Cookies, COPPA and Contracts
Alliteration abounds. Reports today concern the EU Directive on the use of cookies, .jpg)
a settlement with a Disney subsidiary for violation of COPPA (Children's Online Privacy Act of 1998) and why paying attention to the construction and organization in the drafting of a contract can be extremely important.
1. The European Union has issued a directive that will go into effect on May 26 of this year that basically reverses the way cookies are handled. In the past the regulations required that the user be advised of the way that cookies are used and be given the opportunity to opt out of receiving them. The new regulations requires the same advising but requires "consent" before cookies can be placed. This is the so-called "opt in" provision. The regulations recognize that enforcement of this will be a phased in approach with the most intrusive cookies getting the most attention. The Information Commissioner's Office has issued advice about how to deal with this. If your website attracts significant traffic in the European Union, you would be well advised to read the ICO's advice and plan accordingly.
2. COPPA has requirements about what information can be collected from children online
and what use can be made of such information. The Federal Trade Commission accused Playdom, an online game provider, of violating COPPA by collecting information from children without parental consent and by violating its own stated privacy policy. Playdom is a subsidiary of the Disney company. The FTC filed a complaint against Playdom that resulted in a consent decree, which among other things, required a $3,000,000 civil penalty. This is the largest penalty yet assessed for such a violation.
3. The placement (or misplacement) of a single word recently made a $1,000,000 difference in a Maryland case. In Weichert Co. of Maryland, Inc. v. Faust, an ex-employee of a real estate firm was sued for violation her obligation of loyalty and the non-solicitation clause of 
her employment agreement. The Court found that she violated the obligation of loyalty but not the non-solicitation clause. Her contract had an attorneys' fee provision where the prevailing party is entitled to its fees. The real estate firm prevailed on the breach of the duty of loyalty but the employee prevailed on the issue about non-solicitation. The attorneys' fee provision was included in the non-solicitation clause and gave fees to the party that prevailed "hereunder". Since the "hereunder' was in the particular clause, the Court reasoned that it applied only to that clause and not the contract or the relationship as a whole. Hence, the employee was entitled to her attorneys' fee, which were approximately $1,000,000, even though she had "prevailed" on only half of the issues. In the lessons learned department for us attorneys, if you intend to make a provision apply to the contract as a whole and not just a specific clause, move the provision into a section of its own or make it very clear that it is applicable to the whole contract.
