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Cloud Computing – Clouds Can Sometimes Be Storm Clouds

This post was written by Joe Rosenbaum and Adam Snukal.

Among others news publications, CNN Money just recently reported that Amazon.com’s cloud-based Web service EC2 suffered a “rare and major outage” this past Wednesday that affected several online sites it supports, including Reddit, HootSuite, Foursquare and Quora. Amazon.com hosts many major websites on its servers through its cloud-based service and, in total, “[t]housands of customers hitch a ride on Amazon’s cloud, renting space on its servers.” The recent outage crashed several customer sites and created glitches of varying degrees on others.

As cloud-based Web services have proliferated, the risks associated with major outages for companies dependent on cloud-based services have become a reality. This recent outage, and potentially others like it, could create reputational risk not only to the cloud providers, but also to those who use the cloud computing services of those providers for their technology infrastructure – processing, applications and data – exposing them to contractual liabilities for failure to meet promised service levels, breaches of performance representations and warranties, and even potential security and data breaches. All these and more, possible legal and contractual problems arising from the use of and reliance on cloud computing. These potential risks should be eliminated or mitigated, and while contracts cannot always guarantee operational integrity or performance, they can provide indemnities and remedies that offer a measure of protection or mitigation in many circumstances.

Rimon has been at the forefront of cloud computing legal thought-leadership and risk-mitigation strategy for our clients. Our lawyers have significant U.S., international and multinational experience in implementing strategies, such as service level agreements and risk-mitigating tools that help limit risks associated with cloud-based computing and cloud service outages. Indeed, to appreciate the risks, one need only look to one of the very first articles by Rauer Meyer, entitled When the Cloud Bursts – SLAs and Other Umbrellas, drawn from Rimon’s on-going series – one that you can view or download entirely in up-to-date form – entitled “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing.” You can access and download a PDF of the individual article or the entire “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing” compendium, up to date and including all of the previous chapters in one document.

Of course, feel free to contact Christopher G. Cwalina or Daniel Z. Herbst or Joe Rosenbaum or Adam Snukal (or the Rimon lawyer with whom you normally work) if you have any questions or require legal counsel or assistance. Make sure you subscribe via email or get the Legal Bytes RSS Feed so you are always in touch with our latest information.

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Spanish Court Dismisses Copyright Action Against YouTube

In June, Legal Bytes reported [Federal Court Awards YouTube Summary Judgment in Viacom Copyright Infringement Case]that a United States federal court ruled in favor of YouTube and Google in the billion-dollar case brought by Viacom on a summary judgment motion. Just last month, we again reported that Viacom had filed notice of its intention to appeal that ruling [Viacom Appeals Google/YouTube Ruling], and a companion article written by Joseph I. (“Joe”) Rosenbaum [Viacom Appeals YouTube Copyright Ruling] has been posted on the Media & Entertainment Newsletter of the International Law Office.

Now in Spain, the Spanish Federal Court sitting in Madrid has dismissed charges brought by the Spanish broadcasting company Telecinco (Gestevision Telecinco SA), alleging that YouTube was liable for copyright infringement resulting from users uploading content and material that infringed the copyright of others. Mediaset, the Italian company that is the majority shareholder of Telecinco, is also involved in a copyright infringement action involving such video uploads, although no ruling has yet issued in that case. The ruling from the Spanish Federal Court comes on the heels of a ruling at the end of last year in France that found Google guilty of copyright infringement, but in that case, books were being scanned and excerpts put online without first obtaining permission or consent from the copyright owner. That said, earlier this month, a court in Germany ruled against Google, holding it liable for videos that were subject to the copyright of others and uploaded on YouTube.

The Spanish court essentially agreed with YouTube’s argument that it is a content-hosting platform, not directly responsible for content uploaded or posted by others. Without appearing flippant, Legal Bytes notes that, similar to Viacom’s decision to appeal the ruling in the United States, everyone who is on the losing side of these battles is (or has indicated an intention of) appealing the ruling against them.

