What Does a First-To-File System Mean and What Will This Change to the Patent Process Mean for Inventors and Companies?

The America Invents Act (AIA) is the latest reform in U.S. patent law signed into effect on September 16, 2011. With a set of rolling changes, on of the main modifications takes place on March 16, 2013, which will transition the patent system from a “first-to-invent” system to a “first-to-file” system. This will bring serious change for inventors and companies in their strategies for filing patents.

The United States patent system has operated under a first-to-invent system for the last 200 years. Under this system a patent is granted to the inventor who first effectively invented the patent, regardless if they were the first to file for a patent application on the invention. For example if Inventor A invents a patentable invention but does not yet file an application with the United States Patent and Trademark Office (USPTO), but then Inventor B invents the same patent and does file an application with the USPTO claiming the invention, A would be entitled to the patent if A later filed an application. Even thought A filed after B, A would be granted the patent if he showed documentation of having an earlier invention date and showing he actually or constructively worked to “reduce the invention to practice.” This system is time consuming and difficult as attempting to deduce a date on which a person actually invented something can prove quite difficult.

March 16, 2013 brings about a first-to-file system, which de-emphasizes the actual invention date while focusing on who filed first. This change will further synchronize U.S. patent law with most of the rest of the world who also implement a first-to-file patent law system. The main question this change brings about is not who first conceived an invention (as in under a first-to-invent system), but rather who was the first to file a patent application with the USPTO. Some critics of the system change argue that this first-to-file system will boost patent troll activity, which will a person to be able to file patent applications on inventions that have been released but not yet filed on by smaller companies or underfunded startups. Some argue this will also give larger companies an advantage over smaller companies who do not have equal funds or resources to file patent applications at the same rate large companies do. However something to understand with this change is that while a first-to-file system will go into effect, it is not a true first-to-file system because the one-year grace period on public disclosure will stay in effect. An inventor can publically disclose his invention, through for example a blog post, and is given a one-year grace period from that time of disclosure to file for a patent application. If an inventor publically discloses his invention but does not file with the USPTO right away, he still has one year from that disclosure and will be granted a patent over any other inventor who disclosed later but may have filed earlier. This essentially means that the USPTO will now look to who first filed a patent application or who first publically disclosed the invention, both easier to deduce than which inventor first conceived the invention.

Under this new system well-timed disclosures of inventions by smaller companies will be able to block better funded companies from receiving patents. Disclosure will become of utmost importance as delay of disclosure can allow a competitor to file a patent application on the same technology that they invented later, but filed first. The competitor in that situation would receive the patent under this new system. Companies should begin to create processes that will quickly and effectively identify inventions, as well as whether it is financially beneficial to file a patent application or to publically disclose first.

The Law - Promoting Data Insecurity

The MBTA, U.S. Customs, Apple, and Cisco would like you not to know that their data was or is insecure. Yes, I repeat, their data was, or is, insecure, and they don’t want you to know. Rather than promoting information security by working with security researchers, the MBTA, U.S. Customs, and Cisco would rather file criminal complaints against researchers who find vulnerabilities in their security.

With the advent of the Internet, data stored on computers with access to the Web are prone to access by hackers. Infosec specialists and researchers work hard to protect our data, but the policies that make hacking a criminal activity sometimes also encompasses the work of security researchers. While some organizations agree to have their security measures inspected by researchers, other researchers find vulnerabilities in a company’s security without their express consent. In the name of research, infosec specialists often disseminate their findings at security conferences for the benefit of other researcher’s knowledge and development of techniques.

However, this well-meaning effort to develop better information security has met extreme pushback from companies wishing to maintain their bottom line and avoid bad publicity. Companies with security vulnerabilities may threaten researchers with legal action and filing of criminal complaints in efforts to suppress their findings. This is counterproductive to improving data security, and policy should be construed in favor of promoting more security and public awareness of security breaches.

Privacy on the Internet? “Do Not Track” Won’t Get Any Traction So Long as Compliance is Voluntary.

A quick visit to the Ads Preferences section in the personal settings of my Gmail account reveals my age, an affinity for all types of news (local, newspaper, international), an interest in the law and government, and an unhealthy obsession with coffee. Unless you’ve never Google-d anything, the search engine giant probably has very similar – and eerily accurate - information about you. But what happens when you’d like to maintain some semblance of privacy on the world wide web? The onus is largely on internet companies to be forthright about the kind of information they collect about users and how they use it.

Back in May 2011, Senator Jay Rockefeller (D. W.Va.) introduced the Do Not Track Online Act, which subsequently died in committee. Faced with the threat of regulation, many internet companies vowed to increase privacy settings, become more transparent about how personal information is used, and allow users to exercise more control over whether their information is collected at all. It comes as no surprise that very few companies actually followed through with these vows. Privacy settings on websites like Facebook are notoriously difficult to navigate and every time we click “I have read and agree to the terms of service” we give up a little slice of our private information without fully understanding what it is we’re allowing these companies access to.

Some form of a “Do Not Track” setting currently exists in many of the most popular browsers but the problem is that compliance with the wishes of internet users by internet companies is entirely voluntary. Essentially, companies are free to honor or ignore their users request to not have their information collected and used for advertising or other purposes. Since many companies don’t honor the “Do Not Track” request, many consumer advocate groups are calling for the Federal Communications Commission to step in and require companies to give users the information necessary to grant internet companies informed consent, in other words "opt-in," to use their personal data. Senator Rockefeller has reintroduced the Do Not Track Online Act that would give the FCC the authority to create rules around the collection of personal user information online.

In an Ad Week article Senator Rockefeller is quoted as saying, "[o]nline companies are collecting massive amounts of information, often without consumers' knowledge or consent . . . [and] [m]y bill gives consumers the opportunity to simply say 'no thank you' to anyone and everyone collecting their online information. Period." Senator Rockefeller’s proposed legislation does not try to do away completely with companies utilizing, or making money off of the information of their users. Instead, it requires companies to fully disclose the information they collect and how that information is used. It should be a welcome step forward for consumers.

Podcasters Hope to Raise SHIELD Against Patent Trolls

Ahead of the standard introduction to his February 28, 2013 episode of his WTF Podcast, standup comic Marc Maron decided to shine a light on patent trolls, or “non-practicing entities” ("NPEs") as they are otherwise called. These organizations have been characterized as shell companies that procure broad patent portfolios, do not produce content, and sue inventors for patent infringement if the invention allegedly incorporates a patent held in the portfolio. Winning in court is not even the endgame for the troll here, because the defendant may be someone who can ill afford to continue in drawn-out litigation, and therefore the inventor may opt to settle.

Protracted patent litigation is well-trodden ground for the likes of Apple and Samsung. Apple has been criticized for wielding broad patents against competitors like Android with respect to touchscreen smartphone interfaces. On a different scale, this is occurring in the arena of podcasting. A February 7, 2012, patent issued for Personal Audio LLC that it is being put forth as essentially preempting podcasters in the medium, many of whom are small operations out a garage speaking to their audiences in weekly installments on all matters of, well, anything at all. Personal Audio has actually taken on Apple in the past and won $8 million in a suit for infringement of downloadable playlists.

Personal Audio’s patent is said to be the precursor to podcasting, as it set forth a “system for disseminating media content representing episodes in a serialized sequence.” Some of the podcasters Personal Audio has reached out to and invited to apply for a license include Maron, Adam Corolla, and Stuff You Should Know. Personal Audio has been criticized for having “not sold a product since 1998.”

The SHIELD Act, an acronym for Saving High-Tech Innovators from Egregious Legal Disputes, was initially introduced in 2011 by Rep. Peter DeFazio (D-OR) and Rep. Jason Chaffetz (R-UT) and intended to create a loser-pays rule by which the loser of the patent infringement or validity suit would be made to pay the costs of the opponents’ fees for the proceedings. The idea is to deter would-be litigants from filing frivolous suits regarding computer hardware and software patents, specifically, “where the court finds the claimant did not have a reasonable likelihood of succeeding.” The software portion is defined as covering “(A) any process that could be implemented in a computer regardless of whether a computer is specifically mentioned in the patent; or (B) any computer system that is programmed to perform a process described in subparagraph (A).” The revised bill intends to expand its scope to all patents to protect not just technology companies, but retailers, manufacturers, podcasters, and municipalities from being subjected to predatory litigation, as expressed in a press release from Rep. Chaffetz’s site.

It would seem like an oddly unjust policy to allow for a patent to cover a medium in its entirety; in the case of podcasts, an application of electronic audio files in a serialized form disseminated online. Legislative efforts like the SHIELD Act could help prevent patent litigation undertaken in bad faith.

For many podcasters, monetizing the podcast is an issue. While the format may be inexpensive, with the producers of the content often using nothing more than their microphones and a computer for interviews, it is not generally lucrative in a direct way. It seems that much of the value derived from the podcast for the broadcaster/podcaster is the goodwill it generates with the audience. It can also be an effective means of self-promotion; for example, a comic promoting his upcoming appearances and shows. Another mechanism for income is the utilization of ads for things like stamps.com or audible.com. This is all to say that podcasters may make for an odd target for this type of litigation, even if some podcast authors are more well-known and have somewhat deeper pockets. Is it because some in this demographic earn just enough to yield a promising settlement but not enough to pursue all-out “sport of kings” patent litigation?

There is also a question as to whether there should be a distinction made between original content available exclusively in the podcast format from, for example, a radio show on NPR that is broadcast live on terrestrial radio and via livestreaming online, and then packaged for downloads later as a podcast. Should podcasters now have to consider the high price of patent litigation just a cost of doing business?

As suggested in some comments on related articles like Techcrunch.com’s The Death of the Non-Practicing Entity?, additional measures could be taken to close potential loopholes, and to craft legislation to address not only NPEs, but NPEs that purport to be practicing entities. Arguments against the SHIELD Act suggest that it might stifle startup companies that have legitimate patent claims from litigating those claims, because the costs would be too burdensome if unsuccessful. Addressing the categories of companies that occupy the grey areas between practicing entities and NPEs might address that concern in some measure. What still remains is the larger issue of fairness and incentives created by the current standards used by the US Patent and Trademark Office in patent examinations and whether they are truly effective in promoting innovation, which was the original intent of patent protection in the United States Constitution.

NYPD & Microsoft join together to create a high tech crime fighting dashboard

It sounds like something out of a futuristic science fiction movie, but the New York Police Department’s Domain Awareness System is far from a fantasy. This system, nicknamed the “dashboard”, connects the cities over 3,000 public and private cameras onto one central network. This system has allowed the police department to respond to crime more quickly, more effectively, and also more efficiently.

The way that the system works is best illustrated by a hypothetical scenario. Hypothetically, a call comes in for a bomb in lower Manhattan. An alert would contact the officers and they would be able to focus their cameras on the threatened area. The cameras could scan for heightened levels of radiation as well as suspicious behavior. This type of response creates a safer working environment for the officers as it provides them with crucial information prior to entering the field. As the Fox News article states, it enables officers to know what they are getting into. According to the Fox News article, it is the city’s hope to connect this system to a laptop in every police cruiser. This would allow for real time updates and more effective crime management.

Right now the Domain awareness system is getting most of its use in the counterterrorism unit. Jessica Tisch, who is the director of planning and policy for the counterterrorism unit, was quoted referring to the system, saying “it works incredibly well”. According to the Fox News article the system was used during the “deadly shooting outside of the Empire State building this past August”. With so many calls coming in, it originally looked like there were multiple shooters. However, after the system pulled cameras within 500 feet of the area and mapped the data, police were able to determine that there was a single shooter.

Besides being able to detect bombs, other uses of the Domain awareness system include access to the entire departments arrest records and emergency calls. Also, in addition to the 3,000 connected security cameras, there are also license plate readers and portable radiation detectors being used.

One of the interesting twists of this story involves Microsoft. In 2009, the NYPD approached Microsoft with the idea of developing this type of technology. According to Richard Daddario, the NYPD’s deputy commissioner for counterterrorism, “usually you purchase software that you try to work with, but we wanted this to be something that really worked well for us, so we set about creating it with them”. It was estimated that the development of this software would cost between $30 and $40 million. The city also looks to potentially benefit financially from this system. A potential marketing deal between the NYPD and Microsoft would pay the city tens of millions of dollars according to the article.

While this system will undoubtedly create a more effective and efficient police force, many citizens are rightfully concerned about the privacy implications that come with a surveillance system of this magnitude. This system provides immense power to a small group of individuals. Being able to track an individual, without a warrant or scan an individual’s license plate without cause could raise Constitutional issues not only in privacy but also invalid search and seizure. The courts will have to take a serious look at this system. While it does increase our safety as citizens and provide the NYPD with a tool leading to more effective policing, its unregulated use could prove quite invasive.

Bowman v. Monsanto: Unlimited Right to Sue on Self-Replicating Genetic Technology?

On February 19, 2013, the United States Supreme Court heard oral arguments in Bowman v. Monsanto, Docket No. 11-076, a currently a pending decision. This case involves the question of whether the patent exhaustion doctrine applies to seeds, a self-replicating technology. A blog article entitled "A Soybean in the Supreme Court" does a snappy job of describing the case and the issue in layman’s terms. The two lower courts that have already decided on the matter both concluded in favor of the chemical giant, Monsanto. My argument is that this is one of many cases where the law has not caught up with technology. A seed (and, for that matter, a baby animal) is not like any non-self-replicating product, and policy should be changed to take account of the difference.

As aptly summarized by authors Raustiala and Sprigman, Mr. Bowman, now seventy-five years old, bought seed from Monsanto and signed a standard agreement not to use the seeds for anything but one planting, to give away the seeds or save any of their progeny. The agreement is recited in the decision of the most recent court to decide the case, the Federal Circuit, sitting in Indiana: Monsanto Co. v. Bowman, 657 F.3d 1341 (Fed. Cir. 2011). He later decided to plant a second crop in the growing season, and for this riskier venture, he purchased cheap seeds, more often used for animal feed, from a grain elevator where farmers sell discarded seeds. While Mr. Bowman was upfront with Monsanto, he did save seeds from the second crop, and planted them in following years. Monsanto eventually investigated his crops, found second planting seeds to contain its patented technology, and sued for multiple infringement of two patents.

