As CNET reports, “Independent bloggers who fail to disclose paid reviews or freebies can face up to $11,000 in fines from the Federal Trade Commission, according to revisions to [...]]]> As I argue in my essay Individual Branding the web presents important and amazing new possibilities for individuals to earn money and much of that potential will flow from one’s online reputation. In short, as one blogs or shares information in another form, one becomes a trusted source and can start extract money from those activities. I argue that those acts have the seeds of the possible destruction of Benkler’s world of sharing. Today the FTC has targeted a practice that arguably could increase the reliability of social network endorsements but will also upset many people.

As CNET reports, “Independent bloggers who fail to disclose paid reviews or freebies can face up to $11,000 in fines from the Federal Trade Commission, according to revisions to the agency’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising” published Monday.” The FTC has not updated the Guidelines since 1980. The press release is here. The full text of the Guides are here (pdf). It is 81 pages, and I have not read it as yet but one thing people should know is that the effective date is December 1, 2009.

From the release it appears that the guides take am expansive view of what presents a moment to disclose “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.” CNET suggests that celebrities and “mommy bloggers” could be in trouble under the new rules. (Here is my prediction on the riposte to come but that I don’t think is accurate: “The FTC hates moms. In a down economy and with more and more people needing new ways to earn, the FTC actions are a direct attack on the importance of moms.” Now back to our regularly scheduled blogging.)

There are a ton of oddly connected things here. First, I just blogged about CITP and its FedThread project. That project would allow one to track this sort of moment rather quickly. Second, I was just at the Works In Progress Intellectual Property Conference at Seton Hall (which was yet again an excellent conference and for which everyone at Seton Hall deserves many thanks) where Zahr Stauffer presented a fascinating paper called Novels for Hire: Branded Entertainment, Copyright and the Law that I think will have something to say about these changes. As one blog notes, the practice of giving journalists freebies is common. Zahr’s paper shows how advertising and novels have had a rather curious interaction over the years. I think the paper will help understand the way writing and advertising have co-existed in either good or bad ways at different times with the shift to blogging fitting in as part of that history. The paper should be available soon so keep an eye out for it.

Electronics and other big ticket items seem to be where the concerns are. I look forward to finding out whether book, film, and music reviewers have to tell readers whether they received a review copy of the book. In general if one only says nice things about a review subject, one might receive more books etc. I think that non-professional blogs and other online information sources such as rating systems and FaceBook will allow people to find out whether they should buy a product (i.e., one might use a personal network to ask whether a product is good). That practice could undercut the quiet payment model.

Here is a possible way to understand this turn of events. 1) Secret endorsements die out and full disclosure of what has been given is the norm. 2) Small bloggers and big agencies are no longer able to seem credible as reviewers. 3) If people want independent reviews, they must pay magazines or other pay sources who can afford to buy the review items and avoid the taint of being given free stuff. 4) The public does not want to pay and instead reads the blog reviews with the disclosures and augments the research with social networks and user ratings which are more difficult to fake and possibly more reliable. 5) Yet again paid, professional independent news and reviews seems to be squeezed out.

The case illustrates a clash between important principles.  On the one hand, it’s important to get the word out to the gullible public that they are being taken in by ineffective products, including — indeed, especially including — medical products.  I am frequently amazed at how people [...]]]> Excellent article by Olivia Judson in the NYT about how British libel law impacts science journalism.  A British science journalist is being sued by the British Chiropractic Association for writing that the association “happily promotes bogus treatments.”  A judge has ruled that the author’s use of the word “bogus” implied that the members of the BCA were not only promoting ineffective treatments, but treatments that they know are ineffective.  And that’s a statement of fact that might be libelous.

The case illustrates a clash between important principles.  On the one hand, it’s important to get the word out to the gullible public that they are being taken in by ineffective products, including — indeed, especially including — medical products.  I am frequently amazed at how people (including otherwise intelligent people) can fall for things such as those “homeopathic” products in which the allegedly effective ingredient has been diluted to the point where there is not likely to be even a single molecule of it left in the medicine the patient is supposed to take.  It’s important to educate the public about such things.  (Magician James Randi has dedicated decades to this effort.)

On the other hand, even a thief can complain if he is wrongly charged as a burglar. (Jackson v. Virginia, 443 U.S. 307 (1979).)  If people are promoting products that they honestly, but mistakenly, believe to be effective, it does seem libelous (although I’m not expert in libel law) to assert that they are deliberately engaging in fraud.

My snap judgment on this case is that the problem lies not so much in the rule as in its application.  I would say the judge erred in determining that the word “bogus” necessarily implies that the author is accusing chiropractors of deliberate fraud.  To me, the word “bogus” implies only that the treatments in question (and the article wasn’t a blanket condemnation of all chiropractic treatment, but only of claims that such treatment can cure certain, specified conditions) were in fact ineffective, whether or not the doctors performing them thought so.  Indeed, in the context of the full paragraph, it seems that the word “bogus” might have meant even less — only that the value of the treatments was unsupported by evidence.

According to the OED, “bogus” means “Counterfeit, spurious, fictitious, sham.”  I don’t see the necessary implication that people promoting bogus things know that they are bogus.  So without reaching the question of whether free speech trumps libel law in this kind of situation I think I would have determined that the critical sentence wasn’t as fraught with meaning as the judge thought.

