Category Archives: Commentary

Consumer Reviews: A Form of Permitted Defamation?

Commentary: We regularly receive inquiries relating to postings on consumer review websites. The usual issue concerns the fact that the business owner feels that the customer’s posting is defamatory and should be removed. In such a case, there are a number of things that the “victim” business needs to keep in mind.

First, for most of these websites, the publication of customer reviews, whether positive or negative, is the nature of their business. If they were to remove negative reviews, their credibility would arguably be hurt and the website’s viability as a business model might be diminished. These sites generally need to allow the posting of negative reviews in order to survive. Accordingly, injured parties are likely to face resistance when requesting that a host website remove such content. In order to have a posting removed, additional legal action may need to be taken; more often than not, a mere demand letter will not do the trick. It is also important to keep in mind that the websites may not have incentive to cooperate with the complaining business under the law. The Communications Decency Act states that a website will generally not be liable for its posters’ speech.

The next question is what right does a business owner have to seek damages against a customer who has posted a negative review. All of the rights and remedies that may be available will vary based upon the specific information relayed in the posting and the unique context facing the victim and the speaker. This is yet another reason that it is important to seek legal counsel to evaluate a specific claim. However, for purposes of this discussion, our analysis will focus on the potential defamation claim.

It is critical that businesses understand that simply because information is negative, and even injurious, that statement may not be defamatory. The posting itself would not be a “permitted form of defamation” since if it is found to be defamatory, it would not be permitted. The question is really whether or not the statement is defamatory. Defamation law is almost always analyzed in accordance with First Amendment law. Just as a business or person has protections under the law from being defamed, so too does the speaker have a First Amendment right to speak about his experiences.

The balance therefore comes from an analysis of the speech itself. Again, the negative nature of the statement is not itself conclusive. Rather, for a defamation claim to exist, the speech must not only be damaging, but it also must be false. Thus, if the customer reports a bad encounter, but he is truthful in his recitation of the history, there is likely no claim for defamation. Similarly, opinions are protected. If a customer simply indicates that he does not like the business owner or did not like the business’s products or services, that is arguably an opinion and therefore, is not a statement that is capable of being false. It therefore cannot be defamatory. The customer has a First Amendment right to share his opinions and experiences.

Defamation law seeks to protect those who are injured by lies. If a posting is made by someone who has never been a customer of a business or by someone who falsifies facts about the business or its products and services, a viable claim for defamation may exist. Of course, the claim would rest upon the extent of the resulting money damages that could be proven.

There is a complex analysis of all statements and underlying facts to determine whether or not a claim for defamation can be made based upon a customer’s online review of a business’s products and services. It is therefore critical that all potential plaintiffs immediately consult with counsel to evaluate the statements and to review the applicable remedies that may be available.

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

Internet Websites May Be Vulnerable to Regulation by Foreign Countries

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

A “Poor-Man’s Copyright” is a Poor Solution for Copyright Protection

Commentary: Beware the “poor man’s copyright.” It is nothing more than an urban legend that if an artist mails himself a copy of a song, story or some other artistic expression that he created, he will be preserving his copyright in it. That procedure is generally insufficient to protect the original creator’s rights.

Instead, the “poor man’s copyright” is useful solely in that it can help establish when the work was created for purposes of proving that it is protected as a common law copyright. While this could help to establish the ownership and creation date (if that is challenged in a later dispute), it is insufficient to maximize the right to recover damages; for that, one would need to have filed a statutory copyright..

In other words, if someone does not register their work as a statutory copyright with the United States Copyright Office, they may still be entitled to a common law copyright. However, without the Federal registration of a statutory copyright, the amount of damages they can collect will be severely restricted.

What is the difference between a common law and a statutory copyright? Essentially, as soon as an expression is recorded in a tangible form (i.e. written on paper, recorded on film, etc.), there is a common law right in and to the copyright of that expression. This does grant the artist the above-referenced exclusive rights as a copyright owner. Unfortunately, this generally provides him with rights without a remedy. The main concern underlying copyright ownership is preventing someone else’s unauthorized usage. Unfortunately, a common law copyright owner cannot generally go to court to sue for copyright infringement unless and until they have a registered copyright. This means that the work is actually registered with the Library of Congress’s U.S. Copyright Office.

However it is not generally recommended that an owner simply wait until an infringement occurs to register his work as it severely limits his rights. We strongly recommend that all works be registered with the Copyright Office at the earliest possible point. This is because there are added rights and protections that inure to a registered copyright holder. These specifically include an ability to obtain statutory damages and recoup attorneys’ fees. However, an owner can only avail themselves of these protections in a dispute if the work was registered when the alleged infringement occurred.

