Better Anti-Piracy Bill Introduced in Wake of SOPA, PIPA

We previously wrote about the broad protests over two bills in Congress targeting online copyright infringement – the House’s Stop Online Privacy Act (SOPA) and the Senate’s Protect Intellectual Property Act (PIPA). We were pleased that the protests and other activities were effective in ending efforts to pass those versions of the legislation.

The protests were led by Internet businesses that argued that the bills would lead to censorship of the Internet and to the cutting off of useful, legal online content. Under these bills, websites such as Facebook and YouTube could have been found liable if they hosted infringing content. As a result of the massive protests, Congressional leaders were forced to table PIPA and SOPA for the time being.

Many critics of SOPA have instead announced their support for legislation sponsored by Sen. Ron Wyden (D-Ore.) and Rep. Darrell Issa (R-Calif.) as a means of preventing online piracy without threatening free speech. The Online Protection and Enforcement of Digital Trade Act (OPEN Act) would allow people or groups that own content on the Internet to ask the International Trade Commission (ITC) to investigate whether a foreign website is dedicated to piracy. The ITC would be given power to collect fees from complainants and to hire additional personnel for investigations. The website owner would be allowed to offer evidence to rebut the claim. If the ITC ruled in favor of the content owner, it could then direct payment firms and advertising networks to stop doing business with the site and require search engines to delete links.

SOPA and PIPA had contained language that would allow for the Department of Justice to “disappear” a website, meaning that it would require Internet service providers to disable the resolution of the site’s name by the Domain Name Service to an IP address. This would effectively eliminate the web site from the Internet. The OPEN Act would not give DOJ this power.

The OPEN Act would be able to deal with a primary concern of copyright holders — that the process would not be able to catch up with the speed that pirates are stealing intellectual property. Under the OPEN Act, copyright holders could request temporary restraining orders to protect their intellectual property in the short term, a provision that would be particularly important for websites seeking to protect live broadcasts over the Internet, such as sporting events.

NetCoalition, a technology industry group that counts Google, Yahoo!, Amazon, eBay, PayPal, Expedia, Bloomberg LP, and Wikipedia among its members, has said that it supports the OPEN Act.

The Senate version of the OPEN Act has been referred to the Finance Committee, and the House bill has been referred to the Judiciary Committee.

It is good news for Internet entrepreneurs, and for free speech, that SOPA and PIPA were defeated. In addition to the chilling effect on the Internet that would have occurred under either SOPA or PIPA, it makes no sense to use scarce criminal resources to prosecute piracy cases. The OPEN Act would represent a much better approach to combating online piracy.

The dispute resolution process under the OPEN Act would provide both parties with the opportunity to present their positions before an experienced tribunal that could resolve the issues on the facts before them.

Online Protests Hit Hard Against Anti-Piracy Bills

Organized online protests over two bills in Congress targeting online copyright infringement — the House’s Stop Online Piracy Act (SOPA) and the Senate’s Protect Intellectual Property Act (PIPA) — seem to have crippled these bills’ progress and ended their chances of becoming law in their present form.

We have previously written about the protests mounting against the bills.

Just this week, high-profile protests cropped up all over the Internet. On January 18, Wikipedia shut down all English content on the site in protest; Reddit.com also went offline for the day; Google covered its homepage logo with a black box; and an estimated 10,000 smaller websites participated in some kind of protest over the bills.

Google’s online petition to Congress expressing opposition to the bills obtained over 7 million signatures in the United States in a very short period of time.

The bills’ supporters continue to argue that the legislation is important to protecting intellectual property. The bill would allow the Justice Department as well as private parties to seek court orders against foreign websites that steal content from American authors and would prohibit advertising networks and payment facilitators from doing business with the offending companies. The bills would also criminalize the streaming of restricted content, with a maximum penalty of five years in prison.

The bills enjoy strong support from organizations that rely on copyright protection, such as movie, music, and cable companies. The bills have also garnered the support of business groups such as the U.S. Chamber of Commerce. The Chamber estimates that American industry loses roughly $135 billion every year to online piracy.

The protests have been led by Internet businesses that argue the bills will lead to censorship of the Internet. Under SOPA, websites such as Facebook and YouTube could be found to be liable if they host infringing content. This would require these sites to police the content that users post, opponents say, and essentially have a censoring effect on the content.

Supporters of the bill stress that the bill is targeting activity that is already illegal and targets foreign websites that infringe on American copyrights.

Due to the protests, at least 13 lawmakers who co-sponsored the legislation have withdrawn their support. According to one media outlet, from the beginning of January 18 to the end of January 19, seventy members of Congress announced their new opposition to the bill.

The Senate has a procedural vote scheduled on January 24 on proceeding with PIPA. Senate leaders currently still plan to move forward with the vote, but it remains unclear if the bill has the 60 votes it needs to pass the procedural vote. Senate Minority Leader Mitch McConnell (R.-Ky.) has called for a delay of the bill because of “serious legal, policy, and operational concerns.”

In the event the bills were to make it out of Congress, President Obama might veto them, but he has not yet made a definitive statement that he intends to do so. The Obama administration did respond to a petition against the bill stating that it would not support legislation that could lead to Internet censorship or reduced Internet security.

Opponents of the current bills are looking toward another proposed bill, the Online Protection & Enforcement of Digital Trade Act, known as the OPEN Act, which takes a much narrower approach to copyright issues by trying to cut off the money that flows to foreign piracy sites.

The online protests have placed a major roadblock in the way of these bills. The bills’ potential to stifle speech and Internet entrepreneurship are too great and the strength of the online protests appear to have put Congress on notice that these bills in their current form should not go forward.

Protests Mount Against Proposed Law That Would Cripple the Internet

From the Arab Spring to the Occupy Wall Street movement, 2011 was a year of protests. It was capped off with a little-covered (by traditional media) but important protest that will carry on into 2012. We’ll call it the “Pioneers Strike Back” movement of Internet entrepreneurs. The issue is a piece of controversial legislation pending before Congress — H.R. 3261, commonly known as the Stop Online Piracy Act, or SOPA.

The bill, which is supported by Hollywood, major media companies, and labor unions – along with many corporate monoliths – is supposed to combat copyright and trademark infringement over the web. The general tactic is to create new causes of action against websites for facilitating intellectual property violations. The problem is that the legislation is so broad that it could change the dynamics and use of the Internet as we know it. And in the process, it could run roughshod over the Constitution – undermining free speech and due process.

Through a notice and cutoff system, SOPA would allow private parties to effectively shut down any supposedly infringing site based merely upon the rights-holder’s allegations. For instance, a rights-holder could require payment processors and advertising networks to sever ties with an allegedly infringing site upon a five-day notice. Any subsequent determination by a court in favor of the alleged infringer could be too little, too late.

And SOPA goes even further: Service providers would be forced (for their own protection) to shut down entire domains, without regard to the content of each specific site.

Also troubling is the evisceration of safe harbors for websites established under the Digital Millennium Copyright Act. The DMCA limited websites’ responsibility to monitor content posted by users. Under SOPA, so long as a site is determined to “facilitate” infringing behavior, it could be considered liable under the law. So Facebook could find itself in hot water for something a user posted on his or her Facebook profile. The law, therefore, would require websites to institute policing measures to avoid liability. The law would also make it hard for smaller, emerging services to stay clear of litigious online entities that may constantly challenge the new sites’ content and/or architecture.

The prospective law’s measures risk stifling speech and innovation. Moreover, as many have pointed out, it could institute a framework for government censorship. (See an interesting review of this by the Cato Institute.)

These concerns over SOPA, along with concerns about potential cyber security and stability risks, have been written about extensively across the web and have been addressed to Congress. Most compelling is an open letter to Congress signed by 100+ law professors who express concern about both technological and constitutional infirmities of the law.

But the legislation, with some 31 co-sponsors, may very well make its way through committee to a potentially successful House vote. The reason would be the extensive big business backing of the bill. A non-exhaustive list of supporters identifies major players such as the Chamber of Commerce, News Corp., CBS, Viacom, MasterCard and Visa, and the Teamsters Union, just to name a few (some strange bedfellows, by the way!). In the world of political currency, the deep pockets that support the bill are formidable competitors. OpenCongress.org provides detail by identifying which deep pockets are supporting which congressmen.

SOPA supporters argue that the legislation is important to protecting intellectual property. The Chamber of Commerce, for instance, has estimated that online piracy costs U.S. companies roughly $135 billion a year. Detractors have a very different take on the economic – and non-economic costs – of the legislation.

Fortunately, all hope is not lost. Internet pioneers and entrepreneurs have been actively countering supporters of the bill. GoDaddy, which initially supported the bill, was “encouraged” to change its position after a registrant rebellion incited by Reddit.com. RedState.com is going after supporting legislators. And, best of all, major online presences like Google, Facebook, Yahoo!, and Amazon are taking a stand against the legislation, even considering the “nuclear option” of temporarily shutting down their services in protest. Yahoo! is rumored to have declined to renew its membership to the Chamber of Commerce in response to the group’s support of the bill. There is speculation that Google will do the same. Hopefully these moves will signify success for the Pioneers, and not the Empire.

New Step for Nevada: Commission Approves Online Gambling Regulations

On Dec. 22, 2011, the Nevada Gaming Commission unanimously approved regulations drafted by the Nevada Gaming Control Board that could make Nevada the first state to provide online gambling within its borders.

Earlier this year the Nevada state legislature passed legislation allowing for intrastate online gaming.  In June, Governor Brian Sandoval, a former Nevada Gaming Commission Chairman, signed the legislation into law. Earlier this year, Washington, D.C., became the first U.S. jurisdiction to pass a law allowing online gambling played within its geographic limits, but the law has still not been implemented. Several other states have debated or introduced bills that would legalize online gambling within its borders.

The Nevada regulations would allow the state’s casinos to launch gambling websites for players within the state’s borders by the end of 2012. Six companies have already filed an application for a Nevada license. The main operator of the website must be a casino company, but other companies will be allowed to provide software or other services to the websites.

The regulations state that all bets received by the website must be placed within Nevada until federal law changes or the Justice Department states that bets may be accepted from outside the state.

Mark Lipparelli, chairman of the Nevada Gaming Control Board, believes that under the new regulations, online poker in Nevada will be legal under federal law as long as the right to bet is limited to people located in Nevada. The regulations place the burden on the website operator to show that the bets were placed within the state. Lipparelli also stated that the technology exists to permit operators to enforce such a geographic limit. Lipparelli pointed to the fact that Nevada has allowed several companies to offer websites for sports betting within the state, and these sites have gone unchallenged by the federal government.

The regulations also require that website operators verify the age and location of every gambler who registers within 30 days of registration. Operators will be required to hold a reserve of cash or a line of credit to cover the money held in player accounts – a provision that must be verified by an independent accountant. The regulations also cover problem gambling notifications, information that must be posted on the websites, fees and taxation and record-keeping requirements.

Nevada Gaming Commission Chairman Peter Bernhard said that he expects the regulations to be adjusted as issues develop that are not addressed at present.

Some in the industry question whether Nevada, with a population of about 2.6 million, has enough people within its borders playing online poker will allow the sites to be profitable.

There has been some momentum in Congress toward getting an online gaming bill passed. Two hearings have been held by a House subcommittee looking at the viability of online gambling.

The Nevada move is a major step forward for online gambling in the United States. The Nevada law clearly shows that there is a demand for online gambling and a belief that it can occur with the proper controls in place for age verification and for the prevention of problem gambling. This action may serve as an impetus for other states and the federal government to pass laws allowing online poker.

Ifrah Law Blog Wrap-Up for November 2011

In November 2011, we at Ifrah Law expressed our views on a number of current issues in our blogs, Crime in the Suites and FTC Beat. This post summarizes and wraps up our thoughts from the month.

ACLU Wins FOIA Appeal on Prosecutors’ Use of Cell Phone Location Data

The Justice Department must turn over the names and docket numbers of numerous cases in which the government accessed cell phone location data without probable cause or a warrant.

Read the full post here on the Crime in the Suites blog.

Options for Suing the Federal Government Under Bivens Unlikely to Expand

U.S. Supreme Court argument indicates that the Justices are unlikely to extend Bivens to cover cases against private employees.

Read the full post here on the Crime in the Suites blog.

Judge Imposes 15-Year Sentence in FCPA Case; Appeal to Follow

This case will test the Justice Department’s expansive definition of “foreign official” under the statute.

Read the full post here on the Crime in the Suites blog.

High Court Hears Argument in GPS Fourth Amendment Case

The Justices grapple with issues of search and seizure in an online, wired world.

Read the full post here on the Crime in the Suites blog.

In Appeal of Construction Fraud Case, DOJ Seeks Tougher Sentences

This case, arising from Boston’s “Big Dig” project, will test the limits of a trial judge’s sentencing discretion.

Read the full post here on the Crime in the Suites blog.

Self-Regulation Reigns, for Now, on Consumer Data Privacy Issues

The online advertising industry is inching its way to more comprehensive policies regarding the collection of consumer data.

Read the full post here on the FTC Beat blog.

Google, Microsoft Assume Roles of Judge, Jury and Executioner on the Web

The Internet giants cancel the Web connections of companies that are accused by the government of mortgage fraud but have not been convicted.

Read the full post here on the FTC Beat blog.

New House Hearing Shows Strength of Hill Support for Legal Online Gaming

Many members of Congress remain serious that legal and technical obstacles can be overcome and that legislation can be passed in this area.

Read the full post here on the Crime in the Suites blog.

Convicted of Fraud but Changed Their Lives; Appeals Court Takes Note

A couple committed mortgage fraud back in the late ‘90s. The 7th Circuit gives them sentencing credit for self-rehabilitation.

Read the full post here on the Crime in the Suites blog.

More Big Pharma Companies Cough Up Big Dollars in DOJ Settlements

How high will these settlements go? The government has the power to strong-arm drug companies into settlements. How much will it demand?

Read the full post here on the Crime in the Suites blog.

New German State Law May Pave Way for Expansion of Internet Gaming

Will the German state of Schleswig-Holstein become the “Las Vegas of the North,” as some are already calling it?

Last month, Schleswig-Holstein passed new online gambling legislation that will allow for online gaming beginning next year. The move will bring legal online gaming to one of Europe’s biggest and previously most closed markets.

Schleswig-Holstein’s law allows for an unlimited number of web-gambling licenses, as well as a more favorable tax structure that would take a 20 percent tax on gross profit. The 15 other German states have proposed rules that would only allow seven license holders and would place a 17 percent tax on individual betting stakes. Companies had argued that the tax on individual betting stakes would make it impossible for them to operate.

Under current German law, the federal government has a monopoly on sports betting and lotteries. The treaty under which these rules operate will expire at the end of 2011, allowing the new Schleswig-Holstein law to come into effect on January 1, 2012. Licenses will become valid on March 1, 2012.

A spokesman for an Internet betting company based in Schleswig-Holstein has been quoted in Bloomberg BusinessWeek as saying his company plans to offer Web-based sports betting, poker and casino games to all of Germany from the country’s northernmost state starting March 1.

The impetus for the new gaming laws in Germany was a 2011 ruling by the European Court of Justice that the country’s national monopoly on gambling violated the European Union’s (EU) free trade laws because it was too aggressively protecting the state’s monopolies. The Schleswig-Holstein laws have been approved by the European Union Commission.

Other German states may now feel compelled to follow suit and pass laws more suitable to online gaming or risk losing their business to Schleswig-Holstein. The opening of a new market for online gaming is very good news for online poker companies because it allows them to quickly tap into one of the larger markets in Europe. It is also possible that the increasing openness of the European market to online gaming will continue to put pressure on U.S. lawmakers to permit legal online gaming.

At the same time, we are also seeing a move toward uniformity in EU gambling laws, which currently vary from relatively open markets to complete bans.

The absence of EU legislation has led to several European Court of Justice rulings on online gambling, requiring member nations to comply with Article 49 of the EU Treaty, which guarantees the free movement of services.

Both policymakers and gaming operators have expressed support for EU-wide legislation to govern the online gambling market, but there is some disagreement about what the level of regulation should be. Some member states contend that they should be free to decide how to regulate online gambling within their own jurisdiction. Some in the industry fear that there may not be sufficient regulators capable of regulating the gambling market in Europe, which represented 45 percent of the world share of the online market in 2010. Other industry participants note that the various nations need to impose common standards rather than conflicting ones.

We see the new Schleswig-Holstein law as a victory for gamers in Germany and for operators seeking to enter the German market. We hope that the competition that it brings about will lead to more legalized gaming in Germany and in Europe as a whole and that the expansion there helps create more acceptance of it in the United States.

With a Veto, N.J. Governor Stays Out of the Game

Today’s news is that New Jersey Gov. Chris Christie has just vetoed a bill, overwhelmingly passed by both houses of the state legislature, that would have made New Jersey the first state in the country to legalize online gaming.

The governor, who has been widely mentioned as a GOP presidential candidate for 2012, though he has disavowed such ambitions, said he had “legal and constitutional” issues with the bill.

As he explained it at a press conference, he isn’t opposed to legal online gambling in principle. He noted that the state’s voters approved gaming in Atlantic City alone in 1976, not statewide – and expressed concern that under the present bill, people could gamble all over the state in bars, hotels and Internet cafes. The fact that the computer servers are in Atlantic City wouldn’t satisfy the constitutional requirements, Christie said. He said that he’d rather put New Jersey’s horse racing industry on a sound footing on its own rather than use gaming revenue to subsidize it.

We are disappointed in Christie’s decision. It seems that he has placed his presidential ambitions and a misguided interest in the horse racing industry ahead of the best interests of New Jersey’s voters and residents. The state has missed out on an opportunity to be in the forefront of the nationwide movement towards legal online gaming and on a large chunk of revenue.

Now it appears that the District of Columbia may, to many people’s surprise, become the first U.S. jurisdiction to permit online gaming.

Facebook Friends and Judicial Ethics

Last December, another legal ethics commission addressed the question of whether a judge may become a “friend” on a social networking site with attorneys who appear as counsel in the judge’s courtroom. The Ohio Supreme Court Board of Commissioners on Grievances and Discipline opined that a judge may “friend” attorneys as long as the judge takes care to protect the integrity and impartiality of the judiciary.

Given the explosion of social networking sites over the last decade, it is surprising that relatively few ethics committees have addressed the issue. (The paucity of opinions on the topic suggests that social networking misconduct is not a huge problem. To date, only one North Carolina judge has been publicly reprimanded for misusing his Facebook account.) Ohio is only the fifth state to issue an opinion regarding judges’ use of social media and the fourth to favor content-based restrictions over media-based restrictions. Like Ohio, ethics committees in Kentucky, New York, and South Carolina concluded that judges may participate on social networking sites. The Kentucky and New York committees qualified their opinions by stating that judges should be mindful of whether online connections, alone or with other facts, amount to a close social relationship that should be disclosed or that requires recusal. Florida is the only jurisdiction to opt for a bright-line rule against judges “friending” attorneys who may appear in the judge’s courtroom.

The Ohio Board’s December 3, 2010, decision may be an early signal that critical mass is forming around content-based restrictions on Internet use. The well-reasoned decision applied settled rules and canons to social networking. The single thread running through the Board’s pronouncements is that the judiciary must be and appear to be impartial. Otherwise, public confidence will erode, diminishing the prestige and strength of the judiciary. To that end, the Board urged judges to “maintain dignity” and to disqualify themselves when social networking relationships create bias or prejudice. The Board further instructed judges not to foster communications that erode confidence in the judiciary, not to comment on matters pending before the judge, not to use social networking sites to gather information about matters before the judge, and not to give legal advice.

Other state ethics committees surely will have more to say on this issue. Technology is increasing exponentially as is the speed of technological change (think Moore’s Law). Now more than ever before, it’s important for our legal institutions to keep pace.

Is D.C. on the Way to Legalizing Online Poker?

An amendment introduced to the District of Columbia Fiscal Year 2011 Budget Support Act and approved with little fanfare or advance warning could signal a major change in the law of i-gaming.

The amendment, introduced by at-large Democrat Councilmember Michael A. Brown, would allow the D.C. Lottery to administer online poker by defining the D.C. Lottery to include both “games of skill and games of chance” and allowing the games to be played over the Internet within the District. According to the fiscal impact statement issued by D.C. Chief Financial Officer Natwar M. Gandhi, online poker administered by the D.C. Lottery would generate more than $13.5 million for the District of Columbia by 2014. It would bring in these funds through taxes levied on the winnings of District residents and through a 50-50 revenue sharing agreement with a contractor, Intralot. The D.C. Council approved the act, including this provision, by a vote of 11-2.

The act has been approved by D.C. Mayor Vincent Gray. Like all D.C. acts, it will next be sent to Congress for a 30-day review period. It remains to be seen whether members of Congress would prevent the poker measure from taking effect. Currently, although there is significant interest in a number of states, there are no legal Internet poker sites based in the United States. Late last year, a bill sponsored by Senator Harry Reid that would have fully licensed and regulated internet poker failed to garner the support necessary to become law.

If Congress does not accept the act, it may enact a joint resolution disapproving it. If, during the 30-day review period, the President approves Congress’s joint resolution, the act would be prevented from becoming law. If the President doesn’t approve such a joint resolution, the bill becomes law.

We hope that this act is passed with the amendment intact so that D.C. can benefit from a badly needed new source of revenue and lead the way for other jurisdictions to implement similar laws.

Online Gaming on Path to Legalization in New Jersey

It appears that New Jersey will very soon become the first state to legalize and regulate Internet gambling.

On January 10, 2011, the New Jersey State Assembly overwhelmingly passed an online gaming bill. This bill was passed by the state Senate, also overwhelmingly, late last year, and all that remains for the bill to become law is the expected signature of Governor Chris Christie. The bill would permit casinos in Atlantic City to offer online versions of their games to New Jersey residents.

Clearly, any move in the direction of legalization and regulation of online gaming is a good development. This reflects the ongoing change for the better in the public’s attitude toward gaming and the great interest that exists in creating a safe, legal space for people to gamble online.

However, the purely intrastate nature of the bill gives us pause when it comes to online poker. Players will be limited in that they will be allowed to compete only against other players who are located in New Jersey. This is far from the ideal player experience, as it limits the level of competition and excitement that is available.

In addition, because of this restriction, the newly legal online poker sites might receive relatively little online traffic and might take a long time to build up a critical mass of players.

It appears that the state, in imposing this limitation, is trying to avoid a conflict with the federal government. The Justice Department continues to take the view that interstate gaming over the Internet is illegal. Gaming within the confines of a single state would be a state, not a federal, issue.

This may also be why the bill does not expressly prohibit foreign operators from offering online gaming to New Jersey residents. Rather, the bill was drafted in the permissive form: It provides a mechanism by which the Atlantic City casinos may offer internet gaming, but it does not state that no one else may provide internet gaming to New Jersey residents. For example, the stated purpose of the act is that it “permits Internet wagering at Atlantic City casinos under certain circumstances,” but it does not mention any prohibition of foreign operators to offer online gaming in New Jersey. The procedures under the act provide a legal means to offer online gaming for the Atlantic City casinos, but the act does not state that any other form of online gaming is prohibited. Therefore, the status of online gaming for offshore operators in New Jersey is arguably no different than it was before the passage of this bill.

We will watch developments in New Jersey with great interest.