Virtual World Law Blog

In one of the most closely followed cases involving the  digital millennium copyright act (DMCA), an appeals court punted one of the key issues back to the lower court. The key issue left open relates to what constitutes actual knowledge for purposes of the DMCA. In light of this decision there are some interim steps companies should take in the event that the lower court rules in favor of the copyright owner.  

On April 5th, 2012 the U.S. Court of Appeals for the Second Circuit issued an order in the ongoing case Viacom International Inc. et al. v. YouTube Inc. et al., vacating a lower court's summary judgment in YouTube's favor and remanding the matter back to the district court for consideration of whether YouTube had actual knowledge of the infringement alleged by Viacom.  The underlying ruling by the district court in June of 2010 had granted summary judgment and found that YouTube was not liable to Viacom for copyright infringement relating to various videos that were available on its site due to the safe harbor language in the Digital Millennium Copyright Act.

The current opinion by the Second Circuit based its decision in part on and referenced an internal YouTube report noting that clips of certain Viacom shows were available on the site, and that such content was "blatantly illegal".  The Second Circuit's opinion stated that "[o]n these facts, a reasonable juror could conclude that YouTube had actual knowledge of specific infringing activity, or was at least aware of facts or circumstances from which specific infringing activity was apparent".

Moreover, while the Second Circuit agreed with underlying district court's decision that only actual knowledge of specific and identifiable infringements bars a service provider from protection under the DMCA's safe harbor, it felt that the lower court erred by not addressing whether YouTube had engaged in "willful blindness".  The ruling directed the district court to consider if YouTube (1) made a "deliberate effort to avoid guilty knowledge," (2) had the ability to control the infringing activity, and (3) received a financial benefit from the infringing activity.

Ultimately, the Second Circuit opined that "we hold that summary judgment to YouTube on all clips-in-suit, especially in the absence of any detailed examination of the extensive record on summary judgment, was premature."  Given the online technology industry-wide reliance on the protections available under the DMCA, this case will continue to be one to watch.  Its impact could be far-reaching whichever way it is finally decided.   

Given the uncertainty regarding how this case will ultimately be decided, companies hosting user posted content should take reasonable steps to minimize any liability in the event the decision ultimately favors copyright owners. Contact us for more insights on how to do this.

Pinterest is one of the fastest growing social media sites. Pinterest enables users
to "pin" interesting things to a virtual pinboard to share with others. A pinboard is largely a collection of images organized by topic (home decorating, wedding planning, etc.).

A recent article calls into question the potential risks that users face by "pinning" third party content. As pointed out in the article:

Who:
Pillsbury's Cydney Tune and Mark Litvack

What:
PLI's Technology and Entertainment Convergence 2011: Hot Business and Legal Issues in "Technotainment"

When:
September 9, 2011 (New York) & September 21, 2011 (San Francisco)

Links:
New York - http://www.pli.edu/re.aspx?pk=29651&t=HCF1_1TECH
San Francisco - http://www.pli.edu/re.aspx?pk=29652&t=HCF1_1TECH

Details:
PLI has completely revised this year's program to include today's major legal and business issues in the convergence of entertainment and technology.  The program brings together a faculty of experienced in-house lawyers, law firm attorneys and senior business executives on the cutting edge of this burgeoning practice.

Cydney Tune, Chair of this year's program, will be speaking on a panel titled "Licensing Film and Television Content for New Media and Platforms." In this presentation, the points of view of various stakeholders in the digital film and television content industry (content owners, distributors, platform providers) will be discussed. The panel will also address various digital video distribution models (e.g., transactional video-on-demand, subscription video-on-demand, free/ad-supported video-on-demand, and electronic sell-through) and the careful attention to deal structuring necessary to achieve an integrated, cross-platform model of sales and distribution that maximizes exploitation across all possible avenues.

Mark Litvack will be speaking on a panel titled "An Update On Social Media and Copyright - Is Anyone Winning This Race?" Social media (also known as participatory media, or user generated content) presents challenges for platform provider, copyright owners, brand holders, and users alike. In this presentation, the panel will address the legal obligations on these stakeholders, trends and practices in DMCA notice-and-takedown and Terms of Service enforcement and attempt to answer the question are content owners simply continuing to play a must-lose game of "Whack-a-Mole." The panel will also cover some of the innovative, voluntary efforts that build atop these obligations, including Content ID on YouTube including its "Copyright School" and Google's recent antipiracy initiatives and discuss the balance of the question about what the social media sites have done against what more they have left to do.