For instance, if a company obtains the script of a film from another company and then produces the film utilizing that script without permission, it has arguably infringed on the rights of the company owning the script. The creation of a film from a script is a derivative work. Since only the copyright holder may create a derivative work without permission, this is problematic. If the script was not registered for copyright infringement when the film was produced, the script owner will generally only be able to recoup damages from lost profits. This can be very difficult to prove and/or end up being minimal. For instance, the film that the infringing company made may not have been profitable. Accordingly, there might be little damages at stake, even though the violation may have been blatant.

On the other hand, if the company had a registered copyright for the script, it could then have the ability to instead obtain statutory damages rather than be limited to lost profits. In addition, with the prior registration, the company may be able to recoup the attorneys’ fees it expends in connection with the prosecution of its infringement case. This can be the difference between the case being a viable lawsuit or not, at least from a cost-benefit standpoint.

The best practice is therefore to obtain a statutory copyright registration prior to any release, promotion or other distribution of a work so that it can be protected before anyone has the opportunity to infringe on the work.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Stolen Ideas Often Result in Limited Remedies

Commentary: Imagine the following scenario: you develop a great idea for a television show and submit it to a network for consideration. They reject the proposal. But, a few months later you see an advertisement for a new show that looks a lot like the show that you had pitched. “Looks like a duck, quacks like a duck…,” right? Unfortunately, even if the show follows the precise outline of your pitch, such use may not be deemed to be intellectual property infringement.

The law does not generally allow individuals to protect ideas. However, it does have certain modes for protecting aspects of intellectual property: copyright allows the protection of the actual expression of an idea (the written script, the actual photograph, etc.); trademark law enables the general protection of a business and product or service names, branding and logo; and patent law will sometimes protect a general concept, however this is generally limited to technical aspects or utilitarian concepts. The best way to protect an “idea” is to generally engage in a combination attack. Essentially, the idea may be able to be protected through the different protectable aspects of the project through intellectual property filings.

In order to protect the over-arching “idea,” protection must be contracted for. Again, the law itself does not provide an over-arching protection for an idea itself. If an idea is openly shared, someone else can separately develop it. It is not a good practice to share ideas unless and until the person or entity with whom they are sharing it promises to keep the ideas confidential and to not use or exploit the idea themselves. This type of contract is generally called a non-disclosure agreement (NDA) or confidentiality agreement. Executing this agreement, might arguably provide recourse against the party to whom the idea was revealed, assuming they then utilized it in violation of their signed, written agreement. Whereas the idea-holder may not be able to sue for infringement, he may have the ability to sue for breach of contract and either stop the infringer from proceeding with the idea and/or obtain damages from their wrongful use.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

Independent Filmmakers Increasingly Utilizing Self-Distribution Model

Commentary: In recent years, the marketplace for independent films has become increasingly overcrowded. Several prominent distribution houses for independent films have been forced to sell or close and currently, the general thought is that there are simply too many films for too few theatres. As a result, independent filmmakers have seen it become more and more difficult to obtain conventional movie deals for their films.

For many independent filmmakers, the do-it-yourself model of distribution has become an increasingly attractive option. Although some are forced to go it alone because they have no other viable alternative, for others who do have options under the old model, self distribution can still be the more attractive approach. For example, distribution houses typically require that the filmmaker sign over most of the rights to their film in exchange for small cash advances, and often, they do not expend the funds necessary to sufficiently market the film to the general public. The do-it-yourself model not only allows filmmakers to retain the rights to their films, but it also enables them to retain control over where the film is distributed. It can also enable the filmmaker to exert more artistic control with regard to how the film is marketed, so that the distributor is no longer at the helm. Moreover, it allows the filmmaker to be proactive rather than simply waiting to find a deal.

Nonetheless, there is certainly a downside to self-distribution. In order to take on distribution without the help of a prominent distribution house, independent filmmakers must have a solid understanding of the marketplace. In addition, self-distribution requires the filmmaker to have access to the necessary capital. For example, there can be a huge expense involved in opening a film in major movie markets; filmmakers must cope with the hassle of collecting money from exhibitors; and they must handle the detailed logistics involved in booking a film. To be sure, self-distribution involves an enormous amount of work. But if the filmmaker is willing to put the time in, that work has the ability to reap substantial rewards.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

A Work for Hire Agreement: A Critical Tool for Production Companies

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

Privacy Policies Can Be Held Against You Too

Commentary: As Mr. Horn previously discussed in his post, Ebay Liable for Breach of Contract Based on Violation of Terms and Conditions, the Missing Link case underscored the need to take caution in preparing website terms and conditions. There, eBay was held liable for failing to comply with its own terms and conditions. As Mr. Horn explained, this case emphasizes the importance of drafting terms and conditions that are directly applicable to the website and with which the company can comply. However, equally important is that the company is prepared and able to comply with the edicts of its privacy policy.

