Forum Selection Clause and FACTA Electronically Printed Receipt Issues Determined by Ninth Circuit

The Ninth Circuit resolved two issues when it released its opinion in Simonoff v. Expedia, Inc.,(pdf) on May 24, 2011:

  • Whether the forum selection clause limited jurisdiction to Washington state courts; and
  • Whether an email receipt displayed on a computer screen is an electronically printed receipt under the Fair and Accurate Credit Transactions Act (FACTA).

This case does not involve copyright issues per se, but does present two interesting issues.  The first issue provides information to licensing attorneys on how to draft a forum selection clause.  The second provides information on the definitions of the words “print” and “electronically printed.”  Although the court’s ruling is specific to FACTA, neither FACTA nor the Copyright Act defines the word “print.”

Facts.  Expedia is an online travel arrangement service that accepts credit or debit cards.  As such, it must comply with FACTA.  The portion of FACTA that is relevant to this case states:

no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

15 USC §1681c(g)(1).

Dimitriy Simonoff used Expedia’s website to purchase travel arrangements.  Expedia emailed him a receipt that included the expiration date of his credit card.  Simonoff claims that the email receipt he received from Expedia violates FACTA.

Forum Selection Clause.  Simonoff originally filed this case in Illinois state court.  Expedia removed it to federal court.  Under 28 USC §1441, a defendant can remove to federal court any civil action brought in state court which the federal district court has the power to hear and decide.  In Illinois federal court, Expedia filed a motion to dismiss pursuant to the user agreement’s forum selection clause.  A “forum selection clause” allows contract parties to choose in advance the location in which disputes will be resolved.  Simonoff voluntarily dismissed his case and refiled it in state court in King County, Washington.  Expedia then removed the King County case to federal court.  The federal district court judge denied Simonoff’s motion to remand the case (send it back) to state court.

Simonoff argued that the wording of Expedia’s user agreement limited jurisdiction to state court.  Expedia’s agreement stated that “You hereby consent to the exclusive jurisdiction and venue of courts in King County, Washington.”  (Opinion, pdf page 4).

In Doe 1 v. AOL LLC, the Ninth Circuit ruled that only state courts had jurisdiction under that user agreement.  That user agreement provided for “exclusive jurisdiction for any claim or dispute…in the courts of Virginia.”  (Opinion, pdf page 4).  The Doe 1 court thought the phrase “the courts of” a state meant “courts that derive their power from the state—i.e., only state courts.”  (Opinion, pdf page 4).  In contrast, the phrase “courts in” a state imposes a geographical limitation, but not a limitation on sovereignty.

In short, the rule we adopted in Doe 1 is that a forum selection clause that specifies “courts of” a state limits jurisdiction to state courts, but specification of “courts in” a state includes both state and federal courts.

The court applied its rule from Doe 1 in Simonoff.  This rule is consistent with Fifth, Fourth, Tenth, Eleventh, Sixth and First Circuit opinions, but inconsistent with one other Tenth Circuit opinion.

Emailed Receipts Not Covered by FACTA.  The court begins its analysis with the text of the statute.  It determined that FACTA “prohibits merchants from printing credit card expiration dates and non-truncated credit card numbers on ‘electronically printed’ receipts” and that the meanings of “print” and “electronically printed” determine the outcome of the case.  (Opinion, pdf page 8).

Neither “print” nor “electronically printed” is defined in the statute.  The court looked at the ordinary meaning of “print”: 

The ordinary meaning of “print” is clear:  printing involves a physical imprint onto paper or another tangible medium….A printed receipt is thus a receipt that exists in physical form, not one electronically displayed on a screen.

(Opinion, pdf page 9).

The court indicated that the use of “electronically printed” in FACTA versus just “print” does not change its analysis.  Under FACTA, full credit card numbers are allowed to be printed on handwritten or manually imprinted receipts, while they are not allowed to be printed on electronically printed receipts.  The use of the word “electronic” makes that distinction clear.

Congress used the phrase “electronically printed,” not “electronically printable” in drafting the statute, another indication that the act was not meant to apply to emailed receipts.  In addition, by its own terms, FACTA “excludes machines that do no more than electronically display information.”  (Opinion pdf page 11).  Another point made by the court is that FACTA’s staggered implementation schedule is based on when the merchant got the machine that prints the receipts.  That provision would become nonsensical if a display on the customer’s computer screen were deemed to “print” a receipt.  The court’s final point is that the statute uses the phrase “at the point of the sale or transaction,” which contemplates a face-to-face transaction at a physical location at which the consumer is handed a receipt.

I think the best part of this opinion is in the third paragraph:

“Print” refers to many different technologies—from Mesopotamian cuneiform writing on clay cylinders to the Gutenberg press in the fifteenth century, Xerography in the early twentieth century, and modern digital printing—but all of those technologies involve the making of a tangible impression on paper or other tangible medium….Although computer technology has significantly advanced in recent years, we commonly still speak of printing to paper and not to, say, iPad screens.  Nobody says, “Turn on your Droid (or iPhone or iPad or Blackberry) and print a map of downtown San Francisco on your screen.”

The court’s comment highlights the difference between printing a document and displaying it on a computer screen.

Mouthful of Potholders – Molly’s Defining Moment



She concentrated on the salmon skin tantalizingly dangling before her eyes as one human held up the baked fillet while the other scraped off the skin.  Suddenly, she saw her chance and sprang forward with lightning speed.  She was sure she nabbed the luscious skin, but when her front feet landed on the kitchen floor, she realized that all she had was a mouthful of potholders.  She spit them out on the floor, thoroughly disgusted with her prize.  The humans laughed at her antics, adding insult to injury.

Molly is our 16 plus year old senior rescue dog.  A tweet from Dog Star Daily regarding a webpage on Muttville about the benefits of adopting a senior dog inspired me to write a post about Molly.

Hikers found Molly at the Taylor River trail head, near North Bend, Washington, in February 2007.  She was sitting on a bridge near the beginning of the trail.  Instead of going on a hike, the hikers put Molly in their car and took her to the King County Animal Shelter at Crossroads in Bellevue, Washington.  Taylor River trail head is a remote location, making it unlikely that Molly wandered there by herself.  She was probably deliberately dropped off there.  Many thanks to these hikers and other people like them who inconvenience themselves to help abandoned, lost and stray animals.

I received an email from NW Vizsla Rescue asking me if I could go by the shelter on my way home from work to identify whether a dog there was a Vizsla.  Dee and I both worked in downtown Seattle at the time and commuted together.  We snuck out of work a few minutes early so that we could get to the shelter before it closed for the day.

Molly was lying curled up in a cage when we first saw her.  We were instructed by the shelter staff that we could look at her, but that we couldn’t touch her until she became available for adoption 3 days later.  The thing that struck me when I first saw her was that her ears are deformed.  Vizslas are supposed to have beautiful, silky, flop ears.  Molly’s ears are shrived up by hemotomas.  That type of hematoma is caused by the dog shaking its head due to a chronic ear infection and is a sign of neglect.  Molly was well cared for in other ways and was even a touch overweight.  We stood there peering in at Molly and discussing her ears.  After a couple of minutes, Molly engaged us by wagging her tail at us without moving any other part of her body, a very Vizsla thing to do.  We determined that she must be a Vizsla and left the shelter.

I didn’t think Molly was very adoptable, due to her ears and her age.  Most people who plan to adopt a Vizsla want a young dog that matches their image of a Vizsla.  Although I didn’t think Molly was very adoptable, we were reluctant to take her ourselves, since we already had 3 dogs.

I initially told my contact at NW Vizsla Rescue that we could foster Molly for 2 weeks.  By the time Molly was available for adoption from the shelter 3 days later, we had decided to keep her as our own pet.  We are very happy that we did!  Molly has been an important part of our family for a little over 4 years now.  Both the animal shelter staff and our vet estimated that she was 12 years old when she first joined our family.

Molly is quite charismatic!  She is easily the best socialized dog I have ever met.  She gets along well with people, other dogs and cats.  She is very low key in greeting other animals, sniffing and allowing others to sniff her without getting excited – it’s a routine aspect of life for her.  She continually demonstrated the proper technique for greeting the cat to Flash (p. 5), the agility dog in the weave pole picture to the right.  Molly simply walks up to the cat, sticks her nose in the cat’s face, then walks away.  Flash never did catch on and couldn’t approach the cat without quivering all over.

