Facebook, Inc. v. Power Ventures, Inc.
By Gary Pong – Edited by Eric Engle

Facebook, Inc. v. Power Ventures, Inc., Case No. 08-cv-05780-JF (N.D. Cal. Oct. 22, 2009)
Order (Hosted by SPAM NOTES)

The United States District Court for the Northern District of California has granted a motion by Facebook to dismiss counter-claims and strike affirmative defenses in its ongoing case against Power Ventures (Power.com). In his order, United States District Judge Jeremy Fogel wrote that Power.com’s answer and counter-claim relied on legal conclusions which were not directly supported by factual allegations. Judge Fogel went on to note that antitrust claims, like those made by Power.com, “require a ‘higher degree of particularity in the pleadings.’” The order gives Power.com 30 days to amend its pleading.

TechCrunch provides an overview of the issues involved in this case. The Financial Times and Eric Goldman’s Technology & Marketing Law Blog comment on the decision.

Power.com is a service that aggregates various social networking sites so that users can access them all via Power.com. The service promotes to users that they can have “all [their] friends in just one place.” Power.com had allowed users to integrate their Facebook accounts into the service until Facebook filed suit on December 30, 2008. In its complaint (hosted and discussed by the New York Times), Facebook alleges, among other things, that Power.com had violated Facebook’s terms of use, infringed upon Facebook’s copyright and trademark, and violated the Digital Millennium Copyright Act (”DMCA”).

In response, Power.com filed a motion to dismiss (hosted by and discussed by SPAM NOTES) that was subsequently denied. It then filed an answer and counter-claim (hosted by Power.com and discussed by SPAM NOTES) against Facebook. In the counter-claim, Power.com alleges that Facebook engaged in monopolistic and anti-competitive behavior by placing restraints on Power.com’s ability to manipulate users’ Facebook data even when their consent was given. The present order by Judge Fogel gives Power.com 30 days to support its claims against Facebook with facts.

Whether or not Power.com ultimately prevails may have far-reaching effects on social networking sites and the personal data they amass, since one of Facebook’s greatest assets is the personal information it has collected on its over 300 million users. Facebook has an undeniable interest in keeping this information from potential competitors such as Power.com. In such an environment, it may be difficult for a new competitor to reach critical mass and to obtain enough users for the network effect to take hold. At the same time, users are very concerned about their privacy and Facebook has faced vocal criticism in the past whenever it instituted policies that users felt were threatening (e.g. Facebook Beacon). It would be even more difficult for Facebook to protect its users’ privacy if the data was shared with third-parties. With this in mind, it may not be hyperbole to say that the outcome of this case could affect a population the size of America.

ISPs Found Liable for Websites’ Trademark and Copyright Infringement

Computerworld and Ars Technica report that on August 28, a federal jury handed down a $32.4 million judgment against two ISPs that hosted websites selling counterfeit Louis Vuitton products. Louis Vuitton successfully argued on a theory of contributory infringement, overcoming the ISPs’ claims of immunity under the Digital Millennium Copyright Act’s “safe harbor” provisions. Evidence that the ISPs had received and failed to respond to notices of the illegal activity from Louis Vuitton was key to the case.

EU to Investigate Oracle/Sun Deal

On September 3, the European Union’s antitrust regulators announced plans for a formal investigation of Oracle’s planned buyout of Sun Microsystems, The Washington Post reports. The investigation will center on the competitive consequences of “the world’s biggest proprietary database company . . . tak[ing] over the world’s leading open-source database company.” The European Commission will come to a ruling on the deal by January 19; the U.S. Department of Justice has already approved it.

Authors Voice Privacy Concerns in Objection to Google Settlement

A group of authors and publishers filed an objection to the proposed settlement between The Authors’ Guild and Google Book Search (GBS), the Electronic Frontier Foundation (EFF) reported on September 8. A fairness hearing regarding the settlement is set for next month. In the objection, prepared by EFF, the ACLU, and the Samuelson Clinic at UC Berkeley School of Law, the authors assert that GBS’s collection of personally identifiable information regarding users’ habits will having a chilling effect on readership. Limited information retention and strict disclosure standards are among the authors’ specific demands.

