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INTERACTIVE ONLINE ENTERTAINMENT LAW Rob
Hassett ACKNOWLEDGEMENTS The writers wish to thank Robert C. Port, a partner in the above law firm, and Lori Brill, an associate, for their help in preparing these materials.
INTERACTIVE ONLINE ENTERTAINMENT LAW I. Introduction Over the past year, courts, Congress, and state legislatures have dealt with a number of different issues that concern Interactive Online Entertainment, including:
These and other issues are discussed in this paper. II. Domain Names and Marks A. Case law Uses of domain names and references made to marks on the Internet frequently clash with the rights of owners of trademarks and service marks. Ten (10) examples of these kinds of clashes are discussed below in order from those most likely to be prohibited to those most likely to be allowed. 1. Consumer Confusion Where consumers are likely to be confused because two marks are similar and used in the same channels of trade, courts will almost always prohibit those uses. See Playboy Enter. v. Calvin Designer Label, 985 F. Supp. 1218 (N.D. Cal. 1997). 2. Dilution Where a mark has become "famous" it is entitled to protection not only from "confusion" but also from tarnishment and blurring. For example, it is not likely that customers using the adult site "Adults "R" US" thought that the site was being operated by Toys "R" US. As discussed below, the use of that domain name was nevertheless illegal.
3. Contributory Infringement The Ninth Circuit upheld summary judgment in favor of Network Solutions, Inc. (NSI) in a case where a trademark owner sought to hold NSI liable for trademark infringements by cybersquatters and others who used its services. Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 52 U.S.P.Q.2D (BNA) 1481 (9th Cir. 1999). Lockheed sued NSI in 1996 over use of the domain name "Skunkworks," which is a trademark of Lockheed's Southern California aircraft construction and design laboratory. Lockheed wanted NSI to "preclude anyone from registering anything with [the words] >Skunk Works,' in the domain name or that sounded like >Skunk Works.'"(1) The Court held that NSI was only vulnerable to suit if it intentionally induced a third party to infringe a mark or supplied a product to that third party with actual or constructive knowledge that the product was being used to infringe the service mark. See Lockheed, 194 F.3d 980, 984. 4. Cybersquatting Panavision, Int., L.P. v. Toeppen, 945 F. Supp. 1296, 40 U.S.P.Q.2d (BNA) 1908 (C.D. Cal. 1996). The Court found that defendant’s registration of the plaintiff’s trademarks as the defendant’s domain name for purposes of resale constituted trademark dilution. Accord Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227, 41 U.S.P.Q.2d (BNA) 1223 (N.D. Ill. 1996). The plan to resell the domain name was determined to be "commercial use" which is required to constitute dilution. 5. Hijacking Until recently, registration of a competitor's mark as a domain name (hijacking) would not be illegal, see, Juno Online Servs., L.P. v. Juno Lighting, Inc., 979 F.Supp. 684 (N.D. Ill. 1997), 44 U.S.P.Q.2D (BNA) 1913. See also HQM Ltd. and Hatfield Inc. v. William B. Hatfield, 71 F. Supp. 2d 500 (D. Md. 1999) (holding that the registering and activating of a Web site with the".com" designation does not, by itself, constitute commercial use). Hijacking with "bad faith intent to profit" is now illegal under the recently enacted Anticybersquatting Act, discussed below.(2) 6. Registering Registering a domain name with "intent to profit" would now be illegal under the Anticybersquatting Act (which created a new §43(d) of the Lanham Act, 15 U.S.C. §1125(d)). Previously, registering a domain name without more would not constitute either "use in commerce" or "commercial use" as was previously required under the Lanham Act to establish a violation. 7. Criticism In Bally Total Fitness Holding Corp. v. Faber, 29 F. Supp.2d 1161, 50 U.S.P.Q.2D (BNA) 1840 (C.D. Cal. 1998), the defendant used Bally’s trademark in a Web site entitled "Bally sucks," which was critical of Bally. The District Court dismissed Bally’s suit because the defendant’s use of Bally’s mark did not create a likelihood of confusion or otherwise constitute trademark infringement or dilution. See the Web site at Compupix.com/ballysucks/index.htm 8. Communicative Use Playboy Enters., Inc. v. Welles, 7 F.Supp.2d 1098, 47 U.S.P.Q.2D (BNA) 1186, (S.D. Ca. 1998), aff'd, 1998 U.S. App. LEXIS 27739 (9th Cir. 1998). A former playmate was permitted to state her association with Playboy enterprises, Inc. (PEI)(3) on her own Web site. The heading of the defendant's Web site is "Terri Welles--Playmate of the Year 1981," and the title of the link page is "Terri Welles--Playboy Playmate of the Year 1981." Each of the pages uses "PMOY '81" as a repeating watermark in the background. According to defendant, eleven of the fifteen free Web pages include a disclaimer at the bottom of the pages which indicates that the Web site is not endorsed by Playboy. Id. at 1100. Playboy moved for a preliminary injunction which would enjoin the defendant (1) from using the trademarked term "Playmate of the Year" in the title of the home page and the link page; (2) from using the watermark "PMOY '81" in the background; and (3) from using the trademarked terms "Playboy' and 'Playmate" in the meta-tagging(4) of defendant's site. The Court denied a preliminary injunction because the trademarks that defendant uses, and the manner in which she uses them, describe her and identify her. Therefore the Court held that the defendant has made a "fair use" of these marks(5) and her site was not confusingly similar to Playboy's site. Later, the Court granted the defendant's motion for summary judgment, holding that the use of the words "playboy" and "playmate" in the text portion of her Web site were a fair use of Playboy's trademarks because they fairly described and identified the defendant.(6) The Court noted that Playboy failed to introduce compelling evidence of actual consumer confusion.(7) Compare N.V.E. v. Hoffmann-La Roche, CA No. 99-5858 (D.N.J. 1999) (WHW) (the District Court enjoined metatagging where the metatag misdirected searchers to a competing Web site).(8) 9. Associating Advertisements With Internet Searches Playboy Enters., Inc. v. Netscape Communications Corp., 55 F. Supp. 2d 1070 (C.D. Ca. 1999) aff’d without opinion, 1999 U.S. App. LEXIS 30215 (9th Cir. 1999). This case involves the sale of online banner ads keyed to the specific search terms: "playboy" and "playmate." The Court ruled that the terms "playboy" and "playmate" are generic and that Playboy has no monopoly on these words in all forms. Consequently, the Court denied Playboy's request for a preliminary injunction against Excite, Inc. and Netscape Communications Corporation finding that the sale of those search keywords to third-party advertisers which operate adult entertainment sites does not constitute trademark infringement or dilution. The freedom to create links has also become an issue where courts enjoined entities from linking due to contributory infringement. See Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., Civ. No. 2:99-CV-808C (C.D. Utah Dec. 6, 1999).(9) 10. Common Surnames Avery Dennison Corp. v. Sumpton, 189 F.3d 868 51 U.S.P.Q.2D (BNA) 1801 (9th Cir. 1999). This was an appeal of a case in which an entity which maintained domain registrations for individual names that included among other surnames, "Avery.net" and "Dennison.net" was held not to have diluted the "Avery Dennison" mark. The Ninth Circuit reversed the District Court's holding that there was dilution. The Ninth Circuit held that:
Other domain-name decisions have favored the "smaller" party. See, e.g., Hasbro, Inc. v. Clue Computing, Inc., 66 F. Supp. 2d 117, 52 U.S.P.Q.2D (BNA) 1402 (D. Mass. 1999) [holding that ownership of a well-known trademark (the mark "clue" for a board game) does not automatically entitle a party to a domain name ("clue.com" which Clue Computing registered)].(10) 11. Generic and Descriptive The Federal Circuit held that the slogan "Best Beer in America" was incapable of registration as a trademark because of its highly laudatory and descriptive nature. In re Boston Beer Co. Ltd. Partnership, No. 99-1123 (Fed. Cir, 1999).(11) But see Etoys.com v. etoy.com, Los Angeles Superior Court, preliminary injunction issued Nov. 29, 1999.(12) 12. Multiple Defendants The Anticybersquatting Act, infra, allows a court to order the cancellation or forfeiture of a domain name or the transfer of a name to the owner of the trademark. It is now possible for plaintiffs to pursue domain names as a group rather than being forced to sue each of the registrants individually. Cf. Porsche Cars North America, Inc. v. porsch.com, 51 F. Supp. 2d 707, 51 U.S.P.Q.2d (BNA) 1461 (E.D. Va. 1999), in which the Court rejected Porsche's "in rem" claim to grab control of domain names incorporating versions of the "Porsche" name. The 'in rem" action was an effort to avoid having to individually sue hundreds of registrants who had registered those domain names. B. Legislation: Anticybersquatting Consumer Protection Act On November 29, 1999, President Clinton signed the Omnibus Appropriations Act (H.R. 3194). This Act includes the Intellectual Property and Communications Omnibus Reform Act of 1999 (S. 1948), which incorporates, inter alia, the Anticybersquatting Consumer Protection Act. 1. The Anticybersquatting Consumer Protection Act (S. 1255):(13)
2. Recent Cases Victims of cybersquatting are already taking advantage of this new Act. See, e.g., John Tesh v. Celebsites, Inc., C.D. Calif., 00-00603ABC (RZX) (filed Jan. 19, 2000), (John Tesh claims, inter alia, that defendants, owners of "JohnTesh.com," falsely advertised that site as the official site for Tesh, creating consumer confusion because Tesh owns and operates his own official Web site, "Tesh.com.");(16) President and Fellows of Harvard College v. Rhys, D. Mass., No. 99CV12489RCL, (filed 12/6/99, Judge Reginald Lindsey), (Harvard sued domain name owners, and seeks to prevent Web Productions, a company which has registered sixty-five domain names relating to Harvard and Radcliffe, from using Harvard's trademarks). Brad Pitt has also filed suit against the owners of "bradpitt.com," who initially tried to sell the domain name to Pitt for as much as $50,000.00, and the owners of "bradpitt.net," a commercial cite and fan club outlet which sells merchandise featuring Brad Pitt.(17) Moreover, courts are enforcing the Anticybersquatting Act: see, e.g., Bargain Bid v. Ubid, 99-CV-7598 (E.D.N.Y. 2000) (the District Court, Eastern District of New York, enjoined defendants (1) from using the Bargain Bid and Barginbid marks and (2) from indicating that the defendants’ services were sponsored, affiliated, or approved by Bargain Bid, where the defendants registered the domain name "bargainbid.com" to allegedly divert consumers from the Bargain Bid’s Web site by using the common misspelling of "bargain.")(18) C. ICANN (Internet Corporation for Assigned Names and Numbers) ICANN is the non-profit body responsible for domain name system management, IP address allocation, and related functions. ICANN was established last year to (a) phase out the government's involvement in the domain name system and (b) to end the monopoly held by Network Solutions Inc. (Nasdaq: NSOL), by opening up the registration of such popular domains as ".com" and ".net" to additional companies. Although the database for the Top Level Domain is still managed by NSI (a "registry" function), the domains may be "registered" by many different entities including www.register.com and www.aol.com. ICANN is now considering additional generic TLDs to .com, .net and .org for commercial uses.(19) On October 24, 1999, ICANN adopted a uniform domain name dispute resolution policy which is binding on all accredited registrars; this policy incorporates by reference the Rules for Uniform Domain Name Dispute Resolution Policy.(20) The policy and the rules provide a method to contest the propriety of existing domain name registrations. In order to be entitled to obtain transfer of a domain name from a prior registrant, a complainant must establish that:
III. Copyright Several recent Internet related cases and statutes involve copyright issues, including the expansion of rights in sound recordings and the lengthening of the copyright term.(22) A. Legislation The Digital Millennium Copyright Act of 1998 (105 P.L. 304; 112 Stat. 2860) 1. Exempts Internet service providers from liability for copyright infringement under certain circumstances;(23) 2. Makes it illegal to circumvent technology used to prevent copyright infringement(24) (this provision is to take effect two (2) years from October 28, 1998); and, inter alia, 3. Expands the rights of owners of sound recordings to restrict performance of (or in some cases receive set royalties for) their sound recordings from what was covered by the Digital Sound Recording Act of 1995(25) to any sound recordings provided over the Internet whether or not it is via subscription or interactive (this provision is effective as of the date of enactment). The effect of the Digital Millennium Copyright Act on Webcasting and the interplay of the rights any Webcaster must acquire are as follows:
i. Current license agreements (BMI, ASCAP, SESAC).(27)
ii. Future license agreements.
iii. Failure to obtain a license.