The seeds he bought were "Roundup-Ready" soybean seeds. "Roundup-Ready" seeds have been genetically modified to live through a spraying with Monsanto’s "Roundup" herbicide, made with N-phosphonomethylglycene, commonly known as glyphosate. The herbicide will kill all other plant life in the field, eliminating weeds in a situation where hand-weeding would not be economically feasible, but other herbicides were only intermittently effective. But only "Roundup-Ready" soybeans will survive it. A non-patented older variety would wilt. This solution to the “weed problem” is described in the District Court case, Monsanto Co. v. Bowman, 686 F.Supp. 2d 834 (S.D. Ind. 2009).

The particular patents in the "Roundup-Ready" soybeans are patents 605 and 247E. The 605 patent is for the use of viral nucleic acid from the cauliflower mosaic virus, which is able to infect plant cells, as a method of introduction of new genetic material into plant cells. Using the 605 patent in the soybean, Monsanto was able to introduce the particular transformation covered by patent 247E, in which protein-encoding plant cells that encode for a glyphosate-tolerant enzyme were added. This created the glyphosate resistance in the "Roundup-Ready" soybeans.

Mr. Bowman argued that the patent on the seeds sold to the grain elevator was exhausted when the first farmers bought the seeds. The patent exhaustion doctrine limits the right of a patent holder to sue on that patent after the patented good has been sold. “A Soybean in the Supreme Court” gives a good example; if you buy a car containing many patents, and sell it to someone else, you’re not liable for infringement, because the patents in the car were exhausted at the first sale. The analogous doctrine in copyright law is the first sale doctrine. Many exclusive rights under copyright are exhausted once the physical copy is purchased, so if you sell a used book, there is no infringement problem. Nevertheless, you cannot make a copy of a Cadillac and then sell it as your own invention. That’s what Monsanto argued: by saving seeds that turned out to have the genetic characteristics that made them glyphosate-resistant, and planting them for a second crop in serial years, Mr. Bowman was replicating the technology.

Both the District Court and Federal Circuit came to the conclusion that if you make a copy of a seed by growing a plant and then saving its seed, you are infringing a patent—even after it has been sold twice. The exhaustion doctrine did not apply. Nevertheless, this non-traditional view of the exhaustion doctrine amply demonstrates the difference between a plant and a car. A car is made and done with. By its nature, a car eliminates the expectation that it will reproduce itself, and therefore the need to investigate car dealerships and local driveways, worry about in whose hands this car is, and sue repeatedly to remind owners that they cannot make a copy, all of which Monsanto does to maintain its patent rights over its genetically modified soybeans.

Raustiala and Sprigman point out that at least two of the Supreme Court Justices, Sotomayor and Chief Justice Roberts, appeared to be on the side of Monsanto. Chief Justice Roberts expressed the opinion that no one would want to make improved seed varieties if the patents could eventually be taken and replicated. This is the seminal reason for the existence of patents: to encourage people to invent and improve goods by ensuring financial reward for that invention. Justice Sotomayor said, “The exhaustion doctrine permits you to use the good that you buy,” but not to make another item out of the item you bought. On the other hand, when a “good” that gives birth, or sprouts, produces additional little replica goods, people need do very little to be hauled into court.

I would suggest the U.S. at least institute a policy to keep genetically modified crops from mixing with other crops. The European Union adopted regulations ensuring the traceability of genetically modified crops, while acknowledging that “certain traces of GMOs (genetically modified organisms) in products may be adventitious or technically unavoidable.” The regulations are accompanied by guidelines to be followed as best practices to prevent the mixing of ordinary, genetically modified, and organic crops. Neither are militaristic in restriction of patented self-replicating plants, but the existence of such regulations merely acknowledges the problem and tries to create a framework to control these patented goods. The life inherent in the genes of a seed does not know to whom it belongs, and will, like the Kudzu vine on southern roadsides, take over, if given the chance.

The U.S. should not let its self-determination and independence as a nation convince it that corporations may profit on their, yes, fascinating, yes, amazing patents, without limit. The blog that first drew my attention suggests that this is only the first wave in a sea of litigation to come, noting that many patents are already held on animals. I am completely at a loss to say what can be done legally with a patented animal: classified as a good, similar to a seed in its reproductive capabilities, but, at least in the case of Dolly, the cloned sheep, similar to humans in that it is warm-blooded and gives birth to live young. On the "Roundup-Ready" issue, counsel for Mr. Bowman made a few policy arguments in District Court, including the argument that Monsanto should have the responsibility to warn the grain elevator, or the farmers that sold the seed to it, about mixing. The District Court stated in reply that it “may disagree with the decision to award unconditional patent protection to Monsanto . . . but this court does not make policy; rather, it interprets and enforces the law, which, in this case, does not support Bowman.” Let’s make that policy now.

The Times They Are A’ Changin’: Sony Exploits Recent Copyright Term Extension, Releases 50 Year Old Bob Dylan Tapes

After a recent European Union Directive, which extended the term of copyright for sound recordings, Sony has released a collection of Bob Dylan tapes in order to take full advantage of the situation. The 2011 Directive extends the term of protection for sound recording copyrights from 50 to 70 years. But, the work must be published within 50 years of creation. Recordings by many popular British bands of the 1960s, including the Beatles, the Rolling Stones, and the Who, are right at the 50 year mark. Sony recognized that the 50 year window’s expiration was approaching and released the tapes.

If not released before January 1, 2013, the works would have been dedicated to the public domain and free for anyone to exploit without requiring permission or payment to Sony. The new release, “Bob Dylan: The Copyright Extension Collection Vol. 1,” includes alternate takes of “Blowin’ in the Wind,” “Bob Dylan’s Dream” and “I Shall Be Free,” as well songs that missed final cuts and live performances from Carnegie Hall.

The Directive, named “Cliff’s Law” after the 1960s British pop singer who campaigned aggressively for the extension, is seen as a victory for many aging superstars, including the aforementioned British invaders, as well as American artists like Frank Sinatra, Miles Davis, and Mr. Dylan, who recorded in Europe. In an interview with the BBC, The Who’s Robert Daltrey explained that the Directive ensured that artists could continue to receive royalties into their old age. “They are not asking for a handout,” he said, “just a fair reward for their creative endeavors.”

Not everyone is as pleased with the extension, however. The Electronic Frontier Foundation points to numerous reports concluding that longer terms will not benefit the smaller acts and session artists whom the Directive was designed to protect. A study by the Center for Intellectual Property Policy and Management at Bournemouth University in England calculates that 72% of the financial benefits from the Directive will accrue to record labels, and the vast majority of the remainder to superstar acts, not those musicians identified in the Directive. And many argue that restricting the public’s access to recorded works for another 20 years will hinder creativity, an outcome seemingly at odds with a fundamental aim of copyright law.

U.S. Considers Economic Sanctions against Chinese Hackers

The United States Executive Branch is considering enacting economic sanctions against individuals and countries that attempt to hack U.S. networks. Other policies that may be considered include visa restrictions, military action, and State Department diplomacy efforts. Intellectual property concerns are the main motivation in the White House’s consideration of the issues of cyberattacks and cyber theft. White House Cybersecurity Coordinator Michael Daniel is the official responsible for developing a strategy to address the internet issues between US data owners and hackers.

The policy considerations seem to be in response to recent news alleging that a military unit of Chinese hackers based in Shanghai have been attempting to hack into U.S. companies’ data. The administration has not named China specifically in these policy discussions, but the news, along with hacker attacks involving The New York Times, The Washington Post, Apple, and other companies, are part of the backdrop of this initiative. The White House is encouraging Congress to develop legislation surrounding sharing information about cyber threats, fortifying cybersecurity measures, and establishing law enforcement tools for such crimes. The Commerce Department has also been involved in setting standards for cybersecurity.

These measures are part of an ongoing struggle regarding intellectual property between U.S. innovators, and entrepreneurs in countries such as China that borrow U.S. designs and technologies without regard to ownership. While the U.S. is clearly concerned about innovation and innovators’ rights, more needs to be done before China will respect property rights as the U.S. and inventors desire.

More here.

Hail a NYC Taxicab on a Smartphone? Not Yet.

Considering that there is a smartphone application for just about everything these days, it is surprising that the New York City Taxi and Limousine Commission (TLC) did not approve a pilot program for electronic hail applications (e-hail program) until last December. However, the day before the pilot program was set to launch in NYC on February 13th, The Livery Roundtable and Black Car Assistance Corporation, among others, filed suit claiming that the program was improperly passed. The petition argued that the pilot program was invalid because the TLC failed to obtain City Council approval before starting a year long trial period for the e-hail program.

The e-hail app. would allow passengers using the application on their smartphones to identify available taxis in their area and/or hail a taxicab using the device. Alternatively, taxi drivers will be able to locate passengers in need of rides and/or receive electronic hails. Some companies with pre-existing e-hail applications such as Uber, GetTaxi, Hailo, and Flywheel were required to augment their pre-existing e-hail applications in order to conform to the TLC’s e-hail program regulations. Specifically, the TLC wanted to ensure that passengers and drivers used the application exclusively to hail, or accept hails, not bribe drivers with cash bonuses.

While the TLC was excited about the e-hail program and believed it would benefit both passengers and drivers, some companies lobbied against the program. Unsurprisingly, those in opposition of the e-hail program include the aforementioned petitioners Black Car Assistance Corporation and The Livery Roundtable, as well as other black car companies. The companies believe the e-hail system will generally hinder the livery business and negatively impact certain segments of the NYC population, specifically the elderly and the lower class. While this maybe true since yellow cab drivers and passengers will be easier to locate, there is nothing preventing black car companies from developing their own applications.

Nonetheless, the TLC and Mayor Michael Bloomberg remain unconcerned by the petitioners’ injunction and informed the public that the e-hail program was validly passed.

Marketplace Fairness Act Aims To Allow States To Obtain Sales Tax From Large Internet Retailers

On February 14, 2013 a bipartisan group of Senators and Representatives introduced legislation that will supposedly level the playing field between local brick-and mortar retailers and out-of-state Internet retailers. The Marketplace Fairness Act of 2013 would allow states to require out-of-state online retailers to collect sales and use tax on in-state purchases. Businesses with less than $1 million in annual domestic sales would be exempt from the bill. Despite the optimism for the passing of the bill, critics question whether it will achieve its goal of leveling the playing field between local businesses and out-of-state online retailers without introducing a host of unintended consequences.

Currently, due to a 1992 Supreme Court decision, states have been unable to require out-of-state online retailers to collect sales taxes from in-state customers. See Quill Corp. v. North Dakota ex rel. Heitkamp, 504 U.S. 298, 313 (1992) (holding that although businesses did not need to have a physical in-state presence to permit the state to require the business to collect taxes from its in-state customers, physical presence within the state is required for the business to have a “substantial nexus” with the taxing state as required by the Commerce Clause). Customers who order products from online retailers from outside of the state are supposed to declare these purchases on their tax forms, but few customers do. Due to this outdated Supreme Court ruling the National Conference of State Legislature reports that, collectively, states miss out on approximately $23 billion in tax revenue annually. Furthermore, local business are at a disadvantage because consumers can walk into these local stores, try out the product that they are interested in, and go home and purchase the item from an out-of-state online retailer without paying the state sales tax.

The current version of the bill combines several proposals from the previous bill that failed to pass last year while incorporating revisions intended to make the bill more palatable to critics and opponents. In particular, the exemption threshold for businesses was raised from $500,000 to $1 million in out-of-state annual sales. The Marketplace Fairness Act of 2013 would empower states to compel out-of-state online retailers to collect sales and use taxes provided that the state simplifies its sales and use tax system. Several online retailers, including Amazon, have expressed their support for the bill.

Despite the optimism and support for the passing of this bill, it is not without critics. Some critics argue that given that one of the prerequisites for states to use this bill is that they must simplify their sales and use tax system, the bill may have the potential to create a complicated new tax system with differences in each state. Furthermore, the legislation may be difficult to enforce because determining whether a retailer is not collecting the taxes may be challenging and needs to be addressed. There are concerns that the bill has a potential to stifle Internet commerce. Large online retailers such as Wal-Mart and Amazon can easily deal with the increase reporting expenses and decreased revenues in out-of-state sales but the smaller online retailers may be forced to keep their sales within their state of operation or confined to states where they have their largest out-of-state sales revenues. The bill, if passed, will likely do the most good in terms of getting states sales revenues that they are already rightfully owed but are not being paid because customers fail to report their out-of state purchases. In this tough economy an infusion of sales revenue may be the much-needed resource that may allow state governments to keep their taxes steady and prevent the need for cuts in programs and services and this bill appears like it has the potential to help in this respect.

The Marketplace Fairness Act appears most misguided in its focus on putting local business on a level playing ground with out-of-state online retailers. The bill may just be slowing down the inevitable. The fact that residents have to pay taxes on goods bought in local business may not be the only reason for why customers are choosing to buy from out-of-state online retailers. The prices of the online retailers may still be significantly lower than the local business even after the passing of this bill because some online retailers are able to provide lower prices due to economies of scale and the fact that they do not have the expense of having locations or warehouses within the state. Therefore, the bill should be presented more as a way for states to obtain revenue that they are rightfully owed and less as a savior of local businesses.

Source: http://news.cnet.com/8301-13578_3-57569600-38/politicians-push-bill-to-help-states-collect-online-sales-tax/

Piracy in the Caribbean: WTO Approval of Antigua and Barbuda Piracy Site

The World Trade Organization (WTO) has taken a controversial step in an effort to settle the score between the United States (US) and Antigua and Barbuda: authorizing the suspension of US copyrights in Antigua and Barbuda. This move in essence allows the islands to give away US copyrighted material without compensation to the copyright holders. While actual implementation of a government-powered website that freely distributes US copyrighted material might be a distant reality, this WTO action could ignite a disastrous ripple effect and is being highly scrutinized by member countries who are wondering if these retaliatory legal measures are in line with the spirit of the WTO.

US intellectual property rights, specifically copyright laws, prevent anyone but the copyright owner or someone they authorize from distributing or otherwise utilizing the copyrighted material - music, film, books, games, software, and photographs. The WTO has each member country agree to honor every other member country’s intellectual property laws. Respecting other member country’s laws is imperative in maintaining the harmonious spirit of the WTO and promoting free trade, and this protection can sometimes be a driving force behind a country’s decision to join the WTO. The WTO has the authority to issue decisions that are binding and punitive on member countries, which the countries must agree to comply with when joining the organization.

In 2007, the US and Antigua and Barbuda’s disagreement over online gambling services was brought to the WTO’s Dispute Settlement body, the highest trade body in the world. The US claimed they had inadvertently agreed to place no restrictions on the ability of foreign countries to provide online gambling services to US citizens. Antigua and Barbuda had invested millions of dollars in furnishing such services to US citizens under the belief that the US government was allowing this to happen, and when the US government later attempted to stop these services, Antigua and Barbuda lost money and many of their citizens lost jobs, creating a crisis for the islands. The WTO ruled that although the US’ agreement to no restrictions may have been unintended, the government had acted carelessly in outlining their restrictions and the agreement was binding because other countries had relied on it. The WTO ruled that the US must follow through with removing the restrictions on foreign online gambling services, or alternatively, compensate affected countries for their losses.

But since the ruling in 2007, the US has dragged its feet in following through with the WTO’s orders. On Monday, January 28, 2013, the WTO gave Antigua and Barbuda the final authorization to suspend US copyrights and implement a government-run website that can freely distribute US copyrighted materials, worth up to the sum of $21 million dollars a year, for as long as the US continues to refuse to comply with the WTO order. This measure is categorized as a retaliatory compensatory measure, typically implemented when a member country does not comply with a WTO ruling to the harm of another member country. The harmed member country is then allowed to retaliate in a proportionate manner to the non-compliant member country.

The WTO may have gone too far with this ruling, however. The suspension of intellectual property rights does not seem to have a clear ending point; once one song, for example, if freely distributed, copies can be made over and over again, creating an aggregate loss of much more than $21 million, the set limit imposed by the ruling. Suspension of copyright laws is not a defined enough penalty to be proportionate to the losses Antigua and Barbuda felt by the US’ actions, and the US could end up losing much more than the islands ever had.

It also seems that this sort of authorized retaliatory ruling is not within the spirit of the WTO, whose mission is to promote harmonious free trade throughout the countries of the world. US Trade Representatives have already expressed concern over the ruling, suggesting that this move would further spoil business relations between the countries involved. Imposing this harsh of a penalty on a country that claims to have inadvertently entered into this mess sets a precedent for other countries that they need to be afraid and tedious in their agreements, or else they may find themselves retaliated against, with the retaliation sanctioned by the WTO. This discourages blossoming countries from entering into the WTO, and encourages existing members to be as withholding as possible in their agreements to what services they allow foreign countries to provide. All of these effects are in direct conflict with what the WTO was designed to accomplish.

For now the world must wait to see if the US and Antigua and Barbuda can come to some alternative agreement before the drastic measures of the government-sponsored piracy site are taken. If the piracy website is realized, the WTO should brace itself for the severe backlash from not only the US, but all other countries who fear the extent of the retaliatory measures the WTO is comfortable with authorizing.

Rethinking the Cost and Benefits of Behavioral Targeting

Online behavioral targeting, also known as behavioral advertisement, involves tracking an individual’s online activities for the purpose of delivering tailored services or advertisement to a user. During the 2012 elections, it was revealed that even politicians used behavioral targeting in their campaigns. Online behavioral tracking has been proven to be extremely valuable because not only does it allow interested parties to align their advertisement with what the individual is likely to purchase, it also enables useful features to Internet users such as saving customized personal preferences and settings on the web.

Behavioral targeting has generated a form of service providers called network advertisers, companies that compile and classify expensive consumer profiles and deliver appropriate advertisements to participating websites across their network. Companies generally use “cookies”, amongst other tracking methods, to track consumer activities by associating those activities with a particular computer or electronic device.

Despite the Federal Trade Commission's efforts in setting self-regulatory principles, there is currently no law in the U.S that expressly addresses behavioral targeting. Typically, data that network advertisers collect does not fall under any existing privacy regulations because it does not include any personal identifying information, such as the user’s real name or other identifying information that can tie the user to his/her real identity.

Those who oppose to such act of data collection argue that behavioral targeting constitutes a breach of privacy because it implicates some form of personal information and more importantly, it invades an individual’s “inner identity”. A complete consumer data profile is, in a way, an attempt to replicate the individual’s personality in order to create customized advertisements. Such exploration can be more private and valuable than some aspects of external identity. For instance, the delivery of advertisements may reveal private browsing history such as religious beliefs or sexual orientation to other users of the same electronic device because cookies track the online activities of a device, not of a particular person. In other words, behavioral targeting may lead to not only identify thefts, but also embarrassment, inconvenience, and unfairness.

While many consumers in the U.S remain unaware that their online activities are being tracked, the European Union has heavily promoted Internet privacy awareness. Amongst other regulations, the e-Privacy Directive requires each member of the European Union to legislate the collection, use, and disclosure of personal information. Furthermore, the Directive requires all Internet firms and any other business that process data to obtain informed consent from data protection authority, as well as individuals, before commencing any data collection and processing.

There is an urgent need for the Legislature to find a way to balance data utility and privacy. Don’t you think it is about time that pair of shoes you checked out last week stops following you everywhere?

How Secure is Your Connection?

Lawmakers and technology experts agree that better laws are needed regarding the online availability and use of personal information. There always has been, and probably will continue to be, a great tension between legislation that is too restrictive to innovation or is too vague to have significant legal impact.

Many challenges exist when creating such laws; chiefly, around the constant advancement of technology. Passing a law is a lengthy process that involves stakeholder meetings, compromise between many parties, and ultimately enactment and enforcement. Technological progression greatly outpaces legislative oversight. This dilemma is clearly illustrated in the issue of whether unencrypted wireless networks are protected from interception under the federal Wiretap Act (18 U.S.C. § 2511).

Currently, private wireless networks that are password protected, like the one you may have in your home, are protected from gathering information. However, when you use a non-password protected, unencrypted wireless network, that information might not be protected. These unprotected networks can be accessed in public places, such as coffee shops and airport terminals, or in homes that have a non-password protected wireless network.

The federal Wiretap Act prohibits “sniffing” or gathering of contents of communications by a device unless the contents are readily accessible to the general public. Initially, it only covered certain communication frequencies but over the years Congress has amended it to keep up with advancements in technology. For example, it was updated to include protection for cordless phone use in reaction to the expectation of privacy of most cordless phone users.

This issue has recently been discussed in a class action suit against Google, Inc. When Google was completing its Street View project, part of the project was to detect where the wireless access points were, but it also collected a large amount of data from unprotected wireless networks, such as individuals’ emails, passwords, and browser history. The plaintiffs argue that this collection of sensitive data was illegally intercepted because the users had an expectation of privacy. Google argues that it was legally obtained because the data was not secured. The court found in the plaintiffs’ favor stating, “[T]he wireless networks were not readily accessible to the general public as defined by the particular communication system at issue.” (In re Google Inc. St. View Elec. Communs. Litig., 794 F. Supp. 2d 1067, 2011 U.S. Dist. LEXIS 71572 (N.D. Cal. 2011).

This case clearly illustrates the problem of ineffective legislation attempting to solve technological problems. If the legislation is too strict, the fear is that it will stifle progress and innovation. Conversely, without clear, current laws, individuals’ privacy may be compromised. Whether it may be the Do Not Track proposed legislation, the President’s Privacy Bill of Rights, or something yet to come, the issue remains how to create laws that provide adequate safeguards while incorporating a flexible standard to adapt with the changes in technology.

If legislation continues to be ill equipped at dealing with these issues, high technological industry standards could enforce an atmosphere that would place a premium on individuals’ privacy.

The Technology Patent System, Stifling Innovation?

In a recent Techdirt blog, when discussing the idea that start up companies should be less open in order to avoid patent trolls, the author opined that “What's stunning -- and depressing -- is that the patent system is supposed to be the thing that encourages innovation. And yet, because it's become totally dysfunctional, one of the recommendations for how to avoid running afoul of it now... is to do the exact thing that holds back and limits innovation. What a shame.”

The United States patent system is in a state of disarray, some say due to patent trolls, while others point to the large technology companies, such as Apple, Microsoft, and Google, using the system's weaknesses to dominate with overly broad patents. Patent trolls, companies that exist to sue over violations of patents, make it difficult for startup companies to gain access to a patent for their technology without getting sued. Trolls collect patents solely for the purpose of attacking companies, making cases that the company infringes their patent. The trolls bring lawsuits as a course of business and the large technology companies seem to be following suit, creating an arms race in the field of patent law. The number of lawsuits involving patents in the United States District Courts has almost tripled in the last two decades, the number of patent applications has increased more than 50% over the last decade, and it seems most of the money is going to the trolls and the lawyers.

Trolls have become very efficient in pushing their claims through and the data from 2002 to 2009 shows that the median award given to patent trolls is $12.9 million, while awards given to operating patent holders dropped to $3.9 million. This is a drastic contrast from data between 1995 and 2001, where practicing entities were getting higher median awards ($6.3 million) in patent lawsuits than non-practicing entities ($5.2 million). Patent trolls bringing these lawsuits to extort money from economically productive companies ties money up in lawsuits and hinders innovation, especially for smaller companies. Some argue that if this continues companies will start being intentionally vague and less open, which defeats the purpose of innovation. Research has clearly shown that what helps innovation is more openness and sharing, which will lead to economic growth.

Large companies are following suit, using their patents as weapons against their rivals. Billions of dollars are being spent on bringing lawsuits and buying patents that will never amount to anything. Apple has used patents as a defensive tool, specifically for the iPhone, essentially trying to patent every creative idea, even if knowing it would never lead to a patent. Although Apple knew that a patent would never be approved for a specific technology, they would apply anyway, preventing other companies from later trying to patent that idea. Large companies such as Apple have been accused of applying for overly broad patents, and that accusation has merit considering the patent applicant wants to cover every aspect of a new technology. For example, there are multiple ways to write the same computer, so by creating a broad patent by intentionally making the borders undefined it is easier to sue accusing others of encroaching on the patent. These overly broad patents also hinder innovation by giving monopolies on specific technology to certain companies. Most of the large technology companies are in lawsuits with one another spending millions of dollars as well as time battling in court, so the question becomes how far will this go?

The Making of the Next John D. Rockerfeller: Are Vertical Integrations Setting the Stage for Technological Monopoly?

Google has proven its ability to amaze us over and over again with products like Google Earth, Google Voice, Google driverless car and much more. While many are pleased that this continued innovation comes from a socially responsible corporation, others are concerned that its ambitious expansion could turn into a technological monopoly.

Not including the recent false reports on acquisition of WiFi provider ICOA, Google has actually acquired more than one company per week on average since 2010. Google’s rapid growth has triggered a chain of products, acquisitions and partnerships that extends well beyond pure web search engine. Its products range from various applications, Android mobile operating system to Google Chrome OS browser operating system. It owns several websites that top the most visited website list, along with Google, such as YouTube and Blogger. In 2012, Google began to establish its presence in the hardware industry by partnering with major electronics manufacturers on its “Nexus” series and its acquisition of Motorola Mobility. Google also initiated the Google Fiber broadband Internet service project with the construction of fiber-optic infrastructure in Kansas City.

Google has reached the height of vertical integration. It has purchased sufficient vertically integrated companies in its supply and production chain to prevent hold-up problems. Google and its subsidiaries now essentially control the hardware, software, and marketing of its product and possibly even an independent wireless network. It is worth noting that Google is not the only player in the race to vertical integration. Apple controls the design of its iPad and iPhone hardware and software, and sells its own products directly to consumers. Samsung has also thrived by making everything from LCD panels and televisions to processors and smartphones.

Although a vertically integrated company can benefit consumers with improved product quality and reduced production costs, critics argue that Google has subjected itself to scrutiny in light of all the monopoly accusations and FTC investigations. For example, Google could theoretically give Motorola its latest versions of Android exclusively and place other handset makers at a competitive disadvantage. Similarly, Google could use its ownership of YouTube to disadvantage competitors’ search results. One cannot help but wonder, is Google using vertical integration to eliminate its competitors?

Unlike horizontal monopoly, a vertical monopoly is not considered anti-competitive so long as there are opportunities for others to operate in the line of business. Search is the critical gateway by which users navigate the Web and Google already dominates search and search advertising. Google is now broadening its search-dependent products and services, which reinforces its dominance in the field. It is almost impossible for the government to challenge a vertical merger or acquisition between two companies that are not direct rivals. However, consumers can expect to face higher prices and reduced innovations, something that Google once promised would never happen.

Call Me Maybe? – The Use of Cell Phone Records as an Investigative Technique to Locate and Track Suspects

In 2008, the FBI utilized a novel and innovative way to track a band of bank robbers in Texas – they obtained phone records. These records not only documented over 20 calls made between two of the robbers around the time that the heists occurred, but also revealed the identities of the two men, thus allowing police to make an arrest. The two men were charged with robbery and possession of deadly weapons charges and were eventually convicted.

This case marked the beginning of a trend in the investigative method of cell phone tracking. The ambiguity of many longstanding federal privacy laws allows for debate over whether or not such a method is, in fact, constitutional. The Obama administration has taken the stance that because most Americans have no reasonable expectation of privacy when it comes to their cell phone records, their Fourth Amendment rights are not violated when a phone company subsequently turns over records to police.

On the other hand, many civil liberties groups such as the American Civil Liberties Union argue that allowing warrantless searches of an individual’s cell phone records could open a so-called “Pandora’s Box” regarding privacy limitations (or lack thereof). If cell phones can be tracked without a warrant, can online history, automobile GPS and even social media be trailed by the government as well sans justification?

And for proponents of this novel investigative technique – how far should investigators be allowed to go? Should warrantless searches be limited to retrospective data such as from where and to whom calls have already been placed? Or should law enforcement be privileged to attain up-to-date live information documenting where a cell phone is at any given moment and receive notification when such a device is used? Questions like these are not readily answered in current privacy statutes and have found themselves at the onus of much litigation regarding the issue.

Four years after the Texas case, this issue finds itself before the federal courts yet again, this time in New Orleans. Again the Obama administration is arguing that warrantless tracking of cell phones is entirely constitutional and does not violate any privacy expectations. In fact, federal prosecutors are maintaining that law enforcement should be able to obtain minute-by-minute movements of such devices for up to 60 days at a time as part of an investigative proceeding. Information to be gleaned by such close monitoring, they argue, involves medical treatments, political associations, religious convictions and even potential indiscretions such as adultery.

Advocates of warrantless searches argue that requiring police to obtain a warrant prior to tracking would only serve to hinder law enforcement’s ability to obtain valuable and crucial information relating to investigations of serious crimes. They state that because a cell phone provider stores and records information regarding cell phone location and usage, and because customers voluntarily convey information to their wireless provider by using their cell phone, that customer, upon signing a cell phone contract, has no reasonable expectation of privacy regarding their mobile device. They maintain that as long as law enforcement is able to demonstrate that the cell phone records are relevant and material to an ongoing investigation, no constitutional rights are violated.

On the other hand, individuals who oppose warrantless searches suggest that while tracking for a period of a few weeks might be constitutional, carrying out the period for over two months violates any expectation of privacy cell phone users may have.

While there is much debate in the Senate regarding this issue, with Democrats vetoing required warrants and Republicans introducing pro-warrant legislation, it does not appear as if the issue is soon to reach a resolution. In an age where an individual’s every movement and conversation can sometimes be traced using technology, whether that be through cell phone records, Facebook, Twitter, or otherwise, it seems as if some limits should be placed on the government’s ability to scrutinize every move of the American public. It is hard to believe that an unsuspecting customer using his or her cell phone or updating a status online impliedly renounces the right to privacy, and essentially acquiesces to having every move subject to the investigative techniques of law enforcement.

IT Human Capital Flight

Immigrants make up one-tenth of the overall U.S population and have made significant scientific and economic contributions to the country. According to recent studies of immigration statistics, the disparity between the large number of skilled professionals waiting for visas and the small number that can be admitted to the U.S is creating a possible reverse “brain-drain” effect of highly skilled labor, particularly in the field of high technology and bio-technology, driving both the talents and their businesses back to their home countries.

Human capital flight, more commonly known as “brain drain”, is the large-scale emigration of a large group of individuals with technical skills or knowledge. The U.S has enjoyed a “brain gain” in the IT, bio tech, aerospace, and entertainment industries since the 1990’s, due to its high wages, comfortable living standards and stabilized system of government. Aside from permanent U.S resident visas, the government introduced the H-1B visa program that allows U.S employers to temporarily employ foreign workers in specialty occupations, subject to numerical limits. Each year, over one million highly skilled professionals compete for the 120,000 permanent U.S resident visas and the 65,000 regular H-1B visas.

With the recently tightened immigration law and the thriving economy in other countries, the best and brightest talents are no longer begging to be let into the U.S. This is an alarming trend because immigrants have founded over 50 percent of Silicon Valley’s companies, including Yahoo!, Google, eBay, YouTube, Intel and Sun Microsystems. Most large IT companies have hired immigration specialists and spent millions of dollars on visa administrations in an effort to prevent losing overseas talents and creativities.

One’s loss is someone else’s gain. For the first time, immigrants have better opportunities outside of the U.S as the advantages in entrepreneurship in their home countries outweigh the burdensome visa application process. China and India, two countries that suffered the most from “brain drain” in the past few decades in the field of high technology, are currently benefiting from this reverse brain-drain effect. Studies show that things are good enough economically in these countries that there is little incentive for IT talents to come to the U.S, let alone stay.

Both candidates for the 2012 presidential election highlighted the importance of immigration reform in an economic context, suggesting changes designed to help retain IT talents and innovative businesses. Experts have recommended an expansion of visa programs to increase the number of visas for highly skilled professionals, creating a modern electronic visa system, and more importantly, addressing American workers’ concerns about impacts of immigration on the unemployment rate. Unless the U.S regains immediate access to these talents, it will soon find itself struggling to compete in the global technology industry.

E-voting: Efficient Democracy or Hacker’s Holy Grail?”

Our country recently experienced an extraordinary two weeks, encompassing Hurricane Sandy and the presidential election. This marriage of natural and political events brought a new level of prominence to the issue of electronic voting. New Jersey’s Lt. Governor Kim Guadagno encouraged residents displaced by the storm to vote via email, being treated as overseas voters. In New York State, where voters were allowed to cast their ballot at any polling place because of relocation, the State Board of Elections rejected e-voting, citing its susceptibility to fraud.

The contrasting views of e-voting by these bordering states similarly affected by Sandy reflect the issues surrounding its use on a national scale. Over 121 million Americans voted in the recent Presidential election; 3.5 million of them did so electronically. In a day and age when electronic services are so accessible and popular, can e-voting be securely used to facilitate the democratic process?

There are several types of e-voting, including computer-like touch screen voting machines and voting over email, typically available to overseas residents and military personnel. Some e-voting machines provide no paper record of the votes cast while others produce a record of each vote, providing a back up record if necessary. New Jersey residents who voted via email send a copy of their completed ballot via either email or fax and then mail in the original paper copy as soon as possible.

Many Americans wonder why more states have yet to implement online voting as people perform common, secure tasks online, such as paying their taxes, shopping and banking. Experts have conflicting viewpoints on what is an acceptable and secure model for protecting Americans votes. Many in the technology realm, including security experts, hackers, and cryptologists, challenge the security of current e-voting technology. Groups such as Verified Voting and Common Cause monitor the security of e-voting. Along with the Rutgers University Law School, these two groups recently published a paper citing numerous problems that currently exist with the e-voting methods and machines in America.

They argue that despite the obvious benefits, e-voting has had several notable incidents of failure. The U.S. military attempted to create an online voting system for service members stationed overseas known as the Secure Electronic Registration and Voting Experiment (SERVE). However, this project was abandoned as a result of numerous security flaws.

Another example of a system failure was in Washington, D.C. Prior to launching, District officials invited the public to try to hack into the system. Within 36 hours, hackers gained complete control of the system and were able to switch votes and even made a song play once voters submitted their electronic ballots.

Experts also say that the hardware on some e-voting machines can pose security problems. In one experiment, security specialists revealed how some e-voting machines could be altered and controlled remotely using a few cheap and simple computer parts and a paper clip. Tampering with hardware becomes even more of a threat when expanded early voting practices have put votes on machines stored in schools, churches and other polling places for weeks before Election Day.

Others believe that every state should use e-voting because this new method would increase voter turnout, lessen the time and burden of traditional voting, and instantly and accurately report results. Everyone Counts, a company that creates e-voting machines and technology, cites the successful use of iPad voting in a local election in Oregon last year. They argue that the dangers and “hacking” incidents sighted by opponents are over reported and therefore the threat seems larger than it actually is. “Cyber the Vote” is a voting blog from a former IBM IT employee. It advocates that e-voting can substantially help the voting process by eliminating human error in the vote counting process, preventing future “hanging chad” situations. E–voting could also facilitate any last minute changes to the ballot. Proponents urge more states to embrace e-voting because it would be impracticable to wait for all possible problems to be eliminated as the traditional paper ballot system has inherent flaws.

Hopefully it will not take another Superstorm for states to cast a clear decision on the place of e-voting in the American democracy. The question remains if the benefits of quicker voting and increased turnout outweigh the potential risks of security and fraud. Other countries, including Canada, Sweden and Switzerland, successfully use e-voting systems; perhaps the move to e-voting will happen over time with our country’s voting system.

Court Awards Largest Damages Award to Date in Illegal File-Sharing Suit

An Illinois federal court handed down the largest damages award to date this week in a BitTorrent illegal file-sharing case. Judge John Lee ordered Kywan Fisher, of Virginia to pay $1,500,000 in damages to adult entertainment company Flava Works in a default judgment for sharing ten of their movies on BitTorrent. This total, reaching penalties of $150,000 per movie is the maximum statutory damages under U.S. copyright law.

BitTorrent since early 2010 has been the forum through which hundreds of thousands of people have been sued for downloading and sharing copyrighted material. The most well known case involves Voltage Pictures movie studio, which sued more than 27,000 people who allegedly downloaded “The Hurt Locker.” Most cases are typically dismissed or settled, as finding evidence against alleged file sharers is generally challenging. Multiple cases relied on using the IP addresses of alleged users as evidence, however this idea was struck down by a federal judge in May, ruling that an IP address alone was not enough to accuse someone of illegal downloading. The thrust behind this holding is that IP address identifies only the location at which any number of Internet-connected devices may be located. Discovering the identity of the individual associated with the device, i.e. the subscriber to an IP address, does not necessarily reveal the identity of the true defendant, as it could be the subscriber, a member of his family, an employee, neighbor, etc.

The current case avoids this hurdle by presenting additional evidence of encryption codes inserted in the original films that Fisher bought. Flava Works has software that assigns a unique encrypted code to each member of their paid websites, so every time Fisher downloaded a copyrighted video from Flava’s website the encrypted code attached. Flava Works was able to trace the shared illegal copies of the movies back to Fisher, who copied or distributed Flava Works copyrighted property at least ten times, leading to the videos to be infringed or download more than 3,449 times. The user agreement that Fisher signed expressly forbids copying films, which allowed Flava Works to claim willful copyright infringement for 10 titles that Fisher uploaded to BitTorrent. Fisher did not assert any defenses, as he did not appear in court.

Flava Works and other copyright holders involved in BitTorrent illegal file-sharing lawsuits will embrace this surprisingly sizable verdict as a huge win for copyright holders to combat the illegal file-sharing epidemic. It is likely that this case will be widely cited by plaintiffs, especially in settlement letters. Notably this case is different from other cases in that the encryption code adds the extra evidence needed beyond IP addresses, but it also presents more options for the copyright holders and shows how seriously the courts are taking these cases. Due to Fisher’s nonappearance, the judge entered a judgment in favor of the plaintiffs for one million, five hundred thousand dollars, the greatest amount statutorily allowed by copyright laws; however, Fisher will likely attack this judgment collaterally with a jurisdictional argument.

Your Cloud Ain’t Clean

The idea of data storage “in the cloud,” “cloud storage,” or “iCloud” conjures up a light and fluffy image of an ephemeral, insubstantial imaginary host for your web activities. Well, it turns out that because data storage centers for all kinds of websites—from Westlaw to the federal government to Facebook—are afraid of losing you as a customer, they keep multiple underused servers running day and night, and backup generators at the ready. This New York Times article, the first in a series, points out the close relationship between investor-owned utilities and the data centers they serve. Using “more power than a medium-size town” to keep servers on standby in case of a surge in demand, while 6-10 percent of their capacity is normally used to process data, data centers are the users power companies want.

Imagine another insubstantial, but quite extant substance—air. Each of us breathes 50-60 pounds, or approximately 20,000 liters, of air a day. The Clean Air Act, enacted in 1970, amended many times, but still around, is a permitting process new power plants have to go through to show they are only going to emit so many tons of pollutants per year. The Act is federal, but the states come up with plans and provide permits under it. It regulates as “criteria pollutants” NOx, or nitrogen oxides, SO2, or sulfur dioxide, particulate matter in size PM-10 and PM-2.5 (that’s microns), and O3, which includes volatile organic compounds, non methane organic gases, and hydrocarbons. The nitrogen oxides and sulfur dioxide cause acid rain; the particulate matter is that gray or black stuff coming out of the bus exhaust. The stuff in the “O3” category are ozone precursors. Particulate matter and ozone in the lower atmosphere, also known as smog, cause asthma and other respiratory diseases. N2O, nitrous oxide, is part of NOx, and is a greenhouse gas in addition to being “laughing gas.” Although carbon monoxide, a poison, was always regulated by the Act, carbon dioxide, another greenhouse gas, was not clearly within the Environmental Protection Agency’s power to regulate until Massachusetts v. EPA (http://scholar.google.com/scholar_case?case=16923241216495494762&hl=en&as_sdt=2&as_vis=1&oi=scholarr) in 2007, which was about motor vehicle emissions. EPA then created the “Tailpipe Rule” making greenhouse gases a regulated pollutant.

All these are emitted by coal combustion power plants, and the diesel generators that back up “the cloud” in times when a power line might trip and cause a blackout. Amazon, for example, has been violating state regulations and permits by installing and testing generators. Another Times article written this April discusses a Greenpeace study which found that internet-based companies like Apple are moving to North Carolina, Virginia, northeastern Illinois, and similar regions, to use their (presumably less expensive) coal and nuclear power. Apple came back at Greenpeace, saying it had plans to build two huge renewable energy facilities near its North Carolina data center.

Nevertheless, Google and Facebook, two giants, have a better record on renewables at the moment. Greenpeace ran a campaign on Facebook against Facebook’s Pineville, Oregon data center, which runs off of coal-fired power, according to writer Emil Protalinski on ZDNet and Facebook changed its policy on siting data centers. It’s a bit easier to change your policy after you already have the data center with a handy coal plant. Google invests in renewable energy projects outside its own needs, such as this investment in Solar City, a company that leases solar arrays to home and office owners who might not have the funds to purchase one and this investment in four solar PV projects in Silicon Valley (a good investment because these projects benefit from a tariff in their municipality that guarantees a certain price for their energy). Google also has its own solar outlay on its corporate campus.

The D.C. Circuit Court, in Coalition for Responsible Regulation, Inc. v. EPA , held that since the Environmental Protection Agency created the “Tailpipe Rule” for cars, it can’t just ignore the greenhouse gases coming from “major stationary sources.” A source, like a fossil-fuel-fired power plant, emitting more than 100 tons per year of any regulated pollutant, has to have caps imposed upon it through the Clean Air Act permits. The problem now is that each stationary source emits such a large quantity of greenhouse gases compared with any given car that the EPA said it’s okay to potentially emit 100,000 tons of greenhouse gases per year (that’s called the “Tailoring Rule”). Fat lot of good that does.

With regard to data centers, efficiency (conservation) and investment in renewables (growth) could lessen their pollution factor. LexisNexis, for example, is examined in the first Times article above for going through an energy audit process where it was able to reduce the number of servers running without creating any user issues. More than half of Lexis’s 333 servers were found to be “comatose.” A company called Power Assure sells technology allowing servers to safely power down at night when they are not being used, but people are afraid to try it. Unfortunately, IT folks from back in the day when running too many programs on a computer—or even turning it on and off—would crash it, are paranoid. Now, I want my internet as much as the next person does. But with all the talk about green energy, smart grids, and efficiency, data centers—and the demand from the “cloud” that drives conventional power—are something to keep an eye on.