Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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Lawrence W. Gallick

Social Links: If the Suit Fits

Social Links: Age Verification, X Appeal, and the Great White North

Social Links: Fake Reviews, Real Rulings, and an Epic Fail

Lawrence W. Gallick on Toth v. Everly Well, Inc.

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CHARACTER.AI SUED IN TWO STATESCharacter Technologies has been hit with two lawsuits, including a wrongful death suit (among other claims), in less than two months over its popular Character.ai chatbot. The first was filed in the U.S. District Court for the Middle District of Florida (<a href="https://d34mgxl0pedajf.cloudfront.net/wp-content/uploads/2024/10/FILED-COMPLAINT_Garcia-v-Character-Technologies-Inc-1.pdf" target="_blank">Garcia v. Character Technologies Inc.</a>) by the mother of a Florida teenager who <a href="https://www.fastcompany.com/91215310/character-ai-app-lawsuit-legal-complaint-teen-suicide-chatbot-google" target="_blank">tragically committed suicide</a> after the chatbot allegedly encouraged the child to do so. The Plaintiff claims her son became instantly addicted to Character.ai and “fell in love” with the bot, leading to drastic behavioral changes such as sleep deprivation, school-related issues, and low self-esteem, which culminated in the child’s death. Just a few weeks later, two plaintiffs in Texas <a href="https://www.documentcloud.org/documents/25450619-filed-complaint/" target="_blank">filed suit</a> alleging that Character.ai <a href="https://www.npr.org/2024/12/10/nx-s1-5222574/kids-character-ai-lawsuit" target="_blank">abused the plaintiffs’ children</a> by exposing them to hypersexualized content, encouraging self-harm, and suggesting they should kill their parents. Both suits allege that the Character.ai chatbot is intentionally designed in a way that exploits minors by simulating human interaction, creating emotional dependence, and failing to implement safeguards against misuse. Given that these are the first major cases to seek damages related to anthropomorphized AI tech, it will be interesting to see whether juries find Character.ai liable, as this could spawn waves of similar lawsuits.MAJOR RECORD LABELS PETITION SUPREME COURT OVER VERDICT REVERSALThree of the world’s largest entertainment companies—Sony Music, Warner Music, and Universal Music—have <a href="https://tmsnrt.rs/3SX6Do2" target="_blank">petitioned the U.S. Supreme Court</a> to reconsider an appellate ruling that wiped out a $1 billion jury verdict in their suit against internet service provider Cox Communications. In 2019, a <a href="https://www.reuters.com/article/lifestyle/cox-to-pay-1-billion-to-music-labels-publishers-over-piracy-infringement-idUSKBN1YO0DE/" target="_blank">Virginia jury</a> found Cox liable for rampant music piracy by the company’s customers and failure to act despite receiving thousands of infringement notices. The verdict was <a href="https://business.cch.com/ipld/SonyMusicEntmtCoxComms4C20240220.pdf" target="_blank">overturned</a> earlier this year by the U.S. Court of Appeals for the 4th Circuit, which confirmed the jury’s finding of willful contributory infringement, but called for a new trial on damages because Cox did not directly profit from the piracy. Unsurprisingly, the plaintiffs appealed, and it appears the Supreme Court is poised to take the case. In a <a href="https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/24-181.html" target="_blank">one-sentence order</a>, the High Court has invited the solicitor general to file a brief expressing the views of the United States. This is a strong indication that the Court is interested in hearing the case. With a new administration set to take the reins in Washington next month, it seems likely that appellate attorney <a href="https://www.scotusblog.com/2024/11/trump-taps-lawyer-who-argued-his-immunity-case-for-solicitor-general/" target="_blank">D. John Sauer</a> will be solicitor general. Sauer’s disposition toward IP cases is tough to predict, as his work has largely focused on hot-button social issues. A brief in the case may give insight into Sauer’s positions