New Year’s Resolution: Always Read Terms of Service for Social Media Networks!

by Christina Frangiosa | 1 Comment

You should always read very carefully the various terms of service associated with the social media networks in which you participate – particularly with respect to ownership of the material that you post and/or share on these sites.   In other words, do you know who owns what you post?

Recently, one social media site’s public announcement highlighted this question in appalling clarity.  On December 17, 2012, Instagram announced that it had the right to sell any photo that you took and uploaded using its service – in other words, to “commercialize” it.  (SeeCNET’s article about the change in terms: Declan McCullagh, “Instagram says it now has the right to sell your photos,” CNET, Dec. 17, 2012.) 
If you are unfamiliar with Instagram, it used to be a standalone company, but was recently acquired by Facebook and is used on Facebook to share customized photos with your networks.
Here’s the rub:  the right to distribute (or not to) is actually an exclusive right set forth in the Copyright Act as being owned EXCLUSIVELY by the copyright owner.  17 U.S.C. §106.  Not by a vendor who handles the distribution.
Unless the author has licensed its ability to redistribute an “original work of authorship fixed in a tangible medium of expression” (as an original photograph surely is) to another, any redistribution of a published work constitutes copyright infringement under 17 U.S.C. §501, and carries certain remedies and penalties depending on the context.
The public outcry in response to this notice was apparently widespread, as Instagram immediately appeared to retract this statement, and stated that users retain the copyrights in their original photographs even when posting them using Instagram’s tools.  Declan McCullagh and Donna Tam, “Instagram apologizes to users: We won’t sell your photos,” CNET, Dec. 18, 2012; see also Instagram Blog, “Thank You and We’re Listening,” Dec. 18, 2012.  Its restatement of the policy suggested that Instagram believed the hue and cry to have been solely based on a misunderstanding of the revised terms of use and privacy policies.
 
In this restatement, Instagram explained that ownership rights would not change as a result of this policy, and neither would any privacy settings users have already set.  Current Version of Instagram’s Privacy Policy and Terms of Use, updated Dec. 18, 2012.
The Copyright Alliance points out that this explanation does not meant that Instagram cannot commercialize your images – in fact, the text that Instagram removed was merely a disclosure of the ways in which it “can” use your photos:
“Instagram has issued a statement saying that it has heard its customer’s complaints, is removing the clause that most offended its customers, and reverting to its old terms of use. But ironically, the clause that caused the outrage, and which Instagram says it has removed, was merely a disclosure and acknowledgment by the user of how Instagram could use a customer’s images. Removing that clause alone doesn’t change the license the user grants Instagram. Moreover, even if Instagram reverts to its current terms of service, those terms of use not only permit Instagram to commercialize user posted images in virtually unrestricted ways, they pass the responsibility for paying any royalties or fees owed for such commercialization on to the user who originally posted the works.” (emphasis added).  Read the Copyright Alliance’s full article for more on this point, “Instagram Still Has the Right to Commercialize Your Work (or Why You Should Read Terms of Service Carefully),” Dec. 21, 2012.
The lesson to be learned here is to be proactive with all of your social media use – understand what Terms of Service apply to your use, and whether the company will be using your information in a way with which you are not comfortable.  Review carefully to determine whether by using their site, you automatically grant the site a license to use your content (your text, pictures, video, whatever) without specific notice or obtaining your consent to that specific use. 
And, try to stay on top of changes to these policies in case changes are made that further impose on your privacy or intellectual property rights.  Many of these policies have a “these terms can be modified without prior notice” provision, but the sites may also host blogs that announce new features or changes to their services.  You might want to subscribe to them (through RSS feeds or email) so that you are notified promptly of any advertised changes. 
Here are links to some of the more commonly-used social media sites, and their relevant blogs (if available):
·       Facebook (“Facebook and privacy”; privacy policy; terms of service)
·       MySpace (privacy policy; terms of service; “learn more”)
·       Twitter (blog; privacy policy; status)
·       LinkedIn (blog; community guidelines; privacy policy)
·      Instagram (terms of service; blog)
·       Snapfish (terms of service; privacy policy; sharing FAQ)
·       Google (which owns Google+, YouTube, Blogger, Picasa, and Instagram competitor, Snapseed)
·       Reddit (blog; privacy policy; user agreement; rules; “reddiquette”)
You might also be interested in posts from The Copyright Alliance(their article on Instagram is here) or the Electronic Frontier Foundation(their article on Instagram is here) generally, as they both cover issues like these on a regular basis. 

