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Welcome to Three Point Shot, a newsletter brought
to you by the Sports Law Group at Proskauer. Three Point
Shot
 brings you the latest in sports law-related news and
provides you with links to related materials.

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Edited by Robert E. Freeman

Online Golf Store’s Computer Access Claim against
Competitor Fails to Reach the Green

The suit between battling online golf retailers Motogolf.com,
LLC (“Motogolf”) and Top Shelf, LLC (“Top
Shelf”) is currently in the rough after a Nevada district
court dismissed all but one set of claims. (
Motogolf.com, LLC v. Top Shelf Golf, LLC, No. 20-00674
(D. Nev. Mar. 25, 2021)). Though the court order left a large divot
in Motogolf’s suit, the court allowed a mulligan, granting
Motogolf time to file an amended complaint.

As we wrote in the 
May 2020 edition of Three Point Shot, Motogolf is an online
golf retailer based in Nevada that sells golf apparel and
equipment. Motogolf used online advertising to promote its online
store. Motogolf contends that it contracts with online ad platforms
on a pay-per-click (PPC) basis whereby Motogolf pays a specific
amount of money for a certain number of ad clicks each day. If a
prospective customer clicks on the ad, he or she is taken to
Motogolf’s website. According to Motogolf, it also receives
“valuable, requested demographic and other data” about
prospective customers that click on an ad. Once web viewers have
clicked on the ads a certain number of times in a given period, the
PPC ads are “exhausted” and stop appearing online and
Motogolf allegedly must pay higher rates for future PPC ads.

Top
Shelf, based in Maine, is an online golf retail competitor to
Motogolf. In 2019, Motogolf claims it became aware of Top
Shelf’s alleged practice of selling golf equipment at lower
prices than the minimum set by the equipment vendors and reported
this activity to such vendors. Motogolf alleges that, in response
to its calling out such irregularities on Top Shelf’s
scorecard, Top Shelf, being aware of how PPC ads work, used
electronic devices in various locations in or near Maine to locate
Motogolf’s PPC ads and click on them repeatedly in an effort to
“exhaust” or make Motogolf’s ads disappear for other
viewers, prevent future potential customers from viewing the ads,
and generally increase Motogolf’s ad costs and deny it access
to online web advertisement data. Motogolf alleges that such
actions by Top Shelf were an intentional effort to gain an economic
advantage over Motogolf. In response, Motogolf sent Top Shelf
multiple cease-and-desist letters stating that Top Shelf was no
longer authorized to access Motogolf’s website or click on its
advertisements.

On April 10, 2020, Motogolf 
sued the defendants for multiple claims, including
accessing Motogolf’s computers without authorization in
violation of the federal Computer Fraud and Abuse Act (CFAA), and
its Nevada state law counterpart, as well as various tort-related
claims over interference with contractual relationships and
prospective economic relationships. The defendants moved to dismiss
all claims. 

The court began by looking at the CFAA claim. The CFAA is a
federal computer fraud law that was passed in 1984 and was designed
to address the growing problem of computer hacking. The CFAA
prohibits a number of different computer crimes, the majority of
which involve accessing computers without authorization, or in
excess of authorization, and then taking specified forbidden
actions, ranging from obtaining information to damaging a computer
or computer data. See 18 U.S.C. § 1030(a)(1)-(7). In examining
Motogolf’s CFAA claims, the court stated that they fell under
18 U.S.C. §§1030(a)(4) and §1030(a)(5)(B)-(C).

1030(a)(4) requires
the plaintiff to allege the defendant:

(1) accessed a “protected computer,” (2) without
authorization or exceeding such authorization that was granted, (3)
“knowingly” and with “intent to defraud,” and
thereby (4) “further[ed] the intended fraud and obtain[ed]
anything of value,” causing (5) a loss to [Motogolf] during
any one-year period aggregating at least $5,000 in value.

Additionally, §1030(a)(5)(B)-(C) requires the defendant to
intentionally access a computer without authorization and either
recklessly cause damage or cause damage and loss.

In the complaint, Motogolf alleged that Top Shelf, with intent
to defraud, accessed Motogolf’s computers (or the online
advertising platform’s computers that were used to conduct
business with Motogolf) without authorization when it conducted its
alleged illegitimate scheme to click on Motogolf’s PPC ads and
thereby caused “impairment to the integrity and availability
of data reposed on Motogolf’s Computers.” Motogolf further
argued that the cease and desist letters it sent to Top Shelf
affirmatively revoked the defendants’ access and that Motogolf
was harmed because it lost valuable demographic data regarding
prospective customers and the defendants gained a market advantage.
The defendants countered that the claim should be dismissed because
Motogolf’s website is publicly available, and therefore such
access cannot be “without authorization” if it is for
publicly available website content. In its approach shot, Top Shelf
cited 
Ninth Circuit precedent holding that when a computer network or
website generally permits public access to its data, a user’s
accessing of that publicly available data will not constitute
access “without authorization” under the CFAA.
Additionally, the defendants argued that Motogolf had not alleged
the requisite loss or damage, or that the defendants gained
anything of value.

The judge granted the motion to dismiss the CFAA claim, with
leave to amend, sending Motogolf back to the range. The court noted
that Ninth Circuit precedent interpreted the CFAA’s
“without authorization” language to not encompass access
to publicly available websites because “information open to
the public is not the kind of access that the CFAA was designed to
prevent and that a computer or website would need access
permissions like a password for the CFAA to apply.” Finding
Motogolf’s novel CFAA claim no gimme, the court further stated
that Motogolf’s CFAA “unauthorized access” claim was
insufficient because it did not plausibly allege that the
defendants acted “without authorization” and that even
though Motogolf revoked Top Shelf’s access to its website
through the cease-and-desist letters, such letters “do not
affect the public website analysis.” Therefore, because both
Motogolf’s websites and the ads at issue were public, the judge
granted Top Shelf’s motion to dismiss.

The court followed similar reasoning in dismissing the Nevada
state computer access claims under the Nevada Computer Crimes Law
(NCCL). According to the court, Motogolf’s NCCL claims were
similar, as that statute prohibits various acts related to
accessing a computer or data on a computer “without
authorization.” NRS §§ 205.4765(1)(g), (h), (k).
Considering the NCCL claim to “rise and fall” with the
CFAA claims, the court followed the same putting line as it did
with the CFAA claim and dismissed the state law claim.

On the back nine, the court, for the most part, dismissed the
remaining tort- and fraud-related claims, with leave to amend.
However, the court refused to dismiss Motogolf’s tort claim
that Top Shelf intentionally interfered with prospective economic
advantage. Such a tort claim essentially involves allegations that
the defendant acted with specific intent to disrupt plaintiff’s
business expectancy. Here, the court found that, although Motogolf
did not allege any prospective customers specifically,
Motogolf’s outlining of a class of prospective customers (i.e.,
those that would click on its PPC ads) was sufficient at the
pleading stage of the litigation. 

Despite having a shaky first round, Motogolf filed an 
Amended Complaint on April 15, 2021, prompting Top Shelf
to counter with another motion to dismiss. Only time will tell if
Motogolf can muster a miraculous recovery shot with its amended
claims to drive the suit forward.

Appeals Court Shutters Press Agency’s Claims over
Unlicensed Copying of Sports Photos

The Second Circuit Court of Appeals recently 
affirmed a lower court order that had found
copyright-related claims brought by a press agency, Zuma Press,
Inc. (“Zuma”), against one of the world’s largest
photo agencies, Getty Images (U.S.), Inc., (“Getty”),
were underexposed. In doing so, the court determined that the
presence of thousands of Zuma’s sports images on Getty’s
website in 2016 were authorized by an unbroken chain of licensing
agreements and that any photo metadata removals or alterations were
not done knowingly by Getty. (
Zuma Press, Inc. v. Getty Images (US), Inc., No.
19-3029 (2d Cir. Mar. 3, 2021) (summary order)). Thus, the
dismissal of Zuma’s copyright infringement and Digital
Millennium Copyright Act (DMCA) removal of copyright management
information (CMI) claims against Getty was affirmed.

As we outlined in the 
December 2018 edition of Three Point Shot, Zuma
is a press agency which holds a collection of millions of licensed
images, including the more than 47,000 sports photographs at issue
in this case. Zuma contracts with third-party image licensing
companies to distribute its images in return for an agreed royalty
rate. Getty is one of the world’s largest photo agencies and
markets its images through its website.

The opening shot of the dispute occurred when Zuma typed the
phrase “Zuma Press” into Getty’s search bar and
discovered a cache of sports photos that Zuma believed were
uploaded without proper license and with inaccurate photo credit
metadata. Zuma asked Getty to take down the images and Getty
eventually complied. Later that year Zuma 
brought suit against Getty, alleging that Getty improperly
copied at least 47,000 sports photographs that Zuma allegedly owned
or exclusively licensed and made them available for licensing and
sale on its website. Zuma further alleged that Getty removed
Zuma’s CMI from the digital photographs such that the
images’ metadata no longer reflected Zuma’s rights in the
photos and placed its own watermark on the images.

The confusion over how Zuma’s photos ended up on Getty’s
website required flipping through an array of prior licensing
arrangements entered into by Zuma regarding the images at issue.
According to the court, Zuma first granted Corbis Corporation
(“Corbis”) the license to sell Zuma’s photographs for
a set amount of the royalties received. Zuma later learned that
NewSport Photography Inc. (“NewSport”) had a similar
contract with Corbis, but that NewSport’s contract entitled
NewSport to a higher royalty rate than that paid to Zuma. Zuma then
entered into a Redirection Agreement with NewSport to upload its
portfolio of sports images through NewSport’s FTP onto
Corbis’s system. Under this new agreement, Corbis would then
remit royalty payments to Zuma for the images submitted via
NewSport’s FTP. NewSport’s contract with Corbis gave
Corbis, among other things, the right to assign its rights in the
images to third parties. The first muddying of the ownership rights
occurred as a result of this agreement. Corbis kept
“metadata” about the source and rights associated with
images, and this metadata identified the relevant photographer and
agency. By comingling its images with NewSport, Zuma caused
“NewSport” to now be labeled in the “Credit”
line of the metadata that Corbis kept on its images.

When Zuma’s arrangement with NewSport ended in 2013, Zuma
sent multiple emails to certain parties to unwind prior
arrangements and switch the images back to Zuma, but the written
consents were never obtained and the sports images at issue
remained as part of the NewSport collection. Advancing the film a
few clicks, in January 2016, Corbis sold its image portfolio to
Unity Glory International Ltd. (“Unity Glory”), which
later entered into an agreement authorizing Getty to distribute and
market its images outside of China, including all the images it
acquired from Corbis. These images included the photographs at
issue. Thus, the direct chain of licensing agreements finally
reached from Zuma to Getty, albeit requiring a telephoto lens to
decipher. When the images were migrated onto Getty’s system,
the software looked to the existing “Credit” line
metadata, which ascribed them to Zuma’s former distributor, not
to Zuma, even though Zuma was referenced in other metadata text
fields. Other metadata anomalies also caused Getty to misapprehend
the proper rights information for the photos in question. 

In October 2018 a New York court found that it was Zuma’s
actions that caused the confusion, and 
granted summary judgment on Zuma’s claims for
copyright infringement. Getty then filed a motion seeking an award
of $2.87 million in attorney’s fees due to Zuma’s
“objective unreasonableness” in bringing the suit that it
“litigated aggressively and dishonestly long after its claims
had been exposed as having no merit” solely for the purpose of
securing a massive statutory damages windfall. The district court
denied such motion. Zuma appealed the lower court’s summary
judgment rulings and Getty cross-appealed the court’s denial of
its request for attorney’s fees.

