Facebook contempt of court derails UK drug case

June 30, 2011

By Dr Melissa de Zwart

A major drug trial had to be abandoned and a juror and an (acquitted) defendant found guilty of contempt of court in the UK High Court, following contact between the juror and defendant on Facebook. This was the first prosecution for internet related contempt in the UK. The juror, Joanna Fraill, a 40 year old mother of three, created a Facebook profile called ‘Jo Smilie’, which clearly showed her image. She then used that profile to make contact with the defendant in the drug trial, Jamie Sewart, (34) who had been acquitted of conspiracy charges that day. The contact was made while the jury was still deliberating on other charges.

The complex multi-million pound trial, being heard in Manchester, had involved multiple defendants and charges and was one of a series of four trials. The high profile contempt proceedings came at a time of increased attention by the judiciary in the UK (and Australia) to issues related to jury members accessing the internet for information and attracted the personal involvement of the UK Attorney-General, Dominic Grieve. The case illustrates not only the allure of using the internet for research, but in particular the deceptive sense of privacy and intimacy created by social networking sites, such as Facebook.

Transcript evidence

A transcript of the Facebook chat, which took place in August 2010, has been made available by The Guardian. That transcript shows that Sewart clearly knew that ‘Smilie’ was a juror and asked her: ‘what’s happening with the other charge??’. ‘Smilie’ had asked her to clarify the question, but then went on to post a little later ‘don’t worry about that chge no way it can stay hung for me lol th’. Smilie was also clearly aware of the risk she was running, posting: ‘cant get anywaone to go either no one budging pleeeeeese don’t say anything cause jamie they could call mmiss trial and I will get 4cked too’.  Sewart reassures her: ‘I know I have deleted all the messages I wudnt do that to u don’t worry xx’. The pair also discuss nods, blinks and smiles that Smilie had been sending to Sewart in the courtroom (although Sewart seems to have been unaware that they were meant for her). Sewart later says that they should keep in touch and that she would get Smilie ‘a nice pressie’ if she got anything ‘out of um’, presumably the ‘compo’ she said she would be applying for. At the heart of the exchange is the sense that Smilie wants to show her empathy with Sewart and to explain that she had felt that she had shared the experience with Sewart, noting that she had laughed and cried along with her during the trial.

Despite her assurances to Smilie, Sewart told her lawyer about the Facebook exchange the next day. This resulted in the seizure of her computer and the bringing of the contempt charges. The jury was discharged and the case collapsed.

Both Fraill and Sewart were found guilty of contempt of court in June 2011. Fraill admitted that she had contacted Sewart, claiming that she had been motivated by her joy that Sewart had been acquitted of the charge of conspiracy to supply drugs, after being on remand for fourteen months and separated from her young child, and because she had felt that there were ‘considerable parallels’ between the womens’ lives which made her feel empathetic to Sewart’s plight. Fraill also admitted to having conducted internet searches on Gary Knox, Sewart’s partner and co-defendant in the trial.

Gary Knox, a defendant who was convicted in the original drugs trial and jailed for six years on charges related to paying a police officer to disclose information relating to drug dealer has also applied to have his conviction overturned on the basis of alleged jury misconduct.

The case was heard by the Lord Chief Justice, Lord Judge, Ouseley and Holyrode JJ.

Sentence and observations

Fraill was sentenced to eight months in jail for the contempt. Seward was sentenced to two months, suspended for a period of two years. The contempt action was conducted personally by the Solicitor- General, Edward Garnier QC, who stated that the case was necessary to protect jury integrity. After the trial, Garnier stated that: ‘Jurors should take careful note and know that the law officers will prosecute those who commit contempt.’ He continued:

‘The jury system is a cornerstone of our society and confidence in this vital part of our criminal justice system will crumble if jurors do not take their responsibilities seriously.’

The written ruling of Lord Judge stated: ‘Her [Fraill’s] conduct in visiting the internet repeatedly was directly contrary to her oath as a juror. And her contact with the acquitted defendant, as well as her repeated searches on the internet, constituted flagrant breaches of the orders made by the judge for the proper conduct of the trial.’ The messages exchanged between Fraill and Sewart ‘went much further than the expression of a compassionate concern’. The ruling warned that any similar action by a juror would result in a custodial sentence, such punishments being necessary to maintain faith in the integrity of the jury system. [sky.news.com.au]

In November 2010, Lord Judge had presented a paper to the Judicial Studies Board warning of the prospect of jail sentences for jurors engaging in internet research. He highlighted the risks posed to the jury system by jurors using the internet to search for further information on matters related to the trial. He stated: ‘I do believe that if it is not addressed, the misuse of the internet represents a threat to the jury system, which depends, and rightly depends, on evidence provided in court which the defendant can hear and if necessary challenge. He is not to be convicted on the basis of material which from his point of view is secret material – not only secret material, which is bad enough, but material which may be inaccurate and could also be false.’

