MDY Indus. LLC v. Blizzard Entm’t, Inc., Nos. 09-15932, 09-16044 (9th Cir. Dec. 14, 2010).

Today the Ninth Circuit gave a mixed result to both parties. We have previously discussed this case as part of the three copy ownership cases before the Ninth Circuit.

Overview:

• MDY is not liable for secondary copyright infringement because Blizzard’s “no-bots” provision was merely a contractual “covenant” and not a condition whose violation would amount to copyright infringement. To be such a condition it must be a “restriction[] that [is] grounded in [a copyright holder's] exclusive rights of copyright.”
• Following Vernor, users of World of Warcraft are not owners of their copies of the software (madness!) and therefore are not entitled to a Section 117 defense.
• The Ninth Circuit really, really, really hates the Federal Circuit’s Chamberlain decision and explicitly rejects the idea that there should be a nexus with infringement before a violation is found of the anti-circumvention provision regarding access controls in 1201(a)(1).
• A tortious interference with contract claim under Arizona law is not preempted by the Copyright Act.

Upshot:

• The court is grasping towards the right sort of resolution to the condition/covenant distinction, but doesn’t really give us enough to sort out tough cases.
• The holding on copy ownership turns out to be entirely unnecessary since the secondary copyright liability was resolved based on the condition/covenant distinction instead.
• Your garage door openers may start coming with lengthy EULAs in the Ninth Circuit and it just might end up being a DMCA violation to buy a replacement opener made by a third party. (More madness.) Some of the sanity that Chamberlain brought to DMCA jurisprudence slipped away today.

See also:

• Corynne McSherry, A Mixed Ninth Circuit Ruling in MDY v. Blizzard: WoW Buyers Are Not Owners – But Glider Users Are Not Copyright Infringers, EFF DeepLinks (Dec. 14, 2010).

Facebook, Inc. v. Power Ventures, Inc. (N.D. Cal.)

Background:

This lawsuit involves Power.com, a third-party platform allegedly “scraping” content for and from users on different social network sites into a single user interface. Facebook sued Power, claiming violations of copyright, anti-circumvention regulations, CAN-SPAM, and the Computer Fraud and Abuse Act. More on the case can be found here.

Upon a motion to dismiss the case, Judge Fogel upheld the complaint, primarily addressing the copyright and circumvention claims and whether to dismiss any of the claims outright because they were based on invalid legal theories. He refused to do so based on two cases that have troubled many copyright and internet scholars: MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993) and Ticketmaster LLC v. RMG Techs., Inc., 507 F. Supp. 2d 1096 (C.D. Cal. 2007).

Fogel’s reasoning, under these cases, is that any scraping of a webpage involves copying that webpage into a computer’s memory in order to extract the underlying information contained therein. Even though this “copying” is ephemeral and momentary, he held that it is enough to constitute a “copy” under Section 106 of the Copyright Act and therefore what we lawyers call a prima facie (or “on its face”) case of infringement. Since Facebook’s Terms of Service prohibit scraping (and thus, Facebook has not given any license to third parties or users to do so), the copying happens without permission.

What’s at stake:

While there are many reasons to be concerned with this preliminary ruling and with the MAI/RMG line of cases in general, this case is worth watching for many reasons. For one, it combines several of the most controversial U.S. cyberlaw statutes – Section 1201 of the DMCA, the CFAA, and CAN-SPAM. It also has significant implications for the doctrines of both fair use and copyright misuse, as detailed below.

Fair Use

In his order, Judge Fogel does not discuss fair use directly. In fact, it’s unclear whether or not Power even raised the issue. Perhaps it is waiting for a later stage in the case, such as summary judgment. However, Fogel does discuss the core of what would be at issue in the fair use argument. When discussing the copying that is alleged, he states:

Defendants correctly assert that Facebook does not have a copyright on user content, which ultimately is the information that Defendants’ software seeks to extract. However, if Defendants first have to make a copy of a user’s entire Facebook profile page in order to collect that user content, such action may violate Facebook’s proprietary rights.¹

In other words, Fogel held that intermediate or temporary copying of FB content in order to extract non-FB content may violate FB’s copyrights. This type of argument, however, has been rejected by most courts. Intermediate copying, even extensively, of another’s copyrighted works in order to extract non-proprietary information has been found to be fair use in numerous cases, including several in the Ninth Circuit Court of Appeals, the jurisdiction where Judge Fogel resides. See, e.g., Sega v. Accolade, 977 F.2d 1510 (9th Cir. 1992) and Sony v. Connectix, 203 F.3d 596 (9th Cir. 2000).

In both of these cases, direct competitors used intermediate copying of proprietary content in order to create alternative ways of using technology and accessing information. In Sega, it was to create brand new games that worked on Sega’s Gensis console. In Connectix, it was to create a Playstation emulator for PCs so that PC users could play PS games. In finding these actions fair use, the courts emphasized that the ultimate end product of the process did not infringe any copyrights in the original copied works and that the purpose was pro-competitive — the creation of other products and platforms for users to take advantage of technology and information products. In this case, Judge Fogel will likely decide whether these cases apply to aggregation sites, with huge implications for almost all Web 2.0 companies.

Copyright Misuse

The case also raises serious copyright misuse issues. Copyright misuse is a judge-created doctrine used to curb abuse of copyright licenses. For example, in one case,² an attempt to restrict copyright licensees from creating competitive computer-aided design programs for 99 years was found to be abusive (in part because copyright only lasted 75 years at the time). The court found that the copyright owner was trying to effectively extend the term and scope of its copyright beyond what copyright law permitted, and that would prevent people from legitimately developing competitive software. The penalty was a loss of the ability to enforce the copyright.

Here, FB claims a violation of its copyrights to access user information on its website but yet concedes that they have no proprietary rights in user information. This is clearly in tension with the appearance that users, who do own whatever rights exist to the information sought, have expressly given power permission to gather this info. Again, a decision on this issue will have a significant impact on data sharing between social media sites like Facebook and others.

Anti-Circumvention Claims

The anti-circumvention claims are a bit more complicated and were less developed in the Complaint, however they seem to raise serious issues regarding the right to reverse engineer and create interoperability under Section 1201 of the Copyright Act. Moreover, as the court recognized, if there is no underlying copyright infringement, the case for a violation of the anti-circumvention laws is much weaker. See Chamberlain v. Skylink, 381 F.3d 1178, 1203 (Fed. Cir. 2004). This issue is a bit of a lurker at this point, but still one to watch.

See also:

• Jeff Neuburger, Facebook Takes a Page from Ticketmaster’s Playbook: Block Unauthorized Web Site Access with Carefully Drafted Terms of Use , New Media & Technology Law Blog (May 27, 2009).
• Thomas O’Toole, Provocative Ruling in Facebook v. Power Ventures, E-Commerce and Tech Law Blog (May 22, 2009).
• Venkat Balasubramani, Judge: Facebook Can Use Terms of Service to Keep Developers In Check, Spam Notes (May 11, 2009).

Footnotes

1. Facebook, Inc. v. Power Ventures, Inc., 91 U.S.P.Q.2d 1430 (N.D. Cal. May 11, 2009).
2. Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).