Need to understand user-generated content, uploading videos or other content, rights of authors, and creators of content, and understand them in multiple jurisdictions around the world?  Contact Joseph I. (“Joe”) Rosenbaum, or the Rimon attorney with whom you regularly work. We can help.

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Transcending the Cloud – The German Perspective

As part of our Cloud Computing initiative entitled, we take a step over to Europe and proudly present our next chapter in Rimon’s on-going series “Cloud Computing – A German Perspective.” This white paper and chapter, takes a look at cloud computing from a German and, to some extent, potentially representative European perspective. It’s a refreshing look at both some legislative and regulatory implications, as well as a view from outside the United States.

We would like to thank Thomas Fischl and Katharina A. Weimer in our Rimon Munich office for their insight and effort. Feel free to contact them directly if any questions arise or if you need help or more information. As we continue to do, we updated the entire work so that when you access the .PDF of our “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing” compendium, you will receive all of the sections, now updated with this chapter from Germany.

Make sure you subscribe via email or get the Legal Bytes RSS Feed so you are always in touch with our latest information. Of course, if you ever have questions, you can always contact me Joseph I. (“Joe”) Rosenbaum, Adam Snukal, or any Rimon attorney with whom you regularly work.

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Political Advertising

An article, written by Marina Palomba, former Legal Director of the Institute of Practitioners in Advertising, and now a partner in the London office of Rimon focusing on advertising law and regulation, has just been published and makes both informative and great reading. First published in Media Lawyer April 13, 2010, the article reviews just how far political ads can go. Read the entire article entitled, Political Advertising – Legal, Decent, Honest and Truthful?, and if you need legal guidance or representation, don’t hesitate to contact Marina Palomba in our London office.

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French Connection: Google’s AdWords Clipped by Louis Vuitton

Over five years ago, in early 2004, luxury fashion designer Louis Vuitton sued Google in connection with the sale of search-related advertising.  You will recall the company behind the Louis Vuitton brands and many others (LVMH Moët Hennessy • Louis Vuitton S.A., usually shortened to LVMH) has been very aggressive in policing and protecting its marks on eBay and other Internet sites.  The Paris District Court held that Google was engaged in trademark infringement, unfair competition and misleading advertising.  The Paris Court of Appeals subsequently ordered Google (and its French subsidiary) to pay €300,000 in damages. When those rulings were announced, a spokesperson for Louis Vuitton, praising the Court’s decision, said, “It was absolutely unthinkable that a company like Google be authorized, in the scope of its advertising business, to sell the Louis Vuitton trademark to third parties, specifically to Web sites selling counterfeits.”  The remarks went on to state, “This milestone ruling grants protection for the first time to both consumers and brand owners” adding that Louis Vuitton believed the Court’s finding meant that Google’s services were “misleading advertising services.”

Google appealed, and today the European Court of Justice (ECJ) released its ruling on appeal of that decision.  For you purists in the audience, procedurally within the ECJ, the decision is one in respect of the Joined Cases C-236/08 to C-238/08, in the proceedings captioned Google France SARL, Google Inc. v. Louis Vuitton Malletier SA (C-236/08), Google France SARL v. Viaticum SA, Luteciel SARL (C-237/08), and Google France SARL v. Centre national de recherche en relations humaines (CNRRH) SARL, Pierre-Alexis Thonet, Bruno Raboin, Tiger SARL (C-238/08).

The case essentially asks whether Internet search providers can be liable for trademark infringement when selling ‘keywords’ that are based upon the trademarks of another.  The ECJ ruling doesn’t completely immunize or exonerate Google, nor does it leave advertisers defenseless either, but it does in effect give the green light to Google and other search providers to continue to offer keywords to bidders; there had been concern in Europe that a negative judgment from the ECJ would have brought all such services to a halt.  The decision takes a now familiar, “let’s examine if you do more than just sell the trademark as a keyword at the request of the advertiser” approach.

