New Media and Technology Law Blog

New York Court Dismisses Antitrust Defense to Breach of Distribution Contract

Your client is sued for failure to pay on a contract and says it shouldn’t have to pay because the prices were fixed by a cartel or that it was strong-armed into paying for a “bundle” of services or distribution channels even though it only wanted a subset of the bundle. Is that a defense? After all, aren’t contracts for unlawful ends unenforceable?

The answer, most often, is “no.” A recent decision by a New York Commercial Division judge provides a useful reminder of the fairly limited allowance of antitrust defenses to contract claims.

In Time Warner Cable Enterprises LLC v. Universal Communications Network, Inc., Justice Oing granted Time Warner Cable’s (“TWC”) motion to dismiss the defendant’s affirmative defenses under federal antitrust laws.

Read the full post on our Minding Your Business Blog.

Satellite TV Provider Not Required to Offer Credit When Channels Go Dark

Expanded Basic. Choice. Choice Plus. Cable and satellite TV customers pay monthly fees for bundled channel packages of different sizes. The packages are becoming “skinnier,” allowing you to customize your service from a set of modules (i.e., the Family package, the Sports package, various language packages, etc.). But each module is still a pre-set bundle of channels.

In the meantime, class action lawyers have launched a series of cases to try to “break the bundle.” Antitrust attacks have had middling results. See e.g., Brantley and Cablevision. And now the Eighth Circuit has decisively rejected claims that bundled monthly services contracts are “illusory” or include an implicit guarantee to consistently provide the same channel lineup.

In Stokes v. DISH Network, LLC, customers brought a class action against DISH after Turner and FOX News channels went “dark” on DISH for about a month each during 2014-2015 license disputes. The customers argued that they had paid for the advertised bundle and, therefore, either (i) DISH was required to credit customers for the missing pieces of the bundle or (ii) the entire monthly service for fee contract was based on an illusory promise and, therefore, unenforceable.

Read the full post on our Minding Your Business Blog.

Know Thy Software Vendor: Website Operator Cannot Sidestep Copyright Infringement Claims over Link to Allegedly Infringing Software

Last month, a New York district court refused to dismiss most of the copyright infringement claims asserted against a website operator based on an allegation that the website linked to an infringing copy of plaintiff’s software stored on a third-party’s servers. (Live Face on Web, LLC v. Biblio Holdings LLC, 2016 WL 4766344 (S.D.N.Y., September 13, 2016)).

The software at issue allows websites to display a video of a personal host to welcome online visitors, explaining the website’s products or services and, ideally, capturing the attention of the visitor and increasing the site’s “stickiness.”  A website operator/customer implements the software by embedding an HTML script tag to its website code to link the website to a copy of the software on the customer’s server or an outside server. When a user’s browser retrieves a webpage, a copy of the software is allegedly stored on the visitor’s computer in cache.

The plaintiff claimed that the defendant used an infringing version of its software to display the welcome video on its website.  The defendant countered that, in good faith, it hired a web developer to implement this functionality, that the developer represented that it had exclusive rights to its software, and that the software was not hosted by the defendant.

At this early stage of the litigation, the court allowed the claim of direct copyright infringement to go forward.  Based upon the allegations in the complaint, the court reasoned that the infringing software was automatically saved into the cache or RAM of website visitors that resulted in the display of the spokesperson video on their screens – actions that sufficiently allege distribution of the infringing software.

The court noted, however, that defendant may have a viable defense (based on the landmark 2007 Perfect 10 decision) that the act of inline linking to infringing copies of software hosted and distributed by a third party does not constitute direct infringement – in essence, because the infringing software was stored and distributed from a third-party web developer’s servers, defendant cannot be deemed a direct infringer.  However, the court felt that the issue was not adequately briefed and required additional discovery.  Another issue that required additional discovery was defendant’s argument that any storage of the infringing software on users’ systems was only for a “transitory duration” and not sufficiently “fixed” as to create an infringing copy under controlling Second Circuit precedent; again, the court stated that “to the extent that the duration of storage on users’ systems is relevant, it presents an issue of fact.”

Regarding secondary liability, the court dismissed the plaintiff’s contributory infringement claim, finding nothing in the complaint suggesting that defendant had knowledge it was using an infringing version of plaintiff’s software or that it otherwise materially contributed to the infringing conduct. Yet, the court allowed the vicarious liability claim to proceed, finding that the complaint plausibly alleged that defendant controlled the allegedly unlawful distribution of software to website visitors and arguably benefited from the increased web traffic.

The dispute is an interesting one, as it highlights some of the more evolving areas of copyright law that crop up when content or software is delivered over the web or from remote servers.  As mentioned by the court, the involvement of defendant’s outside web developer “may be significant in determining defendants’ ultimate liability,” particularly in determining any potential damages and whether plaintiff might only garner a minimal statutory award.

Ultimately, the lesson is that lawyers need to be in synch with tech developers as new initiatives are developed.  Although it is not clear from the opinion, one would expect that the defendant’s contract with its developer might have contained appropriate intellectual property representations and indemnities. Even so, as a practical matter, this case illustrates the value of doing reasonable diligence when third party software will be an important part of one’s online presence.

Liability under CDA Section 230? Recent Lawsuit Tries to Flip the Script against Social Media Service

Title V of the Telecommunications Act of 1996, also known as the “Communications Decency Act of 1996” or “CDA” was signed into law in February 1996.  The goal of the CDA was to control the exposure of minors to indecent material, but the law’s passage provoked legal challenges and pertinent sections of the Act were subsequently struck down by the Supreme Court as unconstitutional limitations on free speech. Yet, one section of the CDA, §230, remained intact and has proven to encourage the growth of web-based, interactive services.

Over the last few years, website operators, search engines and other interactive services have enjoyed a relative stable period of CDA immunity under Section 230 of the Communications Decency Act (CDA) from liability associated with user-generated content.  Despite a few outliers, Section 230 has been generally interpreted by most courts to protect website operators and other “interactive computer services” against claims arising out of third-party content.

However, a recent dispute involving a Snapchat feature known as “Discover” raises new questions under the CDA.  The feature showcases certain interactive “channels” from selected partners who curate content daily.  Last month, a parent of a 14-year old filed a putative class action against Snapchat claiming that her son was exposed to inappropriately racy content, particularly since, as plaintiff alleges, Snapchat does not tailor its feeds for adult and younger users.  (Doe v. Snapchat, Inc., No. 16-04955 (C.D. Cal. filed July 7, 2016)).  The complaint asserts that while Snapchat’s terms of service prohibit users under 13 from signing up for the service, it does not include any warnings about any possible “offensive” content on Snapchat for those under 18, beyond stating some “Community Guidelines” about what types of material users should not post in “Stories” or “Snaps.” Continue Reading

Second Circuit Blazes New Trail in Set-Top Box Cases: Cable Service and Boxes Are Not Separate Products

Since 2008, cable customers have been suing cable operators across the country claiming operators violate the antitrust laws by forcing customers to lease set-top boxes from the operator to access “premium” cable services.  Plaintiffs claim that the operators have “tied” one product (the service) to another product (the box) and that the arrangement is a per se violation of the antitrust laws (i.e., unlawful regardless of any alleged pro-competitive benefits).

The lawsuits have taken a number of different paths—with some surprising twists and turns:

  • The first jury trial resulted in a verdict against Cox in 2015.  But the trial court then set aside the verdict on the grounds it had rejected earlier on summary judgment.
  • When another operator agreed to settle claims in a Philadelphia case, the district court refused to approve the deal, finding that the settlement class was not “ascertainable.”  But last week, the Third Circuit quietly reversed in a summary decision, ruling that ascertainability is not relevant where the parties have agreed to the settlement class definition.
  • Meanwhile, the FCC has jumped (back) into the fray by proposing rules to force cable operators to “Unlock the Box” —or, perhaps, give the FCC the keys.

A number of courts have dismissed set-top box tying claims for failure to plead or prove that the cable operator has sufficient “market power” to coerce a customer into leasing the set-top box because cable operators face competition from “overbuilders” and/or satellite services.  Others dismissed because there was no proof that anyone would have sold stand-alone boxes “but for” the alleged tying.

Just before the Labor Day weekend, however, the Second Circuit established a new and different path.  In Kaufman v. Time Warner, No. 11-2512-cv (2d Cir. Sept. 2, 2016), a panel affirmed 2-1 the district court’s ruling that the plaintiffs failed to allege market power.  But that ruling was only a backstop.  The majority’s principal ground for affirming dismissal was that premium cable services and the interactive boxes used to access them are not separate products at all.  As such, the fundamental premise of any “tying” claim—two otherwise separate products tied together by the seller—simply does not exist. Continue Reading

Mobile App VPPA Suit Survives Spokeo Standing Challenge

In Yershov v. Gannett Satellite Information Network, Inc., a user of the free USA Today app alleged that each time he viewed a video clip, the app transmitted his mobile Android ID, GPS coordinates and identification of the watched video to a third-party analytics company to create user profiles for the purposes of targeted advertising, in violation of the Video Privacy Protection Act (VPPA). When we last wrote about this case in May, the First Circuit reversed the dismissal by the district court and allowed the case to proceed, taking a more generous view as to who is a “consumer” under the VPPA.

On remand, Gannett moved to dismiss the complaint again for lack of subject matter jurisdiction, contending that the complaint merely alleges a “bare procedural violation” of the VPPA, insufficient to establish Article III standing to bring suit under the standard enunciated in the Supreme Court’s Spokeo decision. In essence, Gannett contended that the complaint does not allege a concrete injury in fact, and that even if it did, the complaint depends on the “implausible” assumption that the third-party analytics company receiving the data maintains a “profile” on the plaintiff. Continue Reading

FCC Media Bureau Clarifies Broadcasters’ Negotiation Remedies

Negotiations between television channels/networks and pay TV operators are a breed apart.  The stakes are high and the consequence of failure – a “dark” screen – is all too public.

But the critical factor that sets these negotiations apart is the actual regulation of the negotiations under three main categories of rules.

  • Broadcasters may invoke “Must Carry” status or seek to negotiate terms for “retransmission” under FCC rules requiring “good faith” negotiations.
  • Program Carriage rules protect channels and networks from certain abuses by operators. Conversely, Program Access rules ensure operators have certain rights to license programming.
  • The FCC also has issued a series of orders in connection with mergers and other transactions, some of which allow an arbitrator to pick one offer or the other in “night” baseball-style arbitration when certain networks and operators cannot agree on terms of carriage.

On August 26, 2016, the FCC Media Bureau ruled that broadcasters are limited to the first bucket above, the Must Carry/Retransmission Consent rules. (In re Liberman Broadcasting, Inc. v. Comcast Corp., MB Docket No. 16-121 (Aug. 26, 2016).  This is significant because it comes in the midst of an ongoing debate over the Retransmission Consent rules and the FCC’s “totality of the circumstances” test.  Generally speaking, a party to a retransmission consent negotiation may seek to demonstrate, based on the “totality of the circumstances” of a particular retransmission consent negotiation, that the other party breached its duty to negotiate in good faith.  Under the Media Bureau’s ruling, broadcasters may look solely to the Retransmission Consent rules to regulate their carriage negotiations. Continue Reading

Of “Lunch Stands and Merry-Go-Rounds”: Ninth Circuit’s Rejection of FTC Authority Over “Throttling” Could Have Far Reaching Implications for Cable and Other Broadband Providers

On August 29th, a Ninth Circuit panel unanimously held that the FTC has no power to challenge “throttling” of unlimited data plan customers by mobile broadband providers as an “unfair or deceptive act.”  The panel found that a core source of FTC authority (Section 5 of the FTC Act) does not apply to any “common carriers” that are subject to regulation under the Communications Act of 1934.  (FTC v. AT&T Mobility LLC, No. 14-04785 (9th Cir. Aug. 29, 2016)).

Continue Reading

California Legislature Nearing Final Debate of Biometric and Geolocation Data Security Bill

UPDATE: Prior to the close of the legislative session, the amended AB 83 failed to make it out committee.

With the session ending on August 31st, the California legislature is debating a bill (AB 83) that would expand data security requirements for businesses that maintain personal information of California residents to include, among other things, protection for geolocation and biometric data. Under existing law (Cal. Civ. Code §1798.81.5(b)), a person or business that owns, licenses, or maintains a California resident’s “personal information,” must implement and maintain “reasonable security procedures and practices appropriate to the nature of the information.”   The current law also lists multiple types of covered “personal information.” Continue Reading

Switching Consumer Device to Ad-Supported Environment Is Not Deceptive under New York Law

If your company sells a smart device to a consumer, can it later turn the device into a paid advertising platform? Can it do so without advanced disclosure?  A recent court ruling suggests the answer is “yes,” at least in New York. Continue Reading