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The Law and Business of Social Media

With Highly Anticipated Copyright Decision, The AutoHop Litigation Is Coming to a Close

Posted in Copyright

In 2012, DISH Network announced two novel product offerings that would result in considerable backlash from the four major broadcast television networks and set in motion a three-year, wide-ranging, multi-front battle with the networks. As the dust now begins to settle, the copyright litigation has resulted in important precedents that will help define the boundaries under the Copyright Act for the multi-channel programming distribution industry.

DISH Introduces PrimeTime Anytime and AutoHop

On Jan. 9, 2012, at the Consumer Electronics Show (CES) in Las Vegas, DISH unveiled its PrimeTime Anytime service. In connection with its two-terabyte Hopper DVR, PrimeTime Anytime allows DISH subscribers, with a few pushes of a button, to copy up to eight days of ABC, NBC, CBS and Fox primetime programs. Once initiated, the service continually makes copies of the primetime lineup going forward, with the last eight days available for the subscriber.

About four months later, on May 10, 2012, DISH introduced AutoHop, which works in conjunction with the PrimeTime Anytime service and allows subscribers, with the single push of a button, to replay those network programs without advertisements. Viewed as a serious threat to their advertising supported revenue model, the introduction of this ad-skipping technology pushed the major networks to take action.

On May 24, 2014, the networks launched litigations. In the Central District of California, Fox, NBC, and CBS, each in separate cases, filed copyright infringement complaints against DISH. See, Fox Broad. Co. v. Dish Network LLC, 2:12-cv-04529-DMG-SH (C.D. Cal.), NBC Studios LLC v. Dish Network Corp., 2:12-cv-04536-DMG-SH (C.D. Cal.), and CBS Broad. Inc. v. Dish Network Corp., 2:12-cv-04551-DMG-SH (C.D. Cal.). On the same day, DISH — apparently seeking the protection of the then more favorable Second Circuit authority, including Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (the “Cablevision decision”) — preemptively moved for declaratory judgments against ABC and the other networks in the Southern District of New York. See, Dish Network, L.L.C. v. Am. Broad. Cos., Inc., 1:12-cv-04155-LTS-KNF (S.D.N.Y.).

Ultimately, the cases proceeded on two tracks, with the Fox and NBC cases proceeding in California before the Honorable Dolly M. Gee, and the ABC and CBS cases proceeding in New York before the Honorable Laura Taylor Swain.

While the networks also pursued breach of contract claims arising out of their existing agreements with DISH, the focus here is on the core copyright claims. Counterparties like DISH and the networks will often agree to expand or limit their own rights under the Copyright Act depending on their own commercial interests, but the more lasting legacy of the AutoHop cases will be the copyright precedents they have established.

DISH Wins the Early Rounds In California

On Aug. 22, 2012, Fox made the first move and sought a preliminary injunction against DISH’s PrimeTime Anytime and AutoHop services. Fox suffered an early defeat. On Nov. 7, 2012, the district court denied Fox’s motion for preliminary injunction, finding that Fox had not established a likelihood of success on the merits of its claims with respect to those two services. Fox Broad. Co. v. Dish Network, L.L.C., 905 F. Supp. 2d 1088, 1111 (C.D. Cal. 2012)

First, with respect to the claims that DISH directly infringed Fox’s copyrights in offering the PrimeTime Anytime service, the district court held, relying on the Cablevision decision, that because the subscriber is the one who decides whether to initiate the PrimeTime Anytime service, the subscriber not DISH is the one who makes the copies. The district court also held that notwithstanding the extent of DISH’s control over which programs get recorded and the subscriber’s inability to stop a recording in progress, DISH is not “the most significant and important cause” of the copying.

Second, with respect to the claims that DISH was secondarily liable under the Copyright Act for the conduct of its subscribers, the district court held that to establish derivative copyright infringement, direct infringement by a third party must be established. The district court held that DISH subscribers’ conduct is no different than that of the consumers in the Supreme Court’s decision in Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) (the ” Betamax” case), which involved copying programs to Betamax tapes with the ability to skip ads. Because the DISH subscribers would not be liable for direct copyright infringement, the district court held that DISH cannot be liable for secondary or derivative copyright infringement.

Fox immediately appealed the decision to the Ninth Circuit. Again, Fox lost. On July 24, 2013, the Ninth Circuit held that Fox did not demonstrate a likelihood of success on its copyright infringement claims regarding the PrimeTime Anytime and AutoHop services. Fox Broad. Co. v. Dish Network L.L.C., 747 F.3d 1060 (9th Cir. 2014) (as amended). The Ninth Circuit, citing the Cablevision decision with approval, held that Fox failed to demonstrate a likelihood of success on its direct copyright infringement claim regarding PrimeTime Anytime, because infringement would require DISH to cause the copying, but here, because DISH’s program creates the copy only in response to the subscriber’s command, the subscriber causes the copying. The Ninth Circuit further held that Fox was unlikely to succeed on its claim of secondary copyright infringement for the PrimeTime Anytime and AutoHop services. The court held that advertising skipping does not implicate Fox’s copyright interest, because Fox does not own the copyrights to the ads aired during commercial breaks. While Fox would later note that it in fact owns a copyright interest in ads promoting Fox programs, the district court would hold that the Ninth Circuit’s holding on the merits of Fox’s ad-skipping claims would have resulted in the same outcome.

Fox Expands Litigation Scope

DISH Anywhere and Hopper Transfers

On Feb. 21, 2013, during the appeal of the earlier preliminary injunction decision, Fox expanded the litigation by amending its complaint to include two additional DISH product offerings.

First, with respect to DISH’s second-generation Hopper set-top box, loaded with Hopper, Sling and DISH Anywhere, which allows subscribers to view broadcast signals over the Internet, Fox claimed that DISH publicly performs Fox’s copyrighted works by streaming them over the Internet and is secondarily liable for the conduct of its subscribers.

Second, with respect to a service called Hopper Transfers, which allows subscribers to copy programs saved on their Hopper DVRs to mobile devices, thereby enabling them to watch programs where they may not have Internet connectivity, Fox alleged that this service violated Fox’s exclusive right to reproduce the works and made DISH secondarily liable for the conduct of its subscribers.

