Despite winning an important legal victory against Google last week, Viacom's public image is taking a beating.
Ever since Viacom, parent company of MTV and Paramount Pictures, filed a $1 billion copyright suit against Google's YouTube last year, Google has won kudos for championing the rights of Internet users. On the other side, Viacom was blasted by critics who accused it of trying to lock down information and block people from enjoying South Park and The Daily Show.
Neither of these two perceptions is entirely accurate. But what is true is that there is little Viacom--or any other big media firm trying to enforce its copyright online--can do to avoid being saddled with the image of a corporate bully. Companies considering whether to follow Viacom's lead should carefully weigh the risks of potentially alienating consumers.
Last week, Viacom was widely criticized on the Web after a judge ordered Google to turn over information that included YouTube usernames, Internet Protocol addresses and the viewing histories of YouTube's users. Viacom representatives denied that the company had ever requested any personally identifiable information.
By then, the damage was done. Viacom was branded an enemy of the Internet and of privacy. This kind of public relations drubbing shouldn't come as a surprise to anyone.
Advantage: Google
Look at what Viacom is up against. Many Internet users have simply come to think of free Internet content as their right. Any attempt to restrict access is perceived as an attack on Web freedom. Google, which has a long history of facing down copyright owners, including book publishers, newspapers, and Hollywood studios, has earned respect from those who see content owners as money grubbers and many copyright laws as anti-consumer.
Google is also savvy when it comes to public-relations scuffles, say critics. Not all of Viacom's image problems are self inflicted, says Louis Solomon, an attorney representing a group of copyright holders who have sued YouTube for copyright infringement and are working with Viacom.
"I think there is little doubt that Google has been trying to be effective in its use of the press," Solomon said. "How else do you explain why they have been collecting and using IP addresses to monetize their site (for a while now), yet only now, with great self righteousness, claim to be concerned about producing IP addresses?"
Responding to Solomon's assertion, Ricardo Reyes, a Google spokesman, said Viacom's ailing public image can be traced to another Google advantage.
"The law is on our side," he said.
A judge will be the one to determine that. What is more certain is that Google has been more willing than Viacom to debate the case in public.
Last year, Google CEO Eric Schmidt made news several times by suggesting that Viacom was overly litigious. At a conference in April, Schmidt said this about Viacom: "You're either doing business with them or being sued by them."
At a retreat for media and tech CEOs, Schmidt claimed Viacom was a company "built on lawsuits."
And this week, Viacom's supporters, such as Solomon, accused Google of helping to whip up controversy over the privacy issue.
Google-Viacom deal in the offing?
On Monday evening, sources close to the discussions between Google and Viacom said they were close to reaching an agreement which would allow YouTube to redact IP addresses and usernames.
Did the bad PR affect Viacom's decision? A company's public image certainly can impact business.
Companies dueling it out in court often hire public relations firms to take their case to the masses. They may sense that their opponent is sensitive to negative press. A well-designed PR strategy can hurt the other guy's bottom line, and possibly bring on a settlement.
One way Viacom could instantly improve relations with Internet users is to simply drop the lawsuit, according to Erick Hachenburg, the CEO of Metacafe, a video-sharing rival of YouTube's.
Hachenburg argues that content companies have to decide between one of two ways to handle copyright issues on the Web.
He said the first way is the one chosen by Hulu, the video portal created by News Corp. and NBC Universal. Hulu allows users share videos and the company has syndicated content across the Web (Viacom has traditionally preferred to host its own content but has recently been boosting the number of syndication deals).
The alternative to the Hulu-esque strategy is to follow in the footsteps of the Recording Industry Association of America and solve problems with lawsuits.
"I hope Viacom doesn't use the (YouTube user) information to sue consumers," Hachenburg said. "Clearly there is an underlying question: how much do you want to adapt your strategy to live in Web. 2.0? Hulu is embracing Web 2.0 ideas, and I think they are finding success."
Viacom is getting its hands on some of YouTube's sensitive user data as a result of the copyright infringement lawsuit the conglomerate filed a year ago.
The two companies are in the discovery part of the case and must make certain information available to each other. On Wednesday, a federal judge ruled that Google must turn over YouTube user activity--videos watched, IP addresses, and usernames.
Google responded on Thursday in a statement to the court's order.
"We are pleased the court put some limits on discovery," Google said in the statement, "including refusing to allow Viacom to access users' private videos and our search technology. We are disappointed the court granted Viacom's overreaching demand for viewing history. We are asking Viacom to respect users' privacy and allow us to anonymize the logs before producing them under the court's order."
CNET News.com reported that Viacom is under strict instructions from the court not to use the data for anything other than proving the prevalence of infringement on YouTube.
Viacom, therefore, is forbidden from targeting individual users in the manner of the Recording Industry Association of America's lawsuits against individuals found to be downloading illegal music.
The case is important to Internet users because it could help define the scope of the safe harbor provision of the Digital Millennium Copyright Act. That's the part of copyright law that Google and other Internet service providers claim protects them from being held responsible for the actions of their users.
Don't look for the case to get to court anytime soon. The discovery part of the case isn't expected to end until sometime next year.
What might prove interesting in the meantime is that among the people Google has asked to depose are Jon Stewart of The Daily Show and Stephen Colbert of the The Colbert Report.
UPDATE:To include mention of a report that Facebook valued itself at $3.75 billion.
SAN JOSE, Calif.--What is Facebook really worth?
One of the burning questions in the technology business during the past year also played a major role in the dispute between social networks ConnectU and Facebook, according to documents obtained by CNET News.com.
Some interesting details about Facebook's valuation were revealed in partially redacted court records released Wednesday by federal district judge James Ware. The documents were a transcript of a June 23 hearing in the case, which Ware had closed to the public. The judge released the redacted transcripts after CNET Networks, parent company of News.com, objected to the closing and launched an effort to have relevant documents unsealed.
Facebook founder Mark Zuckerberg
(Credit: Facebook)ConnectU, founded by brother Cameron and Tyler Winklevoss and Divya Narendra, filed suit against Facebook founder Mark Zuckerberg in 2004 and accused him of stealing their business plan. The two sides reached a settlement, but ConnectU's side tried to pull out of the deal after alleging that Facebook fraudulently misrepresented the value of its stock. Ware disagreed and last week ordered that the settlement be enforced. That means Facebook is nearing the end of the ConnectU case.
But what the transcripts show was just how much Microsoft inadvertently influenced the proceedings.
Last fall, Microsoft paid $240 million to acquire a 1.6 percent share of Facebook. The day that news of the deal broke, headlines screamed that Facebook was worth $15 billion based on Microsoft's investment.
Analysts said all along that the money Microsoft paid was more a reflection of the company's need to strengthen ties to Facebook than what Microsoft thought the company was really worth. Judging from the transcripts, the Microsoft money may have gotten ConnectU's founders seeing dollar signs. But it shouldn't have, according to statements made during the June 23 hearing by Facebook attorney Neel Chatterjee.
The value of Facebook shares
As part of the settlement, Facebook agreed to give ConnectU's four principals--Narendra, the brothers Winklevoss, and their father, Howard Winklevoss, who had invested in ConnectU--an undisclosed amount of cash and Facebook stock. In exchange, ConnectU's principals agreed to give Facebook all the stock they held in ConnectU. The settlement was essentially an acquisition.
In a statement to the court, a small portion of which was redacted, it's obvious that Chatterjee wanted to make clear that Microsoft's investment in Facebook had little in common with ConnectU's deal. The transcript indicates that ConnectU received common stock while Microsoft received preferred stock.
"ConnectU didn't get that and they knew they weren't getting that," Chatterjee said. "What Microsoft got out of the deal...are fundamentally different than what ConnectU is getting, or the principals of ConnectU, which was subject to the fair-market valuation."
Chatterjee pointed out that Facebook provided ConnectU with fair-market valuations it obtained when it considered using stock for other partnerships. But he also noted that if ConnectU wanted to know what Facebook was worth it could have obtained its own "independent appraisal," which it did not do before agreeing the the settlement.
Getting an accurate Facebook valuation was not why ConnectU had sought to challenge the settlement, said the company's attorney, David Barrett. ConnectU argued that the settlement was unenforceable for several reasons, the first being that Facebook withheld vital information.
"The point is that (Facebook's) duty is to disclose all material information," Barrett said, noting that Facebook is a privately held company but comes under security laws when selling shares. "If they decide to engage in a private trade of their stock, they do have to disclose material information."
Specifically, Barrett said that Facebook's board of directors obtained an evaluation of their company's worth following the Microsoft sale but before the settlement was reached. ConnectU claimed that Facebook never handed over that valuation. The transcript of the hearing didn't reveal the amount of Facebook's valuation.
But on Thursday, The New York Times' Brad Stone reported that in a transcript from a June 13 case management conference, that figure was revealed: "one-quarter of its apparent value based on Facebook's public press releases." That would put the price of Facebook at $3.75 billion.
As Stone points out that valuing private companies is not exact and we'd have to wait until someone actually plunks down real money for Facebook in an acquisition or in a public offering of the company's stock.
