Laws of .com

Volume IV, Issue 6: March 23, 2006

Quebec Company Fined for Evading Private Copying Levies

Google Settles Click Fraud Suit For $90 Million

Sony Faces Setback in Patent Battle Over Vibrotactile Technology

OPP Cracks Down on Wireless Internet Theft

European Commission Begins Public Inquiry into RFID Tag Technology

Study Concludes RFID Tags May Be Vulnerable To Viruses

Class Action Launched Against Music Labels Alleging Price Fixing in Online Market

OPC Issues Guidelines for the Use of Video Cameras in Public Spaces

Canadian Cyberstalker Jailed

UK Court Ruled ISPs Not Liable For Posting of Defamatory Content

BC Court Finds Source Code Within Definition of Software at Time of Sale of Business

Court Rules Unauthorized Website Scraping May Be Actionable as Unjust Enrichment

Lawsuit Attacks Google's Secret Formula

Quebec Company Fined for Evading Private Copying Levies

On March 3, 2006, the Federal Court of Canada ordered a Quebec distributor of blank CD-Rs and CD-RWs to pay a $900,000.00 penalty and, $1.65 million in outstanding private copying levies. The company had been sued by the Canadian Private Copying Collective (CPCC) for failing to pay the 21 cent levies on sales of blank CDs since January 2003.

The CPCC is a non-profit agency that represents Canadian music authors, music publishers, recording artists, musicians and record companies. It was established in 1999 to collect and distribute the levies imposed on blank recording media pursuant to the private copying provisions of the Copyright Act, implemented in 1998. The levy was introduced to compensate copyright owners for the provisions of the Act that allow Canadians to copy music for their own private use without authorization.

For additional information, visit:
Press Release

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Google Settles Click Fraud Suit For $90 Million

Google has agreed to pay $90 million to settle a class action lawsuit that stems from Google’s pay-per click advertising system. The suit was filed earlier this year by Lane’s Gifts in Arkansas, over advertising fraud by outside parties on its site.

The settlement involves legal fees and credits rather than cash payments, and applies to all advertisers who used Google’s per-click advertising system in February 2002 and apply to be part of the class settlement.

Google relies heavily on its pay-per click ads, which are highly vulnerable to fraud. The company claims that only a small percentage of search ads are fraudulent.

For additional information, visit:
http://www.msnbc.msn.com/id/11734026/

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Sony Faces Setback in Patent Battle Over Vibrotactile Technology

Sony Corp.’s battle with Immersion Corp. may be nearing an end. Immersion is the holder of U.S. patents for technology that makes game controllers and other related devices vibrate in response to various events within the game. Sony lost a jury trial in 2004 over its DualShock vibration feedback game controllers. An appeal in 2005 was denied and its damage payment obligations were increased to $91 million. Last week, U.S. District Court Judge Wilken rejected Sony’s attempt to reopen the case on the grounds that Immersion held back from Sony evidence crucial to the patents.

The evidence was in regards to prior developments by an inventor, Craig Thorner, who had patented similar technology. Immersion countered that Sony could have discovered the information during the trial, but chose not to. Judge Wilken agreed, and was also critical of the fact that Thorner had received a royalty payment and a purchase option from Sony. Immersion has concluded licensing deals with Microsoft, Samsung, BMW and others.

For additional information, visit:
http://news.com.com/2100-1047_3-6049177.html
http://arstechnica.com/news.ars/post/20060313-6366.html

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OPP Cracks Down on Wireless Internet Theft

The Ontario Provincial Police (OPP) has charged a man under Section 326 of the Criminal Code for Theft of Communications. It is alleged that the man was using his laptop to steal a wireless Internet connection in Morrisburg, Ontario. The OPP has stated that the practice of “war driving”, where people drive around with their computers openly searching for unprotected wireless networks, has become increasingly popular.

This charge demonstrates that the OPP is taking Internet violations seriously and will not hesitate to crack down on Internet crime.

For additional information, visit:
http://www.cfra.com/headlines/index.asp?cat=1&nid=37275

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European Commission Begins Public Inquiry into RFID Tag Technology

A recent report indicates that the European Commission is beginning a public inquiry into citizens’ concerns about the use of radio frequency identification (“RFID”) tags. RFID tags each contain a unique, machine-readable serial number that can be associated with specific database information ranging from the personal information of the bearer of an identity document, to the manufacturing and shipping history of a consumer product, allowing, for example, the authentication of information or the tracking of inventory. Findings from the public inquiry are to be included in a consultation document to be published in September 2006, and may lead to changes in Europe’s e-Privacy Directive, and new legislation, if the Commission determines RFID tags present new privacy threats to citizens. The report also indicates that the Commission seeks to reach an international consensus from governments and industry groups around the world on interoperable standards for RFID equipment, and is considering legislation that will harmonize RFID tag technology across the European Union.

For additional information, visit:
http://www.computerworld.com/softwaretopics/erp/story/0,10801,109365,00.html

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Study Concludes RFID Tags May Be Vulnerable To Viruses

A group of computer researchers affiliated with Vrije Universiteit in Amsterdam have produced the world’s first virus for RFID tags. In a paper entitled, “Is Your Cat Infected with a Computer Virus?” presented at the annual Pervasive Computing and Communications Conference, the group, lead by Andrew S. Tanenbaum, demonstrated that an RFID chip can be infected with an SQL-based replicating virus.

The group did not use a commercially available RFID software program, but rather designed one comparable to existing software. The RFID chip with the program was then infected with the virus code. The virus then infects the RFID database when scanned, and can be spread to other RFID chips via scanning.

Some industry groups have been quick to challenge the results of the paper, claiming that the software used was poorly written and not reflective of current RFID software development. Others have acknowledged that the results represent a wake-up call for an industry that has received increasing criticism over weaknesses in security and encryption.

For a copy of the presentation, visit:
http://www.rfidvirus.org

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Class Action Launched Against Music Labels Alleging Price Fixing in Online Market

A high-profile San Diego-based class action law firm has filed an antitrust class action in the Northern District of California against Sony BMG, Sony Corp., Bertelsmann, Time Warner, Warner Music Group and EMI. Eleven plaintiffs are claiming on behalf of anyone who has “paid inflated prices” for music. The claim alleges:

Defendants engaged in a prolonged pattern of concerted activity to prevent and delay online music from becoming a competitive alternative to their near monopoly of the CD market. Ultimately, when online music became inevitable, defendants then conspired to fix and maintain the prices for such product.

The claim alleges that the joint ventures ‘MusicNet’ and ‘pressplay’ formed by the major labels in 2001 “were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable Online Music competitors from forming and gaining popularity after Napster’s demise.” According to the allegations, the major labels permitted more widespread distribution of online music only after the success of Apple’s iPod in 2003.

Online music pricing has also been the subject of investigation by the New York Attorney General and the U.S. Department of Justice.

For additional information, visit:
http://www.redherring.com/Article.aspx?a=16046&hed=Class+Action+Giant+Sues+Labels+#

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OPC Issues Guidelines for the Use of Video Cameras in Public Spaces

Changes in technology, related both to cameras and to facial recognition software and other computer programs, have made surveillance easier. As a result, the use of video surveillance to detect, deter and prosecute crime has increased significantly in Canada, the U.S. and the United Kingdom. Video surveillance nonetheless presents a challenge to privacy, freedom of movement and freedom of association. The potential for scrutiny of persons in public spaces, the vast number of which are law-abiding citizens, is increasing, and the level of privacy and anonymity in people’s daily lives, is decreasing.

The Office of the Privacy Commissioner of Canada (OPC) has issued guidelines on the use of video cameras by police to monitor public spaces. The guidelines, however, do not bind either the RCMP in establishing video surveillance, or the Privacy Commissioner in investigating it.

For a copy of the guidelines, visit:
http://www.privcom.gc.ca/information/guide/vs_060301_e.asp

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Canadian Cyberstalker Jailed

An Alberta man who used the Internet to wreak havoc in his ex-girlfriend’s life was recently convicted of criminal harassment and sentenced to one year in jail. The accused, Jonathan Barnes, installed keystroke logging software on his girlfriend’s computer; from there he obtained passwords and other information that gave him unrestricted access to virtually all aspects of her life. Barnes’ activities included: accessing her phone records and email accounts; pretending to be her on Internet chatrooms (such that strangers would phone her, thinking that she had asked them to call); distributing nude photos of her from a fake email account in her name; accessing her bank accounts; and, withdrawing her from college.

These activities would obviously have a serious impact on anyone’s day to day life, and indeed Barnes’ victim had to move homes, change phones, change jobs, and even change her Social Insurance Number, in an attempt to escape the harassment. Because this type of cyberstalking has such serious and far-reaching effects, the judge determined that Barnes’ actions were as serious as a physical assault, and that a one-year jail sentence was warranted, even though such sentences are rare in cases of criminal harassment where the accused has no previous criminal record.

For additional information, visit:
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20060317/cyber_stalk_060317/20060317?hub=SciTech

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UK Court Ruled ISPs Not Liable For Posting of Defamatory Content

On March 10, 2006, the English High Court (Queen’s Bench Division) rendered a significant decision regarding liability of Internet Service Providers (ISPs) for the content posted by their clients. The claimant argued that three of the defendants (individuals) had posted defamatory statements about him on the Internet. In addition to naming the three individuals, the claimant also named their ISPs. The ISPs in question had been used by the individual defendants to access the Internet and to post the defamatory material. This decision is significant because it required the Court to grapple with the distinction between an ISPs’ role as either a publisher, or distributor of information.

