Traverse Internet Law: Internet Lawyers

Internet Law Attorney at Affiliate Summit

Internet Lawyer John Dozier is at the Affiliate Summit this week in Vegas at the Rio. I'll be at our booth in the Exhibit hall mid-day for several hours on both Monday and Tuesday. The conference is sold out but if some of our clients need a pass to get in just let me know. Catch up with me today at the "Meet Market". 

Now that the Holiday season is over, we are back to work at Traverse Internet Law. We'll be continuing with our commentary on the misuse of business names and the five most nefarious abuses.

I've noticed a trend towards web businesses getting themselves into more trouble by trying to manage a problem themselves. Even be careful with what you ask for when dealing with problems. Solutions are often the most difficult aspect of remediating defamatory posts, copyright infringement, and business name infringement. For you golfers out there, here is a good example of what I am talking about. Last January some PGA players were ready to head off to Hawaii for the Sony Invitational. The discussion turned to the prospects for success at the US Open at Torrey Pines. They all agreed Tiger would win. Unless, one responded, he breaks his leg!

Be careful what you ask for.   

Dozier Internet Law: The Sky is Falling?

I keep seeing briefs from the Electronic Frontier Foundation, Public Citizen, and a lot of apparently ill-informed "professors" imploring the Judges to, in effect, agree with them in cases or the Internet will collapse. At Dozier Internet Law we even have a name for them..."chicken little briefs". So before the sky falls, let me point out that these free speechers and civil libertarian types keep submitting briefs advising of our imminent demise if they do not win. Has anyone mentioned to them that they keep losing, but the Internet is still here? 

The sky is really falling? Now this mantra has been carried out into the non-lawyer public arena and people are actually repeating this jibberish. The MySpace Suicide conviction is a good case on point. The argument is that if you allow a website to dictate the terms of use of its site, and criminalize the unauthorized "outside of terms" uses, it will cause everyone to stop using the web because of fear of criminal prosecution. This power to establish terms is without precedent, the argument goes.

Therefore, the Courts should take the law passed by Congress and signed by the President and change it. Considering the roles our branches of government play this is a philosophically corrupt argument. It also makes no sense whatsover. Without precedent??? Are you kidding me? Okay, I can accept the fact that EFF, ACLU and Public Citizen have an agenda and bias and prejudice is expected. But these "law professors" should know better. Here's why:

If you break your rental car agreement and don't return it, you have violated the rental car company's "terms of use". Who reads those things? And it is grand larceny.

If you buy a software program, copy it and begin selling copies contrary to the license terms (which no one reads), then it is criminal copyright infringement.

Those are just two of what could be a long, long list. Because "unauthorized use" is a basic element that is often used to show the "mens rea" (latin for "guilty mind") in order to convict someone. So, the MySpace suicide conviction is nothing more than a continuation of the law. This is pretty elementary and is usually covered in the first year of law school. But then it hit me..."law professors" with enough time on their hands to interject themselves into pending cases all around the country probably aren't teaching first year law school classes.  

People are still renting cars the last time I checked. Apparently software programs are still being used too! Is everyone worried that if they violate the "terms of use" (contracts or licenses) they'll end up in prison? No. Because decent, law-abiding people know that if they don't act in a reckless, outrageous, grossly irresponsible way they will be safe. And that belief works just fine.

Well, the verdict is in and the defendant has been convicted. I don't see any panic online. Websites are still processing Christmas orders.  Dozier Internet Law clients don't seem besides themselves with fear.

I did notice, though, that Friday night the moon was really bright and large. And I thought, just maybe, the sky was falling! I can picture 1,000 years ago..."chicken little" characters running through a town creating widespread panic with doomsday declarations and imploring the masses to run for the hills..."imminent catastrophic demise is upon us-the sky is falling!", they would cry. 

Sounds familiar.

Fortunately there is a very logical, rational explanation...I saw online that it was the lunar perigee. Happens every 15 or 20 years. And I then imagined a learned astronomer going into the panicked streets of long ago and telling everyone that there is no emergency, "doomsday is not upon us, so take off your boots and forget about climbing those hills, the sky is not falling, there is no catastrophe, and you can all safely return to your homes."

He turns, wipes the sweat off his brow, gives me a wink, shakes his head in disapproval of the situation, and as he is greeted by his colleague I hear him whisper..."it's just those damn professors again".

Exactly.

Dozier Internet Law: New Laws Are Coming

Have we now reached the point in which the web is so out of control that governmental authorities in the form of prosecutors and state Attorney General offices feel compelled to act? A federal prosecutor in LA gets a conviction of a mom for violating the terms of use of Myspace. The New Jersey AG sues JuicyCampus.com for consumer protection violations based upon misrepresentations in its terms of use. A Colorado prosecutor brings criminal charges against a poster for allegedly defamatory comments on Craigslist. What's going on here?

At Dozier Internet Law we have for a long while encouraged the self regulation and self policing of the web. History has told us that if that fails, government will get involved in one way or another. What we are seeing today is action by the executive and judicial branches of state government. Absent self policing, Congress, state legislators and even city and county governments will begin passing laws that will profoundly impact the web as we know it. 

Codes of ethics for search engine optimization and affiliate marketers have been around for a while. So that industry is trying, at least. But what can web developers, web hosts, ISPs, and domain registrars do to send the message to the legislators that positive steps are being taken to provide a more safe, secure and civil Internet? Each can consider establishing strict guidelines and implementing them through their User Agreements and Acceptable Use Policies. Then, they can each aggressively enforce those rules. And there is no law prohibiting a business from deciding with whom it will do business absent discrimination being visited upon a protected class. And why not do so? In a time when Dozier Internet Law is defending lawsuits filed against webhosts, ISPs, software developers, and ESPs for the conduct of their customers, why would a legitimate business not police itself? There is no reason.

Recently we have seen high profile calls by Public Citizen for web hosts to be willing to bring their financial resources to the table to defend the misconduct of their customers. We, and other lawyers in the know, call this type of a host "bullet proof hosting" or "black hat hosting". The reputation of these hosts, to say the least, is anything but stellar. No legitimate host would want those labels. And there is no business reason to do so. Is this the type of protection a web host would freely offer up to a $7 a month customer? Of course not. 

So, on the one hand we have a pressing need to self regulate and self police, and efforts being made within industries and specific businesses to do so. On the other hand, there is the move afoot by the free speech and anti-business property rights groups to do everything they can to encourage misconduct. If the Public Citizen advice is followed that would be an invitation for legislation, a solicitation for more governmental intervention by the executive and judicial branches, and a recipe for disaster. 

Web hosts should not only develop, implement and enforce strict guidelines aimed at returning safety, security and sanity to the online world, but undertake an industry-wide effort to establish a Code of Ethics and performance standards and good practice certifications. "Bullet proof" and "black hat" hosts need not apply because, well, you are ruining it for everyone. 

Some of these free speech expansionsist public interest groups might think that high profile litigation surrounding new laws would be a good thing for fund raising. I am sure it would be. Is their advice motivated by greed? Or just a fanatical, one sided perspective nurtured by their long standing support of the scofflaws?

Here's the lesson, perhaps. Is the message for web hosts that if you freely associate with outlaws, you find yourself thinking like them? I don't know. But it could explain Public Citizen's position.  

Dozier Internet Law: The "Public Citizen" Defamation Penalty

You own a local restaurant. A competitor decides to play dirty, and goes online and posts anonymous lies about your place...the horrible roaches he saw on his last visit, the owner's child pedophile conviction, and the substitution of horse meat for beef...all lies. At Dozier Internet Law, we are retained to get these false and fabricated claims down and off of the web, but within days the comments generate other seemingly concurring and confirming statements (from the same anonymous source using different names) and the results are now at the top of Google search when your restaurant is searched. Your business has dropped off to a trickle and your restaurant is on the verge of financial collapse. 

Public Citizen and Paul Alan Levy, an attorney with the free speech group, want to penalize the restaurant! That's right. He urged a Maryland Appeals Court on Monday to make it much more expensive, difficult and time consuming for victims of defamation to get access to the courts. Today, the restaurant might elect to file a "John Doe" lawsuit and issue subpoenas to try and get the identity of the attacker so the attacker, and perhaps his employer, can be sued. Makes perfect sense. Public Citizen wants the Courts to require an extraordinary evidentiary showing before allowing information to be gathered by subpoena to identify the attacker because, well...."caution is in order because once anonymity is gone, it cannot be restored" said Mr. Levy. This extraordinary evidentiary showing would be much more expensive to the plaintiff and therefore, although Levy and Public Citizen won't admit it, the very existence of such a requirement will have a "chilling effect" on the ability of small businesses and individuals to seek legal redress through the Courts. At a time when anonymous speech is one of the biggest problems on the web, and people think they can say anything and get away with it, Levy implores the Courts to set things up so...people will think they can say anything and get away with it. 

Dozier Internet Law explained this Public Citizen Litigation Group effort during a presentation last summer to lawyers. It is nothing new. Levy even got one Court to adopt his approach, but all others have flat out rejected the Public Citizen position. It strikes me that if "caution is in order", as Levy claims, he should deliver that advice to the many, many scofflaws Public Citizen Litigation Group openly encourages, supports and protects inside and outside the courtroom.

