Consumer Law & Policy Blog

Prof. Larry Lessig Releases New Book on the Internet Called "Remix"

Stanford law prof and Internet philosopher Larry Lessig has released his latest book on the Internet and the folly and danger of using 20th century constructs such as copyright to regulate it. Lessig's website on the book says this:

For more than a decade, we’ve been waging a war on our kids in the name of the 20th Century’s model of “copyright law.” In this, the last of his books about copyright, Lawrence Lessig maps both a way back to the 19th century, and to the promise of the 21st. Our past teaches us about the value in “remix.” We need to relearn the lesson. The present teaches us about the potential in a new “hybrid economy” — one where commercial entities leverage value from sharing economies. That future will benefit both commerce and community. If the lawyers could get out of the way, it could be a future we could celebrate.

U.S. PIRG's consumer blog has this nice write-up.

Jones Day Opposes Trademark Amicus Brief -- What Is It Afraid Of?

by Paul Alan Levy

Twelve days ago, I posted comments here about a Jones Day lawsuit claiming that its trademark is infringed and diluted by mention of its name in headlines of articles on the BlockShopper web site, www.blockshopper.com, and by links to the Jones Day web site. Last week, we joined with EFF and other groups to file an amicus brief discussing Jones Day’s claims in light of both trademark law and the First Amendment, and posted word of that brief here.   

There are, apparently, some arguments in that brief that Jones Day is desperate to keep away from the judge – or, at least, to avoid having to answer – because it has taken the remarkable step of filing a  five-page brief opposing the motion for leave to file the brief.  It argues that the brief should not be accepted on the one hand because it duplicates arguments made by BlockShopper, and on the other because it makes an argument that BlockShopper does not make, and because the amicus brief is “partisan” in that it takes one side in the case instead of being neutral.  At bottom, Jones Day’s view rests on the notion that amicus briefs should rarely be allowed, relying in turn on a handful of opinions from Judge Richard Posner who feels that amicus briefs rarely say anything that he doesn’t already know.  Both Jones Day’s opposition and our response, as well as the original amicus brief, can be found  here. 

There is one statement in Jones Day’s opposition brief that requires a correction of a statement that I made in  my first blog post.  I expressed concern about a statement by Judge Darrah, leaning on the defendants to give up their free speech rights as follows:  “Do you know, young man, how much money it’s going to cost you to defend yourselves against Jones Day?”  I then said that it was understandable that, after learning the judge’s position, BlockShopper had stipulated to a TRO lasting six weeks.  Jones Day claims that this statement was not made until a court session on August 26, but the TRO was stipulated on August 19, and hence defendants’ decision to stipulate the temporary TRO could not have been influenced by what the judge said.  Following up with my original source, I have satisfied myself that Jones Day’s claim about the date is correct, and hence both my statement that it was made at the initial TRO hearing, and my causal statement, were in error.

Corey Ciocchetti on E-Commerce and Information Privacy

Corey Ciocchetti has written "E-Commerce and Information Privacy: Privacy Policies as Personal Information Protectors," 44 American Business L.J. --.  Here's the abstract:

This article dives into the contemporary debate surrounding information privacy in the twenty-first century e-commerce environment through the lens of consumers submitting personally identifying information into the vast abyss of cyberspace. I argue that this information must be better protected and that United States law should emphasize electronic privacy policies as privacy-protecting devices. Currently, the United States operates under primarily a self-regulatory environment where the federal and state governments allow industry to regulate the use and content of their privacy policies. This article details [the] current state of the United States legal regime, addresses its inefficiencies in this area and proposes a new federal law designed to remedy this situation. This piece argues that with minimal governmental regulation, electronic privacy policies can become effective tools to protect consumers personally identifying information.

