Rossdale cle 4 25-12

Copyright and Trademark
Issues on the Internet

Rossdale CLE
April 25, 2012

Lee Gesmer
Gesmer Updegrove LLP
Boston, Massachusetts

Copyright Gesmer Updegrove LLP 2012

www.gesmer.com

Topics: 2

Digital Millennium Copyright Act (DMCA)

Copyright First Sale Doctrine

Keyword Advertising/Trademark

Computer Fraud and Abuse Act (CFAA)

4.25.2012 www.gesmer.com

Digital Millennium Copyright Act 3

- UMG Recordings, Inc. v. Shelter
Capital Partners LLC, 667 F.3d 1022
(9th Cir. 2011)
- Viacom Int'l, Inc. v. Youtube, Inc.,
2012 U.S. App. LEXIS 6909 (2d Cir.
N.Y. Apr. 5, 2012)


17 USC § 512 Safe Harbors 4

§ 512 immunizes Internet intermediaries for
user supplied infringing content but service
provider -
• Must: comply with statutory notice/take
down system
• Must: provide storage at direction of a user
• Must not: Have actual knowledge or facts/
circumstances
• Must not: Derive financial benefit + right/

By Reason of Storage at Direction of User 5

“A service provider shall not be liable . . .
by reason of the storage at the direction of
a user of material that resides on a system
or network controlled or operated by or for
the service provider . . .” § 512(c)


“By Reason of” Storage - Veoh 6
“language and structure of the statute . . . [and]
legislative intent clarify that § 512(c) encompasses
the access-facilitating processes that automatically
occur when a user uploads a video to Veoh”

“web hosts, like Veoh, . . . store user-submitted
materials in order to make those materials
accessible to other Internet users. . . . if the web
host only stored information for a single user, it
would be more aptly described as an online back-up
service”

“By Reason of” Storage - Youtube 7
Agrees with Veoh regarding scope of storage safe
harbor –“transcoding,” “playback” and “related
videos” (automated algorithm) fall within safe
harbor

Third-party syndication – Youtube licensed videos to
Verizon. “Manual selection of copyrighted material
for licensing to a third party”

=> Remanded to determine whether clips-in-suit
were licensed


Actual Knowledge/Facts-Circumstances 8

[the service provider is not liable if it] . . .
does not have actual knowledge that the
material . . . is infringing;
. . . in the absence of such actual
knowledge, is not aware of facts or
circumstances from which infringing activity
is apparent” (Red Flag)
§ 512(c)(1)(a)


Veoh - Actual Know./Facts-Circumst. 9

• Actual knowledge/facts and circumstances both
require specific knowledge of infringing conduct, not
generalized knowledge
• Email from Disney CEO to Veoh investor inadequate
because the copyright holder did not comply with
notice requirements - deficient notice "shall not be
considered under paragraph (1)(A) in determining
whether a service provider has actual knowledge or is
aware of facts or circumstances from which infringing
activity is apparent"


Youtube - Actual Know./Facts-Circumst. 10
“the actual knowledge provision turns on whether
the provider actually or “subjectively” knew of
specific infringement, while the red flag provision
turns on whether the provider was subjectively
aware of facts that would have made the specific
infringement ‘objectively’ obvious to a
reasonable person”
=> “Upon a review of the record, we are
persuaded that the plaintiffs may have raised a
material issue of fact regarding YouTube’s
knowledge or awareness of specific instances
of infringement”

Youtube - Willful Blindness Doctrine 11
“Safe harbor not conditioned on service provider
monitoring its service or affirmatively seeking facts
indicating infringing activity” . . . [DMCA] is
incompatible with a broad common law duty to
monitor or otherwise seek out infringing activity
based on general awareness . . . . . . [therefore]
willful blindness cannot be defined as an
affirmative duty to monitor. . . . [But the statute
does not] abrogate the doctrine. . . . the willful
blindness doctrine may be applied, in appropriate
circumstances, to demonstrate knowledge or
awareness of specific instances of infringement”


