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Second circuit reverses hot news misappropriation case

The second circuit issued an opinion in Barclays v. TheFlyOnTheWall.com today, reversing the district court’s previous ruling in favor of the plaintiffs.  The case has been closely watched by content-owners and copyright attorneys since 2010, after the district court enjoined the defendants from publishing the plaintiffs’ financial recommendations to clients until 30 minutes after the securities market opened.

I’ve only had a chance to skim the opinion, but it appears that the court found that the misappropriation claim was federally preempted by the Copyright Act (see 17 USC § 301).  It’s worth noting that while this case is important, the facts seem to play a decisive role and the court (unsurprisingly) didn’t opine on the first amendment issues.

For background:  The claim in the lawsuit was that TheFlyOnTheWall.com had misappropriated “hot news”– which may be (loosely) described as free-riding off news that was “gathered at the cost of enterprise, organization, skill, labor, and money” of another.  The hot news doctrine has a long history that dates back to the early 20th Century as a state common law distinct from copyright infringement.  This is important to most content owners because:  (1) copyright law protects expression, and generally affords little, if any, protection to factual information (though it still protects the expression of factual information), (2) even when expression is unlawfully reproduced,  the fair use doctrine may protect certain uses of the expression.  In other words: where copyright law doesn’t provide a legal relief, a state-recognized exclusive property right to news might.  The right to hot news was widely recognized until the enactment of the “Copyright Act of 1976″ (the last major overhaul of the Act) in which Congress added an express preemption provision (under 17 USC § 301) that severely limits the ability of state law to mimic rights granted by the Copyright Act.  It’s still recognized, but under limited circumstances.

[Opinion]

Comments Off Posted in: Commentary on June 20, 2011

Righthaven sues Eriq Gardner, an Ars Technica writer, then withdraws

This case is a real head scratcher. 

Eriq Gardner, who writes The Hollywood Reporter ESQ blog and occasionally contributes legal commentary to Ars Technica, recently found himself at the business end of a Righthaven copyright lawsuit.

The story begins last December, when Gardner wrote an article for Ars Technica that Described Righthaven’s copyright claims in a lawsuit against the DrudgeReport.  In that case, Righthaven alleged that the DrudgeReport had reposted a photograph of a TSA Agent giving an airport traveler a pat down without authorization.  In Gardner’s Ars Technica article about the DrudgeReport lawsuit, he reposted the photograph as it had appeared in the court filing:  as a black and white, grainy image that (probably) had been printed out and attached to the complaint as an exhibit and then rescanned for the Ars Technica article.

Last Friday, Righthaven filed a complaint against Gardner claiming that his use of the photograph from the court filing in the Ars Technica article was an infringement of copyright(!).  According to Ars Technica, which has a detailed post about the incident, Righthaven voluntarily dismissed the suit this morning, stating to Ars that the filing was the result of a “clerical error.”

It’s hard to imagine a set of facts that is a better candidate for a fair use defense.  Aside from the fact that the image in question wasn’t even the original photograph, Gardner’s Ars Technica piece is a news article, with commentary on the DrudgeReport lawsuit.  News reporting and commentary about ongoing cases has a long history of public policy support in the courts.  Moreover, those activities are among the few explicitly mentioned as examples of fair use in the Copyright Act (use of a work “for purposes such as criticism, comment, news reporting … is not an infringement of copyright”).  This lawsuit looks bad for other reasons too, as one could seemingly perceive it as an attempt by Righthaven to quell commentary about its litigious activities.

Even more confounding, however, is that the majority of Righthaven’s lawsuits (that I am aware of, at least) come from its newspaper clientele.  If we take a momentary trip to upside down world, where this lawsuit wasn’t dismissed and the fair use argument failed in court, Righthaven would have obtained a ruling that is rather antithetical to the same principle that its client-newspapers rely on for commentary and reporting in their own publications.

Comments Off Posted in: Commentary, Links on March 29, 2011

FCC approves Comcast – NBC merger

Today, the FCC announced their approval [CNET article] of the Comcast/NBC merger, after a 4 to 1 vote in favor of the merger.  According to the announcement [via FCC.gov], the FCC only approved the merger after NBC/Comcast agreed to a number of restrictions, which will be enforced for a period of seven years following the merger.

