Third Circuit Holds Child Online Protection Act Unconstitutional
By Anna Lamut – Edited by Nicola Carah

ACLU v. Mukasey
Third Circuit, July 22, 2008, No. 07-2539
Slip Opinion

On July 22, the Third Circuit affirmed the United States District Court for the Eastern District of Pennsylvania’s decision, finding that the Child Online Protection Act (“COPA”), 47 U.S.C. § 231, violated the First and Fifth Amendment, and permanently enjoined its enforcement. COPA imposes civil and criminal penalties for anyone who, “for commercial purposes,” knowingly posts “material that is harmful to minors” on the World Wide Web. 47 U.S.C. § 231(a)(1).  While broad, COPA allows web publishers a complete defense if they ”require[] use of a credit card, debit account, adult access code, or adult personal identification number,” “accept[] a digital certificate that verifies age,” or use other similar measures. 47 U.S.C. § 231(c).  COPA has been mired in litigation since it was first enacted in October of 1998, including two trips to the Supreme Court;  this is the third time that the Third Circuit has held the Act unconstitutional.

Judge Morton I. Greenberg, writing for a unanimous panel with Judges Thomas L. Ambro and Michael A. Chagares, found that COPA failed to meet the strict scrutiny standard for restrictions on constitutionally protected speech. To survive strict scrutiny review, regulation that restricts protected speech must serve a “compelling government interest”, be “narrowly tailored” to serve the interest, and use the least restrictive means available.  The Third Circuit found that COPA served the compelling government interest to protect children, but that it failed to meet the second and third prongs of the test.  The court held that COPA was insufficiently narrowly tailored because, inter alia, minors were broadly defined as any person under the age of 17, and the standard for harmfulness did not require that the material be viewed in context.  In addition, the court found the definition of a “commercial” publisher to be overly inclusive and the affirmative defenses available to such publishers — evidence of the implementation of credit card shields or similar measures — unduly restrictive both to publishers and adults wishing to access the material. Finally, the court held the government failed to demonstrate that internet content filters, deemed a less restrictive option, were less effective than COPA.

The Electronic Privacy Information Center hosts the full text of COPA and related House Report.

The Center for Democracy and Technology, an online rights advocacy group that filed an amicus brief for an earlier Third Circuit COPA case, lauded the decision. CDT General Counsel John Morris states, “This empowers parents, respects the First Amendment and acknowledges the diverse sensibilities of American families.”

Professor Susan Crawford of the University of Michigan Law comments on the decision, and addresses the possibility that the case will once again return to the Supreme Court.

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Third Circuit Vacates FCC Fine
By Jon Choate — Edited by Stephanie Weiner

CBS Corp. v. Federal Communications Commission
Third Circuit, July 21 2008, No. 06-3575
Slip Opinion

On July 21, the Third Circuit vacated an FCC order fining CBS $550,000 for the nine-sixteenths of one second broadcasting of Janet Jackson’s bare right breast during the halftime show of Super Bowl XXXVIII in February 2004. The court held that the FCC had departed from its prior policy in fining CBS for the “fleeting image” and that this change was “arbitrary and capricious” under the Administrative Procedure Act § 706. The court also held that Janet Jackson and Justin Timberlake were independent contractors with respect to CBS while performing at the half-time show and that CBS could not be held vicariously liable for their actions without proof of scienter.

The case was remanded for further proceedings consistent with its ruling; however, the court noted that any further action would be declaratory in nature, as the FCC cannot retroactively penalize CBS.

Ken Ferree, president of The Progress & Freedom Foundation (“PFF”) hailed the ruling as a reinforcement of First Amendment rights. Adam Thierer, a senior fellow at the PFF, expects the FCC to appeal the decision, as it did a Second Circuit opinion holding that the FCC’s policy sanctioning “fleeting expletives” was arbitrary and capricious.

Jonathan Rintels, Executive Director of the Center for Creative Voices in Media, also applauded the decision, focusing in particular on the “chilling” effect the FCC’s decisions might have on freedom of expression.

The Parents Television Council (“PTC”) was somewhat less pleased with the decision, which, in its view, “hijacked the will of the American people” and the “intent of Congress.”

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Federal Circuit Clarifies Patent Obviousness after KSR
By Debbie Rosenbaum — Edited by Stephanie Weiner

Eisai Co. v. Dr. Reddy’s Laboratories, Ltd.
Federal Circuit, July 21, 2008, No. 2007-1397
Slip Opinion

On July 21, the Federal Circuit affirmed the United States District Court for the Southern District of New York’s ruling in favor of plaintiff Eisai Co., holding that the patent-in-suit, U.S. Patent No. 5,045,552, was non-obvious and was not obtained through inequitable conduct.

This case illustrates the Federal Circuit’s current test for chemical obviousness since the Supreme Court rejected the Federal Circuit’s application of the “teaching, suggestion, or motivation test” for obviousness in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007) as too rigid, mandating a more flexible approach that takes ordinary creativity and skill into account. A brief background on KSR can be found at Patent Docs.

Kevin E. Noonan at Patent Docs welcomes the decision.

The Patent Hawk characterizes the court’s opinion as positing a “problem-reasoning-predictability” test for chemical obviousness.

Aaron F. Barkoff at Seeking Alpha makes the observation that patents on chemical compounds are holding up well even after KSR.

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District Court Declares Purchasers of Software to Be Licensees
By Anna Volftsun — Edited by Joshua Gruenspecht

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. (more…)

District Court Will Not Require Ebay to Make Greater Effort to Police Trademark Infringers
By Jeff Gritton — Edited by Joshua Gruenspecht

Tiffany, Inc. v. eBay, Inc.
S.D.N.Y., July 14, 2008, No. 04 Civ. 4607
First Circuit, June 18th, 2008, Nos. 07-2078, 07-2246
Slip Opinion

On July 14, the Southern District of New York denied Tiffany’s claims of direct and contributory trademark infringement against eBay. The court agreed with eBay that, as a legitimate seller of Tiffany goods, the online auctioneer had the right to use the Tiffany marks under the nominative fair use doctrine. It also rejected Tiffany’s demand that eBay be held jointly and severally liable for sales made on eBay.com by third parties.

Tiffany instigated this suit against eBay after its research showed that the majority of claimed Tiffany products for sale on eBay were counterfeit. While eBay provided reporting services for both users and trademark holders to notify its fraud division of counterfeit items, Tiffany had requested a more proactive solution: removal of all sellers placing five or more Tiffany items up for sale and suspension of the use of the Tiffany mark on the eBay site and in eBay advertising.

Brad Stone at the New York Times notes that courts in two prior international cases brought by luxury brands (Rolex in Germany and Louis Vuitton in France) had ruled against eBay. The divergent opinions may pose a challenge to eBay’s operation of a single global marketplace.

Professor Eric Goldman also provides a detailed analysis of the case. (more…)