Perfect 10 files Reply Brief with Supreme Court

I just finished looking over Perfect 10’s reply brief, recently filed in support of its petition for certiorari pending before the U.S. Supreme Court. Thank you to Perfect 10’s counsel, Jeff Mausner, for sharing it with me.

I still think that Perfect 10’s position on the merits is the legally correct one. My opinion is based on the text of the statute, and the apparent absence of any compelling evidence of congressional intent supporting an opposite reading. Whether withholding immunity for state IP claims is a good idea, though, is not something I’m going to address here.

Will the Supreme Court issue a writ on the basis that, simply put, the Ninth Circuit blew it by employing the wrong approach and reaching the wrong decision? I am not convinced that it will. Last week litigant and amicus briefs were distributed for consideration at a November 30, 2007 conference, so perhaps we’ll have an answer before the end of the year.

If you missed them, here are links to my prior posts on the petition itself, and the Respondents’ opposition brief, as well as a summary of the Ninth Circuit’s opinion.

CCBill and CWIE file brief opposing Perfect 10’s Supreme Court Petition

A few months ago I wrote about the Petition for a Writ of Certiorari filed by Perfect 10, Inc. with the U.S. Supreme Court in Perfect 10 v. CCBill, et al. In a nutshell, the Ninth Circuit previously ruled that the intellectual property exception to Section 230 immunity only pertains to federal (not state) intellectual property claims. Perfect 10 wants the Supreme Court to hear its appeal and rule that the exception applies to both federal and state IP claims, meaning Section 230 immunity would not protect a defendant from state (and federal) IP claims. Now it’s the Respondents’ turn to weigh in.

John P. Flynn, a partner in the Phoenix law firm Dioguardi Flynn Jones LLP, represents Respondents CCBill LLC and CWIE LLC. John kindly shared with me the brief filed last Friday opposing Perfect 10’s petition. John’s co-counsel is Jay M. Spillane of the Los Angeles law firm Spillane Shaeffer Aronoff Bandlow LLP.

Zeroing in on a serious potential problem with Perfect 10’s position, Respondents argue in their submission that the Ninth Circuit’s ruling below

is consistent with the findings and intentions of Congress to promote the development of Internet computer services with a clear nationwide immunity. . . . [w]ere the rule otherwise, Internet computer service providers would be faced with uncertainty across all fifty states as to which state claims for relief are, involve, or are akin to ‘intellectual property.’

In other words, adopting Perfect 10’s interpretation of Section 230(e)(2) could/would have a chilling effect upon online publishers across the country, uncertain as to their exposure to liability from one state to another.

That said, I still find Perfect 10’s position on the merits – which if ever adopted would require guidance from the courts on what constitutes a state IP claim – more persuasive. I haven’t researched the relevant legislative history, but it would seem that if Congress meant to limit the exception to federal IP claims, it could (and would) have said so (as it did in 230(e)(1)). If the legislative history clearly supported the opposite conclusion, I would have expected to see a reference to same in the Ninth Circuit’s ruling and/or Respondents’ brief (which instead cites Zeran). And as an aside, Respondents’ use of Potomac Electric Power Co.‘s rule of statutory interpretation (“members of the judiciary must put aside their ‘appraisal of the wisdom or unwisdom of a particular course consciously selected by Congress’”) could come back to haunt them. Some courts may not like Congress’ apparent decision to provide a broad IP exception to Section 230 immunity, but it’s not their (the courts’) job to approve or disapprove. However, it’s probably not fair for me to opine on the merits here, given neither parties’ brief was offered as a merits brief. Which brings me to my next and more important point. Who cares about the merits right now?

Remember, Perfect 10 is trying to persuade the Supreme Court to hear the case, not to rule in its favor, just yet, on the merits (although merits arguments can of course sometimes help get the job done). And on this issue, I think Respondents have the better arguments. For example, Respondents accuse Perfect 10 of trying to manufacture a conflict between the Ninth Circuit’s ruling and UCS v. Lycos, arguing that in UCS the First Circuit

did not analyze the meaning of ‘law pertaining to intellectual property,’ but simply assumed that the state trademark dilution claim at issue came within this exception. Such an unconsidered assumption, without analysis, does not create a conflict worthy of review.