on copyright law and corporate liability.X CLAIMS OWNERSHIP OF ALEX JONES ACCOUNTThe asset liquidation of Alex Jones’s <a href="https://storage.courtlistener.com/recap/gov.uscourts.txsb.459750/gov.uscourts.txsb.459750.882.0_1.pdf" target="_blank">intellectual</a> and tangible property in the bankruptcy proceeding following the $1.5 billion <a href="https://www.statesman.com/story/news/politics/state/2024/06/06/timeline-lawsuits-alex-jones-sandy-hook-shooting-infowars-false-claims/73985486007/" target="_blank">defamation judgment</a> against him has hit an unusual speedbump. At issue is Jones’s X account. With its 3.4 million followers, the account is among the highest-profile IP assets on the auction block. But here’s the thing: X has <a href="https://storage.courtlistener.com/recap/gov.uscourts.txsb.459750/gov.uscourts.txsb.459750.937.0.pdf?ref=404media.co" target="_blank">filed an objection</a> claiming that the account belongs to it, not Jones, and is therefore exempt from an asset sale. This raises several interesting questions and a judgment either way could have wide-ranging implications for all social media platforms. Though X’s <a href="https://x.com/en/tos" target="_blank">Terms of Service</a> state that users maintain ownership of “any Content you submit, post or display on or through the Services,” the terms do not explicitly define who actually owns the account. An ownership argument in this context is unusual. We’ve been <a href="/topics/owned-second-circuit-holds-that-traditional-principles-of-property-law-apply-to-social-media-accounts" target="_blank">covering</a> social media account ownership issues <a href="/topics/social-links-social-media-account-ownership-once-again-in-the-spotlight" target="_self">for years</a> and in the majority of cases the conflict is between employee/employer or company/consultant. X may very well prevail in this action. Users own their content, but the account itself will likely be seen as an extension of a user’s license to access and use the platform’s services. We’ll be following this one very closely.X LAWSUIT AGAINST ISRAELI DATA SCRAPING FIRM REVIVEDIt appears that Israeli firm Bright Data will be back in court facing an amended version of a complaint from X that was <a href="https://casetext.com/case/x-corp-v-bright-data-ltd-1" target="_blank">dismissed last May</a>. As we <a href="/topics/california-federal-court-holds-x-s-claims-against-scraper-preempted-by-federal-law" target="_self">reported in June</a>, X alleged that Bright Data’s scraping and selling of data from X violated the social media giant’s Terms of Service and the U.S. District Court for the Northern District of California held that X’s claims were preempted by federal copyright law. Though the court declined to allow amendments related specifically to Bright Data’s scraping operations, it granted X’s motion for leave to amend the company’s trespass to chattels claims and fraudulent business acts allegations. Judge William H. Alsup ruled that X’s updated complaint sufficiently alleges that Bright Data improperly accessed X’s servers, writing: “X Corp. newly alleges that scrapers traverse the X service in patterns markedly different from humans or authorized machines, that scrapers thus use underlying server capacity in abnormal proportions, and that this results in intermittent, isolated server failures and a ‘glitchy, lagged user experience’ for X’s human users.” Judge Alsup added that X also properly alleged that if it hadn’t purchased “millions of dollars of server capacity,” the alleged scraping would have resulted in “catastrophic system failures,” concluding that, with these revised allegations, “X Corp.’s proposed complaint now sufficiently alleges server impairment from scrapers accessing its service. . . Bright Data does not contest that if X Corp. states trespass to chattels as to data scrapers, it plausibly does so as to Bright Data, too. This order will assume as much.” You can read Judge Alsup’s thorough, and surprisingly entertaining, <a href="https://www.courtlistener.com/docket/67637345/156/x-corp-v-bright-data-ltd/" target="_blank">ruling</a>. Now that this case is set to move forward, we’ll see if