Merry Christmas, Kevin Systrom!

The accusations leveled? Funes is mad about Instagram’s set of Terms of Service amendments made last week, which caused widespread furor among the app’s user base. The suit, which was first reported by Reuters, claims breach of contract based on “the implied covenant of good faith and fair dealing,” along with a handful of other California civil code breach accusations.

“We believe this complaint is without merit and we will fight it vigorously,” a Facebook spokesman told AllThingsD.

In a nutshell: Instagram freaked everyone out last week when it updated its ToS, stating that the service had a right to introduce advertising products that accompanied user photographs. Along with the distaste folks had at the thought they may start seeing diaper ads plastered alongside pics of their kids’ faces, the uproar eventually made it seem like Instagram would sell the content created by users in their photos.

Eventually, Instagram dialed back the language, publishing an apologetic note to its site near the end of the week. But the damage had been done, as thousands of users had sworn to leave the service in favor of other photo-sharing applications — in particular, the recently updated Flickr app for iOS.

Funes and company’s biggest grievance with Instagram lies in that cancellation grey area; If users decide to delete their accounts, “customers forfeit all right to retrieve the Property that was previously entrusted to Instagram, which retains rights thereto in perpetuity,” the filing states.

The money quote: “In short, Instagram declares that ‘possession is nine-tenths of the law and if you don’t like it, you can’t stop us.’”

Bummer of a present for CEO Systrom on Christmas Eve. Here’s hoping the gifts left in his stocking fare better.

The proceedings won’t move much until 2013, so for now, head on over to McSweeney’s for another fantastic privacy policy update, courtesy of Santa Claus.

Oh, and here’s the filing if you want to check it out:

Instagram Lawsuit

U.S. District Judge Lucy Koh ruled this week that the discovery phase of the class-action lawsuit will proceed and ordered Apple to turn over relevant documents to the plaintiffs’ legal team by May 17, without any “game play.”

An unfortunate turn of events for Apple, which fought to have the case tossed, arguing that the plaintiffs have so far failed to prove that they suffered any injury at Apple’s hands.

Apple did not respond to a request for comment on the ruling.

The furor eventually prompted Steve Jobs to hold an unprecedented press conference to defend the phone’s design. The issue eventually went away, but not completely, due to the inevitable class action suits.

But now those are gone, too. A settlement will give iPhone 4 buyers who never exchanged their phones for a new one — and didn’t take up Apple’s offer for a free “bumper” back in 2010 — a chance to get a new bumper, or take a $15 payout.

CNET has more details, and Apple PR rep Natalie Harrison offered this comment over the phone: “This settlement relates to a small number of customers who indicated that they experienced antenna or reception issues with their iPhone 4 and didn’t want to take advantage of a free case from Apple while it was being offered in 2010.”

From what I can tell the settlement applies to anyone who’s ever bought an iPhone 4, including people who are buying them at this very moment — there doesn’t appear to be any kind of end date.

If you’re looking for ways to spend that $15, by the way, Apple just happens to have iTunes gift cards, in two very nice designs, in that exact denomination.

What took so long?

Actually, it did not take any time at all for someone to start legal proceedings against the current effort by Yahoo to sell itself.

In this case, no surprise, it is aimed directly at the how of doing it.

In an unusual injunction request, M&C Partners is seeking to enjoin the Silicon Valley Internet giant from using its stringent “no cross talk” rule for its potential buyers to limit possible bidding syndicates.

“The No Cross Talk Provision constitutes an unreasonable anti-takeover device, designed to entrench and favor [Yahoo co-founder, director and major shareholder Jerry] Yang and the current Board,” reads the legal filing, in part.

In addition, M&C does not like what it calls a “Minority Stake Promise,” which it alleges Yahoo is “requiring those who sign the Confidentiality Agreement to use any information they receive to confine themselves to a bid for only a minority stake.”

That refers to the fantastically named PIPE deals — or Private Investment in Public Equity — that PE firms like Silver Lake and TPG Capital have just offered. These are bids to buy 19.9 percent of Yahoo, which will essentially give them a lot of power.