B. RIAA v. Diamond Multimedia
Sys., Inc., 29 F. Supp. 2d 624 (C.D. Cal. 1998) aff'd, 180 F.3d 1072 (9th
Cir. 1999), 51 U.S.P.Q.2d (BNA) 1115. The Court of Appeals for the
Ninth Circuit affirmed the denial of a preliminary injunction finding
that Diamond Multimedia, the maker of Rio,(33) had not violated the Audio
Home Recording Act of 1992(34) with the Rio because the Rio could not
make copies except from a hard drive. The Court found that such copying
was not covered by the Act. However, on August 4, 1999, Diamond Multimedia
and the RIAA announced that they entered into C. Tasini v. The New York Times Co., 192 F.3d 356, 52 U.S.P.Q.2d (BNA) 1186 (2d Cir. 1999). A Federal District Court in New York held that making publication information accessible on Lexis-Nexis and other similar data bases "constitutes reproduction and distribution of freelance contributions as part of that particular collective work." Tasini v. The New York Times Co., 972 F.Supp. 804, 43 U.S.P.Q.2D (BNA) 1801 (S.D.N.Y. 1997). The District Court held that the publishers were protected by a privilege afforded to publishers of "collective works" under Section 201(c) of the Copyright Act, but the Second Circuit reversed this decision in Tasini v. The New York Times Co., 192 F.3d 356, 52 U.S.P.Q.2d (BNA) 1186 (2d Cir. 1999). The Second Circuit concluded that "the Publishers' licensing of Authors' works to UMI for inclusion in these databases is not within the Section 201(c) revision privilege." Tasini, 192 F.3d 356, 364. The Court continued:
Id. Accord Ryan v. Carl Corp., 23 F. Supp. 2d 1146, 1150, 48 U.S.P.Q.2D (BNA) 1626 (N.D. Cal. 1998) (commenting that "calling the reproduction of a single article a "revision" of a collected work, however, is more strained than even a flexible interpretation can withstand" and construing Section 201(c) of the Copyright Act in the authors' favor). The impact of Tasini on electronic media could take two paths. First, according to Patricia Felch, an attorney who represented four of the Tasini plaintiffs in the appeal of the trial court's ruling, print and electronic publishers could claim that print publishers must refrain from reselling free-lancers' works to electronic publishers and that electronic publishers must remove free-lancers' works from the electronic databases.(36) Felch notes that this reaction would ruin the value of databases as a comprehensive and long term research tool she therefore proposes an alternate solution which lead plaintiff Jonathan Tasini encouraged: electronic database producers and print publishers can join the Publishing Rights Clearinghouse (PRC).(37) In a similar manner to what ASCAP and BMI do with royalties earned from public performances of music, the PRC accepts applications for reuses of individual works and (a) sets a cost for such reuses, (b) finds the authors, and (c) administers payments to the original authors.(38) D. Transformative Fair Use of Copyrighted Works. In Kelly v. Arriba Soft Corp., C.D. Calif, SAC No. 99-560 GLT (JW) Dec. 15, 1999, the Federal District Court for the Central District of California granted summary judgment to the creators of a "visual search engine," www.ditto.com, which searches a database of digital images, even though the images were copied without authorization from third-party Web sites. The Court found that such actions constitute a "fair use."(39) The Court determined that the defendant’s visual search engine was designed to catalog and improve access to images on the Internet, not for an artistic or illustrative purpose, and was, therefore, a "transformative" use and additionally did not harm the market for the copied works. E. Challenging the constitutionality of Sonny Bono Copyright Term Extension Act of 1998 (CTEA).(40) The Sonny Bono Copyright Term Extension Act of 1998 has been criticized as copyright overprotection, rather than copyright extension. This Act is important to the Internet because it reduces the benefits of those Internet sites that provide digital copies of public domain works. Some have criticized the CTEA because it offers an extension of the term of copyrights for an author or creator without any reciprocal requirement of the author or creator. Also, the CTEA delays works from entering the public domain, without any corresponding benefit to society. One such critic of the CTEA, Lawrence Lessig, the Berkman Professor of Law at Harvard Law School, has filed a lawsuit on behalf of Eldritch Press,(41) a non-profit organization that posts literary works on the Internet when they have entered the public domain.(42) Article I, Section 8 of the United States Constitution states that Congress may "promote the Progress of Science and useful arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" (emphasis added). In 1790, this limited time period of copyright was twenty-eight years. Subsequently, Congress enacted a series of extensions, which provide for copyright terms of up to seventy-five years. These extensions retroactively extended the copyright for works which were written many years ago that would otherwise soon enter the public domain.(43) CTEA has again retroactively extended the copyright terms; this extension is challenged in the Eldritch lawsuit. The plaintiffs argue that (1) the retroactive extension in CTEA violates the constitutional "limited times" requirement for constitutional exclusive rights to "writings and discoveries" and (2) the retroactive and prospective extensions violate the First Amendment because they suppress speech without promoting any respective governmental interests. The CTEA has also been criticized by some as merely a vehicle which will benefit Disney (which lobbied for the Act) because Mickey Mouse would have entered the public domain in 2004. Under the CTEA, however, Mickey Mouse will remain Disney's copyright until 2023.(44) F. Hacking DVD. Two courts have recently granted preliminary injunctions against Web site operators from "posting [hacking information] on any Internet Web site, or in any other way [assisting users to circumvent the protections from copying afforded by DVD technology]." The court held that such activities constituted circumvention of technological measures which control access to a work protected under the Copyright Act as prohibited under the Digital Millennium Copyright Act of 1998. The defense argued that the circumvention procedures had been obtained as a by-product of developing a system to allow the playing of DVD on Unix computers (which arguably would be allowed).