3rd Circuit splits with 9th, says celeb can sue Facebook for unauthorized photo

A 3D-printed Facebook logo is seen placed on a keyboard in this illustration
A 3D-printed Facebook logo is seen placed on a keyboard in this illustration taken March 25, 2020. REUTERS/Dado Ruvic/Illustration

(Reuters) - If the doomsday predictions are right, a Philadelphia morning news anchor and two federal appellate judges just broke the internet.

On Thursday, a divided 3rd U.S. Circuit Court of Appeals ruled in Hepp v. Facebook, Inc that news anchor Karen Hepp can sue Facebook for running a dating-service advertisement that featured an unauthorized photo of Hepp, a local celebrity in Philadelphia. The 3rd Circuit majority held that Section 230 of the Communications Decency Act does not preclude Hepp’s suit because the law’s broad immunity for internet publishers includes an exception for intellectual property claims under both state and federal law.

The majority -- Judges Peter Phipps and Thomas Hardiman, in an opinion by Hardiman -- said its interpretation was textual, since Congress didn’t specifically distinguish between state and federal intellectual property rights in enacting an exception to Section 230 immunity. But Hardiman also said the court’s holding was consistent with the law’s goal of “preserving the vibrant and competitive free market that presently exists for the internet.”

In a dissent, Judge Robert Cowen vigorously disagreed. Cowen bemoaned the majority’s “drastic” ruling, which, he said, had opened the door to chaos, in the form of liability risk under state privacy laws that may -- or may not! -- be fairly defined as intellectual property claims. That’s exactly the sort of unpredictability that Congress was trying to avert when it adopted Section 230 to encourage “unfettered” free speech and innovation on the internet, Cowen said.

Facebook’s amici from the Electronic Frontier Foundation and other groups were even more dire in their predictions of the consequences of the theory that the 3rd Circuit majority just adopted: “It (will) upend the legal landscape that has promoted a flourishing internet for decades,” the amici’s brief said. Online sites and services, the brief hypothesized, will be thrown into a panic by their risk of exposure to meritless state-law claims. Some will adopt “draconian measures” to avoid liability, EFF said. Many others, the brief said, “will simply refuse to host user-generated content at all -- and we will all be the poorer for it.”

I’m sure you won’t be surprised to hear that Hepp’s counsel, Samuel Fineman of Cohen Fineman, believes those apocalyptic predictions are way overblown. Fineman said the warnings of a muzzled internet cowering in fear of state-law publicity claims are “poppycock” and “a red herring.” Online companies, he said, no longer need the coddling they received when the internet was in its infancy. “This decision is new, up-to-date analysis based on the facts as they are today,” Fineman said.

The 3rd Circuit majority pointed out in Thursday’s decision that internet companies haven’t previously been swamped with state-law intellectual property claims, despite an explicit ruling in 2009’s Atlantic Recording Corporation v. Project Playlist, Inc from then U.S. District Judge Denny Chin of Manhattan that such claims are viable under the Section 230 exception. It’s been more than 10 years since that decision, the majority said, and there’s no evidence of the chaotic “disarray” predicted by Facebook and its amici.

One thing is certain: The new 3rd Circuit decision will not end debate over the implications of allowing state-law intellectual property claims against internet companies. The ruling marks a clear split with the 9th Circuit’s 2007 decision in Perfect 10, Inc v. CCBill LLC, which held that the exception in Section 230 for intellectual property claims allows internet companies to be sued only for alleged violations of federal intellectual property laws -- not claims under state law. The 9th Circuit expressly said that interpreting the exception to include state claims “would be contrary to Congress's expressed goal of insulating the development of the internet from the various state-law regimes.”

Facebook counsel Craig Primis of Kirkland & Ellis didn’t respond to my query on the 3rd Circuit ruling, but given Cowen’s dissent and the majority’s split with the 9th Circuit, I have little doubt that the company will ask for en banc review at the 3rd Circuit and, if that fails, will file a petition at the U.S. Supreme Court. The 3rd Circuit dismissed Hepp’s claims against the online discussion site Reddit Inc and the photo sharing site Imgur Inc on jurisdictional grounds. Fineman declined to comment on whether Hepp will seek review of that holding.

The 3rd Circuit majority emphasized that its actual ruling for Hepp is quite narrow. The interpretation of the scope of Section 230’s exception was only a first step in the court’s analysis. The judges then had to decide whether Pennsylvania’s right-of-publicity law is a matter of intellectual property. The court determined that the law does invoke intellectual property law because it provides a cause of action only to people who have cultivated their reputation through the “the investment of time, effort and money.”

Hepp has a valuable property interest in the image she has developed, the 3rd Circuit said, because she has made that investment. But the Pennsylvania law sets a high bar for publicity claims, the 3rd Circuit said, and its ruling does not address any other state’s statute.

“Our holding does not open the floodgates,” the majority said.

The court also said that Hepp’s suit is no more of a threat to free speech than a claim by a trademark owner whose intellectual property has been misused by a counterfeiter. Like trademark owners, Hepp contends that the unauthorized use of her image will confuse consumers and endanger the good will she has developed. Trademark claims, “typically avoid violating free speech by addressing misleading commercial speech,” the 3rd Circuit said. “So too for Hepp’s statutory claim against Facebook. Thus, Hepp’s statutory claim against Facebook is about the commercial effect on her intellectual property, not about protected speech.”

Hepp counsel Fineman told me he’s gratified to represent a client willing to fight for everyone who has worked hard to develop their image. “She’s a trooper,” he said. “She stands by her brand.”

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.