This Week in Law 277 (Transcript)
Denise Howell: Hi folks, Denise Howell here and next up on This Week in Law we’ve got Jonathan Askin, Reg Levy, Mary Hodder, and me. We’re going to discuss the FAA’s first commercial drone exemptions, Ello’s policy and business model choices, disruptions in equity crowd funding accommodations, transportation, and lots more next on This Week in Law.
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This is TWiL, This Week in Law with Denise Howell. Episode 277, recorded October 3, 2014.
Over the Tent and into the Wallet
This episode of This Week in Law is brought to you by Harry’s for guys who want a great shave experience for a fraction of what you pay now. Go to harrys.com, get $5 off your first purchase by entering the code TWIL when you check out. Hi folks, I’m Denise Howell and you’re joining us for This Week in Law. So thrilled that you’ve had the chance to join us this week. We were dark last week and I’ve been chomping at the bit to come back here and chat some more about all the hottest issues at the intersection of technology and law. It’s always interesting and we have a phenomenal panel of folks to help us try and understand the latest and greatest developments this week. Joining us from Brooklyn Law School is Jonathan Askin. Hello, Jonathan.
Jonathan Askin: Hi, Denise. It’s great to be here.
Denise: It’s great to have you back. For those of you that don’t remember, he is a professor at Brooklyn Law School. The founder and director of the Brooklyn Law Incubator and Policy Clinic. And definitely an expert and aficionado on all things related to tech policy. You worked with the Obama Administration as they came into the office, didn’t you Jonathan?
Jonathan: Yea, I shared the internet governance working group for the OA campaign and then I was the chief wrangler for the Federal Communications Commission transition.
Denise: Wonderful. So we have tons of stuff to pick your brain on today. Before we do that I’m going to introduce you to the rest of our cast of characters for this episode of TWiL. We have Mary Hodder joining us. Hello, Mary. Great to see you again. Oh, I think you might be muted, Mary. Possibly.
Mary Hodder: You’re right. Hello. Sorry about that.
Denise: Great to see you and hear you. Mary folks will remember is an entrepreneur and a coder and blogger, thinker about all the kinds of things that we talk about on this show. She’s a founder and a consultant, and we’re thrilled to have you back, Mary.
Mary: Actually I should say I don’t write code. I read code. It’s like saying I read the newspapers when I’m in France, but I don’t actually speak.
Denise: I like it. You’re fluent in comprehension of code. That’s good. That’s more than I can say beyond a bit of HTML. Also joining us today is Reg Levy. This is the first time Reg has joined us on this show. She is the director of legal affairs at Minds and Machines, a domain name registrar. And we’re thrilled to have you, Reg. Great to see you.
Reg Levy: Great to see you. I’m honored to be involved in this!
Denise: So, Reg, tell us a bit about what you do as director of legal affairs at Minds and Machines. Obviously a lot of domain-related law.
Reg: Right, so we’re a registrar as well as a registry. And we are the third largest applicant for new GTLDs in the GTLD round. We’ve got dot-London, and dot-byre, as well as dot-horse and dot-radio. I do a lot of stuff related to that and policy issues with iCam.
Denise: Very cool. Alright, well let’s get into it. We’ve got a lot of policy stuff to discuss today. So let’s start there. So many good policy developments it’s hard to know where to go first. But since we’ve been waiting for the FAA to take some step on authorizing use of commercial drones and that happened this week, let’s start there. The FAA is still waiting to give us legislation that changes the existing legal framework. And that’s going to be a long time coming still. But what happened this week is the FAA granted some exemptions for mostly filming in Hollywood using drones in connection with making motion pictures. And went ahead and put some guidelines out for how you can do that. Jonathan, were you surprised to see this? Is this the kind of evolutionary step we should expect to see more of from the FAA?
Jonathan: I’m always surprised to see any regulatory document coming out of DC these days. Frankly, I thought we’d see a lot more from the states before the FAA opted to step up its efforts to come up with standardized practices across the nation.
Denise: We were talking a little bit before the show about knocking around the Santa Monica Airport because that’s where Reg’s offices are. And drones around airports. And obviously picking up on your thread that the states have large interest to protect here Jonathan. What we can probably expect to see is the states enacting all sorts of regulations around drones. Everything from who can use them, how they can be used, what times they can be used, the manner in which you have to be communicating with your drone, what uses they can be put to. There’s a whole smorgasbord of activities that are related to drones that are right for regulation and legislation. I guess I’ll start with you, Mary and get you gazing into your crystal ball. Telling me what you think is going to happen here. Do you think the states are going to enact a lot of contradictory laws that then perhaps the Federal government will come in and change? Or what can we expect to see?
Mary: I don’t know in terms of… it’s hard for me to predict. And some of that is colored by the fact that I have access to a private plane that my partner Ed owns. And so I have the opportunity to listen a lot to all air traffic control, and to what pilots say as they’re flying around. And when you’re in a populated area, just having that experience on a regular basis of seeing the tremendous amount of traffic and activity and the ways that air traffic control has to… they are in a very stressful situation where they’re directing all these different planes and the communications are short and fast. And activities that a pilot might make or a direction that they might take has to be done very quickly. If you have a plane coming at one o’clock three miles away right towards you at the same speed as you, and they tell that guy to go up 2,000 feet and you need to go down 2,000 feet. Like, it’s immediate. You need to do that in 15 seconds. When I think about the notion of having had that experience on a regular basis, the notion of drones, I have to say I find it almost terrifying. Because of that sort of first-hand visceral experience. But that said, I can see why the Hollywood exemption was granted. Two nights ago on the Bridge, the closing scene for the season ending was I think shot in a drone where they went from the ground up maybe 5,000 feet in the air in the matter of a few seconds. And it was to me, it looked very much like a drone that went straight up and had this view. And it made sense and I get the artistic reasons for why they would want to shoot this way. At the same time, it will be very easy with a lot of drones in the air to have an accident. So that said, to your question about the different states, first of all the FAA and air traffic control generally is done on this national level. And when you go from one airspace to another, you’re not dealing with state laws. You’re dealing with Federal regulations that control all of this. And it too is a highly complicated thing. You’re dealing in 3D, it’s not like driving your car on a map. You’re dealing with levels of airspace and all kinds of activities. And I have to say I find it very concerning as someone who likes to get in planes sometimes. The notion that there would be all these drones around. So I hope that they stay highly regulated. I also have one other comment; I know I’ve been going on here, but one other comment about the Facebook work on drones. They want to put 747-size drones in the air in foreign countries to provide internet access to areas that don’t have it. And I have to say my take on that is that it’s a little crazy and the reason is for that size and expense of a plane, you could just get a pilot for $50 an hour or $100 an hour to drive it around. You don’t really need it to be a drone. But I think there is this other element where the notion of drone, the word drone is very sexy right now. And everybody wants to be doing it. And I don’t know that that’s necessarily healthy for the way we manage our airspace. So I hope there aren’t a bunch of laws enacted that enable drones in ways that are unhelpful or possibly dangerous just because it’s sexy right now. That worries me.
Jonathan: Denise, I look at this like it’s the camel’s nose over the tent. To me, it’s interesting but not surprising that the first camel’s nose came from the Hollywood lobbyists. I don’t know if that’s the most socially virtuous but it’s certainly and interesting application of drone usage. And they carry a lot of sway with powers and structures in DC.
Denise: Right and what happened seems to me that six aerial photo and video companies went ahead and applied for exemptions and got them. It seems like there’s at least threshold requirements at this point that you show that you’re not just an amateur. It’s reminding me actually of the distinction between journalists and bloggers and new media and old media, and where you’re going to draw the lines on things. Because lots of people have drones, lots of people want to make movies. They may not officially work in the Hollywood industry. But they may be aspiring to do something independent. Or just in the right place at the right time. I remember down here a couple weeks ago we were having huge surf. Because of the big tropical storms that were coming up through the Gulf of California, etc. And while that was pretty devastating, down in Baja, California, a bit dangerous off the coast here, there was also an opportunity for some great surf videos to be captured. And someone stuck a drone up in the air above where Laird Hamilton was surfing off the Malibu pier, and got some incredible footage of him shooting the pier. He was on a paddle board and he did it twice. And a friend of his did it with him at least one time. I don’t know if they planned to be there or happened to be there. They got some amazing footage and I’m wondering how this is all going to shake out for the occasional filmmaker as well. If you haven’t gone through all of the steps that the FAA has made these six companies go through, let’s see. Provide you with some more detail about that. Operators in the film industry will have to hold private pilot certificates, keep the drones within line of sight at all times, and restrict flights to the sterile area on the set. So clearly you’re in the right place and right time and something amazing is happening. A scenario I’m envisioning would be at least in a gray area here. What do you think, Jonathan?
Jonathan: This reminds me a lot of the historic processes that allowed new telecom services to function. The way it used to work at the FCC, someone would file a pioneer’s preference to get access to use a swath of spectrum. And then demonstrate to the FCC and the world that it wasn’t causing interference and it was in the public put to have use of this spectrum for their particular purpose. So I think we may sort of be seeing the rumblings of a similar process. Essentially pioneer’s preferences to those with the withal to demonstrate a virtuous use or a positive use of the air through use of drones. So instead of spectrum in the air, it’s drones in the air. And problem I have though, it does reconsolidate power with those that are best-connected to the power structure. And may preclude certain real stray innovative applications of drone usage because they won’t have the withal to convince the FAA that they’re in fact of virtuous use of drones.
Denise: I think you’re right about that. Reg, any thoughts on the exemptions or the morass of where drone law will go in the future?
