“Hot News” Doctrine Not So Hot

July 5, 2011

In Barclays Capital, et al. v. Theflyonthewall.com, Inc., Docket No. 1-1372-cv (2nd Cir. June 20, 2011), the Second Circuit U.S. Court of Appeals dealt a significant blow to the viability of the tort of “hot news” misappropriation and thereby gave an additional boost to the status of online content aggregation companies. 

As so-called “new media” companies go, the subset known as content aggregators — such as the Huffington Post or the Drudge Report — have been a curious burr in the side of many, more traditional media businesses engaged in news gathering and reporting.   If content aggregation sites are readily able and without payment to repurpose the efforts of the old line news outfits such as the Associated Press, The New York Times or ABC News, for example, does this threaten the core news gathering and reporting functions of that latter group and, if so, should there be a prohibition on such aggregation activities.

Background of Hot News Doctrine

The “hot news” doctrine is intertwined with copyright law and derives from a 1918 U.S. Supreme Court case involving International New Service (INS) and the Associated Press (AP),  in which INS was prohibited from free riding on the AP’s efforts by taking factual accounts derived from AP news stories and then presenting the news stories as INS’s own reports.  International News Service v. Associated Press, 248 U.S. 215 (U.S. 1918).   The doctrine was later severely limited by the Second Circuit in National Basketball Association v. Motorola, 105 F.3d 841 (2nd Cir. 1997), which addressed a collaboration between Motorola and a reporting service using pagers to transmit with only a few minutes delay game scores and data compiled from various sources and which competed somewhat with the NBA’s own efforts at packaging and selling games data in more or less real time.  The NBA court articulated a multi-factor test for when a hot news misappropriation claim would survive copyright law preemption and ultimately concluded that the hot news claims asserted by the NBA were preempted by copyright law because the actions complained about by Motorola, among other things, did not involve any free riding and thus did not satisfy the elements of a hot news claim. Read the rest of this entry »


.COM’s May Never Be the Same

June 21, 2011

Up to yesterday, only 22 generic top-level domains (gLTDs) or suffixes for websites — such as .com, .org and .edu — had been authorized by the Internet Association for Assigned Names and Numbers (ICANN).   Following approval at its most recent Board meeting on Monday, ICANN announced the ability of organizations and individuals  to apply, starting in January 2012, for custom top-level domains, which may be any word that meets the approval of ICANN after submission of an application. 

According to ICANN’s gTLD Applicant Guidebook (30 May 2011) applications to allow for such creativity won’t be cheap — the application fee is a whopping $185,000!  While the fee amount sounds prohibitive it may have the welcome effect of discouraging undesirable cyber-squatting on domains, perhaps leaving the use of such creative gTLDs to organizations with a solid business case to support the cost.


Being Bad With Technology

February 6, 2011

The recent skewering of Kenneth Cole’s CEO by the “twittersphere” for his bad attempt at humor by connecting this past week’s mass protests in Egypt to the Kenneth Cole brand provides one of those object lessons that I’m sure make marketing people cringe (although I’ve heard cynical PR folks observe that even this type of publicity is priceless in a good way) and that we all get with the benefit of 20/20 hindsight.  There have been other notable inappropriate uses of new media by businesses and their executives, but considering the relative age of such technologies, I’d suggest that some of the authors of these faux pas probably deserve to be cut some slack.  Whether such leniency will be in order say 10 years from now  — when the contours of propriety with this stuff will have been better worked out — is another story.

However, the Kenneth Cole incident brought to mind the case of Vitaly Borker and his DecorMyEyes.com website, which is a truly sordid episode of the misuse of online technology for marketing purposes (of a sort) that unfolded a couple of months ago.  The DecorMyEyes situation seems to have received far less attention, at least based on the instances where I’ve mentioned it to others and realized they had not heard of it, so I thought I’d provide a brief overview. 

