Facebook is being sued by a Polish drug prevention group over free speech violation

Facebook’s efforts to shut down harmful and malicious content on its platform have landed it in a European courtroom, after an anti-drug abuse organization in Poland claimed that a freeze on its Facebook Pages is a violation of its rights to free speech.

The Civil Society Drug Policy Initiative (Społeczna Inicjatywa Narkopolityki in Polish, which goes by the slightly unfortunate abbreviation of ‘SIN’) says that it has filed a complaint with the District Court of Warsaw against Facebook for violating articles 23-24 of the Polish Civil Code, which ensures free speech for individuals and organizations.

SIN says that Facebook deleted several of its pages on Facebook and Instagram for violating its community standards in 2018 and 2019 (here, here, here, herehere, and one page that appears to have been claimed by someone else in the interim). Another page SIN set up after the others were shut down appears to still be up for now.

SIN is asking for Facebook to reinstate its Pages and its followers, and to apologise publicly for its actions.

When contacted for a response, Facebook declined to comment on the case.

SIN describes itself as a Polish NGO that runs educational activities to make people aware of the harmful consequences of drug use, and provides assistance to people drug abusers.

The group is being supported in its legal action by lawyers working pro-bono with a Polish non-profit called Panoptykon, which was set up in 2009 to find and help fight cases against tech companies where it believes personal rights are being violated in our current “surveillance society” (its description, and also the reason for the panopticon reference).

Panoptykon is a busy group these days: another case that it filed against Google and the IAB in Poland over targeted advertising recently got referred up to the authorities in Ireland (where many cases are heard as a result of the country being home to many global HQs) and Belgium (home of the European Commission.

It’s not exactly clear what Facebook found offensive in SIN’s content since Facebook declined to respond.

From the looks of it, SIN itself does not take your typical “don’t do drugs” approach but instead focuses on the concept of harm reduction. It sets up a presence at clubs, festivals and other events where people might take recreational drugs. Then, it “leave[s] the assumption that it’s best not to start using drugs, or to stop if you do so [since] it’s not always possible. If you are already using, we educate on how to do it with least damage possible.” It also offers methods for testing drugs and advice on what different drugs can do.

SIN notes that the UN, the EU, the National Bureau for the Prevention of Drug Addiction; Red Cross; Doctors Without Borders and many others support this approach.

However, it may be that its native approach appeared to Facebook’s algorithms as similar to groups that advocate using drugs. Alternatively, it may be that Facebook regarded SIN as taking a particular approach on a controversial subject — the best way to cope with illegal drug use — which would have run afoul of its guidelines. “The main goal of our action is to make sure that regardless of what decisions you make at parties, you have fun and keep it safe,” SIM notes on its site.

Social media platforms have come under fire for how their efforts to contain malicious or harmful content occasionally backfire by sometimes penalising more innocent accounts by mistake. Similarly, there have been accusations that rules designed by regulators to prevent harmful content on social media are partly responsible for the platforms mandating particularly stringent controls, which ironically end up violating the exact rights that regulators are trying to ensure, like free speech.

Facebook — which has had its share of heat from European regulators over issues like violations of personal privacy, data breaches, and the role it plays in helping to police its platform against abuses and misuse in democratic processes — has been working to improve the nuance of its controls, by making it more transparent to users when it has taken certain actions like shutting down pages or blocking content, and why. Panoptykon says that it believes this legal action, if successful, could help that evolution along.

“We hope that SIN vs Facebook will incentivize the portal to make further changes and implement ‘due process,’ thus establishing the standards also for other platforms,” Panoptykon notes. “In addition, with SIN vs Facebook we strive not only to persuade the platforms to create better internal procedures, but also to ensure that users who do not agree with their decisions can challenge them before an independent, external body, such as a court.”

The EU will reportedly investigate Apple following anti-competition complaint from Spotify

The spat between Spotify and Apple is going to be the focus on a new investigation from the EU, according to a report from the FT.

The paper reported today that the European Commission (EC), the EU’s regulatory body, plans to launch a competition inquiry around Spotify’s claim that the iPhone-maker uses its position as the gatekeeper of the App Store to “deliberately disadvantage other app developers.”

In a complaint filed to the EC in March, Spotify said Apple has “tilted the playing field” by operating iOS, the platform, and the App Store for distribution, as well as its own Spotify rival, Apple Music.

