“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 »

Twitpic User Terms Brouhaha

June 21, 2011

As noted in an earlier post on TechRazor, in the online realm website and app terms and conditions merit barely a yawn from most users.  Interesting then that a recent business deal announced last month between Twitpic and World Entertainment News (WEN) garnered so much pushback from the Twittersphere.   Under the deal, WEN was designated as Twitpic’s exclusive photo agency partner. 

 The catch for users of Twitpic, an immensely popular application used to attach pictures to Twitter posts, is that the fine print of the user terms grants broad rights to Twitpic to pretty much do whatever Twitpic desires with uploaded images, including to profit off of them.  Specifically:

“By uploading content to Twitpic you give Twitpic permission to use or distribute your content on Twitpic.com or affiliated sites.  . . . [B]y submitting Content to Twitpic, you hereby grant Twitpic a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare derivative works of, display, and perform the Content in connection with the Service and Twitpic’s (and its successors’ and affiliates’) business, including without limitation for promoting and redistributing part or all of the Service (and derivative works thereof) in any media formats and through any media channels.”

Twitter users, especially professional photographers, rebelled and WEN’s CEO did not really help the situation by later stating that WEN was only interested in photos posted by celebrity users.  So, sometimes the fine print contains traps for the unwary that can snag many.

For more on this tempest, see Joshua Brustein’s recent piece about this in the NY Times and a follow up piece a week or so later by Paul Boutin.

Social Media and Debt Collectors

May 23, 2011

Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are restricted in the manner in which they may seek to collect a debt.  Among those restrictions are strict limits on communications with debtors and avoiding deception in those communications.   An article on the use of social media by debt collectors that I read last week in the American Banker (article access may require a subscription), which does a pretty good job covering technology issues related to the financial and payments industry, focused my attention on this topic as an example of how business practices involving social media raise questions on what should be allowed. 

If we think of social media applications as simply variations of other communications tool, there should not be much difficulty in analyzing whether the FDCPA rules apply to social media when used by debt collectors  — generally speaking, the rules should apply.  Yet, the extent to which the FDCPA limits social media use by debt collectors is an open issue in some circles.  So, much so that as the American Banker article mentioned above reports that a court in Florida recently issued an order restraining a debt collector from contacting a debtor via Facebook.  As another example, see a story on The Consumerist website reports a particularly interesting and extensive use of Facebook by a debt collection agency to friend unsuspecting debtors and thereby collect information that might otherwise not be available to the collectors.   

Expect the states and the FTC to step into what appears to be something of a void — putting aside whether it should even be regarded as that.  On April 28, the FTC held a day-long public workshop entitled “Debt Collection 2.0:  Protecting Consumers As Technologies Change”, for which the period to submit additional public comments runs through May 27.   Given all this, it is likely that the FTC will either recommend a regulatory framework or step up its own enforcement actions based on its authority to investigate unfair and deceptive trade practices.

Graphics Credit: Terinea IT Support on Flickr

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.

Enlightenment Sensibility of Netflix Prize Runs Afoul of FTC

March 13, 2010

The data privacy and breach stories that have made the biggest headlines over the past couple of years have principally involved companies either not adequately securing data or being the subject or hackers, which in turn resulted in exposure to statutory breach claims under various state laws, contractual breach claims and tort liability under negligence theory.  So, the news this week that Netflix is suspending its much vaunted Netflix Prize 2 until it resolves data privacy concerns expressed by the Federal Trade Commission (FTC) provides a good reminder of the authority at the federal level of the FTC to hold companies accountable for the assurances they provide their customers about data privacy.

Well before the advent of the Nobel Prize, arguably the premier prize for scientific achievement, there existed a tradition dating back at least to the Enlightenment of science-focused groups and clubs staking a prize for the proving of some scientific theorem or mathematical conjecture.  In a sense, Netflix was following in this long tradition, with a little bit of marketing and general business savvy thrown in to the mix, when in 2006 it announced its initial Netflix Prize contest in which it would award $1 million to whoever could most improve its movie recommendation algorithm.  Much like a mini-space program, this spurred numerous teams of professional and amateur researchers to pore over the data that Netflix then made available to facilitate the contest.  Therein lies the rub.  The data was supposed to be anonymous — and for all practical purposes this may have been the case.  The data was purged of all names and other personally identifiable information.  Yet, proving that clever people can do a lot with very little, a separate researchers uninterested in the Netflix prize proceeded to show that with a little effort the purportedly anonymous data was, in fact, not so anonymous. 

While the parallel analysis did not achieve any sort of prize recognition, it garnered the attention of the FTC.  Made aware of the research after the second Netflix Prize contest was announced and that Netflix actually planned to provide even more demographic information than was provided in the first contest, the FTC opened an investigation this past fall pursuant to its broad authority under Section 5 of the FTC Act to address unfair and deceptive trade practices.  While businesses other than those in certain  regulated areas (for example, financial institutions and healthcare providers) do not have to have any privacy policy, if they do have such a policy they are obligated to adhere to what they promise. 

The current Netflix Privacy Policy states, in part, that:  “We may also disclose and otherwise use, on an anonymous basis, movie ratings, consumption habits, commentary, reviews and other non-personal information about customers.” (Emphasis added.)   The quoted portion of the Netflix Privacy Policy is a fairly plain vanilla statement.  Variants of this are commonly found in many consumer-focused websites and work just fine so long as the policy is adhered to.  Netflix is not alone in wanting to use its storehouse of seemingly anonymous customer data for analytical purposes, and there is real good that comes from such efforts.  But, with advanced methodologies and the telling ingredient of a little ingenuity continually posing challenges to long-held assumptions about how secure data is, you can be sure the FTC will keep knocking on the doors of those who are less than vigilant.

NetFlix Blog Notice on Ending Contest: NetflixBlog–PrizeNotice

FTC Letter Closing Investigation: http://www.ftc.gov/os/closings/100312netflixletter.pdf