Supreme Court of Virginia Strikes Down Anti-Spam Law on First Amendment Grounds

Yesterday, in Jaynes v. Commonwealth, No. 06-2388 (Sept. 12, 2008), the Supreme Court of Virginia struck down a state statute that criminalized the sending of unsolicited bulk email to consumers. The defendant in question had been sentenced to 9 years in prison. Noting our long tradition protecting anonymous speech, the Viriginia high court struck down the statute because it included all spam, including non-commercial spam addressing political and religious matters at the core of the First Amendment.  The court's website synopsizes the opinion as follows:

In a prosecution for violations of Code § 18.2-152.3:1, the unsolicited bulk electronic mail provision of the Virginia Computer Crimes Act, the circuit court had jurisdiction over the person of the defendant, and defendant had standing to raise a First Amendment overbreadth claim as to the statute. Because Code § 18.2-152.3:1 is overbroad on its face, prohibiting the anonymous transmission of all unsolicited bulk e-mails – including those containing political, religious or other protected speech – the judgment of the Court of Appeals upholding the defendant's convictions is reversed and those convictions are vacated.

Today's Washington Post has this informative article on the decision. The Virginia attorney general has vowed to take the case to the U.S. Supreme Court.

Trademark Abuse by Jones Day to Suppress Free Speech

by Paul Alan Levy

A new entry in the contest for “grossest abuse of trademark law to suppress speech the plaintiff doesn’t like” comes from Chicago, where the giant law firm Jones Day has sued BlockShopper.com, a web site that reports on real estate purchases in two upscale specific Chicago neighborhoods, as well as in Las Vegas, Palm Beach, and St. Louis.  The defendant’s crime?  In discussing condo purchases by Jones Day associates Dan Malone and Jacob Tiedt here and here, BlockShopper used the name “Jones Day” to identify the employer of each of the two associates, and linked from each associate’s name to Jones Day’s own web site here and here. 

According to Jones Day, linking to its web site dilutes its trademark and creates a likelihood of confusion.    But that is preposterous.  The link is in connection with a comment on Jones Day; when a trademark is used to comment on the trademark holder, the use reinforces the association with the trademark holder, rather than blurring it, and besides use for commentary is expressly protected as fair use under the Lanham Act as amended in 2006.   Moreover, nobody could visit the BlockShopper web site and think that it is sponsored by or affiliated with Jones Day, even if they follow the links from BlockShopper’s mention of Jones Day associates to Jones Day’s own web site.  That is what web sites do – they link to other web sites (that’s what makes it a “World Wide Web”).   

Indeed, throughout the first paragraph above, I used Jones Day's name (because I am writing about that firm) and linked to Jones Day’s web site and elsewhere.  Is Public Citizen equally liable for trademark infringement and dilution?   If Jones Day is right here, it is hard to see how the Web could survive.

Times Reports on Home Equity Loans, Countrywide Litigation, Subprime Borrowers, and More

Another roundup of article in recent issues of the Times: Friday's Times brought another important installment in "The Debt Trap" series, this one headlined "Home Equity Frenzy Was a Bank Ad Come True," about how banks reframed second mortgages--once seen as a product for those experiencing dire financial problems--as home equity loans.  These loans were presented as ways to use the home as a source of funds for "living richly," and thereby vastly increased consumer indebtedness and reduced the amount of equity Americans have in their homes. 

Today's Times includes Bob Tedeschi's Mortgages column, "Finding Cash in a Home," about an alternative to reverse mortgages which cuts down on the normally high closing costs for reverse mortgages--but because the lender takes out a life insurance policy on the owner, only owners eligible for life insurance can take advantage of it.  In an August 3 column titled "Subprime Loans' Wide Reach," Tedeschi reported on a study by Compliance Technologies that contradicted standard wisdom about subprime loans:

WHILE subprime loans deeply penetrated low-income and minority groups, a new study suggests that more upper-income borrowers and more whites took out such loans than any other groups.

* * * [R]oughly 56 percent [of subprime loans originated in 2006] went to non-Hispanic whites. Affluent borrowers, those with annual income at least 120 percent of their given area’s median income, meanwhile, took out more than 39 percent of the loans.

That seems like a rather low definition of affluent.

