Cyber Report: A Dozen Things You Need to Know (Patriot’s Day Edition)

April 20, 2015

A Dozen Things

in Tech You Need to Know 

Happy Patriot’s Day!

Patriot’s Day commemorates that Battle of Lexington and Concord and the “shot heard ’round the world” that began the American Revolution.  It is a holiday in Maine and Massachachusetts and celebrated by, among other things, the running of the Boston Marathon and a Boston Red Sox afternoon game at Fenway Park.  Regardless of whether you are in Hopkinton, MA (where the marathon begins) or are one of the 628 people in Hopkinton, Iowa or anywhere else in the country, it is day worth celebrating in some fashion. (PS- Go Sox!)

Photo: Statue in Minute Man National Historical Park, Aldaron (CC By 2.0)

#1: Silicon Valley After Pao

The 24-day trial of Ellen Pao’s gender discrimination claims against Silicon Valley VC powerhouse Kleiner Perkins ended in a victory for Kleiner Perkins, but in the process a bright light was placed on the ongoing sexism and discrimination in Silicon Valley and tech work places in general.  

The Pao trial followed other recent cases of abuses at (i) Tinder where  co-founder Whitney Wolfe’s title was yanked since having a woman on a board “makes the company seem like a joke;” (ii) CMEA Capital where a partner trapped female employees in his office; and (iii) GitHub where founder Tom Preston-Warner was forced to resign after a female developer (Julie Ann Horvath) said an engineer there hijacked her work after she refused to sleep with him.

The spotlight likely will remain on Silicon Valley and the tech sector for a period of time as there are similar lawsuits pending against both Facebook and Twitter

Resources:  A Primer on the Ellen Pao TrialCLBR #178: Ellen Pao Aftermath with Kristen V. Brown

#2: Privacy – Chilly Reception in Washington, Eraser Law in California

The White House released draft privacy legislation, along the lines of the Consumer Privacy Bill of Rights its announced in 2012.  The bill’s creation of a safe harbor for compliance with industry codes of conduct and preemption of state law has resulted in a backlash even among Obama’s FTC who stated, “the draft bill does not provide consumers with the strong and enforceable protections needed to safeguard their privacy.”  While the Georgetown Law Center Center on Privacy and Technolgy said it would be “a significant setback for privacy.”

In California, however, January marked the effective date of its Eraser Law, which applies to online applications and mobile apps that are directed at minors (i.e., “created for the purpose of reaching an audience that is predominately comprised of minors, and is not intended for a more general audience comprised of adults”) OR that have a registered user that is a known minor.  To comply under the law, sites must afford any California minor the right to remove OR request to remove any content or information posted publicly on the website and provide notice to the minor and clear instructions as to how to effect removal.  The website operator has the option of anonymizing the minor’s content rather than removing it.  The statute does not extend to a minor’s content that is reposted by third parties. The statute does not apply if the minor was compensated or received “other consideration” for his/her posts.

The law also prohibits marketing to the minor “based upon information specific to that minor, including, but not limited to, the minor’s profile, activity, address, or location sufficient to establish contact with a minor” or sharing the minor’s information with third party’s “for the purpose of marketing or advertising products or services to that minor” based upon information that the user is a minor.

Resources: California’ Online Eraser Law and Other New Developments for 2015Obama’s Privacy Bill of Rights Discussion Draft Gets Chilly Reception

#3: Net Neutrality – The Battle Has Just Begun

In February, the Federal Communications Commission adopted Net Neutrality regulations based on three core principals:

  • No Throttling – broadband providers may not impair ordegrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
  • No Blocking – broadband providers may not block access to legal content, applications, services,or non-harmful devices.
  • No Paid Prioritization –  broadband providers may not favor some lawful Internet traffic overother lawful traffic in exchange for consideration –in other words, no “fast lanes.” This rule also bans ISPs from prioritizing contentand services of their affiliate.

The new regulations came about after the D.C. Circuit Court of Appeals invalidated the FCC’s last attempt at net neutrality in early 2014.  Congress is likely to attempt to either expressly override the regulations and/or adopt riders to bills that would limit its enforcement.

Resources: Net Neutrality Timeline: How We Got HereFCC Approves Net Neutrality and Preempts State Muni-Broadband Restrictions;  CLBR # 172: The Battle Over Net Neutrality with Free Press’ Craig Aaron

IN THE NEWS

Former White House Counsel turned legal columnist, John W. Dean, recently interviewed me for a discussion about the legal implications of online harassment.  I stressed that “while existing laws can often be used to address many of these problems, one should not underestimate the normative value of enacting legislation declaring that this city, state, or even nation will not tolerate certain conduct.”

Resources: Q&A With John Dean on Cyber Harassment in Today’s Verdict

#4: Cyber Harassment: A String of Court Victories, Pressure in Congress

In December the Massachusetts Supreme Court rejected a constitutional challenge to a criminal harassment conviction.  The court held that  “where the sole purpose of the defendants’ speech was to further their endeavor to intentionally harass the [victims] such speech is not protected by the First Amendment.” 

In February, a San Diego County court convicted Kevin Bollaert of 27 felony counts of identity theft and extortion in connection with a revenge p-rn operation.  Bollaert was behind the revenge p-rn website UGotPosted and a site called changemyreputation.com that collected $30,000 from users to have their photos removed from UGotPosted.  He was sentenced to 18-years in prison.

In addition, Craig Brittain operator of revenge porn site IsAnybodyDown entered into a settlement with the FTC requiring him to permanently delete all of the images and other personal information he received during the time he operated the site. He will also be prohibited from publicly sharing intimate videos or photographs of people without their affirmative express consent, as well as being prohibited from misrepresenting how he will use any personal information he collects online.

In Washington, Congresswoman Katherine Clark has responded to the lack of action by law enforcement to address the hundreds of death threats arising from Gamergate, by publishing an op-ed in a Capitol Hill publication entitled “Sexism in Cyberspace” criticizing the lack of action by the Justice Department which has prosecuted only 10 of the estimated 2.5 million cases of cyber-stalking between 2010 and 2013.  Clark is seeking to add a rider to the DOJ appropriation to urge them to intensify enforcement actions.

Resources: Massachusetts Supreme Court Upholds Conviction for Online HarassmentLandmark Victories for Revenge Porn OpponentsRep. Clark Challenges DOJ to Increase Enforcement Against Online HarassmentCLBR #170: The Cyber Civil Rights Initiative and the Fight Against Revenge Porn

#5: Online Advertising: Email Court Victories, Enforcement in Canada 

Spamigators continue to suffer setbacks as appellate courts address claims under CAN-SPAM and state email laws.  The Fourth Circuit Court of Appeals recently has held that a party that actively seeks out emails is barred from bringing suit under the common law principle “no wrong is done to one who consents.”  

On Thursday, I will be arguing before the California Court of Appeals in Dewitt v. Footlocker Retail, Inc. et al to uphold the dismissal with prejudice of a claim under California’s email statute and even hold that the Calfirona law is preempted.  In an unusual development, infamous spamigator Dan Balsam has filed a brief urging the Court of Appeal to uphold the dismissal but not issue any published opinions that might limit the favorable opinion he obtained in Balsam v Trancos.

Meanwhile Canadian authorities have announced their first major enforcement action under their new email law, which included a C$1.1 million fine.

Resources: Canadian Regulators Get Serious on Spam – Issue C$1.1M FineBriefing in Dewitt v Footlocker (Cal Court of Appeal Case No A141847)

#6 FTC – No More Checked Swings on Enforcement

Since updating its Endorsement Guidelines in 2009, the FTC has repeatedly declined to take enforcement actions against companies found violating the guidelines.  Late last year, however, the FTC sanctioned Deutsch LA for using its employees to promote Sony Playstation via Twitter without disclosing their connection.

Now, once again the FTC has entered into a consent decree with a company for incentivizing and then touting its reviews without disclosing their involvement.  AmeriFreight, an automobile shipment broker based in Peachtree City, Georgia, has agreed to halt the company’s allegedly deceptive practice of touting online customer reviews, while failing to disclose that the reviewers were compensated with discounts and incentives. The FTC’s complaint marks the first time the agency has charged a company with misrepresenting online reviews by failing to disclose that it gave cash discounts to customers to post the reviews.

In March, the FTC won a $16 million judgment against affiliate network Lead Click Media, finding that it was liable for bogus news sites with fake news and fake testimonials established by its affiliates.

Resources: FTC Declines to Take Action Over Yahoo! AstroturfingInside Sony/Deutsch LA Consent Decree: FTC Cracks Whip on Endorsement Guidelines in Social MediaAfter Several Check Swings, FTC Hits Company Over Incentivizing Reviews; Federal Court Rules Affiliate Marketing Network and its Parent Company Must Turn Over $16 Million They Received From Deceptive Marketing Scheme

#7: Troubled Waters – European Operations Can Cause Liability On Both Sides of Atlantic

Last week the European Union announced its antitrust complaint against Google alleging that it unfairly prioritized its own Google Shopping search results over comparison shopping sites.  if the charges are proven,  Google could face up to $6.4 billion in fines. At the same time, the EU announced it was launching another investigation into Google’s Android system. Google is not alone, Microsoft has paid almost €2 billion in European fines for antitrust claims and Apple’s new music service is also being reviewed. 