Index of Articles in 2012

by Christina Frangiosa

Below is the list of articles published to this blog in 2012 – in chronological order.  Most of the year was focused on a study of counterfeiting remedies (some of which were not posted here, but elsewhere), which may continue in the next year.  I also expect 2013 to include some interesting legislation on the trademark side, which I plan to address as they become relevant.

I look forward to your comments in the coming year!

January
·        Jan. 24, 2012:  SOPA – Dying on the Vine?
February
March
April
May
June
July
August
September
October
 
November
 
No posts in December.

I am working on a webinar through Thomson West on trademark tips, and I’ll post details here as soon as they are available.  This webinar is expected to broadcast in January/February 2013.

I am also planning a panel discussion in April 2013 at the ABA IPL Section meeting in DC on the topic of anti-counterfeiting and anti-piracy legislation.  Links to the session and registration information will be provided once they are finalized.

And, more posts will continue in 2013 – I wish you all a healthy, happy and prosperous new year!

Court-Ordered Restitution Vacated in Criminal Copyright Infringement Case, Based on Lack of Relevant Evidence

by Christina Frangiosa

On November 9, 2012, the United States Court of Appeals for the District of Columbia Circuit (D.C. Cir.) vacated a district court’s decision to impose a restitution penalty against Defendant Gregory Fair (“Defendant Fair”) in favor of Adobe Systems in the amount of $734,098. U.S.A. v. Gregory William Fair, No. 09-3120, slip op. at 2 (D.C. Cir. Nov. 9, 2012) (appealing from Crim. A. No. 1:09-cr-00089-1 (D.D.C.) – Pacer login required). The D.C. Circuit concluded that the district court had abused its discretion by awarding restitution, when the government failed to meet its burden to prove the amount of Adobe’s losses.
 
The Mandatory Victims Restitution Act (18 U.S.C. § 3663A) (“MVRA”) – upon which this restitution award was based – provides that victims of certain crimes may be awarded restitution to compensate them for their actual losses that resulted from the defendant’s crime. In this case, however, the government only introduced evidence of what Defendant Fair’s actual sales were – and based its request for restitution on that amount. It did not introduce any evidence that Adobe Systems had lost sales as a result of this criminal activity, or that its sales were diverted to Defendant Fair.

Underlying Facts

Defendant Fair pled guilty to charges of criminal copyright infringement (18 U.S.C. § 2319, 17 U.S.C. § 506(a)(1)(a)) and mail fraud (18 U.S.C. § 1341), after spending more than six years (Feb. 2001-Sept. 2007) selling counterfeit copies of outdated Adobe software and upgrade codes on eBay, which allowed his customers to obtain full copies of the current versions of these programs at a fraction of the regular price. Opinion at 3. “For example, a customer could first buy a pirated copy of outdated PageMaker software and an upgrade code from [Defendant] Fair for around $125 and then pay around $200 to Adobe Systems to upgrade to the most current version. The total price paid, around $325, would be less than half of the retail price of the authentic up-to-date Adobe program (approximately $700).” Id. at 2.

According to evidence presented at trial of the completed eBay transactions that filtered through PayPal, “[Defendant] Fair received, and he admitted receiving, approximately $1.4 million from his sales of pirated software on eBay.” Id. at 3. When Defendant Fair objected to the restitution claim, he initially sought a reduction to $455,000, the amount which he had actually withdrawn in currency from the PayPal account. Id.
   
Following the plea agreement, the district court sentenced Defendant Fair to 41 months’ imprisonment and three years’ supervised release – and ordered the $743,098.99 restitution payment to Adobe Systems (the balance of the amount identified on the government’s spreadsheet, less the $24,367 that the Postal Service had already released to Adobe Systems). Id. at 5.

Defendant Fair’s counsel argued that Adobe Systems was capable of distinguishing between its regular customers, and those who sought upgrades as a result of Defendant Fair’s scheme, and instead “chose as a ‘corporate strategy’ to permit [Defendant] Fair’s customers to purchase upgrades but to give no tech support to Fair’s software.” Id. at 5. This suggests two things: 1) that evidence of lost sales could have been available if the government requested it; and 2) that Defendant Fair may have had an argument that Adobe had acquiesced by its conduct (in part) to the so-called “criminal scheme.”

