Archives for December 2015

California’s Anti-Spam Laws May Provide a Potent Weapon for Private Parties to Wield Against Spammers (Eventually)

Private parties frustrated by spam often face significant legal hurdles to bringing suit against the spammer. Businesses and individuals, except for internet service providers, cannot sue under the main Federal anti-spam statute — CAN-SPAM. 15 U.S.C. § 7706. Some state anti-spam laws do permit email businesses and individuals to bring suit. For example, California’s anti-spam laws permit any email recipient to sue. Cal Bus. & Prof. Code § 17529.8. However, CAN-SPAM also unfortunately provides that all state laws regulating commercial emails are preempted (can’t be enforced), except to the extent that such laws prohibit “falsity or deception.” 15 U.S.C. § 7707(b)(1). This rule has often meant that businesses and consumers seeking to sue spammers under state laws are out of luck.
The reason for their ill-luck is that courts have generally interpreted the terms “falsity and deception” in CAN-SPAM to refer to common-law fraud. This means that the state law is invalid except to the extent that it merely prohibits common-law fraud. So to bring suit under a state anti-spam statute that prohibited falsity or deception, the plaintiff would have to prove that the spammer intentionally made a misrepresentation of material fact, on which the plaintiff actually relied and which caused him actual damages. See, e.g., Omega World Travel, Inc., 469 F.3d 348, 353 (4th Cir. 2006).
To penetrate anti-spam defenses, many spam emails contain false “header” information — in which a “friendly” email address, from an organization that the email recipient will not block — is substituted for that of the actual sender (the spammer). Sometime the “from” box in a spam email will contain a variant of the recipient’s email address, an email address of another person at the recipient’s firm, an email address of another legitimate business, or a misspelled email address from any of the foregoing.
Spam emails also often contain deceptive information in the reference line, such as “A free gift for you”, or “You have been selected for a cruise”, etc. This material convinces the recipient to open and read the file.
While this header information may be false, it may be difficult for the recipient to argue that this false header information gives rise to the common-law tort of fraud. The false information may have permitted the spammer to get around the recipient’s anti-spam software, or the recipient may have been induced by a false reference line to open the spam email. However, the recipient may have never relied on this false information to enter into a transaction in which he lost money. There lies the rub: if there was no actual reliance and no damages caused by the reliance — then there is no cause of action for common-law fraud. This eliminates most private suits against spammers.
However, some recent decisions regarding California’s anti-spam laws have begun to question the standard interpretation of “falsity and deception.”

Tiffany v. eBay: eBay’s Notice and Takedown System and Trademark Law

The suit between Tiffany and eBay is providing a serious test of eBay’s “Notice and Takedown” model for avoiding contributory infringement liability for counterfeiting and other trademark misuse by sellers on its site. (Fn1) In this suit, Tiffany seeks to hold eBay liable for contributory and direct infringement, false advertising and trademark dilution for its involvement in the sale of counterfeit Tiffany merchandise on its site.

According to eBay, more than 100 million listing appear on eBay at any one time, and approximately 6 million new listings are posted each day. However, a certain percentage of these listings are for counterfeit goods. Tiffany alone reported 20,915 infringing listings to eBay in 2003, 45,242 in 2004, 59,012 in 2005 and 134,779 in 2006. According to Tiffany, 30% or more of Tiffany jewelry list on the site at any time can safely be deemed to be counterfeit.

Selling counterfeit trademarked merchandise constitutes trademark infringement. It also downgrades the confidence of consumers in the integrity of the source of those goods. eBay does not take possession of, and hence never sees, the goods sold on its site, so to combat the sale of counterfeit goods on its site, eBay has employed an ever-expanding arsenal of computer-based defenses. Chief among these is its “notice and takedown” system — its VeRO program. Under this system, a trademark, copyright or patent rights owner who sees an infringing item on the site can report the listing to eBay by submitting a Notice of Claimed Infringement (NOCI).

eBay’s NOCI form is its Digital Millennium Copyright Act (DMCA) takedown notice form — which eBay has converted for use for all forms of alleged intellectual property rights infringement. The form requires that the rights owner submit all of the elements required for a DMCA notice (Fn2): (i) the identity of the alleged rights owner, (ii) the identity of the specific eBay listing numbers where the infringing material is located, (iii) the type of infringement, and (iv) the required DMCA statements that the complaining party has a good faith belief that the use on eBay is unauthorized and that the complaining party is authorized to act for the rights owner. For an overview of the VeRO program and to obtain a NOCI form, see

Upon receiving a NOCI, eBay verifies that the NOCI contains the necessary information and appears accurate, and then removes the reported listing. At the time of the Tiffany v. eBay trial (2008), 75% of reported listings were removed within 4 hours. After removing a listing, eBay also attempts to prevent or to undo any actual sale. If the listing is removed before a sale has occurred, eBay cancels all bids and notifies the seller and bidder that the listing has been removed. If a sale has already occurred, eBay cancels the transaction retroactively, removes the listing and informs the parties that the listing has been removed and that the transaction should not be completed. eBay also refunds all associated fees. eBay also reviews the seller’s account and may suspend the seller. (Fn3)

In addition to its NOCI system, eBay also uses what it terms a “sophisticated fraud engine,” on which it spend more than $5 million annually to maintain and enhance. This search engine “uses more than 13,000 different search rules to locate potentially infringing or problematic activity. For example, it searches for listings that explicitly offer “knock-off,” “replica,” or “faux” merchandise. eBay also suspends sellers for repeat violations, conducts periodic “clean-up” reviews of listings and warns sellers against listing counterfeit goods. (Fn4)

What is the US SAFE WEB Act and what does it mean for you?