Fun stuff but here is the problem. The Monty Python Channel has nowhere near the quantity of Python material one can find elsewhere on YouTube. I wonder whether the Python folks chose to leave the other posters alone and [...]]]> So I had my iTunes open and on shuffle yesterday when Monty Python’s “Finland” came on. That was what prompted me to check YouTube for Python offerings. Now the Python chaps have offered their own channel. This video has the usual Python cheek as they talk about YouTube, being ripped off, and the open plea that viewers buy the products after they enjoy them. The clip also touts the troop’s interest in showing the clips as they wanted them to be shown and in high quality.

Fun stuff but here is the problem. The Monty Python Channel has nowhere near the quantity of Python material one can find elsewhere on YouTube. I wonder whether the Python folks chose to leave the other posters alone and offer what they see as the best or most in demand clips in a branded area. Then again, they may have decided to go after the other posters too. And to think this train of thought all started in Finland. Finland? Yes, because I could take a CD, put into MP3 format, and listen to “Finland” as a shuffle tune. But wait. There’s more! The devil you say. No, really.

Check out the clip for Finland below. It is a good quality stream of the music. It is funny and adds a fair amount of creativity. It attributes the visual work and the software to make the work. It also acknowledges Python as the source of the music. In addition, it has embedded ads to allow a viewer to buy the song from iTunes or Amazon. Now given all the new works, Python’s failure to offer a similar video (even if they did the video is a new work albeit one needing the song to make much sense), AND the ads is it fair use? After all YouTube and the poster probably take a cut, as would the seller, but as the Python folks acknowledge they too are giving access to and enjoyment of their clips away for free with the plea that people buy their work. As my essay Individual Branding: How the Rise of Individual Creation and Distribution of Cultural Products Confuses the Intellectual Property System argues these facts present confusing situations for intellectual property. Sharing, attribution, some control, encouraging purchases, remixing, and more can all be seen in my encounter with Finland which may be my new personal metaphor for IP. Watch the video and tell me what you think, fair use, attribution, new work, infringement, all of the above?

I’m not sure that the Court will outright overrule Austin, but I understand why many smart people are predicting that it will.

After hearing the case originally last [...]]]> As Gerard noted earlier, the Court today is hearing arguments in Citizens United v. FEC, the well-publicized case featuring “Hillary: The Movie.” The case is receiving a great deal of public attention, not only because many commentators suspect the Court will overrule Austin v. Michigan Chamber of Commerce, but because the case represents a number of notable firsts—it will be the first case of the 2009 Term, the first oral argument by Elena Kagan as solicitor general, and the first case on the Court for Justice Sonia Sotomayor. Rick Hasen has collected previews of Citizens United here.

I’m not sure that the Court will outright overrule Austin, but I understand why many smart people are predicting that it will.

After hearing the case originally last spring, the Court ordered supplemental briefing and re-argument to address the specific question whether the Court should overrule Austin, which affirmed the constitutionality of source restrictions on campaign expenditures from corporate treasury funds. This obviously was not a good sign for Austin or supporters of campaign finance restrictions on corporate campaign spending. However, the build-up to Citizens United reminds me of another election law case last Term and therefore gives me pause about expecting the Court to strike down federal restrictions on corporate campaign money that have existed in some form for a century. In NAMUDNO v. Holder, the Court decided against summary affirmance, scheduled arguments on the constitutionality of Section 5 of the Voting Rights Act, and led many to expect a decision striking it down. But the Court then surprised nearly everyone with an incremental ruling that trimmed back Section 5 based on an odd reading of the statutory language but left Section 5 otherwise constitutionally intact for the time being. It was easy to conclude that a Justice or two contemplated a more sweeping decision but ultimately backed away from the political controversy that would have followed a Court decision striking down the revered Voting Rights Act. Similarly here, it’s easy to imagine a Justice or two being deterred by the potential headlines about the Court opening the “floodgates” to corporate money following a decision outright striking down Austin. I cannot claim any particular ability to predict accurately what the Court ever does, but for the reasons above, it wouldn’t be entirely surprising if the Court ultimately produces a more incremental decision than many expect, even if all signs right now point to a sweeping decision against Austin.

Putting Citizens United aside, it seems to me that the larger problem in campaign finance reform has less to do with whether regulation can be characterized as “anything other than an effort to silence contrary views,” as Gerard puts it, and everything to do with what Sam Issacharoff and Pam Karlan call the hydraulics of campaign finance. Although I have written a bit about the ulterior motivations behind some forms of campaign finance regulation, I believe that there are plenty of reasonable arguments that characterize campaign finance regulation as something more than simple viewpoint discrimination. However, in my view and the view of many election law scholars, the practical reality in campaign finance is that money wants to enter the political system and tends to restore its own level in response to almost any constitutionally realistic form of regulation. Of course, the re-direction of money through new channels may be useful and worth the effort. But as an overarching matter, I’m not sure that re-directing money away from candidates and parties, for instance in the form of independent expenditures, is usually a good idea. And as the Court began to suggest in Caperton v. Massey, independent expenditures may not be much less corrupting when we’re talking about significant amounts of money. So far, we have a campaign finance system that is more regulated and transparent than ever before, but it’s not clear that many of us are very happy with the results.

Sometime in the past few days, just in time for the President’s birthday, posters of Obama in Joker-style makeup appeared on a Los Angeles overpass. The images quickly spread across the internet and have sparked predictable praise from the right or criticism from the left. Whether or not the posters are unduly offensive to President Obama, they are a serious insult to Heath Ledger’s Joker and his gleeful nihilism. What strikes and fascinates me is the poster’s angry incoherence: under the image of Obama is the word “socialism.” Did this artist even see The Dark Knight? Or perhaps I should ask, what does this artist think socialism is, anyway?

Consider that socialism is associated with the [...]]]>

Sometime in the past few days, just in time for the President’s birthday, posters of Obama in Joker-style makeup appeared on a Los Angeles overpass. The images quickly spread across the internet and have sparked predictable praise from the right or criticism from the left. Whether or not the posters are unduly offensive to President Obama, they are a serious insult to Heath Ledger’s Joker and his gleeful nihilism. What strikes and fascinates me is the poster’s angry incoherence: under the image of Obama is the word “socialism.” Did this artist even see The Dark Knight? Or perhaps I should ask, what does this artist think socialism is, anyway?

Consider that socialism is associated with the concepts of “central planning” or a “planned economy,” in which a centralized authority manages everything (or at least the economy) according to plan. Now, thanks to a conversation with Brooklyn Law prof Nelson Tebbe, who offered a profound analysis of The Dark Knight, I watched that film with the close attention of a serious academic, ready to learn what it could teach me about violence. I even read the script. And the Joker’s worldview seems pretty antithetical to socialism. Here’s what the Joker has to say about planning:

Do I really look like a guy with a plan, Harvey? I don’t have a plan… The mob has plans, the cops have plans. You know what I am, Harvey? I’m a dog chasing cars… I wouldn’t know what to do with one if I caught it… I hate plans. Yours, theirs, everyone’s… Schemers trying to control their worlds. I’m not a schemer, I show the schemers how pathetic their attempts to control things really are.

If the Joker were an economist, wouldn’t he be a free-market guy?

Of course, coherence is no prerequisite for First Amendment protection, and I disagree with commentators who question the artist’s right to compare the President to a crazed movie character. These posters remind me a little of an incident I discussed here on Concurring Opinions a few years ago – a high school student’s suspension for displaying a banner that read “Bong Hits for Jesus.” As I said then, it’s not entirely clear what “Bong Hits for Jesus” means. It seems vaguely pro-marijuana, and perhaps disrespectful to Jesus, but at best it only gestures at ideas. These Obama posters do the same, and I think I get their message: “Obama is evil, and socialist, and I have no clue what socialism is, but I know it’s evil, like Obama.” Sounds like protected speech to me.

Many thanks to Dan Solove and his co-bloggers for the invitation to join them this month.

On the Media has a great [...]]]> First Amendment fundamentalist Floyd Abrams is back on the attack, now in the service of the credit rating agency S&P. He says that their ratings are essentially the same as an editorial — a position I looked at with some skepticism here. Editorials fail to receive the regulatory subsidy routinely channeled to raters, via acts like the Secondary Mortgage Market Enhancement Act of 1984 and the Investment Company Act of 1940, and agencies like the National Credit Union Administration (all of which mandate the use of raters’ products). Abrams appears to want to let the raters get all the benefits of such government subvention, without the liability or extensive regulation it should naturally lead to.

On the Media has a great interview with Abrams, who vigorously defends the agencies’ actions:

[Interviewer] BROOKE GLADSTONE: Okay, so first of all, explain to me why this is more like an editorial. To me it seems more like a clothing inspector, the people who leave the little number inside the clothing you buy. They leave their number so that if the zipper was put in backwards, for instance, they could theoretically take responsibility. Why are the ratings companies different from that?

FLOYD ABRAMS: Well, because the rating agencies use their models, use their heads, use their common sense, have ratings committees. They sit down and they come out with their best judgment as to what is likely to happen in the future about repayment of debt. And that is not subject to mathematical yes/no answers. It’s not the same as saying, my zipper is no good or a couch is no good. It’s not being an inspector. It’s not.

BROOKE GLADSTONE: Fair enough. Let’s move away from that analogy and let’s go to one that attorney David Grais, who we just spoke to, came up with, that in many cases rating agencies want their ratings to be protected as opinion, like, say, a restaurant critic’s. But more often, he notes, they’re like critics who go into the kitchen, make the food and then come out and write about it. They help create these deals. And they have a financial stake in their own ratings ‘cause they’re paid by the very companies they rate, a seemingly obvious conflict of interest.

FLOYD ABRAMS: Rating agencies have analytic standards. They apply those standards. And, yes, they discuss with the entities that they’re rating why they’re doing what they’re doing. And if the entity asks them, well, you know, how come you’re giving us a triple BBB instead of a double AA, they tell them why. And if the entity wants to do things to get a higher rating, they can do them.

And it is not inappropriate, in my view, so long as they take good steps to deal with the potential for conflict of interest. It is not inappropriate that they get paid by the entities they rate. I mean, it is not conceptually that distinguishable from, you know, a large entity which puts big ads in – what, a motorcycle magazine and then they write about the motorcycles. Do they have to be careful? Yeah.

BROOKE GLADSTONE: The fact of the matter here is that the ratings agencies, in this case, were so widely off the mark, ultimately, that it doesn’t seem to have been just a series of mistakes of judgment.

I really look forward to seeing how Abrams would deal with facts like these if similar revelations emerge about his own client:

[In the package of loans it was to rate,] Moody’s learned that [over 38 percent of the borrowers] did not provide written verification of their incomes. . . . On the plus side, Moody’s noted, 94 percent of those borrowers with adjustable-rate loans said their mortgages were for primary residences. “That was a comfort feeling,” [one analyst] said. Historically, people have been slow to abandon their primary homes. When you get into a crunch, she added, “You’ll give up your ski chalet first.”

Borrowers have no chance of repaying via income and assets? Assume a ski chalet! (Much like the classic economic approach of assuming a can opener.) As the Summary Report of Issues Identified in the Commission Staff’s Examinations of Select Credit Rating Agencies (by the Office of Compliance Inspections and Examinations of the SEC) noted in July 2008, none of the rating agencies had specific procedures for collateralized debt obligations–even though 17 CFR 240.17g-2 required them to make certain internal documents public, including procedures and methodologies they use to determine credit ratings.

Sadly, I think that, given the current state of the law, Abrams’s First Amendment arguments will do well in front of many courts. But as David Segal states in the NYT article, “The First Amendment is no defense against fraud, and that is what is alleged by many of the plaintiffs.” Segal notes that, “Against them, Mr. Abrams will argue that S.& P. was every bit as blindsided as nearly everyone else in the private sector and in the regulatory sphere.”

Here are a few quotes that appear to be from S&P:

1. Internal Email: “rating agencies continue to create [an] even bigger monster – the CDO [collateralized debt obligation] market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”

2. Instant Message: “It could be structured by cows and we would rate it.”

These people don’t sound blindsided to me. Rather, they, like the three ratings agency CEOs who together earned $80 million themselves over the past 6 years, sound like people who knew exactly what they were doing: getting while the getting was good. If Abrams succeeds, he’ll be making that particular Wall Street strategy all the more foundational for America’s brave financial innovators.

But would a loss for S&P change anything? I really don’t know. What I do believe is that the US discourse on rating agencies would probably benefit from some input by scholars like John Quiggin, who argue that “Among the many challenges in reconstructing a sustainable system of global finance, the replacement of ratings issued by for-profit agencies with an alternative system, in which AAA ratings actually mean something, is among the most important.” Quiggin notes that the rating agencies are biased in many important ways:

[T]hey have a long-standing ideological bias against the public sector. This is reflected in the fact that state and local governments, which rarely default on their debt, are assessed far more stringently than corporate issuers. In the last year, thousands of private-sector securities issued with AAA ratings have been downgraded to junk, and many have subsequently gone into default.

By contrast, defaults on government debt have remained rare. One effect of the differential ratings practices of the agencies is that government borrowers have been forced to seek insurance from bond insurance companies such as AMBAC that are, in reality, less sound than the governments they are insuring.

Unfortunately, the 2006 Credit Rating Agency Reform Act specifically prohibited the SEC from regulating the “substance of the credit rating or the procedures and methodologies” used to calculate it. Reform measures proposed by the Obama administration have barely addressed the CRA’s. At the very least the government ought to be able to use FAIR v. Rumsfeld to insist on more responsible behavior (as Jennifer Chandler has argued, in another context, here). CRA’s should take the bitterness of regulation with the sweetness of regulatory subsidies.

I believe that as long as the US government provides a de facto regulatory subsidy to CRA’s, it should require them to factor into at least some of their ratings the full social value of the rated entity—not simply its likelihood to default. Ratings are often a self-fulfilling prophecy, and the state should harness their value to promote projects that improve the health, safety, security, and well-being of citizens. At the very least, the government should set up a “public option” in credit rating (akin to the proposed public option in health insurance) that is more transparent and accountable than extant credit raters. If the finance sector is going to grow as dependent on government help as the health care sector has, it should learn to accept the same web of standards and regulation that guarantee some minimal accountability for providers who accept government funds. Looking at the AHRQ and comparative effectiveness research could be a good place to start.

When I hear about these situations, I always wonder about the “character and fitness” implications. It seems to me that a law student who is publicly judging a [...]]]> Law students sometimes use the internet to widely disseminate racist or gendered comments about women and minority faculty members. For example, I have heard about law students using teaching evaluation forms or Facebook or Myspace to make comments to the effect that that a female faculty member is a bitch with PMS or that an African-American faculty member is a [insert racial slur]. Indeed, the Auto-Admit debacle from a couple years back revealed that law students or potential law students seem to at least sometimes use the internet to convey vicious gendered and/or racist comments.

When I hear about these situations, I always wonder about the “character and fitness” implications. It seems to me that a law student who is publicly judging a female faculty member negatively on a gendered basis or who is characterizing minority faculty members by way of stereotyping and ugly slurs is raising questions about his/her character and fitness to practice law. In the same way that a lawyer who embezzles is not fit to practice, one might argue that a law student who dismisses individuals with ugly characterizations based only on race or gender might also be of questionable character for purposes of practicing law. Yet not everyone agrees with this assessment, and, with respect to law students using the internet for such attacks, there has not been a lot of discussion about the character and fitness issues raised.

Therefore, the AALS Section on Women in Legal Education will be presenting a panel at the AALS Annual Meeting in New Orleans examining the issues raised – including the character and fitness issues – when law students, lawyers, judges, or potential law students use the internet to make gendered or racist comments. If a student posts on her Myspace page that Professor John Doe, who teaches Gender and Race and the Law, is an “ugly [insert racial slur] who only has a job due to affirmative action,” does that pose a character and fitness concern? Should we care?

There is a call for papers for this panel presentation, and anyone interested in submitting a paper or paper proposal is welcome to e-mail me for the details.

Mike Allen at Politico.com [has] reported that Post publisher Katharine Weymouth has decided to solicit payoffs of between $25,000 and $250,000 from Washington lobbyists, in return for one or more private dinners in her home, where lucky diners will receive a chance for “your organization’s CEO” to interact with “Health-care reporting and editorial staff members of The Washington Post” and “key Obama administration and congressional leaders. . . .”

Though the Post’s leadership quickly backed away from the plan, we can [...]]]> As newspapers falter, we often hear about how terrible it would be if public funding supported them. Imagine the conflicts of interest! Well, we’re now getting an inside look at the “stealth marketing” media may need to engage in in order to survive:

Mike Allen at Politico.com [has] reported that Post publisher Katharine Weymouth has decided to solicit payoffs of between $25,000 and $250,000 from Washington lobbyists, in return for one or more private dinners in her home, where lucky diners will receive a chance for “your organization’s CEO” to interact with “Health-care reporting and editorial staff members of The Washington Post” and “key Obama administration and congressional leaders. . . .”

Though the Post’s leadership quickly backed away from the plan, we can only imagine what kinds of fire sales a few more years of economic hardship will bring:

Looks like Dan Froomkin got out just in time!

On April 16, 2009, the Thurston County Court ruled in favor of a Vietnamese man who sued for defamation. This case was the first of its kind in the state of Washington. . . . The court found the five defendants . . . guilty for wrongly accusing the plaintiff . . . of having communist sympathies.

[I]n this case, both the defendants and plaintiffs fought against communism during the Second Indochina War. All those interviewed invoked a word commonly used within the Vietnamese émigré community to describe the act of wrongly accusing someone of communist sympathies: chụp mũ. [...]]]> I was recently listening to a program on the rise of “red-baiting” in some Vietnamese-American communities. It’s apparently becoming a common rhetorical strategy:

On April 16, 2009, the Thurston County Court ruled in favor of a Vietnamese man who sued for defamation. This case was the first of its kind in the state of Washington. . . . The court found the five defendants . . . guilty for wrongly accusing the plaintiff . . . of having communist sympathies.

[I]n this case, both the defendants and plaintiffs fought against communism during the Second Indochina War. All those interviewed invoked a word commonly used within the Vietnamese émigré community to describe the act of wrongly accusing someone of communist sympathies: chụp mũ. As this trial brought to light, chụp mũ is a widespread practice among Vietnamese community leaders. However, it is very rare for a person who has been chụp mũ to sue his/her accusers.

This might be an interesting precedent for those accused by shock jocks of being socialist, Marxist, Bolshevik, or in favor of concentration camps.

It also brought to mind the vituperative attacks often directed at Gretchen Morgenson of the New York Times. As a recent profile noted, many are bizarrely dismissive of her pathbreaking work:

“The consensus view of her among actual business people I know is pure contempt,” says [a source who] has represented high-profile business-press targets. “Her work has a sort of drive-by, potshot quality to it that leads to habitual mistakes and ideological laziness. She is reflexively opposed to free markets and assumes bad faith in almost every subject or person she examines.”

[But] many will be surprised to learn she’s a moderate Republican. “I believe in capitalism,” she says. “To me it’s natural that I would go after the people who are wrecking it.”

What becomes apparent over several conversations is that Morgenson is a business reporter–no more, no less. She’s more likely to mention investors as her main concern than readers or “the public.” Her views are pragmatic, sometimes small-bore to the point that her detail-laden writing can turn off casual readers. Her fixes are meliorative and not particularly original–better regulation, more competition. Her radical idea is, basically, that regulators should regulate, rating agencies should rate according to the merits of the credit, corporate compensation committees should set executive pay at arm’s length, directors should look to the interests of shareholders first, large shareholders should act like the owners they are and mortgage lending should be something other than a game of three-card monte. That these views are seen as “antibusiness” in some circles tells us less about Morgenson than about the ethical breakdown among this generation’s corporate elites.

People like Morgenson realized that the abuse of the capitalist system could lead to its decline around the world. It’s sad to think that in today’s lapdog business press, shibboleths have often supplanted sober appreciation of the stellar work she’s done.

