Carrier IQ – Has someone violated the Electronic Communications Privacy Act?

Photo Titled "Completely Taped" by Byung Kyu Park available on Flickr

141 Million handsets have a software program deployed on them which purports to only collect network diagnostic information for mobile phone service carriers. However, this software program is secretly running because is not easy for an average mobile phone user to see the program running on their phone because it does not appear as a “running application” on the applications list. Nor is there a clear disclosure of what data is being collected by the application, or a way to easily opt out of the application running on the mobile device. Nor is there any easy way to stop it from running on the Android phones. On November 28, 2011 Trevor Eckhart uploaded a seventeen minute video (shown above) exposing the extent of the data being captured by Carrier IQ, an application that mobile phone providers and/or carriers install on mobile phones. The video shows an Android developer searching his phone for privacy policy disclosures, and not finding any privacy disclosures related to the Carrier IQ program, he proceeds to show the type of data that is logged by Carrier IQ onto the phone’s debug log. For example, each time he presses a key that key press is logged, even when he enters information into a web page over his own local WiFi connection and the session is protected with SSL (which is an encrypted means of communicating between a client and host and forms the backbone of all secure communication over the Internet; as a standard and all data transferred within an SSL connection should be encrypted and protected after the SSL handshake). As of January 25, 2012, Eckhart’s video received over 1.9 Million views on YouTube.

In response, Carrier IQ sent Eckhart a letter threatening legal action unless he retracted his research, characterizing his analysis and posting of privacy policies as a breach of copyright which could expose him to an excess of $150,000 in damages. In response, Eckhart reached out to the E.F.F., who agreed to represent him; Carrier IQ has since backed off from its legal action and apologized for the cease and desist letter. The question remains now – has Carrier IQ, or the mobile phone manufacturers, or the mobile service carriers violated the E.C.P.A. by secretly running a software program on the mobile phones?

The Electronic Communications Privacy Act (E.C.P.A., 18 U.S.C.A. § 2510) was enacted to expand the scope of the Wiretap Act (which was focused on the interception of voice communication) to protect data transferred by computers. Title I of the Act protects messages that are in transit, and Title II of the Act protects messages that are in storage on a device. Within the E.C.P.A., it is unlawful for a person to distribute “any electronic, mechanical, or other device, knowing or having reason to know that the design of such device renders it primarily useful for the purpose of the surreptitious interception of wire, oral, or electronic communications” (18 U.S.C.A. § 2512(1)(a)). However carriers do have an exception, where under the normal course of their business in maintaining their communication systems, they can use devices to intercept wire communications.

Senator Al Franken, who chairs the Senate Judiciary Subcommittee on Privacy, Technology and the Law, has requested more information regarding what data is being collected and where the data is being sent. Depending on the type of data that is actually collected and sent to the carriers, they may be able to claim that they were operating within their normal course of business in maintaining the stability of the wireless networks. A criminal or civil case under the E.C.P.A. may not be a guaranteed success in a court of law. However, the public surprise of the extent of data being captured, and the lack of notice and control that users are able to exercise over how much activity is being tracked has already made the carriers and Carrier IQ losers in the court of public opinion.

Massachusetts Lawmakers Approve Human Trafficking Bill

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On November 15th, Massachusetts’ House and Senate approved a Human Trafficking Bill that has been urged by human rights advocates. The bill imposes life sentences for pimps and other traffickers found guilty of coercing children into sex and forced labor. The bill also confronts the important matter of treating children as well as adults forced into prostitution as victims and not as offenders. Additionally, the bill will create a panel to study approaches to prevent trafficking. The sex trade is an increasing problem in Massachusetts, yet the state is one of three states that have yet to enact an anti-trafficking law.

While slavery is often considered obsolete, the exploitation through forced sex and labor is estimated to include trafficking of 27 million people around the world. This modern slavery has evolved through the use of the Internet, which conveniently allows traffickers to recruit and sell victims over websites, taking prostitutes off of the streets and out of the view of the public and law enforcement and placing them into hotel rooms.

Much attention has been given to advertising websites and their “adult” sections, which are intended as a means for consenting adults to find other consenting adults. Inevitably, the advertisements have been used for soliciting sex and in some instances sex with minors. When Craigslist banned sexually related advertising in the US in 2010, a majority of this activity found a new home on BackPage.com. The site has recently received demands from anti-trafficking advocates, including the fifty-one attorneys general and an interfaith social justice group, to remove the section in order to stop the online advertising for prostitution, emphasizing the exploitation of minors made possible through listings.

