Header graphic for print

New Media and Technology Law Blog

Upcoming Summer Blockbuster: Impending Shortage of IPv4 IP Addresses

Posted in Internet, Technology

There is an interesting article in today’s Wall Street Journal about the impending shortage of IPv4 IP addresses (forcing tech companies and cloud providers to scramble to secure the remaining stock for U.S. users) and the IPv6 solution.

Hate to say “I told you so” but…see our prior coverage here and here.

But what should you be doing now? To the extent you are involved in negotiating internet-related infrastructure transactions, you should be thinking about adding in IPv6-capability provisions, including, as appropriate, commitments regarding upgrades.  There is a real cost to becoming IPv6-compatible, as companies have to purchase new network switches and routers. According to sources quoted in today’s Wall Street Journal article, only 9% of the Internet community has done that so far, and such a company-wide migration may cost as much as 7% of a company’s annual IT budget. Thus, since this can be a significant financial issue, best practice would be to capture any understandings in the transaction documents.    

Who Exactly Is a ‘User’ under the DMCA Safe Harbor?

Posted in Copyright, Online Content

The DMCA was enacted in 1998 to preserve “strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in a digital networked environment.”  As part of this implicit bargain, Title II of the DMCA offers safe harbors for qualifying service providers to limit their liability for claims of copyright infringement.  The Section 512(c) safe harbor protects storage providers (and has been the subject of the much litigation over the past decade).

Specifically, Section 512(c) applies to infringements that occur “by reason of the storage at the direction of a user of material” on a service provider’s system or network.  The statute does not define “user” and it seems, until recently, no court had interpreted the term.  Is a “user” simply anyone who uses an online storage platform, or should the definition exclude those persons who may have an independent contractor or similar relationship with the service provider?  In the typical situation, a website or app might offer to host content and facilitate online sharing and viewing of uploaded photos and videos.  But what if the online site only allows selected applicants to post content on the site on specific topics and offers financial incentives based upon the number of clicks?

In BWP Media USA, Inc. v. Clarity Digital Group, LLC, No. 14-00467 (D. Colo. Mar. 31, 2015), the court was compelled to take a deep dive into what “storage at the direction of a user” means in the context of new media — specifically, the business model of Examiner.com, a so-called “content farm” style site which posts articles written by third parties on popular news, entertainment and lifestyle topics.  Unlike the popular video sharing sites, Examiner.com has more involvement in what goes up on its site. The site does not assign stories and asserts that it does not pre-screen or edit the work of its contributors.  However, the site conducts background checks on individuals who apply to be “Examiners” on a chosen topic, requires contributors to comply with its Editorial Requirements, and may decide to feature a contributor’s work outside his or her topic page (such as on the Examiner.com main page). In some circumstances, contributors may be paid based upon an article’s page views, traffic and similar metrics.  In addition, contributors must also enter into the “Examiners Independent Contractor Agreement and License” before receiving permission to post to the site.  The agreement holds contributors to certain editorial requirements and obligates them to “regularly create and post new Works to the Web Page and update the Web Page as often as reasonably needed.” The agreement also states that contributors must not include copyrighted content on their pages without permission.

The plaintiffs alleged that the Examiner hosted user-submitted articles that contained their copyrighted photos without an appropriate license.  The defendant admitted that the site displayed 75 of plaintiffs’ copyrighted photographs without permission, but argued that the Examiners who included those images in posted content did so without involvement from Examiner.com staff.  In claiming protection under the DMCA safe harbor, the defendant countered that it had no involvement or specific knowledge of the infringing use of plaintiffs’ photographs before they were posted to the site, that it didn’t pre-screen or approve the articles at issue and that it otherwise complied with the requirements of the DMCA and removed the photos at issue in a timely manner after it received a takedown notice.

The dispute centered on whether the defendant was entitled to protection under the § 512(c) safe harbor.  More specifically, the question became whether the contributors to the Examiner were “users” under § 512(c), that is, were the plaintiffs’ photographs stored on defendant’s system at the direction of the site’s contributors or stored at the direction of defendant.  In rejecting the plaintiffs’ copyright claims, the court found no evidence that a content manager, review team, or any Examiner.com staff had any actual control or influence over the content of the articles containing plaintiffs’ photographs so as to render the use of plaintiffs’ photographs at the direction of defendant.  Moreover, the court stated that in the absence of evidence that the defendant directed the contributors to upload plaintiffs’ photographs to the site, defendant’s policies (e.g., prohibiting use of infringing content in the user agreement, having a repeat infringer policy and offering contributors free access to a licensed photo library) further supported the conclusion that plaintiffs’ photographs were not stored on the site at the direction of defendant.

