BlackBerry Limited, a Canadian corporation, announced in 2016 that it would no longer design Blackberry smartphones and that it would outsource production of devices to other manufacturers. While BlackBerry smartphones once dominated the market, it struggled to compete when companies such as Apple and Samsung gained traction among consumers. Now, only two years after the company’s announcement, hardware accounts for a mere 1% of BlackBerry’s revenue.

BlackBerry decided to launch itself into new arenas as it attempted to distance itself from its floundering smartphone business. Under the guidance of CEO John Chen, the company is now focusing on its highly successful software business. BlackBerry is even branching out into autonomous cars and cybersecurity, ventures which today account for over 90% of its total revenue. In addition, since over 80% of those sales are recurring, BlackBerry now has a secure annual source of revenue flowing from corporate clients and no longer relies on individual consumers for its success.

According to CNN Business, on September 20, 2018, BlackBerry “topped Wall Street’s forecasts” with its reported profits and sales from its most recent quarter. As a result, the company’s stock bumped up more than 15% in trading. Even more notably, revenue from the business unit encompassing software for connected and autonomous cars grew 30% in BlackBerry’s latest quarter.

BlackBerry’s newfound profitability is largely a result of successfully integrating its software into automotive industry enterprises. This year the company announced a partnership to design software for autonomous cars with Baidu, a Chinese search engine. BlackBerry also boasts big-name automotive clients like Jaguar Land Rover, which announced in March that it will integrate BlackBerry’s QNX software into Jaguar Land Rover cars for navigation and “infotainment” services. BlackBerry also recently launched “Jarvis,” a QNX cybersecurity tool designed to help automakers secure their software supply chain and identify security vulnerabilities in their cars.

BlackBerry’s innovation does not stop with the automotive industry. The company also hopes to revolutionize the health care industry. BlackBerry provides a highly-integrated Spark platform, a medium for “ultra-secure hyperconnectivity” that encompasses enterprise software, secure communications, connected transportation, secure smartphones, and cybersecurity consulting. Spark exemplifies BlackBerry’s goals for its future: integrated and intelligent software and technology grounded in a corporate client base. With stock up over 60% compared to five years ago, BlackBerry is proving that its long-term strategy focused on innovative new business ventures is delivering results.

Making a Comeback: Blackberry Goes All-In with Software and Cybersecurity

Amid tweets from President Trump alleging bias against him and against conservatives more generally, the Department of Justice began looking into Facebook, Google, and other tech giants that may be “intentionally stifling the free exchange of ideas.”  The assertion came at the end of a Senate hearing on September 5, where Facebook’s COO Sheryl Sandberg and Twitter’s CEO Jack Dorsey testified.

The DOJ’s latest probe is the culmination of a vigorous online campaign by conservative publications including Fox News, the Daily Wire, and Breitbart, and hits at an area where Facebook in particular has long felt insecure.  Hyperaware of conservative regulators motivated to scrutinize Facebook’s business practices for what they perceive as liberal bias, the company has made a concerted effort in recent years to build relationships with prominent Republicans, and particularly so during the unpredictable Trump Administration.

The problem is that Facebook is now embroiled in significant pushback from its own employees, who are primarily based in the notoriously liberal Silicon Valley.

The tension between Facebook’s regulatory concerns and its employees’ ethos came to a head last week when Joel Kaplan, Facebook’s Vice President of Global Public Policy and former Deputy Chief of Staff for Policy in the Bush White House, attended Justice Brett Kavanaugh’s hearing before the Senate Judiciary Committee.  With Kavanaugh there to answer senators’ questions about his alleged high school sexual assault of Dr. Christine Blasey Ford, Kaplan was there as Kavanaugh’s longtime friend.

But many perceived Kaplan’s appearance as inextricable from his capacity as a top executive at Facebook.  Employees of the company are demanding that Facebook answer for one of its top executives publicly supporting a man credibly accused of sexual assault.

While Facebook’s regulatory strategy has been to round out its policy leadership and lobbying offices with prominent conservatives like Kaplan, Facebook faces an equally pressing business need to keep its employees happy.  Given the ongoing competition with companies like Google and Apple for engineers, data scientists, and AI experts, Facebook needs to maintain its reputation as a good place to work for its predominantly progressive employees or risk an overcorrection that alienates the most valuable commodity in Silicon Valley: talent.

