CHARACTER.AI SUED IN TWO STATES

Character Technologies has been hit with two lawsuits, including a wrongful death suit (among other claims), in less than two months over its popular Character.ai chatbot. The first was filed in the U.S. District Court for the Middle District of Florida (Garcia v. Character Technologies Inc.) by the mother of a Florida teenager who tragically committed suicide after the chatbot allegedly encouraged the child to do so. The Plaintiff claims her son became instantly addicted to Character.ai and “fell in love” with the bot, leading to drastic behavioral changes such as sleep deprivation, school-related issues, and low self-esteem, which culminated in the child’s death. Just a few weeks later, two plaintiffs in Texas filed suit alleging that Character.ai abused the plaintiffs’ children by exposing them to hypersexualized content, encouraging self-harm, and suggesting they should kill their parents. Both suits allege that the Character.ai chatbot is intentionally designed in a way that exploits minors by simulating human interaction, creating emotional dependence, and failing to implement safeguards against misuse. Given that these are the first major cases to seek damages related to anthropomorphized AI tech, it will be interesting to see whether juries find Character.ai liable, as this could spawn waves of similar lawsuits.

MAJOR RECORD LABELS PETITION SUPREME COURT OVER VERDICT REVERSAL

Three of the world’s largest entertainment companies—Sony Music, Warner Music, and Universal Music—have petitioned the U.S. Supreme Court to reconsider an appellate ruling that wiped out a $1 billion jury verdict in their suit against internet service provider Cox Communications. In 2019, a Virginia jury found Cox liable for rampant music piracy by the company’s customers and failure to act despite receiving thousands of infringement notices. The verdict was overturned earlier this year by the U.S. Court of Appeals for the 4th Circuit, which confirmed the jury’s finding of willful contributory infringement, but called for a new trial on damages because Cox did not directly profit from the piracy. Unsurprisingly, the plaintiffs appealed, and it appears the Supreme Court is poised to take the case. In a one-sentence order, the High Court has invited the solicitor general to file a brief expressing the views of the United States. This is a strong indication that the Court is interested in hearing the case. With a new administration set to take the reins in Washington next month, it seems likely that appellate attorney D. John Sauer will be solicitor general. Sauer’s disposition toward IP cases is tough to predict, as his work has largely focused on hot-button social issues. A brief in the case may give insight into Sauer’s positions on copyright law and corporate liability.

X CLAIMS OWNERSHIP OF ALEX JONES ACCOUNT

The asset liquidation of Alex Jones’s intellectual and tangible property in the bankruptcy proceeding following the $1.5 billion defamation judgment against him has hit an unusual speedbump. At issue is Jones’s X account. With its 3.4 million followers, the account is among the highest-profile IP assets on the auction block. But here’s the thing: X has filed an objection claiming that the account belongs to it, not Jones, and is therefore exempt from an asset sale. This raises several interesting questions and a judgment either way could have wide-ranging implications for all social media platforms. Though X’s Terms of Service state that users maintain ownership of “any Content you submit, post or display on or through the Services,” the terms do not explicitly define who actually owns the account. An ownership argument in this context is unusual. We’ve been covering social media account ownership issues for years and in the majority of cases the conflict is between employee/employer or company/consultant. X may very well prevail in this action. Users own their content, but the account itself will likely be seen as an extension of a user’s license to access and use the platform’s services. We’ll be following this one very closely.

X LAWSUIT AGAINST ISRAELI DATA SCRAPING FIRM REVIVED

It appears that Israeli firm Bright Data will be back in court facing an amended version of a complaint from X that was dismissed last May. As we reported in June, X alleged that Bright Data’s scraping and selling of data from X violated the social media giant’s Terms of Service and the U.S. District Court for the Northern District of California held that X’s claims were preempted by federal copyright law. Though the court declined to allow amendments related specifically to Bright Data’s scraping operations, it granted X’s motion for leave to amend the company’s trespass to chattels claims and fraudulent business acts allegations. Judge William H. Alsup ruled that X’s updated complaint sufficiently alleges that Bright Data improperly accessed X’s servers, writing: “X Corp. newly alleges that scrapers traverse the X service in patterns markedly different from humans or authorized machines, that scrapers thus use underlying server capacity in abnormal proportions, and that this results in intermittent, isolated server failures and a ‘glitchy, lagged user experience’ for X’s human users.” Judge Alsup added that X also properly alleged that if it hadn’t purchased “millions of dollars of server capacity,” the alleged scraping would have resulted in “catastrophic system failures,” concluding that, with these revised allegations, “X Corp.’s proposed complaint now sufficiently alleges server impairment from scrapers accessing its service. . . Bright Data does not contest that if X Corp. states trespass to chattels as to data scrapers, it plausibly does so as to Bright Data, too. This order will assume as much.” You can read Judge Alsup’s thorough, and surprisingly entertaining, ruling. Now that this case is set to move forward, we’ll see if it will have wider implications on the legalities of data scraping and platform protection.

META PREVAILS IN IMMUNITY SUIT

University of Massachusetts Amherst professor Ethan Zuckerman has lost his bid for immunity from potential lawsuits alleging breach of contract and violation of federal criminal computer fraud laws related to his “Unfollow Everything 2.0” browser extension. The extension is designed to allow users to turn off the newsfeeds assembled for them by Facebook’s algorithms with one click, blocking unwanted content and advertisements. Unfollowing functionality is already in place on Facebook but requires unfollowing groups and pages individually. In the November 22 ruling, Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California wrote that Zuckerman’s “alleged injury is too contingent upon uncertain events to satisfy the constitutional ripeness requirement” and that the request for relief is too speculative because Zuckerman has not actually released the browser extension. Last May, Zuckerman filed a preemptive suit against Meta requesting immunity under Section 230, asking the court to declare that his extension would not violate Facebook’s Terms of Service or federal computer fraud laws, but this action was also rejected. The current case was dismissed without prejudice, so Zuckerman could refile it if he ever releases the Unfollow Everything 2.0 extension, but after two court losses, he faces significant headwinds.

UBER’S ARBITRATION CLAUSE UPHELD BY APPEALS COURT

In a 5–2 decision, the New York Court of Appeals has ruled that a plaintiff’s legal claims against Uber must go through arbitration—even though her action was currently pending before a court. The ruling stems from a November 2020 lawsuit brought by plaintiff Emily Wu, who originally agreed to a prior version of Uber’s Terms of Service without mandatory arbitration. Uber amended its Terms of Service in January 2021, updating its mandatory arbitration clause, which Wu agreed to.

At the heart of the case is the plaintiff’s argument that the arbitration clause should not apply to claims pending in court, even though the amended Terms of Service purported to apply to “any claims” without limitation. Among other things, Wu claimed that Uber’s notice to Wu violated Rule 4.2 of the Rules of Professional Conduct for attorneys, which bars the other party in a pending lawsuit from directly contacting a party they know is represented by counsel. The Court of Appeals disagreed with Wu, maintaining that (a) a mass email notification sent by Uber clearly explained there would be changes to the arbitration agreement and that Wu entered into a contract when she agreed to the revised terms; (b) Uber did not know that Wu was represented by counsel when it sent the mass notice; and (c) even if the claim had merit, Wu’s requested remedies were too extreme and she did not even ask for the more targeted and sensible remedy of simply voiding the arbitration agreement and allowing the dispute to move forward in court.

In his majority opinion, Judge Anthony Cannataro wrote, “For essentially as long as there have been written contracts, parties have entered them without first carefully reviewing their terms. That failure can have legal consequences, whether the party is a sophisticated entity or an ordinary consumer, and whether the contract is presented on paper or through an electronic pop-up window.”

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