The FCC’s 3-page announcement provides an overview of the conditions in bullet point form.  Here’s a few interesting points (that I noted after a quick skim) which pertain to “Protecting the Development of Online Competition”:

  • that Comcast/NBC provide “any affiliated content that Comcast makes available online” to its own subscribers at “fair market value and non-discriminatory prices and conditions” to customers of other online video service.
  • that Comcast/NBC offers a broadband service at “reasonable prices and of sufficient bandwidth” so that customers do not need a cable television subscription through Comcast/NBC to view online videos and the like.
  • that Comcast/NBC does not enter into agreements that unreasonably restrict online distribution of video programming
  • that Comcast/NBC does not “disadvantage rival online video distribution through its broadband Internet access services and/or set-top boxes”
  • that Comcast/NBC does not “unreasonably withhold programming from Hulu”

Read the announcement for the rest.

There is a lot of information to digest related to this deal and it’s still early in the process.  So,  I would expect to hear a lot more about it in the coming weeks. In the meantime, check out Commissioner Michael J. Copps dissenting statement on the vote.  Copps was the only commissioner to vote against the combination.

Related:

Comcast’s Blog Post on the FCC announcement.

1 Comment Posted in: Commentary, Links on January 18, 2011

The legality of denial of service attacks

With all the banter about Wikileaks and the reports of attempted DDoS attacks, I thought this might be a good time to explore some of the legal issues that can follow DoS activity. As usual, this isn’t meant to be a comprehensive practice guide or constitute advice.

First, for a primer on denial-of-service (DoS) and distributed-denial-of-service (DDoS) attacks, read the Wikipedia article — it’s easy to follow. In the simplest terms, a successfully orchestrated DoS or DDoS attack results in an overloaded network device (e.g., a webserver) such that the device ceases responding to requests for activity or functions intermittently for the duration of the attack.

In the United States, participants in these attacks can run into a number of legal problems at the Federal level, both criminally and civilly. For our purposes, there is no need to distinguish the “distributed” form of the attack from the singular (i.e., DDoS vs. DoS), since, as you will see below, a culpable person is one who merely directs the attack at a target.

In terms of criminal violations, there’s the Computer Fraud and Abuse Act (the “CFAA”), which prohibits a person from “knowingly caus[ing] the transmission of a program, information code, or command, and as a result of such conduct, intentionally causes damages without authorization to a protected computer” (see 18 U.S.C. § 1030(a)(5)(A)). The requisite “damage” element under the CFAA is “any impairment to the integrity or availability of data, a program, a system, or information” (see 18 U.S.C. § 1030(e)(8)) and a “protected computer” is defined as a computer “which is used in or affecting interstate or foreign commerce, including a computer located outside the United States that is used in a manner that affects interstate or foreign commerce or communication” (see 18 U.S.C. § 1030(e)(2)(B)).

DoS attacks almost unquestionably fall under the broadly-worded prohibited activity in this portion of the CFAA (“transmitting … information, code, or command”) and would likely meet the low standard of damage (“any impairment to the integrity or availability of data, program, system, or information”). The CFAA may also apply to unsuccessful attempts (see 18 U.S.C. § 1030(b)).

The CFAA also has a civil component that permits “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunction relief.” In other words, the target of the DoS attack can sue the individual(s) who were responsible for the damages incurred as a result of the attack (e.g., server downtime, costs to repair, and in some lost revenue (see 18 U.S.C. § 1030(g)). There is a limitation that requires the damages exceed $5,000; however, some courts have liberally construed its calculation to include consultation services (e.g., IT/security persons) used to assess the extent of damage caused by the attack.  Also, this provision does not require that a person ever be convicted before being sued for damages.

Private parties that are an intermediary along the vector of attack (e.g., an ISP) may also have additional legal options available at the state court level. Since most U.S. homes connect to the internet through an ISP, like Comcast, their usage of Comcast’s services are likely subject to a “terms of service” agreement that prohibits DoS attacks and other illicit activities. For instance, the Comcast Terms prohibits “undertak[ing] or accomplish[ing] any unlawful purpose” including “interfer[ing] with computer networking or telecommunications services service to any user, host or network, including, without limitation, denial of service attacks, flooding of a network, overloading a service, improper seizing and abusing operator privileges, and attempts to ‘crash’ a host.” Since these terms are a legal contract, it is possible for an ISP to sue a subscribe/user for breach of contract.  Similarly, if the target of a DoS attack is a website, website visitors may also have their own terms of service agreement with similar contractual prohibitions. For instance, PayPal’s terms prohibit users from “tak[ing] any action that imposes an unreasonable or disproportionately large load on our infrastructure” under the “Restricted Activities” section. The PayPal terms also list a number of potential remedies that the company may pursue legal action for violations — which might include a lawsuit for breach of contract or even on a “trespass to chattels” theory.