In a truly terrific piece of investigative reporting by NY Times writer David Segal, who was working on a story about why Brooklyn-based DecorMyEyes had generated such a substantial number of consumer complaints, Borker revealed in an extensive and audacious interview with Segal that part of the business model for this web-based business was to antagonize his customers to the point that they would write negative, even scathing reviews.  Sounds weird, right?  Except that Borker had somehow stumbled upon the realization that any publicity, especially bad publicity such as persistent customer criticism, jacked up his rankings in Google searches because, according to him, Google’s algorithm did not factor out negative feedback.   Here’s an excerpt from Segal’s piece:

Today, when reading the dozens of comments about DecorMyEyes, it is hard to decide which one conveys the most outrage. It is easy, though, to choose the most outrageous. It was written by Mr. Russo/Bolds/Borker himself.

“Hello, My name is Stanley with DecorMyEyes.com,” the post began. “I just wanted to let you guys know that the more replies you people post, the more business and the more hits and sales I get. My goal is NEGATIVE advertisement.”

It’s all part of a sales strategy, he said. Online chatter about DecorMyEyes, even furious online chatter, pushed the site higher in Google search results, which led to greater sales. He closed with a sardonic expression of gratitude: “I never had the amount of traffic I have now since my 1st complaint. I am in heaven.”

Perverse, for sure.  Perhaps if he had stayed below the radar screen with his unethical gamesmanship, Borker would today still be harassing consumers and enjoying his laughter all the way to the bank.  But the arrogance that he flaunted in his NY Times interview caught the attention of local and federal law enforcement and resulted in a major comeuppance when he was arrested by federal postal authorities several days after the interview on charges of mail fraud, making threats to customers and fraudulent business conduct. 

The entire original article by Segal makes for fascinating reading, as well as the ensuing comments over the following weeks from many readers and Google about its search algorithm and related changes.  While several organizations came across as less than diligent in their customer safeguards, the online retailer Amazon fares well in the piece.  Lots of lessons here.  For consumers, do your research before you buy online.  More generally, if you base your business strategy on a faulty premise, such as the unethical use of a technology platform, expect that the dumb behavior will eventually catch up with you, and that arrogance can only sustain itself so long.


Hines v. Overstock.com: Notice of Browsewrap Terms Must be Conspicuous

November 30, 2009

As the volume of online transaction activity continues to grow, it is not surprising that so called “browsewrap” agreements – essentially, terms and conditions that a site user is presumed to have agreed to merely by accessing a website — have garnered more scrutiny by consumers and, ultimately, within the courts.  What is surprising is that website operators continue to overlook basic elements to ensure that such agreements are enforceable.  The recent case of Hines v. Overstock.com, Inc., Case 1:090-CV-00991-SJ-RLM (Sept. 8, 2009  E.D.N.Y.), is a case in point.

 Context

Ms. Hines purchased a vacuum cleaner through Overstock’s website and upon later returning it was charged a restocking fee.  Upon objecting to this charge, Overstock pointed to the Terms and Conditions posted on its website, which included the statement that “Entering this Site will constitute your acceptance of these Terms and Conditions” – notwithstanding that a user has to actually visit the Terms and Conditions to become aware of this statement.  The same with a mandatory arbitration clause buried within the Terms, which specified Salt Lake City, Utah as the place of arbitration.  The Hines court regarded Overstock’s contentions with skepticism and ultimately determined that the placement of the Terms and the configuration of the website’s purchasing process worked against Overstock.

Common Sense vs. Hindsight?

In hindsight it may seem readily apparent that it would be unfair to hold a site user accountable for website terms, such as a mandatory restocking fee or an arbitration clause, about which the user was not made aware prior to completing a transaction through the site.  Many websites have traditionally posted somewhere on them “Website Terms” or the like with the expectation that such terms provide a measure of protection even if a site user never actually visits those terms.  For sites that are principally informational in nature, basically, an online brochure, this has long been regarded as sufficient.  However, the more interactive a site is, es[ecially if a transaction of any sort is being conducted, requiring some affirmative assent to the website terms by the site user is imperative if the site operator is to have a realistic expectation of enforcing those terms. 