WTO Finds China’s Media Laws Violate International Trade Laws

On August 12, Ars Technica and the New York Times reported that the World Trade Organization ruled against China in a complaint by the United States regarding China’s limitation on imports of songs, movies, and books. The Chinese laws constituting trade violations require that many forms of imported media must be distributed by a single, state-owned company. The laws also limit foreign ownership of Chinese media companies and allow domestic companies to bypass trade censors. Ron Kirk, the US trade representative at the WTO conference in Geneva, said that the “decision promises to level the playing field for American companies working to distribute high-quality entertainment products in China so that legitimate American products can get to market and beat out the pirates.”

Hollywood Group Secures Preliminary Injunction against DVD Copying Software

On August 11, U.S. District Court Judge Marilyn Patel issued a preliminary injunction against RealNetworks, barring the company from selling its RealDVD copying software until a jury can decide the issue, CNET News reports. She stated that RealNetworks cannot use fair use as a defense under the Digital Millennium Copyright Act or the company’s license with the DVD Copy Control Association, but noted that “[i]t may well be fair use for an individual consumer to store a backup copy of a personally owned DVD on that individual’s computer.” While the decision is seen as a major victory for the Motion Picture Association of America, the Electronic Frontier Foundations views it as a setback for innovators and consumers.

David Kappos Sworn in as New Director of USPTO

Patently-O reports that on August 13, David Kappos was sworn as Director of the United States Patent and Trademark Office. Kappos addressed USPTO employees at the ceremony, pledging to work on “reducing the backlog of unexamined patent applications, cutting pendency dramatically, working off the mounting appeals backlog, [and] improving re-exam processing.” He also projected his goals to secure more stable financial backing or the USPTO, hoping there will be no need to utilize the Office’s new authority to use trademark funds to pay for patent operations. A video of Kappos’s swearing in ceremony is available on the blog Anticipate This!

Wiki Operator Seeks Right to Host Discussions About Circumvention of iPhone’s DRM System

Wired reports that on April 27, BluWiki operator OdioWorks filed a declaratory judgment lawsuit against Apple in order to “clarify the rights of the parties.” Last November, Apple threatened OdioWorks with legal action over a thread discussing how to use unapproved software on both the iPod and iPhone. Apple claimed that the content was “designed to circumvent Apple’s FairPlay digital rights management system” in violation of the Digital Millennium Copyright Act. OdioWorks initially complied with Apple’s takedown demands, but is now being supported by Keker Van Nest and the Electronic Frontier Foundation in its lawsuit.

Ontario to Propose New Legislation Banning Ticketmaster from Reselling Tickets Through Its Subsidiaries

On April 29, The Toronto Star reported that Ontario’s Attorney General Chris Bentley plans to introduce a bill that would outlaw ticket sales companies such as Ticketmaster from reselling their tickets on subsidiary websites. Although ticket scalping is already illegal in Ontario, Bentley says the proposal is in response to complaints from customers upset with Ticketmaster’s practice of reselling tickets at prices above face value on its subsidiary TicketsNow. Ticketmaster had previously agreed to voluntary limitations on its use of TicketsNow in the United States.

European Union Votes to Extend Music Copyright by 20 Years

The European Parliament voted on April 23 to extend the length of musical copyright protection from 50 years to 70 years. If the proposal is approved by the European Council, artists will be able to continue receiving royalties for up to 70 years after the first release of their songs. Ars Technica reports that several groups have criticized the extension because most of the new royalties will go to record labels rather than the original performers of the songs.

By Chris Kulawik — Edited by Jon Choate

Coupons, Inc. v. Stottlemire
N.D. Cal., No. CV 07-03457 HRL
Court Documents (hosted by Justia)

Last week, Coupons, Inc. (”Coupons”), settled its DMCA suit against John Stottlemire, who had defended himself pro se. The parties have not fully disclosed the details of the settlement, but Stottlemire indicates that the case was dismissed with prejudice. The agreement follows a year’s worth of litigation in the United States District Court for the Northern District of California.