Finally, one last  point, social websites like Facebook also contain provisions within their terms of service agreement that prohibit certain types of unlawful activity (e.g., “you will not use Facebook to do anything unlawful, misleading, malicious, or discriminatory”). Although it would be unlikely for a company to be charged with a crime under the CFAA (at common law corporations usually lack the requisite criminal intent) for unknowingly hosting a group that encourages participation in DoS attacks, once aware, they most certainly do not want to find themselves defending their lack-of-action to an unlawful situation or face a civil lawsuit filed by the target website (though, it would probably take very unique facts to be successful on the merits).  So, it comes at no surprise that Facebook took the risk-averse approach this week by terminating groups that encouraged participation in DoS attacks.

I hope this post clears up some of the misconceptions I’ve heard in passing this week.

Comments Off Posted in: Commentary on December 12, 2010

The Borings win $1 from Google Street View lawsuit

Remember Mr. and Mrs. Boring?  The Pennsylvanian couple making headlines? … no?

In 2008, they found out that Google Street View allowed users to see into their property from a private drive next to their home.  In response, they sued Google for invasion of privacy and trespass.  This week, they’re back in the news again.

For the last two and half years, the case has crawled through the legal system.  In February 2009, the District Court for the Western District of Pennsylvania granted a 12(b)(6) motion to dismiss  in favor of Google (read the order here), for failure to state a claim.  The Boring’s invasion of privacy claims were rather dubious from the start.  A plaintiff generally needs to establish that the invasive act caused “mental shame, suffering, or humiliation” that a person of “ordinary sensibilities” would have suffered in the same instance.  Without this, a mere photograph of a residential structure, even when taken from private property, without any visible persons, is not likely to pass the threshold motion to dismiss stage of a lawsuit.

The Borings appealed the dismissal to the 3rd Circuit, which partially reversed the District Court’s ruling in February 2010.  However, the only claim reversed was the trespass claim.  Common law trespass is a tort that governs interference with rights associated with real property,  personal property, and certain personal rights.  The Borings’ best claim here is that the Google car with the mounted camera committed trespass to land when it snapped the photographs.  In fact, the photographs appear to offer strong evidence in support of this theory since it would have been difficult for the photographs to have been taken by the vehicle from any area other than the private drive.  As I noted last February at the Citizen Media Law Blog, trespass to land claims aren’t much of a risk to the longevity of Google Street View, so long as Google cars aren’t driving across everyone’s front yard.

Trespass to land is simple to understand; it only requires that a person voluntarily enter the property of another without consent.  But, just because the Borings might have a “good case” on a trespass to land theory, it doesn’t mean they are entitled to millions of dollars.  The trespass by the Google car didn’t appear to have caused any actual harm to the property, structures or items on the property, or persons.  Also, since the Borings couldn’t establish that they any suffered mental shame, suffering, and humiliation, the fact that the Google car may have been trespassing on private property while capturing images doesn’t revive the invasion of privacy claims.

In these cases, if you really feel strongly about the “principle of the matter” as the Borings seem to, it’s possible to be awarded “nominal damages,” which is akin to saying: “yes, you’re technically correct, but you haven’t suffered any harm worthy of compensation, so here’s a token for the violation of your right.”  Considering how expensive it is to obtain a lawyer, file a lawsuit, and pay the associated costs of the filing the suit, it’s not very surprising that you don’t often hear about nominal damages being awarded these days.

One last thing.  The award of $1 in this case was actually a “consent judgment” which is procedurally distinct from the damage awards issued by juries that you probably hear about on the news.  Consent judgments are usually negotiated settlements between the parties that are adopted by the judge and recorded as part of the case.  One purpose of doing this is to bind the parties to the judgment and invoke res judicata on the claims — which prevents the Borings from suing Google again with identical legal claims based on the same facts.

