Welcome back for another week of What's Next, where we report on the intersection of law and technology. This week, a self-proclaimed founder of Bitcoin is ordered to split ownership of his estimated $10 billion worth of bitcoin with the estate of his former business partner in a case that some say demonstrates that judges can keep up with crypto nerds. Plus, a magistrate judge argues the forced use of biometric data violates the Fifth Amendment. And a California appellate court clarifies the meaning of concealed as it pertains to privacy in the bedroom. Let's chat: Email me at [email protected] and follow me on Twitter at @a_lancaster3.

The $5 Billion Judgement Rocking Bitcoin

Over the years, many people have claimed to be "Satoshi Nakamoto," the pseudonym used by the alleged founder of Bitcoin. One of the most recent self-proclaimed fathers of Bitcoin is Australian computer engineer Craig Wright, who claims he mined more than 1 million Bitcoins. Last Tuesday, a judge orderedWright to share half of his Bitcoins, worth an estimated $10 billion, as well as intellectual property with the estate of his alleged former business partner, David Kleiman, who died in 2013.

"This is one of the largest (and first) cryptocurrency cases being litigated and everyone is watching to see how it's handled," said Kyle Roche of Roche Freedman in New York, in an email.

Roche Freedman and Boies Schiller Flexner are representing Kleiman's family, who are the plaintiffs in the case filed in the U.S. District Court for the Southern District of Florida. They claim that Kleiman and Wright mined Bitcoin together, but Wright denies the partnership. He claims that Kleiman transferred any Bitcoin ownership interest he had in exchange for equity in Wright's shuttered company.

The court ordered Wright, who is represented by Rivero Mestre in Miami, to disclose a list of his Bitcoin holdings prior to Kleiman's death and where they've gone since. However, Wright said that a private encryption key to the public addresses were divided among multiple individuals in his blind trust, so "he alone does not have ability to access the encrypted file and data contained in it."

That did not go over so well with U.S. Magistrate Judge Bruce Reinhart, who is overseeing the case. Reinhart completely rejected Wright's assertions that he could not access the encrypted file nor identify his Bitcoin holdings.

"During his testimony, Dr. Wright's demeanor did not impress me as someone who was telling the truth," Reinhart wrote. "When it was favorable to him, Dr. Wright appeared to have an excellent memory and a scrupulous attention to detail. Otherwise, Dr. Wright was belligerent and evasive. He did not directly and clearly respond to questions. He quibbled about irrelevant technicalities."

While the legal community has wondered how the courts will grapple with the internal workings of the cryptocurrency world, it was who Reinhart actually corrected Wright's terminology in his ruling.

"During his testimony at the evidentiary hearing Dr. Wright made a point of being precise in his use of terms, including contesting whether a document was an email or a pdf of an email," Reinhart wrote. "It is not credible that, given his claim to have an unmatched understanding of Bitcoin, he would have mistaken the Bitcoin currency for the keys that control the ability to transfer the currency. I find instead that he belatedly realized that any transaction(s) transferring bitcoin into the alleged Tulip Trust would be reflected on the Bitcoin master blockchain, that he would then be required to identify those transaction(s), and that Plaintiffs could use that information to trace the bitcoin. So, Dr. Wright changed his story to say that only the keys had been transferred."

Vel Freedman of Roche Freedman said his team never agreed with the assessment that some people believed the courts couldn't understand cryptocurrency technology, and that there would be a motivation to try and take advantage of what people perceived as a blind spot.

"The orders in this case, including the latest one by Judge Reinhart, demonstrate the court's understand cryptography just fine," Freedman said in an email.

Wright aims to push back against Reinhart's ruling and was granted a 14-day extension to file his motion challenging the order. "Counsel for Dr. Wright have been diligently working on meeting this deadline, however, Central and South Florida are currently threatened by a major hurricane," wrote his Rivero Mestre attorneys. "Hurricane Dorian is expected to make landfall in Florida early next week and counsel for Dr. Wright have been expending significant time preparing for the hurricane, which has limited their ability to work on this matter."

Wright has warned that the ruling could mean billions of dollars worth of Bitcoin will flood the market, tanking values. However, Bitcoin prices remain steady as of Tuesday afternoon.

Andrew Brenner of Boies Schiller Flexner in Miami, who also represents Kleiman, said the legal team will seek attorney fees next. "Beyond that, we are going to continue pursuing this case and do everything we can to ensure Dave's Bitcoin and intellectual property are returned to his estate," he said in an email.

Fingerprints and the Fifth Amendment

Eyeballs, fingerprints and faces might just be protected under the Constitution. A magistrate judge in the Northern District of California contributed to the ongoing debate over whether the forced use of biometrics is protected under the Fifth Amendment. U.S. Magistrate Judge Virginia Demarchi's ruling came on a search warrant application in an opioid trafficking investigation requesting permission to forcibly obtain biometric data, such as a fingerprint, to unlock a phone. Demarchi wrote that compelling suspects to unlock their devices for law enforcement is "inherently testimonial."