Lord Judge concluded: ‘if the jury system is to survive as the system for a fair trial in which we all believe and support, the misuse of the internet by jurors must stop. And I think we must spell this out to them …  yet more clearly. It must be provided in the information received by every potential juror. It must be reflected in the video which jurors see before they start a trial. Judges must continue to direct juries in unequivocal terms from the very outset of the trial. And I should like the notice in jury rooms which identifies potential contempt of court arising from discussions outside the jury room of their debates, to be extended to any form of reference to the internet.’

Facebook ‘friends’

One of the interesting issues raised by this trial, is not so much that Fraill was tempted to discuss the case on Facebook, but rather what Jenny McCartney writing in The Telegraph described as the ‘illusion of intimacy’ displayed in the transcript of the chat. Fraill clearly wanted to be identified by Seward as a friend and ally. Although she had used the internet to search for information on Knox, it appears that she was mainly interested in getting some acknowledgment from Seward that they shared a special bond. Although she had been signalling to Seward in court, it was by no means clear that the signals had been received by Seward. In the same way that for example, fans of a popular musician or actor can gain a sense of contact through receiving a message via Facebook, Fraill sought some affirmation from Seward. This sort of contact would not have been possible in pre-Facebook modes of contact and represents a unique aspect of social network communication. This is an extension of the general problem of jurors being tempted to conduct their online ‘research’ during trials. It is now necessary for jury instructions to specifically prohibit using any internet enabled device to conduct research or to communicate with anyone regarding the case. Whilst this may appear to be common sense, experience suggests that we are still learning how to use Facebook and social networking sites appropriately.

Dr Melissa de Zwart is an Associate Professor in Law at the University of Adeliade.

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The Trans-Pacific Partnership Agreement (TPPA) IP Chapter

May 6, 2011

By Melissa de Zwart

Nine countries are currently negotiating the Trans Pacific Partnership Agreement: US, Australia, New Zealand, Singapore, Chile, Malaysia, Brunei Darussalam, Vietnam and Peru. Under the terms of this agreement, signatories will be required to amend their domestic intellectual property laws to comply with the terms of the TPPA. The US draft of the intellectual property chapter of the trade agreement was leaked in February 2011 generating significant controversy regarding its draconian terms. The leaked chapter is available here at Michael Geist’s blog.

Some key aspects of the draft are as follows:

Geographical Indications

A party must provide that geographical indications (GIs) are eligible for protection as trademarks. For this purpose geographical indications are defined as ‘indications that identify a good as originating in the territory of a Party, or a region or locality in that territory, where a given quality, reputation, or other characteristic of the good is essentially attributable to its geographical origin. Any sign or combination of signs (such as words, including geographical and personal names, as well as letters, numerals, figurative elements, and colors, including single colors), in any form whatsoever’.

The TPPA provides for a registration of GIs if recognized by a member party. Of course, in Australia, GI protection currently extends only to wine and spirits, under the Wine Australia Corporation Act 1980 (Cth). This scheme was introduced to give effect to Australia’s obligations under TRIPS and, more specifically, the Australia-European Community Agreement on Trade in Wine 2008 (and it is predecessor signed in 1994). It is precisely this sort of agreement (reached in order to secure access to the European market for Australian winemakers) which would be prohibited by the TPPA.

Article 2 (which deals with trademarks and GIs) provides that no party shall (whether pursuant to an agreement with another government or otherwise):

  • Prohibit third parties from using translated versions of the geographical indications for goods other than wines or spirits;
  • Prohibit third parties from using a term that is ‘evoked by’ the geographical indication;
  • Prohibit third party uses of any component of a multi-component geographical indication protected by virtue of the agreement, even if such components are generic or use would not give rise to confusion (Clause 17).

For the purposes of the Agreement, a term is generic if it is customary in common language as the common name for the goods or services associated with the term or GI (Clause 18).

Clause 19 sets out a range of factors which may be taken into account in determining whether the terms is generic, such as whether:

  • persons other than the person claiming the rights use that term as the name for the product; and
  • the product is imported into the relevant country, in significant quantities, from outside the proposed protected region using the same name.

This is contrary to the current Australian regime, and particularly the Australia-EC Wine Agreement, which prohibits the use of certain traditional expressions and required the phasing out of local uses of specific GIs, despite their long-term use in Australia.

Clause 22 provides for the non-misleading use and/or registration of signs or indications that reference a geographical area that is not the true place of origin of the product of the product or services other than for wines or spirits, provided that:

a)     the sign or indication is used in a manner that does not mislead the public as to the geographical origin of the goods or services;

b)     the use does not constitute an act of unfair competition;

c)      use would not cause a likelihood of confusion with an earlier trade mark or GI; and

d)     the request for registration does not relate to a generic term.
This reflects the two tier system for GI protection provided for in Articles 22 and 23 of TRIPS, which recognize a higher level of protection for wine and spirits, extending to non-misleading and translated uses of GIs.

