What I actually think would happen is that Photoshop would be mildly more expensive, and would contain code which tries to recognize and stop things like editing a photo of a driver’s license.
So free software would be effectively banned? Both free-as-in-beer (because that can’t pay for liability) and free-as-in-speech (because that doesn’t allow controlling distribution).
Many software products are free even if supplied by a corporation. For example, the Visual Studio programming environment is free to you and me, but charges for enterprise licenses.
If Microsoft is liable to the full depth of its very deep pockets for the harm of computer viruses I write in Visual Studio, and needs to pay for that out of their profits, they are unlikely to continue offering the free community license they currently do.
Presumably the project itself would be housed in an LLC, so individual developers would be shielded that way.
If the developers didn’t go through an LLC at all at any step, then yeah, they’d be liable. But if we’re in a world consistently using this sort of liability law, then presumably developers would know to use LLCs, in the same way that developers today know to attach a standard open-source license. (And today’s open-source developers can, IIUC, be liable for problems if they don’t attach the right license to their software.)
Naive question: What stops a company from conducting all transactions through LLCs and using them as liability shields?
I’m imagining something like: Instead of me selling a car to Joe, I create a LLC, loan the LLC the money to buy a car, sell the car to the LLC for the loaned money, the LLC sells the car to Joe for the same price, uses Joe’s money to repay the loan, leaving the LLC with zero assets, and no direct business relationship between me and Joe.
I imagine we must already have something that stops this from working, but I don’t know what it is.
So I googled this real quick and found a list of exceptions here.
Signs a personal guarantee of the loan or other business debt and the LLC defaults on its payments
Personally and directly harms or injures someone
Fails to deposit taxes withheld from the LLC’s employees’ wages
Intentionally takes action that is fraudulent, illegal, or reckless that results in damage to the company or harm to somebody else
Fails to treat the LLC as a separate legal entity
I think the bolded reason is why your proposed scheme won’t work. This would probably also be why a company couldn’t shield themselves from liability for harm from their AI product by making a bunch of subsidiaries they wholly own—those aren’t really separate entities.
To ensure that you are treating the LLC as a separate legal entity, the owners must:
Avoid co-mingling assets . The LLC must have its own federal employer identification number and business-only checking account. An owner’s personal finances should never be included in the LLC’s accounting books. All business debts should be paid out of the LLC’s dedicated bank account.
Act fairly. The LLC should make honest representations regarding the LLC’s finances to vendors, creditors or other interested parties.
Operating Agreement. Have all the members executed a formal written operating agreement that sets forth the terms and conditions of the LLC’s existence.
I imagine the bite is in the “act fairly” part? That sounds distressingly like the judge just squints at your LLC and decides whether they think you’re being reasonable.
So free software would be effectively banned? Both free-as-in-beer (because that can’t pay for liability) and free-as-in-speech (because that doesn’t allow controlling distribution).
Limited liability is still a thing, so e.g. open source projects would probably be fine, as long as they’re not making any money.
Many software products are free even if supplied by a corporation. For example, the Visual Studio programming environment is free to you and me, but charges for enterprise licenses.
If Microsoft is liable to the full depth of its very deep pockets for the harm of computer viruses I write in Visual Studio, and needs to pay for that out of their profits, they are unlikely to continue offering the free community license they currently do.
Wouldn’t the individual developers on the project be personally liable if they didn’t do it through a LLC?
Presumably the project itself would be housed in an LLC, so individual developers would be shielded that way.
If the developers didn’t go through an LLC at all at any step, then yeah, they’d be liable. But if we’re in a world consistently using this sort of liability law, then presumably developers would know to use LLCs, in the same way that developers today know to attach a standard open-source license. (And today’s open-source developers can, IIUC, be liable for problems if they don’t attach the right license to their software.)
Naive question: What stops a company from conducting all transactions through LLCs and using them as liability shields?
I’m imagining something like: Instead of me selling a car to Joe, I create a LLC, loan the LLC the money to buy a car, sell the car to the LLC for the loaned money, the LLC sells the car to Joe for the same price, uses Joe’s money to repay the loan, leaving the LLC with zero assets, and no direct business relationship between me and Joe.
I imagine we must already have something that stops this from working, but I don’t know what it is.
So I googled this real quick and found a list of exceptions here.
Signs a personal guarantee of the loan or other business debt and the LLC defaults on its payments
Personally and directly harms or injures someone
Fails to deposit taxes withheld from the LLC’s employees’ wages
Intentionally takes action that is fraudulent, illegal, or reckless that results in damage to the company or harm to somebody else
Fails to treat the LLC as a separate legal entity
I think the bolded reason is why your proposed scheme won’t work. This would probably also be why a company couldn’t shield themselves from liability for harm from their AI product by making a bunch of subsidiaries they wholly own—those aren’t really separate entities.
Thanks for doing research!
Your link goes on to say:
I imagine the bite is in the “act fairly” part? That sounds distressingly like the judge just squints at your LLC and decides whether they think you’re being reasonable.