 Articles Found in This Issue
 
Operator of Online Roommate-Matching Website Not Entitled to CDA Immunity for Certain Alleged FHA Violations
FACTS:
- Roommates.com, LLC ("Roommates") operates an online roommate matching website.
- Users/potential members of Roommates respond to a series of online questionnaires by choosing from prepared answers in drop-down and select-a-box menus.
- Users must disclose information about themselves and their roommate preferences based on characteristics such as age, sex and whether children will live in the household.
- They can further provide “Additional Comments” through an open-ended essay prompt.
ALLEGATIONS:
- Local fair housing councils filed suit in federal district court, claiming that Roommates violated the Fair Housing Act and various state laws by:
- posting the questionnaires on its website and requiring individuals who want to take advantage of its services to complete them;
- posting and distributing by email its members’ profiles; and
- posting the information its members provide on the “Additional Comments” form.
DISTRICT COURT HOLDING:
- The United States District Court for the Central District of California ruled that the Communications Decency Act ("CDA") barred the FHA claim and granted summary judgment for Roommates, declining to exercise supplemental jurisdiction over the state law claims.
NINTH CIRCUIT COURT OF APPEALS:
- The Court reviewed the scope of immunity accorded to
Roommates under the CDA.
- Under CDA § 230(c), providers of interactive computer services are immune from liability for content created by third parties.
- The immunity extends to the “provider . . . of an interactive computer service” who is being sued “as the publisher or speaker of any information provided by another information content provider."
- A content provider is defined as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet.”
ISSUES:
- Whether Roommates is responsible, in whole or in part, for the creation or development of the information.
- Whether the CDA exempts Roommates from liability for publishing and distributing its members’ profiles, which it generates from their answers to the form questionnaires.
- Whether the CDA exempts Roommates from liability for publishing the content its members provide in the “Additional Comments” portion of their profiles.
DECISION:
- Roommates is considered a content provider of these questionnaires. The Court reasoned that under the CDA, Roommates is “responsible” for the questionnaires because it created or developed the forms and answer choices.
- The Court found that by categorizing, channeling and limiting the distribution of users’ profiles, Roommates provides an additional layer of information that it is “responsible” at least “in part” for creating or developing*.
- However, Roommates' involvement is insufficient to make it a content provider with respect to the Additional Comments.
WHY DOES THIS MATTER?
- This decision impacts providers of interactive computer services.
- If a provider posts content, either directly, through editing, or through the creation of pre-populated questionnaires, it may be considered an "information content provider" and not entitled to CDA immunity.
See Fair Housing Council of San Fernando Valley v. Roommates.com, LLC 2007 WL 1412650 (C.A. 9)
*The Court distinguished its decision in Carafano v. Metrosplash.com, Inc. There, the Court found that an online dating service was not a content provider of the offending information because it “did not play a significant role in creating, developing or ‘transforming’ it.” Further, Carafano dealt with a prankster providing information that was not solicited by the operator of the website.
Use of Generic Search Terms Does not Violate Terms of Permanent Injunction
FACTS:
- Sport Court and Rhino Sports are in the recreational flooring business.
- Both companies use distributor/dealer networks to promote and sell products directly to the consumer. Both also promote their good and services via the Internet.
- At some point, both companies agreed to be bound by a permanent injunction order providing, in part, that Rhino Sports would not use “in commerce the mark SPORT COURT or any words, marks, or phrases confusingly similar thereto either alone or in combination with other words, marks, or phrases, and including any plural forms, in any style, form, or media whatsoever, including, but not limited to, on or in connection with the Internet, such as in an Internet domain name, as a sponsored link, in connection with an Internet web page, or as HTML code for an Internet website in any manner, such as the title or keyword portions of a metatag, or otherwise.”
- Rhino Sports advised its employees, distributor network and other third parties of the permanent injunction and advised them not to use the SPORT COURT mark or variations thereof.
- Rhino Sports employed Cybermark International, Inc., a search engine optimization company.
