Articles Posted in Business Law

There has been an increase in privacy violations that have led to class action lawsuits. For example, Facebook was forced to pay $550 million to settle a class action lawsuit for privacy violations. In that case, it was ordered to pay the plaintiffs due to an alleged systematic violation of an Illinois consumer privacy law. The settlement agreement included a provision that required Facebook to procure express consent for face analysis and auto-tagging its users. There have been other lawsuits filed against technology companies, such as, Shutterfly, Snapchat, and Google for similar violations.

The California Consumer Privacy Act (“CCPA”) gives consumers the right to request information from a business about its data collection and retention practices. The consumers have the right to know if the business is using their data to make inferences from their behavior, attitude, psychology, intelligence, or abilities. This statute grants consumers the right to request a data deletion. It gives the consumers an “opt-out option” from selling their data to third parties. However, the statute is not retroactive which means that it does not apply to violations that took place before implementing the law.

A putative class action lawsuit was filed against Hanna Andersson, LLC and Salesforce.com for their alleged failure to maintain reasonable safeguards that led to a data breach. The complaint alleges that a group of hackers infiltrated the defendants’ websites with malware allowing them to extract personal information. Under Civil Code § 1798.150, a consumer is permitted to file a lawsuit if he or she can prove the business failed to implement reasonable safeguards to protect personal information. Then, if the plaintiff overcomes the applicable burden of proof, then he or she may be entitled to a minimum of $100 or maximum of $750 per consumer per incident, or actual damages, whichever is greater, as well as injunctive relief. However, there is a provision which requires giving the business an opportunity to cure the violation. In other words, the consumer must initially inform the business of the violation and grant at least 30 days to cure the violation. The business must provide a written statement that confirms the violation has been cured and no other violation will take place. Yet, the statute does not yield a safe harbor clause for the business against consumers who are seeking actual damages.

There are various ways to protect your intellectual property rights. First, you can register a copyright. Second, you may register a trademark or service mark. Third, you may register a patent. Copyrights are meant to protect literature, music, motion pictures, artistic works, photographs, essays, articles, computer programs, graphic design, and sound recordings. A trademark is a word, phrase, symbol, or design, or a combination of any of them that identifies and distinguishes the source of the goods of one party from those of others. A service mark is the same as a trademark but it identifies and distinguishes the source of a service. A patent grants a property right to the inventor. It grants the right to exclude others from making, using, offering for sale, or selling the invention or importing the invention into the United States. In general, patents are valid for 20 years from the application date.

So, in summary, trademarks, service marks, copyrights, and patents protect different types of intellectual property. Trademarks protect brand names and logos used on goods and services. A copyright protects an original artistic or literary work. A patent protects inventions. For example, if you invent a television, you should file a patent application. You would apply to register a trademark to protect the television’s brand name. You can also register a copyright for the product’s advertisement.

There have been multiple intellectual property disputes especially between e-commerce websites. For example, there was a legal battle between Amazon and Barnes & Noble regarding the “single click” or “one-click” buying mechanism. This legal action was confidentially settled between the parties. Google has been sued by multiple companies for selling their trademarks as keywords. In fact, American Airlines and Geico have instigated legal actions against it. Also, the infamous “Da Vinci Code” lawsuit was brought by several authors against the Random House Group claiming copyright infringement. The case was about an alleged copyright violation by Dan Brown who wrote the bestselling “Da Vinci Code” book. However, the court dismissed the case and stated that there was no copyright infringement by textual or non-textual copying of a substantial part of the subject book.

The question is whether you can copyright computer programs and videogames. The Copyright Act was amended to expressly include the right to register computer programs and videogames.

What is a computer program and how can you copyright it?

A computer program is a set of statements or instructions to be used in a computer to provide a result. See 17 U.S.C. § 101; Stern Electronics, Inc. v. Kaufman, 669 F.2d 852, 855 (2d. Cir. 1982). Copyright protection extends to the copyrightable expressions embodied in the computer program. Computer programs are classified as literary works for the purposes of copyright. See Whelan Associates v. Jaslow Dental Laboratory, 797 F.2d 1222, 1234 (3d Cir. 1986). Also, copyright laws do not protect the functional aspects of a computer program (e.g., algorithms, formatting, functions, logic, system designs).

The copyright application process is three parts: (1) application form; (2) nonrefundable filing fee; and (3) a nonreturnable deposit of the work’s copy. In general, the copyright owner should submit a separate application for each work. However, the following exceptions apply for registering multiple works in one application:

  1. Collective Works: When a number of separate and independent contributions are assembled into a collective whole;
  2. Group Registrations: When multiple unpublished works, serials, newspapers, newsletters, contributions to periodicals, photographs, database updates, or secure test items meet registration requirements in one application;

The basic rules for commercial emails should be known by all business organizations. They should include having proper identifiers, opt-out mechanisms, and a valid mailing address in all commercial emails. In fact, the CAN-SPAM Act states that the senders of commercial emails will be acting legally if:

1) The header of the commercial email (indicating the sending source, destination and routing information) doesn’t contain materially false or materially misleading information;

2) The subject line doesn’t contain deceptive information;

Both California and the federal government have enacted statutes that regulate arbitration agreements and awards. The Federal Arbitration Act (FAA) and California Arbitration Act (CAA) are similar in many aspects but they have differences that can sometimes lead to conflict. Other state and federal statutes can also conflict with the FAA. Under the Federal Preemption Doctrine, provisions of state law that directly conflict with a federal statute are invalid or unenforceable. The U.S. Supreme Court has issued several rulings in recent years about preemption of state laws, and even other federal laws, by the FAA. The Supreme Court has also identified situations in which the CAA can apply instead of the FAA.

Federal Preemption Doctrine

The Supremacy Clause, found in Article VI, clause 2 of the U.S. Constitution, states that federal law is “the supreme Law of the Land.” The preemption doctrine is intended to guide courts in determining when federal law supersedes state law. In a 2009 decision, Wyeth v. Levine, the Supreme Court expressed its “assumption” that preemption would not occur “unless that was the clear and manifest purpose of Congress.” Whether the court has always strictly held to this principle is a matter of some disagreement.

The U.S. Supreme Court Finds Preemption by the FAA

In 2017, the Supreme Court decided Kindred Nursing Centers Ltd. v. Clark, which involved a challenge to mandatory arbitration clauses signed by individuals with powers of attorney on behalf of elderly nursing home residents in Kentucky. Under Kentucky law, according to the Supreme Court, “the rights of access to the courts and trial by jury [is considered] to be ‘sacred’ and ‘inviolate.’” State courts ruled the arbitration agreements to be invalid. The Supreme Court found the state court rulings to be invalid under § 2 of the FAA, which states that arbitration agreements are only subject to challenge under “such grounds as exist at law or in equity for the revocation of any contract.”
Continue Reading ›

Mediation gives the parties to a dispute, either during an ongoing lawsuit or in an effort to avoid one, a chance to present their cases to a neutral third party trained in dispute resolution. In order to promote candor during the mediation process, anything that is said during mediation is considered confidential under state law. California requires the parties to a mediation to follow specific procedures to ensure that any written agreement resulting from mediation is admissible in court. This may be necessary in order to have the parties’ agreement entered as a judgment or to have it be enforceable as a contract.

Confidentiality of Mediations Under California Law

Under the California Evidence Code, statements made during mediation, whether oral or written, are not admissible in any noncriminal judicial, administrative, or arbitration proceeding. Any and all communications between the parties involved in mediation or between them and the mediator must remain confidential.

State law makes an exception for written settlement agreements prepared during or at the end of mediation, provided that all parties consent in writing to disclosure of the document. If the document meets all of these requirements, a court may rely on it to enter a judgment in a civil proceeding. Otherwise, the document is not admissible as evidence.
Continue Reading ›

Mediation is a form of alternative dispute resolution (ADR) that allows the parties to a dispute to present their claims to a neutral third party, known as the mediator, who will try to help them reach an agreement. Once the mediation is over, how can one party make sure that the other party or parties hold up their end of the agreement? The best way to enforce a mediation agreement depends largely on the circumstances in which the mediation took place. If the mediation occurred as part of a lawsuit, the court can enter an order that encompasses the agreement’s terms. If it was not part of a lawsuit, then the written agreement will be enforceable as a contract.

What Is Mediation?

In general, mediators are trained in conflict resolution which includes identifying areas in which parties to a dispute have common ground and encouraging them to resolve their differences. The goal of mediation is to come to an agreement that everyone can live with even if they do not particularly like it.

Mediation is a less formal procedure than arbitration which resembles a trial in many ways. While arbitration almost always results in a decision by the arbitrator, mediation is not guaranteed to result in an agreement. If a party to the mediation walks away, then the remaining parties cannot mediate any issue that involves that party. If the parties have not reached an agreement at the end of the period of time allotted for the mediation, they can either arrange for more time with the mediator, or they can walk away and pursue other avenues such as litigation.
Continue Reading ›

Alternative Dispute Resolution (ADR) allows two or more parties in conflict to take their case before a neutral third party outside of the court system. This often has the benefit of sparing them the expense of litigation and to avoid a trial. Many contracts now include clauses requiring the submission of disputes to arbitration which is a type of ADR that resembles a trial. If the parties have agreed in advance, the arbitrator’s award will be binding on them. In fact, federal and state laws have encouraged the arbitration of disputes and have established procedures for enforcing binding arbitration awards.

What Is Binding Arbitration?

An arbitration is similar in many ways to a courtroom trial. A trained and certified arbitrator, or a panel of arbitrators, conducts a “trial” in which both sides present their claims, defenses, and evidence. The arbitrator then makes a decision and issues an award.

This award is only binding on both parties if they have agreed in writing. If an arbitration agreement does not specify that the award will be binding, either party is free to disregard it and seek other means of redress.
Continue Reading ›

The Internet of Things is a relatively new development that has changed the world. However, the laws were either non-existent or archaic. Now, it’s important to inform our readers that Jerry Brown has signed a cybersecurity law covering “smart” devices. The bill, SB-327, was introduced last year and states in relevant part that:

Existing law requires a business to take all reasonable steps to dispose of customer records within its custody or control containing personal information when the records are no longer to be retained by the business by shredding, erasing, or otherwise modifying the personal information in those records to make it unreadable or undecipherable. Existing law also requires a business that owns, licenses, or maintains personal information about a California resident to implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification, or disclosure. Existing law authorizes a customer injured by a violation of these provisions to institute a civil action to recover damages.

This bill, beginning on January 1, 2020, would require a manufacturer of a connected device, as those terms are defined, to equip the device with a reasonable security feature or features that are appropriate to the nature and function of the device, appropriate to the information it may collect, contain, or transmit, and designed to protect the device and any information contained therein from unauthorized access, destruction, use, modification, or disclosure, as specified.