The letter from the attorneys general states that efforts made by BackPage.com to reduce trafficking of both adults and children have been unsuccessful, and more than 50 instances of trafficking or attempting to traffic minors through the site have been discovered. The letter provides an example of how a trafficker, in Dorchester, MA used the site to exploit a minor by “forcing a 15-year-old girl into a motel to have sex with various men for $100 to $150 an hour” and found the customers by “post[ing] a photo of the girl on BackPage.com.”

While shutting down the advertising will put an end to trafficking on those sites, with the Internet’s infinite domains, any setbacks for traffickers will be minor and clients will merely be required to use some extra effort to find other sites. Sadly, if traffickers are capable of physically abusing, controlling and exploiting children, they are also capable of looking elsewhere and creating other means to continue making a profit off of forcing others to work for it.

The recent Massachusetts bill approval is a great start to shed light on the fact that there is a problem and treating the victims as criminals is not the solution. The bill places the blame where it belongs: on the trafficker. Arguments have been made that not all adult prostitutes are trafficked, and it is a nice theory that a consenting adult has a right to make a living selling their body. However, prostitution by choice is not the rule but the exception. Children are trafficked as young as eleven and twelve years old and often remain in the sex trade into adulthood, demonstrating that even adult prostitutes are unlikely to have chosen this life for themselves. The reality is that all trafficking victims are controlled by fear, coercion, and violence, and the Internet is allowing this activity to go unseen. By shifting the current social stigma surrounding prostitution to victimization, trafficked individuals are more likely to seek help from the medical community and from law enforcement.

The bill, which will more likely than not soon become law, is important in officially recognizing there is a problem that needs to be addressed. A significant part of the bill is the establishment of a panel to study ways to prevent trafficking. Educating young people at risk of being trafficked as well as the entire public is essential. Eliminating the role of the Internet in trafficking is to be expected as a major issue in prevention to be addressed by this future panel.

Data Protection Uniformity in the European Union

Image Titled "Internet Global Advertisement" by The Miiz

On Tuesday, Vice President of the European Commission Viviane Reding, announced a plan to harmonize data protection policies throughout the European Union. The plan would allow an Internet company to operate throughout the 27 Member States as long as its data protection policies were approved by a single state.

The new directive will update the EU’s data protection laws, to patch holes created by U.S. law through the introduction of the Patriot Act, and to bring the 1995 Data Protection Directive up to speed on new and developing technologies, such as cloud computing. Based on European data protection standards, the rules Reding would like to introduce are codes of practice ensuring "adequate safeguards" for data transfers between parts of the same corporate group.

Reding hopes the new data protection regulations will make it much simpler to negotiate such binding corporate rules (BCRs) she said Tuesday at a conference in Paris organized by the International Association of Privacy Professionals.

“They [Companies] need ... to have a ‘one-stop-shop’ when it comes to data protection matters, one law and one single data protection authority,” Reding told the American Chamber of Commerce. “I want to drastically cut red tape.

Reding reiterated that European law would apply to any company operating within the European Union, even if the company is based outside the area, such as the United States. Subsequently, any non-European company with customers or clients inside Europe will have to comply fully with European regulations. Details of the plan are expected to be revealed by late January although it may take as long as 18 months before the bill becomes law.

Under the current Data Protection Directive, companies have to have their data protection policies approved by each individual country. The Directive offers basic principles and laws that each member state has built upon. This fragmented approach has made it increasingly difficult for businesses to trade, and comply with the complicated rules and regulations. Germany for example has stricter laws than the UK, making trade between the two countries difficult. Reding estimates that this bureaucratic approval process costs companies approximately $3.1 billion per year.

In order for there to be uniform E.U.-wide privacy rules, the data protection officials in individual countries would have to be granted greater power to enforce their laws and to impose penalties on violators. Under the existing system, privacy officials in some countries can only make recommendations. Jacob Kohnstamm, chairman of a panel that advises the commission on privacy issues, said the Union needed data protection authorities that were “able to bark and bite.”

Reding believes that an overhaul of the privacy regulations is crucial to increasing the competitiveness of the European economy during its present debt crisis. According to a New York Times article, Ms. Reding said, “I think I am persuaded that while bringing member states out of their debt crises, we have to do everything we can to help our companies grow.”

Such changes are necessary because the world is no longer defined by physical borders, she said. "Data races from Barcelona to Bangalore. It is processed in Dublin, stored in California and accessed in Milan. The transfer of data to third countries has become an important part of daily life, and this affects businesses and citizens."

