The year 2016 was momentous in politics and celebrity deaths, but also in the field of technology law. Here’s our wrap-up of the five most significant tech cases that hit the judiciary in the past year.
1. Apple v. FBI
Encryption has been around a long time, but 2016 saw this technology for data security hit the mainstream, as Apple, Google and others began to encrypt smartphone data by default. That led to a lawsuit, boringly captioned In Re Order Requiring Apple, Inc. to Assist In the Execution of a Search Warrant Issued By this Court, in which a federal magistrate judge on Long Island denied the government’s motion to mandate that Apple unlock an iPhone 5s belonging to a drug crime suspect. And in a parallel case, another magistrate judge in California entered an ex parte order requiring Apple to create software — custom firmware — to circumvent the security measures on another iPhone used by one of the attackers during the assault in San Bernardino that killed 14 people in December 2015.
Apple resisted and appealed the orders, which for all practical purposes became moot when the FBI announced that it had hired an undisclosed third-party to hack into the passcode-protected iPhone of the San Bernardino shooter (reportedly paying more than $1 million for the hacking tool itself). The government’s claims, based on a law known as the All Writs Act — an obscure, catchall statute that dates back to the 18th century — were later rejected by a bipartisan congressional encryption working group, which issued a report concluding that “any measure that weakens encryption works against the national interest.” The underlying legal issues remain unresolved.
2. Microsoft v. United States
Microsoft appealed a district court order denying its motion to quash a warrant issued under the Stored Communications Act (SCA), 18 U.S.C. 2701 et seq., and holding Microsoft in contempt for refusing to execute the warrant on the government’s behalf. The warrant directed Microsoft to seize and produce an e‐mail account account believed to be used in furtherance of narcotics trafficking that Microsoft maintains for a customer. Microsoft ascertained that, to comply fully with the warrant, it would need to access customer content it stores and maintains in Ireland and to import that data into the United States.
In a decision of first impression, the Second Circuit concluded that Congress did not intend the SCA to apply extraterritorially. The focus of those provisions is protection of a user’s privacy interests, and therefore the Act does not authorize a U.S. court to enforce an SCA warrant against a U.S.‐based service provider for the contents of a customer’s electronic communications stored on servers located outside the country. As the New York Times observed, “like almost any 30-year-old law dealing with technology, [the SCA] is hopelessly out of date because it has not been meaningfully updated by Congress to address how digital information is created and stored.” This case may help bring pressure, at long last, to update those archaic laws.
3. Oracle v. Google
Oracle’s long-running lawsuit against Google arising from implementation of Java code in the Android OS raises two contentious questions. The first is whether application programming interfaces (APIs) are copyrightable. And second, whether, if they are subject to copyright, portions of those APIs may nonetheless be repurposed by developers without a license under the “fair use” doctrine. In the first trial between the companies in 2012, the court ruled that Google had copied portions of Java but that these copied portions were mere APIs; as such, they were not protected by copyright law. “So long as the specific code used to implement a method is different, anyone is free under the Copyright Act to write his or her own code to carry out exactly the same function or specification of any methods used in the Java API,” wrote district judge William Alsup.
The Federal Circuit reversed this decision in 2014, holding that the “structure, sequence, and organization” of an API was in fact protectable by copyright. The case then returned to the trial court to determine whether copying of Oracle APIs was an infringement of copyright. In that second trial, in May, a jury found that Google’s use of the API code was protected by fair use, an affirmative defense acknowledging the material in question is copyrighted but that otherwise unauthorized use is permissible to more broadly serve the public interest. Oracle has pledged to appeal once again.
Central to Oracle’s bid for what would have been one of the largest jury verdicts in U.S. history was its claim that Google has reaped $21 billion in profit from more than 3 billion activations of Android. Oracle sought damages of $8.8 billion, plus $475 million in what it claims was lost licensing revenue. Software developers rejoiced over the fair use verdict while they remain in shock over the underlying concept of API copyrights.
4. Uber v. Its Drivers
Ride-sharing startup Uber has been hit with a “staggering” number of class action lawsuits by its drivers claiming they are wrongly classified as independent contractors, and thus owed back pay and overtime wages. In April, Uber agreed to settle two of those cases that posed a threat to the company’s on-demand business model, paying some $100 million to resolve complaints in California and Massachusetts for some 385,000 drivers and loosening its policies to give drivers more discretion.
Lawsuits may be the cost of doing business when you’re disrupting a very established and highly regulated industry. But as I’ve written elsewhere, seeking to apply industrial-era labor laws to today’s mobile-driven, sharing economy “presents a serious and very real threat of over-regulation.” Indeed, the federal judge overseeing one of the cases likened this glaring mismatch of old laws and new ways of work to being “handed a square peg and asked to choose between two round holes.” But another rejected the proposed settlement in August, saying that $100M was not “fair, adequate and reasonable” in light of the potential damages recoverable by the drivers’ class, and then certified another class of 160,000 drivers bringing a challenge under California’s ambiguous and employee-friendly labor regulations. So buckle up and stay tuned.
5. Apple v. Samsung
So you’ve waited for something from the Supreme Court? Well the high court had few major technology cases last year, but in one of the most important financially SCOTUS unanimously reversed a federal appellate ruling that found that Samsung must pay its profit from the entire line of Galaxy phones ($399 million) that were found to infringe Apple’s design patents covering the front face of the phones and the arrangement of icons on the home screen. Justice Sonia Sotomayor wrote that owners of design patents are not always entitled to the total profits from the infringing product sold to consumers. In this case, the device has multiple components and thus the award may be limited to those specific features that infringed. Chief Justice Roberts also commented that “It seems to me that the design is applied to the exterior case of the phone. It’s not applied to all the chips and wires…so there shouldn’t be profits awarded based on the entire price of the phone.”
Apple — backed by dozens of independent designers as well as fashion-focused companies like Nike and Tiffany — argued that design is central to many products and that a patent violator should be forced to turn over the full profits it made from infringing designs. Samsung — whose position was backed by Silicon Valley giants like Google, Facebook, eBay and HP — argued that any penalties should be proportionate to the importance of the infringing features to the overall product. The Supreme Court’s decision reasoned that liability in design patent cases is not necessarily an all-or-nothing proposition. But the court declined to offer more specific guidance or resolve whether, for each of the design patents at issue in the case, the “article of manufacture” was the smartphone or a component of the phone. So now Apple and Samsung, the two leaders in the smartphone market, will go back to court to wrangle over the appropriate amount of damages for Samsung’s infringement.
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I am sure we’ve missed a few. Tell us by commenting below!