- On behalf of Rhino Sports, Cybermark purchased the keywords “courts” and “basketball courts” through the Google Adwords program.
- Sport Court alleged that Rhino Sports had violated the injunction by virtue of the fact that its website, www.rhinocourts.com, has appeared as a “sponsored link” in response to a search for the term “sport court,” without quotations, through use of the Google search engine.
ISSUES AND COURT FINDINGS:
- Whether Rhino Sports violated the permanent injunction beyond substantial compliance when Rhino Sports broad matched keywords using Google’s Adwords program that led to its sponsored link appearing when the term “Sport Court,” without quotation marks, was queried.
The Court determined that Sport Court presented no evidence that
Rhino Sports used SPORT COURT or any variation thereof in any Internet advertising text, as an Internet domain name, on its website, or on any of its web pages as HTML code or as a metatag.
- The Court was left to review the narrow issue of “sponsored link” prohibitions within the permanent injunction.
The Court held that Sport Court did not prove by clear and convincing evidence that Rhino Sports or Cybermark, on its behalf, purchased the SPORT COURT mark or any variations thereof as contemplated by the permanent injunction when Rhino Sports purchased the terms “courts” and “basketball court” and, through broad matching, SPORT COURT came up.
The Court reasoned that a contrary interpretation would not be reasonable because it would preclude Rhino Sports from using these generic terms as keywords.
See Rhino Sports, Inc. v. Sport Court, Inc. 2007 WL 1302745 (D.Ariz.).
| "The law limits the common practice of keyword-triggered advertising" |
| "Industry lawyers predict that the law has a high probability of being overturned in court." |
Fantasy Sports Leagues do not Constitute Gambling as a Matter of Law
FACTS AND ALLEGATIONS:
- Plaintiff, Humphrey (a Colorado attorney and professional poker player), sued Viacom and many other media companies alleging that defendants operated fantasy sports sites in violation of various state gambling laws.
- Plaintiff sought to recover participant registration fees arguing that said fees are the equivalent of wagers or bets under state gambling loss-recovery statutes.
- Defendants moved to dismiss the complaint arguing that plaintiff failed to state proper claims under the governing law.
COURT DECISION:
- The U.S. District Court Judge in New Jersey granted defendants' motion to dismiss finding that the entry fees paid to enter the contests (fantasy sports leagues) with guaranteed prizes are not bets or wagers as a matter of law.
- The Court noted several reasons for its decision:
- Plaintiffs failed to identify any participants who lost money to the defendants.
- When an entry fee is paid unconditionally and the prize is for an amount certain and is guaranteed to be won by a participant, a contest is not “gambling” under the law.
- Everyone who pays is entitled to participate in a full season and may utilize a wealth of support services provided by the defendant fantasy sports sites.
- The Unlawful Internet Gambling Enforcement Act of 2006 establishes that fantasy sports leagues are not gambling operations.
RATIONALE:
- Here, all prizes are announced in advance and do not depend on the number of participants and the amount of fees paid by the participants.
- Winning outcomes reflect the knowledge and skill of participants and are based on accumulated statistical results of the performance of individual athletes.
- Winning outcomes are not based on the score, point-spread or any performance of a single real-world individual or team.
See Humphrey v. Viacom, Inc. 2007 WL 1797648 (D.N.J.).
| "The Court found that defendant had a bad faith intent to profit from the use of its website and Anlin's specific domain names." |
| "...defendant should have heeded the warning and immediately stopped using the mark and domain names." |
Settlement in FTC Investigation of Deceptive Gift Card Sales
In April 2007, Darden Restaurants, Inc. ("Darden") agreed to settle Federal Trade Commission charges that it engaged in deceptive practices in the advertising and sale of its gift cards.
Darden owns several restaurant chains, including Olive Garden, Red Lobster, Smokey Bones and Bahama Breeze.
THE FTC COMPLAINT:
- Darden advertised its gift cards on television and radio, in its restaurants and on its websites.