A weekly wrap up of interesting news about virtual worlds, virtual goods and other social media.

Could Social Media Flub Cost You $4.3 Million?

What can a social media mistake cost your company in fines, litigation, or loss of customer trust? A new survey reveals some interesting data points.

Gamification: How Competition Is Reinventing Business, Marketing & Everyday Life

The word "gamification," much like the phrase "social media" a few years back, is being lobbed around in technology circles as the next frontier in web and mobile. Just as nearly every application, website, brand and marketer now employs social media in some capacity, so too will these entities gravitate toward game mechanics in the years ahead.

Avoid Social Media Meltdown: Create a Strategy Take Back Control

Everyone said that you and your business needed to be on Facebook, Linked-In, Twitter, and every other new social media site or service that has made its debut since then. You linked your webpage and your blog and made sure you had the right apps on your mobile devices to post on the go. You have profiles and pages on multiple services and.... now what?

Nixon bans Teacher-Student Friendships on Social Networking Sites

A new Missouri law is forbidding friendship between teachers and students, at least on Facebook. It's part of a bill Governor Jay Nixon just signed designed to more clearly define teacher-student boundaries.

Qualcomm Releases Augmented Reality Game SDK

According to TechCrunch, Qualcomm has released its ARG SDK, which was originally intended for Android devices with Snapdragon chips, for iOS-compatible devices. This initial release has support for, specifically, the iPhone 4, iPad 2, and even the fourth-generation iPod Touch.

Virtual World Usage Accelerates

Virtual worlds gained 214 million new users in the second quarter of 2011, according to virtual worlds research firm KZero Worldwide. It was the largest quarterly increase since the company began tracking these numbers in 2008.

Lawsuits Against Grooveshark Continue; Music Publishers Seek To Redefine The DMCA

Grooveshark has been involved in a series of lawsuits from the recording industry and, as with the Limewire lawsuits, it looks like the music publishers are piggybacking on the labels by suing later. We've already explained why Grooveshark appears to follow the rules set out by the DMCA, but I would imagine that Grooveshark is the sort of site where judges simply won't like the idea of it, and will thus figure out a way to rule against it. That could be very problematic.

The Digital Millennium Copyright Act, 17 U.S.C. § 512 provides many benefits to copyright holders. Add one more to the list. In Xcentric Ventures LLC v. Karsen Limited et al (2011), the court refused the let the Russian Defendant play hide-and-seek to avoid service of process and authorized the Plaintiff to effect service by email due to a provision in the DMCA.

Plaintiff XCENTRIC VENTURES is the operator of a consumer complaint website. It discovered that a website owned and operated by defendant allegedly contains certain copyrighted material. Pursuant to the DMCA, it sent a series of DMCA take-down notices to non-party Google, Inc. to remove the infringing content from its search index and inform defendant that it is infringing on plaintiff's copyrights. Google complied. Pursuant to the DMCA, defendant responded by serving a counter-notice on Google to contest the accuracy of the initial notice. To be effective, the counter-notice must contain certain things including: "the subscriber's name, address, and telephone number, and a statement that the subscriber consents to the jurisdiction of the Federal District Court . . . and that the subscriber will accept service of process from the person who provided notification under subsection (c)(1)(C) or an agent of such person." § 512(g)(3)(D).

Plaintiff filed a suit alleging copyright and trademark infringement. See § 512(g)(2)(C) (stating that unless a party files an action seeking a court order to prohibit the infringing activity, the service provider can restore the removed material). Plaintiff attempted to serve defendant a copy of the summons and complaint via Federal Express delivery to the address provided in St. Petersburg, Russia and via email. Delivery at the Russian address was unsuccessful because the address was "incorrect" according to FedEx. On June 13, 2011, defendant emailed plaintiff in response to plaintiff's emailed service of process. Defendant generally objected to the lawsuit and included a response, which it asked plaintiff to file with the court. In a later email correspondence, defendant argued that it never waived service of process and any service must be in compliance with the Hague Service Convention.

