At-Large WCIT Workspace

ICANN should relieved to hear that, at the East Africa IGF earlier today, that Michael Katundu of Communications Commission of Kenya - who will be representing Kenya at the WCIT said he though ICANN was doing an "acceptable job"  (midway http://livestre.am/41XcM )

At the same meeting ITU representative Preetam Maloor insisted that 1) WCIT was only about national regulations, not international, and, in response to transparency queries' that ALL documents are "open", (late: http://livestre.am/41Wb1 )..

From where I am sitting, which is in Fiji, where I look outside my window to see if the tomatoes from my garden have ripened and if the capsicum is ready to be harvested and the pineapples are still too small, I think of this debate over the Internet and the war that is ongoing.  I am tempted to isolate the drivers of the global tension and suggest that there are two main issues surrounding the continuous onslaught we see in the media. This is not to say that other issues are not important and they are but for today’s reflections, I have chosen to base it on things that have been on the At Large list for a while but with greater context.

The two principal issues that I would like to touch on are Intellectual Property Rights and the other the issue of Taxation so my reflections on a Sunday morning in Fiji will be premised in two parts. At the end, I highlight why it is important for At Large to monitor.

Part 1 Intellectual Property Rights

Activism Against SOPA/ACTA – Did we win the war?

There are interesting movements happening that affect what we perceive to be a free and open internet. When the Stop Online Piracy Act (SOPA) was introduced the global community in a massive display of outrage protested by writing submissions, lobbying and blacklisting website to make a stand as collectively this was a victory and one short lived. The adage you may have won the battle but you did not win the war seems to ring into the atmosphere. When the news came out in relation to Anti-Counterfeiting Trade Agreement (ACTA) and the secret negotiations of the Trans Pacific Partnership (TPP), there were protests. There were a few countries where their citizens actively demonstrated against the ACTA ratifications and succeeded. There were fifty (50) US legal scholars who wrote an open letter to the Members of the US Senate Finance Committee asking them to exercise their Constitutional responsibility to ensure that ACTA was submitted to the US Congress[1]. We celebrated when the European Parliament on 4 July 2012 by a 478 votes to 39 with 165 abstentions rejected the ACTA[2].  Its rejection means that neither the EU nor its individual member states can join the agreement[3]. The question is can its member states join the TPP?

The Blindside

The change in offensive strategy adopted by key International Lobbyists of the “ACTA” in another form is simply changing the dress that Barbie has on.  It is a testament to commitment and tenacity of not given up. The commitment to lobby and advocate is commendable and an example to the global community of what it literally means not to back down from a fight. I admire this tenacity. The July 2012 negotiations in California marked the TPP’s 13^th negotiations.  However, I do not believe in what is being pushed and it is important for the global community to be vigilant and alert. They continue to gain mileage as we have seen with the number of countries coming on board in exchange for free trade[4]. We saw this espoused in the comments made by the US Assistant Secretary, Jose W. Fernandez of the Bureau of Economic and Business Affairs to Taiwan.

Why IPRs are important to the US?

Fernandez stated that the protection of Intellectual Property Rights (IPR) and said that a study shows that 75% of US exports involve IPR. The US Chamber of Commerce website[5] mentions 74% estimated at $1 trillion which is a discrepancy of 1% from what was claimed by Fernandez. I was curious and looked for the study[6] which makes this assertion. When you read the actual study there is no mention of 74%, only an assertion of 60% based on data till 2007 and I assume that Dr Nam used some sort of mathematical modeling to simulate the asserted 74%.

