In a class action suit filed in San Jose, California, Debra Hilton claims that Apple knew about a defect in a flex cable that controls the on-off button, but chose to stay quiet about it so as to sell more phones.

As evidence, she points to Apple discussion forums viewed by hundreds of thousands of visitors on which users complain of “wiggly” power buttons. Hilton also points to a fix-it video on YouTube and comments by a self-described iPhone repairman who says the power button defect is prevalent on the iPhone 4 which went on sale in 2010.

Apple did not immediately return a request for comment.

The lawsuit claims that the defect typically arises shortly after one year at which point the warranty has expired, forcing consumers to pay $149 for repairs.

Hilton is suing under the RICO statute, a federal racketeering law that has become a vehicle for national class actions. The lawsuit also accuses Apple of violating California’s unfair competition laws.

You can read the complaint for yourself here:

Apple Power Button Lawsuit

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In a decision issued Wednesday in San Francisco, US District Judge Edward Chen ruled that GoGo, despite supplying 85% of all internet-equipped airplanes in the US, does not have a monopoly. The company’s customers include Alaska Airlines, American Airlines, Delta, US Airways, and Virgin America.

In throwing out the case, Chen accepted GoGo’s argument that it doesn’t have dominant market share because it covers only 16% of all US airplanes, and it’s possible for the remaining planes, which do not offer internet, to sign up with a competing service provider. The internet contracts are sold on airplane-by-airplane basis, and not across entire airlines.

The passengers sued GoGo in October, claiming that competitor Row44 charges only $5 for an entire flight of internet service but that airlines can’t drop GoGo because of ten-year contracts that lock them in. They also argue that GoGo’s internet technology is inferior because it relies on ground-to-air tower transmission rather than the satellite service offered by Row44 and Jet Blue’s ViaSat service.

The decision also agreed to GoGo’s request to acknowledge that a third provider, Panasonic, is entering the market with satellite service on United.

Chen dismissed the case without prejudice, meaning the passengers can try to bring up new facts to show that GoGo does have a monopoly. You can read the decision yourself below.

To understand the science of in-flight internet, see ”Why your in-flight WiFi is slow and expensive” by my colleague Stacey Higginbotham.

GoGo Dismissal

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In a ruling issued on Tuesday, a New York federal judge threw out the authors claim that Harlequin had used a corporate sleight-of-hand to pay them 3-4 percent of ebook royalties instead of the 50 percent they believed they were due.

The case, which turned on technical questions of law, is an example of the collisions that can arise as a result of book contracts signed in an age that pre-dated the current boom in ebooks. (In another case in the same court, parties are squawking over whether an author signed to a 1971 contract can shop ebook rights to another publisher.)

In the Harlequin case, the authors pointed to publishing contracts that granted them 50 percent of the digital royalties that the publisher collected. The authors believe this should let them collect half of the $4 Harlequin earned from an ebook with a cover price of $8.

Harlequin instead decided to pay 3-4 percent ($0.24 to $0.32 on an $8 book) on the grounds that this was half of the 6-8 percent it received from licensing the rights to a different publisher. The issue became contentious because the third party publishers in this case were subsidiaries created by Harlequin for tax purposes.

In a related letter to authors, Harlequin explained that, prior to 2005, no one had foreseen the growth of ebooks and that it was reasonable to pay authors less than 50 percent.

In a four-page decision, the New York court declined to consider the authors’ arguments that the “third party publishers” were alter-egos for Harlequin. Instead, the court relied on a narrow interpretation of contract law to dismiss the claim.

The decision is very brief and contains an unusual footnote stating that the judge’s clerk, a second-year law student, had largely researched and drafted the opinion (clerks often help with such tasks but judges rarely acknowledge this).

The authors’ counsel included veteran publishing lawyer David Wolf. Reached by phone, Wolf declined to comment and said his clients were considering their options. You can read the ruling for yourself here:

Harlequin Dismissal

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Under the terms of the settlement, Apple will offer a $5 iTunes credit to those who claim that a minor bought in-game items without their knowledge or permission. If the amount in question is more than $5, Apple will offer a credit for that amount. If the amount in question is over $30, an Apple user can claim a cash refund.

