e-Commerce Docket Sheet

Lawyers Have Duty To Ensure Clients Comply
With e-Evidence Obligations

An attorney has an affirmative duty to take “active steps” to oversee client compliance with discovery obligations and ensure that relevant electronic documents are preserved and produced. Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243 (S.D.N.Y. July 20, 2004). The court found that spoliation had occurred when relevant e-mails had either been purposely or inadvertently deleted, in some cases because of the re-use of backup tapes after the obligation to preserve e-evidence had attached. The court commented that counsel's obligation in supervising compliance includes identifying sources of discoverable electronic information (including by becoming familiar with a client's document-retention policies and data-retention architecture), speaking directly with key individuals (including client information-technology personnel) in the litigation to determine how documents are stored, requiring employees to produce copies of relevant electronic evidence, and providing for the segregation and safeguarding of any archival media, such as backup tapes.

FTC Settles Charges Alleging Retroactive
Change In Privacy Policy

Gateway Learning Corp. settled Federal Trade Commission (FTC) charges that it engaged in an unfair- and deceptive-trade practice when it revised its posted privacy policy ' retroactively ' to allow the rental of consumers' personal information to marketing companies. In re Gateway Learning Corp., No. 042-3047 (FTC July 7, 2004). The privacy policy posted on the Web site marketing the company's Hooked on Phonics products initially stated that the company did not provide consumer information to third-party marketers without explicit permission, or provide information on consumers under the age of 13 in any circumstances. The policy also stated that consumers would have a chance to opt out of any change in the privacy policy. Despite these promises, in 2003 the company changed its privacy policy to allow broader use of customer information, and did not notify customers of the change or get their consent. As party to the FTC settlement, Gateway Learning agreed to abide by the initial privacy policy concerning information collected under it, unless the firm first acquired express, affirmative, opt-in consent to the changes. The settlement also requires Gateway Learning to divest the income obtained from selling the information to marketers.

An online site is not entitled to immunity under Section 230 of the Communications Decency Act (CDA) for a user's alleged defamation of another user in a “feedback” posting, if the site's publisher “knew or had reason to know” of the alleged defamation and refused to remove the posting. Grace v. eBay, Inc., No. B168765 (Cal. Ct. App. 2d Dist. July 22, 2004). In analyzing the issue, the court focused on Section 230's immunity from liability as a “publisher or speaker” of information. The court distinguished this potential liability from that of a distributor, and found that the CDA immunity provisions did not shield against distributor liability. The court concluded that the auction site nevertheless escaped liability for the allegedly defamatory posting because the site's user agreement contained a general release of liability for all claims related to disputes among site users.

Companies that supplied various services to affiliate adult-content Web sites may claim immunity from copyright-infringement and other claims arising from the material posted on the affiliate Web sites under various “safe harbor” provisions of the Digital Millennium Copyright Act (DMCA) and the immunity provisions of Communications Decency Act (CDA). Perfect 10, Inc. v. CCBill, LLC (C.D. Cal. June 22, 2004). The court held, among other things, that the online-billing, Web-hosting and Internet-connectivity companies were entitled to DMCA Section 512(a) immunity for transitory digital-network communications, and the age-verification service was entitled to immunity under Section 512(d) for information-location tools. The court also considered the scope of CDA Section 230 immunity, including the statutory direction that the provisions not be construed to “limit or expand any law pertaining to intellectual property.” The court held that CDA immunity was available for state law unfair-competition and false-advertising claims, but concluded that it was not available for intellectual property-related claims such as trademark-infringement and infringement of the right to publicity.

A cable-television provider has standing to assert that the operator of a Web site containing links to other Web sites selling illegal cable-pirating devices violated the anticircumvention provisions of the Digital Millennium Copyright Act (DMCA). Comcast of Illinois X, LLC v. Hightech Electronics, Inc., No. 03 C 3231 (N.D. Ill. July 28, 2004). The court ruled that the maintenance of such links fell within the DMCA prohibition against “trafficking or acting in concert with” a manufacturer or distributor of illegal circumvention equipment. The court also held that the provider could sue under the Illinois Cable Piracy Act, which prohibits assisting or instructing other people engaged in unauthorized access to a communications service. The court dismissed the provider's claim under the federal Cable Communications Act, however, finding that the definition of the term assist in intercepting or receiving a communications service unlawfully was narrowly defined to cover the actual manufacture or distribution of such a device, and did not encompass the maintenance of a Web site containing links to sites selling piracy devices.

A person who uses the Internet to download copyrighted music from a peer-to-peer file-sharing system may be engaging in a limited exercise of First Amendment speech, but that fact does not protect the downloader's identity in an infringement suit brought by copyright owners. Sony Music Entertainment Inc. v. Does 1-40, No. 04 Civ. 473 (S.D.N.Y. July 26, 2004). The court concluded that the limited First Amendment expression involved in the selection of certain music and making it available to others, or in the “statement” being made by engaging in such activities, provided only limited protection against the copyright owner's “right to use the judicial process to pursue what appear to be meritorious copyright infringement claims.” The court held that the downloader's interest in remaining anonymous could be overcome by a) “a concrete showing of a prima facie claim of actionable harm” b) a specific discovery request c) the lack of an alternative source for the information and d) “a central need for the subpoenaed information to advance the claim.”

Summary judgment dismissing a Web grocer's copyright claims in a database of product descriptions should not have been granted because the introduction of more evidence might support a finding that limited aspects of the arrangement and selection of the product information was sufficiently original to be copyrightable. MyWebGrocer, LLC v. Hometown Info, Inc., No. 03-7909, 2004 U.S. App. LEXIS 14320 (2d Cir. July 13, 2004). The court concluded that the product descriptions may be protected by copyright if it can be shown that the descriptions “involve original selection” among various elements describing the products. The appellate court took note of evidence that various Web grocers used differing elements in their databases, suggesting that creative choices were made about what to include or exclude in those descriptions. While the court ruled that summary judgment dismissing the claims should not have been granted, the court declined to find that a preliminary injunction against the alleged infringement was warranted, because the Web grocer had shown only “fair grounds for litigation.”

Lawyers Have Duty To Ensure Clients Comply
With e-Evidence Obligations

An attorney has an affirmative duty to take “active steps” to oversee client compliance with discovery obligations and ensure that relevant electronic documents are preserved and produced. Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243 (S.D.N.Y. July 20, 2004). The court found that spoliation had occurred when relevant e-mails had either been purposely or inadvertently deleted, in some cases because of the re-use of backup tapes after the obligation to preserve e-evidence had attached. The court commented that counsel's obligation in supervising compliance includes identifying sources of discoverable electronic information (including by becoming familiar with a client's document-retention policies and data-retention architecture), speaking directly with key individuals (including client information-technology personnel) in the litigation to determine how documents are stored, requiring employees to produce copies of relevant electronic evidence, and providing for the segregation and safeguarding of any archival media, such as backup tapes.

FTC Settles Charges Alleging Retroactive
Change In Privacy Policy

Gateway Learning Corp. settled Federal Trade Commission (FTC) charges that it engaged in an unfair- and deceptive-trade practice when it revised its posted privacy policy ' retroactively ' to allow the rental of consumers' personal information to marketing companies. In re Gateway Learning Corp., No. 042-3047 (FTC July 7, 2004). The privacy policy posted on the Web site marketing the company's Hooked on Phonics products initially stated that the company did not provide consumer information to third-party marketers without explicit permission, or provide information on consumers under the age of 13 in any circumstances. The policy also stated that consumers would have a chance to opt out of any change in the privacy policy. Despite these promises, in 2003 the company changed its privacy policy to allow broader use of customer information, and did not notify customers of the change or get their consent. As party to the FTC settlement, Gateway Learning agreed to abide by the initial privacy policy concerning information collected under it, unless the firm first acquired express, affirmative, opt-in consent to the changes. The settlement also requires Gateway Learning to divest the income obtained from selling the information to marketers.

An online site is not entitled to immunity under Section 230 of the Communications Decency Act (CDA) for a user's alleged defamation of another user in a “feedback” posting, if the site's publisher “knew or had reason to know” of the alleged defamation and refused to remove the posting. Grace v. eBay, Inc., No. B168765 (Cal. Ct. App. 2d Dist. July 22, 2004). In analyzing the issue, the court focused on Section 230's immunity from liability as a “publisher or speaker” of information. The court distinguished this potential liability from that of a distributor, and found that the CDA immunity provisions did not shield against distributor liability. The court concluded that the auction site nevertheless escaped liability for the allegedly defamatory posting because the site's user agreement contained a general release of liability for all claims related to disputes among site users.

Companies that supplied various services to affiliate adult-content Web sites may claim immunity from copyright-infringement and other claims arising from the material posted on the affiliate Web sites under various “safe harbor” provisions of the Digital Millennium Copyright Act (DMCA) and the immunity provisions of Communications Decency Act (CDA). Perfect 10, Inc. v. CCBill, LLC (C.D. Cal. June 22, 2004). The court held, among other things, that the online-billing, Web-hosting and Internet-connectivity companies were entitled to DMCA Section 512(a) immunity for transitory digital-network communications, and the age-verification service was entitled to immunity under Section 512(d) for information-location tools. The court also considered the scope of CDA Section 230 immunity, including the statutory direction that the provisions not be construed to “limit or expand any law pertaining to intellectual property.” The court held that CDA immunity was available for state law unfair-competition and false-advertising claims, but concluded that it was not available for intellectual property-related claims such as trademark-infringement and infringement of the right to publicity.

A cable-television provider has standing to assert that the operator of a Web site containing links to other Web sites selling illegal cable-pirating devices violated the anticircumvention provisions of the Digital Millennium Copyright Act (DMCA). Comcast of Illinois X, LLC v. Hightech Electronics, Inc ., No. 03 C 3231 (N.D. Ill. July 28, 2004). The court ruled that the maintenance of such links fell within the DMCA prohibition against “trafficking or acting in concert with” a manufacturer or distributor of illegal circumvention equipment. The court also held that the provider could sue under the Illinois Cable Piracy Act, which prohibits assisting or instructing other people engaged in unauthorized access to a communications service. The court dismissed the provider's claim under the federal Cable Communications Act, however, finding that the definition of the term assist in intercepting or receiving a communications service unlawfully was narrowly defined to cover the actual manufacture or distribution of such a device, and did not encompass the maintenance of a Web site containing links to sites selling piracy devices.

A person who uses the Internet to download copyrighted music from a peer-to-peer file-sharing system may be engaging in a limited exercise of First Amendment speech, but that fact does not protect the downloader's identity in an infringement suit brought by copyright owners. Sony Music Entertainment Inc. v. Does 1-40, No. 04 Civ. 473 (S.D.N.Y. July 26, 2004). The court concluded that the limited First Amendment expression involved in the selection of certain music and making it available to others, or in the “statement” being made by engaging in such activities, provided only limited protection against the copyright owner's “right to use the judicial process to pursue what appear to be meritorious copyright infringement claims.” The court held that the downloader's interest in remaining anonymous could be overcome by a) “a concrete showing of a prima facie claim of actionable harm” b) a specific discovery request c) the lack of an alternative source for the information and d) “a central need for the subpoenaed information to advance the claim.”

Summary judgment dismissing a Web grocer's copyright claims in a database of product descriptions should not have been granted because the introduction of more evidence might support a finding that limited aspects of the arrangement and selection of the product information was sufficiently original to be copyrightable. MyWebGrocer, LLC v. Hometown Info, Inc., No. 03-7909, 2004 U.S. App. LEXIS 14320 (2d Cir. July 13, 2004). The court concluded that the product descriptions may be protected by copyright if it can be shown that the descriptions “involve original selection” among various elements describing the products. The appellate court took note of evidence that various Web grocers used differing elements in their databases, suggesting that creative choices were made about what to include or exclude in those descriptions. While the court ruled that summary judgment dismissing the claims should not have been granted, the court declined to find that a preliminary injunction against the alleged infringement was warranted, because the Web grocer had shown only “fair grounds for litigation.”