The Economist argues that the EU is partly motivated by the fact that “Europe is belatedly discovering its failure to develop many of the platforms underpinning the online economy. Much of the world’s digital territory has in effect been ceded to America without a fight.”    The Economist states that the EU would be better served by focusing  “on fixing what is holding back the old world’s most promising platforms: the lack of a common digital market.”

On this side of the Atlantic, the FTC is continuing its crackdown on companies making false certifications that they are compliant with the US-EU Safe Harbor Framework.  Adherence is to the framework is necessary to allows companies in the EU to transfer personal information to the United States.  The FTC recently announced their 15th and 16fh enforcement action taken on false safe harbor certifications since June 2014.

Resources:  EU Announces Antitrust Charges Against GoogleFTC Continues Crackdown on Companies Making False US-EU Safe Harbor Reps in Privacy Policies

#8: Cyber Security:  White House Orders Asset Seizures to Counter Cyber Attacks, Target Pays a Price; ISSA Summit

President Obama has issued an executive order authorizing the Treasury Secretary to freeze assets of foreign actors who threaten critical infrastructure, launch denial-of-service attacks, or seek to steal trade secrets or financial data.  The move came days after China’s cyber attacks against Github, the open-source code repository that included code to enable users to bypass China’s censorship firewall.
Target has settled consumer claims arising out of its 2013 data breach compromising as many as 110 million people for $10 million and agreed to pay $19 million to reimburse MasterCard.  So far the worst data breach of 2015 has been the Anthem-Blue Cross hack that exposed approximately 80 million records.

Learn more about how you can protect your company against data breaches at the Seventh Annual Information Security Summit on June 4th at the Los Angeles Convention Center.

#9: E-Commerce: The Debate over Application of ADA to Web and the Supreme Court’s Amazon Tax Ruling

Vermont federal court refused to throw out a suit by the National Federation of the Blind brought suit against Scribd, the so-called Netflix for books and other documents, for failing to make its content available in any non-visual way claiming it violated the Americans with Disabilities Act (ADA).  The U.S. Department of Justice will offer rules in March 2015 clarifying its position that the Americans with Disabilities Act extends to public websites and can require certain accommodations for the blind.  So far, however, the Ninth Circuit (which covers the states of Alaska, Arizona, California, Hawaii, Idaho Montana, Nevada, Oregon, Washington) has repeatedly held that the ADA does not apply to online commerce, ruling earlier this month in favor of Netflix on such a claim.

In late 2010, Colorado passed an onerous reporting scheme applicable to out-of-state retailers who did not collect sales tax.  The Direct Marketing Association (DMA) immediately challenged the law in federal court and won a preliminary injunction in 2011. The next year, the court granted the DMA summary judgment finding that the law violated the Commerce Clause.  In 2013, the 10th Circuit reversed the ruling on a technicality finding that the suit was barred by the federal Tax Injunction Act (TIA), which provides that federal district courts “shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law.”

unanimous Supreme Court reversed.  What has everyone talking, however, was Justice Kennedy’s concurrence regarding the continued vitality of the decision in Quill Corp. v. North Dakota, 504 U. S. 298, 311 (1992) which affirmed a bright line rule that retailers need not collect sales tax in states in which they do not have a physical presence.  Kennedy stated that “ a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the term” and therefore, “given these changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the Court’s holding in Quill.” 

The prospect of a looming Supreme Court review might give renewed impetus to the Marketplace Fairness Act, a federal legislative solution to enable states to collect sales taxes subject to certain conditions which passed the Senate last year, but I suspect that the same ideological objections that blocked its passage in the past will continue to do so.

Resources:Another Court Finds ADA Applies to WebsitesShould Netflix Be Accessible to the Deaf?DMA Wins Battle Over CO Sales Tax Law, But May Lose War As Supreme Court Opens Door to Revisiting Quill

#10: Consumer Reviews: New California Law, Yelp Documentary, Recent Cases

On January 1, California’s law prohibiting companies from including “a provision waiving the consumer’s right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services” went into effect. A recent New York federal court decision indicated that such provisions might be enforceable under New York law.

