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This post was written by Steven Getzoff and Adam Snukal.

On Jan. 19, 2010, Weight Watchers International Inc. of New York sued its rival, Jenny Craig, Inc., in the U.S. District Court for the Southern District of New York. The suit alleged that the latter's ads were misleading and deceptive, claiming they reference a comparison study carried out by Jenny Craig between the two companies' competing products--Weight Watchers' current weight-loss program and Jenny Craig's pre-packaged meals system. Apparently, no such study was ever conducted. Weight Watchers' suit asked for injunctive relief and damages. The next day, Jan. 20, 2010, Weight Watchers announced that the court had issued a Temporary Restraining Order (TRO) against Jenny Craig. TROs are generally issued when the court believes the plaintiff's claims would likely succeed on their merits in a preliminary injunction proceeding, and that to do nothing in the interim would unfairly prejudice the plaintiff. The TRO forbids Jenny Craig from broadcasting, publishing or disseminating claims of superiority over the Weight Watchers program. In other words, they cannot use the ads at issue or any other ads containing these claims.

The comparative advertising doctrine allows one party to use the trademarks of another without permission if truthful and verifiable facts presented provide a valid factual comparison that helps consumers decide which product is better. On the other hand, a comparative advertisement that falls short of substantiation and validation, as in the foregoing case, could very well give the harmed party a claim of trademark tarnishment, in addition to deceptive advertising.

One e-columnist claims the lawsuit was and is a waste of time. We wonder, if it were that columnist's trademarks or those of his e-journal that were being exploited by a competitor, would he be so philosophical.

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Once again, that truism that old habits die hard has been substantiated. The U.S. District Court of Northern California just awarded Facebook a $711 million judgment against the self-described “spam king,” Sandford Wallace, for violating the CAN-SPAM Act. The CAN-SPAM Act establishes the rules for sending commercial emails and bans “false and misleading” marketing emails. 

Wallace and two others were sued by Facebook in February, alleging they used various phishing sites, technologies and other means to gain unauthorized access to Facebook users’ accounts, and then used those same accounts to distribute SPAM throughout Facebook’s network. Specifically, Facebook asserted that Wallace had used the site to induce members to click on messages that appeared to be legitimate, but were actually designed to capture personal information.

Judge Jeremy Fogel wrote in his order, “The record demonstrates that Wallace willfully violated the statutes in question with blatant disregard for the rights of Facebook and the thousands of Facebook users whose accounts were compromised by his conduct.” In addition to the aforementioned monetary judgment, Wallace has been permanently prohibited from accessing or using Facebook, or from creating a Facebook account.

Along with Wallace’s violation of the CAN-SPAM Act, Judge Fogel noted that Wallace “willfully violated” a temporary restraining order and preliminary injunction issued earlier in the case against accessing Facebook. The court referred this matter to the U.S. Attorney’s Office for criminal prosecution.

You may recall Wallace’s name being mentioned in the past in the context of anti-spam and/or CAN-SPAM violations. Wallace was a defendant in a similar case in 2008 in which he was ordered to pay MySpace $234 million for similar violations. He was also the target of the FTC in a suit brought in 2006, in which he was fined $4 million after the FTC accused him of running an operation that infected computers with software that caused flurries of pop-up ads, known as “spyware.”

Why This Matters

Interestingly, this not the largest CAN-SPAM award. That honor also belongs to Facebook, who in November 2008 won an $873 million victory against Adam Guerbuez and Atlantis Blue Capital. In all earnest, Facebook realizes the likelihood of enforcing its judgment is remote at best. In fact, Facebook’s lead counsel for litigation and intellectual property remarked on a Facebook blog post: “While we don’t expect to receive the vast majority of the award, we hope that this will act as a continued deterrent against these criminals. This is another important victory in our fight against spam.”

However, this case proves, once again, that even in a dynamic and evolving landscape such as social media, fundamental legal principles, rules and regulations still apply, and have an excellent chance of being enforced by the courts around this country.

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This post was written by Rachel Rubin.

If it looks like fruit and sounds like fruit, it must be fruit. Well, not exactly, and please don’t waste our time, says a California court. Ray Werbel recently filed a lawsuit in San Francisco federal court claiming that he bought and ate Froot Loops cereal, believing it was healthy . . . for four years. Upon discovering that it was in fact a sugary children’s cereal, Werbel claims he was misled by Toucan Sam’s claims about “the flavor of froot.” He seeks unspecified punitive and actual damages to be paid to all consumers who, like him, bought Froot Loops under the same mistaken belief.   