"Here, compelling an individual who is a target of the investigation to use his or her finger or face to unlock a device represents incriminating testimony within the meaning of the Fifth Amendment because it amounts to an assertion of fact that the individual has the ability to unlock the device; which in turn makes it more like that the individual locked the device and put the material sought by the warrant on the device," wrote Demarchi, who is based in San Jose, California.

Demarchi's order follows a January ruling on biometrics from U.S. Magistrate Judge Kandis Westmore in Oakland, California. In a social media extortion investigation, Westmore decided that it violated the Fifth Amendment to compel the use of biometric features for an authorized search.

"Courts have an obligation to safeguard constitutional rights and cannot permit those rights to be diminished merely due to the advancement of technology," she wrote, citing Carpenter v. United States. "Citizens do not contemplate waiving their civil rights when using new technology, and the Supreme Court has concluded that, to find otherwise, would leave individuals 'at the mercy of advancing technology.'"

Orin Kerr, a professor at the University of California Berkeley School of Law, disagrees that the Fifth Amendment applies here. "The problem is that the [Fifth] Amendment test for whether something is testimonial is not its evidentiary significance," he wrote. "The question is what the person is being forced to say, not what the government may learn as a consequence of the person's act."

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A New Definition of Concealed for the Digital Age

After a teen reportedly attempted to garner sexual favors for a buddy by leveraging an explicit video he took of a sexual partner without her consent, The Court of Appeal of the State of California for the Second Appellate District decided to clarify the definition of concealment as it pertains to privacy in the bedroom.

The case, hailing from Los Angeles County Superior Court, involves two minors called K.V. and R.C. While the teenagers were having sex at their friend Emilio's house, R.C. allegedly pulled out his phone and told K.V., "I'm recording, OK." K.V. claims she asked R.C. to stop recording and delete the video, but he would not. Instead, R.C. allegedly said he would only delete the video if K.V. performed sexual acts on Emilio. K.V. refused, and later that day R.C. said he deleted the video. But a couple months later, K.V., who is represented in the appeal by California Attorney General Xavier Becerra, started hearing rumors that her classmates had watched the video.

A juvenile court strapped R.C. with six months of probation for unauthorized invasion of privacy. However, R.C. and his lawyers from the Law Offices of Esther R. Sorkin contend there is no evidence to suggest his phone was concealed, which is required to invoke Penal Code section 647 subdivision (j)(3)(A). The statute bars the use of a concealed camera to secretly record a person who is indisposed for the purpose of viewing their body or undergarments in a bedroom or other setting where there's a reasonable expectation of privacy.

R.C. asserts that just because a person is unaware of a recording device does not mean it is concealed, contending that he made no attempt to hide his phone. However, the court argues that conceal could also be defined as the plain old Merriam-Webster definition: to prevent disclosure or recognition of. "Here, contrary to R.C.'s revisionist view of the record, R.C. did take 'a specific action' designed to prevent K.V. from seeing the cellphone camera: He kept it out of K.V.'s sight and hidden from her view until after he announced he had begun recording. Thus, in the words of the statute, he concealed it from her," wrote Associate Justice Brian Currey, alongside Presiding Justice Nora Manella and Associate Justice Audrey B. Collins.

The justices also sought to clarify their stance on a similar statute in a Utah case that R.C. relied on in his defense. In State v. Bilek, the defendant claimed even though his photo subject was unconscious, he did not conceal his camera since it was in plain sight. "It is not our place to interpret the Utah statute, but section 647, subdivision (j)(3)(A) plainly is concerned with a camera that is 'concealed' from the person being secretly photographed. Rendering someone unconscious strikes us as an effective way of keeping a camera out of the victim's sight, and therefore concealed," Currey wrote.

Anthony Levadowski, leaves District Court in San Jose after being indicted for trade secret theft. (Photo: Jason Doiy/ALM)

On the Radar

Levandowski's Trade Secret Battle Wages On  The federal government has charged Anthony Levandowski, the former head of Google's autonomous vehicle project, with 33 counts related to trade-secret theft. In 2016, the engineer allegedly left his post at the tech giant with 14,000 documents in hand to start his own company, Otto, which Uber bought for $680 million. Levandowski's lawyers from Ramsey & Ehrlich argue the case rehashes claims invalidated in the civil case. Read more from Ross Todd here.

AI Inventors and the Future of IP As lawyers begin filing patents on behalf of machines, the USPTO has formally requested comments from the public on the nuances of inventions from artificially intelligent creators. For instance, the office is asking experts to weigh in on whether the current legal and regulatory framework needs to change to accommodate AI-driven innovations. Lawyers from Fish & Richardson and Winston & Strawn share their answers to the USPTO's questions. Read more from Scott Graham here. 

Is YouTube Too Big to Block?  A panel for the U.S. Court of Appeals for the Ninth Circuit considered arguments over whether YouTube's dominance in online video equates it to a state actor. Last Tuesday, Peter Obstler of Browne George Ross, representing Prager University founded by conservative political commentator Dennis Prager, asked to revive claims against Google for demonetizing and blocking access to certain PragerU videos on YouTube. Obstler argued that YouTube is a public forum similar to a "company town." Read more from Ross Todd here.

Thanks for reading. We will be back next week with more What's Next.