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April 2001 Volume 2, Issue 4
Editors: Cherie W. Blackburn Robert W. Pearce, Jr. John C. McElwaine
For more
information contact 1-800-237-2000 Nelson Mullins has more
than 250 attorneys firm-wide, with over 25 attorneys having
significant representation of e-commerce clients in areas including
patent, copyright and trademark protection; business planning,
securities and venture capital; and licensing, distribution and
contract preparation. Atlanta
Office Contacts: Neil Grayson Cherie
Blackburn Robert
Pearce John
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Contact: Mark Dukes Greenville
Contact: Marvin
Quattlebaum William
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Contact: Stefan Lode CyberWatch is an Internet Law Group news digest published as a service to Nelson Mullins’ clients and friends. The articles are summaries of particular developments in the law and are not intended to be a solicitation or to render legal advice. This publication can be considered advertising under applicable laws
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New.Net Offers New Domain Name System Start-up New.Net plans to capitalize on the slow roll out of the new top-level domain names (TLDs) approved by the Internet Corporation for Assigned Names and Numbers (ICANN) in November of last year. ICANN granted permission for seven new TLDs registries to begin operation: .biz, .aero, .museum, .info, .coop, .pro and .name. However, various issues related to the new TLDs have delayed their availability. New.Net initially intends to offer 20 new TLDs, including: .shop, .mp3, .inc, .kids, .sport, .family, .chat, .video, .club, .hola, .soc, .med, .law, .travel, .game, .free, .ltd, .gmbh, .tech and .xxx. However, since these new TLDs operate outside traditional Internet registries, Internet service providers would have to reconfigure their hardware to recognize these new domain names. Alternatively, New.Net is offering a free browser plug-in that enables consumers to access its new domains. The domain names are now available at the New.Net site for a flat rate of $25per year. New.Net says that it will follow ICCAN’s dispute resolution policy. Interestingly, what New.Net offers are not new TLDs. Instead, when a user buys a New.Net domain address, they are really purchasing a registered third or fourth level domain name with New.Net. For instance, firm.law would actually appear as a domain name registration for www.firm.law.new.net. ICANN has yet to comment on this new domain name registry system. The Gavel Comes Down On Napster The 9th Circuit Court of Appeals has ruled that Napster must stop allowing music fans to use its free Internet-based mp3 file swapping service to share copyrighted materials. In the 58-page opinion, a three judge panel found that Napster had engaged in assisting copyright infringement, although the opinion instructed the lower court judge to rewrite her injunction to focus more narrowly on the copyrighted material. The appeals court said it was apparent that “Napster has knowledge, both actual and constructive, of direct infringement.” The revised opinion required Napster to implement a filtering system based upon the names of artists and their songs. NASA Hit Once Again A 15-year-old Michigan boy has been arrested on felony hacking charges after defacing at least three NASA Web sites. The teenager is allegedly related to a hacking group known as the Electronic Souls. The boy is charged with unauthorized access to a computer system, which is a felony punishable by up to five years in prison. Attrition.org, a Web site which monitors Web security issues, reported that Electronic Souls has hacked into 32 Web sites since February. Barnes & Noble Wins Second Round in One-Click Case Barnes & Noble won the second round in the one-click patent battle against Amazon.com when a federal appeals court overturned a lower court ruling supporting Amazon’s contention that it holds a patent to the online shopping technology. The Federal Circuit Court of Appeals vacated a District Court’s decision granting a preliminary injunction barring the Barnes & Noble Web site from using the one-click feature and remanded the case back to the lower court. The court stated that BarnesandNoble.com “raised substantial questions as to the validity” of Amazon.com’s patent on the one-click technology. Executives Plead Guilty for Selling Fake Gifts The operators of Fakegifts.com, a Web site that did exactly what it said and sold bogus brand name luxury items, have plead guilty for trafficking in counterfeit goods. In January, authorities arrested the operators for selling phony versions of luxury items, such as Mont Blanc pens, Rolexes and designer hand bags from this Web site. Although the Fakegifts.com Web site had a disclaimer that the items were replicas of the luxury items, the Assistant U.S. Attorney