Facebook ‘Friends’ Conservatives, to Employees’ Dismay

Just weeks before sexual assault allegations surfaced against Supreme Court nominee Brett Kavanaugh, the #MeToo movement made an unprecedented inroad into the corporate sphere. Early last month, media titan and CEO of CBS Leslie Moonves resigned amidst allegations of sexual misconduct. Moonves’ resignation was the movement’s first reckoning against the CEO of a Fortune 500 company.

CBS retained both Covington & Burling and Debevoise & Plimpton to conduct an internal investigation when The New Yorker reported six allegations of sexual misconduct against Moonves. In addition, the New York County District Attorney’s Office and the New York City Commission on Human Rights launched an investigation of Moonves’ conduct following a second report by The New Yorker, wherein six more women stepped forward to report Moonves’ misconduct.

Despite Moonves’ resignation, activists say the battle is far from over. If the internal investigation does not find sufficient evidence of wrongdoing, Moonves could still benefit from a $120 million severance agreement. CBS agreed to donate $20 million of Moonves’ severance to organizations that address sexual harassment and workplace safety. In response, Time’s Up urged CBS to donate all of Moonves’ severance to organizations that support women’s equality in the workplace.

The term “golden parachute” traditionally referred to the lucrative settlement packages paid to executives who were pushed out of their companies following a merger or takeover. Now, many people use the term more broadly to refer to an executive’s general severance pay. Golden parachutes have been the subject of intense public scrutiny for decades, but activists have recently criticized companies for awarding large severance payments to executives accused of sexual harassment.

Moonves’ golden parachute may explain CBS’ initial decision to retain the embattled CEO. Elizabeth Tippett, a Law Professor at the University of Oregon, believes that CBS sought to retain Moonves as a bargaining chip in a settlement negotiation of a legal dispute related to a takeover attempt. Several months ago, National Amusements assembled a controlling block of CBS stock and attempted to merge the firm with Viacom, to which Moonves’ golden parachute proved a significant obstacle. A merger initiated by National Amusements would trigger the golden parachute and immediately entitle Moonves to $180 million.

If, however, Moonves was terminated for sexual misconduct, he would be entitled to nothing under the agreement. Therefore, Professor Tippett posits that CBS’ board may have been slow to act on the allegations in an attempt to keep Moonves’ golden parachute in play as part of a bargaining strategy. However, the board was forced to abandon the strategy following the second report by The New Yorker, as it could not publicly support Moonves. CBS simultaneously announced Moonves’ resignation and a settlement of the legal conflict with National Amusements.

Gayle King, co-anchor of CBS This Morning, called on her employer to release the results of the internal investigation, notwithstanding CBS’ nondisclosure agreement. Perhaps the government investigation will answer King’s call for “full transparency.”

Former CBS CEO Leslie Moonves Now Faces Government Investigation, Compounding Public Scrutiny of Large Corporations in the #MeToo Era

If you are one of Gmail’s 1.4 billion users, Google and third-party developers may be reading your emails. Google admits that “non-Google” apps can access your email; however, the third-party developers must pass Google’s review process. The review process includes two key requirements. First, these apps must be transparent about who they are and what they plan to do with the data and must have a clear privacy disclosure. Second, apps can only request relevant data and must be clear about how they will use it. If an app is found not to be compliant, they are then suspended. In addition to these requirements, users must also grant these apps permission for them to collect data.

Although Google has implemented these safeguards, issues still arise. In letters addressed to Senators obtained by CNNMoney, Google admits that in the “majority of cases” it is able to suspend apps before third-party developers can access the user’s data. However, it is not clear how many apps have been suspended or if Google can retrieve user data collected by these apps in the case that its review process fails. Also, if users are not careful about granting permission, their emails could be exposed.

Unfortunately, Google has not done much to quell the U.S. Senate’s fear. On September 5, 2018, Google declined to send a senior executive to testify before the Senate Intelligence Committee. It was not until September 26, 2018 that Google spoke at a Senate hearing. Moreover, the Senate was not reassured by Google’s statement that it is in the process of creating a search engine for China that may censor certain results and curtail user privacy.

As a result of increased privacy concerns, some law makers have enacted tougher data privacy laws. In California, Gov. Jerry Brown signed the California Consumer Privacy Act of 2018. This Act gives users more control over their data and requires companies like Google to inform users as to why they are collecting the data and who the data is being shared with. Also, Google must allow users to bar companies from selling their data.

