Packets: Friday, March 3, 2007, Volume 4, No. 3

Packets is production of the Stanford Center for Internet & Society (CIS). It is written by members of the Stanford Law and Technology Association (SLATA), and edited by CIS staff, fellows and volunteer attorneys.

Our purpose is to provide the legal community with a concise description of recently decided cyberlaw-related cases, and where possible, to point to the original decisions. We urge you to forward Packets wherever you please, and to take from it any content you would like.

The writers on the Packets Editorial Board are: Sarah Craven, Elisabeth Derby, Shannon Kenealy, Julia Kripke, Leslie Liang, Charlin Lu, Scott Noveck, Lillian Pan, and Olga Shishkova.

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Applying “Expected Norms of Intended Use,” Court Upholds Conviction for Accessing Protected Computer Without Authorization
Phillips raised several challenges to his conviction under the Computer Fraud and Abuse Act for intentionally accessing a protected computer without authorization. The Fifth Circuit, holding that questions of “authorization” should be understood with reference to “expected norms of intended use,” rejected these challenges and upheld Phillips’ conviction.
United States v. Cristopher Andrew Phillips, No. 05-51271 (5th Cir. Jan. 24, 2007).

Plaintiffs, employed on the campus of defendants' residential facility for abused and neglected children, appealed the entry of summary judgment for defendants on their invasion of privacy and related claims. Defendants had installed a video camera in plaintiffs' office without their knowledge or consent, but only connected the camera's wireless receptor to monitoring and recording equipment after plaintiffs went home for the day, disconnecting the receptor again in the morning before they arrived for work. The California appellate court held that actual viewing or recording of plaintiffs was not necessary to their invasion of privacy claim; rather, the creation of access to such information was actionable.
Hernandez v. Hillsides, Inc., 48 Cal.Rptr.3d 780 (Cal.App. 2 Dist. 2006), cert. granted, 53 Cal.Rptr.3d 801 (Cal. 2007).

Court Rules on Copyright Preemption of Trade Dress Infringement and State Law Claims

Plaintiff Blue Nile, Inc. and Defendant both own and operate online diamond and fine jewelry retail sales businesses. Plaintiff alleged that Defendant copied both certain elements of Plaintiff’s website in violation of the Copyright Act and the “overall look and feel” of Plaintiff’s diamond search webpages in violation of the Lanham Act. Under Fed. R. Civ. P. 12(b)(6), Defendant moved to dismiss Plaintiff’s claim of trade dress infringement and three state law claims—violation of Washington’s Consumer Protection Act, unfair competition, and unjust enrichment and restitution—on the grounds that these were preempted by Plaintiff’s copyright claims. The District Court for the Western District of Washington (i) denied Defendant’s motion to dismiss Plaintiff’s trademark infringement claim finding that a developed factual record was necessary given the novel nature of the claim, but (ii) granted Defendant’s motion to dismiss on the three state law claims.
Blue Nile, Inc. v. Ice.Com, Inc., No. C06-1002RSL (W.D. Wash. 2007).

District Court Finds Plaintiff Satisfies “Case or Controversy” Requirement and Sufficiently Alleges Copyright Misuse in Declarat

Plaintiff Carol Loeb Shloss (“Plaintiff”) sought a declaratory judgment that the use of written works in an electronic supplement to Plaintiff’s book Lucia Joyce: To Dance in the Wake would not infringe the copyrights of Defendants Seán Sweeney and the Estate of James Joyce (“Defendants”). Defendants filed a motion to dismiss the declaratory judgment based on several grounds. The Court found that Plaintiff demonstrated the existence of an actual “case or controversy” and interpreted Defendants’ unwillingness to extend a covenant not to sue based on the amended electronic supplement as a continuing threat of litigation. The Court denied Defendants’ motion to strike three of Plaintiff’s claims. First, and most significantly, the Court denied the motion to strike Plaintiff’s copyright misuse affirmative defense, holding that the standard for copyright misuse merely requires “a nexus between the copyright holder’s actions and the public policy embedded in the grant of a copyright.” In applying this standard, the Court found that Plaintiff’s allegations demonstrated such a nexus between Defendants’ actions and their negative effect on creative expression. Second, the Court denied Defendants’ motion to strike Plaintiff’s claims that the 1922 Paris edition of Ulysses is in the public domain. Third, the Court denied Defendants’ motion to strike allegations of Defendants’ unclean hands. Schloss v. Estate of Joyce.

