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Online Contracts – When Is the Last Time You Read the Terms and Conditions?

Online Contracts – When Is the Last Time You Read the Terms and Conditions?

When you sign up for an online service do you read the terms and conditions? Few people do, not even the lawyers that are hired to write these things. While online agreements are ridiculed for their length and complexity they are important to the online service companies – companies like Uber, Airbnb and countless others that have to deal with the risk of customer lawsuits. Companies use online agreements to protect themselves in a variety of ways – against jury trials (often by requiring arbitration), to establish the location where customer lawsuits must be filed (often the merchant’s home state), and to limit damages customers can recover.

The strange reality is that when a customer challenges the enforceability of an online agreement the courts have to disregard the fact that the customer likely wouldn’t have read the agreement no matter how it was presented. When was the last time you read the terms and conditions when registering for a service on your smartphone? If you’re like most people, never.

Assume that you were signing up for Uber on your smartphone, and after navigating through two screens where you entered your contact info and created a password you were presented with this third, final screen (click on the image for clarity):

Would you think that by creating an account you had agreed to Uber’s terms and conditions, even if you didn’t click on the “Terms & Conditions and Privacy Policy” box and never read those terms? What if I told you that the text in that box was not blue or underlined, would that make a difference? Would the fact that the top line – “By creating an Uber account, you agree to the” – is in a lighter font than the words below it – “Terms & Conditions and Privacy Policy” – have made a difference to you? Might you not have completed your registration with Uber if you’d realized that any damages claim against Uber was barred? That any legal claim had to be brought before an arbitrator rather than a court?

These factors made a big difference to the Massachusetts Supreme Judicial Court when it was presented with the question whether Uber’s online agreement formed an enforceable contract. On these facts the SJC held that no contract had been formed.

The case was brought by Christopher Kauders, a blind man who alleges that on three occasions Uber drivers discriminated by refusing to pick him up because he was accompanied by a seeing eye dog, in violation of a Massachusetts statute that protects handicapped people with dog guides. Uber claimed that during the online registration process Mr. Lauder had agreed to its terms and conditions, one of which required him to resolve any claim by arbitration, another of which absolved Uber of any monetary damages.

After a byzantine procedural history the case eventually found its way to the SJC, which held that the framework for analyzing issues of online contract formation requires a two-part test: first, was there reasonable notice of the terms, and second, did the customer provide a reasonable manifestation of assent to those terms?

While this may sound straightforward (although I doubt it), in a case like this the devil is in the details – or, as the court put it, “the trick here is to know how to apply these general principles to newer forms of contracting over the Internet.”

What is “reasonable notice”? The court explained: “In examining the interface, we evaluate the clarity and simplicity of the communication of the terms. Does the interface require the user to open the terms or make them readily available? How many steps must be taken to access the terms and conditions, and how clear and extensive is the process to access the terms?”

What is a “reasonable manifestation of assent”? According to the court, “when considering whether the user assented to the terms of the online agreement, we consider the specific actions required to manifest assent.” Not surprisingly, the court noted that clickwrap agreements are the clearest manifestation of assent.

What about an online agreement such as Uber’s, which is not a clickwrap agreement, but rather a “browsewrap”? To analyze Uber’s agreement – and ultimately reach the conclusion that a contract had not been formed – the court applied a “totality of the circumstances” test. Among the factors the court considered were –

– The nature of the online transaction
– The scope of the agreement
– The interface design

Applying this criteria the court found that factors 2 and 3 favored a finding that Uber’s online contract was not enforceable – the agreement was broad, and the interface design was inadequate to provide reasonable notice that a new subscriber was entering into a contract.

What does this mean for online service providers?

First, online service providers should pay close attention to this case, whether they are based in Massachusetts or not, since almost any online provider could be sued in Massachusetts based on principles of personal jurisdiction. As a practical matter, the most conservative state sets the “lowest common denominator” standard for online providers nationwide. After the Kauders case, and at least for the moment, Massachusetts is that state.

Second, “browsewrap” agreements are now a thing of the past. No online provider wants to go through what Uber went through in this case – having their online contracting process and content picked apart in minute detail and argued over by lawyers and judges who have shown an inexhaustible capacity to do just this. While allowing users to register via a streamlined process that doesn’t force them to scroll through terms and conditions may be desirable, it’s not worth the risk. Clickwrap agreements are now the standard for every online company.

Third, even a clickwrap agreement is not totally immune from challenge. Online providers need to be careful to structure the registration process so that the user cannot register without being presented with the online agreement in a standard font size, being required to scroll through the agreement to the bottom of the screen, and to then either check a box indicating assent (preferable) or click a link stating “I Agree.”

Postscript for lawyers and other legal beagles: Uber faced an uphill fight in this case. In 2018 the same online agreement was at issue before the First Circuit, which held that the agreement was not enforceable. Cullinane v. Uber Techs., Inc. (1st Cir. 2018). See If Everything Is Conspicuous, Nothing Is Conspicuous: Forming an Online Contract in the First Circuit (July 2, 2018). While a First Circuit decision on a matter of state contract law is not binding on the SJC, it is highly persuasive. During oral argument before the SJC Uber’s lawyer described the First Circuit’s Cullinane decision as an “outlier.” The SJC didn’t buy that, and Uber now faces trial in a Massachusetts state court.

Kauders v. Uber Technologies, Inc. (Jan 4, 2021)

Additional posts on this topic:
Sloppy Online Agreements Costs Plaintiff Its Breach of Contract and CFAA Claims (Nov. 16, 2012)
“Yet Another Hierarchical Officious Oracle” Is Unable to Create an Enforceable Online Agreement (May 14, 2013)
Ninth Circuit Finds Barnes & Noble’s “Browsewrap” Unenforceable (Sept. 12, 2014)
The Copyright Workaround and Reputation Management: Small Justice v. Ripoff Report (Jan. 8, 2018)

Biden Administration Signals Reversal Of Delrahim Position on Standard Essential Patents

Nestled within the Biden administration’s recent, sweeping Executive Order on Promoting Competition in the American Economy is a small, rather oblique paragraph that has garnered little attention to date. Appearing as Section 5(d), it urges the Attorney General and the Secretary of Commerce to “consider whether to revise their position on the intersection of the intellectual property and antitrust laws,” in order to “avoid the potential for anticompetitive extension of market power beyond the scope of granted patents, and to protect standard-setting processes from abuse…” And specifically, to revisit a position taken in 2019 by three agencies they supervise – the Department of Justice (DOJ), Patent and Trademark Office (PTO) and National Institute of Standards and Technology (NIST).

This short statement signals a significant shift in policy on the proper balance between the rights of the owners of patents that would be “necessarily infringed” by the implementation of a standard and the rights of those buildings product that comply with a standard. Its importance to the administration is evidenced by the fact that presidents before Donald Trump rarely made public requests of the DOJ.

. . . continue reading on Andy Updegrove’s blog, Consortiuminfo.org

 

Trump v. Facebook, Twitter and Google

Trump v. Facebook, Twitter and Google

I don’t know how much money Trump’s lawsuits against Facebook, Twitter, and YouTube (and their CEOs) will help him raise, or whether it will gain him political support, but I do know one thing about these cases – they have no basis in current law.

Of course it’s not outside the realm of possibility that Republican judges in Florida will see it his way, but it seems very unlikely.

At issue is the infamous Section 230 of the Communications Decency Act (CDA) – 47 USC Section 230. The relevant part of this law states:

No provider or user of an interactive computer service shall be held liable on account of–

(A)  any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected

Trump argues that the companies are state actors and are required to host content protected by the First Amendment. 

However, the courts have consistently held that social media companies like Facebook are not state actors subject to the First Amendment, and that their decisions to delete or block access to a user’s account fall squarely within Section 230 immunity.

Not surprisingly, the prolific Prof. Eric Goldman explains why Trump has no case in this interview by Michael Smerconish:

Prof. Goldman has a paper coming shortly which analyzes 61 prior lawsuits by users over having their account terminated or content removed. In every case Internet service providers have won lawsuits challenging termination/removal decisions:

You can’t know for sure, but to say that Trump’s lawsuits are a long shot doesn’t do them justice.

Final Thoughts On Google v. Oracle

Final Thoughts On Google v. Oracle

At long last – after more than ten years, two trials and three appeals – the copyright lawsuit in Google v. Oracle has come to a close. In a surprise ending (given the emphasis on copyrightability for much of the case) on April 5, 2021 the Supreme Court held that Google’s copying of 11,500 lines of code from Oracle’s Java SE Application Programming Interface (the “Java API”) and its use in Google’s Android mobile operating system was copyright fair use.

A deeply disappointing ending for Oracle, which was hoping for a third trial, where it intended to seek ten billion dollars in damages.

I’ve written about Oracle v. Google more than any other case over the last ten years – I count 12 posts (enter “java” in the search bar above to find them or click here and scroll to bottom), and I have a few observations. But first, here is my highly compressed summary of the court’s fair use decision:

(1) The Oracle Java API is a functional “user interface,” analogous to a gas pedal in a car or the QWERTY keyboard. It is entitled to only “thin” copyright protection. (2) Google used the Java API to develop the Android platform software for a smartphone, a “transformative” use. (3) The 11,500 lines of code copied by Google represent less than one-half of one percent of the Java platform. (4) Since many programmers are familiar with the Java API, Google’s copying benefited the public by allowing programmers to use their knowledge and experience to program Android, rather than having to learn a new API. (5) Android did not harm Oracle’s actual or potential markets for the Java API (or so the jury could have found).

What Does Oracle v. Google Mean for the Copyrightability of APIs? For most of the ten years this case was in the courts the central issue was whether Oracle’s Java API was protected by copyright. However, the Supreme Court bypassed that difficult issue – it decided the case on fair use alone. The Federal Circuit’s holding that the Java API is copyrightable remains as precedent in the Federal Circuit, and the Federal Circuit decision can be cited for this holding, with the caveat “reversed on other grounds.” It’s not, however, binding on any other circuit, not even the Ninth Circuit, the circuit from which the case was appealed.

This means that anyone using an API and facing a claim of infringement could still have to relitigate copyrightability and enter the murky waters of fair use – murky because the litigation outcome of fair use is notoriously unpredictable, with a high reversal rate on appeal in the federal circuit courts.

Many companies in the software industry supporting Google had hoped for a ruling that APIs are not protectable, reversing the Federal Circuit. Instead of black and white they have continued uncertainty. This means that it remains risky to use an API without consent, since the user may still be subject to a copyright challenge.

What Does Oracle v. Google Mean for Fair Use When it Comes to APIs? To read the computer press you might mistakenly conclude that copying of APIs is fair use. While Google certainly made it easier to establish fair use in this context, the case doesn’t hold that APIs are subject to fair use in every instance, as a matter of law. For example, not every API will share the popularity of the Java API, and not every case will reflect the same economic non-impact  that was present here. In other words, in a different context Google could be distinguishable. 

What Does Oracle v. Google Mean for Jury Trials in Fair Use Cases? The second trial in this case was a jury trial on Google’s fair use defense. Oracle argued that fair use should be determined by the judge as a question of law de novo, while Google argued that the jury’s verdict should control, and be reversed only if it lacked substantial evidence to justify it. 

The Supreme Court held that fair use is an equitable defense, and therefore should be decided by the judge. The Court didn’t rule out fact finding by a jury, but the judge delivers the last word.