it will have wider implications on the legalities of data scraping and platform protection.META PREVAILS IN IMMUNITY SUITUniversity of Massachusetts Amherst professor <a href="https://en.wikipedia.org/wiki/Ethan_Zuckerman" target="_blank">Ethan Zuckerman</a> has lost his bid for immunity from potential lawsuits alleging breach of contract and violation of federal criminal computer fraud laws related to his “Unfollow Everything 2.0” browser extension. The extension is designed to allow users to turn off the newsfeeds assembled for them by Facebook’s algorithms with one click, blocking unwanted content and advertisements. Unfollowing functionality is already in place on Facebook but requires unfollowing groups and pages individually. In the <a href="https://casetext.com/case/zuckerman-v-meta-platforms-inc" target="_blank">November 22 ruling</a>, Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California wrote that Zuckerman’s “alleged injury is too contingent upon uncertain events to satisfy the constitutional ripeness requirement” and that the request for relief is too speculative because Zuckerman has not actually released the browser extension. Last May, Zuckerman filed a <a href="https://knightcolumbia.org/documents/gu63ujqj8o" target="_blank">preemptive suit</a> against Meta requesting immunity under Section 230, asking the court to declare that his extension would not violate Facebook’s <a href="https://www.facebook.com/legal/terms?_rdr" target="_blank">Terms of Service</a> or federal computer fraud laws, but this action was also rejected. The current case was dismissed without prejudice, so Zuckerman could refile it if he ever releases the Unfollow Everything 2.0 extension, but after two court losses, he faces significant headwinds.UBER’S ARBITRATION CLAUSE UPHELD BY APPEALS COURTIn a <a href="https://aboutblaw.com/bgm7" target="_blank">5–2 decision</a>, the New York Court of Appeals has ruled that a plaintiff’s legal claims against Uber must go through arbitration—even though her action was currently pending before a court. The ruling stems from a November 2020 lawsuit brought by plaintiff Emily Wu, who originally agreed to a prior version of Uber’s Terms of Service without mandatory arbitration. Uber amended its <a href="https://www.uber.com/legal/en/document/?name=general-terms-of-use&country=united-states&lang=en" target="_blank">Terms of Service</a> in January 2021, updating its mandatory arbitration clause, which Wu agreed to.At the heart of the case is the plaintiff’s argument that the arbitration clause should not apply to claims pending in court, even though the amended Terms of Service purported to apply to “any claims” without limitation. Among other things, Wu claimed that Uber’s notice to Wu violated <a href="https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_4_2_communication_with_person_represented_by_counsel/" target="_blank">Rule 4.2 of the Rules of Professional Conduct</a> for attorneys, which bars the other party in a pending lawsuit from directly contacting a party they know is represented by counsel. The Court of Appeals <a href="https://www.reuters.com/legal/government/column-uber-clickwrap-contract-gets-blessing-nys-top-court-theres-twist-2024-11-26/" target="_blank">disagreed with Wu</a>, maintaining that (a) a mass email notification sent by Uber clearly explained there would be changes to the arbitration agreement and that Wu entered into a contract when she agreed to the revised terms; (b) Uber did not know that Wu was represented by counsel when it sent the mass notice; and (c) even if the claim had merit, Wu’s requested remedies were too extreme and she did not even ask for the more targeted and sensible remedy of simply voiding the arbitration agreement and allowing the dispute to move forward in court.In his majority opinion, Judge Anthony Cannataro wrote, “For essentially as long as there have been written contracts, parties have entered them without first carefully reviewing their terms. That failure can have legal consequences, whether the party is a sophisticated entity or an ordinary consumer, and whether the contract is presented on paper or through an electronic pop-up window.”

