Contracts

Subscribe to Contracts

ChatGPT has quickly become the talk of business, media and the Internet – reportedly, there were over 100 million monthly active users of the application just in January alone.

While there are many stories of the creative, humorous, apologetic, and in some cases unsettling interactions with ChatGPT,[1] the potential business applications for ChatGPT and other emerging generative artificial intelligence applications (generally referred to in this post as “GAI”) are plentiful. Many businesses see GAI as a potential game-changer.  But, like other new foundational technology developments, new issues and possible areas of risk are presented.

ChatGPT is being used by employees and consultants in business today.  Thus, businesses are well advised to evaluate the issues and risks to determine what policies or technical guardrails, if any, should be imposed on GAI’s use in the workplace.…

At the close of 2022, New York Governor Kathy Hochul signed the “Digital Fair Repair Act” (S4101A/A7006-B) (to be codified at N.Y. GBL §399-nn) (the “Act”). The law makes New York the first state in the country to pass a consumer electronics right-to-repair law.[1] Similar bills are pending in other states. The Act is a slimmed down version of the bill that was first passed by the legislature last July.

Generally speaking, the Act will require original equipment manufacturers (OEMs), or their authorized repair providers, to make parts and tools and diagnostic and repair information required for the maintenance and repair of “digital electronic equipment” available to independent repair providers and consumers, on “fair and reasonable terms” (subject to certain exceptions). The law only applies to products that are both manufactured for the first time as well as sold or used in the state for the first time on or after the law’s effective date of July 1, 2023 (thus exempting electronic products currently owned by consumers).…

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.…

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)).…

UPDATE: On December 23, 2021, the parties reached a settlement, as Southwest filed an unopposed motion for entry of final judgment and a permanent injunction containing the same restrictions as the temporary injunction issued in September. Under the proposed permanent injunction, Kiwi would be barred from scraping flight and fare information from Southwest’s site, publishing any Southwest flight or fare information on kiwi’s site or app (or selling any Southwest flights), or otherwise using Southwest’s site for any commercial purpose or in a manner that violates Southwest’s site terms.

UPDATE: On November 1, 2021, the parties filed a Joint Notice of Settlement indicating that they have reached a settlement agreement in principle.  The terms of the settlement were not disclosed.

UPDATE: On October 28, 2021, the defendant Kiwi.com, Inc. filed a notice of appeal to the Fifth Circuit seeking review of the district court’s ruling granting Southwest Airlines Co.’s motion for a preliminary injunction.

On September 30, 2021, a Texas district court granted Southwest Airline Co.’s (“Southwest”) request for a preliminary injunction against online travel site Kiwi.com, Inc. (“Kiwi”), barring Kiwi from, among other things, scraping fare data from Southwest’s website and committing other acts that violate Southwest’s terms. (Southwest Airlines Co. v. Kiwi.com, Inc., No. 21-00098 (N.D. Tex. Sept. 30, 2021)). Southwest is no stranger in seeking and, in most cases, obtaining injunctive relief against businesses that have harvested its fare data without authorization – ranging as far back as the 2000s (See e.g., Southwest Airlines Co. v. BoardFirst, LLC, No. 06-0891 (N.D. Tex. Sept. 12, 2007) (a case cited in the current court opinion)), and as recently as two years ago, when we wrote about a 2019 settlement Southwest entered into with an online entity that scraped Southwest’s site and had offered a fare notification service, all contrary to Southwest’s terms.

In this case, the Texas court found that Southwest had established a likelihood of success on the merits of its breach of contract claim. Rejecting Kiwi’s arguments that it did not assent to Southwest’s terms, the court found that Kiwi had knowledge of and assented to the terms in multiple ways, including by agreeing to the terms when purchasing tickets on Southwest’s site. In all, the court found the existence of a valid contract and Kiwi’s likely breach of the terms, which prohibit scraping Southwest’s flight data and selling Southwest flights without authorization. The court also found that Southwest made a sufficient showing that Kiwi’s scraping and unauthorized sale of tickets, if not barred, would result in irreparable harm. In ultimately granting Southwest’s request for a preliminary injunction, the Texas court also found that Southwest also demonstrated the threatened injury if the injunction is denied outweighed any harm to Kiwi that will result if the injunction is granted and that the injunction would be in the public interest.

What made this result particularly notable is that the preliminary injunction is based on the likelihood of success on the merits of Southwest’s breach of contract claim and Kiwi’s alleged violation of Southwest’s site terms, as opposed to other recent scraping disputes which have centered around claims of unauthorized access under the federal Computer Fraud and Abuse Act (CFAA).

On January 14, 2021, Southwest Airlines Co. (“Southwest”) filed a complaint in a Texas district court against an online travel site, Kiwi.com, Inc. (“Kiwi”), alleging, among other things, that Kiwi’s scraping of fare information from Southwest’s website constituted a breach of contract and a violation of the Computer Fraud and Abuse Act (CFAA). (Southwest Airlines Co. v. Kiwi.com, Inc., No. 21-00098 (N.D. Tex. filed Jan. 14, 2021)). Southwest is no stranger in seeking and, in most cases, obtaining injunctive relief against businesses that have harvested its fare data without authorization – ranging as far back as the 2000s (See e.g., Southwest Airlines Co. v. BoardFirst, LLC, No. 06-0891 (N.D. Tex. Sept. 12, 2007), and as recently as two years ago, when we wrote about a 2019 settlement Southwest entered into with an online entity that scraped Southwest’s site and had offered a fare notification service, all contrary to Southwest’s terms.

According to the current complaint, Kiwi operates an online travel agency and engaged in the unauthorized scraping of Southwest flight and pricing data and the selling of Southwest tickets (along with allegedly charging unauthorized service fees), all in violation of the Southwest site terms. Upon learning of Kiwi’s scraping activities, Southwest sent multiple cease and desist letters informing Kiwi of its breach of the Southwest terms. It demanded that Kiwi cease scraping fare data, publishing fares on Kiwi’s site and using Southwest’s “Heart” logo in conjunction with the selling of tickets. Kiwi responded and sought to form a business relationship, an overture that Southwest refused.  According to Southwest, when discussions failed to yield a resolution, Kiwi allegedly continued its prior activities, prompting the filing of the suit.

As reported last week, it appears that a state-sponsored security hack has resulted in a major security compromise in widely-used software offered by a company called SolarWinds. The compromised software, known as Orion, is enterprise network management software that helps organizations manage their networks, servers and networked devices. The software is widely-used by both public and private sector companies.

The exposure, in the form of “spyware” inserted into one or more updates to Orion, is significant. According to an alert issued by the Cybersecurity and Infrastructure Security Agency (“CISA”), it is common for network administrators to configure Orion with pervasive privileges, which would allow it to bypass firewalls and other security measures, thus making it an enviable target for hackers. CISA categorized the SolarWinds attack as presenting a “grave risk” to government agencies and private entities.

The attack had been ongoing and undetected since perhaps March 2020 (or earlier, and certainly planned out for years). SolarWinds’s SEC filings last week estimated that about 18,000 of its customers may have downloaded the malware-laden software update for Orion.  However, the number of organizations impacted may be even higher.  Orion may be part of a larger infrastructure implementation or managed service provided by third party service providers.  And as a result, even entities that do not have a direct relationship with SolarWinds may need to investigate potential impacts.

It is important to note, however, that even though a business may have the malicious code integrated into their network, they may not yet have suffered an actual breach or intrusion.  “Luckily,” this actor seems to have taken great pains to remain concealed, and as a result, it appears that the perpetrators had not yet had an opportunity to invoke their ability to invade every impacted network in all potentially impacted cases.

While we are far from learning all of the various ways in which this backdoor was exploited, early anecdotal evidence suggests that these attackers were very interested in pivoting into other systems, including cloud-based systems, such as Office 365, that may not have any direct connection to a SolarWinds installation.  While the disabling of the so-called Orion “Sunburst backdoor” and the confiscation of the original domain name that was receiving communications from the attacker should stop further data loss from the initial entry point, it will not stop further incidents if the attacker has already established persistent access within the network. Thus, it is important to note merely because an affected organization may have closed the initial vulnerability, it should not declare itself as contained too quickly as the hackers may have surreptitiously achieved persistent access beyond the Orion entry point.

There are two sobering consequences from this recognition.  First, if an organization determines that it installed the corrupted version of Orion, an organization’s investigation may need to be very broad in nature.  Second, organizations may need to consider whether previous breaches that were resolved this year might, in fact, have had something to do with this issue that was undiscovered at the time of detection.  Accordingly, it may be necessary to revisit prior incidents thought long resolved.…