ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

A Member of the Law Professor Blogs Network

Wednesday, July 24, 2013

Fox Broadcasting v. Dish Network - let's hop to the contract issues

The Ninth Circuit recently decided an interesting case involving video on demand – or is the Hopper a DVR?  That was one of the questions at the heart of Fox Broadcasting Company v. Dish Network. (Jeremy Telman had previously blogged about the case when the complaint was first filed a year ago).  At issue was the Dish Network’s PrimeTime Anytime service which only works with the Hopper, a set top box with digital video recorder and video on demand functionalities.  PrimeTime Anytime records Fox (and other) network shows and stores the recordings for a certain number of days (typically eight) on the Dish customer’s Hopper.  Dish does not offer video on demand from Fox (but see discussion below).  Dish started to offer a new feature called “AutoHop” that allows users to skip commercials on shows recorded on PrimeTime Anytime (although it doesn’t delete the commercials, the user can press a button to skip them).  Fox sued Dish for copyright infringement and breach of contract and sought a preliminary injunction.  The Ninth Circuit upheld the district court’s denial of the motion.  The copyright issues are interesting, but I’m going to skip over them using this blog’s virtual AutoHop feature and get right to the contract issues, which are much more interesting to readers of this blog. 

There were two agreements at issue here.  There was a 2002 license agreement and a subsequent 2010 letter agreement (there were others but these were the two relevant ones).  Pursuant to the 2002
agreement, Fox granted Dish a limited right to retransmit Fox’s broadcast signal to Dish’s subscribers.  It also contained several restrictions and conditions and prohibited video on demand.  A 2010 letter agreement, however, agreed to video on demand provided that Dish agreed to certain conditions, the primary one being that it couldn’t show the content without commercials. 

So the basic questions (overly simplified for blog purposes) were – did Dish distribute Fox video on demand content?   If so, did it comply with the terms of the 2010 letter?  (Okay, that’s not exactly how the court or the parties put it, but those were the issues stripped down to their essence).

Fox argued that Dish breached this provision of the 2002 contract:

“EchoStar acknowledges andagrees that it shall have no right to distribute all or any portion of the
programming contained in any Analog Signal on an interactive, time-delayed, video-on-demand
or similar basis; provided that Fox acknowledges that the foregoing shall not restrict EchoStar’s practice of connecting its Subscribers’ video replay equipment.”

The district court construed the word “distribute” as requiring a copyright work to “change hands” (analogous to under the Copyright Act).  Because the copies remained in users’ homes,they did not change hands and there was no distribution.  Fox challenged this construction and argued that the prohibition against distribution meant that Dish would not make Fox programming available to its subscribers on the aforementioned basis.  The Ninth Circuit found both Fox’s and the district court’s constructions plausible (yes I realize there’s a distinction between interpretation and construction but I don’t want to go there right now, although you may). 

The Ninth Circuit withheld judgment on which construction was better but stated that “in the proceedings below, the parties did not argue about the meaning of ‘distribute.’  We express no view on whether, after a fully developed record and arguments, the district court’s construction of ‘distribute’ will prove to be the correct one.”

The court did, however, express skepticism that PrimeTime Anytime was not “similar” to video-on- demand (remember, the 2002 contract prohibited “video-on-demand or similar basis”)(emphasis added by yours truly).  The “distribution” of that, therefore, would violate the 2002 contract. Dish argued that its service was not “identical” to VOD but, as the Ninth Circuit noted, did not explain why it was not “similar.”  (Note: I hope all you contracts profs are feeling ever more relevant!  And our students thought we were just making mountains out of molehills when we focused on the importance of contract language).  The addition of that word “similar” might just save Fox when the case goes to trial.  Especially since, as even the district court held, if PrimeTime Anytime is VOD, then Dish clearly breached the contract which prohibited skipping commercials. The district court, however, wasn’t convinced that it was VOD.  Rather, the district court concluded that it was a hybrid of DVR and VOD and “more akin” to DVR than VOD.

In other words, the district court’s analysis went along these lines – the 2002 contract was not breached because there was no distribution of VOD (or similar) content.  The 2010 contract was not breached because this was not VOD but DVR. In short, this was not VOD and there was no distribution of a VOD-like service.

Query if the 2010 amendment had adopted the “VOD or similar” language instead of just “VOD”; in other words, what if it permitted Dish to offer Fox’s programming as VOD or “similar” service?  My guess is that they specifically drafted it narrowly to include just “VOD” to limit the scope of the license – but that it ended up backfiring to exclude the conditions on “similar” services.  Funny how drafting rules of thumb can sometimes come back to bite you.  Note the problem was created because the definitions were not consistent in the 2002 and 2010 agreements – it created a gap regarding a service (a “VOD similar service”) which required judicial construction.  Distribution of VOD or similar services was prohibited under the 2002 contract but VOD was permitted under the 2010 provided commercials were not skipped.  And what happens to showing (not distributing) "similar services to VOD"?  Mind the gap!

 There was a final issue regarding a “good faith” in performance type clause.  The Ninth Circuit  concluded that there was no evidence that Dish launched PrimeTime Anytime “because it was unwilling to comply with the requirements to offer Fox’s licensed video on demand service, rather than because Dish lacked the technological capability to do so.”  Frankly, I’m not sure why this was not a bigger issue since it seems, at least to me, that Dish is trying to get around the “no commercial skipping” restriction in the 2010 agreement by using the Hopper.

 The Ninth Circuit noted a few times that it was applying a “deferential standard of review” given the request for a preliminary injunction so I don’t think Dish can rest easy just yet.  I think Fox’s case will eventually hinge upon how the contract issues are resolved.  What is the meaning of “distribute”? (I don’t know enough about how Dish technology works to determine whether distribution occurred.  Even under the district court’s definition, could it have occurred?  Does rebeaming signals constitute distribution?  Is the service analogous to a lease?  I think there’s room here).  Is the PrimeTime Anytime service VOD or not?  And isn’t that 2002 agreement relevant in determining what the meaning of VOD is under the 2010 amendment?  Finally, why did the court give the “good faith in performance of contract” such short shrift?

I didn't get to review the actual agreements, but I would look at what exactly is being licensed under the 2002 agreement.  Does it exclude the VOD-like service or include it?  The gap seems odd to me - it must be addressed in one of the agreements.  What exactly does Dish have the right to do?  That seems to me one of the keys to unlocking the "correct" interpretation of the contract - and help determine whether the obligation of good faith is being fulfilled.

The real hammer here is going to be contract renewal - if Dish pisses off Fox and the other networks then it may kiss its business goodbye if they don't renew their contracts.  (As I mentioned, I haven't seen the contracts so don't know what the terms are).

As the court notes, the parties probably didn’t contemplate a hybrid DVR and VOD (this is the old “anticipating the future and new technologies” problem that contract drafters have to which I’ve previously referred) I think the copyright issues weigh more heavily in favor of Dish whereas Fox has the better argument re the contract issues.  Of course, the much larger policy issue is how to strike the balance between contract and copyright – a recurring issue since the late eighties…Generally, it's been advantage contracts.

 [Nancy Kim]

July 24, 2013 in Current Affairs, In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, July 15, 2013

Tracking and Data Collection - Coming to a Store Near You!

As Jeremy Telman noted in his post, the OUP website which sells my forthcoming book on wrap contracts contains a wrap contract that requires users to the site to accept cookies.  This type of wrap is  what I refer to as "contract as notice", and much better than what most websites do, which is implement a "notice as contract".  The OUP  website requires specific assent to a particular term which raises the salience of the term.  My guess is that OUP provides this because its parents company is based in the U.K. which has better laws about this kind of stuff.  Most US corporate websites throw a bunch of terms into a browse wrap to which the user is deemed to have given blanket assent.  Visitors to OUP's website -- which requires specific assent -- are made aware of the cookies, whereas most visitors to other sites aren't even aware that a contract governs.  This is the difference between effective notice and  ineffective notice, aka contracts that nobody reads but that courts deem are still enforceable via constructive assent. 

The real problem with not reading is the nature of the terms that go unread--if you don't read terms, what's to stop a company from piling them on, adding more intrusive privacy stripping terms and rights deleting  provisions ( to use a Radin-esque term). According to case law, not much. 

I set my browser to alert me when I visit a website with cookies and I just couldn't visit any site without having to press the "allow" icon several times.  Now I allow first party cookies, and ask for a "prompt" from third parties. I wouldn't be able to use my computer otherwise.

And now, we have the pleasure of being tracked in person.  This morning, the NYT reported that some physical stores have started testing technology that allows tracking of customers' movements by using their smart phone signals. Nordstrom tried the old "Notice as Contract" method, by posting a sign telling customers they were being tracked.  Those customers who saw the sign were creeped out.  How long before we get used to these notices - and start to ignore them?  How long before they are so ubiquitous that we have as little choice as we do online to stop a company from tracking and collecting information about us?

BTW, you can't read the NYT article unless your browser is set to allow cookies.....

 

[Nancy Kim]

July 15, 2013 in In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, July 11, 2013

Website for Law Professor's Book about Wrap Contracts Contains a Wrap Contract!

KimThose of you who read the previous post and clicked on the link to get a sneak peak at Nancy Kim's forthcoming book, Wrap Contracts, may have noticed the banner at the top of the screen, which reads:

We use cookies to enhance your experience on our website. By clicking 'continue' or by continuing to use our website, you are agreeing to our use of cookies. You can change your cookie settings at any time.

There may be some irony in this situation, or perhaps it is strategic: the website performs, and makes one of Nancy's points for her.  Wrap contracts are everywhere and have become an unavoidable fact of life for the computer literate.

[JT]

July 11, 2013 in About this Blog, Books, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Documentary on Terms of Use

There's a new documentary about...wait for it....contracts!  Well, if you want to call terms of use "contracts" - which courts seem to want to do.  Here's a link to an article in USA Today  and a link to the the official trailer on YouTube (yes, I get the irony of posting a trailer to YouTube which you can't do without agreeing to their terms of use....).  The clip contains some infuriating quotes from self-interested folks who want to perpetuate consumer ignorance of privacy looting.  One of my favorites-to-hate is the lie that people don't care about privacy - if they did they would do something about it.  But contracts profs know about bounded rationality and the limits of cognition - and we also know about lack of choice, the importance of contract design and effective v. ineffective notice.

I cover all of this ground (and more) in my forthcoming book  but more on that later.... 