Yesterday's Times reported "Judge Rejects Countrywide Settlement" about how a bankruptcy judge rejected the settlement between Countrywide and nearly 300 of its borrowers, saying he wasn't convinced it was fair to the borrowers.  The complaint charges Countrywide with making inaccurate claims, and demanding improper fees, among other things.  Meanwhile, back on August 7, the Times noted that "Connecticut Joins Other States in Suing Countrywide."

On Wednesday, the Times published a short but ominous-sounding piece, "Some New York Loans Shunned," at the tail of a longer article.  Here's an excerpt:

Freddie Mac said Tuesday that it would stop buying subprime loans issued in New York State as a new law takes effect that holds investors accountable for mortgage fraud.

Freddie will not buy loans dated on or after Sept. 1 that meet the state’s subprime definition, the government-chartered company said in a lender bulletin on its Web site. Gov. David A. Paterson of New York signed new foreclosure and lending laws last week that tighten legal protections for borrowers.

The legislation holds mortgage buyers like Freddie liable in ways that “we have no way of monitoring and preventing,” Brad German, a company spokesman, said.

It's not clear how many such loans would be made even if Freddie Mac was willing to buy them: the state law will almost certainly be preempted as to federal lenders, and in the past, lenders have tended to avoid loans labeled as high-interest loans, thus making mini-HOEPA laws effectively usury statutes. 

On Monday the Times ran "Web Privacy on the Radar in Congress," about behavioral marketing.  An excerpt:

On Aug. 1, four top members of the House Committee on Energy and Commerce sent letters ordering 33 cable and Internet companies, including Google, Microsoft, Comcast and Cox Communications, to provide details about their privacy standards. That followed House and Senate hearings last month about privacy and behavioral targeting, in which advertisers show ads to consumers based on their travels around the Web. * * *

As advertisers become more sophisticated about behavioral targeting, and online privacy standards become increasingly varied, regulators and privacy advocates are becoming concerned. A few companies have taken precautionary measures to try to fend off criticism; in the last few days, for instance, both Yahoo and Google have made it easier for people to opt out of targeted ads on their sites. But that may not be enough.

“Some type of omnibus electronic privacy legislation is needed,” said Representative Edward J. Markey, Democrat of Massachusetts, chairman of the House Subcommittee on Telecommunications and the Internet, “regardless of the particular technologies or companies involved.”

Back on August 6, the Times ran an editorial,"Listen to the 56,000," about the response to the Fed's call for comments on its proposed rules on credit cards.  Excerpts:

This anguished deluge should send a clear message to leaders in Washington. The Federal Reserve should swiftly adopt its proposed rules against unfair or deceptive credit card practices. But the real burden to curb these abuses falls on Congress.

For too long, members of Congress have shirked the responsibility to ensure fair lending to credit card customers and have listened more intently to the banking lobbyists. A low point came in 2005, when Congress passed a bankruptcy law that was badly tilted against borrowers. * * *

Ronald Mann, a Columbia Law School professor, has argued that the law creates a “sweat box of credit card debt.” 

The editorial also noted that the House Financial Services Committee had voted for a cardholder's bill of rights, but that banks oppose it.

Moving right along, here is an article about deceptive advertising of "free" credit reports that end up costing money.  And finally, an article that may scare some, "If You Run a Red Light, Will Everyone Know?" reports on a web site, www.CriminalSearches.com that enables people to conduct free searches to see who has a criminal record.

Tiffany's Loses Trademark Claim Against eBay

by Greg Beck

In a comprehensive 66-page opinion, a federal district judge today rejected Tiffany's claims that eBay infringed its trademarks by allowing the sale of counterfeit Tiffany's goods on its site.

The court first held that eBay did not infringe Tiffany's trademark by advertising the availability of Tiffany's products. The court noted that there were many authentic pieces of Tiffany's jewelry for sale on eBay and that "the law clearly protects such secondary markets in authentic goods." eBay was entitled to advertise the availability of these pieces under the doctrine of nominative fair use, which holds that a reseller may use a product's trademarked name for the purpose of truthfully identifying that product.

