Can the FTC Protect Us From Fake News?

In September 2016, the Second Circuit handed down its decision in FTC v. LeadClick Media, LLC, holding the operator of an affiliate-marketing network liable for the fake news published by its affiliates. This case could serve as a tool in combatting fake news stories that have plagued social media and caused real-world problems (like Pizzagate) in recent years. While this Second Circuit decision is unlikely to solve the problem of fake news stories on social media, it is a step in that direction. The Case In the case, a generator of fake news was denied protection of the Communications Decency Act. The CDA protects Internet service providers from being held liable as publishers of material posted on their sites by third parties. Until 2011, LeadClick operated an affiliate-marketing network to provide advertising to online businesses. The affiliates advertised in various ways, including by creating advertising websites. In August 2010, LeanSpa, a company that sold purported weight-loss and colon-cleanse products over the Internet, hired LeadClick to provide advertising through its affiliate network. Some of these affiliates created what the court called “fake news sites,” which looked like genuine news sites with reporters discussing, what they claimed to be, their own experiences and comments from satisfied users. However, all of the content on these websites was fabricated. The court held that LeadClick was not entitled to immunity under CDA §230(c)(1) because CDA had helped develop the deceptive content and was not merely a publisher of third party content. Without CDA immunity, LeadClick could be held liable for its affiliates’ false and deceptive advertising practices. Our Salvation? Hardly. By denying LeadClick CDA immunity, the...

Elon Musk’s New Master Plan: Brilliant, Devious, or Both?

When Tesla announced it had agreed, in principle, to purchase SolarCity, many analysts were shocked.  Not only does the deal represent a merger of two innovative companies, neither of which is currently turning a profit, but many analysts also believe the deal represents a massive conflict of interest. Elon Musk founded Tesla in 2003 and remains Tesla’s CEO.  Musk also founded SolarCity, which is the United States largest solar power provider. Musk is currently SolarCity’s Chairman.  Musk is also the largest shareholder in both Tesla and SolarCity, holding over twenty percent of each company.  As if Musk were not entangled enough, the current CEO of SolarCity is Lyndon Rive, and the company’s CTO is Peter Rive.  Lyndon and Peter Rive are Musk’s cousins. As a result of Musk’s many connections to both SolarCity and Tesla, many corporate governance experts have said the deal suffers from a blatant conflict of interest on the part of Musk. However, Tesla and SolarCity have taken several steps to ensure the propriety of the deal.  First, in order to allay any concerns about a conflict of interest, independent board members were brought on to review, and ultimately approve, the acquisition.  The next step required in finalizing the deal is to gain shareholder approval by a majority vote of each company’s respective shareholders.  At first glance, this step seems to actually exacerbate the conflict of interest because Musk owns twenty percent of the outstanding shares of both companies.  However, as part of the conditions of the deal, Musk and his affiliates have recused themselves from voting on the deal. Musk’s absence from the vote allows...

California Governor Shoots Down Drone Privacy Bill

Hobbyists and drone industry giants were relieved last week when California Governor Jerry Brown vetoed legislation that would have severely limited drone operation in the state. California Senate Bill 142, which passed both houses of the legislature in late August, aimed to prohibit drone flights below 350 feet over private property without permission from the landowner. The bill would have allowed a property owner to file trespassing charges against operators flying aircraft over his or her property in violation of the elevation restriction. Under the Federal Aviation Administration’s proposed rules for drones, commercial operation has a ceiling of 500 feet and recreational use is capped at 400 feet. The bill, therefore, would have limited operation to a relatively narrow band of airspace and posed challenges to flying over large portions of the state. As popularity for unmanned aircraft has grown, concerns over their operation have risen as well. Chief among these fears has been the collision hazard that drones pose to traditional, manned aircraft. California Senator Hannah-Beth Jackson, author of the bill, cited private property rights and privacy concerns as the impetus for the proposed legislation. She and other proponents of the measure hoped that California would join many other states in protecting individuals from drone-operating voyeurs. In his veto statement, Governor Brown recognized the concerns addressed in the bill, but said that he feared the proposal “could expose the occasional hobbyist and the FAA-approved commercial user alike to burdensome litigation and new causes of action.” The Consumer Electronics Association, a trade group that lobbied heavily on the drone industry’s behalf, was pleased with the decision. “With this veto, the...

Big Data and the Fall of Personally Identifiable Information

There has been no shortage of “Big Data” based start-ups in the last decade, and that trend shows no sign of slowing down. As computing power and sophistication continues to increase, the ability to process large sets of information has led to increasingly pointed insights about the sources of this data. Take Target for example. When you pay for something at Target using a credit card, not only do you exchange your credit for physical goods, you also open a file. Target records your credit card number, sticks it to a virtual file and begins to fill that file with all sorts of information. Your purchase history is recorded: what you buy, when you bought it, how much you bought. Every time you respond to a survey, or call the customer help line or send them an email, Target is aware. Anytime you interact with Target, the data and meta-data that characterize that interaction are parsed carefully and stored as Target’s institutional knowledge. But it doesn’t end there. As diligent as Target may be in monitoring your interactions, there will inevitably be holes. But fear not! Instead of settling for an inadequate picture of who you are, Target can just buy the rest of it from the other people you do business with. “Target can buy data about your ethnicity, job history, the magazines you read, if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings,...

How the SEC Really Feels About High Frequency Trading

For fans of Michael Lewis’s Flash Boys, the SEC would like you to know that things are going splendidly on the high frequency crackdown front. In January 2015 alone, the agency brought three high frequency trading (HFT) suits against different sharks in the securities market. One such shark is high frequency trader Aleksandr Milrud. Milrud layered trades for approximately two years starting in January 2013. Around the globe, Milrud’s recruits used HFT to fraudulently inflate and deflate stock prices to profit upon buying and selling at the altered price. To clear up any lingering confusion on the part of the SEC’s confidential broker informant, Milrud actually referred to the artificial price pressure as “the dirty work.” Milrud further explained that he usually wired his illicit profits to an offshore bank account and later met with an individual who would give him a suitcase full of cash. The SEC’s complaint confirms that the agency believes “Milrud’s layering scheme was very lucrative. In the course of soliciting the [confidential informant’s] participation in his scheme, Milrud stated that one of his trading groups generated profits of approximately one million dollars per month.” Indeed, the complaint later outlines two examples of Milrud’s profiteering activities: Exhibit 1 involved an order that resulted in a $72.28 profit for the trader. Exhibit 2 clocked in a bit more conservatively at $60.74 worth of illegal profits. Milrud even “directed a wire transfer of $5,000 to a bank account located in New Jersey. The purpose of the transfer was to fund a trading account . . . so that Milrud’s traders could use the account to engage in layering.”...

Obama Administration to Weigh in on Google v. Oracle Java Dispute

Last month, the Supreme Court invited input from the Department of Justice regarding the ongoing Java dispute between Google and Oracle, asking for advice on whether the Court should hear the case. According to the Court’s memo, U.S. Solicitor General Donald Verrilli, Jr. “is invited to file a brief in this case expressing the views of the United States.” Technology Analyst Al Hilwa calls this a “true 2015 nail-biter for the industry” because “[t]his is a judgment on what might constitute fair use in the context of software.” The dispute between Google and Oracle began in 2010, when Oracle sued Google seeking $1 billion in damages on the claim that Google had used Oracle Java software to design the operating system for the Android smartphone. Google wrote its own version of Java when it implemented the Android OS, but in order to allow software developers to write their own programs for Android, Google relied on Java Application Programming Interfaces (“APIs”). These APIs are “specifications that allow programs to communicate with each other,” even though they may be written by different people. Oracle alleged that Google copied 37 packages of prewritten Java programs when it should have licensed them or written entirely new code. Google responded with the argument that such code is not copyrightable under §102(b) of the Copyright Act, which withholds copyright protection from “any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in [an original work of authorship].” Google also argued that the copied elements were “a key part of allowing...