Thursday, October 27, 2011
Private Crackdown on Copyright Infringement
Photo courtesy of Richard Ericksson
Hollywood and the music industry announced a new policy in July aimed at cracking down on copyright infringement by Internet users. The agreement, which also involved Internet service providers (ISPs) such as AT&T, Cablevision, Comcast, Time Warner, and Verizon, requires the ISPs to punish their customers who are suspected of violating copyrights. An Internet-service customer who downloads movies or music from peer-to-peer networks may be subjected to “mitigation measures.”
The mitigation measures are graduated—first, an email alert is sent to the suspected infringer stating that the user may have misused their Internet account for online content theft. If a second suspected offense is committed, the user may receive an email “educating” him/her about the legalities of online file sharing. If several more suspected violations are committed, the user’s ISP may temporarily reduce the user’s Internet speed, or redirect the user to a landing page. At this point the user would either need to contact his/her ISP or respond to some educational information regarding copyrights.
This is disturbing enough, but emails obtained through the Freedom of Information Act and provided to Wired.com, reveal something even more troubling. The U.S. copyright czar, as well as other top-ranking Obama administration officials, were involved in the closed-door negotiations leading to this agreement. This is troubling because despite the fact that the U.S. government has an extensive copyright statute to protect copyright holders, it is also pushing its enforcement policy through private action that is not subject to judicial review.
Further, consumer advocacy groups were hardly consulted during these negotiations and were not given the opportunity to provide any sort of substantive input. Some people may not be troubled by such actions taken by government officials, or some may feel indifferent. But the question that must be asked is what is the proper role of government? Here it seems that the federal government is pushing policies through private contracts between ISPs and their customers. Such contracts are much more likely to be enforced than a federal statute that says the same thing. Not to mention that Congress itself is being bypassed through such a process, eliminating the need for Congress’ approval of a de facto legislative act.
Supreme Court Set to Hear Arguments on GPS Tracking Devices in United States v. Jones
Photo courtesy of Sho Hashimoto on Flickr
On November 8th, the Supreme Court will hear arguments in what the New York Times has described as, “the most important Fourth Amendment case in a decade.” United States v. Jones is on appeal from the D.C. Circuit, and considers the issue of whether law enforcement can install and subsequently monitor a GPS tracking device on a suspect’s car without first obtaining a warrant. The Supreme Court was inclined to grant certiorari following a decision by the D.C. Circuit that the police violated defendant Jones’s Fourth Amendment rights, a clear split from other circuit courts which have heard the issue.
The case is essentially the next step in a pair of decisions handed down by the Court in 1983 and 1984, United States v. Knotts and United States v. Karo, respectively. In Knotts and Karo the Supreme Court ruled that monitoring a beeper tracking device attached to a suspect’s car was not a Fourth Amendment violation. The Court’s decision stemmed from the fact that one could not have a reasonable expectation of privacy in their public movements, because the police could have essentially conducted the same surveillance without the aid of the tracking device. Defendant’s which have attempted to distinguish themselves from the Knotts and Karo decisions have focused on dicta in Knotts, explaining that the issue could be reconsidered when twenty-four hour surveillance encompassing dragnet-type law enforcement was being conducted. The circuit courts which considered the GPS issue prior to the D.C. Circuit all found that law enforcement did not use GPS tracking devices in a volume to be distinguished based on the language in Knotts.
In the D.C. case, the circuit court took an alternate approach. Instead of considering the amount of people being investigated with GPS tracking devices, the court determined that the Knotts court was actually referring to the length of the surveillance. The court found that the vast technological differences between GPS and beepers enabled the police to conduct surveillance for a much longer period of time and in greater detail. Beepers require the police to follow a suspect’s car and only give the relative distance that the police are from the suspect. GPS on the other hand, is able to map a suspect’s movement without any police involvement. The D.C. Circuit relied on a mosaic theory, essentially finding that the sum of the information provided by GPS was greater than the amount of information the suspect intended to convey through his public movements.
Despite the rulings in Knotts and Karo, the Supreme Court should distinguish GPS technology from the beeper technology used in those cases. Without a warrant, police are free to conduct GPS surveillance on whomever they please, without making any showing of suspicion. In beeper technology cases, law enforcement were still limited as to how they could conduct surveillance. Beepers required police to still be an active part of the investigation because they had to follow the electronic beeps emitted by the device. Besides the initial investigation, police can monitor GPS passively. This, combined with the falling cost of GPS, means that police can monitor a greater number of people than traditional or beeper technology would allow, going beyond the capabilities of surveillance the public reasonably expects.
Facebook-Tapping: Facebook sued for watching you once you sign-out.
Photo courtesy of Alan Cleaver on Flickr
It seems like Facebook maybe tapping our computers without us knowing. Recently, a lawsuit was filed against the social networking site claiming that they monitor their users after they log out. The lawsuit seeks class action status and is requesting that the court block the tracking of users based on violations of federal wiretapping laws, computer fraud, and abuse fraud. With Facebook already facing privacy concerns over their new features such as “Timeline,” this could be one of many lawsuits the social-networking powerhouse faces in the near future.
The issue arose after an Australian blogger conducted tests on Facebook’s cookies. He discovered that when users logged out of Facebook the site did not delete their “tracking cookies” but modified them so they were allowed to continue monitoring users. With this allegation, Facebook admitted that that cookies were used to track users even after they logged out. Just recently, Facebook has informed users that any cookies that were installed on user computers that track their Facebook interaction and websites have been removed.