Next, the court held that eBay was not contributorily liable for failing to prevent the sale of counterfeit Tiffany's products. Although eBay had generalized knowledge that counterfeit Tiffany's goods were being sold on its site, it was required only to block those sales that it knew or had reason to know were counterfeit. The court found that eBay made reasonable efforts to detect and terminate sales of counterfeit goods, and promptly terminated any counterfeit sales that Tiffany's brought to its attention.

Some may worry that this decision will hurt consumers by allowing sales of counterfeit products to continue. On the other hand, Tiffany's suit threatened to block the online sale of authentic, as well as counterfeit, products. This suggests that Tiffany's motives for bringing this case may not have been as simple as a desire to prevent counterfeiting. As the court noted, "rights holders such as Tiffany may have obvious economic incentives to curtail the sale of both counterfeit and authentic goods on the Internet -- after all, every sale of Tiffany jewelry on eBay potentially represents a lost sales opportunity via Tiffany's own authorized distribution channels." Not only would blocking online sales funnel more business to Tiffany's, it would force consumers to pay higher prices by reducing supply and eliminating Tiffany's need to compete with the market for its own used products.

eBay will never be able to successfully detect and block all counterfeit products sold through its site. That some fraud exists, however, does not justify blocking all sales, whether authentic or not. To do so would give Tiffany's and other companies a windfall at consumers' expense.

Times Articles on Credit Card Law Reform, Online Privacy, and New York's Foreclosure Legislation

The weekend's consumer law harvest from the Times:

The Times reported on Saturday that Credit Card Overhauls Seem Likely.  The entire article is worth reading, but here's an excerpt:

Working with the Office of Thrift Supervision and the National Credit Union Administration, the Federal Reserve introduced its proposals in early May. It has asked for comments and expects to formalize proposals by the end of the year.

At the same time, the legislation most likely to succeed in both the House and Senate sets similar rules on consumers’ behalf. Representative Carolyn B. Maloney, the Democrat of New York who wrote the House bill, and Senator Christopher J. Dodd, the Democrat of Connecticut behind the Senate measure, said they planned to bring their measures to the floor for votes before Congress adjourns in September.

The House and Senate bills as well as the Federal Reserve require that lenders apply payments to the debt with the highest interest rate. All would ban “double cycle” billing, in which interest is charged on some already repaid debt, and all would extend the time required, currently 14 days, between a statement mailing and payment due date.

All the measures would, under various conditions, prohibit lenders from raising interest rates on existing debt. The central bank proposes that except for increases caused by changes in stated variable and introductory offers, lenders may increase interest rates only if minimum payments are more than 30 days late.

Only the Dodd bill prohibits charges for paying by mail, phone or online, and restricts marketing and offers of credit to consumers under 21.

Friday's edition included Google Told to Turn Over User Data of YouTube, about a decision that has privacy advocates concerned.  An excerpt:

For every video on YouTube, the judge required Google to turn over to Viacom the login name of every user who had watched it, and the address of their computer, known as an I.P. or Internet protocol address.

Both companies have argued that I.P. addresses alone cannot be used to unmask the identities of individuals with certainty. But in many cases, technology experts and others have been able to link I.P. addresses to individuals using other records of their online activities.

The amount of data covered by the order is staggering, as it includes every video watched on YouTube since its founding in 2005. In April alone, 82 million people in the United States watched 4.1 billion clips there, according to comScore. Some experts say virtually every Internet user has visited YouTube.

And on Sunday Bob Tedeschi had a column, Mortgage Brokers as Naysayers, about the new New York foreclosure legislation, passed by the legislature, but not signed by the Governor, at least as of the time Tedeschi's piece went to press--though the article states that the Governor is expected to sign it into law [I should note that last week I posted that the bill had been enacted by the legislature, which was premature].  More excerpts:

* * * [The bill provides] that brokers have a “duty of care” to offer appropriate loans to subprime borrowers — those with poor credit.

