A Virtual Currency (BitLicence) Bill (AB 1326) was introduced into the California Assembly on 27 February 2015.
A few days ago, the Senate amended that Bill to create a Digital Currency Business Enrollment Program instead; and it’s now been ordered to 3rd reading.
The Digital Currency Business Enrollment Program will be administrated by the Commissioner of Business Oversight, and last until 1 January 2022.
The Bill prohibits (a) a person from engaging in “digital currency business” without enrolling in the program; and (b) the conduct of “digital currency business” through an unenrolled agent.
An enrollment application will cost up to $5,000, and there’ll be an annual fee of $2,500 to maintain enrollment, once secured. Applicants must provide fingerprints, and give the commissioner consent to share them with law enforcement agencies.
Program enrollees will be prohibited from advertising products, services, and activities unless they include a statement about the program, and make it clear that the government has not reviewed the safety or soundness of the business or digital currencies. Enrollees will also be required to give their customers a receipt that includes prescribed information when they accept digital currency or money, and may be obliged to pay a fine of $100 for each violation of the Bill’s receipt provisions.
“digital currency” as “a digital representation of value that can be digitally traded and is used to facilitate the sale, purchase, and exchange of goods, services, or other digital representations of value among its users [but] not include fiat currency, e-money, or currency value of which was fixed by its issuer to the value of a fiat currency“; and
“digital currency business” as “the business of offering or providing the service of storing, transmitting, exchanging, or issuing digital currency [but] not [for example, the] Transmission of digital currency where the transaction is undertaken for nonfinancial purposes and does not involve the transfer of more than a nominal amount of digital currency necessary to complete the transaction … [or certain] customer affinity or reward programs...”
The Commissioner will be required to publish an annual report on the state of the digital currency business industry.
Court of Justice considered under which circumstances SEP owners seeking an injunction abuse their dominant position - Lexology
Court of Justice considered under which circumstances SEP owners seeking an injunction abuse their dominant position
On 16 July 2015, the Court of Justice rendered its long-awaited judgment in Huawei/ZTE. In answer to several preliminary questions asked by the Landgericht Düsseldorf, the Court of Justice considered under which circumstances seeking an injunction for infringement of a "standard-essential patent" ("SEP") constitutes an abuse of a dominant position. Unfortunately, the judgment raises more questions than it answers.
As its name suggests, an SEP is a patent reading on technology that is essential to the implementation of a standard. In other words: it is impossible to implement the standard without incorporating the technology on which the SEP reads. Thus, a manufacturer wishing to produce a standard-compliant product must obtain a license to the SEP. If an industry is "locked-in" to a standard, implementers may be "held-up" by an SEP owner's refusal to license or demand for excessive royalty payments. In order to prevent hold-up from occurring, most standard setting organisations require SEP owners to agree to their SEPs on "fair, reasonable and non-discriminatory" ("FRAND") terms.
Commentators have pointed out that the hold-up problem may be worsened by SEP owners threatening to shut down the operations of an infringing company through an injunction. However, the possibility that seeking injunctive relief for infringement of an SEP may be contrary to competition law has only been recognized in the context of the "smartphone wars". The current case also relates to a dispute between major technology companies in the mobile market: Huawei Technologies and ZTE. In 2011, the former brought an action for infringement against the latter before the Landgericht Düsseldorf, seeking amongst others an injunction prohibiting the infringement of one of its SEPs. In 2013, the Landgericht Düsseldorf asked the Court of Justice whether the action brought by Huawei could be qualified as an abuse of a dominant position.
Interestingly, the European Commission did not wait for the Court of Justice's answer before intervening in similar disputes. In 2014, it adopted two decisions relating to this issue: one addressed to Motorola and one addressed to Samsung. In short, the Commission took the position that an SEP owner who has given a FRAND commitment may breach Article 102 TFEU if it seeks an injunction against "willing licensees". It follows from both Commission decisions that alleged infringers should be regarded as "willing licensees" if they agree to determination of FRAND terms by an objective third party, such as a court or arbitral tribunal.
