Source: http://cychanglaw.com/index.php?/authors/1-Chia-Yu-Chang
Timestamp: 2017-06-23 01:30:49
Document Index: 487104043

Matched Legal Cases: ['§416', '§115', '§202', '§273', '§273', '§273', '§273']

Entries by Chia-Yu Chang - Rebuttable
Entries by Chia-Yu Chang
- Because liberty is not a given
"Turkey coup: Purge widens to education sector." http://www.bbc.com/news/world-europe-36838347
"More than 15,000 education staff in Turkey have been suspended after last week's failed coup, as a purge of state officials widens still further."
"More than 1,500 university deans have also been ordered to resign and the licences of 21,000 teachers working at private institutions revoked."
"The army, judiciary, security and civil service have all been targeted following Friday's coup attempt:
Some 1,500 employees of Turkey's finance ministry have been dismissed
More than 250 staff in Mr Yildirim's office have been removed
Turkey's media regulation body on Tuesday also revoked the licenses of 24 radio and TV channels accused of links to Mr Gulen.
"The removal of thousands of officials has alarmed international observers, with the UN urging Turkey to uphold the rule of law and defend human rights."
"The President of the European Parliament, Martin Schulz, has accused Turkey of carrying out "revenge" against its opponents and critics."
On 7/17/2014, the Department of Financial Services of the State of New York published a draft of its long-awaited proposal to regulate Bitcoin and other decentralized virtual currencies. The proposed rules was officially published on 7/23/2014, beginning a 45-day comment period before the rules can be finalized.
In essence, the proposed regulations require certain participants in virtual currency activities to apply for a license, and adopt a regulatory framework that combines 6 main component areas: License Application, Consumer Protection, Anti-Money Laundering, Cyber Security, Business Operation, and Records, Reports, & Examination. The table below groups each of the 18 sections of the proposed regulations (except Section 200.1 Introduction, Section 200.2 Definitions, & Section 200.21 Transitional period) into the 6 main component areas.
Sections of the Proposed Regulations Grouped into 6 Main Areas
200.3 License
200.4 Application
200.8 Capital requirements
200.9 Custody and protection of customer assets
200.20 Complaints
200.15 Anti-money laundering program
200.16 Cyber security program
200.7 Compliance
200.10 Material change to business
200.11 Change of control; mergers and acquisitions
200.17 Business continuity and disaster recovery
Records, Reports, & Examination
200.12 Books and records
200.13 Examinations
200.14 Reports and financial disclosures
Note that in the existing regulatory schemes for NY financial service sectors, separate anti-money laundering rules apply to non-banks, such as check cashers or money transmitters[1], and to banks[2]. By including a separate set of anti-money laundering rules for virtual currencies (in addition to the other component areas), the NY DFS has placed the sector in a distinct category on the same standing as money transmitters, or banks.
Therefore, one can hope that such a regulatory framework can accelerate the acceptance of decentralized virtual currencies as a legitimate financial sector, similar to money transmitters or banks. Such benefits aside, however, the proposed regulations do raise some concerns, particularly the high costs of compliance, the lack of exemptions for small businesses, the broad scope of the definition of virtual currency business activities, the 100% reserve requirement, and the permissible investments for retained earning. These and other potential issues, some of them gathered from internet sources, are briefly summarized in the table below.
High costs of compliance
The costs include application fees, bonds, capital requirements, record keeping, anti-money laundering compliance, cyber security compliance, record keeping, reporting, & examination.
200.3(c)
Lack of exemptions for small businesses
The high costs of compliance create high barriers of entry to small businesses, which may stifle innovations and drive them offshore.
200.2(n)(5)
Definition of “virtual currency business activity” includes
- controlling, administering, or issuing a Virtual Currency”
The terms “controlling”, “administering, & “issuing” are not defined in the regulations. Broadly construed, they may require a license for protocol developers, miners, and creators of any decentralized virtual currencies (so-called “Satoshi Clause”). 200.2(n)(1), 200.2(n)(2)
Definition of “virtual currency business activity” includes: - receiving Virtual Currency for transmission or transmitting the same; &
- securing, storing, holding, or maintaining custody or control of Virtual Currency on behalf of others
The definition can cover lawyers or escrows having custody of virtual currencies, or services that do not access user funds. Further, it is not clear whether a party to a multi-signature transaction has “custody or control” of the virtual currency.
200.9(b)
Licensed businesses must maintain 100% reserve of the virtual currencies held for others
This requirement prohibits leveraging for all virtual currency businesses, effectively bans banking in virtual currencies without obtaining a banking charter, which is exempted from obtaining a virtual currency license.
200.8(b)
Retained earnings can be invested only in U.S. dollar-denominated instruments
A more flexible approach, allowing investments in virtual currencies or other currencies, may be more desirable.
200.2(g)
Definition of “New York Residents” include persons “conducting business” in New York
It will be difficult to verify whether a person is doing business in New York.
Must maintain info of all parties to all transactions, including identity, address, etc.
It will be practically burdensome, if not impossible, for wallet providers.