So, if all an Internet search company such as Google is doing is selling keywords, the decision appears to allow Google to do so, despite a showing of confusion by consumers.  But – as those of you advertisers and marketing professionals who are tuned in to AdWords’ algorithmically driven ‘suggestions’ will know – Google’s program actually suggests keywords derived from previous selections. So Google’s AdWords code might suggest “British Airways” as related to “Virgin Atlantic” or “Ryanair” or, as in this case, “imitation” or “fake” coupled with “handbags” as a keyword related to “Louis Vuitton.” Not merely passively selling an existing word or mark and more actively engaging in the ‘suggestion’ process, in the Court’s view, consequently attaches liability.

By analogy, one can rationalize such a decision with similar rulings in the United States under the Digital Millennium Copyright Act (DMCA) or more directly under Section 230 of the Communications Decency Act (CDA).  In the case of the DMCA, if one has no notice of infringement and innocently publishes infringing content, until knowledge is shown – by ‘take down’ notice or otherwise – a passive distributor would generally not be held liable for intellectual property infringement.  Similarly, the CDA distinguishes between those who participate in the content creation process and those who merely distribute (the traditional news media distinction between editor/publishers and newsstand/distributors).

Under the instant ruling by the ECJ, although simply purchasing a keyword would not seem to constitute a per se legal violation in the EU, some rather arcane wording by the ECJ seems to suggest that advertisers (not necessarily the search provider) could now be held liable for trademark infringement resulting from their keyword purchase if their advertising can be shown to be confusing to consumers.  Thus, courts in the EU will now be examining both the appearance of the advertising and its demonstrable or likely effect on consumers.  One of our Associates, Drew Boortz, who follows these developments, notes that we are not aware of any U.S. case that has delved this deeply into keyword sales.  While there are trademark and advertising cases that deal with “use in commerce,” the eight or nine recent cases against Google directly involving keywords are yet to come up for trial (e.g., Rosetta Stone Ltd. v. Google, Inc., U.S. federal complaint filed on July 10, 2009 in the Eastern District of Virginia; scheduled for trial in May).

Chris Hackford in our London office notes that trademark owners will no doubt be a little disgruntled after this ECJ judgment, as they will have to continue to bid on their own registered trademarks in order to ensure that they remain at the top of the listings.

If you want to form your own view of the ECJ decision, you can read it right here: Louis Vuitton v. Google; or you can call Rimon for help.  Our offices in Paris, as well as London, Munich and Piraeus in the EU, stand ready to assist; and, of course, you can contact me, Joe Rosenbaum, in New York; Chris Hackford in London; Drew Boortz in our Washington, D.C. office; or the Rimon attorney with whom you regularly work.

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Outsourcing Providers Pitching Business? Be Careful What You Wish For.

As far back as May 2005, Legal Bytes reported that Europe was becoming a major outsourcing hub for a variety of reasons (Outsourcing Statistics). Well just this week, the law started catching up.

In what is certainly a major ruling and quite possibly the beginning of emboldened plaintiff-customers seeking greater accountability from outsourcing providers, Electronic Data Systems (EDS) has lost a case initiated by British Sky Broadcasting Plc (BSkyB) back in 2004, alleging that EDS, one of the leading outsourcing providers in the world, had misled BSkyB about its capabilities and expertise. For those of you who are legal research hounds, the case is cited as HT-06-311, British Sky Broadcasting v. Electronic Data Systems, although I don’t believe it has been fully published yet. The dispute arose over a services contract that was entered into by EDS and BSkyB in 2000, well before EDS was purchased in 2008 by its current owner, Hewlett-Packard (HP), for slightly more than US$13 billion.

To give you the background, BSkyB selected EDS to develop a new customer relationship management (CRM) system for its call centers in Scotland. After almost two years and failure by EDS to deliver, by March 2002, BSkyB ended the contract and took over the project itself – the frustration and events ultimately leading to the legal proceedings filed in 2004 that alleged EDS lied about its ability to undertake and complete the project. On the other side of the case, in its own court documents, EDS alleged that BSkyB simply “did not know what it wanted,” and wanted the lowest cost possible to accomplish “it.” To highlight the disconnect further, the contract with EDS was for £48 million, but according to court documents filed in the case, with all of the delays, budget over-runs, EDS’ failure to deliver, and BSkyB taking over and completing the project itself, costs had mounted to £265 million.