However, getting 27 countries to agree on a uniform policy may be easier said than done. The EU must iron out differences between its members over privacy issues. Countries like France and Germany favor stronger protections for privacy, while Ireland, Britain and others prefer more market-friendly rules. A further example of international divergence is shown in the European consensus on the new plan’s possible ‘right to delete provisions, which would allow European citizens to apply to social networks or companies to delete the data held on them. The UK data protection agency called the proposals “unenforceable” and that the proposed measures should not go ahead. It is also likely that we will see conflicts between the rules in the European Union and other jurisdictions, like the United States, where data protection regulations are also under review.

Compliance and enforcement are two other major concerns surrounding the proposed plan. Kohnstamm urged the commission to draft the new privacy rules through regulation, a measure that would give E.U. member states little room for interpretation in their implementation of the law, rather than via a directive, like the current law, which means the law is not self-executing and the countries may adapt it. However, compliance and enforcement outside the European Union could prove costly. Wojciech Rafal Wiewiórowski, Poland's inspector general, raising this issue, asked, "Who will say whether a company is fulfilling its responsibilities under a BCR? "Let's assume it's the DPAs [Data Protection Authorities]: that works in Europe, but that's not really the problem. The problem is those companies moving data outside Europe. In the U.S., we can count on the support of the Federal Trade Commission, and Mexico too has a strong data protection authority,” he said. "But what about Laos? Who will check what is going on in a data center in Laos?"

The new proposal will likely have strong effects on the world outside of the bloc as well as inside. Ronald Zink, chief operating officer for E.U. affairs at Microsoft, said that harmonizing policies internationally might be just as important as doing it within the Union, but added: “I think the E.U. data protection laws can be a beacon for the U.S. and around the world. They do a lot of things right.” The details of the plan and the dates of its implementation are yet to come.

SOPA: The New Way to Stop the Feed

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Introduced in October, the Stop Internet Piracy Act ("SOPA") is the House of Representatives attempt to place greater restrictions on websites hosting copyright infringing material. In the Congressional hearing that have thus far been held, representatives of Hollywood and the Recording Industry Association of America ("RIAA") have strongly supported this bill, as it would attempt to stem the flow of copyright infringing material, especially from websites from foreign states. This controversial bill has come under fire from internet providers, including Google, Verizon, Comcast, and AT&T, specifically focused on section 102 of the proposed bill, the site blocking provision.

Section 102 of SOPA provides the courts with the power to require an internet service provider ("ISP") to block a website that is found to contain infringing material. The location of the website is not relevant to this section, as the provider can be ordered to take measures to "prevent prevent access by its subscribers located within the United States to the foreign infringing site."

Some ISP's, specifically those running smaller servers, have already stated that such a blocking requirement is simply not technically feasible with their current network infrastructure. They would have to completely redesign their system in order to be able to screen access to a list of potentially thousands of sites, placing an immense financial burden on these smaller providers.

In addition to this worry, ISP are concerned at the vagueness of the requirements and responsibility that will be assigned to providers for complying with a blocking order. Proponents of the legislation state the SOPA does not have any specific technology requirements, or methodology for listing and blocking the infringing sites, so that it can be flexible. The problem is that such flexibility means that the court will be required to determine whether an ISP is complying with the spirit of the law, as there is no letter of the law to follow.

Regardless of whether such blocking should be required, potential costs from both possible legislation and network redesign will make the implementation of this legislation difficult to say the least.

9th Circuit Withdraws Decision Dismissing Antitrust Claim Regarding Cable Channel Bundling

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On October 31, 2011, the 9th Circuit withdrew its June 3 decision holding cable companies’ bundling of channels did not violate antitrust law, specifically the Sherman Act. The suit commenced in 2007 on behalf of a class of consumers against cable programmers, including NBC Universal, The Walt Disney Co., Time Warner, Comcast, and DirecTV. The companies packaged “must-have” cable channels with low-demand channels thus prohibiting cable distributors from offering the channels à la carte. The consumers alleged that this practice forced independent distributors out of the market.

The Sherman Act prohibits contracts, trusts, or conspiracies in unreasonable restraint of trade or commerce. One unreasonable restraint can be the practice of “tying” two or more products together that could otherwise be sold separately. The idea is that the seller has market power over the “tying product” and can leverage this power to exclude other sellers of the “tied product.” In the case of cable channels, the high-demand, “must-have” channels would be the tying product and the low-demand would be the tied product.

The District Court dismissed the case for failure to state a claim concluding that the plaintiffs failed to show how cable channel bundling keeps independent companies from entering and competing in the industry. The court contended that the plaintiffs did not plead facts asserting an antitrust claim, but instead asserted a class action suit by claiming that cable bundling harms consumers by limiting the way in which cable distributors compete with one another. Harm to consumers and limits on competition, without more, does not constitute injury to competition sufficient to bring an antitrust suit.

