E-Commerce Law Week, Issue 480

Congress Threatens Crackdown on Companies that Assist "Internet-Restricting" Regimes

For Yahoo!, Google, Cisco, and other Internet companies that are pursuing the Chinese market, congressional tongue lashings for alleged complicity in Beijing's efforts to censor the Internet or surveill dissidents are nothing new.  But H.R. 275, approved by the House Foreign Affairs Committee last week, goes beyond strong words, and would create significant liability and record keeping requirements for any " United States business" that cooperates with certain "Internet-restricting countries," including China.  The bill would also restrict the ability of U.S. businesses to store or process electronic communications in such countries.  And it would direct the secretaries of Commerce and State to study the feasibility of imposing licensing requirements on the export of items that could be used to restrict "Internet freedom" in such countries. The bill defines "United States business" broadly -- including not only companies that have their primary place of business in the United States , are incorporated under U.S. law, or are traded on a U.S. exchange, but also any foreign subsidiary of such a company that is "control[ed]" or "direct[ed]" by the U.S. business.  Even if only parts of the bill were enacted, Internet and technology companies could face serious conflict-of-laws conundrums.

Nevada Crypto Law Seeks to Protect Privacy, But Could Pose Problems for Businesses

A Nevada law will require all businesses in the state to use encryption to "ensure the security" of any personal customer information they transfer "through an electronic transmission other than a facsimile to a person outside of the secure system of the business."  The law takes effect October 1, 2008.  This requirement could impose serious burdens on businesses that operate in Nevada and don't already regularly encrypt their communications with customers, vendors and others.  But the statute's bizarrely broad definition of "encryption" -- which includes "any protective or disruptive measure," including a "computer contaminant" -- could give companies some wiggle room.  While Nevada is known for marching to the beat of a different drummer (what other state has anything like legal brothels, the Burning Man festival, or Area 51, let alone all three?), other privacy-protective states could eventually follow the Silver State's lead.  Even if they don't, businesses that operate in multiple jurisdictions might find it easier to implement one system with encryption for all their transmissions rather than setting up a special system just for transmissions in Nevada.  In either case, what happens in Vegas -- or Carson City, actually -- won't stay there after all, but could spread across the country.

Google's Motion to Dismiss Fails to Ground American Airlines' Trademarked Search Term Suit

After surviving a motion to dismiss, American Airlines' trademarked search term suit against Google continues to fly high.  As we previously reported, the airline filed suit in a federal court in Texas in August, alleging that, by selling airline industry competitors the right to display ads alongside web searches for terms such as "american airlines" and "aa.com," Google directly and indirectly infringed American's trademarks.  American also claimed that the text of the triggered ads sometimes displays American's trademarks.  Google subsequently filed a motion to dismiss, contending, inter alia, that triggering an ad with a keyword is not actionable under the Lanham Act as "a use in commerce," that displaying American's marks in ads for resellers of tickets and news organizations is "legitimate," that the direct infringement claim must fail because American did not allege that Google "labels or promotes" its services using American's marks, and that the indirect infringement claim must fail because Google "lacks the requisite ownership and control over its advertisers."  Offering no rationale for its decision, the court denied Google's motion to dismiss.  While this outcome is in line with rulings by federal courts in Virginia and California, it runs counter to several other opinions, which have generally followed the Second Circuit in holding that the sale or purchase of trademarked search terms is not a use in commerce.  Given the high profile of the parties and the unsettled state of the law, search engines and online advertisers should watch this case closely.  A jury trial is scheduled for October 2008.

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