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LEGAL BRIEF

By Max Stul Oppenheimer, Esq. • Comment about this article

It didn’t take a crystal ball.

If, on January 1, 2023, I had made predictions about what would happen in the coming year, I would not have received high marks for boldness. In a way, that’s reassuring — there were no paradigm-shifting catastrophes that struck technology consumers.

I would have predicted the following.

There were, however, wins and losses for consumers. Here are the big events of 2023 and how I score them. (For additional commentary on these matters, see my past columns.)

New user agreements

Microsoft and Meta rolled out new agreements. No big surprises, which means they remain unsurprisingly anti-consumer.

The Microsoft Service Agreement basically asked the user to agree not to use the services for anything bad (illegal purposes, spam, fraud, infringement, harm to children, circumvention of Microsoft restrictions, etc.), and to agree that Microsoft could use cookies for a variety of purposes including helping them improve their products; make personalized recommendations; and target advertising. In return, Microsoft agreed to “strive” to provide services but made “ … no warranties, express or implied, guarantees or conditions with respect to your use of the services. You understand that use of the services is at your own risk and that we provide the services on an ‘as is’ basis ‘with all faults’ and ‘as available.’”

Meta changed its privacy policy. It gave itself permission to collect many things that most users would consider public (“content you create, like posts, comments or audio”) and things deliberately disclosed to Meta (“time, frequency and duration of your activities on our Products; Information you’ve shared with us through device settings, like GPS location, camera access, photos and related metadata”). But it also gave them permission to collect things that many users would consider personal (“Messages you send and receive, including their content…; Metadata about content and messages…; Types of content you view or interact with, and how you interact with it; Apps and features you use, and what actions you take in them; Purchases or other transactions you make, including credit card information….”).

It also gave them permission to “collect and receive information from Partners, measurement vendors and third parties about a variety of your information and activities on and off our Products, notably including your demographics; the ads you see and how you interact with them; and your email address, cookies and advertising device ID.” They note that “… we receive this information whether or not you’re logged in or have an account on our Products.”

The only constraints on companies such as Microsoft and Meta appear to be the imagination of their lawyers and the legal restrictions imposed by the EU-US and Swiss-US Privacy Shield frameworks (which you can learn about from the US Department of Commerce by going to privacyshield.gov) — confirming that it takes a government in order to bargain with a company the size of a Microsoft.

Score: 1 for Big Tech.

Section 230

The goal of the Communications Decency Act (CDA) was to rein in the distribution of obscene material on the Internet by allowing ISPs to censor content without becoming responsible for the content they let through. Traditional defamation law held publishers (for example, newspapers) responsible for what they published, but passive distributors (for example, the phone company) not. Congress wanted ISPs to refuse to transmit offensive material; ISPs did not want to cross the line from passive distributors to publishers because they feared it would render them liable for the material they did transmit.

Section 230 of the Communications Decency Act of 1996 was Congress’s solution. Section 230(c)(1) provides: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Section 230(c)(2) allowed ISPs to remove content deemed, in good faith, to be obscene or offensive. Problem solved. No more pornography on the Internet.

But in the 21st century a new problem arose. The Internet had become the dominant source of news — and fake news. The social media companies claimed they had no responsibility for the consequences of disseminating untrue information. Some members of Congress thought that maybe the two decades of growth in the online environment warranted a rethink of Section 230. They’re still rethinking.

Score: 1 for Big Tech.

Blockchain/cryptocurrency

Cryptocurrency and NFTs had ups and downs, and the downs convinced many in Congress that “something should be done.” It remains to be seen what should be done and who should do it. Candidates include the Securities and Exchange Commission, on the theory that cryptocurrency and NFTs are securities and therefore under their jurisdiction; the Office of the Comptroller of the Currency (it’s in their name and they regulate federally chartered banks); the Federal Reserve Board and state banking commissioners (they regulate state-chartered banks); the Consumer Financial Protection Bureau; and the Federal Deposit Insurance Corporation — to name a few.

The fact that several agencies would like the job makes it easier to delay regulations until jurisdiction is clarified. In the meantime, the industry remains unregulated and constrained only by the possibility of lawsuits based on general contract and fraud theories.

Score: 1 for Big Tech.

AI

At the moment, AI is being governed by a mix of contract law and “I’ll deal with it if and when someone sues me.” As noted above, Big Tech is adjusting its user agreements to try to obtain explicit access to the raw data its LLM engines need, while preventing users from claiming ownership of AI products. Congress and the White House are, however, alert to the possibility that certain issues might be involved in the development of AI and that maybe something should be done about this. The White House has appointed a commission and has enlisted voluntary (although ambiguous) agreements from several large AI players, to the effect that AI should be used for good, not evil, and that it should be safe.

Score: Draw. (No significant constraints on Big Tech, but being too aggressive would likely draw increased governmental attention.)

Tax simplification

The Inflation Reduction Act gave the Treasury Department $80 billion dollars to create a world-class customer experience for taxpayers. Treasury, for its part, promised “we will improve the taxpayer experience through better customer service, clearer guidance on how to correctly file taxes, increased options for filing electronically, and robust online accounts to take care of business quickly and independently.” It turned out that the amount allocated to improving taxpayer service (out of the $80 billion) was $4.3 billion. But they had other objectives, such as delivering cutting-edge technology, data, and analytics to operate more effectively. And that certainly seems like a good idea — as they reported, “We already prevent and block billions of unauthorized access attempts, scan attacks, and probes every year.”

Score: This one depends on your belief threshold. If Treasury actually produces a simpler, more reliable system for filing tax returns, it will be a win for consumers. Too soon to call.

Thinking positive

From a marketer’s perspective, it makes perfect sense to facilitate customer payments but to make it difficult for customers to stop paying them. From the customer’s perspective, it seems unfair — but the individual user does not have the bargaining power to change it. The system is known as “negative option marketing.” In the words of the chair of the Federal Trade Commission, “You might sign up for a cell phone plan online, but to cancel, you have to call an 800 number, wait on hold for a customer service representative, and then speak to that representative, who will keep you on the line to try to convince you to stay. These companies are betting that customers will be too impatient, busy, or confused to jump through every hoop.”

The Federal Trade Commission is proposing to stop this practice. In the view of a majority of the Commission, Section 5 of the Federal Trade Commission Act (which prohibits unfair or deceptive acts or practices) gives them the power to do so. Among the FTC’s proposals, it would be “… a violation for a Negative Option Seller to misrepresent, expressly or by implication, any material fact related to the transaction, such as the Negative Option Feature …, or fail to provide a simple mechanism for a consumer to cancel.” The “simple mechanism” would need to be at least as easy to use as the method the consumer used to initiate the transaction.

Score: 1 for the consumer (although the rule has yet to be formally adopted, much less tested in court)

By its nature, statutory law lags behind technological progress. The process of passing a law is time-consuming in itself, but it does not even begin until someone recognizes a problem that needs to be addressed. Once the problem is recognized, it must be defined in a way that legislators can understand, and consensus must be reached as to how to address the problem. This can be a lengthy process. Congress is always playing catch-up.

The law is not powerless to adapt to changing technology during the gap between technological advance and legislative reaction. Courts have the power to interpret statutes and can, in deciding specific cases, take into account legislative intent and how it might be applied to new technologies. The problem with case law is that it can be inconsistent and confusing. Federal statutory law is usually better suited to addressing big issues.

There’s a practical problem with the legislative solution, and it’s one that IT folks will recognize: GIGO. In this case, the input may not be garbage, but it is biased. It is the government’s function to maintain a reasonable playing field — it can do so with blunt instruments such as antitrust laws, consumer protection laws, financial controls, and the like. But legislation targeted to specific activities must be detailed and specific, and even the general tools come with exceptions. With profits at stake, companies have an incentive — and the resources — to gather, create, and present to the legislature data supporting the rules that they want. Individuals do not. Legislators make decisions based on the information they have. So if the information is biased, expect the legislation to be as well.

The good news: At least Congress knows that there’s a game in progress.

I am ready to make my predictions for 2024:

And the bonus prediction: Most of the continental United States will experience sunny days, rainy days, and periods of dark followed by periods of light.

Log in next December, and we’ll see how I did.

Join the conversation! Your questions, comments, and feedback about this topic are always welcome in our forums!

Max Stul Oppenheimer is a tenured full professor at the University of Baltimore School of Law, where he teaches business and intellectual property law. He is a registered patent attorney licensed to practice law in Maryland and DC. Any opinions expressed in this article are his and are not intended as legal advice.

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