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions.











Anthony Ramirez

Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.

Aaron Rubin

Character Technologies has been hit with two lawsuits, including a wrongful death suit (among other claims), in less than two months over its popular Character.ai chatbot. The first was filed in the U.S. District Court for the Middle District of Florida (Garcia v. Character Technologies Inc.) by the mother of a Florida teenager who tragically committed suicide after the chatbot allegedly encouraged the child to do so. 

The Federal Trade Commission has finalized a <a href="https://www.ftc.gov/business-guidance/blog/2024/08/well-pay-you-give-our-new-rule-good-review">new rule</a> aimed at curtailing false, misleading, and otherwise fraudulent reviews on online retail sites. Fake reviews are a <a href="https://pushpullagency.com/blog/a-deep-dive-into-amazon-consumer-review-statistics/">significant problem</a> for the big e-commerce platforms, given that a robust customer review system is crucial to modern e-commerce business models. In fact, <a href="https://pushpullagency.com/blog/a-deep-dive-into-amazon-consumer-review-statistics/">studies</a> have shown that a one-star rating increase in a product review can result in as much as a 26% increase in sales. Unsurprisingly, this has caused a proliferation of fake reviews and “<a href="https://www.theguardian.com/money/2023/apr/22/it-can-be-incredibly-profitable-the-secret-world-of-fake-online-reviews">review brokers</a>.” The new FTC rule is pretty comprehensive and worth a <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/r311003consumerreviewstestimonialsfinalrulefrn.pdf">full read</a>.New York trademark attorney Jeremy Green Eche hit the jackpot—and may have run afoul of <a href="http://www.internetlibrary.com/publications/anticybsquattSamson9-05_art.cfm">federal anti-cybersquatting law</a>—when he recently sold the HarrisWalz.com domain for $15,000. Eche <a href="https://www.cbsnews.com/news/harris-walz-domain-name-sold-for-1500/">purchased the domain in 2020</a> for $8.50. Though cybersquatting law is focused predominantly on trademark protection, it includes a provision barring any registration that “consists of the name of another living person” without their consent and “with the specific intent to profit” from its sale. This isn’t the first time Eche got lucky purchasing domains. In 2016, he <a href="https://www.usatoday.com/story/news/politics/onpolitics/2016/10/03/clinton-kaine-trump-website/91462708/">sold ClintonKaine.com to the Trump campaign,</a> also for $15,000. Eche denied being profit-driven, noting the relatively low price he put on both the Harris and Clinton domains. That the “relatively low” price happens to be slightly less than the cost of pursuing a cybersquatting case against him is probably just a coincidence, right?The U.S. Court of Appeals for the Ninth Circuit has ruled that employers may be subject to lawsuits based on their employees’ off-work social media posts. In <a href="https://casetext.com/case/okownowsky-v-garland">Okonowsky v. Garland</a>, the court unanimously ruled that an employee of a federal prison was sexually harassed on Instagram by a coworker in violation of Title VII of the 1964 Civil Rights Act. Following the ruling, plaintiff’s attorney Drew Pletcher said, “It appears to be the first holding in the Ninth Circuit to find that social media posts on an Instagram page could be considered workplace harassment under Title VII.” In the wake of this ruling, companies will need to consider whether their employee <a href="https://www.expresspros.com/Newsroom/America-Employed/88-Percent-of-Hiring-Managers-Would-Consider-Firing-Workers-for-Content-in-Personal-Social-Media-Posts.aspx">social media policies</a> adequately address