Finding that the defendant complied with the remaining requirements of the statute, the court ruled that the defendant was entitled to § 512(c) safe harbor protection, dismissing the case.

The ruling appears to be the first court to interpret the term “user” under the § 512(c) safe harbor and the broad reading is certainly notable for providers and distributors of new media.  Today’s online “storage” providers that rely on the DMCA for legal protection are so much more than simple web hosts.  Indeed, the BWP Media ruling echoes prior, expansive readings of the safe harbor, where courts have avoided rigid interpretations and ruled that certain automated functions that make files accessible – such as transcoding or converting uploaded content to certain file formats, extracting metadata to aid searching or assigning permalinks – fell within the ordinary meaning of “storage.”

Emergence of Live Streaming Apps Brings Up Copyright, Privacy, Legal Concerns

Posted in Copyright, Online Content, Social Media

The big fight may be over, but the implications of Mayweather vs. Pacquiao with respect to real-time, one-to-many streaming of video through apps like Meerkat and Periscope are still rippling through the media industry. In short, livestreaming apps allow anyone with a smartphone to effortlessly broadcast live video to social media followers and the wider internet – everything from ordinary life activities (e.g., an individual walking down the street), to live action (e.g., events, protests), to the redistribution of content (e.g., streaming a popular cable show).

This past week, the media reported widespread streaming of the pay-per-view broadcast of the fight by individuals who had paid to view the fight at home. While Periscope’s streams expire after 24 hours and Meerkat does not archive streams, new platforms are being rolled out to support the users of these types of apps, thus suggesting that this may be a growing phenomenon. Expect the delicate push and pull involving DMCA takedown notices to continue between content owners and these new streaming apps. Though, it should be noted that the intellectual property rights issues associated with real-time streaming through these apps are not straightforward, particularly when dealing with the stream of a live event directly from the venue of that event.

Stay tuned for further developments.

U.S. Dept. of Commerce Releases Multistakeholder Guidance on DMCA Notice and Takedown Best Practices

Posted in Copyright

On Tuesday, the U.S. Dept. of Commerce’s Internet Policy Task Force released a guidance containing a list of best practices (and notable “bad” practices), all designed to improve the DMCA’s notice and takedown system for both senders and recipients of notices [See “DMCA Notice-and-Takedown Processes: List of Good, Bad, and Situational Practices”]. The document was developed as part of a multistakeholder forum held between rights holders, creators, service providers and consumer protection advocates, all of whom have an interest in an effective notice and takedown system that balances the interests of both rights holders and online services.

For example, some “Good Practices” for service providers include:

  • Making DMCA takedown and counter-notice mechanisms easy to find and understand.  Web forms should have clearly labeled fields, with help buttons and instructions.
  • Implementing efficient processes for receiving notices that are commensurate with the volume of claims (e.g., allowing multiple URLs to be submitted at one time).
  • Providing confirmation of receipt of a notice or counter-notice that includes a method for referencing past notices in further communications.

The document also offers good general practices for Notice Senders:

  • Taking reasonable measures to determine the online location of the infringing material and “appropriately consider” whether use of the material identified in the notice is unauthorized.
  • When using automated tools, conducting a human review of the site where the notices will be directed, as well as performing periodic spot checks to evaluate whether the automated search parameters are returning the expected results.

Lastly, the document offers guidance on “Situational Practices,” such as Trusted Submitter Programs, which provide efficiencies for rights holders who have a track record of submitting accurate notices.

At only 7 pages, the Dept. of Commerce document is certainly worth the read for both copyright holders and service providers.  Improved notice and takedown practices can result in streamlined procedures, a better reputation in the online community, and fewer disagreements over posted content (which, will decrease the likelihood of litigation for copyright infringement or wrongful takedown notices).

FCC Adopts Net Neutrality Rules, Reclassifies Broadband Access under Title II

Posted in Internet, Regulatory

After nearly 4 million public comments, and months of vigorous public, industry, and Congressional debate, the FCC, by a 3-2 vote, approved revised net neutrality rules to “protect the Open Internet.”  As expected by the Chairman’s statements in the lead-up to the vote, the FCC’s Open Internet Order reclassifies broadband internet access as a “telecommunications service” (or common carrier service) under Title II of the Communications Act.  The new rules cover both wired and wireless broadband.

The principal aspects of the Open Internet Order are:

  • No blocking lawful content.
  • No throttling lawful content.
  • No discrimination against lawful content.
  • No paid prioritization.
  • New FCC authority to examine interconnection agreements.
  • Transparency requirements regarding rates, data caps, network management practices.
  • Reasonable network management permitted to manage the technical and engineering aspects of a provider’s broadband networks.
  • The Order cites the legal foundation for the rules as both Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996.
  • Forbearance from many Title II regulations, including rate regulation, tariffs, or network unbundling.