The “Froot” in Kellogg’s Froot Loops cereal is not real fruit. Eating the “froot” does not provide the same health benefits of real fruit. We expect the court to dismiss this complaint just as it has recently dismissed similar complaints – and there have been a few of them lately. Though Werbel claims otherwise, he may be a serial cereal litigant. He also brought suit against Pepsi, the maker of Cap’n Crunch with Crunchberries cereal, not realizing that a nearly identical case had been dismissed by the court earlier this year. In May, a judge in the U.S. District Court in the Eastern District of California dismissed a complaint by a woman who claimed she had purchased Cap'n Crunch with Crunchberries because she believed "crunchberries" were real fruit. The plaintiff, Janine Sugawara, alleged that she had only recently learned to her dismay that the "berries" were in fact simply brightly colored cereal balls. Though the colorful “berries” did contain a small amount of strawberry fruit concentrate for color and flavor, it was not enough to be considered an actual strawberry. Judge Morrison England, Jr. stated that:

This Court is not aware of, nor has Plaintiff alleged the existence of, any actual fruit referred to as a "crunchberry." Furthermore, the "Crunchberries" depicted on the [box] are round, crunchy, brightly-colored cereal balls, and the [box] clearly states both that the Product contains "sweetened corn & oat cereal" and that the cereal is "enlarged to show texture." Thus, a reasonable consumer would not be deceived into believing that the Product in the instant case contained a fruit that does not exist. . . . So far as this Court has been made aware, there is no such fruit growing in the wild or occurring naturally in any part of the world. 

Noting that normally the loser on a motion to dismiss would get a chance to amend the complaint, that was not going to happen here:

In this case, . . . it is simply impossible for Plaintiff to file an amended complaint stating a claim based upon these facts. The survival of the instant claim would require this Court to ignore all concepts of personal responsibility and common sense.  The Court has no intention of allowing that to happen.

More on the decisions here, here, and here.   

In other breakfast news, consumers filed a $5 million class action suit against General Mills over its claims that Cheerios helps to lower cholesterol. Suits by consumers in three states were consolidated in federal court in New Jersey last week. The suits were prompted by a warning the FDA issued to General Mills in May on the claims that Cheerios “can lower your cholesterol 4 percent in 6 weeks” and has been “clinically proven to lower cholesterol.” As we previously reported, the FDA said that Cheerios’ claims regarding its benefits in the prevention and treatment of a disease (hypercholesterolemia) likely make it a drug under FDA standards. Cheerios responded to the FDA, arguing that its claims are not unlawful disease claims, and that the claims are consistent with the FDA’s health claim regulations. General Mills says it is in talks with the FDA to resolve the issue. General Mills’ answer to the complaint is due at the end of the month.

Why This Matters

Besides setting the media and blogosphere abuzz with bad puns and witticisms (nor could we help ourselves), this case is interesting from an advertising perspective. It reminds us that the court has a sense of humor, and, more importantly, addresses the “reasonable person” standard. It affirms two important points: (1) that the “reasonable person” is expected to have some common sense, some perspective, and to not take things so literally, but (2) companies are still accountable for the content of their advertising, especially when statements cross the line from marketing messages to health- or scientific-related claims. 

As always, you can contact the author, Rachel Rubin, Adam Snukal or any other Reed Smith attorney with whom you regularly work, for more information or assistance.

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This post was written by Dan Jaffe.

The business community has won an important victory in a lawsuit challenging a Maine law that severely restricts the collection, transfer and use of “personal information” or “health-related information” from minors.  The Maine Attorney General has publicly committed not to enforce the law, which was scheduled to take effect on September 12^th.  Although the federal court stopped short of granting a preliminary injunction, it sent a clear message that any private cause of action under the new law could suffer from “constitutional infirmities.”  We are very hopeful that this will give the business community an opportunity to work with the Attorney General, the bill’s sponsor and others in the Maine Legislature to resolve the serious defects with the legislation.

On August 26^th, a lawsuit was filed in federal court in Maine by the Maine Independent Colleges Association, the Maine Press Association, NetChoice and Reed Elsevier challenging the Maine “Act to Prevent Predatory Marketing Practices Against Minors.”  The lawsuit argues that the law is unconstitutional on both First Amendment and dormant commerce clause grounds and is preempted by the federal Children’s Online Privacy Protection Act (COPPA).

After hearing arguments yesterday on the motion for a preliminary injunction against the Act, the federal court found that the Plaintiffs had “met their burden of establishing a likelihood of success on the merits of their claims that Chapter 230 is overbroad and violates the First Amendment.”  The court’s order specifically noted that the Attorney General has publicly acknowledged First Amendment concerns and has committed to not enforce the Act.  In addition, the order put potential third parties on notice that any private cause of action under the Act could suffer from “the same constitutional infirmities.”  We are very hopeful that this will discourage any such private lawsuits.  With these strong findings of the court, the parties agreed to dismiss the lawsuit without prejudice, allowing the parties to relitigate if some third party tries to enforce the law. 

