Lahoti v. Vericheck Inc., No. 08-35001 (9th Cir., Nov. 16, 2009)
Opinion

On November 16th, the Ninth Circuit held that the district court’s finding that the mark “VeriCheck” was an inherently distinctive, legally protectable mark was based in part on erroneous legal reasoning and in part on valid reasoning. Accordingly, it vacated the lower court’s award of summary judgment in favor of the defendant and remanded. However, the Ninth Circuit affirmed the district court’s finding that the counterclaim defendant acted in bad faith. The court noted that it is proper for a court to consider the fact that the PTO has allowed others to register the mark at issue without requiring a showing of secondary meaning as weighing in favor of a finding of inherent distinctiveness.

The Ninth Circuit held that because the district court did not rely exclusively on the proper legal standard, its finding that Disputed Mark was distinctive must be vacated — even if there may have also existed proper legal grounds for finding the mark distinctive. The court also held that Lahoti acted at least “partially in bad faith” by gambling that the district court would agree with his interpretation of trademark law. He knew or should have known that he would risk cybersquatting liability if his gamble failed.

BNA and Michael Atkins, a Seattle trademark lawyer, provide relevant overviews of the case.

VeriCheck, Inc. (“VeriCheck”), a Georgia corporation that provides electronic financial transaction processing services, had unsuccessfully attempted to secure the vericheck.com domain name in 1999. David Lahoti claimed that in anticipation of future business pursuits, he registered a number of domain names with the “veri-” prefix, acquiring the vericheck.com domain name in 2003. After a failed negotiation in 2004 between Vericheck and Lahoti, VeriCheck filed an arbitration complaint pursuant to the Uniform Domain-Name Dispute-Resolution Policy in 2006. Although the arbitrator ordered the transfer of the Domain Name to VeriCheck, Lahoti sought a declaratory judgment that he did not violate the Lanham Act’s cybersquatting or trademark infringement provisions. Vericheck counterclaimed that Lahoti’s actions violated the Lanham Act, the Anti-Cybersquatting Consumer Protection Act (“ACPA”), the Washington Consumer Protection Act (“WCPA”), and Washington common law.

The Ninth Circuit reasoned that the proper standard of appellate review was for “clear error,” and it held that the district court’s decision that the “VeriCheck” mark was a distinctive, legally protectable mark under the ACPA and federal trademark law was based in part on reasoning contrary to federal trademark law and based in part on reasoning that could support the district court’s conclusion. Accordingly, because the district court did not rely exclusively on the proper legal standard, the appellate court vacated and remanded the judgment to the extent it determined the Disputed Mark was distinctive.

The appellate court also held that the record supported the district court’s summary judgment determination that Lahoti was motivated by a bad faith. Not only did he intend to profit from his use of the Disputed Mark, but also he was a repeat cybersquatter who has been admonished by other judicial bodies for cybersquatting. The court reasoned that Lahoti’s failed defenses in these other cases made it unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case.

This case is significant because it maintains that the issue of whether a mark is suggestive or descriptive is a fact-intensive question that poses a difficult decision in many close cases. This case falls in line with a series of cases that have been reluctant to allow for the ACPA safe harbor defense that protects registrants who “believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.” 15 U.S.C. 1125(d)(1)(B)(ii).

Convicted Murderer Demands that Wikipedia Remove His Name from Victim’s Article

On November 11, Wired reported that a convicted murderer in Germany has issued a cease-and-desist letter demanding that Wikipedia remove his name from his victim’s Wikipedia article. Wolfgang Werle murdered Bavarian actor Walter Sadlmayr in 1990, and was released on parole in 2007. The letter demands legal fees and compensation for “emotional suffering” caused by the publication of Werle’s name in connection with the murder since his release. German media have already stopped using Werle’s name. Since Wikipedia is an American organization, the Electronic Frontier Foundation describes the issue as “an apparent conflict between the U.S. First Amendment — which protects truthful speech — and German law — which seeks to protect the name and likenesses of private persons from unwanted publicity.”

Senator Criticizes Verizon’s Increased Cancellation Fees as “Anti-Competitive”

On November 10, Ars Technica reported that United States Senator Amy Klobuchar wrote a letter to Verizon, criticizing the company’s announced increase in early cancellation fees for cell phone contracts. Verizon recently announced that, beginning November 15, the fee for cancelling a subsidized smartphone contract would double from a maximum of $175 to $350. Senator Klobuchar, who is a proponent of the Cell Phone Consumer Empowerment Act, called the increase “anti-consumer and anti-competitive.” Senator Klobuchar also wrote a letter to the FCC, asking for an investigation into the competitive and economic impact of the decision on consumers. Verizon noted that consumers can avoid the early termination fees by purchasing smartphones without Verizon subsidies.