Because, unfortunately, netizens don't know better and actually believe the crazy advice regularly flowing over the web and blogosphere from the Public Citizen lawyers and Paul Alan Levy. And the web is a more dangerous place because of it. 

Dozier Internet Law on How to Use a Competitor's Name To Drive Sales

Each month we are the editor and publisher of the Dozier Internet Law Federal Court Report. Lately we've seen a remarkable increase in Federal lawsuits over the use by someone of a business or product name of a competitor. This is a revealing development. But while the lawsuits are new, the rampant use of competitor names is not. 

For years, online businesses and affiliate marketers and the like have known that visitor traffic is the key to success. And if you can have your site return high in the natural or organic search results, then traffic, sales, commissions and profits will follow. And in order to do that, Search Engine Optimization (SEO) techniques are used. It didn't take long to figure out that if your business could present a result when a competitor was searched, that would be great for generating highly qualified traffic. So the less scrupulous online industry started figuring out ways to use competitor's names so that Product X would be presented when Product Y was searched. And that's what the lawsuits are about.

This will be the first in a series of exposes surrounding the surreptitious and illegal use of competitor's names. For businesses out there that are potential victims, pay careful attention to the guidance Dozier Internet Law will offer up so you can see if a competitor is ripping you off. For marketers, publishers, and those looking for more effective ways to drive traffic, please ignore our commentary (of course we strongly discourage using the information we provide as a training manual but putting this information out there is the only way to educate the online business world about the rampant illegalities existing today). And for you "Fair Use" and "Free Speech" lawyers who follow every comment we publish and constantly attack our positions, either you do not understand the business of the web and SEO enough, or you do and just elect to openly encourage these tactics. I suspect ignorance is the most likely culprit, but one must wonder whether your fundamental abhorrence to the protection of property rights of businesses is your motivation. Today, the Dozier Internet Law expose begins with a short list that we'll explore as we move along.

1) Product Reviews: Traditionally protected by "fair use ", many product review sites are surreptitiously owned by a competitor or a marketer. For some reason your business is always getting negative reviews and the competing products are always getting positive reviews! 

2) Comparative Advertising: A competitor is openly comparing your product on its website. If the information is false, it is easy to deal with. If it is true, it still can be illegal since the site may have published trivial and irrelevant information and optimized your business or product's name inordinately for SEO purposes.

3) $ucks Sites: Many "sucks sites" are commercially motivated. Can you imagine Sears launching a "sucks site" of comments from Walmart's disgruntled customers and, after it gets indexed high when someone is searching for Walmart, running their own advertising on it? Groups like Public Citizen and Electronic Frontier Foundation and the ACLU think this practice is just fine and dandy. Of course it is illegal.

4) First Sale Doctrine: A competitor of yours goes out, buys one of your products, advertises your products on its site, and then captures prospects searching for you. Funny thing, though. As much as you have tried to figure it out, you have no idea who his source is for your products. That could be a long search. That's because...well, there is no source. They bought one, and don't plan on getting rid of it, so they price your product at an exorbitant level and the customers opt for your competitor's product. Some will argue this is permitted by the "First Sale Doctrine". No, it's not...and on two separate grounds. Not even close. 

5) Directories: We caught a Fortune 500 company at this one. Whenever someone searched for a local business by name, the results for the directory listing would come up. Funny thing, though, is that our client did not remember paying for the listing, and he didn't remember ever getting referrals from it. It turned out that when a consumer went to the site, was presented with the details of the company, and requested someone to contact the consumer, the lead was captured and sold to a competitor. There are many ways for directories to use your name legally. This clearly is not one of them.   

6) Keyword Stuffing: Or spamdexing. Basically, a competitor uses your name on its site. It could be in the URL, in meta data, behind images in alt tags, in colors your eyes cannot see, or surreptitiously in the html code of the site in such a way that it is indexed by the search engines but never presented as words on the page. Obviously you'll see their site coming up high in search results.

There is one consistency in these situations. When approached about it, the perpetrators always plead ignorance. All of a sudden these skilled search engine optimizers don't even know what "SEO" is, have never heard of a "meta tag", and may have a slight recollection of the existence of a search engine called "Google", but they are not sure (at least according to their lawyers).

At Dozier Internet Law we'll continue to add to the list. Let's expose these practices for what they are!

Dozier Internet Law: Top Five Tips For Start-Ups To Protect Assets

The calls come into Dozier Internet Law regularly...even during this economic downturn. "I want to start up a new web business and I need to make sure it is legal" is a typical inquiry. That's likely impossible, I respond, unless you are going to be so passive as to be non-competitive. No one knows where all of the lines are drawn yet, and everyone who is competitive learns to stay away from "blackhat" and clearly illegal activities but at the same time not limit tactics to "white hat" and clearly legal activities. If you operate in a clearly illegal arena there is a small (but not insignificant) chance of getting in a lot of serious trouble, and if you operate in a very safe manner, there is a high probability your business will be non-competitive and fail. So most online businesses operate in the gray area.

That's a fact. That's reality. And therefore a successful online business (there are some exceptions, of course) carries with it inherent risk to your body, mind, soul, spirit, reputation, money and freedom. 

If you are young, carefree, and think you have nothing to lose, then your appetite for risk could be high. If you have a family, are moving towards retirement, have some savings and a reputation, then your risk profile might be very low...you don't want to assume much risk. If you are in the later category, consider these five tips from Dozier Internet Law:

1) Incorporate in Nevada or Wyoming. In Nevada you can hide your identity (like a mob controlled Casino front-man) and both states offer strong protections for an individual owner of a corporate entity.

2) Move to Florida or Texas. Both states have generous "homestead exemptions" that will usually allow you to hold onto your house if you have to hide from creditors or file bankruptcy.

3) Move all of your assets into either your wife's (or husband's) name or make sure property (real and personal) is held as a joint tenancy with the rights of survivorship (tenants by the entirety) so your share cannot be taken. And while you are at it, consider opening overseas bank accounts in some select countries that have a particularly strong view on privacy.

4) Consider leaving the US and operating overseas from a country that will offer you strong protections.

5) Establish business relationships with partners outside the US and not subject to subpoenas or extradition so they cannot be forced to testify against you....Caribbean and Central America are popular options this time of year, but certain anti-US Russian states are best. 

Or, get a really, really good Internet law lawyer, and use his guidance to help you navigate through the minefields. And when someone comes along and says that Dozier Internet Law is crying wolf and trying to scare people into hiring a lawyer, just the opposite is true. For the great majority of new start-ups on tight budgets being started by mature professionals whose careers have been interrupted by tough economic times, I'm suggesting you find an off-line business idea. A lower risk investment. Like mortgage backed securities... 

Capice???

Dozier Internet Law: US Senate Passes Pro-IP Bill

At Dozier Internet Law, we represent a lot of businesses in protecting their intellectual property. On the other hand, we represent a lot of businesses accused of intellectual property infringement and theft. So unlike the IP owner special interest groups, which are always going to support stronger IP laws, and the "public interest" groups, which are always going to oppose stronger IP law enforcement, we don't have a preconceived agenda to push, except to try and encourage smart and thoughtful legislation and enforcement decisions. 

There is always a balancing act to legislating, of course. In my lobbying days in the 1980s and 90s, I was always impressed by state and congressional legislators' willingness to listen to objective and fair advice. But keep in mind that this bill is being pushed by both sides, Republicans and Democrats, with the support of the RIAA and business concerns, and the support of the AFL-CIO and labor concerns. So, that is a formidable combination unlikely to be defeated. 

That being said, the bill, which is headed to the President for his signature, is pretty broad and potentially expands beyond reason the parties and penalties subject to the US Intellectual Property laws. There is going to have to be a lot of prosecutorial restraint exercised to avoid very unpleasant and cataclismic unwarranted and unjustified damage to businesses involved in E-commerce. Dozier Internet Law will give a more detailed review of the law once the President signs it. But vesting greater power in prosecutors to pursue IP theft/infringement and seize associated assets is not a good practice. Because, unfortunately, the "greater power" gives the prosecutor far greater discretion. And it seems to me, from what we are seeing, that broader prosecutorial discretion in complex IP and IT cases is a recipe for disaster.

I cannot forget our ISP client being sued for spam and ending up in bankruptcy, even though they were likely not liable. I cannot ignore the "mistake" made by the Connecticut state police in getting the IP address of our client wrong, raiding his house, seizing his work computers, and then dropping all charges without as much as an apology. I still recall the the FBI raiding our business client's two offices for "hacking"...falsely reported to them by a competitor, or the Utah police taking out criminal charges for what was obviously a "standard fare" civil intellectual property dispute, or a pending prosecution for posting something on Craigslist that is blatantly unconstitutional on its face. Being pro-business does not always mean being biased or prejudiced, or even inclined, towards the protection and prosecution of IP. We handle matters on both sides. But it does mean supporting smart, well conceived, understandable, and fair laws and the attendant prosecution of those laws.