Copyright

Article 4 extends the rights granted to authors, performers and producers of phonograms to all forms of reproduction of their works/ performances including temporary storage in electronic form.  The temporary reproduction right proved particularly controversial during the negotiations that resulted in the WIPO Copyright Treaty (WCT) and ultimately could not be resolved at that meeting. Rather, it was dealt with by way of the Agreed Statement to Article 8. (‘It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention. It is further understood that nothing in Article 8 precludes a Contracting Party from applying Article 11bis(2)’). The inclusion of the temporary reproduction right here in the TPPA without further fanfare or disclosure is particularly tricksy on the part of the US and is likely to cause significant debate!

Other notable expansions of copyright include:

  • Prohibition on parallel importation, even of goods manufactured with authorization of the copyright owner outside of the relevant territory.
  • Copyright terms are extended to life plus 70 years for individuals (already the case in Australia) and between 95 and 120 years for corporate works.

The relevant exceptions and limitations are left blank with only a ‘placeholder’ marking their potential inclusion (an ominous lack of attention to detail, given the foreshadowed expansion of rights) although it is noted with respect to the above, one of the possible exceptions would relate to internet retransmission.

Technological protection measures

Technological protection measures are yet again the focus of strengthening efforts. Parties are required to provide that any act of circumvention or dealing in circumvention devices or services shall be subject to civil and criminal penalties. Criminal penalties apply to anyone other than a non-profit library, archive, educational institution or public noncommercial broadcasting entity, who engages in circumvention ‘for purposes of commercial advantage or private financial gain’. Circumvention gives rise to liability independent from any infringement of copyright.

Exceptions and limitations to the anti-circumvention provisions must be confined to the purposes defined in paragraphs (d) and (e).

The narrowness of these exceptions will require amendment of Australia’s TPM provisions which currently require that a TPM be an ‘access control technological protection measure’ which effectively excludes protection of TPMs which protect region coding and TPMs embodied in machines or devices, not directed primarily to protecting copyright.

ISP liability

Article 16 provides for ‘Special Measures Relating to Enforcement in the Digital Environment’. Notably, Clause 3(a) requires parties to provide ‘legal incentives for service providers to cooperate with copyright owners in deterring the unauthorized storage and transmission of copyrighted materials.’ Given the current global climate regarding ISP liability and the decision of the Full Federal Court in the iiNet decision, this would impose significant pressure on the Australian government to reform the law. This is subject to compliance with the US DMCA safe-harbor provisions.

Conclusions

As expressed in this leaked US draft, the provisions of the TPPA, particularly those relating to copyright, appear to be more restrictive than ACTA. Some commentators have hypothesized that the ambit claims made in the leaked document are so extreme that the US is playing a negotiating tactic that allows them to significantly back down from this position and still come out ahead in terms of outcomes. Whilst this remains to be seen, it has reminded us that the parameters of intellectual property rights remain contested and vulnerable to being traded away in the international trade environment.

Dr Melissa de Zwart is an Associate Professor in Law at the University of Adelaide.

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The Kookaburra laughs again….

April 21, 2011

By Dr Melissa de Zwart

In EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Limited [2011] FCAFC 47 (31 March 2011) the Full Federal Court, comprising Emmett, Jagot and Nicholas JJ, upheld the first instance decision of Jacobson J in Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2010] FCA 29 (4 February 2010). Each judge gave a separate judgment, Emmett J taking the lead on the approach to the test of infringement, Jagot J focusing upon authorisation liability and the scope of the orders to be made by the Court, and Nicholas J making some observations on the approach of an appellate court to the findings of the primary judge and the nature of ‘substantial part’.

EMI had appealed the decision on the grounds that the primary judge erred in determining that the recording in question involved a reproduction of a substantial part of the ‘Kookaburra’ song, in particular the manner in which the primary judge came to a determination of aural similarity and substantial part. Larrikin also cross-appealed on the basis that the trial judge erred in the finding that two Qantas advertisements did not reproduce a substantial part of Kookaburra, and in the question of EMI’s liability for authorisation of acts of infringement with respect to the reproduction of ‘Down Under’ in Qantas advertisements and other works.

In the unlikely event that the reader requires a refresher on the facts (this being one of the most widely reported copyright cases of the past few years, and one on which everyone has an opinion), the question before the Court was whether the recordings of the ‘iconic Australian musical work’, the Men At Work song ‘Down Under’ involved the reproduction of a substantial part of ‘another iconic Australian musical work’, the campfire classic loved by the Scouting/Guiding movement worldwide, ‘Kookaburra’, originally composed by music teacher, Marion Sinclair. Sinclair composed the little song, to be sung as a round, in response to a competition run by the Girl Guides in 1934. Ownership of the copyright had been acquired by Larrikin Music Publishing with effect from 21 March 1990. (See Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2009] FCA 799 (30 July 2009).

At first instance, Jacobson J held that the 1979 and the 1981 recordings of ‘Down Under’ (‘the recordings’) infringed copyright in ‘Kookaburra’. However, Larrikin also claimed that EMI had authorised acts of infringement in relation to the reproduction of ‘Down Under’ in other works, including two Qantas advertisements in which ‘Down Under’ was featured. The trial judge held that the Qantas advertisements did not involve the infringement of copyright in ‘Kookaburra’. An order relating to damages was made on 6 July 2010 and discussed in Fortnightly Review.