Privacy policies are critical documents for an e-commerce company. They generally outline what information is being collected by a company and how that information will be utilized. They are required in certain instances and by certain state laws. Moreover, the Federal Trade Commission (FTC) has offered precise guidelines with regard to the implementation of a privacy policy.

Notably, the FTC does not generally compel a company to adopt a privacy policy on its website. A significant number of cases brought by the FTC relating to website privacy policies not only concern the failure to have a policy, but also relate to enforcement actions against companies who fail to adhere to posted privacy policies they do have. In essence, while it is advisable to post a privacy policy, to do so and not adhere to it would be worse than not posting it at all. For example, in one of the landmark decisions in this area, the FTC brought suit against GeoCities, Inc., based on inconsistencies between its privacy practices and its stated policies. A settlement agreement was reached which required GeoCities to change its data collection policies and adopt a new privacy policy to protect consumer rights. In re GeoCities. Notably, this case is also beneficial because the settlement that was reached is instructive of the types of practices the FTC deems appropriate with regard to privacy policies and provides suggestions on implementation (i.e., where the notice should be placed on the website).

Again, this underscores the importance of making sure that the privacy policy, and all of a website’s legal disclaimers, are appropriate for its business. It is critical that the company take time to develop and precisely customize website terms and conditions and privacy policies. These documents need to suit the business’s needs, obtain the rights it needs against customers and website users, but also establish corporate standards that are reasonable and with which the company can easily comply.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

The Digital Millennium Copyright Act: A valuable tool or a dangerous weapon?

It is critical that website operators fully understand their rights and responsibilities under the Digital Millennium Copyright Act (“DMCA”). This is particularly important for operators of social networking sites, blogs or other sites that allow third parties to publish content on the site. As more and more “traditional” websites now allow such postings — one of the many aspects of the Web 2.0 age — the importance of the DMCA grows.

The DMCA is a Federal statute that was enacted in the 1990’s which essentially modified copyright law in order to account for new technology, including the Internet. One aspect of the statute specifically provides for a limited immunity for websites posting content that might arguably infringe another’s copyright rights. Essentially, the law outlines certain protocols for webmasters to utilize, which includes providing an adequate way for those whose work has been infringed upon to contact the website and request the removal of the content. The DMCA generally says that if the website has engaged such protocols, and takes down content that is properly reported to it, it can have immunity from a copyright infringement claim. For this reason, it is critical that all websites who host third party content ensure that they are properly engaging in the protocols provided by the DMCA and include the appropriate instructions in their posted terms and conditions.

A little-known aspect of the DMCA applies to those reporting infringements. While the DMCA protocols allow a person whose rights have been infringed to request that the website remove the protected content, the statute also provides a penalty for a person who wrongfully utilizes this protection. The law provides for liability against the wrongful reporter, including payment of attorney’s fees, which may be payable to (a) the alleged infringer; (b) the website that removed the content; and/or (c) the copyright owner or licensee of the copyright owner. Essentially, the damages might be paid by anyone in one of those three categories who is injured as a result of the false report. Specifically, the DMCA states that: “[a]ny person who knowingly misrepresents under this section – (1) that material or activity is infringing, or (2) that material or activity was removed or disabled by mistake or identification, . . .” is liable under the Act. 17 U.S.C. 512(f). In sum, there are two ways of being liable under this provision: (a) for indicating that a work is infringing if it is not or (b) for indicating that a work which was removed was in fact, not infringing and should have remained posted.

This penalty-based aspect of the statute was recently highlighted in a case currently pending in Illinois relating to the YouTube.com posting of rodeo competitions. In that case, Showing Animals Respect & Kindness v. Prof’l Rodeo Cowboys Association, an animal rights group posted video from a rodeo event on YouTube. The Rodeo Association then contacted YouTube and requested that the videos be removed because they infringed upon the Association’s copyright. SHARK, the animal rights group, filed suit indicating that the Association’s request violated the DMCA because it was based on a false claim. Its argument was that the Association knew that there was no copyright in the rodeo event, and therefore the request that the videos be taken down was not a rightful request to prevent infringement, but rather constituted a wrongful means of trying to remove content that was unfavorable to them. The case is ongoing.

