Online auction giant eBay has been sued for $3.8 billion USD by XPRT Ventures in a patent infringement suit over its use of PayPal as its preferred payment system. Do not adjust your monitors ladies and gentlemen, you read correctly, that is [...]]]>

Perhaps we can get a patent for patent trolling and sue the patent trolls

Online auction giant eBay has been sued for $3.8 billion USD by XPRT Ventures in a patent infringement suit over its use of PayPal as its preferred payment system. Do not adjust your monitors ladies and gentlemen, you read correctly, that is $3.8 billion dollars, enough money to buy a small island in the Pacific and equip it with comic book villain gizmos, including robotic sharks, heat-seeking missiles and an army of ninja assassins.

The case is rather convoluted, it involves patent trolls, secret meetings, and races to the USPTO (full complaint here). The dispute goes back supposedly to 2001, when a couple of lawyers based in Delaware applied for several electronic payment systems patents, the main ones are 7483856 for “System and method for effecting payment for an electronic auction commerce transactions”, and 7567937 for “System and method for automatically effecting payment for a user of an electronic auction system”. I have no qualms about calling these XPRT Ventures a patent troll outfit. For example, the inventors are the attorneys, and they have never done anything with their patent, they simply hold the title and snipe from the sides at the real enterprises and innovators. Even a cursory glance at the patents makes one aware that this is outrageously obvious stuff. Look at the main claim in the 7483856 patent:

“1. A method for effecting payment for a purchaser of at least one item offered for an electronic auction sale by a seller via an electronic auction web site maintained by at least one computing device of an electronic auction system, said method comprising the steps of:
maintaining an electronic database of a plurality of electronic auction payment accounts corresponding to a plurality of users, including the purchaser, of said electronic auction web site and a payment segment of said electronic auction web site by an electronic auction payment system integrated with said electronic auction system, each of said plurality of electronic auction payment accounts storing funds therein and each capable of being used for user transactions in the electronic auction system;
performing at least one payment-related activity by at least one processor of said electronic auction payment system for effecting payment for said purchaser, said at least one payment-related activity selected from the group consisting of debiting an electronic auction payment account corresponding to the purchaser of the at least one item and maintained by said electronic auction payment system, and withdrawing funds from at least one account storing funds therein and not corresponding to at least one of the plurality of users, wherein at least one payment source corresponding to the purchaser is used to obtain funds for storing within the electronic auction payment account corresponding to the purchaser prior to debiting the electronic auction payment account corresponding to the purchaser; and
crediting by said at least one processor at least one account corresponding to the seller to effect payment for the at least one item offered for the electronic auction sale via the electronic auction web site.”

So, people have been paying for things for thousands of years. New methods of paying for things are springing up all the time. Some attorneys look at a successful online auction business and think “hey, we can get in on that act, just draft a patent application that brings together the existing online auction market and the existing intermediary payment system, and we can get a patent for it!” This is not only trivial, it is so obvious that I remember following the PayPal and eBay developments at the time and thinking that it was evident that they would be joined somehow, I even wrote a paper about it in 2002! My mistake was not to get a patent for that of course.

Anyway, the patents have had a very bumpy ride through the USPTO, they have been rejected, appealed and re-examined, and it was not accepted until it had been considerably re-drafted (see the original application here, and contrast it with the final version). It is quite indicative of the quality of the “invention” that it was rejected so many times. It seems like XPRT Ventures were desperate to get this approved one way or another. Why? Hold on to your chairs, this is where the story gets weird.

Allegedly, George Likourezos and Michael Scaturro, the attorneys and “inventors” making up XPRT Ventures, arranged a meeting with eBay after filing the patents. They did not meet anyone at eBay directly, but one of their lawyers, who took the patents back to eBay for analysis and discussion. XPRT did not hear back from them, other than the message that eBay’s lawyer had made an assessment of the patents and sent it to eBay. I can bet that the assessment read something like “Nothing to worry about”, or something similar.

