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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, October 7, 2013

Click to Assign Copyright

I’ve been meaning to blog about a Fourth Circuit opinion that went under noticed, although it should have raised alarm bells.  That opinion, rendered in Metropolitan Regional Information Systems, Inc.  v. American Home Realty Network, Inc.,722 F.3d 591 (July 17, 2013) held that copyright could be transferred via a clickwrap. 

MRIS operates a website that offers a “multiple listing service” for a fee to real estate brokers and agents.  Subscribers to the site can upload their real estate listings, including photographs.  In order to submit their photographs they must click to indicate assent to the terms of use.  The court doesn’t specify exactly how this is done (and states in a footote that the “record is not clear as to the precise manner in which the TOU appears to subscribers). 

The TOU states:

“All images submitted to the MRIS Service become the exclusive property of (MRIS).  By submitting an image, you hereby irrevocably assign (and agree to assign) to MRIS, free and clear of any restrictions or encumbrances, all of your rights, title and interest in and to the image submitted.  This assignment includes, without limitation all worldwide copyrights in and to the image, and the right to sue for past and future infringements.”

The defendant, AHR, operates a website, NeighborCity.com which displays real estate listings using a variety of sources, including photographs taken from the MRIS website.

MRIS sued AHR for copyright infringement.  Photographs are protected under the Copyright Act.  Section 204 of the Copyright Act requires that transfers of copyright ownership require a writing that is signed by the owner.  AHR argued that  MRIS did not own the copyright to the photographs because its TOU failed to transfer those rights.   The issue then was whether a subscriber who clicks agreement to a TOU has “signed” a “written transfer” of the copyright in a way that meets the requirement of Section 204.  The Fourth Circuit found that “(t)o invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act.  We therefore hold that an electronic agreement may effect a valid transfer of copyright interests under Section 204 of the Copyright Act.”

Given the reality that few read wrap contracts, holding that an author/creator can give up copyright with a click is alarming.  The opinion is a prime example of a court doing what is arguably the right thing for reasons of business competition but creating an alarming precedent in the process.  Shades of ProCD!  Online businesses will certainly benefit from this decision, but creators - not so much.  They may realize too late that when they clicked to upload content, they also assigned their rights to their work.  This is especially problematic since the primary reason creators use some of these sites is to get publicity for their work. The bargain, in other words, may be quite different from what the creator might have intended.

So - all you creators out there - BEWARE and check out those terms before you click.  They may not be as harmless as you think.

H/T to  my former student, Leslie Burns and her blog.

 

[Nancy Kim]

October 7, 2013 in E-commerce, Miscellaneous, Recent Cases, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Monday, September 30, 2013

Internet Contracting Mayhem

Modelmayhem.com (“Modelmayhem”) is a nationwide modeling industry website.  Shana Edme (“Edme”) joined the site to further her modeling career.  After several photographs of Edme modeling lingerie were disseminated and viewed without her permission, Edme commenced an action in the Federal District Court for the Eastern District of New York (“EDNY”) against Modelmayhem (among others).  Edme claimed that the site violated her right to privacy under New York State statutes.

Modelmayhem moved to dismiss, arguing that Edme agreed to resolve any and all disputes in California. Specifically, Modelmayhem claimed that the "Terms of Use" found on its website contains a forum selection clause.  The EDNY (Judge Hurley) denied Modelmayhem’s motion because it failed to explain how Edme bound herself to the Terms of Use, including how users of its website were advised of the terms.

The court began with a discussion of contracting and the Internets:

The conclusory statement by Modelmayhem that "New York law specifically recognizes 'Terms and Conditions' posted on a website as a binding contract" (Modelmayhem's Mem. at 6) completely ignores the developing discussion within this Circuit (and courts nationwide) regarding what actions by an internet user manifests one's asset to contractual terms found on a website. "While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract." Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004). "Mutual manifestation of assent, whether by written or spoken word or by conduct" is one such principle. Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 29 (2d Cir. 2002). As Judge Johnson of this District previously explained:

On the internet, the primary means of forming a contract are the so-called "clickwrap" (or "click-through") agreements, in which website users typically click an "I agree" box after being presented with a list of terms and conditions of use, and the "browsewrap" agreements, where website terms and conditions of use are posted on the website typically as a hyperlink at the bottom of the screen.  Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 366 (E.D.N.Y. 2009). A browsewrap agreement "usually involves a disclaimer that by visiting the website — something that the user has already done — the user agrees to the Terms of Use not listed on the site itself but available only be clicking a hyperlink." Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012). Thus, in deciding the validity of browsewrap agreements, "courts consider primarily whether a website user has actual or constructive knowledge of a site's terms and conditions prior to using the site." Hines, 668 F. Supp. 2d at 367 (internal quotation marks and citation omitted).

The Court then discussed Modelmayhem’s failure to explain how Edme became bound to the terms on the website.  Modelmayhem could have presented Edme with the terms in a number of ways:

For example, (1) a user could have agreed to the Terms of Use by clicking an "I agree" box before creating an account and gaining access to the website's services; (2) the Terms of Use could have
appeared on the website's homepage; (3) the Terms of Use could have been accessible from a hyperlink located on the homepage; (4) the Terms of Use could have been buried somewhere else on the website; or (5) some other combination or scenario not otherwise contemplated by the Court.

Modelmayhem did not, however, provide any evidence of how the Terms of Use were made available to users of the site:

The only evidence presented on this issue is a screenshot of the Terms of Use. The Court, however, cannot glean solely from this screenshot how the Terms of Use were presented to users of the Modelmayhem website.