And that is the problem with discretion. Government can put a business out of business using their own "judgment" and "expertise". Just look at last week's seizure by Kentucky of the domain names of alleged gambling sites under the guise that the domain names are an instrumentality of illegal gambling without notice to anyone! This is a complex issue. Litigate first, then obtain the remedy second. But don't go out and shut down businesses because you think you have an argument that you might be right. That is the problem with prosecutorial discretion in a subject matter that mixes technology and the business of the web with unclear laws. 

How did we get here? Well, the RIAA tactics of suing first and asking questions second, according to public interest groups, is savage and merciless, they say. The public interest groups are likewise pretty aggressive in explaining how to get rid of evidence of true illegality, representing scofflaws for free, and dishing out legal guidance that is just plain wrong, but gives the "mobsophere" a false sense of security that leads to more brazen misconduct.

Self policing and self regulation did not work. Public interest groups like Public Citizen, Electronic Frontier Foundation, the ACLU and the like did not use appropriate restraint and reasoned judgment, but instead fostered IP problems by fighting for the rights of the "maligned", but really just promoting a false sense that stealing the IP of others is quite alright.

Now we have Congress over-reacting, as so often happens. The pendulum has now swung too far off center. It is caused, indeed, by the inability of the public interest groups to see the bigger picture. And it is not good for the public, it is not good for web businesses, and it is not good for the online world as a whole. And just watch how many stay legislators decide that this type of law would be good for their state. It is only going to get uglier for everybody. 

One day, Congress and state legislatures may realize they went too far, and the pendulum will swing back. Let's hope next time it swings back to the middle with a fair and balanced solution. And the RIAA and the IP owners will likely be to blame if that happens for having been too aggressive in their enforcement efforts. My gut tells me, however, that the business interests and IP owners (RIAA included) may know a good thing when they see it, use very measured self-restraint, and ride this law for a long, long time.

The public interest groups could learn a thing or two about self-restraint and good judgment if that happens. 

Update: The public interest blogosphere is full of claims that the President will veto this bill. Unfortunately, the vote passing it out was far in excess of 2/3 in support, which means the bill is "veto proof". 

Dozier Internet Law v. Ronald J. Riley, et. al.

Well, at Dozier Internet Law, enough is enough. Anyone who knows Ronald J. Riley seems to know about his "antics" online. And from the response we have received from what seems to be all corners of the country, a lot of people are very upset with Riley. Businesses and people want us to represent them and sue Riley on a broad range of claims. The allegations against Ronald J. Riley continue to evolve. Just check out comments about Ronald J. Riley on Techdirt . The Dozier Internet Law lawsuit is here: Ronald J. Riley lawsuit. 

Since we decided to move forward with a lawsuit exposing what we believe is an extensive pattern of misconduct, Ronald J. Riley has been working hard to try and get us. Let's follow what he has been doing:

1) His webhost pulled his sites down for violations of terms of use. Riley countered by buying "sucks" domain names of the webhost. From what I understand, he threatened to sue the webhost.

2) His second webhost terminated his account. He then moved his sites to a third webhost as of today. I suspect he will also be terminated by this webhost very soon. Perhaps the hosts simply don't want to risk being tied up in litigation and risk potential "aiding and abetting", "conspiracy", and "contributory trademark infringement" claims as defendants and witnesses in the pending and future litigation and investigations, but my guess is that they just don't like what Riley has been doing, either.

3) Riley went out and "bumped" forum posts and blogs he has published critical of our firm, mostly on free speech sites that disagree with our ongoing efforts to encourage the proper policing of the web, and posted "spam" comments, which is the same cut and paste craziness he has been using for many months, obviously trying to get his negative attacks presented as results on the first page of Google results when someone searches "Dozier Internet Law".

4) Riley opened a number of blogs and tried using our name in posting his canned spam comment critical of our firm. Just as quickly as he was opening these and launching the blogs, the blog owners like Google (blogspot) and others were unilaterally terminating his accounts for what they considered terms of use violations.

5) Riley opened up forum subjects on "fraud" websites trying to make this lawsuit look like a free speech issue and exhorting the masses to assist him by launching "sucks" sites against our firm and specific attorneys within our firm. It looks like someone took him up on it for a day or so, and then probably figured out the truth about Riley and promptly pulled it down before we even found it. No one else has taken him up on it, and most of the websites have removed his posts. 

6) Ronald J. Riley appears to have taken at least one old article from the web and posted it in a forum as if the article was brand new, under the apparent guise of a submission from the true author, in an effort to once again get what he clearly perceives as "negative" search results showing. The site promptly pulled the article and forum posting down.

7) Riley has been trying mightily to "rally" the free speech expansionists and Dozier Internet Law has seen some rather childish efforts by a very few commentators to defend Riley. In fact, the Ronald J. Riley Techdirt.com article referenced above was begun as a defense of Riley, but commentators from all over the web used it as a forum to lay out in details the alleged widespread misconduct of Ronald J. Riley.

8) There is a Ronald J. Riley Blog that lays out in detail allegations against Riley, and the owner of the blog claims that Riley copied the blog, placed it on his own server on his own site, and is trying to get Google to see both as "duplicate content" and "sandbox" the blog far down in search results so people won't see it when researching Riley. Now the owner is claiming that someone has hacked into his site and embedded an html code in his site code that prevents search engines from indexing it.

9) Riley is using other Search Engine Optimization techniques to attempt to increase the popularity of his negative posts in the hopes of getting these to be displayed more prominently.

10) Within a couple days of the Dozier Internet Law lawsuit being filed, we saw a post on about Ronald J. Riley on techdirt.com defending Riley, and the blogosphere quickly claimed, with some pretty strong evidence, that it was from Riley using an alias. The response? New and more aggressive rounds of criticism of Riley, even by some who had the knee-jerk reaction to initially defend Riley.

Now I am hearing, although I have no way of confirming this right now, that Riley was asked to leave the membership of the Young Inventor's Group, which is a nationwide group for children to submit their inventions for acceptance, publication and awards...because he was stealing their inventions. Ronald J. Riley stealing kids' inventions? I find that a bit hard to believe, even for a fellow like Riley. I did get a link to the court decision about the lawsuit that Riley's daughter's teacher filed against him after he launched a site attacking her. Interesting read. 

I guess Riley thinks that he can carry on as he always has and hide behind some perceived blanket of protections. But reality is otherwise. And if he thinks we don't know what he is doing, how he is doing it, and how to deal with him, then he is mistaken, clouded in his limited wisdom and judgment by his misperception of reality. 

The fact is that there is a small percentage of scofflaws out there on the web creating problems for the blogosphere as a whole. And the blogosphere understands that unless it "self-regulates", we will all be subject to formalized government and legal regulatory mandates that will be much more burdensome and create far more numerous and serious problems than exist in a self regulated environment. So, the blogosphere is policing Ronald J. Riley. Good for the blogosphere and the online industry! 

Dozier Internet Law: $400,000 Judgment For Using Competitor Name

Dozier Internet Law often deals with situations in which a competitor is using another competitor's name, and while this area of law is clearly evolving, the Courts are beginning to understand the nuances associated with the power of this practice for SEO purposes, and reacting appropriately.

An excellent court decision crossed my desk about the August 28, 2008 First Circuit Court of Appeals opinion confirming a judgment for over $400,000 against a small business. The "offense"? Trademark infringement. In particular, the defendant used a competitor's name in its "metatags", and in the content of the site in white lettering with a white background, obviously for SEO purposes. And that is all that was proven. Both the US District Court that awarded the judgment and the First Circuit agreed that both uses infringed on the plaintiff's trademarks.

My guess is that the defendant took the advice of some of the commentators you see online and I suspect, given the other facts of how the case was handled, assumed the Court would conclude there was no trademark infringement. The end result was a judgment for all of the net profits of the Defendant's entire business for the last three and a half years, which was $230,339, plus attorney fees of $188,583, and to add insult to injury, another $7,500 in costs.

Eric Goldman blogs about how "wrong" this decision is. He claims that "metatags don't matter from a technology perspective", citing to his own blog post in which he claims, well..."metatags don't matter". Dozier Internet Law and the Courts, on the other hand, know they do. But this case was also about using a competitor's name in the content, something Goldman missed, I guess. 

First, metatag descriptions are used by Google and Yahoo and most search engines. Metatag keywords are used by meta search engines, and other search engines. Anyone with even a passing understanding of search engine optimization would understand that Goldman's off base here and he really does not seem to grasp how SEO and the algorithms of search engines function.

Now, with respect to using competing trademarks in your content, the search engines use those terms to decide when to return a result. So, if someone is searching for Sears, and Walmart repeatedly, and with search engine optimization principles in mind, uses the Sears name on a page of its site, Walmart will come up in the search results when someone is looking for Sears. And thus the problem. If Walmart uses the Sears trademark in the coded title of the page, in an HTML header, repeats it three times, and uses anchored hypertext links with the name to mislead the search engines into believing that a Walmart page is a Sears page, then it becomes more and more apparent what is going on, and the Walmart result will move higher in searches seeking "Sears". There are many other SEO techniques surrounding the Sears name that could be employed, which I won't discuss here. Suffice it to say that the Courts, both the US District Court and Circuit Court, got it right.

