INTERNET LEGAL
DEVELOPMENTS
Matthew D. Marquardt, Editor
Articles:
Net Jurisdiction Remains Unsettled (Continued)
OSP Liability Act Aired in House
House Hears Testimony on Criminal Provisions for Electronic Piracy
Web Site Use of "Hidden" Trademarks Marks Enjoined
Digital Signatures Gain Support of Law
Microsoft Sued over Hyperlink
States Consider E-Mail "Spam" Regulations
Jurisdiction Ruling Strengthens Domain Name Trademark Status
Personal Jurisdiction in Internet Disputes Remains Unsettled
Congress Provides New Tool for Domain Name Defense
Net Jurisdiction Remains Unsettled (Continued)
The U.S. Second Circuit Court of Appeals, based in New York, and state appellate courts
in Minnesota and California have reached opposite conclusions on whether website operators
could be sued for operations in distant states. The federal court ruled that the operator New
York's "Blue Note" night club, for which it holds a federal trademark registration, could not sue
a Columbia, Missouri website operator in New York because "those who used the trademark"
were "physically present" in Missouri -- and because under New York's long-arm statute a non-resident must commit an act within the state to be subject to jurisdiction. On September 5, the
Minnesota Court of Appeals ruled that a Las Vegas, Nevada resort could be tried in Minnesota
for consumer fraud, false advertising, and deceptive trade practices based on a single contact with
a Minnesota resident. And a California court ruled August 7 that a New York retailer could be
sued in California for Internet transactions conducted with a single California resident.
Source: National Law Journal, 9/22/97
Liability Act Aired in House
The House Subcommittee on Courts and Intellectual Property on September 16 and 17
held additional hearings for House Bill 2180, the On-Line Copyright Liability Limitation Act.
The Act is intended to limit copyright infringement liability for on-line service providers, and
was introduced by Representative Coble. A Senate counterpart, S 1146, has been introduced
by Senator Ashcroft. The bills are not identical -- the Senate version adds provisions for fair use,
among other things -- but each would create a new section 512 to the Copyright Act, Title 17
of the United States Code. Under the House version no one would be liable for direct copyright
infringement solely for transmitting material on-line, so long as he or she did not generate the
material, place it on line initially, select or edit the material, did not direct the material to
recipients, was not paid directly for taking part in the act, did not sponsor, endorse or advertise
the material, and did not know (or have notice) that the material was infringing. For
contributory infringement, the sole remedy against such persons would be injunctive relief.
It is not known when the bill may be passed to the floor for a vote.
Source: BNA's Patent, Trademark & Copyright Journal, 9/18/97; HR 2180; AIPLA Website
House Hears Testimony on Criminal Provisions for Electronic Piracy
The House Subcommittee on Courts and Intellectual Property heard testimony on
September 11 that criminal penalties should be imposed for wilful acts of on-line copyright
infringement. The "No Electronic Theft" ("NET") Act, HR 2265, was introduced in July by Rep.
Bob Goodlatte of Virginia, and would provide penalties of up to three years, with fine, for first
offenses and up to six years for repeat offenders, for the electronic reproduction or distribution
of ten or more copies of one or more copyrighted works within a six-month period so long as the
value of the works or copies is at least $5,000. Each of the witness who testified supported
criminal sanctions.
The bill is aimed at closing the loophole that permitted MIT student David La Macchia
to escape conviction under federal wire fraud statutes for operating a computer bulletin board
which allowed users to download copes of popular commercial software, resulting in a loss to
software publishers alleged to exceed $1,000,000. An identical Senate counterpart, S 1044, was
introduced by Senator Leahy of Vermont.
