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May 2023

A website chatbot can lead to a wire-tapping lawsuit in California

A US District Court has ruled that a lawsuit filed against Old Navy, a San Francisco-based clothing retailer, can proceed after a customer accused the company of violating California’s Invasion of Privacy Act (CIPA) through the use of a chatbot feature on its e-commerce site. In August 2022, Miguel Licea filed a lawsuit alleging that the company “eavesdropped” on his private conversations without his knowledge or consent.

Old Navy sought to have the case dismissed entirely, but Judge Sunshine Sykes of the U.S. District Court for the Central District of California has allowed Licea’s CIPA Section 632.7 claim against the retailer to move ahead. This section imposes liability on anyone who “without the consent of all parties to a communication, intercepts or receives and intentionally records … a communication transmitted between two … telephones.” Old Navy argued that Licea “cannot allege that both parties were using a qualifying telephone device to conduct the customer chats,” but Judge Sykes ruled that smartphones are included in the definition of cellular phones and thus fall under the scope of Section 632.7.

However, the court dismissed Licea’s Section 631(a) claim, which prohibits “intentional wiretapping,” including in the context of internet communications. Judge Sykes stated that Licea had sufficiently pled facts to allege that his communications with Old Navy’s chatbot “were intercepted in transit” without his knowledge and without his consent. The court determined that Old Navy “uses a third-party service to ‘covertly embed code into its chat feature that automatically records and creates transcripts of all such private conversations,’ and ‘allows at least one third party … to secretly intercept in real time, eavesdrop upon, and retain transcripts of [the Old Navy] chat communications with unsuspecting website visitors.'”

Old Navy argued that it did not “intercept” the communications in transit as required by Section 631(a), and more than that, the communications were not “intercepted” because “the third parties [that] access the messages [do so] after they are electronically stored rather than while they are in transmission.” However, the court dismissed the Section 631(a) direct liability claim on the basis that CIPA exempts from liability any individual or entity who is a “party” to the “communication.” Since Old Navy “was a party to the customer chats at issue in [the] complaint,” Licea’s claim that it is directly liable for wiretapping fails, according to the court.

This case highlights the importance of businesses understanding the legal implications of using chatbots and similar technology in a business context. While technology can be a powerful tool for improving customer engagement and support, businesses must tread carefully and deliberatively when introducing new technologies that interact with consumers to ensure that they remain in compliance with applicable privacy laws and regulations. Few of these laws will have been written with these new technologies in mind, and a failure to comply can lead to lawsuits and reputational damage.

Read the full article: Court Refuses to Toss Out Chatbot-Centric Wiretapping Lawsuit Against Old Navy

Contact your attorney or The Karlin Lawfirm for questions regarding the use of chat boxes and what you can do to protect your business in this litigious landscape.

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