As it had with respect to PrimeTime Anytime and AutoHop, Fox moved for a preliminary injunction on the DISH Anywhere and Hopper Transfers products. On Sept. 23, 2013, without reaching the question of whether Fox was likely to prevail on the merits of its claims, the district court again denied Fox’s preliminary injunction motion. The district court held that “[i]f a plaintiff fails to establish that a significant threat of irreparable harm exists, the Court need not reach the likelihood that he would be successful on the merits of his claims.” Fox Broad. Co., Inc. v. Dish Network, L.C.C., No. CV 12-04529 DMG (SHx), 2013 U.S. Dist. LEXIS 187499 (C.D. Cal. Sept. 23, 2013)

As before, Fox immediately appealed to the Ninth Circuit. Fox lost again. On July 14, 2014, the Ninth Circuit, in a summary six-paragraph order, affirmed the district court’s decision focusing on the failure to show irreparable harm without discussing the merits of Fox’s claims. Fox Broad. Co. v. Dish Network L.L.C., No. 13-56818, 2014 U.S. App. LEXIS 13348 (9th Cir. July 14, 2014).

DISH Also Prevails in the Early Rounds in NY

Separately, on Nov. 23, 2012, in its case pending in the Southern District of New York, ABC also moved for a preliminary injunction against DISH based on the PrimeTime Anytime and AutoHop features. ABC’s preliminary injunction motion met the same fate as Fox’s motion.

On Sept. 18, 2013, the district court denied ABC’s motion for a preliminary injunction. DISH Network, L.L.C. v. ABC, Inc. (In re AutoHop Litig.), No. 12 Civ. 4155 (LTS) (KNF), 2013 U.S. Dist. LEXIS 143492 (S.D.N.Y. Sept. 18, 2013). With respect to ABC’s direct infringement claim, the district court found that ABC had failed to demonstrate “likelihood of success on its direct copying cause of action because the evidentiary record indicates, and the Court finds, that the consumer makes the copy [such that there] is thus no factual basis upon which DISH could be found liable for direct infringement of ABC’s right of reproduction.” With respect to the secondary infringement claim, the district court found that DISH had “demonstrated that it is likely to succeed in carrying its burden of demonstrating that its subscribers’ time-shifting constitutes fair use [and that] ABC has failed to demonstrate that it is likely to succeed on the merits of its claim of secondary or vicarious infringement.”

ABC appealed the decision. While the Second Circuit heard oral argument on Feb. 20, 2014, the court never got the opportunity to decide the appeal.

ABC and CBS Settle With DISH

On March 3, 2014, ABC and DISH issued a press release announcing that the parties had reached a settlement of the dispute in connection with the renewal of the carriage agreement. Of critical importance to DISH, the agreement granted DISH the “rights to stream cleared linear and video-on-demand content from the ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN and ESPN2, as part of an Internet delivered, IP-based multichannel offering.” Thus, the renewal agreement set the groundwork for DISH to be able to launch its Sling TV, which is a first of its kind over-the-top offering that includes ESPN sports programming. Of critical importance to ABC, DISH agreed to “disable AutoHop functionality for ABC content within the C3 ratings window.” Thus, DISH subscribers would now have to wait until three days had passed before they could play back primetime ABC programming while automatically skipping the advertisements.

Similarly, on Dec. 6, 2014, CBS and DISH issued a press release announcing a renewal of their carriage agreement and the settlement of the litigation. The parties announced that “[t]he agreement will result in dismissal of all pending litigation between the two companies, including disputes over PrimeTime Anytime and AutoHop [and that as] part of the accord, DISH’s AutoHop commercial-skipping functionality will not be available for CBS Television Network-owned stations and affiliates during the C7 window.” Thus, DISH subscribers would now have to wait until seven days had passed before they could play back primetime CBS programming while automatically skipping the advertisements.

The Fox Summary Judgment Decision

On Aug. 22, 2014, in the California action, Fox and DISH filed opposing motions for summary judgment on Fox’s copyright claims with respect to the AutoHop, PrimeTime Anytime, DISH Anywhere, and Hopper Transfers product offerings.

On Oct. 17, 2014, the district court, from the bench promising a written decision to follow, provided the parties with its tentative decision on the claims. With respect to each of the core product offerings, the district court noted that she was inclined to rule in favor of DISH.

On Jan. 12, 2015, the district court issued its written summary judgment decision under seal. Shortly thereafter, DISH and Fox filed a joint stipulation noting that the current Fox carriage agreement expires on Oct. 29, 2015, that “DISH has settled similar disputes with both ABC and CBS in the context of renewals of their respective … agreements,” and that the parties “believe it highly likely that the negotiation later this year of a renewal of their 2010 agreement will result in resolution of this lawsuit.” The parties proposed keeping the summary judgment order under seal during the stay, claiming that “unsealing the Order may impair the parties’ ability to reach a resolution of the case.”

Although it granted the stay motion, the district court denied Fox’s and DISH’s request to keep the summary judgment order under wraps. On Jan. 21, 2015, the district court unsealed its written summary judgment decision, which revealed a clean sweep for DISH on Fox’s copyright claims regarding the core product offerings, AutoHop, PrimeTime Anytime, DISH Anywhere, and Hopper Transfers.

In reaching the decision, the district court rejected the expansive reading of the Supreme Court’s decision in ABC, Inc. v. Aereo, Inc., 134 S. Ct. 2498 (2014) that Fox advocated. While Fox argued the Aereo decision was a “game-changer,” the district court disagreed, noting the Supreme Court’s “effort to cabin the potential overreach of its decision” and its express admonition that “its ‘limited holding’ should not be construed to ‘discourage or to control the emergence of use of different kinds of technologies.'” The district court found that Aereo should be limited to companies that engage in conduct like Aereo, stating that “Aereo’s holding that entities bearing an ‘overwhelming likeness’ to cable companies publicly perform within the meaning of the Transmit Clause does not extend” to DISH’s product offerings.