Nevertheless, while California’s recent legislation may serve as a precursor for what is to come in data privacy law, many questions are left unanswered. What if users choose to prohibit a company from selling their data, can their data be shared with other parties? For example, if an app meets Google’s requirements and you allow it access to your Gmail, what is stopping that third-party app from sharing your information with other companies? If that data is then used in an unwanted or illegal way, can users be held accountable because they consented to release their data? It is only a matter of time before these questions are tested in the courts; however, for now, they remain unanswered.

Is Gmail Ensuring Your Security and Privacy?

As the partisan divide in the country deepens, the possibility of political content bias in social media and search platforms is increasingly becoming a concern. Most recently, Google is combating allegations of political bias in its search algorithms.

Since an estimated 90 percent of web searches occur on its platform, Google plays a significant role in how society accesses information on the internet. Acknowledging its influence, Google actively seeks to remain transparent around how it filters and provides information. Despite not releasing the specifics on its search algorithms due to proprietary interests, the company has publicly provided its searching guidelines since 2013. The guidelines make users aware of how Google evaluates factors such as a webpage’s “E-A-T” (expertise, authoritativeness and trustworthiness) as well as how it approaches “potentially harmful pages.”

Critics have claimed these guidelines do not provide enough of an insight into the company’s distinct search approach. However, a search quality fellow at Google asserted that knowing the intent behind the guidelines is truly more important than having detailed information on the search algorithms themselves. He emphasized that “The actual algorithm is not as important as what the algorithm is trying to do.”

Notwithstanding Google’s unequivocal denial of the current allegations, the American public does seem to believe that an anti-conservative bias exists within the tech industry. According to a recent study by the Pew Research Center, 43% of Americans think major technology firms support the views of liberals over conservatives. The vast majority, 85%, of Republicans and Republican-leaning independents think it is “likely that social media sites intentionally censor political viewpoints.”

The Department of Justice may be interested in addressing the potential for political bias in the tech industry. Last week, Attorney General Jeff Sessions convened a meeting with state attorneys general and other members of the Justice Department. The meeting was to discuss, among other matters, whether there is any evidence to support the claims that social media companies are biased against conservative viewpoints. Ironically, given the topic of political bias, invitation to the meeting was initially offered only to Republican officials. After Democratic attorneys general voiced their interest in being included in the dialogue, the invitation was extended across the aisle.

Just a few days after the Department of Justice meeting, Google’s CEO Sundar Pichai visited Washington to meet with members of Congress and White House officials. While Google continues to assert that political bias does not affect the content of its search results, Pichai did commit to testify before the House Judiciary Committee this fall and to meet with president Trump and “other internet stakeholders” in the near future.

Google Faces Political Bias Allegations

Just months after clips of Facebook CEO Mark Zuckerberg’s testimony before Congress regarding the Cambridge Analytica scandal faded from the forefront of the internet, Facebook is again facing major scrutiny in what has been labeled the company’s biggest cybersecurity breach to date.

On September 28, Facebook announced that the digital login access tokens of 50 million users had been stolen, signifying that those accounts and their contents had been compromised. Another 40 million had been placed at risk before the company was able to “patch the security vulnerability.” Exploiting three bugs in the website’s “View As” function, hackers were able to access users’ login tokens, effectively giving them access to all of the content in roughly 50 million accounts.

The legal system’s approach to increasingly massive cybersecurity issues like these is similar to how it dealt with Uber’s major security breach back in 2014: as they tread into the relatively uncharted arena of cybersecurity, regulatory agencies and courts are desperately attempting to delineate the responsibility that these companies have in terms of security protection for their users. As of now, many businesses, especially small ones, share the sentiment of “shooting a bit blind regarding how to protect data and the consequences for not doing so.”

A wrinkle in this investigation that poses an especially interesting inquiry for the legal world stems from Facebook’s Single Sign-On (SSO) feature, an idea implemented nearly a decade ago, which allows users to sign into third-party applications with a single Facebook login token. Companies like Airbnb, Tinder, Instagram, and thousands more utilize the SSO feature to streamline the sign-up and login process, thereby rapidly expanding their user bases at a higher speed. Because hackers acquired Facebook users’ digital login keys, they theoretically could have had access to accounts in these third-party companies as well.