- Darden represented that consumers could redeem the cards to buy goods or services at its restaurants in an amount equal to the cards' monetary value.
- But Darden did not disclose adequately certain “dormancy fees” that would be deducted after a specific period of time (e.g., for cards sold before February 2004, after 15 months of non-use, a $1.50 dormancy fee was deducted from the cards' balance for each month of inactivity; for cards sold after February 2004, the monthly dormancy fee was deducted after 24 months of non-use).
- The FTC alleged that, in many instances, consumers did not learn of the fee until they attempted to use their gift cards and realized that they had little or no remaining value.
SUMMARY OF ALLEGATIONS:
Darden and co-respondents:
- Inadequately disclosed the fee by noting it in fine print on the back of the cards, obscured by miscellaneous other information;
- marketed a transparent Red Lobster Gift Card with a red lobster on the front that further obscured the disclosure; and
- marketed cards in restaurants and on websites without notifying consumers of the fee.
SETTLEMENT TERMS:
- Darden is required to disclose any automatic fee or expiration date clearly and prominently in future advertising, at point of sale, and on the cards.
- Darden is prohibited from collecting any fee on cards activated before the Order was approved by the Commission (approved May 11, 2007).
- Darden must retain all documentation associated with the labeling, advertising, promotion, sale or distribution of any gift cards, including all preliminary drafts and communications relating thereto.
- Darden is also required to restore to each card any dormancy fees that were assessed and publicize the restoration program on its websites for two (2) years.
WHY DOES THIS MATTER?
- Purveyors of gift cards should take particular notice of the FTC’s actions in recent months. The FTC brought a similar case against Kmart for the fees and restrictions that it associated with its gift cards.
- The Darden settlement makes clear that full disclosure in marketing and prominently on the cards of any and all fees and any expiration dates is not only wise, but necessary for gift card purveyors and its marketers.
House Approves Two Spyware Bills
H.R. BILL 964:
- On June 6, 2007, the House passed H.R. Bill 964 with the stated purpose of protecting Internet users from the unknowing transmission of their personally identifiable information through spyware programs.
- The Bill would prohibit the collection of personal information from a computer without notice to and consent from the applicable consumer.
- The legislation is designed to restrict the use of spyware – i.e., tracking software that can be secretly installed on a computer through an Internet download.
- The Bill would also prohibit various deceptive practices, such as key-stroke logging, computer hijacking, phishing and the display of Internet-based advertisements that consumers cannot close.
INDUSTRY GROUPS REACT:
- Industry groups argue that the Bill is too broad – that the constituent definitions reach far beyond unwanted downloadable software and apply unnecessarily to restrict other aspects of the Internet.
- Specifically, Section 3 of the Bill would make it unlawful to transmit to a protected computer any “information collection program” unless the computer owner has been notified and given an opportunity to provide consent.
- The Bill further defines the term “information collection program” as “computer software” that collects any “personally identifiable information” or any information on web pages that an individual has visited.
MODIFIED VERSION OF THE BILL:
- Industry groups are not satisfied with revisions; the changes do not adequately address their concerns. They feel that Section 3 would need to be eliminated or completely reworked in order for the Bill to be satisfactory.
H.R. BILL 1525 (The Internet Spyware Protection Act):
- On May 22, 2007, the House passed another spyware regulation Bill.
- The legislation would make it a criminal offense for an individual to place unauthorized code on a computer and use it to obtain or transmit personal information or to impair the security protections on a computer.
- Rather than creating new regulations, this Bill would increase penalties for malicious practices.
- In contrast to Bill 964, this measure has received strong industry support.
- The Chairman of the FTC has also raised concerns about the need for legislation and has instead asked Congress to provide additional enforcement tools and resources to better equip the FTC to go after spyware distributors under the Commission's existing authority.
STATUS:
Both Bills have been referred to the Senate for review. The Senate does not have any pending spyware legislation.
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