In a recent ruling, a California district court held that Apple, as operator of that App Store, was protected from liability for losses resulting from that type of fraudulent activity. (Diep v. Apple Inc., No. 21-10063 (N.D. Cal. Sept. 2, 2022)). This case is important in that, in
FTC Sues Data Provider over the Collection and Sale of Geolocation Data
On August 29, 2022, the Federal Trade Commission (FTC) announced that it had filed a complaint against Kochava, Inc. (“Kochava”), a digital marketing and analytics firm, seeking an order halting Kochava’s alleged acquisition and downstream sale of “massive amounts” of precise geolocation data collected from consumers’ mobile devices.
The complaint alleges that the data is collected in a format that would allow third parties to track consumers’ movements to and from sensitive locations, including those related to reproductive health, places of worship, and their private residences, among others. The FTC alleged that “consumers have no insight into how this data is used” and that they do not typically know that inferences about them and their behaviors will be drawn from this information. The FTC claimed that the sale or license of this sensitive data, which could present an “unwarranted intrusion” into personal privacy, was an unfair business practice under Section 5 of the FTC Act.
Businesses That Use Consumer Data or Data Products (Everyone?) Take Heed: FTC Moves Ahead with Rulemaking Process on “Commercial Surveillance” Practices
On August 11, 2022, the Federal Trade Commission (FTC) issued an Advance Notice of Proposed Rulemaking (ANPR) and announced it was exploring a rulemaking process to “crack down on harmful commercial surveillance” and lax data security. The agency defines commercial surveillance as “the collection, aggregation, analysis, retention, transfer, or monetization of consumer data and the direct derivatives of that information.”
The FTC View
The FTC has not released any proposed rules but seeks public comment on the harms stemming from commercial surveillance and whether new rules are needed to protect consumer data privacy. As part of the ANPR, and before setting out a host of questions for public comment, the FTC offers its take on the opaque ecosystem surrounding the collection of mobile data and personal information (which the FTC asserts is often done without consumers’ full understanding). The FTC discusses the subsequent sharing and sale of information to data aggregators and brokers that then sell data access or data analysis products to marketers, researchers, or other businesses interested in gaining insights from alternative data sources. The agency argues that based on news reporting, published research and its own enforcement actions, the benefits of the current consumer data marketplace may be outweighed by “harmful commercial surveillance and lax data security practices,” thus potentially requiring rules to protect consumers and to offer more regulatory clarity to companies beyond the FTC’s case-by-case enforcement. As FTC Chair Lina Khan said in her statement accompanying the ANPR: “[T]he growing digitization of our economy—coupled with business models that can incentivize endless hoovering up of sensitive user data and a vast expansion of how this data is used —means that potentially unlawful practices may be prevalent, with case-by-case enforcement failing to adequately deter lawbreaking or remedy the resulting harms.”
FTC Invitation for Comment
After describing the FTC view on the issues, the Commission invites public comment on whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive. Within the ANPR are a myriad of questions (too numerous to list here; a fact sheet is available here and the press release also offers a breakdown). Though, perhaps the multimillion-dollar questions asked by the agency are: Which kinds of data should be subject to a potential privacy rule? To what extent, if at all, should a new regulation impose limitations on companies’ collection, use, and retention of consumer data?
FTC Blog Post Highlights Regulatory Focus on Collection of Location and Health Data
On July 11, 2022, the Federal Trade Commission (FTC) published “Location, health, and other sensitive information: FTC committed to fully enforcing the law against illegal use and sharing of highly sensitive data,” on its Business Blog. The blog post is likely related to an Executive Order (the “EO”) signed by President Biden in the wake of the Supreme Court’s Dobbs decision. Among other things, the EO directed the FTC to consider taking steps to protect consumers’ privacy when seeking information about and related to the provision of reproductive health care services.
While this latest drumbeat on this issue came from the FTC, we expect to see attention to this issue by other regulators, including, perhaps, the Department of Justice as well as state attorneys general.
Although the FTC post centers on location data and reproductive health services, it is likely that there will be more scrutiny of the collection and use of location data in general. This renewed focus will potentially subject a wide group of digital ecosystem participants to increased attention. The spotlight will likely fall on interactive platforms, app publishers, software development kit (SDK) developers, data brokers and data analytics firms – over practices concerning the collection, sharing and perceived misuse of data generally.