abusive or harassing behavior both inside and outside the workplace, including on personal social media.Ye, the artist formerly known as Kanye West, <a href="https://usaherald.com/kanye-west-faces-1-5m-copyright-suit-over-unauthorized-photo-use/">has been hit</a> with a $1.5 million copyright infringement lawsuit by celebrity photography sites <a href="https://usa.backgrid.com/">BackGrid USA</a> and <a href="https://uk.backgrid.com/">BackGrid UK</a>. The paparazzi companies allege Ye posted 10 BackGrid-owned photos to his Instagram account without permission or compensation. While it may seem counterintuitive that celebrities cannot post photos of themselves on their own social media, this is actually a fairly common fact pattern, and one that we <a href="https://www.sociallyawareblog.com/topics/by-winning-motion-to-dismiss-supermodel-loses-chance-to-clarify-whether-she-can-lawfully-post-photos-of-herself-to-social-media">have covered previously</a>. For Ye, in any event, this will not be the first time he has <a href="https://edition.cnn.com/2014/03/17/showbiz/kanye-west-plea-deal/">tangled with paparazzi</a>.Embattled Georgia attorney Lin Wood has been <a href="https://lawandcrime.com/high-profile/pro-trump-defamation-attorney-lin-wood-must-pay-former-law-partners-4-5-million-after-defaming-them-as-criminal-extortionists-on-social-media/">ordered to pay</a> his former law partners $4.5 million after an <a href="https://www.documentcloud.org/documents/25049449-lin-wood-defamation-damages">Atlanta jury found him liable</a> for defaming them on social media. The feud began, like so many do, as an argument over money. The federal court’s initial <a href="https://storage.courtlistener.com/recap/gov.uscourts.gand.301086/gov.uscourts.gand.301086.90.0.pdf">ruling</a> contained some not-so-subtle jabs at Wood. Judge Michael L. Brown wrote, “During a five-week period the following year, Defendant repeatedly accused Plaintiffs of criminal extortion in a series of messages he posted on a social media platform called Telegram. Hundreds of thousands of people viewed Defendant’s messages.” Brown continued, adding: “Tellingly, Defendant does not even try to show his accusations were true. Indeed, he admits Plaintiffs did not commit ‘the crime of extortion.’ But he insists his extortion accusations were still non-false because they contained ‘loose, figurative, or hyperbolic language’ that no reasonable person could construe as a genuine accusation of criminal conduct. The Court disagrees.” Lin Wood’s Telegram page can be viewed <a href="https://t.me/s/linwoodspeakstruth?before=50839">here</a>.A paywall for Reddit? CEO Steve Huffman <a href="https://www.pcmag.com/news/reddit-ceo-teases-paywalled-subreddits">hinted</a> at subscription-only features for the wildly popular news aggregation and social forum site during an <a href="https://s203.q4cdn.com/380862485/files/doc_financials/2024/q2/Reddit-Q2-24-Earnings-Call_Transcript.pdf">earnings call</a> with investors. Unsurprisingly, Redditors had a snarky, and often hilarious, <a href="https://www.reddit.com/r/technology/comments/1emac0p/some_subreddits_could_be_paywalled_hints_reddit/">meltdown</a> on the site. Despite its popularity, Reddit has struggled to become profitable. It’s a top site for AI web scrapers, which prompted the company to <a href="https://www.pcmag.com/news/microsofts-bing-search-engine-gets-ai-overviews-as-reddit-blocks-it">block Microsoft’s Bing</a> search engine and enter into an <a href="https://www.theverge.com/2024/2/22/24080165/google-reddit-ai-training-data">agreement with Google</a> for site access for AI training. Of the data sharing and web scraping situation, Huffman said, “[Our] preference is to have relationships with everybody, but we need to be very considered of where Reddit data goes and what it’s used for.”

