• by Wendy Davis  @wendyndavis, March 3, 2017

In a blow to Vizio, a federal judge has refused to dismiss allegations that the smart TV manufacturer violated a federal video privacy law by sharing information about consumers with ad-tech companies and data brokers.

U.S. District Court Judge Josephine Staton in Santa Ana, California, Staton rejected Vizio's argument that the Video Privacy Protection Act doesn't apply to device manufacturers. That law, which dates to 1988, prohibits video providers from disclosing "personally identifiable information" about people's video-viewing history.

The legal battle centers on allegations that Vizio tracks TV viewers by default, and then shares data with companies that send targeted ads to people's phones, tablets and other devices. The first video privacy lawsuit against the company was filed in late 2015, less than one week after ProPublica published a report about the company.

Since then, other consumers filed several similar lawsuits against Vizio, which recently agreed to be acquired for $2 billion by Chinese tech company LeEco. The matters were consolidated and are pending in front of Staton.

Staton's ruling, issued Thursday, allows the plaintiffs to proceed with the lawsuit, but doesn't indicate that they will ultimately prevail in the matter.

Vizio unsuccessfully contended that the case should be dismissed at a preliminary stage for numerous reasons, including that the video privacy law doesn't cover electronics manufacturers. The company said it is comparable to "a building that leases space to several video rental stores," but isn't itself a video rental store.

Staton rejected that argument, ruling that Congress intended for the video privacy law to apply to companies that are "in the business of delivering video content."

She said the complaint alleges that Vizio's apps aim to enable consumers to "seamlessly access Netflix, Hulu, YouTube, and Amazon Instant Video content" at home.

"A reasonable inference is that Vizio enters into agreements with these content providers to enable consumers to access their programming on Vizio’s Smart TVs," she added. "Essentially, Vizio has designed its Smart TVs to perform all the same functions of -- and its Smart TVs are in direct competition with -- Roku’s devices."

Privacy expert Bill McGeveran, a University of Minnesota law professor who has testified on Capitol Hill about the video privacy law, says Staton's interpretation appears consistent with lawmakers' intentions. 

"The statute was conceived of in a brick and mortar world, but was written by design to be expansive," he tells MediaPost. He adds that there's nothing in the text of the law that would make it inapplicable to hardware providers.

Vizio also argued that it the information it allegedly disclosed -- including IP addresses, media access control (MAC) addresses, ZIP codes, computer names, and product serial numbers -- was't personally identifiable.

Staton rejected that argument -- at least for now. She said the complaint alleged that MAC addresses can be used to learn specific geolocation data, and can identify individuals when combined with data about IP addresses, ZIP codes, serial numbers, and the other information that Vizio allegedly disclosed.

The judge also referenced Vizio's marketing materials, which allegedly boasted about its ability to offer specific viewing behavior data. "Plaintiffs have thus plausibly alleged that Vizio’s provision of -- to quote its own prospectus -- 'highly specific viewing behavior data on a massive scale with great accuracy' amounts to the disclosure of personally identifiable information," she wrote.

In the last several years, numerous online video distributors -- including Gannett and ESPN -- have been sued for allegedly violating the video privacy law by sending "anonymous" data, like device identifiers, to third parties.

Questions about whether these transmissions violate the video privacy law haven't been definitively resolved. The 1st Circuit Court of Appeals ruled last year that Gannett potentially violated the law by allegedly transmitting users' device identifiers, GPS data and video viewing history to Adobe.

But other judges have dismissed lawsuits against video distributors that allegedly transmitted "anonymous" information to outside companies. Among others, a judge in Seattle dismissed a lawsuit by Roku user Chad Eichenberger, who accused ESPN of transmitting his Roku's serial number, combined with data about videos watched, to Adobe. Eichenberger appealed that matter to the 9th Circuit Court of Appeals, where the case is pending.

Earlier this year, the Federal Trade Commission brought a separate enforcement action against Vizio for allegedly engaging in an unfair practice by tracking consumers, and for deceiving consumers by failing to adequately explain its data practices. The company agreed to settle the charges by paying $2.2 million to the FTC and the state of New Jersey, which also filed a complaint about the company.