“Financial Benefit ... Ability to Control” 12

Service provider is eligible for the §512(c)
safe harbor only if it -
"does not receive a financial benefit
directly attributable to the infringing
activity, in a case in which the service
provider has the right and ability to
control such activity" 17 U.S.C. § 512(c)(1)
(B)
=> Financial Benefit + Control ≠ Safe Harbor


Veoh - “Financial Benefit/Control” 13

“Service provider must be aware of specific
infringing material to have the ability to
control that infringing activity . . . Only
then would its failure to exercise its ability
to control deny it a safe harbor . . . "right
and ability to control" . . . requires control
over specific infringing activity the provider
knows about . . . Of course, a service
provider cannot willfully bury its head in
the sand to avoid obtaining such specific
knowledge . . .”

Youtube - “Financial Benefit/Control” 14

“importing a specific knowledge
requirement into [control/benefit] renders
the control provision duplicative of [the
actual knowledge provision]. Any service
provider that has item-specific knowledge
of infringing activity and thereby obtains
financial benefit would already be excluded
from the [control/benefit] safe harbor . . .
for having specific knowledge of infringing
material and failing to effect expeditious
removal.”

Perfect 10 v. Cybernet Ventures, 213 F. Supp. 2d
1146 (C.D. Cal. 2002) - service provider
instituted a monitoring program by which user
websites received detailed instructions regarding
issues of layout, appearance, and content, and
also forbade certain types of content and refused
access to users who failed to comply with its
instructions
=> “exerting substantial influence on the
activities of users, without necessarily—or
even frequently—acquiring knowledge of
specific infringing activity”

“the ‘right and ability to control’ infringing activity
under § 512(c)(1)(B) requires something more than
the ability to remove or block access to materials
posted on a service provider’s website . . . The
remaining—and more difficult—question is how to
define the ‘something more’ that is required . . .
we think it prudent to remand to the District Court
to consider in the first instance whether the
plaintiffs have adduced sufficient evidence to allow
a reasonable jury to conclude that YouTube had the
right and ability to control the infringing activity
and received a financial benefit directly
attributable to that activity”

Attempt to graft Grokster onto DMCA 17

Metro-Goldwyn-Mayer Studios Inc. v.
Grokster (U.S. 2005)
“... one who distributes a device with the
object of promoting its use to infringe
copyright, as shown by clear expression or
other affirmative stops taken to foster
infringement, is liable for the resulting acts
of infringement by third parties”


Viacom: YouTube is a “Video Grokster” 18

- “[W]e need views, [but] I’m a little concerned
with the recent [S]upreme [C]ourt ruling on
copyrighted material”
- “[S]ave your meal money for some lawsuits!”
- “concentrate all of our efforts in building up
our numbers as aggressively as we can through
whatever tactics, however evil”
- “our dirty little secret . . . is that we actually
just want to sell out quickly”


Both courts reject application of
Grokster 19

Veoh - “In light of the DMCA's language,
structure, purpose and legislative history, we
are compelled to reject UMG's argument that
the district court should have
employed Napster's vicarious liability
standard . . .”
Youtube - “a finding of safe harbor application
necessarily protects a defendant from all
affirmative claims for monetary relief”


Veoh - Investor Liability (secondary liab.) 20
“The Investor Defendants argue that it would be
illogical to impose greater liability on them than on
Veoh itself. Although we agree that this would
create an anomalous result, we assume without
deciding that the suit against the Investor
Defendants can properly proceed even though Veoh
is protected from monetary liability by the DMCA”

“. . . were we to hold that Veoh was protected, but
its investors were not, investors might hesitate to
provide the necessary funding to companies like
Veoh, and Congress' purpose in passing the DMCA
would be undermined”

Veoh: Prevailing Def. Denied Atty Fees 21

FRCP 68 – “If the judgment that the offeree
finally obtains is not more favorable than the
unaccepted offer, the offeree must pay the
costs incurred after the offer was made”
Copyright statute - court "may . . . award a
reasonable attorney's fee to the prevailing
party as part of the costs" 17 U.S.C. § 505