Dr Nam’s study is interesting as it refers to the US commitment to protecting intellectual property rights, see page 53[7]. It was also interesting to read about the following excerpt from the study:-

“The Congress in 2008 passed, and President Bush signed into law, the Prioritizing Resources

and Organization for Intellectual Property Act (ProIP Act) that increased both civil and criminal

penalties for trademark and copyright infringement. Consequently, the Senate in December

2009 confirmed Victoria Espinel as the first IP enforcement coordinator to oversee the nation’s

enforcement of intellectual property laws and to protect U.S. intellectual property abroad. And

the U.S. House of Representatives recently passed the Cybersecurity Enhancement Act of

2009 to protect intellectual property online.  As for cross-border IP theft, this can be addressed

by re-authorizing the U.S. Customs and Border Protection Reauthorization Act to enhance the

IP enforcement capabilities of the U.S. Department of Homeland Security and to press for

internationally coordinated rules in relevant global forums.”

There are mixed reactions when it comes to IPR in the US as the case of Google shows It was interesting to read about Google lifting the veil on Copyright Takedowns[8]. Yet Google like many other US companies whose principal source of revenue is derived from e commerce hate anything which can cut into their bottom line. During the SOPA Protest there were many companies from within the US that protested against the SOPA. 

This of course raises the issue of extraterritorial jurisdictions or cross border enforcement.

Legitimising Domain Name Siezures

This brings to mind the recent return of the Rojadirecta[9]. The Electronic Frontier Foundation also criticized the legitimacy of the illegal seizure of Rojadirecta[10]. The TPP without a doubt legalises the potential seizures of domain names etc. Without a transnational agreement or Treaty, for the US to act arbitrarily and sieze domain names like Rojadirecta would be viewed as an illegal seizure by many in the global community.

I am not anti- IPR and I know that people have a right to protect their rights but I believe that issues which affect global public interest should not be rushed but requires dialogue amongst civil society, private sector and governments. This is because things like “fair use” need to be aired out in arenas like the IGFs. The level of strategy deployed in the global level showed finesse and strategic and calculated decisions which had to be put into motion at least around 6 years if not longer. There are some countries who have signed onto the TPP who would not have been able to do so if they did not have the domestic capabilities, that is legislated it within their countries.

The Importance of Innovation

Whilst there are many that criticize China for infringing on IPRs, many forget that there are numerous things like even the computers we use that were first inspired from calculators that were inspired from things like the abacus. The magnetic compass, porcelain and numerous other things formed the basis with which people could build upon to bring innovation to a whole new realm and give us many things that we take for granted. Likewise there are numerous things from the developing world which many have taken and patented only because they did not know about patenting mechanisms, does it make it right.

A Case Study from Samoa – An Illegal  Patent

Traditional knowledge or inherent knowledge on medicinal plants from many developing countries have been patented by pharmaceutical companies. One example from Samoa, a country in the Pacific there was a case that was being litigated for a while which was to do with a non-Samoan national who visited one of the villages, learnt the language and medicinal plants including the “Mamala Plant” benefits etc who returned to the US patented it in the US and signed a deal with a Pharmaceutical company whilst hiding behind a “non-profit” scheme. The Mamala contains a strain of “Prostratin” which is an anti-AIDS drug. Where is the “fairness”? The patent is reported to have been filed by Dr Paul Cox is illegal as expert Dr David E Martin[11]. There are other examples of Traditional Knowledge which has been exploited such as music, art  but for the sake of making a point, I am only using one example.

Economic Justice

There have been numerous commentaries written on the all out Apple and Samsung war but one which is interesting is where the writer mentions that this “mad war” on the IPRs does nothing but harm for mankind and quotes from Article 1, Section VIII of the US Constitution, see excerpt[12]:

“We may realize that, as egregiously demonstrated this week, the media-hyped Apple v. Samsung case was not a “win” for Apple or a “loss” for Samsung, but rather a huge loss for society all around. Apple didn’t invent the tablet and its “winning” patents, which were declared invalid when first submitted to the USPTO, do not represent the Constitutional intent from which they spring”.

Part II Taxation

Global Trade

As electronic trade in knowledge, literature, music, movies, software and games and many other digital products, it follows that increasingly how Intellectual Property Rights continue to drive the politics surrounding the Internet. One of the other aspects as I had mentioned earlier as a major driver for the all out turf war is the issue of taxation. It is impossible to discuss this without seeing how this issue has evolved over time.

In 1996, there were independent media reports that highlighted the Internet tax loophole where some purchases could be made over the Internet tax free[13]. Within the US at the time, it is reported that there were states that were scrambling to introduce taxation on internet sales which consequently led them to fear that it could mean that operations would desire to shift to states which were more accommodating[14]. Whilst the US was doing this, the European Commission was busy studying the implications of European Commission law on the Internet[15].

US and a Tax Free Internet

It is no surprise that the US declared that the Internet should be a tax free zone when the US Congress's Tax Freedom Act 1998 (authored by Representative Christopher Cox and Senator Ron Wyden and signed into law on October 21 1998 by then President Clinton) which following expiry continued to be reauthorised and it most recent reauthorisation) was in October 2007 where this has been extended till 2014.

OECD on Taxation – Leveling the Ground for European Companies

The EC’s Taxation and Customs Union state that the “EU became the first significant tax jurisdiction in the world that developed and implemented a simplified framework for consumption taxes on e-services in accordance with the principles agreed within the framework of the OECD[16]”. These principles were agreed at a 1998 conference in Ottawa[17]. The EC’s Taxation and Customs Union further state that the OECD Ottawa Principles:-

“establish that the rules for consumption taxes (such as VAT) should result in taxation in the jurisdiction where consumption takes place. The OECD also agreed that a simplified online registration scheme, as now adopted by the Council, is the only viable option today for applying taxes to e-commerce sales by non-resident traders”.

It became clear that on taxation the European Commission and the US were diametrically opposed[18]. Jovan Kurbalija describes how the OECD and the EU have been holding the opposite view[19] see the commentary on Ottawa Taxation Principles where the OECD finds that there e taxation does not require special treatment from traditional taxation and that there is no need for special regulations. “In 2003 when the EU introduced a regulation requesting non EU e commerce companies to pay value added tax (VAT) if they sold goods within the EU, the main driver or motivation was that non-EU companies (many of whom are US companies) had an edge over European companies”[20].  The point of controversy as far as taxation was concerned was location (US is pro-origin) and destination (EU is pro-destination/consumption). The Ottawa Report is also an interesting read because aside from highlighting issues pertaining to taxation it also talks about how “Revenue authorities should work closely with relevant government regulatory agencies, business associations and other associations should work closely to ensure that businesses engaged in e commerce provide complete and accurate information to the Internet Registrar with which they register” [21]. The Ottawa Report goes on to say the following:-

“Revenue authorities are encouraged to work with relevant government regulatory agencies, business associations and other organisations to ensure that country code Top Level Domain registrars for their geographic jurisdictions abide by internationally recognised registrar requirements in respect to the collection, verification and global availability of WHOIS data for business registrations.  Revenue authorities are encouraged to work with relevant government regulatory agencies, business associations and other organisations to ensure that the Internet Corporation for Assigned Names and Numbers (ICANN) considers on a periodic basis whether regular pre or post verification of WHOIS data by registrars is warranted in certain circumstances.”

Impact on Developing Countries

Most US companies that stand to have anything threaten their bottom line are fighting vigorously against any potential tax imposition. Hence their hatred for "taxation" at the consumption end. Aside from a free reign in activities on the Internet, they have only been accountable powerful jurisdictions that have told them of when they have misbehaved. Some of these examples include when Google was fined $22.5million for Safari Tracking or when they made the front page of a NZ Newspaper where they were being investigated the Cyber Crimes Unit, in the New Zealand Police for taking illegal pictures or when Facebook was told off for breaching Privacy laws in Germany by the Regulator or more recently the sharp reprimand where they were told off by the Australian Privacy Commissioner.

However, when regulators from developing countries raise certain issues they are either ignored because they are not perceived to have the clout. In any event for developing countries to desire to tax at consumption for services provided for by other companies to them is not a big deal. It is the same as the EC imposing a tax regulation. This is not regulating the internet, this is merely giving countries what is legitimate revenue due to them. 

How is this all relevant for At Large?

At Large represents the views of ordinary internet users thoughts its membership base which are accredited At Large Structures. In the Whois Review Final Report, they defined two potential classes of consumers namely:-

• All Internet users, including natural persons, commercial and non-commercial entities, governments and academic entities, and registrants, registries and registrars.

• The individuals and organizations who purchase the domain name and provide data for inclusion in the WHOIS.

The reality is that we live in a world which has all kinds of complex and competing priorities. As we are embarking into a time when all the stakeholders are competing for attention whether it is the threat of regulation of the Internet or encroachment of terrain, make no mistake, there is a global turf war that has been raging for a long time. It is reaching a point of critical mass.

There will be all kinds of messages, all kinds of advocacy but it is important that the ordinary internet user is equipped and is aware of all the forces at play in order to navigate through the maze. This is intended for ordinary internet users who are focused in contributing to policies and laws. The reality is that there are many internet users who will never be interested in the Internet Policy space, they will be content to remain users only and that’s ok too.

For us within At Large, the issues will include things like:-

• Extraterritorial jurisdiction treatment

• • Anti trust

  • Competition

  • Law enforcement

• Intellectual Property

• • Impact of TPP on Domain Name Seizures

  • Domain Name Seizures

  • Trademark Clearing House

• E commerce

The reality is that ICANN does not need to do commission Working Groups to look into extraterritorial jurisdictional treatment. There are Studies[22]  on Extraterritorial Jurisdiction that have already been thoroughly traversed in the areas of Antitrust, Tort, Criminal, Bribery and Corruption, Securities and Insolvency.

[1] infojustice.org/senatefinance-may2012 

[2] http://www.europarl.europa.eu/news/en/pressroom/content/20120217BKG38488/html/ACTA-before-the-European-Parliament

[3] ibid

[4] Strengthening the U.S., Taiwan Economic Relationship, Remarks by the Assistant Secretary Jose W. Fernandez Bureau of Economic and Business Affairs, America Chamber of Commerce, Taipei, Taiwan on August 5, 2012.

[5] http://www.uschamber.com/ip

[6] Pham, D, N. 2010. The Impact of Innovation and the Role of Intellectual Property Rights on U.S. Productivity, Competitiveness, Jobs, Wages and Exports in http://www.theglobalipcenter.com/sites/default/files/reports/documents/NDP_IP_Jobs_Study_Hi_Res.pdf

[7] ibid

[8]

[9] http://arstechnica.com/tech-policy/2012/08/government-goes-0-2-admits-defeat-in-rojadirecta-domain-forfeit-case/

[10] https://www.eff.org/deeplinks/2012/08/rojadirecta-government-reverses-course-and-returns-domains-without-explanation

[11] http://www.m-cam.com/sites/www.m-cam.com/files/10182008.pdf

[12] The Economic Cost of Blinded “Justice” Apple v. Samsung Patent Wars in http://www.m-cam.com/content/economic-cost-blinded-justice-apple-v-samsung-patent-wars

[13] Cope, N and Trapp, R. 1996. Europe and US Scramble to close Internet Tax Loophole, The Independent in http://www.independent.co.uk/news/business/europe-and-us-scramble-to-close-internet-tax-loophole-1309964.html

[14] ibid

[15] ibid

[16] http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/index_en.htm

[17] ibid

[18] Wunsch-Vincent. 2006. The WTO, The Internet and Trade In Digital Products: EC and US Perpectives in http://www.law.ed.ac.uk/ahrc/script-ed/vol4-1/kb_review.asp

[19] Kurbalija, J. 2010.  4^th Edition of An Introduction to Internet Governance.  Pages 110 -11

[20] ibid

[21] http://www.oecd.org/tax/taxadministration/20499630.pdf

[22] International Bar Association Report of the Task Force on Extraterritorial Jurisdiction