Plaintiff moved for an order determining whether it has effectively accomplished service of process on defendant Karsen or for leave to perform alternative service. Defendants did not respond or otherwise appear in the case.

The court found:

It is clear to the court that defendant has notice of the lawsuit and is evading service of process. By filing the counter-notice, defendant expressly agreed to accept service of process at its Russian address. Plaintiff attempted to perform service there but was unsuccessful. Defendant also purports not to understand the English language or the American court system, yet it corresponds sufficiently in English and appears capable of drafting a responsive pleading, as evidenced by the response it emailed plaintiff. Plaintiff has made other diligent, but unsuccessful, efforts to locate an alternative mailing address. In the absence of a correct address, plaintiff cannot personally serve defendant in Russia. It seems the only medium effective at reaching defendant is email.

We cannot, however, find that plaintiff has already accomplished service of process. While defendant did agree to accept service of process when it filed the counter-notice, plaintiff was unsuccessful in serving defendant by conventional means at its Russian address. [*3] Service by alternative methods, such as email, is only effective after court approval. See Rio Props., Inc. v. Rio Int'l. Interlink, 284 F.3d 1007, 1018 (9th Cir. 2002) (stating that email service is not available absent a Fed R. Civ. P. 4(f)(3) court decree); see also Fed.R.Civ.P. 4(h)(2) (authorizing service of process on a foreign business in the manner prescribed by Rule 4(f)).

The court granted plaintiffs leave to serve defendant via email, stating "Service by email in circumstances where the defendant is evading service of process and it is the only method reasonably calculated to appraise defendant of the pendency of the action is permissible. See Rio Props., 284 F.3d at 1017 (approving an order granting leave to serve by email under similar circumstances); see also Liberty Media Holdings, LLC v. Vingay.com, No. CV-11-0280-PHX-LOA, 2011 WL 810250 (D. Ariz. March 3, 2011) (permitting service by email). Moreover, alternative methods of service in Russia, even those not required under the Hague Service Convention, are permissible, since Russia unilaterally suspended all judicial cooperation with the United States in 2003. See Nuance Commc'ns., Inc. v. Abby Software, 626 F.3d 1222, 1237-38 (9th Cir. 2010) (holding that a district court erred in requiring service upon a Russian corporation to be in compliance with the Hague Service Convention). As the Ninth Circuit stated, "when faced with an international e-business scofflaw, playing hide-and-seek with the federal court, email may be the only means of effecting service of process." Rio Props., 284 F.3d at 1018.

As we previously posted, Viacom is appealing to the Second Circuit its summary judgment loss to YouTube (and its parent Google) of a billion-dollar copyright infringement suit.  Last June, the U.S. District Court for the Southern District of New York ruled that YouTube is entitled to safe harbor protection under the Digital Millennium Copyright Act ("DMCA") and granted YouTube's motion for summary judgment on the basis that it did not have sufficient notice of the specific infringements at issue.  

At the crux of the court's decision was "whether the statutory phrases 'actual knowledge that the material or an activity using the material on the system or network is infringing,' and 'facts or circumstances from which infringing activity is apparent'" in 17 U.S.C. § 512(c)(1)(A)(i) and (ii) mean "a general awareness that there are infringements" as argued by Viacom, or instead mean "actual or constructive knowledge of specific and identifiable infringements of individual items," as argued by YouTube.  The court agreed with YouTube's interpretation, ruling it was supported by both the DMCA's legislative history and recent case law.

Both sides have submitted their appellate briefs, and the Second Circuit has received 28 briefs filed by amici curiae.  Oral argument will likely be scheduled between late August and late September.   

Microsoft Corp. has recently won a bid to force Datel Holdings Ltd. to produce documents and sample products in an action involving Datel's Xbox 360 accessories.  The Judge has ruled in favor of Microsoft and ordered that certain documents must be produced on behalf of Datel relating to allegations that it hacked the Xbox security system in order to produce its line of Xbox accessories.  Datel must also produce information and materials concerning its inventory of current and past product samples and any offers to sell its technology.  In certain circumstances, the Judge said, Datel will be able to let Microsoft inspect Datel's products at its counsel's office in San Francisco or charge Microsoft for the products.