Yelp announced that the FTC had closed its investigation into it despite thousands of complaints, but a scathing documentary about Yelp’s practices Billy Dollar Bully has successfully obtained funding through Kickstarter to complete filming and production.

In Goren v. Ripoff Report, a defamation plaintiff obtained a default judgment and gained the copyright rights to the defendant’s offending post on RipOffReport.com, tried to use that right to demand the post be taken down.  Goren, however, could not overcome the fact that the original defendant had waived any such interest under the RipOffReport terms and conditions.

In Japan, a court has ordered Google Maps to remove critical reviews – worldwide and not just in Japan. Google plans to appeal.

Resources: California’ Online Eraser Law and Other New Developments for 2015Billion Dollar BullyJapanese Court Orders Google To Delete Critical Reviews From Google Maps

#11: Patent Trolls:  IPR and Alice Decision Lead to Continued Setbacks

Two relatively recent developments have caused federal courts to be less hospitable to patent trolls.  The first, was the enactment of patent reform in 2009 which established a post patent review procedure (IPR) with the Patent and Trademark Office (PTO).  The second was the Supreme Court’s decision last year in Alice Corp. v. CLS Bank International which held that abstract ideas are not patentable. The Alice decision led a California federal court to invalidate the e-Associate patent claimed for affiliate marketing operations. Most recently, the IPR procedures were used to invalidate parts of the Personal Audio podcasting patent.

And now they have a more potent enemy . .. John Oliver.

Resources: How the government just protected some of your favorite podcastsE-Commerce Traffic Patent Invalid Under Aliice, Judge Rules; CLBR: Joel Voelzke on Supreme Court’s Alice Ruling

#12: Silicon Beach: Provisors, Playa Vista and LBC

NOTE: I am on the executive committee for a soon to be launched “Silicon Beach 2” group in ProVisors.  If you know of anyone interested in joining the group, please let me know.

—-

Things are looking bright for Silicon Beach.

  • Entrepreneur Magazine reports that according to the L.A. Economic Development Council, the city has more people employed in high-tech jobs (368,500) than any other metro region in the U.S.   In addition, according to the Kaufman Index of Entrepreneurial Activity the city claimed 490 entrepreneurs per 100,000 people which puts it just behind San Francisco’s 570 per 100,000, but way ahead of New York’s 320.
  • City National Bank reports that $333 million in Q2-2014 alone -with almost half of that with startups in Santa Monica.
  • Google just purchased 12 acres in Los Angeles’ Playa Vista and will lease an adjacent 319,000 square feet facility in what could bring up to 6,000 jobs to the area.

In January, Yahoo! announced it was moving from the center that bears its name in Santa Monica, to a new 130,000 square feet development in Playa Vista that could house as many as 650 employees.  The move is a boost for the area, which includes other tech notables such as Belkin, Electronic Arts, ICANN, Facebook, Microsoft, Rubicon Project and YouTube, over neighboring Santa Monica.  The Los Angeles Times boasts that Playa Vista is turning into Silicon Valley South, it certainly is becoming the capitol of Silicon Beach.

A recent Los Angeles Times feature highlighted the city of Long Beach’s attempt to enter into the competition. While Long Beach has much to offer and generally is more affordable than its neighbors, it does not compare as favorably in the areas of education and crime.  

Resources: Silicon Beach is Booming and Shifting to Playa Vista; Silicon LBC? Mayor Garcia’s Vision of a Tech Hub Faces Challenges, But Could Give Overlooked City Attention

ABOUT THE INTERNET LAW CENTER & CYBER REPORT

The Internet Law Center is a law firm dedicated to helping businesses navigate the evolving legal standards for today’s digital economy.  Today the firm serves a diverse client base that includes startups and public companies both online and offline across four continents on issues ranging from online marketing, e-commerce, privacy, domain names to cyber harassment, as well as entertainment, general transactional and litigation matters.

The Internet Law Center was founded by Bennet Kelley who has been named as among the nation’s top internet lawyers by several publications including the Los Angeles Business Journal which named him one of the Most Influential Lawyers in Digital Media and E-Commerce.  

Cyber Report is the award-winning newsletter of the Internet Law Center.  It is for information purposes only and is not meant to express any legal opinion or advice (not even if read backwards).  The occasionally snarky views expressed herein do not necessarily reflect the views of the firm nor any ILC client. 

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2 thoughts on “Cyber Report: A Dozen Things You Need to Know (Patriot’s Day Edition)

  1. Pingback: CLBR #179: Mark Ishman on Data Breaches | Cyber Law & Business Report

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