Contrary to Fox’s suggestion, the district court further expressly held that the volitional conduct doctrine survives the Aereo case. The district court held “[t]he volitional conduct doctrine is a significant and long-standing rule, adopted by all Courts of Appeal to have considered it, and it would be folly to presume that Aereo categorically jettisoned it by implication.”

What Lies Ahead

With CBS and ABC having already settled with DISH and a settlement with Fox likely to be completed before the expiration of the parties’ current carriage agreement in October 2015, NBC would then be left as the last remaining network with which DISH has not reached an accord.

In comparison to these other networks, NBC has not been active in the litigation. Pursuant to an Aug. 6, 2014 stipulation between the parties, the NBC action was stayed until a final judgment in the Fox action. To date, no action has been taken to lift the stay. In light of the March 2013 acquisition of NBC by Comcast, it is questionable whether NBC has the same interest in pressing copyright claims that, if successful, could limit the rights of a programming distributor like Comcast. Thus, one would imagine that DISH and NBC will likely also reach an accord.

If the recent summary judgment decision in the Fox action marks the end of the road for the litigation, these rulings with respect to ad-skipping, the automated wholesale copying of programming blocks, and place-shifting devices such as DISH Anywhere and Hopper Transfers, will likely provide greater license for distributors to offer these products to their subscribers and limit the copyright owners’ ability to prevent the distribution of their works through new distribution channels.


This article originally appeared in the Intellectual Property Strategist.

Twenty Years Down the Road: A Q&A With Paul Goldstein, Author of Copyright’s Highway

Posted in Copyright

More than two decades have passed since internationally recognized copyright law expert and award-winning novelist Professor Paul Goldstein of Stanford Law School (and Of Counsel to Morrison & Foerster) published his landmark book, Copyright’s Highway: From Gutenberg to the Celestial Jukebox—a wide-ranging and insightful (not to mention entertaining!) examination of the past, present and future of copyright law, from both a cultural and legal perspective. We sat down with Professor Goldstein to discuss how his predictions have fared over the last twenty years, and what his thoughts are on the future of copyright law.

Socially Aware: In writing Copyright’s Highway, at a time before the existence of Hulu and Spotify (and during which Amazon and Netflix delivered content solely by physical mail), you predicted with almost spooky accuracy our society’s transition from traditional content distribution models to the “celestial jukebox,” which you defined as a “technology-packed satellite” or earthbound web of “cable, fiber optics and telephone wires” providing on-demand access to “films, sound recordings and printed materials” alike. Looking back at your predictions, how do you think you did as a prognosticator? 

Prof. Goldstein: In broad outline, I think the book’s predictions were pretty accurate. I had help, though. Between 1972-1974, I had the opportunity to do some legal and policy work with a small Palo Alto company headed by a brilliant engineer and visionary, Paul Baran, that, among other projects, was consulting with the Defense Advanced Research Projects Agency on the divestment from government control, and introduction into the private sector, of something called the Arpanet­—which matured into what we know today as the Internet. As I said, it was a small company—Vint Cerf was one of the other two principals—but it had no problem with big ideas. My work and conversations with Paul, Vint and Ed Parker, the other principal, surely informed what I wrote in Copyright’s Highway.

Socially Aware: Are there content delivery developments today that you hadn’t anticipated in Copyright’s Highway? Have you been surprised at how rapidly that transition has occurred?

Prof. Goldstein: The delivery (and implicitly the production) model I had in mind was that the traditional suppliers of entertainment and information—film studios, record labels, book publishers—would continue to supply content through this new, speedy and highly individuated channel, but would be joined as suppliers by individual creators—writers, musicians, even filmmakers—taking advantage of the new economies of digital production and delivery to bypass these more traditional institutions. I thought that would happen sooner than it did, and I also hadn’t a clue about the emergence of such low-creativity adventures as file-sharing and YouTube.

Socially Aware: You also anticipated in Copyright’s Highway the key issue raised in 2014’s most closely followed U.S. copyright case, American Broadcasting Companies, Inc. v. Aereo, Inc.:  “[W]ill courts call it a public performance when a copyrighted work is not broadcast simultaneously to a large public but rather is transmitted to subscribers by the celestial jukebox, one performance at a time, on demand?” In its opinion last summer, the Supreme Court answered in the affirmative (at least with respect to the particular transmission methods employed by Aereo). What was your reaction to the Aereo decision?

Prof. Goldstein: My first reaction to Aereo was relief that the Court got the law right. The second was surprise that the majority opinion was authored by Stephen Breyer who, from his 1970 tenure article in the Harvard Law Review, “The Uneasy Case for Copyright,” on through his first sale opinion in the Kirtsaeng case the previous term, has been no fan of a robust copyright system. Someone who does support a robust copyright system might be disappointed with the extent to which the majority opinion tethered the Aereo system to the analogue of more traditional cable systems (a tactic presumably dictated by the need to assemble a majority), but on the crucial question of what the 1976 Act means by “public performance” in the context of transmissions, the majority opinion got the answer as demonstrably right as the Second Circuit got it demonstrably wrong in the decision below and in the Cablevision case.

Socially Aware: Aereo supporters have predicted doom and gloom for the celestial jukebox and other innovative cloud solutions in the wake of the Supreme Court’s ruling, despite the Supreme Court’s efforts in its decision to limit the impact to Aereo’s specific business model. Given your Nostradamus-like track record, we’re interested in your predictions regarding the short-term and long-term effect of the Aereo decision—any thoughts?

Prof. Goldstein: The short term is pretty much past by now and, on the ground, I think that we have seen no great threat to innovations in the cloud emerging as a consequence of Aereo. Longer term, I believe that a factual distinction between the Cablevision and Aereo systems—that in the former there was an occasion for license negotiations between the transmission provider and the content supplier, and in the latter there was not—will take on added legal salience. The point, not lost on the Court, is that if program suppliers want to capture the value of such functionalities as remote DVR, they can put this on the table when they negotiate their next license agreement with cable companies. The Aereo model provided no such occasion for contract negotiations. This is, however, only a factual distinction between the two cases, and not an endorsement of Cablevision, which got the law so painfully wrong.

