Splendor in repossession?

I am glad I am back to my staple subject matter, which is Internet law. There were quite a number of excursions from it these past weeks, but it feels good to nestle within the exciting, though still-evolving and fast-expanding, discipline that is Internet law.

I know I’ve got to respond to and acknowledge some of the e-mails I have received. I am grateful to Jeremy C. Talbot, Esq., from New Jersey, USA; to Lawrence Jeffrey Ambrose, a PhD from Hartford, Connecticut; and to law professor Timothy B. Lorenzo from Los Angeles, California, who e-mailed their comments on my series on the patentability of software and business methods.

Their insights will certainly help me in future explorations on the subject matter, and I am grateful to them. Remember Franklin P. Adams’ wise words? “I find that a great part of the information I have was acquired by looking up something and finding something else on the way.” I’ve heard the following said before that one can be knowledgeable with other men’s knowledge, but we cannot be wise with other men’s wisdom.

I also got an e-mail from Zurich, Switzerland, from a law student, Ken Fallmer, posing some very interesting questions. What was also interesting about his e-mail was the fact that he said he has an uncle, Oliver, who remembers me as one of the keynote speakers at the opening plenary session of a world telecom conference more than a decade ago, in 1997. His uncle, Oliver Fallmer, was in the audience as a delegate and remembers me as “one of only two female speakers (there were 48).” The younger Fallmer’s comments confirmed my statements on the fact that innovations in e-commerce and automated business methods have been multiplying far too quickly — in fact, exponentially — for patent examiners worldwide to keep pace.

Two students from Boston University in Massachussetts e-mailed their comments on an earlier article, on the exclusionary nature of patent lawsuits. Andy and Celina (they did not give their surnames, and probably are significant others, for they signed in that manner) had very good and useful comments. They requested that I write on “electronic repossessions, if possible.” This was the inspiration for my article today.

Internet firms are increasingly concerned about the number of customers who fail to pay for their goods or services and breach their contracts in other ways. In response to such failures, Internet firms have resorted to electronic means of self-help, including electronic repossessions — reclaiming their goods and services such as digital text, software, data, and images, or denying access to their services in the event of a failure to pay, rather than suing the customer. When the customer pays for the goods or services, the provider can use the Internet to restore the electronic goods or services.

Software that facilitates repossession usually performs one of the following four functions, each normally embedded in the original program: 1) denying access to a part of the program; 2) erasing part of the program; 3) preventing further changes in the program; or 4) changing certain parts of the program. Triggering any one of these functions effectively results in the repossession of the software and can be effected over the Internet.

This sort of self-help remedy is authorized by common law. Internet repossessions have been successfully based on contract or tort (personal injury) claims involving breaches of express warranty or conversion. Successful tort claims have also been made using the theories of misappropriation of a trade secret, breach of a covenant of fair dealings, trespass, and international interference with contractual relations.

Some Internet firms in the United States have been advised that Internet repossessions are justified by the Uniform Commercial Code (UCC) since its Article 9 provides that repossessions may be carried out without the aid of a court order in some situations. However, courts have been reluctant to permit the use of Article 9, because Internet goods are intangible goods, and Art. 9 actions were intended only for tangible goods.

As far as my own studies are concerned, most experts on the UCC believe that the only way electronic repossession or e-self-help will be allowed is by amending the UCC to specifically deal with this issue. I have information that a new section of the UCC is under consideration for this purpose.

The proposed (if not yet passed) section 2B-716 of the UCC will allow Internet data, text, and image software providers to take part in electronic repossession. However, this provision places restrictions on its use, such as requiring each party to contractually agree to electronic repossessions at the outset of the transaction, which must be categorically specified; prior notice of its implementation, also specifically given; and the right to an expedited hearing to consider its implementation.

Because the users of this type of self-help legal remedy are vulnerable to a civil action, the use of repossession may be risky. Not too long ago, an insurance provider-client who had paid a lump sum for a perpetual license to use some software was unable to access the data stored on a software program only a year after it was purchased on, and delivered through, the Internet.

This client contacted the manufacturer and was informed that he had failed to pay the software’s annual maintenance charge and that until he did so, the software developer would refuse to provide maintenance services via the Internet necessary to reset the program’s one-year clock. Without access to his client data program, the client lost thousands of dollars.

A threat to bring suit on the grounds of conversion (an unauthorized assumption of goods belonging to another), and on the theory that the software developer’s actions effectively deprived the client of access to his own property, was sufficient to settle this case before a trial. The software developer was reminded that the client received neither prior notice of, nor gave his consent to, deactivations, and that courts are more than willing to award punitive damages in such cases.

The software developer was also reminded that New York has a criminal computer-tampering statute that could apply in this instance. In this case, as in the case of most legal self-help remedies, the courts are unlikely to approve of the remedy, unless the parties agreed to it in their contract.

It is therefore important to bear in mind that if you intend to use electronic repossession, the customer should be informed of this possibility in the contract, and a notice of the electronic repossession actions should be sent to the customer in the form of a warning notice prior to activating the e-repossession plan.

Repossessions, with its legal connotation, cannot help but evoke negative feelings, especially when done electronically, where the process is swift and cruel.

Just a couple of days ago I was at the Santo Domingo Church for the “people’s wedding” of Mar Roxas and Korina Sanchez.

The Aranetas have been my friends for decades, especially Jorge and Stella Araneta, both extraordinary people, and Mar’s mother, Judy, who remains, beyond the worldly blessings she has, a lovely lady absolutely without pretensions. And of course, Mar has been a friend also for a good long time, especially on the political front.

In spite of the excessive media coverage of Mar and Korina’s love affair and the antecedents to the wedding, and in spite of a church filled to overflowing, there was a warm, familial feeling that lingered. There was splendor in simplicity.

Mar and Korina did make an extraordinarily good-looking couple. There was love that showed through every embrace and every kiss. There was possession in every glance, which brings me to what I wanted to say in the first place. For beyond a wonderful wedding, there is a marriage. And this is where repossession derives its splendor. For it would indeed be splendid if, every day, the man and the woman repossess each other. There is splendor in simplicity … splendor in repossession.

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