As the Commission did in Samsung and Motorola, the Court of Justice in Huawei/ZTE considered that the exceptional circumstances of this particular case warranted deviation from its earlier case law on mandatory licensing. These special circumstances were the fact the injunction was sought for an infringement of a "patent essential to a standard established by a standardisation body" as well as the fact that Huawei had given a commitment to license on FRAND terms. In such a scenario, the Court of Justice considered that Article 102 TFEU requires an SEP owner to fulfil certain obligations before it is entitled to seek an injunction. First of all, the SEP owner should alert the alleged infringer, identify the infringed SEP and specify the way in which the infringement occurred. If the alleged infringer expresses its willingness to conclude a license on FRAND terms, the SEP owner must present "a specific, written offer for a license on such terms, specifying, in particular, the royalty and the way it is to be calculated". The SEP owner can seek an injunction if the "alleged infringer has not diligently responded to that offer, in accordance with recognised commercial practices in the field and in good faith". An injunction may furthermore be sought if an alleged infringer unwilling to accept the initial offer did not submit "promptly and in writing, a specific counter-offer that corresponds to FRAND terms".
The Court of Justice furthermore clarified some of the rights and obligations resting on the alleged infringer. For one, the Court considered if the alleged infringer does not accept the SEP owner's offer while already implementing the standard, it must provide adequate security. According to the Court, parallel to the negotiations, the alleged infringer should remain free to challenge the validity of the SEP, its essential nature or its actual use.
While the judgment does shed some light on the matter, the position of SEP owners and their prospective licensees still remains largely unclear. A notable reason for this is the Court of Justice's use of many open legal norms, such as "good faith" and "recognised commercial practices in the field". It is moreover unclear whether the rules laid down by the Court of Justice also apply to owners of patents that are essential to de facto standards or patents that should be regarded as commercially rather than technically essential. Also, it would have been helpful if the Court of Justice in Huawei had at least clarified whether it agreed with the Commission's characterisation in Motorola and Samsung of a "willing licensee". Most importantly, courts, SEP owners and implementers remain in the dark as to how FRAND terms and conditions should be determined. This is unfortunate, especially considering the fact that an SEP owner retains the right to bring an injunction against a licensee who made a counter-offer which is not FRAND.
EU Advocate General: no injunction against users of standard essential patents without an offer to license *
On July 27, the United States District Court for the Southern District of New York denied a preliminary injunction sought by Citizens United and Citizens United Foundation to stop the Attorney General of New York from enforcing a state policy that requires registered charities, in order to solicit funds in New York State, to disclose the names, addresses and total contributions of their major donors. A copy of the ruling can be found here. Although denial of injunctive relief serves merely an initial step at the district court level, the ruling has significant, and potentially lasting, transparency implications for “social welfare” advocacy groups seeking to raise funds in New York.
Citizens United, as a 501(c)(4) entity, and Citizens United Foundation as a 501(c)(3) organization, are required to comply with a number of registration and reporting requirements in order to maintain their tax-exempt and charitable organization statuses. Federal law, however, does NOT require organizations such as Citizens United Foundation and Citizens United to publicly disclose the identity of their donors. New York law provides that all charitable organizations that are not otherwise exempt must first file a registration form with the Attorney General’s Charities Bureau in order to solicit donations in the state. In subsequent years, New York law obligated charitable organizations to file an annual report form known as CHAR500. In 2006, the Attorney General’s office promulgated a regulation that required an organization’s CHAR500 filed with the Charities Bureau to include a copy of the organization’s complete IRS Form 990, 990-EZ or 990-PF. Attorney General Schneiderman’s interpretation of the 2006 regulation requires the Form 990 submitted with the CHAR500 also include the Form’s Schedule B, which includes the organization donor list. This policy would allow parties to obtain information about donors to a charitable organization, thus circumventing federal law that makes Form B unavailable to the public. Citizens United and Citizens United Foundation, although registered as charities in the state since 1995, have never filed copies of their Schedules B with the Attorney General, citing First Amendment protections against such disclosure.
