Weekend Law: Social Media Addiction, Music Piracy & Asylum

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1:45It took nine days of deliberations, but on Wednesday, a California jury found Meta and Google libel in a first-of-its-kind lawsuit. The jurors held the social media platforms responsible for a 20-year-old woman's mental health struggles, which she said were caused by her addiction to the platforms. Jurors awarded her$6 million, finding that Meta and Google were negligent in the design and operation of their platforms. Her attorney, Mark Lanier, says the verdict 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.

2:29I feel like we're about something that is incredibly socially important and responsible. There are thousands of other lawsuits that claim that Instagram, YouTube and other platforms are intentionally designed to addict young users, But it's a long road ahead for those plaintiffs, as Metta and Google will appeal. We respectfully disagree with the verdict and will appeal. Teen 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. This is what's called a bellwether trial or a test case designed to foresee how future litigation will play out.

3:19And the next case is slated to go to trial in California in July. Joining me is an expert in cybersecurity and data privacy, Colin Wacke, a 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. they 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.

4:09So the difference here 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. Did the jury discount those factors? Did 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 minutes worth of time was actually proven to have been on YouTube.

4:47So 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 about 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.

5:19And so I think the jury knew that, understood it, and have lived through it and simply did what has been a long time coming. What do you think the strongest evidence was showing the intention of the platforms to knowingly addict young users? Some of the evidence that came out during this trial, for example, was a study that Metta 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 an effect on mental health.

5:57Not only that, but another study that they conducted showed that individuals who were already predisposed to mental health issues increased their usage of social media and increased their worsening mental health. So these were some of the studies that were shown. So this put Metta on notice of what their algorithms were doing. 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? Well, 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.

6:34Is 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, OK, 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. Isn't it usually the case that when you hear about these huge verdicts, most of it is in the punitives?

7:14Absolutely. Whether the evidence shows that their actions were willful and wanton and in reckless disregard of the plaintiff's rights. 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. Well, 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 Metta's, you know,$60 billion in profits last year, that can be a fairly big number just for a speeding ticket.

7:55So 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 Metta 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.

8:36I 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. So as I mentioned, this is just the first verdict. Do you think that meta now goes out and tries to start settling?

9:09Do you think they're going to take the long road and say, well, wait for the appeal, wait for other cases 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. And 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.

9:52And 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. And 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?

10:24I mean, it seems like we're 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. But what I will tell you is 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.

11:00And so the point here 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. To put it in terms we all can relate to, how depressed do you think Meta and Google should be about this verdict? 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.

11:41The 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. Colin, what do you see as the ultimate sort of ideal answer? The social media companies 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.

12:15In other words, one thing they could do, for example, is stop infinite scroll. The 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 on social media. The irony is thick here and we don't realize that we ourselves are participating in this problem.

12:54I guess I'll have to plead guilty to that as well. Thanks so much, Colin. That's Colin Wacke of Hall Estill. Coming up next on the Bloomberg Law Show. In a landmark case, the Supreme Court deals a major blow to the music industry's efforts to stop music piracy. I'm June Grosso, and you're listening to Bloomberg. Every business has an ambition. PayPal Open is the platform designed to help you grow into yours. With access to business loans so you can expand and hundreds of millions of PayPal customers worldwide. Your customers can pay all the ways they want today. With PayPal, Venmo, Pay Later and all major cards.

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15:17A jury had returned a$1 billion verdict against Cox Communications for failing to shut down the accounts of more than 100 ,000 users who illegally downloaded and distributed copyrighted songs. Justices Sonia Sotomayor and Amy Coney Barrett had called Cox out for its flagrant behavior during oral arguments. You did nothing. And in fact, Counselor, your client's sort of laissez-faire attitude towards the respondents is probably what got the jury upset. What incentive would you have to do anything if you won? If you win and mere knowledge isn't enough, why would you bother to send out any notices in the future?

16:05And yet Sotomayor and Barrett joined their colleagues in letting Cox completely off the hook. In a unanimous decision, the court overturned the verdict and found that Internet service providers like Cox can't be held liable for copyright infringement, even if they know their users are illegally copying and sharing protected content. The decision sets a precedent that's a serious blow to the music industry's efforts to curb online piracy. My guest is intellectual property litigator Terrence Ross, a partner at Katnuchin Rosenman. Terry, the jury said Cox had to pay a billion dollars in damages. And now the Supreme Court says, no, Cox doesn't have to pay anything at all.

16:53That's correct. The cause of action in the lower court was for contributory copyright infringement, which means that the defendant did not actually commit the copyright theft, but somehow contributed to the ability of a third party to commit copyright infringement. And the Supreme Court determined that the lower courts had applied the wrong standard for measuring whether or not contributory copyright infringement had occurred and therefore reversed as to liability, which eliminated the damages verdict. Justice Sotomayor scolded Cox's attorney saying you did nothing. And now the court is saying that's fine.

17:38You don't have to do anything. Well, as we discussed that week after the oral argument before the Supreme Court, I had commented that I thought this was one of the most opaque oral arguments I'd ever listened to at the Supreme Court. And you'd ask me what's going to happen. I said, I just plain don't know. I do not have a clue. And I was proved right. The oral argument centered so heavily on the really terrible facts for Cox surrounding its efforts, half-hearted at best, to comply with the safe harbor provision of the Digital Millennium Copyright Act. And they were just terrible facts. We know the jury thought they were so bad that they found Cox to be willfully liable for contributory infringement.

18:22And yet none of that came out in this opinion. There was some discussion, although very limited during oral argument, as to what the correct standard for contributory copyright infringement was. But Cox in particular had pushed that argument into a very odd place where it was drawing upon aiding and abetting cases from common torts, even cited to the recent Mexican government case against American gun manufacturers, which was an aiding and abetting theory that the Supreme Court had tossed. And so the decision is maybe not surprising as to the result, but a little bit surprising after the oral argument that it went in the direction that it went.

19:05How did the court handle the apparent violations of the DMCA, with Cox ignoring more than 160 ,000 copyright infringement notices and giving users chance after chance after chance rather than terminating their service? And there was evidence that the Cox manager, who was overseeing compliance, told his team to ignore the DMCA, using foul language to say that. That's clearly all correct. Justice Thomas, who wrote the opinion for the majority of the court, simply chose to ignore the Digital Millennium Copyright Act. In essence, he said that Cox had failed to comply with the safe harbor in the Digital Millennium Copyright Act because they did not have a program in place to comply with copyright infringement notices.

19:58But then he said, and this is the important part, he said, but that does not prove the case for the recording companies. He said a mere failure to establish that you're entitled to take advantage of the safe harbor defense of the Digital Millennium Copyright Act does not establish the affirmative grounds for contributory copyright infringement. And then he went through an analysis of what he viewed to be the elements of cause of action for contributory copyright infringement. He found that there was an affirmative action required on the part of the defendant to be accused of contributory copyright infringement.

20:39And that's what surprised, I think, a lot of us. There is a long history of decisions in the circuit courts and in the Supreme Court, stretching back to 1912, in which courts have allowed contributory copyright infringement cases go forward in situations, factual situations, which seem to be nothing more than providing a product or a service. And Justice Thomas starts off by recharacterizing those cases as findings that a company cannot be liable as a copyright infringer for merely providing a service to the general public, even with knowledge that it will be used by some copyright infringers.

21:22And that's the big surprise here. The cases had implicitly understood the provision of services and products that led to copyright infringement as an affirmative action on the part of the defendant. Now the Supreme Court says that's not good enough. They seem to be of the view that the only way you can bring a contributory copyright infringement case against a provider of a service or product is if they specifically promote that product or service as capable of engaging in copyright infringement. And so the result of this case is that it will be extraordinarily hard to ever again bring a cause of action for contributory copyright infringement.