Socially Aware: In Copyright’s Highway, you explored issues raised by private copying, including efforts by courts over the years to define the line between “public” and “private” copying. Congress has previously responded to concerns regarding private copying in the context of library photocopying (through Section 108 of the Copyright Act) and home audiotapes (through the Audio Home Recording Act). Any thoughts today as to how the public vs. private issue may play out going forward?

Prof. Goldstein: Looking forward, there is no more important battleground for copyright than the private-public distinction. Private copying, although it undermined licensing possibilities for film studios (Betamax) and publishers (Williams & Wilkins), never threatened the very existence of these sources of creativity, for alternative markets (theatrical, free TV, pay TV, cable, in the case of film; library and individual subscriptions in the case of print) existed side-by-side with these free uses. By contrast, to treat public performances of streamed films and music as “private,” as Cablevision misconstrued the 1976 Act to do, or to propose that the Act be amended to exonerate all private uses from copyright control, as one self-appointed American public policy initiative proposed, would cut the economic heart out of copyright industries for which, in the age of the celestial jukebox, private uses will be the only markets, as other, less convenient markets grow smaller by orders of magnitude.

Socially Aware: In your book, you discuss the impact the photocopier had on notions of copyright in the 1960s and 1970s through the lens of Williams & Wilkins Co. v. United States. And, of course, the Sony Betamax was another disruptive technology that helped to shape today’s copyright laws. The common wisdom in Silicon Valley and elsewhere is that copyright law must make accommodations for cutting-edge technologies—that, as a society, we simply can’t allow laws adopted in the analog era to prevent technological innovation and progress. Yet, with Aereo, we’ve seen a promising, potentially game-changing technology stopped dead in its tracks due to copyright law. What’s the interplay between new technologies and copyright law? Should new technologies receive some benefit of the doubt when they don’t appear to fit nicely into our decades-old copyright regime? Or should we wait for Congress to intervene?

Prof. Goldstein: In the current political environment, waiting for Congress to act is like waiting for Godot, so let’s put that possibility aside. And certain—but far from all—voices in Silicon Valley are correct in how they frame the proposition that copyright law ought to be designed to accommodate new technologies. But, that said, it would be a serious mistake for policy makers (and I include the courts) to reflexively reach for a new exemption or an expanded fair use any time copyright appears to stand in the way of the roll out of some new technology. It would be a mistake because the characteristic impediment in all of these cases is not copyright, but the transaction costs associated with securing licenses under copyright. The proper target, then, is not copyright, but transaction costs, and digital facilities, including the Internet, offer dramatic possibilities for reducing these transaction costs to close to zero. Today’s Congress, faced with the picture that confronted Congress a century ago, of musical performances in hundreds of thousands of restaurants, saloons and dance halls, all beyond the reach of individual composers or publishers to control, would probably carve out an exemption for these uses, citing transaction costs as an impediment to licenses, and the occasion would never have arisen for Victor Herbert and his fellow composers and music publishers to form ASCAP to engineer  a means for reducing  the transaction costs connected to licensing these performances. (Congressional stalemate does have certain benefits!)

Socially Aware: In your book, you discuss the impact the celestial jukebox might have on the traditional filtering or screening role played by book publishers and motion picture and record producers—allowing artists of all disciplines to directly access the public at little or no cost over the Internet, bypassing these types of traditional intermediaries. And, once again, since the publication of the book, we’ve seen the creation of new channels pursuant to which content creators can directly connect with their audience. Is there still a role for traditional content intermediaries? Have you seen signs that such intermediaries are adapting to this change?

Prof. Goldstein: It’s still too early, I think, to forecast how the individual-intermediary tradeoff is going to shake out. In terms of quantity, the Web has certainly enabled a vast outpouring of self-published novels; in terms of quality . . . well, Fifty Shades of Grey was originally self-published. The same can be said for music. I would keep my eye on the still primitive technologies of recommendation engines if I wanted to speculate on the ultimate role of print and music publishers in screening works for consumers. The large publishers, at least, don’t do a particularly good job of it at present, and I can imagine that between developments in artificial intelligence and the spread and increasing sophistication of social networks, we are one day going to see the technologies of the Web overtake the craft of publishers and record labels in targeting new works at receptive audiences.

Socially Aware: There’s talk out there about the need for an extensive overhaul of the U.S. Copyright Act to ensure its relevance to the digital age. Do you see such an update to the law happening any time soon? What are some of the issues that you think should be addressed in connection with any such update?

Prof. Goldstein: Some years ago I gave a talk entitled “Copyright on a Clean Slate” suggesting what a copyright law might look like if it took into account only the contemporary conditions surrounding the production and use of copyrighted works, and if it was unencumbered either by history or by the special pleadings of industry groups. That law, which of course would never be enacted, would be no more than four pages long—about the length of the first U.S. Copyright Act in 1790—and would possess the immense virtue of being immediately apprehensible by the lay user of copyrighted works. Short of that, I do hope that Congress gets around to dealing with the question of orphan works, even if only in laying the framework for the private sector to develop mechanisms for clearing rights, and also—this was the subject of hearings just last week—providing the Copyright Office with the budget and the technological independence that it needs to execute its mandate well.

Socially Aware: Professor Goldstein, thank you for sharing your thoughts with us! (We note that, of course, all views expressed by Professor Goldstein are his own, and not to be attributed to Socially Aware, Morrison & Foerster, its clients or others.) For our readers, if you haven’t had the pleasure of reading Copyright’s Highway, check it out here.

Oh Snap! Social Media, Snapchat and the Need for Platform-Specific Marketing Strategies

Posted in Online Promotions

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One of the fascinating things about social media is that, from a marketing standpoint, each social media platform offers its own unique set of features and opportunities; as a result, a marketing strategy that proves successful on one platform is likely to be a flop when applied to another platform. Each platform requires a marketing strategy tailored to the particular strengths of that platform.

(By the way, the same is true with respect to legal risks associated with social media platforms – each platform presents unique risk issues – but that’s a topic for another blog post.)