The FTC issued a press release announcing that a federal court had ordered “key players in an international spam ring to give up $3.7 million that they made by sending out illegal email messages pitching bogus hoodia weight-loss products and a ‘human growth hormone’ pill.” The FTC claimed that this was the first case in which the FTC used the US SAFE WEB Act.

The US SAFE WEB Act was a Sen. John McCain-sponsored bill that was enacted in December 2006 and codified as portions of 15 U.S.C. §§ 44, 45, 46, 56 and 57-57c. With some exceptions, the US SAFE WEB Act does not create new areas of prohibited conduct for which a person could be subject to criminal or civil liability. Rather, it primarily provides the FTC with new powers to cooperate with foreign law enforcement agencies and new protections for persons who voluntarily provide information to aid FTC investigations.

For example, the Act permits the FTC to provide investigative assistance to foreign law enforcement agencies, including conducting investigations to collect information and evidence for these foreign agencies. 15 U.S.C. § 46(j). It also authorizes the FTC to spend funds for the costs of multilateral cooperative law enforcement groups. 15 U.S.C. § 46(l). This would seem to permit the FTC and foreign governments to create super-police agencies which could cooperate to gather information around the globe. However, the original Act limited these funds to $100,000 and specified that they had to be spent for the costs of five specific international groups. So while the concept of international policing agencies seems exciting, at least as of December 2006, Congress intended these to be quite modest efforts.

The Act permits the FTC to share investigative materials, such as documents, written reports or answers to questions and transcripts of oral testimony with foreign law enforcement agencies. 15 U.S.C. § 57b-2(6). However, the foreign government has to show that the materials are to be used to investigate or enforce foreign laws prohibiting fraudulent or deceptive commercial practices that are “substantially similar” to the practices prohibited by U.S. law.

The Act also contains secrecy provisions, so that the FTC does not have to disclose information provided by foreign sources under FOIA or other provisions of U.S. law. 15 U.S.C.§ 57b-2(f). The bill provides that the FTC was subject to the Right To Financial Privacy Act. However, it also specifies procedures under which disclosures mandated under the Right To Financial Privacy Act can be delayed or prohibited if it would jeopardize an FTC investigation. 15 U.S.C. § 57(b)-2a.

Federal Government Puts Baby Teeth into Enforcement of Criminal Copyright Infringement Laws

A number of press reports have given the impression that the Colorado District Court’s ruling in Golan v. Holder (fn1) means that that Federal laws reviving expired copyrights violate First Amendment protections on free speech. The actual ruling is far narrower.

184525_flute_player.jpgIn 1993, Congress enacted 17 U.S.C. Section 104A, to permit foreign authors whose copyrights had fallen into the public domain for technical reasons (such as by failing to renew the copyright with the U.S. Copyright Office) to restore their copyrights. Section 104A solely permitted “restoration” of copyright protection for works from “a nation other than the United States.” (fn2) Section 104A was added after the United States joined the Berne Convention for the Protection of Literary and Artistic Works — a treaty first enacted in 1886, but not joined by the U.S. until 1988. Article 18 of the Convention requires member nations to provide copyright protections to works by foreign authors so long as the term of protection in the country of origin has not expired as to the work.

The plaintiffs were U.S. artists who used works by foreign artists that had been in the public domain before 1994, such as Sergei Prokofiev’s “Peter and the Wolf.” The plaintiffs claimed that after Section 104A was enacted, they were subjected to higher performance fees, sheet music rentals and other royalties. In some cases, these costs were prohibitive. (fn3)

The Golan case was the brainchild of Stanford Law professor, founder and co-director of the Center for Internet and Society and Director of the Fair Use Project, Lawrence Lessig. The original complaint claimed that Section 104A shrunk the public domain and thereby violated the limitations on congressional power inherent in the Copyright Clause, and violated First Amendment rights to free expression. The Colorado District Court originally rejected these claims. However, on appeal, the Tenth Circuit found that a legitimate First Amendment claim existed and remanded the case for First Amendment analysis.

