Spring 1999 Student SS # ____________________

Alpha ID # ____________________

Course: ____________________

Professor: ____________________

THESE EXAMINATION QUESTIONS MUST BE RETURNED AT THE END OF THE EXAMINATION.

SANTA CLARA UNIVERSITY

SCHOOL OF LAW

57931 Cyberspace Law May 8, 1999

Professor Eric Goldman Spring Semester

2 Essay Questions 1:15 to 2:45

THIS IS AN OPEN BOOK EXAM (ANY MATERIALS PERMITTED BY THE EXAMINATION RULES ARE PERMITTED). THE EXAMINATION RULES AS STATED IN THE CURRENT STUDENT HANDBOOK GOVERN THIS EXAMINATION.

Instructions--PLEASE READ CAREFULLY

1. This is a single part exam with a total time limit of 1½ hours. There are a total of two questions, with the following weighting for each question:

Question 1: 66.67% (1 hour)

Question 2: 33.33% (30 minutes)

2. I have the following tips and strategies for you:

2.1 Please outline your answers carefully and deliberately. I recommend that you spend approximately 1/3 of your allocated time reading the question and outlining a response.

2.2 Follow the call of the question. Target your response to your audience.

2.3 While generally your answers should be based on legal principles, it is always appropriate to address business issues.

2.4 Keep separate legally-distinct parties and their respective rights & responsibilities.

2.5 Additional information may be useful in your analysis. Please indicate what additional information would be helpful, and then make assumptions to proceed with your analysis.

QUESTION 1 (1 hour)

Your client is Flaschy, a start-up company in the real-time headline news business. Users install Flaschy’s client software on their computer. The software then displays a "ticker" (a small window) on the user’s computer regardless of what software application the user is using. Thus, for example, the ticker is visible even when the user is using his or her word processing or spreadsheet program.

The ticker displays news headlines downloaded from the Flaschy server. The client software automatically accesses the Flaschy server every few minutes, downloads the latest headlines to the user’s computer, and then displays the headlines in the ticker. Users can establish parameters (i.e., interested in Kosovo but not soccer) on the type of headlines they want, and only headlines meeting these parameters will be displayed. The ticker also displays banner ads sold by Flaschy.

Flaschy obtains its headlines from 100 or so information publishers (each a "publisher"), but it does not have contracts with any of these companies. Instead, Flaschy’s robot accesses each publishers’ website and sends a copy of their headlines pages to Flaschy’s server. Then, Flaschy’s server software strips out all of the content from such pages except the headlines. To accomplish this, Flaschy’s programmers analyze the publisher’s page to determine what portions of the page contain headlines; they then program the software to store only those portions and discard the rest. Currently the software is not programmed to include any copyright notices from such pages.

All headlines in the ticker link to the original publisher’s web page containing the full text of the associated story. Thus, a user of Flaschy’s client software will likely access pages on the publishers’ websites when the user sees headlines that interest them. However, most publishers have separate pages for headlines and the full text of articles, both of which are supported by banner ads. Thus, a user clicking on a headline in the Flaschy ticker likely bypasses the publisher’s headlines page.

Flaschy has received a cease and desist letter from GMM, a leading publisher whose headlines Flaschy distributes, complaining about Flaschy’s practices. Your investigation shows that GMM has a free daily email service that sends GMM’s headlines to GMM registered users, and such emails contain banner ads themselves. You also notice that GMM’s website has a footer on every page that reads "© 1999 GMM. Terms under which this service is provided to you." The word "terms" is a hypertext link to a page entitled "service agreement" which says, among other things, that users may not modify, publish, transmit, participate in the transfer or sale, create derivative works, or in any way exploit, any content on the GMM website.

A. Assess Flaschy’s legal position with respect to GMM. What types of causes of action could GMM bring, and how serious would those claims be?

B. Can you recommend any changes to Flaschy’s practices that might generally improve its legal position?

[Eric’s Tips and Hints:

· Do not address any claims that any plaintiffs other than GMM or other information publishers may have against Flaschy. Do not discuss the Computer Fraud & Abuse Act.

• It is OK to combine your answers to parts A & B so long as you respond to both inquiries.
• In part B, please do not just glibly suggest that Flaschy stop its business!]

END OF QUESTION 1

QUESTION 2 (30 minutes)

Your client is Smellyexhaust.com (SE), a website oriented to auto enthusiasts. SE is negotiating a content in-license with Routers whereby Routers will deliver, on a daily basis, car-related news articles and associated photos for display on the SE site. SE will receive the articles and photos electronically and will upload this content to SE’s site automatically without any edits, but an SE producer lays out the organization of each SE web page containing Routers’ content.

Routers is a prominent, reputable, centuries-old British news publishing company that tends to be inflexible about negotiating changes to its standard form agreement. Routers’ form content license agreement offers SE an indemnity only against the Routers-delivered content infringing any US copyright.

SE’s chief financial officer asks you if this indemnity is sufficient. Specifically, she’d like to understand how much you think SE should argue for an indemnity for the following types of potential claims:

· the Routers content is defamatory

• the Routers content is inaccurate in a way that leads to personal injury
• the Routers content violates someone’s rights of publicity or privacy
• the Routers content misappropriates someone’s hot news interests
• the Routers content is "obscene" or "harmful to minors"

To make this determination, she needs to understand the risk that SE would be liable for these claims based on Routers’ content. Please BRIEFLY describe (in a half page or less per claim—no more!!) your analysis of each claim and offer your conclusion about whether or not a Routers indemnity on such claim is worth aggressively fighting for given Routers’ inflexibility.

[Eric’s tips and hints:

· An indemnity is a promise to pay damages awarded to a third party. Thus, when Routers indemnifies SE, if SE must pay a third party based on a claim covered by the indemnity, Routers will pay SE an equivalent amount. An indemnity does not cover any first party losses suffered by the indemnified party.

• It may be accurate to answer "I don’t know" to a particular type of claim, so long as you (BRIEFLY) explain what rules might apply and why you can’t reach a definitive conclusion.
• To reach a conclusion, it may be helpful to separate issues: (1) is the claim even a viable cause of action in this context, and (2) assuming it is, could the claim be established against SE based on Routers content? (So long as you do so BRIEFLY!)
• Do not address any potentially indemnifiable claims other than the enumerated ones above.]

END OF QUESTION 2

END OF EXAMINATION