The proposed settlement comes after parents sued Apple in 2011 upon discovering that their minor children had racked up credit card charges in supposedly free games. The issue was the subject of a Daily Show feature about a father whose kids racked up hundreds of dollars to keep virtual fish alive in a game called “Tap Fish.” The same problem also befell GigaOM’s Kevin Tofel whose kids spent $375 – also on virtual fish.

In order to collect under the settlement, Apple users will have to attest that a minor bought “game currency” and that the user did not provide the minor with the Apple password.

The proposed settlement, first reported by Law360 (subscription required), does not state how much Apple will pay in total or how many users are affected. It does state that Apple will send an email notice to “over 23 million iTunes account holders who made a Game Currency purchase in one or more Qualified Apps.”

The settlement still must receive preliminary approval from a federal judge. If that occurs, which it typically does in class action cases, the notification period will begin and Apple will begin accepting claims. After the claims are in, a judge will approve the final settlement and Apple will begin making payments — this would likely occur late this year or in early 2014.

Apple did not immediately reply to an email request for comment.

You can read the proposed settlement yourself below (I’ve underlined some of the key parts) :

Apple’s Bait App Settlement by

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Two months later, what’s the fallout? Well, nothing. Instagram’s new rules went in place in January and the site appears popular as ever (based on my own experience and Facebook’s optimism on a recent earnings call).  Meanwhile, Instagram this week issued a stinging rebuke to Lucy Funes, the California woman who is leading a class action suit against it.

In a filing to dismiss the suit, Instagram’s lawyers said the case was based on “wrongheaded, even frivolous, legal theories.” The document, reported by Reuters, added that Funes’ alleged injury was “self-inflicted” and pointed to “her failure to take the self-help measure of deleting her account.” (our emphasis)

The comments are harsh but also fair. Instagram, and every other social media company, is right when it points out that no one is forcing people to use their service and that, if you don’t like their rules, you can just leave. Instagram notes that Funes is still using the service.

This take-it-or-leave-it approach may be exasperating to consumers who feel powerless as Facebook and others turn them into product pitchmen (Instagram will follow suit soon enough). But for now, the licenses these companies impose ensure the law is on their side and, as long as people don’t pay for sites like Gmail and Twitter, advertising is the only option that will sustain them.

Unfortunately, companies that do try to be transparent about their advertising intentions are likely to be punished for their efforts. As Verge reporter and former copyright lawyer Nilay Patel explained in December, the controversy over Instagram only creates an incentive for companies to be obtuse or sneaky about their terms of service in the future.

This doesn’t mean, of course, that everything is okay. Instagram and the other companies do pose serious threats to our privacy, data and dignity. But until there is a system in which consumers have an option to pay these companies to leave us alone (would you pay $5 a month for ad-free Facebook? — I might), this is the world we’re stuck with.

The Instagram episode ultimately reflects a familiar pattern of hysteria, resignation and forgetting. There will be other examples soon enough.

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In case you missed it, a San Diego law firm this week sought to run to the rescue of Instagram users who are upset that the site will change its terms of service in January. These new terms are meant to help Instagram introduce advertising practices akin to its new parent company, Facebook, which turn users into pitchmen for products.

The lawsuit, which came after weeks of uproar about the maladroit way in which Instagram rolled out the proposed changes, made for good headlines. Too bad, then, the case stands as much chance of success as that petition to deport CNN’s Piers Morgan.

Writing on Eric Goldman’s respected Technology and Marketing Law Blog, Seattle lawyer Venkat Balasubramani described the case as “flimsy,” “borderline frivolous” and “an example of lawsuits against social networks gone completely amok.”

Balasubramani, who tracks social media cases closely, points out that that the revised terms haven’t even gone into effect (meaning that users can simply leave) and that, in any case, Instagram has the right to change its terms of service if it darn well pleases. You can see the full take-down, including Goldman’s view, here.

So why are the good folks at Finkelstein & Krinsk law firm filing this case in the first place? My own hunch is that it’s a way for the firm to get on the radar as part of California’s growing cottage industry of privacy lawsuits. This involves law firms who wait for the latest privacy outrage, and then race each other up the courtroom steps to file a case. Next, they ask for Facebook (or whoever) to pay them as part of a “privacy settlement” which typically compensates lawyers and activists — but not the users whose privacy was breached. In this case, though, the only payout Finkelstein & Krinsk are likely to receive is a clobbering by Facebook’s veteran legal team.

