Category: General Law

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When Joining Forces Spells Trouble: Proposed Merger of E-Voting Companies

450px-Issy_IVotronic_img_3426Last month, Diebold announced that ES&S would purchase its e-voting business for $5 million plus some outstanding revenue.  Diebold’s shareholders no doubt rejoiced: while the company’s ATM machines have a strong reputation, its e-voting machines brought the company only grief.  Diebold even changed its e-voting unit’s name to Premier to protect the company’s otherwise strong brand name.

This merger, however, is bad news for voters.  It would entrust 3/4s of e-voting machines into the hands of a company whose machines rival Diebold’s for inaccuracy and insecurity.  Consider this recent example.  In 2008, ES&S machines allocated votes cast in one race to a different race that was not even on the ballot.  As a result, the wrong candidate won a state House nomination race.  Given the consolidation of the e-voting market, we can have little hope that future machines will be more secure.  Ed Felten explains that  “[t]he odds of one major e-voting company breaking from the pack and embracing up-to-date security engineering are now even slimmer than before.”  Because breaking into the e-voting business is expensive due to high accreditation costs, ES&S may face limp competition in bids for upcoming contracts.  Voting administrators thus may be unable to obtain important terms crucial to transparency and accountability, such as the placement of source code in escrow.

Although voters should lament this development, all isn’t lost.  As Joe Hall notes,  California Secretary of State Debra Bowen has provided wise advice to the Election Assistance Commission with regard to the integrity of e-voting systems.  Bowen urges that the EAC require greater disclosure of vulnerabilities, the adoption of procedures that jurisdictions can follow to collect and report data about incidents they experience with their voting systems, and the systematic collection of data from election officials about how voting systems perform during general elections.  This recalls the important work of Heather Gerken in her book The Democracy Index: Why Our Election System is Failing and How to Fix It.  The EAC would be wise to adopt these proposals, especially in light of the upcoming merger.

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Signing off

The semester has just concluded at my institution. The end of classes is always a bit of a relief, although it also means that grading is just around the corner. So, alas, it’s time to swap blogging for grading papers and exams. I’ve enjoyed my guest stint, and I’d like to thank everyone here at Concurring Opinions, and particularly Dan Solove for inviting me.

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Farewell to CoOp

Today is my last day as a guest on Concurring Opinions.  Many thanks to Dan Solove and the rest of the CoOp crew.  It’s been a pleasure participating.

If you’ve enjoyed my posts here, you can continue to follow me on my regular blog, Law Prof on the Loose.

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Disturbances in the Blogosphere

The FTC recently churned up the blogosphere by releasing new “Guides Concerning the Use of Endorsements and Testimonials in Advertising” that indicate that bloggers — bloggers! — have a duty clearly and conspicuously to disclose whether they have a “connection,” such as the receipt of free product, with the makers of products that they endorse.  (See particularly section 255.5, Example 7.)  We thought that we were just posting stuff on our blogs, but suddenly it’s a federal matter.

Like most bloggers, I believe in freedom to blog, but I have to say I think the FTC has a point.  The FTC’s statutory mandate is to stamp out “unfair methods of competition . . . , and unfair or deceptive acts or practices in or affecting commerce.”  This venerable proscription should apply to new media as well as to old.  The Internet is new and cool, but deception over the Internet is still deception.  Deception on a blog is still deception. 

If you’re representing yourself as a source of unbiased information about consumer products but (to take the simplest case) you’re actually getting paid by someone to say something nice about their products, there’s some deception going on.  Whether it’s deceptive not to reveal that you’re reviewing a product that you received for free because you’re known to be an influential reviewer is a closer question.  I expect magazine reviewers get free stuff all the time, but they don’t necessarily reveal it conspicuously, precisely because it’s already keyed into our assumptions.  If the proscription against deception carries over to new media, the assumptions that mitigate deception should carry over too.  So it’s ultimately a question of fact whether people assume bloggers get free stuff.  But the basic point that it should be as unlawful to use a blog to deceive as to use anything else for that purpose is sound.

Also churning up the blogosphere is the opposite trend — the consumer use of blogs and other Internet avenues to say not-so-nice things about products and services they received.  Usually big corporations have an edge in battles with consumers, but the Internet levels the playing field somewhat in this regard — the manufacturers and service providers have to be concerned about the ability of one dissatisfied consumer to communicate the problem to millions.

Let me  join both trends at once.   I recently redid my kitchen, and got all-new KitchenAid appliances.  I’m sensitive to noise, so I carefully investigated the noise levels of the refrigerator and dishwasher, and they’ve turned out great.   (FTC-Recommended Full DisclosureI didn’t get a dime for saying that but I would be happy to accept an appropriate fee.  KitchenAid, call my agent.)

But the oven!  Would it even occur to you to check whether an oven might make too much noise, or, indeed, any noise at all?  Well, my consumer friend, I want you to know that if you’re thinking of buying a KitchenAid range, you’d better check into it.  Every time you switch on the oven (on my model at least), a fan comes on — quite a noisy fan, too, in my (admittedly sensitive) estimation.  And it stays on the whole time you’re cooking.  The purpose of this fan, I learned from a quite unapologetic KitchenAid representative, is just to cool the range’s electronic instrument panel.  There’s progress for you — first they install a souped-up electronic panel you don’t really need (what was wrong with knobs, exactly?), and then they have to add a noisy fan so the panel won’t overheat.

The range had to go.  I knew I couldn’t live with that fan noise, so I set out on a search for a range with a quiet oven.  But it turns out to be impossible to search, because you can’t listen to ovens in stores — they’re not connected up.  And they’re not rated for noise either.  There’s no way to tell whether an oven is noisy short of buying it and installing it.  After calling every appliance store for 50 miles around, I finally found a knowledgeable salesman who recommended GE Profile, and (after spending just a few hundred bucks to get the countertop reconfigured) I got a GE Profile Double Oven, which, thank goodness, is much, much quieter.  So that’s what I recommend.

And I didn’t get a dime for saying that either.

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Do We Need a Law of the Brand?

Brands matter. Brands have existed in various forms, serving various functions, for nearly four thousand years. In more modern times, brands and brand management have become a central feature of the modern economy and a staple of business theory and business practice. Businesses rely on branding to avoid 1) commoditization of their products and services, 2) distinguish themselves from their competition, and 3) build loyal customer bases for whom no other brand or item will suffice. Consumers in turn rely on brands to 1) guide their purchasing patterns, 2) express their sense of style and individuality, and 3) form important connections with the brand providers and fellow brand consumers.

Given the centrality of brands and branding, one would expect that the law to understand this critically important concept, ponder the appropriate legal regime, and develop effective legal rules in one or more areas of the law that deal with business behavior. Instead, the law has been largely blind to the power of brands.

Both trademark law and antitrust law stand out as promising discourses for understanding the significance of brands and constructing an appropriate legal regime. Neither has proved up to the challenge, and more dishearteningly, neither field seems to perceive much of a need.
To some extent, both trademark and antitrust law suffer from the same myopia and for the same reason. Over the past thirty years, both bodies of law have relied heavily on neo-classical price theory to define legal rules that promote efficiency. For many purposes, this is entirely appropriate. But such a focus misses the point (and often assumes away) the role that brands play in promoting product differentiation, market segmentation, price discrimination, and increasing customer loyalty to the point where price theory no longer explains well what brands (if any) consumers view as substitutes, when confusion does or does not arise in the marketplace, and how consumers choose between brands and between dealers for the same brands.

Trademark law has failed to recognize that trademarks are only a subset of businesses’ broader brand strategy in the real world. A successful brand encompasses far more than a registered trademark and sometimes does not require a trademark at all. Trademark law was thus always incomplete and regulated only a fraction of the real business behavior that mattered. In addition, trademark law over time has largely abandoned effective regulation over the slice of the action that it has retained as it has expanded the subject matter of trademarks and what constitutes infringement. The combined effect is to provide greater and greater protection for trademarks from competition from products and services that do not purport to originate from the mark holder. Protection for a mark has first subtly, and then more aggressively, transformed into protection for a brand.

This dramatic transformation took place with virtually no recognition of the significance of brands and branding. The overall effect was an important legal change without debate or recognition of the elevation of the brand to one of the most protected forms of legal property and one of the most valuable assets in the marketplace. Neither advocates nor opponents of these changes appreciated the subtle shift from marks to brands. This blindness led to unintended (or at least misunderstood) change and one-sided expansion of the legal regime.

To the extent this discussion took place, both sides of the debate were reassured by the presence of the antitrust laws which allegedly would regulate anti-competitive behavior involving trademarks and related rights. In the end, antitrust law as a discipline was in no better position to understand the shift to a brand-based economy and make a conscious decision as to the appropriate legal regime. Older cases identified where trademarks were used as a cover for collusion, but those were easy cases both before and after the rise of the brand. Otherwise, the increasing emphasis on neo-classical price theory in the past thirty years robbed antitrust of any chance of understanding and responding to the rise of the brand as a tool for diminishing the role of price competition, segmenting market demand, facilitating price discrimination, and locking in consumers to a favored brand. Like trademark law, antitrust law either fails to ask the right question, ignores the non-price aspects of how brands and branding affect market competition, or defers to trademark law to set the proper limits of the intellectual property rights in question.

The combined effect of this failure in both trademark law and antitrust law is a dangerous vacuum. No one is asking the right questions. No body of law is confronting what brands are, what role they play in business practice, how they affect traditional concepts of trademark law, how antitrust law should incorporate brand management in analyzing market competition, how the two fields of law should be better integrated to address the brand juggernaut, or whether there needs to be a true law of the brand.

Co-author (and fellow Concurring Opinions blogger) Deven Desai and I are working on these topics and more in an on-going effort to transform the law so that it is more in line with the realities of the business world. We have each done previous solo work on the disconnect between the language of law and the language of business. Our first effort together consists of comments filed with the Federal Trade Commission and the Antitrust Division of the Justice Department as part of upcoming hearings on possible revisions of the antitrust merger guidelines. Later versions will include at least one weighty traditional co-authored law review article and then various individual offshoots since we are each interested in slightly different aspect of these issues.

In the meantime, we welcome your input as to whether we are on the right track. Do brands matters (legally)? Should they? Why has the law paid so little attention? What is the right response?

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Things not to post on Facebook: Part 34,683

Okay, so I just picked that number out of the sky.

Five high school students (from my old high school) have caused a minor scandal after they were found to have posed with the swastika and other various Nazi regalia during a school trip to the Auckland War Memorial Museum. According to media reports, this included ‘kissing a swastika, making a Nazi salute and kneeling in homage before a flag.’ (This news comes a month after it was reported that first year university students decided that to have an Oktoberfest party with some students dressed as Nazis and others as concentration camp prisoners.) The boys involved in the current incident have now been back to the Museum and apologised in person to staff and war veterans.

The incident actually occurred earlier in the year, but came to the attention of the school recently after the pictures were posted and seen by a former student on Facebook (not me in case you are wondering – I am useless on Facebook). Whereas in the past one might have called up one’s mates and told them about pictures of such tasteless and offensive acts, the age of digital cameras, wifi and social networking means that the pictures themselves can be there for the world to see.

Now, the New Zealand Herald wonders breathlessly, ‘What history should schools be teaching our students?’ (I like history, so super-deluxe with extra cheese.) But seriously, I hope this is just a case of historical ignorance about World War II, Nazis and the Holocaust. In any case, I imagine the five boys concerned will have learnt about, if nothing else, the perils of Facebook.

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Virginia Law Review 95:6 (October 2009)

VOLUME 95      OCTOBER 2009     ISSUE 6

Virginia Law Review 95:6 (October 2009)


ARTICLES

National Security Fact Deference

Robert M. Chesney

Intent to Contract

Gregory Klass

 ESSAY

Originality

Gideon Parchomovsky  & Alex Stein

NOTE

Separate, But Equal? Virginia’s “Independent” Cities and the Purported Virtues of Voluntary Interlocal Agreements

David K. Roberts

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The UK Supreme Court: a coda

Two further matters regarding the UK Supreme Court. The first concerns the vacancy for the 12th spot on the Supreme Court. According to the Ministry of Justice, vacancies are filled by a selection commission, comprising of  ‘the President and Deputy President of the Supreme Court . . .  and members of the appointment bodies for England, Wales, Scotland and Northern Ireland.’

