ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, August 26, 2016

Ryan Lochte and Morals Clauses

I have witnessed with interest the evolving story of what exactly happened in Rio involving Ryan Lochte the morning of August 14. Initially Lochte claimed he had been robbed at gunpoint. I later heard through the gossip mill that that story was untrue and that Lochte had in fact beat up some security guards. That turned out, it seems, just to be rumor-mongering, but the story has continued to evolve from there, with both Lochte and the Rio police making statements that later seem untrue, or only partially true, or exaggerated. Slate has a good run-down of the changing versions of Lochte's story, although it's from a week ago. Now Lochte has been charged with filing a false police report, since it does seem clear at this point that no robbery happened. Even that, however, is confusing to parse if you read a lot of articles about it: It seems like the crime is more accurately making a false communication to police, as some articles have eventually stated, since there are conflicting reports about whether a police report was ever filed. 

In the wake of this whole mess, Lochte has lost several of his sponsorship deals (although he's also picked one up). It's unclear, because the contracts don't seem to be public, whether this is a choice of just not renewing the contract (apparently that's the case with Ralph Lauren) or if a violation of a morals clause is being invoked to allow cancellation of the contract (which might be what's going on with Speedo). All of this provokes an interesting morals-clause conversation to me, and we had a bit of discussion about it on the Contracts Professors listserv. It seems clear that Lochte engaged in some sort of inappropriate behavior, and it seems also clear that whatever that behavior was, even the most minor version of the story is arguably a violation of any morals clause out there.

What is most clear is that, no matter what really happened, this has definitely served to tarnish his reputation, and that's is what's striking to me. This story has taken on an enormous life of its own, with many differing versions of it floating around the Internet. This situation has been caused, of course, by Lochte's many differing stories, together with some apparent conflicting statements by the Rio police, coupled with reporting that may have been less than precise itself in describing what was going on. One online story details all the conflicting information and asks the individual reader what they believe about the story.

While this particular maelstrom seems to have some basis in fact, it's not difficult to imagine something like this getting out of control without such justifying behavior at the root of it. Morals clauses tend to be about perception, but does that mean you can manipulate the perception of someone, through no real fault of their own? Take, for instance, the "Ted Cruz is the Zodiac Killer" meme that was popular on the Internet earlier this year. Ted Cruz wasn't born until after some of the Zodiac killings had happened, so he obviously could not have been the Zodiac Killer, and in fact some people interviewed about the meme noted that was the point: what they were saying was impossible. Nevertheless, it was reported that polls indicated 38% of those surveyed thought he might, in fact, be the Zodiac Killer, despite the impossibility. If a substantial number of people start thinking you did something you absolutely did not do, is that enough for a morals clause to be violated, because of the perception that you did it? 

August 26, 2016 in Celebrity Contracts, Commentary, Current Affairs, Games, In the News, Sports, Travel, True Contracts, Web/Tech, Weblogs | Permalink | Comments (0)

Monday, August 22, 2016

Microsoft Does Marijuana

In a move that demonstrates how contracts for various aspects of marijuana products and services are going mainstream, Microsoft Corp. has accepted a contract to make marijuana-tracking software available for sale on its cloud computing platform. The software is developed by “cannabis compliance technology” Kind Financial and allows regulators to track where and how much marijuana is being grown, sold or produced in real time. In turn, this lets the regulators know how much sales and other tax they should be collecting and from whom (maybe this is the beginning of the end of some growing marijuana plants in state and national parks to hide their activities from the government). Medical-marijuana-colorado

This contract – called a “breakthrough deal” because it is the first time that Microsoft ventures into the marijuana business - may end up enabling the software developer to capture as much as 60% of this very lucrative market. (Other companies with government contracts often end up with such a large market share.)

How did the company strike such a lucrative deal? You guessed it: by networking. Kind’s CEO was introduced by a board member to an inside contact in Microsoft.

Happy semester!

August 22, 2016 in Commentary, Current Affairs, Food and Drink, Government Contracting, In the News, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0)

Saturday, August 20, 2016

My Least Favorite Contractual Relationship at the Moment Is with AT&T

I apologize for my lack of blogging lately, but, you see, AT&T was supposed to have my Internet connected last Monday and still hasn't managed to get around to it,  after a series of delayed appointments, canceled appointments, and appointments where no technician ever showed up. On Wednesday evening when I called to express my displeasure about all of this, I was told that my failure to accept the delays without complaining meant that they were now pushing my installation back even further, so that now I am looking at sometime next week. 

Naturally, at a time when I will be teaching, so the Saga of Internet-less may drag on for a while. 

I would love to examine my AT&T contract in detail to see what my rights (if any) are,  but, of course, the contract requires me to have Internet access to get to it! So for the time being I am keeping my mouth shut and hoping AT&T decides to show up next week and then I will return to my regularly scheduled blogging!

August 20, 2016 in Commentary, True Contracts, Web/Tech, Weblogs | Permalink | Comments (2)

Thursday, August 4, 2016

Service Fees Are Annoying...But Not Bad Faith

A recent case out of the District of Connecticut, Singer v. Priceline Group, Inc., No. 15-cv-1090 (VAB), tackles an issue familiar to all who travel: service fees. The plaintiff, on behalf of a class, sued Priceline over the fact that service fees were added on to the price that he bid to pay for a hotel room. We've all been beset by service fees tacked onto the prices quoted for various travel-related items, from hotel rooms to flights, and to be honest I feel like I, to some extent, have just grown used to and resigned to them. The court seems to feel the same way about them here. The service fees weren't a breach of contract, since Priceline's Terms of Use explicitly stated that service fees might be charged above the quoted price, nor were they a breach of the covenant of good faith and fair dealing because, again, Priceline was upfront about the fact that Singer might owe more money in service fees from the hotel. Priceline never made any representation that it wouldn't provide Singer with quotes that might require further service fees and so did not act in bad faith when it did so in a way that the court found was open and reasonable.

I might wish that more places would just tell me the end price without the extra fees, but, for now, I think the widespread acceptance of these fees in the course of transactions indicates they're here to stay for the time being.

August 4, 2016 in Commentary, E-commerce, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (3)

Wednesday, August 3, 2016

What Mobile Payments Can Learn from Debit Cards (circa 1995)

Contract-based payment systems have substantially supplanted the check-oriented payments contemplated by the Uniform Commercial Code over a half-century ago. Is there another commercial revolution waiting in the wings with mobile payments? In an insightful industry-focused piece at PYMNTS.com, Karen Webster shares observations on what enabled the mid-1990s success of debit cards and how those ingredients have not fallen into place (yet) today for mobile payment systems such as Apple Pay, Android Pay, and Samsung Pay.  Some of the key paragraphs:

Debit CardsDebit ignited by leveraging existing technologies that could be easily enabled at merchants – or that already existed at those merchants – to enable payment via a checking account using a plastic mag stripe card. Mastercard and Visa simply used the technology merchants already had and paid for while the EFTs subsidized the technology that merchants would need to use their cards. No one expected merchants to go sink money in a new technology out of their own pockets.

That has not been the case with NFC and mobile payments.

We’ve unfortunately spent the last 10 years forcing mobile payments into an in-store NFC technology mold that hasn’t knocked the socks off of consumers by simply substituting a tap for a swipe and asked merchants to foot the bill. We’ve let technology drive mobile payment’s ignition strategy, instead of the value created when a consumer with a mini computer in her hand encounters a merchant who’d like to use that computing power to help him sell more stuff to her.

NFC as an ignition strategy has also ignored the many, many dependencies that such a strategy requires to get the critical mass needed to achieve ignition: enough merchants with enough NFC-enabled terminals, enough consumers with enough of the right handsets or cards and enough of a value proposition for both to care. Absent all three, mobile payments ignition is left up to chance: the hope that one day *something* might happen to move things along, and at that point, there’d be infrastructure in place to support it.

This view of the payments market and place of innovation strikes me as largely correct, though I must admit some of my sympathy comes from having recently written here about what payments law can learn from its past.

Despite all the technological innovation sweeping the payments arena, past comparison of the law and the markets suggest that Solomon got it right with the observation that there really is "nothing new under the sun."

August 3, 2016 in Commentary, Current Affairs, Web/Tech | Permalink | Comments (0)

Monday, July 25, 2016

Non-Competes: An Internet Show Is Not a Radio Show

A recent case out of the Eastern District of Michigan, Burke v. Cumulus Media, Inc., Case No. 16-cv-11220 (behind paywall), has some interesting things to say about the impact of the Internet on non-competes you may be drafting.

In the case, the plaintiffs had a radio show on a Michigan radio station owned by Cumulus. Cumulus terminated the plaintiffs, and they sued alleging age discrimination. In response, Cumulus counterclaimed alleging that the plaintiffs were violating their non-compete clause because they were hosting an Internet-based radio show together.