 Social Links: Recent Developments in the Law and Business of Social Media

Social Links: Recent Developments in the Law and Business of Social Media

The Federal Trade Commission has finalized a new rule aimed at curtailing false, misleading, and otherwise fraudulent reviews on online retail sites.

Social Links: Recent Developments in the Law and Business of Social Media

On May 9, 2024, in <a href="https://casetext.com/case/x-corp-v-bright-data-ltd-1" target="_blank">X Corp. v. Bright Data Ltd</a>., the U.S. District Court for the Northern District of California dismissed X’s claims alleging that Bright Data’s access to X’s systems, and scraping and selling of publicly available data from X’s platform, violated its Terms of Service and other policies. Bright Data’s business involves various data scraping products and services, such as scraping data on behalf of its customers, selling tools that enable customer to scrape data, and providing IP proxies for customers to use when scraping data.As an initial matter, the court divided its analysis in two, first looking at X’s claims based on Bright Data’s improper access to X’s systems and then at X’s claims based on Bright Data’s scraping and selling of X’s data. The court easily dismissed the claims based on improper access to X’s systems, including claims for trespass to chattels, violation of California Section 17200 (prohibiting unlawful, unfair and fraudulent business acts), tortious interference with contract, and breach of contract. There was nothing particularly surprising in the court’s analysis of these claims, since the dismissals primarily resulted from X’s failure to plead adequate damages arising from Bright Data’s allegedly improper access.The more interesting aspect of Bright Data came next, where the court considered X’s claim that Bright Data’s scraping and selling of data violated X’s Terms of Service and held that X’s claims were preempted by federal copyright law.Section 301(a) of the Copyright Act states that federal copyright law preempts state-law claims when a plaintiff’s work “come[s] within the subject matter of copyright” and state law grants “legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright.” The court in Bright Data noted that there are two types of copyright preemption: (i) express preemption with respect to state law rights that are “equivalent” to federal copyright rights, and (ii) conflict preemption, where enforcement of the state law would more generally undermine the purpose of federal copyright law. The court in Bright Data focused on this second type of preemption.Under X’s Terms of Service, users retain ownership of the images, text, and other content that they upload to the X platform, and grant X a broad, non-exclusive, royalty-free license to display users’ content on the X platform and to use that content in various other ways, including by disseminating the user content through X’s paid tools. The Terms of Service also prohibit scraping and selling any content from the X platform.As a first step in its preemption analysis, the court notes that, under the Terms of Service, X does not own the user content that Bright Data scraped and sold, and X merely has a non-exclusive license to use the content. Under federal copyright law, a non-exclusive licensee is permitted to use the licensed works within the scope of the license, but has no right to enforce the copyright in, or exclude others from using, the works. Despite this, the claims that X asserted in Bright Data sought to enforce contractual terms that would give X the ability to exclude others from using the content in a manner that would otherwise be available only to the owner (or, possibly, the exclusive licensee) of the copyright in the content, not to a mere non-exclusive licensee.(As an aside, the court speculates that the reason that X does not require users to assign ownership of their content to X, or grant X an exclusive license to use content, under its Terms of Service is because this would impact X’s ability to claim the benefit of the safe harbors under Section 512(a) of the Digital Millenium Copyright Act and Section 230 of the Communications Decency Act, two federal statutes that protect website operators from liability arising from content posted by users. The court notes: “X Corp. wants it both ways: to keep its safe harbors yet exercise a copyright owner’s right to exclude, wresting fees from those who wish to extract and copy X users’ content.” In fact, it is not necessarily true that the availability of these statutory safe harbors turns on whether the website operator holds title (or an exclusive license) to the user content at issue. The more likely reason that X does not claim ownership of user content is that doing so would be viewed as overreach and result in significant backlash among its users. But as this issue is not central to the copyright preemption analysis, we leave it for another day.)The court then goes on to hold that X’s claim that Bright Data breached the Terms of Service by scraping and selling user content is preempted by federal copyright law in three ways, namely that enforcement of X’s contractual rights would:<ol class="li-text-orange"><ol class="li-text-orange"><ol class="li-text-orange"><li>Interfere with copyright owners’ exclusive rights and frustrate federal copyright law, since allowing X to enforce its Terms of Service would give it, a non-exclusive licensee, the ability to exclude others from exercising those rights;</li><li class="li-text-orange">Frustrate the operation of fair use, which would (absent a contract preventing it) allow use of the user content for certain permitted purposes (note that, as <a href="https://blog.ericgoldman.org/archives/2024/05/x-corp-v-bright-data-is-the-decision-weve-been-waiting-for-guest-blog-post.htm">observed</a> by guest blogger Guy Rub in Eric Goldman’s blog, the court seems to treat fair use as something akin to an affirmative right, rather than as the affirmative defense to an infringement claim that it actually is); and</li><li>Restrict use of type of information that Congress intended to keep free from restraint, namely uncopyrightable items such as likes, user names, short comments, etc. (It is not entirely clear how this can form a basis for preemption given that these items fall outside the scope of copyright law … but we digress.)</li></ol></ol></ol>Overall, the court presents an interesting new addition to web scraping law, one not addressed in a case that the court still found six occasions to cite, <a href="https://law.justia.com/cases/federal/appellate-courts/ca9/17-16783/17-16783-2019-09-09.html" target="_blank">hiQ Labs, Inc. v. LinkedIn Corp</a>. (see one of our <a href="https://www.sociallyawareblog.com/topics/ninth-circuits-linkedin-decision-does-not-greenlight-the-unauthorized-web-scraping-of-public-websites" target="_blank">previous articles</a> on that case). In light of Bright Data, website operators should be aware that contractual prohibitions contained in terms of service may not be effective to prevent scraping of user content that they make publicly available.