The Full Court dismissed EMI’s appeal and allowed in part Larrikin’s cross-appeal. In particular, it remanded back to the trial judge the task of determining the matter of authorisation, other than in respect of the Qantas advertisements.

The judgment of Emmett J contains a lengthy discussion of the development of copyright law, not an unusual thing in itself in recent Federal Court decisions, but unusual in this instance due to the fact it begins with a discussion of Roman Law. He observes: ‘The Romans disliked monopolies just as much as common lawyers’ (para. 30) and recognised ‘no exception for copyright’. Rather, questions of ownership with respect to creative outputs were dealt with according to concepts such as ‘accessio’ and ‘specificatio’. However, the invention of printing and other technologies facilitating multiple reproduction necessitated the intervention of the state, and hence the evolution of the modern copyright statutes. After this general discussion, Emmett J considered the relevant test to be applied to the infringement of a musical work, concluding that it involves an objective stage, where ‘the inquiry is whether the alleged infringing work is similar to the copyright work’, and the subjective stage, ie the question whether the copyright work was copied.

Emmett J was prepared to conclude that the primary judge had erred in principle in some respects and that the Full Court should consider de novo the question of infringement. He based this assessment on five key arguments made on behalf of EMI and Hay: first, the primary judge had placed too much reliance on Hay’s performance of ‘Kookaburra’ in conjunction with ‘Down Under’ at certain live performances; second, that he overlooked the importance of ‘Kookaburra’ being a round; third, that the primary judge misapplied the concept of originality; fourth, that ‘the finding of objective similarity was based on a consideration of certain elements of Kookaburra, namely, melody, key, tempo, harmony and structure’, that Jacobson J considered in isolation from each other, and that his Honour ‘appeared to give melody greater weight than the other elements without explaining the basis for that approach’ – this approach being ‘overly mechanistic’; and finally, that Jacobson J had erred with respect to assessing the relative parts of the two works in considering the concept of ‘substantial part.’ Emmet J accepted that the primary judge had only been ‘able to detect the resemblance between the relevant bars of Kookaburra and the Impugned Recordings with the assistance of the experts and of Mr Hay, and that there was force in the submission that the primary judge had become sensitised to the similarities’. In particular, this related to Hay’s admission that for a period of about 2- 3 years from 2002, when he performed Down Under at live concerts, he would sing the words of Kookaburra in place of the flute riff, thus leading Jacobson J to conclude that the ‘short answer’ to the qualitative test requirement was to be found in Hay’s own performance of both works together.

Whilst Emmett J agreed that the ‘short answer’ was not to be found in this way, and on this point the trial judge had erred, his Honour observed (at para. 86):

‘A similarity between part of Kookaburra and the flute phrase is clearly perceptible. True it is that that similarity went largely unnoticed for in excess of 20 years, notwithstanding that each work is said to be an iconic Australian work. Nevertheless, the question is one of objective similarity. The aural resemblance need not be resounding or obvious. The relevant test is not the effect upon a casual listener of the whole of the versions of Down Under in the Impugned Recordings. Sensitised though the primary judge may have been to the similarity, it is not erroneous to direct oneself to the relevant parts of the works, to listen to the works a number of times, and to accept the assistance of the views of experts, in determining the question of objective similarity. In those respects, I do not consider that the primary judge erred.’

With respect to the argument regarding lack of aural similarity, Emmett J noted that there was no similarity between the works in terms of their genres, styles, objects or purposes, but the quotation from Kookaburra was intended to be perceived by listeners as ‘a quotation, or a reproduction, of part of Kookaburra, and the musical genres or styles associated with Kookaburra.’ However, he continued, neither ‘the existence of the quotation or reproduction, nor its capacity to be discerned, is affected by casting it as a tribute or reference to an Australian cliché or iconic melody. The flute phrases in the Impugned Recordings are a clear departure from the genre of a rock anthem, and therefore distinguish the part taken from Kookaburra from the other parts and musical elements of Down Under.’ Ultimately, therefore, what the listener hears is ‘a reproduction of part of Kookaburra’. (para 92).

Emmett J rejected any need to establish animus furandi in order to make out infringement, concluding rather that ‘the quotation or reproduction of the melody of Kookaburra appears by way of tribute to the iconicity of Kookaburra, and as one of a number of references made in Down Under to Australian icons.’ (para. 99) However, the fact that Kookaburra is used in this way is no defence to the infringement action.

Perhaps the most surprising part of Emmett J’s judgment is his lament regarding the state of modern copyright law. He concludes his discussion of the question of infringement with the following:

If, as I have concluded, the relevant versions of Down Under involve an infringement of copyright, many years after the death of Ms Sinclair, and enforceable at the behest of an assignee, then some of the underlying concepts of modern copyright may require rethinking. While there are good policy reasons for encouraging the intellectual and artistic effort that produces literary, artistic and musical works, by rewarding the author or composer with some form of monopoly in relation to his or her work (see Ice TV at [24]), it may be that the extent of that monopoly, both in terms of time and extent of restriction, ought not necessarily be the same for every work. For example, it is arguably anomalous that the extent of the monopoly granted in respect of inventions under the Patents Act 1990 (Cth), being a limited period following disclosure, is significantly less than the monopoly granted in respect of artistic, literary or musical works, being a fixed period following the death of the author or composer, irrespective of the age of the author or composer at the time of publication.

Of course, the significance of the anomalous operation of the Copyright Act can be addressed in terms of the remedies and relief granted in respect of infringement. Nevertheless, one may wonder whether the framers of the Statute of Anne and its descendants would have regarded the taking of the melody of Kookaburra in the Impugned Recordings as infringement, rather than as a fair use that did not in any way detract from the benefit given to Ms Sinclair for her intellectual effort in producing Kookaburra. (paras. 100-101.)

It remains to be seen how this general regret may be taken up in later Federal Court decisions.

Jagot J also considered the argument that the trial judge’s approach to the aural comparison was ‘overly mechanistic’ and ‘fragmented’ but rejected this on the basis that although Jacobson J made use of expert evidence and made reference himself to the fact that he had become sensitised to the similarities during the course of the hearing, the trial judge was entitled to have regard to expert evidence on the question of objective similarity and also to have regard to Hay’s own evidence regarding the playing of the two songs together:

The fact that Mr Hay’s performances are not the infringement sued upon, in this context, is immaterial. As the trial judge put it, the capacity to sing the Kookaburra melody directly over the relevant parts of the Down Under flute riff “graphically” illustrates that the fourth bar of Example D and the second and fourth bars of Example E are unmistakably the melody of Kookaburra. The trial judge was entitled to use that evidence as he did. (para. 218)

Jagot J delivered the leading judgment with respect to the question of authorisation. The trial judge’s findings regarding the Qantas advertisements stands, but the authorisation case, other than in respect of the Qantas ads is to be remitted to the trial judge. The Qantas ads were found by the primary judge not to infringe copyright in Kookaburra and no error in that conclusion had been established. Larrikin’s argument was that by granting licences to reproduce Down Under to third parties EMI and Hay authorised the infringement of copyright in Kookaburra by those uses. EMI and Hay argued that any individual reproduction of Down Under may not involve an infringement of Kookaburra, as Down Under appears in many forms which do not involve Kookaburra, as it did not form part of the original composition, but was added later by Mr Greg Ham.

As the other matters raised by Larrikin in the cross appeal, ie liability of EMI under ss 36 and 115 of the Copyright Act with respect to damages, account of profits, and the ordering of injunctions against EMI, depend upon the determination of the authorisation case, these issues are left to be dealt with by the trial judge.

Nicholas J agreed with the reasoning used and orders made by Jagot J.

The outcome of the appeal reflects the difficulties of applying the test of infringement to musical works, as well as the general frustration that many have had with the outcome ie the finding that a much loved Australian song infringes a tune that many people considered to be a ‘folk song’, and therefore long since out of copyright term. It is likely that musicians will still continue to struggle with the concepts of originality and substantial part. Ultimately, the case reflects nothing new or novel in the approach to the interpretation and application of copyright law, although it will inevitably continue to generate bad press for the doctrine of musical copyright for some time to come.

Dr Melissa de Zwart is an Associate Professor in Law at the University of Adelaide.

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Are you addicted? Online games and internet addiction

November 19, 2010

By Dr Melissa de Zwart

The dangers posed by online games is a favourite topic of the mainstream media. The US Supreme Court is currently hearing the case of Schwarzenegger v. Entertainment Merchants Association (click here for transcript), concerning the Constitutional validity of the Californian law banning the sale of violent video games to minors.

In addition to the matter of violent content, the media focuses on the horror stories of babies left to starve to death while their parents are busy raising a virtual baby online; the young man who died after enduring a long gaming stint during which he refused the leave the console for 50 hours (click here) and the zombie-like teenagers who don’t sleep, playing World of Warcraft all night long.

But what is the truth about online gaming? Is it truly addictive? And, if so, does it make gamers a danger to others, such as the Otaku panic in Japan in the late 1980s suggested? Do game providers owe a duty to potential customers to warn them of the risk of psychological addiction?

A case currently before the US Courts may give us some of the answers to these questions.

Smallwood v NCSoft Corporation

In October 2009, Craig Smallwood filed a Complaint against online game provider NCSoft in the US District Court, District of Hawaii, alleging that ‘as a direct result of using Lineage II [an online game created and operated by NCSoft and its affiliated companies] and Defendant’s acts and omissions, he has suffered extreme and serious emotional distress and depression, he has been unable to function independently, he has suffered psychological trauma, he was hospitalized, and he requires treatment and therapy three times a week.’ Smallwood claimed $3 million in damages. (Click here for filings)

Smallwood had played Lineage II using three accounts for over 20,000 hours during the period 2004-2009. This level of play, averaging 11 hours per day, left him unable to function in his daily life. Smallwood stated that he ‘experienced great feelings of euphoria and satisfaction from persistent play.’ During this time he claimed that he ‘became psychologically dependent and addicted to playing Lineage II.’ He also claimed that, despite being banned from the game, he continues to experience a compulsive urge to play the game.

At the time of bringing the action Smallwood had been banned from the game due to allegations that he had been involved in Real Money Trade (RMT) in breach of the game rules.

Smallwood claims that had he been warned about the trauma he would experience as a consequence of his addiction and subsequent exclusion, he would not have commenced playing the game and invested so much time and money in it.

The original Complaint had a troubled progression through the Court, due to problems with the drafting of the pleadings, and particularly the issue as to whether Smallwood was an unrepresented (‘pro se’) litigant, or had in fact received significant legal help in drafting his claims. Judge Kay determined that Smallwood had received assistance from legal counsel, but that rather than striking his pleadings, he would not liberally construe them as would normally be done for a pro se party.

In summary, Smallwood claimed that he ‘would not have bought and played Lineage II if he had been aware that he would be subjected to the dishonesty and unfairness described above, or that he would become addicted to the game.’ The specific legal claims related to misrepresentation/deceit, unfair and deceptive practices, defamation/libel/slander, negligence, gross negligence, intentional infliction of emotional distress, negligent infliction of emotional distress, and punitive damages. The Court ultimately dismissed all of the claims except for those in defamation, negligence, gross negligence and negligent infliction of emotional distress.

In assessing the Defendant’s Motion to Dismiss, the Court had to determine whether or not there was a certainty that under existing law (the law of Hawaii) ‘no relief can be granted under any set of facts that might be proved in support of the plaintiff’s claim.’

Validity of the User Agreement

NCSoft sought to dismiss Smallwood’s claims on a number of grounds. Most relevant for our purposes are that Smallwood’s claims are limited by the terms of the Lineage II User Agreement to the $65 account fees paid by Smallwood for the preceding six months. Smallwood opposed enforcement of the terms of the User Agreement on the basis that it not relevant to consider the terms of the User Agreement and that it had not been sufficiently relied upon in his Complaint, effectively disputing the authenticity of that Agreement. In addition, he claimed that as a ‘click wrap agreement’ it should be declared void and unconscionable. The Court rejected all of these arguments in that Smallwood himself had referenced the User Agreement a number of times in his Complaint.

The Court determined that the validity of the Agreement and the limitation of liability clause would be determined under the specified law of the Agreement, ie the law of Texas. A number of decisions of the Texas Courts had upheld the validity of clickwrap agreements. Therefore the Court held that the relevant agreement was valid. In particular, Smallwood ‘had notice of the User Agreement, was required to affirmatively agree to it by clicking “I agree”, and had an opportunity to cease playing Lineage II if he disagreed with it.’ The Court held that Smallwood ‘repeatedly reaffirmed his acceptance of the User Agreement by continuing to play’. Furthermore, and most damningly (and surprisingly) was the fact that Smallwood actually claimed to have read the User Agreement and relied upon it framing his claims.

As noted above, the User Agreement contained a limitation of liability clause. However, the Court held that this clause could not, according to principles of general law, exclude liability with respect to willful or fraudulent behaviour or gross negligence.

A ‘Fair Game’?

With respect to the allegations of fraud the Court held that the claim had not been pled with the required specificity. Smallwood’s claims with respect to fraudulent misrepresentation were as follows, that NCSoft had falsely represented that:

  • the three-month automatic payment plan was for the Plaintiff’s benefit, when in fact it was a means to retain the Plaintiff’s money after he was banned. Smallwood claims that there was also a secret strategy to force players to invest more money by moving to the new game ‘Aion’;
  • Lineage II was ‘a fair game’. In particular, Smallwood asserted that the Lineage Game Masters did not enforce the game rules fairly;
  • Lineage II was a safe product, in particular that there was ‘inadequate advice to plaintiff as to “taking breaks” from play, but not disclosing that lengthy breaks in play were necessary to avoid addiction to the game;
  • ‘botting was not allowed, when in fact, it was rampantly obvious during plaintiff’s game play but nothing was done about it’.

However, none of these claims were supported by sufficient detail regarding who made such misrepresentations, where or when they were made.

The only allegation for which sufficient detail was provided was the claim by Smallwood that the reason for banning him from the game was ‘phony and fraudulent’. Importantly, Smallwood alleged that he relied upon NCSoft’s actions to his detriment ‘by investing his time and money playing the game.’ The Court rejected this claim on the basis that Smallwood could not have relied upon his investment of time and money to his detriment once he had been banned from playing the game. The claims in negligent misrepresentation and unfair and deceptive trade practices were also dismissed for lack of specificity.

Defamation

Further, Smallwood brought a claim in defamation, claiming that he was ‘falsely accused of being involved in real money transfers’ and that such statements were published to other players to his detriment. The Court found that this claim was sufficiently stated but as the claim for defamation was based upon negligence, damages were limited under the terms of the User Agreement.