The three ISP defendants brought a motion to dismiss the claim as against them. They argued that their involvement with the individual defendants was analogous to that of the post office; they simply could not be expected to review every posting made by their clients. They submitted that they had the right to be an intermediary without an obligation to filter content.

Justice Eady agreed with the submissions of the ISPs, and dismissed the claim. In doing so, the Court held that it would be inappropriate for an ISP to be liable without an opportunity to prevent the defamatory publication at issue; a duty of care would arise when the ISP had knowing involvement in the process of publication. In this instance, there was a lack of knowing involvement in the process of publication of the relevant words. The Court relied on longstanding authority for the proposition that it is simply not enough that a person play a passive instrumental role in the publication process. In addition, the ISPs have placed an onus on the uploading customer of ensuring that content was not defamatory through their user agreements. The court held that persons who truly fulfill no more than a passive medium for communication cannot be characterized as publishers.

For a copy of the decision, visit:
Bunt v. Tilley

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BC Court Finds Source Code Within Definition of Software at Time of Sale of Business

In 1997, Coreco Inc., a Quebec company in the business of designing and selling computer imaging systems including software, acquired the assets of Logical Vision Ltd. (“Logical”) for $4,103,000.00; a substantial amount of the purchase price was allocated to software. At the time of purchase, Coreco did not remit Social Service tax on the software allocation, as proscribed by the Social Services Tax Act (the “Act”) of British Columbia. On December 16, 2002, the Commissioner of Social Service Tax issued a notice of assessment for $271,945.59 with an additional $157,681.26 for interest. The Act, which defines personal property to include software, provides that a purchaser of tangible personal property in British Columbia is required to pay tax on 7% of the purchase price.

In 2004, Coreco appealed the assessment to the Minister, arguing that:

1. it was entitled to a refund under the Act since the software had not been used in B.C.;
2. a 1998 amendment to the Act should be retroactively applied;
3. some of what had been allocated as software was not strictly software; and
4. the tax ought to be pro-rated based on use of property outside of B.C.

Coreco argued that a 1998 amendment of the Act which excluded software source code in non-executable form from taxation should retroactively apply to the transaction. In dismissing Coreco’s appeal, the British Columbia Supreme Court held that, however distinct source code may be from software, the distinction was not legally recognized at the time the asset purchase agreement was made. Accordingly, source code was properly within the definition of software at the time Coreco purchased Logical. Additionally, the court went on to conclude that aside from source code, Coreco was not persuasive in demonstrating that other non-taxable items were included within the software heading in the asset purchase agreement.

For additional information, visit:
http://www.it-can.ca/newsletters/030906.pdf

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Court Rules Unauthorized Website Scraping May Be Actionable as Unjust Enrichment

The parties in ShopLocal LLC v. Cairo, Inc. are competitors in Internet advertising. ShopLocal sued Cairo under the Computer Fraud and Abuse Act, and for common law trespass to chattel for unauthorized use of a content scraper, whereby Cairo accessed and republished advertisements created by ShopLocal. In addition to these claims, ShopLocal asserted claims for breach of contract and unjust enrichment. Cairo moved to dismiss the unjust enrichment claim, based on ShopLocal’s failure to plead its unjust enrichment claim in the alternative, thus failing to allege a claim upon which relief could be granted.

The U.S. District Court for the Northern District of Illinois rejected Cairo’s argument and denied the motion to dismiss. The court held that under Illinois law, “an unjust enrichment claim may be predicated on either contract or tort.” A plaintiff may sue for both breach of contract and unjust enrichment when: 1) the unjust enrichment claim is based on tort; or 2) the two claims are pleaded in the alternative. Because ShopLocal’s unjust enrichment claim is based on tort, the court held that it was not necessary for ShopLocal to plead this claim as an alternative to its contract claim.

For additional information, visit:
http://www.internetcases.com/archives/2006/03/court_okays_unj_1.html

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Lawsuit Attacks Google's Secret Formula

A civil complaint recently filed in the U.S. District Court alleges that Google has engaged in anti-competitive behaviour and misled the public by positioning its search engine as an objective source for finding Internet content. The Plaintiff, KinderStart, a Website devoted to information about children, claims that it was dropped from Google’s index a year ago without warning. KinderStart says that its traffic plunged significantly after Google dropped it. Google’s secret method of ranking Websites is designed to elevate in search results the sites with content most relevant to a request. However, according to the lawsuit, Google’s attempts to police its ranking system results in Websites being unfairly banished, or, receiving low rankings. Google has previously defended its right to revise its formula and to keep the formula a secret. So far, a court has never ordered Google to reveal the formula for ranking Websites.

For additional information, visit:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14125988.htm

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