So this brings us to Snapchat, a red-hot, innovative social media platform that seeks to join Facebook, LinkedIn and Twitter as one of the giants in the industry. With 100 million monthly active users, a valuation that could rise as high as $19 billion, and a user base that primarily consists of 13-to-25-year-olds, the “disappearing messaging” platform Snapchat is on the radar of nearly every B2C company anxious to grow its brand on social media.

But, for most businesses, advertising on Snapchat is likely to be cost-prohibitive; the company is reportedly charging $750,000-a-day for regular ads that appear in everyone’s feeds.

According to marketing experts, however, businesses can nevertheless capitalize on Snapchat’s reach by launching promotions that capitalize on the sense of urgency that the platform’s disappearing messages create. That is, by embracing a strategy that takes into account the unique features of the Snapchat platform.

Case in point: AdAge suggests that retailers offer potential consumers in-store only coupons with a surprise offer that they’ll learn the value of – 10% off or 30% off, for example – only upon reaching the check-out counter (the Snapchat user wouldn’t be able to open the snap containing the coupon before reaching the register because the coupon would disappear before he could redeem it).

Other ways for companies to leverage Snapchat’s unique characteristics can be found in this Marketing Land article.

When it comes to social media marketing, one size does not fit all.

Status Updates

Posted in Status Updates

Blawg rules. The California State Bar has issued an opinion outlining the circumstances under which an attorney’s blog would be subject to the requirements of the California State Bar Act’s Rules of Professional Conduct regulating attorney advertising. According to the opinion, a legal blog qualifies as attorney advertising if it conveys the message that the lawyer is available for professional employment directly, “through words of invitation or offer to provide legal services,” or implicitly, by describing the lawyer’s legal services or case results. The opinion gives what it describes as an “extreme” example of an attorney’s implicit expression of his or her availability: A blog in which a lawyer hyperlinks his name on the blog to his law firm’s professional web page; identifies himself as “one of California’s premier criminal defense lawyers”; doesn’t allow readers to post comments; and contains a blog entry in which the lawyer writes, “Once again, I was able to convince a jury that there was reasonable doubt that my client – who had tested positive for cocaine when pulled over by the local constabulary for erratic driving – was completely unaware of the two-kilo bag of the same substance in her trunk. They were absolutely mesmerized by my closing argument.” This lawyer’s blog would violate two of the state’s ethics rules, the opinion explains, including one prohibiting messages “as to the ultimate result of a specific case or cases presented out of context without adequately providing information as to the facts or law giving rise to the result.” So, what kind of a legal blog would fall outside of California’s “attorney advertising” category? One that, for example, identifies a family lawyer as the author, features articles of potential interest to the lawyer’s current or prospective clients, contains bylines hyperlinked to the lawyer’s professional web page, never focuses on the lawyer’s current or former cases or describes his practice, and doesn’t end any blog posts with the admonition that if the reader has “any questions about your divorce or custody case, you can contact” the attorney/blog author.

Lost and found. Law enforcement departments and agencies have been using social media almost since its inception to quickly disseminate and solicit information important to locating stolen property and missing persons, identifying criminal perpetrators, and preventing crimes. The authorities’ posts are usually very dry, however, featuring brief explanations of the crimes they’re trying to solve, or descriptions and photos of the missing criminals, children, or property they’re trying to locate. But the police department in the 2,200-resident town of Crewe, Va., recently took a different tack. After responding to a call from a local Super Dollar store about a suspicious white powder found in the store’s aisle, a member of that department penned the following Facebook post: “If you mistakenly dropped your cocaine today and were at the Super Dollar, please contact us. We would like to talk with you further about your property.” What at first blush appeared to be a trap intended to ensnare the world’s dumbest crook was actually a playful attempt to get the department’s social media followers’ attention, according to Detective Ella Turner, the officer responsible for the post. “We want them to realize we’re human and to talk to us,” Turner told the Washington Post. “If we’re humorous, that can get the ball rolling.” The department’s responses to the Facebook followers who commented on the post clarified the department’s intention: “We will not give you back your illegal narcotics. The narcotics are weighed, photographed and placed into an evidence locker to be destroyed upon the approval of the courts.”

The Internet of Things Toast. Here’s a gift idea for the social media enthusiast in your life who can’t get enough of his own image: The selfie toaster. Just think: Your friend or loved one can wake up to his own face imprinted on a piece of bread every morning. For $69, the Vermont Novelty Toaster Corporation will custom make toaster inserts using images that you provide – one photo for toast bearing the same image on both sides, two for toast with a different image on each side. While the product’s reviews are very positive, the selfie toaster does have its limitations: The company’s marketing copy warns that “props or gimmicks in front of faces do not usually show up well on toast” and “animals with all black fur are extremely hard if not impossible to achieve.”

Social Media 2015: Addressing Corporate Risks

Posted in Event, FTC, Privacy, Terms of Use

Social media is transforming the way companies interact with consumers. Learn how to make the most of these online opportunities while minimizing your company’s risk at Practicing Law Institute’s (PLI) 2015 Social Media conference, chaired by Socially Aware editor John Delaney.

This year’s program features speakers from American Express, BuzzFeed, Dell, and Foursquare. There will also be a “Meet the Regulators” panel discussion featuring representatives from FINRA, the FTC, and the New York State Attorney General’s Office. And the conference will conclude with a networking reception.

Join us for the conference in New York on February 25th. For more information or to register, please visit PLI’s website here.

Status Updates

Posted in Status Updates

Social media for minimalists. These days, the information flooding the news feeds on some social media platforms can feel overwhelming and redundant. Take Twitter, for example—a medium whose popularity has resulted in a user experience that technology futurist Nova Spivack compares to “a crowded room where everyone is shouting.” Explaining his theory behind the decline in Twitter’s user engagement, Spivack says that, for that platform’s users, the only solution to the avalanche of information “is to ignore it all. And that is what most people seem to be doing.” Enter This., a new social media platform seemingly designed to head off the very problem vexing today’s Twitter users. In the words of its creator, Andrew Golis, This. compels its users “to be spare and judicious in what they suggest others listen to, read and watch” by allowing them to post only one link a day. This. users can click on as many links posted by others as they’d like, however, and can express their appreciation for the content at those links by clicking “Thanks,” This.’s version of Twitter’s “Favorite” button. On weeknights, Golis sends This. members a newsletter highlighting the five stories he considers to be the crème de la crème. For now, membership is relatively exclusive; to join This., one must get an invitation from one of its 4,500 current users.