One of the apparent favourites to fill the recently advertised vacancy is Jonathan Sumption, QC. (Aside: wouldn’t it be neat to write your own Supreme Court vacancy? “Wanted: Supreme Court Justice. Must be steeped in legal learning, have gravitas, and be able to get along with others steeped in legal learning and possessing gravitas. Serious brainpower desirable; advocacy experience a must, judicial experience preferred.”) It is Jonathan Sumption QC’s judicial (in)experience that is causing controversy. There is no doubt he is a top advocate, and he apparently doubles as a medieval historian. Intellectual chops is not the issue. But he has never served as a judge, and his potential elevation to the Supreme Court would have him leapfrog judges of the Court of Appeal (and for that matter, the judges below that court as well). Some Court of Appeal judges have reportedly expressed some displeasure at this.

There seem to be two different arguments here. The first is that one should in a sense pay one’s dues out of respect for those more senior. That doesn’t strike me as a particularly good argument, and I don’t imagine readers enculturated in the US system of judicial appointments would feel differently. The second claim, that it would be useful for even the most gifted legal mind to gain some judicial experience before heading to the Supreme Court, strikes me as the better argument.

And now for the second item concerning the UK Supreme Court: The UKSC Blog has an interesting item on the size and composition of the Court. It appears that the Court may sit in various odd numbered configurations. This seems a little odd to me, although there is certainly historical precedent for this with the House of Lords. I think there is a lot of sense in having the same set of judges on a top court. This avoids questions about A-teams and B-teams, and whether one would have won the case if Justice X had been sitting in place of Justice Y.

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Government’s Data Glut

Personal_Computer_Pentium_I_586Government is increasingly automating its services.  From Medicaid coverage to building permits, machines help determine individuals’ ability to take advantage of important governmental benefits and services.  Agencies collect huge amounts of data in the process.  Mayor Michael Bloomberg recently remarked that the real payoff of such automation is “actually us[ing] the data.”  With that mission in mind, agencies emphasize the importance of linking government databases to take full advantage of tools that mine data for insights.  In the effort to make its city “smarter,” Dubuque, Iowa is working on a project that will use sensors, software, and networked computing to give its government and individuals the digital tools to measure, monitor, and alter the way that they use water, electricity, and transportation.

To be sure, computer algorithms can analyze linked databases to identify fraud and waste, as well as simply help government make better decisions and policy.  But one hopes that government is not following the “adopt first-think later” model (as with e-voting machine purchases) when it comes to privacy, security, and auditability of these linked systems.  To what extent are vendors accounting for these concerns?  As my work on Technological Due Process and Open Code Governance explores, government’s automated systems overwhelmingly fail to incorporate audit trails that would reveal where information comes from and who has been using it.  We see this problem at the state level, where agencies often collect information free of intrusive regulation such as the Privacy Act of 1974 and perhaps even if they did would contend that the merging of data to allow intra-agency access would constitute a “routine use.”  No matter, managing this data glut in an accountable and privacy-protective manner is crucial as we move forward.

On a related note, Ken Bamberger’s Technologies of Compliance: Risk and Regulation in a Digital Age does a superb job exploring another side to the automated systems story.  His piece addresses firms’ automation of their compliance with laws mandating risk management.  Click here to read the abstract.  A must read.

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Sidebar Publishes Essay on the Reference Class Problem

Sidebar Logo

Columbia Law Review‘s Sidebar is pleased to announce the publication of Law, Statistics, and the Reference Class Problem, by Professor Edward Cheng of Brooklyn Law School.

In this Preview of his forthcoming Essay, Professor Cheng introduces the reference class problem.  The reference class problem is the problem of how to define the appropriate class to compare a specific case to. For example, when estimating the value of a house one typically looks at comparable houses:  But which attributes do we use to determine which houses are comparable to the house we are trying to value?  Square feet?  Lot size?  Number of bedrooms?  The class we choose will effect the valuation of our house.  In a legal context, different parties may choose different reference classes in order to advance their case and the decisionmaker will have to determine which one is better.  As Professor Cheng notes, to date this decision has been largely made on intuition; however, he proposes a more principled method for choosing one over the other.