200.4(5)
Fingerprints of ALL employees required in the license application
Fingerprints should be required only for principal officers, shareholders, and beneficiaries.
Just like any new statutory or regulatory framework, the Bitcoin regulations proposed by NY DFS are a work in progress. It remains to be seen whether and how the final regulations will deviate significantly from the proposed ones. Given that the public has been given the minimally required comment period of 45 days[3], however, no major revisions are expected.
[1] 3 NYCRR §416.1.
[2] 3 NYCRR §115.1.
[3] NY SAP Law §202(1)(a).
in Finance/Corporation at
94 Search Terms That China Bans Because Of Tiananmen Square (http://www.businessinsider.com/words-china-banned-from-search-engines-after-tiananmen-square-2014-6) Big yellow duck Tank Man Shanghai index 63 + 1 65-1 Candle Fire Torch Oil lamp Candle flame Blood Democracy Autonomous Twitter Memorial event Mobilize troops Crush Crush and destroy Assemble Revolt Open fire One-party dictatorship Today Tomorrow Yesterday Tiananmen Square Mourn When spring becomes summer That year That day Special day Pillar of shame Victoria Park Evening event Silent tribute Recall Ceremony Little secretary Black shirt B lack clothes Redress Commemorate Demonstrate Persecute Conflict Gunfire Turmoil Sensitive Mothers of the Motherland Hunger Strike Declaration Operation Yellowbird Non-violent non-cooperation Chinese Spring Take a walk Member of standing committee Gang of Four Political bureau Protest Sit-in Take to the streets Go into the street Never forget Against bureaucratic profiteering Suppress Tank May 35 35 Six Four 64 June Jun+4 Thirty-five Twenty-four Six+four Six 4 6 four Liusi (Pinyin for "six four") Bajiu (Pinyin for "eight nine") Six four Eight nine E ight eight TAM (abbreviation for Tiananmen) Jinshuiqiao Changan Avenue Muxidi Gongzhufen Martial law Student movement Student strike Student federation Massacre March Beijing massacred In memory of the 25th anniversary of June 4, 1989. Posted by Chia-Yu Chang
Four primary policy rationales have been given by these courts in support of the separate entity rule[3]: (1) inconvenience to the bank’s operations[4]; (2) competing claims to the same asset[5]; (3) risks of forum shopping[6]; & (4) international comity[7]. These rationales, however, have evolved over time. Particularly, technology advances have significantly eroded the influence of the “inconvenience to bank” rationale, even leading a court to completely invalidate the rule in 1980.[8] Moreover, opponents of the rule have argued that the rule allows debtors to evade their obligations by removing assets abroad, depriving creditors of a US forum to enforce court judgments. They have also argued that the rule gives a competitive advantage to foreign banks against US banks.[9] The gradual evolution of the separate entity rule took a quantum leap in 2009, when the NY Court of Appeal decided the case Koehler v. Bank of Bermuda.[10] In Koehler, the highest court of NY, in a divided 4-3 decision, held that as long as a foreign bank (Bank of Bermuda) is subject to the personal jurisdiction of the state, NY courts have the power to order the bank to turn over assets held at its foreign branches.[11] The majority’s opinion in Koehler did not explicitly mention the separate entity rule, because Bank of Bermuda had consented to NY’s personal jurisdiction. Some courts and commentators, however, have construed Koehler to have implicitly invalidated the rule.[12]
Recently, the US Supreme Court has significantly restricted the scope of powers (ie, personal jurisdiction) states can assert over foreign entities doing business in US, based on the constitutional due process requirements.[14] As a result, the NY Court of Appeals is likely to uphold the validity of the separate entity rule. Regardless of how the Court decides, nonetheless, in an increasingly connected world of global economy, the walls erected by the separate entity rule will inevitably become increasingly porous. The battle over the separate entity rule is but a reflection of the globalization trend, where the goals of global banking increasingly conflict with the goals of global judgment enforcement. Conflicts, however, may motivate searches for resolutions. And if these searches are successful, the policy rationales behind the separate entity rule may lose their significance. For example, with respect to international comity, it will most likely be a long time before nations are willing to give full faith & credit to the judicial judgments of other nations. But some types of bi-lateral or multi-lateral agreements providing for international judicial judgment registration systems, similar to the international patent & trademark registration systems, are potentially feasible within a generation’s time. Until that happens, the separate entity rule will likely continue to be the mainstay of global banking in US, specifically in NY.
Generally, §273 allows an entity that has been accused of infringing certain types of patents to escape liability if the entity has first used the patented invention at least 1 year before the effective filing date of the patent. The permissible “prior use” can be either internal or public. Even before the enactment of the previous §273 in 1999, there had been calls for a broad “prior use” defense for all patentable inventions since at least as early as the 1960s[2], but Congress was not able to act on these calls. Primarily because of the commercialization of the internet, the proliferation of business method patents, and the 1998 State Street decision[3] where the Federal Circuit explicitly held that business methods were patent eligible, Congress was able to gather enough votes in 1999 to pass a “prior use” defense under the previous §273, but only for the narrow scope of “methods of doing or conducting business.”[4] As an example, Company A began using a business method internally as a trade secret in 1995. Company A did not apply for a patent for the method, having determined that business methods generally were not patentable. In 2000, however, Company B obtained a patent on the same method, and accused Company A for infringing the patent. In such a case, Company A can raise the “prior use” defense pursuant to the previous §273 to prove that it is not liable for infringement.
in Patent at
- Patents used primarily to attract VCs by software startups
UC Berkeley Law School conducted a comprehensive patent survey in 2008, asking young start-up technology companies to respond to several patent-related questions. (See here and here.) More specifically, the survey included the following questions (not exhaustive):
Frequency of patenting;
Reasons for seeking or not seeking patents;
Comparisons of patents and other strategies in attaining competitive advantages;
Reasoning for acquiring licenses from other companies;
Perceptions of patents as incentives for engaging in innovation;
Perceptions of importance of patents in securing outside investments.
The ~1300 companies that responded to the survey encompassed the software, computer hardware, biotechnology, and medical device industries. More than 700 of them, however, were software companies. One of the co-authors, Pamela Pamuelson, wrote an interesting article in 2010 summarizing the survey results particularly of software companies. Below is a quick recap of her summaries:
Competitive advantage: The companies rated the strategies in gaining competitive advantages in the following order: (a) first-mover advantage; (b) complementary assets; (c) copyright, (d) secrecy (e) trademark (f) reverse engineering, & (g) patent.
Why patents: (a) to prevent competitors from using the technology; (b) to enhance reputation; & (c) to secure investments (including IPO).
Why not patents: (a) costs; (b) unpatentability of invention; (c) ease in designing around; (d) satisfaction in trade secrecy.
Therefore, the first finding of the survey is that software startups generally do not consider patents important in gaining competitive advantages. Unlike biotech or medical device companies, software companies prefer using first-mover advantage, complementary assets, copyright, trade secret, trademark, or reverse engineering to compete in the marketplace. (Click on thumbnail above to view original chart.)
The survey also revealed, however, that those companies backed by VC were much more likely to apply for patents than non-VC-backed companies. -- The software startups that participated in the survey were originally selected from 2 databases: ~500 from Dunn & Breadstreet (DB) and ~200 from VentureXpert (VX). About 10-15% of the DB companies and all of the VX companies were backed by VCs. In responding to the question whether they currently held or were seeking patents, only ~1/4 of the DB companies (with 85-90% not backed by VC) answered positively. On the other hand, ~2/3 of the VX companies answered positively.
Percentage of companies holding or seeking patents
DB companies (~500, 10-15% backed by VC)
VX companies (~200, all backed by VC)
All companies (DB + VX, ~700 companies)
From the survey results, it appears software startups use patents primarily to attract or retain VC investments, rather than as a competitive advantage in the marketplace. It is not clear, however, whether the change in strategy toward patents (with or without VC investments) was caused by the perception of the software entrepreneurs regarding VCs, or by the actual requirements of the VCs.
But, perceived or not, the fact that VCs and software entrepreneurs may hold such different views toward the values of patents is significant. It points to the need of a flexible patent system.
- Fair use for small companies
Recently, Marc Andreesen, the co-founder of Netscape, wrote an interesting article titled “Why software is eating the world”. (See here.) Basically, the article is a recap of the Web movements during the past 10 years since the internet bubble burst in the early part of the last decade. Indeed, Andreesen cited numerous software-focused companies that are biting into the market shares of many old-timer hardware-based companies. These software companies are mostly household names such as Amazon, Netflix, Pixar, Google, Groupon, etc.
Given the controversies that have been associated with software patents, I was curious how these “new” software companies approach patents. So, I looked up the US patents and patent applications held by the companies mentioned in Andreesen’s article. See table below.
# of US Patents & Applications
Rovio 0
It’s pretty clear and not surprising from the table that older companies tend to build up larger patent portfolios than younger ones. This can happen due to the natural growth of a company’s products and technologies with time, and the consequential growth of its patent portfolio. However, the severe backlogs and delays in USPTO can also significantly impede patent protections for younger companies. (Eg, see here, where the inventor of a cloud-based video game technology waited for 8 years to receive a patent.)
Therefore, younger (and smaller*) technology companies do not really benefit much from the existing patent system, particularly for software companies. Even if they have the funding to submit patent applications, they will not receive the protections for the first 3-8 years of their operations. Admittedly, it is also less likely that they will be burdened with patent infringement lawsuits (until later, when and if they survive and grow bigger), but neither will smaller companies be able to effectively protect their inventions from being siphoned off by others, or to protect their investments.
Our patent systems have increasingly become the battlefield for large corporations. (Witness the fierce billion-dollar battle over the Nortel patent portfolios between Google, Apple, RIM, Microsoft, etc.) In that case, why not simply exempt smaller companies from patent infringements, expanding the fair use of patents? That seems to be only fair!
* P.S. Younger companies may not necessarily be smaller. Among the companies in the table above, Groupon, Zynga, or Twitter probably can no longer be considered "small". However, generally being young and being small do tend to go hand-in-hand.