Justice Ramsey, writing for the British High Court, ruled that EDS misled BSkyB in making false and fraudulent misrepresentations in pitching and marketing its capabilities to BSkyB, giving rise to a claim for damages. Further, the court concluded, to the extent these representations were fraudulent, the limitation of liability clause in the contract that would have otherwise limited EDS’ liability for damages should be set aside and does not apply. While damages have not yet been fixed, in theory, if one includes the differential in costs, lost profits and other damages that are now fair game, EDS could be liable to BSkyB for well in excess of £200 million – that’s more than US$315 million at current exchange rates.

This is a major decision not only in the UK, but also for outsourcing deals around the globe, and if the beginning of a precedential trend, it could signal a radical shift in the way outsourcing deals are bid, negotiated and consummated. There is no question that anyone involved in outsourcing knows that the customer does not always have its specifications and detailed requirements buttoned up when discussions begin. Indeed, outsourcing often presents a singularity at which time enhancements, efficiencies and improvements that might have been difficult or impossible internally, can be effected by moving the operations to a third-party provider. The provider, eager to win a lucrative bid, may over-promise or over-represent its experience and capabilities. Smart negotiators know that forcing both sides to diligently and meticulously work through the “devil in the detail,” and making sure expectations, resources and capabilities are clearly set out and unambiguous, is the single most important contribution to be made in avoiding disputes, potential litigation and problems as the work and services unfold. Those of you in marketing know all too well that there is often a fine line between an actual claim and puffery. The former represents actionable representations, the latter . . . well, “you’ve tried the rest, now try the best” on every pizza box in the world.

Are you contemplating a major outsourcing initiative? Are you considering any outsourcing project, even a small one, involving critical operations – customer services, supply chain management, operations, transaction processing? Outsourcing is complicated. Need help? We wrote the book. No really, you can see for yourself: Outsourcing Agreements Line by Line: A Detailed Look at Outsourcing Agreements & How to Change Them to Fit Your Needs, written by none other than yours truly, Joseph I. Rosenbaum. Whether you check out the book or not, if you do need help, our Advertising Technology & Media law team here at Rimon has the help you need to make sure that, even if you are right, you can avoid the costly consequences and angst inherent in any legal proceedings between customers and providers. How can we help you? Call me, Joe Rosenbaum, or the Rimon attorney with whom you regularly work.

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A Pirate’s Life (Not) For Me: France Strikes Out Internet Piracy

This post was also written by Andrew Boortz.

Over the last several months, France’s Parliament has been focusing on the issue of Internet piracy. In May, both houses of the French parliament passed the so-called “three strikes” law which would have given an independent body the ability to disconnect file-sharers from their ISPs. In June, the law was declared unconstitutional by the Constitutional Council because, under French law, the power to force such disconnection could only come through issuance of a court order. In response, French President Nicolas Sarkozy gave the first Presidential speech to the French Parliament in 150 years and passionately defended regulation of Internet piracy.

After President Sarkozy’s speech, the French Senate drafted and passed a modified version of the “three strikes” law which would allow alleged infringers to present their case to a French court, prior to losing their Internet connection. Judges in these hearings would have the power to: (1) order disconnection of the alleged infringer’s Internet access; (2) fine the alleged infringer up to €300,000; and/or (3) sentence the alleged infringer to a two-year prison term. Just yesterday (September 15th), the French National Assembly gave preliminary approval to the measure by a vote of 285-225 and now, a joint committee will unify the Senate and Assembly versions and present a final bill to both houses for a vote on September 22nd.

In looking back over the piracy-related events of this year, it may well turn out that 2009 will be remembered as a watershed year in the struggle between Internet pirates and rights holders.  With the Jammie Thomas and Joel Tenenbaum verdicts in the States, the pseudo-shuttering of the Pirate Bay in Sweden, the implementation of a self-imposed, self-regulatory “three strikes” policy by Ireland’s largest ISP (created under threat of massive litigation) and now France’s revised and revitalized new “three strikes” law, the global community is indeed tilting towards greater sanctions and regulation of Internet piracy.