Brokers are asking, however, what constitutes an appropriate loan, and what happens if a borrower disagrees with a broker’s recommendation.

* * *

* * * Mr. Tricozzi[, president of the New York Association of Mortgage Brokers] said, the legislation requires brokers to weigh a borrower’s future earnings in selecting appropriate loans. For some borrowers, like pregnant women or workers nearing retirement, such prognostications might be unreliable. Yet refusal to offer loans to such borrowers could be construed as age or gender discrimination, he said.

* * *

* * * some advocates want to hold mortgage brokers to the same legal standard as stockbrokers and other financial advisers, who carry a fiduciary duty to act in their clients’ best interests and offer only “suitable” financial products. New York’s proposed law specifically stops short of the suitability standard, said Richard H. Neiman, New York’s banking superintendent.

Florencia Marotta-Wurgler Study of EULAs

Florencia Marotta-Wurgler of NYU has written "'Unfair' Dispute Resolution Clauses: Much Ado About Nothing?" in Boilerplate: Foundations of Market Contracts (Omri Ben-Shahar, ed., Cambridge University Press, 2007), analyzing dispute resolution clauses in end user license agreements.  Here's the abstract:

Dispute resolution clauses are a common and potentially important component of many types of standard form contracts. I examine the use of dispute resolution clauses in 597 end-user license agreements (EULAs) of software packages sold online. I find that 75% of EULAs include choice of law clauses, 28% include forum selection clauses, 6% include arbitration clauses, and none include class action waivers. Sellers are equally likely to include dispute resolution clauses in the EULAs of consumer-oriented and business-oriented products. Despite the concerns of some legal academics, I do not find much evidence of "strategic" use of DRCs to advantage sellers over buyers. For example, sellers located in states with "seller-friendly" laws are no more likely to include choice of law or choice of forum clauses than sellers in states with stronger consumer protections; despite UCITA's flexible choice-of-law rules and otherwise seller-friendly provisions, sellers do not go out of their way to select UCITA; and, there is no evidence that fora selected are intentionally inconvenient to buyers. These results question certain proposals to regulate dispute resolution clauses in consumer form contracts on the basis of strategic behavior by sellers.

Times Articles on the Tort War, Illinois' Suit Against Countrywide, and Google's Marketing

Recent articles from the Times of interest:

Yesterday's edition contains "Google Tries Tighter Aim for Web Ads" about how Google uses what a consumer searched for a few minutes ago to target ads for that user.  Another article, "Post-Spitzer, A New Breed of Reformer," explores the differences between former New York Attorney General Eliott Spitzer's and the current New York Attorney General Andrew M. Cuomo's approaches to bringing cases against the financial industry.

Here is Wednesday's report on the Illinois case against Countrywide, a case Alan White reported on yesterday.

Last Sunday's issue brought "To the Trenches: The Tort War is Raging On," about business's attempts to take on the trial bar.  Some excerpts:

Businesses count among the victories federal legislation passed in 2005 that made it harder to file class-action lawsuits in state courts, where judges and juries were often perceived as hostile to business. In state courts, where most civil litigation plays out, the number of suits involving auto accidents, allegations of medical malpractice and the like fell steadily from 1995 to 2005, according to the National Center for State Courts. The Chamber of Commerce says the number of megaverdicts for more than $100 million dropped to 2 last year, from 27 in 2000.

NEVERTHELESS, there are battles in individual states over judicial campaigns and legislative initiatives.  * * *

Strikingly absent from debates over who should be able to sue whom, when and for how much is any discussion of the fairest and most effective way to make sure that true victims are appropriately compensated for injuries and that people without authentic injury are not compensated.

“That’s not the conversation we’re having,” because the only voices heard belong to advocates of one side or the other, said Robert L. Rabin, a law professor at Stanford. “Those advocates reflect advocacy interests — that is, either defense-side interests or plaintiff-side interests — rather than some overview of global fairness.”