Episode 741: Amy and Steve vs. Facebook : Planet Money The story of a court case. On one side, the best lawyers money can buy. On the other, a night school lawyer who had never argued a case before. The outcome could affect everyone on the Internet.
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Episode 741: Amy and Steve vs. Facebook

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Episode 741: Amy and Steve vs. Facebook

Episode 741: Amy and Steve vs. Facebook

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ALEX GOLDMARK, HOST:

So I admit it. I am on Facebook a lot, way more often than I should be. It is kind of embarrassing.

AARTI SHAHANI, HOST:

I feel you, Alex. Me too.

GOLDMARK: But I want to try a little experiment here. Can I have your password?

SHAHANI: No, no way.

GOLDMARK: Why not?

SHAHANI: I have a lot of Words With Friends games going. It's high stakes and aggressive.

GOLDMARK: (Laughter) And I can screw them up and see your fierce commentary.

SHAHANI: I don't want you to see what I'm doing.

GOLDMARK: OK. So for the sake of this show, how about this? Let's do the experiment this way. I will give you my password. Here...

SHAHANI: OK, I can do that.

GOLDMARK: Here is my username and password.

SHAHANI: OK, I'm going to log in for you.

(SOUNDBITE OF TYPING)

SHAHANI: OK. I'm in.

GOLDMARK: It's exciting, thrilling, you are seeing the world through my digital eyes.

SHAHANI: (Laughter) Alex, I'm in your account right now. Can I go to your private messages?

GOLDMARK: No, please don't.

SHAHANI: Can I see who's friend requested you? I see these two little buttons over here.

GOLDMARK: Yeah, go see that, yeah.

SHAHANI: There's somebody who you have no friends in common with and I don't think that you should accept this person. Can I just say delete request?

GOLDMARK: Delete it.

SHAHANI: OK.

GOLDMARK: So you just logged into my account...

SHAHANI: I did.

GOLDMARK: ...With with my permission, something I asked you to do. But according to a recent court decision, we might have just committed a federal crime.

(SOUNDBITE OF MUSIC)

GOLDMARK: Facebook has invested billions of dollars to make a place online just the way they want it, all based on how each of us individually clicks and likes and friends and unfriends. Our Facebook account may feel like private property, but we're not allowed to give away the keys. It is Facebook's house, not ours. And they say what we just did is something like digital trespassing, climbing onto their servers without permission, which could land someone in jail.

(SOUNDBITE OF MUSIC)

GOLDMARK: Hello, and welcome to PLANET MONEY. I'm Alex Goldmark.

SHAHANI: I'm Aarti Shahani. Today on the show, the story of why we may have just committed a crime, how Facebook protects its turf and what it means for the future of the internet. It's the story of a man who tried to open up the web, who had a great idea that would have made it easier to use - pretty much every site with a login - and how he got crushed.

(SOUNDBITE OF MUSIC)

GOLDMARK: Our story starts in Silicon Valley in 2006. Social networking is the hot new thing.

SHAHANI: Facebook is just 2 years old, and it's growing fast. There's also LinkedIn. There's Myspace. There's Friendster, which was still a thing. And every single one of them have their own freaking username and password.

GOLDMARK: This is when Steve Vachani had his big idea. Steve is one of those Silicon Valley types who was really early to the internet game. He's friends with all of the people that are starting these social networks, and he comes up with what he thinks is an even bigger, hotter, newer idea. He thinks, what if I can fit all of these networks together and make a super network?

STEVE VACHANI: And this is actually kind of when it hit me is that rather than create a social network, why don't I create a site that brings all your - all of your sites together?

GOLDMARK: He was going to make one site to rule them all.

SHAHANI: He called it Power Ventures, and here's how it worked - you'd put your usernames and passwords from your various social media accounts all into his site and from there you could do all your cat picture uploading and liking and hearting and poking from this place.

GOLDMARK: It organizes the chaotic early social networking web into one place, and a lot of people liked it. He said 20 million people signed up. He remembers checking on how fast the company was growing over and over again in those early days. And he remembers how it felt.

VACHANI: It's euphoric. You refresh the page every 10 seconds because it's - you can't believe that you just had - another thousand people just entered in the last minute. It's kind of like pinching yourself to see it's real.

SHAHANI: Only Steve didn't have to pinch himself because he pretty much ended up getting punched in the face by Facebook.

GOLDMARK: People at Facebook saw that his company was growing fast. It caught their attention, and it really worried them.

SHAHANI: They didn't like it because it steals their business. Under their terms of service, yes, we own our data, but Facebook puts ads next to it to make money. So it's really important for them that you're sharing inside Facebook. When you post via Power Ventures, Facebook loses money.