A clearer picture of the net neutrality rules will emerge in the next few weeks when they are officially published in the Federal Register, and presumably take effect 60 days later.  However, based upon multiple reports, broadband providers are expected to challenge the Order in a federal appeals court (the prior 2010 Open Internet Order was challenged and largely overturned in the U.S. Court of Appeals for the D.C. Circuit).  Only time will tell whether broadband providers will win a stay of the regulations or successfully challenge part or all of the Order and the Title II classification, or whether the court will find that the FCC had adequate statutory authority to enact the rules.  Moreover, Congress has also expressed interest in preempting the FCC and passing its own net neutrality legislation.  Stay tuned.  In the meantime, with the growth of over-the-top streaming video programming and other changes in the video and broadband marketplace, it remains to be seen how the new net neutrality will affect emerging business models, relationships with content providers, and future investments in technology.

Virginia Court Dismisses Webcaster’s Suit Concerning Geofencing Workaround to Copyright Royalty Obligations

Posted in Copyright, Licensing, Technology

We previously wrote about a Virginia federal magistrate judge’s report recommending dismissal of a declaratory judgment action brought by several radio stations asking the court to rule that webcasts limited in scope via geofencing technology to 150 miles from the site of the transmitter should be exempt from liability for copyright royalties under section 114 of the Copyright Act. This past month, the district court agreed with the magistrate’s report and dismissed the action for lack of a justiciable case or controversy between the radio stations and SoundExchange, an organization designated by the Copyright Royalty Board to collect royalties from broadcasters on behalf of copyright owners.

On February 13, 2015, the district court adopted the Magistrate’s report and dismissed the plaintiff’s complaint due to lack of standing to sue.  (WTGD 105.1 FM v. Sound Exchange, Inc., No. 14-00015 (W.D. Va. Feb. 13, 2015)).  Tracking the reasoning of the Magistrate’s decision, the court ruled that the radio station’s allegations against SoundExchange were “too speculative, indefinite and hypothetical” and would seek an impermissible advisory opinion about whether the proposed geofenced broadcasts would result in copyright infringement or not.  The court pointed out that the radio stations have not demonstrated that using geofencing technology to limit the range of a webcast was “anything more than a pipe dream” and pointed out that the stations had only consulted with experts and had not done anything to “implement the technology or demonstrate that geofenced retransmissions will meet the § 114 exemption.”  The court also noted that the real injury at issue in the dispute is the radio station’s fear of liability for copyright infringement – an injury not traceable to SoundExchange, a collector and distributor of royalties due under statutory licenses.  In fact, SoundExchange’s lawyers confirmed in open court that SoundExchange (as opposed to the copyright holders themselves) would have no role in asserting copyright claims should the plaintiff implement geofenced broadcasts in the future.

QVC Sues Shopping App for Web Scraping That Allegedly Triggered Site Outage

Posted in Contracts, Internet, Online Commerce

Operators of public-facing websites are typically concerned about the unauthorized, technology-based extraction of large volumes of information from their sites, often by competitors or others in related businesses.  The practice, usually referred to as screen scraping, web harvesting, crawling or spidering, has been the subject of many questions and a fair amount of litigation over the last decade.

However, despite the litigation in this area, the state of the law on this issue remains somewhat unsettled: neither scrapers looking to access data on public-facing websites nor website operators seeking remedies against scrapers that violate their posted terms of use have very concrete answers as to what is permissible and what is not.

In the latest scraping dispute, the e-commerce site QVC objected to the Pinterest-like shopping aggregator Resultly’s scraping of QVC’s site for real-time pricing data.  In its complaint, QVC claimed that Resultly “excessively crawled” QVC’s retail site (purpotedly sending search requests to QVC’s website at rates ranging from 200-300 requests per minute to up to 36,000 requests per minute) causing a crash that wasn’t resolved for two days, resulting in lost sales.  (See QVC Inc. v. Resultly LLC, No. 14-06714 (E.D. Pa. filed Nov. 24, 2014)). The complaint alleges that the defendant disguised its web crawler to mask its source IP address and thus prevented QVC technicians from identifying the source of the requests and quickly repairing the problem.  QVC brought some of the causes of action often alleged in this type of case, including violations of the Computer Fraud and Abuse Act (CFAA), breach of contract (QVC’s website terms of use), unjust enrichment, tortious interference with prospective economic advantage, conversion and negligence and breach of contract.  Of these and other causes of action typically alleged in these situations, the breach of contract claim is often the clearest source of a remedy.

