There has not been much activity on the blog because we have been engaged in a long copyright and misappropriation of trade secrets trial.  So, we share with you some of the articles we have been reading, but just haven’t had time to write about:

Bloggers entitled to same protections as journalists under the First Amendment.  The Ninth Circuit recently applied libel defense protections normally reserved to the “institutional press” to bloggers reasoning the First Amendment applies to all citizens and there has been a blurring of the lines between who and who is not a journalist.  You can read more about this important decision here.

We have our first Twibel verdict – no defamation in 140 characters.  In three hours, the jury returned a defense verdict saying Courtney Love did not libel her lawyers with a tweet that suggested her prior lawyers had been “bought off.”  The bad news is that during the trial Love stayed off of Twitter, and now, she is apparently back.  More here.

Yelp ordered to disclose identity of reviewers.  A court ordered Yelp to review the identify of seven “anonymous” reviewers who criticized a dry cleaning business in Virginia. The business claimed the reviews are fakes and do not match any of their records.  This is another example of how courts are trying to balance the interests of anonymous speech and a plaintiff’s right to combat defamatory speech.  More here.

Parents take to the court to combat cyberbullying.  Locally, there has been a lot of attention about a lawsuit filed by one set of parents against seven minors and their parents for libel and negligence.   More here.

Will there be more transparency regarding government requests for online data?   The Justice Department is relaxing the rules for technology companies like Google and Microsoft to disclose, in broad terms, the number of requests these companies receive from the government and the amount of data provided.  Tech companies have long reported the number or requests from state and non-national security related requests from the federal government, but this will be the first time they can release general information related to national security letters.  If the numbers are surprising, this could lead to even more push back against the government surveillance programs.  More here.

Supreme Court to consider online re-broadcasting case.  The U.S. Supreme Court will weigh in on the rights to re-transmit broadcast programs via the internet.  Aereo receives over the air broadcasts the old fashion way in a warehouse and then sends them to paid subscribers devices.  The broadcasters are arguing that Aereo is violating the “public performance” copyrights to the programming.   Aereo says what they are no different than the users receiving the digital signals on their own devices.  Both sides wanted guidance from the high court and this is one worth watching.  More here.

With the short Thanksgiving week, I thought we would touch on a few interesting stories developing over the last couple of weeks.

Photographer gets $1 million+ verdict from AFP and Getty for copied Twitpics

In my three part series on using images from the web for your news stories, we talked about the Morel v. Agence France-Press case.  Agence France-Press, the Washington Post and Getty used images of the Haitian earthquake put on Twitter by photographer Daniel Morel.  The Washington Post settled, but the case went to trial last week against AFP and Getty.  AFP thought they had permission from the photographer to use the images, but they did not get permission from the right person.

Previously, a judge rejected AFP’s argument that it could use the images because they were put up on Twitter. The Twitter terms of service did not provide that the photographer gave his rights in the images away or grant anyone else the right to use the images outside of Twitter.  In the trial, it turns out AFP did not follow their internal guidelines on the use of images or take immediate corrective action.  The jury awarded the upper end of the statutory damages.

If you have policies, follow them.  If you make a mistake, you fix it as quick as you can. You can read about the case here and here.

Engineering gift for girls’ video spreads on Facebook – lawsuit follows.

I have a daughter.  I liked this commercial.

http://www.youtube.com/watch?v=UFpe3Up9T_g

I assumed they had the Beastie Boys’ permission.  Apparently, they did not and the Beastie Boys sent a copyright cease and desist letter.  The people at Goldiebox fought back and filed a suit asking the court to declare the parties’ rights.   Is it a parody or do the Beastie Boys have to do this to make sure more people don’t use their songs in commercials?  You can read more about the case here with some legal analysis from the EFF here.  At least Goldiebox will get some more attention with the lawsuit at the beginning of the holiday shopping season.

Want to criticize me, it will cost you!

KlearGear’s terms of service state:

“In an effort to ensure fair and honest public feedback, and to prevent the publishing of libelous content in any form, your acceptance of this sales contract prohibits you from taking any action that negatively impacts KlearGear.com, its reputation, products, services, management or employees.