In any case, Chatterjee, Facebook's attorney, told the court he suspected that the reason ConnectU's founders had changed their mind about the settlement was because of a dispute with the company's former law firm, Quinn Emanuel. The reality of legal fees "was affecting the economics in some way they don't like," Chatterjee said.
Lawyers from Quinn Emanuel have filed a lien against ConnectU's settlement money, and appeared before Ware on Wednesday to request that he not release any of the company's funds until they got paid.
CNET News.com's Caroline McCarthy contributed to this report.
Some people might be embarrassed if their friends found an old copy of Mr. Big's "To be with you" or Paula Abdul's "Cold hearted (snake)" stashed away in their CD collection. But not EMI. They own those songs, and they want the world to know it.
The music giant is suing social-networking site Hi5, video advertising start-up VideoEgg, and 10 unnamed defendants for allegedly infringing on the copyrights of those and hundreds of other pop throwbacks.
The lawsuit alleges that Hi5 users have uploaded and disseminated hundreds of music videos the company owns rights to. VideoEgg is on the hook because it's a former partner of Hi5, and those allegedly infringing videos were uploaded to its servers. (On May 31, VideoEgg stopped hosting videos uploaded by the public and refocused efforts on its ad network, prompting rumors that the company was on its way out.) The lawsuit doesn't say much of anything about who the 10 John Does are.
The companies had attempted to work out some kind of deal for more than a year, a source told TechCrunch, but those efforts eventually failed.
In a case that spotlights the growing importance of search engines to commerce, NameSafe has sued a competitor, LifeLock, for trademark infringement involving ads placed next to search results.
NameSafe, which like LifeLock sells services designed to protect customers against identity theft, alleged its rival used NameSafe's name in deceptive search ads on Google, Yahoo, and other search engines.
"The ads created by defendant deceptively contain the words 'NameSafe' and 'NameSafe.com' and those marks are often displayed as hyperlinks. Consumers following the hyperlinks are wrongfully and deceptively directed to the defendant's Web site," the suit said. "Thus, consumers are confused and mislead as to origin of NameSafe's services since defendant's ads result in the appearance of an affiliation between NameSafe and defendant."
This exhibit in the lawsuit purports to show a search for 'Namesafe' that shows Namesafe's name as the top sponsored result, along with a link to rival LifeLock's Web site.
LifeLock denied buying keyword search terms itself that use a rival's trademark, but blamed the issue on one of its 3,000 partners that resell its services.
"We have contacted our reseller network to remind them of the importance of compliance with LifeLock's requirements. We have been informed that a non-compliant reseller purchased the term 'NameSafe.' The reseller has subsequently been terminated," the company said in a statement. "LifeLock will not tolerate violations of our compliance guidelines from any independent reseller."
The suit, filed Wednesday in federal court in the middle district of Tennessee, also accuses Lifelock.com of violating the Tennessee Consumer Protection Act. Namesafe is seeking payment for damages and attorney fees and an injunction that would prohibit LifeLock from using Namesafe's trademarks confusingly in advertisements.
Search: Now a part of business
The issue shows the ever-increasing influence that search engines have over the business world. Because such sites are gateways that lead potential customers to companies, the commercial world naturally is powerfully interested in the search results, both the paid results determined by the winning bidders for search keywords and the "organic" results in the search engine itself.
One earlier paid-search controversy is whether a company may bid for a rival's name as a keyword. The NameSafe case sidesteps this particular issue, though: the company is objecting to the text of the ads, not the keyword itself.
A Yahoo search for 'NameSafe" on Friday included an ad that led to LifeLock's Web site.
LifeLock denied buying the "NameSafe" search term, "We as a company have never bought any branded search terms belonging to any other company. In fact, we have been the victim of many other companies trying to capitalize on the success of LifeLock by buying the term 'LifeLock,'" the company said.
But an exhibit in NameSafe's complaint shows ads that indicate somebody seemed to be winning bids for it. For example, the exhibit showed an ad sponsored accompanying search result that said "Namesafe. Proactive identity theft protection. Save 10% Today. Enroll Now. www.livelock.com."
Also, a search on Google for "NameSafe" on Friday morning showed an ad from LifeLock as the top sponsored result. However, later in the morning, no Lifelock-sponsored ads appeared.
Another Google and Yahoo paid-search response for the "NameSafe" search term was for Identity Theft Labs, which describes itself as "a contracted affiliate of LifeLock, LoudSiren, Debix, and TrustedId," four identity theft services.
