Topic: Legal

Legal side of Reputation Management

First Circuit Rejects Copyright Workaround to Section 230–Small Justice v. Ripoff Report 0

Ripoff Report Screenshot

[It’s impossible to blog about Section 230 without reminding you that it remains highly imperiled.]

Goren runs a law firm, Small Justice. DuPont, a defendant in a case Goren brought, posted two negative reviews about Goren to Ripoff Report. Goren sued DuPont, who no-showed, resulting in  default judgment. The state court awarded DuPont’s copyright in the two reviews to Goren. Goren then asserted the copyright against Ripoff Report. We have been covering this case for years (since 2013!). My blog post on Goren’s initial complaint. Venkat’s post on the initial district court ruling. My post on a subsequent district court ruling.

On appeal, the First Circuit sides completely with Ripoff Report. Barring an ill-advised appeal to the Supreme Court, this case should be over.

Section 230. Section 230 wipes out Goren’s defamation, intentional interference and (parts of) unfair competition claims based on DuPont’s negative reviews. Goren argued that Ripoff Report partially developed DuPont’s posts (using tired arguments like Ripoff Report had copyright interests in the reviews, an argument that first failed in the Blumenthal v. Drudge case 20 years ago). The court disagrees because “Xcentric did not alter the content of the information DuPont posted.” Furthermore, Ripoff Report’s efforts to get DuPont’s content indexed in the search engine did not “specifically encourage” DuPont’s content (cites to Kimzey v. Yelp, Ascentive v. Opinion Corp. and  Ayyadurai v. Techdirt). Curiously, while the First Circuit discusses its powerful UCS v. Lycos opinion from 2007, there’s no mention of its even more powerful Section 230 ruling in the Doe v. Backpage case from last year.

Copyright. Ripoff Report claims that DuPont granted it an irrevocable nonexclusive license, so Goren never had the right to terminate the license or claim Ripoff Report was infringing. Goren argued that DuPont received no consideration for the license. The court says that Ripoff Report performed its end of the bargain by publishing DuPont’s reviews, mooting any consideration concerns. Goren also argued that Ripoff Report’s contract was void for public policy because it implicitly promised never to remove posts that were defamatory. The court says that argument is irrelevant to the DuPont-Ripoff Report copyright license.

Unfair Competition. Part of the unfair competition  claim, predicated on Ripoff Report’s Corporate Advocacy Program and pay-to-play arbitration program, wasn’t preempted by Section 230. It still fails because Goren couldn’t show how Ripoff Report’s allegedly unfair programs motivated DuPont’s submission.

Attorneys’ Fees. The appeals court upholds the district court’s award of attorneys’ fees and costs pursuant to copyright’s fee-shifting statute (17 USC 505) to the tune of over $120,000. That’s a lot of money….er, close to the cost of a law degree. In a sense, Goren will have paid for his legal education twice.

Implications

This litigation raised numerous interesting issues that the appellate ruling didn’t address, including whether the state court had the legal power to award copyright ownership to Goren in the first place (I think no), whether Ripoff Report had acquired more than just a nonexclusive license to its users’ posts, the problems that Ripoff Report created for itself by not having a proper call-to-action on its user agreement (it got bailed out by a layered notice), and much more. I’d say that perhaps those issues will be resolved in other cases, but I’m hoping no future case like this ever emerges!

Even among the many cases we’ve blogged, this case stands out as particularly noteworthy because it exposes an ugly interface between copyright and reputation management. Goren didn’t want copyright ownership to “promote the progress of science.” Like the doctors in Medical Justice’s decrepit program to pre-acquire the copyrights to unwritten reviews of their patients, the real goal of copyright ownership was to suppress the content. To me, this turns copyright law on its head, by making our society dumber, not smarter. Jessica Silbey and I are co-authoring a paper on how and why copyright has emerged as a reputation management tool of choice, and the paper prominently features this case as an example. The fact that the appeals court reached a satisfying outcome is nice. However, the fact it took four years of litigation to reach this result, when most defendants would have given up long ago, is symptomatic of copyright law’s overreach. We need to build industrial-grade doctrines in copyright law to prevent its misuse as a reputation management tool.