After receiving a flood of amicus briefs from organizations and consumer groups, the 9th Circuit withdrew its opinion and will seek a third judge to join the panel. Likely, the court will issue a more in-depth and detailed opinion. The court fell short in its analysis, merely stating that injury to consumers is not proof of injury to competition. It is probable that the court will set forth a clear pleading standard that lawyers must meet to assert injury to competition, rather than reverse the grant of the motion to dismiss. It is rare for a court to withdraw a decision on its own and rarer for a court to reverse that decision.

Copyright Office Releases Discussion of “Mass Digitization”

Photo Titled "Kindle/Nook Hollow Book Holder" by Conduit_Press

Just this past month the Copyright Office released a forty page document entitled Legal Issues in Mass Digitization: A Preliminary Analysis and Discussion Document. The document is supplemented with multiple useful appendixes and comes in at just under one hundred pages total. What could possibly motivate the Copyright Office to go to such lengths? The answer is Google. More specifically, Google Books and a variety of organizations throughout the world that are attempting to compress as much printed or published material as possible into a digital medium. The problem is that the printed material, overwhelmingly books, is most likely under copyright with an owner who must grant permission for such copying. Hence copyrights.

The cases that led to this report and raised most of these concerns are Authors Guild v. Google Inc., 770 F. Supp. 2d 666 (S.D.N.Y. 2011), and the companion case American Society of Media Photographers, Inc. v. Google Inc., Civil No. 10-2977 (S.D.N.Y.). Google has been scanning books, many copyrighted, since 2004 and made full copies available to users of partner academic libraries and samples available to the general public via the internet. The report notes that the court was concerned “that exclusive rights afforded by copyright law should not be usurped as a matter of convenience, and that policy initiatives that redefine the relationship between copyright law and new technology are in the first instance the proper domain of Congress, not the courts." Google attempted to settle the matter at one point but he Department of Justice was concerned that Google’s behavior would continue and have negative long-term implications. Though settlements are expected, future litigation is almost inevitable.

The document goes on to describe how books are being mass digitized and who the interested parties are. Google is obviously one of these parties. A conglomerate made up of twelve well-known universities, Google, Microsoft and the Internet Archive created the HathiTrust Digital Library that contains three billion pages of scanned content. European governments have also partnered with private organizations to digitize as much cultural and scientific resources as possible. The Library of Congress, the Smithsonian Institution, and the National Archives all have detailed digital plans for the future as well. It is definitely worth noting that there is already a vast amount of literary work available online throughout the world. The EU, France, Germany, and China are all working on government funded projects to digitize books that are considered imperative to the preservation of history.

The fourth part of the report analyzes how copyright laws, specifically licensing, interact with book digitization initiatives. Under the Copyright Act a copyright owner possesses a “bundle of rights” that includes the right to exploit the digital rights of their work however they see fit. The Copyright Act also grants a limited exception to libraries and their ability to make copies of books. The report also notes “it is difficult to imagine an exception to copyright applying to the commercial partners of libraries.” The Fair Use exception is discussed but no concrete predictions for its application can be arrived at. Fair Use is employed as a defense once the court finds infringement, which analyzes the motives and individual circumstances of the infringer on a case-by-case basis. The last issue raised in the fourth part of the report is “orphan works.” The term orphan work is used to describe a copyrighted work without a locatable owner to obtain permission from. Congress has discussed a “safe harbor” for certain organizations that are using orphan works as long as the work is no longer used if the copyright owner reappears and objects to its use.

Licensing schemes are discussed in the last part of the report covering both direct licensing and collective licensing. Collective licensing would encompass voluntary (direct negotiation between licensee and licensor), extended (requiring some form of legislation to allow groups to bargain on behalf of licensee and licensor), and compulsory (basically forcing the copyright holder to license the use of the work) methods.

Many of the concerns brought up in this document are analogous to the concerns society and business had with the invention and rise in popularity of copiers/Xerox machines and videocassette recorders/VCRs. The use of digitized books by members of non-profit organizations like universities and public libraries does not seem to be the main problem here because the library will most likely be a good faith partner that can be negotiated or renegotiated with. The long-term concerns seem to be centered on what framework needs to be put in place to protect copyright owners from technology that isn’t “here” yet. If you told an author twenty years ago that their most lucrative royalties would come from tablets, Nooks, or Kindles they would try to have you committed. But, many if not most people’s lives now revolve around digital content. It would not be fair if that stick in copyright owner’s bundle of rights is compromised; it may ultimately prove to be the most valuable stick.

The full document can be found here: OFFICE OF THE REGISTER OF COPYRIGHTS, LEGAL ISSUES IN MASS DIGITIZATION: A PRELIMINARY ANALYSIS AND DISCUSSION DOCUMENT, (2011), available at http://www.copyright.gov/docs/massdigitization/USCOMassDigitization_October2011.pdf

House Subcommittee Hears Testimony on Online Gambling Regulation

On October 25, 2001, the U.S. House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing, and Trade held a hearing on the state of online gambling and the potential impact of regulation. A wide range of testimony was given by varied groups, most of it coming down in favor of taxing and regulating. Given the Joint Select Committee on Deficit Reduction, also known as the Supercommittee, and its mandate to issue a formal recommendation on reducing the budget deficit by at least $1.5 trillion over the next decade, the time seems right to get such legislation passed.

Online gambling has a rocky history in the U.S. In the early 2000’s the Bush administration attempted to use the Wire Act, mostly unsuccessfully, to prosecute online gambling; federal courts have typically held that the Wire Act only applies to online sports betting, not online gambling in general. The Bush administration responded by sneaking the Unlawful Internet Gambling Act of 2006 (UIGEA) into the SAFE Port Act as a last-minute amendment that received almost no review. The UIGEA prohibits payment processors from accepting payments in connection with unlawful online gambling, but neglects to specify what types are unlawful. The UIGEA did cause a number of large online gambling sites to pull out of the U.S. market, but the market quickly recovered and continued to grow, with online poker being a particularly popular form. On April 15, 2011, the Department of Justice seized the domain names and froze the domestic assets of three of the largest online poker sites; Poker Stars, Full Tilt Poker, and Absolute Poker. These sites no longer operate within the U.S. although many smaller sites still operate domestically.

The October 25th hearing may have marked a turning point in online gambling in the U.S. Over the past few years, numerous pieces of legislation were drafted, and at least one was formally introduced. Yet most have stalled in either the drafting or committee review stage. The recent hearing, however, shows that the momentum may have finally shifted. There was key discussion about how regulation could help with consumer protection, and subcommittee members spoke in favor of regulating online poker in particular. Perhaps surprisingly, the National District Attorney’s Association issued a statement supporting online poker. Likewise, the National Council on Problem Gambling, while recognizing that online gambling may increase the danger of gambling addiction, explained how technology could be used to help combat compulsive gambling more effectively in an online setting than in traditional casinos. Finally, former FBI Director Louis Freeh submitted testimony in favor of regulating online poker. Given the potentially large source of revenue that taxing and regulating online gambling could bring to federal and state governments, along with its widespread popular support, it is time for Congress to stop forcing online gambling underground, and instead license and regulate it to provide a safe environment for the players and much needed revenue for the government.

E-Privacy: The Way the Cookie Crumbles

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On May 26th, 2011, a new European Union (EU) Directive came into effect revolutionizing Internet privacy. The newly enacted Directive, Directive 2009/136/EC of the European Parliament and of the Council of 25 Nov. 2009, has been appropriately labeled “the Cookie Directive” because it mandates that without an Internet user’s affirmative assent websites cannot use cookies. Cookies are files that are installed on a user’s computer during web browsing used to authenticate, track, and profile the Internet user’s web surfing behavior. The Cookie Directive requires that any Internet website that directs activities at EU Member States must allow users to opt-in, providing explicit consent to access or store personal information.

The Cookie Directive amends EU directives addressing electronic privacy (e-privacy): Directive 2002/22/EC, Directive 2002/58/EC and Regulation (EC) No 2006/2004. Unlike the earlier E-Privacy Directive that required an option to opt-out to refuse cookies, the new Cookie Directive requires that users opt-in before cookies are used at all. The Cookie Directive requires that a website get a users informed, affirmative consent before using cookies to store or access personal information or to track their website activity.

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.

Web analytics, is third-party software installed on websites to track user behavior. Web analytics software uses cookies to track website behavior. It is one of the best methods for tracking the interest of website users. Adobe Omniture is one of the most popular web analytic software programs. The directive may require Adobe, and other web analytic companies, to implement changes to their software. The cost of the change will likely be passed on to web operator, users of the software. The online marketing industry will also take a hit, as they rely on analytics software.

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.

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.

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.

Reforming R&D Tax Incentives: Do Video Games Deserve Special Treatment?

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.

