The Naked Truth – Follow up to "The Virtual Strip Search"

(Photo by: Hunter-Desportes)

[Update of earlier post: The Virtual Strip Search (Jan. 11, 2011)]

There are a countless number of articles circling the internet about the controversy surrounding the full body scanners at the airport. This entry addresses what the Transportation Safety Administration (TSA) has to say about them.

According to the TSA, the purpose of the Advanced Imaging Technology (full body scanners) is to expose threats that a traditional metal detector would miss (detecting both metallic and non-metallic threat items). A threat to airlines by terrorists still exists and bombs can be made the do not contain mental (the Christmas Day bomber is an example). Greg Soule, a TSA spokesperson stated “this year alone, the use of advances imaging technology has led to the detection of over 130 prohibited, illegal or dangerous items.” To see the recent video created by the TSA to inform passengers about the full body scanners click here.

Initially there was a growing concern regarding the new scanners from pilots. In an effort to prevent a backlash against the scanners from the pilots the TSA is now allowing those who present company and government photo identification to skip the scans. There were also concerns about the amount of radiation the scanners gave off and whether they could potentially pose health problems in the future. TSA’s answer is that the scanners are safe and the public should not be concerned. Only some of the scanners emit radiation and the ones that do emit very low levels, lower than the levels of radiation we encounter every day. In addition to that information the FDA, American College of Radiology and the John Hopkins University Applied Physical Laboratory have all studied the machines and declared them to be safe.

Despite all the negative press the full body scanners have been getting a recent CBS News poll stated that 81% of Americans supported the use of full body scanners and according to TSA more than 90% of passengers choose to go though the scanner rather than opting out of the scan.

Costco v. Omega and the Evolution of the First Sale Doctrine

(Photo by: B. Tse)

The First Sale Doctrine, without many people being aware of it, is one of the most prevalent and applicable sections of U.S. copyright law. The First Sale Doctrine, found in 17 U.S.C. § 109(a) of the 1976 U.S. Copyright Act, provides that “[t]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”

The application of the First Sale Doctrine affects our daily lives in fundamental ways, yet most people benefit from the doctrine without actually knowing what it is. For example, anyone engaged in buying or selling books on Amazon, or anyone attempting to find a new home for a vintage sports jersey on eBay, or anyone marketing a painting on Etsy can with relatively few constraints. Typically, the book, jersey or painting is sold, and while the host site may take a small commission, the seller reaps the monetary windfall. But, it should be known that without the First Sale Doctrine, a percentage of the sale of personal property, provided it is a copyrighted work, would have to go to the copyright owner. Still, most of us simply assume that we can discard personal property in any manner we see fit, yet without the First Sale Doctrine, our concept of personal property would drastically change. The ability to control, get rid of, or determine the fate of the objects you own seems fundamental, yet, without the First Sale Doctrine, controlling personal property would be subject to several limitations.

While it is easy to see how the First Sale Doctrine operates to protect buyers and sellers in the secondary market, the U.S. Supreme Court is currently hearing oral arguments by the Costco Corporation and the Omega watch-making company to determine whether the First Sale Doctrine applies to situations where goods manufactured internationally are sold on the gray market in the U.S. In Costco, Omega manufactured watches in Switzerland, and then sold them to Latin American dealers. The watches then were sold, through back channels, to the Costco corporation, who sold the watches below retail price, thus undercutting the price at which Omega typically sold their watches in the U.S.

The most relevant case law is Quality King Distribs., Inc. v. L’Anza Research Int’l, 523 U.S. 135 (1998), where the Court held that if works manufactured in the U.S. are exported internationally and are then imported back to the U.S., the buyer/importer is permitted to distribute the works at will, and the copyright holder’s rights (i.e., L’Anza’s) are not infringed. Despite this more recent development, however, the inception of the First Sale Doctrine is found in the 1908 case of Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), where the court held that copyright owners may not limit the sale or distribution of their works after their initial sale.

Costco adds more complications to the issue presented, mostly because it deals with works manufactured abroad. It will be determined, when the Court issues their opinion, whether the same rule of law will apply as was applied in Quality King. The current need is for a First Sale Doctrine that effectively governs the prevalence of the international manufacturing, import and export markets. The Court may either expand on Bobbs-Merrill — a case whose outcome predates our current global economy — or find that the Bobbs-Merrill Rule (while keeping Quality King in mind) is still applicable. In Quality King, the Court seemingly promoted a free market economy and a looser interpretation of the First Sale Doctrine. Yet, at the same time, it also approved of a system whereby U.S. companies are undercut in U.S. sales. Now, whether that promotes U.S. manufacturing and discourages international sales in the first place remains to be seen in Costco.

Perhaps the Court, in Quality King, was attempting to encourage U.S. companies to manufacture and sell their goods within the U.S. to benefit the American market. But, in the case of internationally manufactured goods, will the court find in favor of Costco and the argument that the American market is made stronger when goods are made more cheaply and readily available? This is why Quality King is somewhat perplexing; if the Court wanted to encourage U.S. manufacturing to compete with the European market and instead sell their goods in the U.S. in order to prevent gray market sales, why did they make it harder for L’Anza, an American company to make their goods available to a ready global market? Surely, allowing L’Anza to have more control over subsequent sales of their goods would have made them a stronger and more financially stable company, and it might follow that encouraging international sales could result in a surge of productivity by L’Anza and other similar companies.

The reasoning is by no means linear, and the effects of Quality King are neither straightforward nor fully realized. Therefore the Court’s consideration of the economic and legal ramifications of either extending or denying application of the First Sale Doctrine to grey market sales in the U.S. of internationally manufactured goods has the potential to shore up the limits of the doctrine itself. At present, the doctrine is pretty elastic; the statute itself is not specific, and seemingly embraces a policy of “you buy it, you own it.” The Court has the opportunity in Costco to place constraints on this aspect of the First Sale Doctrine, and it remains to be seen how the Court believes the doctrine should function in an undeniably global economy.

Supreme Court to Review Largest Award Ever Given in Patent Infringement Case

(Photo by: Tsukubajin)

Back in November, the Supreme Court granted certiorari in Microsoft v. i4i. The small Canadian company sued Microsoft for patent infringement and was awarded $290 million in damages. Microsoft claims that standard of proof was misapplied in this case.

The dispute arose in 2007 after i4i claimed that Microsoft misused its patent in Word 2004 and 2007. The patent is for text manipulation software which Microsoft has since stopped including in its program. In 2009, the trial court awarded i4i $290 million in damages. Microsoft appealed the decision which was later affirmed. The Supreme Court announced its decision to hear the case sometime in 2011. Chief Justice Roberts has already recused himself because he owns Microsoft stock.

With the support of technology titans Yahoo, Apple, Google, HP, and Facebook behind them Microsoft is hardly the only one advocating for a change. Microsoft’s defense was that the patent was invalid. The current standard for proving that defense is by “clear and convincing evidence.” It has been the standard for the past 26 years. Microsoft defended its position by saying there was evidence that there was a prior offer of sale that the US Patent and Trademark Office did not consider. In light of that, Microsoft believes the standard should have been lowered to the normal “preponderance of the evidence” standard in civil cases.

If the Supreme Court decides to lower the standard for patent infringement defenses, it will have a dramatic effect on patents. Courts will be put in a position to invalidate a high number of patents. It will make it more likely that good patents will be invalidated as courts are flooded with patent legislation. Furthermore, a lower standard will make patents more susceptible to infringement. Proponents are quick to respond that it is also more likely to invalidate bad and questionable patents as well. Some commentators feel that this is a case of big business attempting to impose its will on small, individual patent holders and inventors.

Whichever side the Court comes down on, there will be significant benefits and drawbacks. This highlights the need for real reform at the US Patent and Trademark Office. If the USPTO had the resources to efficiently and properly research each application, then the courts could give greater deference to an issued patent. This would reduce litigation by making rulings more predictable and give businesses a clearer picture of the bounds of their IP rights. Even after centuries of patent case, standards are still unclear, leading to many lower court decisions being overturned. Microsoft v. i4i is another example of why the courts are not the proper place to determine a patent’s validity.

Jailbreaking Smartphones: A Recognized Fair Use

(Photo by: Thanushyon)

Jailbreaking a smart-phone allows individuals to run unapproved applications. Apple pushed for a ruling that jailbreaking was illegal under the Digital Millennium Copyright Act. However, in a ruling on July 26th, 2010, the Library of Congress affirmed the legality of the practice by approving a fair use exception, thereby allowing jailbreaking to continue legally, at least for now.

The iPhone is a popular smart-phone manufactured by Apple; the iPhone held a 14.4% worldwide smart-phone market share in 2010. An iPhone user seeking to purchase additional software for their phone can purchase software at the App Store. Only software applications that are approved by Apple are available in the App Store. According to the Apple website, any application is subject to an approval process “in order to protect consumer privacy, safeguard children from inappropriate content, and avoid applications that degrade the core experience of the iPhone”.

To jailbreak a smartphone, the user replaces the firmware (the operating system software controlling basic phone function) with a modified version. The modified versions of the code remove any requirement that third party applications have completed the approval process. The modified versions are provided by the jailbreak community free of charge.

To jailbreak or not to jailbreak? That is the question that smart-phone owners have been asking themselves. The benefits of jailbreaking include the capability to utilize additional unapproved applications and customizations. It is also worth noting that a jailbroken iPhone can also access cracked Apple applications (one of the points that Apple is so concerned about). On the other hand, many users hesitate to jailbreak because this voids the warranty provided by Apple and a small potential exists that the phone will be damaged by the process. In 2009, about 2.3 million jailbroken iPhones existed (according to the New York Times).

Apple still claims that the practice of jailbreaking violates the Digital Millennium Copyright Act. The DMCA contains an anti-circumvention provision under §1201(a)(1) governing “the act of circumventing a technological protection measure put in place by a copyright owner to control access to a copyrighted work”. In other words, a copier cannot break into a locked room to copy a book. Apples point is that jailbreaking the phone requires a modification to the phone’s copyright protected Operating Software (OS). Furthermore, they state that recognizing a fair use exception will lead to an increase in pirated software (pirated software does not function on a non-jailbroken phone). Apple makes it exceedingly clear that jailbreaking an iPhone voids its warranty and stresses the potential damage to the device.

Here we have an all-too-typical situation: an industry giant attempting to hijack a body of law to serve a purpose that it was not intended to serve. Apple’s real interest in limiting access to third party applications is to ensure that these software revenue streams will remain open for them and exclusively under their controls (Apple takes a 30% cut from apps sold in their app store). They seek to inhibit legitimate competition in the market for iPhone software and ensure that their monopoly continues. Reverse engineering is a recognized fair use when done for purposes of fostering interoperability with independently created software and, thankfully, the Library of Congress promulgated the exception for jailbreaking using this rationale. So for now, Users that purchase smart-phone devices retain the freedom to customize their devices.

Slash Not Welcome in the Jungle: Axl Rose Sues Activision Over Use of Slash's Image in Guitar Hero III

Axl Rose is suing Activision for $20 million for allegedly breaking its promise not to include images of Slash, his former band mate in Guns N’ Roses, in Guitar Hero III. Mr. Rose claims that this promise was a condition of his granting Activision a license to use the song “Welcome to the Jungle” in Guitar Hero III. This promise was allegedly in the form of a written agreement in a series of emails. An animated version of Slash appears on the cover of the videogame. The suit claims fraud and breach of contract amongst other causes for relief.

It may be difficult to prove breach of contract due to the parol evidence rule. The parol evidence rule concerns what can be admitted as evidence when the court considers a contract. California’s parol evidence rule states that “[t]erms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement . . . .” Cal. Civ. Proc. Code § 1856(a) (2007).

A full parol evidence analysis is beyond the scope of this blog entry, and would require a copy of the contract, all relevant material, and the actual complaint; therefore this blog post will concentrate on just one limited aspect. If the court finds that the parties had a contract that was a “writing intended by the parties as a final expression of their agreement,” that will affect the admissibility of evidence of a prior agreement. If the email agreement to not use Slash’s image was made prior to the contract, that agreement will not be admissible as evidence to contradict the contract.

Prior agreements can, nevertheless, be admitted to show fraud. Under California law, the key language which defines fraudulent deceit is “[o]ne who willfully deceives another with intent to induce him to alter his position to his injury . . . .” Cal. Civ. Code § 1709 (2009). Deceit is defined as:

1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 2. The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true; 3. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or, 4. A promise, made without any intention of performing it.

Cal. Civ. Code § 1710 (2009). In order for Mr. Rose to succeed with a fraud claim, he will have to prove that Activision purposely deceived him with the intention of getting him to license “Welcome to the Jungle” to Activision. Fraud cases are often difficult to prove, as there is rarely a “smoking gun” to show the fraudulent intention, and instead, must often rely on the fact-finder to impute intent based on circumstantial evidence. Yet, the fraud claim may wind up being stronger than the breach of contract claim because the parol evidence rule can absolutely bar evidence from even being considered at trial.

The Virtual Strip Search

In July 2010, the Electronic Privacy Information Center (EPIC) filed a lawsuit against the Department of Homeland Security over these scanners. EPIC asked for an emergency stay and the appeals court denied the request. EPIC argues that the scanners violate the Fourth Amendment, the Privacy Act, the Religious Freedom Restoration Act, and the Video Voyeurism Prevention Act (for a discussion about the Video Voyeurism Prevention Act click here).

TSA implemented privacy protection procedures when the full body scanners began arriving in airports this past March 2010. Some of the privacy protection measures include: the individuals face is blurred, the TSA worker who views the image is located in another room where they cannot see the actual person, and the individual can opt out of the full body scan for a full body pat down instead.

The health concern is related to over exposure to radiation and the possibility that the over exposure could cause cancer. Recently, the Allied Pilots Association recommended to their members to submit to the full body search rather than go through the scanner because of health concerns for frequent air travelers.

The question then is: should we hamper our technological abilities to counter terrorism in our airports when the terrorists are not hindering their efforts to create undetectable bombs? You can scan me if that means I am more likely to arrive safely at my final destination.

The Technologically Challenged Tax Code

(Photo by: Ambimb)

While operating a cell phone has become so simple that it seems like every ten-year-old has one, dissecting your cell’s bill has become so confusing it almost requires the use of the Rosetta Stone. Anyone who has had the joy of questioning a cell phone bill knows how hard it is to decipher what fee is for what and which charge goes to what line. It has come to the point where it is more efficient to just pay the bill rather than waste half the day waiting on hold to try to correct the discrepancy with technical support. Over the last few years, it seems like every month there is a new “regulatory fee” or tax increase. For those of us locked into two year contracts so we could afford to buy the newest Blackberry Apocalypse or iPhone 12, what choice do we have but pay it? Luckily the end is in sight, at least partially.

Last year the Cell Tax Fairness Act was introduced, a bill which, if enacted, would ban any new state or local taxes imposed on mobile phones. Currently, taxes on cell phones are twice that of other goods and services. In recent years, these taxes increase four times faster than similar taxes on other goods and services, according to a study by the National Taxpayers Union. While the Act would not repeal any existing state or local taxes, it would prevent further taxation from being enacted.

While it might not result in significant savings, the Act would be a welcome relief for taxpayers who have little recourse against the recent tax hikes in an increasingly cell phone driven world. Not only will it prevent state and local governments from increasing our tax bill, but it will prevent wireless companies from increasing fees and dressing them up as mandatory taxes. Every cell phone bill is riddled with various fees and charges that are passed off as mandatory and presented as if they are imposed by the government. With the enactment of the Cell Tax Fairness Act, consumers can be certain that any new “fee” imposed by their specific carrier, could possibly be avoided on another network. If nothing else, this will give the public back some of the bargaining power and clarity when analyzing their next bill.

Congress has already passed another measure to repeal a provision in the tax code which currently treats personal use of an employer provided cell phone as taxable income to the employee. This legislation, coupled with the Cell Tax Fairness Act, demonstrate a few small steps toward tax reform. There are countless areas of the tax code in great need of an overhaul due to the ever-changing technological world. Every step toward reform is a welcome shift from the outdated, archaic rules that were enacted decades before the Internet existed.