Overall, the Instagram episode is just the latest example of the ritualistic cycle of complacency-outrage-resignation that occurs whenever users discover that websites like Facebook and Google are providing a free service in exchange for advertising data.

(Image by ollyy via Shutterstock)

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For the unfamiliar, “Sponsored Stories” is Facebook’s term for drafting its users as product pitchmen based on their “Likes.” Here are some examples taken from the revised legal settlement filed Friday in California:

Facebook feels the ads are fair since users pay nothing for its services. But the company landed in hot water because the “Sponsored Stories” appear to violate a California law that forbids companies from using people’s endorsements without their permission.

To make the issue go away, Facebook followed a familiar playbook when tech companies get sued over privacy issues: throw a pile of money at lawyers and privacy groups. This has worked many times in the past for Google and others but, unfortunately for Facebook, one judge finally had enough. In August, U.S. District Judge Richard Seeborg refused to sign off on a $20 million plan, noting that lawyers had plucked numbers out of “thin air” and that the Sponsored Stories stars got nothing. Now, under the new plan, reported by Wired, Facebook could pay real cash money to users.

This time, users could get up to $10 if the judge approves the deal, but a closer look at the filing shows this is unlikely to happen. As it turns out, users will only get $10 if there is enough to go around after lawyer and other expenses are paid. If too many of the estimated 125 million eligible people claim the money, everyone’s share will be reduced accordingly. And if the reduced amount falls below $5 per person, the Court has the discretion to give it to the usual suspects — the privacy groups.

This isn’t the only strange feature of the new deal. Another is the notification process. Under the new settlement, Facebook is obliged to create a website and to notify users via email and to place ads in USA Today. This is all well and good but there is no obligation to notify them through, I dunno, Facebook.

The deal also provides lawyers to ask the Court for their share of the $20 million later on but doesn’t specify how much they’ll get. It also obliges Facebook to create a control panel of sorts for users to manage their role in the Sponsored Stories scheme but many of the details are fuzzy.

Overall, the deal is slightly better for consumers but it may not go far enough to charm Judge Seeborg. Here’s a marked up copy of the settlement if you want to decide for yourself:

Fraley v. Facebook Settlment 2

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The complaint says Uber is deceiving consumers about the amount they pay for the fares:

Uber adds an automatic “20% gratuity” onto the metered fare. Uber misleads the public and fails to disclose to consumers that only half of such “gratuity” actually goes to the driver. The remaining half, in fact, goes to Uber.

The taxi groups also claim that marketing terms like “Uber Black Car” and “Uber Taxi” violate trademark laws because they confuse consumers.

The Chicago dispute is the latest and most dramatic episode in a battle that is playing across the country as Uber competes with the powerful taxi lobby in various cities. The upstart has become a hit because it allows customers, who place their credit cards on file, to quickly summon a car with an app that recognizes their location and customers can rate the drivers at the end of the trip.

The taxi lobby is leaning heavily on city governments to shut down the service, claiming it is a danger to the public. In this week’s court complaint, the cab companies blast Uber for creating a two-tier taxi service that caters to rich hipsters (emphasis ours):

The complaint, which is embedded below, seeks an injunction against Uber and damages to compensate the cabbies for lost profits.

Meanwhile, consumers have filed a separate class action lawsuit claiming they overpaid for Uber’s rides.

Update: This story has been amended to clarify that taxi companies, not drivers, are suing Uber. See Uber CEO Travis Kalanick’s comment below.

Yellow Cab v Uber
(Image by  sababa66 via Shutterstock)

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The lawsuit was brought by California man Betsalel Williamson who had to replace the screen of his brand new iPhone after he knocked it off the arm of a chair, resulting “in spider cracks across the back glass panel.”

In his ruling handed down this week, US District Judge Edward Davila wrote that “it is a well known fact of life that glass can break under impact” and said the iPhone owners failed to show that Apple breached a warranty or violated California’s consumer protection laws.

The lawsuit argued that Apple ads touting the glass as “20 times stiffer and 30 times harder than plastic . . . ultradurable and more scratch resistant than ever” were misleading. It cited a study that the glass on the iPhone 4 breaks at a 82% higher rate than earlier iPhones, forcing consumers to to pay $29 to replace a cracked screen and $199 if the glass housing breaks.