Clearly, those reporting infringements should take caution in doing so. The Rodeo case highlights the importance of being reasonably certain that one has a viable claim for copyright infringement before making a request that a posting be removed under the DMCA.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

States Adopt Different Requirements for Jurisdiction over Internet Defamation Cases

The flux in jurisdictional laws of the various states in relation to Internet defamation presents some difficult First Amendment challenges. If a speaker makes a statement online, it is arguably published throughout the world. If that speaker cannot reasonably predict which of the many potential sets of laws circumscribing free speech may apply to him, the effect of that uncertainty may chill his speech. In other words, there is an ongoing concern that the very uncertainty about what is and is not prohibited from state to state may create a situation in which speakers will simply elect not to express their viewpoints online. Surely, this is contrary to the spirit of the First Amendment.

The most obvious laws that circumscribe free speech relate to the prohibition against defamation: an untrue statement about another that is communicated to a third party causing harm. States continue to develop different standards for determining whether their courts have jurisdiction over defamatory statements made by out-of-state authors who write over the Internet. New Jersey and New York offer very good examples of how different such jurisdictional standards can be.

New Jersey courts generally take a more lenient approach when determining whether jurisdiction exists in defamation cases. Essentially, a New Jersey court will look to see whether a message over the Internet specifically targets residents of New Jersey. In one recent New Jersey case, the Court held that it did in fact have jurisdiction. In that case, defamatory statements were made on the Internet regarding a female pilot who resided in New Jersey. The Court reasoned that since the person who made the comments knew that the target of the speech lived in New Jersey, he could reasonably have expected that New Jersey courts would have jurisdiction over the matter.

Courts in some other states, however, have declined to find jurisdiction based upon the impact of the online defamatory statements. Most notably, courts in many states have declined to find jurisdiction over comments made on websites based on a determination that the sites were passive websites not targeted to that particular state.

A good example is New York. New York courts have refused to find jurisdiction over defamatory comments made over the Internet, even if a person in New York suffered harm as a result of the comments. In fact, New York courts require defamation plaintiffs to overcome a higher burden when proving jurisdiction. In many cases, litigants have attempted to get around New York’s harsh rules by trying to claim that the defendant was transacting business within the state. However, New York courts will look very carefully at how much business is actually being transacted. Often, cases will be dismissed because the defamer has very few contacts with New York.

In conclusion, jurisdictional requirements for defamation claims vary from state to state. It is imperative that an individual who wishes to pursue a defamation claim against an out-of-state resident be careful to bring that action in the correct jurisdiction. If done improperly, the case may either be dismissed, or the plaintiff runs the risk that he will run out of time to bring a defamation action in the proper jurisdiction before the applicable statute of limitations for defamation has passed.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

The Legal Aspects of Spyware

Commentary: As most of us know, spyware is something that is hard to define. As Justice Potter Stewart said in the famous Supreme Court opinion, Jacobellis v. Ohio, 378 U.S. 184 (1964), “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it . . . .” He was referring to obscenity, but he could just as easily have been discussing spyware.

Perhaps a reasonable definition would be a program that allows a third party to monitor another’s computer activities. As one might imagine, since most people have an expectation of privacy in their own computer operations, when a third party surreptitiously monitors that usage, lawsuits inevitably follow.

However, those lawsuits are not always successful. In Zango v. Kaspersky, Lab, Inc., No. C07-0807 (W.D. Wash. August 28, 2007), a lawsuit was brought against a company that manufactured software that had inserted spyware on another’s system. The Court ruled in favor of the software manufacturer. It based its holding on Section 230(c)(2)(b) of the Communications Decency Act based on a determination that the software manufacturer was an “access software provider” and that it had provided a means to restrict the utility of the spyware. Similarly, in Zango v. PC Tools Pty. Ltd., 494 F. Supp. 2d 1189 (W.D. Wash. 2007), the Court concluded that the spyware was a legitimate tool to prevent illegal downloading.

On the other hand, there are certainly other lawsuits in which the spyware claim has been successful. One notable example is Kerins v. Intermix Media, Inc., No. 05-4408 (C.D. Cal. 2006) in which California state law was the basis for the Court’s ruling that the claims could proceed. But, it is important to keep in mind that California has numerous state laws that are specifically applicable to Internet and computer related acts. Many of these provisions do not have counterparts in other states. It would therefore not be surprising to see a claim that failed elsewhere succeed under California law.

The law of spyware is constantly evolving. Only time will tell whether current law provides sufficient remedies to those adversely affected by it.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC