47 posts categorized "Courts"

Smells like court

I think Dropbox is awesome and wish that company every success (don't sell us users out!).

But there is a tradition on this blog of watching Dropbox's missteps with attempts to update its terms of service.

CaptureThis time it's a phrasing thing, which I take to be indicative of a low-grade, possibly tech industry-shared, fashionable disdain for the court system.

The phrasing I'm calling out is in a Dropbox email to users explaining why the company's terms of service are being changed to default to arbitration, rather than adjudication in courts, to resolve disputes:

"We’re adding an arbitration section to our updated Terms of Service. Arbitration is a quick and efficient way to resolve disputes, and it provides an alternative to things like state or federal courts where the process could take months or even years. If you don’t want to agree to arbitration, you can easily opt out via an online form, within 30-days of these Terms becoming effective. This form, and other details, are available on our blog."

"Things like courts." Pesky, bothersome, unattractive things like taxpayer-funded, independent tribunals to adjudicate prosecutions, commercial disputes, family matters. Slow, inefficient, deliberate. Many of the same drawbacks as representative democracy itself!

And jurors!

Heaven forbid that users of popular apps should sit in and pass judgment on what terms of service Silicon Valley imposes!

Hero for the holidays

My hero for the holidays is Judge Richard Shelby, of the US District Court, District of Utah.

Now3t2A few days ago, Judge Shelby struck down, as unconstitutional (with reference to the United States Constitution), a Utah constitutional amendment the prohibited same-sex marriage.

Here's a paragraph from Judge Shelby's memorandum decision and order in  Kitchen et al v. Herbert et al (a full copy of which you can find here):

"Rather than protecting or supporting the families of opposite-sex couples, Amendment 3 [the Utah law struck down] perpetuates inequality by holding that the families and relationships of same-sex couples are not now, nor ever will be, worthy of recognition. Amendment 3 does not thereby elevate the status of opposite-sex marriage; it merely demeans the dignity of same-sex couples. And while the State cites an interest in protecting traditional marriage, it protects that interest by denying one of the most traditional aspects of marriage to thousands of its citizens: the right to form a family that is strengthened by a partnership based on love, intimacy, and shared responsibilities. The Plaintiffs’ desire to publicly declare their vows of commitment and support to each other is a testament to the strength of marriage in society, not a sign that, by opening its doors to all individuals, it is in danger of collapse."

And here's a link to Judge Shelby's order from yesterday, denying the State of Utah's request for a stay of his order. (Who would have thought the State of Utah and Vladimir Putin would see eye to eye?)

Good faith and fair flying

Just listened, on C-SPAN Radio, to a fascinating hour of oral argument before the US Supreme Court, in a case called Northwest, Inc. v. Ginsberg.

If you missed it on C-SPAN, you're in luck: recordings of the same oral argument are available, in a variety of formats, on the US Supreme Court's website, here.

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Ostensibly, the case is about frequent flier mileage programs, and the discretion an airline has to boot members out of such a program.

But put 15 minutes of attention into the recording, and you'll see that the case is about contract law, and the unique challenges of selecting what state laws to preempt when trying to set federal policies for national and international businesses.

The setup is this: Congress, our federal legislature, passed an airline deregulation act, by which it put in place a national policy to let airlines set their own fares. To ensure national uniformity and the integrity of this policy, states were preempted from making laws around airline pricing.

The rub is this: state court authority to hear and resolve breach of contract lawsuits was not preempted by the federal airline deregulation act.

The issue the Court is grappling with, you come to discern, is whether the covenant of good faith and fair dealing, which is implied under the law of most states to most contracts, ends up acting as a de facto state attempt to regulate airlines.

That's a tough connection to see from me just laying it out in summary fashion in this post, but the wheels will turn as you listen to the argument.

And it's a case for contract lawyers to be fascinated by, as well. The justices, in their questions, seem ready to entertain fine distinctions between whether or not the implied covenant of good faith is a tool or interpretive aid, to help a court get at the scope of the bargain intended by the parties, or whether instead it reflects the imposition by a state of substantive standards of fairness. If the latter, you come to appreciate in this context, the state action is preempted.

Photo: Aero Icarus / Flickr.

Searching networks versus searching a person

Some years back I wrote a few posts for GeekWire and for this blog about police use of GPS tracking devices and whether smartphones were fair game for searching on arrest.

Fourth Amendment stuff.

3560636199_ca566a543a_zI'm not a Fourth Amendment expert, but I do informally keep up with Jones and the search and seizure cases. In that regard, I thought this recent piece in the USA Today by Richard Wolf – which I would not have known about unless it had been tweeted by Scotus blog - was pretty good. The article quotes several of the current Supreme Court justices, to the general effect that they candidly acknowledge they are not experts in technology.

As I finished the Wolf piece, it seemed curious to me that he had made no mention of NSA surveillance or cell phone metadata.

But then I toggled my surprise back into conventional understanding. I think there is a difference – probably a very useful one – between the mining of data for patterns, at a network level, on the one hand; and they shaking down of a person and his local devices, on the other hand.

The boundary is not always a bright line, but I'd bet the courts by and large will continue to draw it.

Photo: Daryl Mitchell / Flickr.

VCs, Protecting Ideas, and NDAs -- the Nextdoor.com Abhyanker Saga Continues

Nextdoor.com, Inc. v. Abhyanker, C-12-5667 EMC (N.D. Cal. July 19, 2013)

[Note from Bill: this is a post by Venkat Balasubramani, legal blogger par excellence. I am thrilled that Venkat is breaking, here on Counselor@Law, fresh new developments in this important, ongoing lawsuit. The case is not over, but it's getting juicy, and it throws into one package many of the disparate topics we like to cover on this blog (all that's missing is a securities law angle). Click here for a pdf of the written court ruling Venkat is analyzing.]

Abhyanker, who is a lawyer and well known entrepreneur, alleges that he tried to develop a neighborhood-based networking concept known as “Nextdoor,” that someone else ultimately took and ran with, to form Nextdoor.com. According to him, his Nextdoor idea was a spinoff from his concept called LegalForce, which was a private social network for inventors. He also developed “Fatdoor,” a Wikipedia-like public database of neighbor profiles. [sounds scary from a privacy standpoint!] Fatdoor’s assets were ultimately purchased by Google. In 2007 Abhyanker left Fatdoor (who wanted to bring in a new CEO) and came back to work on his Nextdoor idea.  

2757328137_b728306d92_zAbhyanker alleges that he told two people about his Nextdoor ideas and trade secrets: (1) Benchmark Capital; and (2) Sandeep Sood, a designer and contractor for LegalForce. At some point, Abhyanker pitched the Nextdoor idea to VCs, including Benchmark Capital. Although he did not discuss any confidential information in the initial meeting, he supposedly sought and obtained “assurances” from Benchmark that any confidential information disclosed by Abhyanker would be kept confidential. According to him, relying on these assurances, he pitched the Nextdoor idea to Benchmark. In 2007 Abhyanker left Fatdoor (who wanted to bring in a new CEO) and came back to work on his Nextdoor idea. According to him, while he returned to focus on his Nextdoor idea, others were independently working on the Nextdoor concept, and used confidential information and trade secrets to swoop in on the nextdoor.com domain name that Abhyanker had been pursuing for years. The Nextdoor.com founders were Benchmark capital “entrepreneurs in residence,” and Abhyanker alleges that the founders gained access to Nextdoor trade secrets through their work at Benchmark. 

These were just the counterclaim wranglings. The case was preceded by a (still-ongoing) proceeding in the Trademark Trial and Appeals Board, and a short-lived state court proceeding (which Abhyanker filed and dismissed).  

Abhyanker initially asserted several other counterclaims, but withdrew those and filed an amended pleading asserting only a trade secrets claim.  Nextdoor.com (& Sood) moved to dismiss Abhyanker’s trade secret claims. 

Adequacy of trade secrets allegations: Nextdoor argued that Abhyanker’s trade secrets claim failed because he failed to set forth the alleged trade secrets with the sufficient degree of particularity. The court rejects this argument, saying that Abhyanker’s laundry list is sufficient, and requiring him to be more specific would run the risk of forcing him to disclose his trade secrets at the pleading stage. Nextdoor also argued that there were no allegations of how it allegedly exploited Abhyanker’s trade secrets, but the court says there are some allegations—principally, Abhyanker alleges that Nextdoor used the bidding history for the nextdoor.com domain to its advantage. 

The court does say that the parties should work together to come up with a process for identifying the trade secrets and whittling down Abhyanker’s laundry list.  After this process is over, the court says that Nextdoor can revisit the trade secrets issue at the summary judgment phase, hinting that Abhyanker's trade secrets claim may not be all that they are cracked up to be. 

Public disclosure of trade secrets: Nextdoor also argued that Abhyanker disclosed the trade secrets in question in a patent application. Nextdoor says that Abhyanker had filed a patent application disclosing much of the trade secrets at issue in connection with his Nextdoor idea; Abhyanker disagrees, and says that the patent application covered Fatdoor (the wiki site) technology. The court does not delve into the details regarding what facts were disclosed in the patent application (presumably because the facts regarding what Nextdoor does are as yet undveloped), but does say that the patent application discloses the use of nextdoor.com in connection with a  networking site. The court dismisses Abhyanker’s trade secrets claim to the extent it’s based on Nextdoor.com’s alleged misappropriation of “using the name nextdoor.com in connection with a  neighborhood-based social network.”

In addition to the above rulings, the court also (1) says that Abhyanker’s alleged admissions in other proceedings that he does not own the trade secrets at issue (and that the trade secrets were part of FatDoor, which was ultimately acquired by Google) are not necessarily binding against Abhyanker in this matter; and (2) strikes a few of his affirmative defenses. 

Finally, the court also denies Abhyanker’s request to disqualify Nextdoor.com’s law firm, Fenwick & West, on the basis that they previously represented LegalForce. Abhyanker says that Fenwick assisted him in protecting his IP for LegalForce, including preparing non-disclosure and invention and assignment agreements. Fenwick, for its part, had an independent Fenwick attorney review the files and billing records. This lawyer concluded that Fenwick did not really help LegalForce with its IP strategy and at most provided LegalForce with some form documents. The court credits Fenwick’s view, rather than Abhyanker’s view, and also says that the matters in question (this dispute and the prior representation of LegalForce) are not related. The court also says that Fenwick was not likely to glean confidential information relevant to this dispute as a result of its limited representation of LegalForce. (The court also notes that Fenwick implemented an ethical screen between the lawyers working on litigation matters against Abhyanker and lawyers who worked on LegalForce, the bulk of whom are no longer at Fenwick anyway.)

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Yikes. A messy dispute that weakly promises to get at the answer of whether, patents aside, ideas are protectable in this context. In terms that will resonate with entrepreneurs, this case gets at the perennial question of "if I have an idea and a domain name, or the name of an app" should I require someone to sign a NDA before I disclose the details?" My money is on the parties running out of gas to pay their lawyers and eventually coming up with some sort of settlement.

Abhyanker has weak trade secrets claims overall. But he was undoubtedly pursuing nextdoor.com. The fact that after pitching it to Benchmark, it showed up as an idea pursued by former Benchmark entrepreneurs in residence can’t look particularly good for Benchmark. (In addition to the domain name, he also pointed out that the prototype used by Nextdoor.com was for the same neighborhood that Abhyanker focused on when he was working with concepts around next-door.) That said, VCs don't sign non-disclosure agreements for this very reason, and although they are from time-to-time accused of taking an idea that they may receive via a pitch and running with it using another team, I don't get the sense that what happened here is wildly outside the expectations of most entrepreneurs. (It's possible that I'm way off on this, feel free to correct me in comments. It's also worth noting that as domain names become scarce and more valuable, Abhyanker's allegations regarding the domain name--while seemingly menial--do get at an important part of a start-up's trajectory.) 

I’m curious about why Abhyanker withdrew his breach of contract claims that presumably included claims based on non-disclosure obligations Benchmark agreed to? Common wisdom suggests that non-disclosure agreements are over-rated and may even make you look amateurish, but you wonder whether a robust non-disclosure agreement would have helped Abhyanker in this scenario? 

Apart from the merits of the dispute, the disqualification ruling is very interesting. Fenwick, which is one of the go-to firms in Silicon Valley (and in Seattle), works with a huge number of entrepreneurs and ventures. To the extent the judge here would have disqualified it, I would guess it would end up taking a second look at its policies around conflicts and whom it can continue to represent when clients (or former clients) have disputes against one another. I’m not saying its representation of Nextdoor.com against Abhyanker here is improper, but I found it very curious that the court relied heavily on summaries of billing records, when it’s widely known that lawyers in this space often work with smaller clients in the hopes that they may grow into more viable clients—it’s not about billing in the early stages of the relationship. Abhyanker’s testimony about him going to his “family friend,” Fenwick attorney Rajiv Patel, for help regarding intellectual property protections for stuff Abhyanker was developing (based on the partner’s IP expertise) did not put Patel in a particularly favorable light. Abhyanker’s argument is that this IP protection involved protection for situations such as when Abhyanker was pitching the nextdoor concept to Benchmark, or working with contractors such as Sood. How can Fenwick, who signed up to help him with these issues, now represent an adverse party in a lawsuit involving these same issues. Not a terrible argument in my opinion. 

Anyway, a crazy dispute that continues to grind on, but one that raised some interesting points.

The takeaway: to the extent you are looking to protect something like an idea and a domain name, I wouldn't rely on trade secrets. Any sort of implied confidentiality obligation is tough to enforce as well. You have to weigh the extent to which doors will slam in your face as a result of requesting an NDA, but that's what would have probably saved Abhyanker here.

Added: Check out the comments below. Also, as Jeff John Roberts noted in this story from January of this year ("Kickstarter project wants to expose idea thieves of Silicon Valley"), Abhyanker launched a Kickster project titled "Entrepreneurs in Residence"!

Photo: Kelli Anderson / Flickr.

Substance and tactics in the California same-sex marriage case

The Silicon Valley economic case against California's Proposition 8 and for same-sex marriage did not surface during yesterday's oral argument at the US Supreme Court.

I listened to an audio file of the argument in Hollingsworth v. Perry, after the fact. Here's my take.

Supreme Court Hollingsworth v Perry outside closer

Cooper, the attorney for several sponsors of Proposition 8, attempted to launch into rhetoric about the wisdom of ages past, but the Chief Justice cut him off and insisted that he address first a procedural question, namely, whether Cooper's clients had standing to press a case in federal court.

Olson, a former Solicitor General of the United States during the G. W. Bush administration, did manage, slyly, to make a moral statement at the top of his remarks. He did it by acknowledging first that he knew the Court would want him to address the standing question, and stating an intention to get to that subject right away. And then he proceeded to frame the case in terms of the stigma imposed on gay and lesbian people by the same-sex marriage ban.

Because I was listening to a sound recording, I couldn't see the Chief Justice's face, but I imagine he felt bushwhacked by Olsen's tactic. At any rate, the Chief Justice, invoking fair play, eventually cut Olson often, too, but not before Olson had laid out more of his set speech than Cooper had his.

Olson was good, but in almost every respect he had the easier assignment. We are already on the cusp of a cultural shift, where all recognize there is no rational, moral, economic, child-centered, or healthy emotional reason to discriminate over the sexual orientation of couples who want to marry. Olson did a nice job with the standing questions, but on the substance, he was preaching to the choir.

Given this new reality, Cooper readily conceded there is no legitimate basis on which to discriminate against people because of their sexual orientation, other than with respect to marriage. And even with respect to discrimination in marriage, Cooper seemed loathe to actually cite any loss or harm to anyone from allowing same-sex couples to marry. As if acknowledging his weaker hand, Cooper's tactic was to divert attention from the merits to a question of democratic process: shouldn't the Court should stand down, he argued, and let society continue to have a healthy debate about marriage; because no one can really know what the societal consequences of same-sex marriage will be, wouldn't it be better to allow time to assess the consequences in those states which have already chosen to permit same-sex couples to marry?

Cooper's argument was that of a lawyer trying to win the case at hand. I'd imagine it irks those conservatives who want to defend the federal Defense of Marriage Act, the featured subject at this morning's Supreme Court oral argument. In the DOMA case, the issue is whether federal law can deny the benefits of marital status to same-sex couples who are legally married in those states that have already made Cooper's democratic choice.

Justice Scalia, the personification of the best argument that appointments for life are a bad idea, found Cooper's moral relativism appalling. He demanded that Cooper give concrete examples of how same-sex marriage could cause societal harm. And Scalia didn't wait for Cooper to provide an example. Scalia provided one: the adoption of children. It could be, Scalia argued, that a state wouldn't want same-sex couples to marry, because that would mean gay couples could adopt children. (Was Scalia not aware that it is legal for same-sex couples in California to adopt children?)

If Cooper was rolling his eyes, I didn't see it, but he didn't sound like Scalia was doing him any favors. Cooper did utter a canard or two on his own initiative, but, on the whole, he kept to his mission. He tried to define a space where one could feel principled - "we are simply deferring to the democratic process" - about being bigoted.

Not nearly as savvy as Cooper: the brief of the United States Conference of Catholic Bishops, which makes the polygamy argument:

"Though no party to this litigation argues that multiple friendships and polygamous relationships constitute marriage, it is not evident why they would not also qualify as 'marriages' under the Ninth Circuit's novel test."

I know Pope Francis is getting a lot of great press, and I want to keep an open mind about what he has to say about poverty and the distribution of wealth, but the Catholic position on same-sex marriage is medieval and un-Christ like. If the Pope were to withdraw his Church's opposition to same-sex marriage, that might have a bigger impact a judicial thinking than even the conversions of Senator Portman and other Republicans.

Photo from yesterday: Ted Eytan / Flickr.

California's businesses assess the competitive price of the state's bigotry

I'm posting today in advance of this morning's oral argument at the Supreme Court for Hollingsworth v. Perry, the case involving California's ban on same sex marriage. Assuming something doesn't come up at work at that hour, I'm planning to listen in on C-SPAN Radio.

California flagThere is so much good writing and good coverage on the case, I will be reading more than adding substantively to the main thread. But I did want to call out some passages from the brief submitted on behalf of Adobe, Akamai, Alaska Airlines, Apple, Cisco, Dropbox, Facebook, Google, HP, LinkedIn, McKinstry, Qualcomm, REI, salesforce.com and 86 other companies, all (I think) with substantial business operations and employees in the State of California.

These businesses want the Supreme Court to know that bigotry is bad for their ability to compete from operations based in California.

The key point in the brief, I think, is that California's Proposition 8 puts California employers at a disadvantage to employers in states that don't demean gay and lesbian couples:

"Recognizing the rights of same-sex couples to marry is more than just a constitutional issue. It is a business imperative. By singling out a group for less favorable treatment, Proposition 8 impedes businesses from achieving the market’s ideal of efficient operations—particularly in recruiting, hiring, and retaining talented people who are in the best position to operate at their highest capacity. Amici are competing domestically and internationally with companies inside and outside the United States in places where all couples, regardless of whether they are of the same sex, are afforded equal access to marriage. Those of us operating in states like California face a competitive disadvantage . . .

"It is undisputed that gay men and lesbians suffer a daily gratuitous insult by their relegation to second-class status—an insult that negatively affects their productivity in the workplace and thus indirectly impairs their employers. Businesses suffer a more direct injury than that, however. Because domestic partnerships are not equivalent to marriages, supra at 9-11, it should come as no surprise that loving, committed same-sex couples may choose to relocate to states where their relationships are afforded the dignity and respect they deserve as marriage. Take, for example, a graduating engineering student near the top of her class at MIT. She is interested in putting her skills to work for one of the major technology companies in Silicon Valley and finds the perfect job that utilizes all of her skills, talents, and education. The difficulty is that she is also in a long-term, committed, same-sex relationship and she expects that she and her significant other will soon marry and start a family. With those goals in mind, however, the couple cannot move to California (or, at least, would have no interest in moving to California) because they will not be able to get married in California or have their marriage from another state recognized in California. So, they may choose to stay in Massachusetts or New York, even if they are not able to find a position there fully utilizing her unique talents. Even worse for American business, she and her significant other could choose to move to Spain, Sweden, Portugal, the Netherlands, Denmark, or Belgium—all countries that recognize marriage of same-sex couples. And the superstars from those countries will be less likely to take jobs here."

What is the impact on the competitiveness of business operations based in California? The brief says, in a word, "devastating."

Photo: SirJoseMaria / Flickr.

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