Reg: I think it really makes sense to give it to Hollywood providers first, honestly. Just because living in L.A. they shut down freeways, they shut down streets to film. So it makes sense since they’re already doing that to try it out with them. They’ve already got sterile areas, I don’t know how sterile they are. But they’ve already got areas where they’re working and they’re used to dealing with not necessarily fly-overs, but they’re used to dealing with figuring out what’s going on in that particular area.
Mary: The other thing that’s interesting about the Hollywood example is that they typically are highly insured and insurance companies love to manage risk. That’s what they do. They’re going to tell presumably these six companies, here’s what you have to do to be insured for your production. You have to do this stuff. And that’s actually a great set of controls and it’s a market-set of controls but it makes sense to me. My concern is, I mean I get what Jonathan’s saying about startups or innovative uses that might be curtailed. But at the same time, we certainly have gazillions of examples around Silicon Valley of goofy founders doing goofy things. And I do worry about the experimenter who stays up packing something all night and shows up with this drone and just does whatever. And this is a highly populated area like L.A. and pushing a drone in the air here for some experimental use would worry me. So I like the idea of starting where there’s highly controlled risk management in place first.
Jonathan: To me, the more logical way to manage risk in this scenario might be to instead of giving the licenses to those six Hollywood entities, give it to a broker. A trusted intermediary and intermediary can then negotiate those relationships with any entity that comes to them and says we need a drone for this particular purpose. So it could be even in the film context, it could be an independent film studio or TV station that might not have the clearances through the FAA. But it could actually vet itself through a central intermediary. And that would all allow for access to the drones to a broader swath to just those six pioneers.
Reg: I think that’s an interesting idea but I don’t think it’s feasible in practice. Insurance companies as Mary just said, are big on managing risk. So they’re not going to be the ones who are going to apply for that kind of permission. The film companies spurred on by a director who has this really cool shot in mind that he can only get with a drone are going to be the ones who break that barrier. And then try to convince the insurance company that it’s something worth insuring.
Jonathan: Well that means you have to go through one of those six entities. Those six entities will have the luxury and the artistic license to get those great shots. I think that really consolidates creative power with a cabal. You can look at security regulation, brokered dealer situations, we have trusted intermediary in a lot of risky scenarios. And it creates a new market. We created a broker-dealer market as trusted intermediaries. We created the insurance market as trusted intermediaries. It seems to me like the FAA could actually create a new marketplace for these intermediaries. We see it in equity crowd funding for instance. We’re going to have a few dozen intermediary brokers in the equity crowd funding space. That means not every entity out there can do crowd funding. But any entity can partner with one of those crowd funding platforms.
Reg: That makes sense and I understand where you’re coming from. I just don’t think that now having these Hollywood providers authorized to do it is going to be that big of a bar to creativity. Hollywood is already a cabal and I don’t remember exactly who the six were. But it’s likely that they’re already the ones who are big and have these budgets in the first place.
Jonathan: But you don’t need much. A budget for drone flying, I think finally because of the internet we broke the Hollywood cartel. We broke it wide open and allowed independent film making to be as robust and entertaining as the films greenlit by the six Hollywood studio executives. And I think this reasserts control in the hands of that limited cabal.
Reg: That’s a fair point. And I think people who are making really interesting videos like the drone flying through the fireworks video that I’m sure everybody has seen around 4th of July are still going to do it regardless of whether these regulations are in place or not.
Jonathan: So we’re turning them into outlaws.
Denise: I’m thinking there will be a middle ground. That either the FAA will grant more exemptions to people who aren’t in this category. But are able to demonstrate that they are serious about what they’re doing. They’re taking safety precautions, they’re jumping through all the hoops that they need to in order to have an exemption. Or failing that further down the road the FAA keeps promising us-and maybe this is back to your skepticism about anything out of Washington, Jonathan-that there’s actually going to be legislation introduced that will govern all of the scenarios that aren’t covered by the exemptions.
Jonathan: I should amend my statement. Anything out of Washington that doesn’t come from a vested powerful special interest. AKA, Hollywood. AKA, Big Telecom.
Denise: Alright folks, you drone operators out there you’re going to have to keep an eye on this and make sure you’re not treated badly when compared to those with big interests. Before we leave the drone topic entirely, further to your geographic neck of the woods Jonathan, over in New Jersey we had someone arrested recently because they shot a drone out of the sky. CBS Philadelphia reported it. And then it’s written up over the Volokh conspiracy. I’m not quite sure what ticked this guy off so much that he shot down his neighbor’s drone. But something did. It says investigators say the resident was taking aerial photographs of his friend’s home which is under construction. While doing so the resident told police he heard several gunshots as he simultaneously lost control of the drone. This is one of those situations where it was not over his property but he did not like that it could take pictures that were his property. He was arrested, this was not decided to be an okay thing to do, to shoot down your neighbor’s drone. But unsurprisingly over the Volokh conspiracy, Professor Volokh who wrote this up sees this as you could have a law school exam on these issues that would last a day and a half. What if it was over your own property? What if it wasn’t taking pictures? Any thoughts, Jonathan on the conundrum this raises?
Jonathan: This is the first time hearing of this. If I had a gun and thought it was safe enough, it’s probably the most likely target for me. Would be a drone flying through my window or over my house. That hits on, to me, the real core issue of the potential between new technology and sanctifying our individual liberties. I think you have a right to fly a drone up until the point where it interferes with someone else’s autonomy. And coming too close and photographing someone’s house I think most Americans would justifiably see it as an immediate intrusion upon their autonomy and privacy.
Denise: You were going to say exactly what I was going to say, Reg. Go ahead and say it.
Reg: You can take photos from the street of anybody’s house. And you can take photos from your yard of your neighbor’s yard. So it would make sense to me if this were not invading his neighbor’s airspace but was in fact staying on his own property, and taking photos of things that he could see just from really far up on that property. The same thing happened with the Apple announcement about a month ago and is happening right now with the Star Wars episode-whatever number it is-that people are flying drones not necessarily into private airspace but in airspace that they have authorization to potentially… and taking photos.
Denise: And Virgil in IRC is suggesting it could be equally as fun to paintball the lens of the camera on the drone in your neighbor’s yard taking pictures of you. You’d have to have really excellent aim.
Jonathan: Turning it into a game.
Denise: Yes, exactly. So these are all fun questions to think about and conundrum for law professors and law makers everywhere. Mary, any thoughts on the privacy aspect of this?
Mary: Well, it is an interesting issue. Some of the stuff I’m working on right now has to do with consent. And if something is visible from a public space or a private space, it does change what our expectations are. But I mean I think this is something uncharted territory. The notion that a drone is up high over private property but shooting into somebody else’s space. There are some-I’m trying to think-I just was reading in the last week or two about a city or a state somewhere in the U.S. that had outlawed or was considering legislation to outlaw police shooting drone footage-either video or photos-in looking into private homes without a warrant. Which I think is totally appropriate. It’s a variant on what we’re talking about but this guy wasn’t law enforcement and he’s just shooting a view from his own property albeit very high up. In theory, he could have a skyscraper on his property and also shoot photos or videos. So how different is that? It’s kind of an interesting problem and this notion that when data is collected, people ought to be able to give consent. It makes sense except that you have these sort of public or privately public spaces that are in this gray area where you don’t need permission or consent. So I don’t know. Those would be some of the things I would be thinking about.
Jonathan: To me this is the next technological battlefield in a battle between government actors and private actors that we still haven’t figured out the Constitutional juror’s prudence on over the last 60 years. Every time there is a technological advancement the plain sight exception for government to see something. But if they can use binoculars, is that okay? Can they use telescopic lenses, is that okay? Where do you draw the line on technology? If you can see through walls, is that okay? Where is that line drawn? Now that you have drones, are drones now a legitimate tool? We have things like the plain sniff exception which we haven’t fully figured out. If you can smell something is it okay? If a dog can smell it, is it okay? If you can beef up the super powers of a cop so that they can smell things through walls, is that okay? Does that give them cause? So what is the role of government in technological advancement versus private actors in technological advancement? I think we better be very careful and we’re going to see circuit all over the place on both the government actors’ side and on the private actors’ side as they try to incorporate new technologies and the abilities to use those new technologies for what we though was okay historically.
Denise: I completely agree. And I encourage people to check out a post over at Volokh conspiracy. I already have put links to this and everything else we’re discussing on the show today in our discussion points, our public discussion points at delicious.com/thisweekinlaw/277. That’s our episode today. This is called Philosophical Approaches to Drone Regulation. It’s by Michael Barry and Nibia Sied, guest-blogging at the Volokh conspiracy. And they really try to lay out all the scenarios in which a drone can be used and how it can be problematic. And how states and Federal government will be thinking about regulating them. So if you really want to get a good handle on it, I recommend this article. Let’s move on because we had sort of a good Segway when we were talking about risk-heavy activities such as anything flying the public airspace. Investing money in a less-regulated way is also a very risky activity. And we have certainly seen the SEC trying to fumble its way forward in implementing reforms under the jobs act, etcetera. Equity crowd funding is something you’ve been paying attention to, Jonathan. Can you bring us up to speed as to where things stand now that the jobs act has been on the books for a while? What can we expect to see happening?
Jonathan: Well I suspect anything I say today may be obsolete next week. We were expecting rules from the SEC; they had submitted 500-plus pages of post rules a year ago. And we’ve been expecting them to release the final rules any day now. So I know there’s a lot of companies that are chomping at the bit. Some are probably already jumping the gun and are hoping to be part of the equity crowd funding platforms. I think the SEC is working with one of the toughest economic, public policy, legal morasses it’s been experiencing since it was founded in the 1930s. The SEC was designed to protect widows and orphans from nefarious practices by people seeking to extract money from them. I think the biggest dilemma is will equity crowd funding be the place of bottom-feeding? The VCs and private equity folks will always get the best deals. The qualified angel investors will get the second best deals. And will this equity crowd funding platform, while it creates a perfect marketplace for any venture to accept money from anyone, will it become the place where people think it’s going to be a get-rich quick scheme? And a fair territory to pray on the widows and orphans out there who can’t find other places to put the money under the mattress.
Denise: Mary, I’m interested to get your take on this because you work with a bunch of entrepreneurs and startups. So does Jonathan by the way. To see if you think there’s a real demand in the people that you’re chatting with on a day-to-day basis for funding from the general public in a non-IPO kind of way. And we should point out that when we’re talking about equity crowd funding, we’re not talking about what Kickstarter and Indie GoGo already do, which is allow you to back something and maybe get a perk, maybe not. Because you believe in the product or because you want to have one of the products and it won’t get done unless people fund it. This is more of a stock market kind of approach where you’re actually able to purchase some sort of equity in the company. Mary, do you think there’s a big demand for this given that SEC requirements for conventional public offerings are so stringent?
Mary: Actually I do. One of the complaints you hear a lot from startup founders and people trying to raise let’s say at the angel level. So let’s say the first, maybe it’s $50,000, maybe it’s $500,000 to prototype and get things underway. A lot of times that money, at least some of it will come from friends and family. That’s in a bit of a gray area because the requirement has been that investors be qualified investors. Which means that they need to have more than $1M in assets. If it’s your relative, your aunt who may not be worth a million dollars but wants to put $5,000 into your startup. Well, I think they kind of look the other way and if you lose all the money, well it was between you and your aunt. But then there’s the next level which is folks who are out in the world and hear about all the sexy startup stuff. And everybody’s heard about the guy who put $40,000 early on into Facebook and made $160M on the first day that they IPO’d. They want to get in on that. So there’s this desire on both sides and both their founder startup side and smaller-time investors would be able to put money in. But Jonathan makes a really good point. The whole reason the SEC exists is to keep people from being preyed upon. And having their life savings be put into some crazy investment and really the person collecting the money runs off with the money. And that’s it. So it’s a difficult thing. I haven’t read all the rules and I’m really interested in do that. I’m in this article that you posted, 585 pages of proposed rules. That’s a lot. There’s a lot of stuff there to take in. But I do think that if this were somewhat controlled and if maybe the amounts were smaller and maybe it was prior to series A or involved in a series A, but at a very low dollar amount, that waiving some of the requirements may be good. Maybe that somebody loses $5-10,000 in an angel round. And then they get a little more savvy and think, I better be a little more careful when I do the next investment. And yet they may not have $1M in assets like the old rules say. So I don’t know. I think there’s a lot of demand. There’s one other piece to this that I think is really a great comparison to the crowd funding that we’re already familiar with. And that’s the kind where you don’t get any equity. The Kickstarters and what not, you might be buying a phone or a Pebble watch. Or maybe you just get a t-shirt but you’re not getting any equity in the company. So in this version, the equity investing piece, there’s this feeling I think amongst founders that when you go to do crowd funding, either type, that if people give you money in this public way-it’s a public endorsement of your ideas-it’s a way of going around the more-structured and entrenched and maybe clubby version of venture capital. Where if somebody doesn’t fit the profile of those who often get funded, and statistically here in Silicon Valley that tends to be a 25-year old young guy. Who will often just lose all the money. But nonetheless, they continue to be funded. There’s a way where if you have a good idea and you’re a solid team and you maybe don’t fit that profile, you’re still able to prove your model by getting money in the door and building what you want to build. And that’s I think a really compelling argument for this. But I think the SEC would be-I haven’t read the rules-they would be really smart to still protect people because it’s people’s life savings.
Jonathan: Mary and Denise, I don’t want to overstate the proposition that this really will absolutely, immediately feed on widows and orphans. There still are serious restrictions on how much can be raised and from whom you can raise it. Although it does allow seekers of money to go down market to smaller investors for smaller amounts. To me, I talked about the drones being the camel’s nose over the tent. To me this is the camel’s nose into the wallet and it does some very noble things. The creation of a more-perfect marketplace so that money flows into the most interesting array of ventures sounds like a good thing. To me it’s like when Leibnitz and Newton were fighting over the creation of calculus. Before calculus we had geometry. And geometry was used to approximate a perfect curve for instance. Then we developed calculus and we came up with the actual area of a perfect curve. So to me, anything that smooths out a marketplace and does this is probably, ultimately a virtuous thing if we get the rules set straight. There’s going to be a lot of growing pains there. And that’s why I think the SEC is so cautious. There is no doubt that over the next couple years this is going to be very interesting make-work for young lawyers who have parsed through the SEC rules and know the rules quite well.
Reg: It will be interesting to me as well to see how restrictive these new rules are going to be. 885 pages which I have also not yet read. Because I know that as soon as the SEC proves this, the guys who run my company are going to be all over it. And asking me how it is that they can just get anybody to give them money. I’d like to see a cap on percentages. Mary was talking about a cap on amounts. Because there are certain reports that we have to submit if somebody owns more than X percent, 5%, 10%, 15% are the usual ones. If we have some kind of investor that was done via crowd fund and ends up with 6% of the company, I need to know exactly who that is. And if they are named 648 on this website, I don’t think the SEC is going to like that report from me.
Jonathan: I give a lot of credit to Brooklyn based Kickstarter for its refusal to play in the equity crowd funding space. They are being pure and true to their principles. Their objective is to make sure noble admissions are contributed without any real significant financial incentive.
Denise: It’s a good model. And I have to say that when people send me an Indie GoGo request, I judge them because Indie GoGo lets you keep the money if you didn’t get the full amount that you think you need.
Mary: But there’s also the other piece in which Indi GoGo is, I think because I’ve compared the rules for each service, as well as a couple of others; I think Indie GoGo is a little better for nonprofit at first. And there’s some restrictions in Kickstarter that Indie GoGo allows but Kickstarter does not. For certain types of projects and because we’ve looked at doing this for two nonprofits that I’m involved in on the board, I have to say that I would hope that maybe you can consider the GoGo for nonprofits. I promise to consider them for nonprofit style efforts.
Denise: They definitely provide more flexibility as to what you can raise money for on the site. Which is all about competition in this arena and they’re providing it. Let’s make widows and orphans our MCLE passphrase for this episode of This Week in Law. If you are listening to the show for continuing legal or other professional credit, we put these phrases in in case you have to demonstrate to your regulatory body that you in fact listened to or watched this show. We appreciate it however you’re listening to and watching this show. If you need some guidance as to how you might obtain continuing legal education credit for the show, head on over to our Wiki at wiki.twit.tv. Find the This Week in Law page there, and Reg’s friend Franklin did a really nice chart that gives you information on all the various U.S. jurisdictions. Let’s talk beyond the U.S. just for a second. We’ve been talking about startups and laws here in the United States as to how they might get money. And Jonathan since you’re doing a lot of work with your EU startups these days, if you could compare and contrast the regulatory environment for us here in the U.S. It’s going to be easier for entrepreneurs or thieves to obtain money from the unsuspecting and eager public. How are things shaking up comparably in Europe?
Jonathan: What do you mean on the crowd funding front? Or other, broader regulatory issues?
Denise: I mean on the crowd funding front.
Jonathan: I don’t know specifically what’s going on in Europe with the equity crowd funding. I thought there were a couple states, nation states that might had been experimenting a little more than America. But I can’t recall who they are. I know some countries have other methods of funding startups. England treats their new startups like they’re essentially nonprofit. It gives them access to grant funding until they’re ready for prime time. Look, as far as I can tell, for as long as I can remember, America has always been the easiest place to start a business. So it’s been very interesting for me to take the model that I’ve been working with in New York and try to implant it on the versioning startup community in Europe. They’re not quite as adept and agile. They’ve got startups that don’t necessarily understand and appreciate to get your legal structure straight, IP and contracts, equity relationships straight, before they get going. It’s historically made them uncannable for any kind of funding, let alone crowd funding. No VC worth assault 10 years ago wasn’t investing European startups for that reason. So will they have corporate structures that make them viable for equity crowd funding purposes? I would be afraid to invest most European startups that hadn’t gone through the rigorous, legal, and business obligations to make themselves set and amenable for actual ad site and equity investment.
Denise: This seems like a good opportunity to start talking about some specific startups that began in the U.S. and now are moving into other markets or have been moving into other markets very aggressively as well as in the U.S. And I’m thinking of the big disruptors of the last year or so, Airbnb and Uber. Who seem to run into regulatory and legal problems wherever they go. But that doesn’t really seem to slow them down too much. Jonathan, in Europe, do you think it’s even more challenging for these kinds of companies because of the heavier regulatory environment there?
Jonathan: It’s interesting. We’re seeing little laboratories throughout Europe. What I find most interesting actually is that Airbnb apparently has more users in Paris than it has in New York City. That to me is staggering coming from a country like France that has been so protectionist of its own policies. I don’t know. I don’t think we see any unifying themes in Europe at the moment. Germany has been more protectionist. They had come down pretty hard against Uber. I think they’ve opened up the market a bit. But I think Amsterdam had some problems with Uber X or Open Uber whatever they’re calling it. Now it’s been pretty accommodating to Uber. Which I think is important for a city that essentially had outlawed driving cars, for the most part. I thought we’d see a little more protectionist throughout Europe against America carpet-baggers. While they might like the idea and it could be real value to their own citizens, to have that degree of capital life from European hotels to American Arabian B, entrepreneurs; I think if I were a European municipal overseer or European regulator, I would take a more critical look than I frankly think a lot of Europeans are doing.
Denise: There’s a good article at Forbes by Peter Diamandis. Who highlights some of the challenges we’ve all probably heard. We’ve certainly talked about the challenges on the show to Uber and B&B in various cities in the U.S. Here he’s highlighting some of Uber’s challenges abroad. Germany, there’s a nationwide ban on Uber because drivers don’t have correct permits. Spain, taxi drivers went on strike in June protesting the end-regulator private service. In India, three Uber competitors have written to the Reserve Bank of India complaining that Uber’s violating their foreign exchange laws. In Brazil, Uber might face legal problems if the government of Saul Paulo pushes for the suspension of its service. Vancouver’s city attorney is claiming that the service is illegal and of course in the United States, Uber is facing challenges in all kinds of cities. He highlights in this article, Milwaukee, California, New York, Washington D.C. I know in Florida as well there have been various roadblocks in the way. Never the less and Peter Diamandis titles his article Uber versus the Law; my Money is on Uber. Uber seem to be just plugging away and fighting through and operating where it can and fighting legal battles where it’s facing them. And expanding in an unstoppable sort of way. Mary, do you think that will continue?
Mary: Yea, actually I do. At the level that Uber and Airbnb are operating that now, they have enough money. They have enough momentum. They have name recognition. They’re in that stage; they’re not startups. They made, in a way, the behavior of startups when it comes to the incumbents, the legacy companies, the taxi companies. Hotels and whatnot that actually are subject to a lot of regulations that Uber and Airbnb have used to skirt and jump ahead. But now the regulators are sort of catching up to them. I think that they’re going to keep zooming along. But at the same time, I have to say that as a user, I don’t disagree with the notion that there should be some regulation. For example, around taxies. I would like to see them have maybe a better driving license than just the standard one that everyone gets for driving their own car. Or some additional insurance requirements. I do have to say I have a friend that drives for Uber and Lyft; she does both in Chicago. And she told me that Lyft-I think it was Lyft-didn’t require any additional insurance. They were just silent on the topic. Uber had a requirement, and actually helped drivers get the additional commercial insurance that a taxi driver would have to get. So I think the companies are sort of slowly coming onboard with some of the regulations that actually make sense. The customers would like to have the extra insurance. The customers would probably like to know that the drivers have extra training. Just for safety. But after that, yea the legacy companies are going to keep fighting in whatever ways they can. I see them, 16 a day; they’ve grown too big and there’s too much money. And too many investors who are powerful that will help protect them. That’s one reason you take on A-list investors. They’re more connected; you want them on your side so I think at his point there is no question about that for me.
Jonathan: I find so many things fascinating about this. I think this is making for such strange bed-fellows to witness the front-end of a major policy battle brewing both domestically at the state level and internationally. It’s really fascinating for those of us that missed the early battles of say Google and Facebook, and internet application entry into communications. This is a much more interesting example, I think. Democrats and republicans don’t quite know how to line up. A consumer advocate doesn’t quite know how to line up. They’re all sort of vying and figuring out their piece in the pie. Ten years ago, 15 years ago, when the internet application providers were vying for their place in the communications space. They had one huge problem. That was the problem, their competitor was also the provider of the essential components for them to compete. Google couldn’t compete unless it had access to Verizon and AT&T lines. That doesn’t exist so Uber has a much bigger leg up than say the early internet communications companies had. Because the rivals don’t control the streets. The taxi commissions, the buses don’t control the streets.
Reg: I think they also have a big leg up on some of the other startups because due to the prevalence of social media, they already have a fan base. I’m constantly seeing, maybe stop saying a lot… my friends from Austin are saying, wow, Uber! Let Uber be here! We love them! We want them here! And they’re lobbying their governments to allow them and loving to change the current taxi laws. So I think that I’m not as familiar with Airbnb but I think that Uber is such a super-popular service that its users-once you’ve used it in one city-you go home and wonder why you can’t do it there.
Jonathan: That public outcry, that grassroots public outcry from tech-oriented consumers has been astounding to me. And part because I think it’s been a little short-sited. For some reason I think it was because social media, Uber was able to convince everyone that there is no potentially nefarious purpose. No potential negative public consequences of Uber being allowed to do what it wants to do, unfettered by any degree of government regulation. And it’s interesting that that message is essentially the message that most urban nomads believe. Most tech-savvy urban nomads with mobile phones with app-ability on them believe. And we’re sort of missing a lot of the very important over-arching public policy issues. The fact that we may lose carrier of last resort capabilities. How will we get car service to under-served communities? Not the rich white kids with iPhones. How will we serve those smaller inner-city communities? How will we support public transit? To me, I think there’s going to have to be very serious look about massive revenue flows away from public transit and poor people transit to Uber and its community. And it may mean massive taxing of companies like Uber so we can actually support bonified meaningful public transit, especially to underserved communities.
Reg: I don’t think that Uber spells the demise of public transport. But I do think that as you said, younger, tech-savvy people who are lobbying for or rather on behalf of Uber are missing some of the points. Like Mary brought up, Lyft for example doesn’t require insurance. Those don’t ask. Now in California, if you have a license, you have to have insurance. I don’t know if Lyft even requires that you have a license. They presumably require that you have a car. Whereas Uber does to some extent, I don’t know if they’re really looking out for the consumer, but they have some protections in place for the user of an Uber. Although I think I read recently that if you get into an accident, you’re SOL.
Denise: Right. Big issues for David Plouffe. Jonathan, you probably think it’s pretty interesting that they just hired David Plouffe, one of Barrack Obama’s election advisors to take charge of policy and strategy. So not only do they have A-list investors, now A-list policy advice as well.
Jonathan: Right it took Google and Facebook seven years before they got their first D.C. lobbyist. And it wasn’t a top-level White House official. So there is a recognition by Uber and Airbnb that they have to play this game in Washington. So regardless of what we think of their business practices, they are certainly becoming very interesting, savvy government participants. For me, the most problematic issue for uber and I hope they figure out a way around this, is we’ve all be hearing that they now rate their consumers. Which may be good, may be bad. Without any sort of audit or government oversight, I think that opens the door so widely to potential discrimination against users. Unless we have suspect classifications, you can’t unfairly rate someone because of their color or smell or gender. I think we’ve eliminated the common carrier obligation of offering your service in non-discriminatory ways definition and really made it even that much worse where you can have racial categories or gender categories and preclude service to certain categories.
Mary: So that’s a really interesting point. I’m an Airbnb user and everywhere I’ve stayed I’ve been rated. And in order to make the count, I had to give them Facebook and multiple other social identity affirmation services. I mean I don’t think Facebook necessarily considers itself that way. But in a way they do. So the fact that I have however many, 1,500 friends, and they say yes, this is Mary Hodder and I’ve been on the site since 2005. Blah, blah, blah. So I’m socially affirmed and then I give that information, those credentials, to Airbnb. And then I stay somewhere and the host rates me. And what’s interesting about what you just said, Jonathan, and I can completely see ways that people could discriminate, is your photo is there. Because again, it’s Facebook and you have photos. Your photo is transported right over to Airbnb. Everybody’s white that I can see. For everywhere I’ve stayed. And all the other users that had stayed at the sites were all white. And everybody was fairly fluent and they all clearly had smartphones and were technologically adept. And there’s a certain filter there, right? For a level of user and a level of, maybe you can imply, income and economic status. So what’s interesting to me is you start to think about issues of red-lining where people are kept out of opportunity. On the flip side, because those ratings are public, anybody can go to the site and look at the ratings on the particular room or whatever it is you’re renting, apartment. That shows all the people who are doing the ratings, those are public. So if there were some sort of discrimination by the people who stay in these spaces toward the space-holder that would be public. And then I believe that our individual accounts are also public, and so the ratings that people give me are public. So if there were some kind of discriminatory statement or a series of discriminatory acts…
Mary: And so that's not so easy, for example, if it's an apartment rental and the manager —
Denise: The lease.
Mary: — is not allowing anybody who's black to fill out an application — that's really hard to track. But this in some ways would be easier, just because of the public nature of it and the sort of interface function that is there.
Jonathan: That's interesting.
Reg: So —
Jonathan: And it's interesting —
Denise: Yeah, and it's so fascinating to me how we have come around to this really core issue of constitutional law and what businesses are and aren't allowed to do in dealing with their customers, purely by the fact that there's a technological component to how people book and experience using these businesses. What were you going to say, Reg?
Reg: I was going to say that it's interesting to compare Airbnb to Uber/Lyft because I feel like Airbnb is much more of a connection of two parties. They step out of it, for the most part; whereas, Uber is more than just the facilitator because they're so much more involved in it. And I could be completely wrong about this; but if I choose to rent my house out to anyone, I can discriminate however I want because I'm just one party. But if Uber decides or enables that kind of discrimination, they could be open to some kind of a civil rights lawsuit.
Reg: I don't see that Uber is as open to it, but I'm not as familiar with Uber.