GOLDMARK: It's even bigger than ad revenue. It's kind of like an existential crisis for a site like Facebook because Power Ventures makes it easy for you, the user, to just take all of your photos and your posts and your messages and move them from Facebook to somewhere else, to the next hot new social network, really easily.

SHAHANI: So in December of 2008, just a few days before Christmas, Facebook sends Steve an email.

VACHANI: It was kind of an awkward email because they were treating us like a user. Facebook essentially said that you're violating Facebook's terms and conditions. You need to stop.

SHAHANI: Awkward because Power Ventures wasn't a Facebook user. They didn't sign Facebook's terms and conditions. They were just helping people manage their accounts.

GOLDMARK: Facebook is protecting its turf, and it's trying whatever it can. Remember, this is early days on the internet. The rules - they haven't really been written yet. And so this fight sets the groundwork. It puts the paint on the field for so many later cases on the internet.

VACHANI: So I spent about a month just talking to Facebook. They would have five, six lawyers on the phone every time.

GOLDMARK: And they can't work it out. Facebook sues him. Charge one - hacking.

SHAHANI: Facebook says that logging into their site without their permission is hacking, which is a criminal act.

GOLDMARK: Charge two - for good measure - spamming.

SHAHANI: Facebook also says that messages sent out on Facebook on behalf of Steve's customers saying, hey, come use Power Ventures, that was deceptive, unwanted solicitation - spam.

VACHANI: If someone calls you a spammer, there's a connotation that you're from the underworld.

SHAHANI: It's like being an adulterer in Puritan America. It's your scarlet letter.

VACHANI: Yeah, you're not - you cannot be respected.

SHAHANI: Not just not respected. It's really expensive to be a spammer. There's a fine for each message. So Steve was up against a fine of $18 million, and in the first round of battle, Facebook won.

GOLDMARK: Steve doesn't have that kind of money, and because of the lawsuit, he pretty much can't operate his company. And so he shuts it down. It gets so bad that Steve declares personal bankruptcy, but Facebook blocks it. He stays personally liable for that multimillion-dollar fine.

SHAHANI: Steve wants to appeal the case, but he's pretty much broke by now. When he goes to the big shot lawyers to see if someone else will take up the appeal, they're all like, no, this is a case against Facebook and you got to have a lot of cash up front for us to sign on.

GOLDMARK: For most people, this is where things would end, but Steve is not most people. No, Steve is dogged. He's like one of those prisoners digging every day with a cafeteria spoon, and he's got one last idea, one last place he thinks he might find a lawyer.

SHAHANI: There was this website online called Elance where people would post they can do graphic design or build a website for cheap.

GOLDMARK: And he finds Amy Sommer Anderson.

AMY SOMMER ANDERSON: I hadn't ever practiced law before. I didn't do an internship in a law firm. I didn't know the first thing about being a lawyer.

GOLDMARK: She had gotten her law degree from night school a few years earlier. The only case she had ever tried was mock trial in law school.

SHAHANI: Amy was on Elance looking for quick money, just doing business contracts or something simple. She saw Steve's posting and then got curious.

GOLDMARK: She had no idea that Steve wanted her to appear in front of a judge in federal court.

ANDERSON: I had to pay and get admitted to practice there, which I did. And...

SHAHANI: Did he reimburse you for that?

ANDERSON: No. No, he did not.

GOLDMARK: Facebook-level lawyers usually charge around a thousand dollars an hour. Amy was only charging $55 an hour - just the right price for Steve.

SHAHANI: Steve liked the price, and he liked her.

VACHANI: I found her to be very humble and very naturally intelligent.

GOLDMARK: So it's Facebook versus Amy and Steve. On one side, the best legal team money can buy. On the other side, a broke CEO who lost his company and a low-cost Elance night school lawyer on her first case.

SHAHANI: Amy remembers picking out what to wear to court. It was the same suit she wore for a mock trial back in law school - her only suit.

GOLDMARK: And she remembers in the courthouse the first time she saw the Facebook lawyers looking like total pros and also very tall.

ANDERSON: And I'm a little person, right? And so my very first experience was this, you know - these, like, towering attorneys (laughter) coming in. Well, first of all, it's a team of them. And I remember just thinking, OK, don't feel small, don't feel small.

GOLDMARK: And she can just tell they're not taking her seriously right from the first handshake with their lead lawyer.

ANDERSON: Very weak handshake, like he's shaking a, you know, woman's hand. He felt condescending (laughter).

GOLDMARK: He made this big show of being overly polite to her, holding this door for her.