However, the government did not introduce any evidence that Adobe lost any sales due to Defendant Fair’s criminal activities. Instead, the government presented a spreadsheet tallying Defendant Fair’s eBay sales and “unsubstantiated, generalized assertions of government counsel regarding Adobe Systems’ lost sales.” Id. at 11. When presented with the opportunity to present such evidence, the government attorney attempted to shift the burden set forth in the MVRA to the defendant, arguing that because he “created an potential uncertainty in calculating pecuniary harm by selling outdated counterfeit software.” Id. at 12. The government also argued that the lost-profits rationale “makes no sense in the present context because Adobe Systems no longer sells the versions of the software that Fair sold.” Id. The appellate court was unpersuaded.  

On Appeal

The appellate court reviewed the record – and particularly the absence of any evidence of Adobe Systems’ actual losses, and agreed with the analysis of a Tenth Circuit opinion that commented, “we are very skeptical of the implicit suggestion that customers’ purchase of a certain number of copies of low-priced counterfeit software proves that those customers would have agreed to purchase the same number of copies from the legitimate seller for many times more.” Id. at 11 (quoting United States v. Hudson, 483 F.3d 707, 710 (10th Cir. 2009)) (internal quotations omitted). The Fair court also concluded that the government’s evidence in support of its claim for retribution was “merely speculative.” Id. at 12.

The appellate court also recognized that there were other avenues of recovery of restitution: specifically, under the “actual damages” provision for copyright infringement, the copyright owner can recover both actual damages and “any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.” 17 U.S.C. § 504(b). These damages were not claimed in this (criminal) case.

Finally, the appellate court also considered whether a remand of any degree was warranted in this case – and concluded that it was not. The appellate court declined to give the government “‘a second bite at the apple’ absent special circumstances,” especially in light of the fact that the government had the explicit opportunity to introduce this type of evidence, and had declined to do. Id. at 15-16.

In summary, it appears that the prison sentence (and 3 years of supervised release) remains, but that the award of restitution alone has been vacated.

Rosetta Stone and Google Announce Settlement of Trademark Infringement Suit

by Christina Frangiosa

On Oct. 31, 2012, Rosetta Stone and Google announced their decision to settle their trademark infringement case relating to the sale and use of AdWords in Google’s search engine results. Rosetta Stone’s 10/31/12 Press Release.  The companies have agreed to work together to “combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet.” Id. The companies hope that by working together, they can “improve detection methods, and better protect from abuse brands like Rosetta Stone, advertising platforms like Google AdWords, and ultimately consumers on the Internet.” Id.
    
As a consequence of the settlement, the lawsuit Rosetta Stone Ltd. v. Google, Inc., Civ. A. No. 1:09-cv-00736-GBL-TCB (filed July 10, 2009) has been dismissed. Doc # 238 (Oct. 31, 2012) (Order and Stipulation to Dismiss), available on Justia. The complaint originally alleged claims of direct trademark infringement (15 U.S.C. § 1114(1)(a)); contributory trademark infringement; vicarious trademark infringement; trademark dilution (15 U.S.C. § 1125(c)(1)); and unjust enrichment.

Related Information

Recent E.D. Pa. Case: No “Likelihood of Confusion” from Competitor’s Marks in AdWords

by Christina Frangiosa

In CollegeSource, Inc. v. AcademyOne, Inc., Civ. A. No. 2:10-cv-03542 (MAM), slip op. (E.D. Pa. Oct. 25, 2012), the U.S. District Court for the Eastern District of Pennsylvania analyzed a claim of trademark infringement based on the purchase and use of a competitor’s trademarks in AdWords to increase search engine results. (The case dealt with other issues such as contract formation under Pennsylvania law, trademark cancellation due to fraud on the PTO, false advertising, violation of the Computer Fraud and Abuse Act, and others. This blog post will focus solely on the AdWords issue.)
 
The court ultimately concluded that in an environment of increasingly sophisticated Internet advertising, a claim of trademark infringement based on the use of a competitor’s marks in sponsored links fails, when those marks do not appear in the actual advertisement and when the advertisements are set off in a separate section of the search results (under the heading “Sponsored Links,” set off with a different color than the rest of the search engine results). In these cases, modern Internet users are unlikely to be confused by this type of use.

In order to prove trademark infringement and unfair competition under the Lanham Act, plaintiffs must demonstrate that they own the mark in question, that the mark is valid and legally protectable, and that the defendant’s use of its own mark is likely to create confusion. Id. at 39 (citing Checkpoint Systems, Inc. v. Check Point Software Tech., Inc., 269 F.3d 270, 279 (3d Cir. 2001)). In the CollegeSource case, the defendant did not dispute the ownership of the mark or its validity, but instead challenged whether its mark was likely to create confusion.