President Obama Signs First Major Change to Patent Law Since 1952

Photo from IPWatchdog - The Bill is Signed: President Obama Signs America Invents Act  

On September 16, 2011, President Obama signed the Leahy-Smith America Invents Act at Thomas Jefferson High School for Science and Technology in Virginia. One of the significant changes resulting from the America Invents Act is a move from a “first to invent” to a “first to file” patent priority system. Until the recent enactment, the United States was one of the only countries using the “first to invent” system.

To gain the right to a patent under the “first to invent” system, an inventor had to conceptualize the invention and reduce the invention to practice. An inventor could not file a patent application based only on the idea of an invention. Rather, the inventor who put the idea to practice first had the right to the patent. A criticism of the “first to invent” system is that it led to extensive litigation to understand who actually reduced the invention to practice first. On the other hand, the “first to file” system gives the right to a patent to the first person who files the application. An inventor does not need to reduce the invention to practice to be able to file the patent application.

It is not surprising that the Act has generated considerable discussion since it is one of the most significant changes to Patent Law since 1952. Proponents of the bill believe the change from a “first to invent” to “first to file” system will decrease the confusion over who has the right to the patent, and will promote innovation and job creation. The change in the system will allow a clear understanding of who has the right to the patent, which in turn should allow inventors to develop products at a faster pace and decrease the amount of litigation over who owns the right to a patent. Opponents of the bill believe bigger companies will benefit, while smaller businesses and independent inventors will suffer because of a larger company’s ability to file patent applications faster. Opponents also worry that the transition to a “first to file” system will create an increase in the number of back-logged patent applications.

Despite the criticism, a change in the patent law was an inevitable and necessary step. There are currently 1.3 million patent applications waiting for determination and numerous cases of costly litigation to confirm patent ownership. The “first to file” system should provide clarity to patent ownership rights, but it is unknown whether this change will impact the speed in which patents are granted. The “first to file” system will not go into effect for another 18 months, so we will have to take a wait and see approach before concluding that the enactment actually helped reduce the current problems with the patent process.

For the full bill text, see America Invents Act of 2011.

Grudge Match: Amazon versus the Bear Flag Republic

Photo Courtesy of Nils Liehberr on Flickr

In an attempt to collect sales taxes from Internet retailers, California introduced the “Amazon Tax” in June. California’s new law will require Internet retailers to collect sales tax if they use an affiliate program within the state to solicit business and their cumulative sales during the preceding twelve month period are greater than $500,000.

In a move consistent with its battle over sales taxes with New York, Amazon immediately cut ties with all of its California affiliates and began to promote a ballot referendum to block the law. In an open letter to their affiliates Amazon explained, “We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.”

Governor Jerry Brown rejected an offer from Amazon to delay sales tax collection until 2014 in exchange for new Amazon warehouses being located in California, perhaps in response to the wide speculation that without an avenue to avoid sales tax collection, Amazon is likely to build the warehouses simply to serve its California customers better. He did, however, accept an offer from Amazon to drop the ballot referendum initiative in exchange for a grace period. The new law takes effect immediately, but does not require retailers to collect taxes until Sept. 15, 2012.

Amazon has since banded together with independent storeowners and big-box retailers, including Target and Wal-Mart, to lobby Congress for a federal law regulating sales tax collection by Internet retailers. Per the Amazon-California agreement, any federal law will supersede the California law.

Has the Sun Set on U.S. Green Tech?

Photograph courtesy of Living Off Grid on Flickr

Solar panel maker Solyndra, LLC is turning off its lights. After receiving a $535 million loan guarantee from the federal government and raising over $1 billion from private sector investors, Solyndra filed for Chapter 11 bankruptcy. The company is looking into a possible sale of its business or licensing out its technology. Solyndra developed a unique thin-film photovoltaic technology that the company claimed to have the lowest system installation costs on a per watt basis for the commercial roof top market. Earlier this year, President Obama visited a California Solyndra facility to publicize the U.S. government’s investment in green technologies and highlight its incentive programs aimed at promoting clean tech development in the country. The shut down creates a two-fold hit; it exposes an embarrassing vulnerability for Obama administration policy and raises questions about the rationale for U.S. government investment in green technologies.

On the political front, Republican lawmakers are capitalizing on the bankruptcy to highlight a flaw in the Obama administration’s stimulus plans. At a House Energy and Commerce Committee (HECC) panel hearing on September 14, Republicans released a report suggesting that administration officials rushed Solyndra’s loan award and failed to note obvious risks in supporting the company. In response, Democrats argued that Republicans are using the Solyndra bankruptcy to garner criticism for other clean energy projects because of a disbelief in climate change. Congressman Waxman, top Democrat on the HECC noted, “The majority of Republicans on this committee deny that climate change is real. If you are a science denier, there’s no reason for government to invest in clean energy.”