Case citation: Small Justice LLC v. Xcentric Ventures LLC, 2017 WL 4534395 (1st Cir. Oct. 11, 2017)


Source: Eric Goldman Legal

Conference Announcement: “Content Moderation & Removal at Scale,” SCU, Feb. 2 0

I’m pleased to announce “Content Moderation & Removal at Scale,” a conference we’ll be holding on campus on February 2, 2018.  I anticipate a full house, so we’ve set a registration cap. When we reach the cap, we will put subsequent registrations on a waitlist. If you’d like to come, I strongly recommend early registration. If the registration fees pose a hardship in any way and you don’t fit into one of the free registration categories, please contact me.

The Backstory: I was disheartened when I initially saw the first draft of the Allow States and Victims to Fight Online Sex Trafficking Act of 2017 (what I call “the Wagner bill;” its Senate companion is SESTA) to exclude sex trafficking violations from Section 230. The bills reflects unrealistic assumptions about how most online services manage incoming third party content. I thought that we might find more common ground if policymakers better understood how Internet companies actually handle content moderation and removal operations, so they could know what’s easy, what’s feasible but hard and expensive (and thus more likely to be undertaken only by incumbents, not startups), and what’s not possible at any price.

However, companies rarely publicly discuss their content moderation and removal operations. As a result, we lack many basic facts, such as how many people each company employs, what are their job titles, how do they fit in the org chart, and how are they trained. Some reporters and researchers have covered the topic over the years, but often in piecemeal fashion based on secondhand information. Some of these details have been shared in various smaller closed-door events, but the confidentiality cloak has prevented information diffusion. In my initial calls with companies pitching them on the conference, I often learned an incredible amount in the first 3-5 minutes of our conversations–despite the fact that I have studied and written about Internet law for 20+ years. In my conversations, it also became clear that these details weren’t trade secrets or even confidential, they just had not been shared publicly.

I hope this conference is the first of many public conversations about the operations of content moderation and removal. These conversations ought to help the industry accelerate the development of best operational practices. They also should help policymakers better understand the tradeoffs in any efforts they undertake to impose greater content moderation or removal obligations.

Because policymakers are a key audience, there will be a sibling conference held in DC with an agenda customized for its audience. That event is scheduled for January 23, 2018.

The Conference:

Most Internet Law conferences focus on the scope and meaning of substantive rules. In contrast, this conference focuses almost exclusively on how substantive rules are operationalized. Whatever the rules say, and wherever the rules come from–whether it’s legislators, common law, industry standards, or idiosyncratic “house rules”–how do companies translate them into operational practices? Of course, operationalization might differ due to the consequences for violations (i.e., violating legislative rules might lead to jailtime, while violating internal house rules might only be embarrassing). I hope we’ll tease out those nuances through the course of the day.

The main attraction in the morning will be a series of 10 minute presentations by 10 companies about the facts and figures of their content moderation and removal operations. The participating companies are: Automattic, Dropbox, Facebook, Google, Medium, Nextdoor, Pinterest, Reddit, Wikimedia, and Yelp (Note: Nextdoor isn’t listed on the agenda yet but will be added in the next revision). As you can see, this roster of companies ranges from industry giants to much smaller organizations; and the companies have a diversity of editorial practices that should highlight how they’ve optimized operations for their “local” conditions. All of them have agreed to publicly “describe their content moderation and removal operations, such as org charts, department names and job titles, headcount, who determines the policies, escalation paths, and ‘best practice’ tips.” I’m very confident everyone in attendance will learn a lot from these presentations.

(I would have loved to diversify the participant list to include companies outside the Bay Area. I did approach some companies in other regions without success. We might hear from companies in other regions at the DC event).

The main attraction in the afternoon will be four panels on topics that should be interesting to anyone in the industry or observing it:

  • Employee/Contractor Hiring, Training and Mental Well-being
  • Humans vs. Machines
  • In-sourcing to Employees vs. Outsourcing to the Community or Vendors
  • Transparency and Appeals

(Note: I have more panelists to add to the afternoon panels in future revisions).

In addition to the morning presentations and afternoon panels, the conference will feature some brief legal primers, a lunchtime discussion about the history and future of content moderation and removals, and more.

All of the conference proceedings will be on-the-record, and we expect reporters will attend and cover the event. We plan to record the proceedings and are considering a live-stream option.

In addition to the day’s proceedings, many of the participants will be writing a short essay on thematic topics. We plan to bundle the essays into a package and publish the package through a not-yet-identified publication venue.

As you can see, this should be an enlightening and important conversation. I hope you can join us.