The underlying suit, Datel Holdings Ltd. et al. v. Microsoft Corp., case number 09-cv-5535, is currently pending in the United States District Court for the Northern District of California.  In it Datel is alleging that Microsoft reconfigured its Xbox system to allow only the use of Microsoft memory cards, which Datel claims pushed it out of the market for Xbox accessories in violation of, among other claims, the Sherman Act.  Additionally, Microsoft has filed counterclaims alleging that Datel breached its contractual obligations as a subscriber to the Xbox Live service and violated the Digital Millennium Copyright Act. 

Previously, Microsoft's bid to dismiss Datel's antitrust case failed when the presiding Judge ruled against its motion to dismiss the tying, unfair competition and intentional interference with prospective economic advantage allegations.  The ruling was based on the Judge's determination that the Xbox license agreement was somewhat ambiguous.  However, Microsoft was able to obtain a partial dismissal of Datel's Sherman Act claims as the court found that Datel was not a direct participant in the respective market. 

The mater is currently scheduled to go to trial in or about October 2011.

The Court of Appeals for the 9th Circuit ruled on the Blizzard v. MDY case, largely affirming the district court's finding that MDY's bot ("Glider") for playing World of Warcraft (WOW) violates the WOW Terms of Use and violates anti-circumvention provisions of the DMCA. However, the 9th Circuit found that the violation was breach of a contractual covenant not a breach of a condition of the license and applied a somewhat different analysis to the DMCA claims. The net result still largely favors Blizzard and a permanent injunction was affirmed.

We previously prepared an advisory on the District Court decision.

The Court found that the use of Glider violated the Terms of Use prohibition on bots. However, unlike the district court, the 9th Circuit ruled that this was a breach of a contractual covenant not a breach of a condition of the license. One significance of this is the different remedies available for breach of contract and copyright infringement.
 
The DMCA claims related to whether Glider violates DMCA sections 1201(a)(2) and (b)(1) by circumventing WOW's Warden, which is intended to detect bots. The Court ruled in Blizzard's favor with respect to "dynamic non-literal elements" of WOW.
 
In reaching its decision, the Court refused to follow a Federal Circuit decision (in the Chamberlain case) interpreting the DMCA. The 9th Circuit ruled that Section 1201 (a) creates a new anti-circumvention right distinct from copyright infringement while section (b) strengthens the traditional prohibition against copyright infringement.  In contrast, the Federal Circuit in Chamberlain found that the DMCA coverage is limited to a copyright owner's rights under Section 106 of the Copyright Act, and required a "nexus" to infringement. The 9th Circuit refused to adopt any requirement for an infringement nexus. The tension between these appeals courts may set up a show down in the Supreme Court.

The Court went on to find that MDY did violate Section 1202 (a)(2) of the DMCA with respect to the dynamic non-literal elements of WOW.  But the Court found that Glider does not violate DMCA Section 1201(a)(2) with respect to WOW's literal and individual non-literal elements, because Warden does not effectively control access to these WOW elements.

The Court also found that the tortious interference with contract claims were not preempted by the Copyright Act, but that factual issues prevented a proper summary judgment finding. As a result, it vacated the district court's summary judgment ruling on this issue and remanded the issue of personal liability for MDY's CEO.

Perhaps serendipitously, the decision was handed down just days after Blizzard's release of Cataclysm the third expansion of WOW. More than 3.3 million copies as of Cataclysm were sold in the first 24 hours of release, which according to Blizzard, makes it the fastest-selling PC game of all time.

Here is a copy of the 9th Circuit decision.


 

Viacom is appealing the decision of the New York Federal Court which granted Google's (YouTube) motion for summary judgment that it was protected against claims of copyright infringement for videos uploaded to YouTube by the Digital Millennium Copyright Act's safe harbor provisions. Viacom believes that Google is not entitled to the safe harbor shield due to Google's so-called "intentional exploitation" of thousands of Viacom's copyrighted works. Google believes that it is entitled to the safe harbor since it took down the copyrighted files when properly notified of their unauthorized postings. Interestingly, Viacom has apparently hired Ted Olson, of Bush v. Gore and the challenge to California's Proposition 8 fame, to represent it on appeal.

