Factory preloaded viruses and who pays for your money

Today CNN is carrying the news that some electronic gadgets come factory preloaded with computer viruses that can “steal passwords, open doors for hackers and make computers spew spam”. These products seem to come from factories in, yes you guessed right, China and “the virus problem appears to come from lax quality control, perhaps a careless worker plugging an infected music player into a factory computer used for testing, rather than organized sabotage by hackers or the Chinese factories”.
While pages can be written about the recurring issue of lack of quality control in certain Chinese factories, the forgotten lack of control by the buyers and the detrimental effect that this stream of cases can have in the Chinese economy and on the retail sector based on very cheap products produced in China, the current and domestic legal issues arising from this piece of news are probably as important. The first and probably obvious issue has to do with the liability of the seller for the quality of the product. There the well know Sale of Goods Act 1979 (as amended), in its section 14 reminds us that

2) Where the seller sells goods in the course of a business, there is an implied
term that the goods supplied under the contract are of satisfactory quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if
they meet the standard that a reasonable person would regard as satisfactory,
taking account of any description of the goods, the price (if relevant) and all
the other relevant circumstances.

(2B) For the purposes of this Act, the
quality of goods includes their state and condition and the following (among
others) are in appropriate cases aspects of the quality of goods—

(a)
fitness for all the purposes for which goods of the kind in question are
commonly supplied,
(b) appearance and finish,
(c) freedom from minor
defects,
(d) safety, and
(e) durability.

It seems quite obvious that a virus-preloaded gadget will not meet the standard that a reasonable person would regard as satisfactory and that having a password stealing virus represents a lack of freedom from minor defects and in some cases can compromise the safety of the product, among others (and in the US this situation would mean that the product could/should be found to not be of merchantable quality, as established by the Uniform Commercial Code § 2-314). But this situation would only entitle the buyer to cancel the contract for breach of a condition or to get a new product and the preloaded virus may have already compromised your financial information and or other type of private data. Who would be liable then? Can we apply St Albans v ICL to establish that the seller is also liable for the damages causes by its breach of the implied terms? And if the virus starts spamming others as to make you liable to a third party, can you rely in Antiquesportfolio.com PLC v Rodney Fitch Company Limited, so the provider is liable to you for infringing third parties rights?
In the US would be probably possible to go up the stream of commerce and find tortious liability on the manufacturer for losses arising from the virus, but I think that some basics of tort can help in England too. The old and not ageing Donoghue v Stevenson is usually remembered by Lord Atkin’s dicta and his definition of neighbourhood, but its ratio, also delivered by Lord Atkin, was that

[A] manufacturer of products, which he sells in such a form
as to show that he intends them to reach the ultimate consumer in the form in
which they left him with no reasonable possibility of intermediate examination,
and with the knowledge that the absence of reasonable care in the preparation or
putting up of the products will result in an injury to the consumer’s life or
property, owes a duty to the consumer to take that reasonable care.

A far more recent Court of Appeals case, Pearson Education Ltd v The Charter Partnership Ltd, (2007) seems to tell us that the tortious liability will subsist when the defect is latent after some form of inspection…so, Apple, TomTom and others, brace yourselves for a potentially litigious time…

Forget wifi piggybacking, your phone is trespassing in my lawn!