Judge Davila didn’t buy the claims, however, and wrote that Steve Jobs’ claims about the glass were “mere puffery” rather than a promise that could be the basis of a lawsuit:

A “reasonable consumer” viewing a commercial showing the iPhone 4 in use as a phone, but without a cover, would not be misled to believe that the iPhone 4 could withstand any particular level of impact if the phone was dropped.

The judge noted in several other parts of the ruling that a phone without a case was more vulnerable.

Davila gave permission for the plaintiffs to amend the complaint in order to show how specifically Apple deceived them.

The judge’s ruling, which was first reported by Law360 (sub. req’d), is below with relevant portions underlined:

iPhone Screens

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Background

Recall that publishers and Apple have been in a throw down with the government over the price of ebooks. Government lawsuits say that the publishers’ switch to a commission-style pricing system (like the one used in iTunes) amounted to price-fixing. Three of the five publishers threw in the towel while Apple and two hold-out publishers are fighting in court.

The feds’ lawsuit demands that publishers change their pricing model so that Amazon and others can set the price they want (even it the price is below cost). The lawsuit by the states is instead about money; the states want to collect refunds on behalf of ebook buyers.

Three publishers agreed to pay up several months ago, but it was only on Thursday that the dollar figures finally came out. Meanwhile, Apple and the others are refusing to play ball.

• See also: Everything you need to know about the e-book lawsuit

What the deal means for you: a tiny Kindle or iTunes credit and a long wait

If you bought an e-book from one of the five big publishers between April 1, 2010 and May 23, 2012, you will get a 25-cent refund for each old title you bought and $1.32 if the title was a recent New York Times bestseller. The refund will come in the form of a credit to your Amazon, Barnes & Noble or iTunes account; you’ll get a check if you bought from Sony or Google. The retailers have your email address so it will not be hard to notify you.

This is a micro-windfall that you probably weren’t expecting, so it’s all to the good. The only catch is that it will be a long time coming. U.S. District Judge Denise Cote has to stamp the deal — and there’s a good chance she won’t while the case is ongoing against Apple and two hold-out publishers. Realistically, we’re talking years before that $1.32 credit hits your iTunes account. If the two hold-out publishers and Apple finally decide to settle, you may get another small credit.

What it means for publishers: ebook sales and an escape from the class action lawyers

The three publishers who struck a deal are looking smarter by the minute. The settlement not only gets them out of legal purgatory, it will lead to most of the money they pay coming right back to them. What do you think the average person is going to do with a $1.32 Barnes & Noble credit? That’s right. They will buy an ebook that likely costs $5 or $10. This is almost a net win for the publishers.

Just as important, the settlement lets publishers short-circuit the class action lawyers who are coming at them with a separate lawsuit. Those lawyers, who say they would get more money if they were in charge, are now frozen out because there is no money left to collect on behalf of consumers.

The two hold-out publishers, Macmillan and Penguin, now face a hard choice. They have to decide if their fight to keep commission pricing is worth years of legal bills and uncertainty (keep in mind, they could lose the case and face an even stiffer penalty). Given this choice, it’s possible that the publishers, even if they believe they did nothing wrong, will find it easier to just accept the states’ deal and move on.

What it means for Apple: fighting on

Unlike the publishers, Apple has more lawyers than the state of Connecticut. It can (and will) fight this thing forever. At the same time, Apple has a stronger defense than the publishers — it wasn’t in the room or on the phone when many parts of the alleged conspiracy took place.

Apple, which says it did nothing wrong, may also be concerned with protecting the commission model of its iTunes store (if the government wins on ebooks, will it come after apps or music pricing next?).

Finally, if the two other publishers fold and join the settlement, the government may quietly close the case against Apple rather than risk losing an expensive and high-profile court fight.

What it means for the government: election year headlines

The settlement is a trophy for Connecticut Attorney General George Jepsen and his counterparts around the country. They can tell voters, shortly before November elections, that they have won refunds for home state consumers.

This is a big fudge, of course. According to Beth Farmer, an antitrust professor at UPenn, the court is unlikely to approve the deal while the dispute with Apple, Macmillan and Penguin is ongoing. ”The notice and claims process is going to be complicated and it wouldn’t be efficient for the states to do that multiple times,” said Farmer by email last month.

Andre Barlow, a former Justice Department lawyer and antitrust expert, is also skeptical. “It’s not a clean way of doing this but it probably makes sense for the states to do it this way … At least they’ll have a big headline.”

(Image by Pagina via Shutterstock)

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