Rideshare services like SideCar and Lyft have been a welcome development for many San Franciscans, who complain that taxi availability is limited and unreliable. But the newly popular services have faced increasing scrutiny from the California Public Utilities Commission (“CPUC”), which issued several cease and desist letters to rideshare services alleging violations of several California Public Utility Code provisions governing the operation of charter services. (CPUC has since entered operating agreements with Lyft and Uber, but not SideCar.) According to CPUC, such ridesharing services are operating without authority under California Public Utilities Code Section 5371, which states that no charter-party carrier of passengers excepting transit districts, transit authorities, or cities owning and operating local transit systems may operate without first obtaining a certificate that public convenience and necessity require the operation.

However, both Lyft and Sidecar insist that because they operate on a donation basis, their operations fall within a “ridesharing” exception in Section 5353(h) of the Public Utilities Code which, by reference to the California Vehicle Code, exempts “two or more persons traveling by any mode, including, but not limited to, carpooling, vanpooling, buspooling, taxipooling, jitney, and public transit” from Section 5371’s certification requirement. Regulators may quickly counter that the ridesharing exemption “does not apply if the primary purpose for the transportation of those persons is to make a profit.” Although one operator has stated, “I don’t want SideCar to be my job; I want it to offset the cost of having a car in the city,” it strains credulity that such an intention would be construed as anything other than a primarily profit-seeking endeavor.

Evading such classification would be difficult for a number of reasons. First, ventures operating at a net loss (such as those designed to offset expenses) are not rendered altruistic merely because they fail to actually turn a profit. Indeed, characterization of the activity as strategy to offset a major cost of living expense indicates that driving for a rideshare service is not merely a hobby. This is further underscored by rating systems that enable drivers to avoid below-market donors. Second, because suggested “donations” approximate taxi fares for similar rides, it is difficult to argue that “donations” merely compensate the driver for the expense of a particular ride. Although such suggestions are purportedly cheaper than a passenger would pay in a taxi, cab drivers have many business related expenses that rideshare operators do not. Thus, it stands to reason that the profit margin of any given ride is similar to that of a cab driver, even if the absolute cost is lower. Third, while it is undoubtedly true that regulation of taxis and other commercial carriers serves to insulate incumbent businesses from competition, regulation of commercial carriers also furthers the public purpose by ensuring drivers are adequately insured and their vehicles are properly maintained. Thus, it seems exceedingly unlikely that ridesharing services can avoid regulation by merely terming the exchange a “donation.”

Still, as CPUC itself acknowledges, ridesharing services present a novel problem that legislators likely did not anticipate when drafting current law. Moreover, it is not simply hollow messaging to say that ridesharing services benefit consumers: by placing competitive pressure on incumbent operators, rideshare services likely ensure better pricing and wider service. As such, CPUC has indicated a willingness to join the future by beginning a rule making process to institute regulations that fit the new businesses, “[t]he proposal issued is not to stifle innovation and the provision of new services that consumers want, but rather to assess public safety risks, and to ensure that the safety of the public is not compromised.” However, with opposition from cab drivers – who are sometimes treated solicitously by local governments – and an uphill battle under current regulation, it remains to be seen whether ridesharing is truly permitted to flourish.

The omnipresent imbroglio involving former CIA Director General David Petraeus (Ret.), uncovered by anonymous emails leading the FBI to mistress Paula Broadwell, has highlighted some limits of privacy on the internet. Although Broadwell attempted to hide the true identity of the anonymous email account she used to harass Jill Kelley by using public wireless networks, her efforts were fairly easily foiled by the FBI. Using geo-location and other meta-data stored by webmail providers when users log in, the FBI was able to cross-reference a variety of locations with guest lists from hotels to narrow the list of possibilities to Broadwell. The relative ease with which the FBI is presumed to have accessed the sensitive information (data at least six months old may be accessed with only a subpoena issued by a federal prosecutor) has prompted a round of heavy handwringing among the media and advocacy groups. Google reports the United States nearly quadruples the next closest country in surveillance requests.

Google loses defamation suit in Australia

Google recently lost a defamation suit with damages in excess of $200,000 to Australian music promoter Milorad Trkulja. The calumny? Searches for 62-year old in Google yielded results relevant to elements of Melbourne criminal underworld, many of whom were speculated to have been involved with an unsuccessful hit on Trkulja in 2004. After Google failed to remove the results, Trkulja sued Google for defamation, arguing that the search led to reputational damage.

In a decision denying Google’s application for judgment notwithstanding the verdict, Judge David Beach declined to upset the jury’s determination that Google was a “publisher,” and found that Google’s passive role did not warrant reversal. Trkulja’s attorney, Christopher Dibb, claimed the judgment marked the first such defamation suit against a search engine. Google is considering an appeal.

Facebook settlement could be pending

A halting settlement negotiation in a class action suit alleging privacy violations stemming from Facebook’s “sponsored stories” feature may soon come to an end. The complaint alleged that Facebook violated user privacy rights by showing that a user “likes” an advertiser in other user’s news feed without permission or compensation. The first attempt at settlement in May was rejected by U.S. District Court Judge Richard Seeborg, who claimed the deal – which gave $10 million to charity and covered another $10 million in legal fees – didn’t “make any sense.” The new deal, to which both plaintiffs and Facebook have agreed, would give $10 to each affected consumer, establish a mechanism for users to track how advertiser’s used their “likes,” and would allow the parents of minors to disable the feature.

A détente

Although a settlement with competitor Samsung seems remote, Apple and HTC ended their patent disputes over the weekend. The terms of the deal are undisclosed, but given Apple’s success against HTC in the International Trade Commission already, there is speculation the 10-year licensing agreement favors Apple. For its own part, HTC claims the agreement will have “no material impact on the finances of the company.”