Posted on

Transborder Transfers of Data Outside Europe Need New Rules

The European Commission established a Data Protection Working Party on data protection and privacy—an independent advisory body set up under the Data Protection Directive. This Working Party recently published an opinion relating to the EC’s draft standard contract terms that apply to the movement of data across national borders, notably between Member States within and outside of the EU. 

Specifically, the Working Party recommended that the Commission develop brand new model contract provisions to deal with international and multi-national data processing involving transfers of data outside the EC—a long-standing sore point among companies in countries that have historically been viewed as having "inadequate" privacy and data protections. These model or standard contract terms would establish acceptable contractual protections between entities that control data within the European Union/European Economic Area (EU/EEA) and data processors they use outside the European Community, to ensure protections are comparable.

Continue reading “Transborder Transfers of Data Outside Europe Need New Rules”

Posted on

France: Online Ads Could Lead to User Data ‘Merchandising’

In a report entitled “Targeted Online Advertising” (La Publicité Ciblée en Ligne), presented in February and recently released publicly, the French data protection regulatory authority (CNIL) has expressed concern that targeted online advertising could be a conduit for the merchandising of personally identifiable information about online users. 

The CNIL has been examining context-sensitive, behavioral marketing and targeted advertising mechanisms online, and is concerned about privacy implications. The report notes that analyzing online user data for the purpose of serving more relevant advertising involves the collection of Internet protocol addresses, what websites a user arrived from or subsequently visited, and even key words entered by the user. In case you haven’t thought about it, definitions are hardly uniform in laws and regulations around the world, i.e., an IP address is considered personal data in the EU, but is not personally identifiable information in the United States. 

The report raises an alarm over what could be a means of “systematic profiling” and examines what it believes are growing risks to privacy in this context. In France, and many jurisdictions, targeted advertising must comply with the same data protection rules that apply to the use of personal data online. The French authorities have consistently maintained that users should be specifically informed about how their data will be used, and should be given the opportunity to opt out of these uses—even if it means they can no longer use the services available on the site.

The report also specifically notes that many free services on the Internet are actually subsidized by advertising. While “free” is an accurate financial description in a literal sense, consumers often don’t appreciate they are actually paying a “price”—the value of personal information provided in exchange for “free” services they receive online. 

While the report does not attempt to cover mobile or wireless advertising broadly, it does note that adding information about a user’s location through GPS and other technology, adds tracking capability that the CNIL fears will allow for even greater intrusion and profiling of individual behavior. You can read the entire CNIL report in French on their website at “La publicité ciblée en ligne” (Targeted Online Advertising).

Posted on

Domain Names Grow Complex and Pricier on the Information Superhighway

As we reported last in previous issues of Legal Bytes, the Internet Corporation for Assigned Names and Numbers (ICANN) is preparing to open up the generic top level domain space to virtually any string of letters. The 21 existing generic top level domains (gTLD) include .com, .net, .org, .edu, .info and 16 others.

What Does This Means To Your Domains?   Under the proposal, brand owners will be able to apply for gTLDs corresponding to their brands, and entities representing communities, or wishing to organize a community or common interest channel, will be able to apply for names representing those various interests (e.g., .bank, .medicine, .law, .baseball, etc.).

Why Should I Care? These new domains might be used in many ways, but be prepared for steep costs. If someone wants to buy a new top level domain (and, in effect, act as the registry for the purchase or distribution of second level domains), it can be very expensive – $185,000 plus $25,000 per year, plus other fees and costs associated with the processing of the application. . .   and the IP stakes involved in this proposal are high. The comments submitted to ICANN on its First Draft Proposal from about 300 corporations, associations, governmental agencies and individuals worldwide, were largely negative and reflected serious concerns about trademark rights, increased cybersquatting, monitoring costs, defensive registrations and the like. Many complained of the steep toll these costs already take over the 21 existing domains and painted a gloomy choice under the new proposal: increase expenditures on trademark defense over potentially hundreds of new domain channels, or refuse to make the expenditure and potentially jeopardize the strength of a brand.

What You Can Do? Applications will likely not be accepted until, at the earliest, December or the first quarter of 2010, so this is your opportunity to make your concerns known. In the meantime, ICANN submitted its Second Draft Guidebook that purports to address some of the concerns raised by the comments and at least pays lip service to giving further consideration to the trademark questions. Comments on the Second Draft Guidebook are due April 13. ICANN is also soliciting comments on recent related studies and is preparing to issue a report addressing trademark considerations later in April. We know the issues involved and are familiar with this process. We represented the Association of National Advertisers (ANA), the advertising industry’s largest trade association, in connection with its submission to ICANN regarding the First Draft Guidebook, and we are working with the ANA on formulating its position on the second draft. You can click on the highlighted links to read the ANA’s submission to ICANN on the First Draft Guidebook, and an updated Client Alert on this topic. If you are interested in submitting your comments and would like us to assist you, I strongly encourage you to contact John Hines.

Posted on

Google Inoculated Against Fraudulent Advertisers

The Communications Decency Act (CDA) appears to have immunized Google from liability associated with advertisements placed through its “AdWords” program by some allegedly fraudulent mobile service providers. Because the allegations did not claim that Google was an “information content provider” itself, Google could take advantage of the statutory immunity granted by the CDA. That said, the federal court in San Jose did note that the plaintiff claimed Google assists customers in picking keywords and drafting AdWords, and if the plaintiff can amend its complaint and substantiate the fact that those activities constitute providing or creating content, this case may take a different turn. Let’s see how the cookie crumbles.