On that note … I should get back to scanning for more sidewalk baby births caught by Google cameras while I finish lunch.  Happy Friday.

Comments Off Posted in: Commentary, Links on December 3, 2010

Capitol Records, RIAA v. Jammie Thomas-Rasset: Take-3

Yesterday, the third installment in the Jammie Thomas-Rasset case began in the district court of Minnesota.  As has been noted by several others, this case only involves the issue of damages, not liability.

Recall back in 2009, a jury found Ms. Thomas-Rasset liable for infringing the copyrights on 24 songs and awarded the record company $1.92 million dollars in statutory damages.   On granting a motion for remittitur, Judge Michael Davis reduced the damages to $54,000 noting that the statutory damages must bear some relation to the actual damages incurred by the plaintiffs.

When a judge reduces damages on remittitur, the plaintiff then has two immediate procedural options:  accept the reduction or have a new trial on the issue of damages.  In this case, Capitol Records opted for the new trial.

Since the previous trial already resolved the issue of liability, the only issue before the jury in this case is the amount of damages that should apply. At the heart of this issue are the “statutory damages” provisions in the Copyright Act, which lay out a spectrum of damages per instance of infringement.  If the infringement is proved to be “willful,” as was the case in the Thomas-Rasset trial, the spectrum is $750 – $150,000 per instance of infringement.  Since there were 24 songs at issue, that’s 24 instances of infringement.  For Ms. Thomas-Rasset, this means the jury can award Capitol Records somewhere between $18,000 – $3.6 million.

Since this is an abbreviated trial, I would expect arguments and witness examinations by the attorneys to conclude quickly–probably either today or tomorrow. Then the Judge Michael Davis will issue jury instructions and send the jury off to deliberate over the award of damages.   Updates will be posted as soon as they are known.

Huge thanks to Ars Technica for their endless coverage.

Comments Off Posted in: Commentary, Links on November 3, 2010

US argues that genetic material is not patentable in ACLU v. Myriad

The New York Times reported last Friday, October 29, 2010, that the United States has filed a brief, as an amicus curiae, in ACLU v. Myriad Genetics case which is currently on appeal before the Federal Circuit.  This follows the March 2010 landmark ruling by a federal district court in New York (see our related posts here and here) which invalidated several patents claims over isolated and purified genetic material and certain diagnostic processes related to BRCA 1 and BRCA 2 (tumor suppressor gene and protein linked to breast and ovarian cancers).

The brief was filed on behalf of the United States by the Department of Justice’s Antitrust Division. As noted by the NYT, the most surprising takeaway is the brief argues that isolated but otherwise unmodified or untransformed human genetic material is not “patentable subject matter” because it is a product of nature. This argument is a rather sharp contrast to the prior policies of the USPTO which routinely granted patents for isolated genetic material after the famous Diamond v. Chakrabarty Supreme Court decision issued in 1980. The brief also argues in tandem that certain types of genetic material, such as cDNA, vectors, recombinant plasmids, and chimeric proteins, that do not otherwise exist but for human ingenuity and intervention, are patent eligible subject matter. More importantly, the brief uses this logic to argue that several claims in the Myriad patents related to cDNA were incorrectly invalidated by the SDNY in March.

Overall, the brief seems to be well reasoned. In particular, I think the DOJ is correct in that many of the points of law on appeal could be easily addressed by Diamond v. Chakrabarty and by some dicta from the recent Bilski v. Kappos decision.  I wouldn’t be surprised if the Federal Circuit resolves the case on very similar grounds to those argued in the brief. However, I suspect that the case will continue to play out as a major courtroom and media drama and continue its route on appeal to SCOTUS who, by the way, will eventually remind us that this is a legislative problem that needs to be addressed by Congress and not by legislation from the bench.

Also, in case you are unfamiliar with the concept of amicus briefs, here’s a little background on amici curiae. Amicus curiae (or amici in the plural) is a latin legal term which means “friend of the court.” Amici are people or organizations who interject information, which usually highlights or raises awareness of a certain legal, factual, or policy issues that might otherwise go unnoticed on appeal. More often than not, these briefs are filed at the appellate level—I have been told some courts accept amicus curiae briefs at the district or trial court level too, but I think it’s rare.