Most of this seems common sense in terms of basic procedural fairness, which dictates that some meaningful notice have been provided.  Website operators have a great deal of latitude in terms of how they contract with their users and many of the procedural battles over the enforceability of online contracts have long ago been decided on traditional contract principles despite the online context.  On the Overstock site the Terms and Conditions were posted at the bottom of the site and below the fold or the typical viewer window and required a user to scroll down to even take notice that the terms were present.  During the purchasing process, although several screens prompted various responses or information from Ms. Hines at no point was she prompted to acknowledge the Terms themselves.  Thus, as the Hines court noted “[v]ery little is required to form a contract nowadays – but [the Overstock notice procedure] alone does not suffice.”

The Takeaway

So, website operator beware!  If you use  a browsewrap agreement without more for important terms upon which you expect to rely in the event of a dispute, you are taking a big risk.  Unless you can show some evidence of actual notice of the website’s terms by the user, the user will likely be able to skate by without liability because of insufficient notice.  While this is much clearer for transaction-oriented websites, it will likely tilt that way for purely informational sites as well.

 Link to DecisionHines v. Overstock


Veoh Case Illustrates Path to DMCA Safe Harbor

September 26, 2009

A recent decision, UMG Recordings v. Veoh Networks, No. CV 07-5744 AHM (AJWx) (N.D. Cal. Sept. 19, 2009), by a federal district court provides a good example of the tensions sought to be balanced under the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”) and the way to successfully attain the benefits of one of these safe harbors.  While the Veoh case can be viewed as but one of the many ongoing skirmishes pitting music and film industry giants against emerging video and music sharing websites, the decision serves as useful guidance for sites of all sorts that host user-generated content.   

Veoh operates a widely used video sharing website.  Not surprisingly, users sometimes post unauthorized copies of copyrighted materials, including UMG (Universal) music videos.  Veoh maintains a clear copyright policy that is readily available to its users that prohibits posting of unauthorized content and Veoh’s normal practice is to remove promptly known infringing video postings.  Veoh also employs filtering technology that automatically blocks postings of known infringing content.   Notwithstanding these measures, UMG claimed that Veoh should have known that the type of site it operated would result in the posting of infringing content, that Veoh should have employed filtering technology earlier than it did, and that Veoh failed to remove improper videos based on UMG having merely identified UMG artists by name but not specific copyrighted videos.

Enter the DMCA.  The DMCA attempts to strike a reasonable balance between the need to protect the legitimate rights of copyright holders, on the one hand, and the desire to avoid improper constraints on freedom of expression and also to allow the continued development of electronic communications platforms, on the other.  As part of that balancing act, the DMCA contains in Section 512(c) a safe harbor provision against copyright infringement claims for internet service providers and other operators of websites that store user-generated content.  The safe harbor shields an online service provider from liability if the provider:

  1. Does not have actual knowledge that the content is infringing, is not aware of facts or circumstances that would make apparent that infringing activity has occurred, or upon becoming aware of infringing content, acts promptly to remove or disable access to such content;
  2. Does not receive a direct financial benefit from infringing content where the provider also has the right and ability to control such content;
  3. Upon notification of claimed infringement, responds promptly to remove or disable such content; and
  4.  Has adopted and reasonably implemented a policy that informs users that repeat infringers will have their access to the service terminated.

The Veoh court found that, contrary to the strained contentions of UMG, Veoh easily satisfied each of the safe harbor elements.  The court noted that service providers are not required to take any particular actions just because infringing activity could be taking place and what the DMCA requires is notice of specific works claimed to be infringed not generalized assertions that all works involving a particular artist must be addressed.  Providers are also not required to adopt any particular technology, such as filtering technology, or, if they choose to do so, adhere to a timetable preferred by a complainant.  What is required is that the service provider act reasonably under the circumstances.  For all these reasons, the court held that Veoh in fact acted reasonably and granted Veoh’s motion for summary judgment against UMG.

Like the sturdy little train engine of storybook fame, Veoh has seemingly become the “little website that could,” having now scored at least three successive court victories in as many years against claims of copyright infringement.   However, operators of websites that are further below the radar screen should still take note of this case.  Even though greater attention has been garnered by the music and film industries in notable online copyright cases, the types of well thought out steps implemented by Veoh to address issues of alleged infringement are ones from which any website with contributed content can benefit.


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