Source: Eric Goldman Legal

Failing To Consult With A Blockchain Lawyer Could Cost You Everything 0

blockchain lawyer ICO consultations A startup that didn’t invest in a pre-ICO legal consultation decided to shut down after the U.S. Securities and Exchange Commission (SEC) called with some questions. The incident serves as a reminder that startups should consult a blockchain lawyer before an ICO.

Protostarr’s Busted Initial Coin Offering

A dApp (decentralized application), Protostarr’s creators envisioned a fan-funding platform for artists, online celebrities, and aspiring professional gamers. According to the startup, the plan was to “give a new generation of unsponsored artists the ability to fund their operations while providing fans the content they are looking for and the opportunity to profit based on their success.”

Protostarr Launches an ICO; SEC Takes Notice

On August 13th, Protostarr launched an initial coin offering and raised 120 ETH (about US $47,000, at the time). On August 24th, the Securities and Exchange Commission contacted Protostarr.

Joshua Gilson, Protostarr’s chief executive, explained:

“[The SEC investigators] called and asked for me to volunteer a bunch of information about the company. They gave me a quick little brief: They’re both federal investigators, anything I say has to be truthful or honest, I could be prosecuted for providing false information — a bunch of stuff like that, so immediately, I said, I would like to be open with you guys but this is sounding like an ‘I should get a lawyer’ kind of conversation.”

Protostarr Abandoned ICO and Refunded Investors After SEC Inquiry. Why?

After consulting “multiple lawyers,” Protostarr pulled the plug on its ICO and remitted full refunds, explaining to investors that it did “not have the necessary resources” to deal with an SEC investigation.

Was there a silver lining to the Protostarr ICO? Gilson wrote:

At least ETH is worth more now than it was during the campaign so everyone is getting more value back than they donated. […] We are losing all the money we put into this, but want to make sure our supporters are taken care of.”

Before You Launch an ICO, Consult With A Blockchain Lawyer

When asked about the situation, Gilson lamented:

“We’re just a couple guys who are tech nerds in our basement. It didn’t occur to us that the model everyone else in the world is using would have any specific laws here that would apply to us. We just weren’t aware. In the month leading up to it, we were going full bore, working till 2am every night on the ICO, so we didn’t even see the DAO ruling when it came out until someone brought it to our attention.”

Protostarr’s story is like so many others. In startup development stage, the focus is pathologically on the project — and sometimes, legal considerations get tossed aside and forgotten about. Protostarr’s story should serve as a cautionary one — a reminder that finding a blockchain lawyer, who can advise on compliance issues, should be a top priority — even before launch.

Connect With A Blockchain Lawyer

Are you in the pre-launch stage of a startup? Want to make sure your legal ducks are in a row before your ICO? If so, we can take that off your plate and handle it. Get in touch today to begin the conversation.

 

 

The post Failing To Consult With A Blockchain Lawyer Could Cost You Everything appeared first on Kelly / Warner Law | Defamation Law, Internet Law, Business Law.


Source: Kelly Warner Law

Are Exchanges Legally Allowed To Reverse Coin Transactions? 0

reverse coin transactionsMonths ago, a Quoine (also Quoinex) system glitch triggered an erroneous 3,085 bitcoin transfer. Ultimately, the exchange reversed the transaction. In response, the beneficiary sued.

A possible landmark cryptocurrency case, the presiding court may be forced to consider a still unanswered legal question:  Is it legal for exchanges to reverse coin transactions?

The Glitch That Triggered A Multi-Million-Dollar “Erroneous” Bitcoin Transfer

In mid-April, Quoine ran a hack-prevention script. Unfortunately, the protective program triggered a glitch that artificially lowered Bitcoin’s price on its system. Because of the snafu, Quoine user B2C2  was able to purchase ten bitcoins for one ETH. So, he grabbed 3,085 bitcoins, which calculated to US $3.78 million, at the time.

Quoine discovered the out-size exchange and reversed the trade.

B2C2’s Argument: Fraud

B2C2 sued on the grounds that Quoine “acted fraudulently.”

To make matters more (legally) interesting, Quoine’s trading agreement says orders are irreversible — a cornerstone of B2C2’s case. And since the exchange did reverse the trade, the market maker believes Quoine made a tortious misstep by violating its own agreement.

Quoine’s Argument: Obvious Mistake

Quoine, as you may have already guessed, doesn’t think B2C2 has a solid case. It’s primary counter argument? The plaintiff is “being opportunistic and seeking to profit from a technical glitch.”