 

[Nancy Kim]

July 11, 2013 in In the News, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, June 7, 2013

Cell phones, copyright and contracts

Ajit Pai, a commissioner of the Federal Communications Commission,wrote an interesting op-ed in yesterday's NYT.   He argues that consumers should be allowed to unlock their phone when they permissibly (i.e. not in breach of any contract) switch carriers. Some of you might be wondering - Huh?  Is that even illegal?  Don't I own my phone?  You're probably not alone.  As Pai notes, the Library of Congress decided that unlocking your phone violates the Digital Millenium Copyright Act of 1998.  (They basically removed an exception to the Act that permitted unlocking, as this article in the San Francisco Chronicle explains).  But, you might wonder, what does copyright have to do with what you can do with your cell phone?  A lot of people are wondering the same thing, but basically, software locks the cellphone to a specific network and the cell phone owner is a licensee of that software (and software is copyrightable).  Okay, now you understand what this has to do with copyright but what does this post have to do with contract?  Glad you asked.  Pai's op-ed argues, "Let's go back to the free market.  Let's allow contract law - not copyright or criminal law - to govern the relationship between consumers and wireless carriers."  It's interesting given that this blog has spent the last couple of weeks discussing the need for government intervention due to boilerplate - and yet, here's an example of government intervention into boilerplate that is not actually helpful to consumers.  Don't get me wrong - I'm not saying government intervention into boilerplate isn't a good thing sometimes (depends on what it is and how and why) - I just find it interesting that this example of government intervention is on an issue that protects businesses and hurts consumers.  Of course it shouldn't be surprising since lobbyists for carriers are way better organized and have more money and influence than consumer advocacy groups. And that gets to the heart of what's the matter with using contracts as the solution since the same dynamic is at play in the world of private ordering (see symposium on Boilerplate and the book itself, for more details).  Who knows what carriers might come up with in their contracts.  Would they try to "license" instead of sell their phones? In a perfect world, the free market might function, well, perfectly and private ordering would be the order of the day.  But we don't live in that world so an absolutist "no government intervention v. more government intervention" position doesn't work.

 

[Nancy Kim]

June 7, 2013 in Commentary, In the News, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, May 2, 2013

Ticketmaster and Those Pesky Bots

Last week, I mentioned a California bill addressing the issue of ticket resales and secondary marketplaces.  I think that the primary problem for consumers is not that these secondary marketplaces exist -- being able to resell tickets is generally a good thing for consumers--but that scalpers use bots (automated software programs) to buy up large quantities of tickets which they then resell at jacked up prices.  Fans get angry because shows are quickly "sold out" and they are forced to pay heart stopping prices in the secondary marketplace if they want to see their favorite performer (or get decent seats).  Well, Ticketmaster has had enough and is suing 21 people involved in circumventing its online security system by buying up vast quantities of tickets.  Ticketmaster's weapon of choice here?  The universally reviled yet oh-too-familiar Terms of Use.  Ticketmaster's TOU prohibits the use of bots.  (It's also suing for copyright infringement, among other things).  In fact, back in the early days of the Internet, bots were one of the reasons companies started to use TOU.  The more things change....

[Nancy Kim]

May 2, 2013 in Current Affairs, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (1) | TrackBack (0)

Wednesday, April 24, 2013

Paperless Tickets and Licenses

 

The Sacramento Bee reports that a California legislative committee (if you really want to know,  it’s called the Assembly Arts, Entertainment, Sports, Tourism and Internet Media committee) “gutted” a bill that would have illegalized “paperless” tickets.  Paperless tickets are more (or is it less?) than what they sound like – they are a way for companies like Ticketmaster to sell seats without permitting purchasers to resell those seats.  Purchasers must show their ID and a credit card to attend the show.  The bill pitted two companies, Live Nation (owner of Ticketmaster) and StubHub, against each other. 

This bill and the related issues should be of interest to contracts profs because it highlights the same license v. sale issues that have cropped up in other market sectors where digital technologies have transformed the business landscape.  Like software vendors and book publishers, Ticketmaster is concerned about the effect of technology and the secondary marketplace on its business.  Vendors, using automated software (“bots”), can quickly purchase large numbers of tickets and then turn around and sell these tickets in the secondary marketplace (i.e. at StubHub) at much higher prices.  Both companies argue that the other is hurting consumers.  Ticketmaster argues that scalpers hurt fans, who are unable to buy tickets at the original price and must buy them at inflated prices.  Stub Hub, on the other hand, argues that paperless tickets hurt consumers because they are unable to resell or transfer their tickets. 

The underlying question seems to be whether a ticket is a license to enter a venue or is it more akin to a property right that can be transferred.  Or rather, should a ticket be permitted to be only a license or only a property right that can be transferred?  The proposed pre-gutted legislation would have taken that decision out of the hands of the parties (the seller and the purchaser) and mandated that it be a property right that could be transferred.  In other words, it would have made a ticket something that could not be a contract.  Of course, given the adhesive nature of these types of sales, a ticket as contract would end up being like any other mass consumer contract – meaning the terms would be unilaterally imposed by the seller. In this case, that would mean the ticket would be a license and not a sale of a property right. 

It’s not just the media giants who are feeling the disruptive effect of technology  - we contracts profs feel it, too. 

[NB:  My original post confused StubHub with the vendors who use the site.  StubHub is the secondary marketplace where tickets can be resold.  Thanks to Eric Goldman for pointing that out].

[Nancy Kim]

April 24, 2013 in Commentary, Current Affairs, E-commerce, In the News, Legislation, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, April 22, 2013

Phone "Bill Cramming" and Consent

The FTC recently charged a company, Wise Media, with unfair and deceptive business practices. The FTC complaint alleges that Wise Media charged unwitting mobile phone users for “premium" text services, or junk text messages (horoscopes, love tips, other “useful” information…) that consumers never authorized.  The practice is referred to as “bill cramming,” and consumers  often failed to notice the indefinitely recurring charges of, in this case, $9.99/month.  Even when they did and sent a text to “stop” the messages, the company often failed to comply with the request. 

Consumers often miss these charges because they aren’t aware that their mobile phone bills contain charges by third parties and because the charges are not clearly indicated.  The result?  Wise Media has made millions of dollars by surreptitiously charging consumers.

What I find particularly interesting and troubling is the potential interaction of contract law in the area of electronic contracts and consumer protection.  What distinguishes a deceptive business practice (although not necessarily an unfair one) from a “hard bargain” is consent. The FTC complaint, for example, was filed because the charges were “unauthorized” by consumers - they were signed up "seemingly at random" without consumer "knowledge or permission."  The FTC has, in my view, done a pretty terrific job of protecting consumers given the lack of resources and the wide range of consumer-harming activities out there.  Courts have not done so well.  What happens where contractual “consent” (such as in the form of a clickwrap”) is obtained for an unfair practice, such as bill cramming?  What if the consumer had clicked "I agree" on a clickwrap to the premium service?  Would the contract law notion of “consent” mean that the consumer had authorized the “premium text” service, even when we all know that nobody reads clickwraps and browsewraps?  Or would the commonsense version of consent championed by the FTC prevail?

I talk about this disjunction between, what I refer to as “wrap contract doctrine” (since, let's face it, the digital contract cases are not consistent with traditional contract doctrine despite what Easterbrook and others claim) and the FTC’s more commonsense approach to consumer perception and business practices in my forthcoming book on wrap contracts.  (Did you know a plug was coming?  I actually didn’t but there it is.)  The conclusion I reached was that there appears to be a disconnect between contract law notions of “reasonable notice” and the FTC’s notion of “reasonable notice” (which I find more reasonable….)  The takeaway for businesses – just because you obtain consent for a particular business practice via an online contract which may meet the surreal standards of contractual consent set forth by courts doesn’t mean that the practice in question won’t be viewed as an “unfair and deceptive” one by the FTC.

[Nancy Kim] 

April 22, 2013 in Current Affairs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 16, 2013

Dog Bites Man Story from the Nota Bene Blog

Under the headline "Contract Law Can Be Interesting!" Nota Bene, a blog by the librarians at the University of Houston O'Quinn Law Library, features a post praising some recent contracts law books.  Other interesting posts on the Nota Bene blog include "Objects Fall to Earth," "Smoking May Be Harmful to Your Health," and "Cubs Unlikely to Win World Series this Year."  

After proclaiming contracts to be right up there with civil procedure on the list of most boring law courses, he author \recommends two books that can make this daunting subject palatable: Contracts Stories, edited by Douglas Baird, and Larry Cunningham's Contracts in the Real World, about which we posted an online symposium a few months ago.

I also recommend these books, but I'm not sure the blog post's author's marketing strategy is going to work.  He says, in effect, "I recommend to you these two books (only one of which I've read) about a subject that doesn't interest you.  If you did not enjoy studying contracts, here are two books about contracts that will cause you to upgrade your attitutude towards the subject from 'feh' to 'meh.'"

Whatever.  I always thought that the point of books like Contracts Stories is to enable students to learn more about the fascinating cases that they studied in their law courses.  They also provide insights into litigation strategies, legal history, business strategies underlying contractual disputes, and lots of other useful supplements to the raw case law.  Contracts in the Real World is an excellent representation of the sorts of issues that come up in the world of contracts law all the time.  If there were some huge gap bewteen what Larry Cunningham talks about in his book and what we talk about in contracts courses, the book would not be as useful as it is.

Ultimately both books are born of a love of contracts law.  And a book is a mirror. . . .

[JT]

April 16, 2013 in Books, Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, April 15, 2013

CBC Radio Interview with Margaret Radin

Next month, we will host an online symposium on Margaret Radin's recent book, Boilerplate.  

For those who can't wait to get a sesne of the book, you can listen to a Canadian Broadcasting interview with Professor Radin here.

Irony of ironies: in order to listen to this, I had to download an upgrade of Adobe Flash Player, and of course that required my agreement to boilerplate terms and conditions.

There is no escape from boilerplate.

[JT]

April 15, 2013 in About this Blog, Books, Recent Scholarship, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, March 4, 2013

For Those Who Have 76 Days to Spare

( H/T to Ben Davis -and his student - for posting about the article to the Contracts Prof list serv).

This article indicates that the average Internet user would need 76 work days in order to read all the privacy policies that she encounters in a year.  (Unfortunately, the link to the study conducted by the Carnegie Mellon researchers and cited in the article doesn’t seem to be working).  But you don’t need a study to tell you that privacy policies are long-winded and hard to find.  That’s one of the reasons you don’t read them.  Another is that they can be updated, often without prior notice, so what’s the point in reading terms that are constantly changing? Finally, what can you do about it anyway?  Don’t like your bank’s privacy policies – good luck finding another bank with a better one.

But we contracts profs are familiar with the disadvantages of standard form contracts. We’re also familiar with the efficiency argument in favor of them. The same issues arise with privacy policies – only there’s one important difference between a privacy policy and a contract, even an adhesive one. A privacy policy isn’t really a contract, at least not in most cases. That’s one of the arguments I make in my forthcoming book, WRAP CONTRACTS:  FOUNDATIONS AND RAMIFICATIONS.  A privacy policy is typically a notice, not a contract.  Courts – especially in cases involving digital contracts – have tended to confuse or conflate the two.  If you look at the wrap contracts (shrinkwrap,browsewrap, clickwrap) cases under traditional contract law, they make no sense.  If you analyze them as notice cases, they have some consistency. Unfortunately, courts are treating wrap contracts as contracts, not notices. 