The timeframe is important to this case. In 2001, at the time of the alleged meeting, eBay was already one of the biggest e-commerce sites in the world, and certainly the biggest online auction site. At the time, payments were usually handled directly by the users through traditional payment methods (money transfers, cheques, escrow, cash, credit cards), or through eBay’s in-house system, called Billpoint. At the same time PayPal was becoming the standard consumer-to-consumer payment system, so it was clear that some type of arrangement was on the cards. In 2002 eBay announced, to nobody’s surprise, that they were purchasing PayPal. Here is where XPRT come in. They claim that the lawyer who met them took the idea back to eBay headquarters, where they immediately started negotiations with PayPal, so they claim that the whole idea was theirs, and that all of the success that eBay has had since is the result of that secret meeting in 2001, hence the astounding amount of money involved in the suit.

The interesting thing, and something that may be relevant for this case in the future, is that eBay did apply for similar payment method patents, which would unfortunately lend validity to XPRT’s own patent.

Anyway, this is further evidence, if more evidence was needed, that many software patents are a terrible idea, get in the way of true innovators, and are often misused by shady characters. When will the madness end?

I have been reading an article in the Chicago Tribune about online anonymity. Most of the story is centred around the defamation dispute between Lisa Stone and an anonymous individual going by the handle Hipcheck16 (see legal documents here). Lisa Stone was running for local office in an Illinois suburb [...]]]>

It's the 90s all over again!

I have been reading an article in the Chicago Tribune about online anonymity. Most of the story is centred around the defamation dispute between Lisa Stone and an anonymous individual going by the handle Hipcheck16 (see legal documents here). Lisa Stone was running for local office in an Illinois suburb when a story was run about her in the Daily Herald, the suburban Chicago local paper. An anonymous poster named Hipcheck16 started abusing Ms Stone in the coments section, this was read by her 15 year-old son, who became involved in a flame war. The teen invited the man to his house for a real debate with his mother, to which Hipcheck16 replied:

“Seems like you’re very willing to invite a man you only know from the Internet over to your house — have you done it before, or do they usually invite you to their house?”

Nasty stuff. Ms Stone was appalled, and initiated legal proceedings to discover Hipcheck’s identity prior to a defamation suit (petition of pre-suit discovery here). While I was struck by the ease with which Americans will initiate legal proceedings, I was left thinking about the issue of online defamation, and whether or not we need different standards for online discussions such as this one.

Allow me to elaborate. The Internet is filled with rubbish. Yes, we have created this amazing global communication tool of unprecedented influence and reach. Yet we use it to exchange pictures of cats (guilty as charged), or to watch paint dry and grass grow (warning, sites contain unsolicited wav and MIDI files, turn off your speakers if your ears are easily offended). A lot of the rubbish out there comes in the shape of comment threads. One need only read beneath the main line in any article about climate change, 9-11 Truthers, YouTube videos, IMDB forums, or any other area of controversy, and one purchases a ticket to Cuckoo-land. Whoever expects reasoned debate and civil discourse in a discussion list will be sorely disappointed. Flaming is the norm, you need to grow a thick skin.

If this is the case, shouldn’t we have different expectations of civility in such debates? I am not very familiar with the law of defamation, but to me the obvious intent is to safeguard people’s integrity. If one enters an online environment where flaming is to be expected, should we hold the same threshold of what constitutes integrity?

Having said that, I am mindful that such distinctions are impossible to police. Perhaps the law does not need to be changed, but user’s expectations should. Mothers should think twice about suing anyone for anonymous comments in a message board not read by many people, doing so will only draw attention to the original post, and it will be read by considerably more people who would otherwise have done so.

Update: Jas Purewal has informed me of a recent defamation case in England, G & G v Wikimedia Foundation.

Sabam v Tiscali has been a long-running case in Belgian courts with regards [...]]]> Just on the coattails of Roadshow Films v iiNet, we are about to get another landmark ruling on ISP liability. If there was any doubt that we are witnessing a legal struggle between intermediaries and content owners, we can lay those doubts to rest.