(45) G. MP3.com and Fair Use. There have been recent news reports that the Record Industry Assocation of America has filed a lawsuit against MP3.com because MP3.com has just started providing a service where any of its users that has purchased a particular record may listen to that record from the MP3.com archives over the Internet at any time such user wishes. MP3.com is apparently taking the position that this service is merely a form of time shifting which was held to be a "fair use" with respect to videotaping in Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984).(46) IV. Spam (47) A. Spam cases 1. The Tenth Circuit, in U.S. West v. FCC, 182 F.3d 1224 (10th Cir. 1999), held that U.S. West could not be blocked by an FCC rule from using information obtained from customers regarding who the customers called, and other similar data, for marketing to those individuals because such prohibition was "a violation of the First Amendment." The Court reasoned that such use constituted commercial speech, applied the First Amendment commercial speech analysis, and held that the proposed FCC rule was unconstitutional. The test(48) was as follows: First, determine whether the commercial speech concerns lawful activity and is not misleading. If so, the speech can only be restricted if:
Surprisingly, the Court found that the rule was not narrowly tailored because it did not do such things as allow phone customers to opt in or opt out (assuming that there is a serious desire by telephone company customers to have their personal calls tracked and used for marketing purposes). This indicates that some anti-spam statutes may violate free speech if they completely prohibit spam without considering other alternatives.
As in other spam cases, U.S. West involves a "captive," as opposed to a "voluntary," audience.(49) To date, the cases that have held spam to be illegal involved claims of Internet Service Providers and Intel(50) that spam is a form of trespass. This analysis of spam as a trespass is not as vulnerable to a First Amendment attack as a state or federal statute prohibiting spam. See, e.g., CompuServe, Inc. v. Cyber Promotions, Inc., 962 F. Supp. 1015 (S.D. Ohio 1997) (holding that a private company's motion seeking a court to enjoin "spam trespass" did not constitute state action subject to a First Amendment attack).(51) 2. Courts are now beginning to enforce the prohibition against trespass via spam with serious sanctions. In America Online v. The Christian Bros., ___ F. Supp. 2d ___, No. 98 Civ. 8959, (S.D.N.Y. 1999), the Court found that the defendant's unsolicited bulk e-mail had damaged the plaintiff's business, trademark, service mark, and goodwill. The defendant had unlawfully obtained mailing lists of the plaintiff's member's e-mail addresses and sent over twenty million messages which included fraudulent headers misrepresenting that the messages came from the plaintiff. Since the defendant defaulted, the Court awarded the plaintiff $17,940 in hardware processing costs; treble damages of $389,020 for lost advertising revenue; $24,625 in attorney fees; and $200,000 in punitive damages, for a total of over $600,000 dollars.(52) B. Federal Legislation A proposed federal statute regarding unsolicited bulk e-mail was introduced in the House on May 5, 1999: the Internet Freedom Act, 106 H.R. 1686. This Act, in proposed Section 104, entitled "Protection from Fraudulent Unsolicited E-Mail," would amend 18 U.S.C. §1030 such that, inter alia, it would be a violation of the Act to "intentionally and without authorization initiate the transmission of a bulk unsolicited electronic mail message to a protected computer with knowledge that such message falsifies an Internet domain, header information, date or time stamp, originating e-mail address or other identifier" or to sell or distribute a computer program which (a) "is designed or produced primarily for the purpose of concealing the source or routing information of bulk unsolicited electronic mail messages(53) in a manner prohibited by" the Act, (b) "has only limited commercially significant purpose or use other than to conceal such source or routing information," or (c) "is marketed by the violator or another person acting in concert with the violator and with the violator's knowledge for use in concealing the source or routing information of such messages." The Act provides for the following potential damages for various offenses: injunctive relief and other equitable relief, actual monetary losses, statutory damages of $15,000 per violation or an amount of up to $10 per message per violation, whichever is greater; reasonable attorneys' fees, and other litigation costs. Because this language is written broadly enough to prohibit noncommercial anonymous bulk e-mailings, it arguably violates the First Amendment. See, ACLU of Georgia v. Miller, 977 F.Supp. 1228 (N.D. Ga. 1997). C. State Legislation Some states have passed laws regarding unsolicited e-mail. 1. Washington State: Wash. Rev. Code §19.190.020 (1999), entitled "Unsolicited or Misleading Electronic Mail -- Prohibition," provides as follows:
2. Nevada's statute focuses on spam which contains advertisements. Nev. Rev. Stat. 41.730, entitled "Liability of Persons Who Transmit Items of Electronic Mail That Include Advertisements," provides:
3. California has also passed a law dealing with unsolicited bulk e-mail (which also applies to unsolicited faxes(56)). This California Statute requires that the sender of unsolicited advertisements advise the e-mail recipient that the e-mail is an advertisement by placing the characters "ADV:" first in the subject line and also requires that the sender provide the recipient a return address or a toll-free number where the recipient can request that the sender refrain from sending additional unsolicited e-mail. See Cal. Business & Professions Code §17538.4. (Division 7, Part 3, Chapter 1) (Deering 1999), entitled "Unsolicited fax or e-mail."(57) V. Privacy The latest developments concerning privacy on the Internet relate to the passage of the Children's Online Privacy Protection Act of 1998 and the effect of the European Privacy Directive. A. Legislation The Children's Online Privacy Protection Act of 1998 (COPPA), 64 Fed. Reg. 22750 (April 27, 1999), forbids the collection and distribution of minors' personal information(58) without parental consent and restricts distribution and use of that information. This Act is intended to provide protection to the individually identifiable data of children as collected by Internet Service Providers or Web site operators, and it is effective as of April 21, 2000.(59) The Act is implemented by FTC rules which were published in the Federal Register on October 21, 1999:(60)