By the way, I use Sears and Walmart as an example only. I don't know of any information that suggests either one of these companies is doing this...for what should be obvious reasons to everyone who REALLY understands the law and business of the web.

Obvious, according to the Court decision, even to the Defendant in this case...the Courts found that the defendant "admittedly took these actions because he had heard that Venture's marks would attract people using internet search engines to the McGills website." 

Dozier Internet Law Federal Court Report

At Dozier Internet Law we monitor the Federal Courts everyday and once a month prepare summaries of the most important and interesting lawsuits filed. You can imagine the number of lawsuits I personally go through each month. It's enlightening to see what the trends and latest and greatest theories of recovery are in the Federal Court.

You can get the complete lawsuit off of the Pacer system. But, we do not provide copies of the lawsuits to third parties. At Dozier Internet Law we'll give you a heads up, and I spend a lot of time each month authoring the Dozier Internet Law Federal Court Report. One day all of the state courts will be online and we'll be able to add the lawsuits filed around the country in the state court systems to our report. 

The Ronald J. Riley lawsuit will be available online shortly. 

Dozier Internet Law: New Affiliate Marketing Laws Go Into Effect October 1, 2008

The affiliate marketing provisions of the Fair and Accurate Credit Transactions Act ("FACTA") go into effect October 1, 2008. Dozier Internet Law has added the compliance analysis to our legal audits. In a nutshell (it is really quite complicated) an affiliate marketer transferring leads or personally identifiable information to its advertiser requires advance notice to a consumer and an effective 30 day opt-out option.

Penalties? Up to $1,000 per violation (per each solicitation attempt), plus punitive damages and attorneys' fees. In other words, violations will likely bring class action lawsuits and create exposure that is enormous for affiliate marketers.

Dozier Internet Law recommends:

First:  Every affiliate marketer consider its particular information-sharing and marketing practices, today and in the future, to determine whether a notice and opt-out opportunity must be given.

Second: Affiliates should consider whether Advertisers are categorizing the affiliate as subject to the Act, and if so determine whether Affiliate Marketing Agreements require compliance in the contract, even if the Affiliate Marketer is operating outside the scope of the Federal Law definition.

Third: Merchants, Advertisers, and Affiliate Managers should review their Affiliate Marketing Agreements to make sure this new law is taken into account in the contract, and then implement appropriate performance standards, creatives, and the like for affiliates.

Fourth: Everyone should get ready to be compliant by October 1, and be prepared to assure and prove compliance with both internal and external facing performance standards. 

Fifth: Check and see if there were state laws that mandated certain disclosures and affirmative permission from a consumer that now may be PREEMPTED by this federal law. Yes, there is a preemption provision effectively invalidating state laws that purport to regulate the marketing activities now covered by this Federal law. That could be a good thing for affiliates and merchants and everyone else involved.

Sixth: Keep in mind that there is a work-around for the much talked about 30 day opt-out provision. 

Dozier Internet Law  offers compliance services in a broad range of online legal areas, with a strong emphasis on affiliate marketing. Whether you use our firm, or someone else, really consider getting some help in this area. One wrong step can have enormous and adverse consequences. And, keep in mind that things are not going to get any easier. There is a lot of proposed legislation and proposed rules that will continue to impact the affiliate marketing community. 

Dozier Internet Law: Hackers Hack Away at DefCon Annual Convention

Defcon, the annual convention in Las Vegas, began August 8 and it looks like the hackers sitting in the audience and participating in the hacking competitions spent two days trying to hack into the Dozier Internet Law website using SQL Injection Attacks, Mambo Exploits, encoded cross site scripting attempts, shared ciphers overflow attempts, and the like. The frustrated perpetrators (they never got access) were sitting in the Riviera Hotel ballrooms, I suspect, listening to the presentations, and participating in the now infamous "free for all" where the attendees hack into systems in an "Olympian-like" competition to gain bragging rights. The attempts likely came through "backdoor" exploits of webservers around the globe. The favorite and most common ISP access was from Vietnam and China, with Beijing the host and doorway of the Olympic Games as well as many, many hackers.

The Electronic Frontier Foundation staffed a booth full of lawyers to help hackers deal with "bogus legal threats" (the EFF's own words). While attending to their session presentations, offering advice, and driving the underworld of the web to the annual EFF fundraiser, they were losing big time in Court. Then the EFF filed legal documents, released press releases, and held news conferences in which they claimed DefCon attendees are akin to "security researchers" that are gathered in Vegas to listen to presentations involving security.

That's absurd. The graph above shows what these hackers do. They come to Vegas to learn how to hack into systems and create havoc. Going after law firm websites and administration areas that contain attorney/client protected communications and documentation, and even court ordered "sealed" files, is a direct attack on the integrity of the judicial process and the judiciary. And our experience at Dozier Internet Law is just the tip of the iceberg.

This convention wouldn't even exist if the FBI, CIA, Department of Justice, and the National Security Agency and others weren't so anxious to infiltrate it every year for intelligence. Think about it. Hackers from around the world come together once a year and learn how to hack better. Those that support and encourage and facilitate these hackers cannot hide behind the "I didn't know they were hacking while I spoke" defense. Yes, there are researchers and intellectuals and law students and college professors in attendance. But, for the most part, there are hackers learning and improving their trade. And despite EFF's absurd contentions otherwise, the Computer Fraud and Abuse Act, as well as many state computer crime statutes, can and should be used to prevent the aiding and abetting that is the core benefit seen by most attendees.

"SECURITY RESEARCHERS"? Give me a break, Electronic Frontier Foundation. While your lawyers call the hacking laws "bogus", and tell hackers how they can ignore the "bogus" laws, all of the scofflaws are being emboldened by your advice and guidance. The only reason there isn't a round up and indictments for hacking, conspiracy and aiding and abetting is because your annual conference is infiltrated so extensively by the government that it provides a honeypot of intelligence. And adding some professors and other intellectuals to the mixing pot won't clean things up.

Notice to EFF: DefCon is for hackers. Many attendees commit criminal acts while in attendance in organized war games. Others commit criminal acts as they learn the tools of the trade in the very ballroom during speaker presentations. They hack into banks, into personal computers, into businesses, into government agencies, and steal private information, cost businesses billions of dollars annually, and ruin the financial well-being and impair the emotional stability of individuals all across our country. This is the mob of the 21st century; this is the mobosphere. They are hoodlums, thieves, scoundrels, and all too often already convicted felons after the next easy mark.

The only "security researchers" in attendance, I suspect, are the good guys. But then again, they don't need legal advice from EFF, do they?

8/26/08 Update: There have been some of the 9,000 attendees who have blogged this and defended DefCom by pointing out that there are bad eggs everywhere, and most of the attendees are "good guys". 

Anyone can attend, unless, as real life experience tells us, you are a SPEAKER arrested by the Feds, a REPORTER "outed" by the Conference management and pursued by a mob of attendees, or a registrant intercepted at our border before getting into the US. Couple that with the session this year on how to hack a Boston public transit system and get "free fares for life" (interrupted appropriately by a Federal Court lawsuit and injunction), and the MSBlast Worm and Virus fiasco of several years ago where the Department of Homeland Security had to issue a global alert the day before the conference, and the many, many other incidents that are recorded for posterity online. And then lay on top of that the Electronic Frontier Foundation's prominent and high profile attendance and involvement at the conference attacking our computer crime laws as "absurd"...laws passed and strengthened post 9/11 by the US Congress. 

Are the "good guy" attendees naive? Are they in a state of denial? Are they willing to overlook the "open access" problem in order to keep their employer picking up the tab for three days of partying, fun, gambling etc. in Vegas? Or are they enjoying the short time they have each year being exposed to the "dark side"?

So, here I am, getting feedback from those in the know that I "got it right on". And yes, I agree with some of the feedback I have received...the irony is not lost on me...supposed security professionals operating in an insecure and uncontrollable environment and unable, or unwilling, to recognize a huge and pervasive security risk.

Here are some suggestions: Establish some meaningful vetting of attendees, require full disclosure and contractual commitments, screen out the presentations that rely upon illegal hacking for the subject matter, get rid of the "aliases" used by attendees to hide identities, and act responsibly. 

What happens in Vegas, stays in Vegas? If only that were true.

Dozier Internet Law: November 1 Drop Dead Date for Compliance with New FTC ID Theft Rules

Dozier Internet Law today issued a special advisory notice relating to the new Federal Trade Commission requirements for creditors set to go into effect on November 1, 2008. This is the date of compliance-which means that if you are an online business extending credit you may be covered under the law.   

These new rules mandate the development and implementation of a written program that identifies and detects "red flags" of identity theft.  The program must also describe appropriate responses that would prevent or mitigate the crime and detail a plan to update the program, must be managed by senior employees, and must include oversight provisions for contractors and third party service providers. The program documentation and business process needs to be reasonable given the nature of an online business, but this is an objective reasonableness. In other words, a small business owner's subjective thoughts of what is reasonable is not the measure of adequacy or compliance.