Keeping score. Super Bowl XLIX scored a touchdown on social media, according the U.S. news outlets. The game broke records for U.S. sports events on both Facebook and Twitter, where it generated 265 million likes, posts and comments, and 28 million global tweets, respectively. Malcom Butler’s interception of Russell Wilson’s pass alone generated 395,000 tweets per minute, more than any other moment during the game. But, while those numbers are impressive, the 2014 World Cup caused significantly more social media buzz. Having generated 35.6 million tweets during the game, Brazil’s 7-1 defeat by Germany in the semi-finals still holds the record for the most tweeted-about sports event in history. And the 2014 World Cup final, which resulted in 618,725 tweets per minute, is still the winner in the tweets-per-minute category. The Facebook numbers are equally impressive: “By the end of the World Cup, social engagement on Facebook pushed the overall figure to three billion interactions, involving 350 million people,” the BBC reported.

Big plans. Pinterest’s active user base grew in 2014 by 97%, more than any other social media platform. Now, the social bookmarking site is taking steps to monetize its impressive metrics by making itself more attractive to advertisers, who, so far, have only been able to target their ads based on basic information like Pinterest users’ locations, genders, and categories of interest. Beginning sometime this year, the company will leverage its unique ability to cull information about pinners’ future plans and purchases—intelligence that Pinterest’s head of operations, Don Faul, calls “intent data”—by providing advertisers with information about its users’ activities on the site. The content generated by the users of social media platforms like Facebook tends to concern the past, both recent and distant: pictures of a family’s winter holiday, for example, or vintage “throwback Thursday” photos of their 16-year-old daughter’s first birthday party. Social media enthusiasts most often use Pinterest, on the other hand, to keep track of what they want their futures to look like: goods they hope to acquire, designs they intend to replicate, destinations they hope to visit, and recipes they plan to prepare. That information is obviously infinitely valuable to marketers, and may help Pinterest to someday live up to its astronomical valuation.

Status Updates

Posted in Status Updates

Social work. Enterprise social media platforms – i.e., Facebook-like platforms used by companies to facilitate communication and collaboration among their employees – are incredibly popular these days; by some estimates, it has grown into a $2.3 billion market. But why settle for a Facebook-like platform when you can get the real thing? Well, now you can. The Silicon Valley company has begun pilot testing “Facebook at Work,” a new product that will allow a company’s employees to interact with one another in very much the same way they interact with their friends on the Facebook.com site.  Once a company signs up for Facebook at Work, all of its employees are automatically members of the same network (there’s no “friending” required). Among other things, users will be able to determine exactly which of their often far-flung colleagues can help them by searching their co-workers’ profiles for specialties. There are currently a lot of other products in the enterprise social media space; Microsoft’s Yammer is among the most popular. TechCrunch notes that Facebook might be able to set itself apart in the enterprise collaboration arena by having the most relevant newsfeed; it stands to reason that the company that’s spent several years on an algorithm that predicts and prioritizes what people actually want to see would do a good job of keeping a business’s news feed focused. The Facebook at Work app is currently available in the iOS App Store, but only for employees of companies that have signed up and, for now, those companies are limited to the few businesses around the world that are participating in Facebook at Work’s beta testing. The service is currently free, but—like other enterprise-collaboration-tool providers—Facebook likely will eventually charge users a subscription fee.

Tiny tales. Short videos featured on the messaging app Snapchat, known as Snapchat Stories, are the future of social media, at least according to Casey Neistat, a YouTube filmmaker with more than 480,000 subscribers. Neistat attributes what he says has been the unprecedented response to his Snapchat Stories to two things: (1) the fact that the app requires viewers to keep a finger pressed down on the screen in order to view content, therefore ensuring viewers’ undivided attention; and (2) the freedom that the app instills in its users as a result of its disappearing content. Since the videos posted on Snapchat last only 24 hours, there’s no time for an online army of critics to assemble and the content can’t haunt its creator for eternity. Snapchat Stories creators therefore tend to be more willing to take risks, and the viewers of those videos are treated to less edited, more realistic, content than what’s typically available on social media.

Hair razing research. The folks behind the matchmaking app Tinder have tapped into an unlikely source of potential revenue: research. In exchange for compensation, the online dating company agreed to facilitate experiments intended to help the razor-brand Gillette prove that women prefer clean-shaven men to scruffy or bearded ones. Analysis of the responses received by 100,000 male Tinder users supposedly showed that twice as many women preferred the “groomed” to the “grungy” (the clean-shaven guys got 74% more “right swipes”; swiping a photo to the right on Tinder is a user’s way of signaling that he or she approves of it). Gillette then publicized the results by posting them to a web site and touting them in a YouTube video. Tinder is extremely popular among college students, but it apparently has yet to bring in money. Its parent company, IAC/InterActiveCorp, has said that it intends to eventually profit from the online dating giant, which one Internet analyst reportedly expects to have as many as 20 million daily active users by the end of this year. Tinder’s partnership with Gillette may be a sign of deals to come. The company has experimented with promotional tie-ins before. It recently featured fake profiles for characters on Fox network’s “The Mindy Project.”

Hot Off the Press: The January-February Issue of Our Socially Aware Newsletter Is Now Available

Posted in Cloud Computing, FTC, Infographic, Litigation, Wearable Computers

The latest issue of our Socially Aware newsletter is now available here.

In this issue of Socially Aware, our Burton Award-winning guide to the law and business of social media, we discuss key–and often ignored–legal concerns regarding social media assets in M&A transactions; we explore whether anti-Glass hysteria may have doomed Google Glass; we highlight a landmark case finding that parents can be held liable for their child’s online activities (yikes!); we take a look at the FTC’s latest crackdown on social media advertising; and we drill down on cloud services agreements.

All this—plus an infographic roundup of social media’s “greatest” hits in 2014.

Read our newsletter.

EU Copyright: No Resale of Digital Content Except for Software?

