Contracts

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In the first half of 2023, a deluge of new generative artificial intelligence (“GAI”) tools hit the market, with companies ranging from startups to tech giants rolling out new products. In the large language model space alone, we have seen OpenAI’s GPT-4, Meta’s LLaMA, Anthropic’s Claude 2, Microsoft’s Bing AI, and others.

A proliferation of tools has meant a proliferation of terms and conditions. Many popular tools have both a free version and a paid version, which each subject to different terms, and several providers also have ‘enterprise’ grade tools available to the largest customers. For businesses looking to trial GAI, the number of options can be daunting.

This article sets out three key items to check when evaluating a GAI tool’s terms and conditions. Although determining which tool is right for a particular business is a complex question that requires an analysis of terms and conditions in their entirety – not to mention nonlegal considerations like pricing and technical capabilities – the below items can provide prospective customers with a starting place, as well as bellwether to help spot terms and conditions that are more or less aggressive than the market standard.

UPDATE: On February 5, 2024, the California district court granted the defendant Aspen Technology Labs, Inc.’s motion to dismiss Jobiak LLC’s web scraping complaint for lack of personal jurisdiction, with leave to amend. The court found that Jobiak had not adequately alleged that its copyright and tort-related claims arose out of the defendant’s forum-related activities and that there were no allegations that Jobiak’s database or website was hosted on servers in the California forum.  On March 8, 2024, the court dismissed the action with prejudice, as Jobiak did not submit an amended complaint within the time allowed by the court.  

In recent years there has been a great demand for information about job listings, company reviews and employment data.   Recruiters, consultants, analysts and employment-related service providers, amongst others, are aggressively scraping job-posting sites to extract that type of information. Recall, for example, the long-running, landmark hiQ scraping litigation over the scraping of public LinkedIn data.

The two most recent disputes regarding scraping of employment and job-related data were brought by Jobiak LLC (“Jobiak”), an AI-based recruitment platform.  Jobiak filed two nearly-identical scraping suits in California district court alleging that competitors unlawfully scraped its database and copied its optimized job listings without authorization. (Jobiak LLC v. Botmakers LLC, No. 23-08604 (C.D. Cal. Filed Oct. 12, 2023); Jobiak LLC v. Aspen Technology Labs, Inc., No. 23-08728 (C.D. Cal. Filed Oct. 17, 2023)).

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).