United Kingdom Proposes Mandatory Surveillance of Social Networks, Chat Rooms, and Video Games

On November 9, the BBC reported the United Kingdom government has proposed that communication service providers retain records from a variety of new sources including social networks, chat rooms and online games. The move is designed to monitor the parties to and date of each online communication, but not the “actual contents of what was said.” Specific legislation has not yet been introduced, but the proposal includes compensation for the communications providers that must implement the technically challenging requirements. The government has insisted that most concerns about the proposal have only to do with the “detail of what would be done with the information.”

Court Issues TRO Against Sales of Beatles Music “Simulation”

Ars Technica reports that on November 5, a Central District of California judge issued a temporary restraining order (TRO) against BlueBeat.com, a website offering 25-cent downloads and free streaming of thousands of copyrighted songs, most notably including the entire Beatles catalog. The order is part of a suit filed on November 3 by Capitol, EMI, Priority, and Virgin Records, claiming copyright infringement and various state law violations. In its ill-received opposition to the TRO, BlueBeat asserted in part that the sound recordings it sells were not copied from the originals, but instead were “independently developed” through a “psycho-acoustic simulation” process.

New York Files Suit Against Intel

New York Attorney General Andrew Cuomo filed an antitrust lawsuit against Intel on November 4, The New York Times and The Washington Post report. The complaint focuses on Intel’s relationships with Dell, Hewlett-Packard, and IBM, asserting that the company has used what amounts to coercion and bribery to ensure the use of its chips over those of its main competitor, Advanced Micro Devices. This is the second antitrust action taken against Intel in the U.S — the first, an FTC administrative complaint, was filed in 1998 and later settled. Since 2005, however, Intel has battled and lost antitrust disputes in the EU, Japan, and South Korea.

Anti-Net Neutrality Bill Introduced in House

On October 30, Rep. Marsha Blackburn (R-TN) introduced a House bill that would ban the FCC from issuing “any regulations regarding the Internet,” PCMag.com reports. The bill came eight days after the FCC issued its proposed net neutrality rulemaking, and a week after Sen. John McCain introduced a similar bill in the Senate. Blackburn framed the bill as an effort to preserve the Internet as “the last truly open public marketplace”; supporters of FCC regulation counter that the proposed nondiscrimination rule is necessary to preserve that openness.

U.S. v. Cioffi, et al., Case No. 08-CR-415 (FB) (E.D.N.Y. Oct. 26, 2009)
Slip Opinion (hosted by WSJ)

The Eastern District of New York granted defendant Matthew Tannin’s motion to suppress evidence obtained from his personal Gmail account. Ralph Cioffi and Matthew Tannin were charged with conspiracy, securities fraud and wire fraud in connection with their roles as Bear Sterns hedge fund managers. Prosecutors obtained a warrant to search Tannin’s personal Gmail account, but the warrant failed to specify what evidence could be seized or to what crimes the evidence must relate.  After some initial difficulty, Google delivered a copy of the email account to the Government. As the Wall Street Journal reported, one email contained a comment that funds Tannin managed could “blow up.” Tannin moved to suppress this evidence on the ground that it violated the Fourth Amendment.

District Judge Block held that the warrant was facially overbroad and thus violated the Fourth Amendment. The Court reasoned that because the warrant itself was not particular as to either the items to be seized or to a particular crime, and because the affidavit was not attached or incorporated into the warrant, the warrant was unconstitutional. The court also held that the warrant did not merit a “good faith” or “inevitable discovery” exception, largely because the executing officers should have known the warrant was overbroad.

The Wall Street Journal provides a brief overview of the case. The Eric Goldman Blog also provides a summary of the case. Orin Kerr of the Volokh Conspiracy criticizes the ruling, saying that the good faith exception should have been granted since the case law was not firmly established at the time of execution.

In holding that the warrant was overbroad, the court reasoned that the warrant should have included information about the particular items to be seized and what crimes were at issue. Interestingly, the court did not take a firm position on the particularity requirement for computer searches. Instead, the court focused on particularity requirements in general.  Even though the warrant was based on an affidavit containing useful and particular information about the evidence to be siezed and the crime being charged, the warrant was facially overbroad because it did not formally incorporate and attach the affidavit.

