Professor Harpaz
May 2, 2009
Internet Law - Section 1
Final Examination
Question I
(Suggested time: 60 minutes) (40 out of 120 total exam points)
Bob Broker (BB) is a licensed real estate broker in
the State of Texas specializing in timeshares (a property jointly owned
or leased by multiple people who are allowed to use it only during
specified periods each year). His only place of business is in
Texas and he is only licensed as a real estate broker in Texas.
He has sold properties in 47 states and has served purchasers in every
state despite the fact that he was born in Texas and has never traveled
outside of the State of Texas.
To conduct his business, he has established a large
database of available timeshares. This database can be accessed
on his timesharestogo.com website. BB places advertisements on
the internet to attract both buyers and sellers to use his
database. His ads appear on a variety of websites that focus on
travel, leisure activities, vacation planning, and similar
subjects. His website displays his available properties, and his
computer system matches potential sellers with buyers who have listed
their timeshares.
BB generates revenue through listing fees and
commissions. BB charges sellers a one-time $500 non-refundable
advance fee to be listed on its website, as well as a commission of 10%
or $750, whichever is greater, upon sale. Potential buyers can
access his database at no charge. BB makes the vast majority of
his revenue through advance fees, and most timeshares he lists are
never sold.
Florida law requires all real estate brokers to be
licensed and declares that all real estate purchases and sales with its
residents, including timeshares, that are procured by real estate
brokers who are unlicensed in Florida are void. Under this law, a
real estate broker would need to be licensed in Florida to sell a
Florida timeshare only if a Florida resident is buying or selling the
timeshare. Florida real estate broker licenses are available to
out-of-state brokers if they satisfy the same requirements as in-state
brokers, which include completing educational requirements which may be
satisfied online, paying license fees, and approval by the Secretary of
State. Out-of-state brokers must also consent to service of
process in Florida. Failure to comply with the licensing statute
can subject an out-of-state broker to both civil and criminal
penalties. Florida’s regulations of real estate brokers are very
similar to the laws in many other states.
Sarah Seller (SS) is a Florida resident who owns a
timeshare in Florida that she wants to sell. A year ago she saw
an ad for BB’s database on a website she visited as part of her
planning for a trip to Arizona. After reviewing the information
on timesharestogo.com about the database and its effectiveness in
selling timeshares, she paid BB $500 to include her Florida timeshare
in his database.
SS is very disappointed with BB’s listing
service. In the year since she paid her $500 fee, she has not
received a single inquiry from a potential buyer about her timeshare
despite representations on timesharestogo.com that the database
generates many potential buyers for the timeshares that it lists.
SS has filed suit in Florida against BB alleging that he is guilty of
tortious conduct in the form of fraud and misrepresentation. Part
of her theory of liability is based on the fact that BB is in violation
of Florida law because he is not licensed to sell real estate in
Florida.
You have been hired by BB to defend him against SS’s
lawsuit. In constructing a strategy for BB’s defense, please
answer the following questions:
(1) In your preliminary research, you have learned that Florida’s
long-arm statute extends to all cases where personal jurisdiction could
be asserted over a nonresident defendant consistent with the Fourteenth
Amendment Due Process Clause. In light of this, what arguments
are available to you to argue that Florida has no personal jurisdiction
over BB? What responses do you expect SS to make to these
arguments?
(2) What arguments can you make on BB’s behalf to argue that the
application of Florida’s real estate broker licensing law to BB’s
internet-based business violates the Dormant Commerce Clause?
What arguments do you expect SS to make in response to those arguments?
(3) The Florida Real Estate Department is responsible for enforcing the
Florida real estate broker licensing law. BB has learned that SS
has filed a complaint with that Department on the ground that he is in
violation of state law. BB is concerned that Florida may file
criminal charges against him under that law. Could Florida
successfully prosecute BB for his failure to obtain a Florida real
estate license?
Question II
(Suggested time: 60 minutes) (40 out of 120 total exam points)
Roommatefind.com operates a website designed to
match people who need roommates. The website is available for use
by subscribers only. Those with a room who need a roommate are
described on the site as Have Room subscribers while subscribers
looking for a place to live are described as Need Room
subscribers. At any given time the website features approximately
150,000 active listings. Roommatefind.com collects revenue from
advertisers on its site as well as from subscribers.
Before a visitor to the site can search current Have
Room listings or post a new housing opportunity, the visitor must
become a subscriber. This requires the creation of a subscriber
profile, a process that requires a new subscriber to answer a series of
questions. In addition to requesting basic information--such as name,
address, user name, password, and email address--Roommatefind requires
all subscribers to identify themselves as either Have Room or Need Room
subscribers.
Have Room subscribers must list the location of any
room they have available and describe themselves in terms of their sex,
sexual orientation, and whether they have children living in their
household. They must also list their preferences in roommates
with respect to these same three criteria: sex, sexual orientation, and
whether they desire a roommate who will bring children to the
household. Need Room subscribers must describe the location where
they want to live and supply the same descriptive information about
themselves and their preferences in roommates with respect to these
same three criteria: sex, sexual orientation, and whether they have or
want children living with them. The site also asks subscribers to
provide “Additional Comments” describing themselves and their desired
roommate in an open-ended essay.
After a new subscriber completes the online
application, Roommatefind’s software automatically assembles his or her
answers into a “profile page.” The profile page displays the
subscriber’s screen name, description, and preferences, as divulged
through answers to Roommatefind’s questions.