COPPA requires:
B. European Union Privacy Directive The European Union (EU), in its European Union Privacy Directive,(62) has granted broad rights to individuals about whom personal information is collected and stored in databases. This EU position, based on the idea that privacy is a fundamental human right, is more rigorous than the United States' position, which does not provide as extensive access to individuals to review this kind of information and has relatively few restrictions on the use of such personal information.(63) This conflict between the EU position and the US position has threatened international electronic commerce.(64) Therefore, the US Department of Commerce negotiated with EU representatives and proposed safe harbor principles for American companies to use in determining whether they comply with EU data protection laws.(65) The "safe harbor" arrangement is expected to be finalized in the Fall of 1999.(66) Major companies are now requiring sites in which they advertise to meet these standards and the proposed safe harbor provision. For example, IBM's policy(67) on personal information states that it will inform the consumer how it will use the personal information collected:
VI. What constitutes an enforceable agreement entered into over the Internet? Agreements entered into over the Internet generally take one of two forms, either an exchange of e-mail or clickwrap. Clickwrap agreements are agreements formed by a purchaser manifesting assent to the terms of an agreement online by pointing and clicking a mouse. An agreement based on an exchange of e-mails relating to subject matter which does not require a signed writing to be enforceable has been held to be effective. See, e.g., CompuServe, Inc. v. Richard S. Patterson, 89 F.3d 1257 (6th Cir. 1996). The controversies regarding the enforceability of agreements entered into over the Internet involve the enforceability of clickwrap agreements and whether agreements entered into over the Internet constitute signed writings. A. Clickwrap Agreements The authors are not aware of any cases to date that directly address the issue of whether clickwrap agreements are enforceable. There is one case that implicitly holds that they are enforceable. A number of cases deal with whether shrinkwrap agreements (which we believe provide a useful legal analogy) are enforceable. The most important issue addressed by courts today regarding the enforceability of shrinkwrap agreements is whether or not shrinkwrap agreements are pre-empted by copyright law. 1. The case that implicitly held that clickwrap licenses are enforceable is Hotmail Corp. v. Van Money Pie, Inc., ___ F. Supp. 2d ___, 47 U.S.P.Q. 2d (BNA) 1020 (N.D. Cal. 1998); 1998 U.S. Dist. Lexis 10729 (April 16, 1998). In that case, the United States District Court for the Northern District of California granted the plaintiff a preliminary injunction in a case alleging that the defendants breached the terms of a service contract for using the plaintiff's e-mail service. Without discussing the issue, the Court in that case implicitly held that the defendants were obligated to the terms of service on the Hotmail Web site. Users of that service agreed to those terms by clicking the "I agree" button. 2. In ProCD, Inc., v. Zeidenberg, 86 F.3rd 1447 (7th Cir. 1996), ProCD developed and sold copies of a CD ROM containing a database of telephone numbers. The CD ROM box informed the consumers there was a shrinkwrap license inside the box. The shrinkwrap license provided that the purchaser was only receiving a license and the purchaser could not make copies of the product. Zeidenberg copied the database onto his own Web site and then provided access to the database via his Web site to customers for a fee. The Court rejected the holding of Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), that shrinkwrap licenses are pre-empted by copyright law, and held that the ProCD shrinkwrap license was enforceable.(68) The Court thus provided a way for database developers to protect their databases (by contract) even though copyright law would probably not protect the database here.(69)
3. Preemption. Generally, it appeared that the copyright pre-emption barrier raised in Vault Corp., supra, had been buried by ProCD and its progeny. However, in a case involving claims relating to the pitching of a marketing concept (which did not involve any kind of online agreement but could have repercussions in the online context), the United States District Court for the Western District of Michigan held that the claim was pre-empted by copyright law. See Wrench, LLC v. Taco Bell Corp., 51 F. Supp. 2d 840, 51 U.S.P.Q.2d (BNA) 1238 (W.D. Mich. 1999). The Court denied the claim of a company that had pitched the Chihuahua concept to Taco Bell and claimed Taco Bell used the concept without paying for it. The Court held that any implied contract was pre-empted by copyright law. The Court distinguished ProCD on the somewhat nebulous grounds that the ProCD agreement was in effect at the time of purchase (i.e. before use of the product) whereas the Taco Bell agreement was not supposed to take effect unless Taco Bell started using the Chihuahua concept (i.e. after use of the concept). Note that use or copying of a product (i.e. a copyrighted item) is the same action which triggers liability under copyright law. B. Signed Writings. Both clickwrap agreements and e-mail exchanges may cover transactions where signed writings are required under the applicable statute of frauds. A number of states now have some kind of a digital signature act. Most of these acts require that, to satisfy any statute of frauds, the electronic signature must be:
See, e.g., Georgia Electronic and Signatures Act at O.C.G.A. §10-12-3 et seq. as originally enacted; the Utah Digital Signatures Act, Utah Code Ann. §46-3-101, et seq. (Supp. 1996). Before the enactment of O.C.G.A. §10-12-3 et seq., an argument could be made in Georgia that anything intended to be a signature would constitute a signature. See, e.g., Troutt v. Nash AMC-Jeep, Inc., 157 Ga. App. 399, 278 S.E.2d 54 (1981), which held that the printing of a company name at the bottom of a form constituted a signature, permitting a car dealer to meet certain state law requirements of providing a signed form. The latest developments in this area are discussed below.