Who Will Probably Win This Bitcoin Lawsuit?

Who will win? It’s way too early to tell; arguments and evidence have yet to be presented. But if we were to guess, the enforceability of Quoine’s trading agreement, in this scenario, will likely be a crux of the case.

The “Quoine reversal” decision could be a game-changer. Irreversibility is a large part of blockchain’s allure. If exchanges start executing reversals on their own, with global support from courts, the philosophical and technical standards debate will rage, elusively, on.

Connect With A Blockchain Lawyer

Kelly / Warner works with established businesses and startups on blockchain, cryptocurrency, and fintech law matters. Whether you need someone to review an ICO or challenge an opponent in court, we’ll guide you through the process.

Let’s start the conversation.

Article Sources

Helms, K. (2017, August 01). Exchange Sued for 3085 Bitcoins After Reversing Bitcoin-Ether Trades. Retrieved October 04, 2017, from https://news.bitcoin.com/bitcoin-exchange-sued-bitcoins-reversing-bitcoin-ether-trades/

The post Are Exchanges Legally Allowed To Reverse Coin Transactions? appeared first on Kelly / Warner Law | Defamation Law, Internet Law, Business Law.


Source: Kelly Warner Law

Hyperlinking to Sources Can Help Defeat Defamation Claims–Adelson v. Harris 0

An activist group posted an online petition urging then-Presidential candidate Mitt Romney to reject Nevada billionaire Sheldon Adelson’s campaign contribution. The petition linked to an AP story, which in turn linked to a court filing alleging that Adelson OKed his hotel empire chasing prostitution revenues. Adelson claims the petition defamed him. The defense won in the district court (my prior blog post) based in part on the fair reporting privilege to defamation, which gives extra protection from defamation for reporting on court filings.

On appeal to the Second Circuit, the court certified two questions to the Nevada Supreme Court, including:

Does a hyperlink to source material about judicial proceedings in an online petition suffice to qualify as a report for purposes of applying the common law fair report privilege?

Because the petition linked to the AP story, not directly to the court filing, the Nevada Supreme Court rephrased the issue:

we must consider, as an issue of first impression, whether a hyperlink in an Internet publication that provides specific attribution to a document protected by the fair report privilege qualifies as a protected report for purposes of that privilege.

(Only a lawyer could write a sentence like that!)

In a sentence that could have been written at the turn of this century, the court starts by celebrating the virtues of a hyperlinked web:

Hyperlinks provide strong attribution because they allow direct access to underlying materials, are intuitively easy to use, and are extremely prevalent online. A reader can click on a hyperlink and immediately determine whether official proceedings are implicated.

But not everything is aces with hyperlinks:

However, there is a drawback to hyperlinks as attributions—an average reader must identify a hyperlink, understand its importance, and ultimately open the link. When a hyperlink is not found, understood, or opened by a reader, it has failed as a source of attribution.

So the court is interested in whether readers will sufficiently notice any hyperlink to the source materials, prompting the court to digress into the “clickwrap”/”browsewrap” online contract formation rabbit hole, with cites to Specht, Nguyen, Zappos, & Fteja. With little gained from the digression, the court considers whether the petition’s link to the AP story was sufficiently prominent to readers:

Although the AP hyperlink was in the second of four textual paragraphs in the petition, it is important to note that the hyperlink was placed in the same sentence as the content it purported to support. That is to say, the AP news article supported the proposition that a report existed stating that “Adelson ‘personally approved’ of prostitution.” Thus, although the hyperlink was not conspicuous in a general sense, when reading the specific sentence the hyperlink functioned like a footnote. For this reason, we conclude that the hyperlink was conspicuous in the context of supporting a specific claim.

Furthermore, the textual explanation accompanying the hyperlink notifies readers that the petition draws upon other sources. The sentence in which the hyperlink appears states: “But this week, reports surfaced that … Adelson ‘personally approved’ of prostitution in his Macau casinos.” The sentence includes the qualifier “reports” and provides the operative hyperlink over the text “personally approved,” which is quoted. The hyperlink also provides support for the text it covers (i.e., the AP report supports the proposition that Adelson personally approved of prostitution). Although there were other hyperlinks in the sentence, we conclude that the textual references help make apparent to an average reader that the petition draws information from another source. Also, because the AP hyperlink is contained within the same sentence, an average reader interested in what the “reports” stated would simply click on the AP hyperlink to learn more.