Senator Warren Introduces Bill to Ban the Sale of Location and Health Data
On June 15, 2022, Senator Elizabeth Warren introduced a bill, cosponsored by a host of other Democratic and independent Senators, the “Health and Location Data Protection Act of 2022,” which, subject to a few exceptions, would, among other things, prohibit the selling, sharing or transferring location data and health data. The bill gives the Federal Trade Commission (FTC) rulemaking and enforcement authority for violations of the law and also grants state attorneys general the right to bring actions; notably, the law would also give a private right of action to persons adversely affected by a violation of the proposed law.
DOJ Revises Policy for CFAA Prosecution to Reflect Developments in Web Scraping and Other Matters
On May 19, 2022, the Department of Justice (DOJ) announced that it had revised its policy regarding prosecution under the federal anti-hacking statute, the Computer Fraud and Abuse Act (CFAA). Since the DOJ last made changes to its CFAA policy in 2014, there have been a number of relevant developments in technology and business practices, most notably related to web scraping. Among other things, the revised policy reflects aspects of the evolving views of this sometimes-controversial statute and the outcome of two major CFAA court decisions in the last year (the Ninth Circuit hiQ decision and the Supreme Court’s Van Buren decision), both of which adopted a narrow interpretation of the CFAA in situations beyond a traditional outside computer hacker scenario.
While the DOJ’s revised CFAA policy is only binding on federal CFAA criminal prosecution decisions (and could be amended by subsequent Administrations) and does not directly affect state prosecutions (including under the many state versions of the CFAA) or civil litigation in the area, it is likely to be relevant and influential in those situations as well, and in particular, with respect to web scraping. It seems that even the DOJ has conceded that the big hiQ and Van Buren court decisions have mostly (but not entirely) eliminated the threat of criminal prosecution under the CFAA when it comes to the scraping of “public” data. Still, as described below, the DOJ’s revisions to its policy, as written, are not entirely consistent with the hiQ decision.
Taking Cue from the Supreme Court’s Van Buren Decision, Ninth Circuit Releases New Opinion Holding Scraping of Publicly Available Website Data Falls Outside of CFAA
On remand from the U.S. Supreme Court, the Ninth Circuit earlier this week again affirmed the lower court’s order preliminarily enjoining LinkedIn Corp. (“LinkedIn”) from blocking data analytics company hiQ Labs, Inc.’s (“hiQ”) access to publicly available LinkedIn member profiles. (hiQ Labs, Inc. v. LinkedIn Corp., No. 17-16783 (9th Cir. Apr. 18, 2022)) (“hiQ II”). In what might be considered an emphatic, pro-scraping decision (even more so than its first, now-vacated 2019 decision), the appeals court found that hiQ “raised at least serious questions” that its scraping of public LinkedIn member profile data, even after having had its access revoked and blocked by LinkedIn, is lawful under the federal Computer Fraud and Abuse Act (CFAA).
The panel concluded that the reasoning of last year’s Supreme Court decision in Van Buren v. U.S., which interpreted the “exceeds authorized access” provision of the CFAA, reinforced the Ninth Circuit’s interpretation that the concept of “without authorization” under the CFAA does not apply to public websites. Thus, while the law relating to screen scraping remains unclear in many respects – particularly as scraping technology and the applied uses of public website data continue to evolve – this important new decision by the Ninth Circuit carries the reasoning forward from Van Buren and limits the applicability of the CFAA as a tool against the scraping of publicly available website data.
Last June, following Van Buren and the Supreme Court’s separate ruling vacating and remanding the Ninth Circuit’s prior decision in the hiQ case, we had a few questions about how the appeals court would interpret the CFAA’s “without authorization” provision on remand in light of the so-called “gates up or down” approach to the CFAA espoused by the Supreme Court in Van Buren. In particular, we were waiting to see whether the appeals court would consider a website owner’s technical measures to selectively block a specific entity’s access to public website data as effectively bringing crashing down the “gates” of authorized access (and, with it, potential CFAA liability). The long wait is over and the Ninth Circuit has answered these questions with its pro-scraping, open web interpretation of the CFAA (with respect to public websites). While some additional legal questions remain unanswered in this case, it appears the CFAA “without authorization” issue has been firmly resolved, at least as far as the Ninth Circuit is concerned.
However, though one issue may has been resolved, others remain. As stated in our 2017 Client Alert about the lower court’s hiQ decision, entities engaged in scraping should still tread carefully. As the Ninth Circuit itself says in hiQ II: “Entities that view themselves as victims of data scraping are not without resort, even if the CFAA does not apply.”
Also, of course, this litigation does not involve the also-controversial practice of scraping mobile applications. Because the methodology involved in that type of scraping is significantly different, it is possible that a court could come to a different conclusion with respect to the CFAA in that circumstance.
President Biden Signs Executive Order Detailing National Policy Objectives for Digital Assets
On March 9, 2022, the President issued an Executive Order (the “E.O.”) that articulates a high-level, wide-ranging national strategy for regulating and fostering innovation in the burgeoning digital assets space. The strategy is intended to encourage innovation yet still provide adequate oversight to control systemic risks and the attendant investor,
In the Coming ‘Metaverse’, There May Be Excitement but There Certainly Will Be Legal Issues
The concept of the “metaverse” has garnered much press coverage of late, addressing such topics as the new appetite for metaverse investment opportunities, a recent virtual land boom, or just the promise of it all, where “crypto, gaming and capitalism collide.” The term “metaverse,” which comes from Neal Stephenson’s 1992 science fiction novel “Snow Crash,” is generally used to refer to the development of virtual reality (VR) and augmented reality (AR) technologies, featuring a mashup of massive multiplayer gaming, virtual worlds, virtual workspaces, and remote education to create a decentralized wonderland and collaborative space. The grand concept is that the metaverse will be the next iteration of the mobile internet and a major part of both digital and real life.
Don’t feel like going out tonight in the real world? Why not stay “in” and catch a show or meet people/avatars/smart bots in the metaverse?
As currently conceived, the metaverse, “Web 3.0,” would feature a synchronous environment giving users a seamless experience across different realms, even if such discrete areas of the virtual world are operated by different developers. It would boast its own economy where users and their avatars interact socially and use digital assets based in both virtual and actual reality, a place where commerce would presumably be heavily based in decentralized finance, DeFi. No single company or platform would operate the metaverse, but rather, it would be administered by many entities in a decentralized manner (presumably on some open source metaverse OS) and work across multiple computing platforms. At the outset, the metaverse would look like a virtual world featuring enhanced experiences interfaced via VR headsets, mobile devices, gaming consoles and haptic gear that makes you “feel” virtual things. Later, the contours of the metaverse would be shaped by user preferences, monetary opportunities and incremental innovations by developers building on what came before.
In short, the vision is that multiple companies, developers and creators will come together to create one metaverse (as opposed to proprietary, closed platforms) and have it evolve into an embodied mobile internet, one that is open and interoperable and would include many facets of life (i.e., work, social interactions, entertainment) in one hybrid space.
In order for the metaverse to become a reality – that is, successfully link current gaming and communications platforms with other new technologies into a massive new online destination – many obstacles will have to be overcome, even beyond the hardware, software and integration issues. The legal issues stand out, front and center. Indeed, the concept of the metaverse presents a law school final exam’s worth of legal questions to sort out. Meanwhile, we are still trying to resolve the myriad of legal issues presented by “Web 2.0,” the Internet we know it today. Adding the metaverse to the picture will certainly make things even more complicated.
GPL Open Source Litigation Could Open the Door to Other Suits
In today’s digital age, the question isn’t whether there is open source software being used in a company’s products, but how it is being used and what license governs its use. Open source is ubiquitous. Despite its widespread use over the past decade, the provisions of open source licenses have been interpreted by only a handful of U.S. and foreign courts. Open source-related disputes do not usually reach court as open source advocacy groups that enforce open source license provisions often work out a resolution between the parties without litigation.
However, one recent open source dispute has reached the courthouse. As discussed below, a new case filed in California state court could test the enforcement of one of the most common family of open source licenses, the GNU General Public Licenses or “GPL.” If the plaintiff is successful, the case could have the effect of expanding enforcement of GPL licenses under the rubric of consumer protection and allow a broad range of parties to bring claims under the GPL as third party beneficiaries of those licenses.
Last week, the Software Freedom Conservancy, Inc. (“SFC”) filed a complaint against smart-TV manufacturer Vizio, Inc. (“Vizio”) alleging a failure to comply with the GNU General Public License Version 2 (“GPLv2”) and GNU Lesser General Public License Version 2.1 (“LGPL v2.1”) (collectively, the “GPL Licenses”). SFC alleges that, over the last four years, Vizio distributed smart TVs that included executable versions of Vizio’s “SmartCast code. The SmartCast code, it alleged, contained modifications to the Linux kernel and other code obtained by Vizio pursuant to the GPL Licenses. SFC asserts that Vizio did not release the corresponding modified source code (as enhanced, modified or otherwise altered by Vizio) or accompany their smart TVs with a written offer to supply such code upon demand, as is required under the GPL Licenses. (Software Freedom Conservancy, Inc. v. Vizio, Inc., No. 30-2021-01226723 (Cal. Super. Orange Cty Filed Oct. 19, 2021)).