Dozier Internet Law provides coverage advice and assists in the drafting, documentation, and implementation of the processes required by these new rules. It is essential that if your online business takes credit card payments or otherwise extends, renews, continues, or receives through assignment credit commitments you have a qualified attorney determine if your business is covered by these "Red Flag" rules. While many of the indications of identity theft are already used by businesses to avoid credit losses, the key to compliance with the Federal Trade Commission rules, and avoiding prosecution, civil fines, and potentially devastating publicity that cuts to the core of a small business'  customer relationships, is to document reasonable processes in a formalized manner.

Dozier Internet Law on The Scary and Unknown Weapon of Contributory Copyright Infringement

Dozier Internet Law handles alot of e-commerce and website legal audits. That means that we review a website and e-commerce business and "get it legal". That is becoming more and more difficult because we have to look into the future and figure out where legal doctrines are headed and what the popular lawsuits will be about in two or three years. Because, as our clients learn, what they do today may not have an impact on them for years. It would be a shame to be doing something today that you learn three years from now was illegal.

And to do this effectively Dozier Internet Law, as a litigation law firm, often sees the evolving issues very early on. Our Dozier Internet Law Federal Court Report serves as a monitor and advance early warning avoidance system, in a sense, for web businesses to understand what will get you sued. But you really have to live the law of the web day in and day out, have a firm grasp of technology, be intimately familiar with the business of the web, and have a great imagination to see the future. We don't claim to be perfect, but here is some food for thought on a legal risk that could lead to your company being sued for copyright infringement.

Under Section 512 "safe harbor" protection, a business can avoid copyright infringement liability if you do certain things at certain times. So, if you have a music site, and you follow the Digital Millennium Copyright Act provisions, you likely won't be sued or have liability unless your site is reliant in some material respect on the copyright infringement occurring. Under the doctrine of "contributory copyright infringement", liability for copyright infringement extends to business partners who are intentionally inducing or encouraging the direct infringement. So, if you know or should know of the infringing conduct, are advertising on a site that is carrying copyright infringing materials, you are providing services and support for the infringing site, you are a payment processor or even a web host or web developer, or you are somehow monetarily benefiting from the traffic at the site, you may be asked in a not so gracious way to assist the courts in defining who is liable as a contributory copyright infringer in the online world. And these lawsuits will be filed against individuals even though the small business is a corporation. That's a pretty scary possibility. But that is where I see things headed, and the only issue will be where the courts will draw the line of liability...what concepts, doctrines and rules of law will be adopted from the case law to apply to an online business world operating in an entirely new way? No one knows. But we can make an educated and informed guess. And that is what we at Dozier Internet Law do just about every day.

Sure, it's guesswork. If you can't see the trees because of the forest, this arena is not a place for you as a business person. As Internet lawyers we have to not only see the trees, but the saplings that will become the forest. And sometimes we have to see the seeds that will become the saplings that will become the trees that will become the forest.

If you want to avoid liability for contributory copyright infringement you need to know a lot about the business practices of your customers, business partners, and affiliate marketers. Pleading ignorance may be a successful defense, and I am sure one that will be used in virtually every case by the defendants. If you have a six figure legal budget to fight the lawsuit you may like your chances. But the smart thing to do is to make an informed decision. We help with that.

Dozier Internet Law Coming to The Big Apple

Dozier Internet law has been on the road quite a bit lately keeping up with the business side of the web. After speaking at OnlineMarketWorld on Web 2.0 liabilities in San Fran, we just returned from ISPcon in San Jose. We'll get my interview with the Silicon Valley's KSRO Radio on blogger defamation on the Dozier Internet Law website at www.cybertriallawyer.com this week. Then it is off to Hollywood next week for DigitalHollywood, and then to Manhattan for ad:tech. Dozier Internet Law's last conference of the year will be Webmasterworld in Vegas in December. Not sure about the subject I will be discussing yet. For all of our clients across the country, come by any of the events and visit with us.

Dozier Internet Law will be announcing the opening date of another office shortly. We have added an interesting overview of the blogging industry on our site, a link to which you will find on our homepage right now. It lays out the different renegade blogger types we run into.

Dozier Internet Law continues to grow in leaps and bounds, and the growth is driven by an ever increasing demand from web businesses for IP and reputation protection, as well as risk management and evaluation services. We are now the second most visited intellectual property lawyer website in the world right behind Lessig. Expect to see us open two new offices very soon.

Start-Up Legal Evaluations

The biggest problem I am seeing with start-ups, from a legal standpoint, is issue identification. For example, we are often told by a new client that it needs a "terms of use and privacy policy" drafted. Well, that is part of the equation for launching a low risk site. But is a client really knowledgeable enough to identify its legal needs? Rarely.

There are domain name and trademark issues, privacy matters, web development and hosting contract issues, and many other legal concerns that should be addressed. And, for those following the Web 2.0 movement to leverage user generated content, the risks escalate since the content is being created and delivered by third parties. How do you guard against a contributor's content using someone else's trademark, disparaging a product or service or company to the point of defamation, using someone else's creative content protected by copyright (registered or unregistered), or violating state privacy laws by disclosing private information?

The response I get when reviewing these issues is often surprising. Well, a start-up says, so and so is doing the same thing I want to do. My response after research is often that "so and so" has a lot of money and is not an easy target to sue, or "so and so" is owned by young kids with nothing to lose, or "so and so" is actually owned by a guy in a third world country. The point being that the legal liability that exists for any site has to be viewed in context in order to understand the true legal risks. And, of course, the fact that other sites are doing something wrong means nothing at all. Maybe they just got don't care, got bad legal advice, or no legal guidance at all.

I also find that most start-ups don't understand what they have to lose. Most think if they incorporate the only risks are with the corporate assets. Most lawsuits are suits against the individuals also, whether a corporation exists or not. So, when the new start-up thinks all it has to lose is its corporate assets and the personal bank accounts and home are protected, they should think again. I'm not a fan of overstatement, and this isn't intended to scare new online enterprises into seeking legal assistance. It's just good advice. We are litigators. We defend lawsuits. We deal with these misunderstandings and issues everyday.

HostingCon and Upcoming Conferences

Summer is over. Time to look back, and look forward. Looking back on the past month or so, the HostingCon conference in Chicago stands out as an excellent opportunity to meet up with some old friends, meet some new ones, and learn the details about the next generation of hosting related services and related tech apps. I spent a lot of time with some EU based ISPs and a lot more time with clients in the hosting business. SES in San Jose (8,000 in attendance) was something else. I've already blogged on it a bit. Everyone involved in SEO and SEM was there in the heart of Silicon Valley.

Now, looking forward, San Francisco beckons in October at Online Marketworld, and then ISPCon will bring me back to Silicon Valley later that month, then to New York for Ad:Tech and to Vegas for Webmasterworld in December. I don't have everything ironed out yet, but the next conference is Online Marketworld and I'll be speaking about the strategies and tactics for protecting innovation outside of the context of traditional intellectual property rights. This is a really interesting subject, because if you cannot fit your innovations into the traditional IP categories of copyright, trademark, patent, or trade secrets, then how do you protect yourself? I'll be offering some food for thought along those lines.

"Internet Attorney": How We Work

You go to a large firm, arrange a conference call, and tell the Intellectual Property lawyer that someone came to your site, ran a spider, took your content, and launched a competing site. That someone, you just found out, is a former business partner who is also defaming your company on blogs. The IP lawyer, adept at filing copyrights and trademarks, drafting licensing agreements, and all of the standard IP work, looks dazed. He sees a litigation issue, and reschedules the call so he can include the litigation team. The litigation team asks you to explain what a spider is to them, but instead opts to bring in a young lawyer in an unrelated department who "knows technology" to assist them. When the business partnership issue comes up, they call their corporate and business organization lawyer to see what actual legal obligations exist and the issues surrounding the business entity ownership. While they are doing this, the contract department lawyer is called to get his feedback on your site's user contract to see if the access was prohibited by contract, and then the post judgment remedies lawyer (bankruptcy and collections) will evaluate the ability of this ex-business partner to pay a judgment if monetary damages are pursued. And, of course, the IP lawyer is still involved to guide the team on the copyright issue, but he is busy getting the Ist amendment lawyer involved to see whether you can obtain an injunction prohibiting this former partner's blog attacks. You can envision a very funny Youtube video about this process, can't you? A week later you realize that the legal issues include contract, copyright, business organization, litigation, torts, freedom of speech, bankruptcy and collections.

Here is how we work. Our firm is organized by the nature of the client. But instead of having a general practice in which this would be difficult to manage, we only handle the law of the web. If your legal issue is outside this subject matter, we refer you to another firm. That way, we can organize our practice around the subject matter of the web, and not have to divide our expertise by legal category. In the example above, this meeting would have involved one lawyer with the expertise to explain to you the issues involved with the legal partnership entity, the terms of use, the copyright and related infringement, the unauthorized access under state and federal computer crimes statutes, litigation, first amendment, and debt collection if this ex-partner filed bankruptcy.

Yes, we work in a highly collaborative environment as a team, but one team working on the same type of issues every day. I think that makes a big difference to our clients, particularly when a quick answer is needed to a pressing need. Big firms struggle with this because their skill sets are spread out among many different departments. Small boutique firms with an intellectual property practice struggle because they often don't have the wide scope of experience necessary.