The AP hyperlink, as a specific, active, and accurate attribution, provides average readers notice that the petition draws from a summary of judicial proceedings because the petition’s text indicates it is based on “reports” and the hyperlink’s placement and function allows for it to operate like a footnote. Therefore, we conclude that the online petition, as it existed when Adelson’s complaint was filed, fell within the purview of Nevada’s fair report privilege

With this, the Nevada Supreme Court sends its answers about Nevada defamation law back to the Second Circuit, where it appears Adelson is likely to lose his case.

Implications

Hyperlinks as Citations. This opinion dealt with a niche-y defamation law issue (the fair reporting privilege), but I see it as part of a broader legal trend. When I first blogged this case in 2013, I wrote: “if you support your negative factual assertions with hyperlinked citations, you can reduce the risk of a successful defamation claim.” Other cases in this genre include Ayyadurai v. TechdirtRedmond v. Gawker, and Seldon v. Compass. Similar to what you learned in 7th grade math: if you’re treading into possible defamation litigation zones, SHOW YOUR WORK.

Related: linking to defamatory content isn’t defamation (e.g., Slozer v. Slattery, Life Designs Ranch v. Sommer) and is protected by Section 230 (e.g., Vazquez v. Buhl, Directory Assistants v. Supermedia).

Link Rot. In a troubling footnote, the court discusses the negative consequences of “link rot” (citing Prof. Jonathan Zittrain): “If a hyperlink fails to connect a user to its underlying source, it will not bring a document within the fair report privilege.” I don’t think the court thought this through. Read literally, it means the exact same material could be not defamatory on day 1, become defamatory on day 2, and possibly (if the linked URL gets restored) go back to being not defamatory on day 3–even though the content itself hasn’t changed at all, even though the author can’t control what happens on remote servers, even though the author may not know about the link rot, and even though the author may lack the technical and legal authority to fix a broken link (if, for example, a third party publisher isn’t able or willing to update the content). The “link rot” discussion was clearly dicta because the link hadn’t rotted in this case, so I hope any future court encountering the issue will think this issue through more carefully. Among other reasons why a future court might reach a different conclusion: the link might still work in Internet Archive; or a simple Google search might allow the reader to find the source despite the link rot.

[Jargon watch: this opinion, and the district court opinion from 2013, are the only two cases I found in the Westlaw database containing the phrase “link rot.”]

What Do Readers Expect? The opinion turns on whether an “average reader” would understand that the underlined phrase “personally approved” was a hyperlink with supporting information. Without any empirical evidence to bolster its views, the court treats Internet users circa 2017 as savvy enough to interpret underlining in web pages as signals of hyperlinks. While this conclusion seems unassailable, note that it depends on technological facts that weren’t before the court and that change over time (i.e., would courts have reached the same conclusion in 1997?). Thus, the court made the same kind of assumption that the Second Circuit made in the uncited Meyer v. Uber ruling on contract formation in the mobile environment, when it reached an almost identical conclusion that “a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found.” I think both courts reached the right conclusion, but I am troubled by the inherent precariousness of appellate judges making assumptions about what average or reasonable online consumers would expect.

Billionaires and Defamation. What’s the deal with billionaires losing defamation suits (a topic I’ve blogged many times)? Is it that they are targets for harsher criticism than the rest of us? That they have thinner skins? That they can afford defamation lawsuits? (It is, after all, a sport of kings). That they are used to winning? That they expect to drive defendants into submission through expensive litigation, regardless of legal merits? I don’t fully understand the dynamics.

I do know that unsuccessful billionaire defamation lawsuits are one of the best reasons to support anti-SLAPP laws, because the laws change the economic calculus for defendants (though the risk of a fee shift won’t deter billionaires) and speeds up resolution of unmeritorious lawsuits. Nevada recently upgraded its anti-SLAPP law and successfully thwarted a different billionaire’s (Steve Wynn) efforts to undermine it. That’s the good news, but too many Americans still lack anti-SLAPP protection and are reluctant to discuss billionaires candidly due to the risk of being sued, meritoriously or not. So I see this lawsuit as another good reason to support a federal anti-SLAPP law to level the playing field for all of us.

Case citation: Adelson v. Harris2017 WL 4294562 (Nev. Sept. 27, 2017).


Source: Eric Goldman Legal