Net News

FTC Spotlights Proposals on Peer-to-Peer Risks

The head of the Federal Trade Commission (FTC) sent a letter to Congress last month highlighting efforts that file-swapping companies are making to disclose potential online risks.

Legislators have criticized software such as KaZaA, Morpheus and eDonkey for exposing users to spyware, pornography and the risk of lawsuits. Although protesting that their software was no more risky than use of the Internet at large, peer-to-peer (P2P) companies have worked with the FTC to develop better consumer notification techniques.

The FTC included several of those proposals with its letter to Congress, saying that when implemented, they would do a better job of warning consumers.

“P2P industry members have developed proposed risk disclosures that we believe would be a substantial improvement over current practices,” FTC Chair Deborah Platt Majoras wrote in the letter. “We intend to monitor and report back to interested members of Congress on the extent to which P2P file-sharing program distributors implement these proposed risk disclosures.”

The letter follows a tumultuous year in Congress for file-swapping companies, which faced proposed legislation that would have overturned a series of court rulings to make them responsible for copyright infringement on their networks.

That legislation ultimately did not pass but could return next year.

Under the new proposals, consumers would be notified when the software is installed that downloading music, games, movies or software without authorization is illegal.

Representatives for file-swapping trade associations said the FTC letter could help show legislators that they are serious about playing by the rules.

“We are grateful for the interest that the Federal Trade Commission has taken in this young industry's efforts at self-regulation,” Distributed Computing Industry Alliance Chief Executive Officer Marty Lafferty said in a statement. “We hope the FTC letter to Congress will help foster a better understanding on the Hill of the realities of P2P technologies and of the actions being taken by responsible parties to commercially develop this new distribution channel.”

A recording industry trade group said last month that it has filed another wave of lawsuits against 754 people it suspects of distributing songs over the Internet without permission.

The Recording Industry Association of America (RIAA) has now sued more than 7000 people for distributing its songs over P2P networks like eDonkey and KaZaA in an effort to discourage the online song copying that it believes has cut into CD sales.

Despite more than a year of headline-grabbing lawsuits, P2P use has not declined. An average of 7.5 million users were logged on to P2P networks in November 2004, up from 4.4 million in November 2003, according to the research firm BigChampagne.

The four major labels ' Vivendi Universal, Sony BMG Music Entertainment, EMI Group Plc and privately held Warner Music ' have recently begun to license their songs to a new generation of online services as a way to slash distribution costs and reach out to fans.

But recording-industry officials remain at loggerheads with software makers like Grokster and Morpheus that allow users to freely copy songs.

“With legal online retailers still forced to compete against illegal free networks, the playing field remains decidedly unbalanced,” RIAA president Cary Sherman said in a statement.

Courts so far have declined to declare P2P software makers illegal because, like a photocopier, they do not permit copyright infringement but merely make it possible.

The Supreme Court will hear the entertainment's case against Grokster and Morpheus in March. (See the Commentary in this issue.)

A U.S. District Court judge in Virginia ruled last month that Google's policy of selling key words to advertisers, regardless of whether they own the right to use the words, does not violate trademark law.

In GEICO, et al. v. Google, Inc., et al, (E.D. VA, 04-CV-507), District Judge Leonie M. Brinkema granted Google's oral Motion for Judgment as a Matter of Law with respect to Geico's claim under the Lanham Act.

“Today's decision in GEICO v. Google underscores that the even-handed balancing of the interests between trademark owners and search engines articulated earlier this year by the Ninth Circuit in Playboy v. Netscape is becoming the prevailing approach in the on-line advertising arena,” says Barry Felder of Brown Raysman Millstein Felder & Steiner LLP (New York), who served as lead counsel to Playboy in its suit.

“GEICO objected to the popular and profitable Google practice of allowing a GEICO competitor to have a Sponsored Link appear in response to a search for GEICO. Taking an extreme view, GEICO asserted that this practice inevitably caused confusion and automatically amounted to trademark infringement. In squarely rejecting this view by finding that 'there is no evidence that that activity alone causes confusion' the Court followed the Ninth's Circuit's lead in cautioning that on the Internet, as in the 'bricks and mortar' world, each instance of claimed infringement must be determined on its individual merits,” Felder says. “This result, finding that a common and profitable search engine practice will not be struck down on a wholesale basis, is obviously a significant victory for search engines. However the decision will have to be tested in the Fourth Circuit, and various cases in other federal circuits have yet to be adjudicated.”

For his part, James A. Finder of Ostrolenk Faber Gerb & Soffen LLP (New York), claims that “Google's service amounts to, at most, recommending alternative car insurers for drivers who have heard of GEICO.”

“This service is obviously a permissible aspect of normal competition,” says Finder. “Analyzed more closely, Google is doing even less than that. It is merely providing a venue for the rival insurers to offer themselves as alternatives to GEICO, again a normal competitive activity.”

FTC Spotlights Proposals on Peer-to-Peer Risks

The head of the Federal Trade Commission (FTC) sent a letter to Congress last month highlighting efforts that file-swapping companies are making to disclose potential online risks.

Legislators have criticized software such as KaZaA, Morpheus and eDonkey for exposing users to spyware, pornography and the risk of lawsuits. Although protesting that their software was no more risky than use of the Internet at large, peer-to-peer (P2P) companies have worked with the FTC to develop better consumer notification techniques.

The FTC included several of those proposals with its letter to Congress, saying that when implemented, they would do a better job of warning consumers.

“P2P industry members have developed proposed risk disclosures that we believe would be a substantial improvement over current practices,” FTC Chair Deborah Platt Majoras wrote in the letter. “We intend to monitor and report back to interested members of Congress on the extent to which P2P file-sharing program distributors implement these proposed risk disclosures.”

The letter follows a tumultuous year in Congress for file-swapping companies, which faced proposed legislation that would have overturned a series of court rulings to make them responsible for copyright infringement on their networks.

That legislation ultimately did not pass but could return next year.

Under the new proposals, consumers would be notified when the software is installed that downloading music, games, movies or software without authorization is illegal.

Representatives for file-swapping trade associations said the FTC letter could help show legislators that they are serious about playing by the rules.

“We are grateful for the interest that the Federal Trade Commission has taken in this young industry's efforts at self-regulation,” Distributed Computing Industry Alliance Chief Executive Officer Marty Lafferty said in a statement. “We hope the FTC letter to Congress will help foster a better understanding on the Hill of the realities of P2P technologies and of the actions being taken by responsible parties to commercially develop this new distribution channel.”

A recording industry trade group said last month that it has filed another wave of lawsuits against 754 people it suspects of distributing songs over the Internet without permission.

The Recording Industry Association of America (RIAA) has now sued more than 7000 people for distributing its songs over P2P networks like eDonkey and KaZaA in an effort to discourage the online song copying that it believes has cut into CD sales.

Despite more than a year of headline-grabbing lawsuits, P2P use has not declined. An average of 7.5 million users were logged on to P2P networks in November 2004, up from 4.4 million in November 2003, according to the research firm BigChampagne.

The four major labels ' Vivendi Universal, Sony BMG Music Entertainment, EMI Group Plc and privately held Warner Music ' have recently begun to license their songs to a new generation of online services as a way to slash distribution costs and reach out to fans.

But recording-industry officials remain at loggerheads with software makers like Grokster and Morpheus that allow users to freely copy songs.

“With legal online retailers still forced to compete against illegal free networks, the playing field remains decidedly unbalanced,” RIAA president Cary Sherman said in a statement.

Courts so far have declined to declare P2P software makers illegal because, like a photocopier, they do not permit copyright infringement but merely make it possible.

The Supreme Court will hear the entertainment's case against Grokster and Morpheus in March. (See the Commentary in this issue.)

A U.S. District Court judge in Virginia ruled last month that Google's policy of selling key words to advertisers, regardless of whether they own the right to use the words, does not violate trademark law.

In GEICO, et al. v. Google, Inc., et al, (E.D. VA, 04-CV-507), District Judge Leonie M. Brinkema granted Google's oral Motion for Judgment as a Matter of Law with respect to Geico's claim under the Lanham Act.

“Today's decision in GEICO v. Google underscores that the even-handed balancing of the interests between trademark owners and search engines articulated earlier this year by the Ninth Circuit in Playboy v. Netscape is becoming the prevailing approach in the on-line advertising arena,” says Barry Felder of Brown Raysman Millstein Felder & Steiner LLP (New York), who served as lead counsel to Playboy in its suit.

“GEICO objected to the popular and profitable Google practice of allowing a GEICO competitor to have a Sponsored Link appear in response to a search for GEICO. Taking an extreme view, GEICO asserted that this practice inevitably caused confusion and automatically amounted to trademark infringement. In squarely rejecting this view by finding that 'there is no evidence that that activity alone causes confusion' the Court followed the Ninth's Circuit's lead in cautioning that on the Internet, as in the 'bricks and mortar' world, each instance of claimed infringement must be determined on its individual merits,” Felder says. “This result, finding that a common and profitable search engine practice will not be struck down on a wholesale basis, is obviously a significant victory for search engines. However the decision will have to be tested in the Fourth Circuit, and various cases in other federal circuits have yet to be adjudicated.”

For his part, James A. Finder of Ostrolenk Faber Gerb & Soffen LLP (New York), claims that “Google's service amounts to, at most, recommending alternative car insurers for drivers who have heard of GEICO.”

“This service is obviously a permissible aspect of normal competition,” says Finder. “Analyzed more closely, Google is doing even less than that. It is merely providing a venue for the rival insurers to offer themselves as alternatives to GEICO, again a normal competitive activity.”