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E-TIPS^®

E-commerce, Technology and

Intellectual Property Summaries

Headlines:  December 20, 2006 (Volume 5, Number 13)

Holiday Greetings from E-TIPS®

Ontario Enacts Anti-Gambling Advertising Legislation

US Database Rates Travellers for Terrorist Potential

Federal Court of Canada Discusses Internet Jurisdictional Issues

The Next Chapter of Change in the Telecom Sector Announced by the Canadian Government

US Close to Making Pretexting a Federal Crime

UK Gowers Review of Intellectual Property Released

Google Challenges Traditional Radio Advertising Paradigm

 

Holiday Greetings from E-TIPS®

Next Publication Date is Wednesday January 17, 2007

Deeth Williams Wall LLP, the Editor of E-TIPS®, and each of the contributors to the publication wish you and yours a happy and safe holiday  season.

The next issue will appear on Wednesday January 17, 2006 and will be devoted to the Year 2006 in Review.

Ontario Enacts Anti-Gambling Advertising Legislation

On December 12, 2006, the Ontario Legislature enacted legislation to amend the Consumer Protection Act, 2002 (Act).  Included in the amendments is a prohibition on the advertising of an “internet gaming site” that is operated contrary to the Criminal Code.  For the purposes of the section stating the prohibition, advertising means advertising that originates in Ontario or is primarily intended for Ontario residents and includes providing a link to an Internet gaming site for the purpose of promoting use of the site.

According to the definition inserted in the Act, an “internet gaming site” is one that accepts or offers to accept wagers over the Internet,

i)    as part of the playing of a game of chance or mixed chance and skill that is to take place inside or outside of Canada, or

ii)   on any contingency or event that may or is to take place inside or outside of Canada.

It is interesting to note that this definition encompasses games of mixed chance and skill.  As previously reported, an Internet poker site has attempted to argue in the US that it escapes US legislation banning Internet gambling because poker is a game of skill (see E-TIPS®, “Is Poker Subject to the Recent US Internet Gambling Ban?” Vol 5, No 9, October 25, 2006).  As drafted, the amended Act would apply to games of mixed chance and skill, such as poker.

The new ban on advertising also extends to persons, other than Internet service providers, who arrange for or facilitate the advertising of an Internet gaming site.

For the text of the omnibus legislation (Bill 152 - 2006), see:

http://masl.to/?K20E3256E

For background on Bill 152 - 2006, see:

http://www.ontla.on.ca/library/bills/382/152382.htm

Summary by:  Michael Migus

US Database Rates Travellers for Terrorist Potential

For the past four years, the US Department of Homeland Security (DHS) has been secretly assigning computer-generated scores to US domestic and international travellers through what is called an Automated Targeting System (ATS).  These scores are an attempt to measure the risk posed by each traveller for committing terrorist or criminal activities. 

The DHS computers use several factors to determine travellers’ scores such as their place of residence, how they paid for tickets, their motor vehicle records, past one-way travel profile, seating preference and what kind of meals they ordered.  Travellers are not allowed to see or challenge these scores, and the government keeps them on file for 40 years.  DHS also plans to share this data with state, local, and foreign governments.  In some cases DHS may also share these scores with courts and private contractors.

In disclosing the existence of ATS, the federal government referred to it as “one of the most advanced targeting systems in the world.”  However, members of Congress and privacy advocates are questioning its legality.  They cite a ban that Congress imposed on DHS spending over the past three years preventing such activities from taking place.

Michael Chertoff, Secretary of Homeland Security, conceded that the Congressional ban prevents DHS from spending funds on risk assessments of passengers; however, he claims ATS is something different, that it involves risk assessments of people entering or leaving the United States.

The European Commission (EC) has also raised concerns about ATS.  The EC fears that the US is not complying with a US-European Union (EU) passenger data agreement that gives US law enforcement agencies access to data on European travellers, but limits data sharing and retention.  A DHS spokesperson stated that the US Customs agency is abiding by the US-EU passenger data agreement, including a provision that data about passengers arriving in the US from Europe may only be retained for 3 ½  years.

For more information, see:

http://www.siliconvalley.com/mld/siliconvalley/news/editorial/16134135.h;

http://masl.to/?D25E2556E; and

http://masl.to/?E26E5456E

Summary by:  Andrei Edwards

Federal Court of Canada Discusses Internet Jurisdictional Issues

The Federal Court of Canada recently addressed the issue of Internet jurisdiction in Desjean v Intermix Media Inc (2006 FC 1395), a case involving an allegation that the defendant (Intermix) violated the misleading representations provisions of the Competition Act by bundling without disclosure “spyware” or “adware” with free software offered on various web sites.  The Intermix head office was located in California and it had no servers, bank accounts, or employees in Canada, nor did it target Canadian consumers.

The plaintiff (Desjean) failed to establish that the Court had jurisdiction to hear the matter.

In addressing the jurisdiction issue, Justice Montigny noted the relatively greater body of US jurisprudence dealing with Internet jurisdictional issues, discussed the American jurisprudence and applied the “minimum contact” doctrine, which was first considered in Canada by the Ontario Court of Appeal in Muscutt v Courcelles (2002 CanLII 44957).

Under the minimum contact doctrine, for a court to have jurisdiction over a matter involving an out-of-state defendant, the defendant must have certain minimum contacts with the state, contacts that support either general jurisdiction or specific jurisdiction.

General jurisdiction attaches when the defendant has concrete connections to the state that are independent from the plaintiff.  In this case, Intermix was based in California and had no such general jurisdiction contacts.

Specific jurisdiction arises when the defendant directs activities towards the forum state.  In the Internet context, specific jurisdiction will arise where the defendant operates a web site through which business is conducted with individuals in the forum state.  Conversely, no such jurisdiction would attach when the defendant simply posts information on a site that can be viewed in the forum state.  However, American case law has identified a middle ground, represented by interactive web sites, in which specific jurisdiction may also attach.  Web sites in this latter category allow users to exchange information with the host computer.  In this scenario, attachment of specific jurisdiction will depend on the level of interactivity and the commercial nature of the exchange.

Since the web sites at issue in this case were neither commercial nor interactive, the Court ruled that it had no jurisdiction to hear the action.  Furthermore, even if the Intermix site were interactive, specific jurisdiction would not arise because the product was downloaded for free, there was no targeting of Canada or Canadian-specific content, and Intermix did not purposely take the benefit of Canadian law.

For the full text of the decision, see:

http://decisions.fct-cf.gc.ca/en/2006/2006fc1395/2006fc1395.html

Summary by:  Michael Migus

The Next Chapter of Change in the Telecom Sector Announced by the Canadian Government

As predicted in an earlier issue of E-TIPS® (“Fundamental Changes Looming in Canadian Telecom Policy”, Vol 4, No 19, March 29, 2006), the current Canadian government is continuing to implement changes recommended by the Telecommunications Review Panel which are consistent with the government’s own strategic goal of reducing regulation in the telecommunications sector.

The latest example is the decision to permit competition in local phone markets in which two or more big phone, wireless or cable companies operate.  Once again, this expression of government policy is contrary to a position taken by the federal telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC).  Earlier in 2006, the CRTC had announced that it would forebear from regulating local phone markets only after a former monopoly phone company had lost 25% market share in a defined geographic area.  By contrast, the newly announced government policy conditions the introduction of competition on the level of the existing competitive infrastructure, not on levels of market share.

According to the announcement by the Minister of Industry, this will accelerate deregulation while still maintaining existing safeguards to protect consumers such as a price ceiling for stand-alone residential services and continuing price regulation in regions where there is little competition.

The proposal appeared in the Canada Gazette for a 30-day comment period commencing December 16, 2006.

For a copy of the government announcement, a Regulatory Impact Analysis Statement and the proposed Cabinet Order, visit:

http://masl.to/?D27E2656E

For commentary from The Globe and Mail, see:

http://masl.to/?C19E2556E

To file comments during the comment period, visit:

http://canadagazette.gc.ca/partI/2006/20061216/html/commis-e.html#i4

Summary by:  The Editor

US Close to Making Pretexting a Federal Crime

Just before the holiday recess, the US Senate outlawed the practice of “pretexting”, that is, inducing telephone carriers to divulge the calling records of private individuals.  Entitled the Law Enforcement and Phone Privacy Protection Act, the legislation provides maximum penalties of 10-year prison sentences and fines of $500,000.

Earlier in 2006, the House of Representatives had enacted a similar bill (by a vote of 409 – 0), thus holding out the prospect of Congressional near unanimity on the topic and the likely signing into law of legislation by the President early in 2007.

Pretexting is a topic that gained notoriety several months ago following the widely reported situation at Hewlett Packard Inc (HP) when senior executives apparently used this technique to spy on independent directors of the HP Board of Directors.

For a news article from the IDG news service, visit:

http://masl.to/?S1AE3256E

For an update of Congressional legislative history, visit:

http://thomas.loc.gov/cgi-bin/bdquery/z?d109:h.r.04709

Summary by:  The Editor

UK Gowers Review of Intellectual Property Released

A UK government-commissioned but independently prepared Gowers Review of Intellectual Property (Review) was released on December 1 and has received a generally positive reception from interested parties.

As previously reported in E-TIPS® (“UK Announces Independent Review of its [IP] Regime”, Vol 4, No 19, March 29, 2006) Andrew Gowers, a former editor of the Financial Times, headed the Review, and started from the position that "the ideal IP system creates incentives for innovation, without unduly limiting access for consumers and follow-on innovators."

 The 142-page Review makes 54 recommendations, some of the key ones being to:

• retain the length of protection on sound recordings and performers rights at 50 years;
• in principle, prohibit retrospective changes to IP rights;
• allow private copying for the purpose of changing formats;
• allow private copying for research;
• create an exception to copyright for parody;
• encourage sharing between the EPO, the USPTO, and the JPO;
• encourage the development of a single EU patent;
• toughen penalties for online copyright infringement; and
• improve training of judges and magistrates on IP issues.

In accepting the importance of having access to a more or less continuous review of the IP field, the UK government announced on December 1 that it will set up an independent Strategic Advisory Board for IP Policy which will receive ₤500,000 from the UK Patent Office to commission research on emerging IP trends.

For BBC news coverage, visit:

http://news.bbc.co.uk/2/hi/entertainment/6214108.stm

For the full text of the Review see:

http://masl.to/?W3AC4576E

For an analysis of the Review by the online service “Managing IP”, visit:

http://masl.to/?G5BC1576E

Summary by:  James Kosa

Google Challenges Traditional Radio Advertising Paradigm

Google Inc (Google), through an online market-making service, facilitated by its purchase of DMarc Broadcasting early in 2006, is allowing small advertisers to penetrate into the radio market in what Goggle sees as an easy-to-manage and affordable way.  It does this by removing the middleman, typically the radio station’s advertising department, and by using online auctions to let advertisers bid on radio time.  The first radio ad resulting from this program played at the beginning of December.

An advertiser logs into the Google site and chooses characteristics for its ad such as geographic area, audience demographics, time of day and format.  The advertiser then states the amount it is willing to pay for the ad, not knowing which station will carry the ad.  Google also provides access to on-air talent and producers, for customers which have not already created the content for the ad.  Naturally, Google receives a commission from each sale made.

By contrast, the current advertising process usually involves advertisers and ad agencies establishing personal relationships with radio stations.  If this innovation becomes established, it would appear to be another instance of IT acting as a creative but disruptive technology in the marketplace.

Some radio executives are concerned that their sales teams will have to compete with Google and ultimately lower the value of radio advertising, but others welcome it as an innovation which may revitalize the current slump in radio advertising.

For more information on the topic from News.com see:

http://news.com.com/2100-1024_3-6099025.html

For a review from a marketing perspective visit:

http://www.clickz.com/showPage.html?page=3579981

Summary by:  Nyall Engfield

 The E-TIPS^® newsletter is edited by Richard Potter QC, an independent consultant to professional services firms (see his web site at www.i-lawmarketing.ca).

To review past issues of the E-TIPS^® newsletter, visit:

http://www.dww.com/newsletter/archive.html

Disclaimer: This Newsletter is intended to provide readers with general information on legal developments in the areas of e-commerce, information technology and intellectual property.  It is not intended to be a complete statement of the law, nor is it intended to provide legal advice.  No person should act or rely upon the information contained in this newsletter without seeking legal advice.

 Please feel free to forward a copy of this Newsletter to others in its entirety.