Internet Lawyer Blog

E-Commerce and Online Fraud

Mon, 17 Jun 2013 09:46:15 -0800

The Internet has become an expansive worldwide network and users have the freedom to access this network from multiple devices and locations. In light of this growing network, many forms of commerce have also moved to the Internet. E-commerce, or commercial activity that takes place over the Internet, has become a growing part of international markets and businesses. However, this growing market has also led to the proliferation of online fraud. In addition, by gaining access to this wide network, also referred to as the Internet, online fraud is able to harm users and markets on a much grander scale.

What Factors Indicate Online Fraud?

In order to begin to prevent online fraud with e-commerce, it is first important to be able to recognize online fraud. There are certain indicators that can help online consumers recognize fraudulent activity. First, multiple orders within the same day, hour, or minute from the same user, address, or credit card will generally point to fraudulent activity. Also, shipping addresses to suspicious locations, such as abandoned buildings or P.O. boxes, may be indicators of fraudulent activity. Anonymous email accounts associated with online users placing purchases also indicate a higher likelihood of online fraud. These indicators do not necessarily suggest that the online activity is absolutely fraud. Instead, these indicators help protect online consumers by arming them with early signs that can help prevent future harm.

What Methods of Prevention Are Effective Against Online Fraud?

With online fraud ranking as one of the biggest problems with e-commerce transactions, both online buyers and sellers can take steps to protect themselves and prevent fraud. Perhaps the best tool is to use the very network that helps perpetuate fraud, i.e., the Internet, to help prevent future fraud. The magnitude of online resources, such as Google Maps, can help users protect themselves from future fraud. For example, online merchants can check addresses using Google Maps to ensure that the billing and shipping addresses are indeed valid addresses. Merchants should take care to utilize fraud alert programs and devices that monitor online activity and indicate suspicious behavior. Merchants can also call consumers who place online orders to verify the cardholder in an attempt to avoid fraudulent sales or identity theft. Merchants can also establish a sorting system that considers various "fraud indicators" to help distinguish between valid orders and fraudulent orders. This will enable the merchant to quickly place valid orders, allowing for steady revenue and admirable customer service, while also allowing the merchant to look more thoroughly at the potentially fraudulent orders. Meanwhile, buyers can help avoid online fraud by being cautious where they conduct their e-commerce. By limiting online purchases to reputable online sites, buyers reduce their risk of running into risky transactions.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters regarding all aspects of cyber law by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.

Fair Use and Internet Time as Relevant Factors to Copyright Infringement

Mon, 10 Jun 2013 09:18:00 -0800

The U.S. Copyright Act, codified under 17 U.S.C. § 101 et seq., protects copyrighted works from infringement from wrongful users. This federal law aims to protect unique works while still allowing for creativity and future creations. To that end, individuals charged with copyright infringement can avoid liability entirely under a valid fair use defense. The fair use exception, which is codified under 17 U.S.C. § 107, provides that instances of work that fall within this exception do not constitute infringement.

How Do Courts Apply the Fair Use Exception?

Since courts have not adopted a test or set of factors to determine when the fair use defense applies, judges will look to the totality of circumstances on a case-by-case basis to determine whether the defense is appropriate. This exception allows the courts to avoid applying the statute so strictly that it prevents creativity. In Religious Technology Center v. Netcom On-Line Communication Services, Inc., the United States District Court for the Northern District of California found the fair use exception applies when a work is used for "criticism, comment, news reporting, teaching, scholarship or research." Under the fair use exception, courts must consider the following factors: (1) purpose and character of the use; (2) nature of the work; (3) amount of the work used in comparison to the entire work; and (4) effect of the use on the potential value of the work. However, this is not a total list of considerations and courts will often look to any unique factors that affect the outcome of the case.

Do Courts Consider Additional Factors if the Alleged Copyright Infringement Takes Place Over the Internet?

When courts look to the fair use exception in cyberspace, they will also consider the amount of time the work appears on the Internet and the location of the work on the Internet. In a cyber era, Internet users can access and distribute copyrighted work in very short periods of time. The amount of time a copyrighted work appears on the Internet and its location on the Internet will determine the degree of harm to the future market value of the copyrighted work.

For example, posting something on the Internet may allow an international audience indefinite access to copyrighted work. Therefore, courts will consider how long the work will appear on the Internet. Additionally, the location of copyrighted material on the Internet is a relevant factor because the degree of online traffic on that site will determine the potential for on-going infringement. In general, websites with very limited traffic do not pose the same risks as very popular websites.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters regarding all aspects of copyright law by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.