The circumstances surrounding how Modelmayhem's Terms of Use were exhibited to its users is determinative on the issue of whether Edme had actual or constructive notice of the terms and condition, including whether the forum selection clause was reasonably communicated to her. Compare Specht, 306 F.3d at 32 (concluding that a provision that a website user would not encounter until he scrolled down multiple screens was not enforceable because "a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms") and Hines, 668 F. Supp. 2d at 368 (holding that forum selection clause was not reasonably communicated where "Defendant failed to explain how Plaintiff and its other customers were 'advised' of the Terms and Conditions, or to cite a single case that suggests that merely posting such terms on a different part of a website constitutes reasonable communication of a forum selection clause") with Zaltz v. JDate, --- F. Supp. 2d ----, 2013 WL 3369073, at *7-8 (E.D.N.Y. 2013) (finding that "plaintiff assented to Jdate.com's Terms and Conditions of Service, meaning that the forum selection clause contained therein was, in fact, reasonably communicated to her since plaintiff "did not need to scroll or change screens in order to be advised of the Terms and Conditions; the existence of, and need to accept and consent to, the Terms and Conditions of Service was readily visible") and Fteja, 841 F. Supp. 2d at 840-41 (concluding that because plaintiff was "informed of the consequences of his assenting click and he was shown, immediately below, where to click to understand those consequences," defendant's Terms of Use were "reasonably communicated"). Without such information and evidence, the Court is unable to conclude that the Terms of Use were binding on plaintiff and that the forum selection clause — contained within the Terms of Use — were reasonably communicated to plaintiff. Accordingly, the Court denies Modelmayhem's motion to dismiss on the basis that the forum selection clause contained in its Terms of Use is enforceable.

Internet companies, it is not enough to go into court and point to a forum selection clause in your terms of use.  To enforce that clause, you also have to establish where that clause is on your site and how you pointed users to that clause… and better yet, how you obtained the user's assent to the terms.

Edme v. Internet Brands, 12 CV 3306 (E.D.N.Y. Sept. 23, 2013)(Hurley, J.).

[Meredith R. Miller]

September 30, 2013 in E-commerce, Recent Cases, Web/Tech | Permalink | TrackBack (0)

Wednesday, September 18, 2013

New Member of the LPBN: Gender and the Law Prof Blog

LPBNAs announced here on the TaxProf Blog, the Mother Ship of the Law Professor Blog Network, of which this blog is a proud member,  John Kang and Tracy Thomas have just launched the Gender and the Law Prof Blog.  Here's the intro:

Welcome to the new Gender and the Law Blog.  Your coeditors are John Kang and Tracy Thomas.  John is Professor of Law at St. Thomas and he offers his perspective on masculinities and constitutional analysis.  He is presently finishing a book called Manliness and the Constitution. In his spare time, he runs, reads nonfiction and argues with his children.  Tracy is the Aileen McMurray Professor of Law at Akron and brings her feminist and litigator perspectives.  Her work includes the annual edition of West’s Women and the Lawthe book Feminist Legal History (with T.J. Boisseau), and her recent article on the misuse of women’s history in the pro-life movement.  She spends her spare time chauffeuring. Let the blogging begin.

[JT]

 

September 18, 2013 in About this Blog, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, September 13, 2013

Happy Groundhog Day, Facebook!

Groundhog_day

Last week, Facebook announced that it planned to enact changes to its privacy policies.  Its announcement elicited the by now, all too-familiar flurry of protests from users and privacy advocacy groups.  Six privacy groups wrote to the Federal Trade Commission (FTC) that the proposed changes violated the 2011 settlement that Facebook reached with the FTC over its Sponsored Stories advertising program. 

The letter states that the proposed changes “will allow Facebook to routinely use the images and names of Facebook users for commercial advertising without consent.” While the current policy permits users to “use your privacy settings to limit how your name and profile picture may be associated with commercial, sponsored, or related content ,” the proposed policy brazenly states:

“(y)ou give us permission to use your name, profile, picture, content and information in connection with commercial, sponsored or related content…This means, for example, that you permit a business or other entity to pay us to display your name and/or profile picture with your content or information, without any compensation to you.”

As the letter points out, the images of Facebook’s users “could even be used by Facebook to endorse products that the user does not like or even use.”

Facebook’s proposed policy changes also contain this provision:

“If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to the terms of this section (and the use of your name, profile picture, content, and information) on your behalf.”

In other words, Facebook is forcing kids to lie.  As I explain in my new book, nobody reads wrap contracts, such as online terms of use  (and with good reason).  Given our habituation to online agreements, we probably don’t even notice them anymore – we click reflexively, out of habit.  But even though we suffer from click amnesia, courts construe our click as consent.  Facebook’s proposed new policy not only claims constructive consent, it also forces kids to constructively claim their parents consented.  It’s a fiction wrapped inside another fiction.  The result, as the letter to the FTC notes, is an evisceration of  “any meaningful limits over the commercial exploitation of the images and names of young Facebook users.”

This week, the Federal Trade Commission announced that it would investigate whether Facebook's announced policy would violate a 2011 agreement that the company had reached with the agency.  Facebook's position is that the proposed changes were prompted by its settlement in a case involving its Sponsored Stories advertising program. 

Facebook’s proposed changes seemed eerily familiar and then I realized why –I’d already written about this issue back in December.  Back in December, Instagram, a company acquired by Facebook, proposed changes to its terms of service that stated:

“you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you taken, in connection with paid or sponsored content or promotions, without any compensation to you.  If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to this provision (and the use of your name, likeness, username, and/or photos (along with any associated metadata)) on your behalf.” 

Do the terms sound familiar?

Instagram’s proposed changes to its terms of use made its users rally in alarm and threaten to defect.  But Instagram backed off in response and the company promised it would respect their wishes. 

And now this, again.  It's like the 1993 movie, Groundhog Day, starring Bill Murray and Andie MacDowell.  In that film, Murray's character, a T.V. weatherman, is made to report on Groundhog Day activities.  Murray's character, who doesn't like the assignment, finds that he keeps waking up to relive Feb. 2nd over and over again.

Facebook just doesn’t understand that no, means no.  It pleads forgiveness, wants us back, and then the same behavior starts up all over again.  We want to believe you.  We really do.

We feel your pain, Huma Abedin.

There are long term consequences to what Facebook is doing.  Each time it pushes, it pushes hard, and in response to pushback from consumers, it appears to retreat – but not as far back as it pushed.  Then it does it again and each time, Facebook manages to loosen our privacy norms just a bit more.  It wins through increments, through persistence.  It didn’t get to a billion users overnight and it isn’t going to strip us of all our privacy without a good fight from us. 

