Topic: Telecom, Internet & Information Policy

Obama Chastises Rogue Trade Agency for iPhone Ban

On Saturday, the president vetoed a decision of the U.S. International Trade Commission for the first time in over 25 years. As a result, the United States will not be imposing an import ban on older iPhones despite the ITC’s finding that Apple infringed certain patents owned by Samsung. This action by the Obama administration is undoubtedly a good development, not just because you will still be able to get a free iPhone 4 when signing a 2-year contract, but because the veto simultaneously disciplines and discredits the ITC’s disruptive role in the U.S. patent system.

The president’s intervention corrects a bad decision by the ITC. The patents that Samsung accused Apple of infringing in the ITC investigation are standard technology required to run phones on a 3G wireless network. Owners of standard-essential patents must agree to license the technology on fair, reasonable, and non-discriminatory (FRAND) terms to anyone who asks. Samsung claimed at the ITC that Apple refused to pay any royalties at all, and Apple claimed that Samsung demanded an unreasonable royalty. The ITC sided with Samsung.

The ITC’s ruling has been controversial not because Samsung won the case, but because the ITC’s remedy—total exclusion of the infringing products from the U.S. market—is excessive.

If Samsung had brought its case in federal district court instead of the ITC, the judge would most likely have ordered Apple to pay the royalties it owed Samsung. An injunction against future sales would not be granted, because Samsung never had the right to keep Apple from using the technology in the first place, only to collect royalties.

As I wrote last month in anticipation of a potential presidential veto, this action by the president has a number of policy implications that go beyond the Apple–Samsung patent dispute. The Obama administration, leaders in Congress, and much of the tech industry have been converging lately on the idea that remedies for patent infringement at the ITC are too strict. The ITC should not be able to ban future sales in a situation where a district court would refuse to do the same thing. As it stands now, the ITC’s excessive remedies allow patent holders to wield more power than they should and exacerbate the ongoing struggle against patent trolls.

Korean press coverage of the issue has implied that the administration’s veto of Samsung’s patent victory against Apple amounts to “flagrant protectionism.” In a separate case, the ITC is set to decide later this week whether Samsung infringed patents owned by Apple. If the administration allows an import ban on Samsung products despite intervening to help Apple, many in Korea will surely cry foul.

A trade conflict would be a fitting consequence of mixing patent litigation with trade policy. It doesn’t make sense for President Obama to have the power to intervene in a patent case simply because he doesn’t approve of the outcome. Section 337 of the Tariff Act of 1930, the law that enables the ITC to litigate patents, was designed as a protectionist trade remedy. The president’s veto power is meant to ensure that the ITC’s decisions don’t impede U.S. foreign or economic policy. If the ITC were a legitimate patent court, its decision would not be subject to executive override. The ITC is simply the wrong place to litigate patents, standard-essential or otherwise.

Perfect Storm for ITC Patent Reform

Seven weeks ago, the International Trade Commission announced its decision to ban the importation of some late model iPhones and iPads after finding that Apple had infringed patents owned by rival Samsung. In today’s Wall Street Journal, Verizon Vice President Randal Milch has publicly implored President Obama to exercise his power to veto the ITC’s decision. Such a move could be just the thing to prompt real reform of the ITC’s disruptive role in the patent system.

The prospect of a presidential veto of an ITC exclusion order is pretty exciting. The statutory power of the president to disapprove a decision by the ITC has only been exercised five times since the ITC was created in 1975 and the last president to use the power was Ronald Reagan. Disapproving this new order would certainly turn some heads, and it’s not as unlikely as you might think.

Anti-ITC sentiment has been growing steadily in recent years. In 2006, the Supreme Court made it more difficult for U.S. courts to issue injunctive relief in patent cases, dealing a major blow to patent trolls who buy-up patents for the sole purpose of litigating them. The Court’s holding did not apply to the ITC, making the trade agency a more attractive venue for those unsavory litigants. Now the ITC has decided that it can issue injunctions (as it has in the Apple-Samsung dispute) even when the patent owner previously agreed to license the technology to all who offer a reasonable royalty. More and more observers are coming to recognize that the ITC’s powers are inappropriate and need to be reined in.

A presidential veto of the Apple ban could be just the right thing to push Congress or the agency itself to implement real reform. The House has held a number of committee hearings on the topic in the last two years, and bringing ITC remedies in line with district court practices is included in the Obama Administration’s newest outline for patent reform

Even the ITC’s staunchest advocates would rather have transparent and predictable limits than face the specter of ad hoc nullification of orders resulting from expensive litigation.  As Verizon’s Milch explains in his closing paragraph:

If the administration signaled that it would veto ITC relief orders in instances where courts would have found such orders inequitable, it could discourage parties from clogging the ITC’s docket with such cases in the first place. Then the White House could, mercifully, find it unnecessary to veto ITC decisions, perhaps for another 25 years.

Aligning ITC and district court remedies will do a lot to reduce the disruptive impact of having two venues for patent litigation, but a better policy would be to end the agency’s patent jurisdiction entirely. There is simply no need for an import-only specialized patent court. The law the ITC uses to litigate patents was devised in 1922 to prevent “unfair methods of competition” by foreigner manufacturers.  It is a protectionist relic that should be repealed. 

Unless we abolish the institution now, at some point—maybe in 25 years, probably sooner—the ITC will be messing things up again. 

The Talking Points for NSA’s Dragnet Don’t Hold Up

A bipartisan group of legislators in the House—spearheaded by Rep. Justin Amash (R-Mich) and John Conyers (D-Mich)—is bucking both the Obama administration and Republican party leadership to push an appropriations measure defunding the National Security Agency’s dragnet phone records programs. The measure would forbid the government from using any resources to execute a Patriot Act §215 “business records” order unless it is limited to the specific targets of specific investigations—effectively barring use of that authority to vacuum up the phone records of millions of innocent Americans. Predictably, the intelligence community and its proxies in Congress are pushing back ferociously, circulating an “Open Letter of Support” for the dragnet program from former intelligence officials. It’s worth surveying their main talking points to see just why they aren’t persuasive. Note that they begin, as many defenders of the phone dragnet do, by lumping it together with the very different PRISM program, which involves monitoring of international e-mail and Internet traffic:

We are convinced that both programs are vitally important to our national security. The Director of the NSA, Gen. Keith Alexander, has publicly attested that these programs have been instrumental in helping to prevent attacks on the United States and its allies, including the plot to bomb the New York City subway.

The bundling here is important. Alexander did, at a June 18 hearing, assert that PRISM had been “critical” in disrupting a number of “terror events,” mostly overseas.  But when pressed specifically by Rep. Jim Himes (D-Conn.) on whether the §215 call records program had been “essential” in any cases, Alexander conspicuously dodged the question. He would not identify even a single case in which the bulk phone records collection had been “essential,” or even claim that there was such a case that he couldn’t discuss specifically. 

As for the plot to bomb New York’s subway system, the Atlantic convincingly marshalls evidence from the public record showing that the key initial leads in that case did not come from either PRISM or the §215 program. And with those leads, traditional intelligence authorities would have allowed the investigation to proceed more or less as it did. In particular, there is no indication whatever that the use of phone records to identify associates of plotter Najibullah Zazi required a massive database of all Americans’ calls: Ordinary police, after all, do similar detective work all the time, but with targeted orders based on particularized suspicion.

The crucial general point to understand about these claims for the efficacy of these programs is that if you have unlimited authority, then that will be what you end up using even if more limited authority would have sufficed. If we had never passed the Fourth Amendment, and the government could get “general warrants,” allowing police to search any home at will, they would never bother getting specific warrants based on probable cause. Then, every time police solved a crime through a search, they could accurately say “You see, we used a general warrant!”  But that would be no argument for general warrants. The question to ask is: “Why couldn’t you have done it with a specific warrant instead?”  We haven’t heard, at least publicly, any very good answers to that question when it comes to the NSA call dragnet.

Surprised by the Latest Privacy Invasion? Don’t Be

You shouldn’t be surprised by the revelation that police departments across the country are gathering data about innocent people’s movements.

Using automated scanners, law enforcement agencies across the country have amassed millions of digital records on the location and movement of every vehicle with a license plate, according to a study published Wednesday by the American Civil Liberties Union. Affixed to police cars, bridges or buildings, the scanners capture images of passing or parked vehicles and note their location, uploading that information into police databases. Departments keep the records for weeks or years, sometimes indefinitely.

The ACLU study is here.

You should be outraged that your tax dollars are going into surveillance that undercuts your privacy, but don’t be surprised. Why not? Because Cato told you so.

Here’s text from a study we published nearly nine years ago, Understanding Privacy—and the Real Threats to It:

Red-light cameras and speed cameras are another part of the rapidly growing Big Brother infrastructure. Little technical difference separates a digital camera that takes occasional snapshots from one that records continuous footage. Equipped with optical character recognition technology, traffic cameras may soon have the technical capability to read license plates and scan traffic for specific cars. Networked cameras will be able to track cars throughout a city and on the highways. And database technology will make it possible to create permanent records of the movements of all cars captured on camera.

That material is based on testimony I gave to the House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit almost a dozen years ago. In it, I addressed the constitutional status of public monitoring like this. I talked about how license plates deprive drivers of the ability to navigate streets anonymously. That’s not the worst privacy invasion, given how driving laws and traffic disputes are administered. But it’s akin to requiring people to wear nametags to walk on public sidewalks.

Because the law has deprived people of the ability to protect privacy, the better view is that there is a Fourth Amendment search when law enforcement notes the license plates on cars. This search is inherently unreasonable if they do so when they do not suspect crime. As soon as red-light cameras are used for anything other than snapping suspected speeders — and they soon will be — these cameras should be shown a red light themselves.

Courts have only just begun to grapple with these issues, including the Supreme Court in the Jones case, which last year held that the government couldn’t attach a GPS device to a car and monitor its movements, even in public, without getting a warrant. I wrote about the state of Fourth Amendment law in this area in an article cleverly (ahem) titled: “U.S. v. Jones: Fourth Amendment Law at a Crossroads.”

Concerned? Yes, you should be. Angry? If you need that outlet. But don’t be surprised to learn that police departments are tracking of every car’s movements without a warrant.

At Cato Unbound: The Private Digital Economy

What if money were private?

One very correct answer is, simply: Money already is private. Sure, there’s the old familiar legal tender of the U.S. government, but the idea of money, and the practices that surround it, are not necessarily tied to the greenback. We all know how money works, and other things can certainly be used in the dollar’s place – if a buyer and a seller agree. From there, if more buyers and sellers agree, the items they use may become a medium of exchange – a class of things held with the intention of passing them along in the market rather than using them directly.

As most of you probably know, that’s exactly what’s happening right now with bitcoin. But is bitcoin sound money? For that matter, what is it that makes a thing sound money? Gold wasn’t sound money just because of its inherent goldiness; it had (and has) distinct, identifiable properties that make it a pretty good money – properties that, say, land, automobiles, or hydrogen conspicuously lack.

How does bitcoin stack up? Will an all-digital private currency one day supplant fiat money? If so, will it be bitcoin or something else? There are alternatives, and some of them are quite successful, albeit less highly publicized in the West. 

Cato’s own Jim Harper discusses these issues in his lead essay for July 2013’s Cato Unbound. Coming up we have essays by Internet security consultant Dan Kaminsky, tech policy analyst Jerry Brito of the Mercatus Center, and Ph.D. candidate Chuck Moulton, who is writing his dissertation on transitions from unsound to relatively sound monetary systems. 

Congress Spends Your Tax Dollars on a National ID

It’s appropriations season! – that wonderful time of year when the House and Senate pass competing versions of legislation to fund government agencies, bureaus, and…whatever pork and pet projects they can squeeze in.

Congress has made most of its spending decisions over the past few years through last-minute continuing resolutions or consolidated appropriations bills. That makes it harder to follow the money (which may be part of the reason they’ve been doing it that way), but it’s important to watch the dollars because some of that money is going toward national ID systems and biometrics.

Last week the House passed their FY 2014 Department of Homeland Security appropriations bill. As in years past, the legislation contains funding for three of everyone’s favorite identification programs: REAL ID, E-Verify, and US-VISIT/the Office of Biometric Identity Management (OBIM), a DHS office covering biometrics for travelers at airports, ports, and other points of entry.

For the coming fiscal year, the House appropriated $114 million for E-Verify, $232 million for OBIM, and $1.2 billion for the State Homeland Security Grant Program (SHSGP), from which grants for REAL ID implementation get doled out to states.

These numbers are consistent with past levels of appropriations for these programs, with the exception of REAL ID, which had its own funding stream until it was folded into SHSGP in fiscal 2012.

NSA Spying, NSA Lying, and Where the Fourth Amendment Is Going

If you want a good primer on the NSA spying disclosed so far, check out the item by Cato alum Tim Lee on the Washington Post’s WonkBlog. It’s a blessedly brief but informative run-down covering:

- mass collection of phone records;

- the PRISM program, which gathers data about Americans incidentally to its stated aim of foreign surveillance; and

- the NSA’s fiber optic eavesdropping: “[T]he NSA has a broad program (actually, several of them) to sweep up Internet traffic from fiber optic cables.”

Also, be sure to read the letter Senators Wyden (D-OR) and Udall (D-CO) sent to NSA head General Keith Alexander yesterday. In it, they point out inaccurate and misleading statements the NSA made in a recently distributed fact sheet. At a certain point, inaccuracies become willful.

On the question of whether surveillance of every American’s phone calling is constitutional, Lee notes how the government and its defenders will rely on a 1979 case called Smith v. Maryland. In that case, the government caused a telephone company to install a pen register at its central offices to record the numbers dialed from the home of a suspected robber. Applying doctrine that emerged from Katz v. United States (1967), the Court found that a person doesn’t have a “reasonable expectation of privacy” in phone calling information, so no search occurs when the government collects and examines this information.

It takes willfulness of a different kind to rely on Smith as validation the NSA’s collection of highly revealing data about all of us. Smith dealt with one suspect, about whom there was already good evidence of criminality, if not a warrant. The NSA program collects call information about 300+ million innocent Americans under a court order. And the Supreme Court is moving away from Katz doctrine, having avoided relying on it in recent major Fourth Amendment cases such as Jardines (2013), Jones (2012), and Kyllo in 2001.

Nobody knows where exactly the Court is headed with the Fourth Amendment in the challenging area of communications, but I’ve argued for reaching back to the wisdom of Justice Butler, dissenting in Olmstead (1929):

Telephones are used generally for transmission of messages concerning official, social, business and personal affairs, including communications that are private and privileged – those between physician and patient, lawyer and client, parent and child, husband and wife. The contracts between telephone companies and users contemplate the private use of the facilities employed in the service. The communications belong to the parties between whom they pass.