So, what’s the difference between a contract and a notice?  The big difference is that the enforceability of a notice depends upon the notice giver’s existing entitlements, i.e. property or proprietorship rights whereas a contract requires consent.

If I put a sign on my yard that says, Keep off the grass, I can enforce that sign under property and tort law.  As long as the sign has to do with something that is entirely within my property rights to unilaterally establish, it’s enforceable.  If the sign said, however, ‘Keep off the grass or you have to pay me $50” – well that’s a different matter entirely.  That would require a contract because now it involves your property rights.

Privacy policies are more like notices – and should be treated as such even if they are in the form of a contract (such as a little clickbox that accompanies a hyperlink that says TERMS).   If a company wants to elevate a notice to a contract, it should require a lot more than that simple click.  Because the fact is, contract law currently does require the user to do more than click – it requires the user to read pages and pages of terms spread across multiple pages – at a cost of 76 days a year.  The standard form contract starts to look a lot less efficient when viewed from the user’s perspective.

[Nancy Kim]

 

March 4, 2013 in Commentary, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, January 24, 2013

When It Comes to The Hobbit, Wired.com Puts Us to Shame

 

Scroll
Closest Thing to a Dwarvish Scroll Available on Wikipedia
Last month, our very own Nancy Kim beat me to the punch by posting about the contract that Bilbo Baggins enters into with Thorin's crew in The Hobbit.  I was so upset that she beat me to the punch on the subject matter that I docked her a month salary from her position as contributing editor on the blog.   

Now we've both been shown up (and how!), by James Daily, identifed here by Wired.com as

 a lawyer and co-author of The Law and Superheroes, [who] typically focuses his legal critiques on the superhero world at the Law and the Multiverse website he runs with fellow lawyer and co-author Ryan Davidson. 

Apparently, Mr. Daily got his hands on a replica of the five-foot-long scroll that was used as the contracts prop in the film.  He then goes through the contract provision by provision and reaches the following conclusion:

One the whole, the contract is pretty well written.  There are some anachronisms, unnecessary clauses, typos, and a small number of clear drafting errors, but given the contract’s length and its role in the film (which is to say not a huge one, especially in the particulars) it’s an impressive piece of work. I congratulate prop-maker and artist Daniel Reeve on a strong piece of work.  

He provides a link for those interested in purchasing their own version of the contract, for a mere $500.  " If you’d like an even more accurate replica of the contract, Weta’s online store has a version with hand-made touches by Mr. Reeve."

We tip our hats to Mr. Daily.  

Treasure_chest_colorBut I have my own thoughts about the contract that Mr. Daily does not mention.  First, the price term of the contract is ambiguous, since it promises Bilbo "only cash on delivery, up to and not exceeding one fourteenth of total profits (if any)," which on my reading does not really guarantee him anything.  On the other hand, the dwarves do promise to pay for Bilbo's funeral expenses, if necessary, so I think under the contract terms, he's better off dead.

This ambiguity is only partially clarified with the later provision that "the company shall retain any and all Recovered Goods until such a time as a full and final reckoning can be made, from which the Total Profits can then be established.  Then, and only then, will the Burglar’s fourteenth share be calculated and decided."  While this provision would strengthen any potential argument Bilbo might make that he should get no less and no more than a fourteenth share, if the contract does not define "full and final reckoning," he might have to wait quite some time to get that share, perhaps beyond his own final reckoning, and then it's Frodo's problem.

In addition, to address a matter of genuine concern; i.e., one that actually plays a role in the book, the contract does not specify the manner of delivery of payment.  As Bilbo points out in Chapter 18 (spoiler alert: the mission to recover Smaug's treasure was a success), "How on [Middle] earth should I have got all that treasure home without war and murder all along the way, I don't know."   Mr. Daily offers a solution: since the contract does not actually entitle Bilbo to any protion of Smaug's treasure but only to the value of a 1/14 share, the Dwarves could have wired a check to Bilbo's bank in the Shire (or the Middle Earth equivalent to a wire transfer).  But in the book, Bilbo waived his right to the spoils of war beyond "two small chests, one filled with silver, and the other with gold, such as one strong pony should carry."   

The fact that he did so suggests that really no part of the contract mattered much in the end.  And that is as it should be, since the bonds formed by those who joined Thorin's crew went well beyond those that can be reduced to any writing or even to any trilogy of films.

[JT, with hat tip to Mark Edwin Burge of the Texas Wesleyan School of Law for directing us to the Wired.com site]

January 24, 2013 in Film, Web/Tech | Permalink | Comments (3) | TrackBack (0)

When is a Contract Not a Contract?

I recently finished a book manuscript on the subject of “wrap contracts” – shrinkwraps, clickwraps, browsewraps, tapwraps, etc.  These non-traditional contracts are interstitial, occupying space in and between contracts and internet law, but not neatly fitting into one alone.  I'll be blogging a lot more about them in the future.

On the subject of wrap contracts, not long ago I bought a new laptop with Windows 8 pre-installed. 
But that didn’t mean I didn’t have to agree to this:

Windows License Terms 

What's interesting is that my old laptop, which I ordered online, came in a package like this:

  Torn Agreement

Like the typical shrinkwrap, ripping the plastic bag (which was necessary to get to the laptop inside it) was deemed acceptance. 

Both were examples of rolling contracts, but they came in different forms -- and neither gave me notice of any terms to come at the time of the transaction.  Yet consider the hassle I would have to go through if I decided, after having received the goods and a "reasonable opportunity to read" the terms, that I didn't want to accept the terms.  I would  have to ship back the computer or take it back to the store, and try to explain that I was rejecting it because I disagreed with the contract terms. 