In particular, Spotify CEO Daniel Ek has said that Apple “locks” developers and their platform, which includes a 30 percent cut of in-app spending. Ek also claimed Apple Music has unfair advantages over rivals like Spotify, while he expressed concern that Apple controls communication between users and app publishers, “including placing unfair restrictions on marketing and promotions that benefit consumers.”

Spotify’s announcement was unprecedented — Ek claimed many other developers feel the same way, but do not want to upset Apple by speaking up. The EU is sure to tap into that silent base if the investigation does indeed go ahead as the FT claims.

Apple bit back at Spotify’s claims, but its response was more a rebuttal — or alternative angle — on those complaints. Apple did not directly address any of the demands that Spotify put forward, and those include alternative payment options (as offered in the Google Play store) and equal treatment for Apple apps and those from third-parties like Spotify.

The EU is gaining a reputation as a tough opponent that’s reining in U.S. tech giants.

Aside from its GDPR initiative, it has a history of taking action on apparent monopolies in tech.

Google fined €1.49 billion ($1.67 billion) in March of this year over antitrust violations in search ad brokering, for example. Google was fined a record $5 billion last year over Android abuses and there have been calls to look into breaking the search company up. Inevitably, Facebook has come under the spotlight for a series of privacy concerns, particularly around elections.

Pressure from the EU has already led to the social network introduce clear terms and conditions around its use of data for advertising, while it may also change its rules limiting overseas ad spending around EU elections following concern from Brussels.

Despite what some in the U.S. may think, the EU’s competition commissioner, Margrethe Vestager, has said publicly that she is against breaking companies up. Instead, Vestager has pledged to regulate data access.

“To break up a company, to break up private property would be very far-reaching and you would need to have a very strong case that it would produce better results for consumers in the marketplace than what you could do with more mainstream tools. We’re dealing with private property. Businesses that are built and invested in and become successful because of their innovation,” she said in an interview at SXSW earlier this year.

Uber is facing Australian class action suit alleging ‘unlawful conduct’

As it gears up to go public Uber is facing legacy baggage down under: A class action lawsuit has been filed in Australia on behalf of around 6,000 taxi and hire car drivers and license owners, Reuters reported Friday.

The suit was filed Friday at the Victoria Supreme Court by personal injury and compensation law firm, Maurice Blackburn. It’s seeking compensation on behalf of thousands of taxi and hire car drivers and operators who believe they lost income or saw a fall in the value of their licence as a result of what it dubs “Uber’s unlawful conduct”.

The firm is still registering additional participants online — specifically those who were licensed to operate in four states, Victoria, Western Australian, New South Wales and Queensland, between a selection of dates spanning 2014 to 2017.

The argument behind the case is that Uber started operating illegally in the four states in 2014, by offering its UberX service which used vehicles and drivers without “the proper licences, accreditations and authorizations”, as it puts it — thereby leading to a drop in income and licence value for the plaintiffs in the class action. 

State laws were subsequently changed to put ride-hailing on a lawful footing so the case is focused on Uber’s past business conduct, with Maurice Blackburn alleging it operated unlawfully in each of the states for a period of time — hence the varying dates for registering participants. 

In a press release the firm writes that the case has been about 18 months in the making, noting too that the ‘no win, no fee’ class action is being underwritten by “one of the world’s largest litigation funders, Harbour”.

“Make no mistake, this will be a landmark case regarding the alleged illegal operations of Uber in Australia and the devastating impact that has had on the lives of hard-working and law-abiding citizens here,” said Maurice Blackburn’s national head of class actions, Andrew Watson, in a statement.

“It is not acceptable for a business to place itself above the law and operate illegally to the disadvantage of others. We’ve got a strong case, a strong team and substantial support from thousands of drivers, operators and licence owners nationwide,” he added.

The firm takes the view it has a better chance of winning compensation for plaintiffs by suing Uber, rather than the government for failing to enforce relevant regulations — pointing, for example, to Uber’s use of the controversial ‘Greyball’ software, which it describes as a “devious program”.

In 2017 the New York Times reported that Uber was using the software to identify members of code enforcement authorities or city officials trying to gather data about it offering service in areas where it’s prohibited and block their access to prevent their ability to enforce local rules.

“Uber sells the idea that it does things differently, but in reality and as we allege, this has meant operating unlawfully, using devious programs like ‘Greyball’. All of this caused extensive loss and damage to law-abiding taxi and hire car drivers, operators and licence holders across the country,” said senior associate at Maurice Blackburn, Elizabeth O’Shea, in another supporting statement.

