Laws of .com

Volume IV, Issue 8: April 20, 2006

Court Authorizes Internal Revenue Service To Seek Customer Information from PayPal Inc.

CRTC Declines to Regulate Mobile TV

Michigan Law Restricting Violent Video Game Sales Overturned

New Canadian Policy Addresses Trans-border Data Flows

Inadequate Protection of Customers' Personal Information by U.K. Businesses

Swedish Appellate Court Refuses to Hear Case of Individual File Sharing

Court Refuses to Exercise Jurisdiction Based on Website

Court Authorizes Internal Revenue Service To Seek Customer Information from PayPal Inc.

The online payment provider, PayPal Inc., has received a summons from the U.S. Internal Revenue Service (IRS) requesting PayPal account holder information that may assist in the IRS' efforts to trace money that some American taxpayers are suspected to be hiding in other countries. The summons was approved by the U.S. District Court for the Northern District of California.

PayPal, which is owned by eBay Inc., enables individuals and businesses around the world to send and receive money by linking credit card and bank accounts to online PayPal accounts. According to Eileen O'Connor, Assistant Attorney General for the Justice Department's Tax Division, "Paypal is another one of the mechanisms by which money stashed overseas might be spent".

The IRS reportedly hopes that PayPal can help it to link credit card numbers to individuals, and to identify currently unknown taxpayers, credit card numbers and offshore bank accounts that might be evidence of tax evasion.

PayPal has stated that it takes the privacy of its customers' personal information "very seriously" and that it is still evaluating its options.

For additional information, visit:
http://www.siliconvalley.com/mld/siliconvalley/news/editorial/14318267.htm

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CRTC Declines to Regulate Mobile TV

On April 12, 2006 the Canadian Radio-television and Telecommunications Commission (“CRTC”) issued a public notice that television content that is broadcast through cellular networks is exempt from the Broadcasting Distribution Regulations which regulate television broadcasting in Canada.

Broadcasts “delivered and accessed over the Internet” are exempt from the Broadcasting Distribution Regulations under the Exemption Order for New Media Broadcasting Undertakings. Wireless phone companies proposing to broadcast television content to cellular phones argued that they fall under this exemption. They also submitted that their proposed services would not compete with traditional broadcasting services because of the small screens involved, the low audio and video quality, battery life limitations and the narrow range of programming that would be available.

Those opposed to the regulatory exemption of this service argued that users of this service are not connected to the Internet, and that providers would be using their own distinct wireless networks to deliver the service to subscribers. Some groups also raised concerns about the fact that Canadian content regulations would not apply to this type of broadcast.

The CRTC concluded that the television signals in question are sent by the content provider via the public Internet to the Internet gateway of the mobile carrier in question. From there, they are routed to the appropriate tower and transmitted wirelessly for the “last mile” to the user’s handset. To access the signals, the user must connect to the Internet using a web browser. On this basis, the CRTC decided that the broadcasts are exempt. The CRTC also concluded that a new exemption order should be established that will pertain to mobile television broadcasting undertakings more generally, as mobile television broadcasting services are unlikely to become substitutes for conventional broadcasting services or to interfere with the abilities of conventional broadcasters to meet their obligations under the Act.

For a copy of the notice, visit:
http://www.crtc.gc.ca/archive/ENG/Notices/2006/pb2006-47.htm

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Michigan Law Restricting Violent Video Game Sales Overturned

On March 31, 2006 a United States District Judge for The Eastern District of Michigan, ruled that a Michigan state law criminalizing the sale of violent video games to anyone under 17 years of age is unconstitutional because those forms of entertainment are protected by the First Amendment's freedom of expression clause, as well as being unconstitutional under the Fourteenth Amendment for being unconstitutionally vague. This decision is the latest in a series of decisions which have declared similar laws in Washington, Illinois and California unconstitutional on free-speech grounds.

In the 17-page decision, Judge George Caram Steeh stated that “video games contain creative, expressive free speech, inseparable from their interactive functional elements, and are therefore protected by the First Amendment”. Judge Steeh also dismissed expert opinions and academic studies that attempted to establish a link between simulated violence in video games and real-world action as failing to meet the “substantial evidence” requirement under the strict scrutiny standard for permitting the regulation of constitutionally-protected content.

For a copy of the decision, visit:
http://www.politechbot.com/docs/michigan.video.game.decision.040306.pdf

For additional information, visit:
http://news.com.com/2100-1043_3-6057287.html

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New Canadian Policy Addresses Trans-border Data Flows

Privacy analysts and others are increasingly concerned about how foreign legislation, such as the USA PATRIOT Act, creates privacy risks when Canadians’ information travels outside of Canada. These concerns are strengthened by the fact that Canadian governments and private companies increasingly outsource services to foreign entities. As a result, information stored or accessible outside of Canada is subject not only to Canadian laws, but also to the laws of the foreign country.

The Canadian government has recently released a report titled “Privacy Matters: The Federal Strategy to Address Concerns about the USA PATRIOT Act and Trans-border Data Flows” which outlines its strategy for addressing these concerns.