In rejecting Citizens United's preliminary claims, District Court Judge Sidney Stein agreed with General Schneiderman that New York's insistence upon receipt of donor information from all entities soliciting funds in the state did not violate the two organizations’ freedom of speech and association rights. The court found that the 2006 regulation bears a substantial relation to the important governmental interests of enforcement of charitable solicitation laws and the oversight of charitable organizations, and determined that New York’s interests in enforcing the Schedule B policy clearly outweigh any burden that it may impose on charities. In addition, the court held that although the requirements that charities register with the Attorney General and submit annual reports in order to solicit contributions in New York function as a prior restraint on speech, such requirements nonetheless set forth “narrow, objective, and definite standards” that restrain the Attorney General’s exercise of discretion.
The court also rejected other, more technical, objections to the law—that the Attorney General’s enforcement of the policy violated due process by reversing earlier interpretations of the law, and that the Attorney General failed to comply with the formal rule-making procedures under the New York State Administrative Procedure Act before adopting the policy change. Finally, and importantly, the court held that the policy is not preempted by federal law, which sets out a mechanism for states to request Schedules B from the IRS and also ensures the confidentiality of donor information.
While this preliminary ruling is almost certain to receive appellate scrutiny either before or after development of a factual record, the national implications of this ruling must be noted by tax exempt entities looking to raise funds in New York. First, as noted by Citizens United following the ruling, it is a significant development that General Schneiderman has recognized the need for donor information to remain confidential, notwithstanding the requirement that such information now be disclosed to New York State. It is also noteworthy that the court accepted the Attorney General's argument that requiring registered charities to file donor disclosures furthers the state's interests in overseeing charitable organizations and enforcing solicitation laws, since information on charities’ sources of funding enables law enforcement to identify organizations that may be operating fraudulently or without a proper charitable purpose. This is an important precedent that other states are likely to follow when enacting similar policies in the future.
New York charitable organizations may also face further scrutiny with respect to their transparency obligations going forward. On August 3, New York’s Joint Commission on Public Ethics (JCOPE) ruled that two 501(c)(4) organizations, Family Planning Advocates of New York (FPA) and the state Civil Liberties Union (NYCLU) were not exempt from New York law that required advocacy organizations to publically disclose the source of their funding for lobbying activities. A 2012 amendment to New York lobbying law obligated entities who lobby on behalf of themselves and who spend more than $50,000 on lobbying activity in New York State to make publically available each source of funding that exceeds $5,000 for such lobbying. An organization, however, could seek an exemption from disclosing such funding sources to JCOPE (and thus becoming publically available) if the entity could demonstrate, by clear and convincing evidence, that disclosure of the funding source would cause “substantial likelihood of harm, threats, harassment or reprisals” to the donor of such funds.
Last year, JCOPE rejected the requests by FPA and NYCLU for a donor-disclosure exemption. The groups appealed this administrative decision and a judicial hearing officer reversed JCOPE’s decision. As a result, the two groups resubmitted their exemption applications to JCOPE.
Upon review of the application and evidence presented by the two organizations, JCOPE ruled that the two organizations failed to demonstrate by clear and convincing evidence that “harm, threats, harassment or reprisals” existed to warrant an exemption. In fact, the JCOPE chairman noted that lobbying law “should tilt heavily in favor of disclosure” and warned that granting such an exemption in these two cases would establish an excessively lax standard. This sends a strong signal that groups seeking a disclosure exemption will have a very high bar to clear to prevent public scrutiny of its donors. Accordingly, advocacy organizations and other 501(c)(4) groups need to be aware that significant lobbying in New York State could open themselves up to disclosure about the individuals and entities that support such group’s lobbying activity.