Molly’s people greeting is colorful.  She sticks her head in a person’s crotch and pushes up with the top of her skull while enthusiastically wagging her tail.  Some people won’t let Molly greet them this way.  They are missing out.  I have the good fortune of receiving Molly’s special greeting at least once a day. 

Molly was very playful for the first few years she was with us, less so now.  Molly would race around the yard with the other dogs, then do a stationary spin.  She would keep her back end in the same spot while whirling her front end around in a circle, like a horse in a reining competition.  It’s great fun to see!  The only other dog I have seen do that is Chiz, the first Vizsla I ever met.  I think it’s a special dog that spins on her own like that and feel delighted every time I see Molly do it.

Molly rarely spins anymore, but does still race around the yard sometimes.  She even plays with Pip, the puppy, now and then.  Pip always tries to get Molly to play with him and is pleasantly surprised when she does.  Pip knows he needs to respect Molly.  She has never put him in his place, but he knew from the moment he met her that he better respect her.

Molly spends a lot of time sleeping.  In the morning, she likes to sleep under a blanket on her favorite chair.  In the evening, she wants someone to sit on the couch with her.  Anyone who will sit on the couch with Molly in the evening is her new best friend.

We feel that Molly has enriched our lives.  We would have missed out on many wonderful moments had we passed up the opportunity to adopt this senior dog.

Washington Shoe Seeks to Enforce Copyrights on Boot Designs

Washington Shoe Company manufactures, designs, distributes and sells footwear.  Its territory covers the U.S. and some foreign countries.  It sells both directly and through licensees.

Academy Ltd. does business as Academy Sports + Outdoors.  Academy sells a variety of sports and outdoor merchandise through its website,  Academy offers footwear for sale through its website.

Washington Shoe sued Academy for copyright infringement (pdf) in the Western District of Washington on May 5, 2011.  Washington Shoe alleges that it has registered copyrights in two different boot designs, Magic Carpet and Zebra Supreme.  It alleges that Academy infringes its copyrights by reproducing, adapting, distributing, selling, performing or displaying its copyrighted works without authorization.  Academy is specifically alleged to offer for sale, display and distribute unauthorized copies in interstate commerce for financial gain.

Washington Shoe’s Exhibit A (pdf) to its complaint is a copy of the copyright certificate and deposit for the Magic Carpet design.  Exhibit B contains photographs of the boots offered for sale by Academy.

Washington Shoe’s Exhibit D (pdf) contains photographs of its Zebra Supreme design.  Exhibit E is a copy of the copyright certificate and deposit for the Zebra Supreme design.  Exhibit F contains photographs of the boots offered for sale by Academy.

Washington Shoe alleges that it sent cease and desist letters to Academy’s counsel with respect to both designs.  Washington Shoe claims willful infringement, irreparable injury, loss and damage and entitlement to gains, profits and advantages obtained by Academy resulting from its infringing acts.



Ninth Circuit Upholds Script Writer’s Implied Contract Claim under California State Law

Montz v. Pilgrim Films  addresses a script writer’s worst fear in shopping a script around to producers.  The court framed the issue:

In Hollywood, writers commonly submit copyrighted scripts to producers with the understanding that if the script is used, the producer must compensate the writer for the use of the copyrighted material.  But what happens when the producer uses the idea or concept embodied in the script, but doesn’t pay?

(pdf page 3)

The Facts

Plaintiff Larry Montz is a parapsychologist who developed an idea for a television show about a team of paranormal investigators conducting field investigations in various real-world locations.  The investigators would use tools such as magnetometers and infrared cameras to investigate paranormal activity reports.  Montz and publicist/producer Plaintiff Daena Smoller pitched the idea to NBC, the Sci-Fi channel and others, presenting screenplays, videos and other materials, from 1996 to 2003.  The studios were not interested.  In 2006, Plaintiffs filed sued in federal court against Defendants over the television show Ghost Hunters, a show about a team of investigators travelling the country to examine paranormal activity. 