I am not sure that firms can ever move away from being organized by legal specialties because it adds significant value to the big client. Lawyers who organize and manage corporate filings and registrations are really good at that. Employment lawyers are really good at dealing with employment and personnel matters. Litigators are trial lawyers, and they are really good at trying cases. This creates an obvious benefit for most clients of the firm. But not for the Internet business client who is faced with a problem that requires expertise across multiple legal practice areas.

Our skills are very broad in nature, but highly focused in application. Holistic analyses of problems or issues are at the core of our value equation. So for all of you who wonder why we limit our practice so "narrowly" to the law of the web, that's why.

SES Conference Update

The search engine industry conference in Silicon Valley was quite a show. Several thousand attendees (many of the biggest names in online search). Keep an eye out for an interview I did with the main Search Engine Watch website on trademark infringement and related issues for the SEO industry. There will also be a video coming out on Youtube from an interview I did with another industry site.

My take is that the industry is maturing, but Google basically is in the driver's seat. The entire SEO and online marketing industry follows Google's lead in almost every arena. Remarkable to see the devout following. It's also interesting to watch Microsoft, Yahoo and others mimic many of the Google offerings and business models (months or years behind Google). If anyone questions the dominant role Google is playing in the online advertising space they probably weren't at the conference.

Also had the opportunity to spend some time at the Google HQ. Interesting place, obviously, and the reputation is seemingly deserved. I heard one young recent college grad explain to another Googler that he had been there three weeks, and it was like Disneyland and he never wanted to leave. I guess having employees who are enthused and want to work all the time is business justification for the unique and relaxed work environment.

Our Beverly Hills office is jumping with music industry work. This area is exploding. We met alot of people from the mainstream music labels and related businesses looking to leverage assets into online businesses. Legally most of the sites will be fine. The success will lie in execution, and it will be interesting to see how the artistic and creative types do in a technology and business environment with competition coming from all corners of the globe. 

Silicon Valley Lawyer this Week

Just got back from HostingCon in Chicago, and I'm off again to San Jose for SES this week. We'll be there to meet many of our Silicon Valley clients and everyone else who wants to drop by. It's refreshing to get out and get some face time with those innovating the latest and greatest web based business strategies. I've been in this industry since 1994, raised venture capital and gone through the Internet bubble of the late 1990's as an entrepreneur, and with the evolution of technology and the business of the web that seems a long time ago now. I cannot imagine how I could practice in this field if not constantly engaged in the latest and most exciting changes. You definitely need to live the web constantly to stay in touch with the legal issues.

We've been working with a lot of start-ups lately. Now that the VCs are investing aggressively again, things are really heating up. It's tough to draw the line between my Internet entrepreneur days and my lawyer's role today. Business decisions are for clients. Fortunately we are able to ask the right questions, I think, to help our clients avoid some really imprudent decisions. We have a lot of smart clients working on launching new businesses and with a little prompting they do a very good job of figuring things out and weeding out faulty business models or strategies. The market is so up and down right now that it is hard to say what the future holds, but VC money is back, and in a big way. With some luck we'll see some more successful IPOs, and with that will come higher valuations for clients and better VC terms. We'll see how that plays out.

One of the hottest areas right now is music industry sites. With all of the attention the music industry has been receiving lately, it's no wonder a lot more of these sites are being proactive in managing risk. It's really not rocket science to get protected from trademark, copyright, defamation, privacy, and 2257 liability, but I am not sure there are many law firms out there willing to stick their neck out to give a definitive opinion on what to do to protect yourself. I'll blog a bit about the Search Engine Strategies conference upon my return.

The Law of Protecting Data

In my former life, I was the architect of a high volume credit card account processing system allowing hundreds of businesses to conduct highly secure and reliable e-commerce with major financial institutions. Our clients were some of the largest banks and credit card issuers in the world. It was a hard sell to very conservative banks in the mid-1990's, to be sure. Data security and privacy concerns had to be overcome. Today, legislation in the banking and medical industries mandate security requirements surrounding data. But what laws mandate best of breed data security policies and practices for the typical online retailer? Some states have laws requiring disclosure of data losses. But, for the most part, legislators have stayed away from creating standards for data security. The reasoning is that Government can only go so far when it comes to dictating how companies operate internally. I like the concept of a "hands-off" approach to governmental intervention. I prefer to let the industry set and, most importantly, enforce data protection standards. And that is happening. Take a look at the PCI Data Security Standard from the payment card industry that everyone is required, by contract, to follow. Nothing about it seems particularly onerous. It includes logical steps a company should be taking already to protect systems and data, requires appropriate documentation, and it also mandates ongoing auditing. It looks a lot like the business requirements we worked with ten years ago.

And with the hands off approach so far of the federal government, everyone would be wise to implement the data protections standards and program voluntarily. Self regulation is critical to avoid the burden of another federal law that increases the cost of doing business. Once again, these regulations are part of the contract with all credit card issuers today, and the penalties for non-compliance are huge, and they apply to everyone accepting credit cards to varying extents.

Music Industry Record Labels Are In Trouble

We've seen it for years. Disruptive technology disrupts business models. Disruptive applications of technology force innovative change. Some companies react and transition well when faced with innovation that threatens their businesses. Others (most) don't.

The music industry record labels were slow in reacting to the fundamental shift from CD to online distribution. Think about it. Artists used to dream of signing with a label. The label could be very selective in picking artists and controlling support for, and distribution of, the artist's work. And rightfully so, since their revenue was generally based on a percentage of CD sales. So, what happens when CD sales are replaced by online distribution? Merely changing the method of distribution shouldn't make much difference, you would think. Well, how would you feel if you owned a professional baseball team, and you only controlled the ticket prices? The parking, the concessions, the TV and radio rights, and all of the other related revenue streams were controlled, and revenue realized, by third parties? For a change, you, as the owner, would be calling for renegotiation of the player contracts. And, so, we find the same thing happening today.

Labels want to renegotiate their deals. They want a percentage of ALL revenue from CD sales, online sales, appearances, tours, product sales...they want to own a cut of the entire revenue stream. Quite smart. Too bad they didn't figure this out years ago and start transitioning to this new model in a more manageable way by educating the industry as to the coming challenges. Are labels going the way of stock brokers? Has the music industry finally succumbed to "disintermediation", another fancy term for taking out the middle guy? We'll have to wait and see. One thing is for sure, though. If the labels can't figure out how to add value commensurate with their compensation, they are in for a rough road ahead.

And here's the hard part. The online revenue streams today are complex, and negotiation on a case by case basis with artists will likewise by complex. Both sides need to understand all of the sources of revenue that exist today and are likely to exist in years to come. Relationships are less employer/employee-like, and more partner-like. For instance, if you are a label, and you agree to a revenue split for online record sales, I can easily imagine a business model that generates signficant non-sales revenue you don't get a cut of. And how about sharing online advertising revenue from streaming free video? There the parties need to decide who will take the lead on cutting deals. Are artists going to understand the online music world, and related revenue streams today and in the future, to make good decisions? How, as an artist, do you make sure revenue is accounted for fairly when your song is packaged with other artist's songs on a membership site? Your revenue share might be a percentage of membership dues, but is the percentage of dues fair, and what formulas can be put into play that will adjust compensation fairly? How do you make sure you are being paid fairly?

It is going to be an interesting process to be involved in over the coming months and years. Today, the artists are in a commanding position. They can opt to go it alone and distribute product directly online. Labels have to come to the table with a great value proposition. They don't seem to have any real options. My guess is that labels will try to treat the online music sites the same way they treated the brick and mortar music stores. We'll see if they can pull it off and control the distribution point. If they can, they'll be in control once again. It will take some remarkable strategic and tactical thought leaders working outside of the box to pull this off. Is it possible? I think so. Is it likely? Doubtful.   

Google and E-Bay Fight It Out

In an effort at full disclosure, I own Google stock. I don't own E-Bay stock.

Is it my imagination, or are two leaders of the online world acting a bit childish? First, Google pulls an immature move by running a competing event for its check-out service at the venue of the annual E-Bay convention, which of course competes with Paypal. E-Bay, in retaliation, pulls its PPC ads from Google, and then reinstates them but claims to have "tested" the alternative search engines and the results will mean less spend at Google. Come on, that is ridiculous. If you, E-Bay, weren't already doing this testing, shame on you. We even do it at our small law firm. This window of opportunity for E-Bay to conduct testing was no window at all. They could do it at any time, even while the Google ads were still running.

Of course, both of these companies may be acting a bit aggressively, and some even see it as a matter of immaturity, but this is typical technology company mischief. The only take I get out of it is that E-Bay shoud be embarassed because they apparently have not been running campaigns on all the search engines and evaluating performance on an ongoing basis. Oh, E-Bay, by the way, the demographics are different on each search engine so you WILL get better results on non-Google PPC advertising for some products and services. And even better results when you start up a new campaign reaching fresh prospects. There. The secret is out of the bag!

Maybe E-Bay just needs to hire some quality SEOs. Or, just maybe, they are still a bit upset at Google and they are trying something cute. This is what happens when "strategic partners" start competing. It's not a pretty picture.

When Are You Responsible For Your Affiliate's Misconduct?