Jonathan: So Reg, that's really interesting. So I'm inclined to agree at the moment that if an Airbnb home owner decides to discriminate, under the current law they probably can; and I don't know if that's a good thing. What happens when Airbnb is the universe of outside your own home accommodations, if it brings down the hotel industry which had civil rights obligations and constitutional obligations that took us 190 years, and one of the most acrimonious battles in passage of the Civil Rights Act and implementing laws? What happens when Airbnb is the hotel of the digital age? Are you suggesting that we're going to live in a world where discrimination is just matter of fact?
Reg: I absolutely agree with you. I don't have an answer for you. I think that Airbnb, because it does facilitate this, may want to take some kinds of actions to make sure that it markets to different populations, isn't just doing its things via social media where more of the users are predominately white, although that is changing with some of the social medias. Twitter, I know, is getting more of a minority community, although Pinterest remains mostly white. So I don't know; maybe they want to take some actions now before that becomes — before people notice so that they can protect themselves.
Jonathan: The result is vulcanized housing accommodations. It's the lunch counter where only blacks are allowed or only whites are allowed or only women are allowed.
Denise: Right. And transportation, as you were saying, Jonathan.
Mary: Right. The problem is that, at least in the Airbnb context because that's the one that I use the most, you essentially apply, right; and then the owner or — they could be a renter — who are subleasing out their place. But the holder of the property looks at your profile and decides whether to accept you. Once you're accepted, then the payment is made through Airbnb; and then after you stay there, you're both asked to rate. So the place where this gets interesting is because you're defusing the decision-making process across all these individuals, in some ways I think it would be a lot harder to track — this is just a decision that somebody's making in their head, and they just say yes or no. Now, if somebody repeatedly said no to, let's say, any minority who applied to stay in their place, even those that had equally good social standing in Airbnb and outside of Airbnb through the social — shoot, what is the — the word that I'm looking for is the social affirmation that you might get from Facebook or Twitter or wherever. And so you could, in theory, go mine the Airbnb data. Let's say somebody did a class action lawsuit and said, Okay. People are routinely discriminating against minorities. They could go grab the data; and if you just see the routine rejection of a certain class of people, you could make the argument because the data would be there. And so in some ways, it might be harder to see; but after a lot of data is available, it's possible that, in theory, you could actually make a much better case than you could against, say, the apartment manager who's just a one-off or the hotel manager who's just a one-off; and it's very hard to track in a single location, a single instance. I don't know.
Jonathan: Right. Mary, to me, that's the most fascinating piece. The ability to harness big data for an Airbnb discrimination claim is qualitatively different than we see in traditional housing accommodations or hotel accommodations. But on the flipside, we don't have a law that we can hang our hat on to actually use that data to make a claim.
Mary: But you don't think that you could use, for example, an anti-discrimination rule for hotels and apply that to Airbnb? Is it because it's somebody's home?
Jonathan: I think someone's going to try —
Reg: No, because Airbnb is not a hotel in the same way that a hotel is a hotel. Airbnb is much more a "friends are staying over on my couch."
Denise: Or in my spare room.
Mary: (Skeptical noise) I didn't know any of the people that I stayed with. And we paid a fee, we hardly interacted with them —
Reg: No, I don't mean — sorry. I don't mean that you know them; it's just that the analogous situation is much more one-on-one relation as opposed to a hotel that's open to all comers.
Denise: Right. Maybe BNB's would be the place to look. I mean, more of a small inn or BNB context, if — I'm assuming that they are regulated in exactly the same way that a Marriott is, and that if you're operating a BNB as a business, you're not able to decide that someone can't stay there because of their race or other protected characteristics.
Jonathan: We've got recent historical examples, analogies to other industries, that could inform a decision on this. Telecom was for 100 years a common carrier service. Telecom service, subject to regulation. Facebook comes along. Let's say Facebook actually builds a communications platform and does away with the need for Verizon or AT&T as your actual communications provider. Now Facebook has a billion people online. Should Facebook be construed as a common carrier? Five years ago, everyone would have laughed at a statement like that. I think today, people are starting to look at the powerful network effects that Facebook has and its ability to function as a common carrier communications platform. So I think the same analogy — if we do away with the hotels and Airbnb becomes the sort of omnibus peer-to-peer hotel network, have they become the provider, the hub for a public accommodation, such that public accommodation, common carrier obligations, non-discriminatory rates, terms, and conditions should apply to Airbnb and anyone that wants an affiliation with that new hub for public accommodations?
Reg: Well, wait a minute. How are VRBOs currently regulated? Vacation rental by owner. I've stayed in a couple of those, and it sounds to me to be very similar to what Airbnb is. There's a website that I go to; they tell me how many people they can accept; and I book them through the website, usually; credit card information goes through the website; and basically — although they can't just accept and decline me. They can only tell me whether or not they're open at that time. So maybe they're more like a hotel. But those are also single people who just own a place that they're renting out.
Jonathan: Right. I think they're largely free of most sort of public accommodation regulations, for better or worse. I don't know that's the right answer. They tend, I think, more to be in the unregulated silo.
Denise: Yeah. Well, this is going to be fascinating to watch as Uber and Airbnb and VRBO and other direct, "I have a thing, and you want the thing" sources continue their proliferation.
I think we're going to take a break. We're going to continue after the break on a topic related to race, which we've been talking about, and other discriminatory-related things. But before that, I want to thank our sponsor for this episode of This Week in Law. It's a new sponsor, and it's Harry's. I have my Harry's kit here. See the H? (Laughs) And Harry's is shaving equipment, and they couch themselves as a men's kind of product, that this is a guy's kind of experience. But I've got to say, I've been using the Harry's; and Lisa, our CEO at TWIT, told me, "You're going to love Harry's," and I do. It's absolutely phenomenal. It has definitely replaced, for me, the shaving equipment that I use because it fixes a lot of problems with shaving, and women have these problems, too. Let's talk about some of those problems. So shaving — it's not something that we do for fun. It's something that we do because we feel it's a hygienic kind of step to take. Sometimes we cut or scrape ourselves with dull blades; that happens all the time. With women, you know that terrible little spot on the outside of your ankle? I can't tell you how many scars I have from shaving there over the years. And even more annoying is the cost of shaving these days. You know that razors run about $4 a blade now; and as someone who stocks up my husband on his shaving supplies as well, I can't tell you how annoying it is when I go down to the grocery store or Target or wherever and have to spend that much money on his razor blades, and also have to deal with those pesky locked up Plexiglass cabinets, or you have to take a whole box up to the register and they have to unlock it for you. It's a complete pain. Harry's fixes all of that and even more. Harry's gives us high-quality razors at about half the price of the big brand blades. Harry's makes their razors in their own factory in Germany. Now, I've been using my razor for a couple of weeks now. I believe I have the Winston model, which is this sleek, chrome — here we go — kind of razor experience. So no more plastic. I live in a humid climate. You do not want a plastic razor with little grooves in it in a humid climate because it rapidly fills up with mildew. And what do you have to do? You have to throw it away, replace it, scrub it out with bleach, maybe. That's a lot of work, too. So these are really nicely made and engineered in Harry's own factory in Germany. They engineer the blades for sharpness and high performance; and everything's shipped for free right to your front doorstep. Because they make and ship their own blades, Harry's is a more efficient company, which means they can give us factory direct pricing. Harry's guarantees your satisfaction, and that's a great thing. And I can tell you, having used it, that they don't — they probably won't have a lot of people coming to them, saying, "I'm not satisfied," because it's a really great product. In each kit, you get a razor with a handle that looks and feels great; three razor blades; and foaming shave gel. The starter Truman set is an amazing deal. You get all of this for just $15. As I said, I've been using it. I love the form factor of the razor. I love the blades. Maybe guys go through blades a little more quickly. I mean, just — I think my husband does faster than I do. But for me, if I change these blades once a week, that keeps it just really, really sharp and wonderful and close. I love the look and feel of the set, and the price is amazing. I'm definitely going to be reordering from them, and this is going to be the way our family shaves now. They also have a new aftershave moisturizer that protects and hydrates the skin. You can check that out at their website, which is Harrys.com. I encourage you, too, if you're — it's great to go ahead and get their kit; and then you can incrementally order blades as you run out. Or if you know — you're one of those frequent shavers and you go through blades quickly and you really, really like to keep those sharp blades on hand, they do have a subscription service you can sign up for as well and decide how often you want things just to automatically arrive at your house, giving you even more convenience. So go to Harrys.com; and not only is the first kit, the Truman set, such an amazing deal for just $15, you can get it for $10. If you go to Harrys.com, you'll get $5 off your first purchase with the code "TWIL." That's Harrys.com; enter "TWIL" at checkout. Thank you so much, Harry's, for changing the way we shave around my household and for your support of This Week in Law.
So there we go, sponsor thanked. Let's move back into our discussion. This time, since we were talking about race, I think it's a good opportunity to talk about the fact that there's been an application, a petition, filed with the FCC by Professor John Banzhaf, who I know nothing about. Jonathan, do you know anything about Professor John Banzhaf?
Jonathan: I don't — I don't know where you're going yet.
Denise: Yes, okay. So he's the guy who has asked the FCC to revoke the broadcast license of stations that use the word "Redskins." He's decided that this is not a term that should be used on television; so if we can't change the name of the football team, we're going to petition the FCC. And the goal is to prevent people from using that term on over-the-air broadcasts. So FCC chair Tom Wheeler — Tim Wheeler, excuse me — no, it's Tom Wheeler, isn't it?