Unfortunately for Cumulus, though, the non-compete prohibited the plaintiffs from doing various things related to "radio stations." It said nothing about any other medium, including the Internet. Because the plaintiffs had shifted their show to an Internet stream, it was not covered by the non-compete.

If you're drafting non-competes in this context, keep this ruling in mind. Of course, I have no idea if a non-compete that included the Internet would have been considered enforceable or if it would have restricted the plaintiffs' ability to earn a livelihood too much.

Another interesting facet of this case is that only one of the plaintiffs' non-competes was at issue here. The other non-compete by its terms was only enforceable if Cumulus paid the plaintiff for the period of time he was prohibited from competing. Cumulus chose not to pay that plaintiff and so did not (and could not) seek to enforce his non-compete. Whenever I talk to my students about covenants not to compete, we talk about how easily they can be broadly drafted to possibly intimidate less legally knowledgeable employees, and one of the things we bring up is that making them have some cost to the employer could help judge the seriousness of the necessity of the covenant. Here, it apparently wasn't worth it for Cumulus to pay to keep one of the plaintiffs from competing.

July 25, 2016 in Commentary, Recent Cases, True Contracts, Web/Tech | Permalink

Monday, July 18, 2016

Contracts Law and the Case of the Super Bowl Jewelry Heists

 

Brillanten.jpg
By Mario Sarto - Self-photographed, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=1015397

Here's a case with some interesting facts: Jacobsen Diamond Center, LLC v. ADT Security Services, Inc., Docket No. A-1578-14T1, out of New Jersey.

The plaintiff in the case is a jeweler, who suffered two consecutive thefts on Super Bowl weekends in 2010 and 2011. The first Super Bowl theft involved cutting through the wall that bordered a retail store next door and removing a safe positioned against the wall. Because the thieves cut through the wall, they didn't set off the ADT alarm system linked to the jeweler's doors.  

After this robbery, the jeweler then moved its safes to the middle of the store, away from the walls. The second Super Bowl theft (perhaps by the same people, emboldened by their previous success?) involved the disabling of the ADT security system in place.

The Super Bowl thieves have never been apprehended, and the jeweler did not have any insurance on the stolen jewels, so the jeweler has sued ADT and a number of other companies that were involved with the jeweler's security systems, alleging various misrepresentations about the security, fraud, negligence, and breaches of contract. The jeweler lost on all of its claims, either by summary judgment or by jury verdict, and the jeweler now appeals.

Of special interest to this contracts law blog is the ruling on the limitation of liability clause in ADT's contract with the jeweler. This was a standard form contract used by ADT that limited its liability to $1,000 (far below the alleged worth of the stolen jewels). These limitations of liability clauses are enforceable and reasonable; the policy behind this stance is supposed to encourage the purchaser of the security system to maintain insurance coverage of its valuables, as it is the purchaser in the best position to know what the value is of the things it is seeking to protect. The court found that the jeweler knew it should have had insurance and it was not ADT's fault that the jeweler failed to obtain such insurance; therefore, ADT should not be held responsible for the jeweler's failure.

July 18, 2016 in Recent Cases, True Contracts, Web/Tech | Permalink

Saturday, July 9, 2016

Arbitration Clauses: Gogo Internet Edition

The rise of Wi-Fi on airplanes means that you never have to be without the internet if you don't want to be...which also means that you never have to be without terms of use! A recent case out of the Eastern District of New York, Salameno v. Gogo Inc., 16-CV-0487 (behind paywall), reinforces that those terms of use are binding on you, and, as could probably be predicted, leads to the enforcement of an arbitration provision contained in them.

In this case, the plaintiffs had purchased Gogo's in-flight Internet access multiple times. They claimed that the Internet access didn't work as advertised, with allegations that it was incredibly slow, crashed frequently, or sometimes didn't work at all. (Anecdotally, I have heard people around me on flights complain about this, although I don't know if Gogo was at issue there or if in-flight Wi-Fi is simply fraught with complications.) Despite these alleged ongoing issues, the plaintiffs kept buying Gogo's Wi-Fi, perhaps in eternal hope that it would someday work properly? At any rate, this all culminated in plaintiffs' lawsuit here.

A judge recently found that the plaintiffs are bound by the arbitration clause in Gogo's Terms of Use. All of the plaintiffs used Gogo's Internet access multiple times, and each time they had to indicate that they agreed to the Terms of Use. This wasn't just a one-time thing, which maybe would have made the court more sympathetic, but multiple times of clicking "Agree" without looking at the Terms of Use. And, the court said, those who seek Internet access in the air are experienced Internet users who should be expected to know how to read the Terms of Use contained in the hyperlink.

