Five Things That Web Hosters and SEO Providers Should Avoid Like The Plague (Other Than Cliches).

Posted on May 3, 2011 by Paul Stanfield

Companies hosting web sites and providing search engine optimization (SEO) services generally enjoy safe harbor protection from copyright infringement under the Digital Millennium Copyright Act and protection from liability for information provided by third parties under Section 230 of the Communications Decency Act, but does that protection extend to protection from contributory trademark infringement liability?  Courts increasingly have answered that question in the negative.

Let's examine one such instance.  Christopher Prince operated several websites, one of which was called "copycatclubs.com".  Through these websites (all of which resolved to a single online store), Mr. Prince sold golf equipment, accessories and apparel.  The online store was described as a "wholesaler" that was a "...one stop shop for the best copied and original golf equipment on the internet".  A shopper working for Roger Cleveland Golf Company, Inc. (Cleveland) ordered several clubs described as "Cleveland" clubs from the online store.  The shopper received the order and the clubs were branded as "Cleveland" clubs.  Cleveland determined that the clubs were counterfeit and brought suit against Mr. Prince and some of his affiliates.  During discovery, it was determined that Mr. Prince employed Bright Builders, Inc., a web site designer and SEO consultant to create and support the web sites and the business model.  Cleveland amended its complaint to include Bright Builders as a defendant and allege that Bright Builders had contributorily infringed Cleveland's trademarks.

Bright Builders moved for summary judgment with a one and one-half page motion with no supporting citations or reference to the record as is required by court rules.  The gist of Bright Builders' defense was that it was merely a "web hosting entity" and was not "...aware that Mr. Prince was engaged in illegal activities...".  Cleveland strongly disputed this and cited evidence in the record that Bright Builders created the website, assured Prince that he would make at least $300 a month from the online store, took $10,000 to provide coaching and mentoring services, provided a Project Advisor and had discussions with Prince about developing copycatclubs.com.  In fact, the Court said that the name (copycatclubs) should have alerted Bright Builders to possible infringement (even though copying is not necessarily illegal).  Bright Builders did not bother to reply to Cleveland's response.

Perhaps due in no small part to the nonchalant manner in which Bright Builders approached the lawsuit and the pleadings, the Court found that there was a genuine issue of material fact as to whether Bright Builders participated in Prince's business to such an extent that Bright Builders could be held liable for trademark infringement and denied the motion for summary judgment.  This was in December of 2010 and the case proceeded to trial.  On March 10, 2011 the jury found infringement by both Prince and Bright Builders and returned a much larger verdict against Bright Builders (the secondary infringer) than it did against Prince (the actual infringer).

So, here we are again in the Lessons Learned Department.  What steps should website developers and SEO consultants take (or not take) to minimize their exposure to a verdict for secondary liability?

Consider these principles:

1.  If the developer exerts sufficient control over the website and knows or had reason to know of infringement, the developer must not fail to take appropriate actions.  The developer does not have to reasonably anticipate that infringement will occur and generalized knowledge is not sufficient to impute knowledge of any and all instances of infringing activity.

2.  Demand letters and other notices from potential plaintiffs are not sufficient to establish a duty to act but when the developer has knowledge of specific infringing activities, it must not fail to take action to eliminate the infringing activities or it must cease to provide services to the infringer.

3.  The website hoster should have programs designed to detect possibilities of infringement and not fail to take defined steps to eliminate it when specifically found.

4.  Do not be "willfully blind" to infringement.  This means refusing to investigate when you fear the results of the investigation.  White heart and empty head is no defense.  Principles 1 through 4 above are discussed in great length and detail in Tiffany et al v. EBAY, Inc. 576 F. Supp. 463 (2008).

5.  You must not fail to do a better job of documenting your activities and responding to court pleadings than Bright Builders did.  While this might not be the developer's responsibility, the developer should be sure that it engages legal counsel knowledgeable in the area and that takes the potential liability seriously.

Therefore, the next time you are engaged to develop a website to sell Gucci bags and Louboutin shoes, do your due diligence to see if they are the real thing or you may end up taking a bigger hit than the actual culprit.  That's not optimization of any kind.

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App Developers Need to Pay Attention to the DMCA Ruling on Jailbreaking the iPhone

Posted on August 3, 2010 by Stuart Hiserodt

A recent ruling by the Library of Congress on the Digital Millennium Copyright Act (DMCA) resulted in large changes for cell phone users. The Copyright ruling spoke to several issues on circumvention, but for our discussion today, we shall discuss jailbreaking. Jailbreaking is the process of bypassing cell phone software allowing the user to purchase cell phone applications other than ones required by the cell phone manufacturer (here’s some info on the subject). This ruling has large implications in the app development community and could change the face of apps and cell phones … or according to others - do nothing.