Denise: It's Tom. This is a typo in the article I'm reading. (Laughs) ... has recently said that they're going to look at the petition. There are a lot of inappropriate names and descriptions that are used on TV today, and he says he thinks the name attributed to the Washington football club is an inappropriate name or description, but he hasn't said whether that means, yeah, it should be banned and taken off the air. So Jonathan, as our FCC and telecommunications guru, what do you think of all this?
Jonathan: Well, there's certainly been a large public outcry against the use of the term "Redskin"; but I've got to think the FCC is still going to think this does not rise to the level of a significant misuse of the public airwaves to risk running afoul of the First Amendment.
Jonathan: So my guess is that the FCC probably says this is a non-starter.
Denise: That's —
Mary: So what is — I'm curious; I don't know the rules. What is the standard for terminology, I guess you could say, that the FCC allows versus what they don't allow? Like, for example, do they not allow the N word to describe people who are African-American? Is that not allowed, or is it allowed? And is it, therefore, a First Amendment issue?
Jonathan: Right. And I'm not sure where they've drawn the lines at this point. I know the lines have moved a lot over the past few years; but there are different lines, depending on what time of day the comments are being made. And it's a tough balance. I think it's a matter of the FCC applying appropriate public standards to the concept to figure out if this is a breach of the public trust for use of a public right of way. And —
Reg: Well, I also wonder, as Mary said, what their regulations are regarding the N word because there are some things that are appropriately described with the R-word; for example, "red-skinned potatoes."
Reg: And if you are watching Good Eats — or, excuse me, listening to Good Eats — on NPR of a Saturday morning, you might hear that and might be astonished that it could be bleeped.
Jonathan: And there are contexts in which you could say ... [audio fades] ... and contexts in which you can't say ... [audio fades].
Denise: (Laughs) Which we generally don't say on this show, so I'm not sure if that's going to have to be bleeped or not for us.
Denise: We do try and keep our clean tag in iTunes.
Jonathan: And I should tell you, I used that intentionally.
Jonathan: I used that intentionally because, in that context, it has to be allowed.
Denise: Right. Exactly. Because you're —
Mary: I actually —
Jonathan: I would love to see someone challenge the use of that in intellectual discourse on that very concept.
Denise: Yes, absolutely.
Mary: I once wrote a blog post on Napsterization — which I think you could Google if you put in my name — that used the word, like, fourteen times in the post to make the point that, in the particular context where somebody was being censored, that it was really wrong. And so I was demonstrating my — so I get what you're saying; and I'm all for the First Amendment right, I suppose, of somebody to use what, for me, is the equivalent of the N word. I mean, if we had a sports team — if it was the Washington N-words, would we be up for that? I mean, I don't know. And frankly, Redskin is, in my view, a similarly bad epithet. I mean, it basically means people who are Indian who've had their scalps ripped off. That's what a redskin is. And if — so I just gave Denise a link because I don't seem to be able to post anything to the spreadsheet with links on it. But there's a link to the Don Stewart video from — I don't know, in the last couple of weeks, where he kind of lampoons this whole issue by getting some Redskins fans together with folks who are predominately Indian heritage — American Indian. And they talk about it; and then, in the end of the segment, they meet. And they kind of compare notes, and it's a little tense; but it's an excellent demonstration of why this is an issue. And I don't know. I'm really torn. I'm all for the First Amendment piece; but at the same time, I don't — it does really bother me that the American public, who's probably mostly white, is all for the use of this. So what Denise is showing, these are — this is the Indian group.
And they talk about what it means to them to use the word "Redskin."
(The video begins.)
Woman in video: ... to walk down the street every single day and be surrounded by that imagery and being told to get over it?
Man in video: Because ... because ...
Second man in video, You know, just because I'm uncomfortable doesn't mean you have to make fun of my uncomfortableness.
Announcer in video: Sure, these Native American activists make a compelling case. That is, until you hear what's at stake for the true victims: the fans.
Redskins fan 1 in video: If the Redskins' name is changed and I have children one day, what would I pass on to them?
Redskins Fan 2 in video: It'd be tough. It'd be like losing a family member.
Announcer in video: And they've already lost so much. 58 starting quarterbacks, 28 head coaches ...
Denise: (Laughs) Okay. Thank you, Victor.
Mary: Yeah, you don't need to keep showing it. (Laughs)
Jonathan: So —
Denise: Yeah. And I tell you these "news parody shows" are more informational and hard-hitting than the vast majority of our TV news these days.
Jonathan: So I think the last South Park took a more interesting tack than this fellow who filed a petition at the FCC.
Jonathan: On South Park, they claimed the trademark. They said the trademark was abandoned and claimed the right to use "Redskins" for their own business purposes.
Denise: There we go. Perfect.
Reg: Which, I think, is the most brilliant way of going about this. If everybody just uses the Redskins logo in their own way — as they now can because there's no trademark on it — I think that's probably going to encourage them to make changes more than anything else because they're actually going to start losing money. I can go on — now I can't think of it, wherever you make T-shirts for cheap these days — and print as many Redskins logoed T-shirts as I want.
Jonathan: So what we should do — how about an initiative right now to get the South Park Redskins episode a lot of SCO. So it moves up the Google search above the Washington Redskins.
Reg: I think —
Jonathan: So when people search "Redskins," we already have something there that can actually put up a fight and claim more Internet searchability than Washington Redskins.
Denise: There we go. We need a good hashtag for that, Jonathan, for the call to arms. Short and sweet. Think on it.
Denise: Yeah. #NewRedskins. THAT works. There is a great Wikipedia article on "the seven dirty words," if you are curious, as we've been sort of talking around on the show what you can and cannot say according to the FCC. And again, this is a Supreme Court precedent that this is grounded in. It has to do with the speech being — let's see. I'm looking now back at the Valek conspiracy for our source material here. The case is FCC v. Pacifica Foundation, the "seven dirty words" case. The premise of the lead opinion there was that the words were not being restricted because of the opinions or ideas that they supposedly conveyed, but whether they explicitly dealt with sex and excretion. (Laughs) So we're in kind of a different ballpark here, and we're also dealing with a situation where broadcasters can't adequately cover the sports world without saying the name of the team; so I think that that's something that is bound to come into play as the FCC weighs this petition as well. But I thought it fit nicely into our show and is a good example of something pending today that may impact the way that television is enjoyed. But it sounds like our panel today doesn't think like this is going anywhere. The Valek conspiracy doesn't think it's going anywhere. Anyone think that the FCC might actually take some action on this petition? Raise your hand; speak now if you think so. No.
Denise: Deafening silence. Crickets. No.
Denise: Okay. So I guess before we leave our policy discussion for the day and move on to a couple of other topics, we should just mention that the United States is about to have a new Chief Technology Officer and Deputy Chief Technology Officer. This is an office that was first created in the early days of President Obama's presidency, and now he's going to have helping him out in that regard — Megan Smith will be the next USCTO; and Alex Macgillivray, who was Twitter's general counsel and formerly at Google, is going to be the deputy. So just congratulating our friend Alex, who's been on the show, and great news for him and something to pay attention to. I don't know much about Megan Smith. Do you, Jonathan?
Jonathan: I don't. I know she's been at Google for almost ten years, I think, doing business dev stuff; but no, I haven't — I've known most of the other deputy CTOs, at least, who have passed through the White House, including a couple that are still there at the moment, but —
Denise: Very cool. Well, good to see smart people in powerful positions.
Jonathan: We'll see what their take on privacy is.
Denise: Yes, exactly.
Let's move on. Mary and I had a great chat yesterday on another show that we do from time to time called G3 about Ello. And we thought it would be interesting to talk about that today as well. And that relates to the social web, so let's go there next.
(The intro plays.)
Denise: So sometimes we struggle to put legal spin on the things that we cover. (Laughs) Certainly, Ello is not facing any legal difficulties right at the moment; they're mostly facing technical difficulties as they became popular quickly and are trying to scale up to accommodate their users. But there is a — there are two kinds of legal twists, I think, on Ello. And if you haven't heard of Ello yet, just go out right now and Google it, and you will find out that it is E-l-l-o, an up-and-coming social network, right now, invitation only, benefitting from that whole buzz, "Oh, you know, all the cool people are on it, and you can't get an invitation" kind of experience. (Laughs) And they had just a blow-off-the-doors kind of growth spurt over the last week, to the point where their existing users felt a lot of pain. But some of the demand for this service that is putting it on our radar has to do with a couple of legal considerations; and one is the extent to which your data can be sold to advertisers; and another is — actually, I can think of three. The extent to which you can be anonymous on a social network; and then finally — now what was number three that just popped into my head? (Laughs) (Mumbles) Oh! What sort of content — exactly what we were talking about before with respect to the FCC — what sort of content they will tolerate on the network. And Ello has gone on record as saying, We're going to let people be anonymous; we're going to let people have private accounts, although from what I understand, they're sort of struggling to implement that at this point; and we're going to let you do things that are NSFW, which is another word for sexually explicit, pornographic, whatever, as long as it's within things that we find acceptable. We're not going to let you depict people getting hurt; we're not going to allow anything with children. So racy is good as far as Ello is concerned. So this is a bit different positioning from lots of the social networks out there who have taken different approaches on those fronts. And it's really fascinating that we have Jonathan with us here today because, Jonathan, you were involved in and mentoring the folks who — was it maybe two or three years ago now — launched Diaspora, or was it [stressing a different syllable] Diaspora? Am I saying that right?
Denise: Diaspora. Yes.
Jonathan: It's been, like, five years ago. I think it's about five years ago at this point.
Denise: Yes, time flies.