How to click on a hyperlink, yes, most Internet users know how to do; whether or not the average Internet user necessarily understands all of the legalese found at that hyperlink is another question entirely, of course, but not one addressed in this case. Possibly because the court assumes that all laypersons understand the difference between litigation and arbitration, although in my experience I am not entirely sure that's true. At any rate, the court here held this arbitration clause to be binding.

July 9, 2016 in Commentary, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (2)

Wednesday, July 6, 2016

Cheating the Cheaters

Yesterday, I blogged here about ticketscalping “ticketbots” outperforming people trying to buy tickets with the result of vastly increased ticket prices.

Now Ashley Madison – dating website for married people – has announced that some of the “women” featured on its website were actually “fembots;” virtual computer programs. In other words, men who paid to use the website in the hope of talking to real women were actually spending cash to communicate with computers (men have to pay to use the website, women don’t). Images-1

Why the announcement? The new leadership apparently wanted to air the company’s dirty laundry, so to speak.

Ashley Madison was hacked last year, revealing who was using the website to cheat on their husband, wife or partner. It was a devastating hack, ruining lives and even leading a pastor to commit suicide.

This seems to be a clear breach of contract: if you pay to communicate with real women, the contract must be considered breached if all or most of the contact attempts went to and/or from computers only. Perhaps even worse for Ashley Madison is the fact that the company is under investigation by the U.S. Federal Trade Commission. The FTC does not comment on ongoing cases, but “it could be investigating whether Ashley Madison properly attempted to protect the identity of its discreet customers -- which it promised to keep secret. Or it could be investigating Ashley Madison for duping customers into paying to talk to fake women. On Monday, the company also acknowledged that it hired a team of independent forensic accounting investigators to review past business practices around bots and the ratio of male and female U.S. members who were active on the site." Images

July 6, 2016 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, Miscellaneous, Web/Tech | Permalink | Comments (0)

Tuesday, July 5, 2016

Ticket Scalping Machines – An Intersection between Contracts and Criminal Law

Have you ever tried buying concert tickets right when they were made available for sale on the Internet, only to find out mere minutes later that they were all sold out? Or, for that matter, highly coveted camping reservations in national or some state parks?

Where once, we all competed against the speed of each other’s fingertips and internet connections, nowadays, “ticket bots” quickly snatch up tickets and reservations making it virtually impossible for human beings to compete online. Ticket bots are, you guessed it, automatic computer programs that buy tickets at lighting speed. They can even read “Captcha boxes;” those little squiggly letters that you have to retype to prove that you are not a computer. Yah, that didn’t work too well for very long.

“A single ticket bot scooped up 520 seats to a Beyonce concert in Brooklyn in three minutes. Another snagged up to more than 1,000 U2 tickets to one show in a single minute, soon after the Irish band announced its 2015 world tour.”

Ticket bots scoop up tickets for scalpers who then resell them on other websites, marking the tickets up many times the original price. (I’m actually not saying that state and national parks are cheated that way, maybe camping reservations in those locations are just incredibly popular as hotel prices have increased and incomes are staggering. I personally used to be able to, with t Imageshe help of a husband and several computers, make campground reservations for national holidays, but those days are long gone…”we are now full.”).

Ticket bots are already illegal in more than a dozen states. New York is considering cracking down on this system as well. However, the most severe penalty under New York law is currently fines in the order of a few thousand dollars where ticket scalpers make millions of dollars. A new law proposes jail time for offenders. This is thought to better deter this type of white-collar crime in the ticket contract market.

July 5, 2016 in Commentary, Current Affairs, E-commerce, In the News, Legislation, Web/Tech | Permalink | Comments (0)

Monday, June 27, 2016

A Text Message Is a Writing, Too (Albeit with More Emojis)

As technology continues to evolve, so does the law, and a recent case out of Massachusetts, St. John's Holdings, LLC v. Two Electronics, LLC, MISC 16-000090, proves it. Addressing what the court termed a "novel" question in the Commonwealth of Massachusetts, the court concluded that the text messages at issue in the case constituted writings for statutes of frauds purposes.

I have often thought that we communicate much more in writing these days than people did, say, twenty years ago. I know that it is now much more common for me to text the people I want to speak with than actually call them to speak orally. It will be interesting to see how the statute of frauds continues to develop.

(Thanks to Ben Cooper for sending this case my way!)

 

June 27, 2016 in Commentary, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, June 20, 2016

Have You Designated a Legacy Contact on Facebook?

Facebook

Source: facebook.com

It isn't something we typically think about but as our world shifts to digital and as more and more of us leave behind large social media footprints, what happens to those accounts when we die? I have thought about it briefly, mostly in thinking that I should give my passwords to someone, so that, if something happens to me unexpectedly, someone will be able to get onto my social media to let my followers know. I have had social media friends vanish with no explanation, and it's always haunted me that maybe something happened to them and I had no way of knowing. 

Despite the fact that I'm a lawyer, it honestly never occurred to me that what happens to my social media accounts after my death might be governed by their terms of use...until I saw this story reported widely on the local news. There was a recent tragedy in a nearby town that resulted in the unexpected, untimely death of George Heath. George's widow, Rosemary, was accessing his Facebook account to send photos and videos to family and friends and share older memories. Given how long Facebook has been around now, there are potentially years' worth of memories built up on Facebook pages, and one could see how they would be of some comfort in a time of grief. 

However, Facebook's terms of use prohibited what Rosemary was doing. Someone notified Facebook that George had died and Facebook basically locked the account down. They call it "memorializing the page," but the effect of it is that it's locked and no one can access it, not even someone who has the password. Now, this makes sense in a way: People could do malicious and terrible things to a deceased person's Facebook page, theoretically, if Facebook didn't lock it down. But it's a harsh outcome when applied to people in Rosemary's situation. 

Facebook's terms of use inform you that you should designate a legacy contact. This was actually difficult for me to find in Facebook's policies and I eventually only found it by Googling "Facebook memorialized page," so it's not like this is very obvious on the website itself. And, anyway, not many of us think a whole lot about our unexpected deaths. And, if we do, not many of us think that we should read our social media terms of use about it. I looked it up, and Twitter also has a policy where you can lock down a Twitter account if the user dies, but Twitter seems to require a lot more proof than Facebook does

Also of concern to me is that, even if someone is designated as a legacy contact, it still might not allow the kind of access that Rosemary was looking for, or that you might want to grant to someone. Facebook limits what a legacy contact can do, meaning that your power over what happens to your Facebook account really ultimately lies with Facebook, not you or your wishes. Which is a reminder, of course, that our control over our Facebook accounts is limited to begin with and pretty much at the whim of Facebook

We tend not to read the terms of use of sites, as we all know. And we talk about that a lot in the context of agreeing to arbitration clauses and stuff like that. We don't often think about how that can have consequences for our loved ones after our deaths. I understand, of course, that Facebook and Twitter don't want to hand out log-in information, but if the user has given the log-in information to someone else--and, as I could foresee, if the user has given the log-in information to someone specifically for the purpose of managing the social media account if/when they die--it seems odd for Facebook to then react as if that person's actions are prohibited. On the other hand, I suppose, how would Facebook know otherwise? A conundrum.

 

June 20, 2016 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (4)

Monday, June 13, 2016

Airlines Not Required to Honor Pricing Glitches

Stories such as this [https://www.washingtonpost.com/lifestyle/travel/i-flew-to-abu-dhabi-for-265-round-trip-heres-how-you-can-do-the-same/2016/06/07/fc33cbea-29a3-11e6-b989-4e5479715b54_story.html] about finding incredibly cheap airlines to both national and international destinations because of airline computer pricing mistakes (real or otherwise…) have become commonplace. In 2012, the Department of Transportation established clear rules against changing the price of a ticket after purchase.  But in a new decision by the U.S. Department of Transportation, that rule will no longer be enforced:

“As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.

Images

Travelers’ websites thus now recommend that people hold off making further travel plans until a ticket and confirmation number have actually been issued. Some have further said about the glitch fares that “[t]ravel is not something that is only for the elite or [people] from certain economic brackets.” Of course, it shouldn’t be, but with the deregulation of the airline industry and steadily increasing prices and fees, history seems to be repeating itself: air travel is, for many, becoming unaffordable. This in spite of record-breaking profits for the airline industry benefiting from low oil prices and, I want to say of course, fares increasing, holding steady or certainly not decreasing very much.  Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors.  Right… And whereas some years have been marked by bust, many more have been booming for the airlines.

Given that, why would the DOT be amenable to help out the airlines, and not passengers? Under contract law, mistakes that are not easily “spottable” have, traditionally, not been grounds for contract revocation. If one considers the contract to have been executed when the airline accepts one’s online offer, why should the airline, absent a clear error or other mitigating factors, not be expected to follow the common law of contracts as other parties will, depending on the circumstances, of course, likely have to? That beats me.