The basis for the Tenth Circuit’s ruling was the U.S. Supreme Court ruling in Eldred v. Ashcroft (fn4), in which the Supreme Court stated that a Congressional act modifying copyright law might be subject to First Amendment scrutiny if it “altered the traditional contours of copyright protection.” (fn5) While the Tenth Circuit could not find federal authority that explained the phrase “traditional contours”, it concluded that the traditional contours of copyright protection included the principle that “works in the public domain remain there.” (fn6) It based this on the notion that the general sequence is that copyrighted works has always progressed from “1) creation; 2) to copyright; 3) to the public domain” and that Section 104A changed this sequence. (fn7)

On remand, the District Court first found that since Section 104A was content-neutral, it was subject to what is commonly-referred to as “intermediate scrutiny” under the First Amendment. (fn8) Under this test, a statute can only be sustained: (1) if it furthers an important or substantial government interest that is unrelated to the suppression of free expression, and (2) if the restriction is no greater than necessary to further that interest. (fn9)

The U.S. government claimed that the primary interests advanced by Section 104A were compliance with the Berne Convention and correction of historic inequities imposed on foreign authors. The Court rejected both of these rationales.

The parties agreed that the Berne Convention required restoration of the rights of foreign authors. However, the Court found that Section 104A was not narrowly tailored to meet this interest, because “the government could have complied with Berne while providing significantly stronger protection for the First Amendment interests of reliance parties like the Plaintiffs here.”

Reliance parties are persons who have used a foreign work that was in the public domain, and continue to use it after that work is “restored” under Section 104A. (fn10) Section 104A provides that reliance parties may continue to use restored works for 12 months after receiving a notice of intent to enforce a restored copyright without being subject to suit for infringement, and may continue to use to use a restored work for the duration of the copyright if they pay “reasonable compensation” to the copyright owner. (fn11)

The Court found that these protections for reliance interests were not the broadest permissible under the Berne Convention. Rather, it found that Congress could have permitted reliance users to simply continue using restored works as they had prior to restoration. The Court concluded that Section 104A simply was “not tied to the Government’s interest in complying with the Berne Convention.” (fn12) Since Section 104A did not advance a substantial government interest, it could not withstand First Amendment scrutiny.

The Court also rejected the notion that there was any need to correct inequities for foreign authors. Rather, it found there were no such inequities, because U.S. law imposed the same requirements on all authors, whether foreign or domestic, to obtain copyright protection. Moreover, it also found that Section 104A created inequities, by permitting foreign authors to relieve themselves of failure to comply with formalities required for copyright protection, while denying this right to U.S. authors. (fn13)

The District Court’s decision did not go as far as the plaintiffs had wanted. The plaintiffs had argued that Congress simply has no power to restore copyrights to works in the public domain “at all.” Doubtless, this issue will resurface if the District Court opinion is appealed. No notice of appeal appears to have been filed as of the date of this report.

David D. Johnson is a business lawyer whose practice focuses on litigation and other issues relating to digital media and consumer electronics companies. David can be contacted at (310) 785-5371 or


Fn1 United States District Court, District of Colorado, 01-cv-01854-LTB (April 3, 2009), 2009 WL 928327 (2009).

Fn2 17 U.S.C. § 104A(h)(8).

Fn3 Golan v. Gonzales, 501 F.3d 1179, 1182 (10th Cir. 2007).

Fn4 Eldred v. Ashcroft, 537 U.S. 186, 123 S.Ct. 769, 154 L.Ed.2d 683 (2003).

Fn5 Golan v. Ashcroft, 537 F.3d at 1187.

Fn6 Id. at 1189.

Fn7 Id. The Tenth Circuit also attempted to determine if Congress had ever previously permitted works in the public domain to be copyrighted, but ultimately concluded that Congress’s historical practice was uncertain.

Fn8 Opinion at 6-7.

Fn9 Opinion at 7, citing Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622 (1996).

Fn10 17 U.S.C. § 104A(g)(4).

Fn11 17 U.S.C. § 104A(d).

Fn12 Opinion at 15.

Fn13 Opinion at 19.

“Actual Knowledge” Language in COPPA Places Interactive Web Sites at Risk of Non-compliance

The Children’s Online Privacy Protection Act (COPPA), which prohibits website operators from collecting personal information from a child under age 13 without parental consent, has been around for a little over a decade. (fn1) However, because it believes sufficient time has passed for website operators to become aware of and compliant with the rules, the Federal Trade Commission has started imposing higher penalties on violators. In its most recent COPPA enforcement action, against Sony BMG Music Entertainment, Sony agreed to a $1 million fine as part of its settlement with the FTC. .

A brief excursion around the Web suggests that most popular sites appear to attempting to comply with COPPA. Common techniques, for interactive sites that don’t want to deal with the hassle of obtaining parental consent, are to post a policy stating that submissions from persons under age 13 will not be accepted, and/or to require users to provide their birth date before being allowed to begin a registration process that allows access to a site.

However, these exclusionary techniques can be easily circumvented. It is no difficult feat for an enterprising 11 or 12 year-old to falsify her birth date in order to gain access to a social networking site. Once on the site, it would not be surprising if that 11 or 12-year old then posted information that provided her true age — such an account of her birthday party, or pictures from her school yearbook, showing her to be in the 5th grade and listing her actual age. Part of the very purpose of social networking sites is facilitate the exchange of such personal information. This creates a potential COPPA compliance problem for the website operator.