Abroad, foreign governments invest heavily in renewable energy technologies within their own countries and provide incentives for the consumption of the technologies. China leads the way and invests billions of dollars in green tech. Ironically, China’s investment is one of the reasons for Solyndra’s fail. The American company was not able to provide a cost competitive product with those developed in China.

From an economic perspective, renewable energy technology does not follow the traditional supply/demand model. Significant front-end investments are needed for renewable technologies to reduce sufficient costs to allow for competition with coal, natural gas, and nuclear energy. Asian and European governments led the way in these investments and as a result, those countries have a head start in tech development. Not only are Europe and Asian in control of the most cost competitive solar technologies, but they are bringing them to the U.S.

Early policy incentives for the installation of renewable technology in Europe, particularly in Germany and Italy, led to an increase in demand that European companies met with supply, eventually driving down the cost of the products. Technology companies rapidly grew to meet the demand. In response, policy makers relaxed incentives and took a back seat, thereby allowing the market to naturally play out. The lack of incentives resulted in a leveling off of demand, while supply continued to grow as companies worked toward creating better and more cost effective products. Currently, demand is just about tapped out in Europe. Economists predict that European companies will now bring their product to the U.S. market, making it even more difficult for emerging American solar technologies.

Where does that leave the U.S.? Demand for alternative energy, including solar, will rise as traditional energy supplies deplete. The U.S. is one of the world’s top energy consumers, and therefore must play a role in the development of green technologies for security and economic reasons. A mix of policy incentives and public financial backing is needed to ensure the U.S.’s place in the green tech arena. However, the Solyndra bankruptcy is illustrative of the risks of friendly green tech policy. It is probable that the bankruptcy will dissuade lawmakers on both sides of the aisle from supporting future green tech incentives. Lawmakers must search for a swift and creative solution for this bind before we are all left in the dark.

BitTorrent Pirates, Copyright Troll Lawsuits, and the Forthcoming Congressional Response

Imagine by: Cyberspace Law and Policy Centre, University of New South Wales

BitTorrent has become the tool of choice for Internet users sharing digital media. BitTorrent is a peer-to-peer file sharing protocol under which users can access the files shared on others’ computers. The genius of the technology as compared to pre-existing P2P technologies is that it allows users to “swarm” connections, i.e., upload and download pieces of large files from multiple sources at once. The BitTorrent protocol was first released in 2001 and use of the tool has increased steadily over the last decade – with over one hundred million active users of the technology and more arriving daily. This army of users is, wittingly or unwittingly, often guilty of violating the rights of copyright holders.

Needless to say, most media industries that rely on traditional distribution mechanisms are in no way “cool” with this latest wave of file-sharing technology and its tendency to enable copyright infringement. In an attempt to recoup some of the losses that they are incurring from pirates, several companies have enlisted the help of lawyers to churn out massive John Doe lawsuits. In the face of a threatening cease and desist letter (that notes the possibility of $150,000 in damages per download) the suspected infringer is urged to settle. The superficial nature of these lawsuits has earned the firms that engage in this practice the not-so-endearing term “copyright troll”. Corynne McSherry, intellectual property director at the Electronic Frontier Foundation described the practice as “a dragnet approach to litigation.”

One prominent Washington D.C. law firm calling itself the U.S. Copyright Group sued 25,000 users for downloading the movie “The Hurt Locker” in April of 2011. Jeffrey Weaver, head of the U.S. Copyright Group described the approach of his group: “We’re creating a revenue stream and monetizing the equivalent of an alternative distribution channel.” Yikes. Many of The Hurt Locker suits were dropped because of a lack of personal jurisdiction. Another massive lawsuit campaign took place over infringement on The Expendables (do you remember this incredible cinematic achievement?). 70% of the profits from these settlement shakedowns go to the lawyers, with only 30% returning to the rights holders. So at least the lawyers are happy.

More of these lawsuits are coming down the pike (for a weekly update, see http://story.albuquerqueexpress.com/index.php/ct/9/cid/63e88d54af0cf473/id/46388238/). The best way for BitTorrent users to avoid getting sued is not to download or share any copyrighted material- i.e., only share/download files 1) that are in the public domain, 2) for which you have permission to share, or 3) that are made available under pro-sharing licenses. The Electronic Frontier Foundation provides advice on what to do in the event that a cease and desist letter is received.