Note:
Since the writing of this post, Coupons, claiming that Stottlemire breached material terms of the parties’ settlement agreement, has resumed litigation.  Stottlemire, in a motion filed with the court, claims that Coupons is mistaken in its belief that he has breached the confidentiality term of the settlement.

In July, 2007, Coupons filed suit against Stottlemire alleging in its complaint that his online posting constituted a violation of the anti-circumvention provisions of the  Digital Millennium Copyright Act (”DMCA”), 17 U.S.C. §1201, and related California state laws. The posting had detailed a “hack” that allowed Coupons patrons to avoid imposed maximums and print multiple coupons with unique and functioning serial codes. Coupons claimed that the dissemination of the hack effectively “offered to the public” a technology “primarily designed for the purpose of circumventing technological measures that effectively control access to Plaintiff’s works.”

Stottlemire denied the allegation and sought to dismiss on the grounds that his posting did not qualify as the “hacking” or circumvention of certain protection made illegal under the DMCA. He argued instead that this technique merely exploited Coupons’s faulty and limited software. Ars Technica reports Stottlemire as stating, “There are big problems when you are not allowed to delete files off of your computer.”

The Electronic Frontier Foundation (”EFF”), which joined the Berkeley School of Law’s Samuelson Law, Technology and Policy Clinic in filing an amicus brief in support of Stottlemire, discussed its position on the legal issues in the case on its blog after the Court dismissed several of Coupons’s claims in July:

Coupons claimed that Stottlemire’s tool circumvents technological measures that limit use of its coupons (a “rights-control” claim), but also tried to allege that the tool circumvents measures that limit access to those coupons (an “access-control” claim). The problem is that the tool doesn’t have anything to do with access ¾ anyone can access the coupons whether they use the original software or the modified software.

This isn’t just an academic issue. While the DMCA prohibits the distribution of tools that circumvent rights or access controls, it prohibits actual circumvention (e.g., through use of such tools) only in the case of access controls. This is because controlling use of copyrighted material is already addressed by copyright law, and addressing it again in the DMCA would upset the careful balance between the rights of copyright owners and those of the public.

Speaking to Wired, Stottlemire celebrated the settlement:

Without being represented by an attorney, I defended myself in federal court against a company who solicited the services of two separate law firms. And in my opinion, I kicked their ass. By refusing to succumb to their bullying tactics, I continued to assert my innocence and fought the claims Coupons Inc. filed against me.

RealNetworks, Inc. v. DVD Copy Control Ass’n
N.D. Cal., October 7, 2008, No. C 08 04548 HRL
Court Docket provided by Justia

On Tuesday, October 7th, Judge Marilyn Hall Patel announced she would not disturb a temporary restraining order in place against RealNetworks (“Real”), pending a preliminary injunction hearing in mid-November.  The order blocks Real from selling RealDVD, a software program that allows users to copy DVDs to a computer or portable hard drive and watch them later without the physical disk.

The DVD Copy Control Association (“CCA”), filed a motion ex parte for the order just hours after Real began selling the program.  The CCA claimed that RealDVD violates the Digital Copyright Millennium Act (“DMCA”) by circumventing DRM protections on DVDs, and that Real’s development of the program violates a licensing agreement the companies had signed.  With regards to the TRO, the CCA stated, “Real’s conduct is causing and unless restrained will continue to cause immediate and irreparable harm to [a number of Hollywood] Studios, including to their DVD rental and sale markets . . . .”

Real responded in opposition, claiming that any harm the Studios may suffer is “compensable or illusory.” Real argued that the widespread availability of illegal DVD pirating programs undercuts the CCA’s claims, and urged the court that a TRO would irreparably harm the company by depriving Real of positive publicity and other market advantages.  In the filing, Real maintained that its product conforms to the requirements of its license with CCA, and therefore does not violate the DMCA.