Furthermore, “[i]n light of the [purported Florida trademark law] claim’s failure on independent First Amendment grounds, the First Circuit’s view as to the inapplicability of Section 230 is dictum and does not raise a material conflict with the Ninth Circuit decision.”

Respondents offer up plenty of other reasons why this case does not presently belong before the Supreme Court, such as (i) there is no conflict with Supreme Court precedent, (ii) the case was remanded by the Ninth Circuit to the district court, and precedent apparently directs that a case in this posture is not appropriate for High Court review, (iii) following final judgment, Perfect 10 will presumably have another opportunity to request Supreme Court review (and the Court would benefit from a richer record), and (iv) “[t]he law concerning the scope of the ‘intellectual property’ exception . . . is undeveloped.”

My guess is that Perfect 10’s petition (and the various amicus briefs filed in support thereof) will not muster enough votes to obtain the writ. But I wouldn’t mind being wrong on this one, at least from an academic standpoint.

Website (search engine?) not entitled to Section 230 protection for FTC Act violation

If the title of this post didn’t really grab you, how about the fact that I’m reviewing a recent decision handed down in the District of Wyoming? Yep, Wyoming, which as you may know (I didn’t) sits within the friendly confines of the Tenth Circuit.

Here are the undisputed, relevant facts as I understand them. The opinion is a little thin on the inner workings of the subject website during the relevant time period. If anybody has some additional insights and/or has explored the docket closer than I have, please jump in.

Prior to the January 2006 enactment of the federal Telephone Records and Privacy Protection Act (which criminalized the sale, transfer, purchase and receipt of confidential phone record information), Accusearch, Inc. (“in the business of information brokering”), by means of its Abika.com website, advertised the availability of, and accepted orders for, consumer phone records, which even before the TRPPA was passed were deemed confidential under federal law. So somebody interested in who I called in 2005 from my landline (or cell), how long we talked, etc., and who doesn’t think that I’d voluntarily share that information with a stranger (safe bet), could apparently submit an order at Abika.com and obtain the sought after information via the website (for a fee, of course, paid to Accusearch).

To fill its orders Accusearch paid third parties to procure the requested information. Given the nature of the data, the third parties utilized illegal methods to obtain same. These “wholesale” dealings were apparently via email, and Accusearch paid the third parties for their services.

In May 2006 the Federal Trade Commission filed suit against Accusearch and Jay Patel, its sole officer and director, accusing the defendants of an “unfair business practice” in violation of the Federal Trade Commission Act (here’s the accompanying press release). The FTC did not, however, name any of Accusearch’s third party procurers, or seek to hold defendants liable for their wholesalers’ illegal conduct. Instead the FTC’s beef was that “[e]ach time the Defendants placed an order for phone records, they caused others to use false pretenses and other fraudulent means to obtain confidential consumer phone records.” In other words, “the ‘unfair business practice’ relied upon by the FTC is Defendants’ obtaining and selling of confidential consumer phone records where that practice was necessarily accomplished through illegal means.” (emphasis added).

Late last month Judge William F. Downes granted the FTC’s motion for summary judgment, having found that “Defendants’ practice of selling consumer phone records constitutes an unfair business practice within the meaning of” 15 USC 45(a). But not before Accusearch’s counsel argued that Abika.com functioned as an “interactive person to person search engine,” merely an intermediary between “searchers” and “independent researchers” and thus was entitled to Section 230 protection, given that the FTC’s core allegations, according to the defendants, were that the defendants “disclosed, made available or sold information.” The court’s order covers both FTC Act liability and the applicability of Section 230.

On the Section 230 point, the FTC countered that any “publication” here by Abika.com “is not the type of publication contemplated by Section 230 of the CDA. The FTC . . . seeks to hold Defendants liable not for ‘publishing’ anything, but instead for committing acts in the course of trade or commerce, i.e., buying and selling.”