Posted in IP

How Does the European Court of Justice Decision on Exhaustion of the Distribution Right upon First Sale Impact the Resale of Digital Copies?

The European Court of Justice (ECJ) has decided that the rule of exhaustion of the distribution right upon first sale (in the U.S. known as the “first sale” doctrine) does not apply to post first-sale alterations to the physical medium embodying the work if such alterations constitute a new reproduction of the work (here: the transfer of a painting from paper poster onto a canvas). Consequently, such subsequent alterations require the consent of the owner of the reproduction right to the work.

The ECJ expressly states that exhaustion of the distribution right upon first sale under the EU Copyright Directive applies to the tangible object into which a protected work is incorporated. Thus, the first sale of intangible digital copies of works will likely not exhaust the distribution right to such copies. This means that the resale of digital music, film, and e-book files duly purchased by way of download from the Internet will likely be considered as copyright infringement if not authorized by the copyright holders.

WHAT DOES EXHAUSTION OF THE DISTRIBUTION RIGHT MEAN?

When buying a video on a DVD, a hardcover book or an art painting in the EU that was first sold in the EU with the consent of the copyright holder of such work, one can resell such DVD, book, or painting to any other person in the EU later on. The reseller does not need the copyright holder’s consent for such resale. This is possible because Art. 4 (2) of the EU Copyright Directive sets forth that the first sale in the EU of a copy, or of the original, of a copyrighted work by the copyright holder or with his/her consent causes exhaustion of the distribution right of the copyright holder. The copyright holder can neither prohibit such resale nor ask the reseller or purchaser to pay additional compensation.

THE CASE

In the case, Allposters, a Dutch company, bought art posters depicting copyrighted paintings of famous artists that were sold in the EU with the consent of the respective copyright holders. Allposters transferred the image of the painting from the purchased paper poster onto a canvas by a chemical process so that the image no longer appeared on the paper poster but only on the canvas. Thus, there was still only one reproduction of the painting – only that it was on a canvas medium instead of on the original paper poster. The image of the painting itself was not altered. The canvases looked much better and bore a much closer resemblance to the original painting than the paper posters did, and Allposters offered such canvases for sale on its websites. Allposters argued that (i) alterations made to a sold copy after the distribution right to such copy was exhausted had no impact on the previous exhaustion and (ii) the transfer of the image from paper to canvas did not constitute a reproduction of the work, as the image was not duplicated.

THE JUDGMENT

In its decision of January, 22, 2015, the EJC states that the exhaustion of the distribution right applies to the physical medium in which the work is embodied (here: the paper poster) and that alterations of the physical medium which result in a new object (here: the replacement of a paper poster by a canvas) constitutes a new reproduction of the work – which requires the authorization of the holder of the reproduction right. The ECJ therefore decides that “the rule of exhaustion of the distribution right… does not apply in a situation where a reproduction of a protected work, after having been marketed in the European Union with the copyright holder’s consent, has undergone an alteration of its medium, such as the transfer of that reproduction from a paper poster onto a canvas, and is placed on the market again in its new form.” (http://curia.europa.eu/juris/document)

EFFECT ON THE RESALE OF DOWNLOADED COPIES?

The, perhaps, even more interesting aspect of this ECJ judgment is its likely impact on the resale of digital copies of copyrighted works purchased by way of download from the Internet:

In the UsedSoft Judgment of July 3, 2012 (see http://curia.europa.eu/juris/document), the ECJ decided that the first sale of an intangible copy of a computer program by way of download from the Internet onto a buyer’s device with the copyright holder’s consent causes exhaustion of the distribution right to such copy. As a consequence, the buyer of such intangible copy can resell such “used” copy to third parties without the copyright holder’s consent. However, this judgment was based on the interpretation of the EU Directive on the protection of computer programs (Directive 2009/24/EC) and not on the Copyright Directive.

In the Allposters decision, the ECJ clearly states that “exhaustion of the distribution right applies to the tangible object into which a protected work or its copy is incorporated.” For this purpose, it explicitly relies on (i) the wording of recital 28 of the Copyright Directive, according to which copyright “protection under this Directive includes the exclusive right to control distribution of the work incorporated in a tangible article” and (ii) the agreed statement concerning Articles 6 and 7 of the WIPO Copyright Treaty (1996), according to which “the expressions ‘copies’ and ‘original and copies’ being subject to the right of distribution … refer exclusively to fixed copies that can be put into circulation as tangible objects.” In the Allposters case, the ECJ applies precisely those arguments that it had previously rejected as not being applicable in the UsedSoft case. Considering this argumentation, it would appear to be difficult for the ECJ in future cases to turn around and decide that exhaustion of the distribution right under the Copyright Directive also applies to the first sale of intangible digital copies.

Therefore, the underlying arguments of the ECJ in the Allposters case are a strong indication that with regard to literary and artistic works other than software (e.g., music, literature, film, art), the ECJ will likely not apply the rule of exhaustion of the distribution right to the first sale of intangible digital copies of such works by way of download from the Internet (e.g., music, film and e-book files). This would mean that, except for the resale of downloaded software copies, the resale of downloaded copies of such works will continue to require the consent of the copyright holder in each case.

WHAT ABOUT ALTERATIONS THAT ARE NOT NEW REPRODUCTIONS?

The ECJ did not rule on the impact of subsequent alterations of sold physical copies of a work which did not qualify as new reproductions of that work. As regards alterations of a copyrighted work itself, one has to look at the applicable national copyright law of the EU countries, because the exclusive right of authors to authorize adaptations, arrangements and other alterations of their works is not granted by the EU Copyright Directive, but by Article 12 of the Berne Convention as implemented into national law of those countries which are party to this multilateral copyright treaty (including all EU Member States). This alteration right to the work is not impacted by the exhaustion of the distribution right upon first sale. This means that subsequent alterations of the sold work itself require the copyright holder’s consent (e.g. changing a painting of an artist after purchase). However, depending on the national copyright law of the respective country, the mere alteration of the sold physical medium embodying the work can also be qualified as an alteration of the work itself, if such alteration puts the work into a different context, e.g., if the purchaser of a painting changes its frame to a very different frame containing patterns or images that modifies the context of the work (so decided by the German Federal Supreme Court in 2002, I ZR 304/99)

FTC Issues Landmark Report on Internet of Things

Posted in FTC, Internet of Things

The FTC has released its much anticipated report on the Internet of Things (“IoT”) – a topic that has been top-of-mind for many companies. The FTC’s report, “Internet of Things: Privacy & Security in a Connected World” (the “Report”), discusses the benefits and risks associated with IoT, and addresses the privacy and data security measures the FTC recommends for consumer-facing IoT products and services [The FTC’s discussion of IoT within the report, consistent with the FTC’s jurisdiction, is limited to such devices that are sold to or used by consumers, and not devices sold in a business-to-business context or broader machine-to-machine communications]. While the Report is not legally binding, it provides a strong and valuable indication of the positions that the FTC may take in enforcement actions related to IoT.

