Saturday, September 11, 2010

Social Pressure and the Law: Craigslist’s “Adult Services” and Zynga’s Business Practices

Living and working in the Bay Area, a place where you can find people who care deeply about anything and everything, offers a front row view of the impact social pressure can have, often despite the legal nature of the conduct at issue. Two different online companies are experiencing that pressure now, and their response to it may reflect the power such pressure can wield.

Craigslist, the popular online resources/classified ad site, has faced a steady stream of criticism for years over listings that critics claim are thinly disguised advertisements for sex for hire services by prostitutes (both male and female). Politicians like Rep. Jackie Speier (D-Hillsborough, CA) and possible South Carolina gubernatorial candidate Henry McMaster have launched investigations and threatened lawsuits over what they characterize as websites like Craigslist being used to “facilitate criminal activity”. Craigslist’s CEO, Jim Buckmaster, points out that censoring the postings on the site, or forcing it to close down its “Adult Services” pages, won’t really address the social concerns over this kind of activity. Rather, he points out, all a closure will do is cause the companies and individuals advertising to move their ads to offshore websites, or to other sections of Craigslist, such as the “Personals” section. Critics of the closure advocates also note that ads of this nature have run for over fifty years in alternative newspapers (see the Bay Guardian and SF Weekly in Northern California for examples), without drawing similar pressure.

Despite the fact that no one claims that the First Amendment doesn’t protect these listings, and that Craigslist only starting charging for these ads when it was pressured to do so by a group of attorneys general, and that it donated the funds received to charity (until charities started publicly refusing to accept the donations), the pressure on the company continued. In the spring of 2009, Craigslist started manually reviewing all of the Adult Services postings, and reported any that seemed to indicate the involvement of underage persons to the National Center for Missing and Exploited Children. Once again, these measures didn’t appease the critics, nor did they stop the media pressure and threats of litigation and criminal charges.

Finally, last week Craigslist threw in the towel, first slapping a “censored” label over the Adult Services section, and then removing the entire section from the site.

In a similar social pressure vein, SF Weekly, one of those alternative newspapers with a prominent “Adult Entertainment” section laden with ads for escorts, phone sex, massage services and strip clubs, featured in its September 8-14 issue, a cover story by Peter Jamison about Zynga, the creator of Farmville, a hugely popular online game. The cover illustration features a farmer in overalls, wearing a black Zorro-like mask, carrying a pitchfork and a bag of money, with a pink pig looking on with a caption over the pig’s head that reads “WTF?”, a reference I assume needs no translation. The title on the cover page reads: “Zynga Has a Simple Business Formula: Steal Someone Else’s Game. Change Its Name. Make Millions. Repeat.” A pull quote in the middle of a page of the article, attributed to a former employee, reads: “Zynga’s Motto is ‘Do Evil’. I Would Venture to Say It Is One of the Most Evil Places I’ve Run Into.”

This all sounds pretty ominous. It is only deep in the article that Jamison acknowledges that nothing that Zynga is doing is illegal or constitutes copyright infringement or any other violation of intellectual property rights. Rather, the accusation is that the company is very aggressive in exploiting unprotected ideas for games developed by competitors, and essentially building a better mousetrap by focusing on the social networking appeal of these games (virtually all Farmville players play the game through their Facebook connection). Its’ hard to tell what the goal of this attack piece is – other than to assert that Zynga has committed the sin of being aggressively capitalist, instead of fostering innovation in the game universe. If the point is to attempt to get Zynga to moderate its conduct via social pressure, despite the legal nature of that conduct, it is again a bit troubling, as are the efforts of the Craigslist critics.

All participants in these conflicts, of course, have the absolute right to make their divergent viewpoints known, and to use whatever media platforms are available to them to present those views. However, when the expression of those views spills over into threats of litigation, criminal prosecution and thinly supported attacks on business reputation, despite an absence of any evidence of a violation of IP or other laws, then we begin to cross the line from free expression into coercion – a line 1st Amendment protectors need to be vigilant to preserve – always reminding critics that the 1st Amendment isn’t in place to protect speech we like – rather it is there to protect speech we don’t like.

Is It a Sale or a License? Ninth Circuit Sides With Autodesk – The First Sale Doctrine Doesn’t Apply to a License

In a decision filed yesterday, the Ninth Circuit reversed the USDC (Western Dist. Of Washington) in the long-running litigation between Timothy Vernor and Autodesk, Inc. Vernor purchased used copies of Autodesk’s AutoCAD Release 14 software from one of Autodesk’s direct customers and resold the copies on eBay. The problem, the Ninth Circuit found, was that those direct customers didn’t own the software – they merely licensed the right to use it from Autodesk, according to the terms that governed the original transaction. Since the customer didn’t own the software, they couldn’t lawfully sell it to Vernor, and thus Vernor couldn’t count on the first sale doctrine to protect his subsequent sale of it on eBay.

If this decision withstands a possible en banc review or Supreme Court challenge, it may offer a more definitive set of standards for evaluating cases that arise out of the long-standing debate over whether software licensing agreements are true leases or are merely disguised sales agreements. The Ninth Circuit opinion devotes considerable space to a review of the Wise and MAI trio of cases, and rejects, again in significant detail, the arguments advanced by Vernor and amicus supporters of his position. The opinion may be reviewed at

Microsoft Co-Founder Paul Allen Sues Everyone!

In a fifteen page patent infringement suit filed in United States District Court for the Western District of Washington at Seattle, Microsoft co-founder Paul Allen alleges that AOL, Apple, Ebay, Facebook, Google, Netflix, Office Depot, Officemax, Staples, Yahoo and YouTube have all violate four key patents owned by Interval Research, an idea lab he owned some years ago.

The patents involved focus on functions central to e-commerce, such as the ability of a site to monitor what a consumer is looking at in real-time, and recommend related products; the ability to refer readers of a news story to related stories, and the ability to stream news updates and stock quotes on webpages. Not surprisingly, Microsoft, which may also be using these claimed patents, is not named in the suit.

The patents at issue were granted between 2000 and 2004. This was a difficult period for the Patent Office with respect to online applications patents. The Office lacked depth in their team of examiners as far as online software applications, and in some cases may have granted patents whose claims were based on prior art that was not fully understood at the time. A classic earlier example of this problem was the patent originally granted to Random House for “multimedia” – a patent which the Office later withdrew when the industry rose up in protest and proved that the claims were not new, or novel.

The first line of defense in most IP infringement claims is to challenge the validity of the underlying grant or claim, and it looks like that is the path defendants will take in this case as well. I’ll be keeping an eye on this one, as a win for Allen will have far reaching impact on the digital world.