IP Law Daily Ripoff Report operator escapes copyright, 93A liability for hosting ‘libelous’ postings
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Thursday, October 12, 2017

Ripoff Report operator escapes copyright, 93A liability for hosting ‘libelous’ postings

By Peter Reap, J.D., LL.M.

Xcentric Ventures, the operator of the website RipoffReport.com, was not liable under various tort, Massachusetts consumer protection statute (Chapter 93A), or copyright infringement theories for hosting allegedly libelous postings that plaintiff Christian DuPont authored and then posted on the site, the U.S. Court of Appeals in Boston has decided. A federal district court’s grant of Xcentric’s motion to dismiss, the district court’s March 2015 grant of summary judgment in favor of Xcentric, the district court’s December 31, 2015 fees award order, and the district court’s May 2, 2016 orders related to the fees award, were all affirmed (Small Justice LLC v. Xcentric Ventures LLC, October 11, 2017, Barron, D.).

The Ripoff Report’s purpose is to permit consumers "to post free complaints, called ‘reports,’ about companies and individuals whom [sic] they feel have wronged them in some manner." A user attempting to post a report encounters a final screen that is captioned, "Submit your Report." Below that caption is a text box. That text box is separately captioned, "Terms and Conditions," and contains a vertical scroll bar on the right side.

Several years ago, Goren was the subject of two negative reports that had been posted on the Ripoff Report. The person who posted the two reports, DuPont, had been the defendant in a lawsuit in which Goren was representing a party suing DuPont. In the two postings, DuPont leveled a number of criticisms regarding Goren’s character and conduct. In response, Goren filed suit in Massachusetts state court, under Massachusetts state law, for libel and intentional interference with prospective contractual relations.

The state court enjoined DuPont from "continuing to publish or republish" the two reports that DuPont had posted. The state court also transferred to Goren "all rights in and to ownership of the copyright" for each of the two reports that DuPont had posted. Finally, the state court appointed Goren as DuPont’s attorney-in-fact in order to "execute and deliver a conveyance, transfer, and assignment of all rights in and to ownership" of DuPont’s copyright in each posting to Goren. Thereafter, Goren assigned to himself the copyright in the reports that DuPont had posted, which Goren then assigned to his company Small Justice.

The plaintiffs next filed this lawsuit in federal court in Massachusetts against Xcentric. The plaintiffs’ complaint claimed, with respect to copyright law, a right to a declaration of Small Justice’s ownership of the copyright to the two reports that DuPont had posted, and copyright infringement. The amended complaint also made claims under Massachusetts state law for libel, intentional interference with prospective contractual relations, and violations of chapter 93A.

Xcentric moved to dismiss the amended complaint in its entirety. The district court partially granted that motion. Specifically, the district court held that Section 230 of the Communications Decency Act (CDA), 47 U.S.C. §230, immunized Xcentric from liability.

Section 230 of the CDA provides in part: "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." 47 U.S.C. §230(c)(1). Section 230 defines an "interactive computer service" ("ICS") as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server." Id. §230(f)(2). Subsection 230(f)(3) then defines an "information content provider" ("ICP") as "any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service."

Following the district court’s ruling on the motion to dismiss, Xcentric filed a one-count breach of contract counterclaim against DuPont. The case then proceeded to discovery on that counterclaim and also on the plaintiffs’ remaining claims, which consisted of the two copyright-related claims (for, respectively, a declaration of copyright ownership and a finding of copyright infringement) and, in part, the chapter 93A claim. In due course, Xcentric moved for summary judgment on the plaintiffs’ remaining claims. The district court granted that motion in full. Thereafter, on September 30, 2015, the district court denied Xcentric’s April 10 attorney fees award motion, but did so "without prejudice to refilling [sic] with supporting documentation." Following that order on September 30, Xcentric, on October 20, 2015, filed a renewed fees motion. The district court then granted that renewed motion on December 31, 2015, awarding Xcentric over $123,000 in attorney’s fees and over $1,000 in costs. Appeals by the plaintiffs from all of these orders were consolidated.

Section 230 of the CDA. In the first appeal, the plaintiffs contended that Xcentric could not claim CDA immunity under § 230 because the postings at issue did not constitute "information provided by another [ICP]." 47 U.S.C. § 230(c)(1). The appellate court disagreed.