22:11Terry, do you have any idea how the justices reached this, I'll call it a radical decision? Do you think it was the result of compromise? I call this a way out, not a compromise. This was a way to avoid a really hard decision with respect to the damage element, but was not a compromise. It was basically a complete 180 change in direction of the cases that have existed for 120 years now. This case adopts such a radical view of secondary liability under the Copyright Act that I don't think was intended by Congress, that it basically kills off the two causes of action. Only a complete moron could be found liable for contributory or vicarious copyright infringement at this point in time.

22:56So I don't know what went on behind Claude's door. I found it fascinating that Justice Thomas wrote the opinion. Justice Thomas tends to write opinions that are short, sweet, and to the point. And so sometimes he gets designated for a case that the court does not want to spend too much time intellectualizing. They just say, look, here's what we think. You only get contributory infringement if you show an affirmative act. There was no affirmative act found. Case over. And that's what this opinion is. It certainly doesn't address any of the past cases involving contributory copyright infringement, except for Grokster and Betamax, both of them Supreme Court cases, which were only slightly helpful in this decision.

23:37They really needed to look at the full spectrum of contributory copyright cases over the last century, and they failed to do that. And this is supposed to be a textualist court. But were they reading the text here? You know, none of this is in the Copyright Act. I mean, the whole purpose of having a statute is to set out the meets and bounds of causes of action and rights. And none of this is in the Copyright Act. I just plain don't get it. And you know, over the years, there have been a lot of good justices who know copyright law. And even Justice Scalia, who was all about the text, never ever stopped to say, wait a minute, there is no secondary liability in the 76 Copyright Act.

24:18What are we talking about here? It's just crazy. How much does this decision hamper the music industry's efforts to combat online piracy? Are there any other options available to music labels now?

24:57Copyright Act to provide that the ISPs must comply with the safe harbor provisions in order to avoid contributory or vicarious copyright infringement. So that's one route that the music companies could pursue. The other route, which is more complicated, is to serve subpoenas upon COX or other ISPs for the IP addresses that are doing the most downloading of copyrighted music. And get the names and addresses of whoever the owner is. And then sue that owner. So you bypass Cox and you sue the person who's actually engaged in the music file downloading for copyright infringement. Now, this was a course of action that occasionally has happened in the past.

25:49And it's relatively successful because the defendant usually caves in quickly and they enter into some settlement where they agree never to download music again. It seems to me that that remains a viable option from a legal side. It's just very cumbersome. You don't always get courts willing to enforce such a subpoena and it requires follow on litigation. So it's going to be a little bit more costly. But those are the only two options I see for the music company at this point. How much does the music industry lose because of this piracy? I've seen all sorts of estimates, but it's over a billion dollars a year typically.

26:28Now, the interesting thing about this case is that the music companies didn't even pursue all the copyright infringements that were being utilized through the Cox system. They were only going after the really large downloads and distributions of files. And the jury found damages of a billion dollars. And that was against a single ISP, not the many ISPs in this country, and for only a portion of the copyright infringement that was going on. So that suggests that the number is many billions of dollars. Look, to understand the extent of the problem, June, at one point in time, over the entire Cox internet system, 21 % of all traffic involved music copyright infringement.

27:15The fall of the traffic is infringement upon copyrighted music. I mean, it's just a phenomenal number. And here the Supreme Court says, well, no, there's actually no remedy for that. And that's not what Congress thought when they passed the Digital Millennium Copyright Act. It'll be interesting to see what happens to a similar music industry case against Verizon that's seeking$2.6 billion in damages. We'll see whether that case survives. It's always a pleasure to have you on, Terry. Thanks so much. That's Terrence Ross of Katnuchin-Rosemann. Coming up next, the Supreme Court appears ready to allow asylum seekers to be turned away at the border.