As a practical matter, this means the end of jury trials in copyright fair use cases in the U.S. It’s not inconceivable that a litigant would ask for a jury on fair use, but this would now require a detailed special verdict, and it would make little sense for a plaintiff or defendant to bifurcate responsibility for the case in that manner. It’s far easier to let the judge determine the facts, since the judge will be weighing the four copyright fair use factors. So, juries are likely a thing of the past in fair use litigation. 

Copyright fair use cases have often been decided on summary judgment, and given the responsibility now added to the role of the judge, summary judgment resolutions will be even more common in the future.

What Does Oracle v. Google Mean for Fair Use Beyond Software? Many copyright observers will be tempted to provide opinions on what this case means for copyright fair use, and in particular fair use outside computer software. However, it’s too early for this. This was the Supreme Court’s first major opinion on the fair use doctrine in over 25 years and it will be parsed and applied by the federal district and appellate courts for years to come in ways that are difficult to predict today. Google may broaden fair use law generally, or it may end up being a fact-bound case about functional computer code with little long-term impact for copyright fair use – it’s too early to say.

Nevertheless, it didn’t take long for lawyers to argue the implications of the case beyond software. In the visual art case Warhol v. Goldsmith, decided in March 2021 (just a few days before Google), the Second Circuit held that Andy Warhol’s use of Lynn Goldsmith’s photograph of Prince to create unauthorized silkscreen and pencil artworks was not fair use. Google was decided soon afterwards, and the Warhol Foundation filed a petition for panel rehearing and rehearing en banc, arguing that Google broadens the law of transformative use and public benefit, and established a new balancing analysis for copyright fair use which favors Warhol. As of this post, the Second Circuit has not acted on this petition. 

The Supreme Court Decision Owes a Large Debt to the First Circuit’s Decision in Lotus v. Borland. I can’t read Justice Breyer’s majority decision without seeing it’s debt to the First Circuit’s 1995 decision in Lotus v. Borland, and in particular Judge Boudin’s concurring opinion in that case. To my eyes, in some respects Oracle is an endorsement of Lotus’s “method of operation” holding in the guise of fair use.  

I suspect that Judge Breyer argued that the Court should hold that the Java API was a “method of operation,” and therefore uncopyrightable, as suggested by Lotus, which involved a menu-command user interface. He couldn’t persuade enough justices to back this theory, but when he wrote the opinion he had Lotus in mind, and the decision reflects it.

Google LLC v. Oracle America, Inc. (USSC April 5, 2021)

Governo Law: Mass SJC Clarifies Chapter 93A in Cases of Employee Misappropriation

Governo Law: Mass SJC Clarifies Chapter 93A in Cases of Employee Misappropriation

Every Massachusetts lawyer that drafts a civil complaint wonders – or should wonder – “can I allege 93A in this case?”

This law, M.G.L. c. 93A, is the Massachusetts unfair competition statute. It makes illegal “unfair and deceptive” acts and practices in the consumer and business contexts. The law is attractive to plaintiffs because it is one of the few state laws that provides the prospect of double or treble damages, as well as attorney’s fees. 

What is “unfair and deceptive”? There are many cases where the courts attempt to parse out what conduct falls under 93A. It’s complicated, and there is a substantial body of 93A jurisprudence. The legal standards are beyond the scope of this post, but to get a sense for how the Massachusetts Supreme Judicial Court (SJC) approaches this take a look at the SJC decisions in Morrison v. Toys “R” Us, Inc. and Aspinall v. Philip Morris Cos.

Because the law is largely judge-created, unless they follow c. 93A law closely most lawyers aren’t fully up to speed on the nuances of 93A and recent developments. And if you don’t assert 93A in your complaint, you might be deemed to have waived it if you try to add it later. What if the law changes between the date you file and the date you are challenged on it? You may be out of luck.

Given these factors many lawyers will include a 93A count almost reflexively, thinking that they’ll worry about the viability of the claim later, if and when the defendant challenges it. You’ll often see a 93A count in even the most routine cases, where it is eventually dropped or dismissed before trial. 