“Uber came in and exploited people by operating outside of regulations and it was Uber’s conduct that led to horrible losses being suffered by our group members. For those reasons, we are targeting the multi-billion dollar company Uber and its associated entities to provide redress to those affected.”

The firm’s PR also includes a statement from lead plaintiff, Nick Andrianakis, a taxi driver, operator and licence owner from Brunswick, Melbourne, describing the impact of “a life’s work being stripped away from you”.

We’ve reached out to Uber for comment on the class action suit.

In a statement given to Reuters the company denied it operated illegally, telling the news agency: “Uber denies this allegation and, if a claim is served making it, the claim will be vigorously defended.”

The law firm told the news agency that the level of damages being sought could run into “hundreds of millions of dollars” — while emphasizing that any compensation would be determined as part of the case or via settlement negotiations.

While Uber’s statement to Reuters implies it has no intention of seeking a settlement to make this latest legacy legal headache go away, two months ago it did just that in the case of a separate US class-action focused on driver pay and benefits.

In that case Uber agreed to pay $20 million to settle a suit, brought six years ago, which had claimed Uber classified its drivers as contractors to avoid paying them a minimum wage and providing benefits.

Though $20M is considerably less than Uber might have been on the hook for had an appeals court not overturned an earlier decision to grant class-action status to hundreds of thousands of drivers in California and Massachusetts — ruling instead that its arbitration agreements were valid and enforceable.

That decision reduced the number of drivers in the suit to around 13,600.

Smartcar accuses $50M-funded rival Otonomo of API plagiarism

Ruthless copying is common in tech. Just ask Snapchat. However, it’s typically more conceptual than literal. But car API startup Smartcar claims that its competitor Otonomo copy-and-pasted Smartcar’s API documentation, allegedly plagiarizing it extensively to the point of including the original’s typos and randomly generated strings of code. It’s published a series of side-by-side screenshots detailing the supposed theft of its intellectual property.

Smartcar CEO Sahas Katta says “We do have evidence of several of their employees systemically using our product with behavior indicating they wanted to copy our product in both form and function.” Now a spokesperson for the startup tells me “We’ve filed a cease-and-desist letter, delivered to Otonomo this morning, that contains documented aspects of different breaches and violations.”

The accusations are troubling given Otonomo is not some inconsequential upstart. The Israel-based company has raised over $50 million since its founding in 2015, and its investors include auto parts giant Aptiv (formerly Delphi) and prestigious VC firm Bessemer Ventures Partners. Otonomo CMO Lisa Joy provided this statement in response to the allegations, noting it will investigate but is confident it acted with integrity:

Otonomo prides itself on providing a completely unique offering backed by our own intellectual property and patents. We take Smartcar’s questions seriously and are conducting an investigation, but we remain confident that our rigorous standards of integrity remain uncompromised. If our investigation reveals any issues, we will immediately take the necessary steps to address them.

Both startups are trying to build an API layer that connects data from cars with app developers so they can build products that can locate, unlock, or harness data from vehicles. The 20-person Mountain View-based Smartcar has raised $12 million from Andreessen Horowitz and NEA. A major deciding factor in who’ll win this market is which platform offers the best documentation that makes it easiest for developers to integrate the APIs. 

“A few days ago, we came across Otonomo’s publicly available API documentation. As we read through it, we quickly realized that something was off. It looked familiar. Oddly familiar. That’s because we wrote it” Smartcar explains in its blog post. “We didn’t just find a few vague similarities to Smartcar’s documentation. Otonomo’s docs are a systematically written rip-off of ours – from the overall structure, right down to code samples and even typos.”

The screenshot above comparing API documentation from Smartcar on the left and Otonomo on the right appears to show Otonomo used nearly identical formatting and the exact same randomly generated sample identifier (highlighted) as Smartcar. Further examples flag seemingly identical code strings and snippets.

Smartcar founder and CEO Sahas Katta

Otonomo has pulled down their docs.otonomo.io documentation website, but TechCrunch has reviewed an Archive.org Wayback Machine showing this Otonomo site as of April 5, 2019 featured sections that are identical to the documentation Smartcar published in August 2018. That includes Smartcar’s typo “it will returned here”, and its randomly generated sample code placeholder “”4a1b01e5-0497-417c-a30e-6df6ba33ba46” which both appear in the Wayback Machine copy of Otonomo’s docs. The typo was fixed in this version of Otonomo’s docs that’s still publicly available, but that code string remains.

“It would be a one in a quintillion chance of them happening to land on the same randomly generated string” Smartcar’s Katta tells TechCrunch.

Yet curiously, Otonomo’s CMO told TechCrunch that “The materials that [Smartcar] put on their post are all publicly accessible documentation, It’s all public domain content.” But that’s not true, Katta argues, given the definition of ‘public domain’ is content belonging to the public that’s uncopyrightable. “I would sure hope not, considering . . . we have proper copyright notices at the bottom. Our product is our intellectual property. Just like Twilio’s API documentation or Stripe’s, it is published and publicly available — and it is proprietary.”

Otonomo’s Lisa Joy noted that her startup is currently fundraising for its Series C, which reportedly already includes $10 million from South Korean energy and telecom holdings giant SK. “We’re in the middle of raising a round right now. That round is not done” she told me. But if Otonomo gets a reputation for allegedly copying its API docs, that could hurt its standing with developers and potentially endanger that funding round.

Student sues JD.com’s billionaire CEO Richard Liu for alleged rape

A Chinese student has filed a lawsuit against JD.com founder and chief executive Richard Liu, alleging the billionaire businessman raped her in Minnesota back in August, four months after local prosecutors decided not to press charges.

The lawsuit, which was filed in Hennepin County on Tuesday, is seeking damages of more than $50,000. It identifies the student as Jingyao Liu (not related to Richard Liu), an undergraduate student at the University of Minnesota.

JD did not immediately respond to a request for comment on the lawsuit. Liu has maintained his innocence through his lawyers throughout the investigation. Liu said on social media in December that he had “broken no laws” but felt “extreme self-admonishment and regret” for the pain that his behavior “on that day” brought to his family and wife, who is an internet celebrity known as Sister Milk Tea.

In December, Hennepin County Attorney Michael Freeman said he was not charging Liu because “there were profound evidentiary problems which would have made it highly unlikely that any criminal charge could be proven beyond a reasonable doubt.” He further emphasized his decision “had nothing to do with Liu’s status as a wealthy, foreign businessman.”

Liu’s case has drawn widespread interest in China where the tale of Liu’s rags-to-riches has inspired many. If charged and convicted, Liu could face up to 30 years in prison.

JD’s stock immediately tumbled after the student first accused Liu in August over concerns that the case will hamper his ability to run the company, which is the arch-rival to Jack Ma’s Alibaba and faces growing competition from ecommerce upstart Pinduoduo.

The company’s shares have slowly crawled back since December after the Hennepin County Attorney decided not to charge the founder. Nonetheless, JD is coping with sagging morale as large-scale layoffs hit executives and a new pay scheme threatens to depress income among its armies of couriers.

New USPTO Guidance May Clear Path for More Technology Patents

On January 4, 2019, the United States Patent and Trademark Office (USPTO) released new Patent Examiner Guidance (“the Guidance”) for subject matter eligibility. The updated guidance could benefit any technology patent applicant who has a computer-related invention – from smartphones to artificial intelligence – and who has previously had difficulty acquiring patents under the USPTO’s procedures for determining patent subject matter eligibility.

This Guidance represents the current methodology for analysis of patent claims under 35 U.S.C. § 101 in view of Mayo v. Prometheus, Alice v. CLS Bank Intl., and subsequent cases, and is intended to provide a more concrete framework for analyzing whether patent claims, as a whole, are merely “directed to” an abstract idea.  The Guidance will supersede certain analysis methods articulated in previous guidance, particularly the Examiner’s “Quick Reference” that previously sought to categorize abstract ideas.

The Alice/Mayo Test

The Guidance acknowledges that applying the Alice/Mayo test to analyze claims under § 101 has “caused uncertainty in this area of the law” and has resulted in examination practices that prevent stakeholders from “reliably and predictably determining what subject matter is patent-eligible.” As such, the Guidance attempts to remedy this uncertainty by revising the USPTO’s analysis under the first step (Step 2A) of the Alice/Mayo test:

China’s largest stock photo provider draws fire over use of black hole image

While the world marvels at the first black hole image ever taken, a Chinese photo-sharing community is setting off a huge public outcry over its use of the landmark photo and a wider debate over copyrights practices in China.

As soon as the European Southern Observatory released the black hole photo on April 10, Visual China Group (VCG), China’s leading stock image provider that’s compared to Getty Images and owns Flikr’s one-time rival 500px, made the image available for sale in its library without attribution to the Event Horizon Telescope Collaboration (EHT), an array of radio telescopes that captured the image of the black hole.

