adult content. It would likely solve the problem for all concerned.

One might ask why Congress did not just rely on such content blocking software in lieu of passing COPA in the first place. The answer appears to lie in the fact that when COPA was passed a number of years ago, content blocking software was not as effective as it is now. Technology has advanced to such a degree that it is now is a reasonably reliable alternative to COPA’s restrictions.

It is possible that this issue ultimately will be taken up by the United States Supreme Court. However, until it is, COPA is unconstitutional in the Third Circuit (New Jersey, Pennsylvania, Delaware and the Virgin Islands).

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC