Everything You Wanted to Know About Emojis and the Law

For the past couple of years, I have invested significantly in all things emojis. This post rounds up everything I’ve done during that period.

1) Emojis and the Law Article

I’m pleased to announce the final version of my paper, Emojis and the Law, was published in the Washington Law Review last month. This version supersedes my working draft, Surveying the Law of Emojis, that became one of my most popular SSRN downloads of the past 15 years. Some topics in the working draft got dropped from the final version, so for those points the working draft is the better citation.

You may be wondering why I posted the full working version, only to write a virtually new version and publish that. In March 2017, relatively late in the placement season, I circulated the working draft to about 50 journals and got zero offers. The journals’ lack of interest surprised me in part because the draft went on to spur a ton of conversation and many downloads, so I’m pretty sure some journals missed a prime opportunity. In any case, I decided to rework the paper and recirculate it in early February 2018, when it attracted over 10 offers. I’m OK being candid about coming up dry in the 2017 cycle because the placement process is fickle, and I’m not the only one who’s experienced its capriciously. I have concluded, however, that the only placement window I trust is the first two weeks of February because the so-called August window has also been dicey.

I chose the Washington Law Review for several reasons, including their willingness to publish it comparatively quickly (placement in February, actually published in October!) and their genuine enthusiasm for the article. How enthusiastic were they? For a law school costume contest, the editorial board dressed up as emojis in honor of the article:

Some media coverage of the Surveying the Law of Emojis draft:

2) Emojis and IP Article

After I posted the Surveying draft, WIPO Magazine asked me write a short article on Emojis and IP. In turn, I asked my former student Gabriella Ziccarelli, also an emoji expert, to collaborate with me. The article largely summarizes the larger work, but because it branched off about midway through the project, it has some pieces that don’t show up anywhere else. If you only want the highlights of the emojis/IP interface, the short piece might be a better choice than the big battleship document.

Co-authoring an article with a former student is one of my greatest professional moments. It’s incredibly gratifying to see our alumni thrive.

3) Blog Posts

Some of my emoji-related blog posts (all but the last one are outtakes from the Surveying draft):

I’ve been patiently waiting for a really juicy emoji interpretation or IP case. Thus far, the Israeli small claims court case is the most “meaty” emoji ruling I’ve seen. I’m sure it’s coming, but it still hasn’t arrived yet. If you see any good cases, please send them my way!

4) Caselaw Dataset

I initially became interested in emoji law after seeing a court opinion reference to emoticons, which made me wonder how often that had happened. Eventually, I compiled every case referencing emojis and emoticons that I could find, and I have keyword alerts set up in Lexis and Westlaw to flag new ones. Unfortunately, there’s no automated way for me to find opinions displaying emojis or emoticons unless the court opinion actually uses one of those phrases, so my list is incomplete. (I fully explain the problems with judicial opinions and emojis in the Surveying draft).

Today I’m sharing the latest version of my caselaw dataset, which I update constantly. As you can see, I have found about 165 opinions referencing emojis or emoticons, of which about 30% are from 2018. I’ll have more to say about the 2018 cohort of emoji/emoticon cases in January.

5) Presentations and Interviews

Talk Slides

I’ve given about a dozen talks on emojis. Some of my slide decks:

Interviews (selected)

The university also put together a promo video.

6) Emoji Items

For me, emojis are not just an area of academic study, they are now an integral and happy part of my life. Some examples:

  • I have decorated my office with many emoji stickers. Photo (I’ve since added dozens more).
  • My kids bought me an emoji tie. Photo (with USPTO Director Andrei Iancu). I also bought the Techdirt Emoji-ment sweatshirt.
  • At IPSC, my fan club honored my birthday with a Poop Emoji cake.
  • My emoji mug. Photo.
  • Combining two of my all-time favorite things, I have a dozen emoji slinkies!!!

 

512(h) Doesn’t Preempt Doe Unmasking Lawsuits–Strike 3 v. Doe

This is my second Strike 3 blog post this week. I imagine this won’t be the last.

In this case, a Doe defendant sought to quash the unmasking subpoena submitted to his/her IAP. The defendant argued that the unmasking subpoena was part of Strike 3’s sue-and-withdraw campaign, but the court says the “burden” is borne only by the IAP having to comply with the subpoena, not the defendant. The defendant argued that copyright doesn’t protect obscenity, but the court pointed to the Copyright Office’s registration of the work being litigated, plus the lack of evidence that the video was obscene (as opposed to just pornographic). The court says that the IP address may not be a reliable authenticator of the defendant’s conduct, but that can be proved at trial. In contrast, in the prior Strike 3 case I blogged, the judge said that it would be too late to correct any misidentification once the unmasking had occurred—a better result that what this court concludes.

The most interesting part of the ruling relates to the defendant’s argument that Section 512(h) preempts unmasking lawsuits against Doe defendants. It’s a creative argument, but not a meritorious one. The court says: “even assuming the DMCA applied here, the statute does not prohibit copyright owners from requesting such a subpoena through other mechanisms such as Rule 45.” I guess it was worth a try.

Unlike the prior case I blogged about , the defendant’s policy arguments fall on deaf ears:

Defendant also implores the Court to stop what it characterizes as the “early stages of copyright troll litigation.” Defendant accuses Plaintiff of having no real intention to litigate, and contends Plaintiff filed these lawsuits as a way to obtain the identities of the alleged infringers at the expense of judicial resources and in circumvention of the avenues Congress sought to provide to similar plaintiff’s. The record before the Court does not support Defendant’s accusations. While the vast majority of Plaintiff’s lawsuits do appear to end in voluntary dismissal after Plaintiff receives the Court’s permission to serve a third-party subpoena on a defendant’s ISP, Plaintiff has proceeded to file an amended complaint in at least one other lawsuit before this Court, indicating that Plaintiff is ready and willing to litigate the cases it files. Additionally, there is no evidence that Plaintiff has engaged in any of the abusive practices used by similar plaintiff’s [sic], such as exploiting Defendant’s identifying information as leverage for settlement or filing one lawsuit against numerous John Does as a way to circumvent filing fees, Because there is no evidence to support Defendant’s conclusory claims that Plaintiff is engaging in copyright troll litigation tactics in the instant lawsuit, and because the subpoena was not granted in circumvention of the DMCA, the Court denies Defendant’s motion to quash on these grounds.

The judge’s only concession to the defendant is that he/she will be referenced in public filings as “John Doe subscriber assigned IP address 69.204.6.161,”  not by name. However, Strike 3 will get the actual name, and it seems likely that a settlement will negate any further in-court proceedings. Bonne chance, IP address 69.204.6.161!

Case citation: Strike 3 Holdings v. John Doe subscriber assigned IP address 69.204.6.161, 2018 WL 6166873 (W.D. N.Y. Nov. 26, 2018)

Failure-to-Warn Claim Against Match.com Fails–Beckman v. Match.com

The Ninth Circuit’s Doe 14 v. Internet Brands and Beckman v. Match.com rulings held that Section 230 immunity did not apply to failure-to-warn claims. Those rulings revived both cases and provided some encouragement to plaintiffs more generally. However, this hope has proven to be false. The plaintiffs cannot win failure-to-warn claim on their merits, so the extra litigation cycles inevitably led to the exact same result as Section 230 immunity, just after more time and money in court.

The Beckman v. Match.com failure-to-warn issue was appealed back to the Ninth Circuit, and last week the Ninth Circuit dismissed it in a brief memo opinion. Beckman lacked the “special relationship” with Match.com necessary to create a duty to warn:

Nevada courts have never recognized a special relationship akin to that between Beckman and Match, and Beckman failed to allege facts sufficient to show that her ability to provide for her own protection was limited by her “submission to the control of the other” such that a special relationship should be found here.

Not even close.

