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A Perfect Liability Storm?

Intellectual Property, Fraud and Social Networking

July 28, 2009 Photo
Distinguished legal scholar Roscoe Pound once said, “The law must be stable, but it must not stand still.” By design or necessity, the law usually can only be reactive to new developments in commerce and technology. Recent social networking sites like MySpace, Facebook, and Twitter, and sites populated by user-driven content like YouTube and Zazzle, have accelerated those developments with which the law must keep pace.

In early June, misuse of Twitter was the subject of a public statement by the Indianapolis Colts and, separately, a lawsuit from Cardinals Manager Tony La Russa. While the statement on the Colts’ Web site was simply an advisory that a Twitter user posing as Peyton Manning was not the “real” Peyton Manning, La Russa filed a lawsuit against Twitter.

The suit claimed that an unauthorized Twitter page used his name to make light of drunken driving and two Cardinals pitchers who had died. The suit also claimed that tweets were disseminated that appeared to have come from La Russa.

Such activity raises potential issues ranging fromfraud, defamation, invasion of privacy and, potentially, violation of his intellectual property rights, such as trademark and right of publicity. Born out of the right of privacy, the right of publicity concerns the right of every individual to control the commercial use of his or her identity. (For more information on the right of publicity, see http://www.rightofpublicity.com.)

Some sites historically have enjoyed safe harbor from user-posted content that violates applicable laws. But it is conceivable that certain sites are so susceptible to abuse that those safe harbors might be reduced and an affirmative duty to regulate content and prevent infringements would apply.

In addition to La Russa’s Twitter lawsuit, consider sites like Zazzle, which allow users to post content and designs and to create a storefront through which products like T-shirts and coffee mugs can be purchased. If the company handles fulfillment of the order, packages it in the company’s branded materials, and takes a substantial commission from the sale price, that process likely implicates the Web site company to a higher degree than perhaps a site like eBay (which is mainly just a conduit between the buyer and seller and only involves a small commission from the transaction price).

Facebook has been in the news periodically in relation to policies which raise a variety of intellectual property issues. Early in 2009, Facebook announced a policy claiming ownership to any content that is posted on a user’s page. Following immediate public outcry, Facebook quickly retracted the policy.

Most recently, on June 13, 2009, Facebook announced that trademark owners could create personalized usernames (instead of the random, lengthy numerical sequences that had been used). This will allow trademark owners to register their brands with Facebook, but the registration process is on a first-come, first-served basis. The potential for abuse is substantial and foreseeable.

La Russa’s Twitter lawsuit was quickly settled in mid-June. While his claim obviously could have been asserted against the individual posing as La Russa, the suit was directed at Twitter. Just about everyone should take heed: product manufacturers, advertising agencies, individuals and companies with Web sites, insurance companies, and the claims adjusting community. Lawsuits alleging violation of a famous person’s intellectual property can become expensive very quickly.

When litigation alleging violation of a famous person’s intellectual property ensues, the claim often hinges on valuation. How does one assess damages in a case like La Russa’s Twitter suit? Or in the lawsuit rapper 50 Cent filed recently against Taco Bell for a press release reporting that Taco Bell had approached 50 Cent about a possible promotional campaign? In 50 Cent’s case, the only “use” was a press release stating that an offer had been extended.

Typically, such claims will be monetized through use of an expert witness. Valuation experts often perform the integral task of translating the scope of damages that the alleged violation has caused. In some instances, the misuse of social networking sites could conceivably cause a famous individual to lose a valuable contract on the basis that the fraudulent postings violated the morals clause in the individual’s contract.

The elements for a perfect storm of liability appear to be in place, but Roscoe Pound needn’t worry. The law can and will continue to evolve because, in the face of a storm, standing still is not an option.
Jonathan Faber, head of Luminary Group, LLC, a leading licensing and enforcement agency, is an attorney at the Indiana firm of McNeely Stephenson and a professor at Indiana University law school.

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About The Authors
Jonathan Faber

Jonathan Faber, head of Luminary Group, LLC, a leading licensing and enforcement agency, is an attorney at the Indiana firm of McNeely Stephenson and a professor at Indiana University law school. 

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