Both allegations are, well, exactly what Yahoo is doing, even if it’s not for the filing’s stated nefarious reason. Thus, M&C doesn’t think that’s okay, presumably because it wants investors to be able to make a deal without Yahoo’s bossy rules.

To be clear, Yahoo is named in lawsuits all the time for a wide variety of things, such as a case in which one group is alleging it botched a deal with the Alibaba Group over its Alipay controversy to another alleging the price it paid for in its recent $270 million acquisition of Interclick was too low.

And so it is here, one of many to come, I suspect. In this one, there’s also a class-action request and various and sundry bashing of Yang, which you can read below:

yhoo

Chicago-based class action specialist Freed & Weiss — which had been collecting complaints from SuperPoke Pets users upset about the loss of their virtual goods and carefully cared-for online pets — notified the users today that it thought its chances of winning were slim.

That’s because, though players invested much money in the game and had been previously assured that it wouldn’t shut down, Slide and Google’s terms of service seem to cover their actions. Plus, after all the outcry, Google agreed to offer a standalone app called SPP Lite that allows users to keep their pets alive with some limited functionality.

“We have appreciated hearing from many of you and, while this is unfair and unjust, there are just some situations where there is not a likelihood of recovery in the U.S. Court system and we have found that to be the case here,” Freed & Weiss said.

Another law firm, Edelson McGuire, appears to still be collecting complaints from SuperPoke Pets users.

Huffington Post contributors griping in the wake of the site’s sale to AOL? Sure. But it’s also the same gripe that AOL users made in the dial-up era.

And–pay attention, angry bloggers–some of those AOL users eventually got paid!

The bad news: They had to go to court to get their cash, via a class action suit they filed in 1999. And they didn’t see a check until last year.

As the Columbia Journalism Review reminds us, the old, pre-Time Warner AOL used to rely on an army of volunteers–”community leaders”–to do essential gruntwork like moderating chatrooms. Wired called it a “cyber-sweatshop.“

And while it took a decade, the plaintiffs in the AOL case did end up with something for their trouble–a $15 million settlement, handed out last year.

Of course, 30 percent of that–$4.5 million–went to the lawyers, court documents show. But that’s still $10.5 million divvied up among a couple of thousand former chatroom monitors. You can’t retire on that, but you could buy a few MacBook Airs.

So could HuffPo’s angry bloggers get something for their troubles? Seems like a tough case to make: One big difference between AOL’s unpaid workers and HuffPo’s unpaid writers is that AOL really did treat its workers like workers.

It recruited them through want ads, held them to time commitments and compensated them with benefits like free or discounted dial-up access. (Remember that?)

HuffPo’s writers, on the other hand, simply handed the site some copy, which it ran–just like the people who submit op-ed pieces to newspapers. And I never hear about them demanding cash for their work. It seems quite clear that the trade is your words/their distribution.

Still, you never know! And I’m sure there’s at least one attorney, somewhere, who’s ready to try it out. Let’s check back in a decade and see how it panned out.

A lawyer for two California residents said they filed suit against the owner of adult website YouPorn, alleging that it had violated cybercrime and consumer-protection laws by using the method, which is drawing increased scrutiny from regulators and academics.

The suit, among the first to target history sniffing, alleges that YouPorn used technology that can “peek in on the plaintiffs’ Internet-visitation history” by exploiting a vulnerability in Web browsers and failed to disclose to users that the site was doing so. The suit filed in U.S. District Court for the Central District of California, seeks unspecified damages and an injunction to stop YouPorn from using the technology. Plaintiffs David Pitner and Jared Reagan, both of Newport Beach, Calif., allege that their privacy was violated by YouPorn and are seeking class-action status for their suit.

Read the rest of this post on the original site

Since July, at least six suits have been filed in U.S. District Court for the Central District of California against websites and companies that create advertising technology, accusing them of installing online-tracking tools that are so surreptitious that they essentially hack into users’ machines without their knowledge. All of the suits seek class-action status and accuse companies of violating the federal Computer Fraud and Abuse Act and other laws against deceptive practices.

In 2001 and 2003, courts ruled that websites could place small text files called “cookies” on machines. Cookies allow sites to remember users, so they don’t have to log in user information on each visit. But they can also be used to track users across websites, compiling a profile of a user’s browsing interests.

Read the rest of this post on the original site

Welcome news for Intel (INTC), which has long insisted there is nothing wrong with its business practices. “Consumers, as well as computer manufacturers, have benefited from Intel’s price discounts,” said spokesman Chuck Mulloy. “When Intel’s competitors offer lower prices, Intel responds with its own discounts that lower Intel’s prices, just as any competitive company would.”

For their part, the plaintiffs in the case plan to press on. “We strongly disagree with the recommendations made in the report as it ignores charges made by several regulatory bodies,” said attorney Steve Berman. “We plan to continue to prove our case to the court.”

Filed in federal court in Maryland Wednesday on behalf of a pair Maryland residents who purchased two iPhone 4s each, only to find they suffered significantly reduced reception and performance when handled the way any reasonable person would handle a cell phone, the class action accuses Apple (AAPL) and AT&T (T) of knowingly selling phones with a defective antenna design.

Evidently Apple’s “just avoid holding it that way” prescription didn’t go over too well with the plaintiffs.

“Plaintiffs were sold defective iPhone 4 units, which drops calls and data service when held in a manner consistent with normal wireless phone use,” the complaint reads (full text embedded below). “Plaintiffs have experienced numerous dropped calls, and as a result, Plaintiffs are left with a device that cannot be used for the normal purpose and in the normal manner in which such devices are intended to be used. Plaintiffs are unable to return the phone without incurring a substantial restocking fee. As a result of the defect in the iPhone 4, Plaintiffs have suffered monetary damages. Defendants’ design, manufacture, marketing, distribution, or sale of the defective iPhone 4 has directly and proximately caused all class members to suffer injury.”

The suit goes on to accuse Apple and AT&T of a host of misdeeds, including:

• General negligence
• Defect in design
• Breach of warranty
• Deceptive trade practices
• Intentional misrepresentation
• Negligent misrepresentation
• Fraud by concealment

The evidence supporting those allegations: The various accounts of iPhone reception problems and their possible causes that have been posted to the Web in the past few days, Apple CEO Steve Jobs’s “just avoid holding it that way” email, an alleged AppleCare support script instructing technicians not to offer warranty service to customers complaining about the iPhone 4′s antenna, and some investigations of the issue by armchair antenna engineers.

In other words, a bunch of stuff posted to the Web.

That seems a soft foundation upon which to build a case like this. How can the plaintiffs be certain that the iPhone 4’s antenna issue can’t be remedied with a software update? Have they spoken with antenna engineers that guarantee it is exclusively a hardware issue? Are they aware of evidence that suggests a number of other smartphones suffer similar attenuation problems when their antennas are covered?

I put those questions to Charles Gilman, one of the attorneys for the plaintiffs, and here’s what he had to say:

I am not aware of other smart phones that suffer from the same problem. Certainly previous iPhones did not suffer from this problem. We have seen sufficient information to lead us to believe that Apple knew of the problem. I do not anticipate having a problem with our case. We will obtain our most valuable information through the discovery process. No expert has opined at this point as to whether this issue can be fixed with a software patch.

Fair enough. Let’s see how this one plays out, then.

ECF 1 Complaint –

One of the most popular shows online, too, after 14 seasons, the Comedy Central television series will air the 200th episode tonight, in which all the celebrities ever mocked on it join in a class-action lawsuit.

Tom Cruise, beware!

Here’s the short video:

“Although the United States believes the parties have approached this effort in good faith and the amended settlement agreement is more circumscribed in its sweep than the original proposed settlement, the amended settlement agreement suffers from the same core problem as the original agreement,” the DOJ said in a filing with the U.S. District Court for the Southern District of New York.

“It is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the court in this litigation,” the report continues. “Under the [revised proposal], Google would remain the only competitor in the digital marketplace with the rights to distribute and otherwise exploit a vast array of works in multiple formats. Google also would have the exclusive ability to exploit unclaimed works–including so-called ‘orphan works’–without risk of liability.”