First, when I was discussing this with some friends of mine the first question most had was, “Say what?! Why is the Library of Congress speaking on jailbreaking and who gave them authority? How is jailbreaking a Copyright issue?” So before I go into an analysis of the ruling, a quick rundown of the logistics of this might be in order.

The Library of Congress governs the United States Copyright office (it’s actually a division of the Library of Congress), and as such the Librarian of Congress discusses certain rules from time to time. Okay?! But this still doesn’t answer why this is a Copyright issue. In 1996 there were treaties passed by the World Intellectual Property Organization (WIPO), and the DMCA is the implementation of those treaties. These treaties covered several aspects of IP law, but for this post the relevant area of the treaties implemented into the DMCA dealt with the prohibition of circumvention of technology measures that control access to copyrighted works. In other words, this gave the Copyright office the ability to govern technologies on cell phones that protected copyrighted works, such as applications. As a result, the Librarian of Congress can determine if things such as jailbreaking of phones should be legal or not.

The Librarian of Congress, stated jailbreaking a cell phone was an exception to the general rule of prohibiting people from circumventing certain Copyright protection technologies. Namely, you can jailbreak the iPhone and buy “non-App Store” apps for it. The ruling states:

“Persons who circumvent access controls in order to engage in noninfringing uses of works in these six classes will not be subject to the statutory prohibition against circumvention.

…

(2) Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.”

 

Therefore, you can bypass certain iPhone access controls if you are going to legally purchase a non-Apple application for your iPhone.

As you can imagine, Apple doesn’t want this to happen for multiple reasons, and they are doing much to ensure the ruling has no effect on the app market. First, Apple states that if a user jailbreaks the iPhone they will breach their end-user license agreement (EULA). This breach would relieve Apple from its obligation to provide a warranty, repairs, and anything stated in the agreement. Additionally, Apple will continue to develop updates of its software attempting to outsmart the jailbreak engineers. There will be a continuous back and forth of Apple updates and the soon to follow jailbreaking updates. As a result, it might make the process too difficult for the end user keeping them from jailbreaking the phone. But currently that doesn’t seem to be the case. A developer going by the name Comex has been flooded with so much interest in the new Jailbreakme 2.0 software, his site is crashing from too much traffic. I have spoken with some app developers that believe ultimately the consumer will not want to risk losing the warranty, so most things won’t change. However, what occurs when the warranty runs out?

It’s no secret that Apple has a significant market share in the cell phone and application market. The Android markets have been gaining ground, but Apple still maintains a solid position in the market. Prior to this ruling, the iPhone, iTouch, and iPad were all limited to apps from the iTunes App Store. The popularity of these products fuels application development to be more Apple based. Currently, if you are developer, you are going to develop for Apple first and then the Android or other platforms second (if at all). Now that the powers that be say no violation occurs when jailbreaking your iPhone, other application sites will undoubtedly begin to arise. Getjar, an application site already in existence, is about to hit 1 billion downloads. However, iTunes has almost three times as many applications and Apple has stated that they have already surpassed the 5 billion downloaded apps milestone producing over a billion dollars for app developers (leaving Apple with $300 million).  Creating a market others will want to cut into. This ruling will no doubt assist in the loss of significant application market share.

Apple makes its money off the iPhone, but how much will the new app markets affect the purchasing of the iPhone? I recently wrote about Apple’s firm position in governing its operating systems and the type of code and applications that would be submitted. Apple believes that flash is a poor system and that it frustrates the Apple OS, so flash products cannot be utilized in app development for Apple. However, flash is not the only restriction with Apple (percentage of sales, procedure of approval, etc.). If other markets begin to lure other developers away from the Apple market higher quality applications will be developed and be sold at other app stores

So what will be the repercussions of new application sites? I assume with the creation of several application sites new license agreements will arise. The freedom to negotiate price, term, programming platforms, etc. will affect how licensing is accomplished in this arena. Although many other outcomes will arise from this ruling, one issue developers will face is how they go about licensing their applications. There won’t be the standard app development agreement as the only option anymore. Competition should likely create flexibility in these otherwise strict agreements. Therefore in developing apps, the creators should begin to realize the popularity of the application could be beneficial for the new app store itself and provide options to the now standard boilerplate agreements.  
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