Tuesday’s hearing was the second regarding the restraining order.  According to Wired.com, Judge Patel originally put the order in place on Friday, October 3rd, warning both parties not to disclose details to the public.

CNET.com provides a summary of the hearing.  As result of Judge Patel’s concern that RealDVD may result in copyright violations, the software will remain unavailable pending further hearings in November.

Real initiated litigation with the CCA on September 30th, seeking a declaratory judgment stating RealDVD does not violate the DMCA, and that Real did not violate its licensing agreement with the CCA in developing the product.

The CCA cross-claimed, alleging that RealDVD circumvents DRM controls on DVD disks, and therefore violates both the DMCA and the companies’ contract.

The Electronic Frontier Foundation has questioned the CCA’s rationale, criticizing it as an attempt by Hollywood to stifle and control innovation.

Io Group, Inc. v. Veoh Networks, Inc.
N.D. Cal., August 27, 2008, No. C06-03926 HRL
Slip Opinion
(hosted by Electronic Frontier Foundation)

Last week, a federal judge in San Jose, U.S. District Judge Howard Lloyd, ruled that Veoh Networks, Inc. (“Veoh”), is not liable for copyright infringement for material that was uploaded to its site. Veho provides software and a website that enables the sharing of user-provided video content over the Internet.

The case arises from a complaint filed by Io Group, Inc. (”Io”), a company that holds and owns a number of registered copyrights for a variety of adult entertainment products. Between June 1 and June 22, 2006, Io alleged that it discovered clips from ten of its copyrighted films had been uploaded and viewed on veoh.com without its authorization. None of the clips contained copyright notices, except one work that displayed a “Titan Media” trademark several minutes into the clip; Io conducts business under that name.

Veoh’s first notice of the claimed infringement was Io’s filing of the instant lawsuit on June 23, 2006. Independently, Veoh had already decided that it would no longer permit adult content on its website. By the time this suit was filed, access to all adult content on Veoh’s website – including any content allegedly infringing Io’s copyrights – had been terminated.

Io sought summary judgment on liability for direct, contributory and vicarious copyright infringement. The court ruled that, even assuming that plaintiff’s infringement claims pass summary judgment muster, Veoh was eligible for safe harbor protection from damages; furthermore the court found the limited injunctive relief provided under the DMCA was moot.

Commentators have noted the potentially far-reaching effects of this decision, especially for the ongoing YouTube-Viacom infringement litigation. See the L.A. Times, CNet, Wired, Silicon Alley Insider, Techdirt, TechCrunch.

Bruce Boyden of Prawfsblawg notes, most commentators have focused the holding that Veoh’s automated reformatting of uploaded materials does not create copies for which Veoh is responsible. Boyden also notes the similarities to the Second Circuit’s recent Cablevision case, calling the cases “good precedent for ISPs who process uploaded content. . . . .”

While the DMCA “safe harbor” provision does not immunize online service providers from liability, it provides copyright owners with only limited injunctive relief. Under the circumstances presented, the court found it only necessary to address Veoh’s motion as to the applicability of the safe harbor under DMCA section 512(c). Veoh contended that it qualified for “safe harbor” because it did not “actively participate or supervise the uploading of files. . . . Instead, video files are uploaded through an automated process which is initiated entirely at the volition of Veoh’s users.” The company added that the evidence “demonstrates that, far from encouraging copyright infringement, Veoh has a strong DMCA policy, takes active steps to limit incidents of infringement on its website and works diligently to keep unauthorized works off its Web site.”

Additionally, the court discussed the “duty to police” within the context of the DMCA and the right and ability to control infringing activity. The implicit requirement to police the system comes up in the context of vicarious liability, which is not immunized under the DMCA safe harbor. The test for vicarious liability has two prongs, (1) the “right and ability to supervise the infringing activity” and (2) a “direct financial interest” in those activities. The court’s discussion of policing reached only the first prong, noting that while Veoh may be able to “affect” the infringing activity, the number of submissions render the site unable to control what content is uploaded before it’s placed on the site by users.

