## Facts

- The Federal Trade Commission (FTC), through the United States, filed a civil enforcement action in the U.S. District Court for the Central District of California against LAI Systems, LLC (LAI).
- LAI developed and distributed mobile applications to consumers, including apps alleged to be directed to children under age 13.
- LAI earned revenue by allowing third-party advertisers to collect data from users of LAI’s apps.
- The FTC alleged that third-party advertisers collected “persistent identifiers” from app users, including identifiers such as cookies, internet protocol (IP) addresses, and device identifiers.
- The FTC alleged that, under COPPA, these persistent identifiers qualify as “personal information” when they can be used to recognize a user over time and across different websites or online services.
- The FTC alleged LAI did not tell the third-party advertisers that LAI’s apps were directed to children.
- The FTC alleged LAI did not give adequate notice to child users or their parents about the collection of personal information and did not obtain verifiable parental consent before allowing the collection.
- The matter was resolved shortly after filing through a stipulated order for permanent injunction and civil penalty judgment, including a $60,000 civil penalty, without a litigated merits decision.

## Issues

1. Whether an operator of child-directed mobile apps violates COPPA and the COPPA Rule by allowing third-party advertisers to collect children’s persistent identifiers without adequate notice and verifiable parental consent.
2. Whether persistent identifiers collected through mobile apps can constitute “personal information” under COPPA when used to recognize a user over time and across online services.
3. Whether a permanent injunction and civil penalty are appropriate remedies where the FTC alleges COPPA violations involving third-party advertising data collection in child-directed apps.

## Decision

- The court entered a stipulated order for permanent injunction and civil penalty judgment in favor of the United States and against LAI Systems, LLC.
- The order permanently restrained and enjoined LAI (and those acting in concert with LAI who received notice of the order) from violating the Children’s Online Privacy Protection Rule, 16 C.F.R. Part 312, in connection with operating any website or online service directed to children, or any site/service with actual knowledge it is collecting or maintaining personal information from a child.
- The order imposed forward-looking COPPA-related requirements typical of FTC COPPA judgments, including requirements tied to notice, parental consent, and handling of children’s personal information.
- The court entered a civil penalty judgment of $60,000 against LAI.
- The case concluded through the stipulated judgment, rather than through an adjudicated opinion resolving disputed facts or legal questions.

## Legal Principles

- COPPA and the COPPA Rule treat certain persistent identifiers (such as device identifiers and IP addresses) as “personal information” when used to recognize a user over time and across websites or online services.
- Operators of child-directed online services may be responsible under COPPA when their products permit third parties (such as ad networks) to collect children’s personal information through the operator’s service.
- COPPA generally requires clear disclosure of information practices and verifiable parental consent before collecting, using, or disclosing children’s personal information, including collection by third parties through an operator’s child-directed app.
- In FTC COPPA enforcement actions resolved by consent, courts may enter permanent injunctions that incorporate COPPA Rule obligations as enforceable court requirements, along with civil penalties and compliance-related provisions (such as reporting and recordkeeping).

## Conclusion

United States of America v. LAI Systems is a COPPA enforcement action alleging that LAI’s child-directed mobile apps allowed third-party advertisers to collect children’s persistent identifiers without adequate notice to parents and verifiable parental consent; the case ended in a stipulated permanent injunction requiring future conduct consistent with the COPPA Rule and a $60,000 civil penalty.


United States of America v. LAI Systems, Case No 2:15-cv-9691 (2015)