By: Matthew N. Foree
Last week, the United States District Court for the Northern District of Illinois preliminarily approved a class action settlement involving the manufacturer of an Internet of Things (“IoT”) device. In this case, two plaintiffs, whose names were withheld “due to the sensitive subject matter of this case,” filed a lawsuit against Standard Innovation Corporation (“Standard Innovation” or “Defendant”), a “sensual lifestyle products” company that sells a “high end vibrator called the We-Vibe.” As stated in the complaint, to fully operate the We-Vibe, users download Defendant’s “We-Connect” application and install it on their smart phones. With this app, users can “pair” their smart phone to We-Vibe, allowing them and others remote control over the device’s settings and features. As alleged in the complaint, the customers were unaware that Defendant designed the We-Connect app to collect and record data regarding consumers’ personal use of the device, including the date and time and the settings of the device, and then to transmit such data usage with the user’s personal email address to its servers in Canada. Based on these allegations, Plaintiffs sought an injunction to prohibit Defendant from monitoring, collecting and transmitting the information, as well as damages from the invasion of privacy and from the purchase of the device, including return of the purchase price and disgorgement of profits. Specifically, Plaintiff raised claims of violation of the Wiretap Act (18 U.S.C. § 2510), intrusion upon seclusion, and unjust enrichment.
On March 9, 2017, Plaintiffs’ filed the class action settlement agreement as part of Plaintiffs’ motion for preliminary approval of the settlement. Under the agreement, the parties agreed to divide the class into two separate classes, one for individuals who downloaded the We-Connect application and used it to control a We-Vibe brand product before September 26, 2016 (the “App Class”), and a second class including individuals who purchased a Bluetooth enabled We-Vibe brand product before September 26, 2016 (the “Purchaser Class”). Per the agreement, the parties agreed on a settlement fund for the App Class in the amount of $4 million CAD and a separate settlement fund for the Purchaser Class in the amount of $1 million CAD. Members of the App Class can receive up to $199.00 USD, while members of the Purchaser Class can receive up to $10,000 USD.
On March 14, 2017, the court granted an order preliminarily approving the class action settlement as defined by the parties. Among other things, the Order certified the proposed Purchaser Class and the App Class for settlement purposes only. It also approved the appointment of the Plaintiffs as class representatives and set the schedule for Notice to the Class and other deadlines. Significantly, the settlement agreement requires Defendant to remove and not include a registration process, and not collect email addresses, through the We-Connect application. It also requires Defendant to update its privacy notice to specifically disclose its data collection practices concerning the application. Additionally, the Defendant must, subject to any legal requirements, purge the data collected from its users.
We have reported previously about the proliferation of issues related to IoT devices, including the development of guidance for securing such devices. The security of IoT devices and the unauthorized use of information generated from them are topics ripe for litigation. The We-Vibe case, which may be the first IoT class action settlement, provides an early glimpse at theories of litigation involving IoT devices and, specifically, allegations of use of private consumer data without knowledge or consent. This case could create a framework for plaintiffs’ attorneys to use in bringing other IoT device cases, including class action matters. It remains to be seen whether actions such as this ultimately will lead to regulation in the IoT space and, if so, how long it will take to enact such regulation.
Please contact Matt Foree if you have any questions regarding the decision, or wish to obtain copies of the documents in this case. In the meantime, we will continue to provide updates regarding IoT litigation and other developments.