• by Wendy Davis  @wendyndavis, April 3, 2024

A California appellate court confirmed this week that Apple co-founder Steve Wozniak can attempt to proceed with a lawsuit against YouTube over videos that used his image as part of a cryptocurrency fraud.

In a revised opinion issued Tuesday, the 6th Circuit Court of Appeals rejected YouTube's argument that it was completely protected from lawsuits by Section 230 of the Communications Decency Act. That law broadly immunizes web companies from lawsuits over illegal material posted by third parties.

The appellate judges said that while Section 230 broadly protects YouTube from liability for frauds committed by third parties, the law doesn't immunize YouTube for allegedly providing “verification badges” to channels that were hijacked by scammers.

The ruling stems from a lawsuit brought by Wozniak in 2020, when he alleged that YouTube featured “scam videos and promotions” that wrongly used his image and videos in order to cheat YouTube users.

He alleged that fraudsters used his likeness to persuade YouTube users that he was hosting a “bitcoin giveaway,” and that people who sent in bitcoin would receive twice as much in return. Instead, when people transferred their cryptocurrency, they received nothing, according to the complaint.

His original complaint listed a host of claims, including that YouTube negligently failed to prevent the channel hijackings.

A trial judge dismissed the entire complaint, ruling that YouTube was protected by Section 230.

Last month, the California appellate court upheld the bulk of that ruling, but allowed Wozniak to attempt to proceed against YouTube for allegedly verifying the scam accounts. The allegations regarding verification centered on YouTube's own statements, as opposed to content posted by fraudsters, the court ruled.

“Unlike the scam videos themselves, the third-party scammers did not create or develop the verification badges -- defendants allegedly did,” the judges said.

At the same time, the appellate court said Wozniak's allegations would have to be fleshed out before he could move forward with the case. For instance, the judges wrote, the complaint didn't make clear whether YouTube issued the verifications before or after the channel hijackings.

The court sent the matter back to the trial judge with directions to allow Wozniak to beef up the allegations and bring them again.

YouTube then petitioned the appellate court for a new hearing.

On Tuesday, that court tweaked some of the language in its original opinion, but left in place the part of the decision allowing Wozniak to attempt to sue over the alleged verifications.

That portion of the ruling could also affect X Corp. (formerly Twitter), Santa Clara law professor Eric Goldman suggests in a blog post about the decision.

“Though YouTube is the defendant in this case, this ruling is of high interest to Twitter, which is well-known for having issued blue-check verified accounts to pretenders and interlopers,” Goldman wrote.