2. Consumer Drawbacks of Cloud-Delivered Content Privacy, Reliability, Security Issues Jim Burger Dow Lohnes PLLC

3. Introduction Contractual Issues: Privacy, Reliability, Security Cloud-Based Services and the Fourth Amendment Copyright Issues in Cloud Computing – New Developments 2

4. Contractual Issues: State Law Where is data physically stored/processed? What state law controls? E.g., CA law provides more privacy protection Where are your customers? E.g., EU e- Privacy Directive (US-EU Safe Harbor Framework) 3

5. Contractual Issues: Privacy/Reliability Terms Privacy  What are the cloud provider’s obligations to ensure privacy of customer data?  What terms apply to third party access (e.g., notice)? Reliability (SLA)  What are acceptable service levels?  Will the cloud provider have alternative services during scheduled downtime or provide compensatory “credit?” 4

6. Contractual Issues: Security/Exit Terms Security/Risk OObligations to ensure security of customer data? PProvider comply with national or industry standards for data security? AAllocation of breach risk? CCloud provider have cyber insurance? Exit EExit scenario? PProvider obligations to find/transition to alternate provider? 5

7. Contractual Issues – 2011 Developments Live up to security or privacy promises or risk litigation or FTC action. Dropbox facing two class actions alleging it failed to follow its own privacy and security policies. FTC increasingly active. Recent settlements with Twitter, Facebook, and Google for allegedly deceptive data and/or privacy policies. 6

8. Cloud-Based Services and the Fourth Amendment Consumer expectation of privacy in the cloud? Physical world – Constitution says: people should be secure from unreasonable search – need a judge to issue a warrant for your home PC Judges confused in the digital world But ECPA allows mere subpoena to cloud provider to access confidential information 7

9. United States v. Warshak 6 th Circuit Federal Court of Appeals declared warrantless search of email servers unconstitutional “…subscriber enjoys a reasonable expectation of privacy in the contents of emails that are stored with, or sent or received through, a commercial ISP” Subscriber agreement didn’t defeat that expectation when it stated that the ISP would only access content to protect its own service. But what about documents or pro-subpoena subscriber agreements? 8

10. Copyright Issues in Cloud Computing: Storage of User Material in Cloud-Based “Lockers Capitol Records, Inc (EMI) v. MP3tunes: Modest victory for locker/cloud providers Three important issues addressed: DMCA safe harbor, public performance right, and secondary infringement MP3tunes provided a service allowing users to search for free MP3s and “side load” these into their lockers. EMI claimed contributory/vicarious infringement. MP3tunes claimed DMCA safe harbor 9

11. Copyright Issues in Cloud Computing Viacom v. Youtube and Veoh held locker providers must take down infringing content only when provided with specific URLs or ‘red flags’ MP3tunes held provider still has no obligation to investigate general allegations of infringement; high bar remains for red flag But provider obligated to take down material traceable to specific URLs MP3tunes held not to have “red flag” knowledge 10

12. Copyright Issues in Cloud Computing Cartoon Network, et al. v. CSC Holdings, Inc. (Cablevision): public performance right not infringed when provider maintained separate copies of files stored by each user. No redundant files “deduplification,” so no performance to the public Inefficient use of server space for locker providers MP3tunes: Deleting redundant data not same as using a “master copy;” does not infringe public performance right as long as copy played back to user is exactly same as that uploaded by the user Favorable holding, but inconsistent logic. How is deleting redundant data any different from deduplifying? 11

13. Copyright Issues in Cloud Computing MP3tunes out of safe harbor because failed to meet obligation to remove files in user lockers traceable to EMI-provided URLs MP3tunes committed contributory infringement because it knew of these files and contributed materially to users’ infringement by failing to terminate infringers’ accounts Providers should be vigilant about terminating accounts with such users 12

14. Conclusion Hopefully sunrise for providing consumers cloud computing services But potential legal pitfalls remain Thank you, Jim Burger 13