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EFF to 9th Circuit (Again): App Stores Shouldn’t Be Liable for Processing Payments for User Content

EFF filed an amicus brief for the second time in the U.S. Court of Appeals for the Ninth Circuit, arguing that allowing cases against the Apple, Google, and Facebook app stores to proceed could lead to greater censorship of users’ online speech.

Our brief argues that the app stores should not lose Section 230 immunity for hosting “social casino” apps just because they process payments for virtual chips within those apps. Otherwise, all platforms that facilitate financial transactions for online content—beyond app stores and the apps and games they distribute—would be forced to censor user content to mitigate their legal exposure.

Social casino apps are online games where users can buy virtual chips with real money but can’t ever cash out their winnings. The three cases against Apple, Google, and Facebook were brought by plaintiffs who spent large sums of money on virtual chips and even became addicted to these games. The plaintiffs argue that social casino apps violate various state gambling laws.

At issue on appeal is the part of Section 230 that provides immunity to online platforms when they are sued for harmful content created by others—in this case, the social casino apps that plaintiffs downloaded from the various app stores and the virtual chips they bought within the apps.

Section 230 is the foundational law that has, since 1996, created legal breathing room for internet intermediaries (and their users) to publish third-party content. Online speech is largely mediated by these private companies, allowing all of us to speak, access information, and engage in commerce online, without requiring that we have loads of money or technical skills.

The lower court hearing the case ruled that the companies do not have Section 230 immunity because they allow the social casino apps to use the platforms’ payment processing services for the in-app purchasing of virtual chips.

However, in our brief we urged the Ninth Circuit to reverse the district court and hold that Section 230 does apply to the app stores, even when they process payments for virtual chips within the social casino apps. The app stores would undeniably have Section 230 immunity if sued for simply hosting the allegedly illegal social casino apps in their respective stores. Congress made no distinction—and the court shouldn’t recognize one—between hosting third-party content and processing payments for the same third-party content. Both are editorial choices of the platforms that are protected by Section 230.

We also argued that a rule that exposes internet intermediaries to potential liability for facilitating a financial transaction related to unlawful user content would have huge implications beyond the app stores. All platforms that facilitate financial transactions for third-party content would be forced to censor any user speech that may in any way risk legal exposure for the platform. This would harm the open internet—the unique ability of anyone with an internet connection to communicate with others around the world cheaply, easily, and quickly.

The plaintiffs argue that the app stores could preserve their Section 230 immunity by simply refusing to process in-app purchases of virtual chips. But the plaintiffs’ position fails to recognize that other platforms don’t have such a choice. Etsy, for example, facilitates purchases of virtual art, while Patreon enables artists to be supported by memberships. Platforms like these would lose Section 230 immunity and be exposed to potential liability simply because they processed payments for user content that a plaintiff argues is illegal. That outcome would threaten the entire business models of these services, ultimately harming users’ ability to share and access online speech.

The app stores should be protected by Section 230—a law that protects Americans’ freedom of expression online by protecting the intermediaries we all rely on—irrespective of their role as payment processors.

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Another Court Rules Copyright Can’t Stop People From Reading and Speaking the Law

Another court has ruled that copyright can’t be used to keep our laws behind a paywall. The U.S. Court of Appeals for the Third Circuit upheld a lower court’s ruling that it is fair use to copy and disseminate building codes that have been incorporated into federal and state law, even though those codes are developed by private parties who claim copyright in them. The court followed the suggestions EFF and others presented in an amicus brief, and joined a growing list of courts that have placed public access to the law over private copyright holders’ desire for control.

UpCodes created a database of building codes—like the National Electrical Code—that includes codes incorporated by reference into law. ASTM, a private organization that coordinated the development of some of those codes, insists that it retains copyright in them even after they have been adopted into law, and therefore has the right to control how the public accesses and shares them. Fortunately, neither the Constitution nor the Copyright Act support that theory. Faced with similar claims, some courts, including the Fifth Circuit Court of Appeals, have held that the codes lose copyright protection when they are incorporated into law. Others, like the D.C. Circuit Court of Appeals in a case EFF defended on behalf of Public.Resource.Org, have held that, whether or not the legal status of the standards changes once they are incorporated into law, making them fully accessible and usable online is a lawful fair use.

In this case, the Third Circuit found that UpCodes’s copying of the codes was a fair use, in a decision closely following the D.C. Circuit’s reasoning. Fair use turns on four factors listed in the Copyright Act, and the court found that all four favored UpCodes to some degree.

On the first factor, the purpose and character of the use, the court found that UpCodes’s use was “transformative” because it had a separate and distinct purpose from ASTM—informing people about the law, rather than just best practices in the building industry. No matter that UpCodes was copying and disseminating entire safety codes verbatim—using the codes for a different purpose was enough. And UpCodes being a commercial venture didn’t change the outcome either, because UpCodes wasn’t charging for access to the codes.

On the second factor, the nature of the copyrighted work, the Third Circuit joined other appeals courts in finding that laws are facts, and stand at “the periphery of copyright’s core protection.” And this included codes that were “indirectly” incorporated—meaning that they were incorporated into other codes that were themselves incorporated into law.

The third factor looks at the amount and substantiality of the material used. The court said that UpCodes could not have accomplished its purpose—providing access to the current binding laws governing building construction—without copying entire codes, so the copying was justified. Importantly, the court noted that UpCodes was justified in copying optional parts of the codes as well as “mandatory” sections because both help people understand what the law is.

Finally, the fourth factor looks at potential harm to the market for the original work, balanced against the public interest in allowing the challenged use. The court rejected an argument frequently raised by copyright holders—that harm can be assumed any time materials are posted to the internet for all to access. Instead, the court held that when a use is transformative, a rightsholder has to bring evidence of harm, and that harm will be balanced against the public benefit. Because “enhanced public access to the law is a clear and significant public benefit,” and ASTM hadn’t shown significant evidence that UpCodes had meaningfully reduced ASTM’s revenues, the fourth factor was at least neutral. It didn’t matter to the court that ASTM offered to provide copies of legally binding standards to the public on request, because “the mere possibility of obtaining a free technical standard does not nullify the public benefits associated with enhanced access to law.”

This is a good result that will expand the public’s access to the laws that bind us—something that’s more important than ever given recent assaults on the rule of law. In the future, we hope that courts will recognize that codes and standards lose copyright when they are incorporated into law, so that people don’t have to spend years and legal fees litigating fair use just to exercise their rights.

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