ANA has provided financial support for the lawsuit and we are pleased with this result.  Also, there has been a commitment to revisit and consider carefully revising the law when the Maine Legislature reconvenes this January.

If you have any questions about the Maine lawsuit, please contact Dan Jaffe or Keith Scarborough in ANA’s Washington, DC office at (202) 296-1883.

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The lawsuit filed in Maine to stay enforcement of a Maine privacy law targeting minors, received a hearing today in federal district court. The Maine attorney general argued that the motion for a preliminary injunction should be denied and that the case should be dismissed. MediaPost reports that Attorney General Janet Mills, having already stated that she will not enforce the law, sought dismissal of the case on the grounds that "It is well-established that a federal court has no jurisdiction over a challenge to a state statute when there is no credible risk of enforcement." Even though the plaintiffs in the case fear that the private right of action in the statute (which becomes effective Sept. 12, 2009) could bring an avalanche of lawsuits, the Maine AG contends that those lawsuits are hypothetical. She states in her papers, "Essentially, the courts do not require state officials to defend against theoretical lawsuits that might be brought by private parties against private parties." The judge in the case, the Hon. John A. Woodcock, did not rule from the bench at today’s hearing. He indicated that he would have a ruling no later than Friday (Sept. 11, 2009). Stay tuned. . . .

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Over the past year, we’ve written on several occasions about various topics related to gift cards. In fact, earlier this month, Adlaw by Request featured a handy grid that originally appeared on our companion blog, Legal Bytes, of the gift card laws across the United States on a state-by-state basis.

A settlement reached in California in early August 2009 pertaining to gift cards sold in that state is worth reporting. The settlement, between a major coffee retailer and the state, resolved alleged violations of certain provisions that were added to California’s gift card statute in 2008. Specifically, the law in California requires all businesses, upon a customer’s request, to redeem gift cards and certificates for cash, if the remaining balance on the card or certificate is less than $10, provided the card or certificate was not (i) part of an award, loyalty or promotional program, or (ii) sold at a volume discount to employers, nonprofits, or charities for fundraising purposes, if the expiration date on those cards is 30 days or less from the date of such sale.

The settlement terms reached in this case will likely become an inflection point for businesses in this state, and may even dictate a somewhat new modus operandi. In addition to the $225,000 civil fine, investigative and legal costs, and restitution that this retailer was compelled to pay, the state required the coffee retailer to add a button to each of its point-of-sale devices (aka cash registers) that would facilitate the immediate redemption of a customer’s gift card. Moreover, the retailer was required to design, implement and maintain training programs for its employees on how and when to redeem gift cards, and was further compelled by the state to post signs throughout all of its retail locations on consumers’ rights to have their gift cards redeemed when the balance dropped below $10. 

Although it is still too early to know which of these requirements will eventually become commonplace among retailers in California, this settlement serves as an important precedent and development that business owners need to know is out there.

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On July 14, 2009, Andrew Cuomo, the attorney general of New York, settled with Lifestyle Lift, a plastic surgery franchise, for false and deceptive trade practices. The case concerned the growing practice of “astroturfing,” which refers to flooding the Internet with false positive reviews about one’s goods or services. The case is believed to be the first in the nation, and will cost Lifestyle Lift $300,000 in penalties and costs.

According to the New York attorney general’s complaint, Lifestyle Lift asked its employees to create accounts with various Internet message boards and pose as satisfied customers of Lifestyle Lift. In addition, employees were asked to attack legitimate message board posters who criticized Lifestyle Lift, and tried to get those posts removed from message boards. The act of having employees pose as independent consumers, according to the New York attorney general, was fraudulent and deceptive conduct because it could mislead consumers about the product’s effectiveness.

In addition to posting on various Internet message board services, Lifestyle Lift registered and created stand-alone websites, such as MyFaceliftStory.com, which appeared as if they were created by independent and satisfied customers. The sites offered positive narratives about the Lifestyle Lift experience, as well as comments from what appeared to be other consumers about their experiences with Lifestyle Lift. However, these sites were directly controlled by Lifestyle Lift, which either provided all the “user comments” themselves, or closely monitored and edited third-party comments to skew the discussion in favor of Lifestyle Lift. The New York attorney general’s office has provided examples of these narratives here.

Under the settlement, Lifestyle Lift will stop publishing anonymous positive reviews about the company to Internet message boards and other websites, and will pay $300,000 in penalties and costs to the State of New York.