The complaint alleged breach of an implied-in-fact contract and breach of confidence by Defendants.  Defendants brought a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted.  “Failure to state a claim” means that even if all of the plaintiff’s factual allegations are true, the plaintiff still fails to indicate why she is entitled to a legal remedy.  The district court determined that the complaint alleged sufficient facts to state a federal copyright claim, but that the state law claims were preempted by federal copyright law.  The state law claims were dismissed with prejudice and without leave to amend.  “Dismissed with prejudice” means that the court has made a final determination on the merits of the case and that the plaintiff may not refile the lawsuit.  “Without leave to amend” means that the plaintiff may not amend the complaint to better state her claims. 

Plaintiffs amended the copyright claim to add Universal Television Networks, then stipulated (agreed) to a dismissal of the amended copyright claim with prejudice.  There were no remaining claims, so the district court entered judgment in the Defendants’ favor.  On appeal, the three-judge panel affirmed the district court’s decision.  A majority of the active Ninth Circuit judges voted to rehear the case en banc, leading to the court’s current decision dated May 4, 2011.

California Implied-in-Fact Contract Law

Desny v. Wilder is a 1956 Supreme Court of California ruling “recognizing an implied contractual right to compensation when a writer submits material to a producer with the understanding that the writer will be paid if the producer uses the concept.”  (pdf page 3)  In Desny, the plaintiff phoned director Billy Wilder’s office and pitched a movie idea to Wilder’s secretary.  The secretary and Wilder both understood that Wilder was to pay the plaintiff if he used the story.  Wilder produced the film Ace in the Hole, allegedly based on the idea Desny pitched to his secretary, without compensating Desny.  The trial court granted summary judgment in favor of Wilder, but was overruled on appeal.  The California Supreme Court considered the entertainment industry norms in holding that Desny sufficiently pled a claim for breach of implied contract.

The court in the present case also considered the entertainment industry practice of submitting scripts to producers, attempting to sell scripts or ideas.

Since an idea cannot be copyrighted, a concept for a film or television show cannot be protected by a copyright.  17 U.S.C. §102.  But the concept can still be stolen if the studio violates an implied contract to pay the writer for using it.

(pdf pages 7 and 8)

Copyright Preemption is a two prong test

Preemption” is the principle arising out of the Supremacy Clause of the U.S. Constitution that the Constitution, and the federal laws made pursuant to it, are “the supreme law of the land” and that federal law displaces state law when there is a conflict between the two.  The Copyright Act preempts state law claims when

  • The plaintiff’s work comes within the subject matter of copyright, and
  • The state law grants legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright.

17 U.S.C. §301(a).

Even though copyright protection does not extend to ideas under 17 USC §102, the preemption aspect of copyright law does extend to state law that attempts to protect ideas.  The scope of copyright preemption is broader than the scope of copyright protection, creating an area that is not protected by copyright law but that copyright preemption law prevents state law from protecting.

The court indicated that most litigation focuses on the second prong of the preemption test. 

To survive preemption, a state cause of action must assert rights that are qualitatively different from the rights protected by copyright.

(pdf page 9)

An extra element can make the qualitative difference that prevents the preemption principle from applying.  In Desny, the extra element was “an agreement to pay for the use of the disclosed ideas.”  An implied agreement of payment for the use of a concept is a personal agreement between the parties and can only be effective between the parties.  Such an agreement contrasts with and is unlike the public monopoly created by copyright law.  A contract’s purpose is to provide greater protection than is available under the Copyright Act.  The Desny ruling allows creators to share their concepts and ideas “with the understanding that they are not being given away for free.”  (pdf page 11)  The court noted that without the protection provided by Desny, there would be very little protection for some potentially valuable creative resources.

Contract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas.

(pdf page 12)

The court ruled that Plaintiff’s breach of confidence claim also survives copyright preemption.  The duty of trust or the confidential relationship is an extra element in the breach of confidence claim that makes it qualitatively different from a copyright claim.

The court reversed and remanded the district court’s judgment.  Circuit Judge Schroeder wrote the majority opinion.  Judges Kozinski, Reinhardt, Thomas, Wardlaw, Paez, and Smith joined.

O’Scannlain’s dissent. 

