Wednesday, February 11, 2015

Third Circuit affirms competitor's victory in college course copying case

CollegeSource, Inc. v. AcademyOne, Inc., --- Fed.Appx. ----, 2015 WL 469041, No. 12–4167 (3d Cir. Feb. 5, 2015)
CS and A1 compete in the market for college credit-transfer information. CS alleged that A1 misappropriated the contents of CS’s main product, its CollegeSource Online database, to stock its own fledgling database. After various proceedings, the District Court granted summary judgment on all claims in favor of A1, and the court of appeals affirmed.  CS’s database contains over 50,000 digital course catalogs and related documents from the offerings of colleges across the country. CS tried to prevent or detect copying or use of its materials by potential competitors. It embedded an unavoidable “splash page” in its catalog files alerting the user that the catalog originated from CS, and a full-page “Copyright and Disclaimer,” which states that “CollegeSource digital catalogs are derivative works owned and copyrighted by CollegeSource, Inc. .... Catalog content is owned and copyrighted by the appropriate school.” The notice also declares that distribution and noncommercial use are prohibited.
Users of CollegeSource Online must check a box that states, “By signing in above, I agree to be bound by the terms of the ... Subscription Agreement.” The agreement also states that commercial use of the data is prohibited.  CS also offered a service known as “CataLink,” allowing colleges to store their catalog information on CS’s servers and link to that information from their websites, rather than hosting the information themselves; 110 schools have paid to use that service.
A1 was founded in 2005 as a free online alternative to CS.  It was rebuffed in attempts to buy or license the contents of CS’s database, then hired an independent Chinese subcontractor to obtain course catalogs by downloading them directly from individual schools’ websites. A1 also pursued an in-house effort to obtain course catalogs in the same way. At its launch in 2007, A1 had course catalogs from roughly 4,000 schools, most of which were from the independent contractor. CS swiftly sent a C&D claiming over 700 copyright infringements and demanding removal of infringing material.  A1 conducted a brief review and concluded that CS was largely correct.  A1 immediately disabled acces to the database and made efforts to remove materials that originated with CS [NB that a lot of this might well have been copyright misuse], but this proved technically challenging.  As late as 2010, A1 discovered additional documents on its servers that contained CS’s Copyright and Disclaimer.
In late 2008, A1 was the winning bidder for a contract with the State of South Carolina that had also been sought by CS, which prompted CS to sue.
Breach of contract: CS argued that A1 entered into a contract with CS when it created trial accounts for CollegeSource Online. There was a limited agreement between the parties arising from those trial accounts.  But there was no evidence that A1 downloaded any of CS’s course catalogs pursuant to those trial subscriptions, and thus there was no breach. 
CS argued that some of A1’s initial documents came from websites of schools that subscribed to CataLink, and that by its terms the contract also governed the use of those documents because the contract by its own terms covered the use of all CS services.  However, a user of CollegeSource Online “could not have reasonably interpreted the Agreement to cover the attenuated scenario in which that same user obtains a course catalog from a link embedded in the website of a third-party college that happened to be a CataLink subscriber.”  Plus, the contract itself used the term “service” in ways inconsistent with CataLink’s characteristics, “for instance, by referring to the ‘Help section’ of a service, which CataLink does not have, and by noting that individuals access ‘services’ with a user name and password, neither of which CataLink requires.” 
Finally, CS argued that, no matter how A1 obtained the digital files, it was bound by the Copyright and Disclaimer barring use for a commercial purpose. “The Copyright and Disclaimer, however, explicitly identifies itself not as a contract, but as a declaration of copyright, and purports to describe the parties’ respective entitlements—i.e., what the viewer ‘may’ and ‘may NOT’ do.” It wasn’t a contract.  Summary judgment affirmed.
Unjust enrichment: This claim was preempted by the Copyright Act.  CS, however, disavowed any claim of copyright over the materials at issue, and thus claimed it fell outside §301.  [Note that this argument is wrong on its face: preemption is broader than copyright protection; a claim based on copying materials in the public domain would be preempted because it covers the subject matter of copyright.  A defendant need not admit infringement to take advantage of preemption.]  Even assuming that this was true, the claim failed on the merits.  On being notified of its “transgression,” A1 took extensive efforts to purge the materials from its database, and there was no evidence of direct or indirect profit from their use.  “These facts preclude a finding that an injustice would result if recovery is denied.” CS also failed to show damages.
CFAA: A CFAA claim requires proof that the defendant accessed information “without authorization” or “exceed[ed] authorized access.” Though courts have divided on the scope of this protection, there’s agreement that “without authorization” should be given its “common usage, without any technical or ambiguous meaning.”  There was no evidence that A1 accessed CS’s servers without authorization.  At least two A1 employees created trial accounts for CollegeSource Online, using a process available to the general public. But there was no evidence that those employees downloaded catalogs for commercial use in violation of the contract, “hacked into technologically sequestered portions of the database, or even so much as viewed any particular document.”  Course catalogs obtained from CataLink “were available without precondition to any member of the general public who clicked the link on the subscribing school’s website and was thereby directed to CS’s servers.”  That again was not without authorization.
Trademark infringement: A1 bought AdWords for terms including “college source,” and “collegesource.” The district court found no likely confusion using the Third Circuit’s multifactor test, guided by Network Automation.  The district court’s “careful” analysis concluded that the strength of CS’s mark was outweighed by: “(1) the lack of evidence of actual confusion; (2) the expected savviness of internet users seeking out college-transfer information; and (3) the distinct labeling of Google’s advertisements.” Affirmed.
False advertising: CS argued that A1 falsely represented the contents of its catalog database as current, reliable, and accurate, and that it emailed colleges in July 2010 with the false statement that CS regarded itself as the owner of the course catalogs in its database and was aggressively pursuing lawsuits containing “copyright claims” against competitors. The district court found that CS failed to show literal falsity or a tendency to deceive.  CS didn’t provide admissible evidence that A1’s database was out of date.
As for the email, CS argued that it mischaracterized CS’s legal claims, which weren’t based on copyright or on asserted ownership of the underlying course catalog data. The email, “viewed in light of CS’s aggressive prosecution of its alleged statutory and contractual rights, was at worst ambiguous regarding its description of the instant legal action.”  At the time it was sent, “CS had sued or threatened to sue A1 under the Copyright Act, the Lanham Act, RICO, the CFAA, the California Computer Crimes Act, the California Business and Professions Code, and the contract law of both Pennsylvania and California.” Many of its claims were based at least in part on CS’s position that users were bound by the Copyright and Disclaimer in each of its documents, which asserted entitlements under the Copyright Act and claimed ownership of the “digital catalogs” at issue.  No jury could reasonably find the email false or misleading.

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