Court Upholds Copyright Infringement and Unauthorized Access Claims Where A Single User License Was Shared By Multiple People

Plaintiff Therapeutic Research Faculty brought suit in the Eastern District of California against defendants NBTY, Rexall Sundown, and Le Naturiste. Plaintiff alleged that NBTY had violated the terms of a single user license for plaintiff’s database by sharing access and information with its employees and with the other defendants. Defendants moved to dismiss eight of plaintiff’s claims: direct, contributory, and vicarious copyright infringement; violations of the Computer Fraud and Abuse Act, Title II of the Electronic Communications Privacy Act, and the California Comprehensive Data Access and Fraud Act; trespass; and misappropriation of trade secret. The court held that violation of a single user license by allowing access to copyrighted content by multiple users constituted unauthorized access and infringed the exclusive rights of copyright holders, and that a confidential username and password can be a trade secret,and therefore denied the motion to dismiss. Therapeutic Research Faculty v. NBTY, Inc., No. 2:05-cv-2322-GEB-DAD (E.D. Cal. Jan. 25, 2007)

MySpace Is Not Liable for Third Party Content and Has No Duty to Protect Users from Sexual Assault

Plaintiffs, Jane and Julie Doe, filed suit against MySpace, Inc. and its parent company, News Corporation, alleging negligence, gross negligence, fraud, and negligent misrepresentation based on MySpace’s failure to implement safety measures to protect minors like Julie Doe from sexual assault by adult MySpace users. The Court held that the CDA provided Defendants with immunity from tort liability even if MySpace was aware of the risk of sexual assault and took no precautions. Declining to extend the duty of premises owners to “virtual premises,” the Court concluded that the negligence and gross negligence claims also failed under common law because MySpace had no duty to protect Julie Doe from sexual assault, regardless of the foreseeability of sexual assault. The Court granted Defendants’ motion to dismiss on all counts.
Doe v. MySpace, Inc., No. A-06-CA-983-SS (W.D. Tex. 2007).

District Court Declines to Exercise Personal Jurisdiction over Foreign Corporation Hosting Interactive but Non-Service Website

In a fraud and conspiracy suit filed by investors in an apparent pyramid scheme, a District of Columbia District Court held an interactive website with demos but no actual online investment services insufficient to establish general personal jurisdiction over a foreign corporation with only one identified in-forum customer. That the Defendant “could” transact business did not establish that it in fact “did” systemically and continuously transact business in the District, making the exercise of general jurisdiction inconsistent with constitutional due process. The Court further found insufficient minimum contacts relating to the investment scheme by the Defendant or its alleged conspirator for either specific, conspiracy, or RICO jurisdiction.
FC Investment Group v. IFX Markets, Ltd, No. 04-1939 (PLF), 2007 WL 325355 (D.D.C. Feb. 6, 2007)

Record Rental Exception to First Sale Doctrine Only Applies to Musical Works

Brilliance Audio, Inc. (“Brilliance”) appeals from the district court’s dismissal of its claims for copyright and trademark infringement under Fed. R. Civ. P. 12(b)(6). This case presents the novel question of whether the record rental exception to copyright’s first sale doctrine, codified at 17 U.S.C. § 109(b)(1)(A), applies to all sound recordings, or only sound recordings of musical works. Specifically, this case asks whether the exception applies to sound recordings of literary works such as Brilliance’s audiobooks. The Court of Appeals of the Sixth Circuit held that it does not, and thus affirmed the district court’s dismissal of Brilliance’s claims for copyright infringement. However, the Court held that the district court erred in dismissing Brilliance’s claims for trademark infringement. Following the law of other circuits, the Court concluded that two exceptions exist to the first sale doctrine under trademark law and that Brilliance’s complaint, construed broadly, had alleged that these exceptions apply in the present case. Thus, the Court affirmed the decision of the district court with respect to the copyright claims but reversed with respect to the trademark claims.
Brilliance Audio, Inc. v. Haights Cross Communications, Inc., WL 188103 (6th Cir. Jan. 26, 2007). .