Some airlines are, however, choosing the honoring the mistake fares. Others don’t. Bad PR, you say? That also does not seem to matter. The most hated airline in the U.S. a few years back – Spirit Airlines – was also (at least then) the most profitable.

Hat tip to Matt Bruckner of Howard University School of Law for bringing this story to my attention.

June 13, 2016 in Current Affairs, E-commerce, Legislation, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, June 6, 2016

"Facebook Addendums": Does Your Landlord Want to Be Your Friend?

I'm one of those apparently rare people who doesn't really use Facebook. But Facebook was evidently very important to City Park Apartments in Salt Lake City, whose management company presented all of the tenants with a "Facebook addendum" to their lease. The addendum allegedly stated that all residents had to befriend the complex on Facebook or be found in breach of their lease agreement. 

This seems like an alarming development that I hope is going to be very limited. Is a Facebook account going to start being like a telephone number or an e-mail address, something it's assumed by everyone that you have and should hand over access to in exchange for goods or services? The reason I stopped using Facebook was because of privacy concerns. I wouldn't be thrilled about being told that I'm required by my lease to make sure my landlord can watch my Facebook activities (which often correspond, as we all know, to our real-life activities; if your landlord asked to follow you around through your daily life, or to get e-mailed your vacation photos, I would think many people would consider that a weird request).

And, since I don't do anything on Facebook, does that mean that I wouldn't be allowed to rent an apartment there unless I opened an account? Many people have legitimate, important, in some cases necessary reasons to limit their online presence. Let's hope "Facebook addendums" don't start sweeping the nation. 

June 6, 2016 in Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (1)

Monday, May 30, 2016

Terms and Conditions: You Agree to What You've Agreed To

Watching terms and conditions litigations continue to play out is an interesting exercise. One of the things we learn is that the terms and conditions mean what they say, which should be obvious, but of course ignores the fact that basically nobody reads what they say. Consumers seem to be consistently caught off-guard by some of the terms. A recent Ninth Circuit decision, Geier v. M-Qube Inc., No. 13-36080, reinforces this (you can watch the oral argument here).

Geier sued m-Qube based on a mobile game it marketed called Bid and Win. m-Qube was not the provider of the game; rather m-Qube merely marketed the game. The other defendants in the case were all similarly removed from the actual content of the game, serving as "intermediaries" and "gateways." The game's actual content provider, Pow! Mobile, was not sued by Geier. 

The dispute in the case was over whether m-Qube and the other defendants were third-party beneficiaries of the terms and conditions of the game. Allegedly, when signing up for the game, subscribers, under the terms and conditions, waived all claims against Pow! Mobile's "suppliers." Despite this clause, Geier was attempting to sue m-Qube, et al., over text message abuses in violation of Washington law. (Geier, incidentally, was not alone in suing over this. A class action in the District of Nebraska was complaining about the same behavior.)

The Ninth Circuit's decision in this case is a matter of straightforward contract law: If you are an intended third-party beneficiary of the contract, you can enforce the contract. There is no real surprise there, except maybe to the consumer here, because it may sink Geier's entire case, which now hinges on whether m-Qube and the other defendants are Pow! Mobile's "suppliers." If they are, then they are intended third-party beneficiaries of the terms and conditions' waiver clause and can seek to enforce it. We may not be reading those terms and conditions, but we may be waiving lots of our rights nonetheless.  

May 30, 2016 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Thursday, May 12, 2016

Removing Confidential E-Files When Quitting: Not a Good Idea

If you and I worked in an industry with highly sensitive information (assuming that we do not), it might be one thing if we thought we could email confidential information to our private email accounts and copy such information to a memory stick without finding out. But if a C-level employee at a high-tech company does so, does such conduct not rise to an entirely different level of at least naivety, if not deliberate contractual and employment misconduct?

A court will soon have to answer that question. Louis Attanasio, former head of global sales for an IBM cloud computing unit has been sued Seasonal-celebrations-lose-lost_property-name-identity-father_christmas-jdon16_low by IBM for breach of a contractual confidentiality clause, misappropriation of trade secrets, and violation of a non-compete agreement when he left – information in hand – to work for direct competitor Informatica.

In 2016, Attanasio allegedly started sending confidential information to his private email account, including draft settlement agreements between other IBM employees who had left to work for competitors. Before leaving IBM, Attanasio was asked to return a laptop to the company, which claims that he cpied files to a USB storage device.