Whatever the outcome of the lawsuit, users may feel a sense of concern over whether they will continue to be watched by Facebook. The federal wiretapping laws are set in place to prevent such monitoring without explicit authorization by a judge. However, there is already a sentiment building that the more power Facebook has over the social networking realm, the more likely they will continue to expose their users for financial and transactional purposes. With many users not technology savvy, Facebook has enough computer geniuses to figure out another way to monitor users without being detected. In the end, depending on what further information comes out of the lawsuit, if Facebook can’t continue to ensure a user’s privacy, then users may turn to emerging sites like Google+ to get their social networking fix.
Tuesday, October 25, 2011
E-Privacy: The Way the Cookie Crumbles
Photo Provided by: Pete Taylor on Flickr
Internet users have expressed an interest in protecting their personal information. Google Inc.’s Executive Chairman, Eric Schmidt, said some pretty scary stuff in a 2010 interview with The Wall Street Journal concerning the lack of privacy on the Internet. “[W]e [at Google] know roughly who you are, roughly what you care about, roughly who your friends are." “It will be very hard for people to watch or consume something that has not in some sense been tailored for them.” The EU has responded to these concerns with multiple Directives that are representative of value Europe places in protecting individual privacy.
Companies with websites are not yet sure how to comply with the new regulations. There are worries about how to actually implement the directive. If a website is forced to comply with the directive, operators will have to spend a lot of time and resources to make the changes.
If websites can no longer track user behavior, web operators will have to make uninformed, wild guesses about the best user experience. Being prevented from tracking user interests will prevent tailoring the experience and will result in less relevant and individually interesting user experience. The directive is overly broad. It should be limited to tracking individuals, but not include tracking users as a whole.
New Faction of Anonymous Targets Chinese Corporate Fraud in its First Report
Photo by: Anonymous Analytics
The computer hacking group “Anonymous,” has formed a new faction called Anonymous Analytics (Anonalytics for short) to target and expose corporate corruption. In its first report published in the last week of September, the group takes aim at a Chinese fruit and vegetable supplier allegedly involved in deceitful business practices. Interestingly, the government of Hong Kong announced that it was investigating the company on the same day Anonymous published the report. Was this a coincidence or an immediate victory for the group trying to improve corporate transparency?
Anonymous has achieved notoriety for executing a number of high profile cyber attacks against a wide range of targets including large corporations and government entities. While the group often has political or “hacktivist” motivations, its actions are not always so high-minded. Some Anonymous members have histories of defacing websites, stealing information, and executing other forms of digital hacks purely for the lulz or enjoyment, just because they can.
Anonalytics presents a face quite different from other Anonymous efforts - one of legitimacy focused on promoting access to information and transparency. Notably, the group staffed by analysts, forensic accountants, statisticians, computer experts, and lawyers, claims to use legal means to acquire information, which it fact-checks and vets prior to release.
The group focused its first publication on Chaoda Modern Agriculture, a company widely reported to have a history of fraud and deceiving shareholders and investors. The 38-page report (including full disclaimer) details a range of evidence showing fraudulent practices including the falsification of financial statements, operation through bogus companies, and illegitimate branding and promotion.
In addition to its claims and analysis of corporate fraud, the group also calls the Honk Kong Stock Exchange (HKEX) and Securities and Futures Commission into question for allowing Chaoda to operate unhindered for over 11 years. Coincidentally, HKEX’s Market Misconduct Tribunal and a Hong Kong government spokesperson released statements that they were investigating Chaoda and suspended the company from trading on the same day Anonalytics published its report. Chaoda’s stock has since plummeted and the company has hired DLA Piper to take legal action against the report.
Anonalytics admits that Chaoda presented an easy target for its first project. Regardless, its first report did not go unnoticed. It remains to be seen whether the group’s future investigations will directly influence major government action but Anonalytics certainly provides businesses with extra incentive to fly right and operate transparently.
Big businesses will likely take note of Anonalytic’s investigations and closely watch the group’s future activities. Will big businesses and regulators take measures to improve corporate transparency as a result of this new Anonymous faction? Does the forming of Anonylitics signal an evolution in Anonymous operations? It will be interesting to watch this developing situation and gauge the potential for effecting a significant change in corporate transparency.
Saturday, October 22, 2011
Holding Google Accountable: DOJ Settlement over Canadian Pharmaceutical Advertisements
Photo by: ahhyeah
Over eighty percent of Internet users worldwide use the Google search engine. Information sharing over the Internet has incredible benefit to society, but we must recognize that the corporation controls our access to that information. Further, any corporation’s main objective is to make profit and increase shareholder value, not to protect people. Google’s incredible control over the information we discover warrants robust government oversight – the recent settlement over illegal pharmaceutical advertising and sales is a positive step.
The issue in the Google Settlement is Google’s violation of The Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 331(a) and (d) and § 952. The Act makes it a crime to introduce into interstate commerce a misbranded or unapproved drug. Google allowed online pharmacies to buy advertising through its AdWords program and import prescription drugs into the United States. It also frequently assisted these advertisers with its “geo-tracking” function, which allows advertisers to focus on their ads in particular areas based on ad text and keywords.
Google was on notice that this activity violated US law. In March of 2003, the National Association of Boards of Pharmacy advised Google that the importation of prescription drugs from foreign countries is illegal. In response, Google hired various companies to monitor Canadian online pharmacies. The first was Square Trade, Inc., which allowed the pharmacies to self-certify their compliance with US law. Google knowingly allowed sellers who had self-certified to sell into the United States. The next was PharmacyChecker, LLC, which certified advertisers of non-controlled prescription drugs, which Google knew. Some advertisers didn’t meet either internal check and were still allowed to continue advertising. Lastly, Google knew that some advertisers, the “shady, fraudulent” ones , were not using pharmacy related terms in ad text, but instead only in key words. Since Google monitored advertisers that used pharmacy terms in text, this allowed many to go unnoticed. But Google knew of this practice and allowed it.
