Social Media Addiction Verdict & Cox SCOTUS Decision

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1:24Do that with Acrobat. Want to stop searching for files and finally get everyone on the same page? Do that, do that, do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. This is Bloomberg Law with June Grosso from Bloomberg Radio. After nine days of deliberations, a jury found meta and YouTube libel in a first-of-its-kind lawsuit that aimed to hold social media platforms responsible for harm to children from using their services. Los Angeles jurors decided that Meta and YouTube were negligent in the design or operation of their platforms and that each company's negligence was a substantial factor in causing harm to the plaintiff.

2:14The 20-year-old woman had argued that her use of social media as a child addicted her to the technology and exacerbated her mental health struggles. The jury awarded her$3 million in compensatory damages and$3 million in punitive damages. Her attorney, Mark Lanier, said the case is a game changer. I feel like what we're about here is something beyond just trying to make a buck, beyond just trying to help Kaylee. I feel like we're about something that is incredibly socially important and responsible. Meta spokesperson Ashley Nicole Davis says the company will appeal. We respectfully disagree with the verdict and will appeal.

3:02Teen mental health is profoundly complex and cannot be linked to a single app. We will continue to defend ourselves vigorously as every case is different, and we remain confident in our record of protecting teens online. My guest is Colin Walkie, a cybersecurity and data privacy partner at Hall Estill. Colin, this is one case among thousands. What does this verdict stand for? This verdict actually stands for the proposition that Meta and YouTube intentionally made their algorithms addictive and negatively impacted someone's mental health as a result. This particular claim is based upon negligence, i.e.

3:46they knew and owed a duty to individuals to not make their algorithms addictive. They did it anyway. However, you could look at a recent case out of New Mexico to the tune of$375 million where tech companies were found to have violated the consumer protection law. So the difference here is, is this is just a traditional negligence theory. There is no statutory action against these companies. Metta argued that the plaintiff had struggled with her mental health separately from her social media use, and they pointed to her turbulent home life and bullying at school, etc., etc. Did the jury discount those factors?

4:26Did they find they were not contributory? That wasn't the only thing that their attorneys pointed to. YouTube's attorney also pointed to the fact that in all of the evidence presented, only a few moments or a few minutes worth of time was actually proven to have been on YouTube. So I don't think that the jury discounted that fact. I think the jury knew what we all know, which is we reach for our phones when we don't intend to, when we're sitting on their couch without thinking. And why? Because social media is addictive. And not only that, this case is a long time coming. It's not as though we haven't read tell-all book after tell-all book.

5:03about the manner and method by which these tech companies have attempted to make their algorithms more addictive in order to get more attention, in order to sell more advertising. When you are using a free product, you are the product. And so I think the jury knew that, understood it, and have lived through it, and simply did what has been a long time coming. I mean, can you compare this to, let's say, you know, a bakery bakes delicious cakes, and you start to gain weight? I mean, are you responsible? Or is the bakery responsible for trying to make the cakes as delicious as possible to hook you.

5:35I know that's a far out example, but I'm just trying to get to the question of where does our personal responsibility or parental responsibility factor in? Or do the social media companies shoulder all the blame? So let me show you the distinction between your example and the tech companies, which is to say some of the evidence that came out during this trial, for example, was a study that Meta had suppressed and they had conducted it themselves that showed when individuals and particularly youth put away their phone for a week there was an actual causative relation we're not talking correlative relation we're talking causative relationship between that showing that there was a effect on mental health not only that but another study that they conducted showed that individuals who are were already predisposed to mental health issues increased their usage of social media and increase their worsening mental health.

6:32So these were some of the studies that were shown. So this put Metta on notice of what their algorithms were doing. So in your case, if the bakery knew that all that fat and sugary goods was in fact addicting individuals, there might be a claim there. So Colin, what's the ultimate answer? Are the social media companies supposed to go out of business? Well, I don't think that they're supposed to go out of business. I think that they are supposed to show generalized and neutralized algorithms, not algorithms that are designed to get you hooked. In other words, one thing they could do, for example, is stop infinite scroll.

7:06The whole reason why infinite scroll was invented was because people got tired of having to wait for their page to load. A little bit of patience built into an algorithm might actually get us off of our phones. And that's one of the things that I find so ironic about this. The entire point of this case is that social media negatively impacts mental health. And I go and I look at the front page of the newspaper after this verdict comes down and everybody's on their cell phone sharing it into social media. The irony is thick here and we don't realize that we ourselves are participating in this problem.