California Federal Court Holds X’s Claims Against Scraper Preempted by Federal Law

California Federal Court Holds X’s Claims Against Scraper Preempted by Federal Law

On May 9, 2024, in X Corp. v. Bright Data Ltd., the U.S. District Court for the Northern District of California dismissed X’s claims alleging that Bright Data’s access to X’s systems, and scraping and selling of publicly available data from X’s platform, violated its Terms of Service and other policies.

Is scraping data from a publicly available website trade secret misappropriation? Based on a new opinion from the Eleventh Circuit, It might be.In <a href="https://law.justia.com/cases/federal/appellate-courts/ca11/18-12004/18-12004-2020-05-20.html" target="_blank" rel="noopener noreferrer">Compulife Software, Inc. v. Newman, Compulife Software</a>, a life insurance quote database service alleged that one of its competitors scraped millions of insurance quotes from its database and then sold the proprietary data themselves. Compulife brought a number of claims against its competitors, including misappropriation of trade secrets under <a href="https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1122&context=umblr#:~:text=Florida's%20version%20of%20the%20Uniform,prevailing%20plaintiff%20in%20some%20cases." target="_blank" rel="noopener noreferrer">Florida’s version of the Uniform Trade Secrets Act (FUTSA)</a> and under the <a href="https://www.americanbar.org/groups/business_law/publications/blt/2016/09/03_cohen/">Federal Defend Trade Secrets Act (DTSA)</a>.Following a bench trial,<a href="http://davidrutstein.com/compulife-lawsuit-decision.pdf"> Magistrate Judge James Hopkins found</a> that, while Compulife’s underlying database merits trade secret protection, the individual quotes generated through public Internet queries to the database do not. So using a bot to take those individual quotes one by one did not constitute a misappropriation of trade secrets. On appeal, however, the <a href="https://law.justia.com/cases/federal/appellate-courts/ca11/18-12004/18-12004-2020-05-20.html" target="_blank" rel="noopener noreferrer">Eleventh Circuit disagreed</a>, vacated, and remanded the case.Facts of the CaseCompulife’s main product is its “Transformative Database,” which contains many different premium-rate tables that it receives from life insurance companies. While these rate tables are available to the public, Compulife often receives these tables before they are released for general use. In addition, Compulife applies a special formula to these rate tables to calculate its personalized life insurance quotes.Compulife sells access to its “Transformative Database” to life insurance agents. The agents can either buy a “PC version” of the database or an “internet-engine version” of the database. In addition, Compulife provides access to the database to consumers for free through its <a href="http://www.terms4sale.com">Term4Sale.com</a> website. When an individual gets a quote from the Term4Sale website, the site automatically refers that individual to an insurance agent who works with Compulife.The defendants operate two competing life insurance quote websites: NAAIP.org and beyondquotes.com. “NAAIP” stands for National Association of Accredited Insurance Professionals. Through NAAIP.org, the defendants offer a “Life Insurance Quoter Engine” that is similar to and partly copied from Compulife’s “Transformative Database.” Life insurance agents can sign up for a free website through NAAIP.org and put NAAIP’s life insurance quoter on their own website. Beyondquotes.com functions just like Compulife’s Term4Sale website. Individuals can use that site to obtain free life insurance quotes and are then referred to a NAAIP affiliated life insurance agent.As part of other efforts to take its proprietary data, Compulife alleged that the defendants retained an Israeli hacker to run automated queries on the Term4Sale website to obtain individual quotes that would be used in the defendants’ competing sites.Trade Secret MisappropriationUnder either the FUTSA or the DTSA, to prove trade secret misappropriation, Compulife had to show that (1) it possessed a trade secret and (2) the trade secret was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it. Misappropriation can be shown through improper acquisition, disclosure, or