Honestly, now - don't you think the retailer would just think I was nuts?  Or that I had found a better deal elsewhere?  (Or that I had done something sneaky, like somehow copied the software or infected the computer with a virus?)  How many think I would actually get my money back if there was nothing (else) wrong with the laptop(s)?

 

[Nancy Kim]

January 24, 2013 in E-commerce, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 16, 2013

Teaching Sales, Issue 2: When Is Software a Good and What of the Cloud?

This is the second in a series of posts on issues that arise in a Sales course.  

SoftwareAs Holly K. Towle lays it out in, Enough Already: It Is Time to Acknowledge that UCC Article 2 Does not Apply to Software and Other Information, 52 S. Tex. L. Rev. 531 (2011), many courts simply apply Article 2 to software licenses without much consideration of the law of licenses  Others apply the law of licenses, which she thinks is appropriate.  Her approach makes sense when we're talking about mass-marketed software provided to consumers through licenses.  In fact, courts ought to take notice of the fact that all U.S. jursdictions have now clarified the status of software as a "general intangible" and not a good through the revisions to UCC Article 9 adopted in all fifty states.  

But what of custom-made software that may not be licensed but sold to the client who will be its exclusive user?  My impression from the limited caselaw I have reviewed on the subject suggests that courts recognized early on that software consists of both tangible and intangible elements.  They seem to have assumed that the intangible elements (the services provided in developing software, for example) could be easily separated from the tangible elements (the disks, drives or hardware associated with the delivery of the software).  On this line of reasoning, only the latter are goods.  That distinction strikes me as artificial.  Unless the deal involves a lot of hardware, the cost of the "goods" is trivial compared to the costs of software development, and in fact, with digital downloads and cloud computing, there may not be a good at issue at all.  That is, my office used to be cluttered with the boxes that held the disks on which my software came to me.  I may have naively thought of software as a good then because those boxes made software look like a good.  Now, my software either comes pre-loaded or I download it without the aid of a disk or external drive.   Now it looks much less good-like, but of course, how it looks should not matter.

Towle draws on IP law to argue that software is really "information" and information ought to be treated differently from tangible goods.  I'm not sure I understand why that distinction matters if we are dealing with a sale rather than a license.  A lot of things that we consider goods are really just information, in the sense that Towle uses it.  Books are just information, but a sale of books is a sale of goods (although she is correct that you cannot return a lousy novel based on a breach of the implied warranty of merchantability).  There are lots of other items that we buy about which is could be said that the costs of development constitute a large part of the costs of the good, but the UCC does not ask about cost breakdowns; it just asks if the subject of the transaction is moveable at the time that it is identified to the contract.  Electricity has been held to be a good because it moves.  So does information.  More particularly, custom-made software, White & Summers point out, does not really seem much different from any other specially-manufactured good, which the UCC treats as a good for the purposes of Article 2.  

I recommend Towle's article.  She has persuaded me that courts err in trying to apply Article 2 to software licensing transactions, but when it comes to custom-designed software that is actually sold, rather than licensed, to the end user, I think a strong case can be made for applying Article 2.  

I do not know if the software design companies agree to flat out sell the software they develop.  It might be safer for them to license it so that they can re-use the code for other businesses that might need similar software designed for their specific needs.  If that's the way these deals are done, it follows from Towle's reasoning that licensing law, rather than Article 2 should apply to those transactions as well.

[JT]

January 16, 2013 in Commentary, Teaching, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Wednesday, December 19, 2012

Thoughts on the Instagram Kerfuffle

Stop me if you've heard this one before - Facebook changes its Terms in a way that its users find offensive and invasive of their privacy.  Uproar ensues and Facebook promises that the changes are harmless and everyone is just overreacting.  Facebook backs off, a little, and then pushes the boundaries a little further next time, regaining even more ground against its users.  Sound familiar? 

When Facebook bought Instagram for (approximately) $750 million dollars, we should have known the time was coming when Instagram would piss off its users, too.  Well, that time is here.  Instagram posted changes to its Terms of Use this week which made users concerned that the company could use their content (i.e. photos) in advertisements.  So that lovely picture you took of your sweet grandmother could be used in an ad for Depends. The media was all over it, and you can read about it here, and here, and here

I think the public backlash is a very good thing since it reminds companies that there are at least some people who are reading their online agreements.  Unfortunately, they are usually only reading the terms of companies that already have a monopoly in the marketplace.  It's not easy for unhappy Facebookers, Googlers or Instagramers to pick up their content and go elsewhere - where would they go? 

What makes my skin crawl, however, is the misleading reassurances doled out by companies when they are called on their online agreements.  Instagram, for example, states on its blog that users shouldn't fear, because it respects them, really it does:

"Instagram users own their content and Instagram does not claim any ownership rights over your photos. Nothing about this has changed. We respect that there are creative artists and hobbyists alike that pour their heart into creating beautiful photos, and we respect that your photos are your photos. Period.

I always want you to feel comfortable sharing your photos on Instagram and we will always work hard to foster and respect our community and go out of our way to support its rights."

While it may be true that Instagram users own their content, Instagram does take a pretty broad license from its users:

"Instead, you hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use the Content that you post on or through the Service, except that you can control who can view certain of your Content and activities on the Service as described in the Service's Privacy Policy, available here: http://instagram.com/legal/privacy/."