There are a number of limitations on 93A, and one important limitation is that the illegal conduct must take place “in the conduct of any trade or commerce.” Based on this language the courts have held 93A to be inapplicable in the employment relationship. An employer-employee dispute is considered an “internal” business dispute outside “trade or commerce.” As a result of a series of decisions applying this doctrine, it is near-black letter law that 93A cannot be claimed by an employer against an employee, whether the employee’s violation occurs during or after the employment relationship. One well-known example of this is in the area of noncompete law – even though an employee’s breach of a noncompete may take place after employment ends, it is still considered an employer-employee dispute arising out of the employment relationship, and 93A does not apply. 

Traditionally, under Massachusetts law, the act of misappropriating a trade secret by an employee falls under this restriction if the misappropriation occurs during the employment relationship. However, the courts have struggled with this doctrine, attempting to distinguish intra-employment conduct (which is exempt) from post-employment conduct (which may not be exempt).

The most recent decision in the line of employee misappropriation-93A cases is Governo Law Firm LLC v. Bergeron (2021). In this case six attorney-employees of the Governo law firm secretly downloaded proprietary information belonging to the firm and used that information when starting a new firm. 

You’d think lawyers would know better.

At trial the jury returned a verdict for $900,000 in favor of Governo Law on the claims of  conversion, breach of the duty of loyalty, and conspiracy.   

However, Governo Law was unhappy with several aspects of the trial, one of which was that the judge instructed the jury that Chapter 93A did not apply to anything the defendants did while still employed by Governo, and the jury ruled against Governo on its 93A claim. This cost Governo Law the potential for double or treble damages and attorneys fees. 

Governo Law appealed, and it won on this issue  – the SJC reversed and sent the case back for a new trial on the 93A claim. The court fudged the distinction between the attorneys’ conduct during employment and afterwards. The heart of its holding is as follows:

[T]he  93A, claim required the jury to consider that the defendants stole the plaintiff’s materials in order to determine whether the subsequent use of these materials was unfair or deceptive.  . . . where an employee misappropriates his or her employer’s proprietary materials during the course of employment and then uses the purloined materials in the marketplace, that conduct is not purely an internal matter; rather, it comprises a marketplace transaction that may give rise to a claim under 93A . . . . That the individuals were employees at the time of the misappropriation does not shield them from liability under 93A, where they subsequently used the ill-gotten materials to compete with their now-former employer.

This holding is not entirely new law – the state appeals court reached similar decisions in 2011 and 1984. (Specialized Tech. Resources, Inc. v. JPS Elastomerics Corp. (2011); Peggy Lawton Kitchens, Inc. v. Hogan (1984)). The Superior Court has also issued decisions on this issue. However, this is the first time the issue has reached the state supreme court, and it’s an important new landmark in Massachusetts 93A law. Whether it will lead to further erosion of employee 93A immunity in other contexts where the defendant’s conduct straddles the line between employee and non-employee remains to be seen. It may be that any illegal conduct during employment that will shed light on a former-employee’s post-employment conduct may now be admissible under the rationale used by the SJC in this case.

Governo Law is now entitled to a new trial, and this time the jury will be free to consider the six attorneys’ conduct while still employed by Governo Law in considering whether their subsequent use of the converted materials was an unfair or deceptive act. Exactly how the judge will instruct the jury on 93A remains to be seen – the SJC did not provide directions on this issue. However, the SJC opinion makes clear that the jury will be able to consider the fact that the attorneys stole Governo Law’s proprietary information, and regardless of whatever precautions the judge may take in the jury instructions, it’s hard to believe that jurors will not conflate employment conduct (stealing proprietary information) with post-employment conduct (using that information). 

Governo Law goes into its 93A retrial (assuming no settlement) with a strong upper hand. 

Governo Law Firm LLC v. Bergeron, 487 Mass. 188 (2021).