2. The proposed Uniform Electronic Transactions Act (UETA). This Act provides that "an electronic record or signature may not be denied legal effect or enforceability solely because it is in electronic form" and that "if a law requires a record to be in writing, an electronic record satisfies the law"(73) has been approved by the National Conference of Commissioners on Uniform State Laws, and the Conference has voted to present the Act to states for adoption.(74)
3. The Uniform Computer Information Transactions Act (former proposed UCC Article 2B). The legal rules for computer information transactions which was to be promulgated by the National Conference of Commissioners on Uniform State Laws(75) as Article 2B of the Uniform Commercial Code. Instead it is being proposed as the Uniform Computer Information Transactions Act (UCITA).(76) The Act is the first general commercial statute to provide comprehensive procedures and rules for computer software licensing. Most of those rules would also be appropriate for a broad range of transactions outside UCITA's scope, and it is expected that they will form the model for several future articles of the UCC as they did for the Uniform Electronic Transactions Act (UETA), which was approved at the same time.(77) The provisions include:
Software publishers and computer manufacturers strongly support UCITA, but it is as strongly opposed by a wide range of groups who contend UCITA "favors big business at the expense of consumers and small businesses."(79) UCITA is controversial because:
A Quick Look at the Uniform Computer Information Transactions Act (UCITA), American Association of Law Libraries: Washington Affairs, July 15, 1999.(80) 4. Assignment of Copyright By Email. Ballas v. Tedesco, 41 F.Supp. 2d 531 (D.N.J. 1999). This case addresses the issue of whether an exchange of e-mails can satisfy the requirement that assignments of copyrights are not effective unless they are in writing and signed by the transferor. See, Copyright Act §201(d). Tedesco wanted to produce a CD of dance music for Ballas. Ballas would pay Tedesco a fee for the musical arrangements and production of the CD, and Ballas would have the exclusive right to manufacture copies of the CD for sale. Negotiations, via e-mail, were unsuccessful, and the parties did not agree on terms of the arrangement. The parties agreed that the music content copyright belonged to the Defendant. The Court enjoined the Plaintiff from making or selling the music on the CD because the Court found that there was no valid assignment of the copyright since there was no written assignment. VII. Jurisdictional Issues A. People v. World Interactive Gaming Corp., N.Y. Sup. Ct., N.Y. Co. (July 24, 1999). According to the Internet Newsletter, August 1999, a New York trial court has held that a gambling site in Antigua that would not allow gambling on the site if anyone gave an address in a state that prohibited gambling but did not take any other further steps to verify the address' accuracy constituted a violation of New York State's prohibitions on gambling and the Federal Wire Act, the Travel Act, and the Interstate Transportation of Wagering Paraphernalia Act.
B. Coastal Video Communications Corp. v. Staywell Corp., 59 F. Supp. 2d 562 (E.D. Va. 1999). In a copyright case where one company alleged that its employee handbook had been infringed by another company, the District Court held that whether there was long-arm statute jurisdiction depended on whether the defendant had actually sold its publication, not just attempted to sell its publication, in Virginia. The Court also said that even if such copies were sold in Virginia, that would not be enough to grant specific jurisdiction in that case because the declaratory judgment action that had been filed does not "arise from the sale of the defendant's publication" but rather from its very existence. Perhaps the lesson from this case is, in order to obtain jurisdiction, file an infringement action in a copyright case instead of a declaratory judgment. C. Where a Virginia resident sued out of state defendants for posting allegedly defamatory material (one defendant posted the material on servers in Virginia via "AOL" and the other defendant posted the material on servers outside Virginia but was held by the Court to be doing business in Virginia from its Web site), a District Court for the Eastern District of Virginia held that there was a tort in the State of Virginia, and there were sufficient minimum contacts to allow for jurisdiction. Bochan v. LaFontaine, 1999 U.S. Dist. LEXIS 8253 (E.D. Va. 1999). D. In a similar case, Melvin v. Doe, Cir. Ct. of Loudoun County, Civil No. 21942 (June 24, 1999), a Virginia Court held that where both the plaintiff and the defendant were Pennsylvania residents, even though a tort may have occurred in Virginia by defamatory material being placed on the AOL server in Virginia, there were not sufficient minimum contacts to meet the jurisdiction requirements for personal jurisdiction. E. In Mink v. AAAA Dev., 190 F.3d 333 (5th Cir. 1999), the Fifth Circuit articulated a structure for determining when a court can assume jurisdiction of a company with a presence in cyberspace.
