The Internet of Things: New Questions about Contracts

When the Internet first became prevalent, it ushered in several new contracting questions with the rise in use of end-user agreement practices. Take, for example, “click-wrap” agreements, whereby users agree to terms and agreements before the use of any actual services of products, with the click of a button. Now, as the Internet of Things (“IoT”) has become reality, the legal landscape is again wrestling with change in what it means to form a contract, as IoT devices create further distance between the user and the actual process of contract formation.

IoT is the now common name for everyday devices (e.g., coffee machines, refrigerators, etc.) becoming connected to the Internet, allowing them to send and receive data and to, in theory, become “smart.” For example, the Amazon Dash Button is a new device that connects to the Internet to reorder products through the press of a physical button. To use the Dash Button, each Dash Button must be paired with its specific product. When the paired product is running low and needs to be replenished, the consumer simply presses the button to reorder. The Amazon Echo, on the other hand, is Amazon’s voice command device that allows users to access a wide variety of “skills” that include ordering pizza, streaming music on demand, and purchasing other goods or services through Amazon, all through voice command.

These innovations are amazing in many ways, and they undoubtedly save consumers considerable time and effort. But they also place distance between consumers and the actual contract-formation process. Consumers who order products via voice command to an Echo are unlikely to peruse contract terms or even review the actual product before purchase. While Amazon specifically notes that their Terms of Use still apply to any agreements entered into through use of the Dash Button or Amazon Echo, it should be noted that Amazon’s Terms of Use, like most companies online, is subject to change at any time and waives the consumer’s right to trial by jury. But to “read the fine print,” a consumer would need to stop using the Echo and log in to a computer or smart phone — a step that defeats the benefit (and, let’s face it, the fun!) of using a voice command device.

As IoT devices become more predominant, businesses may become further emboldened to include contracting terms that, at the very least, skew in the company’s favor, or, at the very worst, include contractual abuse. Moreover, such devices are also giving companies unprecedented access to immense amounts of electronic data collected about a user’s purchasing habits, preferences, and daily routines.

It remains to be seen whether Courts will consider these factors and become wary about upholding contracts formed through IoT devices. In the meantime, be careful when your kids are talking to that Amazon Echo: they might be making contracts right in your kitchen!

For more information on this topic, please visit our eCommerce Agreements service page, which is part of our Internet & eCommerce Practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  Additional information about the Internet & eCommerce law firm and its Internet & eCommerce attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.

Pin it for later: https://www.pinterest.com/pin/315252042651715025/