“This is an editorial image. Please call 400-818-2525 or consult our customer service representative for commercial use,” said a note for the black hole image on VCG’s website.

Internet users took to social media slamming VCG for monetizing a photo intended for free distribution among the human race. Most of images on ESO are, according to the organization, under the Creative Commons license.

Unless specifically noted, the images, videos, and music distributed on the public ESO website, along with the texts of press releases, announcements, pictures of the week, blog posts and captions, are licensed under a Creative Commons Attribution 4.0 International License, and may on a non-exclusive basis be reproduced without fee provided the credit is clear and visible.

VCG swiftly revised the note to say the black hole photo should not be used for commercial purposes, but Pandora’s box was already open. The incident sparked a plethora of comments on Weibo, China’s equivalent of Twitter, condemning VCG’s opportunist business practice. The site is said to often play the role of the victim to obtain financial compensation, and it does so by seeking damages from users who inadvertently use a public domain photo that VCG has preemptively copyrighted.

Shares of VCG plummeted 10 percent Friday morning in Shanghai, giving it a market cap of 17.66 billion yuan ($2.63 billion).

Assets of VCG’s massive content library range from logos of large tech companies like Baidu, all the way to the Chinese national flag.

“Does your company also own copyrights to the national flag and national emblem?” remarked the Chinese Communist Youth League on its official Weibo account in a snarky response to VCG’s unscrupulous licensing practice.

The price tag of the national emblem image is, lo and behold, no less than 150 yuan ($22) for use in a newspaper article and at least 1,500 yuan ($220) on a magazine cover.

Screenshot: The image of the Chinese national emblem was for sale on VCG at 150 yuan to 1500 yuan

“Copyrights protection should definitely be promoted. The question is, why is VCG allowed to price photos of the black hole and the likes out of the market? Why is it able to exploit loopholes?” Du Yu, a Beijing-based freelance technology journalist, said to TechCrunch.

TechCrunch has reached out to ESO for comments and will update the story once we hear back.

Government intervention soon followed on the heels of online criticisms. On April 11, the cyberspace watchdog of Tianjin, where VCG’s parent company is based, ordered the photo site to end its “illegal, rule-breaking practices.”

VCG apologized on April 12 in a company statement, admitting the lack of oversight over its contracted contributors who allegedly uploaded the images in question. “We have taken down all non-compliant photos and closed down the site voluntarily for a revamp in accordance with related laws,” said VCG.

A fight is brewing between two machine intelligence startups, and neither side looks all that smart

Sometimes, reading a lawsuit, it’s tempting to pick sides, to judge who is more right than wrong based on its contents. But a new lawsuit involving two venture-backed companies — both of which are rooted in machine intelligence — makes both sides sound surprisingly careless given their line of work.

The plaintiff is Quid, a now 12-year-old company that has raised roughly $108 million from investors, shows Crunchbase. Its newest, $38 million round closed in October, led by REV Ventures, the investment arm of LexisNexis owner RELX Group, and it included participation from some very heavy hitters, including Tiger Global founder Julian Robertson and KKR cofounder Henry Kravis.

Quid calls itself a “platform that searches, analyzes and visualizes the world’s collective intelligence to help answer strategic questions.” As company cofounder Bob Goodson has described the company, its software scours the internet, including company websites, news databases and social media postings to help its clients understand how their industries are changing.

What has Quid convening with lawyers —  including powerhouse attorney Patty Glaser (she has represented Harvey Weinstein, Kirk Kerkorian, and Conan O’Brien, among many others) — is a small group of former employees who Quid says stole from the company to create a rival startup. That company, Primer.ai, says it “builds machines that can read and write, automating the analysis of very large datasets” in order to “accelerate” its understanding of the world, then sell those insights to clients in government, in finance, and to other companies.

It sounds similar, but Primer.ai – – founded four years ago in San Francisco and now venture-backed with $54.7 million, including from Lux Capital, Data Collective, and Avalon Ventures —  says it is fundamentally different than Quid. It says Quid’s product is a network-based data visualization and exploration tool, while it instead focuses on text-generation technologies using deep neural networks.

If there are actual trade secrets employed by Primer.ai that belong to Quid, it’s now for a judge to decide. In the meantime, we rule the battle ridiculous sounding.

It’s a lot to read through, so we’ll just highlight some of the parts of this back and forth that we find particularly strange, starting at the very beginning.

