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Top Cyberlaw Developments of 2007

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2007 didn't see many Cyberlaw bombshells, but there were still some noteworthy legal developments. Eric Goldman looked back through the year's developments and came up with his list of the top 10 Cyberlaw developments of 2007.

2007 was a relatively quiet Cyberlaw year. We didn't have any sweeping Congressional reforms or US Supreme Court decisions, and many potentially interesting Cyberlaw situations settled (such as AFP v. Google), are pending (such as the Google Book Search cases or some of the lawsuits discussed below) or simply fizzled out (such as Congressional anti-spyware (1, 2) or Net Neutrality regulation; plus my choices for the top 2 Cyberlaw developments below). These lack-of-developments once again left the Ninth Circuit as a leading source of new Cyberlaw developments, but that's hardly good news. The Ninth Circuit Cyberlaw jurisprudence continues to show radical differences between the Ninth Circuit judges, leading to significant inconsistencies in Ninth Circuit jurisprudence depending on which judges are empaneled.

Before we get to the top 10, some runners-up:

My vote for the top 10 Cyberlaw developments of 2007:

#10: Internet Tax Moratorium Extended. The moratorium on taxing Internet conduct is one of the flagship examples of 1990s cyberspace exceptionalism (47 USC 230 is the other main one). In the Internet Tax Freedom Act Amendments Act of 2007, Congress has extended the moratorium another 7 years. It's too bad Congress couldn't make the ban permanent, but this development nevertheless holds the tax jackals at bay a little longer. Not that they won't try backdoor methods to tax the Internet (see the #1 entry below).

#9: Ninth Circuit Rejects Automatically Updating User Agreements Without Notice. You've seen them before--online user agreements that say "We can amend this agreement by posting a new version to the website. Check back often." The meme is so prevalent that it's hard to believe it's not legally effective. But according to the Ninth Circuit, it isn't. It will be interesting to see if websites stop using the language or if the meme is so deeply ingrained that websites will keep using this language even if it's not legally effective.

#8: Everyone Sues YouTube. YouTube's successes brought out plaintiffs in droves. The most interesting of these is Viacom, a major content owner that has plenty of reasons to strike a deal with YouTube rather than force the issue in court. From a legal standpoint, these lawsuits squarely implicate the statutory safe harbors enacted as part of the DMCA and codified in 17 USC 512(c). Remarkably, 9 years after the DMCA's passage, (A) cases are raising rather pedestrian statutory construction issues about 512(c), and (B) more importantly, we still have no idea how they will be resolved by the courts!

#7: Google Keyword Lawsuits Substitute "Airlines" for "Blinds." Courts continued to fracture on the trademark implications of keyword advertising, which led to a number of interesting cases in 2007. I'll focus on perhaps the biggest surprise of 2007, which occurred when American Blinds stunningly dropped its 4 year old lawsuit against Google without receiving any meaningful concessions from Google. Also stunning was American Airlines' decision to sue Google on the same theories, despite the obvious expense of litigating a bet-your-business issue with Google, and despite having some very weak trademarks. For now, the trademark consequences of keyword advertising appear to be far from resolved.

#6: Facebook and ConnectU Brawls Continue. The Facebook litigation is a textbook example of how money, ego and vindictiveness can lead to messy litigation. No one wins in these situations except the lawyers, who get to be the arms dealers to combatants locked in a death struggle. The story starts in 2003 when the ConnectU team retained Zuckerberg to help code a social networking site. Zuckerberg in turn launched Facebook a few weeks after his involvement with ConnectU. ConnectU alleges that Zuckerberg stole ConnectU's IP to launch Facebook, a lawsuit that's been going on for almost 4 years.

Meanwhile, Facebook has been a hit in the marketplace and ConnectU has not. To catch up, ConnectU sent some robots to Facebook to collect some info about Facebook users. Facebook has sued ConnectU in a lawsuit that's been going on a couple years as well.

Remarkably, neither lawsuit has really reached an important substantive opinion yet, representing a lot of time and money spent by both parties to make surprisingly little progress. Perhaps everyone will find harmony in 2008.

#5: KinderStart Emphatically Loses Lawsuit Over Google Rankings. KinderStart sued Google for downgrading KinderStart's PageRank. This was a silly lawsuit from the start, but the denouement was a spectacular victory for Google. Not only did the judge uphold Google's independence in determining its rankings, but it slammed KinderStart's lawyer with sanctions for making unsupportable allegations against Google. This outcome has really cooled the enthusiasm of plaintiffs hoping that judges will substitute their relevancy judgments for Google's.