Because the court found that Veoh qualified for safe harbor under Section 512(c), the only relief available was limited injunctive relief under Section 512(j). However, Veoh independently removed all adult content before it ever received notice of any claimed infringement. Thus, any injunctive relief to which Io would be entitled was moot. The court declined to address Veoh’s liability for copyright infringement, as any finding would be merely advisory; accordingly the court did not reach the issues raised in plaintiff’s motion for summary judgment.

MDY Industries, LLC v. Blizzard Entertainment, Inc. et al.
District Court of Arizona, July 14, 2008, No. CV-06-2555-PHX-DGC
Order (via Justia)

The District Court of Arizona entered a summary judgment motion finding that MDY Industries, LLC (“MDY”), creators of a software program called WoW Glider (“Glider”), were liable for contributory and vicarious copyright infringement because their program loaded a copy of a copyrighted Blizzard Entertainment, Inc. and Vivendi Games, Inc. (collectively, “Blizzard”) game into computer memory on the game-owners’ machines against the terms of the game’s End User License Agreement (“EULA”). As part of this decision, the Court also found that over-the-counter buyers of the computer game were licensees rather than owners and were thus bound by the terms in the EULA.

Judge David Campbell ruled that the EULA created a limited license rather than a sale because the title explicitly uses the word “limited” and because several of the provisions contain explicit restrictions on the use of the game which, when read together, prohibit the use of Glider. As licensees rather than owners of the game, users were only allowed to copy it under circumstances dictated by the EULA and were thus guilty of direct infringement when they used Glider because it loaded the game into the user’s RAM. A line of Ninth Circuit cases had previously held this to be “copying,” an exclusive right of the copyright holder under Section 106 of the Copyright Act. MDY was found to be liable for contributory and vicarious copyright infringement because it materially contributed to users’ direct infringement, profited from it, and declined to exercise its ability to stop Glider users from activities infringing the license.

The motions of both parties can be found here.

Public Knowledge argued that because 17 U.S.C §117 reserves to the computer user the right to make RAM copies to run the program, this construction of the EULA will allow Blizzard to retain rights it has never owned. Their amicus brief can be found here, and and Blizzard’s reply can be found here.

The Patry Copyright Blog notes the dismissal of the DMCA claim with approval but finds the copyright ruling to be wrongly decided and to also be a “chilling extension of control” by copyright holders over their products.

Corynee McSherry of the Electronic Freedom Foundation Blog also disagrees with the copyright ruling and notes other recent district court cases under Ninth Circuit jurisdiction which have come out differently, speculating that there will be an appellate decision on this matter soon.

A Note by Christina Hayes published at 22 Harv. J.L. & Tech. touched on whether Blizzard’s EULA could be enforced to limit users’ copyright fair use rights.

World of Warcraft (“WoW”) is a multiplayer online role-playing game whose copyright is owned by Blizzard. Many copies, though not all, are sold over the counter. To play the game a user must load a copy of the software and then access the online server using an online account for which the user pays a monthly fee. Glider automates some of the tedious game activities so that players progress through the game faster. In the process of carrying out this function Glider loads WoW onto the computer’s RAM.

The Court also ruled that MDY did not violate 17 U.S.C. § 1201(a)(2)(part of the Digital Millennium Copyright Act), which forbids tools that circumvent technological measures that a copyright holder has implemented to control access to its copyrighted work. Since the user does not have to pass through Blizzard’s security devices to gain access to the code, the Court found that Glider’s circumvention of these devices is not a § 1201(a)(2) violation. The Court denied summary judgment and wanted further fact-finding on the question of whether MDY violated this section with respect to “non-literal elements” of the game. Similarly, it denied summary judgment on potential MDY violations of § 1201(b)(1), which focuses on whether a technological measure protects copyright rather than whether it controls access.

The Court also granted summary judgment to Blizzard on a claim of tortious interference, to MDY on Blizzard’s claim of unfair competition, and denied summary judgment to MDY on an unjust enrichment claim.