Search trademark rules
Search engines have rules about use of another company's trademark in search ads. "Yahoo Search Marketing...requires advertisers to agree that their search terms, their listing titles and descriptions, and the content of their Web sites do not violate the trademark rights of others," Yahoo's rules say. "Advertisers are responsible for the keywords and ad text that they choose to use. Accordingly, Google encourages trademark owners to resolve their disputes directly with the advertiser, particularly because the advertiser may have similar ads on other sites," Google's trademark rules say. Both companies also offer mechanisms to lodge complaints.
But that process didn't satisfy Namesafe founder and Chief Executive David Ridings.
When NameSafe found the LifeLock ads, "We handled it with a complaint through the search engine informal complaint process," he said in an interview. "It did not have any effect. We had no other alternative but to file the lawsuit."
The complaint doesn't show any exhibits with a Google search, but the search ads were shown at the site, Ridings added. "We have evidence they were displayed on Google," he said.
The complaint process at the search engines didn't do the trick for Ridings, but the lawsuit apparently did. NameSafe filed its suit after hours on Wednesday, and it became public at 8 a.m. Thursday, he said. The ads were gone by 9 a.m., he said.
LimitNone, a small software development company, is seeking nearly $1 billion in damages in a lawsuit that accuses Google of reneging on a partnership with the small company and misappropriating its trade secrets for its Google Apps online service.
Specifically, the suit concerns LimitNone software called gMove designed to let people move e-mail, contacts, and calendar information stored in Microsoft Outlook to Google's online service. Google initially helped LimitNone develop, promote, and sell the product, assuring LimitNone it wouldn't offer a competing product, but then reversed course by giving away its own tool, Google E-mail Uploader, to premier-level Google Apps customers, the lawsuit said.
"With gMove priced at $19 per copy and Google's prediction that there were potentially 50 million users, Google deprived LimitNone of a $950 million opportunity by offering Google's competitive product for free as a part of its 'premier' Google Apps package," the lawsuit, filed Monday in Cook County Circuit Court in Illinois.
Google didn't immediately comment for this story.
LimitNone had shared confidential technical and sales forecast details with Google, the lawsuit said.
"Without Google's knowledge and use of the gMove trade secrets and confidential information, Google would not have been able to solve its longstanding Microsoft Outlook to Gmail conversion problem," the lawsuit said. "At a minimum, Google's access to the internal workings of gMove allowed it to gain a significant head start on designing the inner workings for a competing application."
Google's product "copied gMove's look, feel, functionality, and distribution model, including several unique and proprietary operations," the suit said.
And in May 2008, Google changed its user interface, breaking gMove compatibility and forcing the company to provide customer refunds.
The complaint alleges Google misappropriated trade secrets from LimitNone and violated fraud law by inducing LimitNone to share confidential information Google used to develop its competing product.
Updated 1:12 p.m. PDT to reflect that the hearing session has ended.
SAN JOSE, Calif.--A hearing in a dispute between Facebook and ConnectU wrapped up early Monday afternoon with no ruling, after the federal judge overseeing the matter had closed the proceedings to the public and the press.
U.S. District Judge James Ware plans to issue a ruling before too much time has elapsed, attorneys involved in the matter said as they left the courthouse here following the hearing, which lasted somewhat less than two hours.
Reporters from CNET News.com, the San Jose Mercury News, and Bloomberg had objected to the courtroom being closed, which is uncommon in federal civil cases, and asked for a delay so their attorneys could be present. Ware rejected the request, saying he would "set up a time to make objections."
"I've made a judgment that it could be beneficial to the court" to conduct at least the first portion of the hearing "in a closed courtroom," Ware said Monday morning.
A lawsuit between ConnectU and Facebook was settled earlier this year. ConnectU now says Facebook, the most popular social network in the world, entered into the settlement fraudulently. Therefore, it says, the case must be reopened.
The beef stems from allegations by ConnectU's founders that Facebook's Mark Zuckerberg stole their business idea in 2003, when the founders were students at Harvard University.
Many documents in the case have been filed under seal, including instant messages reportedly sent by Zuckerberg to colleagues at Facebook.
The city of Los Angeles' lawsuit against Time Warner Cable has prompted a neighboring community to look at suing the cable provider.
Now the city of Costa Mesa, Calif., is also considering suing Time Warner, claiming that its residents have gotten poor service, too. Complaints had gotten so out of hand, that earlier this year the city council called a public hearing to question a Time Warner representative about the issue.
Even though service has improved over the past few months, the city's attorney said that residents have experienced similar issues as those outlined in the Los Angeles complaint, according to the Daily Pilot, the local newspaper's Web site.