Should you violate this clause, as determined by KlearGear.com in its sole discretion, you will be provided a seventy-two (72) hour opportunity to retract the content in question. If the content remains, in whole or in part, you will immediately be billed $3,500.00 USD for legal fees and court costs until such complete costs are determined in litigation. Should these charges remain unpaid for 30 calendar days from the billing date, your unpaid invoice will be forwarded to our third party collection firm and will be reported to consumer credit reporting agencies until paid.”

A Utah couple criticized KlearGear on RipOff Report.  Soon thereafter, KlearGear sent the couple a bill for $3,500.  KlearGear never sued, but did report the couple as delinquent to the credit reporting agencies.  We have talked about being proactive, but not too proactive, when it comes to online complaints.  Since the news of this broke, KlearGear has shut down its Facebook page and its Twitter feed to hide from the blow back.  You can read more here, here and here.  This is not the kind of press you want before the shopping season.

Update 11/27/13 –  a lawyer is now representing the couple and has sent a demand to KlearGear to remove the notation with the credit agencies or face a Fair Credit Reporting Act lawsuit.  Read about it here.

Reputable companies line up to support TheDirty.com

Finally, we update you on the Jones v. TheDirty case we have talked about before.  This is the suit by a former Cincinnati Bengals cheerleader against the website TheDirty.   A Kentucky judge allowed the case to proceed against the rumor and trash site despite Section 230 of the Communications Decency Act which normally provides immunity for website operators based on user generated content.  The jury awarded $380,000 and TheDirty.com appealed.

While some may believe the ends justified the means against this particular defendant, the refusal to dismiss this case flies in the face of almost every other Section 230 case.  In this case, the court wrote “the very name of the site, the manner in which it is managed, and the personal comments of defendant Richie” shows that the site “specifically encouraged development of what is offensive about the content.”  TheDirty.com asks people to “submit dirt.” Their submission form has entries for the “dirt,” and provides a link to upload photographs. The court seized on the fact that in response to the post about Jones, the site operator wrote “I love how the Dirty Army has a war mentality.”  Thus, no dismissal by the judge.

Section 230 has its place.  Imagine if Facebook, Google, or YouTube could be sued or had to police all of the user generated content.  I don’t think those services would exist.  That’s why many of them have filed amicus briefs with the Sixth Court of Appeals urging the court to reverse the ruling and dismiss the claims.  You can read more here about how and why the likes of Amazon, Google, LinkedIn, Google and Microsoft are asking for the reversal.

 

In part one, we discussed how fair use may apply to the media’s use of social media images.  In part two, we looked at how the various sites’ terms of service come into play.  Today, we look at the one prominent case in this area and describe some best practices.

 The Agence France-Presse Twitter Case

There is just one well-known case involving the media’s use of social media images.  Agence France-Press and the Washington Post both used images of the Haitian earthquake put on Twitter by photographer Daniel Morel.  A judge rejected AFP’s argument that it could use the images because they were put up on Twitter.  The Twitter terms of service did not provide that the photographer gave his rights in the images away or grant anyone else the right to use the images outside of Twitter.  After denying AFP’s motion for summary judgment, the case, as far as I can tell, is still pending.

Best Practice

1.   Make sure it’s legit

It’s easy to get duped.  Jimmy Kimmel showed us that.  This is more a producer/editorial function rather than legal, but it’s worth noting here.

2.    Get permission

The good news about social media is that it makes it easy for you to reach out to ask permission.  You don’t need any magic language and you don’t need a lawyer to draft anything for you.  Send the person who posted the image – “Hi, I’m the producer, we are considering using this image.  Did you take it and would you mind if we used on the news?” It is not uncommon for there to be a small payment, but most amateurs won’t ask.

3.     Make sure you have permission from the right person

In the AFP case, AFP did reach out and tried to get a license to use the images.  They just did not get them from Morel — the actual photographer.  The AFP staffer saw the images on Twitter and reached to the account where the staffer saw them.  Unfortunately, that person had already lifted them from Morel’s account.  AFP then distributed the images to Getty and Morel was not pleased.   You can read more about the facts of the case here.  For those of you who want some more legal beef on the case, check out Professor Goldman’s post here.