As Instagram knows, it doesn't need to own your content in order to use it as if it owned it.  All it needs is a broad license, like the one it has.  Note that it has the right to "use" the content - and doesn't define what that means or restrict that use very much.

The Privacy Policy states that Instagram may use the information to in the following ways:

  • "provide personalized content and information to you and others, which could include online ads or other forms of marketing
  • provide, improve, test, and monitor the effectiveness of our Service
  • develop and test new products and features
  • monitor metrics such as total number of visitors, traffic, and demographic patterns"

I found this sentence particularly sneaky:

"We will not rent or sell your information to third parties outside Instagram (or the group of companies of which Instagram is a part) without your consent, except as noted in this Policy"

Did you like the "except as noted in this Policy" ?  And, as Contracts profs know, "consent" means something other than what a layperson might think - it can mean just using a website in many cases.  There is similar broad language here:

"We may also share certain information such as cookie data with third-party advertising partners. This information would allow third-party ad networks to, among other things, deliver targeted advertisements that they believe will be of most interest to you." 

I'm not as concerned about the targeted advertisements (which doesn't mean I'm not concerned at all) as I am about the "such as" and "among other things."

And remember, the Terms do expressly state:

"Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you."

The company reassures its users, on its blog that it is not their "intention" to "sell" user photos.  The company says it is working on language to make that clear.  Let's hope so, but my guess is that they are probably going to use more mealy language like "at the moment" or "sell as a good defined under the UCC," or something that leaves wide open the possibility that it can make money off user photos by selling them to third party advertisers. 

I'd suggest you save Granny some embarrassment and delete that photo now.

[Nancy Kim]

 

December 19, 2012 in Commentary, Current Affairs, Miscellaneous, True Contracts, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, November 19, 2012

London Court Finds Breach of K in Terminating Man for Facebook Post Opposing Gay Marriage in Church

The Independent reports here that Adrian Smith, who was stripped of his managerial post with the Trafford Housing Trust (the Trust), won his breach of contract claim against his employer.  London's High Court found that Mr. Smith had not engaged in "gross miconduct" by posting on this Facebook page his view that gay marriages in the church were "an equality too far."  However, the High Court awarded Mr. Smith less than £100 on his breach of contract claim, despite the fact that his slaray had been reduced as a result of his demotion from more than £35,000 to £21,000.  

Rainbow_flag_and_blue_skiesThe limited damages may have been the only remedy available to Mr. Smith in a court.  He could have taken his case to an Employment Tribunal and gotten more substantial damages, but Mr. Smith claims that he did not bring the case for money.  He did it for the principle involved.  The Trust has apologized to Mr. Smith and claims that it attempted to settle with Mr. Smith for a much higher amount, but Mr. Smith rejected the offer and chose to proceed with his litigation.  

The Trust's action against Mr. Smith is somewhat surprising, given that Mr. Smith does not oppose civil marriage for gay partners.  He only spoke out against church marriages for gay couples  The Independent even quotes a "gay rights campaigner Peter Tatchell" as supporting Mr. Smith: 

This is not a particularly homophobic viewpoint,  In a democratic society, Adrian has a right to express his point of view, even if it is misguided and wrong.

A spokesperson from Stonewall, an LGB rights charity described the Trust's treatment of Mr. Smith as "a little heavy-handed given that he had temperately expressed his point of view, however disagreeable that point of view might be to many.”

[JT]

November 19, 2012 in In the News, Recent Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, October 29, 2012

Profile Tech Falls Out with Facebook and Sues for Breach

Chris Claydon, the Managing Director of a New Zealand based company, Profile Technology, Ltd. (Profile Tech.), has brought suit against the social networking giant, Facebook, alleging breach of contract, interference with business relationships, defamation, and unlawful, unfair and fraudulent business practices.  Claydon’s Complaint alleges that Profile Tech. and Facebook entered into an agreement in 2008 allowing Profile Tech. to acquire Facebook data by automated “crawling,” for the purpose of creating a service called Profile Engine.  Profile Engine became the world’s first search engine dedicated to Facebook.  However, according to the Complaint, without notice, Facebook cut off the access Profile Tech. needed to continue its venture shorty after October 13, and began a “malicious” defamation campaign, thereby damaging Profile Tech.’s business and reputation.

MarkZuckerberg
Facebook Founder, Mark Zuckerberg
Claydon claims the agreement was partially written (via emails) and partially implied through the parties’ conduct, As consideration, Facebook gained a search engine more powerful than any of its own tools.  According to the Complaint, after months of disruption, Facebook denied the existence of an agreement maintaining that Profile Tech.’s data was obtained without authorization and that Profile Tech. sold the information to background services without Facebook’s or its users’ permission.   When Profile Tech confronted Facebook, the latter allegedly wrote a letter to Profile Tech. demanding that it “go out of business” and threatening that if it did not do so, “Facebook would escalate its efforts” to punish Profile Tech.  When Profile Tech. refused these demands, Claydon contends Facebook did, in fact, punish Profile Tech. by informing Facebook users that Profile Tech was “unsafe” and “spammy,” and disabled both Profile Tech.’s and Claydon’s Facebook page, which were used to communicate with customers, and indeed, with Facebook itself.    

Claydon further alleges that Facebook interfered with access to its other applications, independent of Profile Engine (IQ Test, Survey, Polling, etc…)  Facebook’s actions were allegedly purposeful and malicious and as such, require punitive damages in addition to compensation for lost profits and defamation.  In addition, Claydon requested an injunction to prevent Facebook from any further defamation it is allegedly employing against Profile Tech.

