Law and technology

Stuff reports that Telecom has been accused of “probably” breaching the anti-spam law:

Internal Affairs is looking into whether Telecom may have breached spam laws by sending text messages to customers that did not include instructions on how customers could unsubscribe from receiving such messages… Victoria University law student Hamish McConnochie drew attention to the texts, promoting Telecom’s pre-pay top-ups and roaming services …

Here’s a quick tip: look at Telecom’s Term’s & Conditions (see below).

The anti-spam law (the Unsolicited Electronic Messages Act 2007) requires certain types of commercial electronic messages to offer an unsubscribe facility. This law is “technology neutral” – it applies to all types of electronic messages, including emails, text messages, instant messages, etc. However, the unsubscribe facility is not needed where there is a “contract, arrangement or understanding” between the sender and receiver not to include an unsubscribe. Telcos are well aware of this law and usually take necessary steps to comply. Telecom argues it has such an arrangement as follows:

Telecom sent customers text messages in November telling recipients that unless they objected then, Telecom would deem they had agreed future text messages from the company need no longer include an opt-out message. Spokeswoman Anna Skerten said those messages created such an arrangement.

A “no response means you accept” text cannot create a contract. However, it is arguable that it could create an “arrangement or understanding” – which are clearly intended to mean something less than a contract or other form of express consent.

But what is unusual is that Telecom’s spokeswoman did not simply refer to Telecom’s mobile service terms and conditions (link is for the prepaid version – others exist). Clause 13(3) states:

From time to time we may send you sales and marketing information about Telecom products and services. You can let us know at any time if you do not want to receive sales and marketing information by contacting Telecom Customer Services

There is no need for messy arguments over whether some text sent last year created an “arrangement”, when there is a contract which clearly applies. Together with Telecom’s “opt-out” text, that would probably suffice (there may be a more specific opt-out in some of the other T&C’s but I’m not going to read them all…) Importantly, Telecom’s T&C’s, like most others, also include a “changes” provision allowing Telecom to modify its terms. So if Telecom decides it needs to change or clarify its T&C’s in response to this reportage, it can do so. It should. Vodafone’s T&C’s are much better, as they clearly state:

You agree that we and our Agents may send you marketing messages, electronic or otherwise, about our special offers, products and Services, and those of our selected Agents and third parties which may be of interest to you. You agree too that the electronic marketing message we, our Agents and third parties send need not include an unsubscribe facility.

Internal Affairs could allege that Telecom’s terms (together with the opt-out text) were insufficient and launch a prosecution. I don’t think it would succeed, and it would probably be a waste of taxpayer money:  the worst outcome for Telecom would be a relatively minor fine that would most likely not cover the costs of a defended prosecution. Also it is highly unlikely that any customer will be able to claim compensation (which requires loss to have occurred).

Finally there is room for argument that under clause 11(2)(a), third-party texts would still not be covered by the telco’s terms & conditions, but that is a separate question.

My latest Computerworld article is now available online:

• Getting to yes, but at what cost? Computerworld 15 June 2010

In New Zealand, several laws are relevant to allegations of deceit or misrepresentation in trade, the most significant of which is the Fair Trading Act 1986. The key part of this Act states that “no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” The Act cannot be excluded by contract, and applies to virtually all local commercial dealing.

…

BSkyB v EDS provides a useful example, applicable in New Zealand, of a vendor impliedly misrepresenting that there was a proper foundation for making a statement in a pre-contractual situation. The message is that such conduct (making a representation without foundation) may not simply be “negligent” or an oversight, but may be found to be deceitful.

Since publication, it has been announced that HP (which bought EDS) will pay a total settlement of £318 million (~NZ$680 million), and will not appeal the High Court judgment.

An amusing aspect of the trial involving a barrister’s dog is mentioned here.

The judgment itself is here.

Gareth Morgan has written an interesting article (a follow up to this one) discussing the “systemic failure to be more successful in using IT to capture material productivity improvements”:

By focusing on the technical weakness inherent within the job specification that the client has signed off on, and forcing variation to contracts as they work their way through, even though the supplier knew at the start that they could not meet timeframes and delivery targets, the multinational easily arm-wrestles the hapless customer to fund excess profitability. These projects follow the same pattern over and over again, they become five to six times over budget – a $20 million project can turn into a $120 million one. The supplier knows that walking away is not an option for these clients.

While Gareth addresses a broader issue, many of the problems he discusses arise from poor contacting. There are a number of problems endemic in IT project contracting:

• The project is simply contracted far too large.
• The contract relies on the often faulty assumption of Big Design Up Front.
• The contract is prepared as if it were a construction contract.
• The contract is only seen as “safe” if it nails down every last detail, and only allows changes through variations, which as Gareth says usually produce poor results.
• The contract imposes completely unrealistic and ineffective “project management and control procedures”, that are either never used or are simply “caught up” on from time-to-time.
• The contract is usually in conflict with the “agile intention” of the project (whether or not an agile methodology is actually going to be adopted).

I have written about some of these problems (and overcoming them) here: Contracting in an agile world (part 2 here). The solutions are not complicated, but when contracting is seen as a contest (which party can tie the other up the most?) the result can be a contract that’s more useful when the project actually fails, than facilitating the project’s success.

When the cost of IT failure in New Zealand is $5.4 billion a year, it pays to get the comparatively small matter of contracting right.

Not a never ending licence

A UK court has ruled, and a customer found out the hard way, that what was described as a “perpetual” software licence was not a “never ending” licence. In BMS Computer Solutions v AB Agri Ltd (UK High Court, 10 March 2010) the customer was granted a “UK-wide perpetual licence” for a program. However, the contract granting the licence also required the customer to keep buying support from the developer:

In the event that the software technical support agreement is terminated for any reason whatsoever this agreement shall terminate.

The customer wanted to terminate the support agreement, but keep using the software. Terminating the support agreement would terminate the contract which had granted the licence. It is quite common for specific terms of a contract (including software licences) to survive termination (assuming that is what the parties intended). The question in this case was whether the grant of the “UK-wide perpetual licence” intended to create a never-ending licence that would survive termination of the main contract. The judge said:

The word “perpetual” can carry different shades of meaning. It can, for example, mean “never ending” (in the sense of incapable of being brought to an end) or it can mean “operating without limit of time”.

The judge found that in this instance, the “perpetual licence” meant a licence “operating without limit of time”, i.e. it continued until either party terminated it for some valid reason (such as ending the support agreement).

The ruling does not mean that every “perpetual licence” is perpetual until terminated. A contract (such as a licence) is always interpreted according to its terms and intentions of the parties. In some cases, “perpetual” will clearly mean “never ending” (in which case it may be a good idea to record it as “perpetual, irrevocable licence”). In this case, the “perpetuality” was trumped by the tied support requirement, and could not have been intended as never-ending – either a case of poor drafting by the customer, or good (or fortuitous) drafting by the developer.

Smoking gun emails

The major court battle over copyright infringement between YouTube and Viacom currently underway in the US has turned up some pretty damaging internal emails between the founders. E.g. this from YouTube co-founder Steve Chen to Jawed Karim:

“jawed, please stop putting stolen videos on the site. We’re going to have a tough time defending the fact that we’re not liable for the copyrighted material on the site because we didn’t put it up when one of the co-founders is blatantly stealing content from other sites and trying to get everyone to see it.”

While the founders probably aren’t too concerned (having long since cashed out), the evidence may yet cause YouTube’s owner Google a headache. Another reminder not to put damaging comments in writing – in litigation, almost everything is potentially discoverable.

More audio/visual technology in NZ courts

“A bill that will allow greater use of audio visual links in courtrooms passed its first reading in Parliament yesterday.” more…

Nestlé trade marks Kit Kat shape

Nestlé has won an appeal allowing it to trade mark (in Australia) the shape of a Kit Kat bar (or as the application prosaicly calls it, “Chocolate confectionary being chocolate-coated confectionary blocks or bars and chocolate-coated wafer biscuits”). Trade marking shapes is permitted in New Zealand and other countries (for example Toblerone chocolate in some countries). In fact, many “non-lexical” things can be trade marked, including (in New Zealand) colours, smells, sounds, and tastes.

Strangely, chocolate has long been a major battle-ground for trade mark disputes. In New Zealand, Cadbury lost a 2008 Court of Appeal battle to trade mark the word “purple” (though not the colour, which it already trade marks). Last month in Australia, Guylian lost a Federal Court battle to trade mark its seahorse shaped chocolates, which the court found “not sufficiently inherently distinctive”.  In contrast, two years ago a Japanese court allowed Guylian the same trade mark in Japan, finding that the shape was sufficiently distinctive.

Mozilla Public License

The Mozilla Public License is going to be redrafted.  Although this license is only used by about 2% of open source projects, it is the main license used by Firefox and Thunderbird. A controversial question is whether the new version will be compatible with the Apache license, which allows non-copyleft commercial use.

Ask before linking?

An amusing story about a blogger who actually applied to get written consent before linking to the Royal Mail website, as required by its website terms. This is a relatively common provision in website terms. New Zealand Post’s terms include the provision too (under the heading “Hypertext Links”). While such a provision could, technically, be binding, in practice it will be entirely unenforceable and is therefore pointless. The ongoing presence of the clause in so many website terms is a good example of “precedent” terms being copied without much thought.

“Subject to contract” agreement can be binding

The UK’s highest court, the UK Supreme Court (formerly the Judicial Committee of the House of Lords) has ruled that an unsigned agreement, which was “subject to contract”, had actually become binding because the parties acted as if it had. The Court said:

“… we do not think that the reasonable honest businessman in the position of either RTS or Müller would have concluded as at 25 August that there was no contract between them … all the terms which the parties treated as essential were agreed and the parties were performing the contract without a formal contract being signed or exchanged … The only reasonable inference to draw is that … the parties had in effect agreed to waive the ’subject to contract’ provision.

It is quite common for technology contracts to get underway before a formal contract is signed. This case is a good reminder that, even where an unsigned agreement clearly states it to be “subject to contract”, one party may not be able to walk away from it if their behaviour is clearly consistent with a binding agreement having been reached.