I’ve mentioned the Doe 14 denouement before, but for completeness I’ll reiterate here that it reached the same outcome. In 2016, on remand, the district court dismissed the Doe 14 v. Internet Brands case because the plaintiff lacked a special relationship:

The more difficult question is whether Internet Brands had a “special relationship” with Jane Doe, who along with at least 600,000 others, were members of the Model Mayhem website. The relationship between Jane Doe and Internet Brands, a website operator, does not fall under any of the well-recognized “special relationships” under California law, and the Court has not found, nor have the parties cited, any case in which courts have found the existence of a “special relationship” or imposed a duty under similar or analogous circumstances….

While Jane Doe’s injuries are no doubt severe, the Court concludes that there is no exceptional reason to depart from the general common law rule that “one owes no duty to control the conduct of another, nor to warn those endangered by such conduct.” Although it may have been foreseeable that Flanders and Callum would strike again, Internet Brands only had knowledge of a threat to its member base at large, not to any specific member. Imposing a duty to warn under these circumstances would, in the Court’s opinion, only minimally increase the precautions already taken by website users, and would also likely cause website operators to inundate and overwhelm their users with warnings, ultimately diluting the effectiveness of such warnings. Moreover, as argued by Internet Brands and amicus curiae in the Ninth Circuit, imposing a duty in this case would likely have a “chilling effect” on the internet by opening the floodgates of litigation.

I think it’s time to declare the failure-to-warn exception to Section 230 a dead-end for plaintiffs. Pleading around Section 230 with a failure-to-warn claim brings plaintiffs no closer to victory.

Case citation: Beckman v. Match.com, LLC, No. 17-16043 (9th Cir. Nov. 21, 2018)

Other Section 230/Failure-to-Warn Blog Posts:

Snapchat’s Speed Filter Not Protected by Section 230–Maynard v. Snapchat

Recapping a Year’s Worth of Section 230 Cases That Got Stuck in My Blogging Queue

Social Networking Site Isn’t Liable for User’s Overdose of Drugs He Bought Via the Site–Dyroff v. Ultimate Software

Section 230 Protects Grindr From Harrassed User’s Claims–Herrick v. Grindr

Section 230 Helps Snapchat Defeat Personal Injury Claim Due to ‘Speed Filter’–Maynard v. McGee

Unfortunate Expansion of ‘Failure to Warn’ Exception to Section 230–Beckman v. Match

Section 230 Baffles 9th Circuit (Again)–Doe #14 v. ModelMayhem

9th Circuit Creates Problematic “Failure To Warn” Exception to Section 230 Immunity–Doe 14 v. Internet Brands

Online Dating Websites Aren’t Required To Warn That Some Members May Be Murderers (Forbes Cross-Post)

Restricting Competitive Keyword Ads Is Anti-Competitive–FTC v. 1-800 Contacts

Starting in 2002 and continuing for about a decade, 1-800 Contacts systematically locked up many of its online contact lenses retail competitors into settlement agreements that prohibited the parties from bidding on each other’s trademarks at the search engines. Perhaps not coincidentally (this was the subject of some back-and-forth among experts), 1-800 Contacts unapologetically and consistently charges higher prices than its online retailer competitors.

In 2016, the FTC filed an administrative complaint against 1-800 Contacts, alleging that its competitive advertising restrictions were illegal restraints on trade. The enforcement action implicates a number of complex topics, including: (1) when are settlement agreements pro- or anti-competitive; (2) when (if ever) can competitors agree to restrict advertising; and (3) when does competitive keyword advertising infringe trademarks? The case’s complexity virtually ensured long, fact-intensive, divisive, and very expensive proceedings. Both sides lawyered (10+ on each side) and experted up.

The FTC chose administrative review of this matter instead of federal court. A year ago, the FTC’s administrative law judge ruled in favor of the FTC, holding that 1-800 Contacts engaged in anti-competitive behavior. 1-800 Contacts appealed the case to the full Commission. All five FTC commissioners turned over during the case’s pendency, so the new commissioners inherited a case they had no role in bringing.

Earlier this month, the Commission affirmed the ALJ ruling in a 3-1 ruling (one commissioner was recused). The majority opinion completely vindicates the FTC’s decision to bring the case. The dissent’s opinion, in contrast, raises numerous substantive and procedural flaws with the majority decision. The split of opinion exposes some potentially significant ideological fault lines that might define this cohort of commissioners.

If the FTC’s ruling on the matter were the final stop in the litigation, it would be a watershed ruling on the topic of competitive keyword advertising. Instead, the case simply moves to its inevitable appeal at the DC Circuit. Personally, I think the majority opinion is well-constructed for an appeal. At the same time, the dissent raises some good points that might garner attention on appeal. So it’s anyone’s guess what will happen in the DC Circuit.

Commissioner Simons’ majority opinion

The majority praises the role of advertising in efficient markets: “robust, accurate, and intelligible price competition among those who compete for consumers’ dollars is one of the cornerstones of our vibrant market economy. When information is withheld from consumers, it frustrates their ability to compare the prices and offerings of competitors.” This might signal the FTC’s skepticism about advertising restrictions generally. Certainly the FTC finds plenty of good reasons to be skeptical of 1-800 Contacts’ advertising restrictions.

Aren’t Settlement Agreements Good?

Generally, everyone benefits when litigants settles their cases rather than fighting to the bitter end. However, settlement agreements are not categorically pro-competitive. Indeed, in this case, the settlement agreements restrict truthful competitor advertising, which is a problem:

the settlement agreements effectively shut off an entire—and very important—channel of advertising triggered by an alleged use of the trademark in the generation of search advertising. Stated differently, each settlement reaches farther than a cure based on rewording a label or an ad—effectively eliminating an entire channel of competitive advertising at the key moment when the consumer is considering a purchase. Furthermore, 1-800 Contacts systematically applied similar restrictions to rival after rival that sought to challenge its position. And, contrary to Clorox’s premise, the agreements did achieve a market division through their reciprocal prohibitions on bidding in specific search auctions. Thus, from the perspective of substance, the settlement agreements between 1-800 Contacts and its thirteen rivals were indeed unusual….

the Challenged Agreements are, in essence, agreements between horizontal competitors to restrict the information provided by advertising to consumers when they search for 1-800 Contacts’ trademark terms and URLs; consumers could have used that withheld information to compare and evaluate the prices and other features of competing online sellers. Ultimately, the effect of the advertising restrictions is to make information enabling consumer comparisons more difficult and costly to obtain.

Online search is one of the key methods by which consumers discover vendors and compare products and services. It is an important method by which lower-priced rivals compete with 1-800 Contacts. Rival online sellers generally offer lower prices than 1-800 Contacts, and much of the advertising for those retailers emphasizes those lower prices. This is particularly important because the advertising is presented to a consumer at a time when the consumer is more likely to be looking to buy….

the restrictions at issue here are not limitations on the content of an advertisement a consumer would otherwise see; they are restrictions on a consumer’s opportunity to see a competitor’s ad in the first place. Moreover, the record shows that the suppressed ads often emphasize lower prices. In this context, we find the advertising restrictions are inherently suspect.

Can’t 1-800 Contacts Enforce Its Trademark Rights?

The majority acknowledges that trademark enforcement is “a legitimate procompetitive justification.” However,

When an agreement limits truthful price advertising on the basis of trademark protection, it must be narrowly tailored to protecting the asserted trademark right. The agreements here are not—they restrict advertising regardless of whether the ads are likely to be confusing and, apparently, regardless of whether competitors actually use the trademark term (requiring negative keywords).

The Value of Bidding on Keywords Containing 1-8oo Contacts’ Marks

The dissent repeats several times that 1-800 Contacts’ settlement agreements restricted only one form of advertising, leaving open many other advertising channels. Even if that’s true, the majority explains in great detail why the suppressed advertising channel is especially valuable and important to both 1-800 Contacts and its online retailer rivals:

Trademark search is a significant source of 1-800 Contacts’ business. It accounts for the substantial majority of 1-800 Contacts’ new customer orders attributable to paid search advertising. In 2006, 2007, and 2008, trademark search generated far more orders than non-trademark searches. In 2015, between 20 and 31 percent of 1-800 Contacts’ initial web orders came from users searching for 1-800 Contacts’ trademark terms.  1-800 Contacts’ trademark terms have higher conversion rates than non-branded search terms.

Similarly, for 1-800 Contacts’ online rivals, advertising displayed for searches on 1-800 Contacts’ trademark terms is important. During the period from 2002 through 2016, Google displayed advertisements for nine of the 14 contact lens retailers that are parties to the Challenged Agreements, as a result of their direct bidding on 1-800 Contacts’ trademark terms prior to entering into the agreements. These nine firms found such keyword bidding to be worth the cost, and Google determined their advertisements were sufficiently relevant to warrant display. In addition, parties to the Challenged Agreements consistently testified that, absent the agreements, they would bid, or test bidding, on 1-800 Contacts’ trademark terms and/or remove negative keywords from their advertising accounts….

The volume of searches for 1-800 Contacts’ trademark terms is significant. Based on the comScore dataset of searches by users for the period July 2013, through July 2016 (the “comScore dataset”) analyzed by Complaint Counsel’s expert witness, Dr. Susan Athey, 17 percent of search queries for contact lenses were for 1-800 Contacts’ trademark terms. The volume of searches for 1-800 Contacts’ trademark terms in the comScore dataset was similar in size to the collective volume of searches for the top three generic terms (“contact,” “contact lenses,” and “contacts”). The 1-800 Contacts search term is the largest, single brand-name search term, according to the comScore data analyzed by Dr. Athey.

The reason that 1-800 Contacts’ rivals’ ads are so important at this key moment is that the rival online sellers offer lower prices, and advertising for those retailers often emphasizes those lower prices.  That information is valuable: online shoppers for contact lenses are primarily concerned with low prices. Yet, in a 2012 consumer survey of 1-800 Contacts’ customers, more than one-third of respondents explained that they initially purchased from 1-800 Contacts because “It Was the Only Online Contacts Site of Which I Was Aware,” and a 2015 AEA Investors Fund analysis based on another survey found that actual price variances were “much more” than consumers thought them to be.

Consumers respond to competitors’ ads displayed in response to searches for 1-800 Contacts’ trademark terms. Based on data analyzed by Complaint Counsel’s expert, Dr. Athey, firms that are currently bidding on “1-800 Contacts,” have a higher conversion rate for those searches than for other search terms. 1-800 Contacts observed that an increase in competitor ads appearing in response to a search for 1-800 Contacts’ trademark terms tends to decrease sales for 1-800 Contacts. For example, in a report covering the week ending September 22, 2007, 1-800 Contacts noted a 6 percent week-over-week drop in trademark paid search orders, in part because of competition from Vision Direct, which had been “advertising in the 2nd position on many of [the SERPs for searches for 1-800 Contacts’] branded terms in Google.” See also IDF 726 (report for the week ending March 12, 2010: 1-800 Contacts experienced a lower click-through-rate than in prior weeks, which is “likely the result of additional competitor’s ads . . . showing up on our best terms such as 1800contacts and 1800 contacts”), 727 (report for the week ending June 11, 2010: 1-800 Contacts’ trademark paid search orders through Google and click-through rates for trademark ads “were slightly softer than [the preceding week] because of increased competition on [1-800 Contacts’] best branded terms”).

Similarly, 1-800 Contacts found that reducing the competitor ads that appear in response to searches for 1-800 Contacts’ trademark terms increased sales. For example, in a report covering the week of June 20, 2008, 1-800 Contacts attributed an increase in orders as being helped in part by “LensWorld finally removing all their ads from all of [1-800 Contacts’] trademark keywords.” See also IDF 725 (report for the week ending January 8, 2010: 1-800 Contacts achieved “an all-time record high” for orders obtained through searches for its trademark keywords, due in part to fewer advertisers appearing on searches for 1-800 Contacts’ trademark terms that week, “which always helps improve performance”), 730 (reporting that in late August 2010, orders from new customers coming through search ads on searches for 1-800 Contacts’ trademarks “jumped to the highest level of the year,” due in part to the appearance of “fewer competitors on [1-800 Contacts’] best TM words such as 1800contacts 1 800 contacts and 1800 contacts.”), 723 (report for the week of March 6, 2009: “[t]here are substantially less competitors showing up on our list of monitored TM words . . . in Google[,] which is likely helping improve our TM [conversion rate] and TM order volume.”)….

While the Challenged Agreements do not prevent all advertising for the online sale of contact lenses, they affect a particularly significant type of advertising for online sales at the crucial moment when sales are about to be made. See IDF 661 (finding a higher conversion rate for bids on “1-800 Contacts” than for other search terms). The suppressed ads would have enabled consumers to learn about alternative, lower-priced sellers of contact lenses and to make price comparisons. Prohibiting this particular type of advertising is likely to have substantial anticompetitive effects.

Does Trademark Law Ban Competitive Keyword Advertising?

The majority says it doesn’t need to resolve the legality of competitive keyword advertising, but it nevertheless persuasively shows that courts don’t think that competitive keyword ads, in fact, infringe. The majority sketches out the issue (emphasis added):

Although claims based on keyword bidding have sometimes withstood dispositive motions, apart from a single district court summary judgment decision from over ten years ago [Eric’s note: the stupid Soilworks opinion], no court has found bidding on trademark keywords to constitute trademark infringement, absent some additional factor, such as a misleading use of the trademark in the ad text that confuses consumers as to the advertisement’s source, sponsorship, or affiliation. Rather, “[c]ourts have consistently rejected the notion that buying or creating internet search terms, alone, is enough to raise a claim of trademark infringement.” Tempur-Pedic N. Am., 2017 WL 2957912, at *7 (holding, on motion for preliminary injunction, that “[b]ecause the court has concluded that the purchase of AdWords alone, without directing consumers to a potentially confusing website, is unlikely to cause customer confusion, the AdWords will not be included in the injunction”); see Acad. of Motion Picture Arts & Sciences v. GoDaddy.com, Inc., 2015 WL 5311085, *50 (C.D. Cal. Sept. 10, 2015) (“There is a growing consensus in the case authorities that keyword advertising does not violate the Lanham Act.”). Indeed, Respondent lost the one infringement case that it pursued to judgment. See 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013) (affirming, in relevant part, summary judgment in favor of defendant)…..Despite the accumulating evidence regarding the weakness of trademark infringement claims, 1-800 Contacts continued to police and enforce the Challenged Agreements and, consequently, continued to extend their anticompetitive effects.

A leading trademark treatise agrees that displays of non-deceptive advertising links arising from competitors’ purchases of trademark keywords are not confusing. See 5 McCarthy on Trademarks and Unfair Competition § 25A:8 (5th ed. Supp. 2018 update).

FN 42 says (emphasis added): “See CX8014 at 021 (¶ 43) (Tushnet Rebuttal Report) (noting that the “preeminent expert on internet advertising law . . . has been unable to identify any case in which a defendant lost a trial on likely confusion based on purchases of a plaintiff’s trademark as a search engine keyword – despite the filing of over a hundred such cases”); Hogan, Tr. 3459-61 (1-800 Contacts’ trademark law expert acknowledging that he was not aware of any court that had found liability based on keyword bidding alone); USA Nutraceuticals Grp., Inc. v. BPI Sports, LLC, 165 F. Supp. 3d 1256, 1266 (S.D. Fla. 2016) (“[Plaintiff] points to no case indicating that the simple purchase of advertising keywords, without more, may constitute initial interest confusion. . . .”).”

[Navel-gazing sidebar: Rebecca generously called me the “preeminent expert on internet advertising law” in her rebuttal report…but the FTC didn’t reference me by name. Yes, I got the equivalent of subtweeted by the FTC. If my mom were around, she would praise me for the honorific, and then chide me that I obviously wasn’t important enough to be referenced by name by the FTC. Navel-gazing over.]

Back to the FTC’s take on the legitimacy of competitive keyword advertising (emphasis added):

In this case, the agreements restrict a type of competitive advertising that has never been found to violate the trademark laws, and the weight of authority overwhelmingly points to non-infringement. We are not convinced that trademark protection in this case is a valid procompetitive benefit that merits suppressing truthful advertising….

The justification for including negative keywords in the agreements is even weaker. Not only is there a lack of support for a finding of confusion, discussed above, but no court has ever found that bidding on a generic keyword (like “contacts”), which may be broad or phrase matched by the search engine to a trademark search, is even a “use.”…Because there is no support for a trademark infringement claim based on a failure to designate negative keywords, Respondent has failed to establish that protecting trademark rights justifies negative keyword agreements between competitors….the negative keyword requirement forces 1-800 Contacts’ rivals to override the search engines’ determination that the rivals’ ads are relevant and valuable to consumers

Putting It All Together

The majority provides this helpful recap:

the Challenged Agreements cut off advertising in a way that interfered with the operation of competitive forces in the online sale of contact lenses and disrupted consumers’ mechanisms for comparing and selecting between alternative online sources…

the Challenged Agreements reduced the number of competitor ads, and increased sales for 1-800 Contacts while reducing the sales for its rivals….

the Challenged Agreements insulate 1-800 Contacts from normal competitive forces and divert sales from low-priced sellers to a high-priced seller is direct evidence of an increase in price. The higher prices that consumers are paying do not reflect a producer selling a differentiated product, such as a product with new technology or additional features that offer more than the products of low-priced sellers. Instead, the higher prices are a consequence of 1-800 Contacts shielding itself from competitive pressure by preventing consumers from obtaining information that would enable comparison shopping…. Restricting the advertising presented to such consumers at the critical time when they are about to make a purchase impedes their ability to compare prices, which leaves them unaware of alternatives to 1-800 Contacts’ higher-priced products.

Thus, most consumers only knew about 1-800 Contacts and not the other online retailers (as FN50 echoes, “many 1-800 Contacts customers are unaware that other online contact lens sellers exist….Display of rivals’ search ads would tend to counter this ignorance”)–likely an artifact of the suppressed competitive keyword advertising that would have alerted consumers about the alternatives. It’s logical to connect this with the fact that 1-800 Contacts charges the highest price among online retailers, because consumers aren’t aware of the competitors. Thus, 1-800 Contacts’ long-term campaign to control competitive keyword ads apparently has been a contributing factor to its ability to charge more than its competitors, costing consumers substantial money due to their lack of knowledge. This confirms the validity of the FTC’s decision to bring the complaint in the first place. They are helping to monitor and improve the efficiency of the market, just as we want and expect them to do.

Search Engines as Victims

1-800 Contacts’ agreements distorted the search engines’ keyword auctions, and the FTC cites that concern too:

the Challenged Agreements resulted in actual harm to search engines. Witnesses from both Google and Bing explained that a reduction in the number of search-advertising auction participants offering relevant ads reduces the price paid by the auction winners and reduces the revenue for the search engine….1-800 Contacts’ internal documents acknowledge that one effect of the Challenged Agreements was reduced search advertising costs….1-800 Contacts paid less per click as a result of the Challenged Agreements….Preventing 1-800 Contacts’ online rivals from bidding on their first choices for keywords, leaving them to bid only for keywords that they value less, reduced those retailers’ demand for search advertising, reduced their purchases of search advertising, and reduced the search engines’ revenues.

Note that because Google runs a second-price auction, reduced competition for keywords benefits the remaining participating advertisers directly. In particular, 1-800 Contacts saved a lot of money by keeping other bidders from bidding in the auctions for its trademarks. Those savings came directly reduced search engines’ revenues.

Commissioner Slaughter’s Concurring Opinion

Commissioner Slaughter “strongly supports” the majority opinion. She sees 1-800 Contacts’ conduct as a “type of illegal bid rigging.” She adds: “Online search bidding restriction may be a new frontier in advertising restraints, but it is just as pernicious as traditional restraints in frustrating the role that advertising plays to benefit consumers in their search for the highest value products and services as recognized by the Supreme Court.” However, she would not have supported bringing the case if it had been based solely on 1-800 Contacts’ harm to search engines.

Commissioner Phillips’ Dissenting Opinion

Commissioner Phillips writes a spirited dissent. He sees this case quite differently than his peers. It makes me wonder if this presages ideological splits among the FTC commissioners. If so, we’ll have more popcorn moments for FTC watchers, but it could reduce the number of times the FTC commissioners act unanimously–historically, a high priority for FTC commissioners.

Much of Commissioner Phillips’ dissent focuses on antitrust “inside baseball” issues, such as the applicable standard of legal review. If you’re an antitrust geek, you’ll enjoy getting into the weeds. The dissent flags a wide range of topics for the appellate court to reach a different conclusion if they are so inclined.

Commissioner Phillips views keyword ads on 1-800 Contacts’ trademarks as a small corner of the advertising world, so restricting those ads is NBD:

The record reflects that competitors’ advertisements may be less effective without the use of 1-800 Contacts’ trademarks. But these restrictions do not significantly affect competition as a whole because the counterparties to the Trademark Settlements are still capable of competing against 1-800 Contacts—including by selling to whomever they wish, advertising aggressively, and even buying advertisements on search engines, just not all advertisements—as are numerous other sellers of contact lenses, including other online retailers (e.g., Lens.com), independent eye care professionals (“ECPs”), optical retail chains (e.g., Visionworks), mass merchants (e.g., JCPenny), and club stores (e.g., Costco).

Commissioner Phillips also thinks the legal questions around keyword ads aren’t as clear as the majority portrays: “the majority overstates the clarity of trademark law at the time of the Trademark Settlements. The record reflects that the parties entered the Trademark Settlements precisely because of the possibility that bidding on trademarked terms as keywords created liability for infringement, a reality exacerbated by the Rescuecom decision….At most, the majority have shown that the legal status of using trademarked terms as keywords in paid search advertising was uncertain.” I think this overstates the consequences of Rescuecom, which only resolved one element of the plaintiff’s prima facie case, didn’t cast any direct shadows on the other elements, and involved the TM owner v. search engine context as opposed to the TM owner v. advertiser suits.

Implications

1-800 Contacts has already indicated that it will appeal this ruling. We don’t know the case’s real implications until, at earliest, the DC Circuit has spoken. Still, I’ll offer some highly preliminary ruminations about the implications of this ruling.

Most likely, this ruling won’t change anyone’s conduct regarding keyword advertising. 1-800 Contacts’ campaign to suppress competitive keyword ads was relatively unique. I’m not aware of other companies who did something similar to 1-800 Contacts and thus would feel the need to change course after this ruling. Similarly, I don’t expect the FTC will find new enforcement targets.

Still, the ruling implicates several common practices that might now need elevated antitrust compliance review:

Suing Over Competitive Keyword Advertising: I don’t think this ruling restricts trademark enforcement actions. 1-800 Contacts’ problems arose from the settlement process, not the filing of the lawsuits. Indeed, so long as there’s some trademark merit to the lawsuit, I think all of the commissioners would endorse the pro-competitive aspects of trademark enforcement. Still, I can imagine some outer boundary, such as a trademark owner who deliberately pursues a campaign of clearly meritless trademark enforcements to raise its competitors’ costs and drive them off the branded keywords. Anything short of that should be untouched by this opinion.

Including Keyword Ad Restrictions in Settlement Agreements. The FTC’s order provides some details about when the FTC thinks settlement agreements can restrict competitive keyword ads. The order says:

nothing in this Paragraph II.B shall prohibit Respondent from entering into or complying with a written agreement providing that a:

1. Seller shall not include in the text of any Search Advertising (a) a false or deceptive claim, (b) a representation that Respondent is the source of the goods or services advertised therein, (c) a representation that the Seller is affiliated with or sponsored by Respondent, or (d) a name that is identical to or confusingly similar to any trademark owned by Respondent; or
2. Seller’s Search Advertising shall clearly identify the Seller (for the avoidance of doubt, including the name of the Seller in the URL, website address, or domain name shall constitute clear identification of the Seller);….

nothing in this Paragraph II shall prohibit Respondent from entering into or complying with a written agreement with a Seller to require that Search Advertising disclose the Seller’s identity and/or lack of affiliation with Respondent or disclose that the Search Advertising is not sponsored by Respondent.

So settlement agreements can ban competitive keyword ads containing false information or that don’t clearly identify the rival. I also think settlement agreements can prohibit further infringement, kicking over to contempt proceedings to determine if/when competitive keyword ads constitute infringement. Commissioner Phillips’ dissent raises concerns about these ambiguities, but trademark settlements routinely contain ambiguous restrictions.

Vertical Keyword Ad Restrictions. The hardest question left open by the FTC opinion is the continued legitimacy of vertical keyword ad restrictions, such as manufacturers restricting retailers’ competitive keyword ads or retailers restricting affiliates’ competitive keyword ads. Vertical restrictions are usually less problematic than  horizontal restrictions, but with respect to keyword ad restrictions, they have the same consequence that the trademark owner clears out other bidders from the keyword auctions. I think trademark owners routinely will have many reasonable pro-competitive justifications for their vertical restraints. Still, many trademark owners will want to consult with competition counsel to double-check the legitimacy of controlling downstream competitive keyword ads. For example, if the trademark owner’s only justification for the vertical restriction is that it reduces its bid costs in the keyword ad auction, I would give serious thought to the continued tenability of the practice.

Case citation: In the Matter of 1-800 Contacts, Inc., 2018 WL 6078349 (FTC Docket #9372, Nov. 7, 2018)

Case library: The FTC maintains a page with public filings in this case. Here’s a selected library of materials (including some not on the FTC page):

* FTC opinions: majority by Commissioner Simons, concurrence by Commissioner Slaughter, dissent by Commissioner Phillips. Final order.

ALJ opinion. Blog post: Interesting Tidbits From FTC’s Antitrust Win Against 1-800 Contacts’ Keyword Ad Restrictions.

* Some expert reports and related material: Howard HoganDr. William LandesRebecca Tushnet’s rebuttal reportProf. Rebecca Tushnet SlidesDr. Evans’ SlidesDr. Susan Athey’s slides (see the exhibit).

* Respondent’s Second Corrected Pretrial BriefBlog post: 1-800 Contacts Charges Higher Prices Than Its Online Competitors, But They Are OK With That–FTC v. 1-800 Contacts

Complaint Counsel’s Corrected Pre-Trial Brief and Exhibits. Blog post: FTC Explains Why It Thinks 1-800 Contacts’ Keyword Ad Settlements Were Anti-Competitive–FTC v. 1-800 Contacts

FTC Complaint from Aug. 2016. Blog post: FTC Sues 1-800 Contacts For Restricting Competitive Keyword Advertising

Ninth Circuit Easily Dismisses YouTube Remove-and-Relocate Case–Darnaa v. Google

This is one of the many lawsuits against YouTube for removing videos and relocating them to a new URL, which resets the view count and breaks inbound links. This case, involving the “musician” Darnaa, generated a little buzz a couple of years ago when she overcame Google’s Section 230(c)(2) defense. Mostly, that ruling demonstrated how Section 230(c)(2) continues to wither as a safe harbor. Despite that early “win” for Darnaa, the district court eventually dismissed Darnaa’s claim, which she appealed to the Ninth Circuit.

The appeal wasn’t even close. The panel dismissed the case in a memo opinion without oral arguments.

YouTube’s TOS “forecloses damages arising from ‘any interruption or cessation of transmission to or from [YouTube’s] services,’ or ‘any errors or omissions in any content,’” and the district court found that those limitations helped Google’s defense. Darnaa argued that the provision was unconscionable. The court says the availability of marketplace alternatives lessens any procedural unconscionability:

Darnaa alleges that music industry practices have rendered YouTube the only viable choice for displaying videos. But the relevant standard is whether “reasonably available” alternatives exist, not equally dominant or popular alternatives. Indeed, Darnaa’s complaint acknowledges that artists can display their music videos on various websites. Finally, the provision does not bear other indicia of undue surprise, as it is clearly identifiable and printed in all caps.

The court says the provision isn’t substantively unconscionable because “YouTube offers its video streaming services at no cost to the user, [so] it has a valid commercial need to limit liability for actions taken to regulate its platform” [cite to Lewis].

The Darnaa case was filed in April 2014. Barring an appeal to the US Supreme Court (which would have zero chance if filed), this case has quietly reached its entirely predictable denouement after 4.5 years of litigation. What an expensive waste on all sides.

Case citation: Darnaa v. Google LLC, 2018 WL 6131133 (9th Cir. Nov. 21, 2018)

Other YouTube Remove-and-Relocate Posts:

Another YouTube Remove-and-Relocate Case Fails–Kinney v. YouTube
YouTube Defeats Another Remove-and-Relocate Lawsuit–Song Fi v. Google
YouTube Defeats Defamation Claim in ‘Remove-and-Relocate’ Case–Bartholomew v. YouTube
YouTube Defeats Another Remove-and-Relocate Case–Darnaa v. Google
Google Loses Two Section 230(c)(2) Rulings–Spy Phone v. Google and Darnaa v. Google
Section 230 Protects YouTube’s Removal of User’s Videos–Lancaster v. Alphabet
YouTube Wins Another Case Over Removing And Relocating User Videos (re Lewis v. Google)
Can YouTube ‘Remove And Relocate’ User Videos Capriciously?–Darnaa v. Google
Section 230(c)(2) Gets No Luv From the Courts–Song Fi v. Google
Venue Clause in YouTube Terms of Service Upheld–Song Fi v. Google

512(f) Claim Over Counternotice Survives Motion to Dismiss–Handshoe v. Perret

[Oops, this post got stuck in my draft folder. Better late than never.]

Whew, this case will never end. I’ve blogged it a few times over the years, including a ruling not that long ago. It’s showing up again on the blog because a 512(f) claim survived a motion to dismiss. Even more unusually, the 512(f) claim is based on a counternotice, not a takedown notice. I’m sure I’m forgetting something, but I can’t recall a 512(f) case over a counternotice that’s gotten this far.

The underlying dispute relates to files, posted by Handshoe, that allegedly infringe Leary’s Canadian copyrights. Leary sent takedown notices on the files. Handshoe counternoticed. Leary now claims the counternotices were bogus. The court summarizes:

Leary’s § 512(f) claims against Handshoe involve two instances in which Handshoe allegedly submitted counternotifications, one to YouTube on July 14, 2014, and another to AWS in late January 2016. Leary alleges that Handshoe swore under penalty of perjury that he held a good faith belief that his use of Leary’s copyrighted images did not constitute copyright infringement, even though Handshoe purportedly knew that he was infringing Leary’s copyright in the foreign works.  claims that he was damaged in having to research and respond to the counter-notifications and in having his copyrighted works continue to be used in an infringing manner. Liberally construing Leary’s pro se pleadings and assuming all well-pleaded facts are true, his two misrepresentation claims under § 512(f) contain sufficient factual matter to state plausible claims for relief.

I suspect the judge bent the standards in light of Leary’s pro se status. I also doubt Leary’s claims will make it much further, pro se or not.

Despite the court’s statement of plausibility, the court (citing 17 USC 507(b)) says that the applicable statute of limitations for 512(f) claims is 3 years. As a result, the 2014 counternotice is beyond the SOL. The court allows the claim over the 2016 counternotice to proceed.

Case citation: Handshoe v. Perret, 2018 WL 5316361 (S.D. Miss. Oct. 26, 2018)

Prior Posts on Section 512(f):

Another 512(f) Case Fails–Handshoe v. Perret
* A DMCA Section 512(f) Case Survives Dismissal–ISE v. Longarzo
DMCA’s Unhelpful 512(f) Preempts Helpful State Law Claims–Stevens v. Vodka and Milk
Section 512(f) Complaint Survives Motion to Dismiss–Johnson v. New Destiny Church
‘Reaction’ Video Protected By Fair Use–Hosseinzadeh v. Klein
9th Circuit Sides With Fair Use in Dancing Baby Takedown Case
Two 512(f) Rulings Where The Litigants Dispute Copyright Ownership
It Takes a Default Judgment to Win a 17 USC 512(f) Case–Automattic v. Steiner
Vague Takedown Notice Targeting Facebook Page Results in Possible Liability–CrossFit v. Alvies
Another 512(f) Claim Fails–Tuteur v. Crosley-Corcoran
17 USC 512(f) Is Dead–Lenz v. Universal Music
512(f) Plaintiff Can’t Get Discovery to Back Up His Allegations of Bogus Takedowns–Ouellette v. Viacom
Updates on Transborder Copyright Enforcement Over “Grandma Got Run Over by a Reindeer”–Shropshire v. Canning
17 USC 512(f) Preempts State Law Claims Over Bogus Copyright Takedown Notices–Amaretto v. Ozimals
17 USC 512(f) Claim Against “Twilight” Studio Survives Motion to Dismiss–Smith v. Summit Entertainment
Cease & Desist Letter to iTunes Isn’t Covered by 17 USC 512(f)–Red Rock v. UMG
Copyright Takedown Notice Isn’t Actionable Unless There’s an Actual Takedown–Amaretto v. Ozimals
Second Life Ordered to Stop Honoring a Copyright Owner’s Takedown Notices–Amaretto Ranch Breedables v. Ozimals
Another Copyright Owner Sent a Defective Takedown Notice and Faced 512(f) Liability–Rosen v. HSI
Furniture Retailer Enjoined from Sending eBay VeRO Notices–Design Furnishings v. Zen Path
YouTube Uploader Can’t Sue Sender of Mistaken Takedown Notice–Cabell v. Zimmerman
Rare Ruling on Damages for Sending Bogus Copyright Takedown Notice–Lenz v. Universal
512(f) Claim Dismissed on Jurisdictional Grounds–Project DoD v. Federici
Biosafe-One v. Hawks Dismissed
Michael Savage Takedown Letter Might Violate 512(f)–Brave New Media v. Weiner
Copyright Owner Enjoined from Sending DMCA Takedown Notices–Biosafe-One v. Hawks
New(ish) Report on 512 Takedown Notices
Can 512(f) Support an Injunction? Novotny v. Chapman
Allegedly Wrong VeRO Notice of Claimed Infringement Not Actionable–Dudnikov v. MGA Entertainment

Court Blasts “Copyright Troll” for Treating Courts “as an ATM”–Strike 3 v. Doe

Strike 3 produces pornography. The court calls it a “copyright troll.” It has filed nearly 2,000 copyright infringement cases in the past 13 months. With that many cases, it’s bound to run into a skeptical judge, and whoa, did Judge Lamberth of the DC federal courts deliver it a stinging benchslap. After suing an IP address, Strike 3 asked the court to issue a subpoena to the Internet access provider to unmask the subscriber. It’s fair to say this request doesn’t go well. This excoriating opinion correctly identifies, and then eviscerates, many flaws in Strike 3’s litigation strategy.

Suing an IP Address Associated with a BitTorrent User. The court says this approach is “famously flawed” because of its many possible errors in unique identification, including “virtual private networks and onion routing spoof IP addresses (for good and ill); routers and other devices are unsecured; malware cracks passwords and opens backdoors; multiple people (family, roommates, guests, neighbors, etc.) share the same IP address; a geolocation service might randomly assign addresses to some general location if it cannot more specifically identify another….inferring the person who pays the cable bill illegally downloaded a specific file is even less trustworthy than inferring they watched a specific TV show.”

Fleeing Against Opposition. The court describes a copyright troll’s litigation playbook. They “drop cases at the first sign of resistance, preying on low-hanging fruit and staying one step ahead of any coordinated defense. They don’t seem to care about whether defendant actually did the infringing, or about developing the law. If a Billy Goat Gruff moves to confront a copyright troll in court, the troll cuts and runs back under its bridge. Perhaps the trolls fear a court disrupting their rinse-wash-and-repeat approach: file a deluge of complaints; ask the court to compel disclosure of the account holders; settle as many claims as possible; abandon the rest.”

The court runs through the litigation statistics in the DC court. Of the 40 cases Strike 3 has brought there, “Twenty-two have been voluntarily dismissed, all but one following the same formula: Strike 3 files a complaint (identical in every case except for the infringing IP address). A few weeks later, Strike 3 files a motion to subpoena the anonymous defendant’s ISP prior to the Rule 26(f) conference (identical in every case except for the particular ISP to be served—Comcast, Verizon, of RCN). Satisfied by Strike 3’s showing of likely personal jurisdiction, the court grants the motion, usually providing at least twenty days for the defendant to move to quash the subpoena, and sometimes providing for defendant’s continued anonymity. Nothing happens for a few weeks, and then Strike 3 voluntarily dismisses the suit….The eighteen pending cases are no different: in twelve, the judge recently granted the early discovery motion and Strike 3 is waiting for the ISP to respond; in five, Strike 3’s early discovery motion remains pending; and in one, Strike 3 hasn’t yet filed its discovery motion. This sounds crazy, but its [sic] par for the copyright-trolling course.”

Weighing the Prima Facie Case. “Strike 3’s alleged ownership of an infringed copyright sets forth a prima facie claim. So too is the requested information necessary to advance Strike 3’s claim, just as subpoenaing the ISP is necessary to get the information. [However,] Strike 3 could not withstand a 12(b)(6) motion in this case without resorting to far more intensive discovery machinations sufficiently establishing defendant did the infringing—examining physical evidence (at least the computers, smartphones, and tablets of anyone in the owner’s house, as well as any neighbor or houseguest who shared the Internet), and perhaps even interrogatories, document requests, or depositions. Strike 3’s requested subpoena thus will not—and may never—identify a defendant who could be sued.”

Defendant’s Privacy Risks. “Strike 3 fails to give the Court adequate confidence this defendant actually did the infringing. Given this uncertainty, Strike 3 cannot overcome defendant’s weighty privacy expectation. Imagine having your name and reputation publicly—and permanently —connected to websites like Tushy and Blacked Raw. (Google them at your own risk.) How would an improperly accused defendant’s spouse react? His (or her) boss? The head of the local neighborhood watch? The risks of a false accusation are real; the consequences are hard to overstate and even harder to undo. And Strike 3’s flawed identification method cannot bear such great weight. Defendant may not be entitled to the same presumption of innocence a criminal defendant enjoys, but the Court remains uncomfortable publicly presupposing defendant partook in particularly prurient pornography given defendant’s tenuous connection to the infringement.”

A Protective Order Isn’t Good Enough. Making defendants contest the discovery request, even under a protective order, “hardly seems fair. That drags defendant into court and foists on them the unenviable burden of hiring a lawyer or defending their reputation pro se, all before they’ve even been served. That’s not how our system of litigation is supposed to work.”

Pornography Trolling is Especially Problematic. “An honest copyright holder might balk at this result, misunderstanding it to slash congressionally endowed defenses against increasingly creative and covert cyberpirates. But the typical case does not involve pornography, nor is this even run-of-the-mill porn. By extension, two factors limit today’s holding. First is this content’s aberrantly salacious nature. Second is the legion pitfalls associated with Strike 3’s tracking and identification of infringers. Given these high stakes—unlikely to appear in more typical cases—the Court will not accept the risk of misidentification. Maybe someday someone will show the Court a method to identify infringers with sufficiently less risk of false accusations. But because Strike 3 fails to do so here, it cannot subpoena defendant’s ISP.”

In a footnote, the judge adds: “The Court notes ‘it is unsettled in many circuits’—including this one—’whether pornography is in fact entitled to protection against copyright infringement.’” This topic gets raised by academics from time to time, but there any real dispute that pornography qualifies for copyright protection under copyright’s non-discrimination principle?

A Final Benchslap. “Armed with hundreds of cut-and-pasted complaints and boilerplate discovery motions, Strike 3 floods this courthouse (and others around the country) with lawsuits smacking of extortion. It treats this Court not as a citadel of justice, but as an ATM. Its feigned desire for legal process masks what it really seeks: for the Court to oversee a high-tech shakedown. This Court declines.”

Implications

Note the judge made this ruling on an ex parte request. No defense counsel urged this result, As the stats show, judges routinely grant ex parte discovery requests in copyright cases because they don’t hear any counternarratives. Fortunately, Judge Lamberth didn’t need to hear the other side to reach the right result.

We rarely see judicial opinions with such pejorative language, including “copyright troll,” “smacking of extortion,” and “high-tech shakedown.” And this tweetable zinger: “It treats this Court not as a citadel of justice, but as an ATM.” Strong stuff, but perhaps deserved.

Unfortunately, so long as Strike 3 continues to proceed in other cases on an ex parte basis, most other judges will never see Judge Lamberth’s opinion and will have to independently come to the same conclusion–which many judges won’t do. What Judge Lamberth should have done is require Strike 3 to attach this opinion to all future copyright infringement filings so that other judges will actually see the opinion.

For knowing and calling out a troll when he sees it, I’m awarding Judge Lamberth the honorary Technology & Marketing Law Blog judge of the day honors.

Case citation: Strike 3 Holdings, LLC v. Doe, 2018 WL 6027046 (D.D.C. Nov. 16, 2018)

Gambling App Fails to Create Binding Terms of Service–Wilson v. Huuuge

I’ve blogged about the Big Fish gambling case before Judge Leighton. He declined to order arbitration in that case, finding that Big Fish waived its right to arbitrate by extensively litigating the case. Judge Leighton is hearing some other similar cases, and he recently declined to send those cases to arbitration, finding that plaintiff was not reasonably on notice. (This post focuses on Judge Leighton’s ruling in the Huuuge case, but there’s another case involving Double Down Interactive where Judge Leighton reached a similar result. Benson v. Double Down Interactive, Case No. 2:18-cv-00525-RBL (W.D. Wash. Nov. 13, 2018).)

The court starts out by noting the plaintiff did not have to click I agree and thus never affirmatively indicated assent. Huuuge, the defendant, did not provide evidence that plaintiff knew about the terms. Instead, it argued the plaintiff had inquiry notice.

The court says that users can review the terms in two places: (1) when they download the game, and (2) in the “settings” menu. Unfortunately for Huuuge, it takes prospective users several screens to get to the terms, and nothing next to the download button alerts users of the terms.

Access of the terms in the settings area is similarly challenging and not essential to the game. The settings area is not obviously demarcated. And again, nothing apprises the user that there are terms.

The court cited to Nguyen v. Barnes and Noble and Meyer v. Uber Technologies as cases that turn on whether the customer is apprised of the existence of the terms. The court says the result may have been different in the case of Huuuge had the terms appeared next to the download button. The court says the configuration of the download in the app store is even more problematic because the user can download the app when it comes up in search results without even reading the explanatory text (in the full app page).

Huuuge, citing Verio, argued that users played the game multiple times, so they must somehow be on notice. The court says that Verio admitted to awareness of the terms and was actually crawling (albeit using a machine) the entirety of the webpages, including the terms.

Huuuge also makes the argument that users should be presumed to have knowledge of the terms because “everyone knows that all apps comes with terms.” The court says nay:

The Court declines to adopt Huuuge’s suggestion. While online users today are savvier than in the past, this does not mean that the rules of contract law no longer apply. If an app developer wishes to bind a user to their copious terms, the onus is on the developer to at least provide reasonable notice and easy access. This is not a difficult thing to do when designing an app, despite Huuuge’s protestations that the Court should devise some special rule for app store purchases. . . . The fact is, Huuuge chose to make its Terms non-invasive so that users could charge ahead to play their game. Now, they must live with the consequences of that decision.

Ouch.

The court also takes a shot at the fruit stand metaphor that some cases have relied on.

___

The court focuses on the inevitable tension in terms of service implementation. The lawyers want to make the terms of service a hurdle that users cannot access the app without passing. The developers and marketing folks want to make the terms not invasive, so the users can (as the court characterizes it) “charge ahead to play their game”. The latter course of action is risky. Here, it made the difference between being able to send a case to arbitration, potentially avoiding a class action on the one hand, and dealing with full discovery on what could be a very expensive claim, on the other.

Courts have different in their treatment of user expectation with respect to terms. It’s odd from a legal standpoint to see a judge speculate about something that probably varies significantly by generation and age. Here the judge takes a conservative viewpoint and doesn’t credit the app developer with an argument that presumes consumer knowledge of terms. That makes sense in these circumstances.

I’m guessing Huuuge will appeal given that an appeal puts a hold on district court proceedings.

___

Eric’s Comments:

As Venkat notes, this ruling addresses a number of frontiers in online contract formation law:

  • contract disclosures buried well below an app’s download button are worthless. This is just a recapitulation of the uncited Specht v. Netscape case from over a dozen years ago
  • contract terms buried in an app’s “settings” are worthless
  • mere repetitive use of a service isn’t enough to form a contract. The court says: ” a hyperlink may be tucked away in a corner of a website or buried beneath a mountain of text and still be theoretically “available” to a user. While repeatedly playing a game may make it more likely that at some point the ‘Terms of Use’ hyperlink will cross a user’s field of vision, Nguyen specifically held that this is not enough for inquiry notice.” The court goes on to suggest that users may even form “terms blindness” as they grow to ignore seemingly irrelevant parts of the page’s UI.
  • despite the ubiquity of online terms, consumers are not presumed to know that contract terms apply to their usage or obligated to go hunting for the disclosures. This is a helpful counterweight to some possibly contrary intimations from the Second Circuit’s Meyer ruling

(Note: this is another case where the court laments the failings of the clickwrap/browsewrap nomenclature: “Courts have also recognized that the labels of ‘clickwrap’ and ‘browsewrap’ do not encompass every type of online consumer contract.” SIGH).

Of course, as an outsider, it seems like all of Huuuge’s arguments are designed to mask Huuuge’s self-inflicted problem. It’s trivially easy to properly form an online contract if there’s a will to do so. So here’s the perennial reminder: if you want to form a contract with users, say it loud and proud. If you try any other approach, the courts won’t take pity on you.

Case citation: Wilson v. Huuuge, Inc., 3:18-cv-05276 (W.D. Wash. Nov. 13, 2018)

Related posts:

Ninth Circuit Reinstates Virtual Platform Gambling Lawsuit Against Big Fish

Federal Court Rejects Online Gambling Lawsuit Against Valve–McLeod v. Valve

Big Fish’s Virtual Casino Doesn’t Violate Washington’s Gambling Statute

Virtual Casino Doesn’t Violate California’s Gambling Law–Mason v. Machine Zone (Guest Blog Post)

Appeals Court Affirms Rejection of Gambling Claims Against Machine Zone

Uber’s Contract Formation Process Fails (Again)–Cullinane v. Uber

Hyperlinking to Sources Can Help Defeat Defamation Claims–Adelson v. Harris

Ninth Circuit Blesses Amazon’s Terms of Service

Browsewrap/Clickwrap Distinction Vexes Another Court–Nevarez v. Ticketmaster

Faulty Mobile Device User Interface Jeopardizes Uber’s Contract Formation–Metter v. Uber

Retailer’s TOS Fails, But New Jersey Warranty Notice Claim Loses Anyway

Court Upholds Airbnb’s Terms of Service–Selden v. Airbnb

Anarchy Has Ensued In Courts’ Handling of Online Contract Formation (Round Up Post)

“Modified Clickwrap” Upheld In Court–Moule v. UPS

Scraping Lawsuit Survives Dismissal Motion–CouponCabin v. Savings.com

Another Suspended Twitter User Loses in Court–Kimbrell v. Twitter

Just last month, I blogged about a suspended Twitter user who lost in court. This pro se lawsuit also fails. It makes me wonder: how many other suspended Twitter users have pending cases in court?

This lawsuit is also one of the multitudinous lawsuits that relates directly or indirectly to President Trump. Whatever else he’s done for/to the country, he is making American Litigation great again. #MAGLA, or something like that.

In an irony I still can’t fully comprehend, Trump supporters disproportionately claim they are being deprived of their civil rights because they feel like their speech is being discriminated against (see, e.g., my discussion regarding the Dehen case). This case is illustrative of the apparent persecution complex. Kimbrell’s complaint asserts “that Twitter employs twitter trolls who are responsible for goading Twitter users who support President Donald Trump into engaging in purportedly abusive conduct, which Twitter subsequently uses as a basis for banning those pro-Trump Twitter users.” Really? Apparently emulating our President’s incessant denials of responsibility, this plaintiff apparently believes the problem is someone else’s fault. In response to these alleged Twitter trolls, Kimbrell posted the following tweets:

and the following “memes” (that’s what the court calls them; I’m not sure if I’d use that term for all of these):

In response, Twitter permanently suspended Kimbrell’s account for “participating in targeted abuse.” Kimbrell sued Twitter for improperly suspending her.

Looking at these five items, I’ll admit that I’m a little confused exactly what triggered Twitter’s intervention. The middle image denigrates tens of millions of victims, but it does make a political point. The two text tweets have some curse words and name-calling, but that’s pretty tame all things considered. The rest of it looks like standard Twitter nonsense.

Still, I support Twitter cracking down on users like Kimbrell. Twitter has been overrun by content that doesn’t advance any discourse but instead–primarily because its short format encourages zingers over reflection–exacerbates community division. I don’t know anything about the Brock book that Kimbrell and her alleged trolls are “debating,” but Twitter could reasonably decide that it’s not the right venue for such a complicated and nuanced “debate”; and Twitter might reasonably prefer that the dialogue relocate to a more suitable venue. In fact, if Twitter doesn’t want to end up as a cyber-cesspool, I think Twitter will need to retrain hundreds of millions of users how to use Twitter to advance the social good; and that will also require Twitter to shut hundreds of millions of not-appropriate-for-Twitter threads like the one Kimbrell engaged in. Such a wide-scale intervention would require lots of labor power and a massive reduction in Twitter’s users and usage, and I can’t imagine Twitter will incur those financial consequences. Instead, I expect we’ll see more “negative lotteries” where Twitter cracks down on some junk threads and lets others go (in ways that are hard for outsiders to understand), a recipe for further angst and litigation.

Fortunately, Twitter’s lawyers can provide some rare good news on this front. Twitter has the legally protected discretion to shut down users and threads, or let them stay, however it sees fit. Indeed, without that discretion, Twitter would either have to screen everything and go out of business, or accept community-destroying trolling and turn into a cyber-cesspool (and then go out of business). The result of Kimbrell’s lawsuit reinforces Twitter’s legal discretion, and that’s a good thing if Twitter hopes to last.

Kimbrell doesn’t come close to overturning the legal status quo. Several of the statutes she asserts do not support a private cause of action. Her wiretap claim isn’t specific enough. Her UCL claim can’t point to another legal violation and lacks any economic injury. Her fraud claim isn’t detailed enough; she tried to base it on Twitter’s generic claim that it runs a “free and open” platform, and Twitter’s rules state that it can prohibit abuse. Section 230 doesn’t come up at all, even though Section 230(c)(2) should have helped Twitter.

So Twitter can shut down Kimbrell’s account. Good! Now, how many other Kimbrell-like accounts will it shut down?

Case citation: Kimbrell v. Twitter Inc., 2018 WL 6025609 (N.D. Cal. Nov. 16, 2018)

Another YouTube Remove-and-Relocate Case Fails–Kinney v. YouTube

This is one of numerous cases relating to YouTube’s crackdowns on videos allegedly promoted by bots. YouTube removed the videos from the promoted URLs and relocated them to new URLs, thus stripping the initial videos of the benefits of the unwanted promotions while keeping the videos online. YouTube’s crackdown campaign spurred an unusual amount of litigation for a relatively routine anti-spam initiative, suggesting that maybe it could have been handled better. Years later, we’re still seeing cases percolate through the courts, a painful and costly legacy even if YouTube will eventually win them all.

The YouTube channel at issue in this case was called “actionadventures.” YouTube suspended the account in Nov. 2012 and lifted the suspension 2 years later. The channel operator sued in early 2015.

YouTube defended on its contract provision that restricts the time to file claims to within 1 year of their accrual. Here, if the claim accrued at YouTube’s Nov. 2012 suspension, the 2015 lawsuit was untimely.

The plaintiff argued that the synthetic SOL wasn’t in the contract when he created his account. A YouTube engineer submitted a declaration with the contract terms from 2009. (As I’ve said many times, you need to keep records of your historical contract terms sufficient to be able to introduce them credibly in court, even if everyone involved has left the company). The plaintiff  testified that he couldn’t remember if he read the contract when he signed up. With that admission, the plaintiff failed to create a triable issue about the contract terms at signup.

Relatedly, there was no question that the plaintiff agreed to YouTube’s contract:

YouTube offered admissible evidence that Kinney was required to click on the button agreeing to the Terms of Service in order to register his account. Kinney admitted in his opposition to the motion for summary judgment that he did, in fact, click on the “I agree” button

Second, the plaintiff argued the synthetic SOL is unconscionable. Although YouTube’s contract is a contract of adhesion, “there was no surprise regarding the contractual limitations period…the terms were included in all capital letters in a four-page document containing 14 different subjects.” The court also says it’s not substantively unconscionable: “The one-year limitations period is not outside the reasonable expectations of the parties, and is not an unreasonable or unexpected reallocation of risk. A one-year limitations period has been upheld in many types of cases.”

As a result, most of the lawsuit fails due to the synthetic SOL. If your online contract doesn’t contain such a provision, this ruling gives you another reason to consider adding it.

The only other part of the lawsuit is a 17200 “unfair” business practices claim based on YouTube’s alleged mishandling of his situation. The court says the plaintiff improperly asserts 17200 for claims that are otherwise really the provenance of contracts or torts, and it therefore rejects the claim.

A while ago, I explained why I think Section 230(c)(2) (not mentioned in this ruling) should give YouTube virtually unfettered discretion to deal with perceived site abuse.

Case citation: Kinney v. YouTube, LLC, 2018 WL 5961898 (Cal. App. Ct. Nov. 14, 2018)

Other YouTube Remove-and-Relocate Posts:

YouTube Defeats Another Remove-and-Relocate Lawsuit–Song Fi v. Google
YouTube Defeats Defamation Claim in ‘Remove-and-Relocate’ Case–Bartholomew v. YouTube
YouTube Defeats Another Remove-and-Relocate Case–Darnaa v. Google
Google Loses Two Section 230(c)(2) Rulings–Spy Phone v. Google and Darnaa v. Google
Section 230 Protects YouTube’s Removal of User’s Videos–Lancaster v. Alphabet
YouTube Wins Another Case Over Removing And Relocating User Videos (re Lewis v. Google)
Can YouTube ‘Remove And Relocate’ User Videos Capriciously?–Darnaa v. Google
Section 230(c)(2) Gets No Luv From the Courts–Song Fi v. Google
Venue Clause in YouTube Terms of Service Upheld–Song Fi v. Google