Meanwhile, Congress is spinning its wheels once again to create new legislation providing additional enforcement mechanisms for the rights holders. Senator Leahy’s proposed Protect IP Act is the latest attempt; many are critical of the bill’s tendency to inhibit technological innovation.

The digital piracy problem has, to this point, been unsolvable. The media establishment and Congress’s responses over the last decade feels a lot like a rearranging deck chairs. Traditional business models that create revenue streams based upon their pseudo-property rights are opposed to the very concept of the Internet as a tool for the open exchange of information. Whether the tool in question is Napster, YouTube, Google Books, BitTorrent, or some unforeseen, yet-to-be-invented piece of technology, we can be sure the opposition from IP rights holders will continue.

Supreme Court Paves the Way for Changes to Expert Discovery

Picture titled "Transparent Chemistry Glass Tubes Filled with Substances" by Horia Varlan

In "Supreme Court Paves the Way for Changes to Expert Discovery," guest authors, Neil J. Zoltowski & Laura C. Dorner explore the recent changes to Rule 26 of the Federal Rules of Civil Procedure. Going into effect on December 1, 2010, Rule 26 now provides draft protection for testifying experts, as well as certain protections of attorney/expert communications. Throughout the article, the authors give insight into the numerous benefits that the amendments offer including decreased costs, increased efficiency and a more candid atmosphere than under the previous version of the rule. For those heavily involved in litigation, this article is a must read.

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Gasping for Air: How the House is Trying to Choke the EPA Out of the Climate Change Debate.

In an effort to improve the U.S. government’s knowledge of the causes and effects of climate change, the Department of Energy launched the Scalable, Efficient, and Accurate Community Ice Sheet Model (SEACISM). SEACISM is an endeavor to perfect algorithms used at the Oak Ridge National Labora+tory to measure depleting glacial ice in countries such as Greenland. The DOE hopes that SEACISM will create enough data by 2013 to adequately inform the Intergovernmental Panel on Climate Change.

Despite this lack of knowledge, House Republicans proposed a bill on February 2, 2011 which would prohibit the Administrator of the Environmental Protection Agency (EPA) from promulgating rules pertaining to greenhouse gas emissions in efforts to address climate change. The Energy Tax Prevention Act, proposed by Rep. Fred Upton of Michigan, is in response to a variety of administrative rulemakings amending the permitting process for Prevention of Significant Deterioration (PSD). PSD is a permitting process instituted by the 1977 Amendments of the Clean Air Act, to prevent a state that is in compliance with the EPA’s standards on “criteria pollutants” from falling out of the acceptable pollution levels. As part of this permitting process, new sources of regulated materials must incorporate the “Best Available Control Technology” to prevent gas emissions. This can require the installation of costlier pollution reduction technologies in proposed plants, factories, etc. The PSD regulations were amended to include greenhouse gases as a pollutant requiring the BACT after the Supreme Court’s ruling in Massachusetts v. EPA, which permitted the Administrator of the EPA to regulate greenhouse gases.

The Energy Tax Prevention Act would repeal the various rulemakings the EPA has made regarding “concerns over climate change”, and would prevent any future attempts at regulation by the EPA. The Clean Air Act was intended to be technology forcing, placing burdens on polluters so as to force industry standards to adopt newer and cleaner methods of doing business. By removing greenhouse gases out of the purview of PSD, the technology forcing ethos behind the CAA and its subsequent amendments is eroded. While PSD is not the most stringent standard imposed by the CAA, and allows for consideration on a case by case basis of what is technology and economically feasible, the BACT requirement is meant to force industries to consider and incorporate continuously progressing pollution reduction technology.

The debate goes to the heart of contemporary political issues: on one side are pro-business laissez faire supporters wishing to keep business costs down in the hopes of improving the American economy, and on the other side are environmentalists and climate change experts who see the hands off approaches to business as threats to the public health and welfare. The competition of interests creates a foreboding air of stalemate for the representative branches of the U.S. Government. In a climate where the basic existence of climate change and human contribution are so diametrically opposed, it is wishful thinking to believe in any preventative action being taken to better air quality.

Although the bill is unlikely to pass the senate due to the absence of a sufficient majority, the Obama Administration already vowed to veto the bill in the event of the bill’s passage. With climatologists claiming that the point of no return for remedial action is fast approaching, the actions by climate control opponents attempting to remove technology requirements for greenhouse gases further postpones any significant curtailment of the U.S.’s contribution to this potential ecological crisis. Hopefully, the SEACISM project at Oak Ridge can provide some much needed clarity to the issue so as to allow for meaningful discussion based not on opinion but scientific facts; however without scientific certainty this legislative gridlock may be insurmountable.