The Japan Times carries the news that Softbank is launching a Toshiba mobile phone that has “arms” and “legs” and resembles a robot, and while it seems that they are only a decorative element, it can be seen as the first step towards a phone that actually walks and follows you when you forget it (as in the advertisement). Other “interesting” feature is that the phone shows its “emotions” on its screen and sends you, the owner, texts about how the phone is “feeling”…but what would happen if or when it starts sending texts to other people? What if your phone infringes somebody’s rights?
It can be argued that the technological “underdevelopment” in this side of the world has led to the also perceived “underdevelopment” in legal studies dealing with automated responses and/or artificial intelligence, but some current and future developments may make necessary to pay further attention to those issues within the realm of IT law. There are some (probably many) studies dealing with artificial intelligence and the use of automated agents, but when many or most of our home appliances become “intelligent” and carry out activities and engage in transactions, the problems around them may also multiple. When teaching some developments in privacy law, for example, I always refer to fridges that have sensors and that are also connected to Internet, which enables them to order food online automatically. The answer to what would happen if the fridge orders a thousand dozens of eggs seem quite straightforward (liability of the “owner” as the one making the order), but the transaction is quite more complex, involves a credit card company or a debit card (the transfer of risk and liability differ in both cases) and whether the doctrine of genuine mistake can be used also needs to be explored. But that is just an example of the situations that may be created when your appliances or your phone start having their own will…

Has Sony really won the high definition war?

During the last couple of weeks almost every news outlet has given a space to the news that Toshiba bowed out of the high-definition DVD format’s war and that Sony is the winner…but is that perception real? In principle the answer seems to be a definitive and rotund yes, but if we look at the bigger picture we may start to differ. As it has been said everywhere, most film studios have signed to Sony’s blue-ray format and one of the reasons is that it has more capacity than Toshiba’s HD-DVD, which would allow them to include more features, but the one that probably explains the studios’ “love” for blue-ray is that gives far more control over the content than any previous format. So, the industry probably hopes that once we all move to blue-ray they would be able to finally control exactly how we use the films that we purchased. But, will we buy them in blue-ray?
Few days ago I wrote about the news of the launch of the Kizuna satellite that would provide wideband Internet to some parts of Asia. If the experiment is successful we can expect that we will soon have 1.2Gb Internet via satellite all over the world (at least for those who can afford it, what are the same who can afford blue-ray machines and discs). Combining that with the fact that more and more high definition films are available to download (iTunes already has 100 of them), one should wonder why we need to pay the not very cheap blue-ray players to watch the same movie that we could download directly to our TV or mobile device, which soon we will be able to do at super-fast speed…So, was it worth the cost? Are we witnessing a real triumph, a Pyrrhic victory or not even a winner at all?

Japanese super-fast Internet and the digital divide

Few days ago the Japan Aerospace Exploration Agency (JAXA) and Mitsubishi Heavy Industries launched a rocket carrying a satellite aimed to test new technology promising to deliver super high-speed Internet service to homes and businesses around the world. First we have to see whether the experiment is successful, but if it succeeds, users will be able to use Internet at speeds of up to 1.2 Gb per second by connecting to it through a small dish. Although initially the service will focus on the Asia-Pacific region near Japan, JAXA says that the “ultra-fast satellite-based Internet-based communications will remove the so-called digital divide by providing high-speed Internet service in areas where the terrestrial communications infrastructure is poor”. But is it that simple? From the strict technological deployment point of view, the removal of the digital divide would depend on the price of the service more than on it availability, and it could be argued that a better use of the existent mobile and wireless technology would do more to bridge the digital divide than revolutionary technologies. The issue is to create content adapted to the existing mobile phones, which already have a great level of penetration in developing countries and in the poor of those countries, and those levels are still rising. So, quoting Andres, “It's the content, stupid!”, which takes us to the hurdle that will remain preventing poor people from making proper use of digital technologies and being full participants of the information society: the expansion of the rights embedded into the so-called intellectual property. While the new satellite would have the potential to provide access to digital content in remote and poor areas, the current very unbalanced intellectual property rights will make sure that the inhabitants of those areas cannot make use of that potential due to not being able to afford the licensing fees and the constant erosion of the rights to use content without previous authorization. So, while a technology like the satellite-based wideband could help bridging the digital divide, within the current IP rights context it will probably exacerbate it by creating a new way for those that can afford it to get more and better quality content whereas the poor and the marginalized will be left out and further from the current technology and content. Interestingly enough, Japan is one of the countries that usually support the aforementioned IP rights expansion and enforcement, policy that contradicts the stated aims of this rocket launch…