A federal court dismissed on summary judgment most of the copyright infringement claims against Google, ruling, in part, that Plaintiff's notices were not compliant with the requirements of the Digital Millennium Copyright Act ("DMCA"). As a result, the court found that Google was entitled to "safe harbor" protection under various sections of the DMCA.

This is another in a string of DMCA rulings that favor online service providers, place the burden of policing infringement on content owners and demonstrate the courts' inclination to strictly construe the DMCA requirements. We previously posted about the $1 billion damage claim that Google (and its YouTube subsidiary) avoided in its lawsuit with Viacom by reliance on the DMCA. These cases continue to highlight the business need for ensuring that companies have and comply with effective DMCA policies.

In framing some of the issues, the court stated:

In order to be eligible for any of these three safe harbors under the DMCA, a party must satisfy three threshold conditions. First, the party must be a service provider as defined under 17 U.S.C. § 512(k)(1)(B). Second, the party must have "adopted and reasonably implemented, and inform[] subscribers and account holders of the service provider's system or network of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers." 17 U.S.C. § 512(i)(1). Third, the party must "accommodate[] and . . . not interfere with standard technical measures" used by copyright owners to identify or protect copyrighted works. 17 U.S.C. §§ 512(i)(1)-(2).

The court found that Perfect 10 did not dispute that Google met the first and third prongs, but rather it argued that there were issues about whether Google implemented a suitable policy for repeat infringers. But for some of the technologies at issue (e.g., Google's Web Search, Image Search and caching feature"), Google does not have account holders or subscribers. Even Perfect 10 did not contend that Google must, or even can, have a repeat infringer policy for those services. See 17 U.S.C. § 512(i)(1)(A) (requiring a repeat infringer policy for those services with "subscribers and account holders"). Thus, the court summarily found in Google's favor on these issues.

The court also addressed issues relating to the "Information Location Tools" safe harbor under Section 512(d) of the DMCA. Here the court found that Google, in many cases, did not have "actual notice" of infringement, despite receiving numerous notices from Perfect 10. The court stated:

As the Ninth Circuit explained in CCBill, "The DMCA notification procedures place the burden of policing copyright infringement--identifying the potentially infringing material and adequately documenting infringement--squarely on the owners of the copyright." CCBill, 488 F.3d at 1113. P10's Group C notices do not "identif[y] . . . the copyrighted work claimed to have been infringed . . . ." 17 U.S.C. § 512(c)(3). To refer Google to more than 15,000 images appearing on the entirety of P10's website falls far short of identifying what may have been infringed. Nor is a reference to the totality of the P10 image collection "a representative list" of "multiple copyrighted works" appearing without authorization at a single infringing site. See 17 U.S.C. § 512(c)(3). Thus, all of P10's Group C notices lack the identification of the copyrighted work required by section 512(c)(3)(A)(ii).

P10's Group C notices are additionally defective because they do not contain all ofthe required information in a single written communication.

The court also addressed the Safe Harbor for caching under Section 512(b) of the DMCA and various other issues.

The case is Perfect 10, Inc. v. Google, Inc. Here is a  copy of the Decision

On July 23, 2010, Judge William Alsup of the U.S. District Court for the Northern District of California entered an order denying Facebook Inc.'s motion to dismiss a second amended complaint alleging that Facebook is guilty of contributing to the copyright infringement of a video game. Judge Alsup denied Facebook's argument that, as the Plaintiff had failed to properly allege direct infringement by its Co-Defendant, no claim against Facebook for contributory infringement could be made. A copy of the decision can be found here: Miller v Facebook

Background

The pleadings allege that Plaintiff, Daniel Miller, created the video game Boomshine in 2007 and was granted a copyright registration by the U.S. Copyright Office. Boomshine is a game in which players click on floating circles which cause them to expand resulting in the expansion of any other circles which come into contact. Miller's second amended complaint accuses Defendant,Yao Wei Yeo, of direct infringement by arguing a similar "look and feel" between his video game, ChainRxn, and Boomshine but provides no further evidence of copying. According to the allegations in Miller's filings, "ChainRxn copies the look and feel of Boomshine by incorporating almost every visual element of the game". Moreover, the second amended complaint accuses Facebook of contributing to the infringement of the video game by allowing Yeo's game to remain on its website after being notified that it infringed the copyright of Boomshine.  Miller alleges that "[a]fter defendant Yeo published ChainRxn on defendant Facebook's website, members of the public were deceived regarding the origin of ChainRxn." For more information about the history of the case see the previous posting prepared by the Pillsbury Virtual World Team.

The Court's Denial

Facebook filed a motion for dismissal of the suit on June 21, 2010. Its argument was founded on the position that, as Miller had not properly first pled direct infringement by Yeo, he could not sustain a claim for contributory infringement by Facebook. The basis for Facebook's argument was that Miller's mere allegation that ChainRxn "looks and feels" identical to Boomshine without further proof of copying was insufficient to allege direct copyright infringement of Boomshine's source code. Moreover, Facebook argued that the copyright registration Miller had obtained for the source code was limited to its literal elements and not audiovisual elements of Boomshine. Judge Alsup denied the first element of Facebook's motion as premature noting that a "plaintiff can rarely examine the underlying source code of an accused infringing software program without resorting to discovery." Specifically, Judge Alsup said it would be "unreasonable, if not impossible" for Miller to know with "exacting detail" how Yeo copied the Boomshine source code so early in the case. Additionally, Judge Alsup denied the second portion of Facebook's motion by clarifying that the Court's earlier order "did not hold that copyright protection for source code was limited to the literal elements of the work" but rather that "plaintiff's copyright appears to be limited to the source code rather than the audiovisual aspects" and further determination is necessary to decide if the audiovisual elements of the game were also protected.

Finally, the court reminded Miller to address the disputed service of the second amended complaint on Yeo by the July 30, 2010 deadline or suffer a "potentially fatal defect" to his case.

Comments

The above action is interesting for several reasons. Platform companies like Facebook generally rely on the "safe harbor" protections the Digital Millennium Copyright Act provides when an infringement claim is made for the postings of a third-party. In fact,YouTube recently obtained a favorable decision providing it with DMCA protection in a potentially billion-dollar copyright infringement suit brought by Viacom. Moreover, while the Courts may differ on copyright protection for audiovisual "screen displays" in video games, the Copyright office's consistent position is that "a single registration is sufficient to protect the copyright in a computer program and related screen displays, including videogames, without a separate registration for the screen displays or a specific reference to them on the application for the computer program." For further discussion you can review the Copyright office's Circular 61

That said, this case continues to demonstrate that social networking platforms and other websites displaying user generated content must be ever vigilant or potentially face suits arguing various copyright theories. As technology advances (as well as the means of infringement) it is likely the pleading requirements will remain relatively low and defer the need to demonstrate the how, when and why of the alleged infringement until the completion of discovery. Since this will likely increase the cost of litigating these matters, Platform operators and creators of user generated content need to understand and avail themselves of copyright (and other IP) protection, enforcement techniques and available defenses.

Many people routinely click on the Agree button without reading the terms of service. Doing so can be perilous for many reasons. A pending case highlights another potential reason to read and abide by the terms of service - potential criminal liability. Granted, there are some unique facts here as discussed below, but it is to everyone's benefits to read and understand terms of service. For example, for users of a social media site, it is crazy to not understand what personal data is being collected and how it is being used and make an informed decision whether to use that site. For businesses (and investors in businesses) that interact with social media sites, it is critical that you understand and abide by the terms of service to assess whether your business model is "legal" and in compliance with the relevant terms of service. If not, your business (or investment) may be in peril, and in a worst case scenario you may face personal liability. Such was the case for the CEO of MDY when it created a tool that engaged in unauthorized access to Blizzard's World of Warcraft client software in violation of the relevant terms of service and EULA. In addition to the company being found to infringe, the CEO was held personally liable for $6 million in damages.

In a pending case, Facebook v. Power Ventures dba/Power.com, Facebook is relying on its terms of service and the Computer Fraud and Abuse Act and an analogous provision of the California Penal Code to prevent Power.com from using automated tools to populate a portal that aggregates a user's social networking profiles. This is deemed beneficial by many users, but not by Facebook. In its complaint, Facebook alleges that it grants a limited license to create applications that interact with Facebook's proprietary network subject to various terms of use agreements which prohibit, among other things, requesting, soliciting, or otherwise obtaining access to user names, passwords or other authentication credentials.

Facebook alleges that Power.com induces visitors to surrender their Facebook user names and passwords in order to "integrate" their Facebook account into the Power.com website, in violation of the Facebook's terms of service.

After notification from Facebook. Power.com allegedly initially agreed to cease the activity and purge the "ill-gotten data," but apparently later changed its mind and continued its practices. In response, Facebook claims to have implemented technical measures to block access to the site by Power.com but Power.com then allegedly circumvented the technological security measures without authorization in violation of the Computer Fraud and Abuse Act. Facebook also alleged violation of CALIFORNIA PENAL CODE 502(c), the "COMPREHENSIVE COMPUTER DATA ACCESS AND FRAUD ACT" (including Sections 1-4 and 7) and the anti-circumvention provisions of the DMCA, among other claims.

Additionally, Facebook alleges that Power.com used the names to send unsolicited email messages to Facebook users that contained false header information in violation of the CAN-SPAM (CONTROLLING THE ASSAULT OF NON-SOLICITED PORNOGRAPHY AND MARKETING) Act.

Even though this is a civil action the penalties that can flow from a finding of violation of the Computer Fraud and Abuse Act include: (A) a fine or imprisonment for not more than ten years, or both (for a first conviction) and (B) a fine under or imprisonment for not more than twenty years, or both, in the case of a repeat offender. Violation of the relevant sections of the California Penal Code can result in fines and imprisonment up to three years.

The Electronic Frontier Foundation filed an amicus brief in support of Power Ventures; arguing:

Facebook argues that by offering these enhanced services to users, Power violated California's computer crime law. It grounds its claim in the fact that Facebook's terms of service prohibit a user from having automated access to a user's own information and that Power continued to offer the service to Facebook users even after Facebook sent Power a cease and desist letter demanding that it stop. Yet merely providing a technology to assist a user in accessing his or her own data in a novel manner cannot and should not form the basis for criminal liability.

Many commenters have pointed out that taken to an extreme, any online service provider can create ridiculous terms of service and allege that there is a violation. While this may theoretically be true, in reality a court could strike down a frivolous clause if that were the case. However, when a company has a legitimate business interest to protect, and the terms of service relate to that business interest, an argument can be made that such terms should be upheld. Here Facebook appears to be alleging that it has a legitimate right to prevent third party application developers from requesting, soliciting, or otherwise obtaining access to user names, passwords or other authentication credentials. Perhaps this case will shed some light on this issue. Check back as we will provide updates on this case as it progresses.

Facebook Complaint

Google has prevailed on summary judgment in a lawsuit brought against it by Viacom for widespread copyright infringement due to uploading of copyrighted content to its YouTube site. Viacom was seeking $1billion in damages, alleging that Google was aware that users were committing copyright infringement by uploading songs and other content to YouTube and that Google was permitting this to happen. The Judge sided with Google finding that it was protected under the "safe harbor" provisions of the Digital Millennium Copyright Act (DMCA). Viacom has vowed to appeal.

The safe harbor provisions of the DMCA provide a significant shield from liability for online service providers, such as Google, when users post infringing content to their site However, to qualify for this safe harbor, the online service provider must have an effective policy and must comply with any proper DMCA take down notice. Other requirements must also be met.

Many companies are generally aware of the DMCA but some do not comply with all of the steps necessary to benefit from the safe harbor due to a lack of complete understanding of these requirements. If you are an online service provider and allow users to post content to your site, you should consult with an attorney knowledgeable of the DMCA to ensure you qualify for the safe harbor provisions. A copy of the decision is here: Google Decision

A more detailed summary of the case and strategic considerations is here.

On March 31, a California District Court dismissed a copyright infringement suit brought against Facebook relating to a video game made available on its social networking site. The suit was dismissed for failure to state a claim upon which relief can be granted. However, the court provided the Plaintiff, Daniel Miller, an opportunity to file an amended complaint, within 14 days, to cure the deficiencies of the dismissed complaint. On April 14, Miller filed a motion for leave to amend, along with a second amended complaint.