Once again, the extent of the traceability of our electronic actions at work has become apparent. I continually remind my students of this to help them avoid “traps” such as the above or, frankly, simply to remind them that they should not spend much, if any, time on their computers not working (most seem to use their own electronic devices anyway these days, but still… and doing so is also very visual in an office setting.). Employers frequently complain about the work ethics of new college graduates, so it might be worthwhile to remind our students of what seems obvious to us.

May 12, 2016 in E-commerce, Famous Cases, In the News, Labor Contracts, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, May 6, 2016

Facebook Has to Face Illinois's Biometric Information Privacy Act

 Facebook in Laptop

Facebook was sued recently by a number of Illinois residents for its "Tag Suggestions" program. The complaint alleges that Facebook's facial recognition technology, employed to suggest to its users who they should be tagging in their uploaded photos, collected users' biometric data derived from their faces, secretly and without procuring informed consent, in violation of Illinois's Biometric Information Privacy Act ("BIPA"). Facebook moved to dismiss the complaint, in part on the fact that its Terms of Use require disputes with users to be governed by California law and therefore Illinois' BIPA was not applicable. But the recent decision by the Northern District of California in In re Facebook Biometric Information Privacy Litigation, Case No. 15-cv-03747-JD (behind paywall), found that Facebook has to contend with Illinois's BIPA. 

The court performed an analysis of whether or not Facebook's Terms of Use was a binding contract on the user plaintiffs. Before registration, each of the users was required to click a box or a button that clearly indicated that by doing so, they were stating that they had read and agreed to the Terms of Use. Therefore, the court found that the Terms of Use were binding on the users. In addition, every time Facebook updated its Terms of Use, it sent each user an e-mail informing them of modifications, as well as placed a "jewel notification" on their Facebook feeds. Therefore, there was no real dispute that each user had agreed to the current Terms of Use. There was also no dispute that the Terms of Use contained a California choice-of-law provision. 

Nevertheless, the court refused to enforce the provision. The court noted that part of the test in evaluating whether to enforce a choice-of-law provision is to consider whether California's law would be contrary to the "fundamental policy" of Illinois's law and, if so, whether Illinois would therefore have a "materially greater interest" than California in the case at issue. Here, Illinois is one of only a few states with a statute concerning biometrics; California has no such statute. The court found that Illinois's BIPA represented a fundamental policy of Illinois to protect its residents from unauthorized use of their biometrics, and that applying California law here instead of Illinois law would interfere with Illinois's policy. In fact, the court noted, enforcing the choice-of-law provision would effectively eliminate any effectiveness of BIPA whatsoever, because there would be no ability for Illinois residents to protect themselves against national corporations like Facebook. Therefore, the court found, Facebook has to deal with Illinois's BIPA, regardless of Facebook's attempts to limit the relevant laws of its service to only California's laws. 

This all leaves for another day whether the Tag Suggestions program actually does violate BIPA. 

May 6, 2016 in Current Affairs, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Monday, May 2, 2016

You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)

  MTA bus Nashville TN 2013-12-27 002

Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically. 

A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit. 

MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract. 

MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software. 

There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage. 

Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system. 

May 2, 2016 in Commentary, Government Contracting, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Has Bitcoin Creator "Satoshi Nakamoto" Revealed Himself?

The answer is a definite... maybe.

Bitcoin_logo1Bitcoin, of course, is the original--and many would say at this point, most successful--effort to create a "cryptocurrency," a digital store of value that can be traded electronically without the necessity of a bank intermediary yet can also avoid the problem of double-spending (i.e., digital counterfeiting) that would destroy an electronic currency's value. For purposes of contract law, Bitcoin is most notable because the aforementioned double-spending problem was solved by the creation and implementation of blockchain technology. Blockchain programming allows, among other things, for the maintenance of transactional records in a ledger distributed among numerous and otherwise unrelated computers across the internet rather than in a central location. Contract lawyers have particular reason to care about the blockchain because it raises the looming possibility of "smart contracts," contracts with the technical capability of enforcing themselves.

An enduring mystery of Bitcoin has been the identity of its 2008 creator, who to date has been identified only by the pseudonym "Satoshi Nakamoto." Efforts to identify Nakamoto have been largely unsuccessful, with the most notable misstep being Newsweek's debunked 2014 claim that Satoshi was Japanese-American physicist Dorian Nakamoto.