This case is a particularly interesting scraping case because QVC is seeking damages for the unavailability of their website, which QVC alleges to have been caused by Resultly.  This is an unusual theory of recovery in these types of cases.   For example,  this past summer, LinkedIn settled a scraping dispute with Robocog, the operator of HiringSolved, a “people aggregator” employee recruiting service, over claims that the service employed bots to register false accounts in order to scrape LinkedIn member profile data and thereafter post it to  its service without authorization from Linkedin or its members.  LinkedIn brought various claims under the DMCA and the CFAA, as well as state law claims of trespass and breach of contract, but did not allege that their service was unavailable due to the defendant’s activities.  The parties settled the matter, with Robocog agreeing to pay $40,000, cease crawling LinkedIn’s site and destroy all LinkedIn member data it had collected.  (LinkedIn Corp. v. Robocog Inc., No. 14-00068 (N.D. Cal.  Proposed Final Judgment filed July 11, 2014).

However, in one of the early, yet still leading cases on scraping, eBay, Inc. v. Bidder’s Edge, Inc., 100 F. Supp. 2d 1058 (N.D. Cal. 2000), the district court touched on the foreseeable harm that could result from screen scraping activities, at least when taken in the aggregate.  In the case, the defendant Bidder’s Edge operated an auction aggregation site and accessed eBay’s site about 100,000 times per day, accounting for between 1 and 2 percent of the information requests received by eBay and a slightly smaller percentage of the data transferred by eBay. The court rejected eBay’s claim that it was entitled to injunctive relief because of the defendant’s unauthorized presence alone, or because of the incremental cost the defendant had imposed on operation of the eBay site, but found sufficient proof of threatened harm in the potential for others to imitate the defendant’s activity.

It remains to be seen if the parties will reach a resolution or whether the court will have a chance to interpret QVC’s claims, and whether QVC can provide sufficient evidence of the causation between Resultly’s activities and the website outage.

Companies concerned about scraping should make sure that their website terms of use are clear about what is and isn’t permitted, and that the terms are positioned on the site to support their enforceability. In addition, website owners should ensure they are using “robots.txt,” crawl delays and other technical means to communicate their intentions regarding scraping.  Companies that are interested in scraping should evaluate the terms at issue and other circumstances to understand the limitations in this area.

Music Publishers Bring Contributory Copyright Claims Against ISP for Infringing Activities of Subscribers

Posted in Copyright

In a novel lawsuit that tests the bounds of service provider liability, two music publishers brought suit against an ISP for contributory copyright infringement for allegedly facilitating infringement by failing to terminate the accounts of broadband subscribers who were purportedly repeat infringers that had unlawfully downloaded copyrighted music from BitTorrent sites. (BMG Rights Management (US) LLC v. Cox Enterprises, Inc., No. 14-01611 (E.D. Va. filed Nov. 26, 2014)).

The lawsuit raises many issues:

  • What are the obligations of a broadband provider that receives a notice from a copyright holder about a suspected repeat infringer?
  • How reliable are the infringement notices sent to the ISP?  How can an ISP decide when a subscriber is a repeat infringer?
  • Does this dispute implicate the voluntary “six strikes” Copyright Alert System implemented by certain ISPs?
  • Can the ISP claim immunity under the DMCA §512 safe harbor?  How would a court interpret DMCA §512(i), regarding implementing a “repeat infringer” termination policy, with respect to an ISP?
  • What are the bounds of vicarious liability with respect to an ISP having paid subscribers who allegedly commit infringement?

While many of these issues have not been directly addressed recently by U.S. courts, the lawsuit brings to mind the pre-DMCA decision in Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D. Cal. 1995).  There, the court held that an ISP serving as a passive conduit for copyrighted material was not liable as a direct infringer, but allowed contributory copyright infringement claims to go forward based upon disputed issues of fact as to whether the operator had sufficient knowledge of infringing activity.  Obviously, with the enactment and interpretation of the DMCA and the evolution of new business models, the world has changed and it will be interesting to see how a court views these issues 20 years later.

The current dispute also is reminiscent of the Australian decision in Roadshow Films v iiNet Limited [2012] HCA 16, where the High Court of Australia ruled that an ISP did not “authorise” the infringement of copyrighted films by its customers, despite its inactivity after receiving notices from a copyright association about suspected ongoing infringement by the ISP’s customers.

We will be watching this dispute and await any judicial rulings that might unpack some of the above copyright issues.