Subscribers can choose between two levels of
service. Those using the site’s free service level have their
profile page on the website, are able to search the profiles of others
(not including the Additional Comments), and can send e-mail messages
to people listed on the site. Subscribers who pay a monthly fee receive
periodic e-mails from Roommatefind.com informing them of available
housing opportunities matching their preferences and also gain the
ability to view other subscribers’ “Additional Comments.”
The Housing Equity Council (HEC) has recently filed
a civil suit in federal court seeking injunctive and monetary relief
against Roommatefind.com alleging that Roommatefind’s business violates
a federal law that outlaws housing discrimination. The Federal
Fair Housing Act (FHA) prohibits housing discrimination on the basis of
“race, color, religion, sex, sexual orientation, and familial
status.” The FHA applies to buyers, sellers, landlords, tenants,
renters, and real estate brokers. The FHA includes within its
definition of discrimination the making of any “statement with respect
to the sale or rental of a dwelling that indicates an intention to
prefer, limit, or discriminate” on the basis of a protected
category.
Alan Armstrong (AA), the President of
Roommatefind.com, has come to you for legal advice. He wants to
know whether his company can be successfully sued under the Fair
Housing Act. In responding to his question be sure to analyze the
text of the Fair Housing Act to see if Roommatefind’s activities are
actionable under the terms of the statute. You should also
consider any defenses or immunities AA may be able to assert in
defending against this claim. In your response make sure to
include an analysis of the arguments that the HEC can make in arguing
that Roommatefind is liable under the FHA.
Question III
(Suggested time: 60 minutes) (40 out of 120 total exam points)
Perfect 10 publishes the magazine “PERFECT 10” and
operates the subscription website www.perfect10.com., both of which
“feature tasteful copyrighted images of the world’s most beautiful
models.” Perfect 10 has copyrights in the photographs published
in its magazine and on its website, and a federal registration of the
“PERFECT 10” trademark. Perfect 10 has become increasingly
frustrated that numerous websites based in several countries steal its
copyrighted images, alter them, and illegally offer them for sale
online using Perfect 10’s trademark to promote the sale of the images.
Perfect 10 has made efforts to sue these direct
infringers, but this strategy has not been successful because of the
difficulty of identifying the direct infringers and suing them in
locations all over the world. Instead, Perfect 10 has come up
with a new strategy for eliminating this cyberpiracy of its
intellectual property. Several months ago, Perfect 10 began to
send notices to PayPal about the activities of some of the infringing
websites.
PayPal is a payment processing service for online
sellers who pay a fee for this service. Buyers use their PayPal
accounts to make purchases and fund their accounts with an electronic
debit from a bank account or with a credit card. Sellers, to
receive the funds they are owed, can either receive a check from
PayPal, establish their own PayPal deposit account, or request a
transfer to their bank account.
Perfect 10 alleges that it sent PayPal repeated
notices specifically identifying infringing websites and informing
PayPal that some of the visitors to those websites use PayPal to
purchase infringing images. Perfect 10’s notices requested that
PayPal refuse to process any additional payments for purchases on those
websites. PayPal admits receiving these notices. However,
PayPal took no action in response to the notices. PayPal admits
that it receives fees for its services in these transactions.
Perfect10 has sued PayPal alleging secondary
liability under both federal copyright and trademark law. It sued
because PayPal continued to process payments to websites that infringe
Perfect 10’s intellectual property rights after being notified by
Perfect 10 of infringement by those websites. Perfect 10’s
complaint asserts both contributory and vicarious liability as the
basis for its lawsuit.
PayPal has denied all liability in its response to
Perfect 10’s lawsuit. PayPal does acknowledge that in several of
the transactions involving these infringing images, the purchased item
is described by the seller as a Perfect 10 image and this fact is known
to PayPal at the time that it processes the payment. In most
transactions, however, the purchased item is only described as an image
or some other generic description. Moreover, PayPay admits that
its user agreement states that the PayPal service many not be used for
activities that “violate any law, statute, ordinance or regulation” or
involve the “sale of items that infringe or violate any copyright,
trademark, right of publicity or privacy or any other proprietary right
under the laws of any jurisdiction.”
You are a law clerk to the judge assigned to the
case. The judge has asked you to write an analysis of the legal
arguments that can be made by Perfect 10 to support its claims of
contributory and vicarious copyright and trademark infringement.
The judge also wants you to describe any arguments available to PayPal
to support its position that it has not violated the plaintiffs’
intellectual property rights. In addition, the judge would like
to know whether any of the provisions of Section 512 of the Digital
Millennium Copyright Act (pages 520-24 in the casebook), particularly
sections 512(a), (c) or (d), apply to this action. Under those
subsections, a service provider is defined as follows:
(k) Definitions.—
(1) Service provider.—
(A) As used in subsection (a), the term “service provider” means an
entity offering the transmission, routing, or providing of connections
for digital online communications, between or among points specified by
a user, of material of the user’s choosing, without modification to the
content of the material as sent or received.
(B) As used in this section, other than subsection (a), the term
“service provider” means a provider of online services or network
access, or the operator of facilities therefor, and includes an entity
described in subparagraph (A).
(A) As used in subsection (a), the term “service provider” means an
entity offering the transmission, routing, or providing of connections
for digital online communications, between or among points specified by
a user, of material of the user’s choosing, without modification to the
content of the material as sent or received.
(B) As used in this section, other than subsection (a), the term
“service provider” means a provider of online services or network
access, or the operator of facilities therefor, and includes an entity
described in subparagraph (A).
END OF EXAMINATION