4.     Don’t make promises in your request or box yourself in

Because of fair use, you don’t have to ask for permission.  Even if they say no, you might be able to use it.  Therefore, don’t send a message that implies you are only going to use it if you obtain their permission or suggests that you have to have it.  My example above would be fine.  Sending a message that says: “We have to hear from you soon to know whether we have your permission” implies it’s a requirement and could be used against you if there is a trial later.

5.     Attribution

If you are unable to get permission, then you should at least provide attribution.  Many amateurs would be satisfied with a little notoriety from the attribution.  Attribution won’t get you out of a lawsuit if they get mad, but it may help show you were acting in good faith or alleviate any anger so the person reconsiders whether they really want to file a lawsuit.

The Poynter Institute’s Adam Hochberg wrote an article titled “Twitpic, Flikr Use by Eyewitnesses Raises Questions for News Orgs About Image Rights, Compensation” that includes a good discussion of these issues.  According to the article, the Associated Press requires editors to contact all “citizen photos” and verify each image for both authentication and permission.  The article provides several ideas for an image policy and some of the issues involved.

What is the real harm?

The main point of this series has been to avoid any liability and provide some guidance and good practices.  I am not saying the minimal likely harm should be part of the decision-making process as to whether you violate a copyright.  When dealing with fair use, there is risk, but it is usually not a huge risk.  Assuming it is a close call (and you are not scooping or stealing some paparazzi images of the Royal Baby), you are likely looking at having to pay either actual damages or statutory damages.  The actual damages could be the market rate for the license to use the image.  The statutory damages, on the other hand, are between $750 and $30,000 per work.  If the fair use analysis is a close call and you use best practices, you are likely to be on the lower end of the statutory damages.  In the AFP case, the court ruled he damages would be assessed on each image used by AFP and not on each time it was subsequently downloaded or used after AFP sent it to Getty.  Whether you multiply $5,000 times 8 or 8,000 makes a huge difference.

If you mess it up, your biggest liability is likely going to be the bad P.R. and your legal bill.

In July, Netflix CEO Reed Hastings posted on Facebook that viewing on his company’s site “exceeded 1 billion hours” of videos in June.   The stock rose 6.2% on the day of the post.  Last week, the SEC sent Netflix notice it may investigate.  You can read the Washington Post story here

Reg FD, or Fair Disclosure, is the issue.  In a nutshell, companies must make public disclosures of material information to the general public and cannot selectively provide information to favored shareholders or investors.  That’s loaded for two reasons – “public disclosure” and “material.”

Public Disclosure

Usually companies provide press releases to recognized wires or news services and then make public filings with the SEC to make public disclosures.  The reg also allows for “any other non-exclusionary method.”  

This time, the CEO sent the information to 200,000 of his fans on Facebook–many of whom were part of the business media who would have received the press release.  The CEO also posted on his blog earlier in June that Netflix was almost at 1 billion hours per month.  Neither were followed with press releases or SEC filings.

Reg FD was passed in 2000 — before Facebook and Twitter.  It wasn’t until 2008 that the SEC formally approved making public disclosures via company websites under certain circumstances.  Will this force the SEC to accept other more popular ways and current ways of disseminating information?  Perhaps every CEO of publicly traded company should be required to follow an official SEC account so all of their posts or tweets are re-issued and available in one spot. 

Material

Even if the post was not considered a public disclosure, there is still a question as to whether it was material.   As you can probably guess, “material” is not expressly defined, but the SEC has provided some guidelines.  It may be material if there is a “substantial likelihood that a reasonable shareholder would consider it important” such as earnings, M&A issues, new products, changes in management or serious defaults. 

Although Netflix says the information was not material, the stock did have its biggest one day rise in six weeks. 

So do we ban posts and tweets from the corner office?

The Wall Street Journal ran a story in September about the risk of CEOs being on Twitter. If you can’t stop the CEO, here are some tips to minimize risks for upper level management involved in social media.