Why This Matters: This case is notable not because of Lifestyle Lift’s messaging about its own products. Clearly the creation of fake “user” experiences can lead to a claim of unfair or deceptive trade practices. Rather, this case matters because of its treatment of Lifestyle Lift’s removal of bad reviews from its own site. Making a company civilly liable for removing third-party content from its website may appear to conflict with the Communications Decency Act of 1996, which shields interactive computer-services providers from liability for removing content from its websites. But in this case, Lifestyle Lift’s conduct makes clear that the “good faith” requirement of the Act could not be met. Going forward, companies that advertise online must watch not only the statements they are making about their product, but also their efforts to control what is said on their websites by third parties, to ensure that any removal does not cross the line between immunized activity and liability.

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When Laci Satterfield’s son answered his mother’s cell phone in the middle of a cold January night in 2006, he heard the following message: “The next call you take may be your last.” Seconds later, when a text message arrived to the same number promoting Steven King’s newest horror novel, The Cell, Ms. Satterfield decided that some advertiser had crossed the line. Simon and Schuster (“S&S”) was that advertiser.

How did S&S obtain Ms. Satterfield’s cell phone number? Several months earlier, Ms. Satterfield enrolled as a user of Nextones, a company that sells custom ringtones, to obtain a free ring tone. During the registration process, she clicked on the opt-in box with the following adjacent message, “I would like to receive promotions from Nextones’ affiliates and brands.” Soon after the events described above transpired, Ms. Satterfield filed a class action lawsuit against S&S, claiming that S&S violated the Telephone Consumer Protection Act.

We’ve written here in the past about the FCC’s Telephone Consumer Protection Act (the “TCPA”), which makes it unlawful to generate automated calls to mobile phones. Previously we discussed the problems that advertisers are experiencing with the porting of numbers from landline to mobile phones and vice versa. Now there is a new issue on the horizon….

When the Federal Court of Appeals for the Ninth Circuit heard Ms. Satterfield’s case, the court dismissed it, finding that the TCPA did not apply to text messages.  The court also concluded that since Ms. Satterfield agreed to receive solicitations in return for a free ring tone, the text messages she received could not be deemed illegal SPAM. The court also opined that S&S could not have violated the TCPA as no automatic telephone dialing system (“ATDS”) was ever employed by S&S or its agency (a requirement under the TCPA). 

Mobile marketers thought they had dodged a bullet. Until last week.

On June 19, 2009, the Ninth Circuit Court of Appeals rejected all three of the district court’s arguments in a decision that could have a far-reaching impact throughout the mobile marketing industry. The Ninth Circuit dismissed any connection between Nextones and S&S, reasoning that since S&S was never an affiliate of Nextones and The Cell was not a Nextones brand, Ms. Satterfield’s affirmative consent could not be extended to cover text-message campaigns carried out by S&S. Thus, the message was an unsolicited text message and constituted illegal SPAM.

As to whether the system used to call Ms. Satterfield’s phone could be considered an ATDS, the court focused on the device’s capacity, not what it actually did or didn’t do. If a particular system has the capability of storing numbers and automatically dialing them in some programmed manner, then, in the court’s opinion, it is an ATDS for purposes of establishing a TCPA claim.

Finally, the court rejected S&S’s argument that sending the text messages did not constitute a call under the TCPA. Noting that it had no prior case law upon which to base its decision, the court observed that while no definition is ascribed to the word “call” under the TCPA, “[t]he FCC has explicitly stated that the TCPA’s prohibition…‘encompasses both voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls.” The court further noted that in the FCC’s Notice of Proposed Rulemaking of the CANSPAM Act, “the TCPA and Commission rules that specifically prohibit using automatic telephone dialing systems to call wireless numbers already apply to any type of call, including both voice and text calls.”

Should the Court of Appeals decision stand (it can be appealed to the United States Supreme Court), S&S’ potential exposure for a mobile marketing campaign could exceed $100 million.

Why this Matters:

• According to eMarketer, the mobile marketing industry is projecting a spend of more than $7 billion in 2009. Many expect the annual spend will reach $14 billion by 2014. This is the first time a federal appellate court has said that the TCPA applies to text messages.
• Devices that merely have ATDS features and/or are capable of carrying out ATDS functions can be used to build a case under the TCPA, even if those features and functions were never employed by the marketer.
• Content distributors and marketers need to be keenly aware that courts may be more inclined to take a narrow reading of any consumer opt-in with respect to mobile marketing. Solicitations must be closely related to the offers, content and future communications that a consumer elects to receive, and the party sending those communications must have the authorization to do so.

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In the past two weeks, I’ve twice blogged about the Ninth Circuit’s opinion in Barnes v. Yahoo. This case split the Ninth Circuit from other circuits as to how the CDA should be applied – should it support a 12(b)(6) motion to dismiss, or should it be treated as an affirmative defense? In deciding that the CDA was an affirmative defense, the Ninth Circuit created for itself a few problems. If the CDA is treated as an affirmative defense, then a court could open discovery prior to ruling on whether a defendant’s actions were immunized or not. By putting discovery into play, the cost of defending a case on CDA grounds could skyrocket. Thus, the CDA-as-an-affirmative-defense theory would create an incentive for defendants to settle cases for which they ought to receive protection, and create an incentive for plaintiffs to bring cases in the Ninth Circuit strictly for this reason. 