The court zeroed in on two key issues impacting whether Section 230 immunity would apply. First, did the FTC seek to treat the defendants as publishers? The court quickly concluded that such statutory requirement was “ambiguous.” (understandable in my opinion, particularly in this context). Seeking evidence of congressional intent for guidance, the court looked to Zeran, which pointed to the threat of tort-based lawsuits, and desire to encourage self-regulation of offensive material. With that the court concluded without a great deal of analysis (but after expressing skepticism about defendants’ search engine claim) that the FTC’s claims here do not “seek to treat Defendants as a publisher within the meaning of the CDA.”

The second (now moot?) question was whether Abika.com participated in the creation or development of the subject consumer phone records. On this point the court stated that

[w]hile Defendants made admittedly few changes to the records themselves, the Court finds that by soliciting requests for such phone records and purchasing them for resale Defendants ‘participated in the creation or development of the information, and thus do not qualify for §230 immunity.

Thus the District Court presumably had in mind, but did not cite, the Ninth Circuit’s Roommate.com decision. Several weeks later of course the Ninth Circuit agreed to rehear Roommate.com en banc. Regardless, in light of the more reasoned analysis of the publication issue, I imagine many people will consider the above language dicta.

Concluding that the defendants’ “strained interpretation” would “expand Section 230 immunity well beyond its intended scope,” the court denied the defendants’ Section 230-based motions for summary judgment. An evidentiary hearing will be held to ascertain appropriate injunctive and equitable relief, which may include rescission of contracts, restitution, disgorgement of ill-gotten gains by the defendants, and notifying all consumers whose phone records were distributed by the defendants.

An interesting case and decision which I’m still kicking around in my head.

One preliminary observation is that perhaps the order doesn’t say much about how the website operated because, upon reflection, it really wasn’t relevant. The FTC persuaded the court that it was targeting defendants’ supply-side activities – the purchase for resale of confidential consumer phone records which could only be procured by the defendants’ wholesalers via illicit means. The case thus did not turn on the defendants’ delivery mechanism to their customers – Abika.com, seemingly rendering the content and functionality of the website, and, thus, Section 230, irrelevant here.

As for whether Abika.com was/is a search engine, here’s what the company presently has to say on the issue.

Chicago Lawyers’ Committee files appellate brief in Craigslist litigation

Complying with the recently announced filing deadline, the Chicago Lawyers’ Committee has filed an appellate brief in its case against Craigslist, presently pending before the Seventh Circuit.

Buried in a footnote is where I found the only reference to the Ninth Circuit’s now-benched Roommate.com decision. While the issues presented in the two Fair Housing Act cases are not identical, I would have expected CLC’s counsel to try to make more of the Ninth Circuit’s decision. I suppose it’s basically a moot point now.

I’m very much looking forward to attending the oral argument in this one.

Full Ninth Circuit to rehear Roommate.com case

Remember the Ninth Circuit’s ruling in Fair Housing Council of San Fernando Valley v. Roommate.com LLC? How could you forget.

Plaintiff fair-housing groups had charged Roommate.com with Fair Housing Act violations in connection with its online questionnaires and member profiles. This past May a three-judge Ninth Circuit panel ruled that Section 230 does not immunize Roommate.com for all of the content on its website and in its email newsletters. Specifically, the panel concluded that Roommate was “responsible” for its questionnaires because it created or developed the forms and answer choices (rendering the website a content provider of the questionnaires). Explaining that it did not read Carafano “as granting CDA immunity to those who actively encourage, solicit and profit from the tortious and unlawful communications of others,” the panel also ruled that

[b]y categorizing, channeling and limiting the distribution of users’ profiles, Roommate provides an additional layer of information that it is “responsible” at least “in part” for creating or developing.

The decision thus left Roommate.com exposed to potential FHA liability for its questionnaires and user profiles. But that may change.

Eric Goldman and Howard Bashman report on their respective blogs today that the Ninth Circuit has granted Roommate.com’s petition for rehearing en banc. Stay tuned.