But big changes are made in increments.  Policy changes that nobody reads because they are hidden in wrap contracts, slowly but surely, change our expectations of privacy.  The erosion of consent, justifiable perhaps at one time to limit business risks, led us to where we are now –an online contract clause that purports to extract consent from someone who never even received notice of its existence.   To make matters worse, the clause is directed at children who don’t even have legal capacity to contract. 

Really, this time you’ve gone too far, Facebook.  This time, let’s make it the last time, Facebook.  Promise?

Of course you do.

 

[Nancy Kim]

September 13, 2013 in In the News, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, August 23, 2013

Our Re-Design

PaulIf you are reading this post, and if it is not the first post you have ever read on the ContractsProf Blog, then you have noticed that we have a new look.  All of this is thanks to a global re-design at the Law Professor Blog Network (LPBN), headed up by Paul Caron (pictured).

This is our third day with the new look, and the impact on our readership has been dramatic!  Of course, the uptick in our readership is also explained in part by the advent of a new semester, always a good time for people to check in, and by the very exciting symposium on the contracts scholarship of Stewart Macaulay, which ought to be attracting some new readers.  Still, our daily readership has tripled since the re-design, and we have never had results like that either at the beginning of a new academic year or in connection with one of our virtual symposia.  So, we think a great deal of the credit has to go to the re-design.

The re-design includes a bunch of new features with which we ourselves are not yet fully aware.  We will tell you more about them as we play around with the platform and discover its nuances.  Paul Caron has himself explained the purposes behind the redesign in this piece that is availabe on SSRN.  Here is an excerpt from the abstract:

The re-design will (1) optimize each blog for viewing across a variety of platforms (desktop, laptop, tablet, and smart phone); (2) better integrate social media; (3) provide more robust analytics with richer and more accurate readership data; and (4) strengthen our partnership with Wolters Kluwer/Aspen Publishers and provide additional avenues for monetization

We here at the ContractsProf Blog cannot equal the expertise of the TaxProfs in money matters, but our interpretation of the last line of Paul's abstract is that the re-design is going to make us all rich!

[JT]

August 23, 2013 in About this Blog, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, August 12, 2013

Ninth Circuit Leaves Determination of Arbitrability to the Arbiter in Oracle America v. Myrida Group

9th CircuitThe facts of this case are complex and require an understanding of computing that I Iack, but what it seems to come down to is that Myriad Group (Myriad) had some licenses to use Java trademarks and the Java programming language developed by Oracle America (Oracle).  The parties dispute the terms of the licenses and as a result Oracle alleges that Myriad had been using the trademarks and the programming language without paying for them, thus infringing upon Oracle's intellectual property rights.   Oracle sued in the Northern District of California alleging breach of contract and violation of intellectual property rights, while Myriad sued Oracle in Delaware alleging breach of contract. 

Myriad moved to compel arbitration in the Northern District of California pursuant to an arbitration clause that provided for arbitration of any claim relating to intellectual property rights "in accordance with the rules of the United Nations Commission on International Trade Law (UNCITRAL) (the 'Rules') in effect at the time of the arbitration as modified herein . . . "  The District Court granted Myriad's motion with respect to Oracle's breach of contract claim only, finding that the UNCITRAL Rules do not provide the arbitrator with exclusive jurisdiction to determine the scope of its own jurisdiction.

On July 26, 2013, the Ninth Circuit issued its opinion in Oracle America, Inc. v. Myriad Group A.G. and reversed the District Court’s partial grant of Myriad’s motion to compel arbitration.

The Ninth Circuit began by noting that, while public policy favors arbitration agreements, there is a presumption that courts should decide which issues are arbitrable.  Nonetheless, a court should grant a motion to compel arbitration to decide issues of arbitrability if the parties’ arbitration provision “constitutes clear and unmistakable evidence that the parties intended to arbitrate arbitrability.”  While the Ninth Circuit had never decided whether UNCITRAL’s Rules constitute such evidence, both the Second Circuit and the D.C. Circuit had concluded that the 1976 version of the UNCITRAL Rules constitutes clear and unmistakable evidence that the parties to an agreement governed by the Rules intended to arbitrate questions of arbitrability.  Although the 2010 version of UNCITRAL’s Rules might have been at issue in this case, the Ninth Circuit ruled the differences betwee the 1976 and 2010 versions do not affect the outcome on this issue. 

The Court remanded the case to the District Court for proceedings consistent with its opinon.

[JT] 

August 12, 2013 in Recent Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 7, 2013

Response to Jeremy Telman's Post about Op-Ed on Wrap Contracts

This post responds to the thoughtful comments offered by my co-blogger Jeremy Telman in his post about my op-ed.  As he hinted, an op-ed provides a great forum for raising issues to a larger, non-academic audience but it is hardly the place to be thorough. Jeremy’s post gives me an opportunity to briefly touch upon the issues that I address in my forthcoming book.  (Note:  If you use the promotion code 31998 and click here you get a 20% discount).

Danger signJeremy raised the issue of the inadequacy of doctrinal solutions.  In fact, all of my proposed solutions are doctrinal.  There are undoubtedly more effective way to achieve societal changes, but doctrine obviously matters and right now, the law of wrap contracts is a mess.  It’s in a mess in a lot of different ways, yet the courts seem to be in denial, repeating the refrain that wrap contracts are “just like” other contracts. This is simply not so.  Much of my scholarship looks at how technology shapes behavior and argues that courts should consider the role of technology when they interpret and apply the law.  With respect to wrap contracts, courts ignore the ways that digital form affects both user perception and drafter behavior (i.e. overuse).  My proposed solutions seek to make the effects of the digital form part of the court’s analysis. 

One of these solutions, briefly mentioned in the op-ed and discussed in the book and elsewhere,  is a “duty to draft reasonably” which acts to counter the burden of the “duty to read.”  The duty to draft reasonably has very little to do with getting consumers to read contracts – it’s about getting companies to ask for less by making it less palatable for them to ask for more. As I explain in great length in my book, there are plenty of reasons why I am not a big fan of the duty to read –and why I think trying to get consumers to read is an inadequate solution.  Consumers shouldn’t be expected to read online contracts, at least, not as they are now drafted.  Reading wordy online contracts is not efficient and would hurt productivity. It’s also useless, since consumers can’t negotiate most terms.  Instead, we should try to get companies to present their contracts more reasonably/effectively.  We should require them to signal the information in an effective manner, the way that road signs signal dangerous conditions.  For example, I propose using icons, such as the danger icon that accompanies this post, to draw consumers’ attention to certain information.  Currently, courts construe “reasonable notice” to mean something other than “effective notice” – and this places too heavy a burden on consumers to ferret out information.  A “duty to draft reasonably” shifts the focus from the consumer's behavior to the drafting company’s behavior.  Could the company have presented the information in a better way? And if so, why didn’t it?  This is a question that courts used to ask with paper contracts of adhesion – but for some reason, they have moved away from this with wrap contracts. 

A related doctrinal adjustment that I propose in my book is specific assent.  For terms that take away user rights (which I refer to as “sword” and “crook” provisions), the user should be forced to actively assent by, for example, clicking on an icon.  The idea here is also not to get users to read, but to hassle them!  Imagine  having to click to give away each use of your data.  What a pain – and that’s the point.  The incorporation of a transactional hurdle or burden damages the relationship between the website and the user – and the more hurdles, the more annoying it becomes to complete the transaction. 

 Both proposals try to signal the type of company to the consumer.  A website full of danger icons sends a very different message than one with only one or two danger icons.  A website which requires a user to click forty times to complete a transaction won’t be around too long. 

As for better solutions, there are ways to address specific problems by using third party tools and I am all in favor of technical solutions.  For example, you can use duckduckgo or Tor to try to cover your tracks. But technical solutions have their shortcomings or limitations because they only address one part of the larger problem and it gets to be a bit like whack-a-mole as technology shifts and improves. 

Ultimately, any comprehensive solution has to be implemented by the government – either the legislature or the judiciary.  But it’s up to us, the consumers, to raise the issue as one needing a solution and we can do this through the democratic process and by marching with our feet. I agree with Jeremy that there are problems with collective action – there are coordination and resource issues as well as cognition limits, but that doesn't mean we shouldn't do anything. I don’t want to get into the thicket of that in this already too-long post, but I address this issue at great length in my book and propose that one way to deal with this is by reconceptualizing unconscionability.

Consumer advocacy groups and the websites referred to by Jeremy in his post certainly help with the collective action problem.  They inspire us to get off the couch.  Not easy when companies make it so comfortable for us to do nothing but that’s the nature of the beast here – it’s the same in other areas where consumers face the corporate marketing machinery and its expertise in manipulation.  As Kate O'Neill notes in the comments to Jeremy's post, we contracts profs have a role which is to point out the inconsistencies and contradictions in judicial application of doctrine and propose better ways to evaluate legal issues.  Some may scoff that judges don’t read law review articles --or books written by academics-- but it’s our job to keep trying.

 

[Nancy Kim]

August 7, 2013 in Commentary, Current Affairs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Sunday, August 4, 2013

Op-Ed on Wrap Contracts and Online Privacy

The Sacramento Bee published my op-ed on wrap contracts and online privacy today.  Here's the link.

 

[Nancy Kim]

 

August 4, 2013 in Contract Profs, Current Affairs, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 24, 2013

Fox Broadcasting v. Dish Network - let's hop to the contract issues

The Ninth Circuit recently decided an interesting case involving video on demand – or is the Hopper a DVR?  That was one of the questions at the heart of Fox Broadcasting Company v. Dish Network. (Jeremy Telman had previously blogged about the case when the complaint was first filed a year ago).  At issue was the Dish Network’s PrimeTime Anytime service which only works with the Hopper, a set top box with digital video recorder and video on demand functionalities.  PrimeTime Anytime records Fox (and other) network shows and stores the recordings for a certain number of days (typically eight) on the Dish customer’s Hopper.  Dish does not offer video on demand from Fox (but see discussion below).  Dish started to offer a new feature called “AutoHop” that allows users to skip commercials on shows recorded on PrimeTime Anytime (although it doesn’t delete the commercials, the user can press a button to skip them).  Fox sued Dish for copyright infringement and breach of contract and sought a preliminary injunction.  The Ninth Circuit upheld the district court’s denial of the motion.  The copyright issues are interesting, but I’m going to skip over them using this blog’s virtual AutoHop feature and get right to the contract issues, which are much more interesting to readers of this blog. 

There were two agreements at issue here.  There was a 2002 license agreement and a subsequent 2010 letter agreement (there were others but these were the two relevant ones).  Pursuant to the 2002
agreement, Fox granted Dish a limited right to retransmit Fox’s broadcast signal to Dish’s subscribers.  It also contained several restrictions and conditions and prohibited video on demand.  A 2010 letter agreement, however, agreed to video on demand provided that Dish agreed to certain conditions, the primary one being that it couldn’t show the content without commercials. 

So the basic questions (overly simplified for blog purposes) were – did Dish distribute Fox video on demand content?   If so, did it comply with the terms of the 2010 letter?  (Okay, that’s not exactly how the court or the parties put it, but those were the issues stripped down to their essence).

Fox argued that Dish breached this provision of the 2002 contract:

“EchoStar acknowledges andagrees that it shall have no right to distribute all or any portion of the
programming contained in any Analog Signal on an interactive, time-delayed, video-on-demand
or similar basis; provided that Fox acknowledges that the foregoing shall not restrict EchoStar’s practice of connecting its Subscribers’ video replay equipment.”

The district court construed the word “distribute” as requiring a copyright work to “change hands” (analogous to under the Copyright Act).  Because the copies remained in users’ homes,they did not change hands and there was no distribution.  Fox challenged this construction and argued that the prohibition against distribution meant that Dish would not make Fox programming available to its subscribers on the aforementioned basis.  The Ninth Circuit found both Fox’s and the district court’s constructions plausible (yes I realize there’s a distinction between interpretation and construction but I don’t want to go there right now, although you may). 

The Ninth Circuit withheld judgment on which construction was better but stated that “in the proceedings below, the parties did not argue about the meaning of ‘distribute.’  We express no view on whether, after a fully developed record and arguments, the district court’s construction of ‘distribute’ will prove to be the correct one.”

The court did, however, express skepticism that PrimeTime Anytime was not “similar” to video-on- demand (remember, the 2002 contract prohibited “video-on-demand or similar basis”)(emphasis added by yours truly).  The “distribution” of that, therefore, would violate the 2002 contract. Dish argued that its service was not “identical” to VOD but, as the Ninth Circuit noted, did not explain why it was not “similar.”  (Note: I hope all you contracts profs are feeling ever more relevant!  And our students thought we were just making mountains out of molehills when we focused on the importance of contract language).  The addition of that word “similar” might just save Fox when the case goes to trial.  Especially since, as even the district court held, if PrimeTime Anytime is VOD, then Dish clearly breached the contract which prohibited skipping commercials. The district court, however, wasn’t convinced that it was VOD.  Rather, the district court concluded that it was a hybrid of DVR and VOD and “more akin” to DVR than VOD.

In other words, the district court’s analysis went along these lines – the 2002 contract was not breached because there was no distribution of VOD (or similar) content.  The 2010 contract was not breached because this was not VOD but DVR. In short, this was not VOD and there was no distribution of a VOD-like service.

Query if the 2010 amendment had adopted the “VOD or similar” language instead of just “VOD”; in other words, what if it permitted Dish to offer Fox’s programming as VOD or “similar” service?  My guess is that they specifically drafted it narrowly to include just “VOD” to limit the scope of the license – but that it ended up backfiring to exclude the conditions on “similar” services.  Funny how drafting rules of thumb can sometimes come back to bite you.  Note the problem was created because the definitions were not consistent in the 2002 and 2010 agreements – it created a gap regarding a service (a “VOD similar service”) which required judicial construction.  Distribution of VOD or similar services was prohibited under the 2002 contract but VOD was permitted under the 2010 provided commercials were not skipped.  And what happens to showing (not distributing) "similar services to VOD"?  Mind the gap!

 There was a final issue regarding a “good faith” in performance type clause.  The Ninth Circuit  concluded that there was no evidence that Dish launched PrimeTime Anytime “because it was unwilling to comply with the requirements to offer Fox’s licensed video on demand service, rather than because Dish lacked the technological capability to do so.”  Frankly, I’m not sure why this was not a bigger issue since it seems, at least to me, that Dish is trying to get around the “no commercial skipping” restriction in the 2010 agreement by using the Hopper.

 The Ninth Circuit noted a few times that it was applying a “deferential standard of review” given the request for a preliminary injunction so I don’t think Dish can rest easy just yet.  I think Fox’s case will eventually hinge upon how the contract issues are resolved.  What is the meaning of “distribute”? (I don’t know enough about how Dish technology works to determine whether distribution occurred.  Even under the district court’s definition, could it have occurred?  Does rebeaming signals constitute distribution?  Is the service analogous to a lease?  I think there’s room here).  Is the PrimeTime Anytime service VOD or not?  And isn’t that 2002 agreement relevant in determining what the meaning of VOD is under the 2010 amendment?  Finally, why did the court give the “good faith in performance of contract” such short shrift?

I didn't get to review the actual agreements, but I would look at what exactly is being licensed under the 2002 agreement.  Does it exclude the VOD-like service or include it?  The gap seems odd to me - it must be addressed in one of the agreements.  What exactly does Dish have the right to do?  That seems to me one of the keys to unlocking the "correct" interpretation of the contract - and help determine whether the obligation of good faith is being fulfilled.

The real hammer here is going to be contract renewal - if Dish pisses off Fox and the other networks then it may kiss its business goodbye if they don't renew their contracts.  (As I mentioned, I haven't seen the contracts so don't know what the terms are).

As the court notes, the parties probably didn’t contemplate a hybrid DVR and VOD (this is the old “anticipating the future and new technologies” problem that contract drafters have to which I’ve previously referred) I think the copyright issues weigh more heavily in favor of Dish whereas Fox has the better argument re the contract issues.  Of course, the much larger policy issue is how to strike the balance between contract and copyright – a recurring issue since the late eighties…Generally, it's been advantage contracts.

 [Nancy Kim]

July 24, 2013 in Current Affairs, In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, July 15, 2013

Tracking and Data Collection - Coming to a Store Near You!

As Jeremy Telman noted in his post, the OUP website which sells my forthcoming book on wrap contracts contains a wrap contract that requires users to the site to accept cookies.  This type of wrap is  what I refer to as "contract as notice", and much better than what most websites do, which is implement a "notice as contract".  The OUP  website requires specific assent to a particular term which raises the salience of the term.  My guess is that OUP provides this because its parents company is based in the U.K. which has better laws about this kind of stuff.  Most US corporate websites throw a bunch of terms into a browse wrap to which the user is deemed to have given blanket assent.  Visitors to OUP's website -- which requires specific assent -- are made aware of the cookies, whereas most visitors to other sites aren't even aware that a contract governs.  This is the difference between effective notice and  ineffective notice, aka contracts that nobody reads but that courts deem are still enforceable via constructive assent. 

The real problem with not reading is the nature of the terms that go unread--if you don't read terms, what's to stop a company from piling them on, adding more intrusive privacy stripping terms and rights deleting  provisions ( to use a Radin-esque term). According to case law, not much. 

I set my browser to alert me when I visit a website with cookies and I just couldn't visit any site without having to press the "allow" icon several times.  Now I allow first party cookies, and ask for a "prompt" from third parties. I wouldn't be able to use my computer otherwise.

And now, we have the pleasure of being tracked in person.  This morning, the NYT reported that some physical stores have started testing technology that allows tracking of customers' movements by using their smart phone signals. Nordstrom tried the old "Notice as Contract" method, by posting a sign telling customers they were being tracked.  Those customers who saw the sign were creeped out.  How long before we get used to these notices - and start to ignore them?  How long before they are so ubiquitous that we have as little choice as we do online to stop a company from tracking and collecting information about us?

BTW, you can't read the NYT article unless your browser is set to allow cookies.....

 

[Nancy Kim]

July 15, 2013 in In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, July 11, 2013

Website for Law Professor's Book about Wrap Contracts Contains a Wrap Contract!

KimThose of you who read the previous post and clicked on the link to get a sneak peak at Nancy Kim's forthcoming book, Wrap Contracts, may have noticed the banner at the top of the screen, which reads:

We use cookies to enhance your experience on our website. By clicking 'continue' or by continuing to use our website, you are agreeing to our use of cookies. You can change your cookie settings at any time.

There may be some irony in this situation, or perhaps it is strategic: the website performs, and makes one of Nancy's points for her.  Wrap contracts are everywhere and have become an unavoidable fact of life for the computer literate.

[JT]

July 11, 2013 in About this Blog, Books, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Documentary on Terms of Use

There's a new documentary about...wait for it....contracts!  Well, if you want to call terms of use "contracts" - which courts seem to want to do.  Here's a link to an article in USA Today  and a link to the the official trailer on YouTube (yes, I get the irony of posting a trailer to YouTube which you can't do without agreeing to their terms of use....).  The clip contains some infuriating quotes from self-interested folks who want to perpetuate consumer ignorance of privacy looting.  One of my favorites-to-hate is the lie that people don't care about privacy - if they did they would do something about it.  But contracts profs know about bounded rationality and the limits of cognition - and we also know about lack of choice, the importance of contract design and effective v. ineffective notice.

I cover all of this ground (and more) in my forthcoming book  but more on that later.... 

 

[Nancy Kim]

July 11, 2013 in In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, June 7, 2013

Cell phones, copyright and contracts

Ajit Pai, a commissioner of the Federal Communications Commission,wrote an interesting op-ed in yesterday's NYT.   He argues that consumers should be allowed to unlock their phone when they permissibly (i.e. not in breach of any contract) switch carriers. Some of you might be wondering - Huh?  Is that even illegal?  Don't I own my phone?  You're probably not alone.  As Pai notes, the Library of Congress decided that unlocking your phone violates the Digital Millenium Copyright Act of 1998.  (They basically removed an exception to the Act that permitted unlocking, as this article in the San Francisco Chronicle explains).  But, you might wonder, what does copyright have to do with what you can do with your cell phone?  A lot of people are wondering the same thing, but basically, software locks the cellphone to a specific network and the cell phone owner is a licensee of that software (and software is copyrightable).  Okay, now you understand what this has to do with copyright but what does this post have to do with contract?  Glad you asked.  Pai's op-ed argues, "Let's go back to the free market.  Let's allow contract law - not copyright or criminal law - to govern the relationship between consumers and wireless carriers."  It's interesting given that this blog has spent the last couple of weeks discussing the need for government intervention due to boilerplate - and yet, here's an example of government intervention into boilerplate that is not actually helpful to consumers.  Don't get me wrong - I'm not saying government intervention into boilerplate isn't a good thing sometimes (depends on what it is and how and why) - I just find it interesting that this example of government intervention is on an issue that protects businesses and hurts consumers.  Of course it shouldn't be surprising since lobbyists for carriers are way better organized and have more money and influence than consumer advocacy groups. And that gets to the heart of what's the matter with using contracts as the solution since the same dynamic is at play in the world of private ordering (see symposium on Boilerplate and the book itself, for more details).  Who knows what carriers might come up with in their contracts.  Would they try to "license" instead of sell their phones? In a perfect world, the free market might function, well, perfectly and private ordering would be the order of the day.  But we don't live in that world so an absolutist "no government intervention v. more government intervention" position doesn't work.

 

[Nancy Kim]

June 7, 2013 in Commentary, In the News, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, May 2, 2013

Ticketmaster and Those Pesky Bots

Last week, I mentioned a California bill addressing the issue of ticket resales and secondary marketplaces.  I think that the primary problem for consumers is not that these secondary marketplaces exist -- being able to resell tickets is generally a good thing for consumers--but that scalpers use bots (automated software programs) to buy up large quantities of tickets which they then resell at jacked up prices.  Fans get angry because shows are quickly "sold out" and they are forced to pay heart stopping prices in the secondary marketplace if they want to see their favorite performer (or get decent seats).  Well, Ticketmaster has had enough and is suing 21 people involved in circumventing its online security system by buying up vast quantities of tickets.  Ticketmaster's weapon of choice here?  The universally reviled yet oh-too-familiar Terms of Use.  Ticketmaster's TOU prohibits the use of bots.  (It's also suing for copyright infringement, among other things).  In fact, back in the early days of the Internet, bots were one of the reasons companies started to use TOU.  The more things change....

[Nancy Kim]

May 2, 2013 in Current Affairs, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (1) | TrackBack (0)

Wednesday, April 24, 2013

Paperless Tickets and Licenses

 

The Sacramento Bee reports that a California legislative committee (if you really want to know,  it’s called the Assembly Arts, Entertainment, Sports, Tourism and Internet Media committee) “gutted” a bill that would have illegalized “paperless” tickets.  Paperless tickets are more (or is it less?) than what they sound like – they are a way for companies like Ticketmaster to sell seats without permitting purchasers to resell those seats.  Purchasers must show their ID and a credit card to attend the show.  The bill pitted two companies, Live Nation (owner of Ticketmaster) and StubHub, against each other. 

This bill and the related issues should be of interest to contracts profs because it highlights the same license v. sale issues that have cropped up in other market sectors where digital technologies have transformed the business landscape.  Like software vendors and book publishers, Ticketmaster is concerned about the effect of technology and the secondary marketplace on its business.  Vendors, using automated software (“bots”), can quickly purchase large numbers of tickets and then turn around and sell these tickets in the secondary marketplace (i.e. at StubHub) at much higher prices.  Both companies argue that the other is hurting consumers.  Ticketmaster argues that scalpers hurt fans, who are unable to buy tickets at the original price and must buy them at inflated prices.  Stub Hub, on the other hand, argues that paperless tickets hurt consumers because they are unable to resell or transfer their tickets. 

The underlying question seems to be whether a ticket is a license to enter a venue or is it more akin to a property right that can be transferred.  Or rather, should a ticket be permitted to be only a license or only a property right that can be transferred?  The proposed pre-gutted legislation would have taken that decision out of the hands of the parties (the seller and the purchaser) and mandated that it be a property right that could be transferred.  In other words, it would have made a ticket something that could not be a contract.  Of course, given the adhesive nature of these types of sales, a ticket as contract would end up being like any other mass consumer contract – meaning the terms would be unilaterally imposed by the seller. In this case, that would mean the ticket would be a license and not a sale of a property right. 

It’s not just the media giants who are feeling the disruptive effect of technology  - we contracts profs feel it, too. 

[NB:  My original post confused StubHub with the vendors who use the site.  StubHub is the secondary marketplace where tickets can be resold.  Thanks to Eric Goldman for pointing that out].

[Nancy Kim]

April 24, 2013 in Commentary, Current Affairs, E-commerce, In the News, Legislation, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, April 22, 2013

Phone "Bill Cramming" and Consent

The FTC recently charged a company, Wise Media, with unfair and deceptive business practices. The FTC complaint alleges that Wise Media charged unwitting mobile phone users for “premium" text services, or junk text messages (horoscopes, love tips, other “useful” information…) that consumers never authorized.  The practice is referred to as “bill cramming,” and consumers  often failed to notice the indefinitely recurring charges of, in this case, $9.99/month.  Even when they did and sent a text to “stop” the messages, the company often failed to comply with the request. 

Consumers often miss these charges because they aren’t aware that their mobile phone bills contain charges by third parties and because the charges are not clearly indicated.  The result?  Wise Media has made millions of dollars by surreptitiously charging consumers.

What I find particularly interesting and troubling is the potential interaction of contract law in the area of electronic contracts and consumer protection.  What distinguishes a deceptive business practice (although not necessarily an unfair one) from a “hard bargain” is consent. The FTC complaint, for example, was filed because the charges were “unauthorized” by consumers - they were signed up "seemingly at random" without consumer "knowledge or permission."  The FTC has, in my view, done a pretty terrific job of protecting consumers given the lack of resources and the wide range of consumer-harming activities out there.  Courts have not done so well.  What happens where contractual “consent” (such as in the form of a clickwrap”) is obtained for an unfair practice, such as bill cramming?  What if the consumer had clicked "I agree" on a clickwrap to the premium service?  Would the contract law notion of “consent” mean that the consumer had authorized the “premium text” service, even when we all know that nobody reads clickwraps and browsewraps?  Or would the commonsense version of consent championed by the FTC prevail?

I talk about this disjunction between, what I refer to as “wrap contract doctrine” (since, let's face it, the digital contract cases are not consistent with traditional contract doctrine despite what Easterbrook and others claim) and the FTC’s more commonsense approach to consumer perception and business practices in my forthcoming book on wrap contracts.  (Did you know a plug was coming?  I actually didn’t but there it is.)  The conclusion I reached was that there appears to be a disconnect between contract law notions of “reasonable notice” and the FTC’s notion of “reasonable notice” (which I find more reasonable….)  The takeaway for businesses – just because you obtain consent for a particular business practice via an online contract which may meet the surreal standards of contractual consent set forth by courts doesn’t mean that the practice in question won’t be viewed as an “unfair and deceptive” one by the FTC.

[Nancy Kim] 

April 22, 2013 in Current Affairs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 16, 2013

Dog Bites Man Story from the Nota Bene Blog

Under the headline "Contract Law Can Be Interesting!" Nota Bene, a blog by the librarians at the University of Houston O'Quinn Law Library, features a post praising some recent contracts law books.  Other interesting posts on the Nota Bene blog include "Objects Fall to Earth," "Smoking May Be Harmful to Your Health," and "Cubs Unlikely to Win World Series this Year."  

After proclaiming contracts to be right up there with civil procedure on the list of most boring law courses, he author \recommends two books that can make this daunting subject palatable: Contracts Stories, edited by Douglas Baird, and Larry Cunningham's Contracts in the Real World, about which we posted an online symposium a few months ago.

I also recommend these books, but I'm not sure the blog post's author's marketing strategy is going to work.  He says, in effect, "I recommend to you these two books (only one of which I've read) about a subject that doesn't interest you.  If you did not enjoy studying contracts, here are two books about contracts that will cause you to upgrade your attitutude towards the subject from 'feh' to 'meh.'"

Whatever.  I always thought that the point of books like Contracts Stories is to enable students to learn more about the fascinating cases that they studied in their law courses.  They also provide insights into litigation strategies, legal history, business strategies underlying contractual disputes, and lots of other useful supplements to the raw case law.  Contracts in the Real World is an excellent representation of the sorts of issues that come up in the world of contracts law all the time.  If there were some huge gap bewteen what Larry Cunningham talks about in his book and what we talk about in contracts courses, the book would not be as useful as it is.

Ultimately both books are born of a love of contracts law.  And a book is a mirror. . . .

[JT]

April 16, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, April 15, 2013

CBC Radio Interview with Margaret Radin

Next month, we will host an online symposium on Margaret Radin's recent book, Boilerplate.  

For those who can't wait to get a sesne of the book, you can listen to a Canadian Broadcasting interview with Professor Radin here.

Irony of ironies: in order to listen to this, I had to download an upgrade of Adobe Flash Player, and of course that required my agreement to boilerplate terms and conditions.

There is no escape from boilerplate.

[JT]

April 15, 2013 in About this Blog, Books, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, March 4, 2013

For Those Who Have 76 Days to Spare

( H/T to Ben Davis -and his student - for posting about the article to the Contracts Prof list serv).

This article indicates that the average Internet user would need 76 work days in order to read all the privacy policies that she encounters in a year.  (Unfortunately, the link to the study conducted by the Carnegie Mellon researchers and cited in the article doesn’t seem to be working).  But you don’t need a study to tell you that privacy policies are long-winded and hard to find.  That’s one of the reasons you don’t read them.  Another is that they can be updated, often without prior notice, so what’s the point in reading terms that are constantly changing? Finally, what can you do about it anyway?  Don’t like your bank’s privacy policies – good luck finding another bank with a better one.

But we contracts profs are familiar with the disadvantages of standard form contracts. We’re also familiar with the efficiency argument in favor of them. The same issues arise with privacy policies – only there’s one important difference between a privacy policy and a contract, even an adhesive one. A privacy policy isn’t really a contract, at least not in most cases. That’s one of the arguments I make in my forthcoming book, WRAP CONTRACTS:  FOUNDATIONS AND RAMIFICATIONS.  A privacy policy is typically a notice, not a contract.  Courts – especially in cases involving digital contracts – have tended to confuse or conflate the two.  If you look at the wrap contracts (shrinkwrap,browsewrap, clickwrap) cases under traditional contract law, they make no sense.  If you analyze them as notice cases, they have some consistency. Unfortunately, courts are treating wrap contracts as contracts, not notices. 

So, what’s the difference between a contract and a notice?  The big difference is that the enforceability of a notice depends upon the notice giver’s existing entitlements, i.e. property or proprietorship rights whereas a contract requires consent.

If I put a sign on my yard that says, Keep off the grass, I can enforce that sign under property and tort law.  As long as the sign has to do with something that is entirely within my property rights to unilaterally establish, it’s enforceable.  If the sign said, however, ‘Keep off the grass or you have to pay me $50” – well that’s a different matter entirely.  That would require a contract because now it involves your property rights.

Privacy policies are more like notices – and should be treated as such even if they are in the form of a contract (such as a little clickbox that accompanies a hyperlink that says TERMS).   If a company wants to elevate a notice to a contract, it should require a lot more than that simple click.  Because the fact is, contract law currently does require the user to do more than click – it requires the user to read pages and pages of terms spread across multiple pages – at a cost of 76 days a year.  The standard form contract starts to look a lot less efficient when viewed from the user’s perspective.

[Nancy Kim]

 

March 4, 2013 in Commentary, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, January 24, 2013

When It Comes to The Hobbit, Wired.com Puts Us to Shame

 

Scroll
Closest Thing to a Dwarvish Scroll Available on Wikipedia
Last month, our very own Nancy Kim beat me to the punch by posting about the contract that Bilbo Baggins enters into with Thorin's crew in The Hobbit.  I was so upset that she beat me to the punch on the subject matter that I docked her a month salary from her position as contributing editor on the blog.   

Now we've both been shown up (and how!), by James Daily, identifed here by Wired.com as

 a lawyer and co-author of The Law and Superheroes, [who] typically focuses his legal critiques on the superhero world at the Law and the Multiverse website he runs with fellow lawyer and co-author Ryan Davidson. 

Apparently, Mr. Daily got his hands on a replica of the five-foot-long scroll that was used as the contracts prop in the film.  He then goes through the contract provision by provision and reaches the following conclusion:

One the whole, the contract is pretty well written.  There are some anachronisms, unnecessary clauses, typos, and a small number of clear drafting errors, but given the contract’s length and its role in the film (which is to say not a huge one, especially in the particulars) it’s an impressive piece of work. I congratulate prop-maker and artist Daniel Reeve on a strong piece of work.  

He provides a link for those interested in purchasing their own version of the contract, for a mere $500.  " If you’d like an even more accurate replica of the contract, Weta’s online store has a version with hand-made touches by Mr. Reeve."

We tip our hats to Mr. Daily.  

Treasure_chest_colorBut I have my own thoughts about the contract that Mr. Daily does not mention.  First, the price term of the contract is ambiguous, since it promises Bilbo "only cash on delivery, up to and not exceeding one fourteenth of total profits (if any)," which on my reading does not really guarantee him anything.  On the other hand, the dwarves do promise to pay for Bilbo's funeral expenses, if necessary, so I think under the contract terms, he's better off dead.

This ambiguity is only partially clarified with the later provision that "the company shall retain any and all Recovered Goods until such a time as a full and final reckoning can be made, from which the Total Profits can then be established.  Then, and only then, will the Burglar’s fourteenth share be calculated and decided."  While this provision would strengthen any potential argument Bilbo might make that he should get no less and no more than a fourteenth share, if the contract does not define "full and final reckoning," he might have to wait quite some time to get that share, perhaps beyond his own final reckoning, and then it's Frodo's problem.

In addition, to address a matter of genuine concern; i.e., one that actually plays a role in the book, the contract does not specify the manner of delivery of payment.  As Bilbo points out in Chapter 18 (spoiler alert: the mission to recover Smaug's treasure was a success), "How on [Middle] earth should I have got all that treasure home without war and murder all along the way, I don't know."   Mr. Daily offers a solution: since the contract does not actually entitle Bilbo to any protion of Smaug's treasure but only to the value of a 1/14 share, the Dwarves could have wired a check to Bilbo's bank in the Shire (or the Middle Earth equivalent to a wire transfer).  But in the book, Bilbo waived his right to the spoils of war beyond "two small chests, one filled with silver, and the other with gold, such as one strong pony should carry."   

The fact that he did so suggests that really no part of the contract mattered much in the end.  And that is as it should be, since the bonds formed by those who joined Thorin's crew went well beyond those that can be reduced to any writing or even to any trilogy of films.

[JT, with hat tip to Mark Edwin Burge of the Texas Wesleyan School of Law for directing us to the Wired.com site]

January 24, 2013 in Film, Web/Tech | Permalink | Comments (3) | TrackBack (0)