7:42Will you just explain what infinite scroll is? Yeah. So anybody who grew up with the internet between 2000 and about 2011, if you had a GPS unit, for example, when you were driving, it would show that your car was driving towards the top of the screen. And then once it got to the top of the screen, it loaded more data. So you would know where to drive further. Now it just tracks along as you drive. And so the same thing on social media used to be, you'd get to the bottom of a page and you'd have to wait for it to load. Well, now you don't even have to wait for it to load. It just shows you the next thing that you want to see.

8:15So only nine out of the 12 jurors had to agree on each claim against each defendant. Two jurors consistently disagreed with the other 10 on whether the tech company should be held liable. So the social media companies now know what kinds of jurors lean toward their position. Will they be looking to select jurors with similar characteristics to those two in upcoming trials? Oh, absolutely. And I'm confident that Meta and the tech companies spent tons of money on jury consultants and identifying the type of juror they want. And I'm confident now that they've identified these two jurors, their personality profiles will be what is sought out in the future.

8:57I mean, that being said, Metta has already indicated it's going to appeal. So they have legal arguments to appeal from, and then they may have some factual arguments to appeal from. And the fact that you have two dissenting jurors certainly helps that case. But at the end of the day, jury verdicts are typically fairly sacred and they're very hard to overturn. So absent the judge making an error on the law or the jury really abusing their findings of fact, I think this verdict stands. The jury was out for nine days, 40 hours over nine days. So they must have been struggling with some aspect of the plaintiff's case, right?

9:34Well, it could be something that was holding them up from a liability standpoint. To your point earlier, well, this individual did have mental health issues in any event. Is that really the cause here? Because we have to prove it's causative. But I think more to the point, it could also be on the damage valuation. This woman was ultimately awarded$3 million in actual damages and$3 million in punitive damages. Sometimes the fight isn't over the liability. The fight is, it's okay, how much do we award? And where huge liability for the companies could have come in is in the punitive damages. I mean,$3 million in punitive damages is just a drop in the bucket to Meta or Google.

10:17Isn't it usually the case that when you hear about these huge verdicts, most of it is in the punitives? Absolutely, absolutely. And so whether the evidence shows that their actions were willful and wanton and in reckless disregard of the plaintiff's rights. And they're going to point back to those studies where the individuals knew at Meta the consequences of these algorithms. And so, for example, one famous jury verdict that resulted in a several hundred million dollar period of damage award was likened to a parking ticket. If I make one hundred thousand dollars a year and I get a parking ticket for one hundred and fifty dollars.

10:52Well, you know, that's really one percent of my income or whatever that comes out to be. 0.01. And so if you did the same thing to Meta's point, you know,$60 billion in profits last year, that can be a fairly big number just for a speeding ticket. You know, lawyers for both platforms consistently pointed to the safety features and guardrails they each have available for people to monitor and customize their use. I guess the jury didn't think much of those. Well, and part of the issue in this particular case, if I recall correctly, is that this individual actually started before Instagram had begun the age control checks and those sorts of things.

11:33So if the facts had been different to your point earlier, June, the jury might go, well, there were parental controls, there was age verification, those sorts of things. But it also begs the question whether or not those companies are actually fulfilling their requirements on the back end to verify and the evidence that would show to the contrary. So as I mentioned, this is just the first verdict. Do you think that meta now goes out and tries to start settling? Do you think they're going to take the long road and say, well, wait for the appeal, wait to see how other cases shake out? Yeah, I mean, I found it odd that they wanted to use this as their test case, but they clearly have.

12:10And they have a creative First Amendment argument with regard to the whole problem with prosecuting previously has been thought that Section 230 of federal law, which says that social media companies cannot be liable for the information that is posted on their website. This lawsuit says that that's true, but they can be held liable for the decisions and the algorithms that show that content, how that content is portrayed. And typically in intellectual property law, those are considered editorial rights. We are editing what you are seeing. Why is that a problem? And so there's a First Amendment case that they are alleging here.

12:53And so if it goes up on appeal, makes it to the Supreme Court, and the Supreme Court insulates them from liability, they're not likely to settle anything in the future. And that's why I think they'll keep prolonging this litigation, at least through that opinion. Do you think people are jumping the gun too much? They're comparing this to the tobacco litigation and the global settlement there and the opioid litigation? I mean, it seems like were just at the starting gate. I do think it's the starting gate, but I think that so many people, in spite of their constant social media usage, have been expecting this to come for so long that it does feel like the big tobacco settlement scenario, the opioid issues.