#4: Oracle Uses Cyberlaw to Kill SAP Subsidiary. The giants of the enterprise software industry beat up on each other on multiple battlefronts, so in that respect this development was a small part of a much larger phenomenon. But still, it was interesting to see Cyberlaw emerge as a key tool for Oracle to attack archrival SAP. SAP acquired a subsidiary called TomorrowNow that offered cut-rate maintenance for Oracle software. Not only did this cut into the margins of Oracle's cash cow, but it provided Oracle's customers with an easy migration path to switch to SAP products. The problem is that TomorrowNow developed this great business proposition by grabbing copyrighted material from Oracle's password-protected support databases. This is a big no-no that will lead to a favorable Oracle outcome and new jobs for TomorrowNow execs (if they are able to avoid jail).

#3: Ninth Circuit Struggles with Perfect 10 Cases. Every now and then, a plaintiff goes off the deep end and sues the world for perceived transgressions. Perfect 10 is in the middle of such a catharsis, having sued the entire Internet infrastructure (but, conspicuously, not individual users) for the republication of its copyrighted photos. These lawsuits led to a troika of Ninth Circuit opinions that completely befuddled the Ninth Circuit, creating a bad brew of Cyberlaw mush that the Ninth Circuit will be struggling with for years.

In the first, the ccBill case, the Ninth Circuit read 47 USC 230 to preempt state IP laws. This was such a surprising result that the Ninth Circuit issued an amendment to reiterate that it meant what it appeared to have said.

The second was the Amazon and Google case, where the Ninth Circuit held that Google wasn't directly liable for linking to or framing infringing content but it could be secondarily liable. The Ninth Circuit had to do a 180 on this opinion with respect to who bore the burden of establishing fair use in a preliminary injunction request.

Finally, the court resolved the Visa case, which completely exonerated Visa over a stinging dissent by Judge Kozinski claiming that this ruling was inconsistent with the standards in the Amazon/Google case. He had a point.

Collectively, the three opinions leave the unmistakable impression that the Ninth Circuit is making up Cyberlaw as it goes along from case to case. As a result, we're left with some very murky case law and effectively zero predictability about what the Ninth Circuit will do in the next Cyberlaw case.

#2: Ninth Circuit Splinters 47 USC 230 Jurisprudence. In May, the Ninth Circuit screwed up in the Fair Housing Councils v. Roommates.com case. In a badly fractured set of opinions, the initial three-judge panel drafted a set of incoherent exceptions to 47 USC 230 law that represented a major incursion into the otherwise uniform immunity. This initial ruling could have opened the floodgates of plaintiffs seeking to exploit its impenetrabilities. Wisely, the Ninth Circuit granted an en banc hearing in the case, wiping away the original set of opinions. We're waiting to see if they reach a better substantive result when the en banc opinions are issued.

And the winner as my top Cyberlaw development of 2007 is...

#1: The Power to Tax is the Power to Destroy: Utah Tries to Tax Keyword Advertising Into Oblivion. The state of Utah has an unrivaled record of Internet legislative incompetence, but they topped themselves in March when they passed the Utah Trademark Protection Act. This law set up a registry for trademarks and other identifiers and banned third party use of these registered marks as triggers for keyword advertising.

It's been hard to pin down exactly why Utah passed this law. Once the publicity spotlight shone on this law, everyone in Utah involved with the law started finger-pointing, making it difficult to do after-the-fact forensics. As far as I've been able to deduce, Utah hoped to get a little slice of the massive online advertising industry for itself--Utah could charge trademark owners to register their marks and charge online advertisers to check the registry, allowing Utah to tax online advertising even if none of the players (the advertisers, the keyword vendor and the trademark owner) had any relationship with Utah.

We may never know if this law would survive a legal challenge because Utah legislators started backpedaling almost immediately since their actions were publicized. In the end, this particular law is almost certain to fade away quietly--good news, to be sure, but a temporary win at best. The same drivers--greedy and incompetent legislators eyeing a big fat chunk of economic activity--almost ensure that other legislators will try again, making another battle inevitable unless preemptive federal legislation is passed.

For those wanting more perspective, here are my Top Cyberlaw Developments from 2006.

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