On June 22 (roughly six weeks after the release of the initial Barnes opinion), the Ninth Circuit issued an amended opinion in which it deleted the entire discussion of the CDA as an affirmative defense. This marks the second time in two years that the Ninth Circuit has had to go back and correct a decision about the CDA. But by making this correction, the Ninth Circuit resolves the split among the circuits as to whether the CDA can be used to support a 12(b)(6) motion. Thus, in the Ninth Circuit, the CDA can support a 12(b)(6) motion – for the moment, anyway.

If you want to read the full opinion, it can be found here. 

Why This Matters: Notwithstanding a future departure from the norm, the CDA can form the basis for a 12(b)(6) motion in the Ninth Circuit. This means that it is still possible to resolve a case on CDA grounds prior to the opening of discovery.

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On May 28, I wrote about the Ninth Circuit’s decision in Barnes v. Yahoo. In that case, the Ninth Circuit held (among other things) that the Communications Decency Act (47 USC § 230) (“CDA”) could not support a 12(b)(6) motion to dismiss for failure to state a claim, because the CDA is an affirmative defense. As an affirmative defense, CDA protections must be claimed by filing an answer to the complaint, which can allow for the opening of discovery. Given that the opening of discovery can be expensive and time-consuming, it is not surprising that Yahoo has asked the Ninth Circuit for a rehearing en banc, and has received support from various amici briefs.

On the other side of the country, a New York District Court has tackled the same issue, but came to a different outcome. The case – Gibson v. Craigslist, 1:08-cv-07735-RMB (S.D.N.Y. June 15, 2009) – was brought by a shooting victim who claims that the shooter bought the gun via Craigslist. News reports on the case can be found here and here.

The basis of the case was the allegation that Craigslist had a duty to police its system so that "inherently dangerous objects" could not be purchased for use in criminal activities. Gibson sought $10 million in compensatory damages, punitive damages, and the "appointment of a federal monitor" to keep guns from being advertised on the website. 

In its defense, Craigslist submitted a 12(b)(6) motion to dismiss the case on the grounds that the CDA precluded this kind of liability. In granting the 12(b)(6) motion, the court stated that "discovery into defendant’s efforts to prevent the sale of illegal goods on its website would not establish a set of facts that would entitle the Plaintiff to relief." Therefore, raising CDA immunity was more appropriate in a 12(b)(6) than raising it as an affirmative defense.

Why this Matters: As of today, there is a split in interpretation as to how CDA immunity should be claimed. For the Southern District of New York, as well as other courts like the Northern District of Texas [MCW, Inc. v. badbusinessbureau.com, 02-Civ.-2727 (N.D. Tex. April 19, 2004)], the CDA is properly raised in a 12(b)(6) motion to dismiss. If the motion is granted, this would preclude the opening of discovery. However, in the Ninth Circuit, the CDA should be treated as an affirmative defense to be raised in an answer. Thus, a judge may open discovery prior to ruling on the application of the CDA.

This split in application – if not resolved by the Ninth Circuit in an en banc rehearing – is likely to increase "forum shopping" among plaintiffs because, in the Ninth Circuit at least, plaintiffs would stand a better chance at a settlement. After all, a defendant may be more willing to settle a case than to risk the cost incurred in proceeding with discovery.

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In what is likely to be seen as a watershed moment for the application of the Communications Decency Act of 1996 (the "CDA"), the Ninth Circuit Court of Appeals has released an opinion in Barnes v. Yahoo that has the potential to dramatically increase the cost of defending social media and computer service providers.

The Barnes case centered around the posting of defamatory "fake" profiles on Yahoo's social networking pages. The profiles, which appeared to be from Ms. Barnes but were in fact created by her ex-boyfriend, included several pictures of her in the nude. Ms. Barnes asked Yahoo to remove the profiles, but Yahoo took no action until local media did a story on the events, wherein Yahoo promised to remove the fake profiles. Two months after that, the profiles still appeared on the Internet, and Ms. Barnes sued Yahoo.

Yahoo sought a motion to dismiss based on the immunity provided to it by the CDA. The dismissal was granted and Ms. Barnes appealed to the Ninth Circuit. In deciding to remand the case to the District Court, the Ninth Circuit did two things that can be problematic for the future of the CDA.

First, it held that a promissory estoppel-like claim can survive CDA immunity (at least at the motion to dismiss stage). At its core, a promissory estoppel claim requires someone to make a promise, and someone to rely upon that promise to his/her detriment. The court explained that Yahoo could be seen as having made a promise to Ms. Barnes, as part of its privacy policy and terms of service, and reiterated through local media, that it would take down profiles such as the one at issue. The making of a promise would be an activity that would fall outside of the CDA's scope. Thus, a promissory estoppel claim can survive a CDA-based motion to dismiss.