General insisted that the disclaimer was not enough to avoid prosecution. In addition to the criminal charges, several manufacturers have sued the Web site’s operators civilly for trademark infringement and have obtained large verdicts. Dilution Act Claim Fails to Win Domain Name Protection TCPIP Holding Company, Inc., the owner of the trademark “The Childrens Place,” for children’s clothing and accessories, has sued Haar Communications, the registrant of the domain name TheChildrensPlace.com. In November of 1998, lawyers for TCPIP sent Haar a cease and desist letter requesting the return of TheChildrensPlace.com domain name. Haar responded by registering 66 more domain names, all containing variations of the words “children” and “place.” Haar then demanded payment of $575,000 for 35 of the domain names. This offer was later increased to include 44 domain names for $697,000. When a settlement could not be reached, TCPIP sued Haar under the Federal Dilution Act, 15 U.S.C. §1125(c) and for infringement of its mark under §43(a) of the Lanham Act, 15 U.S.C. §1125(a). The court found that the mark ChilrensPlace was not famous and highly descriptive, and thus, not afforded the special broad protection of the Dilution Act. However, the court granted injunction on the grounds that several of the domain names registered by Haar were so similar to TCPIP’s that they would have likely confused customers, which is actionable as trademark infringement under the Lanham Act. SEC Settles Lawsuit with Tokyo Joe On March 8, 2001, the Securities Exchange Commission (SEC) settled its fraud lawsuit against Yun Soo Oh Park, known by the pseudonym “Tokyo Joe.” Officials said that the Internet stock guru charged up to $200 a month for his advice, but used his customers and the information they provided to engage in stock price manipulation. According to the SEC, at the height of the day-trading craze in 1998 and 1999, Park had up to 1,000 registered members who took his advice and also participated in daily online chat sessions. Park would then copy these posts onto several other Web investment sites, and buy or sell stocks as prices rose or fell following his manipulation of information. In the settlement approved by the District Court for the Northern District of Illinois, Park and his company agreed to pay $325,000 of his gains and more than $425,000 in civil penalties. Park also agreed to post a hyperlink to the court order on his Web site for 30 days. CyberWatch By the Numbers 5 percent: The percentage of Internet users who have gambled online. 1.4 billion: The amount wagered online during the year 2000 on casino games, lotteries, horse races and other sports events. 22 million: The number of registered customers of eBay as of January 2001. 62 percent: The Percentage of those surveyed who believe legislators should pass new laws protecting privacy online, according to the above survey. 54 percent: The Percentage of individuals surveyed who favor allowing federal authorities to intercept e-mail, according to a study released April 2, 2001, by Pew Internet & American Life Project. Radiant Settles Class Action Radiant, a company that develops banner ad technology for Internet-based advertising, has agreed to settle a class-action lawsuit in which it was accused of creating software that enabled spying on users’ Internet use and shopping preferences. The lawsuit was filed after media reports last year indicated that Radiant had not fully disclosed its privacy practices. The class action was composed of users claiming that Radiant’s advertising technology installed itself onto the users’ computers without their permission and silently collected demographic data and monitored their viewing of ads. Napster Sued by Roy Orbison Copyright.net reported that it has sent an e-mail to Napster identifying more than 1 million copyright violations of the late pop legend Roy Orbison’s songs. The e-mails were sent on behalf of Roy Orbison Music and Barbara Orbison Music, alleging that Napster violated the Copyright Act. The Orbisons’ estates were able to trace such violations by using a copyright agent software program. Such actions by artists mark the second wave of attacks that Napster faces from the artists who possess the copyrights to their own music. Big Brother Operates in China The Minister of Public Security this month released new software designed to keep “cults, sex and violence” off the Internet in China. The software known as Internet Police 110 was released to prevent users from accessing “unhealthy information” from foreign and domestic Web sites. It operates by blocking information to Web sites containing information concerning cults, sex and violence. The software comes in three versions so that households, Internet cafes and schools can monitor Web traffic and delete or block messages from sources deemed offensive. China routinely blocks Web sites of Western media outlets, human rights groups and other groups critical of Chinese politics. TD Waterhouse Fined for Outages That Hampered Online Trading In its first online trading case, the New York Stock Exchange (NYSE) censored and fined TD Waterhouse Investor Services, Inc., the nation’s fourth largest online broker, $225,000for Internet access outages that left many customers unable to trade for periods of time. The NYSE panel is part of a broader investigation of the operational problems of online brokerage firms. TD Waterhouse was unable to process online orders for various time periods on 33 trading dates during an 18 month period, the hearing panel found. Customers who then tried to place telephone orders faced waits of more than 60 minutes. TD Waterhouse consented to the NYSE board order without admitting or denying guilt. TD Waterhouse is not the only online firm that has been plagued by operational problems. Eleven online brokers reported a total of 88 outages between January and September 1999. House Commerce Committee Considers Anti-Spam Legislation The House Commerce Committee voted on legislation to help consumers and Internet Service Providers (ISPs) go after senders of unsolicited e-mail commonly referred to as “SPAM.” The “Unsolicited Commercial Electronic Mail Act” will make it illegal for spammers to continue sending junk e-mails to an individual after they have been expressly asked to stop. ISP’s that have a junk e-mail policy will be able to sue spammers for $500 per message if their policy is violated. In addition, the Act requires that all spammed messages contain a valid return e-mail address and physical business address for recipients to use to opt out of getting further unsolicited messages. AOL Loses Domain Name Dispute More than 5,500 domain names have been submitted for UDRP deliberation since the Internet Corporation for Assigned Names and Numbers (ICANN) instituted the UDRP, and more than 100 of these were named in complaints filed by AOL. AOL’s near-perfect record of successfully reclaiming Internet domain names under the Uniform Domain Names Dispute Resolution Policy (UDRP) has been blemished. In a complaint filed with ICANN, AOL claimed that Vadim Eremeev of St. Petersburg, Russia, was taking advantage of AOL’s ICQ trademark, which the company regularly uses in combination with other words such as ICQphone and ICQmail. The arbitrator assigned by the World Intellectual Property Organization (WIPO) arbitration and mediation center to handle this dispute ruled that Eremeev will be allowed to keep the domain name ICQPlus.org because he does not charge for the popular software he promotes on a Web site at that address. This decision represents the first case involving its ICQ-related domain name that AOL has lost. In previous cases, WIPO arbitrators had found that holders of the “ICQ” domains were simply cybersquatters out to make money. Dion Awarded Internet Domain Name Canadian singer Celine Dion has been awarded the rights to the Internet domain name www.celinedion.com. Dion and her recording company brought a UDRP proceeding against Jeff Burgar of Alberta, Canada, who claimed that he was using the Web site as a fan club for Dion. Burgar stated that he was not using the name for commercial gain and that the site was clearly marked as “unauthorized” so that no one would mistake it for Dion’s official site. However, the arbitrator found that Burgar had a history of registering the names of celebrities and had only recently added fan club pages. In an earlier ruling, Burgar lost the right to BruceSpringstein.com after the musician brought a UDRP proceeding against him. ICANN Approves Deal with VeriSign The Board of Directors of the Internet Corporation for Assigned Names and Numbers (ICANN) voted 12 to 3 to approve a contract with VeriSign, Inc. that allows VeriSign to retain back-end control over the “.com” registry until 2007 and beyond in exchange for surrendering its control over the “.org” registry. The arrangement would also give VeriSign an opportunity to maintain its hold on the “.net” Internet domain. News of the landmark arrangement brought criticism from many members of the Internet community who felt that ICANN gave VeriSign too sweet a deal. According to one ICANN Board member who voted against the arrangement, ICANN violated its own bylaws and short-changed the Internet community by approving a contract that could give VeriSign near permanent control over the “.com” Internet domain. The contract with VeriSign will not take effect unless the U.S. Commerce Department approves ICANN’s Board decision. Credits: The Standard; C-Net; Yahoo!; NewsBytes; Law.com; Internet News; SiliconValley.com; The Wall Street Journal; Newsfactor Network; The Washington Post Online; Despair, Inc. Press Release, media@despair.com; New York Times; News.com.
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