As the First Circuit explained in Lycos, immunity under Section 230 should be "broadly construed." Universal Commc’n Sys., Inc. v. Lycos, Inc., 478 F.3d 413, 418-419 (1st Cir. 2007). In fact, the appellate court noted there that Congress has expressed a "policy choice … not to deter harmful online speech through the … route of imposing tort liability on companies that serve as intermediaries for other parties’ potentially injurious messages." Id. at 418. Given that legislative policy choice, the court could not construe the CDA’s definition of an ICP—which provides that an ICP is a "person or entity that is responsible … for the creation or development of information[,]" 47 U.S.C. §230(f)(3)—to encompass Xcentric in this case. Accordingly, the district court’s ruling on the motion to dismiss was affirmed.

Copyright infringement. As to the copyright infringement claim, the district court concluded, through the footnote that it appended to its initial ruling granting summary judgment to Xcentric, that Xcentric could not be liable for infringement due to the nonexclusive license that Xcentric had received from DuPont. The district court concluded that "DuPont conveyed a nonexclusive, irrevocable license to Xcentric to display the [two postings]" when DuPont clicked the check box next to the accompanying text stating that a user who posts on the Ripoff Report agrees to give an "irrevocable right[]" to Xcentric to display his postings on the Ripoff Report website. As a result, even if Xcentric was not "the owner of the copyright to [DuPont’s postings]," Xcentric could nevertheless "display them in perpetuity" without infringing DuPont’s copyright.

The plaintiffs’ arguments on appeal that that Xcentric did not obtain a valid nonexclusive license to display DuPont’s postings were without merit, the appellate court ruled. The plaintiffs first argued that Xcentric offered no consideration for the irrevocable nonexclusive license that the district court ruled Xcentric had been given by DuPont. The problem with this argument, however, was that, even if consideration is necessary in order for a party to grant an irrevocable nonexclusive license, performance can itself constitute consideration sufficient to establish a binding contract, the appellate court reasoned. Here, the plaintiffs conceded that Xcentric did actually post the reports at issue. Thus, given that performance, the plaintiffs offered no authority or persuasive argument as to why there was insufficient consideration for the conveyance of the irrevocable nonexclusive license, the court held.

The plaintiffs also contended that the irrevocable nonexclusive license was unenforceable on public policy grounds. While the plaintiffs contended that there is a "strong public policy against per se libel[,]" the plaintiffs offered no basis for concluding that this public policy provided a reason to hold the nonexclusive license itself invalid, the First Circuit opined. The fact that one holds such a license does not in and of itself protect one from liability for libeling another. Furthermore, even assuming that DuPont’s postings were per se libelous, no aspect of copyright law protects the holder of such a license from liability for libel, and nothing in the district court’s opinion suggested otherwise.

The plaintiffs’ other copyright claim: the declaratory judgment claim in which the plaintiffs argued that the copyright to DuPont’s two postings belongs to Small Justice and not to Xcentric, was deemed waived by the First Circuit.

Chapter 93A claim. The plaintiffs claimed that Xcentric violated chapter 93A §11 by "advertising and operation of its reputation restoration business." However, as the district court correctly ruled, causation—both "factual" and "proximate"—is a required element of a chapter 93A claim, the appellate court explained. With respect to a chapter 93A §11 claim, the plaintiffs were required to demonstrate a causal link between Xcentric’s allegedly "unfair or deceptive" business practices and a "loss of money or property" by the plaintiffs. Mass. Gen. Laws ch. 93A §11. Yet the plaintiffs failed to explain how Xcentric’s Corporate Advocacy Program, through which Xcentric offered to assist customers in changing their "search engine listings … from a negative to a positive." or its arbitration program, through which Xcentric offered to redact false statements contained in postings on the Ripoff Report website, caused them any such loss. Thus, there was no error in the district court’s grant of summary judgment to Xcentric on this claim.

Attorney fees. The plaintiffs challenged the district court’s decision to award over $123,000 in attorney fees and over $1,000 in costs to Xcentric, under Section 505 of the Copyright Act. The appellate court rejected each of the plaintiffs’ arguments that the district court abused its discretion. Specifically, the district court did not abuse the broad discretion that Section 505 confers in awarding fees to Xcentric. The district court’s award was supplemented with ample reasoning and offered reasonable and thoughtful analysis.

The case is Nos. 15-1506 and 16-1085.

Attorneys: Richard A. Goren (Law Office of Richard Goren) for Small Justice LLC. Daniel G. Booth (Booth Sweet LLP) for Xcentric Ventures LLC.

Companies: Small Justice LLC; Xcentric Ventures LLC

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