Sabam v Tiscali has been a long-running case in Belgian courts with regards to ISP filtering (see TJ McIntyre’s report on the 2007 ruling here). The case was brought by the Belgian Society of Authors, Composers, and Publishers (Sabam) against ISP Tiscali (which later changed its name to Scarlet). Sabam wanted Tiscali to install filtering software in its network which would allegedly curb illicit filesharing in P2P networks. The first ruling in the District Court of Brussels agreed with the claimants based entirely on expert reports about the feasibility of deploying filtering systems. The expert argued that there were at least thirteen systems capable of effectively filtering P2P transmissions, seven of which could be deployed in Tiscali’s servers. Tiscali’s response was that these solutions were partial and ineffective at best, as P2P clients are increasingly becoming more difficult to filter because of encryption technology. The ruling states:

“[...] it must be noted that the issue of future potential encryption cannot today be an obstacle to injunctive measures since this one is currently and technically possible and capable of producing a result, as it is in the case before this court; that the internet sector is constantly evolving; that in crafting injunctive relief, the judge cannot consider speculations about potential future technical developments, especially if these might also be subject to parallel adaptations concerning blocking and filtering measures [...]

This is an interesting paragraph for various reasons, one is a particular hobby-horse of mine. How does the law respond to changing technological challenges? In this specific case, the Belgian court has decided to ignore future considerations in order to issue an injunction based on existing technologies. Reasonable approach, but I believe the court were misguided by the experts, as nowadays most Bittorrent clients have encryption capabilities.

Unsurprisingly, the decision was appealed, and the Brussels Court of Appeals has referred two questions to the European Court of Justice. According to the IPKat, these questions are:

“1. Do Directives 2001/29 [copyright in the information society] and 2004/48 [the IP enforcement directive], read in conjunction with Directives 95/46 [on the processing of personal data], 2000/31 [the e-commerce directive] and 2002/58 [on privacy and electronic communications] and interpreted with regard to Articles 8 and 10 of the European Convention on Human Rights, allow Member States to authorize a national court, seized in a procedure on the merits and on solely on the basis of the legal provision which holds that “They [the national court] can equally impose a prohibitory injunction on intermediaries whose services are relied upon by a third party to infringe copyright or a neighbouring right”, to order an ISP to put into place, vis-a-vis all of its customers, in abstracto and as a preventive measure, at the expense of the ISP and without limitation in time, a system filtering all electronic communications, both incoming and outcoming, passing through its service, in particular by means of peer to peer software, with the aim to identify the circulation on its network of electronic files containing a musical, cinematographic or audiovisual work to which the claimant alleges to enjoy rights and to then block the transfer thereof, either at the request or at the time it is sent?

2. If question 1 is answered in the positive, do these directives require that the national court, seized to rule over a request for injunctive relief against an intermediary on whose services a third party relies to infringe a copyright, applies the principle of proportionality when it is asked to rule over the efficacy and the dissuasive effect of the requested measure?”

Unfortunately, I have not been able to uncover any more detail (and I do not speak French), but what I have seen so far seems extremely interesting. Those two questions lie at the heart of ISP liability and indemnity in Europe, and any ECJ ruling on them could prove vital for the future of intermediaries.

The [...]]]> Bizarre piece of news. Myspace is being sued by five families who claim that their children were sexually assaulted by men they met in the web space. Details are sketchy, but apparently five teenage girls have joined forces in order to hold Myspace liable for the real-life assaults they were subjected to after meeting people online.

The story is sketchy (and has not been picked up elsewhere as far as I can tell), so we will have to speculate about the details. It is not clear at this time whether Myspace was instrumental in the assaults, or if the teenage girls had more contact through other means. What seems clear is that Myspace was the place where the predators met their victims (that last sentence sounded almost as if lifted from the Daily Mail, but I digress). So, is that fact enough to warrant some form of liability from Myspace? In other words, should online intermediaries be held liable for sexual assaults that occur in the real world as a result of online contact?

I am seriously sceptical about holding intermediaries liable in situations like this. For example, in an unrelated incident two men have been convicted of raping a woman they met in Myspace, but the social networking site had no bearing in what took place, it simply acted as a meeting place. All around the world, victims meet their attackers in all sorts of social meeting places, such as bars and restaurants. Should these locales be held liable for whatever happens? True, online environments provide a modicum of anonymity, so stalkers and groomers can pretend to be something they are not. But surely, by now every parent must instil in their children the mantra that you should not meet people from cyberspace, in the same way that we tell them not to talk to strangers, or get into vehicles with them.