VIII. Conclusion As the practical possibilities for using the Internet for entertainment purposes grow, the tension between the desire to take advantage of the enormous potential benefits of the Internet and to protect traditional legal rights also grows. Legal questions that seemed obscure and academic only six months ago are now important and practical. This tension is likely to increase exponentially in the future as the Internet, and its successors, become the major distribution method for entertainment. 1 Sandburg, Brenda, Lockheed Suit Over Domain Names Crashes, The Recorder/Cal Law, Oct. 26, 1999. 2 Note that the Hatfield case, which held that there was no liability, occurred prior to the enactment of the Anticyersquatting Act. 3 As found by the Court, Playboy Enterprises (PEI):
Playboy Enters., 7 F.Supp.2d at 1100. 4 A "metatag" is a hidden word or label in a Web page which often includes keywords to draw the attention of Internet search engines to that Web page. See Kaplan, Carl S., Former Playboy Model Wins Rights to Use Keywords, Cyber Law Journal, Dec. 17, 1999. 5 The Court also found that, with respect to the metatags, there is no trademark infringement where defendant has used Playboy’s trademarks in good faith to index the content of her Web site. 6 See Former Playboy Model Wins Right to Use Keywords, Cyber Law Journal, Dec. 17, 1999, (wysiwyg://66//http://www.nytimes.com/library/tech/99/12/cyber/cyberlaw/17law.html); Playboy Enters., Inc. v. Welles, Case No. 98-CV-0413-K, Judge Judith Keep (S.D. Cal. Dec. 1, 1999) (http://www.terriwelles.com/order_01.htm). 7 Id. 8 See Slind-Flor, Victoria, False Signs on the I-Highway, Nat’l L.J., Jan 5, 2000. 9 See, also Kaplan, Carl S., Copyright Decision Threatens Freedom to Link, Cyber Law Journal, Dec. 10, 1999. 10 See also Kaplan, Carl S., Judges Pick David Over Goliath in Domain Name Suits, Cyber Law Journal, Sept. 17, 1999. 11 See also Groner, Jonathan, Court Rejects Trademark for "Best Beer in America," Legal Times, Dec. 13, 1999. 12 Kettmann, Steve, E-Riots Threaten Etoys.com, Wired News, Dec. 15, 1999; Mirapaul, Matthew, Etoys Lawsuit is No Fun for Artist Group, New York Times, Dec. 9, 1999. See also Priority of Parties’ Use of Marks on Web Pages Too Close to Call, E-Commerce Law Weekly, Dec. 14, 1999, pp. 219-220. The parties ultimately settled Etoys.com v. etoy.com. 13 See Riffer, Jeff, New Federal Law on Cybersquatting Signed, The Internet Newsletter, Dec. 1999, pp. 1-2. 14 See Porsche Cars North America, Inc. v. porsch.com, supra. 15 The Anticybersquatting Consumer Protection Act provides a non exhaustive list of factors that a court may consider when measuring an alleged infringer’s bad faith intent. These factors include:
Gilbert, Robert D., Significant Changes in Law Offer Cyberspace Protections for Trademark Owners, e-Commerce Law & Strategy, Vol. 16, No. 8, Dec. 1999, pp. 1-4 at 4. See also Riffer, Jeffrey K, Anticybersquatting Consumer Protection Act Targets "Bad Faith" Domain Name Holders, Nat’l L.J., Jan 7, 2000. 16 John Tesh Sues for Trademark Infringement and Cybersquatting, E-Commerce L. Weekly, Jan. 31, 2000. 17 Shepherd, Ritchenya A., Cyberpirates Now May Have to Walk the Plank, The National Law Journal, Dec. 16, 1999. 18 See also Jones, Leigh, Federal Cybersquatter Law Survives Test, N.Y.L.J., Jan 18, 2000. 19 See a copy of the undersigned's "Internetlegal Report" for January 2000, a copy of which is attached hereto as Exhibit "B," addressing issues relating to the addition of generic TLDs. 20 Information about this policy is available at http://www.icann.org/udrp/udrp.htm 21 The policy sets forth several factors to consider as evidence of registration and use in bad faith, including facts which indicate that the registrant
22 Recall that 17 U.S.C. § 106 requires businesses that perform copyrighted music to first obtain permission from the copyright owner, such as the composer, publisher, or the agency representing the copyright owner (such as SESAC, ASCAP, or BMI) prior to performing copyright compositions. 23 Jonathan Band of Morrison & Foerster outlines steps that should be taken to benefit from the DMCA’s safe harbor provision for online service providers: online service providers should (1) adopt a written policy providing for termination of subscribers and account holders who are repeat offenders and post the policy on the Web site; (2) designate an agent to receive notification of claimed infringement from the copyright owner and post the agent’s contact information in a publicly accessible place on the Web site; and (3) register the designated agent with the Copyright Office according to interim regulations at 60 Fed. Reg. 59233, along with a filing fee. See http://www.sla.org/govt/band2html. 24 See Digital Millenium Copyright Act, Sec. 1201. Circumvention of copyright protection systems. 25 Digital Performance Right in Sound Recordings Act of 1995 (Public Law 104-39). See also, Regulations amended by the Copyright Office at 37 C.F.R. Part 201. The Digital Performance Right in Sound Recordings Act of 1995 gave record companies a limited performance right in sound recordings (i.e. the right to bar and/or receive statutory royalties for digital audio transmissions of recordings for which they hold a copyright, namely, interactive transmissions, and those for which a subscription fee was paid). The DMCA applied this right to audio streaming over the Internet, or Webcasting, discussed infra. 26 A Webcaster must meet the following conditions to qualify for the statutory license:
27 Sample Webcasting agreements of BMI, ASCAP, and SESAC are attached, with permission, at Appendix A. 28 Other Internet sites (a) serve as a secondary transmission sites for analog radio, (b) operate as facilitators for commercial radio stations (e.g. Broadcast.com), or (c) operate as a blended entertainment site and offer a mix of audio streaming and entertainment news. See Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5. 29 The RIAA has reached an agreement with Musicmusicmusic Inc., which operates a service called RadioMoi. Richtel, Matt, Web Sites and Recording Labels at Impasse on Fees, N.Y. Times, Nov. 29, 1999. 30 Richtel, Matt, Web Sites and Recording Labels at Impasse on Fees, N.Y. Times, Nov. 29, 1999. 31 The RIAA submitted a Petition to Convene the Copyright Arbitration Royalty Panel (CARP) to the Copyright Office in July, 1999. "When the arbitration panel convenes, it will have six months to issue a recommendation. The Library of Congress will have an additional four months to approve the recommendation." Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin, Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5. "Separate from the its petition, the RIAA is continuing to negotiate voluntary license agreements with individual Webcasters in the hopes of setting a favorable precedent." Id. 32 Scherzer, Dov H., Statutory Fee Issues for Online Recordings, Ent. L. and Fin., Dec. 1999, Vol. 15, No. 9, pp. 1, 4-5. 33 The Rio portable music player is a digital audio recording device. The Rio is a small device (roughly the size of an audio cassette) with headphones that allows a user to download MP3 audio files from a computer and to listen to them elsewhere. 34 See 17 U.S.C. §1001 et seq. (P.L. 102-563, at 4, 106 Stat. 4248). 35 Discord Surrounding Diamond Multimedia’s Rio Player is Ended Through Settlement Agreement, The Intellectual Property Strategist, Sept. 1999, Volume 1, Number 12, at 4. See generally, Houston, Randolph B. Jr., Let’s Get Digital, Texas Lawyer, Dec. 17, 1999. 36 Felch, Patricia A., Free-Lancers Victorious in Tasini, but Impact on Electronic Media Still Unclear, e-Commerce Law & Strategy, Nov. 1999, Vol. 16, No. 7, p. 4. 37 Id. 38 Id. 39 See Clarida, Robert W., Fair Use on the Web – a New Ballgame, Intellectual Property Strategist, Jan. 2000, Vol. 6, No. 4, p. 7; Slind-Flor, Victoria, Thumbnail Not Even Tiny Infringement, Nat’l L.J., Nov. 30, 1999. See also Los Angeles Times v. Free Republic, CV No. 98-7840-MMM (holding that "adding commentary to a verbatim copy of a copyrighted work or portions thereof does not transform the work [to a fair use], especially where the first posting of this article . . . often contains little or no commentary."); Shepherd, Ritchenya A., Web Site Can’t Post News Stories, Nat’l L.J., Nov. 17, 1999. 40 See P.L. 105-298, 112 Stat. 2827. 41 Eric Eldred founded Eldritch Press in late 1995, and initially, Eldritch Press posted works of American literature by authors such as Nathaniel Hawthorne and Henry James. Now, Eldritch Press posts new works the moment they enter the public domain. Some of the works Eldritch Press posts are out of print or are not included in library collections, and therefore they are not obtainable by the public in any other way. See How Long is Too Long? Recent Congressional Copyright Giveaway Claimed Unconstitutional at http://eldred.ne.mediaone.net/pr-1999-01-12.txt. 42 See Eldred v. Reno, United States District Court for the District of Columbia, Case No. 1:99CV00065 JLG (filed January 11, 1999). Visit this Web site to view the pleadings in this case: http://cyber.law.harvard.edu/eldredvreno/legaldocs.html. 43 See http://www.kingkong.demon.co.uk/ccer/ccer.htm, a site that documents all renewals of 1923 book copyrights, representing works that the Copyright Term Extension Act keeps from the public domain. 44 Slotek, Jim, M-I-C . . . See you real soon . . . k-e-y . . ., Toronto Sun Times, Nov. 1, 1998; see also Naughton, John, Mickey Mouse Saved for Disney? Phew. What a Narrow Squeak, Guardian Unlimited, May 2, 1999. 45 See, Universal Cities, Inc. v. Reimerdes, S.D.N.Y., No. 00 Civ. 277 (LAK), (Jan. 20, 2000), and Control Association, Inc. v. McLaughlin, No. CV 786-804, Sup. Court Calif, (Jan. 21, 2000). In the California state court case, the Judge had caused quite a stir by denying a temporary restraining order; apparently the Judge initially believed that the use and information was focused properly on just allowing the playing of DVD's on Unix systems. See, also, Godwin, Mike, Courts Enjoin Sites That Publish DVD Decryption Software, E-Commerce L. Weekly, Jan. 28, 2000. 46 For an indepth discussion of fair use, see the article on fair use at the authors' Web site at http://www.internetlegal.com. 47 Spam is the name given for unsolicited e-mail messages which flood the Internet. Spam generally consists of commercial advertising (sometimes for adult oriented Web sites or get-rich-quick schemes). 48 See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N.Y., 447 U.S. 557, 562-563, 65 L.Ed.2d 341, 100 S.Ct. 2343 (1980). 49 Cf. Sable Communications v. FCC, 492 U.S. 115, 127-128, 109 S.Ct. 2829, 2837, 106 L.Ed.2d 93 (1989) (there is no captive audience problem where the listener of dial-a-porn must take affirmative steps to receive the communication). 50 See Intel v. Hamidi, Superior Court of California, County of Sacramento, Judge John R. Lewis, April, 1999. 51 In similar cases, the First Amendment issue was not raised. See, e.g., America Online v. IMS, 24 F. Supp. 2d 548 (E.D. Va. 1998); America Online v. Prime Data Sys., Inc., 1998 U.S. Dist. LEXIS 20226 (E.D. Va. 1998); America Online v. LCGM, Inc., 46 F. Supp. 2d 444 (E.D. Va 1998). 52 See also Balestier, Bruce, Big Fine for Spamming AOL Members, New York Law Journal, Dec. 14, 1999. 53 The Act defines the term "unsolicited electronic mail message" as "any substantially identical electronic mail message other than electronic mail initiated by any person to others with whom such person has a prior relationship, including prior business relationship, or electronic mail sent by a source to recipients where such recipients, or their designees, have at any time affirmatively requested to receive communications from that source." 54 Nev. Rev. Stat. 41.735 provides immunity for persons who provide users with access to a network and applies to items of electronic mail obtained voluntarily. 55 Nev. Rev. Stat. 41.715 defines "electronic mail" as a message, a file or other information that is transmitted through a local, regional or global network, regardless of whether the message, file or other information is:
56 In New Jersey, recipients of bulk unsolicited faxes are attempting to file a class action lawsuit under the 1991 federal Telephone Consumer Protection Act, 47 U.S.C. §227: Levine v. 9 Net Ave., HUD-L-7965-99. See Booth, Michael, Suit Seeks Class-Action Status For Receivers of Junk Faxes, New Jersey Law Journal, Nov. 10, 1999. 57 Cal. Business & Professions Code §17538.4 provides as follows:
58 The Act defines "personal information" to include an individual’s first and last name, home and other physical address, e-mail address, social security number, and telephone number. 1999 S. 809; 106 S. 809. 59 15 U.S.C. §6501 et seq. A copy of the Act is available on the Federal Trade Commission Web site: http://www.ftc.gov/privacy/index.html 60 16 C.F.R. Part 312. The Rules are available at the Federal Trade Commission Web site, supra. 61 See Benjamin I. Berman, Acting Secretary of the Federal Trade Commission, Federal Register Notice announcing Public Workshop on Proposed Regulations Implementing the Children's Online Privacy Protection Act, Supplementary Information, June 23, 1999, 16 C.F.R |