This is not, of course, a simple issue. Your affiliate marketer goes off and infringes on someone's trademark, steals copyrighted content, spams, or does any assortment of actions that are illegal. Under the CAN-SPAM Act, you may very well be liable for the affiliate's "creative" commercial email program, and will usually be sued as the beneficiary of the misconduct. Typically if you did not conduct due diligence, and had no meaningful monitoring or auditing program in place, you'll have liability. Some states have passed laws that make you absolutely 100% liable.

Other misconduct is more difficult to evaluate in this context. We go back to the old principle of the nature of the relationship: is the affiliate an agent or an independent contractor? This analysis centers upon your control over the vendor. Control, when we consider it in the context of third party misconduct, is defined for the most part as having the ability to direct and control the conduct. Think of the difference as being an employee working for you as opposed to a contractor doing its own thing in an office far away. The former is an agent, the latter is not. However, if you knew, or reasonably should have known, of contractor misconduct, and you did not take reasonable steps to stop it, you will likely have responsibility for the conduct either due to an agency relationship or through theories of conspiracy. The odds are high that if your affiliate is sued then you will be sued, and the cost of defending and winning such a suit should cause you to take steps, in a public way, to only let those with good reputations join your affiliate marketing program, and then to implement performance standards and actively monitor compliance of your vendors. When misconduct occurs, you should consider terminating the relationship, although this is not always an easy decision to make.

If the affiliate is generating significant revenue for you and you value the relationship, there are ways to maintain it. But first determine what effect the improper conduct had on the revenue. If the revenue is in great part a result of the misconduct, discount that revenue from the value equation, and then decide if it is worth investing the time, effort, and resources to maintain the relationship. You'll be wise to seek legal counsel at this point to assist you. You need to be very confident that the affiliate can, and will, change its ways, that a reasonable person will believe that given all of the publicly available facts, and that you are willing to undertake a program of monitoring that will show ongoing vigilance. There are a lot of factors to take into consideration in handing out "second chances".

So, you need to have a due diligence program in place before accepting an affiliate marketer, you need to have performance standards established, you need to have an audit program in place to assure compliance with the standards, and you need to act swiftly when problems arise. Otherwise, you may very well end up on the receiving end of a federal lawsuit, and that is never a pretty picture.

Dozier Internet Law: Defamation Immunity Isn't Clear

Dozier Internet Law is often engaged to evaluate legal risk relating to a website. We also handle a lot of defamation matters in which businesses or professionals are being defamed by a third party posting on a site. The first question is whether there is Section 230 immunity under the Communications Decency Act for the site hosting the content. It is not a simple analysis typically. Keeping the apparent legislative intent in mind, it appears the intent of Congress was commendable when the bill was passed and signed into law. Basically, the argument went, no one should be liable for everything published by third parties on its website since traditional publisher liability implies oversight and editorial control over the content. That does not exist in the online world for the most part.

But, I believe the unintended consequences of such far ranging protection are changing the way the Courts interpret the immunity statute. And for good reason. Dozier Internet Law has seen rampant misconduct occuring among bloggers, including "blog rings" formed to effectuate a "mobosphere" attack for financial gain. Remember that the higher the traffic to a blog, the more a blogger can realize from selling advertising, and the blog site itself can be sold. It's a sleazy world out there. Just follow the money, and the motivation for attacking legitimate businesses is often clear.

Any meaningful editing of the content, manipulation of the information, or even re-characterization of the information, should result in a loss of Section 230 immunity. It's as simple as that. And Dozier Internet Law is starting to see Courts agreeing with this approach. Congress should tighten up Section 230 to make it clear that immunity is not available to those sites materially modifying or editing the content, those practicing selective optimization of posts, or those relying on the information by changing the character of the published defamation. There is a line to be drawn that needs some work, though. For instance, merely adding up results and presenting those without further material enhancement or manipulation should be fine, like Ebay's rating system seems to do. But when a site takes information, feeds it into a mathematical equation, blends it with other information, and materially changes the method, manner and nature of the information presented, then there should be no immunity. No one should be able to act like a traditional publisher, editing and controlling the message, but avoid liability.

Either the courts will take care of this problem, or Congress will step in. Expect that on one side of the debate in Washington will be the liberal free speech advocates opposing any changes except those that would extend the immunity protections, and on the other side of the debate will be the conservative, small business lobbies trying to get rid of the immunity altogether. I'd be surprised to see any movement on this with the present Democratic leadership in place, but you may see something happen if the Courts continue to contradict each other and struggle with the issue. Congress doesn't like the Courts "legislating from the bench". We'll see how this all develops in the coming months as this issue gets more and more attention.

Real Internet Lawyers Find Solutions

We are litigators. We are also trial lawyers. The two are not the same. Most firms have "litigators" who appear to be trial lawyers, but in the end most of the attorneys don't try cases. They litigate...which is the process of filing motions and making arguments, filing and responding to discovery, and all of the other aspects of taking a legal case through the process leading up to trial. We like nothing better, if the case is destined for trial, than to try a case against such a firm. Sure, they have lawyers that try cases, but the odds of getting a truly seasoned technology law trial attorney are slim. That is why you see so many settlements on the courthouse steps right before a trial begins. These are settlements that could have occurred long ago, even at the beginning of the case.

Sometimes the settlement is because the lawyers needed the time, at your expense, to figure the case out. Other times it is a fear of picking a jury and actually trying a case that motivates the firm to recommend settlement to a client. Lawyers know that senior partners often discourage settlement until the file is "mature" for settlement. Many lawyers take this to mean exactly what it often means: litigate it through discovery and motions and once appropriate revenue has been generated then look at settlement options.

If you are fortunate enough to actually have a trial lawyer representing you, then the issue becomes one of habit. Litigation lawyers are trained on the process of moving a case through the court process, and trial lawyers have highly developed skills in the art of trying a case to a jury. Note that neither has necessarily developed the skill of finding a win/win solution for the parties early on in the litigation process. Couple that void with what is often a superficial knowledge of the business and technology of the web and you begin to understand why many cases go on far too long and are settled on terms that could have been achieved without huge lawyer fees.

That is why in today's world, the best lawyers are often the few trial lawyers, seasoned at taking cases to jury trials and winning, with a strong business and technology knowledge base, who can take a complex set of facts, analyze those facts in the context of existing law, and implement a "push strategy"...pushing the dispute towards a win/win settlement. This isn't appropriate for every case; just most. And this approach isn't going to work in every case. Just most.

Clients have a tendency to think their case is one of the unique ones that will have to see the light of a courtroom and the eyes of a jury to prevail. This is rarely true. But the other side needs to think you are ready to go the distance, and that a trial and adverse jury decision is a real possibility. The lawyer on the other side needs to feel that he/she is at a knowledge and expertise disadvantage. After all, no one, particularly a lawyer, likes to be embarrassed.

Remember, it's about solutions! Don't let the time, effort and expense of litigation get in the way of growing your business. Every hour you spend on litigation matters is an hour you cannot be using constructively to develop, sell and grow your business. Every hour invested in legal issues is an hour away from driving your business towards success. When I was the CEO of an e-commerce company, I hated legal disputes and issues, and tried my best to stay out of them with pretty good success. Even for me it was a distraction. Every case will be a distraction for you also.

Keep focused and strive to find solutions to problems. You won't develop new business models, drive your growth, or recruit employees and executives while sitting in depositions. Am I saying that every case should be settled? Absolutely not. Some are destined for trial. The ability to envision the destiny of a case, see how it may play out and what the ultimate result may be, is job ONE for your attorney. Sir Francis Bacon said that "knowledge is power", and whether it is the knowledge of the technology of the Internet, the business of the web, or jury trials, it certainly applies today when selecting a trusted adviser as a lawyer.

ISPs Find A New Revenue Model in Commercial E-Mail

Less than a week ago I criticized the US Attorney for helping major ISPs create a new revenue source (charging commercial e-mailers for the right to send e-mails) by bringing criminal charges against a purported major spammer. Today the new business model I was anticipating was announced. Comcast, Cox, Road Runner, Verizon and others are reportedly joining together to, in effect, create a toll booth in which they charge e-mailers for each e-mail the ISPs let through their systems. This is a first major step towards all commercial e-mail being assessed a postage fee and, given the huge volume, this simply adds a huge revenue line to the ISP financial statements and results at the cost of other businesses.

Commercial e-mailers are worried about civil suits from AOL, Microsoft and others, and the recent criminal indictment is going to scare them into these programs. The US Attorneys and Attorney General need to stop being so naive as to think that all of the "free" help they are getting from ISPs is purely to protect the public. Hogwash. It is to build a powerful new revenue model in which they can immediately monetize the size of their installed e-mail base. Expect now to see the ISPs make it easier to get on their "black lists" and more difficult, or altogether impossible, to get on their "white lists". This will really drive demand for their pay per e-mail services, and in conjunction with civil lawsuits and, most importantly, criminal indictments at taxpayer expense, the demand for this "get out of jail free card" pre-paid e-mail program will skyrocket.

The Department of Justice and local prosecutors should understand that while some of the criminal indictments may be about fraud and phishing, they and others always couch the prosecution in terms of the defendant being a spammer! That reinforces the need for commercial e-mailers, even if they are 100% compliant with CAN-SPAM, to seek shelter.