In short, Myspace is just a virtual meeting room, and its liabilities regarding offline behaviour should end when people shut down their systems. I cannot see any reason why it should be extended beyond that.

Several news sites have reported an interesting copyright case involving the Wikimedia Foundation and the National Portrait Gallery (NPG) in Britain. The NPG undertook a £1 million GBP digitisation exercise, and placed high-definition versions of their pictures in a database locked with technological protection measures. Derrick Coetzee, a volunteer for the Wikimedia [...]]]>

Jeremy Bentham's NPG portrait

Several news sites have reported an interesting copyright case involving the Wikimedia Foundation and the National Portrait Gallery (NPG) in Britain. The NPG undertook a £1 million GBP digitisation exercise, and placed high-definition versions of their pictures in a database locked with technological protection measures. Derrick Coetzee, a volunteer for the Wikimedia Foundation, accessed the database, circumvented the protection, and uploaded 3,300 NPG pictures to Wikimedia Commons. The original portraits are in the public domain, so it would be a fair assumption that pictures of the originals would not have copyright either. However, the NPG disagreed, and sent a cease-and-desist letter to Mr Coatzee alleging copyright infringement, database right infringement, circumvention of technological protection measures, and breach of contract. This is an interesting legal issue for many reasons, chiefly because the legal status of pictures of public domain paintings is not clear in UK copyright law.

Each of the claims can be examined separately. The first one is the question of whether or not the pictures of paintings have copyright. There is an American authority on this very same point, Bridgeman Art Library v. Corel Corp, where Bridgeman Art Library had taken several photographs of public domain paintings, which were copied by Corel and sold in a multimedia CD-ROM. The court in second instance ruled that slavish copying of a painting through a photograph does not constitute originality, and therefore does not have copyright. While the ruling does not constitute precedent in UK jurisdictions, it could be taken into consideration by a court in the UK, as has been the case in many other instances where there are no relevant authorities. The heart of the copyright question is one of originality, does the taking of a photograph of a painting amount to an original work, and therefore should it be protected by copyright? The existing case law on originality seems to leave the question open. Francis Davey pointed me to Hyperion Records v Sawkins, where the Court of Appeals discussed the issue of originality, sweat of the brow and skill and labour in the creation of a copy of a work in the public domain.  Jacob LJ seems to hint that mere copies of a work may not constitute a new original work when he says that:

It was no different from the case of a person making a copy of another’s work (such as the copy of a painting or the enlargement of a photograph): the process might call for effort, skill and judgement, but it did not transform a copy of a work into an original work attracting a fresh copyright…”

He then goes on to establish a test for originality:

“In the end the question is one of degree – how much skill, labour and judgement in the making of the copy is that of the creator of that copy? Both individual creative input and sweat of brow may be involved and will be factors in the overall evaluation.”

Another relevant authority is Interlego v Tyco Industries.  In this case, Lord Oliver discusses precisely the point of originality. He comments:

“Take the simplest case of artistic copyright, a painting or photograph. It takes great skill, judgement and labour to produce a good copy by painting or to produce an enlarged photograph from a positive print, but no one would reasonably contend that the copy painting or enlargement was an ‘original’ artistic work in which the copier is entitled to claim copyright. Skill, labour or judgement merely in the process of copying cannot confer originality.”

This is an entirely open question as far as I am concerned, and I think that there is a strong argument to be made that digitisation of original paintings does not require enough skill and labour to warrant fresh copyright on the images, but I am willing to concede that this could go either way.