SHAHANI: That little swinging gate door that separates the judge from the audience. He's like, madam, after you.

GOLDMARK: So Amy walks in first.

ANDERSON: We walk up there, and I think I picked the right side. I'm not sure. I did - I had no idea where to go. I was just like, OK, I'm just going to, you know, fake it till I make it.

GOLDMARK: The court has already ruled that Steve and his company were guilty of the charges - spamming and hacking. Facebook lawyers went in ready to try and get the maximum penalty, that $18 million. Amy went in to say, hey, I'm the new lawyer. Facebook shouldn't get that automatic win. We should get our chance to argue it out in full.

ANDERSON: You know, all I have to go off at that point is intuition because, you know, zero experience, don't know what I'm doing, shouldn't be there.

GOLDMARK: But actually she's lowballing herself. She has more than intuition.

SHAHANI: When Amy went to go read the briefs, it struck her that the first judge didn't understand the basic facts. He didn't get how social networks work. And so here was her opportunity to explain it correctly.

ANDERSON: You can be professional and you can be courteous.

GOLDMARK: And it works. The judge tells her and the tall Facebook legal team, Amy, we side with you. Facebook doesn't automatically win. You all, you get to keep arguing about it. The case is still alive.

SHAHANI: The weak handshake guy was furious. He storms out of the court, not even holding the swinging door open for her, but that's OK. Amy knows how to open her own door.

GOLDMARK: And she's starting to feel like a real lawyer.

ANDERSON: It lit me up. It made me feel like - well, like there's nothing I can't do.

GOLDMARK: This means Amy gets her chance to try the case in a bigger court, and she had her plan to overturn that spam charge with the fine. Amy basically points out that Steve wasn't spamming. He was just inviting users' friends to join Power Ventures at their request.

SHAHANI: Steve had done basically what every other site does when they're trying to grow.

VACHANI: Facebook's entire company was built around users giving their password to Facebook saying, go access my contacts on Yahoo and Google and go export all my contacts and start communicating and send an invitation to all my friends and bring them into Facebook.

GOLDMARK: The other charge, the hacking charge, was serious because it fell under this law, the Computer Fraud and Abuse Act, a federal criminal law that was about way more than what Steve had done in this one little case.

SHAHANI: Now it was about what all of us are allowed to do on the internet.

GOLDMARK: And because Amy got Steve that appeal, this case suddenly mattered to a whole lot more people than Steve. The case was headed to the 9th Circuit Court. A decision here would set precedent for a big chunk of the country. It's just one step below the Supreme Court.

SHAHANI: And it also happens to be broadcast on YouTube.

(SOUNDBITE OF YOUTUBE VIDEO)

VACHANI: Good morning, your honors. My name...

UNIDENTIFIED WOMAN #1: Can you speak loudly?

VACHANI: Yeah. My name is Steven Vachani. I was, at the time of December 2008, I was the CEO of Power Ventures.

SHAHANI: This is last December, almost exactly seven years after that first letter from Facebook. Steve's still trying to dig out of prison with that plastic spoon.

(SOUNDBITE OF YOUTUBE VIDEO)

VACHANI: Not on behalf of Power Ventures but...

GOLDMARK: Things started off well. One of the judges liked the idea of Steve's website and even tried to give him a compliment, but he's too nervous to hear the praise.

(SOUNDBITE OF YOUTUBE VIDEO)

UNIDENTIFIED WOMAN #2: Were you the one who invented this media site, power.com?

VACHANI: I was the - I was one - I was one of the...

UNIDENTIFIED WOMAN #2: I actually think it's quite clever.

VACHANI: I was the founder...

(LAUGHTER)

VACHANI: I was the founder of power.com, and that's correct.

SHAHANI: Steve is fumbling for the right words. He's got just a few minutes to lay out the arguments that have been on repeat in his brain for the last several years.

GOLDMARK: And then Amy gets a few minutes to make her case. Facebook lawyers, they do their thing. They leave and they wait - for months. And one day, Amy gets an email while she's in bed.

ANDERSON: And I just, like, leapt out of, you know, the covers and probably - yeah, no, I definitely did a dance on the bed (laughter).

GOLDMARK: Steve and Amy, the down-and-out CEO and the newbie lawyer, they had killed it. They got a win bigger than they had ever imagined they could.

SHAHANI: Kind of killed it. The judges threw out the spamming charge and with it the multimillion-dollar fine was gone. Amy's client, Steve, was off the hook, but they had really different reactions to the case because the hacking charge, that one stuck.

GOLDMARK: When Steve called up Amy to talk about the ruling, Amy was ready to celebrate their win, but Steve was like...