Background

According to the pleadings, Miller authored Boomshine, a game using Adobe Flash technology, and made it available on his Web site K2xl.com starting in March 2007. In the game, players click on a floating circle, causing the clicked circle to expand and causing other floating circles it contacts to expand in a chain reaction. The parties do not dispute Miller's ownership of Boomshine, for which he was granted a copyright registration by the U.S. Copyright Office.

Co-defendant Yeo allegedly first published ChainRxn on Facebook's site around April 2009. According to the complaint, "ChainRxn copies the look and feel of Boomshine by incorporating almost every visual element of the game" and Yeo's publication of ChainRxn on Facebook's site resulted in "members of the public [being] deceived regarding the origin of ChainRxn." Miller alleges that he sent letters to Facebook and Yeo in May 2009 demanding that ChainRxn be removed from the Facebook site because it violates his copyright in Boomshine. Yet they refused to do so. Miller also claims that Yeo then modified ChainRxn to prevent Miller and all of his Facebook friends from accessing ChainRxn.

The Court's Dismissal

The dismissed complaint claimed Facebook violated Miller's copyright in Boomshine by allowing ChainRxn to remain on Facebook's site, even after it was notified of the infringement. Miller also named the creator of ChainRxn, Yao Wei Yeo, as a defendant.

Judge Alsup wrote in his Order dismissing the suit that the complaint was unclear as to whether it was attempting to allege direct or indirect copyright infringement, but he addressed both allegations in his ruling. In holding that no allegation of direct infringement was sufficiently pled, the Judge stated: "If plaintiff wishes to proceed with his direct copyright infringement claim, he must include sufficient factual allegations that explain how defendant Facebook copied, displayed or distributed infringing copies of Boomshine. Mere legal conclusions disguised as factual allegations will not suffice."

Likewise, the Judge held that the complaint failed to allege sufficient facts to demonstrate indirect infringement, either on contributory or vicarious infringement grounds, adding "To state a claim for contributory infringement, plaintiff must allege facts showing that defendant Facebook induced, caused or materially contributed to the infringing product. No such factual allegations are included in the complaint." The judge continued: "Because plaintiff's explanation for how defendant Facebook induced and encouraged infringement is flawed, his assertion that defendant Facebook 'induced and encouraged' stands alone as merely a legal conclusion without factual support."

As with contributory infringement, the judge wrote that the complaint lacks sufficient factual allegations to state a claim for vicarious infringement and that "[t]o state a claim for vicarious copyright infringement, a plaintiff must allege that the defendant has ... the right and ability to supervise the infringing conduct ... ." However, the judge explained, the complaint's "allegations do not demonstrate that defendant Facebook has the right and ability to supervise the infringing conduct because it is unclear what infringing material was published on defendant Facebook's website. This information is crucial and without this information, any analysis of defendant Facebook's actions or inactions is mere speculation."

Miller's Second Amended Complaint

On April 14, Miller moved the court for leave to file a second amended complaint, which purportedly addresses each of the deficiencies of the earlier complaint. Narrowing his claims against Facebook, Miller's second amended complaint only asserts a claim of contributory infringement against Facebook because it had knowledge of Yeo's infringement and materially contributed to this infringement by not removing access to the infringing content or disabling Yeo's account. Miller asserts that these acts by Facebook assisted Yeo in distributing the ChainRxn game to Facebook users around the world.

Comments

As this case demonstrates, the rapid emergence of social networking platforms and user generated content (applications, goods, etc.) has increased the number of copyright issues. Now more than ever it is important for both site operators allowing third party content to be posted and creators who post content to such sites to understand and avail themselves of copyright (and other IP) protection and enforcement techniques. Some of the advantages of timely filing copyright protection are addressed in an advisory prepared by Pillsbury's Virtual World team.

Another option often available to content creators is to leverage the "take down" provisions of the Digital Millennium Copyright Act (DMCA). If done right, it is often an effective tool to promptly cause infringing content to be removed from social networking sites. Under one part of the DMCA, online service providers can minimize liability for contributory infringement for content posted to their sites, if upon receipt of a proper "take down" notice, they timely take down the allegedly infringing content.