Back in April, we noted the latest in the rather long saga of Tiffany's legal fight against eBay. Tiffany had sued eBay, claiming that the online auction site was legally responsible for policing the site for counterfeit Tiffany items that users were selling. Despite the lack of a clear safe harbor (a la the DMCA or the CDA), the appeals court agreed with the district court that eBay was not liable for the actions of third parties on its site. The one area where the appeals court sent the issue back to the lower court concerned eBay's own advertisements. eBay had apparently run some ads that mentioned the availability of Tiffany products on the site, and Tiffany claimed this made them liable. The court noted that it didn't appear this was false advertising (as there was nothing false in the ads), but that it might confuse or mislead users. It asked the lower court to look into that specific claim.
It didn't take all that long, as the lower court once again sided with eBay and said that eBay did nothing wrong here:
"Tiffany failed to establish that eBay intentionally set out to deceive the public, much less that eBay's conduct was of an egregious nature sufficient to create a presumption that consumers were being deceived,"
The case isn't quite over yet, as Tiffany keeps appealing various aspects of it, but it certainly doesn't look good for Tiffany -- but does appear very good for anyone who believes in the principles of properly applying liability to those who did the actions, rather than the "easy target" third party (even in the absence of official safe harbors).
We hold today that a software user is a licensee rather
than an owner of a copy where the copyright owner (1) specifies
that the user is granted a license; (2) significantly restricts
the user's ability to transfer the software; and (3) imposes
notable use restrictions.
The full ruling is here:
The case involved a regular eBay seller, who bought some copies of Autodesk at an "office sale" from a company who was no longer using them. He put four of the copies up on eBay for sale, and in each case, Autodesk sent a DMCA takedown notice. The guy, Timothy Vernor, counternoticed each time and Autodesk failed to reply each time, leading the auctions to be reinstated. However, despite all of this, when the 4th takedown came, eBay automatically suspended Vernor's account, and it took about a month to get it reinstated. So, he sued Autodesk, and claimed that he had the right to sell these copies that he had legally obtained.
Last year, the district court sided with Vernor, saying that Autodesk had no right to restrict his first sale rights (which allow you to resell a legally owned copyrighted product without first getting permission from the copyright holder), and that Autodesk's "license" was really a license in name only, since at no point did the possessor of the software have to return it. Instead, the court pointed out that when you bought AutoCAD, there really was a transfer of ownership.
Tragically, the appeals court disagrees with that, and effectively opens the door to effectively killing off the entire concept of the first sale doctrine, by highlighting the rather simple steps anyone needs to take to make sure any "sale" is really considered a "license," and thus removing the first sale rights. Basically, you just have to say there's a license and that "license" has to have a few rather simple things in it. You know all those stories about video game companies hating the used game market? Well, video game companies just got their "kill the secondary market free" card from the 9th Circuit. Of course, as we've pointed out, having a secondary market tends to increase the value of the primary market, so software companies (and others selling copyrighted works) may wish to think carefully before wiping out the secondary markets.
The court does note that this ruling could have quite a negative impact, but says that it's ruling based on what the law says, and suggests that perhaps Congress may wish to revisit this issue (fat chance of that happening, of course). While it is true that a court must rule within the law, even if it thinks the end result is bad, I think that the court here is using that as an excuse. The more you look at the details, the more you realize this is a license-in-name-only, and (as the lower court realized) the court could easily make that point and stay within the law, protecting these important first sale rights.
That said, this case is hardly over. Vernor's lawyer on the case, Greg Beck from Public Citizen has already announced plans to ask the court to reconsider the case en banc (i.e., with the full panel of judges, rather than just the three judge panel who heard the case), and even if that fails, this case will certainly be appealed to the Supreme Court. Given the two other first sale cases soon to be heard, combined with what appears to be (even if the court denies it) a circuit split with at least the 2nd Circuit on first sale issues, hopefully the Supreme Court will set the record straight and reinstate first sale rights for software. It would be great, of course, for Congress to just step in and fix things, but it's difficult to remember the last time Congress got something right when it came to copyright law... and with lobbying giants like the MPAA siding with Autodesk on this one, you can bet that no one in Congress will be able to secure enough votes to fix things.
This ruling is pretty depressing if you actually believe in property rights. It shows, once again, how copyright is not a property right, but often quite the opposite: restricting what people can do with their own property.
We were pretty skeptical two plus years ago when the details came out concerning the lawsuit between eBay and Craigslist over Craigslist's decision to exclude an eBay representative from its board to unilaterally diluting eBay and ignoring a proposed new board member, while holding board meetings without him. As we said at the time, it's quite clear why Craigslist did what it did, but that doesn't make it legal. And, in fact, a judge has now ruled in eBay's favor, rescinding the poison pill anti-takeover rules that Craigslist's board passed without eBay present. The whole situation really is a bit of a mess, and while I think Craigslist was wrong to take the actions it took here, it does make you wonder if eBay should recognize that having a board member on Craigslist's board is too big a conflict of interest. Updated: The original coverage of this news was a bit vague, but now the details are coming out, and the report is mixed: the dilution was rolled back, so eBay still owns the larger percentage, but eBay has been kept off Craigslist's board for now...
Reader Mike sent over a story from Investors.com claiming that eBay was now banning Google Checkout from eBay. That struck me as odd, because we had written about eBay banning Google Checkout more than four years ago, and weren't aware that anything had changed. And, in fact, that's the case. Ebay is pointing out that the new announcement has nothing to do with Google, which has always been banned. Instead, what it means is that other third party payment offerings, which had previously been allowed, will no longer be offered. That seems unfortunate, as eBay used to be quite open about letting others play nicely in its sandbox, but recently has become more and more controlling.
Microsoft's "other" co-founder, Paul Allen, has had a long string of business failures since leaving Microsoft. It's actually quite impressive. One of his most high profile ventures, back in the 90's, was Interval Research, which was designed to be a pure research institute "done right." It was described as trying to replicate Xerox PARC, but that it would actually commercialize the amazing ideas. Of course, as we've pointed out for ages, ideas are only a small part of innovation. Actual execution is the really difficult part, and one thing Interval was never able to do was execute. After eight years and over $100 million of Allen's money, the operation was shut down back in 2000. That was about the last we'd heard of Interval... until now.
Because, while Interval was unable to actually execute, thanks to the wonders of the US Patent system, it was able to secure lots of patents, and now it looks like Paul Allen has gone full on patent troll. He's using those patents to sue Google (and, separately, YouTube), Apple, AOL, eBay, Facebook, Netflix, Yahoo, Office Depot, OfficeMax and Staples -- you know, the companies that actually did innovate and did execute -- for being successful where he failed. Of course, Paul Allen has been tangentially related to patent trolling operations in the past, so perhaps it was just a matter of time. Still, this is a pretty disgusting situation all around.
The WSJ article about the lawsuits doesn't mention the actual patents (why do so few reporters actually point you to the useful info?), but they're the following:
6,263,507: "Browser for use in navigating a body of information, with particular application to browsing information represented by audio data."
6,034,652 & 6,788,314 (really the same patent, involving continuations): "Attention manager for occupying the peripheral attention of a person in the vicinity of a display device"
6,757,682: "Alerting users to items of current interest"
According to a report by Todd Bishop at Techflash, Interval may just be getting started: "This is the most recent step in a long process," he said in an email, "but it is not necessarily the end of the process." What a sad, sad legacy Mr. Allen is leaving behind.
While I think the political and media campaign against Craigslist's adult services section is seriously misguided, I'm not so sure the company's latest strategy will help win over its critics. CEO Jim Buckmaster has taken to the Craigslist blog to point out that eBay is a hell of a lot worse at policing that type of content, highlighting multiple cases where classified ads on eBay owned sites blatantly (and in very not-safe-for-work fashion) pitch prostitution. This came about after Buckmaster was pointed to a Facebook group laughably claiming that using eBay's classifieds will help stop human trafficking. That's obviously ridiculous -- and even more ridiculous as Buckmaster points out how eBay's classifieds' sites do seem to be used for much worse than the questionable behavior that Craigslist is accused of enabling.
So I understand the reasoning behind Buckmaster's post. It's certainly a pretty ridiculous situation when you're accused of doing something downright evil, and your competitors are being promoted for doing the opposite -- when the actual evidence suggests quite a different story. On top of that, there's a bit of a nasty history between Craigslist and eBay (which owns a percentage of Craigslist, which Craigslist is not at all happy about). However, I'm not so sure the "hey, they're worse than us, even though everyone thinks they're golden," response is going to win over many people. It comes off a bit tone deaf, honestly. Yes, the situation is ridiculous, but this is an emotionally driven topic, and the response people want to see is what Craigslist is doing proactively, not how others are worse.
Another day, another patent lawsuit against a big company for doing something obvious, filed by a company that appears to exist solely for the purpose of suing a company that actually does stuff. This time it's a "company" XPRT Ventures who has sued eBay and is demanding a mere $3.8 billion for its troubles. $3.8 billion dollars for doing nothing seems like a pretty good deal. Unfortunately, the news coverage seems lacking. It doesn't say what patents the lawsuit involves or what those patents cover, so we had to do some digging ourselves. The law firm that filed lawsuit issued a rather one-sided press release that also alleges that eBay "unilaterally altered" a confidentiality agreement between XPRT and eBay -- which makes the case a bit more interesting. The press release still doesn't name the patents, but it does link to the ridiculously long (209 pages) complaint (warning: ridiculously large pdf), which you can also read below:
From here we find out that the "inventors" (and I use the term loosely) came up with some rather basic enhancements for online payments, and apparently pitched them to eBay way back in 2001. A law firm claiming to represent eBay apparently asked to see the patent applications, and that was about the end of the discussions. XPRT, however, claims that eBay then took those ideas and decided to buy PayPal to implement them. That eBay bought Paypal because most people on eBay were using PayPal to complete transactions and eBay wanted a cut of those transactions isn't mentioned. Instead, the complaint suggests that eBay bought PayPal specifically to try to replicate what was in XPRT's patent applications:
Upon information and belief, eBay's familiarity with the confidential information provided by the Inventors allowed eBay to recognize the advantages it would realize by acquiring, modifying and integrating PayPal's payment platform with eBay's own e-commerce payment platform. eBay also knew or should have known that such modification and combination would violate Inventors' patent applications claims should they issue as patents.
Yeah, ok. This gets even more ridiculous when you realize that XPRT is claiming that it was modifications that PayPal/eBay didn't roll out until 6 or 7 years later that are supposedly infringing.
As for the whole conspiracy stuff about eBay "unilaterally altering" the date on the agreement, it turns out there's not much there there. Basically, eBay and the inventors negotiated over an NDA to share some information, with the initial proposed NDA having a date of March __, 2002. That was, clearly, a placeholder, found in just about every contact negotiation you'll ever see. When eBay actually signed the NDA it replaced the placeholder with the date of the signature, April 30, 2003. That's how contracts work.
XPRT, however, suggests that eBay's own (equally questionable) patents on its own payment system were filed just before eBay signed this document, and that eBay failed to note the XPRT patent applications, despite knowing about them, as prior art. To make it even more fun, the complaint suggests that eBay effectively admitted that XPRT's technologies are patentable, because it tried to cover the same inventions with the claims in its own patent filings. Basically, this is a sneaky way to (try to) cut off a claim that XPRT's patents are invalid.
Anyway, the key patent in the battle is the following, which, while it was filed back in 2001, didn't actually issue until 2009. If you look through the history of this particular patent, you find a trail of rejection. The USPTO did a non-final rejection, then a final rejection of the patent in 2004 and 2005. The inventors appealed (and twice had problems of filing a "defective appeal brief"). The appeal also rejected the patent and sided with the examiner. The inventors then asked to have the patent reconsidered, and that was rejected. Then, they asked for the patent to be examined again, and, yet again, the USPTO rejected the patent -- with both a non-final and final rejection. Finally, after all those rejections, the inventors amended the patent some more and finally got it through in 2009. In other words, whatever they showed eBay way back in 2001 was not actually patentable, and what was patented in 2009 was quite different.
7,483,856: System and method for effecting payment for an electronic auction commerce commerce transaction
If you look at the other patents, they appear to be continuation patents on that patent, the common trick of updating an old patent application to make sure it covers what others are actually doing in the market, even if such things weren't really what the initial patent was intended to cover.
Oh, and finally, why are these guys demanding $3.8 billion for a basic idea that they failed to implement themselves? Well, they appear to be claiming a 6% royalty on all of PayPal's revenues, and then make a bunch of assumptions about how much PayPal is likely to make between now and 2024 when the patents will expire. In other words, it's simply making up how much eBay might make and demanding a rather large cut of that.
Back in 2004, famed jeweler Tiffany sued eBay, because some users on eBay were selling counterfeit Tiffany items. It's the same old story of secondary liability -- with eBay pointing out (quite accurately) that if users are selling counterfeit goods, that's between Tiffany and those users. eBay is just the platform. But Tiffany didn't care. Its CEO even admitted that it was suing eBay because that was easier than going after those actually responsible. It's an incredible sense of entitlement by Tiffany: because it doesn't want to actually police counterfeit sellers, eBay should just step up and do so automatically?
The district court smacked down Tiffany on every count, explaining pretty clearly that it makes no sense at all for eBay to be responsible for the actions of users. And, of course, Tiffany appealed.
The appeals court has sided with eBay yet again, telling Tiffany, once again, that eBay is not liable for the actions of its users (full decision -- pdf). The court notes that eBay seems to have bent over backwards -- beyond what the law requires -- to help Tiffany stop the sale of counterfeit items and to warn users to make sure they're buying legitimate items. It notes that while eBay may have had "general knowledge" of counterfeit goods on the site, whenever it had specific knowledge, it was quick to take down the offending content, and thus there was no secondary or contributory trademark infringement.
Separately, the court agreed with the lower court that eBay did not violate Tiffany's trademarks by mentioning Tiffany in its own ads -- saying that it was entirely accurate to note that you could buy Tiffany products on eBay. That was factual, and thus, no trademark infringement. It made quick work of Tiffany's "dilution" claim as well, pointing out that eBay has nothing to do with that:
Tiffany argues that counterfeiting dilutes the value of its product. Perhaps. But insofar as eBay did not itself sell the goods at issue, it did not itself engage in dilution.
The one area where the appeals court differed from the district court is outside of the trademark realm, but on the question of whether or not eBay's ads that mention Tiffany could, potentially, be seen as "false advertising." The court noted that there was nothing that was directly false in the ads (it was, again, accurate that you could buy Tiffany goods via eBay), but that it could be possible that users were mislead or confused. So it sent the case back to the lower court to retry that particular issue.
In the meantime, though, Tiffany wants to appeal the rest of the ruling to the Supreme Court, which may now have a chance to establish, clearly, that you can't pin secondary liability on a service provider. Tiffany's response to the ruling actually seems a hell of a lot more "misleading" than any of eBay's ads:
"EBay knew that counterfeit merchandise was being sold on its site -- and EBay took no effective steps to stop it," Tiffany Chief Executive Officer Michael J. Kowalski said in a statement. "EBay deliberately misled consumers for profit, and unfortunately the court has justified its actions."
But that's simply, factually, incorrect. As the court clearly noted, eBay bends over backwards to try to stop counterfeit merchandise from being sold on the site. Hopefully Tiffany execs come to their senses, but it seems likely they'll still appeal, and still fail to recognize the difference between blaming the party doing the actual infringement and the service provider they use.
For years, various luxury brands have been furious that others can buy text keyword advertising based on their trademarked terms, leading to a series of lawsuits. In most place, the courts have realized that just buying a trademarked term as a keyword alone is not infringing on someone's trademark. France, however, is the one exception, having ruled against Google. Now, it's also ruled against eBay for supposedly having ads that pointed to eBay whenever anyone searched on a typo/misspelling of any of LVMH (Louis Vuitton Moet Hennessy). Apparently, in France, you're not even allowed to misspell a trademarked brand name without official permission...
After the story a few weeks ago about Paypal suspending the account of Wikileaks, and blocking it from removing money in the account, many people pointed out how risky it is to leave any money in a PayPal account. It seems that situation is getting worse and worse. PayPal has apparently halted personal payments in India, and aren't allowing merchants to remove money from their accounts. And the reasoning is... not particularly clear as to why:
"Personal payments to and from India and transfers to local banks in India have been suspended while we work with our business partners and other stakeholders to address questions they have about the service...."
Apparently, this has been going on for over a week, which has to be seriously frustrating to many merchants, but a seriously good thing for various PayPal competitors.