So as the FTC attempts to better delineate Facebook’s security responsibilities within its own company for its own users, the SSO issue poses an additional layer of inquiry that it must answer: does an SSO require heightened scrutiny in terms of cybersecurity? What is the burden that a company like Facebook has in relation to third-party companies that utilize features like SSOs? Facebook benefitted immensely from the feature for years despite the multiplicity of security risks that would happen in the event of a security breach. That event, with this hack, has finally arrived.

Thanks to the landmark 2015 ruling in FTC v. Wyndham Worldwide Corporation, the FTC now has the green light from the Third Circuit to establish companies’ responsibilities and liabilities in the “Wild West” of the cybersecurity world. As investigations continue, the FTC will not only see the real magnitude of the harm that may have been multiplied by Facebook’s SSO feature, but also, in conjunction with the courts, come to a clearer judgment about cybersecurity responsibilities.

Facebook’s Massive Cybersecurity Breach: Regulating the Unknown

The American Civil Liberties Union recently filed a complaint against Facebook, claiming that many of the employment advertisements displayed on the popular social media website were discriminatory. Specifically, the advertisements centered on Facebook’s strategic targeting of individuals that identified as male and implicitly discriminating against women and those that are non-binary.

The United States has a long history of employment discrimination, which has primarily affected those from underrepresented and marginalized communities. This form of discrimination is still ever present today, as many people of color and women suffer from explicitly discriminatory hiring practices based upon phenotypic appearance and even their legal name. These practices continue to contribute to the lack of diversity in professions of many fields and, subsequently, maintain the status quo of male dominance.

Despite ultimately being an issue of fairness, as established by the Civil Rights Act of 1964, employment discrimination effectively creates economic ramifications. One primary consequence is the lack of economic efficiency. Businesses that participate in discriminatory hiring practices can suffer economic loss by self-restricting their hiring pools and failing to seek the most qualified candidates. Due to these businesses’ discriminatory preferences, they hire individuals that may be less qualified and, thus, provide compensation for subpar labor.

Ultimately, access to employment and the right to exchange one’s labor for wages are essential components of capitalism. Wages can motivate individuals to pursue the American dream of homeownership and create intergenerational wealth. This capitalistic society is inherently unequal when a singular group reaps these benefits while it actively excludes others. Such behavior contributes to the present wealth gap, and this gap will cease to close if opportunities are not made readily available to everyone.

Alternatively, the use of advertisements through Facebook does not have to be entirely negative; whereas, advertisements could be used to create access to career fields for groups that would otherwise be underrepresented. In a practical sense, this method can be used to recruit groups that lack representation in such fields but can contribute to an expansive and competitive pool of candidates. Rather than using advertisements to aid in discrimination methods, businesses could use these ads as a tool to pursue equity and remedy the lack of diversity in many career fields.

As we continue to navigate through the digital age and as businesses progressively use social media for their daily business practices, explicit biases in the hiring process will continue to manifest in creative ways. In order to successfully combat these biases, business and social media outlets alike must actively evaluate their hiring practices and understand how they are complicit in upholding injustices. Rather than perpetuating inequity, Facebook could enforce stricter regulations upon its employment advertisements to change the status quo.

ACLU Files Complaint Regarding Facebook’s Discriminatory Advertisements

California is facing lawsuits from the U.S. Department of Justice and the broadband industry over the state’s landmark net neutrality law.

Net neutrality is the principle that all internet traffic should be treated equally. In 2015, the FCC enforced net neutrality protections to regulate broadband providers like public utilities. The Trump-era FCC voted to repeal net neutrality rules in 2017. On one hand, Democrats, tech companies, and consumers have pushed for stricter regulations to prohibit the prioritization of internet traffic and boost innovation. On the other hand, Republicans and Internet Service Providers (“ISPs”) argue that net neutrality discourages investment.

The California net neutrality law (SB-822) is the strictest yet of the state legislative efforts to revive net neutrality. SB-822 goes further than just banning ISPs from implementing internet fast-lanes—it also prohibits selective exemptions of apps and services from customer data caps. Other states planning to enact their own net neutrality laws view SB-822 as the “gold standard” of internet regulation.

Federalism is the key issue in this legal fight. Both lawsuits allege the FCC’s deregulatory order preempts the California law and that SB-822 is an unconstitutional attempt to regulate interstate commerce. Supporters of SB-822 say that the FCC explicitly gave up the agency’s authority to regulate internet providers. Further supporters say that where there is no federal law, states can assert their own. According to California Attorney General Xavier Becerra, “California, the country’s economic engine, has the right to exercise its sovereign powers under the Constitution.”