Buyer's Remorse and Contract Cancellation Rights

Mon, 03 Jun 2013 20:56:37 -0800

A buyer who has ever committed to a wrong purchase knows the nagging feeling that accompanies the realization that committing to the purchase of a product was entirely unnecessary. Often informally referred to as "Buyer's Remorse," this feeling of extreme regret usually accompanies very expensive purchases, such as automobiles or real estate. Recognizing that consumers do not always make the soundest purchases, the California legislature has provided state laws that give consumers the right to cancel certain contracts after a short period of time (i.e., cooling-off period) if those contracts fall under the Buyer's Remorse exception.

What Types of Contracts Fall Under the Buyer's Remorse Exception?

Whether or not a contract falls under the Buyer's Remorse exception is entirely up to the governing law in a jurisdiction. For example, California does not provide a cancellation period for automobile sales and leases. Unless a specific dealership or lease agreement provides otherwise, buyers do not have the option to cancel an automobile sale or lease without first showing legal cause. In looking to determine whether a buyer may cancel a contract after a showing of legal cause, courts will often look for instances of fraud, undue influence, illegality, or a breach of a duty. However, under California Civil Code section 1689.6(a), buyers maintain the right to cancel a contract from door-to-door sales within three days. The intent of this statute is to protect buyers from overly ambitious salespeople and give buyers the opportunity to reflect on their purchases without the overbearing presence of the salesperson.

What Is the Required Cancellation Procedure Under Buyer's Remorse Exception?

For contracts that fall under the Buyer's Remorse exception, the buyer does not need to establish any reason for cancelling the contract. However, it is important to note that this opportunity does not exist for all transactions, and consumers should take care to consult with an attorney to learn about applicable contract cancellation statutes in the specific jurisdiction. Generally, there are no penalties for cancelling contracts that fall within the Buyer's Remorse exception. Typically, to cancel a contract, a buyer will need to provide the seller with a written notice of cancellation. However, a buyer must provide such notice within the period of time allowed by the statute. Otherwise, the buyer will need to meet the traditional requirements for cancelling a contract. There may also be specific mailing requirements for the notice of cancellation. Buyers looking to cancel a contract within a Buyer's Remorse exception should seek legal counsel to ensure they are complying with all statutory requirements.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters by using extensive knowledge and skills to create innovative solutions. Please contact us today to set up a confidential consultation.

Cyber Threats: Phishing and Spoofing

Mon, 27 May 2013 12:20:02 -0800

As cyberspace becomes a larger part of everyday life, the threat of cybercrimes becomes more prevalent. Consumers conduct all sorts of business over the Internet, which involves storing and transferring personal information on various online sites. Accordingly, the wealth of personal information available over the Internet has drawn in a new type of crime--phishing and spoofing. Cybercriminals disguise as other people, or legitimate business entities, and they entice consumers to give out personal information, such as bank account numbers. These tactics also help cybercriminals steal people's identities.

What is the Difference Between Phishing and Spoofing?

Phishing is the practice of posing as a legitimate business entity to trick consumers into turning over personal information, such as passwords and bank account numbers. The cybercriminals then use this information to break into accounts and transfer money. They may also use this personal information to apply for credit cards, spend extravagant amounts of money, and ruin people's credit. This is how cyber criminals perpetuate identify theft through phishing. With the right personal or financial information, cybercriminals disguise as other people, building up exorbitant debt against the victim.

Spoofing is much like phishing in that it involves people and programs that pose as another person or business in order to gain information or any sort of advantage. For instance, spoofing agents use technology to alter their caller ID, so that when they call, the ID reads as a legitimate business. The consumer sees the name of the business and willingly gives out personal information. A lesser-known type of spoofing involves a copyright holder's practice of placing damaged files on file sharing networks to discourage illegal downloads.

How Can Consumers Protect Against Phishing or Spoofing?

The California State Department of Justice warns consumers to look for emails that look very official. The cyber thieves will often disguise emails to look formal and convince people to turn over personal information. The most common technique is to use familiar company names to come across as a legitimate business venture. The Consumer Federation of America also warns that spoofing attempts to single out employee emails, and disguise their message, so that it appears to be from their employer.

Consumers can protect themselves by taking extra care before sending any personal information via email. Make sure that links in emails are trusted before clicking on any such links or opening attachments. Phishing and spoofing threats also exist over the phone, so consumers should be careful before giving out any personal information to callers.

Website Copyrights

Mon, 20 May 2013 07:57:51 -0800

Copyright protection is commonly known to apply to inventions and artwork to protect original work from copyright infringement. However, copyright protections also extend to websites. Today, the Internet, and especially personal websites extend to all avenues of the marketplace. Individuals have blogs, businesses have websites to advertise and inform about their services, and professionals maintain websites with personal information and updates in their field of work. All of this content is subject to copyright protection and copyright infringement.

Why is it Appropriate to Copyright a Website?

Anytime a website contains unique and original content, it is subject to copyright infringement. Therefore, anytime a website owner is looking to protect the text, sound, or design contained on a website, it is appropriate to copyright the website. Website owners may also have the option to copyright portions of a website, specifically the portions of the website that are original rather than a template. Often several different parties will contribute to a website by working on different aspects. Therefore, to ease the copyright process, it is often helpful to determine authorship and ownership before creating the website. For instance, a developer may own the code for the site, a designer may own the graphical and creative aspects of the site, and the owner of the site may own the content or material. Establishing ownership will make it easier to copyright the different portions of the website.

In general, creating a website automatically infers copyright protection over the material. However, as an added precaution, it is helpful to also take the additional step to register the copyright. In other words, an owner does not have necessarily have to claim a copyright ownership over content to sustain ownership of the content. However, registering a copyright with the U.S. Copyright Office will establish an unmistakable right to the content. Furthermore, it will make it easier to protect the copyright interest in the unfortunate event of infringement. The U.S. Copyright Office provides a comprehensive guide that assists owners looking to register online content.

Which Aspects of a Website Does a Copyright Protect?

A website copyright gives the owner of the site, or the content, exclusive rights to that site or content. U.S. copyright laws, under Title 17 of the United States Code, applies to this material, granting the copyright owner certain rights. For instance, the owner has the sole authority to reproduce or distribute the particular content. This right extends to artwork, literature, photographs, and other such original content. However, a website owner cannot copyright the domain name for the website. While domain names cannot be duplicates, the Internet Corporation for Assigned Names and Numbers manages domain name rights, not the United States Copyright Office.

Leahy-Smith America Invents Act Changes the Face of U.S. Patent Law

Mon, 13 May 2013 19:35:45 -0800

The central provisions of the Leahy-Smith America Invents Act (the "AIA") went into effect in March 2013, revolutionizing the United States patent system. Traditionally, the United States had maintained a "first-to-invent" patent system, which awarded patent rights to the first inventor who created a unique invention. However, as the AIA went into effect, not only did the statute change the effects of U.S. patent law, but it also affected how inventors will make the decision of whether to file patents.

How Does the AIA Change the U.S. Patent System?

Before this new provision, the United States Patent and Trademark Office ("USPTO") awarded patents to the individual or entity that invented first, rather than the individual or entity that filed an application for a patent first. Now, an inventor could lose patent rights to another inventor who potentially created the same invention later in time, but managed to file a patent application for the same invention sooner. Essentially, regardless of who conceptualized an invention first, the first to submit a good-faith patent application secures patent rights.

Under this system, inventors have a greater chance of losing their patent rights if they fail to take appropriate actions to file a patent application in time. Accordingly, the USPTO will likely see an influx of provisional applications as inventors take care to submit their applications first. Simply keeping records and documenting the date of an invention will not work towards protecting an inventor's rights any more.

How Does the AIA Affect Inventors and their Patent Rights?

First, inventors no longer have the luxury of preserving their rights to inventions simply because they are the first to invent. To protect patent rights, inventors will need to make quick decisions to file patent applications. To protect patent rights longer, inventors will also need to thoroughly consider whether they intend to seek a patent application before they make new inventions public. Especially if inventors are looking to secure their patent rights outside the United States, they will need to make sure they file for patent protection before they introduce their invention in the international market. If an inventor fails to secure patent rights in advance, he may lose his property right and interest in the underlying invention.

However, even a patent application that is filed first may be invalid if the underlying invention comes from stolen or misappropriated ideas. Therefore, companies that primarily work with new inventions and patent rights should ensure that any invention that comes from outside the company includes written authorization from the patent owner. These companies should also keep careful records of their research and development in the event that a patent infringement lawsuit requires the company to establish that it used the invention in good faith.

Recent Cases in Cybersquatting

Mon, 06 May 2013 14:56:53 -0800

Cybersquatting has been a highly litigated issue since Congress passed the Anti-Cybersquatting Consumer Protection Act (the "ACPA") in 1999, codified under Title 15 U.S.C. § 1125(d). The ACPA establishes a cause of action for the bad faith registration of a domain name that is substantially similar to a trademark or personal name.

Under What Circumstances Will Courts Hold Domain Name Registrants Liable Under the ACPA?

In Xereas v. Heiss, the United States District Court for the District of Columbia found that the ACPA extends to include all registrations of a domain name, not just the initial registration. This federal law's intent to diminish cybersquatting suggests that the ACPA meant to protect property interests in domain names throughout subsequent registrations.

In the aforesaid case, John Xereas registered the domain name "riotactcomedy.com" in 2005 and 2009 and conducted business under this name for several years. In May 2010, Xereas joined two others--Dawson and Heiss--to form a limited liability company (the "LLC") and open a new comedy club, called the Riot Act Comedy Club. In January 2011, the LLC hired Squiid, Inc. to create a website for the club using Xereas' domain name. In January 2012, the LLC instructed Squiid to re-register the domain name, listing the LLC as the owner, without Xereas' knowledge or consent. Thereafter, Xereas filed suit alleging breach of the ACPA.

The court in this case explained that the case rested on whether the ACPA was meant to protect the re-registration of domain names. Xereas had effectively presented evidence that Dawson and Heiss had engaged in cybersquatting in that they registered a domain name with bad faith intent to profit from a domain name that was identical to Xereas' distinctive domain name. However, the court found that Squiid was not guilty of cybersquatting because it did not register or use the domain name riotactcomedy.com with bad faith.

What Is The Scope Of Damages Available Under the ACPA?

In Vizer v. Vizernews.com the United States District Court of the District of Columbia found that to maintain an action under the ACPA, a plaintiff must be able to name the party who has registered a domain name in bad faith. This is necessary for a court to effectively determine whether it has jurisdiction over the parties to the suit. Here, Marius Vizer sued under the ACPA to compel a transfer of the domain name "Vizernews.com" to his ownership because the domain name included his last name and was meant to report news about him. The court found that absent a registering party, the court lacked jurisdiction to try the case.

However, in Skydive Arizona, Inc. v. Quattrocchi the United States Court of Appeals for the Ninth Circuit went as far as to award $600,000 in statutory damages for violation of the ACPA.

International Websites and U.S. Internet Laws

Sun, 28 Apr 2013 21:21:22 -0800

Any company conducting e-commerce with consumers in the United States must follow the applicable U.S. Internet laws. Otherwise, the company and its managers may face civil liability and criminal prosecution for violating U.S. laws. However, in the event that a business's website is also accessible internationally, that business may also need to comply with applicable international Internet and business regulations.

Online businesses should be aware of issues relating to contracts, intellectual property violations (e.g., patent, trademark and copyright), email, spam, antitrust, privacy issues, affiliate marketing programs, online fraud, cyber piracy, cloud computing, cybersquatting, compliance and regulatory actions. For example, if a business uses an image or text on its website, it must ensure that doing so does not violate any copyright or trademark laws.

There are also jurisdictional considerations affecting websites in American and international markets. Different countries have different approaches for determining whether respective courts have jurisdiction over Internet material. Generally, jurisdictional considerations will take into account the physical locations of parties. Although, a website is not a physical being, it nonetheless maintains a physical presence in its operations. As such, an Internet transaction over a website may implicate three different jurisdictional laws: (1) the laws that apply to the user's physical location, (2) the laws that apply to the server's physical location, and (3) the laws that apply to the business's physical location. In the event that a business does not maintain any physical location, courts will look to the owner or manager's location, or the location of any warehouse that helps facilitate business. For instance, websites such as Amazon and eBay may charge a sales tax on an online transaction if such a company maintains a physical presence in a jurisdiction that charges sales tax. In February 2, 1998, in an effort to help facilitate online business, U.S. Congress passed the Digital Signature and Electronic Authentication Law ("SEAL"). SEAL provides for legal recognition of electronic signatures sent over the Internet to complete transactions. As such, SEAL expands online business, making it easier for consumers and merchants to conduct business entirely online.

American Internet laws also provide for a new realm of crime involving the Internet. For example, in some jurisdictions, spam is against the law. Accordingly, a business that solicits consumers through bulk email may face civil liability. The CAN-SPAM Act attempted to regulate Internet spam, but fell short because it failed to prohibit many types of email spam. However, the law in this area is still developing since the Internet is a relatively new paradigm, and the laws that apply to websites and online businesses are still shifting.

Even though there is no international Internet convention at this time, however, several related conventions, treaties and agreements do exist. For example, the United Nations Convention on the Use of Electronic Communications in International Contracts, Council of Europe Cyber-Crime Convention, World Intellectual Property Organization Treaties, and Hague Choice of Court Convention are amongst the more prominent organizations.

Defending Against the Growing Threat of Identity Theft

Sun, 21 Apr 2013 10:21:59 -0800

Few crimes affect as broad a scope of people as identity theft. With social networks, credit cards, personal information, and contact information so interconnected, perpetrators can trespass into a person's life by breaking past a single password-protected account. Accordingly, the Los Angeles County District Attorney's Office has created a special division to aggressively prosecute this serious crime. Indeed, the District Attorney's Office has indicated that it would pursue all cases of identity theft, regardless of how minor. This category of illegal activity includes everything from simply possessing information on another's identity without their permission to using such information to obtain a credit card or make purchases.

In California, identity theft laws are especially strict because perpetrators can be convicted of felony identity theft regardless of whether the victim suffers financial harm as a result of the identity theft. In fact, signing someone else's name on an official document may constitute identity theft, depending on the circumstances. Often, identity thieves work as members of larger organizations, which assemble and carry on large networks of identity theft. Someone may be accused of identity theft simply by association with members of such a network. Under California Penal Code § 530.5(a) to maintain a case of identity theft, the district attorney will need to show that a defendant intentionally obtained "personal identifying information" without the consent of the person, to use "for any unlawful purpose." Defendants may be able to avoid prosecution for identity theft if they can present evidence to show that they obtained the identifying information with the person's consent.

The most common identity theft cases include illegal credit cards, fake identification cards, stolen social security numbers, purchases with stolen credit cards, and skimming. Skimming involves installing a skimmer to illegal obtain identification and credit card information from card machines in retail stores and gas stations. Identity theft also involves cyber crimes such as phishing or spoofing.

The Federal Trade Commission ("FTC") provides a general guide for consumers and business owners to help victims of identity theft take immediate action to prevent excessive harm to their reputation and credit. This guide also provides suggestions to help protect against potential identity theft. For example, the FTC suggests that consumers take steps to ensure that personal records are safely locked away. Additionally, the FTC warns consumers to keep passwords private to help protect online security.

The federal government is also taking steps to protect consumers against identity theft. In 1998, Congress passed the Identity Theft and Assumption Deterrence Act, which established identity theft as an offense. Under 18 U.S.C. § 1028, a defendant guilty of identity theft may serve up to fifteen years in prison, pay a fine, and lose any property gained by virtue of the identity theft.

A Call for Laws Against Online Piracy

Sun, 14 Apr 2013 21:12:05 -0800

The illegal downloads of music and movies, and the corresponding financial consequences for music labels and movie production companies, introduced online piracy to the forefront of newsworthy discussions. Today, online piracy has expanded into an online market that allows criminals to profit from stealing intellectual property (such as patents, trademarks, copyrights) from American owners and selling such valuable property online. Such "rogue sites" are usually located outside of America and organizations are able to maintain these sites by circumventing U.S. laws. The rogue sites will sell everything from movies and music, to medicine and automotive parts. In fact, counterfeit baby food comprises a large sector of the online piracy market, endangering the health and wellbeing of American consumers.

In light of this growing threat to American consumers, and their intellectual property rights, there is a call for more stringent online privacy laws to protect against these threats. Illegal piracy costs America $100 billion and thousands of jobs each year. Accordingly, Congress proposed the Stop Online Piracy Act ("SOPA") to protect American consumers and American intellectual property. SOPA intends to target foreign websites that manage the sale and traffic of counterfeit products.

However, opponents of the bill have spread misinformation over the Internet to block SOPA's passage. For example, Google openly opposes SOPA. To that effect, Google paid $500 million to settle a case alleging that Google promotes illegal foreign online pharmacies. The case suggested that these pharmacies pose a health risk for American consumers. Google argues that SOPA will allow for online censorship. Proponents of SOPA argue that the law does not aim to censor the Internet. Instead, this law only focuses on online activity that is already illegal. Furthermore, SOPA only covers foreign websites that are specifically involved in infringing activity. The National Association of Manufacturers, International Union of Police Associations, United States Conference of Mayors, National Songwriters Association, and the National Center for Victims of Crime all support SOPA and its overall purpose. Additionally, both the United States Chamber of Commerce and the American Federation of Labor and Congress of Industrial Organizations have formed a unique bond to support SOPA.

SOPA works to end the flow of funds to illegal foreign websites, thereby making it more difficult for online criminals to market their sites, and distribute the illegal products in America. This federal statute will attempt to follow the financial trail that the illegal websites and online criminals leave behind to cut off sources of revenue. SOPA will also work to prevent search engines from redirecting consumers to such illegal foreign websites. Finally, this law provides a cause of action for consumers dealing with instances of infringement in their attempts to legally market and distribute their intellectual property online.

Post-Bankruptcy Mortgage Reaffirmation

Thu, 11 Apr 2013 13:26:58 -0800

Individuals who file for bankruptcy to seek relief from debt have the option of reaffirming certain debts. In the event that a debtor elects to reaffirm debt, the debtor will continue to be liable for the balance on the respective property. However, the debtor also maintains the right to the property. Debtors generally reaffirm debt in relation to automobiles or real property.

A debtor may file a reaffirmation agreement in the bankruptcy court that allows the debtor to "reaffirm" the debt obligation with a lender. Such an agreement is a legally enforceable contract, and it binds the debtor to the promise to repay all, or part of, the debt. Otherwise, the debt would be subject to a discharge through the bankruptcy proceedings. If a debtor fails to make timely monthly payments toward a mortgage debt, the debtor will once again be subject to foreclosure proceedings. A debtor could continue to make mortgage payments without reaffirming the debt. In this case, the debtor would continue to provide adequate protection for the lender, but there would not be a legally-binding contract between the parties.

The lenders are not under any obligation to compromise with debtors to reaffirm mortgage loans, allowing the debtors to keep their property. This is especially problematic when the lender refuses to send regular statements to debtors after the bankruptcy because the debtor does not know the current state of the mortgage. However, debtors may still be able to keep their property if they continue to make regular monthly payments towards their mortgage throughout bankruptcy. Generally, lenders are more inclined to reaffirm a mortgage and create a binding legal contract because, by doing so, they sustain the right to seek legal relief in the event that debtor fails to make mortgage payments. However, lenders may also be reluctant to reaffirm a mortgage loan with debtors.

For instance, in some jurisdictions, lenders cannot pursue a remaining balance on a property after foreclosure proceedings. Therefore, lenders in those jurisdictions do not want to take the time and resources to complete reaffirmation paperwork because this procedure does not adequately protect the lender's interests. Furthermore, lenders often maintain branches across the nation. In the event that a specific jurisdiction does allow a lender to pursue a balance on a property, it is still overly costly to staff and maintain legal offices across the country to complete reaffirmation paperwork for corresponding lending agreements. However, a debtor may maintain the right to refinance a mortgage in spite of bankruptcy proceedings. In general, lenders are stricter in their refinancing procedures, requiring debtors to show sufficient equity in the property, and a sufficient monthly income to support mortgage payments.

IMAGiNE Group Faces Counts of Criminal Copyright Infringement

Tue, 02 Apr 2013 11:56:13 -0800

After an investigation by U.S. Immigration Customs Enforcement's Homeland Security Investigations unit, U.S. District Judge Arenda L. Wright found members of IMAGiNE Group guilty of criminal copyright infringement. The court found IMAGiNE Group, an Internet piracy circle, guilty of perpetuating an effort to release movies available only in movie theaters. A representative of the Motion Picture Association of America testified that IMAGiNE was responsible for the most expansive effort to release pirated films between September 2009 and September 2011.

Judge Wright sentenced Jeremiah B. Perkins, a leading member of IMAGiNE, to prison and ordered him to pay $15,000 in restitution damages. After prison, Perkins will also face three years of supervised release. Perkins was responsible for recording films in theaters and compiling data into complete movie files to share on the Internet. Perkins admitted to renting computers, registering domain names, and opening email and PayPal accounts to help run IMAGiNE's operation.

The National Intellectual Property Rights Coordination Center ("IPR Center") within the United States Department of Homeland Security has supported the underlying investigation in this case. This center is one of the federal government's greatest weapons in the fight against counterfeiting and piracy. The IPR Center works closely with other agencies within the Department of Justice to facilitate information sharing in an effort to establish and enforce initiatives that deter intellectual property theft. This case was part of the IPR Center's greater effort to hinder and stop the spread of intellectual property theft. Attorney General Eric Holder instigated these efforts in response to the increasing crimes against intellectual property. Additionally, in light of recent news concerning threats of international cyber attacks, these efforts also go a long way towards protecting American consumers, their health, and their safety. Preventing intellectually property theft also protects the American economy by prohibiting outside parties from profiting on American products and intellectual property. The IPR Center aims to increase intellectual property right protections by implementing stricter criminal and civil liability for property right infringements. Additionally, the IPR Center seeks to organize greater coordination among federal, state, and local law enforcement agencies. Finally, the task force aims to refocus efforts on international property right protections by establishing and strengthening relationships with foreign governments.

The IPR Center was also responsible for facilitating an investigation into Hana A. Beshari, founder of NinjaVideo.net. NinjaVideo provided a forum for downloading high quality infringing copies of copyrighted movies and television shows. Beshari pleaded guilty to conspiracy and criminal copyright infringement. She could face up to five years in prison for her role in this intellectual property theft endeavor.

At the Law Offices of Salar Atrizadeh, we guide our clients in legal matters by using extensive knowledge and skills to create innovative solutions. Please contact us to set up a confidential consultation.

Kirtsaeng v. John Wiley & Sons, Inc. and Copyright Law Implications

Tue, 26 Mar 2013 21:13:16 -0800

On March 19, 2013, the Supreme Court reached a decision in Kirtsaeng v. John Wiley & Sons, Inc. In this case, respondent John Wiley & Sons, Inc. ("Wiley"), a publisher, brought suit against Petitioner Supap Kirtsaeng alleging violation of the Copyright Act, under Title 17 U.S.C. §§ 101-810. Kirstaeng a student in the United States, studying mathematics at Cornell University and the University of Southern California, sold textbooks to help pay for his education and living expenses. Kirtsaeng's relatives would buy these textbooks in Thailand, where they live, and ship them to Kirtsaeng, who would sell the textbooks in America once he was done using them for his classes. Wiley's subsidiaries in Thailand manufactured these textbooks.

Wiley contended that by selling foreign manufactured textbooks in America, Kirtsaeng was violating Title 17 U.S.C. § 602(a)(1) of the Copyright Act. According to 17 U.S.C. § 602(a)(1), a copyright owner's exclusive distribution right encompasses the importation of copyrighted work into the United States. Importing copyrighted work into the United States without the consent of the copyright owner constitutes a violation of copyright law. Under copyright law, a copyright owner has the exclusive right to distribute copies of a copyrighted work to the public. However, Kirtsaeng argued that the First Sale Doctrine protects him from any liability because according to the doctrine the copyright owner loses an exclusive interest in copyrighted work after the first sale. The First Sale Doctrine, which is codified under Title 17 U.S.C. § 109, limits copyright owners' distribution right to the first sale of the copyrighted work. Once the work is transferred, the copyright owner no longer retains an interest in the work.

In its opinion, the Supreme Court held that copyright law, and specifically the First Sale Doctrine, applies to copyrighted works manufactured abroad. Accordingly, copyright owners, such as the publisher in this case, lose their distribution rights and interests in a foreign manufactured copyrighted work after the first sale of the work. As such, Wiley lost its exclusive distribution right in the textbooks when its subsidiaries first sold the textbooks to Kirtsaeng's relatives in Thailand. When the relatives then sent the textbooks to Kirtsaeng, who proceeded to resell the textbooks in America, Wiley no longer retained a copyright interest in the textbooks.

The president and CEO of John Wiley & Sons stated that the Court's ruling would serve as a blow to the U.S. economy. The ruling will certainly have negative repercussions for publishers since consumers will be able to buy textbooks from foreign manufacturers and resell them in America, thereby reducing the cost of textbooks for American students. The decision in this case will also likely resolve Ganghua v. Pearson Education, Inc., which is another case pending before the Supreme Court.

Impact of ObamaCare on Small Business

Mon, 18 Mar 2013 14:29:25 -0800

President Obama signed the Patient Protection and Affordable Care Act ("Act"), or ObamaCare, as it is more commonly known, into law on March 23, 2010. The Act intends to decrease the number of Americans who do not have medical insurance. Additionally, the Act aims to decrease the overall cost of healthcare in the nation. One of the primary provisions of the Act requires employers that have at least 50 full-time employees to provide healthcare benefits for their employees. If such employers fail to provide benefits adequate under government standards, the employers will have to pay a fine. In National Federation of Independent Business v. Sebelius, the plaintiffs questioned the constitutionality of ObamaCare, arguing that the federal government did not have the authority to require businesses to provide health care. Ultimately, the Supreme Court of the United States upheld the constitutionality of ObamaCare.

Although, ObamaCare will not go into effect until 2014, it is already starting to have an effect on small businesses in America. Indeed, the Treasury Department and the Internal Revenue Service released regulations, in December of 2012, that require companies that average 50 or more full-time employees to provide healthcare or pay a fine now.

The way small businesses structure in 2013 could determine their status under ObamaCare next year. Companies have considered limiting growth to eliminate the need for additional employees. Accordingly, employers are choosing to outsource work instead of hiring full-time employees in order to avoid the cost of providing government-approved health care. Also, employers are hiring employees only on a part-time basis to avoid meeting the standard under ObamaCare.

This may prove to be a problem in light of the IRS's dedication to audit employers who improperly label employees as "independent contractors" to avoid paying taxes on wages. Therefore, small businesses with close to 50 full-time employees need to be careful with how they choose to categorize employees. An IRS audit that reveals improperly categorized employees could hold an employer liable for back taxes and penalties for failing to provide the appropriate healthcare benefits.

The potential for incorrectly categorizing employees is increasingly unclear because an employer's definition of an independent contractor may be different from the government's definition. The vague IRS guidelines take into account: (i) how much control the employer has over the employee, (ii) how permanent the employment is, and (iii) how the employer pays the employee. Given the confusion that these standards may generate, employer can file certain forms with the IRS to determine if an employment relationship properly constitutes contract employment.

Threat of International Cyber Attacks

Mon, 11 Mar 2013 12:39:59 -0800

The news outlets have been reporting that the Chinese have allegedly been hacking into American infrastructures. Assuming this report is accurate, the United States is not equipped to handle the consequences of such an attack. These hackers would possess the power to disable the critical infrastructure in this country, eliminating electricity, gas, water, and all major transit systems. Indeed, earlier this year, both The New York Times and The Wall Street reported that hackers had infiltrated their systems and stolen confidential employee information. The New York Times has further reported that it has been experiencing constant attacks from the Chinese in an attempt to control information that pertains to China. The Ministry of National Defense in China denies any such cyberattack on The New York Times. In light of these recent developments, it has become increasingly important for individuals and businesses to take steps to ensure their cyber protection. By serving California and Washington D.C., the skilled attorneys at the Law Offices of Salar Atrizadeh successfully work on legal matters pertaining to cybersecurity and Internet law.

The former Secretary of Defense, Leon Panetta, has described the scene that will unfold after such an attack as a "cyber Pearl Harbor." Indeed, these hackers could possess software with the capacity to destroy infrastructure hardware. Such an attack would spread chaos throughout the country for months while the government works to restore its vital systems. Pointing to the failed Cybersecurity Act of 2012, Panetta has called upon the private citizens and businesses to act to secure their cybersecurity. Hillary Clinton, former Secretary of State, confirmed that this was a crisis that required global attention.

These instances of "cyberterrorism" threaten to cause damage far beyond the destruction of 9/11. Mandiant, a cyber-security company based in the United States, traces these cyber-attacks to the People's Liberation Army, the Chinese military. The efforts in America to make sense of these attacks have not led to any definitive answers. The dangers of cyber-attacks are apparent in the recent attack on Aramco, the Saudi Arabian oil company. The attack consisted of a virus, which destroyed 30,000 Aramco computers, and replaced essential files within the system with an image of an American flag burning. There was also a reported cyber-attack on Telvent (now known as Schneider Electric), an international corporation that provides companies with the network and connections to remotely control power grids, oil pipelines, and gas pipelines. It remains unclear whether the hacking efforts are meant to steal confidential information, or whether the hacking is part of a larger scheme to derail vital American infrastructures. Indeed, the threat may not be limited to the Chinese, but rather part of a greater effort to launch an attack against American cybersecurity. This certainly poses a threat not only for national security, but also for individual cyber-security involving consumers and businesses that compose and participate in the crucial business and technology infrastructures.