Vizio Must Face Lawsuit Over Spying TVs, Judge Rules

YTJia_William Wang_LeEco_VIZIO - Publicity - H 2016
Jeff Lewis/AP/Courtesy of LeEco

YTJia_William Wang_LeEco_VIZIO - Publicity - H 2016

Vizio may have resolved a government investigation into data collected by internet-connected "smart" televisions, but the manufacturing giant must still contend with a proposed consumer class action on the topic after a California federal judge late last week largely denied a motion to dismiss.

The lawsuit makes a variety of federal and state claims over the way Vizio's Smart TVs use content recognition software to collect and report users' content viewing histories. When consumers bought the TV sets, factory settings automatically enabled data collection, and while the company disputes that viewing data is coupled with personally identifiable information such as name or contact information, the plaintiffs assert that researchers have been able to figure out who is watching what based on IP addresses, zip codes, product model numbers and other data. The plaintiffs also allege that Vizio hadn't adequately disclosed its privacy practices and that to turn off the data collection meant navigating obscure setting options.

In February, Vizio, led by founder and CEO William Wang, came to a $2.2 million settlement with the FTC and also agreed to get consumers' affirmative consent. At the time, though, FTC acting chairman Maureen Ohlhausen questioned whether merely collecting a person's TV viewing data rises to a substantial injury.

With Vizio's $2 billion sale to China's LeEco still pending, the company attacked the civil lawsuit over spying TVs by first raising the issue of standing. In 2016, the U.S. Supreme Court ruled in Spokeo v. Robins that privacy plaintiffs must show an injury is real, not abstract, and both “concrete and particularized.”

U.S. District Court Judge Josephine Staton examines this through the lens of the Wiretap Act as well as the Video Protection Privacy Act, a statute that was enacted in the 1980s when the Washington Post published a list of videos that then Supreme Court nominee Robert Bork had rented.

Staton writes that "Congress has determined that the interception of a person’s electronic communications and the unauthorized disclosure of a person’s video viewing history are sufficiently harmful to warrant private causes of action," and, in response to Vizio's contention that the information it allegedly discloses is not personally identifiable, adds, "Taken to its logical conclusion, Defendants’ argument absurdly implies that a court could never enter judgment against a plaintiff on a VPPA claim if it found that the disclosed information was not within the statutory definition of personally identifiable information; instead, it would have to remand or dismiss the action for lack of jurisdiction."

The judge also finds that plaintiffs plausibly allege that they would not have purchased or would have paid less for their Vizio Smart TVs had Vizio properly disclosed its consumer data collection and disclosure practices.

Vizio also challenged whether it could be deemed a "video tape service provider" under the VPPA, arguing that if true, it would mean that other manufacturers of products including Blu-ray players, smartphones, app stores, cable boxes, wireless routers, personal computers, video game consoles and even cars would qualify.

"Most of these products or services are far too peripherally or passively involved in the delivery of video content to reasonably constitute 'the business' of delivering video content," responds Staton. "By contrast, Plaintiffs allege that Vizio has developed a product intimately involved in the delivery of video content to consumers, has created a supporting ecosystem to seamlessly deliver video content to consumers (including entering into agreements with content providers such as Netflix and Hulu), and has marketed its product to consumers as a 'passport' to this video content."

As to the question of whether plaintiffs have adequately alleged that their personal information is being disseminated, it's a tricky one given that various courts around the nation have come to different conclusions of what this means. Some judges have required an allegation that a person's name or address is being shared while one appellate circuit last year deemed it sufficient to allege the sharing of "information reasonably and foreseeably likely to reveal which ... videos [the plaintiff] has obtained.”

Staton prefers the latter interpretation, and since Vizio is reported to have collected and disseminated media access control addresses that allegedly can be used to acquire names and highly specific geolocation data, she has ruled that plaintiffs have passed the first hurdle in the case. As the litigation continues, though, the judge stresses that plaintiffs will have to demonstrate that Vizio's disclosures were reasonably and foreseeably likely to reveal what video content Vizio consumers watched. In other words, plaintiffs get to the discovery phase, but they will still need to show more to win at the fact-finding stage.

The judge permits the VPPA claim as well as various state-based privacy claims, but dismisses (with an opportunity to amend) a federal wiretapping claim because plaintiffs have not articulated with sufficient clarity when Vizio supposedly intercepted their communications. She also rejects Vizio's attempt to dismiss a fraud claim premised on Vizio's alleged failure to disclose to consumers what it was doing. On the other hand, Staton throws out a separate fraud claim as well as a false advertising claim arising from supposed misrepresentations in the company's privacy policy and product packaging.

Here's the full 39-page decision.