The court went on to deny admission under either the “good faith” or  “inevitable discovery” exceptions. In denying the first exception, the court held that the good faith exception does not apply to cases with facially invalid warrants that executing officers could not reasonably presume to be valid. The court reasoned that this was such a case  because of the lack of particularity in the warrant. In denying the inevitable discovery exception, the court relied on United States v. Eng., and held that the analysis must focus on “what would have happened had the unlawful search never occurred.” 997 F.2d 987, 990 (2d Cir. 1993). The court reasoned that the government relied on the invalidation of the warrant to show that discovery was inevitable. Thus, the government essentially focused on what would have happened given, rather than without, the unlawful search. The court, therefore, granted the motion to suppress the evidence obtained from the government’s warrant.

This case is significant for two main reasons. First, it deals a major blow to the prosecution’s case against the two former hedge fund managers. The emails seemed to contain powerful evidence of knowledge of the funds’ instability, evidence that is now inadmissible. Second, it helps affirm the Second Circuit’s position that an affidavit must be attached and incorporated into the warrant in order for it to “cure” the warrant’s lack of particularity. To do so, it interprets a less than explicit section of the Supreme Court’s opinion in Groh v. Ramirez, 540 U.S. 551 (2004). It thus adds weight to this distinct interpretation of Groh. Perhaps future Supreme Court jurisprudence will clarify and solidify the issue.

By Ian B. Brooks – Edited by Alissa Del Riego
United States v. Kilbride, No. 07-10528 (9th Cir. Oct. 28, 2009)
Opinion

The Ninth Circuit has affirmed the District Court for the District of Arizona, which had convicted and sentenced defendants Jeffery Kilbride and James Schaffer of transporting obscene materials for sale.

The Ninth Circuit held that a national community standard “must be applied in regulating obscene speech on the Internet, including obscenity disseminated via email.” United States v. Kilbride, No. 07-10528 at 14492 (9th Cir. Oct. 28, 2009).  Defendant Internet spammers Kilbride and Schaffer had appealed their convictions for interstate transportation for sale of obscene material in violation of 18 U.S.C. §§ 1462 and 1465. Judge Fletcher of the 9th Circuit examined the opinions of the fragmented Justices in the Supreme Court’s opinion in Ashcroft v. ACLU for guidance in reaching his conclusion that a national community standard would not pose the constitutional concerns that a local community standard would. Ashcroft v. ACLU, 535 U.S. 564 (2002)

Eric Goldman provides an overview of the case. Orin Kerr, of The Volokh Conspiracy, criticizes the Ninth Circuit’s reasoning in the case. Kerr argues that the Ninth Circuit should have followed the precedent set in Miller v. California, 413 U.S. 15 (1973), wherein local “contemporary community standards” were applied.

Although the Ninth Circuit agreed with the defendants’ assertion that the district court erred in its jury instruction on the obscenity community standard, the court found that it was not a plain error and did not require reversal. The court reached its holding based on  Ashcroft, which found the Child Online Protection Act (COPA) unconstitutional because it was based partly on community standards to identify material that was harmful to children.

Defendants Kilbride and Schaffer operated a spamming business through Ganymede Marketing, a Mauritian company with servers operating in the Netherlands. Two images from the defendants’ sexually explicit emails lead to the obscenity charges. Kilbride and Schaffer were sentenced to 78 and 63 months respectively. On appeal, defendants challenged the District Court’s application of a contemporary community standard to email communications under Hamling v. United States, 418 U.S. 87 (1974), because it would subject the defendants to the least tolerant community standard in the country. The government challenged defendants’ argument by citing a prior case in the district, United States v. Dhingra, 371 F.3d 557 (9th Cir. 2004), in which the Ninth Circuit did not foreclose a local community standard where a crime occurred over the Internet. The Ninth Circuit distinguished Dhingra noting that it does not apply to a federal law that regulates speech.

Rather than applying Hamling, the Ninth Circuit followed Ashcroft. The Ashcroft case addressed the constitutionality of the COPA, which regulated material harmful to minors. The opinion of the Court in Ashcroft did not find it significant that Internet communications were not focused to a particular area and rejected the national community standard approach. The Ninth Circuit reasoned that the view of the Court was contrary to defendants’ argument but noted that the opinion was not joined by a majority of the court.The Ninth Circuit found support for its conclusion that a national obscenity standard should be applied by examining the multiple concurrences and dissent of the other Justices in Ashcroft. Judge Fletcher noted that six Justices raised constitutional concerns over the application of a local community standard for defining obscenity in Internet cases.