Late last week, the city attorney for Los Angeles filed a suit against Time Warner alleging the company broke multiple laws by providing poor service to its citizens. The city is seeking to collect tens of millions of dollars in fines.
The suit is linked to problems Time Warner experienced after it took over cable systems from bankrupt cable operator Adelphia. Time Warner also picked up some systems through a swap with Comcast, its co-buyer in the Adelphia transaction.
Time Warner increased its subscribers in the Los Angeles region from 350,000 to 1.9 million literally overnight. The company was overwhelmed as it migrated e-mail accounts, resolved billing issues, and transitioned other video and broadband systems to its own systems. The result was allegedly poor service and a doubling in complaints.
Specifically, the suit alleges the company failed to live up to its part of the franchise cable agreement, which requires the company to answer subscribers' calls within 30 seconds and begin repairs of service interruptions within 24 hours of notification in 90 percent of its service calls. The suit claims that less than 60 percent of calls for service were answered on time and that broadband and TV "was so intermittent and inferior in quality that it was not much better than no service at all."
Time Warner says that it's working to improve customer service in the region, but it disagrees with the suit's allegations.
"We're proud of the service we provide to the L.A. area," a spokesman wrote in an e-mail. "We've made great strides in customer service, evidenced by the fact that call volumes are now lower than pre-acquisition levels, despite being apporximately five times larger."
Improving customer service is a big deal for cable operators, especially as they face increased competition from phone companies. Time Warner is one of many companies with several initiatives in the works to improve its service. But will it be too late? Many customers are already ditching Time Warner in the L.A. area and switching to satellite providers. AT&T also provides its U-verse TV and broadband service in parts of the area, which could give some residents another choice.
Editor's note: Updated on Wednesday at 5:58 a.m. PDT to add information from Copiepresse.
A group representing Belgian newspaper publishers is demanding that Google pay it up to $49 million euros--some $77 million--in damages related to a lawsuit alleging the search giant linked to and cached their news stories in violation of copyright law.
According to an
Google has already
Google, which has challenged that ruling, said on Tuesday that it had not yet received the new Copiepresse legal summons and that it still awaits the outcome of its appeal.
"We strongly believe that Google News and Google Web search are legal, and that we have not violated Copiepresse's copyright," said Google spokesman Gabriel Stricker. "This is why we are appealing the February 2007 ruling. We consider that this new claim for damages is groundless, and we intend to vigorously challenge it."
Stricker declined to provide further details about the status of the lawsuit.
Copiepresse and Google had been in talks after the February 2007 ruling about how to reach a mutually agreeable solution. Last May, Google reportedly began reinstating links to Belgian newspaper sites in its main search results as a result of some of those negotiations.
A Copiepresse representative reached by e-mail told CNET News.com early Wednesday that the new legal action occurred because the two entities could not find an agreement, so the negotiation period ended, and the judicial process resumed.
Buzz about possible fines against the search giant, however, is not new. In November 2006, just after an initial court ruling against Google, there were reports that Copiepresse was seeking some 34 million euros in fines, though Google promptly denied that was the case.
Copiepresse has feuded in the past with other Web companies,
One month after suing three lending firms, LendingTree has now been sued by a Bronx man who claims a security breach with the mortgage site has harmed his credit score, led to higher credit card interest rates, and resulted in him getting rejected for at least one loan.
The lawsuit against LendingTree, filed late last week in U.S. District Court in Manhattan, seeks class action status. Filed on behalf of Marvin Garcia, it alleges that LendingTree was negligent in failing to keep customer personal information secure and failing to notify customers of the security breach in a timely manner.
The breaches--which involved names and Social Security numbers among other personal information--are believed to have begun in October 2006, but LendingTree did not notify customers until last month.
LendingTree also is placing the responsibility and cost on customers for monitoring their credit reports and trying to repair negative impacts on their credit history from the breach, the lawsuit says.
After being notified of the breach, Garcia obtained a copy of his credit report and found that nearly a dozen lenders had pulled his personal information for review without his permission, which affected his credit score, interest rates, and mortgage loan application, according to the lawsuit, which was filed by lawyers at the firm of Meiselman, Denlea, Packman, Carton & Eberz.
A LendingTree representative did not immediately return a call seeking comment on the lawsuit.
LendingTree said last month it was suing Newport Lending Group and Sage Credit Company, both of Irvine, Calif., and Home Loan Consultants of Newport Beach, Calif., over the breach. LendingTree said at the time that several former employees were believed to have taken company passwords and given them to a handful of lenders who then accessed LendingTree customer data files.
