Consumer Law & Policy Blog

Be Careful in Choosing Internet Providers -- Will They Defend Your Privacy?

by Paul Alan Levy

  Public Citizen jumped into a case where a federal judge in San Francisco tried, albeit without success, to shut down the entire Wikileaks web site, based on a claim by a Swiss bank that among the leaked documents posted on Wikileaks were some highly sensitive documents revealing private customer information.  (Wikileaks "invites people to post leaked materials with the goal of discouraging 'unethical behavior' by corporations and governments."  A New York Times editorial denouncing the order is here).  The case raises very serious issues about the First Amendment and prior restraint, which deeply affects consumers.  It also affects groups like Public Citizen, which depends on access to leaked documents to better advocate for consumer safety and other rights.   A discussion of how leaked information can be used to protect consumers appears in the first few pages of our motion to intervene in the case.  Access to the affidavits described in the brief is here.

In our brief, though, we focused instead on the lack of “complete diversity”  because there are subjects of foreign states on both sides of the case -- the Swiss bank on one side, and on the other side a Swiss former employee who took the documents when he left the company and Wikileaks, many of whose members are abroad. In addition, we point out that the main cause of action on which the bank relied, section 17200 of the California Business and Professions Code, applies only to unfair or unlawful "business practices" and hence does not apply to completely non-commercial web sites like Wikileaks. Others, including the ACLU and EFF, and a coalition of media organizations, have filed briefs addressing the First Amendment issues.

There is another serious consumer issue here that has received too little attention.  The judge entered two separate orders.   Although we have no way of knowing what the judge would have done without a stipulation, the broadest of the orders in the case was entered as a permanent injunction, without any findings of wrongdoing or basis for the order, that was submitted to the judge by the plaintiffs with the agreement of Dynadot, the domain name registrar.  So far as I can tell, Dynadot simply rolled over, apparently to avoid having to defend against the relief that the bank was seeking.  And that, to my mind, poses a significant consumer issue concerning the extent to which Internet providers protect their customers’ rights, and the considerations for consumers in choosing their Internet providers.

Article on Peer Promotions and False Advertising Law

Ellen P. Goodman of Rutgers--Camden has written an article on how "peer promotions," such as postings on Facebook or blogs, fit into false advertising law.  The article, Peer Promotions and False Advertising Law, 58 South Carolina Law Review (2007), can be found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1009304.  Here's the abstract:

What many call social media or Web 2.0 applications - podcasts, blogs, and services such as Facebook and Wikipedia - allow individuals to communicate on a massive scale often anonymously or under assumed identities. Businesses are learning to take advantage of these social media to connect with consumers in ways designed to feel authentic and personal. The result is a massive flow of information to individuals, sometimes from their peers, and sometimes from institutions disguised as peers. When the information flow consists of advertising and promotion, it challenges the structure and application of false advertising law, which was designed to manage information in relatively controlled environments where few speakers were capable of mass communication.

This essay offers tentative thoughts on how “peer promotions” fit into the structure of federal false advertising law. In the first instance, it is important to set aside peer promotions that are spontaneous commentary on a product with no connection to the brand owner. These communications are not advertising at all, but editorial comment. Increasingly, however, brand owners themselves create “peer” promotions or adopt such communications for marketing purposes. In these cases, there is commercial speech which, depending on its content, may be regulated.

It is the gray area between brand control and no control where peer promotions most severely strain the application of advertising law and its efficacy. Where brand owners sponsor peer promotions but conceal their involvement, the resulting communication mixes the commercial speech of the sponsor with the noncommercial speech of the peer. The borders of commercial speech have shifted with each innovation in modern marketing, particularly as advertising has become more image-based and integrated into other forms of media content. Mixed peer-advertiser promotions take the blurring of commercial and noncommercial speech one step further and pose more insistently the central question of advertising law: how do we balance the desirability of regulating for transparent commercial communications with the free speech dangers of regulating at the commercial-expressive interface?

Nancy S. Kim on the Effect of Clickwrap and Similar Licenses

Nancy S. Kim of California Western School of Law has authored "Clicking and Cringing," available at http://ssrn.com/abstract=1003921, on the effect of shrinkwrap, clickwrap, and browsewrap licenses.  Here's the abstract:

Shrinkwrap, clickwrap and browsewrap licenses have complicated contract law by introducing non-traditional methods of contracting to govern the use of software. The retention of the underlying intellectual property by the licensor, and the malleable qualities of software, give rise to the ability and the need to set parameters of use. The courts have tended to defer to the ownership rights of licensors by claiming that there is valid contract formation, even in "rolling contract" situations. Some commentators have argued that existing contract law doctrines--such as unconscionability and good faith--are sufficient to address digital-era contracting dilemmas. While such arguments have their place in discussions about contract enforcement, because these doctrines are standard contract defenses, they fail to explain a finding of contract formation. In this Article, I propose a theory for non-negotiated software licenses. A consumer's assent to a transaction should not be transmuted into blanket assent to each individual term of a non-negotiated contract. Instead, the concept of "assent" should be bifurcated into two parts, actual assent and presumed assent. Actual assent means express agreement, not simply to the transaction, but to each of the individual material terms. Presumed assent means that the licensee, by expressly agreeing to the transaction, may also be presumed to have assented to certain of the contract terms. The licensee should not be presumed to have assented to all contract terms, however, as is currently the case under the "blanket assent" approach to contracts. Whether the licensee's assent to a given term may be presumed depends upon the operative effect of the term. The licensee may be presumed to have assented to provisions governing the "scope of license" or the "terms of use" (as further defined) to the software or website because such terms establish the conditions upon which the licensor has agreed to make the digital information available. The licensee's performance under the contract, however, would be conditioned upon notice. Furthermore, the caption heading of "scope of license" or "terms of use" would not be determinative. The licensee should not be presumed to have assented to provisions that impose affirmative obligations or purport to take away the licensee's legal rights. Part I of this Article introduces the doctrinal problems related to non-negotiated software licenses. Part II proposes a 2-part methodology that first analyzes whether the putative licensee has assented and the nature of that assent (i.e. whether it is general assent to engage in a transaction or whether it manifests assent to the disputed term). The second step examines what terms govern the activity and determines enforceability according to the nature of the assent. Part III summarizes and analyzes the current case law using my proposed methodology, and applies the methodology to a sample license agreement. Part VI concludes that a presumption of assent to license terms and a requirement of actual assent to other material terms both respects the integrity of contract doctrine and accommodates business realities. A requirement of active assent affects the consumer experience and is therefore likely to influence contracting behavior.

eBay Strikes Back, Sues for Frivolous DMCA Takedowns

by Greg Beck

A while back I wrote about a case in which an eBay seller sued a company called Innovate! Technology for wrongly invoking the Digital Millennium Copyright Act to cancel his eBay auctions. Although the company claimed that the eBay sales infringed its intellectual property rights, its real complaint was that the sales did not comply with its minimum pricing policy. In other words, the company claimed that its intellectual property rights were violated because its products were priced too low.

Innovate Technology! responded to the suit with what seems to have been a huge tactical blunder: it impleaded eBay, asserting that, if it were held liable to the eBay seller, it would be entitled to indemnification from the auction company. Probably not a good move. eBay generally stays out of DMCA disputes and simply follows the DMCA's statutory takedown provisions, which provide it with immunity from damages. But it could not ignore a lawsuit, and yesterday filed an answer and counterclaim against Innovate! for abuse of the DMCA process, seeking damages, attorneys' fees, and an injunction prohibiting Innovate! from filing any more DMCA notices.

From eBay's countersuit:

Innovate has repeatedly filed notices of claimed infringement ("NOCI") alleging that the sale . . . of Innovate products infringes Innovate’s intellectual property rights when in fact Innovate does not have a good faith belief that its intellectual property rights have been violated.

* * *

Instead, [the NOCI] are an effort by Innovate to impede the legitimate re-sale of Innovate product by bona fide purchasers . . . by knowingly misrepresenting itsintellectual property rights in an attempt to manipulate the secondary product market/s through artificially higher prices. Upon information and belief, to date, Innovate’s conduct has improperly caused the removal of more than 100 listings from the eBay website.

* * *

Innovate’s practices prevent buyers from purchasing genuine items at the best prices the market will bear.

Other cases like this have been brought before (some by Public Citizen), but as far as I know this is the first time that eBay has itself asserted a claim for abuse of the DMCA. It looks like eBay is using this case to make an example out of one of the many companies that are abusing the process at the expense of eBay sellers, consumers, and eBay itself. I think eBay has a strong case.

University of Oregon Takes Legal Stand Against RIAA In Downloading Suits

This story in yesterday's New York Times describes how the University of Oregon is standing up for what it believes are its students' privacy and due process rights by refusing to give up the students' identities in suits by the Recording Industry Association of America. The RIAA suits are going after what it claims is unlawful downloading of copyrighted music. Well worth a read.

Avvo Wins First Amendment Defense in Lawyer-Ranking Suit

by Greg Beck

A while back I wrote about a lawsuit by Seattle attorneys against the website Avvo.com, which provides rankings of lawyers. This week the Western District of Washington solidly rejected all plaintiffs' claims and granted Avvo's motion to dismiss the case.

While expressing skepticism about the usefulness of lawyer rankings, the court held the ratings to be protected opinion under the First Amendment. As the court noted, it is obvious to any reasonable reader that Avvo's numerical ranking of lawyers is subjective and does not convey any facts capable of being proved true or false. That decision is good news for any websites or other media that provide reviews. A review of a product, service, lawyer, or anything else is inherently subjective, and the targets of unfavorable reviews shouldn't be able to recover damages any time they disagree with a reviewer's opinion.