This case represents a departure from the local community standard that had been applied following Miller and goes against the reasoning of the opinion of the Court in Ashcroft, but applies what some believe to be the practical reasoning necessary for balancing Internet communications, free speech, and obscenity concerns. Looking forward, OneNewsNow provides a brief opinion on how the Ninth Circuit’s decision may impact defenses raised by attorneys.

Gamer Appeals Ban from Sony’s Playstation 3 Network

On September 22, 2009, the United States District Court for the Northern District of California dismissed Erik Estavillo’s lawsuit against Sony. Fox40.com reports that Estavillo was banned from Sony’s Playstation 3 Network after allegedly uttering “racial and homophobic slurs to other online gamers.” Estavillo alleged that his freedom of expression was abridged, and likened Sony’s network to a company town. The district court dismissed Estavillo’s First Amendment claims, stating: “Sony’s Network is not similar to a company town. The Network does not serve a substantial portion of a municipality’s functions, but rather serves solely as a forum for people to interact subject to specific contractual terms.” Estavillo recently appealed the dismissal to the Ninth Circuit and has also filed a second lawsuit against Sony.

German Government Pledges to Protect Online Journalism in Germany with a “New Kind of Copyright”

On October 29, 2009, the New York Times reported that Germany’s governing coalition “has pledged to create a new kind of copyright to protect online journalism” with the goal of “level[ing] the playing field with Internet companies like Google.” German publishers fear that Google may be “exploiting their content to build lucrative businesses without sharing the rewards.” Google aggregates news from many news outlets on its Google News website; however, Google News operates in Europe without collecting any advertising revenue. Although “[d]etails of how the proposal would work have not been spelled out,” analysts believes that the new copyright scheme may allow online journalists to “claim royalties for the use of their content by Google or other online ‘aggregators’ of news.” In support of the new scheme, counsel for the German Newspaper Publishers Association argues that there is “no fundamental right to information for free on the Internet.”

United Kingdom to Crack Down on Online Piracy; Could Lead to Outright Disconnection of Pirates

On October 28, 2009, the BBC reported on new legislation that will come into force in the United Kingdom in April 2010. Although “the details of it would need to be hammered out at European level,” the legislation will impose bandwidth restriction on suspected pirates. If necessary, more restrictions will be introduced in the spring of 2011 that could completely disconnect the suspected pirates from the Internet. The legislation already faces challenge from ISP TalkTalk, which has created a “Don’t Disconnect Us” campaign and threatened litigation. Although the legislation is designed to protect the United Kingdom’s creative content industries, legislators emphasize that the long-term solution is for “the industry to educate users and to offer new and cheaper ways to download content.”

Nokia Sues Apple for Patent Infringement Related to iPhone

On October 22, Nokia filed a suit against Apple in Delaware federal court, alleging that the iPhone infringes patents held by Nokia. The New York Times reports that the specific patents deal with the GSM and UMTS wireless standards utilized by the iPhone for voice and data communication, both of which were developed in part by Nokia. The Wall Street Journal notes that the suit might be a strategic response to the iPhone’s increasing momentum in Europe and Asia. Nokia could gain a two-percent royalty on each iPhone sold if the suit succeeds.

Tennessee Couple Is Entitled to Unmask Anonymous Blogger

On October 8, a Tennessee state court held in Swartz v. Does that a couple is entitled to know the identity of the individual who posted critical statements about them in an online blog. Ars Technica notes that the blogger’s claim to protection under Section 230 of the Communications Decency Act likely failed because the blog induced readers to spy on the Swartzes and report back on the blog. The Citizen Media Law Project points out that the legal standard used by the judge in this case was “highly protective of anonymous online speech,” but that the Swartzes provided “sufficient evidence in support of their claims of wrongdoing to outweigh the anonymous blogger’s right to anonymity.”

Charges against Craigslist for their “Adult Services” section dismissed by Illinois District Court
By Ye (Helen) He – Edited by Eric Engle

Dart v. Craigslist, Inc., No. 09 C 1385 (N.D. Ill. Oct. 20, 2009)
Opinion

The United States District Court for the Northern District of Illinois held, on Craigslist’s motion for judgment on the pleadings, that Craigslist is not liable for the content posted by its viewers. The court cited Section 230(c) of the Communications Decency Act, concluding that Craigslist, as an Internet classified ads service provider, is immune to civil liability for third party content. The court found Craigslist analogous to an ISP or phone service provider and thus not liable for users’ content and conduct, as opposed to, as plaintiff contended, a newspaper or magazine which may be held liable for its ads.

