United States: Top Five Shifts In Internet Law In 2014

Internet law is always changing. Here's my impressionistic list of five of the most significant 2014 shifts affecting businesses that operate in the Internet space. David Letterman will be off the air soon, so I won't follow the Letterman list format – I'm going to start at the top:

  1. Cell phone privacy. The Supreme Court's April 2014 ruling, in Riley v. California, that police cannot search digital information contained on a cell phone without a warrant, is a game changer in two ways.

    First, it narrows the scope of police searches made incident to an arrest to exclude cell phone contents — an important ruling in itself. Second, and most importantly, it recognizes the special nature of cell phones, and, implicitly, of digital content. The court's conclusion almost says it all: "Modern cell phones are not just another technological convenience. With all they contain and all they may reveal, they hold for many Americans 'the privacies of life.'"

    The decision is likely to become the starting point for analysis of all kinds of emerging digital privacy issues. Information stored in the cloud, for example, can readily be analogized to information contained on a cell phone, and thus arguably the same privacy protections should apply. Moreover, the decision decisively rejected many analogies to the analog world (for example, to wallets and papers), suggesting that digital privacy issues often demand a fresh analytical approach.
  2. Stronger recognition of fair use. The fair use doctrine in copyright law, which some view as a safety valve for strict-liability copyright law, came into its own in 2014, with a series of significant rulings.

    In great contrast to the somewhat rigid factor-counting approach that previously dominated fair use analysis, courts in many of the recent cases recently took far more flexible approaches, looking at the purposes and effects of uses, and underlying policies, rather than rigid applications of the four factors set forth in section 108 of the copyright act.

    This trend probably began with Judge Denny Chin's late-2013 ruling that the Google Books project was protected by fair use, but it clearly took off in 2014, with a whole series of rulings:

    • The HathiTrust ruling in the Second Circuit that even full-text copying for library indexing purposes constitutes fair use,
    • The White v. West Publishing decision that full-text copying of legal briefs by Westlaw and Nexus constitutes fair use because use of briefs in interactive legal research tool was transformative, and the similar ruling in Denison v. Larken implicitly recognizing a litigation-use fair use consideration.
    • The ruling in Levyfilm v. Fox Sports that news use of a copyrighted photograph contained on DVD cover was fair use, because the photo had become a news story
    • The holding, in preliminary injunction context, in Hoge v. Schmafeldt, that the defendant had a possible fair use defense for significant quotation of plaintiff's blog posts within defendant's own critical blog and Twitter posts.
    • The controversial decision by the Second Circuit in Cariou v. Prince, finding fair use with respect to 25 of 30 disputed works involving art works created by defendant that collaged, overpainted and otherwise used images from plaintiff's book of photography.
  3. Need for clear assent to web agreements. In several cases, courts in 2014 refused to follow website terms and conditions, or privacy policies that in their view never received clear assent from Internet users. These cases seem to mark an increasing frustration by courts of lax procedures for obtaining clear assent from Internet users.

    I've previously written about Nguyen v. Barnes & Noble, in which the Ninth Circuit refused to enforce website terms that were disclosed only through a "browse-wrap" fashion, with no clear notice to or assent from the users.

    More recently, in Rodman v. Safeway, a federal district court in California refused to enforce changes to website terms and conditions when the terms purported to automatically bind users to all policy changes. Website terms cannot "bind customers to unknown future contract terms, because consumers cannot assent to terms that do not yet exist," the court held.
  4. Recognition of the value of data collection. The White House's May 2014 report on privacy didn't take the privacy-above-all approach that advocacy organizations like the Center for Democracy and Technology often seem to advocate. Rather, it recognized that data collection, storage and use can often be extremely valuable to both businesses and American citizens.

    The report, titled "Big Data: Seizing Opportunities, Preserving Values," didn't just moan about the privacy hazards of big data. It acknowledged that though big data is likely to transform the way we live and work, and alter many relationships, it holds many promises: It "can enhance accountability, privacy, and the rights of citizens." If properly implemented, "big data will become an historic driver of progress."

    The report identified many concerns, as well, but its emphasis on balancing concerns with benefits marked a new direction for the privacy debate. Along those lines, the Future of Privacy Forum's September 2014 paper, "Benefit-Risk Analysis for Big Data Projects," provided an initial analytical framework for just such balancing.
  5. Acceptance of keyword based advertising (AdWords). It seems hard to believe, but keyword-based advertisements have been around for more than 15 years. (Yes, longer than AdWords, the $50+ billion centerpiece of Google's profitability.) But what may seem even harder to believe is that these ads have been in shrouded in legal uncertainty for most of that time. That uncertainty is no longer plausible.

    Courts have gone through a long process trying to figure out how to apply trademark law to keyword-based ads. One of the earliest trial court rulings, in Playboy v. Netscape, included the absurd suggestion that courts should look at standard dictionary meanings of keywords rather than their trademark meanings. Luckily, the appeals court reversed, recognizing that when Internet users searched for "playmate," they weren't searching for "a child's play companion."

    In several following rounds of litigation, some courts exempted keyword advertising from trademark law on the grounds that the keywords were invisible to the user, and thus not actually "used," or because they were used functionally instead of as trademarks. Those rulings got squashed by the Second Circuit in the Rescuecom case in 2009, and by the Fourth Circuit in the Rosetta Stone case in 2012. Finally, in 1-800 Contacts v. Lens.com, the Tenth Circuit in 2013 demonstrated that the initial interest confusion theory couldn't justify trademark claims against keyword use of a competitor's trademark, because of the very low click-through rates for those ads.

    The result? Sit down for this one. After 15 years of litigation, it is now clear that AdWords and other keyword-based ads are judged by the standard test of trademark infringement — namely, are consumers confused as to source by the resulting ad? Consequently, almost all the focus these days is on the text of the resulting ad, and whether it is likely to confuse consumers.

By the way, don't take this list to suggest that nothing important happened in 2014 with data breaches, government surveillance, mobile apps, or other subjects. But these are the areas where I think the legal rules or analysis shifted the most in 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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