Google changed its practice after it became aware of the Government’s investigation, and in 2009 began to regulate online pharmacies more rigorously and allowed none from Canada. While a positive step, evading the regulatory arm of the US government in the prior years warrants this settlement. The FDA protects citizens, a vital role especially in our increasingly globalized world. We should welcome protections that safeguard our health. Accountability is vital to maintaining Google’s and society’s interests since Google has such incredible power to determine what information we discover.
An unexpected result of this settlement is the information that Canada’s regulatory regime for prescription drugs does not reach to Canadian pharmacies that ship prescription drugs to US residents. Plus, many of these pharmacies sell drugs obtained from outside of Canada, which lack adequate regulation. For the benefit of the reputation of Canada’s health system, this issue should be addressed in their government with proposed legislation to close that gap. And a request for the US government: show us the financial reporting from the Asset Forfeiture Program for the $500,000,000 dollars
Wednesday, October 19, 2011
Today Congress Giveth, Tomorrow They Taketh Away
Post oral argument and in feverous anticipation of the Supreme Court's opinion, I offer this belated summary of the procedural history of Golan v. Holder, 609 F. 3d 1076 (10th Cir. 2010). The Court's forthcoming opinion will have major implications regarding Congress' constitutional power and the predictability of copyright licensors and licensees worldwide.
Golan, et al., v. Holder is a challenge to the constitutionality of Section 514 of the Uruguay Round Agreements Act of 1989. Section 514 implements Article 18 of the Berne Convention of 1994, which would square copyright law in the United States with copyright law in over one hundred other countries. Much of this case is somewhat familiar territory because the Supreme Court heard a challenge to copyright extensions specifically in Eldred v. Ashcroft, 537 U.S. 186 (2003). In Eldred, the Court found that the “limited Times” language in the Constitution did not preclude Congress from extending copyright terms. Golan is distinguishable from Eldred because the legislation in question, Section 514, is retroactive, not an extension. The plaintiffs in Golan case range from conductors of symphonies, record labels, to motion picture production companies that use public domain works without a license. Well known works by Igor Stravinsky and H.G. Wells are just a couple examples of works that would be affected by Section 514. The plaintiffs’ key argument is that they relied on these works remaining in the public domain and Congress has never granted a retroactive copyright since the first Copyright Act of 1790. The defendants are copyright owners that would like to control the use of potentially lucrative works no longer covered by copyright. The amicus briefs for both petitioner and respondent are compelling because they are not simply public domain advocates versus copyright holders and licensors who are hoping to make a buck.
The first time around, a Colorado district court granted summary judgment to the plaintiffs. On appeal, the court remanded the case back down to the district court with instructions to determine whether Section 514 was content-based or content-neutral. This determination would inform how Section 514 would be analyzed. A content-neutral determination would deserve intermediate scrutiny and content-based would bring on the strict-scrutiny lens. The court found Section 514 to be content-neutral and again granted summary judgment for the plaintiffs holding Section 514 unconstitutional.
The Tenth Circuit Court of Appeals reversed the district court’s judgment and remanded the case with instructions to grant the government’s motion of summary judgment. The Tenth Circuit, using intermediate scrutiny, determined that Section 514 addresses an important government interest and a real harm. The court also determined that Section 514 would cure these harms. These determinations justified Congress’ intention. The court of appeals also determined that the plaintiffs’ speech and reliance on the works remaining in the public domain was not restricted therefore the First Amendment was not violated by Section 514.
This case brings the clash of author and public into the legal spotlight once again. One major negative consequence of this retroactive reinstatement of copyrights is the possibility that a work without a business minded copyright holder will be protected but underexposed or underutilized by the public. A possible positive outcome is that authors or the transferees will now aggressively market these newly protected works because monetary value will suddenly be at stake. The biggest drawback is that one of the major goals of the Copyright Act of 1976 was increased predictability for authors and copyright holders alike. But predictability is not what either party is getting. What if one of your most profitable business models was to capitalize off of copyrighted works that had fallen into the public domain? Without a contingency plan your business might be ruined.
For a discussion of the legal issues stemming from Golan v. Holder, see “Supreme Court Preview – Golan v. Holder: Can Congress Remove Works from the Public Domain?” by Anna Shapell
Supreme Court Preview – Golan v. Holder: Can Congress Remove Works from the Public Domain?
On Wednesday, October 5th, the Supreme Court heard arguments for Golan v. Holder, to decide whether Article I, § 8, cl. 8 of the Constitution prohibits Congress from taking works out of the public domain. This clause, known as the Progress Clause, exists to “promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Essentially, the Court’s task is to decide whether Congress can restore copyright protection for works whose copyright protection has already expired. For the purposes of Golan, analyzing the phrase “for limited times” will be particularly important to the Court as they discuss whether that limited time status is revocable by Congress for certain works—specifically foreign works.
U.S. copyright laws have always been formulated to accord with the time limitation mandated by the Progress Clause. Originally, or at least commencing with the 1909 Act, copyrighted works, so long as they complied with the requirements of notice and registration, were granted with a twenty-eight year period of copyrightability, which was renewable for a subsequent term of equal duration. This Act was then superseded by the Copyright Act of 1976. Regarding the term of protection under the 1976 Act, works created prior to 1976 received an extension amounting to fifty plus the life of the author. Subsequently, the Berne Convention was held, and in 1988, a two-part implementation took place. First, signatories to the Act are required to recognize the works of authors from other signatory countries, and second, all works (with an exception) shall have copyright protection for at least fifty years after the author’s death. It was not until 1998 and the enactment of the Copyright Term Extension Act (CTEA), more affectionately dubbed the “Sonny Bono Bonus Act,” that copyright duration as it exists today was implemented. The Act extended the duration of a copyright to the life of the author plus seventy years. Additionally, it stipulated that any works created in or after 1923 were, as they were still under copyright protection in 1998, were granted additional protection until 2019 or later. As a matter of course, since works created prior to January 1, 1978 (the triggering date for the 1976 Act) would naturally lapse into the public domain, the 1998 Act included that such works were to remain protected until 2047. Often the 1998 Act is called the Mickey Mouse Extension Act, because it was largely believed that the extension was granted in order to postpone the date at which copyright protection for Mickey Mouse would enter the public domain. And it is here that the issues in Golan arose.
Golan is irrevocably tied to another Supreme Court case of note, Eldred v. Ashcroft, decided in 2003. In Eldred, the plaintiff operated a website that displayed what new works entering the public domain were every year. The 1998 Act effectively put Eldred out of business, however, since per the Act, the next time any works will enter the public domain is 2019; Eldred would have to go on hiatus for quite some time before his website could finally be updated. Ultimately, the Court upheld the constitutionality of the CTEA. Represented by copyright advocate and champion Lawrence Lessig, Eldred made several arguments essentially claiming that this extension was just one of many the public could expect in order to prevent certain works from ever lapsing into the public domain. Lessig argued that the extension violated the limited nature of the Progress Clause, and invariably became unlimited. The solicitor general, arguing on behalf of the attorney general, countered by explaining that the very act of setting a time limit—seventy years plus the life of the author—was inherently limited because it set a hard date at which a copyrighted work would no longer be protected. The Court agreed with this argument, and others, and upheld the constitutionality of the Act 7-2. The ultimate impact of Eldred was to uphold the notion that Congress, empowered through the Progress Clause, is the appropriate body for setting the relevant limit.
Returning to Golan, the result of Eldred initially doomed Golan; the U.S. District Court for the District of Colorado dismissed the primary issue of whether the 1998 Act violated the limited time element of the Progress Clause. That case, originally under the name Golan v. Ashcroft in accordance with the fact that John Ashcroft was the attorney general at the time of suit, morphed into Golan v. Holder, as Attorney General Eric Holder was attorney general in 2009 when the suit was brought again. Under this new title, a new Act was brought under scrutiny: the 1994 Uruguay Rounds Agreement Act (URAA). This Act relies heavily on the restoration provisions of the Berne Convention. Under the 1988 Act, foreign works still copyrighted in their source country but that were not in the United States were restored to copyright protection in the U.S. But, in a twist, the United States refused to sign on to this particular aspect of the Berne Convention, and the criticism it faced as a result of this denouncement was remedied by the passing of the URAA. The relevant provision of the URAA restored copyright protection to foreign works that were previously not copyrighted in the United States. It is this provision of the URAA— in addition to the restoration provisions of the CTEA—with which Golan took issue.
As Eldred did for the CTEA, Golan challenges that the URAA violates the limitedness of copyright law by restoring certain foreign works to copyright protection. This argument was not persuasive at the district court level, nor at the in the Appeals Court for the Tenth Circuit. The Supreme Court then granted certiorari on March 7, 2011 for review in its upcoming term.
While oral arguments have been made, the outcome of this case in the Supreme Court could mean many things for the right of the public to copy works that have entered the public domain by virtue of the lapse of their copyright protection. Some argue that withdrawing certain works from the public domain will stifle creativity and discourage the production of new works. Preserving Congress’s right to restore copyright protection to works of its choosing opens up the possibility for doing so for unlimited works. Perhaps if Congress deems it necessary in the future, it will restore copyright protection to works it decides are worthy of continued protection. Advocates argue that the concept of a free and open public commons, one in which artists are free to draw on other works for inspiration, is threatened by a shrinking public domain. It is believed that focusing the Court’s attention on the integrity of the public domain, indeed, the public domain which allows U.S. artists and authors to use the foreign works at issue as a foundation for their own work, is at risk.
Conversely, the government could potentially argue that this practice of restoring copyright protection to certain works is a prerogative Congress has exercised before. The natural byproduct of passing new copyright laws extended copyright protection to works that would have lapsed by for the extension. For example, works created prior to 1978 were gifted with additional years of protection; those who sought to rely on the lapsing of the copyright for those works into the public domain were, at that time, disappointed, but the constitutionality of the 1978 was ultimately upheld. The same could be said for the extensions granted under Berne and the CETA, and therefore, the government could argue, for the sake of consistency, the Court should hold that the extensions under the URAA are similarly constitutional.
This case could finally settle the right of Congress to exclusively control the setting of the limits for copyrighted works. So long as there is a limit, it is the privilege of Congress to set that limit within reason. And in light of the rapidity of technological advancements and the impact that invariably has on the creation of new types of works, not allowing Congress to exclusively control the setting of limits certainly emphasizes a clear bottom line: those who believe the creative commons should be inherently public are hereby being disabused of that notion. In other words, copyright protection persists for the purpose of protecting the rights of artists and authors to continue to create without the threat of copying, which is the basic purpose of the Progress Clause. It will be interesting to see which side prevails, and whether the Court opts to sanctify the superiority of Congress in this matter, or instead upholds the accessibility of knowledge and ideas.
For an analysis of the procedural history of Golan v. Holder, see “Today Congress Giveth, Tomorrow They Taketh Away” by Charles Glyman.
A Whole New Kind of Overshare
Photo is entitled "Facebook" by Massimo Barbieri
On Thursday, September 22, 2011, Facebook founder and CEO, Mark Zuckerberg announced the newest Facebook features to come. Zuckerberg announced the new features at Facebook’s annual developers’ conference, explaining what he calls “Timeline” and “Ticker.”
According to Zuckerberg, Timeline is “the story of your life,” allowing users to fully express who they are by sharing and gathering user information in an entirely new way.
In Timeline, a user has different stories that appear at the bottom of the page on the left, while on the right side of the page, a timeline appears that basically compiles and breaks down previous user page posts from different points in time. Zuckerberg explained that these different story pages allow people to go back in time to earlier posts and feeds easily. Therefore, not only will recent shares be seen on the page, as they currently are, but posts will be organized by year, month, etc. The user will also be able to add photos and other information to these past time periods, like a scrapbook of sorts…adding information to their life that might have been missed for that period.
While Timeline appears to be a new and different way for users to gather and organize their personal information on pages, as well as efficiently view other friends’ information, the second new Facebook feature, “Ticker,” is wrought with privacy concerns.
Ticker and Open Graph are two programs that work complementary to one another. Open Graph is already existing through Facebook, and it is a map of user connections. Ticker takes Open Graph to the next step by taking everything a Facebook user is experiencing in real time and placing it on that map. Open Graph allows the user to obtain things like movies, music, games, shows, and news from different media content sources. Facebook, making it now easier through Ticker to post information to their profiles, is partnering with other companies and developers in order to stream information directly from certain sites to Facebook. What does this mean? For the Facebook user, it means that every song listened to, every movie watched, or every book read may appear on your Facebook profile page for the world to see (or at least all of your 2,000 “friends”).
Thus, without taking the extra steps to ensure that only information you want on your profile page is listed there, Facebook is taking it out of your hands by automatically wiring these things directly into your account when you log into these other sites with your Facebook account profile. Many users may decide to opt out of using Facebook for their social networking needs, as these new features could share more private matters than originally bargained for. By taking the choice out of sharing pictures, music, movies, books, and the like, Facebook may be offering more than users want, or maybe, this is exactly what this over-sharing society is looking for.
Wednesday, October 12, 2011
Supreme Court Says "GAME OVER" to Law Banning Minors from Purchasing Violent Video Games
Photo titled "Supreme Court Violent Videogame Trial Courtroom Drawings" courtesy of Zero-Lives on Flickr
This summer, the United States Supreme Court held that a California statute banning the sale or rental of “violent video games” to minors was unconstitutional. Justice Scalia, writing for the majority, held that video games qualified for First Amendment protection, that violent video games were not excluded from protection based on the Court’s obscenity jurisprudence, that violent video games were not unique so as to be their own category of unprotected speech, and that the California statute failed to meet strict scrutiny. Justice Alito and the Chief Justice concurred, with Justices Thomas and Breyer filing separate dissents.
The court briefly addressed whether video games as a technological medium qualified as speech protected under the First Amendment. Comparing video games to books, plays, and movies, the Court quickly held that video games were a protected form of speech.
The Court then addressed the issue of whether violent video games were considered obscenity, a form of non-protected speech. Focusing on the Court’s obscenity jurisprudence, Justice Scalia aptly noted that obscenity had been limited to certain sexually explicit content. The Court has had the opportunity to expand this definition on several occasions, including to violence, most recently in U.S. v. Stevens, but has declined to do so.
In holding that violent video games were not obscenity, the Court next addressed whether violent video games should be their own category of non-protected speech. Leaning on his originalist tendencies, Justice Scalia recounted the historical absence of banning minors from accessing violent content. The Court referenced the violence portrayed in Grimm’s Fairy Tales, Homer’s Odyssey, and Dante’s Inferno—stories that are currently, and historically have been, read to minors. Citing this historical exposure to violence, the Court found no reason to carve out a new exception for violent video games from the First Amendment.
At that point, the Court turned to a traditional strict scrutiny analysis, reiterating that a restriction of protected speech was presumptively invalid unless the state could demonstrate that the statute was narrowly tailored to serve a compelling government interest. Justice Scalia was quick to point to the lack of a causal link between minors playing violent video games and harm to minors. Without an actual harm that needed preventing, the Court logically held that the state had no compelling interest, and therefore the statute was unconstitutional.
The Court’s decision in Brown v. EMA is consistent with their First Amendment jurisprudence and is a victory for free speech, minors, and the video game industry. A full copy of the Court’s decision may be found here.
No Easy Fix to Cell Phones and Warrantless Searches
Photo titled "Day 8" courtesy of Nathan Brown on Flickr
On January 3, 2011, the Supreme Court of California held that law enforcement officers did not violate a defendant’s Fourth Amendment right when they looked through his cell phone’s text message folder 90 minutes after being taken into custody for drug charges. See People v. Diaz, 51 Cal.4th 84, 93 (2011). In a reaction to the court’s decision in Diaz, the California Legislature recently passed a bill that requires law enforcement officers to obtain a warrant before searching a defendant’s cell phone. The bill passed unanimously in the State Assembly. Governor Jerry Brown has until October 9th to sign the bill into law. What makes this bill even more important is that the United States Supreme Court denied certiorari to the Diaz case for its new term that began on October 3, 2011. As such, this bill, or similar piece of legislation, represents the only potential change to California law in the near future.