Celia Barnes’ ex-boyfriend created fake profiles in her name on Yahoo.  Moreover, as the court relates:

The profiles contained nude photographs of Barnes and her boyfriend, taken without her knowledge, and some kind of open solicitation, whether express or implied is unclear, to engage in sexual intercourse. The ex-boyfriend then conducted discussions in Yahoo’s online “chat rooms,” posing as Barnes and directing male correspondents to the fraudulent profiles he had created. The profiles also included the [...]]]> The Ninth Circuit recently decided Barnes v. Yahoo!, a case with some very interesting holdings relating to the Communications Decency Act § 230 as well as promissory estoppel.  I wrote about this case briefly in my book, The Future of Reputation, long before it made it up to the Ninth Circuit.

Celia Barnes’ ex-boyfriend created fake profiles in her name on Yahoo.  Moreover, as the court relates:

The profiles contained nude photographs of Barnes and her boyfriend, taken without her knowledge, and some kind of open solicitation, whether express or implied is unclear, to engage in sexual intercourse. The ex-boyfriend then conducted discussions in Yahoo’s online “chat rooms,” posing as Barnes and directing male correspondents to the fraudulent profiles he had created. The profiles also included the addresses, real and electronic, and telephone number at Barnes’ place of employment. Before long, men whom Barnes did not know were peppering her office with emails, phone calls, and personal visits, all in the expectation of sex.

Barnes contacted Yahoo to get the profiles taken down:

In accordance with Yahoo policy, Barnes mailed Yahoo a copy of her photo ID and a signed statement denying her involvement with the profiles and requesting their removal. One month later, Yahoo had not responded but the undesired advances from unknown men continued; Barnes again asked Yahoo by mail to remove the profiles. Nothing happened. The following month, Barnes sent Yahoo two more mailings. During the same period, a local news program was preparing to broadcast a report on the incident. A day before the initial air date of the broadcast, Yahoo broke its silence; its Director of Communications, a Ms. Osako, called Barnes and asked her to fax directly the previous statements she had mailed. Ms. Osako told Barnes that she would “personally walk the statements over to the division responsible for stopping unauthorized profiles and they would take care of it.” Barnes claims to have relied on this statement and took no further action regarding the profiles and the trouble they had caused. Approximately two months passed without word from Yahoo, at which point Barnes filed this lawsuit against Yahoo in Oregon state court. Shortly thereafter, the profiles disappeared from Yahoo’s website, apparently never to return.

The court held, as expected, that Section 230 immunizes Yahoo from Barnes’s claim that it was negligent in removing the content.   This is in line with many courts that have interpreted the scope of Section 230 immunity.

The interesting part of the court’s holding involves Barnes’s promissory estoppel claim.  For non-lawyers, promissory estoppel is a doctrine that provides that when one makes a promise to another person, and that person relies on that promise, then the promise will be treated akin to a contract.  Ordinarily a contract requires bargaining and consideration, which are often lacking with mere promises.

Barnes contended that she relied on Yahoo’s promise to take down the tortious profiles and did not pursue other avenues of relief because of her belief that Yahoo would fulfill its promise.  The court held that Section 230 didn’t immunize Yahoo against the promissory estoppel claim as it had against Barnes’s tort claims:

Subsection 230(c)(1) creates a baseline rule: no liability for publishing or speaking the content of other information service providers. Insofar as Yahoo made a promise with the constructive intent that it be enforceable, it has implicitly agreed to an alteration in such baseline.

I agree with this conclusion.  Promissory estoppel and contract claims differ from tort claims such as negligence, defamation, or invasion of privacy.  Indeed, such claims are treated very differently under the First Amendment, with tort claims receiving full scrutiny and contract/promissory estoppel claims receiving virtually no scrutiny.  In a recent paper, Neil Richards and I discuss why First Amendment law takes such wildly divergent approaches: Rethinking Free Speech and Civil Liability, 109 Columbia Law Review (forthcoming 2009).  We also argue that the line shouldn’t be drawn based on the formalist distinction between tort and contract, as this distinction readily breaks down.  For example, we conclude that the tort of breach of confidentiality should be treated akin to contract/promissory estoppel claims rather than tort claims such as defamation and public disclosure of private facts.

Back to the case.  One of the potential problems with the court’s holding is that it may deter ISPs and other sites from having an explicit policy for removing tortious material.  Yahoo could be penalized with potential liability and a loss of its immunity by having a removal policy.  An ISP or site that has no such removal policy and that would say “get lost” to people who request takedowns would not be subject to promissory estoppel liability.  Is it fair to penalize those who have such policies?

The court notes how its holding is limited:

[A] general monitoring policy, or even an attempt to help a particular person, on the part of an interactive computer service such as Yahoo does not suffice for contract liability. This makes it easy for Yahoo to avoid liability: it need only disclaim any intention to be bound.

In other words, Yahoo is liable not because it had a general removal policy, but because it made specific promises to Barnes.

Eric Goldman argues that policies can readily be redrafted.  He notes that “websites can easily manage their potential exposure to this claim by picking their words carefully.”

I hope that the Ninth Circuit’s holding doesn’t result in various sites qualifying all their promises and weakening their policies in the hopes of avoiding liability.  One of the problems with situations faced by Barnes and others is that the websites and ISPs that have the offensive information posted about victims are often not in any customer relationship with the victims.   Barnes did not contact Yahoo for a regular customer complaint with its service — she was hurt by a Yahoo customer.  The removal policies at many sites and ISPs help people who are often non-customers.  There is no particularly strong incentive for such sites and ISPs to respond to such complaints as with customers who could threaten to leave.