The court also held that the website was not subject to Washington's Consumer Protection Act because providing an information clearinghouse about lawyers to the public is not "trade or commerce" as used in the Act. Like many other plaintiffs in Internet cases, the plaintiffs here made the mistake of claiming that placing advertising on the website made the site "commercial." But if communications became commercial whenever accompanied by advertising, even the New York Times would have to be regarded as commercial speech. Courts are wise to recognize that speakers sometimes like to be compensated for their time, and supporting communications with advertising does not change the nature of the underlying speech.

Lawyer ratings will never be perfect, but consumers generally benefit from access to more information about the products and services they use. This decision is therefore a victory for consumers.

Apple Rumor Site Shut Down

by Greg Beck

The New York Times covers Apple's settlement with a Harvard undergraduate that shut down a popular website devoted to rumors about the company. Apple has engaged in a long-running and costly legal battle against bloggers who publish details on unreleased Apple products. In January, Apple lost a case against two bloggers and was forced to pay $700,000 in legal fees under California's anti-SLAPP statute. Apple has now settled its case against another blogger, the operator of ThinkSecret, on confidential terms. And although the blogger and his lawyer are claiming that the First Amendment was vindicated, it's hard to see how that's the case with the website going offline and the terms of the settlement confidential. As my colleague Paul Levy told the Times: "It’s great for the individual critic to be paid to be quiet, but the public is worse off if we lose the ability to get more information in the marketplace of ideas."

Attack on Ebay's Business Model: Tiffany v. Ebay

Tiffany & Co., the famous jewelry company, sued Ebay a while back seeking an injunction requiring Ebay to police all auctions of "Tiffany" products to assure that they are not fakes.  Ebay claims it has no duty to police sales of products that never come into its corporate hands.  A week-long federal bench trial ended last Tuesday, and the judge says he'll issue a decision soon.  Ebay says that the Tiffany suit is an attack on the on-line auction house's business model because the cost of policing each sale for authenticity is prohibitive.  A New York Times article on the case notes that about 102 million items are on sale on Ebay as I write this post.

In Australian Gold Case, Court Protects Consumers from Low Prices

by Greg Beck

The Eastern District of New York's recent decision in S&L Vitamins v. Australian Gold is another troubling case for consumers who shop online. The case involves one of a series of claims by Australian Gold, which makes tanning lotions, against those who sell its products for discounted prices on the Internet. Australian Gold sells its lotions to distributors, who contractually promise to resell the products only to retailers that offer a "salon environment." According to Australian Gold, this contract term is designed to ensure that retailers receive adequate training on how to use the products. Although I can't say whether Australian Gold's tanning lotion really requires a lot of training to use, a more likely explanation for the provision comes from the fact that the company's products are sold by third parties on the Internet at prices far below the prices available at salons. By cutting out low-priced Web resellers, the company can keep its products priced at a level that the market could not otherwise support.

S&L Vitamins bypassed Australian Gold's business model by purchasing the lotions from salons in bulk and reselling it online at half the retail price. Australian Gold claimed that S&L's conduct gave rise to several causes of action, including copyright and trademark infringement, unfair competition, tortious interference with contract, and false advertising.

CL&P Roundup

by Deepak Gupta

• Chair of Product Safety Agency Says Beefing Up Her Agency Would "Harm" Americans:  In the wake of growing public concern over the number of unsafe toys and other products on the market, the chair of the Consumer Product Safety Commission, Nancy Nord, has told Congress that a Senate safety bill--which would more than double her anemic agency budget and expand its authority--would "put the American people at greater risk."  [U.S. PIRG Consumer Blog] [Washington Post].
• Postgame Coverage of the Arbitration Hearing:  For those of you who didn't get to attend or watch yesterday's hearing on binding mandatory arbitration, we plan to bring you the next best thing: Paul Bland of Public Justice will be posting his own expert observations on the proceedings.  In the meantime, here's some coverage from around the web: How Arbitration Steals Your Day in Court [MSNBC] and Liveblogging the House Judiciary Subcommitee Hearing [Consumerist].
• FTC Workshop on Privacy and Advertising:  On November 1st and 2nd, the Federal Trade Commission is holding a two-day workshop to address consumer protection issues raised by the tracking of consumers' activities online in connection with online advertising/behavioral advertising.  The agenda is available here.  Those who are interested but cannot attend can watch a live webcast here.
• Numbers Won't Be Dropped from the Do-Not-Call List (At Least For Now): The FTC has announced that it's not going to drop numbers from the do-not-call list, at least pending a final Congressional or agency decision on whether to make registration permanent.  Because of an internal scrubbing program that removes reassigned or disconnected numbers, there's no need to drop the numbers on the list.