The Lapp Factors

In the Third Circuit, the likelihood of confusion analysis is governed by Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983) – the so-called “Lapp Factors.” These factors are: 

(1) the degree of similarity between the owner’s mark and the alleged infringing mark;
(2) the strength of the owner’s mark;
(3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase;
(4) the length of time the defendant has used the mark without evidence of actual confusion arising;
(5) the intent of the defendant in adopting the mark;
(6) the evidence of actual confusion;
(7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through the same media;
(8) the extent to which the targets of the parties’ sales efforts are the same;
(9) the relationship of the goods in the minds of consumers because of the similarity of function; and
(10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant’s market, or that he is likely to expand into that market.
 

Id. at 463. Originally adapted from Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir. 1961), these factors were applied in the Lapp case for the very limited purpose of considering likelihood of confusion where the products did not directly compete. Id. at 462-63; see also A&H Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 F.3d 198, 206 (3d Cir. 2000) (“In Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983), this Court established a ten-factor test (the ‘Lapp’ test) to determine the likelihood of confusion for direct confusion claims between goods that do not directly compete in the same market, but we have never decided what factors should be considered in the case of directly competing goods.”). 

In a later opinion, the Third Circuit applied these factors more broadly, including in cases where the goods competed in the same channels of trade. A&H Sportswear, 237 F.3d at 207 (“Though a court need not look beyond the marks when goods are directly competing and the marks virtually identical, we conclude that the factors we have developed in the noncompeting goods context are helpful tools and should be used to aid in the determination of the likelihood of confusion in other cases.”). The Third Circuit made clear, however, that the “ten-factor Lapp test [was developed] only as a guide” and the Lanham Act does not require that each of the ten factors must be evaluated in every case. Id.

Application of the Lapp Factors to Use of Competitor’s Trademarks as AdWords
   
In the CollegeSource case, the court relied on a Ninth Circuit opinion that identified the “key” factors to consider in cases where the goods directly compete and where a competitor’s trademarks were purchased as AdWords to generate search engine hits. Id. at 40 (discussing Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1154 (9th Cir. 2011). Specifically, the Network Automation case held that in the context of AdWords cases, four of these factors were most relevant: “[1] strength of the mark, [2] evidence of actual confusion, [3] types of goods and degrees of care likely to be exercised by the typical purchaser, and [4] the labeling and appearance of the advertisements.” Network Automation, 638 F.3d at 1154.

The CollegeSource court agreed with this conclusion, and focused primarily on these four factors in determining whether the defendant’s use of the mark was likely to confuse. CollegeSource, No. 2:10-cv-03542, slip op. at 41. With respect to the first two factors, the CollegeSource court concluded: 1) the plaintiff’s mark (COLLEGESOURCE) was suggestive and commercially strong; and 2) plaintiff failed to provide significant evidence of actual confusion. Id. at 40-43. The court addressed the last two factors in reverse order, but these two provided the crux of the court’s analysis.

With respect to factor 4 (labeling and appearance of the advertisements), the court focused on the placement of ads in search engine results, noting that these ads are generally partitioned under a section of “sponsored links” and appeared separately from regular search results, sometimes in shaded boxes. Id. at 43-44. The plaintiff’s mark did not appear in the language of the advertisement. In this context, the court concluded that the offset of sponsored ads decreased the likelihood of confusion. Id.
With respect to factor 3 (types of goods and degrees of care exercised by typical purchasers), the court considered “whether an ordinary consumer seeking college transfer information via the Internet is expected to exercise diligence in his research.” Id. at 44-45. The court concluded that Internet users are exercising increasing care as the “novelty of the Internet evaporates and online commerce becomes commonplace.” Id. at 45. “Modern Internet users ‘are accustomed to such exploration by trial and error.'” Id. This increasing level of experience with search sites (i.e., the increasing sophistication of the targeted consumer) decreases the likelihood of confusion with respect to Internet advertisements like these. Id.

The Court continued to evaluate the remaining Lapp factors, finding that there was no evidence of an intent to confuse, that the Internet is not an obscure marketing channel, and that AdWords are an increasingly prolific form of advertising. Id. at 46-49. The Court ultimately concluded that plaintiff failed to introduce sufficient evidence to demonstrate a likelihood of confusion; the Court then granted defendant’s motion for summary judgment on the trademark infringement claim.