Capitol Records v. Redigi – First Sale
Doctrine and Digital Recordings 22

“Sell your old songs legally – The world’s first
used digital music marketplace - Buy used
music insanely cheap”

“Store, Stream, Buy and Sell Pre-Owned
Digital Music”


Redigi (2) .... 23

Step One: file is “space shifted” to “music
locker,” verified, fingerprinted, owner’s local
copy deleted

Step Two: Owner designates file “for sale” -
purchased file is retitled to the new owner

Step Three: The new owner can leave the file on
Redigi or download


Redigi (3) .... 24
Capitol’s Argument -
- first sale doctrine limited to owner of a
“particular copy” (a “material object”) in which
a copyrighted work is “fixed,” to “dispose of the
possession of that copy”
- Digital transmissions do not involve the physical
transfer of a material object
- Digital resale requires reproduction of the
original file and creation of a new copy
=> Ergo, first sale does not apply


First Sale Doctrine 25

“. . . the owner of a particular copy or
phonorecord lawfully made under this title,
or any person authorized by such owner, is
entitled, without the authority of the
copyright owner, to sell or otherwise dispose
of the possession of that copy or
phonorecord” 17 US.C. §109(a)
•Copy owner’s rights, as opposed to
copyright owner’s rights


Vernor v. Autodesk (9th Cir. 2010) 26

Garage sale purchaser of software bound by
license prohibiting resale?
“First, we consider whether the copyright
owner specifies that a user is granted a
license. Second, we consider whether the
copyright owner significantly restricts the
user’s ability to transfer the software.
Finally, we consider whether the copyright
owner imposes notable use restrictions”


F.B.T. Prods., LLC v. Aftermath Records
(9th Cir. Cal. 2010) 27

“where a copyright owner transfers a copy
of copyrighted material, retains title, limits
the uses to which the material may be put,
and is compensated periodically based on
the transferee’s exploitation of the
material, the transaction is a license”


MDY v. Blizzard (9th Cir. 2010) 28

EULA for WoW restricted use of “BOT” that
played through game levels
Yes, but:
•Yes - WoW players are licensees
•But - the anti-BOT restriction was a
covenant rather than a copyright -
enforceable condition


UMG Recordings, Inc. v. Augusto (9th Cir.
2011) 29

Unsolicited promo CDs - license or transfer?
No agreement in place
“Resale or transfer of possession is not
allowed ...”
Unordered merchandise statute


Key Word Advertising/Trademark
Rosetta Stone v. Google, Inc. (4th Cir. 2012) 30

Intent:
< 2004 - Google did not allow the use of trademarks as
keyword search triggers for unauthorized advertisers or
in the body or title of the text of an advertisement
> 2004 – Loosened restrictions, but continued to
prevent advertisers from using trademarks in ad text or
ad titles unless authorized; recognized increase in risk.
>2009 – Permitted use of trademark terms in ad text
even if advertiser doesn’t own the mark or have
explicit approval from the trademark owner to use it
(resellers, components, compatible parts, info/reviews)


Rosetta Stone (2) .... 31

“Viewing the evidence and all reasonable
inferences in a light most favorable to
Rosetta Stone . . . a reasonable trier of
fact could find that Google intended to
cause confusion in that it acted with the
knowledge that confusion was very likely to
result from its use of the marks”



Actual Confusion:
• 5 depositions, confusion as to sponsorship (vs
source) sufficient
• Rosetta – over 250 complaints
• Google admissions - the only effective
trademark policy is to allow trademark usage for
keywords but not allow trademark usage in ad
text - title or body
• Google’s internal studies probative as to actual
confusion



Sophistication of Consuming Public:

“internal Google study reflect[s] that even well-
educated, seasoned Internet consumers are
confused by the nature of Google's sponsored
links and are sometimes even unaware that
sponsored links are, in actuality,
advertisements”



Functionality Defense:
Reversed district court’s holding that
Google’s use of keywords was functional

Contributory Infringement:
Remanded – question of fact as to whether
Google continued to supply services to
known infringers