Craig-wright-inventor-satoshi-nakamotoThis rather enduring tech mystery may have been solved, though skeptics remain unconvinced. In an interview with the BBC and other media organizations, Australian tech entrepreneur Craig Wright claims to be the real Satoshi Nakamoto, and other prominent members of the Bitcoin community are backing his claim. The fact that Wright's claim arose on the eve of the digital currency and technology conference Consensus 2016 has allowed for the intriguing circumstance of people in the know reacting and the entire story being live blogged.

So is Craig Wright actually Satoshi Nakamoto? Opinion certainly may shift over the next several days and weeks, but at this point a majority seem to be accepting his claim or profess to be open to accepting it. All in all, an intriguing turn of events out on the periphery of contracts and commercial law. 

 

May 2, 2016 in Current Affairs, E-commerce, Web/Tech | Permalink | Comments (0)

Monday, April 4, 2016

Universities, Graduate Students, Patents, and Policies

 

Harvard college - science center.jpg
CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=39855 (Harvard Science Center)

It's a very common thing, to be provided with a "policy" as opposed to a "contract." A recent case out of the District of Massachusetts, Charest v. President and Fellows of Harvard College, Civil Action No. 13-11556-DPW, addresses that exact issue, and concludes, as you might expect, that what you call something isn't as important as how you behave. 

Dr. Mark Charest was a chemistry graduate student at Harvard University. While he was there, he and his supervisor (also a defendant in this lawsuit) and other scientists developed a "novel and valuable method for creating synthetic tetracyclines," important for commercial antibiotics. Universities have lots of valuable things being created by their employees and students, so it's not surprising that Harvard had a policy in place for this sort of situation. Harvard had Dr. Charest, as a student, sign the Harvard University Participation Agreement, which contained a clause that Dr. Charest "ha[d] read and [] under[stood] and agree[d] to be bound by the terms of the 'Statement of Policy in Regard to Inventions, Patents, and Copyrights,'" referred to in this case as the IP Policy. A lot of things happen from that point on, but the important thing to know for purposes of this blog entry is that Dr. Charest maintained that Harvard had breached the IP Policy. Harvard, in response, maintained (among other things) that the IP Policy was not a contract. 

Other than being called a "policy," you might think this an odd argument for Harvard to try to make, considering that having Dr. Charest sign an agreement to be bound by the IP Policy sounds pretty contract-y. A 1988 Massachusetts Supreme Judicial Court decision, Jackson v. Action for Boston Community Development, had held that an employer's personnel manual was not a contract, and so Harvard relied heavily on that precedent, trying to cast its IP Policy as similar to the personnel manual in that case. 

Jackson established a number of factors for its decision, and, while some of those factors did weigh in favor of Harvard, others weighed in favor of Dr. Charest. For instance, Harvard maintained the ability to unilaterally modify the IP Policy and there were no negotiations between Harvard and Dr. Charest over the IP Policy, two factors Jackson said support a conclusion that the IP Policy does not impose contractual obligations. However, Harvard called special attention to the IP Policy and Dr. Charest's agreement to it, required Dr. Charest's signature acknowledging the IP Policy, and the IP Policy spoke in mandatory terms rather than suggestive terms, all of which made it seem more like a binding contract. 

In the end, the court found that, as the Jackson precedent has developed, the really important thing is whether Dr. Charest understood himself to have to agree to the terms of the IP Policy in order to continue as a student researcher at Harvard, and that Harvard was likewise agreeing to be bound. The court concludes that yes, this was true. The IP Policy sounded as if it was being very clear about Harvard's obligations, because of its unambiguous language. Harvard itself consistently referenced the IP Policy as governing its actions when questioned by Dr. Charest and when communicating with its students. Therefore, Harvard could not pretend now that it had not been behaving as if it was bound by the terms of the IP Policy. 

(Nevertheless, the court went on to dismiss most--but not all--of Dr. Charest's claims. The facts are too complicated to get into in the scope of this blog entry, but if you're interested in the relationship between research universities and their graduate students, it's an interesting read.)

UPDATE: This case has now settled. Dr. Charest released the following statement:

"Harvard University and I have settled our ongoing litigation regarding the allocation of royalties related to the license with Tetraphase Pharmaceuticals on mutually agreeable terms.  In light of my claims and goals in bringing this litigation, I am very pleased to accept terms I view as equitable.”

You can read more here.

(Thanks to Brian O'Reilly at www.oreillyip.com for the update!)

April 4, 2016 in Commentary, Recent Cases, Teaching, True Contracts, Web/Tech | Permalink | Comments (0)