Source: BNA's Patent, Trademark & Copyright Journal, 9/18/97
Web Site Use of "Hidden" Trademarks Marks Enjoined
The United States District Court for the Northern District of California on September
8 enjoined an "adult web site" operator not related to Playboy Enterprises from using the
metatags "Playboy" and "Playboy Magazine" on its web site, after finding that Playboy is likely
to succeed in its claim that the use of the metatags constitutes trademark infringement -- even
though users are unable to "see" use of the marks. The marks are embedded in machine-readable
code processed by web search engines to return "hits" on searches incorporating the marks. Thus
web searchers looking for sites using terms embedded in metatags may be directed to sites using
the terms even though the terms are nowhere "visible" to the user.
Unless the parties settle, the issue of a permanent injunction is likely to arise in the case
and attract considerable attention for its Internet ramifications.
Source: BNA's Patent, Trademark & Copyright Journal, 9/18/97
Microsoft Sued over Hyperlink
In what could be a case of first impression, Ticketmaster is reported to be suing Microsoft for
trademark infringement over a Microsoft failure to remove a hyperlink from a Microsoft website.
Ticketmaster and Microsoft had been negotiating a deal give Ticketmaster a hyperlink presence on
Microsoft's "Sidewalk" websites, and when talks broke down Microsoft apparently failed to remove the
link. It is rapidly becoming accepted that internet domain names are entitled to trademark protection,
but so far no other infringement case over hyperlinks appears to have been filed. Suit was brought in
federal district court in Los Angeles.
The case appears to allege infringement for use of both the link itself and display of the
Ticketmaster logo after the link is activated by a web user.
Source: National Law Journal, May 12 1997.
Digital Signatures Gain Support of Law
One of the most difficult questions facing those engaged in electronic commerce has been the
authentication of electronic documents and "signatures." As anyone familiar with computers is aware,
the contents of any electronic compilation, including electronic "date stamps," are easily manipulated.
How, then, to finalize contracts on the Internet, in such form that their contents and date may be
verified? One answer has been found in encryption and third-party verification. Several states,
including Washington, have begun passing legislation to govern the autenthication of computer
documents and signatures. Utah was the fist state to react, with an act passed in late 1995.
Washington's act, encoded at Chapter 19.34 RCW, is to take effect on the first of next year. The
Washington act provides for licensing and regulation by the Secratary of State of new "certification
authorities" intended to act as neutral third parties in verifying electronic documents. The gist of the
act is that in order to complete verifiable electronic contracts businesses would become "subscribers"
to certification services, generate their encoded in their own system, using public key - private key
technology, register the the public key with the certification authority so that it would be available to
the public, and complete their transactions. The act further provides for warranties, liability limits, and
security requirements.
The legal status of electronic signatures themselves, apart from questions of authentication, has
been less doubtful. Under most current verions of the UCC electronic signatures clearly qualify, and
amendment to make their status even more clear are under consideration.
Approximately twelve states have now completed electronic authentication acts.
Source: National Law Journal, May 12 1997; WSB News, June 1997; Washington Legislative Website.
States Consider E-Mail "Spam" Regulations
Several states are considering taking action to restrict unsolicited mass e-mailings, or "spam."
Regulation would be along the same lines as restrictions already in place for telemarketing and
unsolicited faxing. Legislators in at least California, Colorado, Maryland, Nevada, and New York
are reported to be considering bills. Criticisms have been leveled at both the technical competence and
legal breadth of the proposals, including free speech implications. Federal supremacy and interstate
commerce issues, too, could indicate the necessity of action at the federal level for effective regulation
to result.
In the meantime, some ISP's are taking matters into their own hands, suing several of the
largest "spam" producers. For example, Cyber Promotions was recently found by a federal district
court in the Southern District of Ohio to have trespassed on CompuServe's property by making
repeated mass transmissions through CompuServe's resources.
Texts of some state proposals have been posted on-line at www/jmls.edu/cyber/statutes/email/.
Tied with the present overwhelming uncertainty in internet jurisdiction questions, the passage of any
such laws at the state level could have a tremendous impact on internet advertising techniques.