California Supreme Court Denies Review of Ruling Allowing Restaurant Owner’s False Advertising Claims to Proceed Against Yelp

Posted in Online Commerce, Online Content

On November 12, 2014, the California Supreme Court denied review of the California Court of Appeals decision in Demetriades v. Yelp, Inc., 2014 WL 3661491 (Cal. App. July 24, 2014), which allowed a restaurant owner to proceed with false advertising and other claims against the consumer review site Yelp based upon Yelp’s marketing claims regarding the accuracy and efficacy of its automated “filter” that removes unreliable  or biased consumer reviews.

Companies, frustrated with their portrayal on online review sites, have mostly struck out when seeking to hold website operators liable for managing and displaying user-generated reviews.  However, the Demetriades case is one example where a court refused to dismiss claims against a consumer review site related to marketing representations. For a fuller treatment of the decision and a larger discussion of the interplay between marketing statements and immunity under CDA Section 230, see our prior post — Website Marketing Statements: The Achilles’Heel to CDA Protection?  

FinCEN Releases Two Rulings Classifying a Bitcoin Payment System and Virtual Currency Trading Platform as MSBs

Posted in Digital Currency, Regulatory, Technology

In its opening salvo bringing bitcoin under the watchful eye of the federal government, the Financial Crimes Enforcement Network (FinCEN) issued a Guidance (FIN-2013-G001) in March 2013 clarifying that anti-money laundering regulations concerning record keeping and recording apply to digital currency exchanges.  Under this initial guidance, a bitcoin exchange that allows users to buy bitcoin with real currency and sell bitcoin for real currency must file as a money services business (MSB) as defined under the Bank Secrecy Act (BSA) with FinCEN (but a user who simply obtains virtual currency and uses it to purchase real or virtual goods or services would not be subject to FinCEN regulations).

Yesterday, FinCEN issued two additional rulings that answer questions submitted by two companies seeking guidance on whether they must register as MSBs and be subject to the accompanying reporting, recordkeeping and monitoring requirements.  These rulings are important in further clarifying the scope of its initial March 2013 guidance.

In FIN-2014-R011, “Request for Administrative Ruling on the Application of FinCEN’s Regulations to a Virtual Currency Trading Platform,” one company asked whether its plans to set up a virtual currency trading and booking platform would make it subject to FinCEN regulations.  Specifically, the company’s plan involved a trading system to match offers to buy and sell convertible virtual currency for real currency anonymously among the platform’s customers (inter-account transfers or payments from customer accounts to third-parties would be prohibited).  In response, the agency ruled that such a trading platform would be considered an MSB:

A person that accepts currency, funds, or any value that substitutes for currency, with the intent and/or effect of transmitting currency, funds, or any value that substitutes for currency to another person or location if a certain predetermined condition established by the transmitter is met, is a money transmitter under FinCEN’s regulations.” […] The Company is facilitating the transfer of value, both real and virtual, between third parties.

The method of funding the transactions is not relevant to the definition of money transmitter. An exchanger will be subject to the same obligations under FinCEN regulations regardless of whether the exchanger acts as a broker (attempting to match two (mostly) simultaneous and offsetting transactions involving the acceptance of one type of currency and the transmission of another) or as a dealer (transacting from its own reserve in either convertible virtual currency or real currency). Therefore, FinCEN finds that the Company is acting as an exchanger of convertible virtual currency, as that term was described in the Guidance.

In FIN-2014-R012, “Request for Administrative Ruling on the Application of FinCEN’s Regulations to a Virtual Currency Payment System,” another company asked whether a proposed convertible virtual currency payment system for the hotel industry that accepted customers’ credit card payments and transferred the payments to the merchants in the form of bitcoin (presumably to avoid substantial foreign exchange risks in Latin America) would make the company a MSB.  Under such a payment system, the merchants would be paid using the company’s own large reserve of bitcoins.  FinCEN responded that if the company sets up such a payment system, the company would be a money transmitter and subject to regulations because “it engages as a business in accepting and converting the customer’s real currency into virtual currency for transmission to the merchant.”

The agency further stated:

The fact that the Company uses its cache of Bitcoin to pay the merchant is not relevant to whether it fits within the definition of money transmitter. An exchanger will be subject to the same obligations under FinCEN regulations regardless of whether the exchanger acts as a broker (attempting to match two (mostly) simultaneous and offsetting transactions involving the acceptance of one type of currency and the transmission of another) or as a dealer (transacting from its own reserve in either convertible virtual currency or real currency).

As the bitcoin ecosystem matures and new business models develop, the reach of federal anti-money laundering regulations may be unclear in certain circumstances.  We will keep you posted as we learn more and work through these issues with our clients.