In a short, summary order, the Second Circuit 
affirmed dismissal of the claims and denial of the request
for attorney’s fees. The Second Circuit first reviewed the
copyright infringement claim and Zuma’s contention that the
lower court erred in determining that the chain in licensing for
the photos necessitated dismissal of the copyright claims against
Getty. In affirming the dismissal, the appeals court found that a
reasonable juror could easily find that Getty established the
existence of a valid license with respect to the sports images at
issue. The Second Circuit agreed with the district court’s
finding that the facts in the record were undisputed, and the
“plain language” in each of the agreements established an
unbroken chain of authorization from Zuma to Getty and that Getty
obtained a valid license to use the images when it entered into its
agreement with Unity Glory. Even assuming there were issues of fact
relating to the 2012 Redirection Agreement between Zuma and
NewSport, the court found that Corbis was entitled to use the
licenses for a period of six years, well within the time period
between Getty’s posting and removal of the Zuma photos in
2016.

Zuma also argued that the district court erred in granting
summary judgment to Getty as to its claim for altering CMI without
authority under DMCA Section 1202(b)(3). As the Second Circuit
explained, the CMI removal provision has a “double-scienter
requirement”: to violate the statute, “the defendant who
distributed improperly attributed copyright material must have
actual knowledge that the CMI has been removed or altered without
authority of the copyright owner or the law and have actual or
constructive knowledge that such distribution will induce, enable,
facilitate, or conceal an infringement.” The Second Circuit
agreed with the district court that no reasonable juror could
conclude that Getty knowingly removed or altered Zuma’s CMI
without authority, and that there was no evidence in the record on
which Zuma could rely to establish Getty had actual knowledge that
the images at issue were comingled with the NewSport collection.
Rather, the court spotlighted that a reasonable juror could find
that Getty did not know about Zuma’s right in the images until
Zuma contacted Getty to complain about the uploaded images in 2016.
Further, the Second Circuit concluded that a reasonable juror could
only find that the purported changes to Zuma’s CMI resulted not
from an intentional act on the part of Getty (or that Getty had
actual knowledge that it had altered Zuma’s CMI when it
migrated the photos), but from aberrations and mistakes in the
automatic migration process itself, some of which were due to the
data fields in which Zuma’s rights information was stored in
Corbis’s system. 

The appeals court likewise affirmed Getty’s appeal of the
denial of attorney’s fees. The Second Circuit concluded that
the district court acted within its discretion when it concluded
that fees would not be granted as Zuma’s claims were
objectively reasonable, non-frivolous, and properly motivated. The
Second Circuit highlighted that Zuma’s copyright claim
concerned a “complex set of facts,” which Zuma reasonably
argued, and Zuma’s DMCA claim turned on the double-scienter
requirement which the Second Circuit had not yet construed in a
precedential opinion when the suit was filed.

With the Second Circuit having shuttered this licensing dispute,
it appears that there’s little light left for this case’s
chances of success. 

Court Orders Arbitration in Video Game Loot Box Litigation

A federal judge recently sent a lawsuit against video game
publisher Electronic
Arts (“EA”) to arbitration, citing the
company’s mandatory arbitration clause contained in the user
agreement that appears in a pop-up window on the screen when a user
first loads the EA video games in question. Plaintiff Kevin Ramirez
(“Ramirez” or “Plaintiff”), a player of
EA’s FIFA and Madden
NFL
 games, brought the suit as a putative class action,
claiming that an online in-game feature called Ultimate Team Packs
qualifies as an illegal “slot machine or device” under
California law. Given that the user agreement contained an
arbitration clause and class action waiver, the parties will now
play the odds with an arbitrator who will decide whether the
arbitration clause is enforceable against Ramirez’s claims and
whether any further relief is warranted (
Ramirez v. Electronic Arts Inc., No. 20-05672 (N.D.
Cal. Mar. 5, 2021)).

Loot boxes are an increasingly common phenomenon in video games
and mobile gaming apps. Loot boxes are in-game purchases that
players can make that randomly generate a reward. Although players
can earn loot boxes through in-game play, it can be inconvenient to
purchase loot boxes without spending real money. Critics of loot
boxes have 
argued that they should be treated as betting products to
protect children from impulsive purchases, but they are not
specifically regulated in this country (though a regulator in least
one country, Belgium, declared that certain video game loot boxes
violated the country’s gambling laws). As it stands, multiple
suits have been brought against mobile app gaming operators and
mobile platforms (suits against the latter 
have faced dismissal in some cases). 