Claydon states that Facebook breached the implied duties found in every contract:  to deal fairly and in good faith, and refrain from doing anything that would have an ill effect on, or injure the rights of the other party’s receiving the fruits of the contract. 

[Christina Phillips & JT]

October 29, 2012 in Recent Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, October 22, 2012

Miriam Cherry on Cunningham, Post II: Modern Technology: A Disruptive Influence on Contract Doctrine?

The following post is cross-posted from an online symposium that previously appeared on Concurring Opnions.  The original post can be found here.

CherryMiriam Cherry is Professor of Law at Saint Louis University School of Law.  Some of her scholarship can be found at this link on SSRN.

In my view, modern technology has exacerbated the doctrinal tensions within contract law.  Currently, clickwraps and browsewraps stretch the notion of mutual assent to its extreme, perhaps warping it in the process.

The recent literature on form contracting online has been substantial.  While some of this literature sees online contracting as a natural inheritance to traditional contract law doctrine, other commentators have argued that contracting online has distorted the doctrine.

In Contracts in the Real World, Prof. Cunningham attempts to reconcile two recent cases, Specht v. Netscapeand Pro-CD v. Zeidenberg, as part of his treatment of the theme of contract formation and mutual assent.  As much as he tries, to me the cases still seem to be in conflict.

Real WorldAnd if that weren’t enough, two well-known additional cases that dealt with late-arriving terms inside a computer box, Hill v. Gateway and Klocek v. Gateway, blatantly contradict each other, with contrary holdings on virtually identical facts.

In my mind, these contradictions reveal a mismatch in the doctrine and the reality on the ground.  If there is no way for consumers to read or understand, or perhaps even see these clickwrap agreements, it hardly seems fair to bind consumers to them.  As seen above, however, this leads to contradictory rulings.

Inconsistent holdings create the appearance of an arbitrary justice system, and these disputes, which are governed by the Uniform Commercial Code, should turn out in a uniform manner.  When they do not, it only intensifies the debate about how to deal with online contracting and adhesion contracts online.

As we all continue to click our way through countless EULAs and are told that we are subject to “terms and conditions” that no reasonable consumer has had the time to read,  I do not believe that it is enough to hope that antiquated laws will handle new situations.

Instead, I would suggest that we need to continue to build on the wisdom of contract law.  While there is much to celebrate in the received wisdom of ancient doctrines, we must also recognize that it is the common law’s dynamism and adaptability that have led to its genius.

[Post by JT] 


October 22, 2012 in Books, Commentary, Recent Scholarship, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 5, 2012

Money Well Spent on “America’s Favorite Pastime”

As reported here by mlb.com, ESPN and Major League Baseball (MLB) have entered into an eight-year, $5.6 billion agreement, which includes TV and radio rights to MLB programming both in the U.S. and internationally, keeps baseball on the network through 2021 and includes a record-setting increase in annual rights fees (doubled to $700 million from $360 million annually).  

Wrigley_field_720
Wrigley Field
The agreement significantly expands the network's studio and game content, allowing ESPN to broadcast up to 90 regular-season MLB games plus wild card games for both leagues and the ever-exciting All Star week events (not including sunflower seed spitting).  Further, ESPN was granted the right to air the annual opening night game, games played on national holidays, and it may air up to ten Spring Training games per year.  Games can also be streamed through ESPN.com and an ESPN app.  

And there was much rejoicing.

ESPN's president said, “Baseball remains the national pastime," but the truth is, baseball has long been eclipsed by other sports and then by video games based on other sports and then by video games about killing people, and then by video games about killing zombies.  Meanwhile, there was recently talk of MLB becoming a wholly-owned subsidiary of Justin Bieber, Inc.  Commissioner Bud Selig commented that "today is a very historic day for baseball."   Taken in the context of a sport that is so hung up on statistics that every day is considered "historic" (Wow, Lou, that's the first time that a rookie switch-hitter has struck out looking from both sides of the plate in the same inning -- what a historic day!), Selig's comments seems to be downplaying the deal.    

According to the New York Times, ESPN's rival networks, Fox, TBS, NBC and CBS, are still contenders in the baseball airing arena, as ESPN did not manage to grab the division series or league championship series games.  There's still some history out there to be made.

[JT and Christina Phillips]

September 5, 2012 in In the News, Sports, Television, Web/Tech | Permalink | Comments (1) | TrackBack (0)

Wednesday, August 22, 2012

Cigarette Packaging and - Contracts?

Last week, the Australian High Court upheld a ban on company logos on cigarette packages. The law that was upheld also requires that the front of cigarette packages show images of the harmful effects of smoking (e.g. mouth ulcers, tumors, etc).

Okay, you might be wondering what this has to do with contracts.  One of my current research interests (obsessions) is the idea of notice substituting for actual assent, especially with online contracts. A dinky hyperlink nestled at the bottom of a page can serve as "notice," at least in the eyes of some courts although most people don't actually notice them.  The fuss over the cigarette packaging (and Big Tobacco really fought hard over this one) underscores something that is often lost on courts evaluating notice in contract cases -- the quality of the notice matters. A warning label in a small text box gets ignored; graphic visual depictions of injured human organs do not. Snazzy corporate labels make smoking seem cool; plain labels don't have that same cachet. Websites, too, could draw more attention to their contracts, but they don't. They certainly know how to grab our attention when they want it, with images and sounds. So why make legal terms so unobtrusive?  Could it be that they don't really want us to read them?

[Nancy Kim]

August 22, 2012 in In the News, Legislation, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)