Amicus curiae briefs can argue partisan issues of interest to the litigants (i.e., take a side) or help a party by simply supplementing legal points from an neutral outsider’s perspective.  Regardless of what is argued, these briefs usually help the presiding judges consider multiple legal viewpoints that are affected by the case but not necessarily at issue between the litigating parties immediately bound the decision. Before filing a brief, the amicus curiae must have the consent from all litigating parties or have been granted permission from the court, directly, to file a brief.  There are also circumstances in which a court may solicit amicus submissions on particularly complicated or controversial issues. After a brief has been filed, there aren’t any specific rules that require the judges take the substantive points into consideration in their final opinion, but arguments on significant policy issues tend to be acknowledged in final opinions. (More rules/background on these amicus curiae briefs available in Fed. R. App. P. 29).

1 Comment Posted in: Commentary, Links on November 1, 2010

Overview and thoughts on the “Dancing Baby” case

It’s been three years since Stephanie Lenz posted this home video to YouTube which depicts her then 13-month-old child rocking out to the Prince song “Let’s Go Crazy.” It’s a 29-second video of a toddler bouncing around to fuzzy-sounding music playing from small bookshelf speakers in the background. After the video had been up for about four months, YouTube took it down pursuant to a DMCA takedown notice they received from UMG, the holder of the copyright. With the help of the EFF, Lenz sued UMG and asked the court to declare that UMG violated the DMCA when it sent the original takedown notice to YouTube.

This case raises some interesting DMCA-related questions. First, are copyright owners required to take fair use into account before sending a DMCA takedown notice? Second, if fair use is not taken into account, can copyright owners be liable for damages for “materially misrepresent[ing] … that material or activity is infringing” under §512(f)?

The district court answered the first question affirmatively in August 2008, stating that “in order for a copyright owner to proceed under the DMCA with a ‘good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law,’ the owner must evaluate whether the material makes a fair use of the copyright.” (Order Denying MTD, Pg. 6).  The court also held that “[a]n allegation that a copyright owner acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine … is sufficient to state a misrepresentation claim under §512(f).” (Order Denying MTD, Pg. 6). This was not an obvious conclusion for the court to reach—due, in part, to the nature of fair use and some controlling precedent from the Ninth Circuit.

An official finding that a use of a work is a “fair use” is a legal determination by a judge after weighing the four fair use factors in litigation. This reality sometimes makes predicting whether a use of a copyrighted work will ultimately be adjudicated as a fair use challenging prior to filing a lawsuit. Given the range of user creativity that YouTube so readily inspires, the addition of even a small portion of a copyrighted work to another’s original expression can sometimes make this determination extraordinarily difficult.

The court addressed this concern in the opinion noting that “there are likely to be few [cases] in which a copyright owner’s determination that a particular use is not a fair use will meet the requisite standard of subjective bad faith required to prevail in an action for misrepresentation under §512(f).” (Order Denying MTD, Pg. 6). Based on this somewhat wishy washy language, it seems that an instance where a failure to identify a fair use might qualify for §512(f) damages is when the use is so unequivocal fair that it’s obvious to the person reviewing the use before sending a notice.

Fast forward to last week. Nearly two years after this decision (and extensive discovery), Lenz and UMG filed motions for summary judgment (Lenz’s Motion, UMG’s Motion) on whether UMG violated the DMCA takedown notice requirements under §512(f). As articulated in the statute, 512(f) prohibits “[a]ny person from knowingly materially misrepresent[ing] … that material or activity is infringing” and awards “any damages, including attorneys’ costs and fees, incurred by the alleged infringer … who is injured by such misrepresentation.”

The Copyright Act doesn’t state a definition for “knowingly materially misrepresents.” Under these circumstances a judge usually interprets the proper meaning. Since the DMCA was enacted, two prominent cases have issued opinions that interpreted the phrase “knowingly materially misrepresents” differently: Online Policy Group v. Diebold, 337 F.Supp.2d 1195 (N.D. Cal. Sept. 30, 2004) and Rossi v. MPAA, 391 F.3d 1000 (9th Cir. Dec. 1, 2004). Note here that the Rossi case was decided by the Ninth Circuit; consequently, this means the Rossi interpretation is the controlling precedent in the Lenz case. Still, it’s important to see the distinctions illustrated by these rulings.