The second claim by the NPG is that Mr Coatzee has infringed their exclusive database rights. The NPG is correct to claim that the EU has a sui generis database right, but fails to mention that this right has been seriously eroded by the European Court of Justice (ECJ) in a series of cases (e.g. British Horseracing Board v William Hill). The database right subsists, according to s.13 of the Copyright and Rights in Databases Regulations 1997, “if there has been a substantial investment in obtaining, verifying or presenting the contents of the database“. The NPG has declared that it incurred in a $1 million GBP digitisation process, but interestingly, this sort of investment does not serve to warrant the database right. In British Horseracing, the ECJ commented that:

“The expression ‘investment in the obtaining of the contents of a database’ in Article 7(1) of the directive must be understood to refer to the resources used to seek out existing independent materials and collect them in the database. It does not cover the resources used for the creation of materials which make up the contents of a database”

This is a vital point that has been completely missed by the NPG. It does not matter how much was spent in taking the pictures and digitising the paintings, what matters is the investment in creating the database proper, not its contents. The NPG would have to demonstrate that it has incurred in substantial investment in creating the database in order to claim that it holds a database right over it. Even if it managed to do this, the ECJ has set the bar high as to what can be considered infringement. According to s.16 of the 1997 Database Regulations, “a person infringes database right in a database if, without the consent of the owner of the right, he extracts or re-utilises all or a substantial part of the contents of the database“. The question would be what is to be considered a substantial part of the contents of the database. The ECJ has commented that the term “substantial” has to be analysed both qualitatively and quantitatively, so there will be an analysis of the quantity of content taken in relation to the whole database, but also the relative importance of that content to the overall investment incurred in creating the database.

I would be extremely surprised if the NPG was able to get any results on their database right claim, particularly when one considers that the digitisation investment was financed with public funds.

The third claim is that of circumvention of technological protection measures. This claim is based on ss.296ZF(1) and 296ZA of the 1988 CDPA. These are compelling arguments, as these are restrictions against the breaking of technical measures designed to protect copyright works, and it seems clear that Mr Coatzee broke the protection built into the database in order to access the high resolution version of the images. However, this claim rests entirely on the pictures being subject to copyright protection, and as I have mentioned earlier, this is not straightforward in the slightest.

In my opinion, NPG’s strongest argument may be their breach of contract claim. They say:

“Clearly visible on every page of our client’s website where an image can be seen there is a “Use this Portrait” menu on which two links are clearly visible:

• “License this image” and
• “Use this image on your website”

If you click on either of these links the first thing that you are told is that you need permission to reproduce our client’s images. Your downloading of our client’s images and subsequent uploading of those images to the Wikipedia website has therefore been carried out in direct contravention of the clear rules and this amounts to a breach of contract.”

This is a browse-wrap agreement agreement, as the terms and conditions are located in a link at the bottom of the page, as opposed to a specific acceptance that is presented to the user in the form of a tick-box or “I Agree” button characteristic of click-wrap agreements. Click-wrap agreements have been accepted in the UK, but browse-wraps are still not fully recognised. In an email with Simon Bradshaw talking about this case, he maintained that there is not a contract because there is not acceptance. However, the U.S. and Canadian cases dealing with browse-warp have recognised that the acceptance can be formed if the user undertakes further action other than normal browsing which could be taken as acceptance. In this case, the extraction of images would definitely be a deliberate action other than mere browsing, and in my opinion would be enough to warrant acceptance of the terms and conditions of the case.

I am perfectly aware that this is a contentious issue, but I believe that the enforceability of browse-wrap agreements is of utmost importance for all sort of reasons, but it is particularly vital to people involved in the open and commons movements, such as Wikimedia Foundation. After all, Wikimedia content is released using open licences such as Creative Commons, which are by definition browse-wrap agreements. If one was to argue that the terms and conditions present in the NPG website are not binding, then neither would be the CC licences that protect Wikipedia articles, or the browse-wrap agreements that protect open source software. Furthermore, browse-wrap agreements are an important part of electronic commerce transactions, and they are used and assumed all over the industry. To disallow them would equate chaos.

To conclude, this is an interesting legal case for many reasons. I have not even gone into the many jurisdictional considerations, as Mr Coatzee is an American citizen. I believe that the NPG would have a difficult time in court, with the exception of the contractual case, but as I said, many of the legal issues are completely open in the UK. In a selfish way, I wish the case would be litigated, as it would provide us with some interesting precedent in the case of originality of copies of public domain works, and also on the issue of browse-wrap agreements.

Update: Interesting legal opinions from Simon Bradshaw and Francis Davey (who deals with the topic of originality within an inch of its life).