WHAT IS THE INTERNET OF THINGS?

According to the FTC, IoT refers to “‘things’ such as devices or sensors – other than computers, smartphones, or tablets – that connect, communicate or transmit information with or between each other through the Internet.”

FTC RECOGNIZES BENEFITS AND RISKS OF IOT

The Report acknowledges that Internet-connected devices offer numerous benefits, many of which remain untapped. In the health arena, connected medical devices allow patients to more efficiently communicate with their physicians to manage their medical conditions. In the home, smart meters enable energy providers to analyze consumer energy use, identify issues with home appliances, and enable consumers to be more energy-conscious. On the road, sensors on a car can notify drivers of dangerous road conditions, and software updates can occur wirelessly. And these applications are just the beginning.

On the flip side, however, the FTC cautions that IoT may present a variety of potential security vulnerabilities that could be exploited to harm consumers. First, as with computers, a lack of security could enable unauthorized access and misuse of personal information. This risk is heightened in the IoT world by the plethora of devices to be connected and secured. Second, security vulnerabilities in a particular device may facilitate attacks on the consumer’s network to which it is connected, or enable attacks on other systems. Third, the FTC notes that IoT may present a heightened risk of harm to personal safety. For example, the Report describes an account of how it may be possible to hack remotely into a connected medical device and change its settings, impeding its therapeutic function.

According to the FTC, these risks are exacerbated by the fact that companies entering the IoT market may not have experience in dealing with security issues, or may be creating inexpensive devices for which it may be difficult or impossible to apply a patch for a security bug.

SECURITY

In light of these increased risks, the FTC asserts that “inadequate security presents the greatest risk of actual consumer harm in the Internet of Things.” As such, it recommends that companies focus on security when developing connected devices. The FTC acknowledged that what constitutes reasonable security for a given device will depend on a number of factors, including the amount and sensitivity of data collected, and the costs of remedying the security vulnerabilities. However, the staff did offer approaches that it encourages companies to adopt when developing their products:

  • Building security into their devices at the outset, by conducting an initial privacy or security risk assessment, considering how to minimize the data collected and retained, and testing security measures before launching the product.
  • Training all employees about good security, and ensuring that security issues are addressed at the appropriate level of responsibility within the organization.
  • Retaining service providers that are capable of maintaining reasonable security and providing reasonable oversight.
  • Implementing a defense-in-depth approach for systems that involve significant risks, considering security measures at several levels.
  • Imposing reasonable access control measures to limit the ability of an unauthorized person to access a consumer’s device, data, or network.
  • Continuing to monitor products throughout the life cycle and, to the extent possible, patch known vulnerabilities.

In sum, devices that collect sensitive information, present physical security or safety risks (such as door locks, ovens, or medical devices), or connect to other devices or networks in a manner that would enable unauthorized access to those devices, may require heightened consideration of security measures.

DATA MINIMIZATION

The Report emphasizes the FTC’s view that companies should reasonably limit their collection and retention of consumer data, including in the IoT context. The FTC believes that these practices, known as data minimization, will help guard against two privacy-related risks: first, larger data stores present a more attractive target for data thieves; and second, if a company collects and retains large amounts of data, there is an increased risk that the data will be used in a way that departs from consumers’ reasonable expectations.

At the same time, the Report acknowledges concerns that data minimization requirements may curtail innovative uses of data. Accordingly, the FTC proposes a “flexible” approach to data minimization that gives companies a variety of options: they can decide not to collect data at all, collect only the fields of data necessary to the product or service being offered, collect data that is less sensitive, or de-identify the data they collect. The FTC also suggests that if none of these options work, a company can seek consumers’ consent for collecting additional, unexpected data.

NOTICE AND CHOICE

The FTC acknowledges that notifying consumers of privacy principles and offering them a way to meaningfully choose privacy settings may be more difficult in the context of connected devices, which may not have a screen with which to communicate with consumers. However, the report makes clear that the FTC does not believe it will be sufficient for IoT companies to simply have a privacy policy available on their website, and expect consumers to find that policy. Rather, the FTC recommends that a company find ways to present meaningful privacy notices and choices to the consumer, including in the set-up or purchase of the product itself. The Report suggests creative solutions to this issue, including:

  • Offering video tutorials to guide consumers through privacy settings.
  • Affixing a QR code that, when scanned, would take the consumer to a website with information about privacy practices.
  • Offering a set-up wizard that provides information about privacy practices.
  • Allowing users to configure devices, such as home appliances, so that they receive information through emails or texts.
  • Creating a user experience “hub” that stores data locally and learns a consumer’s privacy preferences based on prior behavior.

Companies may also want to consider using a combination of approaches. Of course, whatever approach a company decides to take, the FTC expects the privacy choices to be clear and prominent, and not buried within lengthy documents.

LEGISLATION

Last but not least, the FTC reiterated its recommendation for Congress to enact strong, flexible, and technology-neutral legislation to strengthen the Commission’s existing data security enforcement tools, and require companies to notify consumers when there is a security breach.

CONCLUSION

As the FTC describes, “in the future, the Internet of Things is likely to meld the virtual and physical worlds together in ways that are currently difficult to comprehend.” As a result, companies should consider guidance offered by the FTC and other regulators, and evaluate what steps they can take to mitigate those risks in the privacy and data security context.