The Diebold court interpreted the term “knowingly” to mean that “a party actually knew or should have known if it acted with reasonable care or diligence, or would have had no substantial doubt had it been acting in good faith.” (Diebold, 337 F.Supp.2d at 1204). This has been termed the “objective standard” and is the more liberal interpretation–obviously, if a party “should have known,” then the onus is far greater on rights holders to correctly identify instances of fair use.

In contrast, the Ninth Circuit in Rossi took a more conservative approach by juxtaposing the phrases “good faith,” as used in §512(c)(3), with “knowing misrepresentation” and reasoned that §512(f) requires some literal form of knowledge, i.e., that the copyright owner is actually aware of facts that legally transform an allegation of copyright infringement into a false allegation of copyright infringement, otherwise copyright owners could be liable for simple mistakes. (Rossi, 391 F.3d at 1004).

Based on the subjective standard, Lenz (and the EFF) now has to show that the UMG employee(s) who reviewed the video prior to sending the takedown notice were subjectively aware that the video was a fair use prior to sending the notice. However, in the Lenz/EFF memorandum filed last week, she states this:

The undisputed evidence demonstrates Universal failed to form a good faith belief that the Video is infringing, either because it never considered whether it was a fair use and therefore authorized by law, or because it chose to be willfully blind to that fact. (Lenz MSJ, Pg. 8).

I think this excerpt is a fair, albeit very brief, summary of Lenz’s factual framework in support of her motion—the unredacted portions at least. This framing definitely supports the objective standard in Diebold, where a defendant could be liable when s/he should have known the video was likely a fair use; but, it feels factually light under the subjective Rossi standard, were they have to actually be aware the video was likely a fair use. Recall that the Ninth Circuit explicitly rejected the objective standard. (Rossi, 391 at 1004 (“A copyright owner cannot be held liable simply because an unknowing mistake is made, even if the copyright owner acted unreasonably in making the mistake. Rather, there must be a demonstration of some actual knowledge of misrepresentation on the part of the copyright owner.”)).

So what now? Back in the 2008 ruling on fair use, the court appeared poised to rule that this video was an unequivocal instance of fair use worthy of §512(f) damages. If that is the outcome on the current motions, I’m not sure the Ninth Circuit will agree based on their narrow circumscription of §512(f) misrepresentations. Unfortunately, if the district court rules this is not a violation, it removes almost all the teeth from §512(f), as copyright owners would then have a statutory incentive to issue takedown notices blindly, without looking carefully at the content in question, and, potentially, without repercussion.

However resolved, this issue smells ripe for appeal.

EFF’s Lenz v. Universal page.

Comments Off Posted in: Analysis, Commentary on October 29, 2010

Impenatrable EULAs and the Dying First Sale Doctrine: Vernor v. Autodesk

Today, the Ninth Circuit issued its opinion in Vernor v. Autodesk, reversing the district court’s ruling which held a sale of software transferred ownership of the copy to a customer and not a mere license.

This case hits on a number of fascinating legal topics (first sale, UCC, licensing rights, statutory interpretations of copyright act, copyright misuse, etc) that are not easily explained in a simple blog post.  Hopefully we can pick this one up for discussion on this week’s podcast and give it some more thought.  In the meantime, here’s a quick rundown of facts/holdings and some quick observations:

Copies of AutoCAD are normally sold from Autodesk (the developer/marketer) with a software license agreement (a/k/a a EULA).  Although there are a few different versions of the license, all of them clearly state that Autodesk retains title to all copies and the customer is receiving a non-exclusive, non-transferable license to use the software.  Also, these agreements state the license terminates upon non-compliance and, if the software is an “upgrade,” the customer “must destroy [any AutoCAD software] previously licensed” to them,  “including [hard and soft] copies, within 60 days of purchas[ing] the upgrade.”

A person named Vernor bought several copies of used AutoCAD, from a few different sources — includes at least a garage sale and an office sale (think “going out-of-business” sale) from a company named “CTA.” Each copy was apparently in a product box, which had already been opened (no shrink wrap on the outside), contained the necessary optical media, and activation code. Vernor never installed any of the copies on his computer — and instead listed them for sale on eBay.

Autodesk, threatened to sue for copyright infringement and sent takedown notices each time they found an eBay listing. Vernor counter noticed each time and sold a bunch of copies.