 1.   Have a plan.  Review your current process you use to disseminate information to investors analysts and other in light of Reg FD.  After you spot the risks, prepare a policy outlining the consequences and share it with executives, investor relations and anyone else who is responsible for talking to investors.  Use the policy to do periodic Reg FD planning and designate a primary compliance person to review statements before they go out if there is a question.

2.   Have a specific plan regarding earnings or other major announcements and collect all public statements not including social media such as SEC filings, press conferences and and conference call transcripts. 

3.   Track the social media accounts of your major executives.  Unless you want to pre-approve the CEO’s message about the company softball game in advance, at least allow your primary compliance person to track all of the various social media accounts to take swift action.

4.  Plan for the unintentional selective disclosure.  That is a term of art under the Regs and requires corrective action beyond the scope of this post.  Assume it is going to happen and be prepared for it with IR, management and your legal team.

5.  When in doubt, bring a witness.  If you are hosting a conference or call and you are concerned, bring someone along whose sole job is to recognize and note any unintentional disclosures.

6.   Get insurance for your executives and the company.

Will the SEC come around and allow for Twitter and Facebook to be used for public disclosures?  If the speed of their implementation of crowd funding is any indication, it may be some time before there is some brightline guidance.  Until then, we have to watch what happens to others.  Tesla could be next — on December 4, the CEO tweeted “Am happy to report that Tesla was narrowly cash flow positive last week” to his almost 113,000 followers.

The Houston Chronicle reported today the CFO of Francesca’s was canned because he posted information about the company on Twitter and Facebook.

Francesca's CollectionsWe have discussed the legality of firing employees for their social media conduct in detail (part one and part two).  In short, in at will state like Texas, you can fire someone for a good reason, a bad reason or no reason at all except generally in three circumstances: (1) in violation of a contract; (2) in a discriminatory fashion against a protected class; or (3) in retaliation of an employee discussing their work activities with other employees. 

It was not clear in the article if the CFO had a contract.  It does appear, however, he was not engaging in protected activity.  Instead the company claimed in a release the CFO was terminated because he “improperly communicated company information through social media.”

The article sites the following:

On March 7, six days before Francesca’s announced its quarterly earnings, he wrote: “Board meeting. Good numbers=Happy Board.”

. . .

Before an earnings call last December, Morphis posted on Facebook: “Cramming for earnings call like a final. I thought I had outgrown that.” In January, he boasted to his friends: “Roadshow completed. Sold $275 million of secondary shares. Earned my pay this week.”

Francesca’s, a women’s clothing and accessory retailer, is a publicly-traded company which means the CFO does not have free reign to say whatever he wants. 

“The rules generally in regards to sharing of material, nonpublic information have not changed even in the age of social media,” Looper Reed & McGraw, P.C. securities lawyer Jeff Hopkins said.  “If a public company hasn’t filed information with the Securities and Exchange Commission to make it generally available, its management and employees should recognize that any disclosure to a select audience (even if that audience is a large Twitter following) is in violation of the rules.”

You can read more from the Wall Street Journal here.

 

For 99% of us, it really won’t ever be an issue — our social media presence just isn’t that important.  Unless your job is to tweet or drive traffic to the company website, your company probably won’t even want your twitter followers who read what you had for lunch or your take on the Republican primary.  Looper Reed doesn’t want  @traviscrabtree if I leave and some would sleep a little better if it were gone.    

But what about the celebrities, media types and marketers who use their accounts to the benefit of their employers? 

The easy answer is that you should take care of it contractually, which given several high profile cases should not be ground breaking.  This issue is not new for journalists.  CNN and Rick Sanchez went through this in November of 2010 when CNN terminated him after he used @ricksanchezcnn and had 150,000 followers.   They agreed to let him have @ricksancheznews. 

The New York Times settled its case against AOL recently.  Lisa Belkin wrote a blog named “Motherlode” for the Times before she left for AOL’s Huffington Post and rebranded the blog as “Parentload.”  The New York Times sued claiming the name was too similar and meant to confuse or steal its readers.  The Huffington Post decided to drop the name.  