Circuit Judge O’Scannlain disagreed with the majority’s ruling on the second prong of the preemption test.  He did not think that the rights Plaintiffs tried to protect were qualitatively different from the rights protected by 17 U.S.C. §106, namely the rights to reproduce, distribute, display and prepare derivative works.  He thought that Plaintiffs tried to exercise a right to exclude, which is more than an agreement to be paid for the use of ideas.  Since Plaintiffs did not offer to sell the ideas outright, their claims did not meet the requirements for a breach of implied contract under Desny

Where a copyright owner authorizes the use of his work, but does not receive the consideration he was promised, he has a contract claim; where a copyright owner does not authorize the use of his work, but, nonetheless, someone uses it to produce a substantially similar work, he has a copyright claim.

(pdf page 19)

O’Scannlain did not think Plaintiffs authorized the use of their work.  He also thought that providing greater protection against the unauthorized use of copyrighted material than is provided by the Copyright Act is inconsistent with the objectives of Congress.

O’Scannlain thinks that the breach of confidence claims fails for the same reason as the breach of implied contract claim – that it seeks to protect the exclusive rights of copyright owners.

Judges Gould, Tallman and Bea joined O’Scannlain’s dissent.

Circuit Judge Gould joined O’Scannlain’s dissent, but also wrote a short dissent of his own.  His main point was that express contracts should be allowed to proceed under state law, but that implied contracts that functionally look like copyright claims should not.

VendNovation Sues to Enforce Copyrights and Protect Trade Secrets in Vending Machine Software

VendNovation, LLC, filed a complaint (pdf) claiming copyright infringement, breach of contract, misappropriation of trade secrets, unfair business practices and other causes of action against Apex Industrial Technologies LLC, on April 26, 2011, in the Western District of Washington.  VendNovation developed “Web Management Software,” a server-hosted software program that allows the user to remotely control vending machines through an Internet connection.  Special control boards programmed by VendNovation are installed in the vending machines.  VendNovation claims trade secrets in the design of the software and the know-how to make it work.  It licensed its software, but did not license the source code.  VendNovation also protected its trade secrets by using a secure procedure to register its software copyrights.  Apex markets and sells vending machines.

VendNovation alleges that it, Apex and a vending machine manufacturer formed a three-way venture to manufacture, market and license vending machines with VendNovation’s Web Management Software and control boards.  The parties operated under an oral agreement for about two years. 

VendNovation alleges that in April 2008, Apex wanted to acquire VendNovation’s assets or become an exclusive licensee and obtain access to VendNovation’s source code so that it could pursue an opportunity with a large customer (Fastenal).  VendNovation declined, but Apex started selling vending machines with VendNovation’s Web Management Software and control boards to Fastenal without an exclusive license from VendNovation or access to its source code.  The Web Management Software used by Fastenal was hosted on VendNovation’s servers.

Users must agree to VendNovation’s End User License Agreement (EULA) before they can access its website.  The EULA is a “click through” license in which users must acknowledge reading the EULA by clicking a button.  The EULA contains language claiming VendNovation’s copyright and intellectual property rights in the software, including the software’s look and feel.  The EULA prohibits reverse engineering, modification or de-compiling the software.

VendNovation alleges that it entered into a written licensing contract with Apex in February 2009.  The license reiterates VendNovation’s ownership in the software, control boards and derivative works.  The license provides that Apex can access VendNovation’s source code and produce derivative works only if VendNovation becomes insolvent. 

VendNovation allegedly learned in January 2011 that Apex ordered vending machines from the manufacturer without VendNovation’s control boards.  It alleges that Apex developed its own competing control board and an inferior substitute for VendNovation’s Web Management Software.  Some people installing Apex’s competing software believed that VendNovation designed the software and contacted VendNovation for technical support.  VendNovation alleges that Apex sold vending machines with Apex’s competing control board and access to Apex’s competing software to Fastenal.  Apex also sold a desktop vending machine model incorporating VendNovation’s control board and Apex’s competing web management software to Fastenal and others.

Apex’s competing works allegedly use VendNovation’s trade secrets and copyrighted works, without VendNovation’s authorization.  VendNovation has not received compensation from Apex for using VendNovation’s copyrighted works or trade secrets.

VendNovation’s cause of action for copyright infringement includes claims against Apex of willful infringement and Apex’s unauthorized copying, distributing and creation of derivative works.  VendNovation requests injunctive relief under 17 USC §502 and impounding and destruction of infringing materials pursuant to 17 USC §503

The number for this case is Case 2:11-cv-00700-JLR, Western District of Washington at Seattle.