What we mean: Quid alleges corporate espionage that dates back to August 2014, saying the company told its then CTO — now Primer.ai founder – – Sean Gourley, that it wanted to let him go, but rather than terminate him,  it let him know he was going to be fired, then it asked him to stay with the company for five more months until it could close its next round of funding. On its face, that sounds not smart, but Quid also insults Gourley’s intelligence in its legal complaint, which reads:

On June 23, 2008, Gourley joined [Quid precursor] You-Noodle pursuant to a consulting agreement where Gourley provided research, development and strategic advice to assist with creation of an earlier . iteration of the Quid platform known at “Startup Predictor.” After completion of this .consulting assignment, Gourley was offered and accepted a full-time position as Director of Data Tools, relocated to San Francisco and started employment in this capacity on November 1, 2009. On the same day, he executed his Confidentiality Agreement.

In September 2010, following the name change to Quid, Gourley was promoted to Chief Technology Officer and given the responsibility to direct a team of software engineers in the development of Quid’s next-generation platform. In January 2012, Gourley announced the new product ready for demonstration to Quid’s Board of Directors, but his presentation failed as the platform did not work as intended, and Gourley seemed to not comprehend its basic functionality. In the wake of this failed presentation, the Board demanded that changes in leadership and direction be made at the Company. Goodson stepped down as CEO and was tasked with sales and helping to reengineer the platform to get it back on track. With the benefit of new funding and the full-time efforts of a new Vice President of Engineering (who took over Gourley’s engineering responsibilities), the product deficiencies were corrected and Quid was able to release the product for commercial testing and use by late 2013.

By early August 2014, Quid’s new CEO, Kevin Freedman, saw no need to keep Gourley as a Quid employee but decided to maintain continuity by retaining Gourley until new investor funding—expected to be in place by mid-January 2015—could be secured. Accordingly, on or about August 8, 2014, Freedman proposed an arrangement to Gourley whereby he would be relieved of his position as CTO and would act as “Advisor to the CEO” until his effective termination date of January 15, 2015. Gourley accepted.

In short, Quid says, in its own complaint, that its cofounder and CEO, Bob Goodson, was demoted, then a new CEO who was brought in fired Gourley, the company’s CTO, in what sounds like a knuckle-headed way.

Unsurprisingly, a legal response since filed by Gourley — who, it’s probably worth noting, has a PhD in physics from Oxford — makes Gourley sound highly capable while painting the same picture of disorganization in Quid’s filing. Here’s Gourley version of events of that same period, taken from his response to Quid’s filing:

The board blamed CEO Bob Goodson for the lack of budgeting and demanded monthly financial reports. This was one of the primary topics in the January 16, 2012 board meeting where the consensus was that the business side of the company needed to be reformed. It was during this same meeting that Dr. Gourley demonstrated the functioning of Quid’s new software to the board. After the meeting, Mr. Goodson was demoted and relieved of his duties as CEO. The board then began the search
for a new CEO. Id. They located Kevin Freedman in February and he took the position in March 2014. Mr. Goodson was demoted to Chief Revenue Officer.

As for Dr. Gourley, far from “fail[ing]” as Quid suggests, on March 20, 2012 he presented the same technology he had presented to the board publicly at a “Data Driven NYC” event. The technology, which largely mirrors Quid’s functionality today, worked. Moreover, after Mr. Freedman was named CEO, Quid awarded Dr. Gourley a significant bonus and pay increase.

Despite the technical successes, Quid’s management remained a problem. Dr. Gourley decided to take action and in June 2014 met with the Chairman of the Board Charles Lho to discuss his concerns. While the board reviewed Mr. Freedman’s performance, Mr. Freedman decided to terminate Dr. Gourley. However, because Dr. Gourley was such an integral member of the company, they decided that the termination would be gradual so that he could continue to help Quid with sales and fundraising while seeking new projects.

Freeman was apparently fired eight weeks after firing Gourley and Neville Crawley, the company’s COO, was named CEO.

But whether Gourley is brilliant or was incapable of comprehending Quid’s technology seven years ago isn’t what’s really central to this fight anyway. Neither does it matter how Freeman handled the situation. The bigger question is whether Gourley, as Quid asserts, violated a confidentiality agreement with Quid by gathering up information, including Quid’s proprietary code, in the time after he was alerted he would be terminated. Quid’s big concern is that Gourley took and used it at Primer.ai, which also employs some former Quid employees who joined Gourley.