Network Automation v. Advanced Systems
Concepts (9th Cir. 2011) 35

Trademark owner lawsuit against keyword
advertiser (compare Rosetta Stone, suing
search engine)
Network Auto’s ads did not use plaintiff’s
trademark
Buying keyword ads constitutes a use in
commerce (accord: Rescuecom Corp. v.
Google Inc., 562 F.3d 123 (2d Cir. 2009)
(selling keywords is use in commerce)


Network Automation (2) ... 36

Most relevant factors to likelihood of
confusion:
(1) strength of the mark;
(2) evidence of actual confusion;
(3) type of goods/ degree of care likely to be
exercised by the purchaser; and
(4) labeling and appearance of the
advertisements and the surrounding context on
the screen displaying the results page



Demise of “Initial Interest Confusion”?

• “Internet users on the whole exercise a low
degree of care.” Brookfield Commc’ns v. West
Coast Entm’t Corp.,174 F.3d 1036 (9th Cir.
1999)
• “the owner of the mark must demonstrate
likely confusion, not mere diversion” . . .
[“initial interest” limited to] “misleading and
deceptive.” Network Automation, 2011



Similar marketing channels:

“it would be the rare commercial retailer
that did not advertise online, and the
shared use of a ubiquitous marketing
channel does not shed much light on the
likelihood of consumer confusion”

=> Preliminary injunction vacated


Louis Vuitton v. Akanoc (9th Cir. 2011) 39

Web host liability/counterfeiting retailers
- $32M damages at trial
-"providing direct infringers with server space"
qualifies as a material contribution for
contributory copyright infringement.
De facto notice/takedown for trademarks?
See also Tiffany (NJ) Inc. v. eBay Inc., 600 F.
3d 93 (2nd Cir. 2010)


Computer Fraud and Abuse Act (CFAA) 40

18 U.S.C. § 1030(a)(4):
(a) Whoever—
(4) knowingly and with intent to defraud,
accesses a protected computer without
authorization, or exceeds authorized
access, and by means of such conduct
furthers the intended fraud and obtains
anything of value . . .
shall be punished . . . .


CFAA - U.S. v. Nosal (9th Cir. 2011) (panel) 41

Company policy "restricted the use and
disclosure of all such information, except
for legitimate [company] business”
"an employee 'exceeds authorized
access' ...when he ...violates the
employer's computer access restrictions --
including use restrictions”


CFAA - U.S. v. Nosal (9th Cir. 2012) (en banc) 42

“we hold that the phrase ‘exceeds authorized
access’ in the CFAA does not extend to violations of
use restrictions” (Majority, Judge Alex Kosinski)

“This case has nothing to do with playing sudoku,
checking email, fibbing on dating sites, or any of
the other activities that the majority rightly values.
It has everything to do with stealing an employer’s
valuable information to set up a competing business
with the purloined data, siphoned away from the
victim, knowing such access and use were
prohibited in the defendants’ employment
contracts” (Silverman, dissenting)

CFAA - U.S. v. Tolliver (3rd Cir. 2011) 43

Upheld CFAA conviction of former bank
teller who provided confidential account
information to "check runners" who cashed
fraudulent checks against the accounts of
bank customers
No reference to bank policies, but "there
was sufficient evidence" that "Tolliver
exceeded her authorized access" because
"she did not have a business purpose" to
access the customers' accounts


CFAA - U.S. v. Teague (8th Cir. 2011) 44

8th Cir. upheld CFAA conviction where
employee viewed Obama student loan data,
but did not remove/use it
Compare: U.S. v. Czubinski (1st Cir. 1997)
(“merely” viewing data insufficient - there
must be a "showing of some additional end --
to which the unauthorized access is a means”)


CFAA - Pulte Homes v. Laborers' Intern’l
Union (6th Cir. 2011) 45

Labor union "bombarded" employer’s
computer systems with emails and
voicemails disrupting communications with
its customers/ vendors
Liable for "knowingly caus[ing] the
transmission of a program, information,
code, or command, and as a result of such
conduct, intentionally caus[ing] damage
without authorization, to a protected
computer"


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