ANDERSON: Whatever. Now we can focus on the real issue. It's like, wait, what? Can we be happy about this for, you know, can we just reflect on this last four years doing the impossible (laughter)?

GOLDMARK: Yes, he had just won his big fight against Facebook and he was free of the millions of dollars in fines, but his case had just set back the internet. And this ruling was going to set a huge legal precedent that could affect every person online.

SHAHANI: The judges said, yeah, it is a violation of that law, the Computer Fraud and Abuse Act, if you share your username and password, like we did at the top of the show, and Facebook tells you not to.

GOLDMARK: The ruling caught the attention of some heavy hitters. Orin Kerr is a law professor at George Washington University. He defends hackers, and he remembers when he heard the news about the case.

ORIN KERR: The decision comes down and I go, oh, wow. That - that is big. That's really troubling in terms of what it means for people using the internet.

GOLDMARK: He has defended some of the most famous hackers in past cases, and now he is joining Amy's legal team, and he's representing Steve pro bono.

SHAHANI: So if you thought Amy was making chump change, Orin's doing it for even less - free.

GOLDMARK: He says that the 9th Circuit ruling puts way too much power in the hands of internet companies and the government.

KERR: They're using a really heavy hammer. This is a federal, criminal law, and they're saying using the account in a way Facebook didn't like, that's not just a bad thing. That's not just something Facebook disapproves of. That's a crime. You should be able to be arrested for that and prosecuted and put in jail for a year or longer.

SHAHANI: By the way, we checked with other lawyers, and they agree on that reading of the precedent.

GOLDMARK: Facebook didn't want to speak on tape for this story, but a spokesperson did tell us that letting anyone else log in for you is dangerous, you shouldn't do it and that your data is safe inside Facebook. But it could be at risk inside of another company like Power Venture. The spokesperson also said Facebook gave Steve many chances to settle the case in a way that wouldn't have been painful for anyone.

SHAHANI: The thing about this case, right, it's like Facebook wants this other startup to back off, and they're like, what can we use to get them to back off? Then they grab this law. They get a huge win out of it, and now they opened up this Pandora's box where, oh, whoops, sharing passwords could be a criminal act. And I don't get the sense in talking to Facebook and reading the briefs that Facebook wanted to do that, but they used what they had to do and this is the messy outcome.

(SOUNDBITE OF MUSIC)

GOLDMARK: Amy and Steve just learned this morning that the 9th Circuit Court, it will not rehear their case. So their next stop is to take it to the Supreme Court. And Amy's already filed the paperwork so she can appear there for the same low rate of $55 an hour.

(SOUNDBITE OF MUSIC)

GOLDMARK: Just like we always do, we've posted a link to this episode right there on Facebook itself. So if you want to give us your feedback and thoughts about this episode using your own login, that's a pretty good place to do it. We're on Twitter - @planetmoney. I'm @alexgoldmark.

SHAHANI: And I'm @aarti411. That's A-A-R-T-I-4-1-1.

GOLDMARK: Our show today was produced by Raina Cohen (ph). And if you liked this podcast and you want to keep it going, the best way to show your support is to go and donate to your local public radio station and tell them that PLANET MONEY sent you. Find out what your station is at stations.npr.org. And don't forget, PLANET MONEY sent you.

SHAHANI: And there's a new app you've got to get on your smartphone if you don't already have it. It's called NPR One. You'll get Fresh Air, Big Listen, Bullseye, Alt.Latino and All Songs, insights and analysis from Code Switch, Politics and Latino USA. Again, that's NPR One. You can get it at npr.org/podcasts. I'm Aarti Shahani.

GOLDMARK: And I'm Alex Goldmark. Thanks for listening.

(SOUNDBITE OF MUSIC)

GOLDMARK: All right. I'm changing my password back right now.

SHAHANI: Hold on. Hold on. Before you do that, let me just do one more thing, OK.

GOLDMARK: No. Well, it's a race. Let's see if you can do it.

SHAHANI: Hold on. Hold on. Hold on.

GOLDMARK: Password is going to be really long.

SHAHANI: Delete request. I'm like - let me go into your photos. (Laughter) Did you go to Burning Man?

GOLDMARK: I did. This has to stop.

SHAHANI: Whoa.

GOLDMARK: (Laughter).

SHAHANI: Really?

GOLDMARK: Do I want to update a password?

SHAHANI: Well, I wouldn't have expected that.

GOLDMARK: Log out other devices - continue.

SHAHANI: Here, I'm going to heart your own picture of your Burning Man. (Laughter) I just hearted your Burning Man picture before you logged me out.

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