Source: National Law Journal, May 12 1997
Jurisdiction Ruling Strengthens Domain Name Trademark Status
A critical unanswered question in determining the trademark status of internet domain names
has been whether use on the internet of such names could be considered use "in commerce," as
required for applicability of the federal Lanham Trademark Act. Many considered the finding
inevitable, but only now are the first decisions actually finding use "in commerce" coming out. On
March 19 the US district court for Southern New York found that the use of the domain name
"plannedparenthood.com" in conjunction with a page that read "Welcome to the PLANNED
PARENTHOOD HOME PAGE" constituted use "in commerce," thus clearing the way for
Planned Parenthood to seek an injunction against an anti-abortion activist under the Lanham Act.
Citing the recent case of Intermatic v. Toeppen, decided last year in Illinois, the Planned Parenthood
court went so far as to declare that the establishment of a typical homepage accessible to all net users
would almost certainly qualify under the Act.
Source: National Law Journal, May 12 1997
Personal Jurisdiction in Internet Disputes Remains Unsettled
One of the most important questions faced by courts as the Internet comes of age is that of
personal jurisdiction: when someone sitting at a
keyboard in his own home or in his own office makes information available to users
anywhere in the world -- by, say, posting it on the net; or
when he accesses information posted at a remote location and a governmental authority or
individual somewhere else in the world considers
that by doing so he has violated the law or infringed a right in that portion of the world, just
where may he be haled into court to answer for it?
The first federal decisions are now coming out; and although the same broad considerations
control -- minimum contacts and due process -- the
decisions as yet fall far short of providing a reliable road map for planning even rudimentary
conduct on the net.
In a recent famous case, U.S. v. Thomas, the Federal Sixth Circuit Court of Appeals
ruled that it was permissible for a California couple to be prosecuted in Tennessee, under
Tennessee obscenity law, for operating an adult bulletin board in California. The same court
also ruled in CompuServe v. Patterson that a Texas shareware provider was subject to
personal jurisdiction in an Ohio declaratory judgment action even though his contacts with
Ohio were made almost solely through the Internet and in fact he had never set foot in Ohio.
Conversely, a federal district court in New York found that it had no jurisdiction over a
trademark infringement suit by a New York restaurant owner against a Missouri nightclub
that operated a World Wide Web site accessible from New York.
Taken together, the rulings indicate that in the embryonic state of electronic
jurisdiction in which we find ourselves, anyone who posts information on the Internet should
exercise great caution: though likely some middle ground will eventually be taken, it still
cannot be said that the "least common denominator" will not control standards of acceptable
Internet conduct. (2/97. Sources: AIPLA Bulletin, Washington State Bar News, National
Law Journal)
Congress Provides New Tool for Domain Name Defense
The potential trademark or trade-name value of internet domain names is obvious: for
the first time in history, direct, instantaneous contact with businesses is possible through the
use of the names of those businesses -- and a computer keyboard -- alone. Moreover, each
domain name must be unique. As many large companies, and even the government, have
discovered (to their chagrin), the combination of these considerations means that early domain
name registration is critical, and vastly increases the potential value of domain
names.
Thus in many cases domain names will be well worth registering and defending. Not
surprisingly, many of the most powerful legal tools for defending domain names derive from
trademark law. And for the purpose of domain name defense, the trademark law recently got
stronger: as of the beginning of 1996, Congress has provided, for the first time, a nationwide
law of "dilution." Under the new law a "famous" mark -- Coca-Cola and Xerox are familiar
examples -- may be entitled to defense beyond ordinary trademark infringement: it may be
shielded from any use which lessens "the capacity of the mark to identify and distinguish
goods or services."
The law will not provide all answers to all defenders of marks and domain names.
For example, the meaning to the law of the term "famous" has not been sorted out yet, and in
all likelihood will not be sorted out for some time -- and will probably never apply to the
names or logos of most start-up businesses. Yet the law has provided one more effective tool
for the defense of one's business identity. (12/6/96)
The Editor
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