Jonathan: So this is how you could date it. You could date it because they were the first company ever to break the 200,000-dollar barrier on Kickstarter. So whenever that was —
Jonathan: — whenever the first company broke 200,000 — and I think that was about five years ago. Maybe it was four years ago.
Reg: Way before Reading Rainbow.
Denise: Yes. Exactly. And —
Jonathan: When $200,000 meant something.
Denise: Right. And Diaspora took a similar approach, which was, We're not going to market you; we're not going to sell you; we're going to give you a network where you're in control. And that seems to be a note that is definitely resonating with the folks who are ramping up Ello here. So Jonathan, do you — tell us about Diaspora and what happened when it launched and where it's gone.
Jonathan: So for those of you who don't remember, Diaspora — these are four kids from NYU who heard a lecture that we co-sponsored with some folks at NYU. Eben Moagland spoke at it, and he talked about the server/client world and the creation of something called the Freedom Box, the idea that Facebook should not be the entity that controls you. The concept was, if you look around and you don't know what the product is, the product is you. So these kids decided they were going to create an alternative social network where you control your own user log, where you control your own intellectual property, where you control your own privacy settings, where you control who is going to be at any moment a member of your particular circle. So it really harnessed the concept of immediate group-forming networks. You could self-assemble immediately with anyone you cared about and share exactly whatever it is you wanted to share and not what Facebook determined should be its — and share it with its marketing partners. So that was the premise; and with that, they got a huge spotlight when they announced they were going to build this great network. They got $200,000 on Kickstarter; they dropped out of school, went to Silicon Valley to try to sort of replicate a Facebook — "Let's build this new cool thing, but let's build it without sort of that mindset of Facebook where they're going to control everything and sell you to everyone, to the highest bidder. So the biggest — they had some serious other issues, but the big problems for Diaspora were, it was an incredibly noble mission without a revenue model. And I think Ello is going to have similar problems unless Ello does a couple things. So for me, the big debate is, should Diaspora have been a non-profit, or should Diaspora have maybe been a benefit corporation, or should Diaspora have come up with some other corporate structure that would have made it more potentially viable when it didn't really have a revenue model baked into its DNA? So I think it may have made sense if Diaspora had taken the Wikipedia route, become a foundation, become a tool for the world, and therefore not have to rely on ongoing revenue streams, to pay back investors, etc. Now I think if Ello — looks like it's going to private path. All they've done is bake into their terms of service some conditions that they think the community would like as an alternative to Facebook. The big problem is, these are completely mutable. If I was Ello, and I really wanted to be the alternative to Facebook, I would do it as non-profit; or I would bake in all of these conditions into a charter and create Ello from the ground up as some sort of socially responsible enterprise that can't be baked out except through dissolution or a rewriting of the corporate charter.
Reg: Yeah. I think that that is exactly what Ello's going to run into. It's claiming right now, We're never going to have ads; we're never going to sell your information. And Facebook didn't at the beginning. It was only later on that it realized that it had a great user base. And I think that what kind of killed Diaspora was that very few people picked it up. And so if Ello becomes this area where the LGBT community and apparently the porn community — and I'm not trying to insinuate that they overlap — find that they can be themselves, then that's where they're going to be; and it's going to be successful for them. Facebook wasn't successful until it reached a critical mass of users. Twitter wasn't successful until it reached a critical mass of users. It's a matter of adoption. And I think that's really what killed Diaspora.
Jonathan: See — so for Diaspora, I think the problem was, yes, in fact, it never reached significant network effects. When I was on, I had two friends, maybe, that I could communicate with on Diaspora. So I think the real value of Ello, if it doesn't become its own sort of niche and build from there, I think it's going to be a wonderful check on Facebook. I think it's going to compel Facebook to look at its ethics and create something — competitive services that look more like Ello and other social networks that sanctify privacy and sanctify IP and don't treat you like you're the product for their marketing partners.
Reg: I would really like to believe that that's the case, but until enough people leave Facebook for Ello or Diaspora or Google+, then it's not going to happen. And the way that Diaspora originally was conceived, that you can select circles, if you will, that you want to share things with and it is only shared within that circle, is exactly what Google+ picked up.
Reg: And they immediately had the critical mass because everybody got to be opted into it. Yay. And now, people use it, but not a lot of people use it. But it is used. I mean, it's not a complete and utter wasteland, as many people on Facebook and Twitter might have you believe.
Jonathan: So the Diaspora kids, because they come from this open-source, information wants to be free kind of mentality, they did not either patent or trademark or copyright circles, which was, in fact, I believe, lifted, stolen, by Google for Google+. So that piece, at least, does live on. I think the difference between Ello and Diaspora is probably that Ello has a much prettier user interface.
Reg: Well, and the other thing that Denise brought up as well was the privacy aspect, where you have to use your own name on Facebook, and that is precious to my heart because I grew up when you did not want anyone online to know that you were a 12-year-old girl.
Reg: And you definitely did not use your first name, your any name. No name, no location, no year that could in any way be tied to you. And I'm watching my nieces and nephews, and they're on Facebook with their real names; and I am just astonished, even though I am as well. But I'm not twelve anymore.
Reg: And I —
Denise: Well, Mary pointed out to me yesterday when we were chatting that Facebook sort of — I don't know if it was quietly; it didn't hit my radar until she mentioned it to me — that Facebook has changed its policy on that, haven't they, Mary?
Mary: Yeah. Yeah, yeah. So two days ago, they backed off and said that they will allow — now the implementation isn't here yet, so it's hard to know exactly how it's going to work in practice; but to quote Yogi Berra, "in theory" — everything in theory and practice is the same, but in practice it's different.
Mary: So we'll see. But basically, the idea is that before two days ago, that if you were uber famous, if you were Lady Gaga, you could be Lady Gaga in a regular profile page. There are pages that are for other purposes, but they're very limited in features and scope; and so that's why people didn't want to use them as their main profile. So now, people who are less famous who use a consistent pseudonym can use that. But I still haven't been able to find anybody who's started using it; and because Facebook has these limitations about — yeah, they apologized — I frankly think this has come about for two reasons because it has come up before with them about using pseudonyms. One is that the — it is — the drag queens and LGBT community was interviewed nationally. They — I heard an hour-long interview on NPR, I want to say maybe on Monday, where they interviewed people talking about these issues and about why it was harmful and why we needed to be able to have pseudonymous names on Facebook. So they got more play. There's more interest in it than the last time it came around, which was, I think, prior to the initial Snowden docs coming out. So people are more interested in privacy, and they're thinking about personal data in different ways over the last 16 months. And then the other issue is that Ello popped up. And so last Friday, they had one of the founders and I think one of the funders from the little boutique-y Vermont hippy VC firm that has funded them to the tune of 435,000. On NPR again — you can tell where I listen.
Mary: But I was driving, and I heard them interviewed. Again, it was a pretty extensive interview; and on Friday, they were seeing 45,000 sign-ups per hour. And I think they've throttled that down; the more recent number I've heard yesterday and the day before was somewhere in the 30,000 range. And in fact, yesterday, they turned off invites because they just — so everybody got an email. And the email was even kind of funky. Like, they accidentally put code into the "to" line and above your actual email address. So we got some funky code there. But in any event — so they're having some growing pains, but the fact that they're getting that kind of response and interest to — so the main difference to me right now around Ello, as Denise mentioned, is design. It's founded by a bunch of designers, and the design is beautiful. It's very retro. They use Courier type, and yet it's incredibly beautiful. And then, it's the no advertising policy; but attendant to that is no tracking and no selling of personal data, right, for the — because most advertising companies or the back ends that support advertisers come in and pressure websites to share personal data. It's not just the ad that's coming to you; it's that the data's going back out to those third parties. And so that's all not going to happen. What Ello did say is that their business model is going to focus on two things. One is selling additional features; and the other is selling digital bits. So you might be able to put something cool on your profile that was a digital bit. And so my guestimate around that is, Okay. The company's not going to be able to make all those digital bits. They'll probably go to a developer community and then split the revenue. Okay, that's been done many times on many sites, especially gaming sites, like at World of Warcraft or There's lots of other sites that allow that kind of a model; and it's been very successful. The problem is, how do you let the users know that that stuff exists? You have to advertise. And so then the question is, is advertising your own stuff, is that an advertisement? Are there going to be people who say, Wait a minute! You said no ads. This is spam! and get really upset with them and say, Well, you haven't upheld your mission. And we came here for the no ads policy. And so it'll be interesting to see how it plays out, but that's what they're planning to do and that's kind of what I'm seeing.
Jonathan: So —
Denise: I, personally — let me just jump in real quick and just say I personally am optimistic and hopeful that they will figure out a way to monetize the site and stay true to these goals that they've come out with, that they will find things to sell that people will find worthwhile to buy, that will actually support the site other than ads, and that hopefully their mutable terms of service will be able to lead a long and happy life. But again, that all remains to be seen. I think it's possible, and I like that they're going to make the effort, it seems like. Jonathan, what were you going to say?
Jonathan: I actually am going to take the contrary position, and I'll put a little bet in with you.
Jonathan: If they don't figure out their viable revenue model in the short term, I wouldn't be surprised if Facebook opened up discussions with them to make them, essentially, Facebook private subscription service.
Jonathan: The alternative to Facebook, where you pay a little fee and you get privacy and you're not sold to marketers; and then they get to piggyback on Facebook's network effects and move into that world, unless they can do it themselves. I'd be hard pressed to think, unless they have real funding with people optimistic about the potential revenue streams, they're going to be hard pressed to look for — maybe this is a Google play. Maybe Google decides they're really going to try another stab at a bonified social network and buy them as a privacy-sanctifying subscription service.