use.With respect to the hacker’s queries to its Term4Sale website, Compulife acknowledged that any individual could visit the Term4Sale website to obtain a quote and that there was no restriction on how an individual could use a quote obtained from the Term4Sale website. Similarly, the Term4Sale website engine was also available on Compulife customer websites, and those sites were also freely accessible to the public.Judge Hopkins held that, while the underlying Transformative Database is a trade secret, the individual quotes are not. Thus, Compulife’s FUTSA and DTSA claims alleging misappropriation of these quotes necessarily failed.Judge Hopkins also found that Compulife failed to establish a claim of misappropriation through either use or acquisition.On appeal, the Eleventh Circuit held that Judge Hopkins erred in reasoning that the public availability of quotes on Compulife’s Term4Sale site automatically precluded a finding that scraping those quotes constituted misappropriation.The Eleventh Circuit recognized that the quotes’ public availability is important to the first prong of trade-secret misappropriation—the initial determination whether a protectable secret exists. The Court held that public availability creates a vulnerability, which—if unreasonable—could be inconsistent with the reasonable precautions requisite to trade secret protection.The Court, however, held that, even granting that individual quotes themselves are not entitled to protection as trade secrets, Judge Hopkins failed to consider the possibility that so much of the Transformative Database was taken—in a bit-by-bit fashion—that a protected portion of the trade secret was acquired.The Court found that Judge Hopkins correctly concluded that the scraped quotes were not individually protectable trade secrets because each is readily available to the public but held that does not in and of itself resolve the question whether, in effect, the database as a whole was misappropriated. The Court reasoned that, even if quotes aren’t trade secrets, taking enough of them must amount to misappropriation of the underlying secret at some point.The Court further held that the fact that the defendants took the quotes from a publicly accessible site does not automatically mean that the taking was authorized or otherwise proper. Although Compulife plainly gave the world implicit permission to access as many quotes as is humanly possible, a robot can collect more quotes than any human practicably could. So, while manually accessing quotes from Compulife’s database is unlikely ever to constitute improper means, using a bot to collect an otherwise infeasible amount of data may well be.ConclusionsAs noted in <a href="https://www.sociallyawareblog.com/2019/09/17/ninth-circuits-linkedin-decision-does-not-greenlight-the-unauthorized-web-scraping-of-public-websites/" target="_blank" rel="noopener noreferrer">recent posts</a>, website owners have many tools at their disposal to combat unauthorized webscraping. The Eleventh Circuit reminds website owners that they may have one more arrow in the quiver. If the website owner can establish that the underlying data viewed in the aggregate is entitled to trade secret protection, it would be no defense under the Eleventh Circuit’s reasoning that the data is taken bit-by-bit through public access.

L.W. v. Snap Inc.,  675 F. Supp. 3d 1087 

Wamai v. Industrial Bank of Korea , 2021 WL 3038402 

In re Maxus Energy Corp.

In re Energy Future Holdings Corp.

James Paul McCartney v. Sony/ATV Publishing LLC

NFL Enterprises LLC v. EchoStar Satellite LLC

VOOM HD Holdings LLC v. EchoStar Satellite LLC

Change Healthcare Operations, LLC v WebMD Health Corp. 2017 WL 6610411  

Register.com, Inc. v. Verio, Inc.

Komag, Inc. v. Asahi Glass Co. Ltd.

Asante Techs. Inc. v. PMC–Sierra, Inc.

Biovail Corp. v. S.A.C. Capital Mgmt. 2009 WL 2844404 

Multi–Faceted Investigation of University Grants

Confidential International Arbitrations

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Alex advises on all aspects of complex commercial litigation in federal and state trial and appellate courts and in arbitration. He has represented U.S. and international clients in actions involving 

J. Lawrence

J. Alexander Lawrence

Webscraping a Publicly Available Database May Constitute Trade Secret Misappropriation