Bloomberg.com and Eric Goldman’s Technology & Marketing Law Blog summarize the case.

Plaintiff Tomas Dart, the Sheriff of Cook County Illinois, alleges that Craigslist is facilitating prostitution through their erotic (now “adult”) services section, and thus constitutes a public nuisance. Plaintiff sought money damages and to enjoin Craigslist from hosting its adult services section (Compl. P 1; id. at P 27.) Dart claims that Craigslist violated Illinois statute by arranging “meetings of persons for purposes of prostitution and directs them to a place for the purpose of prostitution.” As evidence, Dart cites “The Polaris Project,” an advocacy group against human trafficking, stating that “Craigslist is the single largest source for prostitution, including child exploitation, in the country.”

Craigslist argued that U.S.C. Section 230(c) absolves them of any liability. According to Section 230(c), “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Section 230(e) of the further states that, “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” Craigslist also points out that before posting ads on its website, users must first agree to its Terms of Use. Furthermore, prior to entering the adult services section, users must agree to flag any content that violates Craigslist’s Terms of Use.

In addressing Dart’s allegations, the court reasoned that even if Craigslist were found to violate the Illinois statute, Section 230(e) of the act would control. Furthermore, the court found Dart’s interpretation of “arrange” and “direct” to “strain the ordinary meaning of the terms.” The court reasoned that since it was the users who choose to post such content, even against Craigslist’s express Terms of Use, Craigslist in no way induced anyone to create, post or search for illegal content.

The court’s holding is wise and conservative; to rule otherwise would blatantly disregard the plain meaning of the Communications Decency Act, and invite a slew of litigation. The court does note, however, that the act does not protect online content hosts from all civil liability, warning that Craigslist could be held liable for its own content or if its system were truly designed to encourage or cause the unlawful behavior. Given Craigslist’s existing precautions, it seems this message is directed at the public rather that to Craigslist itself.

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.

By Kassity Liu – Edited by Stephanie Weiner

Clark v. State, No. 43C01-0705-FA-127 (Ind. Oct. 15, 2009).
Opinion

On October 15, the Supreme Court of Indiana affirmed a murder conviction and sentence, rejecting the defendant’s claims on appeal, including an argument that the trial court improperly admitted as character evidence an entry he made online on his MySpace page.  The defendant claimed the admission was in violation of the Indiana Rules of Evidence.

Internet Cases and the WSJ Law Blog provide an overview of the case. Evidence Prof Blog criticizes the court’s reasoning on the MySpace entry issue, noting that the evidence was likely admitted in violation of Indiana Rule of Evidence 404(a), not considered by the court.

The trial jury found Ian J. Clark guilty of murdering his then fiancée’s two-year-old daughter.    Matara Muchowicz left her two-year-old daughter with Clark on May 25, 2007; she returned home from work to find her daughter severely beaten and not breathing. Clark was taken into custody, proclaiming to a detective that he would “beat this” because it was “only a C felony.” The jury recommended a life sentence without the possibility of parole.

On appeal, Clark argued that the trial court had erred by admitting into evidence a posting he had made on his MySpace page. Clark claimed that the posting was improper under Indiana Rule of Evidence 404(b), which provides that evidence from other “crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith.”  The Supreme Court concluded that the evidence was properly admitted.  The court found that Rule 404(b) was not implicated because the evidence was of Clark’s own statements rather than his prior actions. Furthermore, the court found that the State had used the posting to rebut Clark’s defense that he was acting recklessly, not intentionally, the day he had killed the two-year-old girl. Clark, by making his character a central issue at trial, had invited the State to use his own words to disprove his defense.  The Court further found the MySpace entry to be probative evidence of Clark’s character and state of mind, particularly when considered in conjunction with Clark’s statements to his arresting officers.

The court also rejected as unfounded Clark’s claim that the prosecution had committed misconduct in questioning him about his involvement with a gang, as well as his claim that fundamental errors during the trial court proceedings required reversal.  The court determined that none of the alleged errors constituted a fundamental error, or “an error that makes a fair trial impossible or constitutes clearly blatant violations of basic and elementary principles of due process presenting an undeniable and substantial potential for harm.”

Clark is one of several recent cases to consider the admissibility of MySpace entries in criminal trials,  with courts reaching differing outcomes based on various grounds.  The issue seems likely to continue to arise in the future – the National Law Journal notes that law enforcement authorities have increasingly sought to introduce such evidence in recent years, and that courts have tended to admit it.