In fact, it’s out of fear that these trade secrets inform some of Primer.ai’s technology that Quid is asking a judge to put Primer.ai in a deep freeze until it can know for certain. It says it only recently began suspecting Gourley after an IT manager at Quid last October discovered that Gourley- – over the four years following his Quid termination —  had repeatedly logged into the Quid computer network to “access Quid confidential data and use his Quid email address.”

From Quid’s filing:

This application is made on the grounds that Defendants —  all former employees of Plaintiff –accessed, copied, downloaded and made active use of trade secret and highly confidential  computer data of Plaintiff – both during and subsequent to their employment with plaintiff – all for  the purpose of benefitting their directly competing company Primer Technologies, Inc. (“Primer”) in the computer-generated analysis of large data collections. As set forth in the accompanying Ex  Parte Application, direct evidence confirms that Defendant Gourley – while still an employee of  Quid – repeatedly downloaded from Quid’s computer network a complete Google data archive of  his entire “Google Suite” of Quid accessible computer data including both his email and Google  drive, amounting to over 100,000 separate highly proprietary items at Quid, including source code  Thereafter, direct evidence also demonstrates that, during and subsequent to his Quid  employment, Defendant Gourley with the active assistance of the other Individual Defendants used his Quid email address for the purpose of soliciting and diverting business opportunities intended  for Quid to his new directly competing entity thereby enabling Primer to receive funding and  customers otherwise intended for Quid’s benefit. All of this conduct occurred in direct violation of  each of the Individual Defendants’ contractual commitments – – continuously in place until this very  day – – to preserve during employment and immediately return upon employment termination all Proprietary Information at Quid.

Here’s the thing, though: Quid — which, again, is an machine intelligence company — says it only stumbled into this discovery after Gourley was finally cut off from his Quid email account and asked Goodson (who was reinstated as CEO in late 2016) if he could continue to access it.

According to Quid’s complaint, Gourley told Goodson that he had personal communications and photos stored with the account, among other things. Goodson didn’t direct that the account be reinstated, however, and this January, according to Quid’s complaint, a forensic team discovered “Gourley’s downloads of the 86 python source code files,” adding that “Quid continues to investigate the full scope of Gourley’s source code theft.”

We don’t have a horse in this race, and obviously, if Quid is proven right in its allegations that Gourley stole from the company while an employee of afterward, there should be appropriate consequences. We appreciate that there’s much on line for both parties, particularly given the opportunity ahead of each.

Still, Quid’s own complaint reveals much about how little the company had buttoned down over the years. In the meantime, Gourley insists that he has done nothing wrong and that Primer.ai is currently in the middle of its own forensic analysis to ensure as much. Relatedly, he says it was known to Quid management for years that he . was still accessing his Quid email, including because he was working for them on commission and communicating with them on it.

Here are all the filings we’ve seen thus far. We’ll keep an eye out and let you know how this story develops.

Quid Motion by TechCrunch on Scribd

Primer Corrected PI Opp (004) by TechCrunch on Scribd

4. Gourley Declaration by TechCrunch on Scribd

VSCO sues PicsArt over photo filters that were allegedly reverse-engineered

Photo editing app-maker VSCO has filed a lawsuit against competitor PicsArt.

The suit focuses on 19 PicsArt filters that were supposedly “reverse engineered from VSCO’s filters,” with VSCO alleging it’s become a legal issue involving false advertising and violations of the app’s terms of service.

“VSCO has invested significant time and resources in developing its presets [a.k.a. filters], which represent valuable intellectual property of VSCO,” the company writes.

In a statement, PicsArt denied the suit’s claims:

VSCO is not a direct competitor, but they clearly feel threatened by PicsArt. VSCO’s claims are meritless. It’s disappointing that they have made these false claims against us. PicsArt will vigorously defend itself against these baseless claims and all options are under consideration.

Specifically, VSCO says that at least 17 PicsArt employees created VSCO accounts — probably not an uncommon competitive practice, but the suit claims they used those accounts to reverse engineer the filters, thus violating the terms in which users “agree not to sell, license, rent, modify, distribute, copy, reproduce, transmit, publicly display, publicly perform, publish, adapt, edit or create derivative works from any VSCO Content.”

In addition, the suit accuses PicsArt of engaging in false advertising by describing the filters in its PicsArt Gold subscription as “exclusive” and “only for [PicsArt] Gold users.”

