Ronald Reagan Law Costs Netflix $9M

Netflix has revealed its $9 million settlement of a claim it breached privacy laws. Surprisingly, the case involved a law intended to govern video rentals rather than Internet data.

The lawsuit came to light in Netflix's latest financial filing with the Securities and Exchange Commission, in which it is required to detail any major legal actions. The filing said Netflix had not expected the settlement, so this was an unexpected expense. (Source: thehill.com)

The case involved the Video Privacy Protection Act (VPPA), signed into law by President Ronald Reagan in 1988. The law bars video rental firms from disclosing details of a customer's rentals, other than to law enforcement officials armed with a court-issued warrant.

The act was introduced largely as a response to a scandal that ensued when a newspaper published details of the video rentals of Robert Bork, then a nominee for a vacancy on the Supreme Court. (Source: bbc.co.uk)

Facebook Scandal Brings Law Into 21st Century

Blockbuster was also sued under the act after the so-called Beacon controversy, in which Facebook automatically shared members' Internet activity with sites that advertised on the social network.

It has been established that the same law could cover new formats, such as DVD or video game rentals. But until now it was unclear if the VPPA covered online rentals where there is no physical product.

The Netflix case actually involves a secondary requirement under the act, which mandates that companies must delete their records of a customer's rentals within one year of the customer closing an account.

According to the lawsuit, Netflix kept such records for at least two years.

Precise Details of Payout Still Unclear

The hefty $9 million award is a result of the case being granted class action status, allowing multiple claimants to join in, rather than start separate legal actions.

It has not yet emerged how much each claimant will receive, or how much of the award will be consumed by legal fees. Netflix had already complained the VPPA was inappropriate in the Internet age, and had lobbied for it to be updated.

The company argues the law has prevented it from launching a US edition of its Facebook application, which allows users to share details of their rentals with their online friends.