Author: stanczyk (Page 1 of 3)

A Look at Smart Contracts @ Paper This Deal

smart contract logoNick Szabo is credited as being the visionary, if not the godfather, of smart contracts.  He sees smart contracts as agreements that “involve objectively verifiable performances, or performances that can be automated such as cash flows.”  His blog “unenumerated” is fantastic (deep posts on a variety of topics – each one is an ocean of thought in and of itself) and his appearance on Tim Ferriss’ podcast is probably the best crash course on all things blockchain and crypto-currency related.

Nick’s proposed definition of a “smart contract” is (1) a set of promises (2) specified in digital format (3) which includes various protocols (4) within which the parties perform.

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Federal Securities Laws applied to ICO’s – Initial Coin Offerings

BITCOINNew “coins” or tokens and their platforms are all the rage.  Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Zcash, Dash, Ripple, Monero, the list goes on and on and new ones keep popping up.  The new coins are either entirely their own platform or they are derivations, i.e. spin-offs of one of the existing virtual currency platforms.

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Browsewrap License Cases: Other

  • Hubbert v. Dell Corp., 2005 WL 1968774 (Ill. App. Ct. 2005) (court upheld arbitration clause in Dell’s for cause regarding alleged false claims made by Dell to online purchasers of the computers. Court found different colored hyperlinks on each page like a multipage contract).
  • Hines v. Overstock.com, Inc., 668 F. Supp.2d 366 (E.D.N.Y. 2009) (both arbitration and forum selection clause invalid due to no actual or constructive notice)
  • Van Tassell v. United Mktg. Group, LLC, 795 F. Supp. 2d 770 (N.D. Ill. 2011) (holding arbitration provision was unenforceable where it was included website’s conditions of use but difficult to find, because users had to scroll all the way down home page, click on Customer Service link, then scroll down and click another link to find it).
  • Friedman v. Guthy-Renker, LLC, 2015 US Dist LEXIS 24307 (C.D. Cal. Feb. 27, 2015) (where two plaintiffs clicked on checkbox that only referenced credit card terms prior to purchase, arbitration not binding; for plaintiff who clicked on checkbox which had a link to the terms the arbitration provision was binding)
  • Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927 (E.D. Va. 2010) (terms of use not valid as they were buried at bottom of first page and on no other page).

Browsewrap License Cases: In re Facebook Biometric Information Privacy Litigation, 185 F. Supp. 3d 1155, 2016 U.S. Dist. LEXIS 60046, (N.D. Cal. 2016)

In In re Facebook Biometric Information Privacy Litigation, 185 F. Supp. 3d 1155, 2016 U.S. Dist. LEXIS 60046, (N.D. Cal. 2016):

  • A class action against Facebook was filed pursuant to the Illinois Biometric Informration Privacy Act (BIPA). Parties agreed to transfer case to N.D. California, but wanted Illinois law (and not CA law) to apply.
    • Plaintiff’s alleged that facial and other recognition used by Facebook violated BIPA
  • Facebook argued that its choice of law clause in its current Terms of Use required the use of CA law.
  • There were three plaintiffs at issue and court reviewed the sign up procedure for each (2005, 2008 and 2009).
    • When Facebook updated its Terms it emailed a notice to all user’s email addresses and the next time each user logged on, they saw “jewel” notification in their personal newsfeed alerting to the change in such documents but no affirmative action was required by each user).BUT said the general and individualized notice was enough, that the agreement was effective, but that in the situation it would not apply CA law.
  • The Court said that the notice provided by Facebook was enough to have a binding choice of law provision (seemed to like the “personalized” nature of the news feed notice).
  • But the Court then still chose to apply IL law as opposed to CA.

Browsewrap License Cases: Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2012)

In Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2012):

  • B&N was unsuccessful in enforcing an arbitration provision in its online Terms of Use.
    • Court found that there was no evidence of Nguyen having actual notice of the Terms of Use or acknowledgement of same.
    • Found that under circumstances a reasonably prudent user would not be on inquiry notice of the Terms of Use
    • Court said Terms of Use where hard to find and barely noticeable.
      • Said “inquiry notice” turns on “design and content of the website and agreement’s webpage.”
  • This case was followed by e.g., Long v. Provide Commerce, Inc. 245 Cal. App. 4th 855 (Cal. Ct. App. 2016) (refused to compel arbitration, stated that to put users on notice you need conspicuous hyperlink plus notice that it contains binding terms. A conspicuous notice alone is not enough).

Browsewrap License Cases: Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Dist. Ct. 2012).

In Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Dist. Ct. 2012):

–The court held that a terms of sale provision found on the “About” page of the website was not enough to enforce the forum selection clause.

  • Plaintiff ordered products ($6,000 worth of tube socks) over the Internet, and sued claiming there were defects.
  • Seller moved to dismiss claiming the forum selection clause required the dispute be heard in a Florida state court, and Plaintiff claimed he never saw clause.

–Court found the clause was not reasonably communicated where it was “buried” and “submerged” on the website, and could only be found by clicking on an “inconspicuous” link to the company’s About Us page.  Seller’s attempt to have the terms incorporated by reference in a printed contract and letter agreement were not enough for the court.

  • Court relied on Specht and Carnival Cruise Lines.

–Similar holding in Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927 (E.D. Va. 2010).

Browsewrap License Cases: Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. CA., March 7, 2003)

In Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. CA., March 7, 2003):

–Tickets.com used deep links to Ticketmaster’s interior pages, in violation of Ticketmaster’s terms of use which were on its homepage.

–Relying on Register.com and Pollstar, the court held that a contract can be formed by use of a website, provided the user, at the time of use, has knowledge of the site’s terms and conditions that provide that such use constitutes an agreement to be bound.

  • Court relied on “cruise ship” case law precedent. It analogized interior web pages to the back of a cruise ship ticket’s venue clause, where user has actual or presumptive knowledge.

–Court found that Tickets.com used Ticketmaster’s site with full knowledge of the terms, and upheld such terms in the breach of contract action.

Introduction to Blockchain and Smart Contracts @ Paper This Deal

BLOCKCHAINTechnology is permeating all aspects of society.  Legal constructs are the latest to be infiltrated. We will discuss some of them in upcoming posts, including blockchain, smart contracts and related concepts.  First we need the building blocks to understand how the blockchain works.

Bblockchain is a form of a decentralized ledger technology.   It is decentralized, or distributed, because it operates on a peer to peer basis.  There is no centralized database of the chain or any blocks. Instead, for each blockchain there are various computers or servers which operate as “nodes” for the applicable chain.  Each node contains the entire chain, and nodes review any proposed block and it must be verified prior to it being added to the chain. Nodes can be anonymous.

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Browsewrap License Cases: Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. CA 2000).

In Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. CA 2000):

–Pollstar kept track of concert information on its website, which any user could download by accepting the terms of Pollstar’s license.

»License prohibited commercial use of information.

»License was not on Pollstar’s homepage, but on different page of its site.

»Visitor is alerted to existence of Pollstar’s license only by reason of a small grey print on grey background (with a link to terms, but other links on homepage were blue)

–Gigmania downloaded information from Pollstar’s site and used it on its own site for commercial purposes. Pollstar sued to enforce terms.

–The court refused to enforce the terms of the license agreement because it found that the link to the license was hard to read based on the way it was presented.

  • Notably, the court did not rule that the license agreement was unenforceable, only that the website did not give users adequate notice of it.

Browsewrap License Cases: Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004).

Below is a brief overview of Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004):

–Register.com sued Verio for violating the terms of use of its WHOIS database, which Verio used to get information on who registered domain names with Register.com to offer web services to the registrants.

  • As part of receiving the information from WHOIS, Register.com’s terms stated that the domain name registrant information, which consisted of email, phone number and mailing address, could not be used for marketing purposes. The terms of use were, however, proffered after the domain name registrant information was presented to the user of the WHOIS database.

–VERIO claimed there was no contract as it never agreed to the terms, and in any event any user of the WHOIS site could receive the information before seeing the terms.

  • The court said that this argument may only have worked if Verio used the WHOIS database once, but Verio did it every day with full knowledge of the terms.

–The Second Circuit held that Verio’s continued use of Register.com’s WHOIS database constituted consent to Verio’s terms of use, expressly  rejecting Verio’s argument that they were not enforceable because the user had not clicked an “I agree” icon.

 

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