The court’s holding, though correct, might encourage ISPs and sites to further attempt to hide under Section 230’s umbrella by weakening promises to take down harmful content.  And that’s a problem because the original goal of Section 230 was to encourage sites to monitor and take down offensive and hurtful content.  Now the law seems to be saying loudly: You have no responsibility to protect people from harmful content about them.  If you do nothing, then you’re not liable because of Section 230 immunity.  If you promise to protect people, then you might be liable.

This reminds me of Stratton Oakmont, Inc. v. Prodigy Services Co., 23 Media L. Rep. 1794 (N.Y. Sup. 1995), where the court held that an ISP could be liable for content provided by another because it had a policy of monitoring content.  This was the very case that Congress wanted to overrule when it passed the CDA 230.

Ironically, the law of Section 230 immunity seems to have moved closer to Stratton Oakmont with the Ninth Circuit’s holding (of course, very significant differences still remain).  This isn’t the fault of the Ninth Circuit’s holding, which strikes me as quite valid.  Rather, it is due to the perverse implications of the overreaching interpretations of CDA immunity that most courts have now adopted, making such immunity near absolute for tort claims.

For further discussion of some of the other issues in the case, see Paul Levi’s post at Consumer Law & Protection Blog and Eric Goldman’s post at Technology & Marketing Law Blog.

In this vein, I couldn’t resist posting an ad I came across last night that squarely raises these legal issues.  A company that appears to be [...]]]> President Obama is likely the first true “celebrity president”, at least the first in our time, in the sense that people see opportunities for making money from his persona and likeness.  Early on in the presidency, his office made some remarks to the extent that they were working on a policy asking people to be respectful of the president and his family in restraining some of these commercial impulses.  Of course, all of this raises the fine line between free speech and personality rights – a topic much debated on the cyberprof listserve in the early days of this presidency.

In this vein, I couldn’t resist posting an ad I came across last night that squarely raises these legal issues.  A company that appears to be in Michigan (although they do not give their postal address, but do require Michigan residents to pay sales tax on purchases from their website) has set up an “Obama shoes” website.  On this website, you can purchase Obama sneakers, backpacks, and basketballs.

The website uses video clips from one of Obama’s speeches and refers to itself as selling merchandise that is inspirational to young folks and that is intended to commemorate Obama’s inauguration. Thus, it obviously intends to juxtapose free speech interests in the inauguration against the commercial use of Obama’s name and likeness.

There are some other interesting little sidenotes about this business venture that suggest the people who set it up sought at least some legal advice before doing so.

1. They used the domain name “obamashoes.tv” presumably either because they couldn’t get a “better” domain name or because they wanted to avoid claims under the Uniform Domain Name Dispute Resolution Policy. They could argue that even if Obama’s name operates as a TM, they have not used his actual name in the domain name, but have added “shoes” to the end of it so no one will think it’s an authorized Obama website.

2. They include a disclaimer on their webpage to the effect that: “Obamashoes.tv is a private entity and makes no claim of affiliation or endorsement by President Barack Obama or his campaign for office.”

3. Interestingly, there is also a disclaimer on their FAQ page about the design of the sneakers themselves. “Q. Why does [sic] the shoes look like Nike Air Force Ones (AF1) and the Jordan Brand?
A. These design is [sic] been proven to be commonly preferred by most Adults & Children (black or white).” Now, I personally don’t know anything about sneaker designs, but I assume this is intended as a preemptive strike to ward of claims in trademark, trade dress, and/or design patent with respect to the actual design of the shoes.

So, interesting business model…
Legitimate free speech? Or intellectual property law infringement as far as they eye can see?

While people often condemn the modern media for sensationalizing issues such as swine flu, consider the alternative.  In John M. Barry’s excellent book on The Great Influenza, he points out that a major factor in the spread of the 1918 virus was wartime censorship.  Newspapers did not report on the virus until long after it was in the population, and when they did the information was scanty and [...]]]> It is often said that a famine cannot occur in a country with a free press.  In other words, natural disasters become severe catastrophes only when corrective measures are not taken due to a lack of awareness.  This point was driven home during the recent swine flu outbreak, which was often compared to the dreaded 1918 influenza pandemic.

While people often condemn the modern media for sensationalizing issues such as swine flu, consider the alternative.  In John M. Barry’s excellent book on The Great Influenza, he points out that a major factor in the spread of the 1918 virus was wartime censorship.  Newspapers did not report on the virus until long after it was in the population, and when they did the information was scanty and unhelpful.  Likewise, public officials were slow to inform the public and were reluctant to admit that there was a problem.  Why?  Largely because people were worried about hurting wartime “morale” by talking about bad news.  Some of this involved official censorship and some involved a culture of conformity created by Woodrow Wilson’s Administration.  The result, one could say, was even more harmful to morale — hundreds of thousands of deaths.

While there are costs to media hype, muzzling the press directly or indirectly is usually more costly.