The second, and potentially more problematic, result of this decision is the treatment of the CDA as an affirmative defense, and the basis for lawsuit immunity. Although this may seem like a small detail, the proverbial devil is in the detail. If the CDA is a source of lawsuit immunity, then this supports a motion to dismiss for failure to state a claim (a 12(b)(6) motion). A 12(b)(6) motion must be dispensed with before the filing of answer, and before the opening of discovery. An affirmative defense, on the other hand, is dealt with by a motion for a judgment on the pleadings. For this type of motion, the defendant must file an answer along with the affirmative defense. The filing of an answer is where things go awry. Upon the filing of an answer, the court can open discovery. If the case was presided over by an overly cautious judge, discovery could be mandated prior to the issuance of a ruling on the summary judgment motion. Given that discovery can be expensive and time consuming, it is not difficult to imagine that the potential costs of exercising CDA immunity may have greatly increased.

Why This Matters: This case should be of great interest to purveyors of social media and those who seek to tap into the power of social networks. Not only does this provide a wake-up call as to what the consequences are of the statements in privacy and terms-of-service policies, but it also defines a way to avoid future promissory estoppel-like claims. Promissory estoppel requires a promise and reasonable reliance – if it is unreasonable to rely on the promise, then the estoppel claim may fail. It is possible that an artful drafting of a terms-of-service document can make this kind of reliance unreasonable, and social media and other interactive website purveyors should think about whether their privacy policies need revision of this type.

Notwithstanding revisions to one's policies, the case is also noteworthy because of the shift in interpretation of the CDA. If the CDA is more properly an affirmative defense than the basis for lawsuit immunity, then the potential cost of tapping into the CDA's protections may rise significantly.

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In September 2008, the Virginia Supreme Court unanimously ruled that Virginia’s then-enacted anti-spam laws were per se unconstitutional on the grounds that they violated the First Amendment right of freedom of speech. At the time, Virginia’s anti-spam laws prohibited the sending of unwanted, unsolicited e-mails, both commercial and non-commercial.

The Virginia Supreme Court argued that since the law failed to make any distinction between the different types of emails a user could be sending, it would have prevented political, religious and other messages covered under the First Amendment, as well as general commercial solicitations. The court also noted that the statute failed to meet strict scrutiny, pointing out that similar anti-spam statutes had been enacted by several states, as well as by the federal government (which passed the CAN-SPAM Act in 2004), but all those statutes were narrowly tailored to target commercial spamming. Justice G. Steven Agee, who wrote the unanimous opinion for the court and cited a 1995 U.S. Supreme Court case, stated “The right to engage in anonymous speech, particularly anonymous political or religious speech, is ‘an aspect of the freedom of speech protected by the First Amendment.’” Along with the State Supreme Court striking down this law, its decision reversed the conviction of Jeremy Jaynes, the first person in the United States convicted of a felony for sending unsolicited bulk-emails. Jaynes was once considered one of the world’s most prolific spammers, sending mass emails anonymously by using false Internet addresses.

Immediately following this ruling in 2008, Virginia Attorney General Robert F. McDonnell promptly announced that he would appeal the case to the United States Supreme Court. Earlier today, the U.S. Supreme Court elected not to consider reinstating Virginia’s anti-spam law.

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On Aug. 27, 2008, in the case Io Group, Inc. v. Veoh Networks [1] (Veoh), U.S. Magistrate Judge Howard R. Lloyd granted Veoh’s motion for summary judgment, that it qualified for “safe harbor” protection under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. § 512. The Veoh decision has been hailed by some as a major victory for Internet service providers and proponents of the sufficiency of the DMCA in addressing copyright infringement issues over the Internet. Does this decision supplant Grokster as the current precedent of U.S. courts with respect to an analysis of the legality of websites featuring user-generated content (UGC)? The Supreme Court’s decision in Grokster established that a service provider that has provided a platform and has promoted its use to infringe copyright or foster infringement could be found liable for the resulting acts of infringement by third parties. [2] In other words, if the service provider’s website has been used, to a significant degree, as a hub of infringing content, then such service provider may not be able to raise the safe harbor provisions of the DMCA as a defense to secondary copyright infringement.[3] Precedential considerations aside, a closer look at the facts of Veoh reveals that the court’s holding is actually quite limited in scope. 

The plaintiff in Veoh, Io Group, Inc. (Io), a publisher of adult video content, claimed in the lawsuit that it discovered clips from 10 of its copyrighted films had been uploaded and viewed on veoh.com without its authorization. Considering that the DMCA was created, in part, to provide a process for copyright owners to police and limit infringing activity, it would be paramount for any copyright owner seeking recourse for a claim of infringement to have complied with the procedures in place under the DMCA[4] prior to filing a lawsuit. Assuming that the website provided a copyright-infringement-claim designated agent to contact regarding infringement claims, a copyright owner would be required to have submitted DMCA-compliant notices of infringement to such designated agent, and have such agent fail to remove the allegedly infringing content, to have an actionable claim. In this case, Veoh had a designated agent assigned to review takedown notices, and maintained terms of use that set forth procedures that were compliant with the DMCA. Plaintiff Io, on the other hand, seemingly ignoring the DMCA procedures entirely, did not send a takedown notice to, or otherwise inform, Veoh that it had determined that its film content had been uploaded to the Veoh website without authorization. Actually, receipt of the complaint was the first notice Veoh received regarding Io’s infringement issues. Strike one.

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The U.S. District Court for the Southern District of New York recently issued a “first-of-its-kind” opinion in a case with potentially wide-ranging implications for anyone engaged in the online dissemination of news. (See, The Associated Press v. All Headline News Corp., et al., 08 Civ. 323 (PKC), Memorandum and Opinion, dated Feb. 17, 2009). By denying a motion to dismiss in the matter, the court has cleared the way for a possible showdown between old and new media.

In its complaint, the AP alleges that online venture AHN enlisted “poorly paid individuals” to cull the Internet for news, including AP stories, and then either rewrote or cut-and-pasted those stories, and disseminated them to the websites of its own paying customers in the form of news reports and breaking news—thereby freeloading on the great effort expended, and great expense incurred, by “one of the world’s oldest and largest news organizations,” self-described as the “gold standard of objective journalism.”

This appears to be the first case to apply an old principle known as the “hot news” doctrine to Internet content. However, in this era of greatly reduced advertising, subscriber revenues, and life-or-death challenges for even the most venerable newspapers and other newsgathering organizations, it is not likely to be the last attack on alleged online “freeloaders.”

The “hot news” doctrine invoked by AP and relied on by the court goes back to a 1918 U.S. Supreme Court decision (International News Service v. Associated Press, 248 U.S. 215), which found breaking news to be “quasi property,” subject to protection from free-riding, or misappropriation, by competitors. In International News Service, the Supreme Court held that allowing one news agency to appropriate and profit from the work of another would “render publication profitless, or so little profitable as in effect to cut off the service by rendering the cost prohibitive in comparison with the return.” (Id., at 241.) As the Court explained, news gathering carries with it “the expenditure of labor, skill and money,” and its appropriation by another “is endeavoring to reap what it has not sown.” (Id., at 239-40.)

Although the common law origins of this doctrine render it non-binding now in federal courts (where it has been preempted by the federal Copyright Act), the doctrine is still recognized in various states, including New York, the state law found by the court to govern AP’s claims. In New York, the court ruled, a cause of action for misappropriation of “hot news” remains viable and has not been preempted.

The court also allowed AP’s claims under the Digital Millennium Copyright Act (for “intentionally altering or removing copyright management information”) and under New York State unfair competition common law to go forward, but dismissed two counts of AP’s complaint based on the Lanham Act (for trademark infringement and for unfair competition under the statute).

The court’s docket does not yet reflect when an answer will be due, but the case bears further monitoring by anyone engaged in the gathering and/or dissemination of news.

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Actress Charlize Theron has settled a lawsuit brought against her by watchmaker Raymond Weil (RW) for breaching a contract to exclusively promote its watches. The terms of the settlement were undisclosed, but it came just more than a month after a federal judge in New York concluded that Theron had breached her agreement, and that Raymond Weil was entitled to prove to a jury that it sustained damages.

In 2005, Theron, who was named by Esquire Magazine as “The Sexiest Woman Alive,” signed an agreement to promote Raymond Weil’s “Shine” collection through advertising and by wearing the watches exclusively. However, during the contract term, she was photographed at a screening of a film produced by her production company wearing a Dior watch.

A photograph of Theron wearing the Dior watch made its way to Tourneau LLC, a major watch retailer and manufacturer, which published the photo in Tourneau Times, a publication the company distributes to high-spending customers. The caption under the photo read, “Charlize Theron wears Dior.”

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Target Corporation and Apple, Inc. have reached agreements with the National Federation of the Blind (NFB) to make changes to their websites to accommodate blind consumers. The agreements follow a groundbreaking federal ruling concluding that retailers with physical locations must make accommodations to their websites under the Americans With Disabilities Act (ADA).

In addition, the NFB also reportedly is working with Amazon to make its site easier for blind and vision-impaired people to navigate.