13:28But what I will tell you is that at least with regards to tobacco, to your point, June,$3 million is a drop in the bucket. And last year, Meta posted$60 billion in profit. In 1997, the year before the tobacco settlement got entered into, Philip Morris, their profits were magnitudes of orders less than that, like$5 billion. And so the point here is, is Meta and these other tech companies have plenty of money to continue to fight on, even if they settle a billion dollars here and a billion dollars there, they have plenty of money to keep fighting. So bottom line, Colin, how depressed do you think Meta and Google should be about this verdict?

14:06point? Well, I don't know, because if you look at the approach that our government has taken to regulating AI and data privacy in general, which is to say we don't and we won't, I would not be surprised at all if what you see is a bunch of legislation coming down the pike pushed by tech industry lobbyists that says we're insulating these companies from these types of lawsuits. The only manner and method by which you can sue these companies is for X, Y, and Z, and negligence ain't one of them. Some sort of insulation from their liabilities. I can see that happening and I can see the legislators, if history is prologue, bending over backwards to accommodate that request.

14:47When I look at the big picture, social media is so entwined with our everyday lives, whether it's Instagram or TikTok or whatever, or whether it's just looking at the news and getting caught up in one news story after the other. I find it hard to believe that there'll be a time when it won't be, if you want to use the word addictive, I mean, it's all around us. Well, to that point, so a few years ago, there was an editorial, I believe it was in the New York Times. And what it spoke about was the future. The number one indicator right now, if you are in poverty, is whether you smoke, period, end of story.

15:22And so the argument here was in the future, those who are impoverished are going to be the ones utilizing social media for free. They're the ones who are going to be bought and sold and exploited. The individuals who have money will be able to subscribe and obtain their privacy through paying for the product into the future. And so if you think about it from that perspective, yeah, social media will always be around, but not necessarily in the way that we see it today. Is there a big lesson from this verdict? I think that this should be a lesson to everyone who says we can't regulate tech, because we don't need to regulate tech.

15:58We need to apply the laws that we currently have on the books in the same manner and method and we can get the same results. This is a negligence claim. It's common law. It's been around for hundreds of years. So I think it was a long time coming and we'll see what happens on appeal. Colin, do you think the defendants have a good chance on appeal? I do not necessarily like their First Amendment argument, i.e. that it's editorial commentary, because again, you're going back to thinking about advertising for tobacco companies. They knew what they were portraying in these advertisements was addictive, you know, their product was.

16:31So I don't know that that goes very far. And I haven't seen any strong arguments that the judge made a huge factual errors or something along those lines, evidentiary errors at trial. So I think it's gonna be a hard road to hoe unless they get that First Amendment claim in. Thanks so much, Colin. That's Colin Wacke, a cybersecurity and data privacy partner at Hall Estill. Support for the show comes from public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game.

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19:10In a unanimous decision, the justices said Cox couldn't be held liable for failing to shut down the accounts of people who repeatedly downloaded and distributed songs without permission. A federal appeals court had upheld a jury's finding that Cox contributed to infringement by its subscribers. My guest is an expert in intellectual property law, Shambalganesh, a professor at Columbia Law School. Tell us about the Supreme Court's decision today. Okay, so Cox v. Sony Communications was the court being asked to reconsider what the level of intent is under a doctrine called contributory infringement in copyright law, which traces itself back to decisions of the court, the most prominent of which was Sony v.

19:58Universal City post-1976, but a basically judge-made doctrine that wasn't codified in the statute that says that someone who actively encourages or induces infringement could themselves be liable for infringement, right? So it was a case examining contributory infringement and its scope around the prong of intent by the person who's doing the encouraging. And so the question was the liability of an internet service provider for potential knowledge that it had that some of its users based on IP addresses were engaged in illegal copyright infringement. And the question was whether that satisfied the intent requirement when this knowledge was made available to the internet service provider.

20:43And despite subsequent requests and notices, it didn't terminate the services of the subscribers. Many of them it allowed to continue, and it knowingly, therefore, in some sense, allowed the illegal activity to go on. So the question was whether this knowledge was sufficient to satisfy the intent requirement. And the Supreme Court says no. The Supreme Court says no. What contributory infringement requires on the intent prong is very specific, as we've told you before in our prior decisions, referencing Sony versus Universal and then later on MGM versus Grokster. to major decisions where the court clarified what it means.

