Archive for the ‘Commentary’ Category

Who owns copyright in a selfie when it’s captured with one person’s phone but by another person’s finger? And what if that other person is actually a monkey? Or a Bradley Cooper?

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Earlier this year, Ellen DeGeneres briefly “broke” Twitter after tweeting a selfie full of celebrities, captured while she was hosting the Oscars. In an attempt to beat the record for most re-tweets ever, she enlisted megastars like Meryl Streep, Julia Roberts, Lupita Nyong’o, Kevin Spacey, Brad Pitt, and Jennifer Lawrence. Shortly after, Ellen gave the Associated Press permission to reproduce her selfie in a news article. But some have argued that the reproduction right – a right reserved to the copyright owner of a work – wasn’t necessarily Ellen’s to give. Technically, Bradley Cooper was the one who pressed the shutter button, evidently because he had the longest arms. Copyright ownership vests in the author of a work, and in the case of photography the author is normally the person who literally creates the photograph by pressing the shutter. In some instances, however, the author is defined as the person directing the creative vision of the work, such as choosing the lighting, composition, costumes, and settings, without actually pressing the button. So why does it matter? For the most part, it doesn’t. The selfies that you or I take are probably not going to be published in magazines or newspapers, unless newspapers are suddenly interested in my new haircut or in what you look like in the bathroom mirror. But Ellen’s selfie was the most retweeted picture of all time, and it was certainly newsworthy, at least in the days following the Academy Awards ceremony. Another selfie has recently been the subject of some news as a wildlife photographer is claiming copyright ownership of a photograph technically taken by a monkey. In 2011, David Slater was photographing wildlife in Indonesia when a group of macaque monkeys started monkeying around with his camera and one of them snapped a selfie. After being posted online, the selfie ultimately made it to Wikipedia. When Slater demanded that it be removed from the site, Wikipedia claimed that he didn’t own copyright in the photo because he hadn’t captured it himself and because he hadn’t made any of the artistic choices in its creation. Though copyright lawyers battled over this question, the U.S. Copyright Office confirmed that the selfie would remain in the public domain because only humans can be authors of works, not monkeys. But what if authorship of the selfies can’t be determined as easily? A few weeks ago, nude photographs of celebrities like Jennifer Lawrence, Kate Upton, and Ariana Grande were leaked onto the internet and quickly spread like wildfire. I have not seen the photos – nor do I encourage any sort of invasion of privacy – but apparently some of them were not selfies at all. When Lawrence's lawyers demanded that 4chan – the online bulletin board that the photos were initially posted to – take down the photos, 4chan reportedly fired back that Lawrence herself might not have copyright ownership of the pictures that were physically captured by someone else. Though some of the hacked celebrities have insisted that the photos are fake, if Lawrence were to potentially reveal the name of her photographer, she would effectively be admitting that the photos are authentic. On the other hand, by not divulging, Lawrence loses her copyright ownership claim and would have to pursue other avenues for getting the pics taken down. Most of us are guilty of taking selfies and quick snapshots of sunsets, puppies, and our food (#food #fooddiary #nom) without a moment’s pause. But you should think twice before handing your phone off to the person with the longest arms. If it’s a quick pic of your best duckface, you’re probably fine. But if it happens to be the next Pulitzer-prize winning photo or the most retweeted twitpic of all time, you may have just lost your copyright claim.

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September 28th, 2014 at 12:07 pm

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Bullies & Hackers: Cyberbullying lessons for revenge porn statutes

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Another year, another batch of nude celebrity photos flooding headlines and the internet. This month, actress Jennifer Lawrence, model Kate Upton, and a handful of other female celebrities became the latest celebrity hack victims when an anonymous user on the online message board 4chan posted dozens of photos of the women nude. As with past leaks, the reaction has followed a similar pattern: the FBI looks for the poster and the media asks what can be done. Between the Computer Fraud and Abuse Act and the Electronic Communications Privacy Act, the answer is a lot. In 2012, federal prosecutors used both to convict Christopher Chaney after he hacked and posted personal photos of the actress Scarlett Johansson online. Chaney is serving a 10 year prison sentence, but the legislative landscape has changed since his trial, including the criminalization of revenge porn. This blog has covered these laws before, but to recap, revenge porn refers to distribution of sexually explicit media online without the consent of the pictured individual, for the purpose of humiliation. In the wake of this latest leak, there have been calls in the media to crack down on revenge porn posters and websites. To that effect, thirteen states have passed laws that make posting revenge porn a misdemeanor, while 27 more state legislatures have introduced similar bills in 2014. However, those calling for prosecutors to use revenge porn statutes against the celebrity hackers should pause to consider the challenge faced by another recent cyber speech proposal. That proposal involves cyber bullying and a statute criminalizing it in Albany County, New York. This past July the state’s highest court struck down the county’s 2010 statute for defining cyber bullying too broadly and implicating the First Amendment. At issue in People v. Marquan M.[1] was whether the defendant, a 15-year-old boy who had posted sexual information and insults about classmates online, could be prosecuted under the statute. Writing for the majority, Judge Victoria Graffeo acknowledged the county had a compelling interest in punishing those who upload offensive content, especially in an educational or bullying context. However, she continued, the statute went too far by criminalizing mere annoying or embarrassing speech. Returning to the revenge porn context, lawmakers face similar challenges distinguishing posts and photos meant to humiliate from those meant to publicize, especially in cases like the most recent hack where multiple parties re-post and share the photos after the initial hacker’s post. It also suggests revenge porn laws may not help prosecutors looking for the celebrity hackers, as the original posters could have operated out of any jurisdiction, whereas the typical revenge porn poster likely lived with or near the victim. Although it’s clear revenge porn and the culture behind it needs to be addressed, it’s less clear that the recent criminal statutes will be of much help. For now, the impacted celebrities and their attorneys seem to have settled on copyright legal strategies, bringing claims against anyone who posts the photos. But for the not so famous victims of revenge porn, there doesn’t seem to be a good way to regain the privacy taken from them.

[1] People v. Marquan M., No. 139, WL 2014 WL 2931482, at *1 (N.Y. July 1, 2014).

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September 25th, 2014 at 3:43 am

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Why Tesla Opened Its Patent Portfolio

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On June 12, 2014, the CEO of Tesla Motors (Tesla), Elon Musk, posted an external memo entitled “All Our Patent Are Belong To You.”  In short, the memo details why Tesla is opening up its patent portfolio to the market.  The primary reason given for this drastic move seems to be a David versus Goliath mentality.  Musk wrote, “[o]ur true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” While most people know Tesla as an electric car manufacturer, it is really a successful battery company that has been focusing its efforts on building a market for its battery technology.  As of late June 2014, 120 of Tesla's 172 issued patents related to battery and charging technologies.  While at first glance the decision by Tesla to open its patent portfolio seems altruistic and selfless, it is likely a power play to strengthen the electric vehicle market as a whole and increase Tesla’s potential market for its battery technology.  In 2013, less than 1% of all vehicles sold were electric, and Tesla accounted for approximately 25% of that 1%.   Musk would likely rather see Tesla make up a much smaller percentage of a much larger market. Musk seems eager to inject a bit of competition into the electric vehicle market in order to spur innovation, increase customer adoption, and share the load in convincing the public that electric vehicles are a viable option.  Tesla is at a stage in its life that not many businesses will ever see – Tesla is lobbying for a shift in the way millions of people conduct their daily lives from something that is quick, easy, and convenient to something that is new, lacking infrastructure, and unpredictable from the point of view of the consumer.   Only time will tell if Tesla’s bold move will pay off, but one thing is certain – it is the only chance Tesla has at moving the electric vehicle market forward.

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September 18th, 2014 at 5:08 pm

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Googling “Search Bias”: The Efforts of Antitrust Agencies to Even the Playing Field.

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Google has been a target of antitrust allegations for nearly as long as it has existed. In recent years, agencies domestic and abroad have accused the tech giant of “search bias.” The charge of search bias—levied against Google by competitors and watchdogs—asserts that the company designed search algorithms to promote its own targeted content at the expense of third-party content and advertising. Google is a slippery target: twice now escaping essentially unscathed from investigation by the FTC and European Commission. The latter of these settlements, however, may be altered or even undone in the course of the next few months. In January of 2013, Google satisfied FTC investigations into antitrust violations of search bias because there was no evidence that Google intentionally sought to hurt competition. Admittedly, the FTC conceded, Google’s play-to-win attitude led the company to strive to out-best its competitors.[1] But Beth Wilkinson, FTC’s outside counsel, publicly maintained that “the FTC’s mission is to protect competition, and not individual competitors.”[2] From Google’s side, the company made two concessions in order to avoid fines by the FTC.[3] First, the company agreed to desist from preventing competitors’ access to key technologies by way of patent blocking. In essence, Google has a history of scooping up smaller companies and their valuable patent portfolios. Later, the company files injunctions against competitors seeking to purchase a license to use the patented technologies in their own products. Tech companies generally commit to license appropriate patents under FRAND (“fair, reasonable, and non-discriminatory”) terms. Google, conceding that there might have been some slippage on those promises with the above patents, has re-committed to the FRAND cause. Second, Google promised to remove restrictions preventing advertisers from managing their own ad content on Google’s pages. Critics within the FTC and Congress questioned why the FTC settled for the above “voluntary commitments” from Google, instead of seeking a formal consent order.[4] More recently, Google agreed to a formal settlement with the EU’s European Commission. Facing complaints that it abused its dominant position in European search markets, Google could not rely on its successful American defense of proving that its efforts were all geared towards creating a better product for its customers. For example, Google contended, and continues to contend, that its algorithms aim to provide the most relevant search results to its users, whether such a result is a website, a map, a forecast, or a game score.[5] In the EU, the primary goal of antitrust enforcement in this realm is protecting small businesses and other competition, not to be quashed by the no-holds-barred “best product” decry. As a result, the EU has cowed Google into agreeing to even more substantial commitments in its European search strategies than those promised following the FTC investigation. Most significantly, the company agreed to display the results of at least three competitors every time one of their own directed results from a specific search appeared.[6] But this summer has seen some skepticism surrounding whether the EU settlement will stick. Intense opposition from politicians and affected competitors, as well as studies showing the settlement terms to likely be ineffective, have made some wonder if Joaquín Almunia, the current antitrust chief of the EU, will hold off on finalizing the settlement until a successor takes office in November.[7] A non-public letter from Mr. Almunia indicated that the European Commission planned to investigate many other antitrust allegations cited to Google, seemingly in an attempt to garner the support needed to finalize the current settlement quickly.[8] But, just last week, Google’s critics notched another small victory: the EU rejected Google’s third settlement offer, stating that the corporate giant will have to make more concessions to reach a satisfactory settlement.[9] Both sides continue to insist they are working together in finding a solution that will work. Until the settlement is finalized or revamped, Google supporters and critics wait to see if search bias has finally risen into the effective purview of antitrust enforcement. Furthermore, how would Google and other international tech companies adjust to comply with disparate antitrust regulations in the wake of such a split between the FTC’s American conclusion and the potential European findings?   [1] Chris Crum, WebProNews, “Was FTC Too Easy on Google? Too Hard?.” [2] Id. [3] See FTC press release. [4] Anaut Raut, 12-AUG Antitrust Source 1, “Antitrust in the 113th Congress”. [5] Amit Singhal, Google’s Public Policy Blog, “Setting the Record Straight: Competition in Search.” [6] Claire Cain Miller & Mark Scott, New York Times, “Google Settles Its European Antitrust Case; Critics Remain.” [7] James Kanter, New York Times, “EU Prepares to Step Up Google Investigations; Opposition Grows in Europe to Google Antitrust Proposal.” [8] James Kanter, New York Times, “Google’s European Antitrust Woes are Far From Over.” [9] Geoffrey Smith, Fortune, “E.U. Rejects Google’s Latest Effort to Settle Antitrust Suit.”

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September 15th, 2014 at 10:51 pm

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Appellate Review of Markman Hearings

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In Markman, the Supreme Court declared that determining the meaning of patent claims, i.e. “claim construction,” is a question to be decided by the court; the Seventh Amendment right to a jury trial does not apply. Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). Shortly thereafter, in Cybor, the Court of Appeals for the Federal Circuit held that de novo review applied when results from these newly-created ‘Markman hearings’ are appealed. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc).   Earlier this year, the Federal Circuit granted a rehearing en banc to determine if Cybor should be overruled, and what, if any, deference should be given to a District Court’s claim construction. Lighting Ballast Control LLC v. Philips Electronics N. Am. Corp., ___F.3d___, WL 667499 (Fed. Cir. Feb. 21, 2014) (en banc). The court considered three options: (1) reaffirm Cybor and maintain de novo review, (2) overrule Cybor and declare claim construction a question of fact, or (3) adopt a “hybrid” standard of review that affords deference to the District Court’s factual determinations but preserves de novo review of the “ultimate” conclusion. Amici from industrial and technological companies advocated reaffirming Cybor. Academics and practitioners generally favored either the hybrid approach or the overruling of Cybor. Relying on stare decisis, a 6-4 majority reaffirmed Cybor.   The majority pointed out that since Cybor was decided, Congress has not acted to overturn it while enacting other patent legislation during that time. They further explained that predictability and consistency favor maintaining the status quo. Consistency is a concern particularly relevant in patent law – a concern which led to the creation of the Federal Circuit over thirty years ago. The majority feared a return of “forum shopping” because the same patent could be subject to conflicting interpretations in different District Courts. Parties would be incentivized to choose a forum with judges likely to interpret patent claims in their favor knowing that reversal on appeal is unlikely.   The dissent, appearing to favor the hybrid approach, pointed out that the parties in the present case, almost all amici, and the Supreme Court recognize that claim construction involves some questions of fact. Thus, they vehemently argued that under Rule 52(a)(6), courts of appeal can set aside only those findings of fact that are “clearly erroneous.” Rejecting stare decisis, the dissent argued that “informal deference” is already given to District Courts because they spend “hundreds of hours” learning the relevant technology, so overruling Cybor would “not upset settled expectations.” The dissent also stated that de novo review incentivizes the losing party to appeal, decreases the likelihood of settlement, and increases litigation costs.   But Lighting Ballast may not stand for long. In April, the Supreme Court granted certiorari in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., which presents a nearly identical question as that in Lighting Ballast. In Teva, the District Court held a Markman hearing and construed the claims in Teva’s favor, avoiding invalidity for indefiniteness. The trial judge relied heavily on Teva’s expert witness to determine the level of ordinary skill in the art at the time of invention. Teva Pharm. USA, Inc. v. Sandoz Inc., 810 F. Supp. 2d 578, 596 (S.D.N.Y. 2011). On appeal, the Federal Circuit explicitly applied de novo review, compared the testimony of the competing expert witnesses, reversed the District Court, and held the claims indefinite. Teva Pharm. USA, Inc. v. Sandoz, Inc., 723 F.3d 1363, 1369 (Fed. Cir. 2013), reh’g en banc denied. Similar to the dissent in Lighting Ballast, Teva claims that Rule 52(a)(6) should have governed the Federal Circuit’s standard of review because determining the level of ordinary skill in the art is a question of fact. Unfortunately, Teva will not be heard until the Supreme Court’s October 2014 term. Until then, Lighting Ballast remains good law; de novo review of claim construction still applies.   Guest Post Written by Brian Apel

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July 13th, 2014 at 1:05 pm

Akamai and the Question on Joint Infringement on Method Claims in the Supreme Court

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On April 30, 2014, the Supreme Court of the United States will hear opening arguments [1] for a landmark case found in patent law casebooks, Akamai Technologies, Inc. v. Limelight Networks, Inc., whereby the Federal Circuit, sitting en banc, held in a 6-5 ruling that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) when no direct infringement occurred under 35 U.S.C. § 271(a). [2] 35 U.S.C. § 271 states:
  • “(a) … whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
  • (b) Whoever actively induces infringement of a patent shall be liable as an infringer…”
The Federal Circuit overruled its own precedence set in BMC Resources, Inc. v. Paymentech, L.P., which had previously held that induced infringement requires a single party to commit all steps of a method constituting direct infringement under § 271(a).  In Akamai, neither Limelight nor its customers performed all of the steps, but nevertheless Limelight was found liable because Akamai and its customers jointly performed all steps.  The court reasoned that a party who actually participates in performing the infringing method should be “more culpable than another one who does not perform any steps” but instead induces another to do so. [3] Arguments supporting Judge Newman’s 35-page dissent include imposing an unfair obligation on businesses to speculate on potential future uses by a third-party buyer or user, the increased discovery costs to an already expensive procedure, and the potential for erroneously imposing liability on supplying non-infringing products and services. [4]  This case is of interest for inventions involving multiple steps, in particular the internet software and hardware industry, as demonstrated by the amicus briefs submitted by technological giants, such as Apple, the Google, Oracle, Red Hat, SAP, CISCO, Xilinx, Altera, HTC, SmugMug, weatherford, the CTIA, Facebook, Inc. and LinkedIn Corporation, The Wireless Association, the Consumer Electronics Association, MetroPCS Wireless, and many others.[5] Many people will be listening next Wednesday on how the Supreme Court will interpret the word “whoever” in the statute and balance these important policy goals.

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May 2nd, 2014 at 3:53 pm

Supreme Court to Rule on Patent Eligibility for Process Claims

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Last month, the Supreme Court heard oral argument in Alice Corporation v. CLS Bank. Many hope the Court’s decision in this case will help clarify the patent eligibly standard for process claims – particularly those process claims that are computer implemented and/or involve business method patents. Patent eligibility is based on 35 U.S.C. § 101 which allows any “process, machine, manufacture, or composition of matter” to be eligible for patent protection. However, laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection. It is important to note that patent eligibility is distinct from patentability (novel, useful, definite, non-obvious, etc.). For example, a chemist who discovers a previously unknown element cannot patent that element because it is a natural phenomenon. It is ineligible for patent protection regardless of how new and useful it is. Traditionally, process claims were evaluated under the “machine-or-transformation test” which conferred patent eligibility on the process if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In the 1970s, broad claims to computer-implemented processes that utilized a mathematical algorithm or formula without meaningful limitations were held ineligible for patent protection under the abstract ideas exception despite requiring a computer in order to be performed. See Gottschalk v. Benson and Parker v. Flook. Four years ago, in Bilski v. Kappos, the Court affirmed the Federal Circuit’s ruling that the process of “hedging risk” in the commodities trading industry is also an abstract idea not eligible for patent protection. However, the Court went on to declare that the machine-or-transformation test is not dispositive of patent eligibility for claimed processes, especially in business method patents, but rather that the test is a “useful and important clue” in determining patent eligibility. Now, in CLS Bank, the Supreme Court is faced with the patent eligibility of certain method, media, and system claims of particular business method patents that utilize escrow to protect against financial risk. Although the Federal Circuit sitting en banc decided 7-3 that both the method and media claims were not directed to patent eligible subject matter, the 7-member majority was split 5-2 on the justification. On the question of patent eligibility of the system claims, the court evenly split 5-5. By its own admission, the Federal Circuit is “irreconcilably fractured” on the complex issue of patent eligibility for process claims – particularly those that are computer-implemented and those in business method patents. Without destroying the software or finance industries, the Court could strike a balance by simply holding that business method patents tied only to a computer do not receive the benefit of the “clue” that the traditional “machine-or-transformation” test provides; the “abstract ideas” exception is controlling. This would allow business methods to remain generally patent eligible, preserve the utility of the “machine-or-transformation” test, and prevent software patents from becoming wholesale ineligible. Perhaps later this summer, the Supreme Court will provide clearer guidance for the Federal Circuit and the District Courts.

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April 26th, 2014 at 5:17 pm

Virtual Reality Technology Going Mainstream?

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While the idea of virtual reality technology has been around for decades, it has yet to make any substantial progress. The roots for virtual reality reach back to the late 1950s when the idea emerged to use computers as tools for digital display rather than just fancy calculators. By the early 1960s, communications technology was intersecting with computing and graphics technology, and this laid the groundwork for computer graphics and eventually, virtual reality. Over the past three decades, virtual reality hasn’t made any particularly significant advances. It has always needed more computational power than was available on standard home computers, mobile phones, and gaming consoles. Because of this, it was not able to grow. The technology itself has also been slow at developing a high resolution, real life experience. However, in the last few years, technologists have been taking steps to find solutions to these issues, spurring discussions on virtual reality technology once again. Recently, Mark Zuckerberg, Facebook CEO, announced Facebook’s acquisition of Oculus VR for $2 billion, bringing virtual reality to the forefront of the news. Even with the strides being made in the technology, however, no one is ready to commit to a release date for a virtual reality platform. Jeremy Bailenson, director of Stanford University’s Virtual Human Interaction Lab, says the trade-off between performance and price may be partly to blame. Facebook is not the only major company anticipating a breakthrough in virtual reality technology. Sony made its own commitment to the technology with Project Morpheus at the Game Developer’s Conference (GDC) 2014. Richard Marks, head of the Magic Lab inside Sony PlayStation R&D, said the difference in virtual technology this time around is that technology has finally caught up with everyone’s long-awaited dreams of virtual reality. If things continue as expected, we are likely to see a drastic change in gaming, education, medicine, and nearly every other realm very soon.

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April 22nd, 2014 at 10:16 am

Obama administration takes first steps to limit NSA data collection but is it enough?

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Last week, President Obama announced that the government would halt its bulk collection of telephone records under the controversial NSA program. Instead the data will remain with the phone companies and government investigators can request judicial approval to release the records. President Obama's announcement comes almost a year after former NSA Contractor Edward Snowden leaked information to the press. Some privacy advocates such as the ACLU are heralding the decision as a crucial first step in replacing the NSA's dragnet surveillance methods with a more targeted program. Although the President and a House committee support changes to the current system, the exact details remain to be finalized in Congress. However, at least one commentator has noted that the proposal may not have much significance to the NSA. Phone companies already routinely collect logs of incoming and outgoings numbers and call length. The proposal also looks strikingly similar to existing procedures in the law for obtaining electronic data. For example, the federal pen register statute allows the government to obtain a court order for logs of outgoing phone numbers or email headers. The government must show only that the information is likely relevant to an ongoing criminal investigation. Similarly, the Stored Communications Act permits the government to obtain records or subscriber data based on specific facts that show there is reasonable grounds to believe that the records would be relevant to an ongoing criminal investigation. Although these investigative techniques are used primarily in criminal matters, they can provide a guideline for national security issues. Even a "reasonable suspicion" standard that an individual may be connected to a national security risk or harm may go a long way in limiting dragnet government surveillance. On the other hand, the proposal only places a procedural "speed bump" by requiring the government to get a court order before accessing the records. Given the importance of national security and the ease by which it justifies government action, the proposal may be more about appearance than in actual substance. Some members of Congress even gained political capital just by calling for reform in this arena. Overall, any step towards tighter scrutiny is positive and hopefully the public will benefit from more transparency.

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April 10th, 2014 at 3:43 pm

IRS Ruling Declares Bitcoin Will Be Taxed As Property

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On March 25, 2014, the Internal Revenue Service issued a ruling declaring that it will tax virtual currencies, such as Bitcoin, as property. This ruling could have significant effects on the way that consumers use Bitcoin. The implication of the ruling is that Bitcoin can no longer operate as an alternative form of currency because any transaction using Bitcoin as consideration will lead to a capital gain or loss for the person paying with Bitcoin. Bitcoin fluctuates drastically in value, which means that almost every transaction using Bitcoin will result in some sort of gain or loss which will now be taxable at capital gains rates. So, for example, if a person buys a Bitcoin for $10 and uses it to purchase an item for $15, he or she will be required to pay capital gains tax on the $5 increase in value. The extreme value fluctuation, however, also explains why the IRS’s ruling may not be as extreme as some commentators suggest. It is, in fact, this value fluctuation which has led consumers to use Bitcoin primarily as an investment medium, like gold, silver, and other commodities, rather than as actual currency. The rapidly changing value of Bitcoin provides plenty of room for investors to try to maximize value by betting on the increase or decrease of the technological commodity. There are also significant administrative restrictions which will make the IRS’s ruling difficult, if not impossible, to enforce, at least with respect to the average individual. In order to determine the amount of capital gains tax an individual owes to the U.S. government, he or she will have to carefully track all of the purchases made with Bitcoin over the course of the year. If individuals are making multiple purchases with Bitcoin, this will prove to be a very tedious and complicated requirement and is likely to discourage individuals from using Bitcoin as currency in the first place. In addition to being difficult for individuals to monitor their capital gains, it will be just as complicated for the IRS to figure out how much it should be receiving in taxes from these individuals. Bitcoin’s original purpose was to provide a type of currency that was completely anonymous, which is why it has often been used in funding illegal transactions. The virtual wallets which house Bitcoins are not tied to individuals; this will make it very difficult for the IRS to monitor how much capital gains tax individuals owe on their Bitcoin transactions. This administrative monitoring gap may provide a new venue for entrepreneurs to develop a platform which provides tracking of an individual’s basis in and purchases using Bitcoin in order to properly determine how much capital gains tax they owe in connection with Bitcoin transactions. But without this type of platform, it is unclear how the IRS will effectively enforce its new ruling. Sources:
  • http://money.cnn.com/2014/03/31/technology/irs-bitcoin/
  • http://techcitynews.com/2014/03/28/bitcoin-is-property-not-currency-rules-irs/
  • http://techcrunch.com/2014/03/30/bitcoin-slips-in-the-wake-of-the-irss-tax-decision/
  • http://www.coindesk.com/irs-bitcoin-ruling-may-bright-side/
  • http://www.inman.com/2014/03/31/irss-bitcoin-guidance-turns-every-transaction-into-a-reportable-capital-gain-or-loss-at-tax-time/
  • http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance
  • http://www.theatlantic.com/technology/archive/2014/03/why-bitcoin-can-no-longer-work-as-a-virtual-currency-in-1-paragraph/359648/
  • http://www.theguardian.com/technology/2014/mar/31/bitcoin-legally-property-irs-currency

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April 8th, 2014 at 10:27 am

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