Thursday, September 20, 2007

26¢ Emails – Regulated by the FCC

Have your received the email alerts about the FCC charging a modem tax? Or about the US Postal Service starting to charge for stamps for email? These are of course hoaxes. One great hoax I remember had to do with a member of Congress Schnell (German for “Fast”) who introduced a legislative proposal 602P (legislative proposals are either “S” for Senate or “HR” for House of Representatives – there’s no “P”) proposing a 5¢ email tax. According the official USPS website,

Some rumors refuse to die-no matter how many times they have been put to rest. . . The fictional Congressman Schnell is making the Internet chat room circuit again, proposing a 5-cents surcharge on e-mail messages. This was a hoax when it first circulated several years ago, and is still a hoax today. There is no Congressman Schnell, and there has never been a Bill 602P. In addition, the USPS has already said it would not support this type of legislation.

And if you don’t believe the USPS, then you should believe the Dept of Energy (after all, they are charge of nuclear power).

Of course, the punch line is that the fee was not 5¢, it was 26¢! And it wasn’t proposed by Schnell - it was proposed by the US Postal Service itself.

Time to use the Way-Back Machine. The time is 1977. The country is in a tailspin. Saturday Night Live is singing carols about killing Gary Gilmore for Christmas. President Carter takes the Oval Office, and pardons Vietnam War draft evaders. The Clash releases their debut album. And the USPS is scared.

The USPS has learned about this thing called electronic mail and electronic transactions. It occurs to the USPS that if everyone were to use these electronic thingies, First Class mail would get wiped out and so would all that revenue. After some careful strategic planning, the USPS launched an attack on email with a classic pincer movement: on the left flank, the USPS initiated its own email service known as E-COM; on the rank flank, the USPS considered banning all private email service.

E-COM was a simple concept. The USPS would set up a network where a message would originate electronically. It would then be sent to one of a handful of participating postal offices that had terminals, where it would be printed out. The hard copy of the message would then be delivered to its destination – essentially in the same manner and with the same speed as first class mail. USPS launched this service in 1981.

Before E-COM could get off the ground, however, it was mired in controversy. The US Postal Commission, the Department of Justice, private companies, and even the FCC, objected. The first objection was that it was against government policy for a government agency to compete with the private sector. Private commercial email services were nascent and promising, and did not think much of a government monopoly using its government bankrole to pay for a competing email service. The FCC made a particularly interesting objection. The FCC said, “we have jurisdiction over all wireline and wireless services. That jurisdiction has been interpreted broadly. And there is no dispute that the transmission of a message over a communications network is communications, under the Communications Act, and under our jurisdiction.” “Not only that,” the FCC was heard to say, “but its common carriage.” Using an actual quote, the FCC stated:

With respect to the relevant judicial decisions defining the nature of common carriage, we note that none of the parties to this proceeding appears to dispute that ECOM service would constitute a common carrier offering if it were to be provided by an entity other than the Postal Service. [Oh really?!?!?!] We also conclude independently that ECOM is a quasi-public offering of a for-profit service which affords the public an opportunity to transmit messages of its own design and choosing. Based on those judicially defined criteria, we find that, in offering ECOM, the Postal Service is engaging in a common carrier activity.

In re Request for declaratory ruling and investigation by Graphnet Systems, Inc., concerning the proposed E-COM service, FCC Docket No. 79-6 (Sept 4, 1979).

In other words, before E-COM could get launched, the FCC said, “if you are going to do this, then you are under our jurisdiction, and you are going to have to file a tariff for the offering of your common carriage service” (do you hear that?!? The FCC said that email, whether from the USPS or privately offered, is a form of common carriage – they don’t say that anymore).

Well, the USPS would not accept “no” for an answer, tinkered with its network in order to weasel out of FCC jurisdiction, and launched E-COM in 1981. A message was priced at 26¢ - and for each email message, the USPS was said to lose around $5. They had apparently estimated that the service would be a raging success; it was not and, with the low message volume, the cost per message was rather high. And by the way, if you used the service you had to send at minimum 200 messages. The service was one directional; if you got an error message, you would receive it in the mail two days later. When the E-COM messages were printed out, it would take two days more to be delivered. And it cost the same as First Class mail.

For some reason, E-COM was a failure (one Senator called it a turkey). Three years after service was initiated, USPS terminated the service and tried to sell it off.

Some what’s the punch line? Congressman Schnell was going to undercut the USPS offering by 21¢ - and deliver you messages two day faster! Vote Schnell!


Wednesday, September 19, 2007

The Sliding Scale Jurisdiction Test : Sliding toward Jurisdiction : Crummey v. Morgan, et al, 2007 CW 0087 (LA App 1st Cir. Aug. 8 2007)

Judges face hard choices. Do they rule in favor of a defendant or do they rule in favor of a plaintiff. Sometimes the law is well settled, and the role of Judge is easy; just follow precedent (in other words, just decide the same way every judge has before). Sometimes old law confronts new facts that confound judges. When adrift in a sea of uncertainty, judges reach deep in their armory of judicial tools and pull out old faithful: the sliding scale.

Sliding scales help sort out uncertainty. On the one extreme of the slide, cases go one way. On the other extreme, cases go the other way. In the middle, differing factual scenarios are resolved on a case-by-case basis. In other words, the judges fudge it, doing their best to see which way the facts tip – and then the decision slides to the outcome. Another way to describe this is that the judge must balance the differing factors and determine whether on the whole the facts weigh in favor of one party over another. The sea of uncertainty is gray and fuzzy.

When the sliding scale works, time gives the judiciary the opportunity to hammer out differing factual scenarios and create well settled precedent. When the sliding scale tumbles, there is little guidance, and the judiciary becomes overwhelmed with parties seeking elucidation of their predicament. See FCC Computer I.

Jurisdiction in Internet litigation is one of those seas of uncertainties. Old law resolves whether a person in one state can sue another person in another state. As articulated in the classic case International Shoe v Washington, a defendant Beta must have certain minimum contacts with the state Alpha in order to be haled into court in the state of Alpha. In applying this well settled law, the court asks questions such as whether the defendant from Beta purposefully availed itself of the privilege of conducting business in the state of Alpha and invoked the benefits of doing business in Alpha. This purposeful availment of Alpha must be of a nature that the defendant could reasonably be expected to be haled into court in Alpha.

Now comes a tsunami in the sea of uncertainty. If a party goes online, their activity online is accessible to any willing plaintiff anywhere. If I blog, can I really anticipate getting haled into court in Demoine? If I sell 1000 hockey T Shirts to Georgia, have I established minimum contacts with George? What if I sell one T Shirt on eBay to Louisiana?

Faced with this conundrum, the judiciary has created a sliding scale. At the one end of this scale is purely passive sites which simply provide information and offer no level of interactivity (and if you can find any of these “purely passive” sites any more, it belongs in a museum). At the other end of the scale is the fully interactive site such as an ecommerce site where the visitor can interact with an inventory, establish a relationship with the website’s company, purchase goods and services, find the status of those goods pending delivery, and provide a review of how good the product was. In between we have the fudge. If I set up an ecommerce business and sell 1 million books to Salem, Massachusetts, seems like I am purposefully availing myself of that jurisdiction. But if I put up one book for sale for whoever wants it on Craiglist, did I really intend to do business with puritans? The sliding scale is in place because there is a certain degree of ambiguity involved.

According a Louisiana Appellate Court, the analysis does in fact slide – it slides straight towards finding jurisdiction (perhaps the sea of uncertainty froze over). In the recent case Crummey v. Morgan, et al, 2007 CW 0087 (LA App 1st Cir. Aug. 8 2007), defendants placed an ad on eBay to sell an RV. Plaintiff reviewed that ad, purchased the RV, picked it up in Texas, and attempted to drive it home. The court makes a lot of the fact that plaintiff in Louisiana called defendant in Texas to ask questions about the RV and put down a deposit on the RV from Louisiana. Plaintiff picked the RV up in Princeton, Texas and, 40 miles after picking it up, it apparently stopped working. Interestingly enough, the court, which made meticulous note of each phone call and payment plaintiff made from Louisiana, fails to note where the RV was when it went kaput; but according to Google it is much more than 40 miles from Princeton to the Louisiana border, so presumably the gremlins emerged while still in Texas. The court provides no further contacts of defendant with the state of Louisiana.

The Louisiana Court reviewed International Shoe and precedent for the sliding scale. However, when it got to its analysis, the court started by saying eBay is not a mere passive site because sellers can receive payment from buyers – in other words, the court positions the one extreme of the scale as a strawman, and knocks it down. And if it is not the strawman, then it must be the alternative.

The court places a stake in the ground of what it means by “passive” by citing Quality Design and Construction, Inc. v Tuft Coat Mfg., Inc., 05-1712, 939 So2d 429 (La App 1st Cir 7/12/06). Here the court defined a “passive site” as one that is informational only. At this extreme, according to the court, one cannot purchase goods. But what is surprising (shocking?) is that according to the court, one cannot even “download repeated or regular information from the website.” Now that’s passive! Although, apparently, in the Tuft’s case cited by the court, somehow buyers could use the information on the Tufts website to have their names added to the Tufts website and purchase goods from Tufts. It is an unusual stake in the ground – the court seeks to establish that a passive website is one where you can do virtually nothing at all – and yet uses as an example a company in the regular business of selling goods interstate.

Now let’s turn to our defendant who (according to the facts recited by this court) sold one thing once over eBay. The rationale of the court that the sliding scale favors jurisdiction is

  • Defendant’s use of the eBay website is not “merely passive;”
  • The use of eBay permitted defendants’ product to be marketed in Louisiana (and the North Pole for that matter); and
  • Plaintiff called defendant, entered into the contract, and paid the down deposit from Louisiana.

Therefore, “Defendants used a variety of means of electronic communication to advertise, puff, negotiate, and accept payment for its product directed to a Louisiana consumer. Thus sufficient minimum contacts effectuated by electronic communications have been established to maintain personal jurisdiction.

In the same paragraph, in the next words, the Court goes on and declares something that has no relevance to the jurisdictional analysis:

To hold to the contrary would have a chilling effect on ecommerce in that buyers wary of being haled into the home courts of out of state sellers will refrain from purchasing goods on eBay and other similar internet websites should the merchandise they considered purchasing be defective or otherwise not conform to the advertised online representations.

Slip at 12. I wont bother responding to this; the dissenting judges does a marvelously sufficient job:

Lastly, while the majority is concerned that a contrary holding would have a chilling effect on ecommerce buyers wary of being haled into the home courts of out of state sellers, perhaps greater significance lies in how the majority’s holding will affect ecommerce itself on eBay or other internet auction websites. The logical inference from the majority’s holding is that any person or entity placing an item for sale on eBay, bought by any person in any foreign forum, is subject to the personal jurisdiction of that foreign forum. The mere existence of such a rule in ecommerce would clearly inhibit such transactions - more so than any chilling effect on buyers wary of being haled into the home courts of out of state sellers.

While the plaintiff in this case will certainly be inconvenienced by having to go to Texas to assert his claim against the defendants, the plaintiff bought the RV without inspection knowing that it was in Texas. The plaintiff specifically chose to go to Texas to retrieve the RV and the sale of the RV was finalized in Texas. To summon the defendants from Texas into a Louisiana court on this matter and to assert personal jurisdiction over them, when they lack sufficient minimum contacts with this state, offends due process.

Dissent at 10.

The dissent reviews a plethora of eBay jurisdictions cases where other courts - a lot of other courts - found that a single sale on eBay is insufficient to establish jurisdiction. Before the sea of uncertainty, it had been well settled that a single phone call or a fortuitous contact with a state was insufficient to establish long arm jurisdiction. In the eBay cases, as in this case, defendants place for sale something with no intent to market or sell that thing in any particular state. The only intent of the defendant was to sell to the highest bidder. The state where the purchaser happened to be was, entirely, fortuitous. Thus, according to the dissent, it cannot be said that “defendant purposefully availed itself of the privilege of conducting activities with Louisiana, thus invoking the benefits and protections of its laws.” Dissent at 6.

The problem with the slippery slide is that factors can get weighed that actually have no part of the test. In this case, it seems clear that the court took great offense at defendant. The court makes clear that (1) defendants had represented on their eBay page that “everything works great on this RV and will provide comfort and dependability for years to come. This RV will go to Alaska and back without problems,” Slip at 3; (2) Plaintiffs had called for assurance that the RV was in good working order and inspected the RV as much as possible without taking it on the highway, and (3) not more than 40 miles on the road, “the vehicle quit running. Crummey also determined that the dashboard air conditioner did not work and that the RV s generator would not run continuously.” The court’s opinion of defendants may or not be valid, but the resolution of whether defendants were engaged in some level of fraud is not the same as the resolution of whether the court has jurisdiction over defendant.

Let’s spin the Wheel of Morality and learn the lesson of today’s post! “Wheel of Morality, turn, turn, turn - Tell us what lesson we should learn.” [Whirl, Click, Click, Clock]. “One should not play on sliding scales near seas of uncertainty.”


Sunday, September 09, 2007

The Communications Decency Act is Dead; Long Live the Communications Decency Act! :: Zango v. Kaspersky Labs :: Good Samaritans

The Communications Decency Act (CDA) was Congress’ first attempt to censor the Internet. This new law plummeted to earth in a flame of glory, struck down as unconstitutional by a unanimous Supreme Court.

And by struck down, we mean, of course, the legislation is alive and well, having tremendous impact over the evolution of the Internet, and who gets sued for what.

The CDA was tremendously unpopular – by those few at the time who had a clue about the Internet and technology. Of course, back in 1995 the Internet was still essentially a military secret that most Americans (including members of Congress) knew little about. Sen. Exon, the sponsor of the CDA, stood on the Senate floor, holding a folder filled with pornography from the Internet for any Member of Congress to peruse. Of course, he reportedly had no idea where the material came from, whether it came from a US server or one from the land of Foo. He also had no idea how to access or download the material; news reports indicated that he had never himself been online.

Members of Congress were, at that early era, confronted with a choice: they could defend the liberty and freedom of cyberspace (for all 12 of their constituents who happened to be online at that time) or they could take a stand against smut! The choice was simple: Members of Congress had to be seen as standing against the barbarian pornographers and voting for the CDA.

There were, however, a few members of congress who had a clue (and by clue, I mean, they represented some part of the country like Berkley or Silicon Valley – and their constituents suggested to them that the CDA was dumb). A compromised was therefore worked out between the CDA and its opponents; the CDA would pass (as a part of the Telecommunications Act of 1996) but it would be amended with things like (1) the Good Samaritan provision which protected internet service providers from liability for third party content, (2) it would be the policy of the USA to keep the Internet “unfettered from state and federal legislation” (whatever “unfettered” might mean); and (3) any good soldier fighting the battle against the barbarian pornographers would likewise be immune from liability.

The DOA CDA got reincarnated as the Good Samaritan provisions. Interactive services have been protected from liability from third party remarks over and over again. The immunity has been interpreted broadly, even though ambitious litigants have tried attempt after attempt at getting big bucks out of service providers.

The Good Samaritan provisions have been vital for the Internet we know today. It has allowed ISPs to advance business plans without exposed liability. It has permitted Web2.0. It has permitted blogs, and wikis, and third-party reviews, and comments. It has permitted interactive services filled with third party content, for which the provider of the service has not be held liable.

Which brings us to today’s lucky contestant. According to the videotape (Zango v Kaspersky Lab, Inc., Case No. C07-0807-JCC (WDWA Aug 28, 2007)), plaintiff Zango is a company that provides free stuff online. Defendant Kaspersky Lab sells malware detection and protection software, that identified Zango’s free stuff as “potentially harmful or malicious” and blocks its use. Zango took offense at being labeled “potentially harmful” and sued.

Defendant Kaspersky said, “not so fast, the unconstitutional ill-fated CDA protects me from liability.” 47 USC § 230(c)(2)(B) says that an interactive computer service that provides a means of avoiding objectionable stuff is not liable on account of that good deed. Try as it may, plaintiff did not persuade the court that 230(c)(2) did not apply to Kaspersky. The court noted that this level of immunity has been interpreted very broadly, and concluded “There is no question that [defendant] Kaspersky USA considers [plaintiff's] software to be objectionable.”

Congressed made clear that it likes service providers that seek to protect us from the barbarians at the gate – whoever or whatever those barbarians might be. The CDA might be dead, but the immunity of Sec. 230 lives on. Defendant motion for summary judgment is granted and the case against it was dismissed.

Let’s spin the Wheel of Morality and learn the lesson of today’s post! “Wheel of Morality, turn, turn, turn - Tell us what lesson we should learn.” [Whirl, Click, Click, Clock]. “Senator Exon was the Father of Web 2.0!”