Why Is The Federal Government Shutting Down A CES Booth Over A Patent Dispute?

from the how-is-it-their-concern dept

One of the big stories coming out of CES this week is the bizarre situation in which US Marshals showed up here at the event yesterday and completely shut down the booth of a Chinese company, named Changzhou First International Trade Co. This happened after a judge granted a motion for a temporary restraining order, filed by US company Future Motion, following a seven minute hearing about the matter, in which Changzhou was not present and had no say.

To be clear, it does appear that Changzhou is building a knockoff of Future Motion's one wheeled self-balancing scooter thing -- a device that got plenty of attention via a big Kickstarter campaign. And, Future Motion does hold both a patent on a self-balancing skateboard (US Patent 9,101,817) as well as a design patent (US D746,928), which was just granted a few days ago, on a device that obviously looks quite a lot like what both companies are selling: In other words, there's a fair bit of evidence to support that the patent infringement case is fairly strong. That said, it still seems quite troubling for US Marshals to then get involved and completely shut down Changzhou First International Trade Co.'s booth at CES right in the middle of the show, when the company doesn't get a chance to present to the judge until January 14th, long after CES has packed up and left town.

If there's a legitimate patent infringement case here, as there may well be (even though I'll have some more to say about patents in this space in an upcoming post...), it's still troubling that the company got shut down in the middle of the trade show and that it involved the US government intervening in what is a civil issue. This is certainly not out of the ordinary in general. Part of the job of the US Marshals is to execute seizures related to restraining orders that are ordered by federal courts. But it still seems like pretty massive overkill for a company that's just showing some scooters at a trade show, and where they haven't had a chance to present a defense.

Filed Under: ces, hoverboard, onewheel, patents, retraining order, seizure, us marshals
Companies: changzhou first international trade co., future motion

Does Congress Even Realize That The Courts Appear To Think That SOPA Is Already In Force?

from the does-that-change-the-debate dept

Venkat Balasubramani and Eric Goldman (who are also posting occasionally on Techdirt these days) are doing an amazing job uncovering a series of lawsuits that suggest many courts are already issuing widespread and questionable injunctions against third party service providers when intellectual property holders come to them demanding vengeance. We've already covered the True Religion case and the Chanel case. It seems worth noting that both True Religion and Chanel have come out in favor of censoring the internet, having sent a letter cheering on both domain seizures by ICE and earlier versions of SOPA and PIPA. And it looks like they figured why wait for the law to change, when they could just convince courts to give them those remedies already.

The link above highlights yet another such case, this time involving Philip Morris. The pattern in all three cases is quite similar. Company claims website is offering infringing works and sues. Court -- without hearing from the site owners (and usually not making any effort to see if the sites are all owned by the same owner) -- issues massive injunctions against third party service providers to take down or otherwise block those sites. As Venkat summarizes, the Philip Morris restraining order includes:

• Defendants are enjoined from using any Philip Morris marks, in websites, domain name extensions, links to other websites, search engine databases.
• The domain name registrars are directed to transfer the domain name certificates to plaintiff (for deposit with the court).
• The registrars are directed to transfer the domain names to GoDaddy, who will "hold the registrations for the . . . domain names in trust . . . during the pendency of [the] action."
• GoDaddy shall also update the DNS data so it points to a copy of the complaint, summons, and court documents.
• Finally, Western Union is directed to "divert" transfers made by US consumers to three named individuals

All without hearing from the other side. Seem excessive? It sure does. Venkat notes how extraordinary these remedies are. Think about it for a second: based solely on the declaration of a Philip Morris employee, the court is ordering the full transfer not just of websites, but of any funds being sent to a website. That's insane and a clear violation of any reasonable due process.

At the same link, Eric Goldman notes that the sudden appearance of three of these cases suggests that there are probably many more in the system. And he points out that this information certainly seems like it should be relevant to those currently debating these bills in Congress. Do they even realize that the remedies they're describing are already being used by courts?

Separately, he notes the ridiculousness of such extreme punishment when only one side is heard:

From my perspective, the three cases demonstrate the problems with ex parte judicial oversight. Only hearing one side of the story isn't enough to trigger the kind of draconian remedies the courts are granting. In particular, in this case, interdicting money being sent via Western Union is quite troubling. Basically, the court says that money being sent by customers who may have done nothing wrong goes into a holding tank--the customers don't get their money back now (and maybe never?) even if the transaction didn't consummate. It seems like rejecting the money transfers, rather than interdicting the money, would have a lot fairer to the buyers caught in the middle. But they aren't in court to defend their interests, and no one else is speaking up on their behalf, so the rightsowner can make a pure cash grab from potentially innocent buyers. That kind of result wouldn't happen with real due process.

He wonders if there's a way to fix these kinds of abuses of process. In fact, I would suggest that the House Judiciary Committee (and the Senate) would be much better served dealing with the problem of such one-sided extreme court rulings, rather than encouraging more of that with SOPA and PIPA.

Filed Under: copyright, due process, injunctions, retraining order, seizure, sopa, trademark, websites
Companies: chanel, philip morris, true religion

If You Dislike SOPA, You'll Dislike This Case Too

from the more-censorship-madness dept

We recently blogged about a case where Chanel obtained surprisingly broad remedies against domain names associated with foreign "rogue" websites which allegedly sold counterfeit Chanel items. Much of the relief Chanel sought and obtained in that case overlapped with relief that the proposed SOPA law would provide to rightsowners.

True Religion, a company which manufactures jeans, brought a similar enforcement action against foreign "rogue" websites in the Southern District of New York. It first obtained a temporary restraining order, which the court converted into a preliminary injunction. The relief obtained by True Religion is similarly broad as, and presents the same due process concerns raised by, the Chanel case.

True Religion filed a lawsuit in the Southern District of New York. As in the Chanel case, it went after numerous domain names in a single lawsuit, and it presented declarations from its investigators that they bought counterfeit goods from those domain names. True Religion also presented evidence that defendants undertook efforts to conceal their true identities (primarily by supplying 'purposely-deceptive contact information' to registrars), and that if defendants were provided notice, they would "likely destroy, move, hide or otherwise make [the domain names, products in question, accounts, and records] inaccessible to the Court." True Religion filed its lawsuit on November 15, and the court issued an ex parte TRO three days later. The TRO broadly enjoined the conducts of defendants and third parties, authorized service via email, and set a hearing for November 30, 2011. Defendants were required to show cause on or before the hearing date as to why the court should not issue a preliminary injunction. True Religion filed two sealed declarations and an unsealed declaration. No defendant appeared or filed any pleadings. On December 2, 2011, the court issued the preliminary injunction.

The TRO:

The TRO finds that True Religion established a likelihood of succeeding on the merits of its claims that defendants sold products which infringed on True Religion's trademarks and copyrights and that defendants' conduct will cause irreparable injury to True Religion. The TRO also finds that defendants undertook efforts to conceal their identity and that if "True Religion were to proceed on notice to defendants," defendants would shift their operations. Pending the court's ruling on True Religion's request for an injunction, the court issues the TRO, which contains the following provisions:

- defendants and any third parties acting in concert with them, including ISPs, registrars or third party selling platforms are restrained from selling allegedly infringing items;
- True Religion is entitled to broad financial discovery and discovery from various service providers (MasterCard, Visa, PayPal, back-end service providers, web designers, third-party selling platforms, registrars, registries, ad-word providers, etc.);
- third party payment processors and financial institutions are ordered to freeze any of defendants' funds;
- domain name registries (VeriSign, Neustar, Public Interest Registry) and registrars are orderd to "temporarily disable" the domain names referenced in the TRO, "through a registry hold or otherwise";
- third party service providers are ordered to cease providing service to defendants.

The Preliminary Injunction:

The order largely tracks the TRO, but adds a approximately 24 new domain names. As with the TRO, the preliminary injunction broadly enjoins defendants from exploiting True Religion's copyrights and trademarks. In addition, it contains the following provisions:

- third party service providers who are provided notice are enjoined from providing services to defendants in conjunction with any of the acts which defendants are enjoined from doing;
- a broad asset freeze, directed at banks, payment processors, PayPal and other payment services providers;
- continuing right to conduct discovery for True Religion;
- domain name registries and registrars are directed to continue disabling and lock the domain names, including the new domain names;
- third party service providers, including ISPs, back-end service providers, affiliate program providers, web designers, sponsored search engine or ad-word providers are ordered to "disable service" to the defendant websites; and
- an authorization to serve process via "registered electronic mail" pursuant to rule 4.

__

This is a slightly different flavor from the Chanel orders, but it raises similar due process concerns. The initial order (the TRO) is issued on an ex parte basis without notice, and it contains extraordinary relief -- it's essentially a kill switch for the websites in question. There are a variety of reasons why this has the potential to run roughshod over the rights of defendants or third parties; among other things, there could be some mistake as to the underlying domain name or website. There's no assurance that the site as a whole (as opposed to one or two products) is infringing. Also, after bona fide adversarial proceedings, True Religion's copyrights or trademarks may not turn out to be as enforceable as they seem at first blush. But on the strength of True Religion's unchallenged assertions, the court orders various third parties, including registrars, registries, payment processors, ad-word providers and others, to cut off the defendants. (The court did require True Religion to post a bond of $10,000--a laughably nominal amount.)

Regardless of whether the court has the authority to issue an injunction binding third parties who are not before the court, and who may not even be subject to the court's jurisdiction, many service providers will just follow the court order anyway. They may have no interest in expending resources to fight for a third party's due process rights. Indeed, in its declaration filed after the TRO was issued, True Religion indicated that the registries (VeriSign, Affilias, Public Interest Registry, Nominet UK) disabled many of the domain names in question upon receiving notice of the court order. PayPal also froze the funds in 84 different PayPal accounts.

It's unclear how much business defendants conducted in the United States. If their business activities in the US were nominal, this looks like an extraterritorial enforcement by a US rightsowner in a US court. It's tough to tell, given that the process hasn't been adversarial or even designed to facilitate bona fide participation by the defendants.

I know there are some tweaks in pending SOPA/PIPA legislation that surely would be even more helpful to plaintiffs, but courts today seem willing to grant broad remedies to rightsholders without any legislative change at all. It seems that today, rightsowners are able to go to court and, quickly and at low cost, take down domain names and get an order directing third parties, including service providers, ad networks, and payment processors, not to provide services to various websites. That's a pretty good deal if you are a rightsholder. They may even prefer that to the ITC proceedings proposed in OPEN.

_______

Additional comments from Eric Goldman

This case raises so many unanswered questions for me:

1) Just how many rightsowner vs foreign rogue website lawsuits are already in the court system? Are the Chanel and True Religion cases unique, or are dozens or hundreds of similar cases percolating through the system?

2) Did so much of this case really need to be done under the cloak of secrecy, and even if the answer is yes, why is so much of the case history still sealed?

3) Just how far can rightsowners go in suing dozens or hundreds of unrelated defendants in a single lawsuit? We've seen some pushback against copyright trolls. Are trademark owners similarly overreaching?

4) Just how far can rightsowners go in forcing third party service providers, like domain name registrars, ad networks, payment service providers and others, to honor rulings where the service providers aren't litigants? We dealt with this issue a bit in the 47 USC 230 context in the Blockowicz case. In that case, the Seventh Circuit set some important limits on the reach of Rule 65. Without an adversarial process, were the Chanel and True Religion courts perhaps a little lax in their reading of Rule 65?

5) If rightsowners can already get in court so much of the remedies that SOPA would provide, then why are they pushing so hard for SOPA?

6) Then again, if rightsowners can already get SOPA-like remedies in court, why are we fighting so hard against SOPA? This reminds me a little of the public outcry against UCITA a decade ago--much of the angst was about the parts where UCITA merely restated then-current contract law. Similarly, perhaps SOPA is more of a mirror on present reality than a bona fide change in the law. At minimum, it suggests SOPA may be distracting us from other real problems. If we object to the remedies in SOPA, not only do we need to kill SOPA, but we need to proactively seek new statutes that prevent the outcomes Chanel and True Religion are getting in court.

I plan to continue my personal efforts against SOPA, but it's clear that killing SOPA isn't enough to end the fight. Perhaps OPEN would help by giving rightsowners an easier path to attacking illegitimate foreign websites and thereby alleviate the pressure that rightsowners are putting on doctrines not specifically designed to deal with that problem. That would be a good reason to support OPEN, but it's now 100% clear to me that OPEN also needs more immunities, safe harbors and other limitations on rightsowner powers. If rightsowners get a shiny new enforcement toy via OPEN, they should have to give up some of their overreaching elsewhere.

Filed Under: copyright, due process, injunctions, retraining order, seizure, sopa, trademark, websites
Companies: true religion

Court Effectively Pretends SOPA Already Exists; Orders Domains Seized, De-Linked From Search

from the wow dept

As a whole bunch of folks have sent in a District Court judge in Nevada issued some rather stunning orders lately concerning websites that luxury brands company Chanel has argued "advertise, promote, offer for sale or sell" possibly counterfeit Chanel goods. The order is basically a more expansive private version of SOPA, in which the judge has let Chanel directly "seize" about 600 domains, as well as issued restraining orders and injunctions, including orders to Google, Bing, Yahoo, Facebook, Google+, and Twitter to "de-index and/or remove [the domain names] from any search results pages." Venkat Balasubramani covers the other wide-reaching aspects as well:

• an injunction against the defendants prohibiting them from using any Chanel marks or selling any Chanel products;
• an injunction against the top-level domain name registry, directing it to change the registrar of record for the domain names to GoDaddy (!);
• an injunction telling GoDaddy to change the DNS data for the domain names so the domain names resolve to a site where a copy of the case documents are hosted (servingnotice.com/sdv/index.html);
• authorization for Chanel to enter the domain names into "Google's Webmaster Tools" and cancel any redirection of the domain names;

Venkat also points out how crazy this whole thing is:

First, I did not get a clear sense that this is an enforcement action against a single defendant. If there's no credible allegation of a conspiracy or an arrangement between whomever is behind these domain names, it strikes me as problematic for Chanel to file a placeholder lawsuit and then add or remove defendants at its convenience.

Second, it was not entirely clear why the lawsuit was in Nevada. The domain names are not registered to a registrar that is based in Nevada, and there's no clear basis for in rem jurisdiction. It's possible that plaintiff picked this jurisdiction as a matter of convenience, but there's no apparent relationship between the alleged counterfeiting activities and the State of Nevada.

Then there's the matter that some of the court's relief is directed at a variety of entities that are not parties to the dispute (including the registrars, the registry, Facebook, Twitter, Google, etc.). I'm not sure how this court can direct a registry to change a domain name's registrar of record or Google to de-list a site, but the court does so anyway. This is probably the most problematic aspect of the court's orders. [Interesting that GoDaddy was chosen as the registrar that the domain names would be transferred to.]

Finally, there's no clear basis to authorize a transfer of a defendant's property pending resolution of a lawsuit to the plaintiff. (See Bosh v. Zavala.) I don't see this as particularly problematic in this case because Chanel is not looking to liquidate the domain names, but it certainly raises due process red flags, given that this is all done with minimal (or no) notice to defendants.

There are all sorts of issues with these rulings that appear to go way, way beyond what the law allows (even if SOPA were passed). And the fact that this includes sites that might only "promote" possibly counterfeit Chanel products? It sounds like many of the sites are entirely clear that they're offering replicas, meaning no likelihood of confusion being at issue. Furthermore, some of the order appears to also bar even the "promoting" of legitimate Chanel products. How is that reasonable?

Beyond that, the broad disappearing of these websites, ordering search engines and social networks to totally block their existence, despite the lack of an adversarial hearing, or any allowance for those search engines or social networks to have a say, seems immensely troubling. Why even bother with SOPA at all, when judges feel they can just order broad censorship based on one side's claims? These rulings are quite worrisome. One really surprising bit is that the judge, Kent Dawson, was one of the judges who smacked down Righthaven, so he at least understands how companies can abuse IP rights. It's surprising that he'd issue such a broad reaching order like this.

Furthermore, as Ars Technica points out, the judge doesn't even bother to look at the jurisdictional questions, and seems to order the global disappearance of sites outside the US, without any clear mandate to do so:

Missing from the ruling is any discussion of the Internet's global nature; the judge shows no awareness that the domains in question might not even be registered in this country, for instance, and his ban on search engine and social media indexing apparently extends to the entire world. (And, when applied to US-based companies like Twitter, apparently compels them to censor the links globally rather than only when accessed by people in the US.) Indeed, a cursory search through the list of offending domains turns up poshmoda.ws, a site registered in Germany. The German registrar has not yet complied with the US court order, though most other domain names on the list are .com or .net names and have been seized.

Who knows if anyone will even step up to appeal such broadly rulings (probably not), but they set a very scary precedent.

Filed Under: copyright, due process, injunctions, retraining order, seizure, sopa, trademark, websites
Companies: chanel