The plaintiff claimed that while playing
the FIFA and Madden NFL video
games he was “induced” to purchase Ultimate Team Pack
loot boxes with in-game currency for the random chance of winning
valuable players and other virtual team items. In-game currency can
be earned through game play or purchased with real money. Ramirez
also alleged that as EA issues new versions of games, new players
are added and players’ ratings adjusted, incentivizing the
player to purchase more Ultimate Team Packs to remain competitive
in the updated game. According to the complaint, the odds of
receiving the most desirable rewards are low and when Packs are
opened, the anticipation of a big score is akin to the “slot
machine effect,” which feeds the purported addictive need to
buy more packs as part of EA’s “predatory”
program.

In August 2020 Ramirez filed a 
complaint alleging that EA’s Ultimate Team Packs are
illegal “slot machines or devices” under the California
Penal Code §330(d) and advanced claims under consumer
protection statutes. The suit seeks, among other things, to
disgorge EA of any profits it made from the use of its Ultimate
Team Packs and for injunctive relief from EA that would prohibit
the company from using loot boxes in its games.

Seeking to hit the reset button, EA moved to compel arbitration.
To access the full features of the games, including the ability to
use its Ultimate Team Packs, players are required to agree to the
EA’s user agreement, which appears as a pop-up window on the
screen, before the player is permitted to access the game. As EA
pointed out, the user agreement contains an arbitration provision
and a waiver of class actions. EA further asserted that Ramirez was
no newbie when it came to playing the video games in question, and
by installing and repeatedly
playing FIFA and Madden NFL, he
accepted and agreed to be bound by the user agreement and therefore
must arbitrate his claims on an individual basis. Finally, EA
argued that any issues with respect to the arbitrability of certain
issues (such as the validity of the arbitration provision itself)
must be decided in arbitration, not court.

The district court first turned to the issue of whether Ramirez
and EA had agreed to arbitrate. The court noted that in order to
use EA products, users must agree to EA’s user agreement
containing the arbitration provision. As Ramirez was presented with
the user agreement on the screen and conspicuous call-to-action
language (“By using EA services, you agree to the arbitration
agreement and class action waiver described in section 15 to
resolve any disputes,”) and was required to affirmatively
click a button indicating assent, the court found the
clickwrap-style electronic agreement enforceable. Thus, since
Ramirez was deemed to not be AFK (“Away from the
keyboard”) and affirmatively clicked and accepted the EA user
agreement and its arbitration provision, the court found that an
agreement to arbitrate was formed.

In the alternative, Ramirez argued that even if he had formed an
arbitration agreement with EA, the agreement was invalid because it
barred his right to obtain public injunctive relief. Therefore,
Ramirez argued, the parties should not have to arbitrate the merits
of the claims and instead litigate them in court. Before
determining the validity of the arbitration agreement, the court
asked whether the parties had delegated decisions of contract
validity to an arbitrator. The court noted that EA’s user
agreement had a clause specifying that the American Arbitration
Association’s rules on arbitration governed. These
rules and their incorporation in the arbitration agreement, the
court stated, provide “clear and unmistakable evidence”
that the parties agreed to delegate the question of arbitrability
to the arbitrator.

Although EA was successful in compelling arbitration, it did not
win the grand prize, that is, dismissal of Ramirez’s claims.
The court pointed out that although it had the discretion to stay
or dismiss claims subject to a valid arbitration agreement, it
would merely stay the proceedings pending the completion of
arbitration, as dismissal would not be appropriate where it is
possible that an arbitrator may find that the arbitration clause is
not enforceable.

As to the merits of the claim, it remains to be seen whether an
arbitrator, or perhaps the district court, will issue a decision as
to the Plaintiff’s consumer claims pertaining to EA’s loot
boxes.


Three Point Shot

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