The question of whether the FCC preempts state regulations will be decided by a case pending at the D.C. Circuit. If California prevails, it will set a new precedent of states reviving regulations in the wake of federal deregulatory orders and open the door for other states working on their own net neutrality laws.

U.S. and Broadband Industry Sue Over California’s Net Neutrality Law

On September 28th, 2018, the SEC sued Elon Musk for securities fraud and sought to ban him from serving as an officer of any publicly traded company. The SEC’s claims arise from Musk’s August 7th tweet of “funding secured” to take Tesla private. In response to the tweet, Tesla’s shares closed up 11 percent from the previous day. The SEC claims that at the time Musk tweeted, he had not discussed specific deal terms with any potential financing partners and that he knew taking Tesla private was still uncertain. Musk admits that he posted the tweet while driving to the airport without anyone’s review. His tweet also came after months of sleeping in Tesla’s factory to ensure hitting Model 3 production targets while fending off angry investors.

Today, Twitter enables leaders to engage directly with the public. Musk often uses Twitter to make bold statements, promising his grand vision for the future realized through his innovative companies like Tesla, SpaceX, and The Boring Company. As a result, Musk has drawn millions of followers and is able to drive national discussions around innovation.

The rise of Twitter usage by leaders, 280 characters at a time and often unfiltered, is a significant shift from the carefully crafted statements of traditional communication. Tweets often promote reactionary behavior, counter to the stability and predictability the SEC and investors prefer. For example, the Nasdaq stock exchange was forced to suspend trading of Tesla’s shares for 90 minutes because Musk tweeted material information without informing Nasdaq.

Musk’s latest controversy highlights how America continues to grapple with social media’s impact on how people deliver and receive information. The mission of the SEC is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” through providing access to certain basic facts about an investment. Access to accurate information is at the heart of the SEC laws and rules. However, as the next generation of leaders rise with new technology and new norms of communication, the SEC will need to evolve while also staying true to its mission.

Eventually, under the pressure of his lawyers and investors of Tesla, Musk settled with the SEC. He will remain Tesla’s CEO but must resign as chairman of the board for 3 years and pay a $20 million fine.

Elon Musk, Twitter, and the SEC

On September 29, 2018, the SEC imposed a cease-and-desist order against Walgreens Boots Alliance Inc., its former CEO Gregory Wasson, and its former CFO Wade Miquelon.  This order comes following the SEC’s investigation over allegations that the company and its directors had misled investors regarding Walgreen’s ability to achieve its forecasted earnings goal.

Walgreens, Wasson, and Miquelon consented to an SEC order finding they had violated Section 17(a)(2) of the Securities Act of 1933, which prohibits “untrue statement[s] of a material fact or any omission[s] to state a material fact” in the offer or sale of securities.  In addition to avoiding future violations of the Act, Walgreens must now pay $34.5 million while Wasson and Miquelon were fined $160,000 each.

The SEC’s investigation focused on Walgreen’s two-step merger with Alliance Boots in June 2012. As it announced the merger, Walgreens assured investors the “combined entity would generate $9 billion to $9.5 billion in combined adjusted operating income in the 2016 fiscal year.” It became apparent after the first step of the merger that the company would be unable to meet its 2016 projection. However, Walgreens, Wasson, and Miquelon continued to voice their confidence in the financial forecasts without disclosing the increased risk. As Walgreens moved forward with the second step of the merger, it presented an adjusted operating income projection of $7.2 billion, 20 percent less than its original projection. Unsurprisingly, the company’s stock price dropped 14.3%.

According to Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, “[t]he penalty assessed against Walgreens is intended to punish and deter such conduct, which deprived investors of information necessary to make fully informed investment decisions.”

It is worth noting that the SEC chose to charge Walgreens and its former senior management with a Section 17(a)(2) violation rather than a violation Rule 10b-5 of the Securities Exchange Act of 1934. While Rule 10b-5 requires satisfying the “scienter” requirement by showing recklessness, under Section 17(a)(2) the SEC has the authority to bring negligence-based charges as long as there is proof of negligence (i.e., deviation from the appropriate standard of care).

SEC Imposes a $34.5 million Penalty on Walgreens Over Misstatement of Forecasted Earnings Goal