Why is VSCO so sure that the PicsArt filters were based on its own? The suit says:

VSCO’s color scientists have determined that at least nineteen presets published by PicsArt are effectively identical to VSCO presets that are only available through a VSCO account. Specifically, VSCO determined that those PicsArt filters have a Mean Color Difference (“MCD”) of less than two CIEDE2000 units (in some cases, far less than two units) compared to their VSCO counterparts. An MCD of less than two CIEDE2000 units between filters is imperceptible to the human eye and cannot have been achieved by coincidence or visual or manual approximation. On information and belief, PicsArt could have only achieved this degree of similarity between its filters and those of VSCO by using its employees’ VSCO user accounts to access the VSCO app and reverse engineer VSCO’s presets.

The suit goes on to claim that VSCO’s lawyers sent PicsArt a letter in February demanding that the company identify and remove any filters that were reverse engineered or copied from VSCO. The letter also demanded “an accounting of all profits and revenues generated from such filters” and that PicsArt identify any employees who had created VSCO accounts.

In VSCO’s telling, PicsArt then responded that it was “in the process of replacing certain underperforming filters and modifying others,” including the 19 filters in question, but it only removed 17 — and supposedly two of the new filters “were similarly reverse engineered from VSCO’s proprietary presets.” The suit also says PicsArt has failed to provide the information that VSCO demanded.

VSCO does not appear to be suing for a specific monetary value, but the suit asks for “disgorgement of any proceeds obtained from PicsArt’s use of VSCO filters,” as well as injunctive relief, compensatory damages and “the costs of corrective advertising.”

You can read the full complaint below.

VSCO Complaint by on Scribd

Startup Law A to Z: Regulatory Compliance

Startups are but one species in a complex regulatory and public policy ecosystem. This ecosystem is larger and more powerfully dynamic than many founders appreciate, with distinct yet overlapping laws at the federal, state and local/city levels, all set against a vast array of public and private interests. Where startup founders see opportunity for disruption in regulated markets, lawyers counsel prudence: regulations exist to promote certain strongly-held public policy objectives which (unlike your startup’s business model) carry the force of law.

Snapshot of the regulatory and public policy ecosystem. Image via Law Office of Daniel McKenzie

Although the canonical “ask forgiveness and not permission” approach taken by Airbnb and Uber circa 2009 might lead founders to conclude it is strategically acceptable to “move fast and break things” (including the law), don’t lose sight of the resulting lawsuits and enforcement actions. If you look closely at Airbnb and Uber today, each have devoted immense resources to building regulatory and policy teams, lobbying, public relations, defending lawsuits, while increasingly looking to work within the law rather than outside it – not to mention, in the case of Uber, a change in leadership as well.

Indeed, more recently, examples of founders and startups running into serious regulatory issues are commonplace: whether in healthcare, where CEO/Co-founder Conrad Parker was forced to resign from Zenefits and later fined approximately $500K; in the securities registration arena, where cryptocurrency startups Airfox and Paragon have each been fined $250K and further could be required to return to investors the millions raised through their respective ICOs; in the social media and privacy realm, where TikTok was recently fined $5.7 million for violating COPPA, or in the antitrust context, where tech giant Google is facing billions in fines from the EU.

Suffice it to say, regulation is not a low-stakes table game. In 2017 alone, according to Duff and Phelps, US financial regulators levied $24.4 billion in penalties against companies and another $621.3 million against individuals. Particularly in today’s highly competitive business landscape, even if your startup can financially absorb the fines for non-compliance, the additional stress and distraction for your team may still inflict serious injury, if not an outright death-blow.

The best way to avoid regulatory setbacks is to first understand relevant regulations and work to develop compliant policies and business practices from the beginning. This article represents a step in that direction, the fifth and final installment in Extra Crunch’s exclusive “Startup Law A to Z” series, following previous articles on corporate matters, intellectual property (IP), customer contracts and employment law.

Given the breadth of activities subject to regulation, however, and the many corresponding regulations across federal, state, and municipal levels, no analysis of any particular regulatory framework would be sufficiently complete here. Instead, the purpose of this article is to provide founders a 30,000-foot view across several dozen applicable laws in key regulatory areas, providing a “lay of the land” such that with some additional navigation and guidance, an optimal course may be charted.

The regulatory areas highlighted here include: (a) Taxes; (b) Securities; (c) Employment; (d) Privacy; (e) Antitrust; (f) Advertising, Commerce and Telecommunications; (g) Intellectual Property; (h) Financial Services and Insurance; and finally (i) Transportation, Health and Safety.