The Changing Legal Geography of Your Online Business

I am often asked to give my opinion on the issues facing a new online business today. I think the biggest change is a loss of the protections arising from your traditional neighborhood and community. Let's travel back in time and see what I mean.

It's 1990, and you want to start a business. Everyone needs a good accountant and lawyer, you are told. So, you go visit an attorney down the street and he sets you up with a corporation, explains business license and employment rules, and reviews your standard contract. Now, all you need to do is lease that retail space! Your family accountant puts you in touch with a leasing agent. You are ready for your retail store lease to require a hefty deposit and a three year commitment with your personal guarantee for monthly payments. For the budding entrepreneur in days past the legal needs did not require a great financial commitment, but the lease did. And if you ever got sued, your local lawyer could easily handle the matter for you at little expense.

It's 2007, and starting a business has never been easier. Just go and start up an online store for next to nothing and start selling. But something has indeed changed. The days of going to your local lawyer for legal guidance and advice are over. Now, you must consider complying with the laws of every state in which you have customers and/or are advertising online. You are faced with issues that are complex and require specialists. The worst thing that can happen is for you to be sued individually in a far off venue! (You are not going to be sued in your hometown anymore.) And the cost of the defense of federal lawsuits dealing with Internet and intellectual property issues can go into the six figures pretty easily.

Today a business can be launched on a very small budget, but the risks have never been higher. Smart entrepreneurs know that quality legal work up front is worth the price even though everything about launching a web business seems to focus on low cost. Things have changed dramatically, and the days of having comfort that your reputation, honesty, ethics, and offline community will protect you from attack by outsiders is, unfortunately, a thing of the past.

So, when I am asked by the next small business person whether it is easy and cheap to launch an online business, my response is that it depends on what you have to lose, and whether you feel lucky.

Cybersquatting and Trademark Infringement

A lot has been written lately about the Cameroon govt. deal for domain names. If you aren't up on things, one individual has locked up a contract having all domain names not purchased (.cm names) point to a fairly typical PPC parking page. So, when someone accidentally misspells a domain name they are directed to a page with advertising for competitor ads. It is reported that such use gets around the domain name rules since the owner of the page does not take ownership of the domain name and there is not much that can be done. I dare say, however, that if an online retailer licensed the use of a competitor's domain name, a trademark infringement action would be coming. And I can envision other claims that could be asserted under various state unfair trade practice statutes.

It brings home one important point. You can't beat the experience of litigators and trial lawyers to maneuver through some of the complex legal issues of today. There are not cases to look up on the point, you cannot go to a treatise or a law review article to "get the answer", and the only solution is often resorting to good old brain power coupled with experience and high quality analysis.

Here is what I would do if a client's name was being used in this situation. I would contact the owner, explain that we intend to bring a trademark infringement and unfair competition lawsuit, and in the alternative propose a confidential settlement agreement in which he would turn the name over to our client. I bet you we would get it. Maybe because the owner would go to our website and realize that we are trial lawyers, have no problem pulling the trigger, and envision a tidal wave of litigation that would ensue when we issue our press release. No telling how many cases we have settled because the other side knows we are serious. I recall one extremely large domain name owner telling us, through legal counsel, that instead of filing a UDRP complaint just call them next time and they would transfer the domain name to us.

So, next time you read or hear about an analysis of a legal issue, keep in mind that there are often approaches that are available that will get the intended results, even when it looks like the law may be against you.

 

Criminal Spam Prosecutions Begin

I guess it was just a matter of time. I have been wondering, ever since a Virginia jury sentenced a spammer to seven years in prison, when and where the next wave of criminal prosecutions would come. The "spam king", according to news reports, was indicted in Washington state and arrested yesterday.

I don't like these criminal prosecutions for sending commercial e-mail, even when rather nefarious methodologies are used. Is it any wonder that the prosecution comes in Microsoft's backyard? Microsoft spends a lot of money each year on attacking spam from a technical standpoint, but isn't that the cost of doing business? These major ISPs (you know who you are) act like they are doing the public a favor in combating spam, but they forget that e-mail was the "killer application" that gave them life in the first place. Sometimes I think that all they are really doing is creating a demand for charging commercial e-mailers to let "spam" make it through their systems. So, if that is the case, why is government protecting these private commercial interests with aggressive and expensive prosecutions? One thing is for sure. All of our commercial e-mail clients will have to be even more aware of the criminal risks with this apparent change in strategy to combat spam. I wonder if the impact of this will simply be to move more mailers towards buying the ISPs' spam mailing services? What a great marketing department...the US Attorney's office!

I find it interesting, by the way, that this guy is supposed to be living the high life yet Microsoft has a $7 Million unpaid civil judgment against him. If he has funds, has the ritzy condo, sports car etc., then I don't understand why Microsoft hasn't been willing or able to seize those assets in execution on its judgment? We handle a lot of defense litigation against Microsoft, and their spam business people, in-house counsel, and outside law firms are very thorough, very smart, and very effective. Is this guy really as big as they say? I guess we'll find out, buy I can tell you that sending a million e-mails a day is a relatively lightweight load for commercial e-mailers, although it sounds like a huge amount to someone outside the industry.

Utah Needs to Lay Off Web Businesses

If you have a web business, it is likely you have to comply with all of the laws of the states into which you are marketing or have clients. The power of states to influence the conduct of others around the country has never been stronger. And with that apparent absolute power comes, unfortunately, bad laws. Utah seems to lead the way in passing new laws that are just bad ideas (like the spam/commercial email registry and the recent PPC debacle). Lately I have been noticing a more active enforcement by Utah of its own consumer protection statutes and policies against our clients, insisting that the laws of Utah must be followed no matter where a website or customer resides. Come on. That's just silly. Utah needs to stop acting like the Internet watchdog for everyone else in the country. Although the various federal departments charged with enforcing our laws are overwhelmed, I think it is wrong for Utah to continue to aggressively pursue its own interests while attempting to supplant the authority of other state and federal governments to establish the proper rules of online commerce.

Which leads me to the main thought behind this posting. When I was a lobbyist at the Virginia General Assembly there was a representative of a Northern Virginia region who kept filing bill after bill, year after year, attempting to deal with access by children to adult content. As well intentioned as he might have been, he did not have an understanding of the technology or business of the web to even get close to drafting a decent bill that could withstand constitutional challenge. In short order, as others began filing Internet bills and total confusion ensued, a new committee of the House of Delegates was formed to deal solely with online and technology issues. Looking back over the past ten years, I have to say that Virginia has passed very few bad bills (other than a version of UCITA) dealing with the regulation of the Internet, and those that have passed often became the model for other states to follow.

That's why Utah really riles me. It can be done right, if you want to. You either lead like Virginia (the founding state of the Internet), follow like many other states, or get out of the way. Utah...you need to get out of the way.

Attempted Copyright Infringement Will Eventually Pass Congress

All of a sudden the cries of contempt are everywhere. The Bush administration has passed to Congress proposed legislation which makes it a crime to even ATTEMPT to infringe on a copyright. The free speech, individual rights, and liberal commentators are decrying this legislation....after all, how, they ask, can we prosecute someone for attempting to commit a crime? I used to be a criminal defense lawyer in the 1980s. One of my fondest memories was winning an ATTEMPTED murder case, which was right after I kind of won an ATTEMPTED grand larceny case, and right before I soundly lost an ATTEMPTED prison break trial. Hhhmmm. Was I dreaming? Coincidentally, I don't remember having any attempted jaywalking, attempted drunk driving, or attempted cursing and abusing cases. Isn't the difference obvious?

It is a matter of degree! And our laws have quite capably addressed attempted property damage crimes through establishment of financial thresholds. It will likely happen here also. We don't want government prosecuting some website business for using an image from a competitor. We probably don't mind our government going after the owner of a website that is selling exact copies of a popular movie and making six figures. It's all about money, frankly.

There are some scary concepts in the new legislation dealing with the ability to pursue alleged infringers when copyright materials are not registered. This opens up a can of worms. Maybe some of these ACLU types should focus their time and efforts on this issue. The payback will be better. And if you can figure out what business concerns are pushing this legislation, I bet you will agree with me that it's all about money anyway.

DMCA Copyright "Take-Down" Notice Stinks

Am I the only one wondering what Congress was thinking when they passed the DMCA website take-down provision? Basically, if you are someone with nothing to lose (and we see them everyday), all you have to do is serve a DMCA notice on the webhost of a site and it, by law, must be taken down...off the web, gone, kaput...and while the law does allow for it to be placed back up AFTER ten days if the site owner files an affidavit denying copyright infringement, the damage is obviously done. It is bizarre to think that in the US of A we effectively allow the total seizure of a business with no legal involvement, no due process, no real repercussions to abusers, and no meaningful validation process prior to using this "online death penalty". Do you get the idea that someone was asleep at the switch in Washington when this made it through? Bad law. Needs to be repealed or amended into something a whole lot more appropriate. We are on both sides of this issue all the time in our law practice, and sometimes it helps our client, and sometimes it hurts our client. But it still stinks.