21:22The first thing it says is, well, the two meanings of intent for our purposes are, one, if there's an active encouragement of the infringement by specific actions, right? That was the Grokster case where a peer-to-peer file sharing service was marketing itself for usage for infringement. That active inducement, the active encouragement, that's the first prong. And the second one is if a service, it says, is specifically tailored to infringement. So if the service being offered by the provider is tailored for infringement, well, how do we understand if it's tailored for infringement? Here the court says if that service is not capable of substantial non-infringing uses.

22:05So if it's capable of substantial non-infringing uses, that means it wasn't tailored to the infringement. But only if it's not capable of substantial non-infringing uses, we could say that it's tailored to the infringement, not simply on the basis of knowledge. We have never held before, the court says, that mere knowledge is sufficient for satisfying the intent prong. And here, Cox did not satisfy either of them and as a result cannot be held liable. So it reverses the decision of the Fourth Circuit on contributory infringement. So the decision was unanimous. And if the Supreme Court's precedent was so clear, How did the Fourth Circuit get it so wrong then?

22:43Yeah, the honest answer is the Supreme Court's prior precedent was not this clear. So there is a oversimplistic reiteration of the prior precedent by Justice Thomas writing for the majority. I think one of the things that's very glaring in the opinion is how there is an oversimplification of the entire complexity of the doctrine that was present not just in the Supreme Court's own prior precedents, but the way in which the intermediate courts of appeal had understood those precedents and applied it in case after case. So there's a simplification here. So just to give you an example, one of the things that the majority doesn't talk about is the fact that when Congress enacted the 1976 Act and put in place Section 106, which deals with the different kinds of infringement, the legislative history makes clear that Congress used a phrase to authorize.

23:34And it used that phrase specifically to recognize that contributory infringement was meant to continue under the 1976 Act, which was a doctrine that had been created by courts before. Justice Thomas is basically saying right now that all that generativity around the contributory infringement doctrine that existed before is off the table. These are the only two variants. He's effectively saying that let's treat this almost as though it's a textualist claim, that unless it falls within the narrow parameters of what we have said before, there is no basis for contributory infringement. And that's the striking part of the opinion in some ways, which is not that the decision is problematic in any way or form.

24:18I think many people believed that Cox should have won. The outcome is not the problematic thing. it's what he does with the doctrine of contributory infringement and really the role of the courts, where he's basically saying that the room for innovation and expansion, which has been the hallmark of this entire area, is off the table. It's only these narrow parameters that need to be complied with in the expansion of the doctrine. And the reason that's problematic is, one, June, just as you pointed out, the court itself had adopted a very different approach in MGM versus Grokster. It introduced inducement, which did not exist in the statute.

24:53And secondly, Congress intended that generativity to continue. So there's something institutional going on here where Justice Thomas does not want the courts to continue developing it. When I say Justice Thomas, writing for the majority. So is that why two of the liberal justices, Sonia Sotomayor and Ketanji Brown Jackson, joined in a concurrence saying the court went too far in insulating Internet service providers And the court should have left open the possibility of suits against companies that intentionally assist specific instances of infringement. That's exactly right. I think the concurring opinion by Justices Sotomayor and Jackson agrees with the result.

25:36But it is vehement in its disagreement on the reasoning adopted to come at that because the concurrence, they see what Justice Thomas and the majority is doing is stifling the further creation of expansion of contributory infringement to domains that Congress and the court itself indicated required potential expansion. And so Justice Sotomayor's opinion actually goes to some lengths to indicate how such an expansion should actually happen, how you might want to look at instances where specific knowledge actually can be a basis of intent. And she says, look, if you have absolute certainty that something is going to be used for a bad purpose, shouldn't that heightened level of knowledge be equivalent to intent and therefore satisfy the prong?

26:22So you give a product to someone when they come to you saying, I want to use it for X purpose and X purpose only. And you say, sure, and give them your product. Well, you have a heightened level of knowledge. That is the kind of intent that is sufficient for the purposes of contributory infringement. And the understanding and the reasoning of the majority, she says, takes that entirely off the table. And that should not be the case. But she's also very ready to point out that even in that expanded universe, it did not exist here, which is why she agrees and concurs with the results. So she says, even under that modified, expanded standard of hers, deferring from the majority, Cox would not be liable because she basically says that while Cox may have had specific knowledge as to the IP addresses, which were committing the infringement, what she points out is there is not a singular correlation between an IP address and an individual user, right?