“It is our sincere hope that other businesses providing goods and services over the Internet will follow Target’s example and take affirmative steps to provide full access to their Web sites by blind consumers,” stated NFB President Dr. Marc Maurer in a statement announcing the Target settlement.

ADA Dispute

The NFB maintains that the ADA applies websites operated by companies with “brick and mortar” retail outlets while retailers have argued that the ADA was not applicable because their websites are not physical spaces or a “place of public accommodation” under Title III of the ADA.

District Court Judge Marilyn Hall Patel of the Northern District of California allowed a suit between Target and the NFB to go forward, holding that the ADA could apply where there was a “nexus” between the use of the website and enjoyment of the goods and services offered at the retailer’s physical store. 

The court reasoned that “The [ADA] applies to the services of [sic] a place of public accommodation, not services in [sic] a place of public accommodation,” the judge stated in her opinion. “[I]t is clear that the purpose of the statute is broader than mere physical access—seeking to bar actions or omissions which impair a disabled person’s ‘full enjoyment’ of services or goods of a covered accommodation.”

Agreement Terms

Target has agreed to ensure that blind guests using screen-reader software are able to acquire the same information and engage in the same interactions that are available to sighted guests. The retailer will add to its site more alt text tags, which are invisible to users but allow screen readers to convert contents into speech. Target also agreed to make its site easier to navigate using just a keyboard, rather than requiring a mouse.

In a public statement accompanying Apple’s agreement, Apple said, “Apple, the Attorney General and the NFB differ as to what applicable law requires in regard to iTunes and the iTunes Services, but whether legally required or not, Apple is committed to making iTunes Fully and Equally Accessible,” the agreement stated.

The agreement notes that Apple already includes Screen Access Software as part of its OS X operating system on a Mac, which enables the blind to use iTunes and access iTunes Services.  Third parties have also developed such software for Windows.

Why This Matters: The federal district court decision in the Target case is only precedential in the Northern District of California. Nonetheless, given Target’s and Apple’s agreements, it is likely that companies with brick-and-mortar locations that also market their products and services via their websites will most likely make their sites accessible to the blind and visually impaired in a fashion similar to the Target and Apple approaches. It remains an open question, however, as to whether sites that do not have a corresponding physical “place of public accommodation” likewise have an obligation to comply with the ADA.

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New York Attorney General Andrew M. Cuomo has announced plans to file suit against Arbitron, alleging that the company has deceptively claimed that its new radio ratings system fairly measures audiences, when in fact it underrepresents African American and Latino listeners.

Arbitron has decided that the best defense in this instance is an offense, and has beat Attorney General Cuomo to court. Before the AG’s office could file its suit, Arbitron filed its own suit against the attorney general in U.S. District Court for the Southern District of New York, seeking to protect its free speech rights through injunctive relief.

The dispute concerns Arbitron’s long-running efforts to replace its paper-diary method of measuring audiences with new electronic Portable People Meters (PPMs). Because paper diaries rely on the memory of the participating listeners, they have been criticized as being unreliable and inaccurate. The PPMs are worn by participants and pick up hidden codes in radio broadcasts, thereby automatically recording participants’ listening habits.

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The criminal conviction of Jeremy Jaynes—the first-ever such conviction under Virginia’s strict anti-spam law—has been vacated in a ruling in which Virginia’s highest court concluded that the law in question is unconstitutionally overbroad. Had Jaynes’ conviction stood, he could have served as much as nine years in prison.

Jaynes was convicted under the Virginia Computer Crimes Act of illegal spam for sending tens of thousands of unsolicited commercial emails to subscribers of America Online, Inc. (AOL). Jaynes allegedly falsified the header information and sender domain names before transmitting the emails in violation of the law. When investigators searched his home, they found electronic records containing the emails of some 1.3 billion users.

A resident of Raleigh, N.C., Jaynes was tried in Loudoun County, Va., where AOL had its headquarters at the time that the alleged spam was sent. He was convicted by a jury, and his conviction was upheld by a Virginia Court of Appeals.

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When the Republican Party recently ran an ad attacking Sen. Barack Obama’s energy policy, with Jackson Browne’s song “Running on Empty” playing in the background, long-time Democratic activist Browne punched back.

Browne sued John McCain, the Republican National Committee and the Ohio Republican Party for using his song in the commercial, which mocks the suggestion by Democratic Presidential candidate Obama that voters can conserve gasoline by keeping their car tires inflated to the proper pressure.

“[T]he [c]ommercial falsely suggests that Browne sponsors, endorses and is associated with McCain and the Republican Party, when nothing could be further from the truth,” states Browne’s complaint, which was filed in U.S. District Court for the Central District of California.

In fact, Browne supports McCain’s opponent. “Browne’s public support for the Democratic Party and its presumptive candidate for President of the United States, Senator Barack Obama, is well-known.” the complaint says.

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