Eventually, after nearly losing his eBay account, Vernor wrote to Autodesk and argued that he had the right to sell copies of the software under the first sale doctrine (which limits a copyright holder’s ability to collect royalties following the first sale of a hard copy, see 17 USC § 109) since he bought it used.  Vernor also argued that the license agreement did not apply to him, because he never agreed to it or installed the software (no “I agree” click-through UI splash).

Autodesk disagreed. Then, Vernor sued Autodesk seeking a declaratory judgment (asking the judge to declare he was not infringing) and alleged copyright misuse. The District court (see MTD and MSJ orders) held Vernor’s sales were not copyright infringements based on the first sale doctrine but never resolved the misuse of copyright claims. Autodesk appealed to the Ninth Circuit.

Interesting questions posed and the ninth circuit’s (paraphrased) answers:

(1) Were the original copies sold or licensed by Autodesk, despite what the license said?

Ninth cir: The AutoCAD EULA is a license, because Autodesk called the EULA a license, restricted the customer’s ability to transfer a copy of the software upon sale, and had a series of additional restrictions on use.

(2) Since the Autodesk EULA allowed “indefinite” possession of the software in perpetuity, can it still be a license?

Ninth Cir: Yes, it’s still a license. The ability to hold rights in perpetuity is a factor in analysis, but not dispositive by itself.

Result: The right to use software is distinct from the right to own it, at least in this case.

Why is this opinion important? There are a lot of journal articles that devote hundreds of pages to this topic and argue both sides fervently on the merits – instrument drafting and UCC Art. II sale/license distinctions, software policy. They are all worth reading — I love thinking about these things as a lawyer.

But, as a consumer, I’m bummed by what I perceive to be the death throes of the first sale doctrine. I wonder if it’s only a matter of time before (possibly not even within my own lifetime) that all (or at least most) media will only be available in these restrictive formats, with licenses or DRM, the concept of a secondary media market is lost, and the first sale doctrine will be as dusty and forgotten as the 3d Amendment.

1 Comment Posted in: Analysis, Commentary on September 10, 2010

iPhone 4 Jailbreak Released, Bricks to follow?

Less than a week after the Library of Congress released the latest round of DMCA anti-circumvention exemptions, word is out that the iPhone 4 has been jailbroken.  In fact, a new website called “jailbreakme.com” offers a software app to accomplish exactly this.

Apple’s support site continues to state that jailbreaking is a violation of the iOS license agreement.  Perhaps the obvious conclusion is that Apple will continue to include anti-jailbreaking/iOS modification restrictions within the license agreement.   The bottom line:  if you jailbreak your iPhone, you still lose your warranty, and an update push might brick your device.  That’s been the norm for some time, so nothing terribly new here.  Apple remains within their legal rights also, since the DMCA exemptions do not affect contract law.

Despite the tech media’s positive support for the new exemptions, I have not seen a detailed discussion of the limitations of the exemptions (Dominik and I discussed some of them on this week’s podcast in detail).  Based on our reading, the exemptions are not a sweeping authorization for all jailbreaking activities.  Websites that provide “jailbreaking” apps or services, like jailbreakme.com,  may still have legal concerns.

If you read the official release from the US Copyright Office, you might have noted this little quirky sentence in the first paragraph:

“Persons making noninfringing uses of following six classes of works will not be subject to the prohibition against circumventing access controls (17 U.S.C. § 1201(a)(1)) until the conclusion of the next rulemaking.”

Important here is that the exemptions only apply to § 1201(a)(1) and no other section.  If you read the entire statute, you can see that § 1201(a)(2), which is not exempted, still prohibits the:

“manufactur[ing], import[ing], offer[ing] to the public, provid[ing], or otherwise traffic[king] in any technology, product, service, device, component, or part thereof, that –

(A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title”

Unfortunately, this means that it is still unlawful to provide an application or service for jailbreaking.  App developers should take notice that they are probably not exempt from these prohibitions, should Apple decide to pursue them in court.  However, based on the 5th Circuit’s latest opinion, there is still some argument that a violation of § 1201(a) does not stand on its own without an underlying infringement of a copyright owner’s exclusive rights.  Still though, I would not consider the 5th Circuit’s opinion on § 1201 to be the ultimate fix.   Be careful when dancing near the lines on these rather complex statutory provisions and don’t forget that an applicable EULA or ToS  may still be enforceable in court.

Comments Off Posted in: Commentary on August 3, 2010

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