And then there was this:

Google’s exclusive access to millions and millions of books may well benefit Google’s existing online search business. Google already holds a relatively dominant market share in that market. That dominance may be further entrenched by its exclusive access to content through the ASA. Content that can be discovered by only one search engine offers that search engine at least some protection from competition. This outcome has not been achieved by a technological advance in search or by operation of normal market forces; rather, it is the direct product of scanning millions of books without the copyright holders’ consent.

In other words, the amended deal continues to give Google (GOOG) significant anticompetitive advantages and rewards the company for scanning books in violation of copyright protections. And while the Justice Department did not go so far as to explicitly urge rejection of the deal, it recommended that parties to the settlement make further changes before the Feb. 18 fairness hearing at which it is to be reviewed.

Another setback for Google, or as Gary Reback–a Silicon Valley antitrust lawyer who represents Microsoft (MSFT) and the Open Book Alliance, a coalition opposed to the settlement–said, the filing is a “profound embarrassment–bordering on an outright humiliation” for the search company.

Filed last Friday, the latest version of the settlement is more limited in scope, but has still drawn the ire of critics, who claim it remains rife with “anti-trust, class action and copyright violations.”

Chin evidently disagrees, and Google (GOOG) is obviously quite pleased that he has done so. “The preliminary approval order sends a positive initial message; this agreement promises to benefit readers and researchers, and enhance the ability of authors and publishers to distribute their content in digital form,” the company said in a statement.

“We remain hopeful that the agreement will receive final approval from the court,” Google continues, “and will realize the goal of significantly expanding online access to works through Google Book Search, an ambitious effort to make millions of books searchable via the Web.”

In a statement of its own, the Open Books Alliance, one of the settlement’s harshest critics, warned Google not to get too, too hopeful. “Today, in an expected procedural move, Judge Denny Chin granted preliminary approval to the revised Settlement of Google’s copyright infringement lawsuit,” the group said.

“This is not a surprising development and is not any indication that the court will or will not accept the terms of Settlement 2.0,” the Alliance warned. “The same procedural preliminary approval was given to Settlement 1.0, and now sets up a court process that will allow those opposed to the revised settlement to let their objections known to the court. The U.S. Department of Justice has until February 4th to weigh in with the court, as their investigation into the matter continues.”

• Orphan works–books whose copyright holders are unknown–will be overseen by an independent trustee who will administer their licensing, not by Google.
• Books published outside the United States, United Kingdom, Canada and Australia will be excluded from the settlement.

Those are substantive alterations, but they clearly haven’t placated critics who accuse Google (GOOG) of attempting an “end-run around copyright law as we know it.”

The Open Book Alliance–a coalition whose members include the Internet Archive, Amazon (AMZN), Microsoft (MSFT) and Yahoo (YHOO)–has blasted the revision twice already, decrying it as “a sleight of hand” intended to distract people from Google’s continued efforts to establish a monopoly over digital content access and distribution.

“The proposed changes fail to address this deal’s fundamental flaws,” Open Book Alliance Co-Chair Gary Reback said in a vitriolic statement. “Despite Google’s effort to spin this deal, it does nothing to promote competition nor does it reform Google’s exclusive access and monopoly hold on this digital database of books. Their proposed ‘unclaimed works fiduciary’ will have zero authority to promote competition or expand access. It is a cynical diversion away from the parties’ continued reliance on the discredited argument that competitors can obtain access through the very means Google did–getting sued for copyright infringement and abusing the class action process. This deal remains rife with anti-trust, class action and copyright violations.”

“The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175,” said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.

An interesting move for Verizon (VZ), which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon’s ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.

Full retail price for the Motorola’s (MOT) new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that’s a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.

So it’s certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon’s new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.

By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn’t seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.

Since Verizon is pro-rating the ETF, why isn’t it doing so in such a way that it zeroes out by the end of the contract?

And isn’t the fast pace of innovation in the smart-phone sector such that prices–for both component and device–are dropping so quickly that high ETFs aren’t really justified? Remember, you can get Apple’s (AAPL) iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.

I’ve put those same questions to Verizon and will update here when I hear back. In the meantime, here’s what Consumers Union policy analyst Joel Kelsey has to say on the matter: “When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon’s move is painful proof that it’s time for lawmakers to crack down on these fees.”

UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:

Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.

On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones–from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android–ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)

But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.