The issue at hand for the Diaz court was whether the defendant’s cell phone in these circumstances was “personal property” associated with him, which would allow a warrantless search incident to the arrest, or whether the cell phone was not associated with him, which would require a search warrant absent very narrow exceptions. The court determined that the cell phone was personal property associated with the defendant because the cell phone was on his person during the arrest and administrative process at the police station, regardless of the cell phone’s ability to hold vast amounts of information.
There is no question that cell phones do much more than just facilitate phone calls – they are readily becoming the primary means that people check their e-mail, surf the internet, and communicate with one another. Moreover, cell phones now also hold a significant amount of personal information due to vastly improved capabilities, such as electronic documents, passwords, bank accounts, and even recently visited locations. Proponents of this bill and other similar legislation argue that the people of California need such an explicit limitation to protect themselves from “Big Brother.”
While this fear is not unfounded, signing such a bill into law would be a tremendous mistake, because it would effectively prevent the Fourth Amendment jurisprudence from evolving to fit the needs of developing technology. There are many questions that should be answered before the California legislature, or any state legislature for that matter, signs such a bill into law. The Diaz ruling is very fact specific and does not represent a “blank check” that allows all police officers to search any and all cell phones. The court specifically noted that the cell phone in this circumstance acted as personal property associated with the defendant because the defendant had the phone on his person during the arrest and administrative process at the police station. As such, there may be a completely different outcome if the cell phone is somewhere besides on the defendant’s person, such as in a vehicle’s glove compartment or even cup holder.
Despite the many questions and the difficulty in waiting for these answers, drastically shutting the door to any and all warrantless searches of cell phones is not wise because such legislation aims to place an absolute right of privacy in individuals’ cell phones. This attempt to grant cell phone users an absolute right against any and all warrantless searches destroys the delicate balance that Fourth Amendment jurisprudence has always aimed for. This bill effectively ignores decades of precedent in establishing exceptions to the general requirement of search warrants, such as exigent circumstances or search incident to arrest.
Although this is not the easiest answer and no doubt the least popular one, the judiciary is the government branch that should decide the Fourth Amendment’s evolution as to warrantless cell phone searches rather than politicians. Simply signing a bill that bans all warrantless searches altogether is a naïve attempt to simplify an area of law that, for better or for worse, requires constant evaluation to properly evolve and protect the delicate balance between law enforcement and individuals.
Say Cheese: Facial Recognition and Privacy Rights
Photo courtesy of Chris Seary on Flickr
What was once fantastic in the 1980’s has quickly become a reality in 2011. Technology that audiences oohed and ahhed in scenes of Robocop or The Terminator have become the technology that is currently seeking to put criminals behind bars. Full body scans at the airport represent not just a leap in x-ray tech but also a battleground of privacy and constitutional rights debates. In the fight against crime BI2 Technologies developed a product that seeks to put more power into police officers’ hands, and I’m not talking about his gun.
BI2 is currently marketing an iPhone additive that will allow police and other law enforcement officials to take pictures of peoples’ faces and link those pictures to records for identification. This MORIS technology links the iPhone to biometric databases that record facial features, iris patterns and fingerprints. This technology has the potential to allow law enforcement to take a picture of anybody walking down the street, instantly run a background check and pull their record.
While it is legal to photograph individuals in public places, this technology begs the question of whether privacy rights as protected under the Fourth Amendment will be violated. Probable cause seems to go out the widow with the realities of facial recognition technology. Similar issues have been raised when it comes to GPS tracking and whether or not the comings and goings of a person should be protected. Facial recognition is the new frontier of technology going hand in hand with law enforcement. This emerging technology, while not implemented currently, has the potential to serve the public good while simultaneously raising legal red flags.
This technology, outside of law enforcement, would be able to serve many functions without running into legal issues. It could be used privately as a way to keep track of employee or client data. It could also be very well used in protecting data as an alternative to alphanumerical passwords. Biometrics is the future of data protection as it is much less susceptible to hacker intrusions.
Use of this technology in law enforcement will undoubtedly be a source of debate. Critics of facial recognition will raise arguments that include probable cause requirements as well as privacy issues. The Fourth Amendment ensures the American citizen freedom from unreasonable search and seizures and that they be secure in their persons. An officer with an iPhone may be able to circumvent these constitutional protections.
Privacy rights and the debates surrounding them have been ever present in current news. Proponents of strict privacy rights have been vociferous in their condemnation of all invasive technology as well as invasive practices seeking to secure public safety. The question is going to be whether the public is willing to allow for flexibility in privacy rights in order to foster a safer living environment. Technology like biometrics has the potential to be used very effectively and for positive change, if we allow it. A firestorm from a myriad of social and legal groups will meet these technologies head on as they are slated for production and dissemination.
Future tech will continue to evolve in spite of legal debates and public opinion. If something has the potential for so much good, should we condemn it on the grounds of law and tradition?
Friday, October 07, 2011
Reforming R&D Tax Incentives: Do Video Games Deserve Special Treatment?
Edited on: Friday, October 07, 2011 5:58 PM
Categories: Computers, Entertainment, Legislation, Patent, Taxation
Image Courtesy of Wikimedia
In September, the New York Times reported that video game designers have been taking advantage of tax breaks meant for other industries, often under terms more favorable than those received by many of the originally intended recipients. Electronic Arts (EA), for example, paid $98 million on $1.2 billion of operating profits over the last five years—an effective corporate tax rate of just under 8.2%. In addition, EA has set up off shore subsidiaries in tax havens and successfully lobbied Congress for new tax breaks.
Firms claiming the federal R&D tax credit elect to receive either a credit for 20% of their research costs above a base amount, or 14% of the excess above the average of the last three years’ R&D spending. I.R.C. §41. Inventive procurement of R&D tax credits has become a lucrative business for the accountants and attorneys who assist firms in obtaining these tax breaks. AlliantGroup, for example, specializes in helping clients obtain tax incentives, and claims credit for helping its clients secure over $1 billion in R&D tax incentives to date.
Claiming the R&D tax credit has become more difficult since its heyday in the 1980s, the NY Times writes, “the credit was being claimed by businesses with little technological background — fast-food restaurants, hair stylists and fashion designers.” Marketing and social science research are no longer eligible for the R&D tax credit. But previous plans to further restrict the credit to basic research have been as poorly designed as the original credit. The Clinton administration proposed restricting the credit to research producing an “actual innovation,” but the Bush administration dropped the proposal as unenforceable.
This difficulty of the enforcement rationale, however, is specious. According to Alliantgroup, more than $5 billion in R&D tax credits are given out annually. Given the amount of money at stake, significant enforcement efforts are warranted. The entire budget of the US Patent and Trademark Office is only about half the amount spent on R&D tax credits. The cost of determining the novelty for products supposedly qualifying for R&D tax credits would be worthwhile if it brought in more revenue by ending frivolous tax credits.
The actual cost, however, would be much lower than the cost of de novo assessments of novelty, as the IRS could treat R&D tax credits as it does the rest of the tax code: grant the credit, only questioning it if the application raises red flags or is part of a routine audit. The threat of being one of those randomly chosen for an audit would ensure substantial honesty from most taxpayers. In the event of an audit, a patent could be accepted as incontrovertible evidence of an “actual innovation.” An innovation subject to trade secret protection would still be eligible for the tax credit as long as the company could prove to auditors that such an innovation existed.
The real problem with the “actual innovation” requirement is that it would increase the tax burden on companies which engage in significant, valuable, but unsuccessful research. Ninety percent of new drugs, for example, fail in clinical trials. Successful research is already incentivized through market forces. There is no need to convince companies to engage in research they know will be successful. The real benefit derived from R&D tax credits is the mitigation of risks involved in R&D expenditures, by reducing total losses, so research failures must be subsidized along with successes.
Alternatively, Congress could simply make a political judgment about which industries or types of research create enough public benefit to deserve R&D tax credits. When video game developers change a few lines of code to create version 10 of their game are the really conducting “research” on something that provides public benefits beyond what the market can reward adequately? Alliantgroup argues that video games do produce public benefits, such as the use of some video games in training military personnel. But this benefit is rewarded by lucrative defense contracts. The best rationale Electronic Arts can come up with is that it donates some games to charity. This, of courses, is already rewarded by a separate tax write-off.
Making video games does create jobs, just like every industry. But making video games is profitable. There is no evidence that game producers would choose to stop making potentially profitable investments if they stopped receiving favorable tax treatment. And even if deprived of the R&D credit, they would still be eligible for the economic development credits given to every industry. R&D tax credits will continue to be just one more government handout for the already well off, unless they are restricted to research which has public value beyond what the market will reward. Those who advocate preserving or expanding the R&D tax credit for video game producers have failed to make a convincing case that there is a public benefit.
Big Tobacco v. Australia: The Battle over Branding
Image by Economicz
As of January 2012, all cigarettes in Australia will be sold in packs of uniform olive green. The color was carefully chosen after a government survey found it to be the most distasteful to Australian smokers. The brand names will be printed in black standardized font. The new legislation will also designate seventy-five percent of the front and ninety percent of the back of the pack to warning labels.
The new packaging is the next step in Australia’s push to reduce smoking rates. Last year, the government raised tobacco taxes by twenty-five percent, bringing the cost of a pack of twenty cigarettes to between sixteen and twenty Australian dollars per pack ($16.75 – 21.00). These are some of the highest prices in the world. Australia has already banned public displays of tobacco products in retail stores, forcing storeowners to keep the products hidden behind counters. Smoking-related diseases kill 15,000 Australians per year and cost the country 31.5 billion Australian dollars in healthcare and lost productivity. Cigarettes are the leading preventable cause of death in the country. Australian officials say they are confident this ban of tobacco trademarks can be justified by its public health argument.
Tobacco companies vow not to give up without a fight. They have invested substantial capital in establishing and protecting their trademarks and feel that the plain packaging requirement will deprive them of their intellectual property without compensation. Philip Morris Asia, based in Hong Kong, has already initiated legal action against the Australian government, claiming the new legislation would violate a twenty-year-old bilateral investment treaty between Australia and Hong Kong. Under bilateral investment treaties, countries pledge to protect the investments made by foreign companies within their borders. On June 27, 2011, Philip Morris Asia filed a notice of claim, starting a mandatory three-month negotiation period. Other companies will likely follow suit.
Stripped of their brand recognition, tobacco companies are concerned for lost revenue. The value of a trademark is not in its possession, but its use. Trademarks create a shortcut in the consumer’s mind between the product and the quality. While Australia represents only a modest fraction of global tobacco sales, companies fear a domino effect. Countries like Canada, New Zealand, and the United Kingdom are watching this situation closely and considering similar measures. Tobacco companies also fear that plain packaging, which is much easier to imitate, will lead to an increase in counterfeit tobacco. This could lead to a greater supply of cheaper tobacco products on the market. Many companies have threatened to lower their prices in order to remain competitive, thus incentivize smoking.
Philip Morris will likely make two main arguments against the Australia’s public health claim First, it will point to the fact that there is no evidence that removing trademarks from packaging will reduce the number of existing smokers. Even if a person may mistake one brand for another, there is nothing to show that their smoking patterns would change. However, proponents of the new packaging argue removing all trademarks will breakdown the smoking-is-cool image the cigarette companies have been working for decades to create.
Secondly, Philip Morris will likely argue that the cigarette industry is being singled out. The Australian government allows for trademark-laden packaging for other unhealthy but legal products, such as alcohol and junk food. When this issue has been raised in interviews, Australian health minister, Nikola Roxon has responded that while alcohol and junk food, if consumed in moderation, produce few health concerns, there is no safe level of tobacco intake.
Outside of the courtroom, the tobacco companies have launched a counter attack. Philip Morris and other companies have joined together to create an advertizing campaign depicting the Australian government as an overbearing parental figure. The ads feature a stern looking woman with a tagline that reads, “Do you like living in a nanny-state?” Philip Morris has also created a website that warns that plain packaging will lead to counterfeit cigarettes manufactured in squalid conditions by organized crime leaders.
At this time, Philip Morris Asia is the only company to begin legal action, although they cannot officially file suit until the law goes into effect in January. When that happens and if Philip Morris is successful, other tobacco companies are likely to follow. Besides suing under bilateral investment treaties, the tobacco companies may also try to persuade their governments to bring suit against Australia under the WTO for violations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The countries most likey to do this would be the world’s leading tobacco producers. Indonesia, the Dominican Republic, Mexico, and the Philippines have already raised concerns. Regardless of how the tobacco companies choose to fight the anti-trademark legislation, Australia should prepare for a shoot-out that would make the Marlboro Man proud.
Cloud Computing: Terms of Service and Risks
Cloud computing is an increasingly used buzzword among IT departments, businesses, advertisers, and individuals. Without even knowing it, many of us use cloud computing daily. For example, the emails I receive, sent to various addresses, are all forwarded to GMail (www.gmail.com), where I’m allowed a free 7 gigabytes of storage – provided that I allow Google to search and read my email, determine what I’m most likely to buy, and serve up advertisements accordingly. Nearly all of my important documents are stored in DropBox (www.dropbox.com), a cloud computing storage drive. It’s installed on my work computer and laptop, and synchronizes with both. Documents are also accessible via the DropBox website. I can pay for more storage, or refer others to get more storage for free. Wherever I am, I have a copy of my important documents. I don’t have to worry about my hard drive crashing or spilling coffee on my laptop (well that’s still a worry but at least I can still access my materials if it happens).
What is cloud computing? There are many definitions, but generally it is a system where resources are accessed remotely from a dedicated internet-based service. In this respect, cloud computing is not a new concept; it’s core functionality has been around in one form or another since the early days of computing.
Originally, computing was prohibitively expensive and typically performed on large systems called mainframes. People would connect to, share time, and work on these systems via a ‘dumb’ terminal. As IBM, Microsoft, and Apple popularized the personal computer, the bulk of computing moved to individual machines with their own dedicated processing units. With the exponential growth of the Internet and increase in network speeds, we now see the proliferation of low (and high) cost ‘terminals’ that ultimately connect to a central resource for the bulk of computing power and storage needed. Cloud computing differs from mainframe computing in that the resources are typically spread across many datacenters and accessible from anywhere with an Internet connection. Cloud-based services can provide greater redundancy and reliability, while also offering elasticity – the ability to instantly scale as needed.
However, there are risks to moving to a cloud model. The most prominent risk is the possibility of data loss. For example, in April 2011 Amazon’s EC2 service crashed. Amazon quickly worked to restore all of their customer data, but their backups were insufficient and a small percentage of data was lost. The outage affected thousands of companies who had outsourced their web hosting and data storage needs to Amazon. The customers who lost data had little recourse; the Amazon EC2 terms of service, the terms that all users of the service must agree to, states that the customer is ultimately the one responsible for backing up his own data.
The terms of service agreements for cloud computing services, while rarely read or understood, highlight many of the risks involved, such as privacy. Data stored with a cloud vendor may physically reside on multiple servers. Any computer attached to a network is vulnerable to security intrusions. In their terms of service (TOS), companies typically do not guarantee against security intrusions. Generally, vague terms such as “Reasonable and Appropriate Measures” will describe the steps taken to secure your data. Having your files hosted and replicated across several data centers in different states and possibly different countries may also lead to some jurisdictional issues.
Another issue is ‘uptime,’ or the percentage of time that a cloud computing service is up and running. Cloud vendors should guarantee a minimum level of service, embodied in what are called Service Level Agreements (SLAs). This level is usually guaranteed to be in excess of 99.9%, with service credits or refunds offered if it dips below this level. However, there are few mechanisms available to monitor uptime for any service, and it is questionable whether the term covers service that is technically up and available, but the speed is frustratingly slow. Businesses that decide to migrate to cloud computing services should ensure that uptime is included in the agreement and determine means for enforcement.
While cloud computing typically offers redundancy, reliability and elasticity, people should be aware of the risks involved and plan on its use accordingly. Businesses should assess the potential reduction in costs by integrating cloud computing into their environments, and compare it with the loss of control inherent to using a cloud provider. However, for the general public, cloud computing storage and services are likely to be more reliable than the same services on a home PC – though having an extra backup couldn’t hurt.
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