JOLT Digest

Ninth Circuit Affirms Injunction Against Online Check-Issuer Qchex
By Leocadie Welling – Edited by Chinh Vo

Federal Trade Commission v. Neovi, Inc., No. 09-55093 (9th Cir. May 14, 2010)
Slip Opinion

On May 14, 2010, the Ninth Circuit affirmed a grant of summary judgment in favor of the Federal Trade Commission (FTC) and an injunction granted by the Southern District of California against appellant Neovi, Inc (“Neovi”). The FTC had brought claims alleging that Neovi, through its online Qchex service, had engaged in “unfair methods of competition” by issuing unverified checks through its website. The court agreed with the FTC, finding that appellant did not take sufficient measures to prevent and address fraud. The injunction prohibits Qchex from continuing to operate without following a court-specified verification process. It further orders Qchex to disgorge its total revenues, which the district court found to be in the amount of $535,358.

Eric Goldman provides an overview of the case and its factual background, and criticizes the opinion’s failure to discuss the relevance of the statutory protection for Internet services found in 47 U.S.C. § 230. Digital Society has a brief discussion of the decision. Ars Technica has two posts from 2009 (February and November) that provide useful background on the case. (more…)

District Court Denies Preliminary Injunction Against File Sharing Service
By Leocadie Welling – Edited by Ryan Ward

Perfect 10, Inc. v. Rapidshare, No. 09-CV-2596 (S.D. Cal. May 18, 2010)
Opinion

On May 18, the District Court for the Southern District of California denied plaintiff Perfect 10’s motion for a preliminary injunction against RapidShare, a file sharing service. The court held that Perfect 10 failed to show a likelihood of success on the merits of their direct and contributory copyright infringement claims against RapidShare, finding it particularly significant that RapidShare does not index its users’ files.

The court also noted that, when ruling on motions for preliminary injunctions, the Ninth Circuit has continued to use a presumption of irreparable harm when a plaintiff demonstrates a likelihood of success on the merits, in contrast to the Second Circuit which recently held in Salinger v. Colting that a plaintiff must show “he has suffered an irreparable injury” prior to obtaining a preliminary injunction.

MediaPost provides a brief overview of the decision, noting the court’s comparison of RapidShare to Napster. Ars Technica discusses the decision, noting past unsuccessful legal action by Perfect 10 and a recent German legal victory by RapidShare. The Legal Satyricon summarizes and criticizes the decision, arguing that RapidShare and similar sites are obviously liable for contributory infringement. (more…)

Another Win for the Record Companies in an Inducement Claim Against Lime Wire
By Sharona Hakimi – Edited By Ryan Ward

Arista Records LLC v. Lime Group LLC, No. 06 CV 5936 (KMW) (S.D.N.Y. May 11, 2010)
Slip Opinion

On May 11, 2010, the Southern District Court of New York granted summary judgment against Lime Wire for inducing copyright infringement of Arista Records’ music, but denied summary judgment for either side on Arista’s contributory infringement claim. The court held that Lime Wire committed a “substantial amount of copyright infringement,” induced others to commit copyright infringement, and engaged in unfair competition using its LimeWire application. Additionally, the court held Lime Wire’s chairman and CEO, Mark Gorton, and its principle investor, the Lime Group, liable for the inducement.

The Wall Street Journal Law Blog offers a brief summary of the case. Ars Technica and Eric Goldman discuss the case and the court’s inducement analysis. The New York Times provides background and reports on the reactions of academics and industry members to the case. (more…)

By Emily Hoort

Federal Circuit to Re-Consider TIVO Patent-Infringement Case

Bloomberg BusinessWeek reports that the U.S. Court of Appeals for the Federal Circuit will be taking a second look at a previous panel decision holding that Dish and EchoStar were violating TiVo’s digital-video recording patent.  The court will consider whether it was error not to give Dish a chance to prove that changes made to Dish software remedied the prior infringement upon TiVo’s patent on “time warp” technology, which allows users to record a TV program and later play it back.  TiVo is seeking a court order to halt Dish’s DVR service and to force the company to pay licensing fees.  TiVo is also seeking around $300 million in damages, in addition to the $100 million Dish paid after the original judgment.

Supreme Court Declines Appeal of FCC “Must-Carry” Rule

Yahoo reports that the Supreme Court has declined to hear an appeal of the case Cablevision v. FCC, in which Cablevision challenges an FCC “must-carry” rule.  “Must-carry” rules require cable television operators to carry local broadcast stations.  Cablevision’s appeal was in response to a New York federal appeals court decision holding that Cablevision must carry the signal of a home-shopping station.  The Supreme Court’s decision not to hear the appeal accords with previous recommendations of the Obama Administration to avoid challenges to the 18-year-old “must-carry” rule.

Microsoft Files Lawsuit against Salesforce.com

CNET reports that Microsoft has filed a federal lawsuit against Salesforce.com.  Microsoft claims that Salesforce.com has infringed on nine patents involving back-end and user interface features.  This is only the fourth patent-infringement lawsuit that Microsoft has ever brought against one of its competitors.  Previous Microsoft cases have been settled quickly, but the trajectory for this lawsuit is unclear.  Microsoft is seeking a jury trial, triple damages and injunctions.  Thus far, Salesforce.com has declined to comment.

By Andrew Segna
Edited by Joey Seiler
Editorial Policy

In December, my JOLT Digest comment discussed the state of independent video game developers on the iPhone and the Xbox 360. This article discussed how a collective action problem plagued independent developers on these platforms. As the platform holders, Apple and Microsoft were able to foster environments that benefited their needs but often were potentially hazardous to independent developers. These hazards became realized when independent developers pursued short-term individual gains, which they are prone to doing due to their limited budgets that require turning quick profits. In order to avoid this problem, I suggested that a legal aid society should promote actions by independent developers that would benefit the class as a whole. The recent release of the iPad presents another manifestation of this problem. Through the case study of the iPad, I will discuss how this new technology presents potential for both success and failure for independent video game developers. However, this problem is not necessarily a legal one as much as it is a collective action issue. Lawyers should serve as mediators between independent developers to foster a unified strategy for the platform in order to ensure that independent developers succeed on both the iPad and in the industry. (more…)