Bitcoin, Everybody's Favorite Crytocurrency, Comes To A Bar Near You (Actually Near Us).

 We have flogged the Bitcoin phenomenon in this blog time and again (see here, here and here).  So when we learned that a bar (HandleBar) in the neighborhood of our office was installing the first ATM in the United States that handled Bitcoins, we were compelled to take a field trip to observe.  The ATM was turned on yesterday (Feb. 20 at 2 pm) so at 2:30 we took advantage of an 80 degree Austin afternoon to walk the short distance to HandleBar to see this miracle for ourselves.

When we arrived we found camera crews, on-lookers like ourselves, Bitcoin disciples and a queue of people seeking to use the technological wonder provided by Robocoin.  One of the Bitcoin disciples said that if I would open an account he would give me a part of a Bitcoin.  I downloaded the Android app Coinbase and he transferred 0.001 Bitcoin to me (apx. $0.64 based on yesterday's market).  I'm counting on a big upswing on this for my retirement.

While this all was interesting, we found we could not use Bitcoins directly to buy beer at Handle Bar.  We would have to have used the ATM to convert to dollars and then bought libations.  However, we could transfer money to Beirut almost instantly without fee or restrictions.  This failed to impress the smoking hot lady drinking and working in her Daytimer at the upstairs bar or maybe it was just me.

The ATM was located in the back of the bar in a dimly lit alcove.  The shape of the ATM and the activity of the people surrounding it was eerily reminiscent of the first monolith and ape scene (see above) in the movie 2001.  Maybe this is our guidepost to the next evolutionary step in money.  They are going to have to fix that beer purchase thing though.

Our Little Blog on LexBlog Gets Cited On LexBlog. How Meta Is That?

Changes At Our Place.

Nothing is as inevitable as change and all good things must come to an end.  We've all heard and used these platitudes.  The same is true with our firm.  Our good friend, partner and founding member of this firm, Stuart Hiserodt, has been offered and has accepted a great position with Centex Systems.  Centex Systems is a leader in the fast emerging field of electronic health records and health insurance exchanges. 

Stuart will be a great asset to Centex.  We miss him here but wish him the best in his new endeavor.

We will change our name to Stanfield Law for the time being.  You can see our marketing creativity continues unabated.

Tags:

Following The "Silk Road". Where Exactly Was That Supposed To Go?

Originally, the Silk Road was a series of routes over which commerce traveled in Asia beginning over 2,000 years ago.  Silk, gold, technology, religion and diseases (e.g. bubonic plague) were carried and exchanged over the Silk Road.

Fast forward to the present day and the Silk Road was, until recently, a website accessible only in the deep web and only by TOR (The Onion Router), a network and browser designed to preserve your anonymity on the web.  Silk Road was the brainchild of fellow Austinite and former neighbor Ross Ulbricht.  Ross was a 2002 graduate of West Lake High, a school that I pass every day coming to work.  His Facebook page is still up and he seems like a pretty cool guy.  We even have a mutual Facebook friend.

However, when I visited Silk Road before the feds closed it in September and arrested Ross on Oct. 2nd of this year, I found that you could purchase most any kind of drug I had ever heard of and many that I hadn't.  Since I have a background in Pharmacy, that's a wide range of stuff.  Cocaine, Ecstasy, black tar heroin and 'shrooms were in abundance.  Apparently, you could also arrange for murder by hire and Ross is accused of that in regard to one of his clients on Silk Road supposedly threatening to expose everybody unless certain conditions were met.

The medium of exchange on Silk Road was Bitcoin, our favorite virtual currency.  When Ross was arrested, the FBI seized over $3,000,000 in Bitcoins belonging to Silk Road customers.  They were also trying to get an estimated 600,000 Bitcoins from Ross' personal Bitcoin wallet.  That's about five percent of all the Bitcoins presently in existence.

All in all, a very sordid story, including the allegation that Ross went by the pseudonym of the "Dread Pirate Roberts", which comes from my favorite movie "The Princess Bride".

So how does a 20s something, suburban, white bread guy go from wake boarding on Lake Austin to being one of the biggest drug dealers (or at least the facilitator) in the world ?

Apparently Ross is brilliant (degree in physics at the Univ. of Texas, graduate work at Penn State), a libertarian fan of Ron Paul and idealistic and naive.  On his Facebook page he wrote an essay on "Thoughts On Freedom".  On his LinkedIn page, he described an idealized version of Silk Road, when he wrote:   "Now, my goals have shifted. I want to use economic theory as a means to abolish the use of coercion and agression amongst mankind. Just as slavery has been abolished most everywhere, I believe violence, coercion and all forms of force by one person over another can come to an end. The most widespread and systemic use of force is amongst institutions and governments, so this is my current point of effort. The best way to change a government is to change the minds of the governed, however. To that end, I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force."

He apparently viewed Silk Road as beneficial because it was a place where people could obtain illegal drugs without the concomitant hazard of having to deal directly with a drug dealer.  Regardless of your view on drugs and their use, it would seem to be preferable if people didn't have to risk their life to obtain them.

In the end, despite his brilliance and perhaps because of his naivete, he got sloppy and used his real name and address in obtaining fake passports and made other mistakes that enabled his arrest.  This could have been a family member of any of us (assuming any of us has anybody that smart in our gene pool) and we would have been simultaneously amazed at  his drive, ambition and success and aghast at what he has wrought.

The Blog Gods Give Us The Winklevoss Twins Again.

We have devoted an inordinate amount of time and blog space to the exploits of the Winklevoss twins.  I won't take the time to do internal links to our posts but just type in Winklevoss in the search function on the side if you are interested.  However, when our creative (cue air quotes) juices run a little viscous, we can always do a Winklevoss post and for that, we thank the blog gods.

As you will recall, they are the guys that were unsuccessful in taking over Facebook, unsuccessful in suing their own lawyers when they failed and unsuccessful in overturning their unfavorable ruling in the Facebook lawsuits, even after several attempts.

Now they have been scooped again, in that someone else has beat them to the market with a Bitcoin investment vehicle.  They had made a filing to sell interests in a trust but because of the nature of their proposed investors, it has been slower going.  Hence, late to market.  However, in light of the Silk Road debacle (more to come on that soon) and its effect on Bitcoins, maybe that's not a bad thing for them.

So, in spite of the fact that they are excessively attractive, smart, educated, athletic, white, privileged and pampered, they have not reached their full potential.  Here's hoping they keep trying for the sake of the blog gods and us.

Hey, Bro! Can You Spare A Bitcoin? Digital Currency For The Homeless And Unemployed.

We have discussed bitcoins several times before, see here and here, for example.  We exulted in the fact that the Winklevoss twins of Facebook fame are starting a bitcoin investment vehicle.  We also talked about how the regulators were taking a bigger interest in how bitcoins were use or abused.

Now a Wired article shows how the unemployed and homeless are using sites such as Bitcoin Get, Bitcoin Tapper and Coinbase to get paid bitcoins for watching videos and tapping an icon, each a technique for driving traffic on the internet.  The Wired article then quotes some of the homeless as preferring bitcoins because it is much harder to steal (at least from them) and they can convert it to money or prepaid cards using their computers or smart phones.  Now, I can hear conservative heads exploding all over at the thought of homeless, unemployed people with computers and smart phones particularly if they are getting food stamps or other assistance.  Be that as it may, engaging in this activity provides them some small bit of assistance to help feed them.  That can't be all that evil.

Some day, you may be approached (or approach somebody) on the street and asked for a handout.  They then offer the internet address for their bitcoin wallet and you send them some from your smartphone.  Panhandling in the digital age.

Court Holds That Non-Present Texter Could Be Liable Along with Textee In An Automobile Accident.

In another case that involves a collision (in this instance a most unfortunate pun) between technology and law, a New Jersey court has held that a person sending a text to a driver, with sufficient knowledge that the driver would observe the text while driving, might be held liable for the driver's negligence when the driver does observe the text and because of the distraction, has a collision.

Oh my!  Consider this possibility.  You are ensconced in your office in San Francisco.  You are engaged in negotiations with a business rival in New Jersey.  Your New Jersey rival is in transit between Newark and Atlantic City and you know this because you had a telephone call with her earlier and she indicated that she would be driving but would appreciate a text if you had any further information or a change in your offer.  You update your offer and text it to her when you know she is in transit.  She has an automobile accident and either because of your crappy offer or her injuries, the deal does not go further.  A month or so later, you receive a demand letter or a complaint and summons from the lawyer of the other participants in the wreck, alleging that your sending of the text makes you liable for his client's injuries.  You say  WTF?

Far fetched, you say.  Yes.  Impossible? No, consider the decision recently in Kubert v. Best.  There, the court held: "The sender of a text message from a remote location can be liable under the common law if an accident is caused because the driver was distracted by the texting, but only if the sender knew or had special reason to know that the recipient would view the text while driving and thus be distracted."

In this case, Mr. Best was texting with Shannon and had been doing so off and on for most of the day.  During his texting, he crossed the center line and hit Mr. and Mrs. Kubert on their motorcycle and caused each of them to lose their left leg.  Very dreadful!  The Kuberts included Shannon in their complaint.  The court found that in this case Shannon was not liable because the plaintiffs had not proven that Shannon knew that Kyle (Mr. Best) would view the text while driving and consequently be distracted.  So, not liable in this case but the court held that if such knowledge and distraction had been proven, the court could have held Shannon liable for the Kuberts' injuries.

This raises several questions that are not answered in the opinion, e.g. (1) Does there have to be a special relationship between the texters?  Would liability be more likely if they were romantically involved or does the business relationship described above suffice?; (2)  Would the fact that the text came from a state that did not prohibit texting while driving have any impact?  Would it even matter if the state in which the accident occurred did not prohibit testing while driving?; (3) Would the automobile liability insurance of the non-present texter cover her negligence as if she had been present?; (4) What if the non-present texter is not an adult?; (5)  In states where parents are responsible for a minor's negligence if they sign to allow them to get a driver's license, would the parents be responsible for the texter's remote negligence?; (6) Could this be applied to other distractions like cell phone calls, the waving of signs on the side of the road for advertisement or in protest or the flashing of parts of the body.  Should cheer leader car washs worry? and (7) Have I given way too much thought to this?

Plaintiff's attorneys will now begin to check the defendant's cell phone and sue anybody that texted or messaged in close proximity to the time of the accident.  Maybe there should be an app for that.


 

A Copyright Claim Is Only As Good As Its Weakest (Hyper)Link.

It has long been assumed by the legal literati that the mere sending of a link in an e-mail or the embedding of a link in a blog post, which link directed the user to a copyrighted work of someone other than the linker, did not constitute direct infringement of the copyrighted work.  However, there was very little actual case law on the subject.  Last month, the federal district court for the Southern District of New York stated unequivocally that: "As a matter of law, sending an email containing a hyperlink to a site facilitating the sale of a copyrighted work does not itself constitute copyright infringement."

In Pearson Education, Inc. et al v. Ishayev and Leykina, the plaintiffs were publishing companies that sold educational material and manuals for which the plaintiffs owned the copyright.  Apparently, one the defendants uploaded such material to a cloud server controlled by the defendants.  Both defendants would then advertise the sale of the material.  When someone bought the material, the defendants would either e-mail the purchaser a zip file with the material in it or would e-mail the purchaser a hyperlink to the file on the server, which would allow the purchaser to download the file.

The defendants filed a motion for summary judgment on several of the counts, including the allegation that the act of sending a link to a copyrighted work that allowed the receiver to illegally access the material constituted infringement.

Although most of the other stuff that the defendants did obviously was an infringement (e.g. sending the works in a zip file), the court held that merely sending a hyperlink did not amount to infringement. 

The court likened a hyperlink to the "...digital equivalent of giving the recipient driving directions to another website on the Internet. A hyperlink does not itself contain any substantive content; in that important sense, a hyperlink differs from a zip file. Because hyperlinks do not themselves contain the copyrighted or protected derivative works, forwarding them does not infringe on any of a copyright owner's five exclusive rights..."

However, the court said that the result could be different if, in addition to sending the hyperlink, the defendant had actually uploaded the copyrighted material to the cloud server himself.  Since the court found that there was no evidence that would allow a jury to find that one of the defendants had uploaded the material, the court granted summary judgment to that defendant on that limited issue.

Whew!  So, everyone of my blog posts is safe to that extent.  We won't discuss issues relating to some of the pictures.

Insurance Company Gets Sloppy and Unlucky and a $1.2 Million HIPAA Penalty.

As is often the case, health care regulations and tech law overlap. 

Consider the unfortunate case of Affinity Health Plan, Inc., a not for profit managed care plan company in New York.  Affinity leased some copiers.  When the lease ran out on the copiers, Affinity let the copiers go back to the lessor.  The lessor stored the copiers in a warehouse in New Jersey.  As you may or may not know, digital copiers have a hard drive, much like the one in your laptop.  The copier makes a copy (hence the name) on its hard drive of each document run through the copier.  These copies on the hard drive remain until overwritten by other copies or until erased.  Most copiers don't have a readily available function that wipes the drive.

Now, Affinity either didn't know (probably) or didn't care about the copies on the hard drive and didn't take any action to delete them before turning them back to the lessor.  So, Affinity was either sloppy, negligent or uniformed, doesn't really matter.  What they were also, was really unlucky. 

Consider this further, there is a company called Digital Copier Security that is owned by a Mr. Juntunen.  Digital Copier Security markets a product to erase information from copier hard drives.  Mr. Juntunen of Sacramento and CBS News of New York somehow got together and decided to do a story on information left on copiers.  You can make your own assumptions as to how they got together and who profits from the arrangement.  Mr. Juntunen and CBS News went to a warehouse in New Jersey and purchased four copiers picked out by Mr. Juntunen.  Affinity's copier was one of the copiers selected.  When Mr. Juntunen removed the hard drive from the Affinity copier and printed out the images left there, several hundred pages of medical records were revealed.  CBS News notified Affinity about this and returned the hard drives to Affinity. 

If this copier hadn't been chosen, it is unlikely that anyone would ever have known about this and probably no records would have been revealed to anyone.  However, saddled with this unfortunate and unwelcome information, Affinity was required, under HIPAA/HITECH regulations, to file a breach report.  Affinity's breach report estimated that almost 350,000 people may have been affected by this breach.  A couple of weeks ago, Affinity settled with Health and Human Services.  The settlement required Affinity to pay a fine of $1,215,780, use best efforts to recover the hard drives from all other copiers they had similarly leased and discarded and to take certain other measures to safeguard all electronic protected health information.

To be fair, the other three copiers purchased by CBS all had sensitive information on them.  One was from the Buffalo, N.Y. Police Sex Crimes Division and it had detailed information on domestic violence complaints and a list of wanted sex offenders.  Another machine from the Buffalo Police Department had a list of targets in a major drug raid.  The other machine was from a construction company and had a number of pay records along with social security numbers.

However, Affinity was the only one that was regulated by HIPAA.  Most unfortunate.

Thus, lessons learned: Things that have digital storage devices, e.g. computers, copiers, fax machines, cameras, smart phones, etc. should be covered in a comprehensive policy that requires their storage to be scrubbed before disposal.  You do not want to be unlucky too.

Zappos Gets Zapped. Browsewrap Agreements Are Collateral Damage.

You know Zappos.  That's where you ordered those 5 inch stiletto clear heeled stripper shoes.  And some of you women bought from there too.  Zappos is a part of Amazon and a year or so ago, Zappos suffered a really bad security breach.  Exposed something like 24 million customers' information.  Well, as almost always happens when something like this occurs, our legal comrades descended in droves and many lawsuits ensued (I guess that's a pun).  These were consolidated in a court in Nevada and procedural motions were filed. 

Zappos claimed that class actions were not justified because Zappos' terms of use agreement specified that all claims by customers had to be settled by arbitration.  The result would have been that each individual customer would be required to have his or her claim settled by a separate arbitration and presumably actually appear at the arbitration rather than be represented in a class.  So, instead of one lawsuit with 24 million plaintiffs in a class, it would have required 24 million individual arbitrations with one claimant in each.  This would have been good for the tourism industry in Nevada but not good for the individual claimants (or their class representing attorneys).

Zappos' terms of use agreement stated that by using the web site, the users consented to the terms of the user agreement, which contained the aforementioned arbitration requirement.  While a link to the terms of use was included on each page, it was in the same font and same color as the rest of the page and nothing compelled the user to look at the terms of use nor take any action that indicated assent to the terms of use.  In addition, Zappos reserved the right to amend the terms of use at any time.

Zappos' terms of use agreement has been referred to as a "browse wrap" agreement or a "click through" agreement.  We discussed the differences in a "clickwrap" agreement (which requires some evidence of assent, such as clicking a box) and a browse wrap agreement in a prior post.  We indicated that some courts have upheld these agreements and that the trend might be toward their acceptability but this court says "Not so fast".  The Nevada court held that a requirement to arbitrate is strictly a contractual matter and therefore, to compel the plaintiffs to arbitrate would require a binding agreement between Zappos and the plaintiff.  The court failed to find such a creature in this situation.  They found: "...we cannot conclude that Plaintiffs ever viewed, let alone manifested assent to, the Terms of Use.  The Terms of Use is inconspicuous, buried in the middle to bottom of every Zappos.com webpage among many other links, and the website never directs a user to the Terms of Use.  No reasonable user would have reason to click on the Terms of Use...".  The court also found that because Zappos reserved the right to unilaterally change the Terms of Use, the contract Zappos sought to enforce was "illusory" and therefore unenforceable.

It is possible that if the issue was not the requirement for 24 million folks to arbitrate in Nevada and something less impactful, like whether you could return your stripper heels, the result might have been different.  However, the fact remains that this case makes the enforcement of such browse wrap agreements tenuous and therefore, we should all review our policy regarding how we get people to agree to our terms of use.  It could become very important.