Update on Chicago Lawyers’ Committee v. Craigslist

For those of you unfamiliar with this case, check out my guest post that appeared on May It Please The Court just after Judge St. Eve ruled last year on Craigslist’s motion for judgment on the pleadings. After the court denied plaintiff’s subsequent motion to reconsider, plaintiff appealed, and for the last six months the Seventh Circuit has suspended briefing, presumably to allow for a negotiated resolution.

Apparently a quick settlement isn’t in the cards. Late last week the Court of Appeals jump-started the case by issuing a briefing schedule. Appellant Chicago Lawyers’ Committee for Civil Rights Under Law, Inc.’s (“CLC”) brief is due October 9, Appellee Craigslist’s brief is due November 20, and CLC’s reply brief is due December 7, 2007.

It will be interesting to see how the the Ninth Circuit’s Roommate.com decision figures in to the parties’ briefs.

Perfect 10 seeks Supreme Court review of Section 230 ruling

Jeffrey N. Mausner, counsel for Perfect 10, Inc., has kindly shared with me the Petition for a Writ of Certiorari filed last week with the United States Supreme Court on behalf of his client in Perfect 10, Inc. v. CC Bill LLC, et al (Docket No. 07-266). He also permitted me to post the 143 page filing on my blog.

Perfect 10’s Petition seeks review of the Ninth Circuit’s March 2007 ruling, as modified one month later, in Perfect 10, Inc. v. CC Bill LLC, et al. as it relates to 47 USC 230(e)(2). As you may know, Paragraph (2) provides that nothing in Section 230 “shall be construed to limit or expand any law pertaining to intellectual property.” The Petition presents the question of whether “the Ninth Circuit err[ed] in reading any law to mean only any Federal law, in conflict with a decision of the First Circuit and statutory construction rules of this Court.” (internal quotations omitted, italics and hyperlink added).

Perfect 10 is concerned that the Ninth Circuit’s ruling, which grants Section 230 immunity for state IP claims, “will sharply erode the ability of those in the entertainment industry to seek meaningful legal recourse for the violation of their valuable publicity rights.” The company would appear to have good reason to be concerned with the treatment of publicity rights, and other state intellectual property rights, under Section 230, given the obstacles it has faced in attempting to protect its federal copyrights under the DMCA framework.

Here are the three main arguments offered by Perfect 10 in support of its Petition:

1. The Ninth Circuit erroneously broadened Section 230 immunity by effectively amending (e)(2) to read “any Federal law” instead of “any law.” Relatedly, the Ninth Circuit also disregarded statutory construction principles when it effectively narrowed the (e)(2) exception from “any law” to “any Federal law.” (noting that when Congress meant ‘just federal’ in another Paragraph of the same statute, it said so).

2. The Ninth Circuit’s decision conflicts with the First Circuit’s UCS ruling and other courts holding that state IP claims are not barred by Section 230.

3. Congress did not adopt the argument – embraced by the Ninth Circuit – that because state IP laws are not uniform they should not “dictate the contours of [Section 230 immunity].”

Although it understandably did not not delve into the impact of having fifty states’ laws to consider, I thought the Petition was quite persuasive. It surely goes without saying that were the Supreme Court to rule that Section 230 does not immunize state IP claims, we would see more of these types of actions filed, which would presumably result in a (desirable?) chilling-effect on certain online conduct (at least with respect to non-judgment proof companies), especially given the fact that few (any?) states have enacted protections from state IP claims comparable to the DMCA takedown provisions.

One last observation. In a footnote, Perfect 10 maintains that, in addition to its rights of publicity and wrongful use of trademark claims, its unfair competition and false advertising claims also “arise under laws pertaining to intellectual property, as they are both based on, among other things, rights of publicity violations.” If another federal appellate court considering the issue rules that Section 230 does not immunize state IP claims, or if the Supreme Court takes this appeal and reverses, online companies and the courts alike will obviously need some guidance as to what constitutes state IP law/claim.

On brief with Mr. Mausner was Daniel J. Cooper, General Counsel for Perfect 10, Inc. Responses to the Petition are due September 28, 2007.