The principles underlying the government’s strategy include the idea that responsibility for addressing privacy concerns is not the government’s alone, but is shared with other governments, the private sector, and Canadians themselves. Further, privacy needs to be weighed against other important considerations such as ensuring that government contracts protect privacy while also resulting in improved service to Canadians, facilitating international trade agreements, and protecting public safety and security.

The report outlines the government’s strategy for addressing privacy concerns arising from trans-border data flows:

• Awareness: The government made all institutions subject to the federal Privacy Act aware of the privacy issues raised by trans-border data flows.
• Risk Identification and Mitigation: The federal institutions reviewed their various contracting and outsourcing arrangements to identify privacy risks, assess the seriousness of those risks, and take corrective action as required.
• Guidance on Privacy in Contracting: The government is providing a list of privacy best practices and a policy guidance document for federal institutions, including a privacy checklist and other advice.
• Follow-up: The government will take additional measures over the next few years to mitigate privacy risks further. These measures include: a further assessment of federal contracting activities; developing additional guidelines; increasing awareness; conducting the scheduled 2006 review of PIPEDA and determining whether the federal Privacy Act should also be reviewed; and developing a privacy management framework to establish high levels of privacy protection throughout the federal government.

For a copy of the report, visit:
http://www.tbs-sct.gc.ca/pubs_pol/gospubs/TBM_128/pm-prp/pm-prp_e.asp

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Inadequate Protection of Customers' Personal Information by U.K. Businesses

According to a recent survey released by the U.K. Department of Trade and Industry, many U.K. businesses are not taking adequate measures to protect customers’ personal information, including many that accept financial transactions online. The problem is particularly acute with smaller businesses. According to the survey, less than one third encrypt the information they receive. As well, increasing numbers of companies are reporting attacks on their Internet or telecommunications traffic, with over one quarter reporting one attempt per day. The survey indicates that, although many companies have adopted firewalls and other basic protections, many are implementing new technologies, such as Voice over IP, without taking into account the security implications.

For additional information, visit:
http://news.bbc.co.uk/2/hi/business/4898832.stm

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Swedish Appellate Court Refuses to Hear Case of Individual File Sharing

A 27 year old man was fined by a Swedish District Court for making a film available to others through a file sharing program. The prosecutor appealed, seeking a more onerous sentence. The Appellate Court refused to hear the appeal.

Reports of the decision reveal a difference of opinion as to its significance. On one hand, commentators say that it really puts an end to the hunt for private file sharers in Sweden. Apparently, the type of sentence available for a given crime determines whether police and prosecutors can request IP addresses from Internet Service Providers. Where the crime is serious enough to warrant a jail sentence, they can obtain such addresses, but not where the sentence is only a fine. By contrast, other commentators point out that this case involved only one film and no commercial interests. Its precedential value is limited since most cases will involve many more films.

For additional information, visit:
www.thelocal.se/article.php?ID=3480&date=20060405

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Court Refuses to Exercise Jurisdiction Based on Website

The U.S. District Court for Kansas recently considered whether it was appropriate to exercise jurisdiction over the defendant company that developed, hosted and maintained a website for one of its clients, Sundance Sauna. The website was the subject of a claim made against Sundance by a competitor, Sunlight Saunas, for false advertising, unfair competition, defamation and other tortious or deceptive trade practices. The Court applied the two part test for determining whether (i) it had specific jurisdiction as a result of the defendant purposely availing itself of the privilege of conducting activities within Kansas, thus invoking the benefits and protections of its laws, or (ii) it had general jurisdiction as a result of the defendant having the requisite level of ‘continuous and systematic’ contacts with Kansas.

The Court held that it did not have general jurisdiction because the defendant’s website was not actually and deliberately used to conduct commercial transactions on a sustained basis with a substantial number of residents of Kansas. The Court also held that it did not have specific jurisdiction because the defendant did not purposefully direct activities at residents of Kansas. Although the website permitted users to send questions or comments through an email “hot link”, the Court concluded that the site was more “informational” than commercial in nature. Also, although the website targeted the plaintiff and the plaintiff was incorporated in Kansas, the Court concluded that the website did not target or focus on users in Kansas any more than it did users worldwide.

For a copy of the decision, visit:
www.ksd.uscourts.gov/opinions/042597KHV-219.pdf

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Announcement

THE IT.CAN / LSUC IT LAW SPRING TRAINING PROGRAM

The Sixth Annual Information Technology Law Spring Training Program hosted by the Canadian IT law Association and the LSUC, will take place at the Law Society Building, 130 Queen Street West, Toronto, on Monday, May 29 - Tuesday, May 30, 2006. This year's program is a comprehensive 2 day IT mentoring program. It will be of benefit to young lawyers and lawyers in general corporate commercial practice with less than 10 years of IT law experience. IT.CAN is offering a 20% discount to any group registering 3 or more lawyers. The full brochure can be viewed at www.it-can.ca. For more information contact IT.CAN Executive Director Lisa Ptack at lisa.ptack@rogers.com