This raises questions for technology innovators. For example, Facebook, which according to a CNN report out today has a social network population nearly as large as the population of the United States, will soon launch a voice chat feature.  Most likely, the feature could be used to stream media across the globe as well as the nation? Would Facebook be liable for creation and distribution of such a feature, which is similar to that which created liability for the Pirate Bay creators for their torrent-tracking website?

Need help? Confused by the torrent of information, technology and legal rights?  Need to know more? Contact Andrew (“Drew”) Boortz, in our Washington, D.C. office, call me or contact the Rimon attorney with whom you regularly work.

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Carpe Diem! Italy Authorizes Issuance of Online Gaming Regulations.

Gaming is a fast-growing segment of the online community—remarkable since people have actually been saying that since 1994! Well online gaming and gambling may become more difficult (and more expensive) in places like Italy, if the Italian Chamber of Deputies has its way. New legislation ratifying and amending existing Italian law authorizes the State Monopolies Authority (Amministrazione Autonoma Monopoli di Stato (AAMS)) to promulgate implementing regulations—which are likely to be issued in early 2010 (although late 2009 is a possibility). Currently, Italy licenses online poker tournament games and fixed-odds sports betting, but online gambling in Italy is limited to Italian gamblers on internal, not international networks.

So what does the new law provide? Although absent the actual regulations it is impossible to predict with certainty, there does appear to be both good news and bad news.

First the good news. The law authorizes the introduction of online cash games—both fixed draws and card games—and permits the implementation of new online lotteries of various types and modes of play. Consequently, online games involving cash are likely to become legal and be introduced in Italy. 

Now the bad news. The tax that will be imposed on these new games is 20 percent of the total (essentially a gross profits tax). This represents an increase above the current 4.5 percent tax on “gross gaming revenues” that applies to sports betting in Italy. In cash online games, unlike tournament poker (in which a tax is imposed as a percentage of gross gaming revenue), the network operator generally takes a “rake” from each game. Thus, using a gross profits tax will allow the operator to set the rake more rationally in the marketplace, but will also result in more tax revenue.

So bottom line, while these new provisions are likely to stimulate new online gaming, the AAMS retains very broad authority to define the basis upon which operators can customize the wagering products and services being offered. Because the AAMS still retains the right to approve each betting product, one wonders if that will not limit both innovation and competition in the online gaming marketplace. That said, gaming and gaming revenues continue to increase and tax revenue will likely follow. We’ll see if the new regulations provide additional opportunities, but as they said in ancient Rome: Cum catapultae proscriptae erunt tum soli proscript catapultas habebunt.

Need to understand more about online gaming, or online gambling, or both? Need help? In Italy? In the United States? Anywhere? Need references? In Italy? In the United States? Anywhere? Contact me at joseph.rosenbaum@rimonlaw.com, check out my bio at Joseph I. Rosenbaum, or contact the Rimon lawyer you normally work with. We are happy to help.

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Don’t Be Green With Envy – Be Green with a Limerick

Valuable insight in an insightful land.

Political leadership throughout the world is changing, nowhere more so than in the United States. With that will come major changes in regulation, at the local and federal levels or through voluntary compliance with industry standards. Member states in the EU find themselves struggling to respond to local concerns while maximizing their combined market strength. Globalized media and interactive technology are providing consumers worldwide with greater control and choice in what they experience. Local markets are now boundary-less – confounding attempts at local regulation. What are today’s rules? How should advertisers and their counsel respond to the merged but dissonant marketplace and how can they balance competing attempts at regulation in the United States and Europe?

If you are a lawyer looking for high quality CLE or an advertiser hoping to get a glimpse (or make sense) of the law – or if you just want to hear where rhyming is an art and a science, then come join some of the most experienced corporate counsel and outside practitioners in Limerick, Ireland for Advertising Law in the United States and Europe — The Challenges Ahead sponsored by the Franklin Pierce Law Center and the University of Limerick. The course, being held at the end of July on the campus of the University of Limerick, a short distance from Shannon, Ireland will be as exciting and vibrant as the countryside.

Faculty is comprised of professors, practitioners and government leaders from both sides of the Atlantic, including Douglas Wood of Rimon LLP.