Techdirt. Stories filed under "disclosure"

Yelp Fights Back Against Carpet Cleaning Service That Sued Anonymous Critics For Defamation

Mike Masnick — Fri, 10 May 2013 15:48:30 PDT

We've seen plenty of lawsuits involving people upset about Yelp reviews, but here's a fairly extreme case. Apparently, a DC-area carpet cleaning service named Hadeed Carpet Cleaning, which is somewhat infamous in the area for its "pervasive advertising" and direct mail coupons promising a $99 cleaning special, does not have the greatest reputation on Yelp. The key issue: apparently that $99 deal is often not honored. Also, there are multiple reviews of people getting a quote, dropping off a carpet, and then being told later if they want the carpet back they have to pay much more -- with various excuses being offered as to why they're charging more than the quote.

Hadeed then decided to sue seven anonymous reviewers for defamation. Here's the oddity: Hadeed does not appear to be suing them over the contents of the bad review. In fact, the company doesn't seem to dispute the various complaints about its pricing practices. Rather, it argues that it could not match these seven reviewers to actual customers within its database, and therefore, the reviewers are defaming them by misrepresenting that they were ever Hadeed customers. Hadeed appears to suggest that they reviews were really written by a competitor.

As we've discussed, many courts have adopted the so-called Dendrite rules for identifying anonymous speakers. The rules require giving the anonymous users a chance to respond and (more importantly) require the plaintiff to present enough evidence to prove there's an actual case. However, the court in Virginia chose to not apply any such rules, but rather allowed a subpoena to Yelp ordering it to identify the posters. Yelp has refused, and the court ordered compliance, which Yelp again refused, leading to the court saying Yelp was in contempt.

Public Citizen has now filed a brief on behalf of Yelp with the appeals court, arguing both that the Virginia court had no jurisdiction over Yelp, a California company, and that Yelp was correct to ignore the order since the First Amendment (which protects anonymous speech) requires much more proof before an anonymous speaker can be revealed.

When pervasive advertisements from a local merchant feature prices that seem to be just too good to be true, they may, in fact, not be the price that the average consumer will pay. Dozens of consumers who have used pseudonyms to post about their experiences with appellee Hadeed Carpet Cleaning, Inc. (“Hadeed”) on the popular website www.yelp.com, maintained by appellant Yelp Inc. (“Yelp”), report that Hadeed routinely fails to honor the advertised discount prices. Hadeed’s responses to several consumers on Yelp suggest that it recognizes the problem; yet its complaint for defamation singles out the authors of seven reviews posted on Yelp that say the same thing as the other online detractors of Hadeed and its sister business, Hadeed Oriental Rug Cleaning. Based on that allegation, Hadeed invoked the court’s subpoena power to strip its pseudonymous critics of their First Amendment right to speak anonymously.

The main question on this appeal—an issue of first impression at the appellate level in Virginia—is whether the trial court applied the proper legal standard in overriding the anonymous speakers’ First Amendment rights. Courts elsewhere have recognized that, given the valuable role played by the First Amendment right to speak anonymously in encouraging ordinary people to express themselves fully, it is necessary to balance that right against a plaintiff’s right to seek redress for wrongful speech by adopting a standard requiring a plaintiff to do more than articulate a good faith belief that the speech “maybe tortious.” Before stripping the defendant of a First Amendment right, these courts take an early look at the merits of the plaintiff’s claim to determine whether a valid claim has been alleged and whether there is a prima facie evidentiary basis for that claim. In this appeal, Yelp urges Virginia to adopt the same approach, and to remand this case to give Hadeed an opportunity to pursue its subpoena by meeting the proper standard.

In the meantime, though, we have yet another case of a company suing over Yelp reviews -- which just makes me wonder how they ever expect to get more customers. Any company that sues over online reviews someone makes is clearly a company not worth doing business with, since they might, potentially, sue you over any bad review you write online about them.

Permalink | Comments | Email This Story

Everyone's Up In Arms Over Instagram's Terms Of Service They Didn't Read In The First Place

Mike Masnick — Tue, 18 Dec 2012 11:48:27 PST

It never fails. No one actually reads the various terms of service for the different online services you use, but when someone finally does -- out of boredom or (more likely) because the terms are changing (yet again!) -- it's not uncommon to see sudden mass outrage. It seems to flare up every few months. Last time around it was Pinterest and this time it's Instagram, based on the claim that the company (now owned by Facebook) will have new terms that allow it to sell your photos to the highest bidder, for which you will get nothing. There is some outrage over that (selling my work!), but the thing that seems to be upsetting people the most is the fact that the company is reserving the right to have your images be used in advertisements. Here's the part in the new terms:

Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.

This has created quite a bit of general outrage, though I'd argue that most (though, not all) of it is misplaced. There are some extreme arguments on both sides -- from Sam Biddle at Gizmodo telling everyone to "shut up" because they're acting like a "little whiny baby" to David Meyer at ZDNet insisting this is a move too far, and is totally unacceptable. Others are pulling out the "it's a business, what did you expect" line.

The most reasonable take I've seen so far comes from Kash Hill at Forbes, who goes through the new terms methodically, explaining what they mean. The whole "use in advertising" thing sounds basically like they're going to integrate Instagram images into Facebook's existing efforts for things like "Sponsored Stories." If that doesn't creep you out, then perhaps you shouldn't be too worried about this new thing:

If this sounds familiar, it's because it's a page from the Facebook book. It sounds like Instagram is planning something along the lines of "Sponsored Stories." So if you go into a business and gram your experience, the business can use the gram in ads, probably targeted at your friends to encourage them to do the same. The fact that Instagram grants itself the right to use metadata is significant — that means it knows the exact location where a photo was taken, making it easy for businesses to know a photo was taken inside one of their fine establishments. A big question here is whether these ad campaigns will be limited to Instagram's (and Facebook's) platforms or if they will migrate outside of the Instabook ecosystem.

Le's be honest: Many of the photos on Instagram are perfect for this. A sample gram from my weekend: "Best bloody mary in D.C. At the Pig;" that's a Pig ad waiting to happen. Actually it's a Pig ad that already happened, but no one got paid for it. Most of us are already essentially packaging and advertising our experiences to our friends (as Joe Brown at Gizmodo makes clear); Instagram is wisely trying to make money off of it.

When pitched that way, it doesn't sound nearly as bad. After all, if you were talking about how awesome the burgers at your favorite burger joint are, is it so crazy to think that the burger place might want to repeat your enthusiasm as part of their push to get more customers? Furthermore, even if the terms are worded poorly (it's mostly boilerplate, and you'll find somewhat similar terms in lots of places) if Instagram really went out and started selling your photos to appear in, say, a big magazine or TV ad, there would be significant public backlash over that, such that it's probably in their own best interest not to do that without direct permission.

That said, there are a few questionable things in the terms that may lead to legal trouble. When they say: "You acknowledge that we may not always identify paid services, sponsored content, or commercial communications as such" they're asking for a beatdown from the FTC (though, the current Facebook terms include an almost-identical item).

The thing that really surprises me in all of this is that Facebook/Instagram didn't see this coming. Perhaps it's because Facebook seems to do this kind of thing every few months -- in which they change their terms or launch a new feature that has a surprising impact on some element of privacy -- leading to mass complaints and outrage... which all gradually fade away. So maybe Facebook just figures to weather the storm -- and, chances are, for all the people complaining, very few will actually leave Instagram.

Still, earlier this year, Tumblr finally realized that it makes sense to put up plain language terms of service that isn't chock full of legalese (beyond what's necessary) and which include straightforward explanations for what the different clauses mean and how they impact you. It seems like Facebook/Instagram could have cut off a significant amount of criticism of this move if they'd simply done that: better explain in plain language what they're doing and why they're doing it. Instead, just flipping the switch on new terms is bound to set off this kind of firestorm of anger.

Permalink | Comments | Email This Story

Pfizer Can't Keep Its Viagra Patent Up In Canada

Leigh Beadon — Thu, 8 Nov 2012 12:02:00 PST

Today, in a ruling from the Supreme Court of Canada, Pfizer lost its Canadian patent on Viagra as the result of a long-fought battle with rival pharmaceutical manufacturer Teva, which sought to make a generic version of the popular drug. Though the patent was not set to expire until 2014, Teva argued (and the Supreme Court agreed, though lower courts had rejected the argument) that it was in fact never valid in the first place, because it was written in such a way as to obscure the information that is required disclosure in a patent:

P holds Patent 2,163,446 for the use of a “compound of formula (I)” or a “salt thereof” as a medicament for the treatment of erectile dysfunction (“ED”). The patent’s specification ends with seven cascading claims for successively smaller ranges of compounds, with Claims 6 and 7 relating to a single compound each. Only sildenafil, the subject of Claim 7 and the active compound in Viagra, had been shown to be effective in treating ED at the time of the patent application. Although the patent includes the statement that “one of the especially preferred compounds induces penile erection in impotent males”, the patent application does not disclose that the compound that works is sildenafil, that it is found in Claim 7, or that the remaining compounds had not been found to be effective in treating ED.

...

The patent application did not satisfy the disclosure requirements set out in the Patent Act, R.S.C. 1985, c. P‑4 (“Act”). The patent system is based on a “bargain”: the inventor is granted exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge. Sufficiency of disclosure lies at the very heart of the patent system, so adequate disclosure in the specification is a precondition for the granting of a patent.

The ruling goes back to this all-important concept a few times: without disclosure, there can be no patent. It's good to see the court making this a central point, because pharma companies are notorious for attempting to twist the patent system so they get virtually perpetual monopolies on their drugs, while still shrouding their research and manufacturing methods in as much secrecy as possible. In the US, Pfizer had a similar showdown with Teva over generic Viagra starting in 2010, in which Pfizer won using a second patent that didn't cover the active compound in Viagra itself, but rather the marketing of it as an erectile dysfunction drug. Thus, even though the core patent on the drug expired this year, Pfizer will likely retain a monopoly on it until 2019. This is in stark contrast to the UK, where the patent on using the drug to treat ED was invalidated for obviousness way back in 2000—but Pfizer still dominates the market there thanks to related patents on manufacturing methods.

Basically, Pfizer uses any method it can think of to prevent its patents from ever expiring and benefiting the public the way patents are supposed to, including writing disclosures that obscure the necessary facts. The Supreme Court was having none of it—rather than letting Pfizer retroactively fix the disclosure, or coming up with any kind of partial remedy that allowed them to retain the patent, the ruling correctly states that patents must be a deal between two sides to function, and thus the patent is (and always has been) invalid:

Although s. 27 does not specify a remedy for insufficient disclosure, the quid pro quo underpinning the Act leads to the conclusion that deeming the patent invalid is the logical consequence of a failure to properly disclose the invention and how it works. If there is no quid — proper disclosure — then there can be no quo — exclusive monopoly rights.

...

There is no question that sildenafil’s utility had been demonstrated as of the time of filing of the patent application. This takes the invention out of the realm of sound prediction. As to the delay of 13 years between the filing of the patent and the challenge, the relevant question is whether the disclosure was sufficient as of the date of filing, so the delay is inconsequential.

This is a big victory for Teva and a major blow to Pfizer's Viagra empire, which is slowly crumbling around the globe. It's also likely to lead to even more illegal cross-border pharma sales, and even more of everyone's favorite email spam advertising online Canadian pharmacies—but that's another story.

Permalink | Comments | Email This Story

Research Shows: You Don't Need Patents To Disclose Information

Mike Masnick — Wed, 27 Jun 2012 23:59:00 PDT

One of the things that we frequently hear in defense of patents (and to a lesser extent, copyrights) is that without that kind of protection, companies would never share information with one another about certain products, because it would be way too easy to simply copy the idea and run with it. The standard example is a case where an inventor or small company has an idea for a product, where they'd need a bigger company to manufacture it. We are told, without patents, how could the inventor possibly go to the manufacturer, without fear of completely losing the product. Similarly, in the drug business, where the key bit of information is the chemical formula, companies often insist that they absolutely need patents, or smaller companies won't bother to share the details of their research with others who can help manufacture the product.

Jerry Brito's Surprisingly Free podcast recently had a wonderful interview with Michael Burstein from Cardozo Law School, in which he talks about his recent research showing that a ton of information exchange occurs in the absence of intellectual property protection, and that inventors and companies figure out ways to protect themselves against someone just flat out copying their idea and running off with it. It's an area of research that is quite fascinating, because in the past, I'd thought that the argument about information sharing actually was one of the more compelling arguments for patents. Now... I'm beginning to question that assumption as well. The key thing that Burstein realized, was that information isn't quite as "clear cut" as people think it is, thus you can share some information without revealing all of the key points:

This article explains that, contrary to the conventional account of the disclosure paradox, information is not always nonexcludable and is not always a homogeneous asset. Instead, information is complex and multifaceted, subject to some inherent limitations but also manipulable by its holders. These characteristics give rise to a range of strategies for engaging in information exchange, of which intellectual property is only one. Information holders can use the characteristics of information itself as well as contractual and norms-based mechanisms and other legal or business strategies to achieve exchange. And examples drawn from fields as diverse and disparate as software and biotechnology show that entrepreneurs and inventors use these strategies alone or in combination to effectively link their ideas with capital and development skills, often without intellectual property playing a significant role in the transaction.

In other words, inventors and companies have already adapted to do this, even without relying on IP laws. Burstein argues that anyone relying on the claim that IP is needed to facilitate information exchange appears to be flat out wrong, based on his empirical research.

Intellectual property is therefore not necessary to promote robust markets for information and is, in fact, just as contingent and context-specific a solution to the paradox as the alternatives described here. At the very least, then, there is reason to doubt that commercialization theories founded upon information exchange provide a standalone justification for intellectual property. This article urges caution in policy interventions that seek to respond to the disclosure paradox and sets the stage for future empirical research to better understand the dynamics of information exchange strategies and the social welfare costs and benefits that may accompany them.

One example used in the report is how biotech firms share information without relying on intellectual property laws. They basically do a bit of a dance, in which they sign agreements and share bits of information with each other, which really seem to serve the purpose of testing whether each other is trustworthy. And, of course, because firms are involved in many, many transactions, there's a reputational issue at play here: a company that simply copies an idea presented to it by another will quickly find itself shut out of future opportunities to work with innovative companies. These are issues that patent system defenders and policymakers seem to rarely consider.

In some ways, this actually reminds me of the posts we've done on cargo cults and copying. Too many people seem to assume that it's easy to define and capture all of the information you need to copy someone else. If someone has a successful product, no problem, just make an exact replica of that product. But what we've seen over and over again is that there's superficial information, which can be easily copied, but most of the time there is also substantial tacit information which is not easy for a copycat to figure out without working closely with the original producer. This can be information into what kind of positioning worked with customers (and what failed). It can be as simple as experience with a unique way to calibrate a machine. There are all sorts of "little things" that those with experience have, that simply is not easy to easily capture from the outside. Thus, no matter how much superficial information is shared, it's not enough to make a really useful copy.

Permalink | Comments | Email This Story

Patent Office Exploring Keeping Patents Secret If They're 'Economically Significant'

Mike Masnick — Fri, 27 Apr 2012 15:46:00 PDT

We're told, repeatedly, by some patent system supporters that the whole point of the patent system is really about "disclosure." Of course, this is a myth for a variety of reasons. The biggest, of course, is that in many industries patents are both completely useless to learn anything from and are never used to learn how things are done. This is especially true in software, where you will never hear about anyone learning how to do anything from a patent. A few years back, the US Patent and Trademark Office (USPTO) started publishing nearly all patent applications 18 months after the application came in. This is a pretty common practice around the globe. If a patent system is about disclosure, this makes sense -- and in theory, allows for people to point out prior art or protest certain patents before they're issued. There is a current exception for patents deemed in the interest of national security to keep secret (such as patents on nuclear energy).

However, as Francisco George points us to the news that the USPTO is now considering also keeping "economically significant" patents secret too (pdf and embedded below). They're exploring this after being directed by Congress -- and it's not hard to see the lobbyists' fingerprints on the specific request:

By statute, patent applications are published no earlier than 18 months after the filing date, but it takes an average of about three years for a patent application to be processed. This period of time between publication and patent award provides worldwide access to the information included in those applications. In some circumstances, this information allows competitors to design around U.S. technologies and seize markets before the U.S. inventor is able to raise financing and secure a market.

As far as I can tell, this directive seems to be saying that because patent applications might do what the patent system is supposed to do -- help disclose ideas -- we should keep the applications secret. The problem, of course, is that pretty much every patent applicant is going to think their patent is economically significant. The reality is that pretty much no one knows if their patents are economically meaningful until years later when a product is actually on the market. This proposal seems to serve no purpose other than helping companies not to disclose ideas while still letting them get patents.

Permalink | Comments | Email This Story

Juror Didn't Disclose MySpace Friendship With Defendant... Because It Was Just MySpace

Mike Masnick — Thu, 17 Jun 2010 05:44:30 PDT

Here's a fun one. An appeals court in West Virginia has granted a new trial to a defendant because one of the jurors failed to disclose that she was a "friend" on MySpace with the defendant and had sent him a message during the trial. The message itself was mostly meaningless ("I can tell ya that God has a plan for you and your life..." etc. and even mentioned "Hey, I don't know you very well"), but the juror never bothered to mention that she knew the defendant at all, let alone well enough to be a MySpace connection. When asked why, she answered:

I knew in my heart that I didn't know him . . . I should have at least said that . . . he was on MySpace, which really [wasn't] important, I didn't think.

Ouch for MySpace. Either way, a new trial has been ordered, and yet again questions revolving around social media in the courtroom need to be tackled in court.

Permalink | Comments | Email This Story

Why Is Product Placement Okay On TV Without Disclosure?

Mike Masnick — Wed, 2 Jun 2010 20:11:26 PDT

We're still wondering if the FTC is really going to go after blogs that don't disclose financial relationships concerning products they're pitching. So far, the only action the FTC has taken (publicly) has been to investigate retailer Ann Taylor for giving bloggers gift cards -- an action for which it was given a pass. In that case, it was worth noting that the focus was on the company, not the bloggers involved. However, there are still many questions about how arbitrarily the rules will be applied. Danny Sullivan is pointing out that with so much undisclosed product placement on TV, shouldn't that be a bigger concern than if a blogger mentions he or she got a free gift card before writing about a product? While I, like many people, tend to think disclosure is important for your own reputation, the ambiguity and subjectiveness of the FTC's rules is worrying. While I don't know for sure, my guess is that the FTC would say that most people already understand how TV product placement works, so they're not too bothered by it. That, at least, was the explanation an FTC person gave when questions were raised about why the FTC doesn't go after celebrities talking up products and services they were given for free... But it does seem kind of ridiculous that a celebrity is given more leeway not to disclose just because they're famous.

Permalink | Comments | Email This Story

FTC Gives Ann Taylor A Pass In First 'Blog Disclosure' Investigation

Mike Masnick — Fri, 14 May 2010 16:40:00 PDT

We expressed some serious concerns with the somewhat ambiguous FTC disclosure rules directed at blogs and new media that went into effect last year, and we've been waiting to see how the FTC enforces those rules. We found it odd that the FTC apparently felt that celebrities could be held to different standards. There have been some questions about different activities -- for example, Viacom's actions in trying to make authorized uploads look as if they were bootlegs certainly appears to run afoul of the rules. And, more recently, there were some concerns over the NY Times' lack of disclosure concerning its relationship with Apple when reporting on the iPad.

However, back in February, some were wondering if retailer Ann Taylor's offer of gift cards to bloggers who covered their new line of clothing violated the rules. Apparently, the FTC did take notice, and Michael Scott points us to the news that last month, the FTC decided to give Ann Taylor a one-time pass, though it did express some concerns about the program: What strikes me as interesting here is that the FTC investigation focuses on the advertiser's actions, rather than the bloggers'. That is, most of the concerns about the program were about whether the FTC would take action against bloggers. But, here, it was focused on the advertiser and its actions. That does make more sense, but does leave open a questionable loophole: if an advertiser tells a blogger to disclose some information and then the blogger does not do so... is the advertiser still liable? In this case, the FTC even mentions that one of the reasons it's not taking action is because many (though not all) of the bloggers, who wrote about the event, disclosed the gift cards. But if they had not -- even though Ann Taylor had told them to -- then is Ann Taylor to blame?

Permalink | Comments | Email This Story

Software Patents Violate The Patent Bargain, Since There Is No Disclosure To Trade-Off

Mike Masnick — Thu, 1 Apr 2010 06:18:00 PDT

It's always fun talking to big time patent system supporters, because it's easy to predict their arguments. After you point out all of the evidence that has shown absolutely no proof that patents increase innovation, the supporters always shift from "patents are necessary for innovation" to "patents are really about disclosure." The argument here is that part of the "bargain" for getting a government granted monopoly over your invention is that you have to describe the invention, so that those who are skilled in the art can replicate it from your description. Of course, as patent attorneys and software engineers admit, that's a myth. Patents are written these days to be incredibly broad, and really only understandable to other patent attorneys, rather than other engineers.

Reader brad points us to an interesting blog post by Lukas Mathis, who points out that, at least in the software world, disclosure is useless anyway, because any competent programmer can understand how to do something without needing to look at any patent:

This trade-off does not apply to many software patents. I only need to spend five minutes on Amazon's site to figure out how one-click shopping works. There is nothing useful I can learn from reading the patent. Likewise, I only need to turn on an iPhone once to figure out how to unlock it. This means that Amazon or Apple don't give up anything when they patent these ideas. There is no trade-off involved; the state grants these patents «for free», because nobody gains anything from the publication of these ideas. They are already public.

This is a really good point, and a great way of highlighting the ridiculousness of most software patents. The deal is supposed to be "we give you a monopoly, you tell us how to do this hard thing that we wouldn't figure out otherwise." But the latter half of the bargain isn't done because it's not necessary. And thus, those software patents are given away "for free," without the other half of the bargain. That would, you might think, bring their entire validity into question.

Permalink | Comments | Email This Story

Will YouTube Case Lead To FTC Investigation Of Viacom's Questionable Marketing Practices?

Mike Masnick — Fri, 19 Mar 2010 10:55:00 PDT

Here's one more point concerning the motions filed in the YouTube case by Google and Viacom. We had mentioned in our analysis that Google highlights the details of Viacom's rather large "stealth marketing" campaign to upload videos to YouTube, but Eric Goldman points out that the practices Google uncovered certainly sound like they cross the line of what the FTC says is legitimate:

YouTube also scored points for its descriptions of Viacom's stealth marketing practices. Although these facts only help YouTube's legal posture a little, the lawsuit's discovery process has unveiled some non-public information about Viacom’s practices that should be interesting to the FTC and state attorney generals. Viacom's alleged stealth marketing practices are aggressive--close to the permissible line, if not over it. As a result, they might be exactly the kind of consumer misdirection and inauthentic online content that the FTC has been railing against, and we know the FTC is looking for test cases in this area. So, a lawsuit that began as Viacom v. YouTube might morph into FTC v. Viacom. This is one of the known risks of picking a fight--once started, you can't control where it goes.

Indeed, Google presents rather detailed evidence of the lengths Viacom went through to fool users into thinking that clips were uploaded by people other than Viacom. Among Viacom's actions:

Hiring "an army of third-party marketing agents to upload clips on its behalf"
Having the uploads come from names that are made to look like random users
Using non-Viacom email addresses to sign up for accounts -- with the company admitting that it wanted to use email addresses that "can't be traced" back to the company.
Leaving Viacom offices to go elsewhere to do the uploads (such as Kinkos) to avoid connecting the uploads to Viacom.
Altering the footage of videos to make them appear unauthorized: "so users feel they have found something unique."

While certainly helping Google make the point that it's ridiculous to expect it to know which videos were legit and which were infringing, these also seem to certainly violate the spirit of the FTC's recent guidelines on questionable "stealth" marketing practices. As Goldman notes, if the FTC is looking for a high profile test case, they may have just been handed a ton of useful evidence.

Permalink | Comments | Email This Story

FTC's Disclosure Rules Apply To Bloggers... But Not Celebrities?

Mike Masnick — Mon, 11 Jan 2010 13:10:04 PST

The FTC's highly questionable disclosure rules have been in effect for a bit over a month now, and it appears that even the FTC doesn't understand who they apply to or how they apply. And that's the problem. Apparently, someone noticed that actress Gwyneth Paltrow lavished praise on a resort in Marrakech, Morocco, and wondered if Paltrow had paid for her stay there -- noting that it was the grand opening of the place, with lots of stars -- and Hollywood publicists asked about this said there was "not a chance in hell" that someone like Paltrow paid to attend. In fact, they wonder if Paltrow was even paid for her "appearance." So, how do the FTC rules apply? She was pitching a place that most likely gave her something quite valuable for free. That should be disclosed, right? That was the whole point of the FTC rules, right? Well, maybe not. When asked about it, the FTC hemmed and hawed and claimed that "celebrity endorsements are different." Why? Because consumers might "understand that celebrities are always getting free stuff." Right, but wasn't the whole reason that these new disclosure rules were instituted in the first place that bloggers and others were supposedly (though, I believe it to be exaggerated) "always getting free stuff" too? Basically, these FTC rules sound like the sorts of things that are totally subjective, whereby the FTC can crack down on someone they don't like if they have nothing else to use, but will leave others untouched.

Permalink | Comments | Email This Story

A Case That Has It All: Kim Kardashian, Twitter, Libel, Cookie Diets... And The New FTC Sponsorship Rules

Mike Masnick — Wed, 6 Jan 2010 11:14:53 PST

Oh boy. Here's a fun one. You had to expect that there would be more defamation lawsuits about Twitter following the first one involving Courtney Love, but this one is quite impressive, considering of all the twists and turns that must be followed. It involves some company promoting something called "The Cookie Diet" (which appears to be exactly what you would think) suing Kim Kardashian for libel. If you don't keep up with pop culture, Kim Kardashian is one of those people famous for being famous. The details of the lawsuit, though, are somewhat complex, and it's difficult to figure out who to side with in this trainwreck in progress (and, yes, it seems pretty likely that the whole thing is a publicity stunt for all involved, but that doesn't mean it's not worth covering).

So, basically, the story is that this "cookie diet" supposedly has some fans in Hollywood, and a variety of media have covered the story. Some of those media reports claimed that Kardashian (among many others) were fans of the diet. The Cookie Diet people -- like you would expect -- have a page on their website that links to news coverage, including a story (which they had nothing to do with) that said Kardashian used the diet. At some point, they also sent Kardashian's publicist a box of the cookies.

At some point towards the end of last year, Kardashian saw the link on the website and got upset, posting two Twitter messages saying the following:

"Dr. Siegal's Cookie Diet is falsely promoting that I'm on this diet. NOT TRUE! I would never do this unhealthy diet! I do QuickTrim!"
If this Dr. Siegal is lying about me being on this diet, what else are they lying about? Not cool!"
After that, her lawyers sent the Cookie Diet people a letter demanding that it remove the link to the story. It's unclear on what legal grounds the demand was made, as the diet company insists it had nothing to do with the story, did not supply the information and, in fact, had no knowledge that Kardashian had tried the diet. However, they did remove the link. It was only then that they noticed the Twitter messages and... then we get the lawsuit.

OK. So far we've already got some confusion about whether a link to a news article is actionable, combined with a Twitter libel claim. But then the story gets even more bizarre. You see, there's been a lot of talk lately about Kardashian being the most high profile client of some company that gets people to post sponsored Twitter messages. In fact, reports claim that some companies are paying her $10,000 per sponsored message. This may or may not be true, but if it is true, then the companies paying that money are likely getting seriously ripped off because they don't understand how Twitter works and how follower counts are grossly inflated.

So, what does this have to do with the cookies? Well, the cookie people are noting in the legal filing that Kardashian is paid to promote QuickTrim, but that she failed to note this. How does that become important? Well... you may recall last year's kerfuffle over the new FTC "guidelines" about paid endorsements online. While the cookie people don't specifically bring this up, it's certainly implied that Kardashian's paid sponsorship had something to do with her messages against the cookie people.

It's hard to see either side as being worth defending here, but sit back, grab a cookie and enjoy watching the legal arguments fly.

Permalink | Comments | Email This Story

AT&T Asks Employees To Hide AT&T Affiliation While Protesting Net Neutrality Laws

Mike Masnick — Tue, 20 Oct 2009 15:02:00 PDT

We've been having some discussions lately about the FTC's new guidelines for "disclosure," and some of our regular critics have been gleefully insisting that the reason I don't like those rules is because I don't disclose stuff, and I'm scared the FTC is going to crack down on the site. I find this pretty funny, because I am a huge believer in the importance of disclosing stuff, and on the rare occasion we've been in a situation where disclosure was necessary, we have no problem disclosing, even to the point that it's almost silly. Almost nothing in those rules impacts us directly. My real complaint with the rules is that the FTC rules aren't needed and raise serious First Amendment issues. First, most blogs and other social media efforts are conversational, not publishing, and a whole different set of social cues matter there. Second, anyone stupid enough not to disclose their affiliations on certain things is going to face pretty serious backlash when it comes out (as it certainly will).

Take, for example, the backlash today on the news that AT&T's chief lobbyist sent out an email to all AT&T employees urging them to protest any new net neutrality laws and hide their AT&T affiliation as they do so. AT&T has confirmed the email, which has numerous factual errors (and remember, I actually agree that net neutrality laws don't make sense). But, more importantly, the mainstream media is now calling AT&T out for this outrageous effort to have employees pretend they're not employees in protesting these rules.

Transparency on conflicts makes a lot of sense. It's something that people should do because it makes you more trustworthy -- not because the FTC threatens to fine you. The problem with the FTC rules is that it creates a weird chilling effect and threat of action on things where the rules aren't at all clear. As AT&T is learning today, trying to hide that kind of thing just creates a lot of backlash. It makes AT&T appear like it doesn't have a strong legitimate case, and needs to resort to underhanded techniques to make its argument.

Oh, and to make the FTC and our critics happy: Full Disclosure: I use AT&T DSL at home, and while I pay for it, a few years back there was a long outage, and AT&T agreed to give me a credit of $35 off my next bill. I also know some people who work at AT&T. My wife uses an iPhone, which I assume must run on AT&T's network, but it's provided by her employer (oh, crap, do I need to disclose who that is too?), and so we never see the bill -- so maybe the FTC thinks it's provided for free? I once sat on a panel with a representative from AT&T, and while I disagreed with him on most things policy-wise, I thought he was a nice guy, and at times I've talked to him about why AT&T should be more involved in online conversations (like this one!). Anything else?

Permalink | Comments | Email This Story

Athletes Can Start Endorsing A Brand In Hours... But A Blogger Does It And It's A Federal Issue?

Mike Masnick — Tue, 20 Oct 2009 05:23:00 PDT

As the FTC still wants to stick by its questionable guidelines concerning bloggers "endorsing" products, I found it interesting that the NY Times was profiling a new online service that more easily allows brands to sign endorsement deals with star athletes. Basically, they just need to fill out a few forms, and within hours, that athlete may be the face of the local car dealership. Now, I don't see anything wrong with this, but I'm curious as to why this is somehow okay, but when a blogger fails to mention that he or she got a book for free, the FTC will consider fining them? Does anyone actually believe that the star football player shops at the local Ford dealer?

Permalink | Comments | Email This Story

IAB Takes On FTC Over Silly Blogger Disclosure Rules

Mike Masnick — Fri, 16 Oct 2009 13:00:00 PDT

While more disclosure is generally a good thing, the FTC's new guidelines for blogging disclosure have some pretty massive problems, and probably aren't legal. As more and more people are recognizing this -- and interviews with the FTC folks in charge of this suggest they either haven't put very much thought into this issue or they don't quite know how the world works outside of their government cocoon -- the backlash is growing. Now, the Internet Advertising Bureau (IAB) has stepped in with quite the open letter to the FTC, asking them to scrap the rules, while noting (snarkily) how impossible they are to follow, in practice:

So there I was last Saturday, about to send out on my Twitter feed -- which automatically updates my Facebook page and links to my personal blog -- a photograph of this wonderful baked halibut dish I'd just made as a surprise for my wife. I was in the middle of typing a rave review of the recipe, which I'd pulled from my favorite cookbook, Delicioso! The Regional Cooking of Spain by Penelope Casas. But before I could press the "post" button, I stopped and canceled the whole thing.

I remembered that the book was a freebie, sent to me by an editor at the Alfred A. Knopf publishing house 13 years ago. And I didn't want you guys to haul me into court and fine me for violating the rules you've just promulgated to muzzle social media.

While this may seem silly, it really does highlight the problems with the FTC's rules. They're totally unclear and absolutely could concern things like this. Getting a free book here or there happens all the time -- and the FTC actually claimed that if people don't return them, then they may face sanctions. That's ridiculous. Last month, we ran a fun contest for people to win free copies of a Kevin Smith book. If the winners from our comments mention that book anywhere online, do they need to mention they got the book for free? If they mention it to a friend, do they need to do the same thing? Because most of the time when posting stuff online, people really are just talking to their friends.

Again, it's not clear why people can't just sort this out themselves. People who post bogus reviews of things because someone pays them to, or because of something "free," are going to get called out on it eventually and lose their credibility. When people talk amongst friends, they don't reveal where they got the products they talk about, or if they happened to get a promotional sample -- and that's fine. While you can understand where the FTC is coming from, it really has gone overboard with these rules.

Permalink | Comments | Email This Story

Did The FTC's New 'Blogger' Guidelines Just Change The Way All Book/Music Reviews Must Be Conducted?

Mike Masnick — Mon, 5 Oct 2009 16:01:00 PDT

A bunch of folks have been sending in the fact that the FTC has (as was widely expected) approved new rules on "endorsements" or "testimonials," including a section on bloggers or "word-of-mouth marketers." The end goal here is definitely admirable, but I question whether or not this ruling really makes sense:

The revised Guides also add new examples to illustrate the long standing principle that "material connections" (sometimes payments or free products) between advertisers and endorsers -- connections that consumers would not expect -- must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other "word-of-mouth" marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.

Again, the concept is definitely admirable. There's long been a fear that companies are effectively bribing people with free stuff in order to get good reviews, and the FTC wants people to reveal that info. But... does that really make sense? It seems to me like this could just create a totally unnecessary minefield for anyone who blogs. And why is this focused on bloggers and word-of-mouth marketers? Almost all book and music reviews in the mainstream press involve the books and music being sent for free - and there's never been any question of impartiality of most of those reviews -- but why are they now left out of these rules? Is every blogger who reviews a book going to have to disclose where they got it? What about music? Many music bloggers are sent mp3s by the record labels. Do they need to reveal who sent them stuff? Does that really matter?

The real question, from my standpoint, is whether or not the FTC is really needed here. If someone is constantly blogging positively about stuff they get for free, they put their own credibility at risk, as people realize that the products aren't actually very good. It seems like the type of situation that sorts itself out. Those who are constantly pushing products for questionable reasons hurt themselves and soon no one trusts them. Does the FTC really need to be involved in that process? In the meantime, I'm suddenly glad that we don't do reviews on this site for the most part. I do occasionally mention or review books, but I guess I'll have to mention when I buy those books vs. when I'm sent them for free (it's about 50/50), which seems pretty pointless.

Permalink | Comments | Email This Story

Microsoft Employee Admits That Patent Disclosure Is A Myth

Mike Masnick — Wed, 12 Nov 2008 15:15:00 PST

Defenders of the patent system quite frequently point out that one of the main benefits (some claim the only benefit) of the patent system is "disclosure." That is, because the patent system requires you to disclose your patent, the patent system is quite helpful in spreading ideas. This is a myth that's easily debunked on a few points. First, it only really makes sense to get patent protection if you know the idea will get disclosed or figured out anyway. In those cases, the disclosure via the patent system is meaningless, since the info would have gotten out anyway. Second, these days, thanks to "willful infringement" tripling the damages you pay, many corporations tell employees not to look at relevant patents, as it only opens up more liability. Third, many patent lawyers are taught to write claims that are as broad and vague as possible while still getting approved. This way, the patent can be construed to cover much more than the actual invention.

Now, Slashdot points us to a Microsoft employee admitting that looking at patents is a total waste because they never actually disclose anything useful:

When using existing libraries, services, tools, and methods from outside Microsoft, we must be respectful of licenses, copyrights, and patents. Generally, you want to carefully research licenses and copyrights (your contact in Legal and Corporate Affairs can help), and never search, view, or speculate about patents. I was confused by this guidance till I wrote and reviewed one of my own patents. The legal claims section -- the only section that counts -- was indecipherable by anyone but a patent attorney. Ignorance is bliss and strongly recommended when it comes to patents.

Of course, technically, a patent is supposed to be written so that someone skilled in the art can replicate the invention from the patent alone. But, when even patent holders can't understand their own patents, it's quite clear that reality doesn't match up with the theory here. So, the next time you hear a patent system defender claiming the importance of disclosure, it might be worth pointing out that one of the biggest patent holding companies in the world instructs its own employees to ignore patents, because you can't actually learn anything from them in the first place.

Permalink | Comments | Email This Story

Judge Still Keeps MIT Students Gagged Over Subway Hacking Presentation

Mike Masnick — Thu, 14 Aug 2008 17:37:00 PDT

The EFF tried to get the gag order lifted off the three MIT students who had planned a presentation on how Boston's subway system was vulnerable to some hacks. However, a judge has left the gag order in place, saying that it will be discussed at a hearing next Tuesday. He also ordered the students to hand over more information.

There's been a long debate in the security community about what is proper "disclosure." There are some who believe that you should wait until a vulnerability is fixed before disclosing it, while others believe that only by disclosing it are people really motivated to fix the vulnerability. However, most of those debates haven't taken place in court -- so this particular case should be quite interesting for those who are involved in security research, no matter which side of the "disclosure" debate you fall on.

Permalink | Comments | Email This Story

DNS Flaw Is A Serious Security Threat

Timothy Lee — Wed, 23 Jul 2008 18:18:00 PDT

Aaron Massey has a good write-up of the DNS vulnerability that was discovered by security researcher Dan Kaminsky and leaked onto the Internet this week. In a nutshell, a flaw in the design of the DNS protocol (which translates domain names like "techdirt.com" to IP addresses) will make it possible for malicious individuals to invisibly redirect web traffic from legitimate sites to sites of the attacker's choosing. This is a huge deal because a ton of online applications and services depend on reliable DNS for their security. You might think you're visiting your bank's website, but if your DNS server isn't patched you could really be sending your password to hackers in Russia. Kaminsky tells Wired that fewer than half of the DNS servers on the Internet were patched when the details of the vulnerability leaked, so it's a real problem. If your ISP hasn't patched its DNS servers, you can protect yourself by switching to OpenDNS until they do so.

There's a long-running argument in computer security circles about the best way to release information about security vulnerabilities, with a lot of security professionals favoring immediate, public disclosure of all vulnerabilities. Kaminsky chose not to go the public disclosure route because he felt this bug was too serious to take the risk of its being misused. Kaminsky approached the major DNS vendors in March, and managed to keep the details secret long enough for them to develop fixes for their products. Then, on July 8, Kaminsky announced the simultaneous release of these fixes, while still keeping the details of the vulnerability secret. (The fixes worked in a general enough way that they didn't give away the details of the vulnerability.) He had been intending to keep it secret until August 8, so that systems administrators would have a full month to prepare their networks. Unfortunately, the information leaked out on Monday, leading to a scramble to patch the remaining DNS servers before exploits start showing up. Given the scope of the patching effort (16 people from various organizations were invited to the secret March summit among DNS vendors), I think it's pretty impressive that the details didn't leak out earlier.

Permalink | Comments | Email This Story

Should Printer Companies Tell You Your Printer Leaves Secret Identifying Info?

Mike Masnick — Wed, 16 Jul 2008 17:17:00 PDT

Every few years or so, the press picks up on the story that laser printers leave some dots that are invisible to the naked eye on every print. These dots are included for the purpose of anti-counterfeiting efforts. Each printer leaves a unique mark that can be read with special blue LED light, and interpreted with a decoding system that only the printers and the secret service are supposed to have. The story is getting some press again as the EFF is pointing out that laser printers have become cheap enough that many people have them and it's possible that the identification dots could be used for other purposes, meaning that people who print stuff out on the assumption that the documents would be anonymous, may be wrong. Officials in the article scoff at the idea that the codes would be used for anything other than anti-counterfeiting efforts. And, indeed, it does seem unlikely that the codes could be used for very much (not only would you need to interpret them, you'd also need the means of tracking down who owns a specific printer). But there is a good point in all of this: why shouldn't the printer providers be forced to at least disclose that their printers mark every document with a unique identifier?

Permalink | Comments | Email This Story

Dutch Chipmaker Sues To Prevent Researchers From Publishing Info About Security Flaws

Mike Masnick — Thu, 10 Jul 2008 08:24:00 PDT

NXP Semiconductors, which was formerly Philips Semiconductor division, is suing some researchers to prevent the publication of a paper outlining the security flaws in smartcards made by NXP. These smartcards are widely used for transit systems and building locks. Of course, the fact that these cards have been insecure has actually been known for quite some time. Rather than fixing the problem, though, NXP spent plenty of effort denying any problem existed. Now that multiple researchers have demonstrated that the problem really does exist, NXP is claiming it hasn't had enough time to fix the problem, and thus is suing to prevent publication.

Of course, if NXP hadn't wasted so much time insisting there was no problem, perhaps it would have been closer to a fix. And, most importantly, those who are looking to use this vulnerability already have access to it. Publication in a journal isn't going to alert criminals -- they already know about it. What it could do, however, is get more researchers helping on a solution. But, apparently, NXP would rather pretend that if they keep the details hidden, they can pretend there is no problem.

Permalink | Comments | Email This Story

Why Do Patents Tend To Cause More Harm Than Good?

Mike Masnick — Thu, 20 Mar 2008 11:46:19 PDT

Continuing my series of posts on some of the basics behind intellectual property, I wanted to delve further into the discussion I kicked off last week about judging the harm vs. benefit of intellectual property, and being able to properly balance the two. As we pointed out last week, nearly all of the economic evidence shows that patents tend to do more harm than good. Researchers James Bessen and Michael J. Meurer (perfect timing again) have gone into a little more detail as to how much damage is done, but I wanted to focus on why the downsides to patents are so often worse than the upsides.

At one level, it goes back to basic fundamental economics. Any given monopoly is going to be bad. There are economic rents associated with a monopoly. It limits the supply available and increases the cost, acting as a deadweight loss to society. That's absolutely true with patents as well (as much of the research has shown). However, there are a few more reasons why patents tend to be a net negative. First, let's focus on why the reasons in favor of patents aren't particularly strong.

The first is that it should act as an incentive to create the product. Yet, as the research has shown, that's almost never true in practice. More innovation tends to happen with weaker patent laws, and when stronger patent laws are put in place, the pace of innovation decreases. The reason is that real innovation almost never happens because of patents. Very few people invent stuff "to get a patent," but because there's a need in the market and they can help solve it. That's true with, or without, patents. Furthermore, it's that need in the market that is the real incentive for innovation. If you can serve a market, there's a way to make money from that market, and that acts as plenty of incentive.

The fears that an "easily copied" product will damage the original inventor are also wildly overblown. Study after study after study has shown that there is a distinct first mover advantage, and even things that are easily "copied" doesn't mean that the copycats get success in the market. People put a premium on buying from the original creator. Furthermore, they often believe (correctly in many cases) that the original creator has a better understanding of the market, and is likely to continue to innovate faster and with better solutions. Finally, in the worst case scenario, where a copycat is able to do a better job, that's also not a bad thing, because the societal benefit is still a better product. It's called competition, and is generally considered a good thing in a market economy.

Another popular claim is that patent benefit us via "disclosure." Because patents require the inventor to "disclose" the invention, the idea is that these patents will spur additional innovation as others learn from the patents and build on them. The idea is that there's obvious benefit in keeping the idea secret, so in exchange for disclosing the idea, the government gives the inventor a monopoly. However, this is easily shown to be false. First, very few patents these days are written to the point where they actually disclose enough to be useful. They tend to be broadly written in a way that can cover as much as possible. However, there's an even better simple logical rationale for why disclosure is a myth when it comes to patents. If the inventor truly believes there's tremendous value in keeping the idea secret, he or she will still keep it secret. There's no real benefit to disclosing it to get the patent. You get just as much benefit from keeping it secret. The only benefit is if you think that others will be able to figure out the same concept in less time than it takes for the patent to expire. In other words, if you realize that others will be able to come up with the same thing in that amount of time. So getting a patent prevents others from doing that. But if you truly believe that it would take longer than the length of the patent to figure out its secrets, then you'll keep it quiet anyway.

As for why the downsides to patents are almost always present, it's based on a fundamental understanding of how innovation works. If most innovation was a single burst of inspiration, then patents could make sense. However, in a scenario where innovation is an ongoing process of building, trying, adjusting, building, trying, adjusting -- then patents are likely to be harmful. They add a cost and a hassle at many of the steps along the way. They add a series of hurdles that involve time, money and effort for each step of that process. That, alone, significantly slows down innovation. Studies have shown, in fact, that most innovation is an ongoing series of innovations rather than a single burst of inspiration. Furthermore, great breakthroughs tend to come not from a single mind, but in different people looking at the same problem, learning from each other and building on each other's work. By throwing tollbooths into that process, you slow down the innovation.

Thus, the supposed benefits of patents rarely are all that beneficial, and yet the downsides to patents are quite large and show up quite often. So, it should be no surprise that the research shows patents tend to do quite a bit to slow down innovation, rather than accelerate it.

Links to other posts in the series:

Permalink | Comments | Email This Story

The Harm Caused By Patent Disclosure

Mike Masnick — Fri, 17 Aug 2007 07:43:13 PDT

Alan Wexelblat has an interesting post over at the Copyfight blog. After participating in a mailing list discussion about some new patents, he's rather stunned to learn that many firms forbid their employees from looking at published patents. He thinks the lawyers are confused about the difference between trade secrets and patents -- but that's probably not true. What's most likely happening is that the lawyers know that you get treble damages if you can prove willful infringement, and you do that by showing that the infringer knew of the patent. So, the way you avoid that is you don't look at any patents. This is exactly the opposite of what the patent system is supposed to be about. In fact, many patent system defenders insist that "public disclosure" is the key benefit of the patent system -- but that's a complete myth. David Levine and Michele Boldrin have already shown why patents are unlikely to increase the disclosure of inventions (because the only people who will disclose are those who know their "invention" would become public no matter what, otherwise they're better off keeping it secret), while other reports point out that patent attorneys are increasingly focused on filing vague patents that can cover lots of things, without actually disclosing anything useful. Now we can add this growing fear of willful infringement to the reasons that public disclosure isn't what it's cracked up to be -- and, in fact, may be hurting innovation by forcing those knowledgeable in a space to ignore the state of the art to avoid the possibility of huge fines for willful infringement.

Permalink | Comments | Email This Story

Techdirt. Stories filed under "disclosure"

Yelp Fights Back Against Carpet Cleaning Service That Sued Anonymous Critics For Defamation

Everyone's Up In Arms Over Instagram's Terms Of Service They Didn't Read In The First Place

Pfizer Can't Keep Its Viagra Patent Up In Canada

Research Shows: You Don't Need Patents To Disclose Information

Patent Office Exploring Keeping Patents Secret If They're 'Economically Significant'

Juror Didn't Disclose MySpace Friendship With Defendant... Because It Was Just MySpace

Why Is Product Placement Okay On TV Without Disclosure?

FTC Gives Ann Taylor A Pass In First 'Blog Disclosure' Investigation

Software Patents Violate The Patent Bargain, Since There Is No Disclosure To Trade-Off

Will YouTube Case Lead To FTC Investigation Of Viacom's Questionable Marketing Practices?

FTC's Disclosure Rules Apply To Bloggers... But Not Celebrities?

A Case That Has It All: Kim Kardashian, Twitter, Libel, Cookie Diets... And The New FTC Sponsorship Rules

AT&T Asks Employees To Hide AT&T Affiliation While Protesting Net Neutrality Laws

Athletes Can Start Endorsing A Brand In Hours... But A Blogger Does It And It's A Federal Issue?

IAB Takes On FTC Over Silly Blogger Disclosure Rules

More Problems With The FTC's New Disclosure Rules: Free Speech And Liability Problems

Did The FTC's New 'Blogger' Guidelines Just Change The Way All Book/Music Reviews Must Be Conducted?

Microsoft Employee Admits That Patent Disclosure Is A Myth

Judge Still Keeps MIT Students Gagged Over Subway Hacking Presentation

DNS Flaw Is A Serious Security Threat

Should Printer Companies Tell You Your Printer Leaves Secret Identifying Info?

Dutch Chipmaker Sues To Prevent Researchers From Publishing Info About Security Flaws

Why Do Patents Tend To Cause More Harm Than Good?

The Harm Caused By Patent Disclosure