I think something similar applies to the moderation of blog comments – moderation in the pursuit of good discussion is [...]]]> I read with interest a couple of weeks ago the discussion on this and other law professor blogs about comments policies – whether to allow comments, whether to moderate them, and when and whether to edit and/or delete them.  The discussion reminded me of Alexander Meiklejohn’s famous conception of free speech as a moderated town meeting, where the diversity and quality of discussion was more important than any individual right to speak.  Meiklejohn argued that “the First Amendment … is not the guardian of unregulated talkativeness” and that the free speech guarantee was “not that everyone shall speak, but that everything worth saying shall be said.”

I think something similar applies to the moderation of blog comments – moderation in the pursuit of good discussion is a healthy thing.   Of course, there is always the danger that thin-skinned or intellectually dishonest moderators might edit in order to come out better in an argument, but this risk is lessened by the fact that there are lots of blogs, and (at least in the case of law blogs) there is a fairly robust set of professional norms and reputational consequences operating in the background.  So I think blog comment policies (like the one on this blog) are perfectly fine (even though I there us some irony in that the blog comment policy having comments turned off!).  But like Meiklejohn’s moderator, as long as the discussion is being moderated constructively, there are real gains from numerous moderated discussions.  In fact, since different discussions can operate under different conditions of moderation, some discussions can be tightly moderated (ie, books and newspapers), others can have little or no moderation, and at the opposite extreme there is the wiki model, where even the statements of others are subject to revision and alteration.  A wide variety of discussions and forms of discussion is, I think, the key to a robust and healthy discourse.

One natural objection to this line of argument is that we’re not really talking about the First Amendment here, since all of the blogs and fora of discussion are private actors.  I’ve increasingly come to believe that the values of free discussion and debate are too important to be left to the First Amendment.  (I make a mild form of this argument here in a recent article).  Newspapers, blogs, email, water-cooler chats and other forms of relatively public and relatively private discussion are the building blocks of a vibrant expressive culture, and if we only think about free expression from the perspective of avoiding government anti-censorship, we are missing (at least) half of the world.  For this reason, I think discussions about issues like blog comment policies are centrally the concern of free expression, and such discussions can benefit immensely from a little First Amendment theory.

Blog comments are turned off from this post (just kidding!)

Florida-based [Mike] Morgan began a blog entitled “Facts about Goldman Sachs” – the web address for which is goldmansachs666.com – just a few weeks ago. . . . [M]any of the posts relate to other Wall Street firms and issues. According to Chadbourne & Parke’s letter, dated April 8, [Goldman] is rattled because the site “violates several of Goldman Sachs’ intellectual property [...]]]> The Paulson-Geithner-Summers regime has been remarkably adept at stonewalling people like Elizabeth Warren and otherwise avoiding transparency in the bailout. Now one of its main beneficiaries, Goldman Sachs, appears to be targeting mere commentators. They’ve hired a prestigious law firm to menace a writer who collects facts & commentary about the company at this site. As the Daily Telegraph reports,

Florida-based [Mike] Morgan began a blog entitled “Facts about Goldman Sachs” – the web address for which is goldmansachs666.com – just a few weeks ago. . . . [M]any of the posts relate to other Wall Street firms and issues. According to Chadbourne & Parke’s letter, dated April 8, [Goldman] is rattled because the site “violates several of Goldman Sachs’ intellectual property rights” and also “implies a relationship” with the bank itself.

How could anyone think Goldman itself would be affiliating with or authorizing a site that links it to devilry? Unfortunately, the strange range of results of UDRP decisions on similarly satiric sites mean that this is not an absurd legal argument. And given the apocalyptic consequences of the former investment bank’s “financial engineering,” perhaps a reasonable person would associate it with the “mark of the beast”–or guess that hellfire was just one more profitmaking angle for its partners.

Activity like this helps us understand why the wall of silence about the exact nature of and conditions (or lack thereof) on TARP/TALF funding are so important to Treasury. Imagine if we were able to track exactly how much more executives were being paid because of these funds than if they’d have been paid absent taxpayers’ subventions. What if we could track who was benefiting politically from donations by employees at the propped up firms? What if the firms in general start using their corporate welfare to silence more critics like Mr. Morgan? At what point does this become state action? And might we start asking whether the resistance to nationalization among policy elites might be due to a need to avoid state responsibility for what is essentially state-funded action by maintaining a fig leaf of “private ownership” over the banking system?

Saddest of all, none of this raises an eyebrow at much of the mainstream media inured to the revolving door atmosphere among banks, regulators, and legislators. As Glenn Greenwald puts it,

One might think it would be a big news story for the second most-powerful member of the U.S. Senate to baldly state that the Congress is “owned” by the bankers who spawned the financial crisis and continue to dictate the government’s actions. But it won’t be. The leading members of the media work for the very corporations that benefit most from this process. Establishment journalists are integral and well-rewarded members of the same system and thus cannot and will not see it as inherently corrupt . . . . [O]nly Unserious Shrill Fringe radicals, such as the IMF’s former chief economist, use that sort of language.

I expect to see more wins for the big banks in coming months, and less accountability. One of the few hopes for progress here is for those concerned about the public interest to take advantage of the occasional divisions within Wall Street, as in the current battle between banks and hedge funds over safe harbor provisions for mortgage modifications.

PS: Here’s a commentary from Elizabeth Warren on the bailout in general: