E-Commerce Law Week, Issue 357

Mix Brix, Clix? Face Tax to Max, Says Cal. Court
Hatfields and McCoys have nothing on the feud between distance sellers and state revenue authorities.  States have long sought to collect sales tax on mail order sales.  After bitter litigation the Supreme Court has held and reheld that distance sellers can't be forced to collect the tax unless those sellers have sufficient contacts with the state to become subject to state law.  Then bricks-and-mortar companies got into the act, creating "clicks and mortar" companies to sell their products over the Internet -- without collecting taxes.  As long as the Internet company was formally separate from the "bricks and mortar" company, the Internet company could not be forced to collect taxes because it didn't have any assets in the taxing jurisdiction.

That was the theory, anyway.  But now a California court has thrown a brick of its own right through that notion.  In Borders Online, LLC v. State Board of Equalization, a California Court of Appeal has upheld a trial court's ruling that although "Borders" and "Borders Online" were two separate companies, Borders' activities in the state "on behalf" of Borders Online were sufficient for the online retailer to be subject to California's tax code.  Further, the appeals court held that the online retailer had a “sufficient physical presence” in California -- by virtue of the presence of brick-and-mortar Borders stores -- to satisfy the commerce clause of the US Constitution. 

Are Your Competitors Designing Spyware Just For You?
The embittered ex-husband is an old story.  So is computer hacking.  And hard-nosed competition.  But mix them all together, and suddenly corporate security officers are facing something very new -- malware targeted at them by competitors.  That's the threat that emerged when police arrested Michael Haephrati after a tip from his former father-in-law.  Interpol says Haephrati designed a Trojan horse that three of Israel's leading private investigator offices apparently used to steal inside information from leading companies on behalf of their competitors. 

Some of Israel’s top  companies -- including a satellite TV company and two wireless phone providers -- have been implicated in the ongoing investigation, which has spread across Europe.  And Israeli police officers recently warned the Jerusalem Post that "leading well-known international-based" companies had been victimized by the Trojan horse virus.  As a precaution, US companies operating in Israel and Europe  -- especially those who compete with the implicated Israeli companies -- will want to scan their security systems with anti-virus software that incorporates Rona.A definitions.  US companies that believe they are the victim of such a spyware attack also can ask the Justice Department to  pursue an investigation under the Economic Espionage Act of 1996 (18 USC 1831).    

FCC Releases VoIP/E911 Report & Order, R equests Comment on Next Steps
Two weeks after voting 4-0 to require "interconnected VoIP service providers" to supply enhanced 911 (E911) calling capabilities to their customers, the FCC released a Report and Order explaining and implementing its decision. "Interconnected VoIP service providers" are those that provide VoIP services that allow calls to and from the public switched telephone network (PSTN).  The FCC explicitly excluded from its rules voice services associated with instant messaging or Internet gaming that are not fully connected  to the PSTN.  Within 120 days of the publication of the FCC's order in the Federal Register, interconnected VoIP service providers will have to submit a letter to the FCC detailing their compliance with the new rules.

The FCC’s Report and Order was accompanied by a Notice of Proposed Rulemaking (NPRM) requesting comment on many related issues. The NPRM specifically asks if the FCC should require all VoIP provisioning equipment sold after June 1, 2006 to be capable of providing location information automatically, and if the FCC should adopt privacy protections similar to those already in place for wireline and wireless telecom carriers. Comments must be submitted within 45 days after publication in the Federal Register, with reply comments due 75 days after publication.

Correction
We jumped the gun last week when we said that Connecticut's Governor had signed into law that state's security breach law.  In fact, it is still awaiting signature.  We'll keep you posted.

Questions and comments about E-Commerce Law Week are always welcome.  Please send your feedback to Sally Albertazzie.