Reg: I think that —
Denise: I don't mind that solution. I think, if that were to ultimately happen, it would maybe be a win all around.
Reg: Some of the reports that I've seen about Ello indicate that they've already floated that idea, that they would never have ads; but they may, in the future, ask that you pay for it. But I'd like to go back to something else that Mary and Denise brought up about the privacy issue. Mary said that, if you are uber famous like Lady Gaga — although Lady Gaga uses a fake name — but if you are Angelina Jolie and uber famous, you also probably don't want your name on Facebook. And below that is another level of people who are famous who may indeed have fans. They may be directors of smaller movies or actors; and I know some of those people who use non-exactly-what's-on-their-passport names. And the people who know them know that that's their Facebook account because they don't want to be shut out of this Facebook network, social network, and they want to be able to communicate with their friends and their colleagues through it, but they also don't want people to just be able to use the search bar in the upper corner and find them because they are not uber famous but they are slightly famous. And I think that that underscores another reason why we really need to have privacy and pseudonymity allowable.
Denise: Right. And you brought up minors, Reg, which is very near and dear to my heart as the mother of someone who's chomping at the bit to have social media accounts. And I can now sort of effectively say, Well, it's not legal; that's against the site's terms of service. If anyone finds you, they're going to cancel your account. So I've been able to stave it off for a bit. But that 13- to 18-year-old demographic, not everyone there might want to use a real name, either, assuming that they're on the site. So it's definitely, I think, a market to play to for social media providers and something to be sensitive to and know that consumers want it.
Okay. I really have enjoyed our discussions of all of the topics we've hit today. There's lots more we could cover. Hopefully we'll get to some of the stuff we didn't talk about this week next week; but I think it's time for us to move on to our resource and tip of the week. Our resource of the week comes to us courtesy of Jonathan. It is the Patent Troll Defense Network. Jonathan, can you tell us why this exists and what it's doing?
Jonathan: Yeah. And we've proved our first case. We won our first case this summer. But the Patent Troll Defense Network is an organization that me and my students started with the App Developers' Alliance out of D.C. And the objective was, there are so many small app developers primarily who are either not charging for their apps or charging very little for their apps and are beset by patent trolls. And they can't defend themselves against the patent troll and are either obligated to pay extortion or give up their venture because they can't afford to defend against a hedge fund backed patent troll that has all the resources, and you've got no resources to spend a million dollars to defend a litigation. So our thought was, Can we create a first line of defense for these small start-ups so that they know they have a place to turn to, and it will discourage the patent trolls from coming after the small developers, thinking that they can either drive them out of business or get extortion from them. So we won our first case — or we got a dismissal on our first case — this summer; and I think we've proved the concept, and now there are, I think, more law schools that want to get on the network. And I think we've gotten many calls from other small start-ups that have been beset by patent trolls, seeking our legal support. So our objective is to build out the network big and broad, with support from the private Bar, with support from other law schools, with additional PR and other support from the Application Developers' Alliance. To me, this seems like a very worthy platform to help the small start-up community against inventors, against people that own large patent portfolios but frankly aren't even using the inventions.
Denise: This is so cool, Jonathan. I'm so glad that you guys have done this. It's right up there with the legal hackathons that you do periodically, potentially of more specific value to the people who are plagued by patent trolls. But the legal hackathons are great, too. And I understand Mary has worked with you on those as well.
Mary: Mm-hmm. Yeah.
Jonathan: Yes. Mary did our first ever trans-global legal hackathon focused on data privacy. So she was our San Francisco outpost. We had a Brooklyn outpost; we had an MIT outpost; and we had a London outpost.
Denise: Very good. And —
Jonathan: And we all basically — a course — as the sun moved from east to west, we hacked from east to west.
Denise and Mary: (Laugh)
Jonathan: And we shared ideas across the globe.
Denise: Yeah, it's a great thing because none of the issues that we've talked about today are easy, and the issues at the intersection of tech and law seldom are. So the more good minds chew them over and try and think of creative solutions, the better; so great that that goes on.
We have a tip for you this week as well. Our tip of the week is: Don't jam the Wi-Fi. We've talked about the Marriott hotel chain earlier in the show as someone who would be subject to laws preventing them from discriminating against guests. Well, what they were discriminating against here was guests who brought their own personal Wi-Fi capability. At its Gaylord Opryland location in Nashville, Tennessee, apparently the Marriott was running jammers that were — it sounds like they were doing some kind of convention or event, and they didn't want their customers who were there for the event to have to — to get around having to pay for the Wi-Fi that the hotel offered. So to ensure that they'd have to buy the hotel Wi-Fi instead of bringing in their own, they jammed, I guess, personal Wi-Fi access spots, phones, and the like that could be used. But that's a no-no, according to the FCC. Marriott is being fined $600,000 for taking that action in fairly obvious violation of Section 333 of the Communications Act, as Kate Knibbs writes at Gizmodo. So "don't jam the Wi-Fi" is our tip of the week. (Laughs)
And we also have kind of a PSA for you. If you happen to be in California, there's going to be a great event, first on this coming Monday, October 6, in L.A.; and then next on Wednesday, October 8, in San Francisco. It's sponsored by the state Bar, and it's called the Copyright Office Comes to California. Great, great speakers, a whole day event; so if you're interested in copyright law and the way that it intersects with technology, this would be a great thing to attend. If you're a lawyer, it's good for 6.35 hours of participatory MCLE credit, too; so check that out. Again, all our links are in delicious.com/thisweekinlaw/277
And I have something sad to announce here at the end of the show, too. You might notice that Evan Brown didn't join us today; and unfortunately, Evan won't be joining us as a cohost for This Week in Law on any kind of regular basis anymore because he's had some really good news. It's bad news for us, great news for him. He has become a partner in the Chicago firm of Much Shelist. And Evan, as you know, does technology and intellectual property related litigation; and as a litigation partner at a busy law firm, your time commitments are many. And we've been so, so thrilled over the years to have Evan give us so much of his time and show up for the show week in and week out. He has promised to come back on as a guest after the first of the year, and you better believe I will get him on just as soon as we can. But in the meantime — and he does send apologies for not being able to come on the show and say goodbye himself in person. So he will definitely have to atone for that when he comes back in early next year, too. (Laughs) But he sends everyone his best. He has adored being on the show, has had great fun, but it's just not going to work with his new job and career. So thanks so much, Evan. We just are going to miss you like crazy. It's getting all misty; it's going to be hard to do the show without you. But we will soldier on, and we will continue to read your great blog, Internetcases.com, for great ideas and coverage of the issues that we discuss on the show. So in the meantime, we will continue bringing you great guests, such as Jonathan Askin.
Jonathan, so nice to have you on the show with us once again.
Jonathan: I was thrilled to be invited back.
Denise: And Reg Levy, great to meet you, great to know you're down here in Southern California.
Reg: Pleasure to meet you as well. Thank you for letting me on.
Denise: It's been really, really fun. And Mary, always great to chat with you.
Mary: Thanks, Denise.
Denise: Anybody want — yeah. Anybody want to plug anything that is going on that they think people need to be aware of that we haven't mentioned already today? Jonathan?
Jonathan: You covered it. I want people to look at the Patent Troll Defense Network and to join the legal hackers' global movement.
Jonathan: So —
Denise: Mary? Oh, sorry.
Jonathan: Oh, I was going to say, just google "legal hackers," and you'll find us.
Denise: Right on. We will do it.
Mary: No. I'm also involved with the legal hackers. Presumably, we're going to do another hackathon on privacy and personal data control in February, so look for that.
Denise: And Reg, anything you want people to be aware of on the domain front? I know we have .vegas as a domain these days. That one's not under your umbrella, but you said you guys have .london?
Reg: We have .london, and we will be — or we also have, but it's not live yet — .law, so keep an eye out for that one.
Denise: Oh, that's interesting.
Reg: But yeah, .london is live, and it's open to anyone just like .com is. It's probably more expensive, but you can attribute or you can use your URL to prove to everyone that you really, really love London if you want.
Denise: (Laughs) That's fantastic. I love all the creative things people are doing with all the TLDs that are available these days. So thanks so much, everyone, for joining us today. And to all of you who have joined us, either live or whether you're listening after the fact, we do this show live every Friday afternoon at 11:00 Pacific time, 1800UTC; so if you're joining us live, you should go to twit.tv and click on "Watch live now." That would be just about all you need to do, other than jump into our IRC chatroom. If you'd like to do that, that's at irc.twit.tv. And if you can't join us live, don't worry because the show is going to be there on your schedule, whenever you would like. You can go to twit.tv/twil; that would be one way to find all our old episodes. You can go to YouTube.com/thisweekinlaw where we have a channel as well. You can get us on iTunes, on Roku. Basically, however you like to pick up this kind of entertainment, we're going to be there for you. So we're so glad that you were able to join us this week. You should get in touch with me between the shows if you'd like; I'm email@example.com. Or give me a shout on Twitter; I'm @dhowell over there. We have a Facebook page and a Google+ page. We do not have an Ello page, nor do I have an Ello personal page yet, although I'm sure that that will be in the offing at some point in the future; so keep your eyes open there. However you get in touch, we love to hear from you with your feedback about the shows that we've done already, the topics we've covered, and love to hear from you about people that you think we should have on the show. So bear us in mind when you come across a great topic or someone who is really, really smart on the issues that we cover here. Thanks so much for joining us on This Week in Law! We'll see you next week.