Negligence

Smallwood’s claims in negligence and gross negligence were based on the allegation that NCSoft ‘acted with negligence in designing, developing, manufacturing, inspecting, testing, marketing, advertising, promoting, selling, distributing, maintaining, revising, servicing, administering, and overseeing Lineage II’.

The Court found that Smallwood had stated a claim in both negligence and gross negligence, with damages potentially being limited under the Service Agreement (not with respect to gross negligence).

Intentional Infliction of Emotional Distress

Smallwood’s claim for the intentional infliction of emotional distress was dismissed on the grounds he had not pled facts supporting a claim that the relevant act was ‘outrageous’ as required under Hawaiian law. However, the Court was prepared to entertain a claim on the basis of negligent infliction of emotional distress.

In order to bring a claim on this basis, as a general rule under Hawaiian law there must be a physical injury to the plaintiff or another person or property. In this case, Smallwood claimed that he ‘suffered extreme and serious emotional distress and depression’ and as a consequence was ‘unable to function independently in usual daily activities such as getting up, getting dressed, bathing, or communicating with family and friends.’ This also resulted in Smallwood being hospitalized for three weeks and needing therapy three times a week. This is sufficient to constitute a physical injury. Again, if successful on this claim the Plaintiff’s damages would be limited by the User Agreement in case of negligence, but not in the case of gross negligence.

Conclusions

As this was a motion by NCSoft to dismiss Smallwood’s Complaint, the matter will now go ahead for a full hearing of the issues with respect to defamation, negligence, gross negligence and negligent infliction of emotional distress.

Recent discussions in the media have also focused on the question of whether internet addiction, and particularly addiction to online games, should be recognized as a classifiable mental disorder. Some of these discussions have highlighted the question, also at the core of the Smallwood case, of whether game providers should provide warnings to users about their addictive qualities. Others take the view that the internet, and particularly games such as EverQuest and World of Warcraft, satisfy a basic human need for achievement and conquest.

For many players, the online game is their place of socialisation and engagement, this social element is often lost in media critiques of the lonely socially isolated gamer. It is important in any consideration of the impact of online games, that the positive elements are not lost in the sensationalized focus on the negative.

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The Safe Harbour UGC Business Model: judicial endorsement in Viacom v YouTube

July 15, 2010

By Dr Melissa de Zwart

From the time that the Internet was opened up to widespread general use, service providers were concerned regarding their potential vicarious liability for end-user copyright infringement, where the service provider had played no active role in the choice of that content.  This was due to the decision in MAI Systems Corporation v Peak Computer 991 F. 2d 511 (1993) in which the United States Court of Appeals, Ninth Circuit, held that when a computer was switched on, causing the operating system to run, the reproduction of that program on the RAM was an act of reproduction within the rights of the copyright owner.

This generated concern within the US Government, then espousing the principles and visions of the Clinton/Gore sponsored A Framework for Global Electronic Commerce, that such potential for liability would act as a roadblock to the uptake of electronic commerce by making business too risky for new ISPs to enter the market. This was despite the decision in Religious Technology Center v Netcom 907 F. Supp. 1361 (N.D. Cal. 1995) where the US District Court held that ISP Netcom should not be liable for the infringing activities of its end user, concluding (at 23) that:

‘The Court is not persuaded by plaintiff’s argument that Netcom is directly liable for the copies that are made and stored on its computer. Where the infringing subscriber is clearly directly liable for the same act, it does not make sense to adopt a rule that could lead to liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for the functioning of the Internet. Such a result is unnecessary as there is already a party directly liable for causing the copies to be made.’

(A sentiment echoed fifteen years later by Cowdroy J in the Federal Court in the recent Roadshow Films v iiNet decision ) Click here for our earlier coverage of that case.

The Safe Harbo(u)r Solution

The US took these concerns to the negotiations that resulted in the WIPO Copyright Treaty (WCT) but only succeeded in having the matter of intermediary liability dealt with in the Agreed Statement to Article 8 of the WCT:

‘It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention. It is further understood that nothing in Article 8 precludes a Contracting Party from applying Article 11bis(2).’

In Australia, this resulted in the insertion of Section 39B in the Copyright Act 1968 (Cth).  However in the US it resulted in the introduction of the ‘safe harbor’ provisions in s 512 of the Copyright Act (US) by the Digital Millennium Copyright Act 1998.  That section provides that a service provider’s liability with respect to infringing material hosted on its system or network is limited where:

  • the service provider does not have actual knowledge of infringement and is not aware of facts or circumstances from which the infringement is apparent, and upon receiving such knowledge ‘acts expeditiously to remove, or disable access to, the material’;
  • ‘does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity’; and
  • Upon notification of infringement ‘responds expeditiously to remove, or disable access to’ that material.

As was observed by the US Senate Committee in 1998: ‘by limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.’

Australia was obliged to introduce a safe harbour regime as a consequence of its entry into the Australia-United States Free Trade Agreement.  This was achieved through the introduction of Division 2AA of Part V of the Copyright Act 1968 (Cth) by the US Free Trade Implementation Act 2004 (Cth) and the Copyright Legislation Amendment Act 2004 (Cth).