If it is not covered in a contract, then be logical about how you create  and use the account.  If you are the individual tweeting, then don’t put the company brand in your Twitter name. Even if my law firm might have a problem if I left after acquiring a large following @bulldoglooperreedlawyer.  If you are a company paying someone to bring you followers or connections, make them use a branded handle. 

Until there are more cases, the answer of owns the account will be very fact specific; the most important being whether the followers are there because of the brand or because of the individual.  Factual issues often require trials.  Trials are expensive.  Therefore, factual issues can be expensive.  Take care of it contractually and eliminate the factual issues.

The Twitter Case 

Unfortunately, the case law does not tell us much.  The most prominent case is PhoneDog v. Kravitz case where they are fighting over who owns the Twitter account Noah Kravitz used when he was employed by PhoneDog @ PhoneDogNoah.   Kravitz was hired as an independent contractor to use social media to promote PhoneDog.  He ammased 17,000 followers.  Kravitz simply changed the name of the account and went to work for a competitor promoting their products to his 17,000 faithful.

The case got a lot of attention about a month ago when the court dismissed PhoneDog’s claims for economic interference for taking the Twitter account with him, but let the claims for conversion and misappropriation of trade secrets proceed.  Since then, the court has allowed PhoneDog to replead the economic interference claim.  PhoneDog is now is claiming its traffic has decreased since Kravitz took the Twitter account and the court is now letting all of those claims proceed.  That means it is expensive.

 The LinkedIn Case

The facts of the LinkedIn case are a little convoluted.  Dr. Linda Eagle had a “personal” LinkedIn account with thousands of connections related to her field.  She partnered with someone to form Edcomm.  Sawabeh Information Services took over Ecomm.  When Sawabeh fired Eagle, Eagle sued claiming the defendants conitnued to access her personal LinkedIn account.   The defendants claimed Eagle misappropriated certain LinkedIn connections because defendants claimed they created and maintained the account.  Defendants also claimed there was an unwritten policy that employees turned over their LinkedIn accounts when they left.   Eagle admitted she provided defendants with her LinkedIn accounts.  

The court said the LinkedIn connections were not a trade secret because anyone could see them as they were publicly displayed.  The court, however, allowed the misappropriation of an idea claim to go forward based on a dispute about whose idea it was to generate the content on the LinkedIn account.  

 But what is it all worth?

Not discussed in any of the cases is the value of these followers and connections.  PhoneDog said the followers were like a customer list and placed a value on each one of $2.50.  If the Twitter account is really about me, how long would it take for the Twitterverse to figure out my new handle?  How close are we to having a social media connections valuation expert?  There is little guidance so far.

What have we learned today?

 If you’re a company and you want the account,  put it in the contract.  If you’re an individual and you want the account, follow these guidelines:

  1. Have it under your name and don’t mix it with the company.
  2. Set up the account yourself.
  3. Populate the content yourself.
  4. Don’t give out the password.

In sum, be a little more like the 99% of us who don’t have to worry about this.

Today, we start a two part series on marketing to minors online.
The law has always sought to protect minors when it comes to commercial transactions. The conventional rule is that someone under 18 cannot bind themselves to a contract. It should, therefore, be no surprise there are special laws about marketing to children on the Internet—even when you don’t mean to.

OMG! I contracted with a minor.

A perfect warning for those trying to contract with minors comes from the fight over rights to the @OMGFacts brand. Seventeen-year-old Adorian Deck tweeted about celebrity gossip and weird news. Emerson Spatz allegedly paid Deck $100 and promised Deck a share of profits from merchandising and a YouTube Channel. Deck also assigned all current and future copyrights to Spatz. Spatz marketed the Twitter feed as part of his media company that targets youngsters.

The teen now claims the deal was unconscionable and unenforceable because, in part, of his age although Deck’s mother also signed off on the contract. Since signing the contract, the @OMG Facts brand has gone from 400,000 followers to roughly 1,900,000 million. When knowingly contracting with a minor, take heed.

We will apply this principles to online marketing in our next post.  In the meantime, even if not in strict violation of the law, the court of public opinion can look down upon marketing on Facebook because of the presence of minors on the site.