Posted on

Gift Cards (The Gift That May Stop Giving) *

Attention holiday shoppers. Not sure what to buy Aunt Matilda or cousin George? A gift card allows them to buy whatever they like? Maybe. Large retailers such as Sharper Image, Bombay Company and Linens ‘N Things have filed for bankruptcy or gone out of business, leaving behind millions of dollars in unused gift cards. In bankruptcy, money left on a gift card is treated as a debt, which the bankruptcy court can decide if it is to be repaid, and how. If the retailer stays in business, the court may allow it to continue to honor its cards, but even then consumers may not get the full value. Sharper Image, for example, was allowed to continue accepting gift cards, but only if the cardholder spent twice the value of the card in a single transaction. Bombay Company was allowed to pay its gift-card holders 25 cents on the dollar. If the retailer closes its doors, it is possible the consumer’s only recourse would be to file a claim and stand in line with the other unsecured creditors.

Continue reading “Gift Cards (The Gift That May Stop Giving) *”

Posted on

Shop, Then Drop

Potentially signaling tougher enforcement initiatives ahead, New York recently enacted a law that gives consumers who shop online, essentially the same types of consumer protections available when buying over the phone or through the mail. New York’s law that now applies to sales over the Internet means that merchants must reasonably expect to be able to ship the goods ordered within 30 days or the order can’t be accepted; merchants who use a post office box or other fulfillment mail address must display (prominently) the company’s name and physical street address; merchants must allow a consumer to cancel any order that doesn’t actually ship within 30 days and either obtain a refund or pick substitute merchandise; the merchant must clearly detail the conditions under which the consumer will be entitled to a refund; and the merchant must keep records of consumer complaints that deal with failures to ship or to provide advertised goods and services.

Posted on

Damages Raise the Ante in Patent Infringement Suits

Just about a year ago, the Supreme Court in Grokster modified a decades-old ruling in the “Sony Betamax” case to remove the insulation automatically given to Internet service providers and hosting services when it can be shown that even with a substantial non-infringing use, a service condoned and encouraged (and made money) through illegal sharing of copyrighted materials. This month, a unanimous U.S. Supreme Court decided a case in favor of eBay which overturns decades of legal precedent favoring the issuance of injunctions as an automatic right granted to plaintiffs for patent infringement. The case involved eBay’s “buy-it-now” feature that permitted customers to buy items “now” without being involved in the auction process. Although the Supreme Court sent the case back to the lower court to ultimately determine if an injunction was or was not appropriate, the significance of the decision cannot be underestimated.

By way of background, when a lower court first held that eBay’s “buy-it-now” feature infringed two patents owned by Tom Woolston (founder of MercExchange), the court ordered eBay to pay damages (approximately $25 million), but did not issue an injunction. That court reasoned that since MercExchange was apparently willing to license its patents, an injunction was neither necessary nor appropriate. Unfortunately, the next court on the ladder upwards, the U.S. Appeals Court for the Federal Circuit, reversed that decision stating the “general rule” that injunctions must follow all infringement findings unless “exceptional circumstances” exist. Since an appeal was pending to the Supreme Court, the court held the injunction in abeyance awaiting the Supreme Court’s decision.

The Supreme Court, in a unanimous decision, held the lower courts did not properly evaluate the case under federal requirements. More importantly, language in the concurring opinion written by Justice Kennedy and signed by Justices Stevens, Souter and Breyer noted that courts must consider the broader implications of using injunctions because an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,” and in those instances, “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”

This language in the Supreme Court’s decision could deal a serious blow to companies that exist solely to engage in patent infringement litigation (so-called “patent trolls”) and who use the U.S. patent system to coerce lucrative settlements from companies who previously faced injunctions that threatened to shut down entire businesses. Hearken back to the RIM “Blackberry” litigation which recently settled. If the schedule had been a few months earlier, RIM could certainly have been much better positioned before choosing to settle for more than $600 million rather than face the possibility of an injunction shutting down (or certainly making life exceedingly difficult with work-arounds) an entire business.

The Supreme Court’s decision in the eBay case could lead to a higher threshold for injunctions, now that money damages are not automatically precluded (nor injunctions automatically issued) in adjudicating patent infringement cases. Some critics complain that the ruling creates the possibility that courts can become the arbiters of a damage-based compulsory licensing system, while advocates say the ruling will prevent companies from buying up patents and exploiting their litigation value, rather than the underlying invention itself—the basis for patent protection in the first place. Most analysts, however, agree on one thing—the likelihood that products subject to patent infringement actions will be threatened with automatic shut downs will start to decrease, increasing the leverage defendants have in any patent infringement suit to settle cases.

Posted on

Find Everything on Google! Someone Thinks They Don’t Have Enough Warnings

Click Defense, a company that sells tools for online marketing, including tools to prevent click fraud, sued Google. Why? Because it just doesn’t do enough to prevent “click fraud”—the process of deliberately clicking Web ads to run up rival advertising costs (the advertiser has to pay Google for each click). Whether it does or doesn’t do enough is a question of fact and whether it has an obligation to do something, anything, or more than it is doing is also debatable. On one end of the spectrum, liability could attach if a search engine company actually knew (or should have known) someone was doing that and did nothing to stop or prevent it. At the other end is the fact that in today’s environment, it is often difficult for these providers to monitor or determine what constitutes improper or proper clicking. After all, isn’t the goal of advertising to induce you to click? This is a sticky problem that is likely not to go away and will find different paths through the courts—there is too much money at stake. How can we help you?