The existence of ‘safe harbour’ protection, limiting liability to an obligation to remove infringing content upon receiving appropriate notification of infringement, created the opportunity for the evolution of websites such as YouTube and Flickr, which host content uploaded by end users (the ubiquitous user generated content (UGC)).

Content is uploaded in such quantities that individual scrutiny of the content is impossible (according to the YouTube judgment content is currently being uploaded to YouTube at the rate of over 24 hours of video every minute).  The end user licence agreements that the contributors to such sites agree to with the service provider require users to declare that such content is not infringing.  The service provider will remove infringing content only upon specific notification from the copyright owner, under the provisions of the DMCA safe harbor provisions. Thus the proliferation of user-generated content directly owes its success to the introduction of the safe harbor provisions which legitimise this ‘infringe now, ask questions later’ approach.

The YouTube case is therefore important because it tested the legality of the business model created and facilitated by the safe harbor regime.

Viacom versus UGC (again) –

Viacom International, Inc., v. YouTube, Inc., 2010 WL 2532404 (SDNY June 23, 2010).

Viacom commenced proceedings against YouTube in March 2007 alleging that You Tube (and its parent company Google) were liable for both primary and secondary infringement of copyright.  (As an aside, the involvement of Viacom in this case is interesting as Viacom, owner of several major production houses including Walt Disney, Dream Works, Comedy Central and Nickelodeon, to name but a few, was one of the earliest content owners to take on the first fan created web sites, namely Star Trek, and in doing so, created very bad publicity amongst its fan base.)

YouTube made an application for summary judgment on the basis of the safe harbor provisions, claiming that under the relevant provisions of the DMCA they had insufficient notice of the relevant infringements.  Thus much of the judgment is concerned with what constitutes knowledge or awareness of infringement.

In his judgment, Judge Stanton avoids most of the vicious allegations and abuses which had been aired by the parties in their Memoranda in Support of Summary Judgment in March 2010, particularly those regarding alleged admissions by Google about how much YouTube content was likely to be infringing.  Rather he focuses upon a straightforward interpretation of the notice and take down provisions, in particular, whether the statutory requirement of ‘actual knowledge that the material or an activity using the material on the system or network is infringing’ and ‘facts or circumstances from which infringing activity is apparent’ are satisfied by a general awareness of infringements or whether it requires ‘actual or constructive knowledge of specific and identifiable infringements of individual items’.

Judge Stanton undertakes an extensive consideration of the legislative history of the provisions and concludes that the provisions require ‘knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough.’

Out of the millions of works that may be posted on the platform, the service provider cannot be expected to know which works are infringing, nor indeed which are subject to fair use or a licence arrangement.  The Judge declined to shift the burden to the service provider to monitor such content and indeed he observed that each of the video clips in suit had been removed from YouTube, most in response to a DMCA takedown notice, usually within a 24 hour period. He further supports his conclusion with reference to a number of cases, including Perfect 10 Inc v CC Bill LLC 488 F. 3d 1102 (9th Cir 2007) and Tiffany (NJ) Inc v eBay 600 F. 3d 93 (2nd Cir 2010) (which concerns trade mark law and therefore does not involve DMCA considerations) and distinguishing the circumstance of peer to peer file sharing in Grokster , concluding that : ‘General knowledge that infringement is “ubiquitous” does not impose a duty on the service provider to monitor or search its service for infringements.’

Finally, the Judge dealt with a number of other points including the matter of whether the service provider receives a financial benefit directly attributable to the infringing activity, in a case where the service provider has the right and ability to control the activity.  The Judge concludes that the provider must know of the particular case before it can control it.

The decision emphasises the need for the service provider to know of and respond to a specific infringement.  General knowledge of infringements at large is not enough to constitute knowledge for the purposes of the section. It is not clear at this time whether the judgment will be appealed.

Outcomes: Actual Knowledge Required

This outcome is consistent with the approach taken by Cowdroy J in the iiNet decision Click here for our earlier coverage of that case.

Considering the application of the Australian safe harbour provisions, Cowdroy J concluded that iiNet did have a repeat infringer policy which would have entitled it to rely upon the safe harbour limitations had infringement been established.

Consistent with the passive approach to copyright enforcement endorsed by the YouTube decision, Cowdroy J imposed the burden of identifying and establishing infringement clearly on the copyright owners.

Relevance of US Cases?

Importantly, Cowdroy J also observed that US authorities on the safe harbour provisions ‘can provide significant assistance’ in the interpretation of the corresponding Australian provisions.  It should be noted that these observations are obiter, the Court having found that there was no authorisation of copyright infringement by iiNet.

The outcomes of the YouTube case represent an endorsement of the UGC model that has been adopted so enthusiastically by web users and which now represents a vital component of Web 2.0.

Dr Melissa de Zwart is an Associate Professor in Law at the University of South Australia.

(return to the top of this edition)

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